Iliad Africa - ShareData · Iliad Africa Limited (Iliad or the Group) sources, distributes,...

EN

ER

GY

PA

SS

IO

N

FO

CU

S

PE

RF

OR

MA

NC

E

2008 annual report

www.i l iadafr ica.co.za

Iliad Africa 2008 A

nnual Report

Pe

rf

or

ma

nc

e

Pa

SS

Ion

en

er

GY

fo

cU

S

2 008 annUal rePor t

OPERATION TEL FAX B-One – Centurion 0861 008 009 012 664 0404 Bildware Décor Centre – Umhlanga 031 566 5566 031 566 5568 Bildware Natal – Durban 031 332 5764 031 332 7895 Buchel – Menlyn 012 361 8304 012 361 8305 Buchel Designa – Faerie Glen 012 998 4687 012 998 3028 Buchel Hardware – Pretoria 012 300 2700 012 325 5472 Buchel Hardware & Tool Centre – Zambezi Drive – Pretoria 012 543 7500 012 567 6588 Buchel Tool Centre – Pretoria 012 300 3800 012 321 8120 Cachet International – Gauteng 011 201 4600 011 201 4601 Cachet International – KwaZulu-Natal 031 240 8100 031 240 8111 Chipbase – Durbanville 021 982 7810 021 982 7819 Chipbase – George 044 874 1753 044 874 1801 Chipbase – Montagu Gardens 021 551 2035 021 551 1926 Chipbase – Retreat 021 701 1128 021 701 5841 Chipbase – Somerset West 021 854 6810 021 854 6862 Chipbase – Stikland 021 949 1794 021 949 1712 Citiwood – Cape Town 021 930 5923 021 930 5625 Citiwood – Denver 011 622 9360 011 622 7938 Citiwood – Durban 031 579 2274 031 579 2293 Citiwood – Port Elizabeth 041 374 7414 041 373 0749 Citiwood – Pretoria 012 804 3554 012 804 0582 Citiwood – Vereeniging 016 421 1683 016 421 1337 Design Hardware – Northcliff 011 782 3629 011 888 1025 Design Hardware – Strijdom Park 011 792 9900 011 792 5153 Design Hardware – Woodmead 011 804 4293 011 804 6931 Ferreiras Décor World – Cape Town 021 510 5555 021 510 5666 Ferreiras Décor World – Durban 031 303 8400 031 303 8576 Ferreiras Décor World – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Zambezi Drive – Pretoria 087 754 0500 012 543 2470 Just Tiles – Port Elizabeth 041 451 3602 041 451 1008 National Tile Traders – Bloemfontein 051 432 6360 051 432 1327 National Tile Traders – Boksburg 011 823 3340 011 826 2617 National Tile Traders – Centurion 012 661 6527 012 661 6586 National Tile Traders – Randfontein 011 693 6525 011 693 6907 National Tile Traders – Roodepoort 011 760 2315 011 766 3642 National Tile Traders – Rustenburg 014 597 0391 014 592 1586 National Tile Traders – Southgate 011 942 5978 011 942 5899 National Tile Traders – Strijdom Park 011 791 0206 011 791 0215 National Tile Traders – Vanderbijlpark 016 931 2456 016 931 2467 Q Lite – Cape Town 021 510 7920 021 510 5994 Q Lite – Strubens Valley 011 475 2412 011 675 2556 Q Lite – Umbilo Road Durban 031 306 9015 031 306 9017 Q Lite – Umhlanga 031 566 4070 031 566 4074 Saflok – Johannesburg 011 453 5375 011 453 5379 SDT – Gauteng 011 392 5306 011 974 3455 The Knob & Knocker – Johannesburg 011 201 4800 011 201 4801 The Knob & Knocker – KwaZulu-Natal 031 240 8100 031 240 8111 The Tile Depot – Cape Town 021 510 1248 021 511 7790 The Tile Depot – North Riding 011 462 3774 011 462 9125 Thorpe Timbers 011 724 4200 011 865 2204 Tile & Décor Mart – Alberton 011 907 1383 011 907 1494 Top Form – Somerset West 021 854 4005 021 854 3397 W&B Hardware – Bellville 021 948 4881 021 948 0370 W&B Hardware – Claremont 021 670 7270 021 670 7288 W&B Hardware – Paarden Island 021 510 0700 021 510 0728 W&B Hardware – Port Elizabeth 041 373 5993 041 374 5396

SPecIalISed bUIldInG materIalS dIvISIon

IlIad afrIca’S StrateGIc Intent

DRIVING FORCEOur strategy is to meet the product needs of the building industry through focused sourcing and redistribution of goods into each identified segment of the market

CORE COMPETENCIESTo survive and prosper we must excel at: • Market intelligence • Procurement • Trading skills

1 FIVE-YEAR REVIEW 2 ThE BOARD 3 GROUP STEERING AND EXECUTIVE COMMITTEE 4 ChAIRMAN’S REPORT6 ChIEF EXECUTIVE’S REPORT9 GENERAL BUILDING MATERIALS12 SPECIALISED BUILDING MATERIALS 16 CORPORATE GOVERNANCE22 VALUE-ADDED STATEMENT23 ANNUAL FINANCIAL STATEMENTS 61 ShAREhOLDER ANALYSIS 62 NOTICE OF ANNUAL GENERAL MEETING 65 FORM OF PROXY 66 NOTES TO ThE PROXY67 CORPORATE INFORMATION 67 ShAREhOLDERS’ DIARY 68 CONTACT DETAILS

contentS

Iliad Africa Limited (Iliad or the Group) sources, distributes, wholesales and retails general and specialised building materials. A range of customers, from large-scale contractors to do-it-yourself homeowners, are serviced through 112 stores.

The Group’s two focused divisions – General Building Materials and Specialised Building Materials – are headed by seasoned professionals. This structure heightens our ability to leverage common pools of expertise, extends the depth of senior management, accelerates the process of succession planning and enables each division to focus on its core market.

GroUP ProfIle

PHILOSOPHY• Owner-manager ethos with strong incentives for performance• Decentralised operating divisions• Tight centralised financial controls• Focus on niche markets without dominating any one segment• Leveraging common expertise between divisions

Quintessential 1672

Iliad Africa | 2008 Annual Repor t

five-yeAR Review

Revenue up 10% Earnings per share up 5%

Distribution maintained at 52 cents per share

2008 2007 2006 2005 2004 R000 R000 R000 R000 R000

Revenue 4 610 920 4 180 355 3 368 388 2 683 398 2 145 571

Profit before interest and taxation 354 397 347 433 278 060 221 614 173 612 Net (finance costs) investment income (18 279) (7 874) 2 310 5 389 4 041

Profit before taxation 336 118 339 559 280 370 227 003 177 653 Taxation (84 524) (92 126) (78 186) (65 983) (50 360)

Profit for the year 250 437 247 433 202 184 161 020 127 293

Headline earnings for the year 249 713 246 651 201 091 160 340 130 087 Number of ordinary shares in issue at year-end 138 217 794 146 433 408 154 284 519 153 427 519 150 737 519 Weighted average number of ordinary shares in issue 141 329 209 146 433 408 146 240 876 144 933 286 141 995 454

Headline earnings per share (cents) 176,7 168,4 137,5 110,6 91,6 Earnings per share (cents) 177,2 169,0 138,3 111,1 89,6 Fully diluted headline earnings per share (cents) 175,0 163,4 133,7 107,1 89,6 Fully diluted earnings per share (cents) 175,5 163,9 134,4 107,6 87,6 Distribution per share (cents) 52,0 52,0 40,0 32,0 24,0

Earnings and distribution per share (cents)

DISTRIBUTION EARNINGS

Profit before and after taxation (Rm)

AFTER TAX BEFORE TAX

Revenue (Rm)

4800

4500

4 200

3 900

3 600

3 300

3 000

2 700

2 400

2 100

1 800

1 500

1 200

900

600

300

0

04 05 06 07 08

180

170

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

04 05 06 07 08

360

340

320

300

280

260

240

220

200

180

160

140

120

100

80

60

40

20

0

04 05 06 07 08

01


the boARd | directors

IndEPEndEnt nOn-EXECUtIVE dIRECtORS

Howard Charles turnerCA (SA) SEP (Stanford) Non-executive chairmanAppointed director in March 2003

Ralph trevor RirieBCom (Wits) CA (SA) OPM (Harvard) Non-executive directorAppointed director in March 2003

Makhosazana Khosi SibisiBA (City College of New York)Dip: supply chain management (Michigan, USA) Non-executive directorAppointed director in September 2005

EXECUtIVE dIRECtORS

Eugene Beneke BCom (Pretoria) CA (SA) Chief executive officer Appointed director in November 2008

neil Peter GoosenBCompt (Unisa) CA (SA) MBA (Wits) Group financial director Appointed director in September 1999

02

directors Left to right Khosi Sibisi | Howard Turner - Chairman | Ralph Ririe | Neil Goosen | Eugene Beneke - CEO


GRoup steeRinG And executive committee

GROUP StEERInG COMMIttEE

EUGENE BENEKEChief executive officer NEil GOOSENGroup financial director

lUiS MENDESGroup company secretary

MARCO VAN NiEKERKSpecialised Building Materialsmanaging director ANDRiES STRYDOMGeneral Building Materialsmanaging director

GEnERal BUIldInG MatERIalS

WiM FOURiEBuilders Market East

GERRiT DU PREEzBuilders Market West

ABU OSMANCampwell Western Cape

DAVE YOUNGD&A Eastern Cape

ROlAND MEEKD&A Kwazulu-Natal and Rustenburg

RHONE DiABGauteng

CAliE OliViERlaeveldbou Mpumalanga

JOHN lATHWOODPlumbing

JOHN CARlilETraining

HARRY SMiTProcurement

GUiSEPPE MARTiNiinformation Technology

SPECIalISEd BUIldInG MatERIalS

JANNiE COETzEEBoards

CHRiS GOODRiCHCeramics

MOHAMED JAMEEl HAMiDCeramics Cash & Carry

ADRiAAN BOOYSENEquipment Hire

KiM DAViDSONironmongery

PiETER PRETORiUSlighting

BRiAN THORPEWholesale Timbers

GAViN ATKiNSONWholesale Plumbing and Hardware

JANNiE COETzEEWholesale Hinges

MAx SACKSWholesale ironmongery

03

Group steering committee Left to right Neil Goosen | Eugene Beneke - CEO | luis Mendes | Marco van Niekerk | Andries Strydom


chAiRmAn’s RepoR t

Howard Turner | Chairman

04

iliad has produced results for the year

to 31 December 2008 that amply

demonstrate this Group’s solid

foundations, prudent management and

ability to weather economic volatility –

even at the levels that characterised the

review period.

The 1% growth in earnings effectively

maintained earnings at the same level as

the previous year which had reflected

ten years of double-digit earnings growth.

The repurchase and cancellation of

8.2 million shares during the year

resulted in earnings growth translating

into 5% growth in earnings per share.

This, together with positive cash flows

from operating activities and a strong

balance sheet, enabled the board to

maintain the distribution to shareholders

at 52 cents per share.

iliad has long enjoyed a strong base

of shareholders, with our two largest

institutional investors being Rand

Merchant Bank Asset Management and

the Public investment Commisioner (PiC).

Macro environmentAs expected, 2008 presented a far

more challenging operating environment,

characterised by the combined impact

of a rapidly slowing global economy,

high domestic interest rates and

inflation and the unquantifiable effect

of South Africa’s energy-savings drive

in the early months. Trading conditions

across the board deteriorated sharply

as the year progressed. As long as the

energy crisis continues in South Africa,

commercial and housing projects will be

affected as minimal energy is available

for new projects.

in stark contrast to the reversal of the

residential market and slowing

commercial sector, the infrastructural

market continued apace, with increased

spending by both the public and private

sectors on infrastructure improvements,

utilities and mining.

With major economies now officially in

recession and few indications that South

Africa will escape this global turmoil, the

year ahead promises to be a signal test

of management resolve and ability across

the spectrum.

With 11 years of earnings growth behind

it, iliad is well positioned to withstand

the pressures 2009 will undoubtedly

bring. A strategic mix of revenue sources

across market sectors, geographic spread

of operations and committed, experienced

teams are all expected to contribute to

a reasonable performance in the new

financial year.

Iliad Africa | 2008 Annual Repor t 05

Black economic empowermentThe 2005 Broad-based Black Economic

Empowerment (BBBEE) transaction with

the Women’s Private Equity Fund (One)

and Vunani Capital for a 10% stake in

iliad continues to deliver benefits in

competitively positioning the Group for

tender work and extending the breadth of

our business experience.

internally the Group’s transformation

committee, chaired by independent non-

executive director, Khosi Sibisi, has been

active in having the BBBEE contribution

status independently verified. The

Group has been assessed as a level-8

contributor, and has set the long-term

target of becoming a level-4 contributor.

Plans are being developed to achieve

this objective, involving all levels of

management.

Strategyiliad’s strategy is to meet the product

needs of the building industry through

focused sourcing and redistribution

of goods into each identified segment

of the respective markets. We do this

through two divisions – General Building

Materials and Specialised Building

Materials. The former accounts for

approximately two-thirds of the Group’s

turnover and profitability, and markets

a comprehensive range of products

which are primarily sourced locally. The

latter accounts for the balance of group

turnover and profitability, and markets

differentiated value-added products,

mainly imported.

The Group’s business is conducted in

South Africa and part of our strategy is

to ensure that we operate throughout the

country in all areas where good markets

exist. To achieve this, new stores will be

opened or suitable businesses acquired.

Our preference is for owner-managed

operations. Should the opportunity for a

major acquisition arise, the Group is well

positioned to fund this through internal

resources or to gear the balance sheet to

a prudent 30%.

in the past three years, we have acquired

a number of companies that bolstered

our annual turnover and broadened our

presence in key group markets, while

expanding our international supply network.

iliad’s ability to identify companies

with activities that complement its

niche markets, to acquire these at the

appropriate price, and then to seamlessly

integrate them into group operations is

now well proven.

The decision was taken last year to

explore the possibility of expanding our

focus into the industrial sector. The

effects of the global economic crises on

South Africa have delayed implementation

of this decision but it will be reviewed

from time to time.

appreciationAfter 11 years at the helm, our founding

chief executive officer, Ralph Patmore,

decided to retire at the end of 2008.

Ralph played an invaluable role in the

growth of iliad over the last decade and

we wish him every success and happiness

in this new stage of his life.

We welcome Eugene Beneke as the new

chief executive officer. Eugene is a

seasoned professional with a very suc-

cessful career track record and we look

forward to his contribution in taking iliad

forward. Eugene is supported by a strong

and experienced management team and i

wish to thank them, my colleagues on the

board and all employees for their sterling

contributions over a difficult trading year.

Howard turnerChairman


chief executive’s RepoR t

Overviewiliad Africa posted a 1% growth in

earnings for the year to 31 December

2008, continuing its record of steady

growth since listing in 1998. Despite

a considerably more challenging

operating environment, earnings per

share was 5% higher than 2007 at

177.2 cents. Turnover rose 10 % to

over R4,6 billion, with 8% of this

increase attributable to the successful

integration of recent acquisitions.

Despite significant increases in

distribution expenses and tougher market

conditions, operating profit rose by 2%.

Whilst fuel prices decreased towards

the end of 2008, the lag between lower

prices and any impact on the supply

chain kept distribution costs extremely

high for the remainder of the year with a

significant impact on operating profit.

06

Eugene Beneke | Chief executive officer

Notwithstanding the slowdown the Group was able to counter challenging market conditions and post a growth in profits, due to a focus on internal efficiencies, financial disciplines and improved procurement skills.


Operating margins reduced slightly in

these exceptional circumstances.

Working capital was extremely well

managed, resulting in good operating

cash flow for the year. Strong

cash flow generated from operating

activities funded the repurchase of

shares, acquisition payments and the

distribution to shareholders.

On the procurement side, iliad recorded

good progress during the year underscoring

the concerted team effort it took to main-

tain gross margins and the strong relation-

ships the Group has built with manufactur-

ers and suppliers over the years.

inflation on locally sourced product con-

tinued to hover at approximately 9% while

the total Group averaged closer to 7%.

The Group’s most recent acquisitions,

Thorpe Timber company, National Tile

Traders and B-One, met all conditions

precedent in the year and contributed to

Group performance.

Performance in contextSlowing activity has been particularly

evident in the residential market as

demand continues to contract. The

effect has been most pronounced in

larger towns and metropolitan centres.

The start of several new housing

developments was postponed by

developers given the current state of

the market, the protracted effects of the

2007 introduction of the National Credit

Act, concerns about power supplies and

the slow pace of regulatory approvals.

industry monitors indicate that building

volumes were lower in 2008, and are

expected to fall further in 2009.

The non-residential market, which had

previously countered slowing activity in

the residential sector, began to show

the effects of the current economic

environment as the rate of growth

(measured by building plans passed)

slowed in the second half of 2008. The

market for additions and alternations,

which is directly correlated to personal

disposable income, slowed but we expect

this to reverse once the interest rate

cycle turns, with possible improvement

in demand towards the end of 2009.

Operational reviewNotwithstanding the slowdown the Group

was able to counter challenging market

conditions and post a growth in profits,

due to a focus on internal efficiencies,

financial disciplines and improved

procurement skills.

iliad’s General Building Materials division recorded solid results for the

year with the turnover increase of

9% matching inflation. This division

entrenched its presence in secondary

towns and expanded its store network.

Our Specialised Building Materials division produced a more muted

performance (excluding acquisitions)

given the slowing residential market

and heightened cost sensitivity that

forces end users to trade down when

finishes are selected. Whilst divisional

turnover rose by 15% compared to

inflation of 4%, the increase in turnover

reflects the acquisitions of National

Tile Traders, B-One and Thorpe Timber.

Although penetration into the non-

residential market has, until now, largely

compensated for the slowing residential

side, both volumes and margins have

been under pressure in this project-

based market.

A more detailed analysis of our perform-

ance follows in the divisional reviews.

07


divisionAl Review | General building materials divisionGRoup stRuctuRe And distRibution | our national footprint

08

BUilDiNG MATERiAlS

SPECIalISEd BUIldInG

MatERIalS

GEnERal BUIldInG

MatERIalS


General Building MaterialsThis division accounts for some two-thirds of the Group’s turnover and gross profits. it markets a comprehensive range of general products from 56 stores, for customers ranging from major construction to DiY enthusiasts. These products are primarily sourced locally.

Eight divisional clusters are headed by seasoned traders, who are also members of the group executive committee. This focused grouping provides the flexibility and the group perspective needed to maximise synergies. The executive team, together with operational management, are driving the same goals to achieve maximum profitability and synergy in the division.

Turnover rose by 9%, matching inflation of 9%, for the review period. Following minor internal restructuring to achieve better regional efficiencies, most regions

divisionAl Review | General building materials divisionGRoup stRuctuRe And distRibution | our national footprint

GEnERal BUIldInG

MatERIalS aCCOUntS

fOR 67% Of tHE

GROUP’S tURnOVER.

tHE dIVISIOn MaRKEtS

a fUll RanGE Of

nOn-dIffEREntIatEd

PROdUCtS.

67

09

Andries Strydom - Managing director


divisionAl Review | General building materials division

performed well during the year, meeting or exceeding expectations.. The shortage of energy had and will continue to have an impact on the performance as many projects were not approved or they were supplied with less capacity than required.

The refined model for the Cash & Carry cluster implemented in the prior period is producing the expected benefits. Fully-fledged regional builders’ merchant branches as well as the support office, effectively serve as administrative and procurement ‘hubs’ for our ten cash-orientated rural stores, resulting in lower costs, greater flexibility, improved supply chains, more identifiable brands and credit facilities where required. Once this model has been consolidated, and with more favourable market conditions, the store network and service range will be expanded to capitalise on group synergies and entrench iliad’s competitive advantage in this sector.

A fully-fledged merchant outlet was opened in lydenburg under the laeveld Bouhandelaars brand. This approach continues to take iliad closer to its customers while capitalising on shared information management systems and efficient distribution channels.

During the year, an investment was made in Campwell Hardware (acquired late in 2006) to upgrade its infrastruc-ture and maximise the opportunities in this key Western Cape market. The inde-pendent Somerset West store, W Miller, was refocused and incorporated into the Campwell management network.

USM Building Supplies, the well estab-lished Eastern Cape business acquired in 2007, achieved warranted profit during the year and was seamlessly integrated into the Group. its existing Jeffreys Bay outlet was relocated to a prime spot and the store size increased.

iliad’s plumbing cluster, which primarily serves the claims needs of the short-term insurance industry, was successfully transferred to the General Building Materials division to expand its geographic coverage and leverage this division’s existing network of 56 outlets. This broader network should serve the insurance industry nationally with both plumbing and building material.

Notable performances during the year included laeveld Bouhandelaars in Nelspruit which was refurbished with subsequent market share gains, despite increased competition. The Builders Market West recorded a commendable performance, outperforming the market.Procurement is one of iliad’s core competencies and a cornerstone of this division’s competitive advantage. Negoti-ated by the divisional executive team

10


divisionAl Review | General building materials division

and driven by operational management, procurement skills were significantly strengthened during the year and a refined group strategy aimed at building enduring supplier partnerships success-fully implemented. Under this strategy, preferred suppliers are determined and reviewed quarterly. The Group benefits from a stable panel of reputable suppli-ers and enhanced buying power, while suppliers benefit from steady group volumes. Given that the bulk of of iliad’s general building materials are locally sourced, strategic procurement – as op-posed to ad hoc sourcing – is essential in protecting group margins. This division also houses the Group’s commercial crime unit. Given that theft and fraud are ongoing risks in the retail environment, the commercial crime team continues to minimise losses to the Group through its multi-faceted approach and dedication. developing skillsiliad has taken the initiative in address-ing the shortage of skills in its industry. in April 2008, the Group appointed a training manager with significant opera-tional experience to ensure a sustain-able pool of skills for both the division and Group. This investment in training and development sets iliad apart in its industry and will establish a benchmark for skills development in the industry.

Based in Middelburg, Mpumalanga, iliad’s training facility accommodates some 35 trainees completing one of the Group’s eight internally-developed modules. Collectively, these three-day courses cover the spectrum of skills re-quired by the Group. At present, around 61% of participants are historically dis-advantaged South Africans. iliad has ap-plied for accreditation by the Wholesale and Retail sector and education training authority (W&R SETA).

divisional OutlookWhilst the year ahead is expected to be significantly more challenging, the groundwork completed in the review pe-riod has positioned the General Building Materials division to maintain its per-formance levels and prudently capitalise on attractive opportunities to increase its geographic presence.

11


divisionAl Review | specialised building materials division

Marco van Niekerk - Managing director

SPECIalISEd BUIldInG

MatERIalS aCCOUntS

fOR 33% Of tHE

GROUP’S tURnOVER. tHIS

dIVISIOn aCCOMOdatES

all tHE dIffEREntIatEd

OR ValUE-addEd

PROdUCt OffERInGS In

tHE GROUP.

33

Specialised Building MaterialsThe division accounts for one-third of the Group’s turnover and profit before interest and tax. This division houses the differentiated or value-added product offerings in the Group, a large percentage of which are imported.

Operating through 56 outlets, divisional clusters currently comprise boards, ceramics, ironmongery, lighting, B-One and wholesale. This wholesale cluster has several specialised sub-entities, including tools and hardware, hinges, draw slides and ironmongery.

importantly, in recent years, the quality and scope of iliad’s specialist ranges has made the group a preferred source for architects and commercial specifiers. The Group’s more recent acquisitions, National Tile Traders and B-One, met all conditions precedent in the period

12


and made valuable contributions to the Group results. Specifically, B-One’s es-tablished presence in the infrastructural development market offers significant opportunities for product and geographic diversification. National Tile Traders, with its solid management structure and established supplier relationships, presents a viable base for expansion from the existing base of nine outlets.Thorpe Timbers exceeded its warranted profit levels during the period and has been fully integrated into the Group.

Turnover rose by 15% (including acquisi-tions) compared to inflation of 4% for the period. This division’s more muted performance reflects the slowing resi-dential market and affordability aspect that forces clients to trade down when selecting finishes. Although penetration into the non-residential segment has compensated somewhat for lower activity levels on the residential side, margins were under pressure for most of the year

in this project-based market. in addition, the nature of iliad’s Specialised Building Materials division means it is particularly active in higher-end metropolitan retail developments, an area hardest hit by the current economic downturn.

Consolidating these specialised clusters into one division, while retaining their points of differentiation, continues to provide critical mass to leverage the Group’s inward-bound logistics and foreign exchange efficiencies and capabilities. This strategic initiative also effectively distinguishes iliad’s value-added and exclusive product lines from the non-differentiated products sold by the General Building Materials division.

The boards cluster has experienced tre-mendous challenges within an industry very hard hit by the economic slowdown. Quick reaction to external stimulus early in the year ensured that the cluster delivered a commendable performance.

The existing oversupply in the industry placed margins under increased pressure and supplier relationships have proven key during the second half of 2008. The ceramic cluster which operates in an exceptionally competitive environment, embarked on a refocusing exercise during the fourth quarter of the year following a disappointing performance. New management is simultaneously re-structuring operational efficiencies whilst continuing to improve service delivery. The cluster focus has remained the sup-ply of high quality European products.

The Cash & Carry ceramics cluster of the Specialised Building Materials division benefited from the prior-year acquisition of National Tile Traders. With outlets in Gauteng, North-West

13



and the Free State, National Tile Traders marked the Group’s entry into the impor-tant middle to lower Cash & Carry segment of the ceramic tile and sanitaryware market.

The lighting cluster delivered a disappointing performance. New management and an aggressive sales focus are already portraying signs of improvement. Common divisional opportunities are aggressively sought after by cluster management and lighting will shortly leverage off opportuni-ties in both Gauteng and the Western Cape allowing a much wider activity net.

Retail sales slowed significantly year on year, underlining the prolonged impact of high interest rates and rising inflation. Sufficient stock and a diverse product range still ensure a prominent place in the starting line up for the additions, altera-tions and refurbishment market drive, long

awaited by industry participants. The wholesale cluster continued on its growth path, as expected, despite the market slowdown. With improved supply lines and infrastructure now entrenched, this cluster is extending its market penetration and leveraging its capabili-ties for group and external clients. With a pleasing balance established between support levels from intergroup companies and external clients, the focus will now shift to expanding the product range off this solid base.

The ironmongery cluster produced excel-lent results for the year and increased market share after recent efficiency improvements. The shift to more com-mercial business continued to place pressure on margins, which was con-tained through effective working capital management.

divisional OutlookTo support our efforts to reach our divisional objectives for 2009, the focus will be firmly on maximising growth opportunities and leveraging internal efficiencies. The coming year will test the resolve of the management team, in a difficult trading environment.

14



Group ProspectsWhilst the coming year is difficult to

predict, 2009 is expected to present

a challenging business environment,

amidst tough economic conditions. iliad

enters the year on a sound footing. We

expect the seasoned trading skills of

management and the focus on operation-

al efficiencies to assist greatly in dealing

with some of the pressure common to

economic downturns.

Although tougher market conditions are

expected to impact on Group turnover,

iliad will leverage its conservative debt

structure and strong cash generative

ability, to generate the necessary cash

flow required to fund anticipated and

appropriate acquisition opportunities.

appreciationThe Group moves forward as a listed and

growing Group with an enviable track

record of steady growth that owes much

to the dedication of its people at every

level. The passion and commitment you

bring to this Group, is deeply appreci-

ated. iliad’s board of directors, chaired

by Howard Turner, is a source of sage

counsel and steady guidance –

particularly in the current economic

turbulence.

We thank our customers for their loyalty

and steadfast support over the year.

We will demonstrate our appreciation by

continuing to deliver the superior serv-

ice, innovation and competitive pricing

that have become such a hallmark of

this Group.

Eugene BenekeChief executive officer

15


coRpoRAte GoveRnAnce

The iliad Africa Group remains commit-ted to the highest standards of corporate governance in all its business dealings, and complies with the spirit and form of the JSE listings Requirements in addi-tion to the principles espoused in the King ii Report on Corporate Governance.

The financial highlights, chief execu-tive’s report, operational reviews and directors’ report detail the Group’s performance. The board believes these reports, along with the chairman’s report and financial statements, reasonably reflect the Group’s position and pros-pects. The directors’ responsibility for the financial statements is set out on page 26.

Board of directors The chairman and a further two of the five directors are independent non-executive directors. The non-executive directors have the necessary skills and range of experience to bring independent and balanced judgement to group business. The executive directors comprise the chief executive officer and the group financial director.

The board meets to initiate, evaluate and monitor business matters which have an impact on the well-being of the Group and all its stakeholders and retains full and effective control of the Group. Management of day-to-day affairs has been delegated by the board to the chief executive officer.

Non-executive directors meet indepen-dently without executives present throughout the year, and communicate regularly. Outside of scheduled quarterly meetings, additional meetings are convened should any matter arise that requires consideration by the board. The chairman and chief executive officer meet at least once a month and also

communicate regularly.

One third of the board retires by rotation

each year. if requested to serve a further

term by the board, retiring directors

may offer themselves for re-election

by shareholders at the annual general

meeting. Newly appointed directors

cease to hold office at the conclusion of

the annual general meeting following the

term of their appointment. if requested

by the board to serve a further term,

those directors may offer themselves for

re-election by shareholders at the annual

general meeting.

All directors have access to the advice

and services of the chairman, chief

executive officer, group financial director

and group company secretary. The group

company secretary is responsible

to the board for ensuring that board

procedures and applicable regulations

are adhered to.

Board operation The board is responsible to shareholders

for both the conduct of group business

and group performance. it provides

leadership and vision to the group so

that shareholder value is enhanced and

iliad’s sustainable growth is realised.

The board approves group strategy,

reviews group performance, approves

interim and annual financial statements,

determines the Group’s authority levels,

treasury policies, risk management

policies and approves major investments

and the remuneration of non-executive

directors.

Financial reporting is routinely per-

formed. Non-executive directors are

given sufficient information to formulate

independent conclusions on all matters

brought to their attention at board

meetings.

The roles of the chairman and chief

executive officer are separate.

Board meetings Board meetings are held at least

quarterly or as required. All directors

are invited to add items to agendas

for board meetings. Dates for quarterly

board meetings in the following year are

set in November each year.

The board and its committees are

supplied with full and timely information

which enables them to discharge

their responsibilities, they also have

unrestricted access to all group

information, documents, records and

property.

Conflicts of interest Directors are required to inform the

board timeously of conflicts or potential

conflicts of interest they may have with

particular items of business. Directors

are obliged to recuse themselves from

discussions or decisions on matters in

which they have a conflicting interest.

Directors are also required to disclose

their shareholding in the company and

all other directorships quarterly, or as

changes occur. Declarations of interest

are tabled at each board meeting.

Board committees Committees are established to assist the

board in performing its duties, and the

board is empowered to form or disband

committees as appropriate. Details of

the committees are presented below.

Audit and risk management committee

The audit and risk management

committee comprises Ralph Ririe

(chairman) and Howard Turner (both

independent non-executive directors).

The chief executive officer, group

financial director, group company

secretary and representatives from the

internal and external auditors, are invited

to attend committee meetings and have

unlimited access to the chairman.

16


The committee functions under a written

board-approved charter and meets at

least three times a year. it reviews the

interim and annual financial statements

before submission to the board. The

committee maintains an objective

and professional relationship with the

external auditors, and has satisfied

itself that the external auditors are

independent.

The committee assists the board in

discharging, inter alia, the following

responsibilities:

• Operating effective systems of

internal control

• Operating an effective risk

management process

• Operating effective internal and

external audit functions

• Ensuring that timely, relevant and

accurate processes exist for interim

and annual financial reporting

• Nominating for appointment a

registered auditor who is independent

of the company

• Determining the auditor’s terms of

engagement and the fees to be paid

to the auditor

• Ensuring that the appointment of the

auditor complies with the Companies

Act, 1973, as amended, and any

other legislation relating there to

• Determining the nature and extent

of any non-audit services the auditor

may provide to the Company and

pre-approving any proposed contract

for such services

• Receiving and addressing any

complaints relating to the accounting

practices and internal audit of the

Company, the content or auditing

of financial statements or any

related matter.

The chairman of the committee is

required to report to the board after

each meeting.

The board has determined that the audit

and risk management committee has

complied with its terms of reference for

the year under review.

The audit committee has considered and

is satisfied with the competence of the

group financial director.

Remuneration committee The committee comprises Ralph Ririe

(chairman) and Howard Turner (both

independent non-executive directors).

The chief executive officer is invited to

attend committee meetings but may not

participate in discussions on his own

remuneration.

The committee operates in terms of a

written charter, approved by the board.

The main purpose of the committee is

to ensure that the company’s directors

and senior executives are appropriately

rewarded for their individual and joint

contributions to the Group’s perform-

ance, with due regard for the interests

of shareholders, the financial and com-

mercial well-being of the Group and rec-

ommendations from industry consultants

and surveys.

The committee has authority for

matters relating to employee remu-

neration, benefits and profit incentives.

Employee incentive schemes, at both

executive and divisional level, are sub-

ject to the approval of the committee

and are based on market conditions and

the achievement of prescribed, measur-

able performance targets. The company’s

philosophy is to set appropriate remuner-

ation levels, taking into account levels

of responsibility and the need to attract,

motivate and retain directors, execu-

tives and individuals of high calibre.

The Group operates both long and short-

term incentive schemes. The commit-

tee recommends fees for non-executive

directors to the board. Fee determination

is based on information from industry con-

sultants and surveys.

This committee meets at least

twice a year, and its activities and

recommendations are reported to

the board.

The board has determined that the

remuneration committee has complied

with its terms of reference for the year

under review.

Directors’ emoluments are detailed in

note 21 on page 54 to the financial

statements.

attendance of meetings

Column A indicates the number of meetings

held during the period the director was a

member of the board and/or committee.

Column B indicates the number of

meetings attended.

* Appointed 1 November 2008

§ Retired 31 December 2008

Directors Board Audit and risk

manage-ment

committee

Remun-eration

committee

HC Turner

E Beneke*

RT Ririe

NP Goosen

MY Sibisi

RB Patmore§

A B A B A B

4

4 4

4 4 3 3 2 2

1 1

4 3 3 2 2

4 3

4 4

17


transformation committee Khosi Sibisi (non-executive director) is

mandated to address all transformation

issues in the Group and chairs this

committee. Other members include

the chief executive officer and human

resources management. Selected

operational executives and senior

managers are invited to attend

meetings and are co-opted to drive

information gathering and assist with

implementation. This committee meets

at least twice a year and operates in

terms of a written charter approved by

the board.

The objectives of the committee

include ensuring smooth, systematic

and meaningful transformation of

employment and social responsibility

practices in the Group in line with

industry charters, legislation, business

profitability and growth objectives.

in line with the Department of Trade

and industry’s Codes of Good Practice

on Black Economic Empowerment (the

codes), the Group has had its Broad-

Based Black Economic Empowerment

(BBBEE) contribution status independ-

ently verified as a level 8 contributor.

The Group continues to strive to improve

its current rating and believes that fur-

ther improvement can be achieved.

Other committeesThe daily management of the Group’s

affairs is delegated to the chief

executive officer, who coordinates the

implementation of board policy through

the steering and executive committees,

which he chairs.

Steering committee The current composition of the

committee is as follows:

Eugene Beneke (chief executive officer)

Neil Goosen (group financial director),

luis Mendes (group company secretary),

Andries Strydom (MD General Building

Materials division),

Marco van Niekerk (MD Specialised

Building Materials division).

The committee

• Is responsible for the day-to-day

management of the Group and its

divisions, and reports directly to the

chief executive officer

• Provides assurance to the chief

executive officer that risk

management policies and strategies

set by the board are communicated to

all operations and operating effectively

• Reviews group performance as well

as commercial and strategic issues

affecting the Group

• Considers all acquisitions and

disinvestment proposals and manages

the process of capital allocation

by ensuring that investments and

disinvestments increase shareholder

value and meet iliad’s financial criteria.

The committee meets monthly, with

additional meetings convened whenever

necessary. The activities of the steering

committee are reported to the board.

Executive committee The composition of the executive

committee is set out on page 3.

This broader forum gathers and

consolidates information obtained from

the 15 operating clusters, with particular

emphasis on:

• Intra-divisional synergies

• Market intelligence

• Procurement opportunities

• Risk management policies

• Strategic direction.

All matters requiring strategic direction

or decisions are submitted to the

steering committee for deliberation and

subsequent referral to the board, where

necessary, for final consideration and

approval. The activities of the executive

committee are reported to the steering

committee.

Reporting controls The group has comprehensive monthly

financial accounting and reporting

routines for its operating divisions.

Management of cash and banking

relationships are centralised.

Formal quarterly meetings are held

between members of the steering

committee and each of the operating

executives and financial managers to

review performance, commercial and

strategic issues.

Internal audit The Group’s formal organisational

structure incorporates suitable

segregation of authority, duties and

reporting lines, and promotes effective

communication of information. The

internal audit and advisory service

responsibilities are clearly defined and

approved by the audit committee.

The head of internal audit reports

administratively to the chief executive

officer on day-to-day operations of

the internal audit department and

has open and direct access, through

informal meetings during the year, to

the chairman of the audit committee

and its members. The ultimate

source of internal audit independence

and authority is derived through its

functional reporting to the audit

committee.


18


The Group’s system of internal controls

is designed to detect and manage risk

to an acceptable level, rather than to

eliminate all risks of failure.

internal audit activities principally

evaluate the adequacy of risk

management and the effectiveness of

controls encompassing the Group’s

governance, operations, and information

systems. These include:

• Reliability and integrity of financial

and operational information

• Effectiveness and efficiency of

operations

• Safeguarding of assets

• Compliance with laws, regulations,

and contracts

Audit plans are drawn up annually and

approved by the audit committee.

These plans take account of changing

business needs, risk assessments, con-

cerns raised by the audit and risk man-

agement committee, external auditors

and management.

internal audit continued to function

effectively during the year, providing

management with an independent and

objective assurance and consulting

service. During the period under review,

no major breakdowns in internal controls

were identified, and the audit committee

has determined that the internal audit

and advisory service has complied with

its terms of reference.

Risk management Group risk management is achieved by

identifying and controlling the main

business and operational risks, and

ensuring that effective risk management

procedures and controls are in place to

minimise or eliminate risks that could

adversely affect achieving the Group’s

business objectives.

The Group is committed to managing its

risk and opportunities in the interests of

all stakeholders. Every business unit and

every employee has a responsibility to

act proactively in these matters.

The management of group risk and

ensuring that the policies and strategies

set by the board are operating effectively

is the responsibility of the Group’s

steering committee under the control of

the chief executive officer.

iliad consists of 112 business units and

managing risk in these units takes place

in the 15 operating clusters to which

they report.

The internal audit department is

responsible for assessing the

effectiveness of the Group’s risk

management processes and reports

its findings to the audit committee.

The quarterly board meetings have a

standard agenda item dealing with risk

management.

External audit The external auditors provide an

independent assessment of internal

financial controls and express an opinion

on the annual financial statements. The

external audit function offers reasonable,

but not absolute, assurance on the

accuracy of financial disclosures. The

external auditors’ plan is reviewed by the

audit and risk management committee

to ensure that significant areas of

concern are covered, without infringing

on the external auditors’ independence

and right to audit.

The audit and risk management

committee monitors fees paid to the

external auditors, which again remained

within acceptable levels. There is

co-operation between internal and

external auditors to ensure appropriate

combined audit coverage and minimise

duplicated effort.

Going concern The annual financial statements set

out on pages 27 to 60 have been

prepared on the going-concern basis.

The directors, after due deliberation at

the last meeting of the board, have every

reason to believe that the company and

the Group have adequate resources to

continue in operation for the foreseeable

future.

Ethics iliad’s code of ethics ensures that

the Group operates, in all respects,

as a good corporate citizen. The code

requires group employees to perform

their duties in good faith and to be

trustworthy in all their dealings with

customers, suppliers, each other and

any other stakeholders, and maintain

the Group’s reputation for integrity and

responsible behaviour.

iliad accepts the recommendations of

King ii that the company should conduct

its affairs with uncompromising honesty

and integrity. The Group continues to

adopt a zero-tolerance approach to theft,

fraud and offering or accepting bribes

and favours as well as uncompetitive

behaviour.

Communication with stakeholders

it is the policy of the Group to pursue

ongoing dialogue with stakeholders.

The chief executive officer and group

financial director regularly communicate

with major shareholders, institutional

19


investors and media analysts.

Financial results are published in the press

and shareholders receive a copy of these

results timeously. A comprehensive

website is maintained with information

on the company, an archive of annual and

interim results as well as an announcement

section. (www.iliadafrica.co.za)

annual general meetingThe agenda for the annual general meeting

is set by the chairman and the company

secretary and communicated to all

shareholders in the notice of the annual

general meeting, which appears on page

62 of the annual report. Consequently, the

notice of the annual general meeting is

distributed well in advance of the meeting

and gives all shareholders sufficient time

to acquaint themselves with the effects of

any proposed resolutions. Adequate time

is also provided by the chairman in the

annual general meeting to discuss any

proposed resolutions.

The conduct of a poll to decide on any

proposed resolutions is controlled by the

chairman at the meeting and takes account

of the votes of all shareholders, whether

present in person or by proxy. A proxy form

is included in the annual report on page

65 for this purpose.

The Group encourages and recognises the

importance of its shareholders’ attendance

at its annual general meeting.

dealing in securities The Securities Services Act and the

JSE listings Requirements regulate

transactions by directors and officers in

securities issued by the company.

Directors and officers may not deal in the

company’s shares without first obtaining

clearance from the chairman. The

chairman may not deal in the company’s

shares without obtaining clearance from

the chief executive officer. Details of all

share dealings in the company’s shares

by directors and officers are disclosed

in accordance with the JSE listings

Requirements and at each board

meeting.

Directors of the Company and its

major subsidiaries, the group company

secretary, their associate/s or members

of their immediate family may not deal,

either directly or indirectly, at any time,

in the securities of the Company on the

basis of unpublished price-sensitive

information about the Company’s

business or affairs. These people are

made aware of restricted or “closed”

periods for dealing in the Company’s

shares and the provisions of insider

trading legislation.

Our people iliad employs 5 080 people and

regularly submits statutory reports to the

Department of labour.

Employment equityiliad continues to provide equal

employment opportunities based on its

strong culture of internal promotion and

personal development. The Company

continues to pursue employment equity

by implementing the reported plan.

The Group is making systematic progress

towards its employment equity targets:

at the end of December 2008, 70,3%

of the overall workforce were from

previously disadvantaged groups.

At management and supervisory

levels, 48,4% (2007: 48,2%) are

from previously disadvantaged groups.

Focused employment equity plans are in

place and are being monitored regularly

by the transformation committee.

training and development iliad spent 0,9% (2007: 0,3%) of

payroll on training and development,

mostly at divisional level. Training

initiatives are focussed on development

and expansion of all core competencies

including trading skills, business

management and procurement.

Through the iliad Academy of learning,

in partnership with Unisa, the Group

offers two-year courses with four

modules focused on development of

business leadership. The fifth intake

began in 2008, bringing the total

number of beneficiaries to date to 59,

of which 28,8% are from historically

disadvantaged groups. iliad further

conducts apprenticeships in technical

fields such as truss manufacturing, at

two outlets.

iliad’s new and fully-resourced

training centre based in Middleburg,

Mpumalanga, operated from April 2008.

A total of 570 staff members (61% of

which are from previously disadvantaged

communities) underwent 12.415 hours

of training in courses ranging from

general sales to project management.

Support for small, medium and micro supplier enterprises

The nature of iliad’s business dictates

an unusually broad base of suppliers in

a number of industries, ranging from

generic to highly specialised products.

Where possible, iliad supports South

African companies, particularly BBBEE

small, medium and micro-enterprises.

The Group’s BBBEE procurement

policies are increasingly used to source

goods from empowered companies and,

in this respect, we are making progress.

This is clearly more challenging in

specialised sectors where the only source

is often abroad.

HIV/aids HiV/Aids is considered in the same light

as any other life-threatening disease and

the group will ensure non-discrimination

against HiV-positive employees.

Businesses monitor the incidence of

HiV to the extent that they are able


20


to without transgressing the rules of

confidentiality. Any employee wishing to

attend training or education programmes

on HiV/Aids is encouraged to do so.

Safety, health and environment All group businesses are required to

report to the executive committee on

their compliance with applicable laws

and regulations. The Group is committed

to best practice and each business is

required to adhere to the applicable iSO

standards governing these issues.

The nature of group businesses have

limited negative impact on the environ-

ment. The Group generates limited noise

pollution and, as far as possible, sites

are selected with sufficient facilities to

prevent vehicle congestion in surround-

ing neighbourhoods.

All waste generated by the Group is

disposed of responsibly through waste

management companies that either

incinerate waste or use it as landfill.

The Group’s operations do not produce

many effluent discharges and during

the year none of the Group’s operations

reported any significant discharge of

water. No fines were imposed for water

pollution or other issues related to the

use of water.

To minimise diesel emissions or other

harmful discharges from vehicles, route

plans are assessed to minimise distances

and regular service and maintenance

schedules are maintained for optimum

fuel consumption.

Corporate social investment Corporate social investment is an

important business issue. Focused

primarily on the communities in which

iliad operates, annual donations are

made to a host of non-governmental

organisations, including children’s

welfare organisations, animal welfare

organisations, care centres for the aged,

associations for the disabled, healthcare

projects and various community initiatives

assisting the underprivileged.

These initiatives are fully integrated with

the Group’s BBBEE strategy.

Overall, the Group contributed

R2,1 million (2007: R2,0 million) to

selected projects during the year.

Political contributionsThe Group does not contribute to any

political parties.

advertisingAdvertising is conducted through a vari-

ety of mediums by the business units

within the Group, targeting the markets

and customers which are appropriate to

each business unit. The Group has no

record of charges being laid by the pub-

lic or competitors regarding misleading

or unfair business practices or advertise-

ments.

ConclusionThe board of iliad is of the view that

the company complies with the Code of

Corporate Practices and Conduct of the

King ii Report.

21

iliad’s new training centre based in Middleburg


vAlue-Added stAtement

2008 2007

2008 Value added 2007 Value added

R000 % R000 %

“Value added” is the value which the Group has added to its

products and services. This statement shows how the value

added has been distributed among our various stakeholders.

CREATiON OF WEAlTH

Group turnover 4 610 920 4 180 355

Cost of merchandise and net expenses (3 673 867) (3 348 068)

Value added 937 053 832 287

investment income 52 996 14 721 Finance charges (71 275) (22 595)

Total wealth created 918 774 824 413

DiSTRiBUTiON OF WEAlTH

To employees – salaries and benefits 548 896 59.74 462 091 56,05 To government – taxation 84 524 9.20 92 126 11,17 To providers of capital

– Distribution to shareholders 76 145 8.29 58 574 7,10

To maintain and expand the group

– Depreciation 33 760 3.67 22 763 2,76 – Retained for future growth 175 449 19.10 188 859 22,91

918 774 100.00 824 413 100.00

Employees 59,47 56,05

Government 9,20 11,17

Providers of capital 8,29 7,10

Maintain and expand group 22,77 25,67

100,00 100,00

Average monthly number of employees which includes executive directors was: 5 080 (2007: 4 806)

DiSTRiBUTiON OF WEAlTH2008 2007

22


ILIAD AFRICA LIMITEDannual financial statements

2008

23


24 Statement of compliance by the company secretary

25 independent auditor’s report

26 Statement of directors’ responsibility

27 Directors’ report

30 Balance sheets

31 income statements

32 Cash flow statements

33 Statements of changes in shareholders’ equity

34 Accounting policies

41 Notes to the annual financial statements

contents

stAtement of compliAnce by the compAny secRetARy

AnnuAl finAnciAl stAtements

for the year ended 31 december 2008

24

in terms of section 268 6(d) of the Companies Act, Act 61 of 1973

[“the Act”] as amended, i certify that to the best of my knowledge and

belief, the company and the Group has lodged with the Registrar of

Companies, for the financial year ended 31 December 2008, all such

returns as are required of a public company in terms of the Act and that

all such returns are true, correct and up to date.

luis Mendes

Group company secretary

6 March 2009

Iliad Africa | 2008 Annual Repor t26

The annual financial statements, set out on pages 27 to

60 and other financial information set out in this annual

report, were prepared by management in compliance with

International Financial Reporting Standards and fairly present

the state of affairs of the Group. They were approved by the

board of directors on 6 March 2009, and have been signed on

its behalf by the undermentioned directors.

The manner of presentation of the annual financial statements,

the selection of accounting policies and the integrity of the

financial information are the responsibility of the board

of directors.

To fulfil its responsibilities, the board has developed and

continues to maintain a system of internal controls. These

controls are based on established written policies and

procedures, are implemented by trained, skilled personnel with

an appropriate segregation of duties and are closely monitored

by both the board of directors and the internal auditors.

We believe that the controls in use are adequate to provide

reasonable assurance that assets are safeguarded from loss or

unauthorised use and that the financial records may be relied

upon for preparing the financial statements and maintaining

accountability for assets and liabilities.

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 year

under review.

After conducting appropriate procedures the directors are

satisfied that the Group will be a going concern for the

foreseeable future and have continued to adopt the going

concern basis in preparing the annual financial statements.

The board of directors is responsible for the financial affairs

of the Group. The external auditors are responsible for

independently reviewing and reporting on the Group’s annual

financial statements.

The annual financial statements have been examined by the

Group’s external auditors and their report is presented on

page 25.

Eugene Beneke Neil Goosen

Chief executive officer Group financial director

stAtement of diRectoRs’ Responsibility diRectoRs’ RepoRt



Your directors are pleased to present their eleventh annual

report which forms part of the audited financial statements

of the company and of the Group for the year ended

31 December 2008. This report deals with matters not

specifically dealt with elsewhere in the annual report.

1 Nature of business and review of activities

Iliad Africa Limited is the holding company of Iliad Africa

Investments (Proprietary) Limited and Iliad Africa Trading

(Proprietary) Limited which have operating divisions and

subsidiaries that focus on the sourcing, distribution, retailing

and wholesaling of a comprehensive range of building

materials.

Iliad supplies the full spectrum of building materials in both

the residential and non-residential segments of the market

through a well-established geographic footprint and strong

regional brands. Proven trading skills, as well as the owner-

manager philosophy at operational level, have been positive

contributors to Iliad’s continued success.

1.1 Acquisition of businesses

The trading results of the new businesses acquired during the

year as well as the assets and liabilities have been incorporated

into the financial statements from the effective dates of

acquisition. The total cost of the investments was as follows:

R000 2008 2007

Net assets at fair value 28 704 22 910

Trademarks 50 100 22 075

Goodwill 62 315 67 065

Campwell Hardware

minority put option 5 687

141 119 117 737

Details of the acquisitions are as follows:

1.1.1 On 01 February 2008, in line with the Group’s stated

strategic intent, United Metal Processors (Proprietary) Limited,

a subsidiary of Iliad Africa Trading (Proprietary) Limited in

which previously disadvantaged management hold 30%,

acquired the business of National Tile Traders as a going

concern from National Tile Traders (Proprietary) Limited for

cash. With outlets in key locations in Gauteng, North-West and

the Free State, National Tile Traders marks Iliad’s entry into

the important middle to lower Cash and Carry segment of the

ceramic tile and sanitaryware market.

1.1.2 On 01 May 2008 the business of B-One was purchased

from B-One Holdings (Proprietary) Limited for cash. This marks

Iliad’s entry into the infrastructural market. This Centurion

based business supplies a service to the construction, civil

engineering and entertainment industry through the hiring out

of portable sanitation, storage, accommodation, office and

ablution facilities.

1.1.3 In 2006, Campwell Hardware (Proprietary) Limited

(“Campwell”) a wholly owned subsidiary of Iliad Africa Trading

(Proprietary) Limited acquired certain assets and liabilities of

the Campwell Hardware businesses from the Campwell vendors

for R165 million in cash.

As part of the acquisition, agreements were entered into

whereby the Campwell vendors acquired a 25% interest in

Campwell for R41,25 million and at the same time were

granted a Put option in terms of which they are entitled to put

the shares in, and claims against Campwell, back to Iliad in

any year after December 2008 but before 30 December 2011

for a consideration to be calculated with reference

to the profits earned by Campwell and the price earnings ratio

of Iliad.

In terms of the Put option formula, Iliad’s obligation to acquire

this remaining 25% of Campwell will be at a 30% discount to

the PE ratio of Iliad at the time of the Put option exercise. The

PE ratio at the time of the Put option exercise is capped at a

maximum of 10 times.

The directors wish to draw to the attention of stakeholders that

although the Campwell Put option is reflected as a R57 million

obligation, this commitment should be viewed as an opportunity

to acquire the remaining 25% of Campwell at a 30% discount

to the future listed market value of the Iliad share. The

25% tranche is also designed to act as a lock-in incentive

for Campwell vendors to remain in managerial positions in

Campwell until 2011 and to achieve and exceed their earnings

projections. As the put liability varies according to changes in

the future Iliad price earnings multiple, the directors are of the

view that Iliad has hedged itself against overpaying in respect

of this 25% stake.

Further details are set out in notes 3 and 11 of the annual

financial statements.

stAtement of diRectoRs’ Responsibility diRectoRs’ RepoRt


2 Group results

The Group’s results and state of affairs for the year under

review are set out on pages 27 to 60 and further information

relating thereto is set out in the chief executive’s report.

3 Dividend

The distribution of 52 cents per ordinary shares paid out of the

stated capital during April 2008 is reflected in the statement

of changes in equity.

In view of the sound results, positive cash flows from operating

activities and a strong balance sheet, the directors have

maintained the distribution to shareholders by paying a cash

dividend of 52 cents per share (2007: distribution out of share

capital of 52 cents per share).

Set out below are the salient dates applicable to the

distribution:

• Last date to trade “cum” the distribution is Wednesday,

8 April 2009.

• Trading commences “ex” the distribution is Thursday,

9 April 2009.

• Record date is Friday, 17 April 2009.

• Payment date is Monday, 20 April 2009.

Share certificates may not be dematerialised or rematerialised

between Thursday, 9 April 2009 and Friday, 17 April 2009,

both dates inclusive.

4 Stated capital

4.1 Iliad Africa Limited

Details of the stated capital are as follows:

4.1.1 Issued ordinary shares

On 31 December 2008 the company had 138 217 794

ordinary shares in issue and the stated capital amounted

to R 122 451 following the repurchase and cancellation of

8 215 614 ordinary shares at a cost of R 85 822 604 and

a distribution out of stated capital of R 76 145 372.

At the beginning of the year under review the company had

146 433 408 ordinary shares in issue and the stated capital

amounted to R 162 090 427.

The issued shares are widely held by the public. An analysis of

shareholders and shareholdings at 31 December 2008 appears

on page 61 of the annual report.

4.1.2 “A” shares

There were no changes to the authorised and issued “A” shares

during the year under review.

5 Special resolutions

No material special resolutions have been passed during

the year except those passed at the annual general meeting

held on 29 May 2008 which dealt with the repurchase and

cancellation of shares by the company.

6 Directors and secretary

Non-executive independent directors: Messrs HC Turner

(chairman), RT Ririe and Ms MY Sibisi.

Executive directors: Messrs E Beneke and NP Goosen.

Following the announcement of Ralph Patmore’s retirement,

Eugene Beneke was appointed Chief executive officer of the

Group on 1 November 2008.

Ralph Patmore resigned as a director on 31 December 2008.

In terms of the company’s Articles of Association, Messrs

E Beneke and NP Goosen retire by rotation at the forthcoming

annual general meeting. Being eligible, both directors have

offered themselves for re-election.

Secretary: Mr JLD Mendes. Information concerning the group

secretary is reflected on page 67.

There were no further changes to the directors and group

secretary during the year.

diRectoRs’ RepoRt


7 Directors’ shareholding

The total direct and indirect beneficial and non-beneficial

interest of directors in the shares of the company are:

Direct Indirect and

2008 beneficial non-beneficial

NP Goosen 1 245 049

HC Turner 200 000

200 000 1 245 049

2007

NP Goosen 1 100 000

HC Turner 200 000

200 000 1 100 100

The shareholdings above have not changed between

31 December 2008 and the date of the financial statements.

No director held in excess of 1% of the company’s stated

capital. All major shareholders with beneficial interests in Iliad

greater than 5% at 31 December 2008 are disclosed on

page 61.

8 Subsidiaries

Information relating to the subsidiaries appears on page 60 of

this report.

9 Auditors

Grant Thornton will continue in office in accordance with

Section 270 (2) of the Companies Act.

10 Non-current assets

There were no changes to the nature and policies relating to

non-current assets of the Group during the period.

11 Post balance sheet events

11.1 Acquisitions

The following acquisition was made after year-end and prior to

the date of this report. This acquisition will not have a material

effect on the financial statements.

11.1. On 1 March 2009, in line with the Group’s stated

strategic intent, Iliad Africa Trading (Proprietary) Limited

acquired for cash, the business of TPS in Cape Town from

Timber Preservation Services CC. The acquisition will be

effected through Iliad’s subsidiary, United Tube (Proprietary)

Limited. The acquisition is however still subject to conditions

precedent.

diRectoRs’ RepoRt


bAlAnce sheets income stAtements

ASSETS

Non-current assets

Property, plant and equipment 2 108 861 71 899

Intangible assets 3 580 703 468 288

Investment in subsidiaries 4 66 592 166 489

Deferred taxation 5 19 246 23 041

Total non-current assets 708 810 563 228 66 592 166 489

Current assets

Inventories 6 800 250 735 151

Trade and other receivables 7 519 985 469 279 397

Taxation 8 372 1 131 1 230 1 067

Cash and cash equivalents 8 96 238 47 043 8

Total current assets 1 328 607 1 301 799 48 670 1 075

Total assets 2 037 417 1 865 027 115 262 167 564

EQUITY AND LIABILITIES

Equity

Stated capital 9 122 162 090 122 162 090

Retained earnings (Accumulated loss) 984 239 733 802 74 775 (35 000)

Share-based payment reserve 9.6 40 247 40 247 40 247 40 247

Attributable to equity holders of the company 1 024 608 936 139 115 144 167 337

Minority interest 10 1 157

Total equity 1 025 765 936 139 115 144 167 337

Non-current liabilities

Long-term borrowings 11 65 981 68 286

Total non-current liabilities 65 981 68 286

Current liabilities

Trade and other payables 14 920 850 854 833 118 227

Short-term borrowings 11 4 234 2 948

Taxation 889 2 821

Bank overdraft 8 19 698

Total current liabilities 945 671 860 602 118 227

Total equity and liabilities 2 037 417 1 865 027 115 262 167 564

Net asset value per share (cents) 741,3 639,3

Net tangible asset value per share (cents) 321,2 319,5

Based on 138 217 794 ordinary shares at year-end

(2007: 146 433 408 ordinary shares)

GROUP COMPANY

2008 2007 2008 2007 Notes R000 R000 R000 R000

as at 31 december 2008


bAlAnce sheets income stAtements

Revenue 4 610 920 4 180 355

Cost of sales (3 261 971) (2 977 275)

Gross margin 1 348 949 1 203 080

Administration, selling and distribution expenses (994 552) (855 647)

Operating profit (loss) before investment income 15 354 397 347 433 104 116 (1 243)

Investment income 16 52 996 14 721 5 496 102 064

Operating profit before finance charges 407 393 362 154 109 612 100 821

Finance charges 17 (71 275) (22 595)

Profit before taxation 336 118 339 559 109 612 100 821

Taxation 18 (84 524) (92 126) 163

Profit for the year 251 594 247 433 109 775 100 821

Attributable to:

Minority shareholders 10 1 157

Ordinary shareholders 250 437 247 433

Profit for the year 251 594 247 433

Number of ordinary shares in issue at year-end 9 138 217 794 146 433 408

Weighted average number of ordinary shares in issue 20 141 329 209 146 433 408

Fully diluted weighted average number of ordinary

shares in issue 20 142 668 859 150 961 099

Earnings per share (cents)

– Basic 20 177,2 169,0

– Fully diluted 20 175,5 163,9

Distribution per share – declared post year-end from

current year’s profit (cents) 19 52,0 52,0

GROUP COMPANY

2008 2007 2008 2007 Notes R000 R000 R000 R000



GROUP COMPANY

2008 2007 2008 2007 Notes R000 R000 R000 R000

cAsh flow stAtements stAtements of chAnges in shAReholdeRs’ equity


Cash flows from operating activities 245 727 153 236 109 106 100 551

Profit before taxation 336 118 339 559 109 612 100 821

Adjustments: 51 033 29 536 (5 496) (102 064)

Depreciation 33 760 22 763

Profit on disposal of property, plant and equipment (1 006) (1 101)

Investment income (52 996) (14 721) (5 496) (102 064)

Finance charges 71 275 22 595

Working capital changes during the year (33 243) (85 511) (506) 45

Increase in inventories (47 639) (128 386)

Increase in trade and other receivables (47 006) (19 598) (397)

Increase / (decrease) in trade and other payables 61 402 62 473 (109) 45

Cash flows from operations 353 908 283 584 103 610 (1 198)

Investment income 52 996 14 721 5 496 102 064

Finance charges (71 275) (22 595)

Taxation paid 25.1 (89 902) (122 474) (315)

Cash flows from investing activities (189 986) (141 033) 99 897 63 235

Purchase of businesses 25.2 (141 119) (112 050)

Repayments by subsidiaries 99 897 63 235

Additions to property, plant and equipment to

maintain operations (56 481) (32 402)

Proceeds on disposal of property, plant and equipment 25.3 7 614 3 419

Cash flows from financing activities (171 036) (53 177) (161 968) (163 779)

8 215 614 shares repurchased and cancelled (85 823) (85 823)

Cancellation of 7 851 111 treasury shares as per

special resolution (102 064)

Increase in short-term borrowings 1 286 1 651

Distributions out of share capital (76 145) (58 574) (76 145) (61 715)

(Decrease) / increase in long-term liabilities (10 354) 3 746

Net (decrease)increase in cash and cash equivalents for the year (115 295) (40 974) 47 035 7

Cash and cash equivalents at beginning of the year 96 238 156 854 8 1

Cash and cash equivalents acquired 25.2 (641) (19 642)

Cash and cash equivalents at end of the year 8 (19 698) 96 238 47 043 8


Balance at 1 January 2007 203 892 122 503 019 40 247 747 280 747 280

7 851 111 shares, held as treasury shares by a

subsidiary, cancelled in terms of special resolution 16 650 (16 650)

Profit for the year 247 433 247 433 247 433

Distributions from stated capital (note 19) (58 574) (58 574) (58 574)

Balance at 1 January 2008 161 968 122 733 802 40 247 936 139 936 139

8 215 614 shares repurchased and cancelled (85 823) (85 823) (85 823)

Profit for the year 250 437 250 437 1 157 251 594

Distributions from stated capital (note 19) (76 145) (76 145) (76 145)

Balance at 31 December 2008 122 984 239 40 247 1 024 608 1 157 1 025 765

Balance at 1 January 2007 232 367 122 (42 441) 40 247 230 295

7 851 111 shares, held as treasury shares by a

subsidiary, cancelled in terms of special resolution (8 684) (93 380) (102 064)


Distributions from stated capital (note 19) (61 715) (61 715)

Balance at 1 January 2008 161 968 122 (35 000) 40 247 167 337



Distributions from stated capital (note 19) (76 145) (76 145)

Balance at 31 December 2008 122 74 775 40 247 115 144

Share

Accumulated based

Stated “A” (deficit) payment Total

capital shares profit reserve equity

R000 R000 R000 R000 R000

Attributable

Share based to equity

Stated “A” Retained payment holders of Minorty Total

capital shares income reserve the company interest equity

R000 R000 R000 R000 R000 R000 R000

GROUP

cAsh flow stAtements stAtements of chAnges in shAReholdeRs’ equity

COMPANY



1 Accounting policies

The financial statements set out on pages 27 to 60 have been

prepared in accordance with International Financial Reporting

Standards (IFRS) and the Companies Act of South Africa

1973. IFRS is continuing to evolve through the issue and/or

endorsement of new standards and interpretations as well as

developments in the application of recently issued standards.

This may impact on future reported results and disclosure.

The basis of preparation is consistent with the prior year. The

financial statements are prepared on the going concern basis

in accordance with the historic cost convention, except for

certain financial instruments which are carried at fair value.

1.1 Judgements, estimates and assumptions

In preparing the financial statements, management is required

to make estimates and assumptions that affect reported

expenses, assets, liabilities and disclosure of contingent assets

and liabilities. Use of available information and the application

of judgement are inherent in the formation of estimates. Actual

results in the future could differ from these estimates which

could be material to the financial statements.

The following have been identified as being areas where

management has made significant judgements or estimates:

1.1.1 Impairment of assets

An assessment of each independent cash generating unit at an

entity and intangible asset level is performed at each reporting

period. Discounted cash flows are used to assess the cash

operating units. All assumptions and estimates used relating to

the discount and growth rates are disclosed in note 3.3.

1.1.2 Deferred taxation

Deferred tax assets are recognised to the extent that it is

probable that taxable income will be available in the future

against which they can be utilised. Future taxable profits are

estimates based on business plans which include estimates

and assumptions regarding economic growth, interest, inflation,

taxation rates and competitive forces.

1.1.3 Contingent liabilities

Management applies its judgement to facts and advice it

receives from its attorneys, advocates and other advisors

in assessing if an obligation is probable, i.e. more likely

than not or remote. This judgement is used to determine if

the obligation is recognised as a liability or disclosed as a

contingent liability.

1.1.4 Valuation of options The valuation of options granted to the Campwell Hardware

vendors (refer note 11.2) and the Woman’s Private Equity Fund

(refer note 9.6) have been valued by the directors with the

assistance of an external valuator.

1.2 Basis of consolidationThe consolidated financial statements incorporate the assets,

liabilities, income, expenses and cash flows of the holding

company and its subsidiaries.

The results of subsidiaries acquired or disposed of during the

period are included in the consolidated income statement from

the date of acquisition or up to the date of disposal.

Inter-company transactions, resulting profit and losses

and balances between Group companies are eliminated on

consolidation.

On acquisition, the Group recognises the subsidiary’s

identifiable assets, liabilities and contingent liabilities at fair

value from the effective date of acquisition.

Minority interests in the net assets of consolidated subsidiaries

are shown separately from the group equity therein. It consists

of the amount of those interests at acquisition plus the

minorities’ subsequent share of changes in the equity of the

subsidiary. On acquisition the minorities’ interest is measured

at the proportion of the pre-acquisition fair values of the

identifiable assets and liabilities acquired. Losses applicable

to minorities in excess of its interest in the subsidiaries’ equity

are allocated against the Group’s interest except to the extent

that the minorities have a binding obligation and the financial

ability to cover losses.

1.3 Business combinationsIn the case of businesses acquired during the year, the results

are included from the date the Group effectively obtained

unrestricted control of the businesses acquired, including the

fulfilment of all conditions. The businesses acquired have

been accounted for in terms of the provisions of IFRS 3, which

requires that the Group initially measures the identifiable

assets, liabilities and contingent liabilities acquired at their fair

values as at the date of acquisition.

Accounting policies



1.4 Comparative figuresComparative figures are restated in the event of a change in

accounting policy or prior period error.

1.5 Post balance sheet eventsRecognised amounts in the financial statement are adjusted

to reflect events arising after the balance sheet date that

provide evidence of conditions that existed at balance sheet

date. Events after the balance sheet date that are indicative

of conditions that arose after the balance sheet date are dealt

with by way of a note.

1.6 Investment in subsidiariesShares in subsidiaries are accounted for in the company’s

separate annual financial statements, at cost less accumulated

impairment losses. Loans to subsidiaries are capitalised to

the net investment in subsidiaries where settlement is neither

planned nor likely in the foreseeable future.

1.7 Property, plant and equipmentThe cost of an item of property, plant and equipment is

recognised as an asset when it is probable that the future

economic benefits associated with the item will flow to the

Group and the cost of the item can be measured reliably.

Assets are stated at cost less accumulated depreciation and

any accumulated impairment losses. The useful lives and

residual values are assessed at each balance sheet date and

adjusted if appropriate.

Depreciation on property, plant and equipment is calculated

using the straight-line basis to write down their cost over their

estimated economic useful lives to estimated residual values,

using a method that reflects the pattern in which the asset’s

future economic benefits are expected to be consumed by

the entity.

The following rates were used during the year to depreciate

property, plant and equipment to estimated residual values:

Machinery and warehouse equipment 3 to 6 years

Vehicles 4 to 5 years

Computer equipment and software 2 to 3 years

Furniture and fixtures 7 to 10 years

Improvements to leased premises and renovations to

showrooms are depreciated over the lesser of the useful life

and the period of the lease.

The gain or loss arising on the scrapping of property, plant

and equipment and the depreciation charge for each period is

recognised in the income statement.

1.8 Intangible assetsAn intangible asset is an identifiable non-monetary asset

without physical substance. It includes patents, trademarks

and goodwill.

Intangible assets are initially recognised at cost if acquired

separately or internally generated or at fair value if acquired as

part of a business combination.

1.8.1 Trademarks

Trademarks are carried at cost less any accumulated

amortisation and any impairment losses.

Trademarks are assessed at the individual asset level as having

either a finite or indefinite life.

If assessed as having an indefinite useful life, the trademark

is not amortised but is tested for impairment on an annual

basis, or more frequently if there is an indication that the

carrying value may be impaired, and is impaired if necessary.

If assessed as having a finite useful life, trademarks are

amortised over their useful lives using a straight-line basis and

tested for impairment if there is an indication that they may be

impaired.

All trademarks currently held by the Group have been assessed

as having indefinite lives.

No valuation is made of internally developed and maintained

trademarks or brand names. Expenditure incurred to maintain

these brands is recognised in profit and loss.

1.8.2 Goodwill

Goodwill represents the future economic benefits arising from

assets that are not capable of being individually identified

and separately recognised in a business combination and is

determined as the excess of the cost of an acquisition over the

interest in the net fair value of the identified assets, liabilities

and contingent liabilities of the subsidiary or business unit at

the date of acquisition.

Goodwill is carried at cost less any accumulated impairment

losses. Goodwill is written down to the extent that the balances

will in all probability no longer be recovered from expected

future economic benefits.

At acquisition date, goodwill acquired is allocated to cash

generating units and impairment is assessed in relation to

these units on an annual basis.

Accounting policies


1.9 Financial instruments

1.9.1 Accounting for financial instruments

The Group classifies financial instruments or their component

parts, on initial recognition as a financial asset, a financial

liability or an equity instrument in accordance with the substance

of the contractual arrangement. Financial assets and liabilities

are recognised in the Group’s balance sheet when the company

becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amount

reported in the financial statements when the Group has a

currently enforceable legal right to set off the recognised

amounts and either intends to realise the assets and settle the

liabilities simultaneously, or to settle on a net basis.

Financial assets, other than hedging instruments, can be

divided into the following categories:

• loans and receivables

• financial assets at fair value through profit or loss

Financial assets are assigned to the different categories on

initial recognition, depending on the characteristics of the

instrument and its purpose. A financial instrument’s category

is relevant for the way it is measured and whether the resulting

income and expense are recognised in profit or loss or charged

directly against equity.

An assessment of whether a financial asset is impaired is made

at least at each reporting date. For receivables, this is based

on the last credit information available, i.e. recent counterparty

defaults and external credit ratings. Financial assets that are

substantially past due are also considered for impairment. All

income and expense relating to financial assets are recognised

in the income statement line item “investment income” or

“finance charges”, respectively.

Loans and receivables are non-derivative financial assets with

fixed or determinable payments that are not quoted in an

active market. They are subsequently measured at amortised

cost using the effective interest method, less provision for

impairment. Any change in their value is recognised in profit

or loss. Iliad’s trade and other receivables and cash and cash

equivalents fall into this category of financial instruments.

Financial assets at fair value through profit or loss include

financial assets that are either classified as held for trading

or are designated by the entity to be carried at fair value

through profit or loss upon initial recognition. By definition, all

derivative financial instruments that do not qualify for hedge

accounting fall into this category. The Group’s management

however, does not consider any other financial asset for

designation into this category. Any gain or loss arising from

financial assets held at fair value is based on changes in fair

value, which is determined by direct reference to active market

transactions, and is recognised in profit and loss.

1.9.2 Financial liabilities

The Group’s financial liabilities, which are recognised at fair

value on initial recognition, include borrowings, trade and

other payables (including finance lease liabilities). These are

subsequently measured at amortised cost using the effective

interest rate method.

All interest related charges reported in profit or loss are

included in the income statement line item “finance charges”.

1.9.3 Cash and cash equivalents

Cash and cash equivalents comprise cash and balances with

banks net of bank overdrafts, short-term borrowings and

acceptance credits, all of which are available for the Group and

are readily convertible into known amounts of cash. Cash and

cash equivalents are measured at fair value.

1.9.4 Loans between companies within the Group

Loans between companies within the Group are measured at

amortised cost less any impairment loss. An impairment loss

is recognised in the income statement of the company when

there is objective evidence that a subsidiary loan receivable is

impaired. Impairment losses are eliminated on consolidation.

Accounting policies



1.10 Impairment of assetsAt each reporting date the carrying amount of the tangible

and intangible assets are assessed to determine whether

there is any indication that those assets may have suffered an

impairment loss. If any such indication exists, the recoverable

amount of the asset is estimated in order to determine the

extent of the impairment loss.

Irrespective of whether there is an indication of impairment,

the Group also:

• tests trademarks with an indefinite life for impairment

annually by comparing its carrying amount with its recoverable

amount,

• tests goodwill acquired in a business combination for

impairment annually by comparing its carrying amount

with its recoverable amount.

Where it is not possible to estimate the recoverable amount

of an individual asset, the recoverable amount of the cash-

generating unit to which the asset belongs is estimated. Value

in use, included in the calculation of the recoverable amount,

is estimated taking into account future cash flows, forecast

market conditions and the expected lives of the assets.

If the recoverable amount of an asset (or cash generating unit)

is estimated to be less than its carrying amount, its carrying

amount is reduced to the recoverable amount. The impairment

loss is first allocated to goodwill and then to the other assets

of the cash generating unit. Subsequent to the recognition of

an impairment loss, the depreciation or amortisation charge for

assets is adjusted to allocate its remaining carrying value, less

any residual value, over its remaining useful life. Impairment

losses are recognised in profit and loss.

Impairment losses on trade and other receivables is determined

based on specific and objective evidence that such assets are

impaired and measured as the difference between the carrying

amount of assets and the present value of the estimated future

cash flows discounted at the effective interest rate computed

at initial recognition. Individual receivables are considered

for impairment when they are past due at the balance sheet

date or when objective evidence is received that a specific

counterparty will default. All other receivables are reviewed for

impairment in groups, which are determined by reference to

the industry and region of a counterparty. The percentage of

the write down is then based on recent historical counterparty

default rates for each identified group.

If any impairment loss subsequently reverses, the carrying

amount of the asset (or cash generating unit) is increased to

the revised estimate of its recoverable amount but limited to

the carrying amount that would have been determined had no

impairment loss been recognised in prior years. A reversal of

an impairment loss is recognised in profit or loss.

For the purpose of impairment testing, goodwill and trademarks

are allocated to each of the cash-generating units expected to

benefit from the synergies of the combination. No goodwill and

trademark impairment losses are subsequently reversed. The

attributable amount of goodwill and trademarks are included in

the profit or loss on disposal when the relevant business

is sold.

1.11 Leases

Leases are classified as finance leases or operating leases at

the inception of the lease.

1.11.1 Finance leases

Assets held under finance lease agreements are capitalised

and are depreciated over their expected useful lives or the

term of the relevant lease, where shorter. Leases are classified

as finance leases whenever the terms of the lease transfer

substantially all of the risks and rewards of ownership to the

lessee, whereas all other leases are classified as operating

leases. At the commencement of the lease, these assets are

reflected at the lower of the fair value of the asset and the

present value of the minimum lease payments at the date of

acquisition. The discount rate used in calculating the present

value of the minimum lease payments is the interest rate

implicit in the lease. Any initial direct costs are added to

the amount recognised as an asset. Finance costs represent

the difference between the total lease commitments and the

fair value of the assets acquired. Finance costs are charged

to profit and loss over the term of the lease and at interest

rates applicable to the lease on the remaining balance of

outstanding lease commitments based on the effective rates

of interest.

1.11.2 Operating leases

Rentals payable under operating leases are charged to profit

and loss on a straight-line basis over the term of the

relevant lease.

Accounting policies


1.12 InventoriesInventories, comprising merchandise, raw materials and

finished goods are valued at the lower of cost and estimated

net realisable value. Estimated net realisable value is the

selling price in the ordinary course of business less the

estimated cost necessary to make the sale when inventories

are sold. The carrying amount of the inventories is recognised

as an expense in the period in which the related revenue is

recognised. The amount of any write down of inventories to net

realisable value and all the losses of inventories are recognised

as an expense in the period the write down or loss occurs.

Cost is determined on a first-in first-out basis. Obsolete,

redundant and slow moving inventories are identified and

written down to their estimated net realisable value. Cost

includes costs of conversion and other costs incurred in

bringing the inventories to their present location and condition.

Provision is made for slow moving, obsolete and redundant

inventories.

1.13 ProvisionsProvisions are recognised when the company has a present

legal or constructive obligation as a result of past events, for

which it is probable that an outflow of economic benefits will

be required to settle the obligation, and a reliable estimate can

be made of the amount of the obligation. Where the effect of

discounting to present value is material, provisions are adjusted

to reflect the time value of money, and where appropriate, the

risk specific to the liability.

1.14 Taxation1.14.1 Current tax assets and liabilities

Current tax assets and liabilities for the current and prior periods

are measured at the amount expected to be paid or recovered

from the tax authorities, using the tax rates that have been

enacted or substantively enacted by the balance sheet date.

1.14.2 Secondary taxation on companies

Secondary taxation on companies (STC) is recognised as part

of the current taxation charge when the related dividend

is declared.

1.14.3 Deferred taxation

A deferred taxation asset or liability is recognised for all

deductible or taxable timing differences except to the extent

that they arise from the initial recognition of goodwill or an

asset or liability in a transaction that:

• is not a business combination; and

• at the time of the transaction, affects neither accounting

profit nor taxable profit or tax loss.

Deferred tax assets are recognised for all deductible temporary

differences and unused tax losses to the extent that it

is probable that taxable profit will be available in future

against which they can be utilised. Future tax profits are

estimated based on business plans which include estimates

and assumptions regarding economic growth, interest rates,

inflation, taxation rates and competitive forces.

Deferred tax is calculated at the tax rates that are expected to

apply to the period when the asset is realised or the liability

is settled, based on tax rates that have been enacted or

substantively enacted by the balance sheet date.

1.14.4 Tax expenses

Current and deferred taxation is recognised as income or as an

expense and included in profit and loss for the period except

to the extent that the tax arises from: a transaction or event

which is recognised in the same or different period directly in

equity, or a transaction or a business combination.

Current tax and deferred taxes are charged or credited directly

to equity if the tax relates to items that are credited or charged,

in the same or a different period, directly to equity.

1.15 Revenue recognition

Revenue is recognised on the date of sale when significant

risks and rewards of ownership are transferred to the buyer.

Revenue is measured at the fair value of the consideration

received or receivable and represents the amounts receivable

for inventory sold and services provided in the normal course

of business, net of trade discounts, volume rebates and

value added tax. Sales within the Group are eliminated on

consolidation.

1.16 Cost of sales

Cost of sales consists of the cost of inventory sold during the

period net of trade discounts, volume rebates and value added

tax. Any write down of inventories to net realisable value and

all losses of inventories or reversals of previous write downs or

losses are recognised in cost of sales in the period the write

down, loss or reversal occurs.

Accounting policies



1.17 Income from investmentsInterest is recognised on a time proportion basis that takes

into account the effective yield on the asset and the principal

outstanding.

Dividend income from investments is recognised when the

shareholders’ right to receive payment has been established.

1.18 Borrowing costsBorrowing costs are expensed in the period to which they are

incurred.

1.19 Translation of foreign currenciesForeign currency transactions are recorded, on initial

recognition in Rand, by applying to the foreign currency the

exchange rate between the Rand and the foreign currency

at the date of the transactions. Uncovered foreign currency

transactions are translated at the spot rates ruling on the date

of the transactions. The related monetary assets and liabilities

at year-end are translated at the spot rates ruling at the

balance sheet date.

Where forward exchange contracts have been entered

into to denominate transactions in Rand, the transactions

are translated at the spot rates at the transaction date. The

year-end monetary balances of liabilities are translated at

the spot rates at year-end. Open forward exchange contracts

are revalued at market rates for equivalent period exchange

contracts. Exchange differences are recognised in the results

for the year.

1.20 Employee benefits1.20.1 Short-term employee benefitsThe cost of short-term employee benefits, (those payable within

one year after the service is rendered, such as paid leave,

sick leave and bonuses) are recognised in the period in which

the service is rendered and is not discounted. The expected

cost of compensated leave is recognised as an expense as the

employees render services that increase their entitlement or, in

the case of non- accumulating leave, when the leave occurs.

The expected cost of profit sharing and bonus payments is

recognised as an expense when there is a legal or

constructive obligation to make such payments as a result of

past performance.

1.20.2 Defined contribution plansContributions to defined contribution plans in respect of

service in a particular period are recognised as an expense in

the period concerned.

By virtue of the types of schemes operated in the Group no

past service costs or experience adjustments will arise in the

retirement funding arrangements.

1.20.3 Defined benefit plansThe defined benefit plan is fully funded and there are no

unfunded liabilities. The Group’s contributions to the defined

benefit plan are charged to the income statement in the year to

which they relate.

1.21 Share capital and equityAny repurchases by the Group of its own equity instruments

are treated as treasury shares and are deducted from equity on

consolidation. No gain or loss is recognised in the profit and

loss on the purchase, sale, issue or cancellation of the Group’s

own equity instruments. Considerations paid or received are

recognised directly in equity.

1.22 Share-based payments

Goods and services received or acquired in a share-based

payment transaction are recognised when the goods or services

are received. A corresponding increase in equity is recognised

if the goods or services were received in an equity-settled

share-based payment transaction or a liability if the goods or

services were acquired in a cash-settled share-based payment

transaction.

For equity-settled share-based payment transactions, the goods

or services received are measured, and the corresponding

increase in equity is recognised, at the fair value of the goods

or services received, unless the fair value cannot be measured

reliably in which case the value is measured by reference to

the fair value of the equity instruments granted.

For cash-settled share-based payment transactions, the goods

or services received and the liability incurred is measured at

the fair value of the liability. Until the liability is settled the

fair value of the liability is re-measured at each reporting date

and at the date of settlement, with any changes in the fair

value recognised in the income statement for the period.

Accounting policies


1.23 Statements and interpretations issued but not yet effectiveAt the date of approval of these annual financial statements,

certain new accounting standards, amendments and

interpretations to existing standards had been published that

are mandatory for accounting periods beginning on or after the

1 January 2009 which the Group has elected not to

adopt early.

The following standards and interpretations may have an

impact on the Group’s operations when they become effective.

The Group is of the opinion that the impact there on will not

be material to the Group results:

• Amendment to IFRS 2, Share-Based Payment (effective

from 1 January 2009): The amendment deals with two

matters. It clarifies that vesting conditions are service

conditions and performance conditions only. Other features

of a share-based payment are not vesting conditions. It also

specifies that all cancellations, whether by the entity or by

other parties, should receive the same accounting treatment.

The amendment will be adopted by the Group in financial

periods beginning on or after 1 January 2009.

• IFRS 3, Business Combinations (Revised) (effective from

1 July 2009): The new standard continues to apply the

acquisition method to business combinations, with some

significant changes. All payments to purchase a business

are to be recorded at fair value at the acquisition date, with

some contingent payments subsequently re-measured at fair

value through income. Goodwill may be calculated based on

the parent’s share of net assets or may include goodwill

related to the minority interest. All transaction costs will be

expensed. This interpretation will be adopted by the Group

for future acquisitions in financial periods beginning on or

after 1 July 2009.

• IFRS 8, Operating Segments (effective from 1 January

2009): IFRS 8 requires an entity to adopt the ‘management

approach’ to reporting on the financial performance of its

operating segments. The standard sets out requirements

under which segment information is presented on the same

basis as that used for internal reporting purposes. The Group

will apply these disclosure requirements in financial periods

beginning on or after 1 January 2009.

• IAS 1, Presentation of Financial Statements (Revised)

(effective from 1 January 2009): The changes made to

IAS 1 are to require information in financial statements

to be aggregated on the basis of shared characteristics and

to introduce a statement of comprehensive income. This will

result in a separate presentation of changes in equity that

arise from transactions with owners in their capacity as

owners from other changes in equity. The amended version

of this standard also changes the terminology and

presentation of the primary financial statements. The Group

will apply these requirements in financial periods beginning

on or after 1 January 2009.

• IAS 23, Borrowing Costs (Revised) (effective from

1 January 2009): In the revised standard, borrowing costs

that are directly attributable to the acquisition, construction

or production of qualifying assets form part of the costs

of that asset. Other borrowing costs shall be recognised

as an expense in the period in which they have occurred.

The Group will apply these requirements to significant

future capital acquisitions in financial periods beginning on

or after 1 January 2009.

• IAS 27, Consolidated and Separate Financial Statements

(Revised) (effective from 1 July 2009): In the revised

standard, transactions with non-controlling interests in

which control is not gained or lost are accounted for as

equity transactions. No income statement gain or loss is

recorded and no adjustment is made to goodwill. On loss of

control of a subsidiary, any retained investment is

re-measured to fair value and a gain or loss is recorded

in profit and loss. This interpretation will be adopted by the

Group in financial periods beginning on or after 1 July 2009.

Accounting policies notes to the AnnuAl finAnciAl stAtements



2008 2007

R000 R000

2.1 Movements during the year Capital expenditure 56 481 32 402

Owned assets

– Machinery and warehouse equipment 16 034 1 807 – Vehicles 14 833 633 – Computer equipment and software 8 263 5 432 – Furniture and fixtures 15 307 11 933 – Improvements to leasehold premises 2 044 6 832

Capitalised leased assets – Machinery and warehouse equipment 5 765

Acquisitions (see note 25.2) 20 849 8 080

Owned assets – Machinery and warehouse equipment 11 697 2 973 – Vehicles 5 991 3 491 – Computer equipment 702 701 – Furniture and fixtures 2 434 915 – Improvements to leasehold premises 25

Disposals (6 608) (2 318)

Owned assets – Machinery and warehouse equipment (2 763) (305) – Vehicles (1 668) (863) – Computer equipment and software (553) (328) – Furniture and fixtures (842) (727) – Improvements to leasehold premises (782) (1) Capitalised leased assets – Machinery and warehouse equipment (94)

Depreciation for the year (33 760) (22 763)

36 962 15 401

2.2 Certain assets are hypothecated under finance lease and instalment sale agreements (see note 11).

2.3 Property, plant and equipment have an estimated replacement cost and insurance value of

R257 million (2007: R193 million).

Accounting policies notes to the AnnuAl finAnciAl stAtements

2008 2007

Net Net

Accumulated carrying Accumulated carrying

Cost depreciation value Cost depreciation value

R000 R000 R000 R000 R000 R000

2 Property, plant and equipment Owned assets

– Machinery and warehouse equipment 53 922 23 431 30 491 31 088 18 852 12 236

– Vehicles 41 544 18 564 22 980 28 606 19 936 8 670

– Computer equipment and software 39 405 28 708 10 697 32 903 24 563 8 340

– Furniture and fixtures 64 584 36 069 28 515 41 223 19 706 21 517

– Improvements to leasehold premises 25 197 12 694 12 503 29 475 14 375 15 100

Capitalised leased assets

– Machinery and warehouse equipment 10 563 6 888 3 675 11 201 5 165 6 036

Total 235 215 126 354 108 861 174 496 102 597 71 899

GROUP

GROUP



3 Intangible assets

Goodwill (refer note 3.1) 455 528 393 213

Trademarks (refer note 3.2) 125 175 75 075

580 703 468 288

3.1 Goodwill

At beginning of the year 393 213 320 461

Acquisitions 62 315 67 065

Contingent purchase consideration (refer note 11.2) 5 687

At end of the year 455 528 393 213

Goodwill represents the excess of the purchase consideration

over the acquirer’s interest in the net fair value of the

identifiable assets, liabilities and contingent liabilities at the

date of acquisition purchased as part of a business combination.

3.2 Trademarks

– Indefinite useful lives

At beginning of the year 75 075 53 000

Acquisitions 50 100 22 075


Trademarks represent registered rights to the exclusive use of certain trademarks and brandnames that have been acquired as part of a

business combination and have been stated at their fair value determined by external trademark valuation specialists.

Trademarks with an indefinite life are considered to be indefinite based on the following factors:

– There is a high product life cycle for the trademark;

– There is a high level of maintenance expenditure required to obtain the future economic benefits, and

– The Group has the intention and ability to reach the required level of maintenance expenditure.

No value has been placed on internally generated trademarks in the Iliad operations.

3.3 Impairment testing of goodwill and trademarks with an indefinite life

Trademarks and goodwill acquired through acquisitions have been allocated to various divisions representing cash generating units

and have been tested for impairment accordingly.

The recoverable amount of the underlying cash generating units has been determined based on a value in use calculation using

the cash flow projections for the forthcoming five years, as per the financial budgets approved by senior management, adjusted for

expected annual growth thereafter. The average annual growth rate for the following five years used for the cash generating units

ranged from 2,5% to 10% depending on the entity assessed. Thereafter an average range of the perpetuity growth rate was 6% which

approximates the estimated future inflation.

The after-tax discount rate applied to the cash flow projections was 14%, being the weighted average cost of capital of Iliad.

In determining the cash flow projections for the forthcoming financial year, sales, gross margins and costs were based on historical

performance and adjusted for projected synergies arising from the acquisitions.

Management believes that any reasonable and possible change in the key assumptions would not cause the carrying amounts

of the cash generating units to exceed the recoverable amounts.

These calculations indicated that there was no impairment in the carrying value of trademarks and goodwill at 31 December 2008.

GROUP

2008 2007 R000 R000

notes to the AnnuAl finAnciAl stAtements



4 Investment in subsidiaries

Investment in subsidiaries (see note 27)

Shares at cost 1 1

Loans 66 591 271 245

66 592 271 246

Amount written off (104 757)

66 592 166 489

5 Deferred taxation

5.1 – Future tax allowances for trademarks which have

been written off 1 363 2 858

– IAS 17 straight-line rental adjustment 4 286 7 546

– Other temporary differences 13 597 12 637

19 246 23 041

5.2 Movements of deferred tax assets

Balance at beginning of the year 23 041 20 798

IAS 17 straight-line rental adjustment (3 260) 1 056

Reversing temporary differences on trademarks (1 495) (1 548)

Change in tax rate (795)

Other movements 1 755 2 735


6 Inventories

Merchandise 779 334 698 247

Raw materials 7 866 9 734

Finished goods 13 050 27 170

800 250 735 151

Inventory balances are net of write downs and provisions.

The cost of inventories recognised as an expense and included

in cost of sales amounted to R3,3 billion (2007: R3 billion).

The cost of inventories written off and included in cost of sales

amounted to R10 million (2007: R8 million).

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000




7 Trade and other receivables

Trade and other receivables 536 517 493 871 397

less: Impairment provision (16 532) (24 592)

519 985 469 279 397

All of the Group’s trade and other receivables are short-term.

The carrying value of trade receivables is considered a

reasonable approximation of fair value.

The trade receivables have been reviewed for indicators of

impairment. Certain trade receivables were found to be

impaired and a provision of R16,5 million

(2007: R24,5 million) has been recorded accordingly.

The impaired trade receivables are mostly due from

customers in the Group’s business-to-business market that

are experiencing financial difficulties. The reduction in the

impairment provision in the current year is due to the fact

that the Group has elected in specific circumstances to write

off debts as opposed to carrying an impairment provision.

Trade receivables comprise a widespread customer base.

The ongoing credit evaluation of the financial position of

customers is performed, and where appropriate, credit

guarantee insurance is purchased. The granting of credit is

made on application and is approved by management.

At year-end, the Group did not consider there to be any

significant concentration of credit risk which has not been

insured or adequately provided for.

In addition, some of the unimpaired trade receivables are past

due at the reporting date. The age of trade receivables past

due but not impaired is as follows:

More than three months but not more than six months

(91 – 180 days) 30 869 11 178

More than six months but not more than a year

(181 – 365 days) 1 748 7 435

32 617 18 613

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000



9 Share capital

9.1 Authorised

300 000 000 ordinary shares of no par value

12 243 804 “A” shares of no par value

9.2 Issued ordinary shares

138 217 794 (2007: 146 433 408) ordinary shares

of no par value

Balance at the beginning of the year 161 968 203 892 161 968 232 367

7 851 111 shares, held as treasury shares by a subsidiary,

cancelled in terms of special resolution 16 650 (8 684)


Distribution out of stated capital (76 145) (58 574) (76 145) (61 715)

161 968 161 968

9.3 Issued “A” shares

12 243 804 “A” shares issued on 1 April 2005 in terms

of the BEE transaction (Refer note 9.6) 122 122 122 122

122 122 122 122

Total issued share capital 122 162 090 122 162 090


The increase in trade receivables past due but not impaired for

the current year is mainly due to increased levels of

government and quasi-government debtors levels and

independent contractors for whom there is no history of default.

Payment cessions over the contractors and credit insurance

exist over these trade receivables.

8 Cash and cash equivalents

Cash and bank balances 156 170 96 238 47 043 8

Bank borrowings (refer note 11.3) (175 868)

(19 698) 96 238 47 043 8

Cash and cash equivalents includes deposits in dividend

income funds.

The effective interest rate on cash and cash balances

averaged 14,4% for the year (2007: 10,5%).

Unutilised bank overdraft facilities amount

to R600 million (2007: R550 million).

Bank overdraft facilities carry an interest rate at the prime

lending rate of its bankers (2007: prime lending rate

of its bankers).

Other short-term banking facilities carry an interest rate of

1% below the prime lending rate of its bankers

(2007: 1.5% below the prime lending rate of its bankers).

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000




9.4 Rights of “A” shares

The following rights, privileges and restrictions attach to the “A” shares of no par value:

1 The “A” shares will rank as regards voting rights pari passu in all respects with the ordinary shares in the capital of Iliad;

2 The holders of the “A” shares shall be entitled to receive notice of all meetings of members of Iliad and shall be entitled to be

present and/or vote, either in person or by proxy, at any meeting of shareholders of Iliad;

3 The “A” shares shall not confer any rights to receive any dividend or distribution out of any capital or revenue profits of Iliad;

4 The “A” shares shall not confer any rights to dividends or return on capital, nor shall they confer any rights to participate in any

surplus assets of Iliad, on a winding up;

5 Iliad shall at its option, and within its sole discretion, be entitled to redeem, convert or acquire all or any of the “A” shares at the

stated capital in respect of the “A” shares divided by the number of “A” shares being redeemed, at any time after 31 December

2009 and prior thereto, only in the following circumstances:

5.1 In the event of Iliad exercising its call option in terms of the BEE agreement, at any time after payment (in terms of the BEE

agreement) has been made to the holder of the shares in the issued share capital of Iliad which are the subject matter of the

call option; or

5.2 In the event of any options that are the subject matter of the BEE agreement being exercised by the holder thereof, Iliad shall

be entitled to cause to be redeemed, converted or acquired at any time following the date of issue of ordinary shares in respect

of options exercised, so many “A” shares as correspond with the number of options that are exercised;

6 Iliad shall, at the option of the holder of the “A” shares, be obliged to redeem, convert or acquire all or part of the “A” shares at the

stated capital in respect of the “A” shares divided by the number of “A” shares being redeemed, at any time falling on a date which

is after that specified in 5 above, which shall apply mutatis mutandis;

7 The terms of the “A” shares may not be modified, altered, varied, added to or abrogated from, and

8 The voting rights referred to in 1 above, shall terminate forthwith upon redemption or purchase of the “A” shares by Iliad.

9.5 Iliad Africa Second Share Option Scheme

All options granted to executive directors and operational executives in terms of this scheme (which were granted prior to November

2002) had been exercised at 31 December 2006. No further options were granted to executive directors and operational executives

during the year.

Salient features of the Iliad Africa Second Share Option Scheme are:

– It makes provision for the granting of options to employees of the companies in the Group and the offering of shares for purchase as

an incentive to promote the continued growth of and interest in the company.

– The scheme shares shall in the aggregate not exceed 20% of the issued share capital of the company. Currently the maximum number

of shares available to this scheme is 11 000 000 shares, of which options have been granted and exercised for 9 610 000 shares.

– The number of shares that any participant is entitled to acquire in terms of the scheme shall not exceed 22% of the maximum

number of shares reserved for this scheme.

– The option will remain open for a period of ten (10) years after the date of granting thereof.

Employee and executive director beneficiaries can exercise their options granted after the adoption of this scheme as follows:

– after the expiration of two years from the option date 33% of such beneficiary scheme shares

– after the expiration of three years from the option date a further 33% of such beneficiary scheme shares

– after the expiration of four years from the option date the remainder of such beneficiary scheme shares.



9.6 Women’s Private Equity Fund 1 (WPEF)

On 18 March 2005 the group concluded a broad-based BEE transaction. In terms thereof options were granted for 12 243 804

ordinary shares at a strike price to be calculated in accordance with the undermentioned formula.

Strike price = A + B - C

Where:

A = R6,58 (six rand and fifty eight cents), being a ten percent discount to the volume weighted average share price of Iliad on the

JSE as at 14 October 2004 (being the day after the letter of intent was executed by the parties);

B = Interest is calculated using the RSA 153 yield closing daily yield to maturity plus two and a half percent

C = The accumulated abnormal dividend for the period from the effective date to the payment date.

Based on the above formula the calculated price at 31 December 2008 is 957 cents (2007: 876 cents).

These options were valued on initial recognition and a share based payment reserve of R40 million (2007: R40 million) has been

raised in respect thereof. As this is an equity settled transaction these options are not revalued annually.

9.7 Unissued shares

The unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general

meeting of members. This authority remains in force until the next annual general meeting.

10 Minority interest Share of attributable earnings for the year 1 157 Balance at end of the year 1 157

Transactions with minority equity holders include the purchase by minority shareholders of 30% of the shareholding in United Metal Processors (Proprietary) Limited. The minority shareholders’ equity stake was acquired as part of the

National Tile Traders transaction.

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000


11 Borrowings11.1 Secured liabilities 13 046 10 165 Secured by finance lease and instalment sale agreements over vehicles and equipment with a net book value of R8 million (2007: R6 million). The liabilities bear interest at rates varying from 12,2% to 14,5% per annum (2007: 10,2% to 13,4% per annum) which are linked to the prime bank overdraft rate and are repayable in monthly instalments of approximately R0.5 million (2007: R0.2 million) inclusive of finance charges.

11.2 Contingent purchase consideration in respect of Campwell Hardware vendors 57 169 61 069 During 2006 the Group acquired certain of the assets and liabilities of the Campwell group.

The Campwell vendors retained 25% of the ordinary shares of Campwell Hardware (Pty) Ltd. The Campwell vendors have been granted a Put option by Iliad Africa Trading (Pty) Ltd in terms of which the Campwell vendors are entitled to sell this 25% tranche of Campwell Hardware (Pty) Ltd shares back to the Group. The Put can be exercised at any time between 2009 and 2011. The Put Strike Price is determined in terms of the Put formula which is similar to the Earn-Out Formula, with the added protection in the Group’s favour that the Put Strike Price also varies with future changes in the Group’s Price Earnings ratio.

It is the directors’ opinion, that, in all likelihood, the Put will be exercised in 2011. The directors have accordingly recognised the 25% acquisition, and raised the associated goodwill in respect of this acquisition. However, in future, should the Group’s acquisition of the 25% Campwell tranche be considered to be unlikely, the acquisition of this 25% tranche and associated goodwill asset will be de-recognised, and a minority stakeholder interest

will be recognised.

The estimated purchase consideration to acquire the remaining

25% of the Campwell shares has been calculated in terms of

the formula at R57 million (2007: R61 million) in present

value terms.

GROUP

2008 2007 R000 R000


for the year ended 31 December 2008


11.2 Contingent purchase consideration in respect of

Campwell Hardware vendors (continued)

Significant variables in the Put Formula (and consequently in

the Group’s Put obligation) are:

- 70% of the future Group’s PE ruling on the Put exercise date

between 2009 and 2011 (capped to a maximum of PE of 10).

- future Campwell earnings between 2009 and 2011.

The Put obligation and underlying financial projections have

been revised .

The valuation of the liability based on the current market

conditions is lower than the carrying amount of R57 million,

however, the directors are of the opinion that these current

market conditions are abnormal in nature and have therefore

elected not to reduce both the liability and the associated

goodwill.

11.3 Bank borrowings (refer note 8) 175 868

246 083 71 234

11.4 Less: Amounts payable within one year included with

current liabilities (180 102) (2 948)

Secured liabilities (4 234) (2 948)

Bank borrowings (175 868)

Long-term borrowings 65 981 68 286

12 Commitments

12.1 Operating leases

Estimated future rentals

– Property 225 197 230 856

– Vehicles and equipment 53 128 71 068

278 325 301 924

Operating leases payable

– within one year 91 381 93 847

– in second to fifth year inclusive 183 414 196 912

– later than five years 3 530 11 165

278 325 301 924



GROUP

2008 2007 R000 R000


12.1 Operating leases (continued)

Property commitments are for fixed rate leases for operating

and trading premises with an average term of five years.

Many lease contracts include a renewal option at the end of

the term at fair market rates. Rentals escalate at rates which

are in line with historical interest rates applicable to the

southern African environment. Lease periods do not exceed

ten years.

Motor vehicle and equipment commitments are fixed rate

leases in operating business units with an average lease term

of four years.

These commitments will be financed from available cash

resources, funds generated from operations and available

borrowing capacity.

12.2 Capital expenditure approved

Contracted for 29 120 25 721

Authorised but not contracted for 13 460 16 273

42 580 41 994

Capital expenditure will be financed from available cash

resources, funds generated from operations and available

borrowing capacity.

Commitment for acquisition of businesses. 100 000 130 000

Total commitments 420 905 473 918

13 Contingent liabilities

Contingent liabilities at balance sheet date, not otherwise

provided for in these annual financial statements, arising from:

13.1 Guarantees issued in the normal course of business for finance 620 000 550 000

facilities granted to subsidiaries.

Management has assessed the fair value of these overdraft

guarantees to be immaterial based on a probable weighted

outcome and is of the opinion that due to the high net asset

value of the companies involved, the expected losses under

the guarantees are unlikely.

13.2 Litigation, current or pending, is not considered likely to have

a material adverse effect on the Group.

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000






14 Trade and other payables

Trade and other payables 920 850 854 833 118 227

920 850 854 833 118 227

All amounts are short term. The carrying values are considered

to be a reasonable approximation of fair value.

15 Operating profit (loss) before investment income

After taking into account the following:

Income

Reversal of provision for write down of investment

in subsidiary 104 757

Foreign exchange (loss) profit (700) 73

Profit on disposal of property, plant and equipment 1 006 1 101

Expenditure

Auditors’ remuneration 4 565 4 116 252 254

– Audit fees 4 058 3 885 250 220

– Under provision prior year 455 204

– Other services 52 27 2 34

Consulting fees for administrative services 7 503 6 804 355 275

Depreciation of property, plant and equipment 33 760 22 763

– Machinery and warehouse equipment 6 713 4 222

– Vehicles 4 846 3 557

– Computer equipment 6 055 4 152

– Furniture and fixtures 9 901 5 974

– Improvements to leased premises 3 884 3 997

– Capitalised leased assets 2 361 861

Operating lease rentals 112 486 105 246

– Property 87 902 82 757

– Vehicles and equipment 24 584 22 489

Staff costs 548 896 462 091

– Salaries and wages 512 506 431 610

– Retirement benefits 25 097 21 236

– Medical aid contributions 11 293 9 245

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000


16 Investment income

Dividends received

– Unlisted investments 36 599 12 989 5 438

– Subsidiary companies 102 064

Interest received 16 397 1 732 58

52 996 14 721 5 496 102 064

17 Finance charges

Bank and short-term borrowings 69 456 22 044

Capitalised finance leases 1 819 551

71 275 22 595

18 Taxation

Normal taxation – current 80 729 94 369 163

Deferred taxation – current 3 795 (2 243)

84 524 92 126 163

Reconciliation of tax rate % % % %

Standard tax rate 28,00 29,00 28,00 29,00

Reduction in tax rate: (3,05) (3,44) (27,85) (29,00)

– Exempt income (3,05) (3,44) (27,85) (29,00)

Increase in tax rate: 0,20 1,58

– Disallowable charges 0,20 1,58

Effective rate of taxation 25,15 27,14 (0,15)

19 Distributions out of stated capital

Distribution out of stated capital – declared on

29 March 2008 at 52 cents per share payable on

10 April 2008 to shareholders registered at 29 March 2008 76 145 76 145

Distribution out of stated capital – declared on

12 March 2007 at 40 cents per share payable on

10 April 2007 to shareholders registered at 29 March 2007 61 715 61 715

Distribution attributable to treasury shares (3 141)

76 145 58 574 76 145 61 715

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000






20 Earnings, headline earnings, diluted earnings and diluted

headline earnings per share

Earnings and headline earnings per share are based on the

consolidated earnings and headline earnings attributable to

shareholders of R250 437 521 (2007: R247 433 848)

and R249 713 084 (2007: R246 651 230) respectively

and are calculated using the weighted average number

of 141 329 209 (2007: 146 433 408) ordinary shares

in issues.

Diluted earnings and diluted headline earnings per share

are based on the consolidated earnings and headline earnings

as stated above and are calculated using 142 668 859

(2007: 150 961 099) ordinary shares in issue.

20.1 Diluted weighted average number of shares

Weighted average number of ordinary shares 141 329 209 146 433 408 Increase in number of ordinary shares as a result of

unexercised share options for the BEE transaction 1 339 650 4 527 691

Diluted weighted average number of ordinary shares at

31 December. 142 668 859 150 961 099

Account is taken of the number of ordinary shares in issue

for the period in which they are entitled to participate in

the net profit of the Group.

20.2 Earnings per share

Profits for the year (R000) 250 437 247 433

Earnings per share (cents) 177,2 169,0

Diluted earnings per share (cents) 175,5 163,9

Percentage dilution (%) 1,0 3,1

20.3 Headline earnings per share

Profits for the year (R000) 250 437 247 433

Profit on disposal of plant and equipment (net of taxation) (724) (782)

Headline earnings (R000) 249 713 246 651

Headline earnings per share (cents) 176,7 168,4

Diluted headline earnings per share (cents) 175,0 163,4

Percentage dilution (%) 1,0 3,1

GROUP

2008 2007 R000 R000


Directors’ Fixed Performance

R000 fees remuneration bonuses Total

21 Directors’ emoluments

2008

Non-executive directors

HC Turner 411 411

RT Ririe 256 256

MY Sibisi 106 106

Executive directors – paid by a subsidiary

RB Patmore (retired 31 December 2008) 2 616 3 124 5 740

E Beneke (appointed 1 November 2008) 417 417

NP Goosen 1 100 1 916 3 016

773 4 133 5 040 9 946

The remuneration of directors is reviewed annually by

the remuneration committee for approval by the board.

Non-executive directors are paid a basic fee with an

additional fee payable for their level of responsibility and

committee membership. They do not participate in any

group incentive plans or share schemes. They are

reimbursed for any group related expenditure.

All executive directors contracts are subject to a three

calendar month’s notice and restraint of trade agreements.

Non-executive directors are not bound by service contracts.

Directors’ Fixed Performance

R000 fees remuneration bonuses Total

2007

Non-executive directors

HC Turner* 513 513

RT Ririe* 309 309

MY Sibisi 98 98

Executive directors – paid by a subsidiary

RB Patmore 2 387 4 506 6 893

NP Goosen 900 1 898 2 798

920 3 287 6 404 10 611

* Additional directors’ fees of R132 000 for HC Turner and R71 500 for RT Ririe were paid for services provided during the

ABSA Capital private equity negotiations.






22 Retirement benefit information The Group contributes to defined contribution schemes covering approximately three fifths of the Group’s employees. The schemes

are administered in terms of the Pension Funds Act, 1956. Contributions to retirement funding during the year amounted to R26 million (2007: R21,2 million). As the fund is a defined contribution scheme, no actuarial shortage can arise in the future. All permanent employees are required to become members of this plan unless they are obliged by legislation to be members of various industry funds.

In addition, the Group contributes to a defined benefit fund for 31 members, which fund is currently in the process of being converted to a defined contribution fund. The last valuation performed in 2004 indicated that the fund had a nil surplus. This was approved by the Financial Services Board. The current valuation is in the process of being completed in accordance with legislation and will be reported in next year’s annual financial statements. Based on current information there is no reason to believe that a material surplus or deficit will arise.

23 Financial risk management

23.1 Credit risk

The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date,

as summarised below:

2008 2007

R000 R000

Classes of financial assets – carrying amounts

Loans and receivables

Cash and cash equivalents 156 170 96 238

Trade and other receivables 519 985 469 279

676 155 565 517

The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and

incorporates this information into credit risk controls. Where available at reasonable cost, external credit ratings and / or reports on

customers and other counterparties are obtained and used. Iliad’s policy is to only deal with creditworthy customers.

Trade receivables consist mainly of a large and widespread customer base. The Group monitors the financial position of their customers

on an ongoing basis. Where considered appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by

application and account limits.

The Group’s management considers that all the above financial assets that are not impaired for the reporting dates under review are of

good credit quality, including those that are past due. See note 7 for further information on impairment of trade and other receivables

that are past due.

Provision is made for bad debts and at the year-end management did not consider there to be any material credit risk exposure that

was not already covered by credit guarantee insurance or a bad debt provision.

None of the Group’s trade and other receivables are secured by collateral and other credit enhancements.

In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or

any group of counterparties having similar characteristics.

The Group only deposits cash with banks and financial institutions of quality credit standing so the credit risk for liquid funds and other

short- term financial assets is considered negligible, since counterparties are reputable banks and financial institutions with high quality

external credit ratings.

GROUP


23.2 Liquidity risk

The Group manages liquidity needs by monitoring daily borrowing levels, cash flow forecasts and ensuring that adequate unutilised

borrowing facilities are maintained. There is no restriction on borrowing powers in terms of the Articles of Association and at

31 December 2008 the Group’s banking facilities substantially exceeded its forecast requirements for the forthcoming year.

As at 31 December 2008, the Group’s liabilities have contractual maturities that are summarised below:

23.3 Interest rate risk

Interest which is payable on long-term and short-term borrowings is at variable rates which are linked to the bank prime lending rate

(refer note 11).

The Group’s policy is to minimise interest rate cash flow exposures on its long-term financing. At 31 December 2008 the Group is

exposed to changes in market interest rates through its bank borrowings and long-term and short-term borrowings, which fluctuate

during the year and are subject to variable interest rates.

The following table illustrates the sensitivity of the net result for the year and equity to a reasonably possible change in rates of

-1% and +1% (2007: -1% and +1%) with effect from the beginning of the year. These changes are considered to be reasonably

possible based on observations of current market conditions. The calculations are based on the Group’s financial instruments held at

balance sheet date. All other variables are held constant.

2008 2007

R000 R000

-1% +1% -1% +1%

Net result for the year 2 327 (2 327) 962 (962)

Current Non-current Total

R000 Within 6 months 6 to 12 months 1 to 5 years

Liquidity risk analysis 2008 2007 2008 2007 2008 2007 2008 2007

Financial liabilities

measured at amortised cost

Bank borrowings 175 868 175 868

Finance lease obligations 2 329 1 621 1 905 1 327 8 812 7 217 13 046 10 165

Trade payables 861 161 778 640 59 689 76 193 920 850 854 833

Other financial liabilities 57 169 61 069 57 169 61 069

Total 1 039 358 780 261 61 594 77 520 65 981 68 286 1 166 933 926 067

GROUP

GROUP






23.4 Fair value of financial assets and liabilities All financial instruments are carried at fair value or amounts that approximate fair value, except for payables and interest-bearing

borrowings, which are carried at amortised cost.

The carrying amounts for investments, cash, cash equivalents, as well as the current portion of receivables, payables and interest-bearing borrowings, approximate fair value due to the short-term nature of these instruments.

The fair values have been determined using available market information and appropriate valuation methodologies.

23.5 Foreign currency risk Most of the Group’s foreign transactions are carried out in US Dollars and Euros. Exposures to currency exchange rates arise from the

Group’s purchases of goods denominated in foreign currencies and hence exposures to exchange rate fluctuations arise. In line with the Group’s risk management procedures the Group has partly hedged through the use of forward exchange contracts of its foreign currency exposure.

To mitigate the Group’s exposure to foreign currency risk, forward exchange contracts are entered into in accordance with risk management policies.

Foreign currency denominated financial assets and liabilities in US Dollars and Euros translated to Rands at the closing rate, are as follows:

2008 2007

Due within six months Rands Rands

US Dollar denominated financial assets (trade receivables) 107 246

Euro denominated financial liabilities (trade payables) (28 644 798) (31 823 616)

US Dollar denominated financial liabilities (trade payables) (67 617 972) (82 779 458)

Short-term exposure (due within six months) (96 262 770) (114 495 828)

Due after six months

Financial liabilities (trade payables) (8 846 052)

Long-term exposure (due after six months) (8 846 052)

Exchange rate at year-end:

US$1 = R9,40 (2007: R6,80)

€1 = R13,22 (2007: R10,05)

Due to the fact that the Group enters into forward exchange contracts in respect of its foreign currency transactions, changes in the

exchange rate would not have a material impact on the results.

GROUP


2008 2007

The gearing ratios at 31 December are as follows: R000 R000

Total borrowings (refer note 11) 246 083 71 234

Less: Cash and cash equivalents (refer note 8) (156 170) (96 238)

Net debt (cash surplus) 89 913 (25 004)

Total equity 1 024 608 936 139

Total capital 1 114 521 911 135

Gearing ratio 8,8%

24 Segment reporting

The Group operates in the building materials supply market

segment within the Southern African building materials

industry, therefore no segmental information is disclosed.

23.6 Capital risk management

The Group’s objectives when managing capital are:

- to safeguard the Group’s ability to continue as a

going concern,

- to provide adequate returns for shareholders and benefits

for other stakeholders, and

- to maintain an optimal capital structure to reduce the cost

of capital, by pricing products commensurately with the

level of risk.

In order to maintain or adjust the capital structure, the Group

may adjust the amount of dividends paid to shareholders,

return capital to shareholders and issue new shares or sell

assets to reduce debt.

Consistent with others in the industry, the Group monitors

capital on the basis of the gearing ratio of which the group

has set at a maximum of 30%.

This ratio is calculated as net debt divided by total equity.

Net debt is calculated as total borrowings less cash and

cash equivalents.

GROUP






25 Notes to the cash flow statements

The following convention applies to figures other than

adjustments:

Outflows of cash are represented by figures in brackets.

Inflows of cash are represented by figures without brackets.

25.1 Taxation paid

Amounts (outstanding) advanced at beginning of the year (1 690) (29 795) 1 067 752

Amounts charged to the income statement (80 729) (94 369) 163

Amount (paid in advance) outstanding at end of the year (7 483) 1 690 (1 230) (1 067)

(89 902) (122 474) (315)

25.2 Purchase of businesses comprises the following:

Details of the acquisitions made during the year is set out

in the directors’ report on page 27. The estimated purchase

considerations totalling R141,1 million have been

provisionally allocated to the underlying fair value of the

identifiable assets, liabilities and contingent liabilities as follows:

Property, plant and equipment (20 849) (8 080)

Trademarks (50 100) (22 075)

Goodwill (62 315) (72 752)

Net current assets (16 545) (40 116)

Long-term borrowings 8 049 5 644

Cash and cash equivalents 641 19 642

(141 119) (117 737)

Satisfied by:

Cash and cash equivalents (141 119) (112 050)

Contingent purchase consideration (5 687)

(141 119) (117 737)

Goodwill of R62,3 million (2007: R72,7 million ) is primarily

related to growth expectations, expected future profitability,

the substantial skill and expertise of the company’s staff and

expected cost synergies. Goodwill has been allocated to cash

generating units at 31 December 2008.

25.3 Proceeds on disposal of property, plant and equipment

Book value on disposals 6 608 2 318

Profit on disposal 1 006 1 101

7 614 3 419

GROUP COMPANY

2008 2007 2008 2007 R000 R000 R000 R000


27 Investment in subsidiaries Issued % % Cost of Cost of Amount Amount

share held held shares shares owing owing

capital 2008 2007 2008 2007 2008 2007

R R R R000 R000

Held directly

Iliad Africa Trading (Proprietary) Limited 1 100 100 1 1 19 519 224 172

Iliad Africa Investments (Proprietary) Limited 1 000 100 100 1 000 1 000 47 072 47 073

Held indirectly

BYM Building Supplies (Proprietary) Limited 100 100 100

Campwell Hardware (Proprietary) Limited 100 75* 75*

CMG Holdings (Proprietary) Limited 1 000 100 100

D&A Timbers (Proprietary) Limited 1 100 100

D&A Truss (Proprietary) Limited 100 100 100

United Metal Processors (Proprietary) Limited 100 70 100

United Steel and Pipe Supplies (Proprietary) Limited 20 000 100 100

United Tube (Proprietary) Limited 100 100 100

1 001 1 001 66 591 271 245

* Although the Group holds only 75% of Campwell Hardware (Pty) Ltd, the 25% minority holds a Put option on the shares held. This

option has been accounted for as a contingent purchase consideration and therefore the Group’s interest in Campwell Hardware (Pty)

Ltd has been recognised at 100% (refer notes 3 and 11).

2008 2007

Attributable profits and losses after taxation of subsidiaries R000 R000




26 Related party transactions The company and its subsidiaries have entered into various transactions with related parties as follows:

Subsidiaries – Details of income from subsidiaries are disclosed in note 16 on page 52. – Details of investments in subsidiaries are disclosed in notes 4 and 27 on pages 43 and 52 respectively.

Directors – Details of directors’ remuneration and directors’ interests in the share option scheme are disclosed in note 21. Directors’

shareholdings are disclosed in the Directors’ report.

Key personnel

– Key personnel comprise the directors of the operating subsidiary and certain divisional managers. The remuneration paid to key

personnel during the year was R19 million (2007: R18 million).

Specific contracts

– R Ririe, a non-executive director, has a 13,5% interest in a company that is the landlord of the 2066 sqm premises occupied by

Builders Market Mafikeng. Rent paid to the company amounted to R0,5 million (2007: R0,4 million). The Group entered into a

seven year lease commencing 1st January 2007 at a straight-line annual rental of R0,6 million.




Portfolio size:

Range

1 – 5 000 2 948 80.33 3 258 870 2.36

5 001 – 20 000 399 10.87 4 359 125 3.15

20 001 – 100 000 188 5.12 8 711 186 6.30

100 001 – 1 000 000 108 2.94 36 058 341 26.09

1 000 001 and more 27 0.74 85 830 272 62.10

Totals 3670 100 138 217 794 100

Category

Individuals 2 853 77.74 15 609 149 11.29

Companies and other corporate bodies 815 22.21 121 163 596 87.66

Directors 2 0.05 1 445 049 1.05

Totals 3 670 100 138 217 794 100

Shareholder spread

Public 3 668 99.95 136 772 745 98.95

Directors 2 0.05 1 445 049 1.05

Totals 3 670 100 138 217 794 100

Major shareholders (5% or more of the shares in issue)

Rand Merchant Bank Asset Management 25 230 348 18.25

Public Investment Commissioner 17 625 398 12.75

The Kalithea Trust 9 140 000 6.61

*Supplied by Link Market Services South Africa (Pty) Ltd

Number of % of Number of % of issued

shareholders shareholders shares capital

shAReholDeR AnAlysis*

as at 31 December 2008


ILIAD AFRICA LIMITEDRegistration number 1997/011938/06(Incorporated in the Republic of South Africa)Share code: ILAISIN: ZAE000015038(“Iliad” or “the company”)

Notice is hereby given that the annual general meeting of ordinary shareholders and “A” shareholders (“shareholders”) of Iliad Africa Limited will be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 28 May 2009 for the purposes of transacting the following business:

As ordinary resolutions1 To consider and adopt the annual financial statements for the year ended 31 December 2008 together with the directors’ and auditors’ reports.

2 To elect the following directors who retire in accordance with the provisions of the company’s Articles of Association and being eligible, offer themselves for re-election:2.1 E Beneke2.2 NP Goosen

Set out below are brief CVs of the directors retiring by rotation:

Eugene BenekeBCom (Pretoria) CA (SA) Chief executive officer

Eugene is a qualified chartered accountant and started his career as financial director of a construction and residential development company. Subsequently he held numerous managing executive positions in an 11 year career in the branded food manufacturing environment, mainly at Tiger Brands. Appointed as director on 1 November 2008 Neil GoosenBCompt (Unisa) CA (SA) MBA (Wits) Group financial director Neil qualified as a chartered accountant after having served articles at Deloitte & Touche. Thereafter, Neil gained commercial experience in the financial field with NEI Africa Limited and Roche Products (Pty) Limited. During this period, Neil also completed an MBA at the University of the Witwatersrand. Appointed as director in September 1999

3 To approve the remuneration paid to directors, as disclosed in the annual financial statements.

4 To place the ordinary shares held in reserve for the share incentive scheme under the control of the directors who shall be authorised to allot and issue these shares on such terms and conditions, at such times and for such consideration, whether payable in cash or otherwise, as they deem fit, subject to the Companies Act (Act 61 of 1973) (“the Act”) as amended, and the Listings Requirements of the JSE Limited (“JSE”) until the next annual general meeting of the company.

5 To reappoint the external auditors until the conclusion of the next annual general meeting.

6 To consider and, if deemed fit, to pass with or without modification, the following ordinary resolution: RESOLVED THAT the Directors be given the general authority to issue unissued shares of a class already in issue held under their control, for cash, when the Directors consider it appropriate in the circumstances, subject to the provisions of the Companies Act, No. 61 of 1973 (as amended), the Listings Requirements of JSE Limited and to the following limitations, that:• the authority shall be valid until the next annual general meeting of the company (provided it shall not extend beyond 15 months from the date of this resolution);• a paid press announcement giving full details, including the impact on net asset value, net tangible asset value, earnings and headline earnings per share, will be published at the time of any issue representing, on a cumulative basis within one financial year, 5% or more of the number of shares in issue prior to such issue;• issues for cash in any one financial year may not exceed 15% of the company’s issued share capital;• the issues must be made to public shareholders as defined by the Listings Requirements of JSE Limited and not to related parties; and• in determining the price at which an issue of shares may be made in terms of this authority, the maximum discount permit-ted will be 10% of the volume weighted average traded price as determined over the 30 business days prior to the date that the price of the issue is determined or agreed by the Directors of the company.The approval of a 75% majority of the votes cast by shareholders present or represented by proxy at this meeting is required for this resolution to become effective.

notice of AnnuAl geneRAl meeting



As special resolutions1 Special resolution 1: General repurchasesTo consider and, if deemed fit, to pass with or without modification, the following special resolution to give a general authority for the company to repurchase its own shares:

RESOLVED THAT Iliad, or a subsidiary of Iliad, be and is hereby authorised, by way of a general authority, to acquire shares issued by Iliad in terms of sections 85 to 89 of the Act, as amended, and in terms of the JSE Listings Requirements and that any director of the company be and is hereby authorised to sign all such documents and do all such things as may be necessary for or incidental to the implementation of this special resolution. The JSE Listings Requirements currently require that the company may make a general repurchase of its shares only if:• Any such repurchase of shares is effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counterparty (reported trades are prohibited);• The company is authorised thereto by its articles of association;• The general authority shall be valid only until the company’s next annual general meeting; provided that it shall not extend beyond 15 months from the date of passing of this special resolution;• In determining the price at which the ordinary shares issued by Iliad are acquired by it or its subsidiary in terms of this general authority, the maximum price at which such shares may be acquired will be 10% above the weighted average of the market value for such ordinary shares for the five business days immediately preceding the date on which the repurchase of such shares is effected;• At any point in time, the company may appoint only one agent to effect any repurchase(s) on the company’s behalf;• After such repurchase, the company still complies with paragraphs 3.37 to 3.41 of the JSE Listings Requirements concerning shareholder spread requirements;• The company or its subsidiary may not repurchase shares during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements;• Acquisitions of shares in any one financial year may not exceed 10% of the company’s issued share capital pursuant to this general authority;• Subsidiaries of the company shall not acquire, in aggregate, more than 10% of the company’s issued share capital, and

• The company publishes an announcement when it has cumulatively repurchased 3% of the initial number (the number of that class of shares in issue at the time that general authority is granted) of the relevant class of securities, and for each 3% in aggregate of the initial number of that class acquired thereafter. Such announcement must be made not later than 08:30 on the second business day following the day on which the relevant threshold is reached or exceeded.The directors have considered the impact of a repurchase of 10% of Iliad shares, it being the maximum permissible of a particular class in any one financial year, under a general authority in terms of the JSE Listings Requirements, and are of the opinion that such repurchase will not result in: • The company and the group in the ordinary course of

business being unable to pay its debts for a period of 12 months after the date of this notice of annual general meeting;

• The liabilities of the company and the group exceeding the assets of the company and the group for a period of 12 months after the date of the notice of annual general meeting, calculated in accordance with the accounting policies used in the audited financial statements for the year ended 31 December 2008;

• The ordinary capital and reserves of the company and the group, for a period of 12 months after the date of the notice of annual general meeting, being inadequate, and

• The working capital of the company and the group, for a period of 12 months after the date of this notice of annual general meeting, being inadequate.

Reason and effectThe effect of the special resolution and the reason therefor is to grant directors of the company a general authority in terms of the Act, as amended, for the acquisition by Iliad, or any subsidiary of Iliad, of Iliad shares.

At present, the directors have no specific intention with regard to the utilisation of this authority, which will be used only if the circumstances are appropriate. No repurchase of shares under this authority will be implemented until such time as the company’s sponsor has confirmed in writing to the JSE that the above working capital statement is valid.


Material changesThere have been no material changes in the financial or trading position of Iliad and its subsidiaries between Iliad‘s financial year-end and the date of this notice.

Litigation statementThe directors, whose names are given on page 4 of the annual report, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or in the previous 12 months had, a material effect on the group’s financial position.

Directors’ responsibility statementThe directors, whose names are given on page 4 of the annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to the resolutions and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that these resolutions contain all information required by the JSE Listings Requirements.

Voting and proxiesAny member entitled to attend and vote at a meeting of the company may appoint one or more proxy/ies to attend, speak and vote in his/her stead. A proxy need not be a member of the company.

Shareholders, which are companies or other bodies corporate, may, in terms of section 188(1) of the Act, by resolution of its directors or other governing body, authorise any person to act as its representative at the annual general meeting.

The ordinary resolutions are subject to a simple majority vote of shareholders present or represented by proxy at the annual general meeting. Every shareholder present in person or by proxy at the annual general meeting shall, on a show of hands, have one vote only, and on a poll, have one vote for each share of which he/she is the registered holder.

Certificated shareholders and own-name dematerialised shareholders who are unable to attend the annual general meeting but wish to be represented thereat must complete and return the attached form of proxy in accordance with the instructions contained therein so as to be received by the company’s transfer secretaries, Link Market Services South Africa (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000), by no later than 13:00 on Tuesday, 26 May 2009.

Dematerialised shareholders, other than those with own-name

registration, who wish to attend the annual general meeting,

must request their Central Securities Depository Participant

(“CSDP”) or broker to issue them with a letter of representation

to enable them to attend the annual general meeting in person.

Alternatively, such dematerialised shareholders must instruct

their CSDP or broker as to how they wish to vote in this regard.

This has to be done in terms of the agreement entered into

between the shareholder and his/her CSDP or broker.

By order of the board

Luis MendesGroup company secretary

Johannesburg

6 March 2009

Registered officeIliad Africa Limited

First Floor, East Block

Pineslopes Office Park

Cnr The Straight and Witkoppen Road

Lonehill, Sandton

PO Box 2572, Honeydew, 2040

Transfer secretariesLink Market Services South Africa (Pty) Ltd

11 Diagonal Street

Johannesburg 2001

PO Box 4844, Johannesburg, 2000

notice of AnnuAl geneRAl meeting foRm of pRoxy



ILIAD AFRICA LIMITEDRegistration number 1997/011938/06(Incorporated in the Republic of South Africa)Share code: ILA ISIN: ZAE000015038(“Iliad” or “the company”)

For use by certificated and own-name dematerialised ordinary shareholders and “A” shareholders (“shareholder”) at the annual general meeting to be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 28 May 2009.

I/We (full names in block letters) of (address) being the holder/s of ordinary shares in the company,

and/or “A” shares in the company appoint: (see note 1)

1 or failing him/her

2 or failing him/her

3 the chairman of the annual general meeting, as my/our proxy to attend, speak and vote for me/us on my/our behalf at the annual general meeting of the company to be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 28 May 2009, and at any adjournment thereof. I/we desire to vote as indicated below (see note 2):

Number of shares

In favour Against Abstain

of the the from

resolution resolution voting

Ordinary resolutions:

1 To consider and adopt the annual financial statements

2 Re-election of directors:

2.1 E Beneke

2.2 NP Goosen

3 To approve directors’ remuneration as disclosed in the annual financial statements

4 Placing of unissued shares under the control of the directors for the purpose

of the share incentive scheme

5 To re-appoint the external auditors

6 General authority to issue shares for cash

Special resolutions:

1 General authority to repurchase shares

(Indicate instructions to proxy by way of a cross in the appropriate space(s) provided above. Unless indicated above, the proxy may vote as

he/she deems fit.)

Signed at on 2009

Signature

Assisted by (where applicable)Each shareholder is entitled to appoint one or more proxies (who need not be members of the company) to attend, speak and vote in place of that member at the annual general meeting, (Instructions overleaf)

foRm of pRoxy


shAReholDeRs’ DiARy AnD coRpoRAte infoRmAtion

INSTRUCTIONS ON SIGNING AND LODGING THE ANNUAL

GENERAL MEETING PROXY FORM:

1 A shareholder may insert the names of two alternative prox-

ies (neither of whom need be a shareholder of the company) in

the space provided, with or without deleting the words “chair-

man of the annual general meeting”. The person whose name

appears first on the form of proxy and has not been deleted and

who is present at the annual general meeting will be entitled to

act as proxy to the exclusion of those whose names follow. In

the event that no names are indicated, the proxy shall be exer-

cised by the chairman of the annual general meeting.

2 A shareholder’s instructions to the proxy must be

indicated by the insertion of an “X” or the relevant number of

votes exercisable by that shareholder in the appropriate box/

boxes provided. If a proxy form, fully signed, is lodged without

specific directions as to which way the proxy is to vote, the

chairman of the annual general meeting will be deemed to

have been authorised as he/she thinks fit. A shareholder or the

proxy is obliged to use all the votes exercisable by the share-

holder or by the proxy.

3 A deletion of any printed matter and the completion of any

blank spaces need not be signed or initialled. Any alteration or

correction must be initialled by the authorised signatory/ies.

4 When there are joint holders of Iliad shares, all joint share-

holders must sign the form of proxy.

5 The completion and lodging of this form of proxy will not

preclude the shareholder, who grants this proxy, from attending

the annual general meeting and speaking and voting in person

thereat to the exclusion of any proxy appointed in terms hereof,

should such shareholder wish to do so.

6 Documentary evidence establishing the authority of the

person signing this form of proxy in a representative capacity

must be attached to this form unless previously recorded by

the transfer secretaries.

7 Where this form is signed under power of attorney, such

power of attorney must accompany this form unless it

has been previously registered with the company or the transfer

secretaries.

8 A minor must be assisted by his/her parent or guardian

unless the relevant document establishing his/her legal capac-

ity has been produced or registered by the transfer secretaries.

9 Completed forms of proxy must be forwarded to the com-

pany’s transfer secretaries, Link Market Services South Africa

(Pty) Limited, PO Box 4844, Johannesburg, 2000 so as to be

received by no later than 13:00 on Tuesday, 26 May 2009.

10 The chairman of the meeting may reject or accept a proxy

that is completed other than in accordance with these instruc-

tions, provided that he/she is satisfied as to the manner in

which a shareholder wishes to vote.

notes to the pRoxy


Financial year-end 31 December 2008

Declaration of final distribution 6 March 2009

Publication of financial results on Sens 10 March 2009

Annual report posted to shareholders 31 March 2009

Payment of final distribution 20 April 2009

Annual general meeting 28 May 2009

Publication of interim results September 2009

shAReholDeRs’ DiARy AnD coRpoRAte infoRmAtionnotes to the pRoxy

Iliad Africa Limited

Incorporated in the Republic of South Africa

Registration number 1997/011938/06

Share code: ILA

ISIN: ZAE000015038

Group company secretary

Luis Mendes

PO Box 2572 Honeydew 2040

Business address and registered office

Iliad Africa Limited

First Floor, East Block

Pineslopes Office Park

cnr The Straight and Witkoppen Road

Lonehill, Sandton

PO Box 2572 Honeydew 2040

Transfer secretaries

Link Market Services South Africa (Pty) Ltd

11 Diagonal Street

Johannesburg 2001

PO Box 4844 Johannesburg 2000

Internet

http://www.iliadafrica.co.za

Attorneys

Fullard Mayer Morrison Incorporated

Second Floor, Office Towers, Sandton City

cnr Rivonia Road and Fifth Street

Sandton 2146

PO Box 78678 Sandton 2146

Principal bankers

First National Bank of South Africa

Mercantile Lisbon Bank, a division of

Mercantile Lisbon Bank Holdings Limited

Nedbank, a division of Nedcor Bank Limited

Sponsor

Bridge Capital Advisors (Pty) Ltd

27 Fricker Road, Second Floor

Illovo 2196

PO Box 651010 Benmore 2010

Auditors

Grant Thornton

Chartered Accountants (SA)

Registered Auditors

(Member firm of Grant Thornton International)

137 Daisy Street cnr Grayston Drive

Sandown 2196

Private Bag X28 Benmore 2010


OPERATION TEL FAX BBS – Benoni 011 422 3005 011 422 4256 Builders Market – Bloemfontein 051 434 2241 051 435 2788 Builders Market – Empangeni 035 787 1416 035 787 1375 Builders Market – Kathu 053 723 2670 053 723 2670 Builders Market – Kimberley 053 833 4214 053 831 2840 Builders Market – Klerksdorp 018 462 2521 018 462 5122 Builders Market – Lephalale 014 763 1332 014 763 1351 Builders Market – Middelburg 013 283 6500 013 283 6511 Builders Market – Pietersburg 015 292 0614 015 292 1446 Builders Market – Richards Bay 035 789 3592 035 789 3600 Builders Market – Vaal 016 986 2085 016 986 1320 Builders Market – Welkom 057 352 8361 057 357 2035 Builders Market W Miller – Somerset West 021 851 2660 021 852 4312 Builders Market – Brits 012 252 3619 012 252 3619 Builders Market – Burgersfort 013 231 7578 013 231 7578 Builders Market – Giyani 015 812 4140 015 812 1855 Builders Market – Isipingo 031 902 9390 031 902 8391 Builders Market – Jane Furse 013 265 1876 013 265 1878 Builders Market – Mafikeng 018 381 5195 018 381 5140 Builders Market – Polokwane 015 297 6814 015 297 4862 Builders Market – Secunda 017 685 3201 017 685 1833 Builders Market – Shayandima 015 964 1664 015 964 1138 Campwell Hardware – Athlone 021 696 5167 021 696 6637 Campwell Hardware – Bergvliet 021 712 4400 021 712 9866 Campwell Hardware – Group X 021 376 5968 021 376 5970 Campwell Hardware – Nyanga 021 691 2206 021 691 5534 Campwell Hardware – Parklands 021 556 7631 021 556 7084 Campwell Hardware – Plaza 021 391 5555 021 392 2701 Campwell Hardware – Polka Place 021 392 7004 021 392 7010 Campwell Hardware – Stellenbosch 021 887 6830 021 887 6836 Campwell Hardware – Vasco 021 592 4119 021 592 4138 Campwell Tile & San 021 376 5968 021 376 5970 D&A Timbers – East London 043 743 3733 043 743 7561 D&A Timbers – Grahamstown 046 622 7301 046 622 8739 D&A Timbers – Kenton-on-Sea 046 648 1300 046 648 1117 D&A Timbers – Pinetown 031 705 8451 031 705 8030 D&A Timbers – Port Alfred 046 624 1103 046 624 2115 D&A Timbers – Shelly Beach 039 315 0790 039 315 0797 Ferreira's Express – Lyttelton 012 664 5687 012 644 2408 Ferreira's – Honeydew 011 795 3733 011 795 2936 F&F Building Supplies – Krugersdorp 011 762 4284/4316 011 762 7422 Laeveld Bouhandelaars – Bushbuckridge 013 799 0245 013 799 1657 Laeveld Bouhandelaars – Hazyview 013 737 7142 013 737 6585 Laeveld Bouhandelaars – Hoedspruit 015 793 0560 015 793 0695 Laeveld Bouhandelaars – Lydenburg 013 753 5349 013 753 5302 Laeveld Bouhandelaars – Malelane 013 790 1670 013 790 1673 Laeveld Bouhandelaars – Nelspruit 013 753 5300 013 753 5301 Laeveld Bouhandelaars – Witrivier 013 750 2090 013 750 0279 Modern Bathrooms 021 592 2190 021 591 4927 Rietpan Hardware – Benoni 011 571 6400 011 973 2996 Rustenburg Building Material – Rustenburg 014 597 1951 014 592 7352 Suncol – Benoni 011 421 6331 011 421 6539 USM – Jeffreys Bay 042 293 4480 042 293 4489 USM – Manor Heights 041 922 9920 041 922 9920 USM – Uitenhage 041 922 9920 041 922 9505

geneRAl BuilDing mAteRiAls Division

contAct DetAils

68

OPERATION TEL FAX B-One – Centurion 0861 008 009 012 664 0404 Bildware Décor Centre – Umhlanga 031 566 5566 031 566 5568 Bildware Natal – Durban 031 332 5764 031 332 7895 Buchel – Menlyn 012 361 8304 012 361 8305 Buchel Designa – Faerie Glen 012 998 4687 012 998 3028 Buchel Hardware – Pretoria 012 300 2700 012 325 5472 Buchel Hardware & Tool Centre – Zambezi Drive – Pretoria 012 543 7500 012 567 6588 Buchel Tool Centre – Pretoria 012 300 3800 012 321 8120 Cachet International – Gauteng 011 201 4600 011 201 4601 Cachet International – KwaZulu-Natal 031 240 8100 031 240 8111 Chipbase – Durbanville 021 982 7810 021 982 7819 Chipbase – George 044 874 1753 044 874 1801 Chipbase – Montagu Gardens 021 551 2035 021 551 1926 Chipbase – Retreat 021 701 1128 021 701 5841 Chipbase – Somerset West 021 854 6810 021 854 6862 Chipbase – Stikland 021 949 1794 021 949 1712 Citiwood – Cape Town 021 930 5923 021 930 5625 Citiwood – Denver 011 622 9360 011 622 7938 Citiwood – Durban 031 579 2274 031 579 2293 Citiwood – Port Elizabeth 041 374 7414 041 373 0749 Citiwood – Pretoria 012 804 3554 012 804 0582 Citiwood – Vereeniging 016 421 1683 016 421 1337 Design Hardware – Northcliff 011 782 3629 011 888 1025 Design Hardware – Strijdom Park 011 792 9900 011 792 5153 Design Hardware – Woodmead 011 804 4293 011 804 6931 Ferreiras Décor World – Cape Town 021 510 5555 021 510 5666 Ferreiras Décor World – Durban 031 303 8400 031 303 8576 Ferreiras Décor World – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Zambezi Drive – Pretoria 087 754 0500 012 543 2470 Just Tiles – Port Elizabeth 041 451 3602 041 451 1008 National Tile Traders – Bloemfontein 051 432 6360 051 432 1327 National Tile Traders – Boksburg 011 823 3340 011 826 2617 National Tile Traders – Centurion 012 661 6527 012 661 6586 National Tile Traders – Randfontein 011 693 6525 011 693 6907 National Tile Traders – Roodepoort 011 760 2315 011 766 3642 National Tile Traders – Rustenburg 014 597 0391 014 592 1586 National Tile Traders – Southgate 011 942 5978 011 942 5899 National Tile Traders – Strijdom Park 011 791 0206 011 791 0215 National Tile Traders – Vanderbijlpark 016 931 2456 016 931 2467 Q Lite – Cape Town 021 510 7920 021 510 5994 Q Lite – Strubens Valley 011 475 2412 011 675 2556 Q Lite – Umbilo Road Durban 031 306 9015 031 306 9017 Q Lite – Umhlanga 031 566 4070 031 566 4074 Saflok – Johannesburg 011 453 5375 011 453 5379 SDT – Gauteng 011 392 5306 011 974 3455 The Knob & Knocker – Johannesburg 011 201 4800 011 201 4801 The Knob & Knocker – KwaZulu-Natal 031 240 8100 031 240 8111 The Tile Depot – Cape Town 021 510 1248 021 511 7790 The Tile Depot – North Riding 011 462 3774 011 462 9125 Thorpe Timbers 011 724 4200 011 865 2204 Tile & Décor Mart – Alberton 011 907 1383 011 907 1494 Top Form – Somerset West 021 854 4005 021 854 3397 W&B Hardware – Bellville 021 948 4881 021 948 0370 W&B Hardware – Claremont 021 670 7270 021 670 7288 W&B Hardware – Paarden Island 021 510 0700 021 510 0728 W&B Hardware – Port Elizabeth 041 373 5993 041 374 5396

SPecIalISed bUIldInG materIalS dIvISIon

IlIad afrIca’S StrateGIc Intent

DRIVING FORCEOur strategy is to meet the product needs of the building industry through focused sourcing and redistribution of goods into each identified segment of the market

CORE COMPETENCIESTo survive and prosper we must excel at: • Market intelligence • Procurement • Trading skills

1 FIVE-YEAR REVIEW 2 ThE BOARD 3 GROUP STEERING AND EXECUTIVE COMMITTEE 4 ChAIRMAN’S REPORT6 ChIEF EXECUTIVE’S REPORT9 GENERAL BUILDING MATERIALS12 SPECIALISED BUILDING MATERIALS 16 CORPORATE GOVERNANCE22 VALUE-ADDED STATEMENT23 ANNUAL FINANCIAL STATEMENTS 61 ShAREhOLDER ANALYSIS 62 NOTICE OF ANNUAL GENERAL MEETING 65 FORM OF PROXY 66 NOTES TO ThE PROXY67 CORPORATE INFORMATION 67 ShAREhOLDERS’ DIARY 68 CONTACT DETAILS

contentS

Iliad Africa Limited (Iliad or the Group) sources, distributes, wholesales and retails general and specialised building materials. A range of customers, from large-scale contractors to do-it-yourself homeowners, are serviced through 112 stores.

The Group’s two focused divisions – General Building Materials and Specialised Building Materials – are headed by seasoned professionals. This structure heightens our ability to leverage common pools of expertise, extends the depth of senior management, accelerates the process of succession planning and enables each division to focus on its core market.

GroUP ProfIle

PHILOSOPHY• Owner-manager ethos with strong incentives for performance• Decentralised operating divisions• Tight centralised financial controls• Focus on niche markets without dominating any one segment• Leveraging common expertise between divisions

Quintessential 1672

EN

ER

GY

PA

SS

IO

N

FO

CU

S

PE

RF

OR

MA

NC

E

2008 annual report

www.i l iadafr ica.co.za

Iliad Africa 2008 A

nnual Report

Pe

rf

or

ma

nc

e

Pa

SS

Ion

en

er

GY

fo

cU

S

2 008 annUal rePor t

Iliad Africa - ShareData · Iliad Africa Limited (Iliad or the Group) sources, distributes,...

Documents

Transcript of Iliad Africa - ShareData · Iliad Africa Limited (Iliad or the Group) sources, distributes,...