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ANNUAL FINANCIAL STATEMENTS
THE BOARD ASKED THAT AECI'S BUSINESSES "MAINTAIN MARKET SHARE AND MARGINS THROUGH CONTINUED EXCELLENT SERVICE". OVERALL, MARKET SHARE WAS AT LEAST MAINTAINED AND WAS INCREASED IN SOME INSTANCES. ALTHOUGH CHEMSERVE'S MARGINS WERE DEPRESSED IN THE FIRST SIX MONTHS, PERFORMANCE IN THE SECOND HALF WAS MORE IN LINE WITH THAT OF PREVIOUS YEARS. AEL ALSO IMPROVED ITS MARGINS AND GREW MARKET SHARE THANKS TO ITS INTERNATIONAL EXPANSION. |
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directors' reportThe directors have pleasure in submitting their report together with the Group and Company annual financial statements for the year ended 31 December 2009. NATURE OF BUSINESS AECI is a specialty product and services Group of companies which provides value-adding solutions to customers through science, technology and industry knowledge. The focus is on serving the mining and manufacturing sectors and in 2009 the Group invested a further R1 billion of the R2 billion strategic capital programme in capital projects to enhance its future growth in these areas. By the end of 2009, all significant projects were mechanically complete. Commissioning had been concluded or was in progress. Although the projects relate mainly to the mining sector, capital was also invested to augment the Group's ability to service consumer-driven markets. AECI's core businesses serve global and regional markets. They are characterised by application know-how and service delivery, operate in niche markets, and are supported by leading international technology alliances. Principal manufacturing sites are located in South Africa, near Johannesburg (explosives and mining services, provided by AEL Mining Services, and specialty chemicals provided by Chemical Services). Chemical Services, which comprises 20 separate operations, also has a major site near Durban as well as a number of smaller sites country-wide. Its mining chemicals thrust is anchored in Senmin, which operates at Sasolburg in the Free State. AEL Mining Services and Chemical Services have expanded their presence beyond South Africa. Both businesses continue to explore opportunities to take their products and service packages to niche markets in countries beyond their traditional areas of activity. AEL Mining Services has a presence in 23 countries. It is well established across the African continent and, in line with the company's international strategy, business in its South East Asian hub made pleasing progress in 2009, particularly in Indonesia. In the year, the company's excellent technology and product position in initiating systems and bulk explosives enabled it to enter into mutually beneficial channel partnerships with leading regional explosives players in Europe and in South America. Chemical Services has established a stable presence in Brazil and more acquisitions continue to be sought using the existing investment as a platform for growth. To an increasing degree, opportunities in other territories in Southern Africa and beyond are being explored. In addition to its core businesses, the Group has a most valuable land asset, the release of which it manages carefully. The property activities are managed by Heartland and this company seeks to optimise the value of the property holdings surplus to AECI's operational requirements by selling land and by selectively investing in revenue-producing buildings in order to grow an existing portfolio of properties. The land holdings are significant and are located in prime locations near Johannesburg and Cape Town. More than 2 000 hectares of excess land are available for redevelopment over the next 15 to 20 years for residential, commercial and industrial end uses and for leasing purposes. SANS Technical Fibers, in the USA, is the Group's fourth business. GROUP RESULTS The activities and results of the Group have been reviewed in this section of this annual report. GOING CONCERN The financial statements have been prepared using appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The directors are of the opinion that the Group has adequate resources to continue as a going concern in the foreseeable future. BORROWING POWERS In terms of its articles of association, the Company has unlimited borrowing powers. ACCOUNTING POLICIES The audited annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretation in line with the International Accounting Standards Board (IASB), the Listings Requirements of the JSE Limited (JSE) and the Companies Act, No. 61 of 1973, as amended, are consistent with those applied at 31 December 2008 and at 30 June 2009. INDEPENDENT AUDITORS The independent auditors, KPMG Inc., will be recommended for re-appointment at the forthcoming annual general meeting. Mr N van Niekerk will be recommended for re-appointment as the individual designated auditor who will undertake the audit of the Company for the ensuing year. All non-audit services provided by KPMG Inc. are tabled at and approved by the Audit and Risk Committee. SHARE CAPITAL AND SHARE PREMIUM The issued ordinary share capital of the Company, at 31 December 2009, was 119 135 869 (2008: 118 846 986). 288 883 ordinary shares were issued during the year. The shares were issued to shareholders who elected to receive scrip in terms of ordinary dividend No. 151 at par value. The Company also has in issue 3 000 000 5,5% cumulative preference shares of R2 each. Details of the share premium and the movements during the year are provided in note 12 of the annual financial statements. STRATE Dematerialisation of the Company's issued shares commenced in July 2001. Shares still in paper form are no longer good for delivery and will require to be dematerialised before participation in any transaction. Shareholders may direct any enquiries in this regard to the Company's transfer secretaries on telephone number +27 0861 100 950 in South Africa or +44 0870 889 3176 in the United Kingdom. DIVIDENDS TO ORDINARY AND PREFERENCE SHAREHOLDERS A final cash dividend of 62 cents per share was declared on 22 February 2010 and is payable on 19 April 2010. Details of the dividends declared and paid on the Company's ordinary and preference shares during the 2009 financial year are set out in note 25 in the annual financial statements. DIRECTORATE AND SECRETARY Details of the directorate and secretary of the Company, at the date of this report, are shown in this section of this annual report. In terms of Section 22.4 of the Company's articles of association, Ms Z Fuphe and Messrs MJ Leeming and F Titi retire at the forthcoming annual general meeting and, being eligible, offer themselves for re-election. Changes to the Board and Company secretary:
DIRECTORS' AND COMPANY SECRETARY'S INTERESTS IN SHARES
1 Retiring on 31 March 2010. At 31 December 2009, the directors and their associates (as defined in terms of the JSE Listings Requirements) had direct and indirect beneficial interests in the share capital of the Company as set out in the table above. There have been no changes in the above interests between the end of the financial year and the date of this report. In addition to the above, certain directors have been allocated share options as detailed in note 31 to the financial statements. MAJOR SHAREHOLDERS Details of the interests of shareholders who are directly or indirectly beneficially interested in 3% or more of the Company's capital, are included in this section of this annual report. SUBSIDIARIES AND JOINT VENTURES Details of each trading subsidiary and joint venture are set out in note 35 and in note 34 of this annual report, respectively. The aggregate net profits and losses, after tax, of subsidiaries and joint ventures attributable to the Company for 2009 were as follows:
SPECIAL RESOLUTION The Company passed the following special resolution at the annual general meeting held on 25 May 2009:
MATERIAL CHANGES There have been no material changes in the financial or trading position of the Company and its subsidiaries since 31 December 2009. MAJOR CAPITAL EXPENDITURE The Group made total additions to its property, plant and equipment of R1 150 million (2008: R1 005 million) in the past financial year. LITIGATION STATEMENT The directors are not aware of any litigation or arbitration proceedings, including proceedings that are pending or threatened, that may have or had in the recent past, being at least the previous 12 months, a material effect on the Company's financial position. DIRECTORS' RESPONSIBILITY STATEMENT The directors whose names appear in this section of this annual report collectively and individually accept full responsibility for the accuracy of the information given 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 this statement contains all information required by law and the JSE Listings Requirements. The directors acknowledge that their responsibility includes:
The directors' responsibility also includes maintaining adequate accounting records and an effective system of risk management. INTERESTS OF DIRECTORS AND OFFICERS During 2009, no contracts were entered into in which directors and officers of the Company had an interest and which significantly affected the business of the Company. The directors had no interests in any third party or company responsible for managing any of the business activities of AECI. REMUNERATION AND EMPLOYEE INCENTIVE PARTICIPATION SCHEMES Full details regarding directors' remuneration and the Group's long-term incentive schemes are disclosed in notes 30 and 31 of this annual report.
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