CA SALES HOLDINGS LIMITED Report of the audit and risk committee
The committee is pleased to present its report for the financial year ended 31 December 2023.
The audit and risk committee is an independent statutory committee appointed by the shareholders. Further duties are delegated to the audit and risk committee by the board of directors of the company. This report includes both sets of duties and responsibilities.
The committee is responsible for ensuring the integrity of integrated reporting and reviewing the effectiveness of the financial reporting process, the system of internal control and management of financial risks, the assurance process, and the company's process for monitoring compliance with laws and regulations and its own code of business conduct. The committee recommends the annual financial statements for approval to the board and is responsible for monitoring, engaging with, and determining the remuneration of the external auditor.
TERMS OF REFERENCE
The audit and risk committee has adopted a formal audit and risk committee charter that has been approved by the board of directors, and the committee has executed its duties during the past financial year in compliance with the terms of reference. The terms of reference, including roles and responsibilities, were aligned with the recommendations of the South African King Code of Governance Principles 2016 (King IV™), the requirements of the South African Companies Act and other regulatory requirements.
COMPOSITION AND MEETING PROCEEDINGS
At 31 December 2023, the audit and risk committee consisted of four non-executive directors who act independently as described in section 94 of the Companies Act.
For the financial year ended 31 December 2023, the members of the audit and risk committee were:
• B Patel (Chairperson)
• F Britz
• L Cronje
• B Mathews
The committee met three times in the financial year under review and had full attendance. B Mathews was appointed on 1 January 2023 and F Britz was appointed in June 2023. B Marole and E Masilela resigned in June 2023.
At the meetings, the members fulfilled all their functions as prescribed by the Companies Act, as well as those additional functions as determined by the board.
In addition, the CEO and the CFO attended all audit and risk committee meetings by invitation. The external auditors, in their capacity as auditor to the company, attended and reported to all meetings of the audit and risk committee.
DUTIES
In execution of its statutory duties during the past financial year, the audit and risk committee has reviewed the interim and year-end financial statements, culminating in a recommendation to the board.
During its review, the committee:
• takes appropriate steps to ensure that the financial statements are prepared in accordance with IFRS;
• reviews the JSE monitoring reports and implementation thereof
• considers and, when appropriate, makes recommendations on internal financial controls;
• deals with concerns or complaints relating to:
- accounting policies;
- the auditing or content of annual financial statements; and
- internal financial controls;
• reviews the external audit report on the annual financial statements;
• reviews the risk management reports and, where relevant, makes recommendations to the board;
• evaluates the effectiveness of risk management, controls, and the governance processes;
• verifies the independence of the external auditor and of any nominee for appointment as the designated individual auditor;
• approves the audit fees and engagement terms of the external auditor; and
• determines the nature and extent of allowable non-audit services and approves the contract terms for the provision of non-audit services by the external auditor.
LEGAL REQUIREMENTS
The audit and risk committee has complied with all applicable legal, regulatory, and other responsibilities for the financial year.
Report of the audit and risk committee continued
EXTERNAL AUDITOR
The board sets a policy that governs the level and nature of non-audit services, which requires pre-approval by the audit and risk committee for all non-audit services. In determining the independence of the external auditors, the committee considers the level and types of non-audit services provided as well as other enquiries and representations. As required by the Companies Act, the committee has satisfied itself that CA&S Group's external auditor, Deloitte & Touche, was independent of the company, as set out in sections 90(2)(c) and 94(8) of the Companies Act and is thereby able to conduct its audit functions without any undue influence from the company.
The committee has considered the relevant audit quality indicators, including the audit firm's system of quality control. As required by section 3.84(g)(ii) of the JSE Listings Requirements, the committee was satisfied with the quality of the audit concluded by considering, the information as supplied by Deloitte & Touche pursuant to the above-mentioned section.
FINANCIAL FUNCTION
In terms of the JSE Listings Requirements, the audit and risk committee performs an annual evaluation of the financial reporting function in CA&S Group. The committee was satisfied that the financial reporting function had appropriate resources, skills, expertise, and experience. The committee ensured that the appropriate financial reporting procedures exist and are operating as contemplated in paragraph 3.84(g)(ii) of the JSE Listings Requirements. The committee also satisfied itself in terms of paragraph 3.84(g)(i) of the JSE Listings Requirements that Mr FJ Reichert, the group CFO, possesses the appropriate skills, expertise, and experience to meet the responsibilities required for that position during his service as such.
INTERNAL FINANCIAL CONTROLS
The audit and risk committee evaluated the company's internal financial controls including the combined assurance model and, based on the information and explanations given by management, the committee is satisfied that there was no material breakdown in the internal financial controls during the financial year under review.
The internal auditor was only appointed in January 2024 due to unforeseen delays. During the year, control self-assessments were conducted, and management received monthly internal control check lists from the operations.
GOVERNANCE OF RISK
The board has assigned oversight of the company's risk management function to the audit and risk committee. The audit and risk committee oversees financial reporting risks, internal financial controls, fraud, and IT risks as these relate to financial reporting.
GOING CONCERN
The audit and risk committee reviewed a documented assessment prepared by management, including key assumptions, of the going concern status of the company and made a recommendation to the board in accordance with this assessment. The board's statement on the going concern status appears on page 5 of the annual financial statements.
ANNUAL REPORT
The committee has evaluated the annual financial statements of the group and company for the year ended 31 December 2023, with specific consideration of the following significant financial reporting matters during the year:
• The key judgements used in the impairment assessment of goodwill
• The key judgements used in the purchase price allocation of the Taeuber & Corssen Group acquisition
In assessing the appropriateness of the key judgements used in the valuation of intangible assets, the committee determines whether they are reasonable in terms of the current macroeconomic climate and in line with assumptions utilised by comparable third parties. Refer to notes 1 and 5 of the annual financial statements for further information.
Based on the information provided to the committee, the committee considers that the group complies, in all material respects, with the requirements of the Companies Act and IFRS.
B Patel
Chairperson of Audit and Risk Committee
27 March 2024
Statement of responsibility by the board of directors
The directors of CA&S Group are responsible for the preparation, integrity and fair presentation of the group and company financial statements of CA Sales Holdings Limited. The group and company financial statements, comprising the statements of financial position at 31 December 2023, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, have been prepared in accordance with IFRS and the requirements of the Companies Act, and include amounts based on judgements and estimates made by management. In addition, the directors are responsible for preparing the report of the board of directors.
The directors consider that in preparing the annual financial statements they have used the most appropriate accounting policies, consistently applied, and supported by reasonable and prudent judgements. Estimates have been used in the preparation of the annual financial statements and all statements of IFRS that are considered applicable have been followed. The directors are satisfied that the information contained in the annual financial statements fairly presents the results of operations for the year and the financial position of the group and company at year-end. The directors also prepared the report of the board of directors and other information included in the annual report and are responsible for its accuracy and consistency with the annual financial statements.
The directors have the responsibility of ensuring that adequate accounting records are kept. The accounting records should disclose, with reasonable accuracy, the financial position of the companies to enable the directors to ensure that the annual financial statements comply with relevant legislation.
CA&S Group operated in a well-established control environment, which is documented and regularly reviewed. The control environment incorporates risk management and internal control procedures, which are designed to provide reasonable, but not absolute, assurance that assets are safeguarded and that the risks facing the business are being controlled and managed. To the best of their knowledge and belief, the directors are satisfied that no material breakdown in the operation of the systems of internal financial controls and procedures occurred during the year under review.
The going concern basis has been adopted in preparing the annual financial statements. Based on their assessment, the directors have no reason to believe that the group or any company in the group will not be a going concern in the foreseeable future, based on forecasts and available cash resources. These annual financial statements support the viability of the group.
It is the responsibility of the independent auditor to report on the annual financial statements. In order to do so, they were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board. The group's external auditor, Deloitte & Touche, audited the financial statements and their report is presented on pages 8 to 11.
The annual financial statements, presented on pages 1 to 89, were approved by the board of directors on 27 March 2024 and are signed on its behalf by:
JA Holtzhausen | DS Lewis | FJ Reichert |
Chairperson | Chief executive officer | Chief financial officer |
Preparation and presentation of the annual financial statementsCertificate by the company secretary
The annual financial statements for the year ended 31 December 2023 have been prepared under the supervision of the CFO, Mr FJ Reichert, CA(SA).
These annual financial statements have been audited by Deloitte & Touche in accordance with the requirements of the Companies Act.
CEO and CFO responsibility statement on internal financial controls
The directors, whose names are stated below, hereby confirm that:
• the annual financial statements, set out on pages 1 to 86, fairly present in all material respects the financial position, financial performance, and cash flows of CA&S Group in terms of IFRS;
• to the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the annual financial statements false or misleading;
• internal financial controls have been put in place to ensure that material information relating to CA&S Group and its consolidated subsidiaries has been provided to effectively prepare the financial statements of CA&S Group;
• the internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function as executive directors with primary responsibility for implementation and execution of controls.
• Where we are not satisfied, we have disclosed to the audit and risk committee and the auditors the deficiencies in design and operational effectiveness of the internal financial controls and have taken steps to remedy the deficiencies; and
• We are not aware of any fraud involving directors.
DS Lewis | FJ Reichert |
Chief executive officer | Chief financial officer |
27 March 2024 | 27 March 2024 |
I hereby certify, in terms of section 88(2)(e) of the Companies Act, that to the best of my knowledge, for the year ended 31 December 2023, the company has lodged with the Companies and Intellectual Property Commission all such returns and notices as required of a public company in terms of the Companies Act and that all such returns and notices are true, correct and up to date.
B Naude Company secretary
27 March 2024
Report of the board of directors
NATURE OF BUSINESS
The CA&S Group specialises in the fast-moving consumer goods industry and on-shelf availability of some of the world's most-loved consumer brands. The group's services include warehousing and distribution, retail execution and advisory, retail support, training, and technology and data solutions. The group has a varied geographical presence across southern and East Africa.
OPERATING RESULTS
The following commentary reflects results from continuing operations. Revenue increased by 19.4% to R11.3 billion on the prior year. Gross profit increased with 21.1% on the prior year to R1.7 billion.
Net profit after taxation of R604.5 million showed 59.7% growth on the prior year. Headline earnings of R464.8 million (2022: R363.2 million) is 28.0% higher than the prior year.
On 2 January 2023, Wutow Trading (Pty) Ltd, a fully owned subsidiary of CA Sales Holdings Ltd, acquired 100% of the share capital of T&C Properties Namibia (Pty) Ltd and Taeuber and Corssen (Pty) Ltd for R65 million, collectively known as the T&C Group. T&C Group is a distribution and retail execution business based in Namibia. As a result of the acquisition, the group increased its footprint in Namibia. The transaction resulted in a gain on bargain purchase value of R123.6 million. See note 25.
In June 2023, Brand Support Services (Pty) Ltd, an indirect subsidiary of CA Sales Holdings Ltd, acquired all the operations of MarketMax (Pty) Ltd, a sales and merchandising business, for R11.5 million. Contracts acquired are with clients who retail their brands in the pharmaceutical channel. This acquisition is in line with the group's channel broadening strategy. Goodwill of R5.6 million arose as a result of the business value, derived from the net present value of expected future cash flows, exceeding the fair value of net assets acquired. Intangible assets of R9.0 million relate to the fair value of the customer list. The value of amortisation included in the statement of comprehension income, relating to this customer list is R1.5 million. See note 25.
The group increased its shareholding in Smithshine Enterprises (Pty) Ltd. For detail of the transaction with non-controlling interest, see note 6.
The operating results and state of affairs of the company are fully set out in the attached statements of comprehensive income and statements of financial position, statements of cash flows, statements of changes in equity and notes thereto.
SHARE CAPITAL
Details of the authorised and issued share capital appear in note 12 to the financial statements. Additional shares were issued on 8 December 2023 to minority shareholders of Smithshine Enterprises (Pty) Ltd in exchange for a 5% increase in shareholding of that subsidiary. In May 2023, share options were exercised by directors of the company and executives of the subsidiaries of the group.
The board proposed the implementation of an odd-lot offer to facilitate the reduction in the number of odd-lot holders in a fair manner, which resulted in the repurchase by the Company of the odd-lot holdings from the odd-lot holders at the offer price. This reduced the administrative time and costs associated with the large number of odd-lot holders. Shareholder approval was obtained in June 2023 at the General Meeting and the repurchase of the shares amounted to R0.7 million paid to odd-lot holders on 24 July 2023. This resulted in a reduction of 4 131 shareholders.
DIVIDENDS
A final dividend of 19.56 (2022: 15.35) cents (or BWP equivalent) per share in respect of the year ended 31 December 2023 was declared on Wednesday, 27 March 2024, for payment to the ordinary shareholders of the company at the close of business on Monday, 22 April 2024. In line with the company's dividend policy, the dividend was maintained at 20% of the headline earnings. The number of issued shares at the declaration date is 475 380 961. The dividend has been declared from income reserves.
As per the double tax agreement between Botswana and South Africa, withholding tax of 15% is deducted from dividends distributed to shareholders registered on the Botswana Stock Exchange. This dividend is treated as a foreign dividend for Botswana shareholders. In respect of shareholders registered on the JSE Limited, the dividend payable is subject to a 20% withholding tax as required under the South African Income Tax Act, resulting in a net dividend of 15.648 cents per share.
The last date to trade is Tuesday, 16 April 2024 and trading ex-dividend commences on Wednesday, 17 April 2024.
CHANGES IN DIRECTORATE
Ms B Mathews has been appointed as an independent non-executive director with effect from 1 January 2023.
GOING-CONCERN
The directors consider that the group entities and company have adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the going-concern basis in preparing the consolidated and company financial statements. The directors have satisfied themselves that the group entities and company are in a sound financial position and that they have access to sufficient cash and borrowing facilities to meet foreseeable cash requirements.
SUBSTANTIAL SHAREHOLDERS
Pursuant to the provisions of section 56 of the Companies Act, the following shareholders held directly and indirectly equal to or in excess of 5% of the issued share capital as at 31 December 2023:Botswana Insurance Fund Management Botswana Public Officers Pensions Fund (BPOPF) Export Marketing Investments (Pty) Ltd Coronation Fund Managers
Total
PUBLIC SHAREHOLDERS
Total Shareholding | % |
60 259 318 58 787 782 42 200 690 35 857 665 | 13 12 9 8 |
197 105 455 | 41 |
Pursuant to the provisions of paragraph 4.25 to 4.27 of the JSE Listing Requirements, the following shares were held by the public as at 31 December 2023:
Non-Public Shareholders Directors and Associates Public Shareholders
Total
Number of shareholders | % | Number of shares | % |
23 7 539 | 0.3 99.7 | 48 679 867 426 701 094 | 10.24 89.76 |
7 562 | 100.0 | 475 380 961 | 100.00 |
DIRECTORS
Detail of the directors are listed in note 27.
The shareholding of directors in the ordinary issued share capital of CA Sales Holdings Ltd as at 31 December 2023 was as follows:
Direct shareholding Executive directors DS Lewis
FJ Reichert Non-Executive directors JA Holtzhausen
2023
Indirect shareholding Executive directors DS Lewis Non-Executive directors FW Britz
E Masilela L Cronje
JA Holtzhausen Total
Number | % |
2 845 689 164 047 759 233 11 248 100 1 229 382 110 250 9 950 627 092 | 0.60 0.04 0.16 2.37 0.26 0.02 0.00 0.13 |
16 993 743 | 3.58 |
2022 Number
%
2 650 588 0.56
27 084 0.01
732 996 0.16
11 248 100 2.38
1 229 382 0.26
30 850 0.01
9 950
560 250
16 489 200
- 0.12 3.49
There were no changes in directors' shareholdings between 31 December 2023 and the approval of the financial statements.
BOARD COMMITTEES AND ATTENDANCE
Regular board and subcommittee meetings were held during the reporting year and all meetings were attended by all members apart from where apologies were received.
BoardAudit and riskRemunerations and nominationsSocial and ethicsNumber of meetings 4 3 2 2
F Britz 4 2 2
L Cronje 4 3
JA Holtzhausen 4 2 0
DS Lewis 4
B Marole 4 1 2
E Masilela 4 1 2
B Mathews 4 3 2
S Moakofi 4 2
B Patel 3 3
FJ Reichert 4
*Changes were made to the membership of the Audit and Risk Committee in June 2023.
EVENTS AFTER BALANCE SHEET DATE
The significant events that occurred after the reporting date that require disclosure in the consolidated annual financial statements for the year ended 31 December 2023 are the following:
On 22 March 2024, CA Sales Investments (Pty) Ltd, a wholly owned subsidiary of CA Sales Holdings Ltd, purchased 49% of the share capital of Roots Sales (Pty) Ltd ("Roots") for R70 million. Roots is domiciled in South Africa and service the informal market in the country, which is a channel broadening acquisition for the CA&S Group.
ENVIRONMENT, SOCIAL AND GOVERNANCE RESPONSIBILITIES
The group is committed to address its ESG responsibilities and has defined its ESG aspiration and set its high-level priority areas. It is in the target setting phase which involves identifying the relevant metrics and obtaining prior year data to establish the base line. The operations have identified green projects and started with investigations regarding the implementation. Social investments continued with a stronger focus on the education theme as guided by the group.
AUDITOR
The appointment of Deloitte & Touche as the external auditor of the group, and that Mr J van der Walt be appointed as the designated auditor for this purpose, was approved by shareholders on 26 May 2023 at the annual general meeting in accordance with the Companies Act.
SECRETARY
The secretary of the company is B Naude, whose business address is:
1st Floor, Building C
Westend Office Park 254 Hall Street Centurion, 0157
Independent auditor's report
To the Shareholders of CA Sales Holdings Limited
Report on the Audit of the Consolidated and Separate Annual Financial Statements
Opinion
We have audited the consolidated and separate annual financial statements of CA Sales Holdings Limited (the Group and Company) set out on pages 12 to 89, which comprise the consolidated and separate statements of financial position as at 31 December 2023, and the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and the consolidated and separate statements of cash flows for the year then ended, and notes to the consolidated and separate annual financial statements, including a summary of material accounting policy information.
In our opinion, the consolidated and separate annual financial statements present fairly, in all material respects, the consolidated and separate financial position of CA Sales Holdings Limited and its subsidiaries as at 31 December 2023, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated and Separate Annual Financial Statements section of our report. We are independent of the Group and Company in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of annual financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate annual financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate annual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report in respect of the separate annual financial statements.
Key Audit Matter Impairment of goodwill (Group) | How the matter was addressed in the audit |
Refer to the following notes to the consolidated financial statements for detail:
On an annual basis, the Group tested whether goodwill has suffered any impairment in accordance with the Group's accounting policy on goodwill. | Our audit addressed this key audit matter as follows: Through discussion with management, we obtained an understanding of their process and procedures applied during their impairment assessment of goodwill. Our audit procedures included, testing of the principles and integrity of management's fair value less cost of disposal calculations. We evaluated the reasonableness of management's calculation by:
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Independent auditor's report continued
Key Audit Matter | How the matter was addressed in the audit |
At year end, the Group recognised goodwill with a carrying value of R501.7 million. No impairment was recognised in relation to the cash-generating units (CGUs) to which goodwill has been allocated due to the recoverable amounts of respective CGUs exceeding their carrying amounts. The recoverable amounts of the respective CGUs were determined based on the fair value less cost of disposal method for all CGUs. This method involves management having to apply judgement in determining the following key assumptions:
We considered the impairment assessment of goodwill to be a matter of most significance to our current year audit due to the level of judgement applied by management in performing the impairment assessments, including determining the key assumptions. |
The assumptions used in the calculation of the fair value less cost to sell were appropriate. Whilst our independently determined key assumptions were different from those applied by management in certain instances, the impact of these differences was found to have an immaterial impact on the recoverable amounts. We considered the goodwill impairment disclosures to be appropriate. |
Key Audit Matter Acquisition of T&C group (Group) | How the matter was addressed in the audit |
Refer to the following notes to the consolidated financial statements for detail:
On 2 January 2023, Wutow Trading (Pty) Ltd, a fully owned subsidiary of CA Sales Holdings Ltd, obtained control of T&C Properties Namibia (Pty) Ltd and Taeuber and Corssen (Pty) Ltd, collectively known as the T&C Group, after concluding an agreement to acquire 100% of the shareholding in the T&C Group. The purchase price amounted to R65.0 million. T&C Group is a distribution and retail execution business based in Namibia. | Our audit addressed this key audit matter as follows: Through discussion with management, we obtained an understanding of their process and procedures applied during their purchase price allocation performed. Our audit procedures on the acquisition of the T&C group included:
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CA Sales Holdings Ltd. published this content on 27 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 March 2024 06:38:03 UTC.
