Notes to the condensed Company annual financial statements

Notes to the condensed Company annual financial statements

for the year ended 31 March
 

Basis of preparation
These condensed annual financial statements of the Company have been prepared in accordance with the recognition and measurement criteria of IFRS and the information required by International Accounting Standard 34: Interim Financial Reporting, as issued by the IASB, the AC 500 standards as issued by the APB, the JSE Listings Requirements and the Companies Act of 1973, as amended. They have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair value or at amortised costs and are presented in South African rand, the Company’s functional and presentation currency.

The significant accounting policies and methods of computation are consistent in all material respects with those applied in the previous period, except as described in the Company’s significant accounting policies, which are available for inspection at the Company’s registered office. The Company’s critical accounting judgements, including those involving estimates, are available for inspection at the Company’s registered office.
 
Rm
2011
  
2010
  
2009
           

1.

Impairment losses

          
Investments in subsidiaries (1 417)   (4 987)   (267)
Other (3)   (185)   (203)
  (1 420)   (5 172)   (470)
 
  Included in the impairment losses are impairments of the Company’s equity investments in its subsidiaries Vodacom UK Limited of R1 223 million and Vodacom Business Africa (Mauritius) Limited of R67 million, as a result of increased price competition and poorer trading conditions. In the prior year impairment losses included an impairment of the Company’s equity investment in its subsidiary Vodacom UK Limited of R3 226 million, which was as a result of the economic downturn and an increasingly competitive environment. The recoverable amounts of these equity investments are based on value in use calculations and the discount rate used in the value in use calculations was 17.8% (2010:14.4%). 
 

2.

Net loss on remeasurement and disposal of financial instruments
  Included in net loss on remeasurement and disposal of financial instruments are impairment losses of R1 741 million (2010: R1 807 million) and reversals of impairment losses of R141 million relating to loans and other receivables from subsidiaries as well as net losses on remeasurement of foreign-denominated assets and liabilities of R307 million (2010: R731 million). 
 

3.

Dividends
  Refer to the directors’ report in the consolidated annual financial statements for details of dividends.
 
Rm
2011
  
2010
  
2009
           

4.

Financial assets

          
Non-current          
Investments in subsidiaries (Note 4.1) 4 258   5 067   9 342
Loans receivable from subsidiaries (Note 4.2) 2 243   2 851   3 218
Investment in associate –   –   92
Other investments –   64   64
  6 501   7 982   12 716
Current          
Loans receivable from subsidiaries (Note 4.2) –   77   32
Loans receivable from associate –   –   117
  –   77   149
4.1 Investments in subsidiaries          
Vodacom (Pty) Limited 2 255   2 255   2 255
Vodacom UK Limited 489   1 712   4 938
Vodacom International Limited 762   575   1 965
VM, SA 568   341   –
Vodacom Tanzania Limited 184   184   184
  4 258   5 067   9 342
4.2 Loans receivable from subsidiaries          
Non-current          
Vodacom UK Limited –   1 563   1 926
Vodacom Tanzania Limited 1 191   1 132   1 155
Wheatfields 276 (Pty) Limited 872   –   –
Other 180   156   137
  2 243   2 851   3 218
Current          
Vodacom UK Limited –   –   32
Other –   77   –
  –   77   32

5.

Trade and other receivables

          
Money market lendings to subsidiaries 5 013   4 317   1 466
Amounts owed by subsidiaries 48   176   92
Other 312   77   24
Total current trade and other receivables 5 373   4 570   1 582
 
R
2011
  
2010
  
2009
           

6.

Share capital

          
Authorised          
4 000 000 000 ordinary shares with no par value (2009: 100 000 ordinary shares of R0.01 each) –   –   1 000
 
Rm
2011
  
2010
  
2009
           
Issued          
Fully paid share capital          
1 487 954 000 ordinary shares with no par value (2009: 10 000 ordinary shares of R0.01 each) *   *   *
Treasury shares          
2 225 312 (2010: 1 433 868) ordinary shares with no par value (138)1   (84)1   –
  (138)   (84)   *
 
Notes:
1. The Group acquired 3 242 476 (2010: 4 722 504) shares as part of the current year forfeitable share plan allocation of which 925 487 (2010: 1 433 868) shares were acquired by the Company for participants employed by the Company and Vodacom Lesotho (Pty) Limited. Refer to Notes 15 and 16.2.1 of the consolidated annual financial statements for further details. 
* Fully paid share capital of R100.
 
Shares
2011
  
2010
  
2009
           
Movements in the number of ordinary shares outstanding:          
1 April 1 486 520 132   1 487 954 000   10 000
Statutory shares in issue 1 487 954 000   1 487 954 000   10 000
Treasury shares (held by the Company) (1 433 868)   –   –
Share movements – forfeitable share plan (Note 7) (791 444)   (1 433 868)   –
31 March 1 485 728 688   1 486 520 132   10 000
Statutory shares in issue 1 487 954 000   1 487 954 000   10 000
Treasury shares (held by the Company) (2 225 312)   (1 433 868)   –
           
 
  The unissued share capital is under the control of the current shareholders and the directors do not have the authority to issue any unissued shares. 
   

7.

Other reserves
 

Forfeitable share plan (‘FSP’) reserve
  The Company granted 925 487 (2010: 1 439 192) forfeitable shares at a weighted average grant date fair value of R62.70 (2010: R58.69), of which 166 478 (2010: 5 324) shares were forfeited and 8 652 (2010: Nil) vested during the year. Net transfers in from other group entities amounted to 41 087 (2010: Nil). The expense recognised amounted to R32 million (2010: R9 million). R7 million (2010: R2 million) of the dividend declared was offset against the FSP reserve. Refer to Note 16.2.1 of the consolidated annual financial statements for further details. 
 
Rm
2011
  
2010
  
2009
           

8.

Borrowings

          
Non-current          
Interest bearing borrowings (Note 8.1) 1 354   2 532   –
Current          
Interest bearing borrowings (Note 8.1) 301   1 061   4 878
Financial guarantee liability –   –   21
  301   1 061   4 899
8.1 Interest bearing borrowings          
The Standard Bank of South Africa Limited/Rand Merchant Bank 1 354   2 532   –
Absa Bank Limited capital facility –   –   2 991
Bank borrowings classified as financing activities 301   1 061   1 887
  1 655   3 593   4 878
Refer to Note 17 of the consolidated annual financial statements for further details.          

9.

Trade and other payables

          
Money market deposits from subsidiaries 1 382   716   508
Amounts owed to subsidiaries 59   90   80
Other 191   173   133
Total current trade and other payables 1 632   979   721
 

10.

Reclassifications
  During the year the Company continued to align with practices of its ultimate parent, Vodafone Group Plc. This resulted in the retrospective reclassification of expenses not relating to payroll, amounting to R18 million for 2010 and R17 million for 2009, from staff expenses to other operating expenses in the income statement.
 
Rm
2011
  
2010
  
2009
           

11.

Commitments

          
Capital 7   7   16
Other 1 091   1 655   1 455
  1 098   1 662   1 471
 
  Capital commitments for property, plant and equipment and computer software will be financed through internal cash generation and bank credit. Other consists of commitments relating to functions and events, funding of subsidiaries and transmission and data lines. 
   

12.

Contingencies
  The Company is currently involved in various legal proceedings and has, in consultation with its legal counsel, assessed the outcome of these proceedings. Following this assessment, the Company’s management has determined that no provision is required in respect of these legal proceedings as at 31 March 2011. Litigations, current or pending, are not likely to have a material adverse effect on the Company. 
   

13.

Events after the reporting period
  Refer to Note 27 of the consolidated annual financial statements for details of events after the reporting period.
   

14.

Related parties
  The Company’s related parties are its parent, subsidiaries, associate, pension schemes and key management including directors. In prior years Telkom SA Limited and its subsidiaries were included in related parties since Telkom SA Limited had joint control over the Company. 
   

14.1

Balances with related parties
  Refer to Notes 4, 5 and 9 for details of balances with subsidiaries. Refer to Note 4 for details of balances with the Company’s associate. These outstanding balances are unsecured and will be settled in cash in the ordinary course of business. 
 
Rm
2011
  
2010
  
2009
           
14.2 Transactions with related parties          
Subsidiaries 10 213   12 401   9 101
Revenue1 489   577   631
Other operating expenses (1)   (62)   (18)
Finance income 571   553   960
Finance costs (241)   (333)   (422)
Dividends received 9 395   11 666   7 950
 

14.3

Key management personnel and directors’ remuneration
  Refer to Note 28.3 of the consolidated annual financial statements for details of directors’ and key management personnel remuneration.
 
Note:
1. Revenue consists of administration fees charged to subsidiaries.

© 2010 Vodacom (Pty) Limited.