Imperial

The condensed consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and its Interpretations adopted by the International Accounting Standards Board (IASB) in issue and effective for the Group at 31 December 2015 and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and financial reporting pronouncements as issued by the Financial Reporting Standards Council. The results are presented in accordance with IAS 34 – Interim Financial Reporting and comply with the Listings Requirements of the Johannesburg Stock Exchange Limited and the Companies Act of South Africa, 2008. These condensed consolidated financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated annual financial statements as at and for the year ended 30 June 2015.

These condensed consolidated financial statements have been prepared under the supervision of R Mumford, CA (SA) and were approved by the board of directors on 22 February 2016.

The accounting policies adopted and methods of computation used in the preparation of the condensed consolidated financial statements are in accordance with IFRS and are consistent with those of the annual financial statements for the year ended 30 June 2015.

2.1 CHANGE IN ACCOUNTING POLICY

Vehicles held under buy-back arrangements

In the prior year the Group changed its accounting policy for vehicles held under buy-back arrangements. The change in the accounting policy resulted in a reallocation between line items on the statement of profit or loss, the statement of financial position and the statement of cashflows without affecting operating profit, total assets or cash generated by operations.

Floorplans

During the current reporting period the Group decided to reclassify its interest-bearing trade payables, payable to vehicle suppliers, from interest-bearing borrowings to trade and other payables. As the interest-bearing amounts are a short-term credit line received from our vehicles suppliers to acquire vehicles as inventory it is considered more appropriate to show them as trade payables. The impact of the above changes in policy on the 31 December 2014 and 30 June 2015 financial statements were as follows:

2.2 RESTATEMENT OF THE SEGMENTAL INFORMATION

The segmental information has been restated to reflect the profit or loss for continuing operations only by excluding the Insurance segment, for the changes in accounting policies as described in note 2.1 and for the reallocation of the UK head office out of Head-Office and Eliminations to the Vehicles Retail, Rental and After Market Parts segment.

The impact of the restatements were as follows:

IFRS 16 Leases introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of longer than 12 months. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Depreciation is recognised on the right-of-use asset and interest on the lease liability. In terms of lessor accounting, IFRS 16 substantially carries forward the requirements in IAS 17 and accordingly a lessor continues to account for its leases as operating leases or finance leases. Issued in January 2016 this standard becomes effective for annual reporting periods beginning on or after 1 January 2019.

Other standards that will become applicable to the group in future reporting periods includes IFRS 9 Financial Instruments (effective 1 January 2018) and IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018). The details of these standards was outlined in the 30 June 2015 annual financial statements.

The group is in the process of assessing the impact of these standards on its consolidated financial statements.

Circular 2/2015 Headline Earnings which was issued by the South African Institute of Chartered Acccountants (SAICA) in October 2015 replaces Circular 2/2013 Headline Earnings. The revisions contained in the new circular relate primarily to IFRS 9 Financial Instruments and has had no impact on the way the Group computes headline earnings.

10.1 FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES CARRIED AT AMORTISED COST

The following table sets out instances where the carrying amount of financial liabilities, as recognised on the statement of financial position, differ from their fair values.

The fair values of the remainder of the Group’s financial assets and financial liabilities approximate their carrying values.

10.2 FAIR VALUE HIERARCHY

The Group’s financial instruments carried at fair value are classified in three categories defined as follows:

Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments.

Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.

Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data. Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant effect on the instrument’s valuation, is not based on observable market data.

The following table presents the valuation categories used in determining the fair values of financial instruments carried at fair value. For assets and liabilities of the discontinued operations refer to Continuing and discontinued operations.

Transfers between hierarchy levels

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. There were no transfers between the fair value hierarchies during the period.

10.3 MOVEMENTS IN LEVEL 3 FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The following table shows a reconciliation of the opening and closing balances of level 3 financial liabilities carried at fair value.

Level 3 sensitivity information

The fair values of the level 3 financial liabilities of R1 934 million were estimated by applying an income approach valuation method including a present value discount technique . The fair value measurement is based on significant inputs that are not observable in the market. Key assumptions used in the valuations includes the assumed probability of achieving profit targets and the discount rates applied. The assumed profitabilities were based on historical performances but adjusted for expected growth.

The following table shows how the fair value of the level 3 financial liabilities as at 31 December 2015 would change if the significant assumptions were to be replaced by a reasonable possible alternative.

ACQUISITIONS

A number of businesses were acquired during the period. These businesses are individually and collectively immaterial in terms of size and value. The total assets acquired was R312 million and total liabilities R180 million. The purchase consideration of R318 million resulted in goodwill and other intangible assets of R217 million. From the dates of acquisition the businesses contributed revenue of R661 million and operating profit of R32 million. The initial accounting for the business combinations are incomplete and based on provisional figures.

DISPOSALS

The Group disposed of its 65% interest in Neska, a subsidiary of Imperial Logistics International BV. The pre-tax profit on disposal amounted to R447 million and is included in ‘Other non-operating items’.

DISPOSAL OF GOSCOR

The disposal of Goscor was completed on 5 February 2016.

DIVIDEND DECLARATION

Shareholders are advised that a preference and an ordinary dividend has been declared by the board of Imperial on 22 February 2016. For more details please refer to the dividend declaration.