Imperial

The condensed consolidated financial statements have been prepared in accordance with the framework concepts and 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 2018 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 2018.

These condensed consolidated financial statements have been prepared under the supervision of WS Buckton, CA(SA) and were approved by the board of directors on 26 February 2019.

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 2018, with the exception of the new and revised IFRS as noted in note 3.

IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers became effective to the group during the reporting period. The adoption of these standards had no material impact on the amounts previously reported hence no restatement of comparative information is required.

The group’s revised policy regarding financial instruments and revenue are summarised below:

IFRS 9 – Financial Instruments

The group’s financial assets that are held to collect contractual cash flows on specified dates are measured at amortised cost. These include trade and other longer-term loan receivables and cash resources.

Interest-bearing borrowings, trade and other payables and other longer-term payables are measured at amortised cost. The put option liabilities and contingent consideration liabilities, included in other financial liabilities on the statement of financial position, are fair valued through profit or loss.

Derivative financial instruments are fair valued through profit or loss unless hedge accounting is applied in which case they are fair valued through other comprehensive income.

Shares repurchased are measured at cost.

The above measurements are consistent to those applied in prior periods.

The group recognises a loss allowance for lifetime expected credit losses on financial assets in a way that reflects an unbiased probable weighted amount, the time value of money and supportable information about past events, current and future economic conditions.

IFRS 15 – Revenue from Contracts with Customers

The group recognises revenue from contracts with customers as it satisfies a performance obligation by delivering the promised goods or services to the customer. The amount of revenue recognised is the transaction price allocated to that performance obligation that at least compensates the group for the performance completed and to which it is entitled to. Performance obligations regarding the group’s revenue from supply chain management and value-add logistics are satisfied overtime whereas revenue from route-to-market are recognised at a point in time.

A significant portion of the group’s revenue is derived from contracts with customers in which the transfer of control coincides with the fulfilment of performance obligations.

Route-to-market includes the sale of fast moving consumer goods and pharmaceutical products. Supply chain management include supply chain management solution and synchronisation management whereas value-add logistics consists of transportation, distribution and warehousing management as well as value added logistics solutions.

Revenue for continuing operations for December 2017 has been restated. In 2017 inter-company revenue of R522 million was incorrectly included in external revenue and as a consequence was not eliminated from the consolidated revenue. This error originated from the International Logistics segment. The restatement had no impact on profits, cash flows or the financial position, it only affected revenue and net operating expenses as detailed below:

On 22 November 2018 Imperial distributed its interest in Motus Holdings Limited to its ordinary shareholders by way of a distribution in specie such that each ordinary shareholder received one Motus share for every one ordinary share held in Imperial. The distribution resulted in the deconsolidation of Motus.

The fair value of the distribution of R17 058 million was determined with reference to the unadjusted listed price of Motus on 22 November 2018. As the distribution value exceeded the consolidated net asset value of Motus a post-tax fair value gain of R4 187 million was recognised in profit or loss. The fair value gain is net of the cost to distribute and together with the trading results of Motus is presented as a discontinued operation in the condensed consolidated statement of profit or loss.

IFRS 16 – Leases

In terms of lessee accounting IFRS 16 – Leases introduces a single model and requires a lessee to recognise assets and liabilities for all leases with a term 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.

The group’s latest assessment determined that the right-of-use asset and lease liability to be recognised on adoption of the standard will approximate R5 087 million and R5 533 million respectively. These amounts have been revised from the initial assessment at the end of June 2018 primarily as a result of certain leases being cancelled.

The provisional impact on the 30 June 2018 financial statements before taking tax and non-controlling interest into consideration is summarised below. A completeness and accuracy review of the impact of IFRS 16 is ongoing.

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.

Fair value hierarchy

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

Fair value of financial assets and financial liabilities carried at amortised cost

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

The following table presents the valuation categories used in determining the fair values of financial instruments carried at fair value.

Transfers between fair value 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.

Movement in level 3 financial instruments measured at fair value

The following table shows a reconciliation of the opening and closing carrying values of level 3 financial instruments carried at fair value.

Level 3 sensitivity information

The fair values of the level 3 financial instruments were estimated by applying an income approach valuation method including a present value discount technique. The fair value measurements are 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, expected future cash flows and the discount rates applied. The assumed profitabilities were based on historical performances but adjusted for expected growth.

There were no material acquisition of businesses during the reporting period or before the financial statements were authorised for issue.

Except for the dividend declaration of this report there were no material events after the reporting period.