NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 August 2008

    Group
    2008 2007
    R’000 R’000
1   Revenue from continuing operations    
  Turnover 11 281 156 10 051 373
  Financial income 18 731 15 866
  Other income 499 209 462 393
    Distribution and logistics fees 291 270 241 045
    Franchise fees – 1 125
    Rental income 4 676 3 464
    Cost recoveries and other 203 263 216 759
         
    11 799 096 10 529 632
2 Financial income and expense    
  Recognised in profit or loss    
  Interest income on bank deposits 7 904 4 738
  Change in fair value of financial assets designated at fair value through profit or loss 5 875 6 211
  Interest income on loans and receivables measured at amortised cost 5 049 4 917
  Financial income 18 828 15 866
  Interest expense on financial liabilities measured at amortised cost 66 378 51 492
  Change in fair value of financial assets designated at fair value through profit or loss 3 537 3 201
  Financial expenses 69 915 54 693
  Net finance cost (51 087) (38 827)
  Less: Discontinued operations (see note 7) (97) –
  Continuing operations (51 184) (38 827)
3 Depreciation and amortisation    
  Depreciation on property, plant and equipment 95 908 98 290
  Amortisation of intangible assets 6 740 6 111
  Total depreciation and amortisation 102 648 104 401
  Depreciation included in cost of merchandise sold (7 226) (6 056)
  Depreciation and amortisation included in expenses 95 422 98 345
  Less: Discontinued operations (see note 7) (44) (16 758)
  Continuing operations 95 378 81 587
4 Occupancy costs    
  Lease charges    
    Operating leases 297 890 321 498
    Turnover rental expense 12 447 16 833
    Movement in operating lease accrual (see notes 18 and 24) (5 574) 2 522
    Movement in provision for onerous contracts (see note 26) (2 184) (4 926)
  Total occupancy costs 302 579 335 927
  Less: Discontinued operations (see note 7) 3 909 (51 322)
  Continuing operations 306 488 284 605
5 Employment costs    
  Directors’ emoluments 15 843 13 084
    Non-executive 2 131 2 076
      Fees 1 531 1 510
      Consulting services                              600 566
    Executive 13 712 11 008
      Salary and bonus 12 510 9 989
      Other benefits 1 202 1 019
  Cash-settled share appreciation rights costs (see note 23) (6 160) 28 033
  Equity-settled share option costs (see note 20) 46 3 749
  Long-term incentive scheme (see note 23) 54 528 26 800
  Staff salaries and wages 847 252 875 343
  Contributions to defined contribution plans 55 716 56 196
  Leave-pay costs 10 533 10 863
  Bonuses 67 980 74 255
  Increase in liability for defined benefit plans (see note 23) 1 065 2 767
  Total employment costs 1 046 803 1 091 090
  Employment costs included in cost of merchandise sold (53 324) (50 889)
  Employment costs included in expenses 993 479 1 040 201
  Less: Discontinued operations (see note 7) (7 351) (148 939)
  Continuing operations 986 128 891 262
  For further detail of directors’ emoluments refer to the Remuneration Report. Included in total employment costs are the following aggregate amounts (including directors’ emoluments) relating to transactions with key management personnel:    
    Salaries and bonuses 17 223 16 751
    Other benefits 15 394 2 113
    Fees and consulting services 2 131 2 077
      34 748 20 941
6 Other costs    
  Other operating costs include:    
  Auditors’ remuneration 3 321 3 427
    Audit fees 3 267 2 981
    Other services and expenses 54 446
  Fees paid for outside services    
    Technical services 20 521 31 114
  Foreign exchange losses – realised 1 476 5 369
  Foreign exchange losses/(gains) – unrealised (see note 17) 3 057 (1 349)
  Share option hedge losses/(gains) – realised 10 665 –
  Share option hedge losses/(gains) – unrealised 12 143 (26 826)
  Impairment of trade and other receivables 9 023 13 597
  Water and electricity 34 336 31 346
    Retail 33 159 30 189
    Distribution 1 177 1 157
         
7 Discontinued operations    
  Turnover 50 140 1 153 507
  Cost of merchandise sold (36 383) (828 873)
  Gross profit 13 757 324 634
  Other income* 1 905 38 748
  Expenses (8 385) (323 421)
    Depreciation and amortisation (44) (16 758)
    Occupancy costs 3 909 (51 322)
    Employment costs (7 351) (148 939)
    Other costs (4 899) (106 402)
         
  Operating profit 7 277 39 961
    Loss on disposal of property, plant and equipment (4) (2 890)
    Profit on disposal of business 23 649 –
  Operating profit before financing costs 30 922 37 071
  Finance income 97 –
  Profit before tax 31 019 37 071
  Income tax on discontinued operations (see note 8) 2 519 (10 751)
  Profit for the year from discontinued operations 33 538 26 320
 

On 7 September 2007 the sale of the Discom business unit to Edgars Consolidated Stores Limited (“Edcon”) became unconditional.

   
  Set out above are the results of the Discom business unit, which as a result of meeting the definition of a discontinued operation, are required to be separately disclosed from the results of the continuing operations.
   
  * Other income comprises cost recoveries and other
           
      Company Group
      2008 2007 2008 2007
      R’000 R’000 R’000 R’000
8   Income tax expense        
  Continuing operations        
  South African normal tax        
    Current tax        
      Current year – – 143 646 101 888
      Prior-year underprovision – – 1 261 20
    Capital gains tax        
      Current year – 2 395 3 399 2 799
      Prior-year underprovision – – 3 286 –
    Deferred tax        
      Current year 18 2 366 (3 446) 24 812
      Prior-year overprovision – – (2 086) (1 653)
      Change in tax rate – – (1 961) –
  Foreign tax        
    Current tax        
      Current year – – 3 254 2 346
    Withholding tax – – 618 –
    Deferred tax        
      Current year – – (344) 30
      Prior-year overprovision – – (250) (277)
      18 4 761 147 377 129 965
  Discontinued operations        
  South African normal tax        
    Current tax        
      Current year – – 12 345 8 486
    Capital gains tax        
      Current year – – 14 315 –
    Deferred tax        
      Current year – – (29 349) 2 067
  Foreign tax        
    Current tax        
      Current year – – 170 195
    Deferred tax        
      Current year – – – 3
        – – (2 519) 10 751
  Total income tax expense 18 4 761 144 858 140 716
  Reconciliation of rate of tax (%)        
  Standard rate – South Africa 28.00 29.00 28.00 29.00
  Adjusted for:        
    Capital gains tax – 1.45 2.71 0.21
    Change in tax rate – – (0.33) –
    Disallowable expenditure – – 1.56 0.39
    Exempt income and allowances (28.00) (28.85) (3.90) (2.63)
    Foreign tax rate variations – – 0.11 0.01
    Foreign withholding tax – – 0.11 –
    Goodwill impairment – – – 0.04
    Prior-year overprovision – – (0.15) (0.37)
    Secondary tax on companies deferred 0.05 0.98 – 0.35
    Sale of business – – (3.52) –
    Other – – 0.08 –
  Effective tax rate 0.05 2.58 24.67 27.00
  Subsidiaries of the group have estimated computed tax losses of R37.9 million (2007: R56.9 million) available for set-off against future taxable income of those subsidiaries. A deferred tax asset of R10.6 million (2007: R16.57 million) has been recognised in respect of the total computed tax losses (see note 13).
              Group
            2008 2007
            R’000 R’000
9 Earnings per share    
  Reconciliation of headline earnings    
  Profit attributable to equity holders of the parent 442 435 380 508
  Adjustments:    
    Profit from discontinued operations (33 538) (26 320)
    Profit before tax from discontinued operations (see note 7) (31 019) (37 071)
    Tax relating to discontinued operations (2 519) 10 751
         
  Earnings from continuing operations attributable to equity holders of the parent 408 897 354 188
  Profit attributable to equity holders of the parent 442 435 380 508
  Adjustments:    
    Profit on disposal of property, plant and equipment (12 412) (23 836)
    Profit before tax (13 921) (26 512)
    Tax 1 509 2 676
    Profit on disposal of businesses (29 162) –
    Profit before tax (24 893) –
    Tax (4 269) –
    Goodwill impairment – 250
  Headline earnings 400 861 356 922
  Earnings per share – continuing operations 137.1 105.4
  Earnings per share – discontinued operations 11.3 7.8
  Earnings per share 148.4 113.2
  Headline earnings per share 134.4 106.1
  Diluted earnings per share – continuing operations 134.6 102.3
  Diluted earnings per share – discontinued operations 11.0 7.6
  Diluted earnings per share 145.6 109.9
  Diluted headline earnings per share 131.9 103.0
    2008 2007
    '000 '000
  Reconciliation of shares in issue to weighted average number of shares in issue    
  Gross number of shares in issue at the beginning of the year 335 957 355 488
  Treasury shares held for the full year and/or cancelled (19 842) (7 875)
  Shares issued in respect of options weighted for period in issue – 447
  Treasury shares purchased during the year weighted for period held (21 213) (20 865)
  Treasury shares utilised for share options weighted for period in issue 3 264 9 071
  Weighted average number of shares in issue for the year 298 166 336 266
  Reconciliation of weighted average number of shares to weighted average diluted number of shares    
  Weighted average number of shares in issue for the year 298 166 336 266
  Dilutive effect of share options and forward purchase of shares 5 681 10 106
  Weighted average diluted number of shares in issue for the year 303 847 346 372
       
    Group
      2008     2007  
    Accumulated   Accumulated  
    depreciation and   depreciation and  
    impairment   impairment  
    Cost losses Book value Cost losses Book value
    R’000 R’000 R’000 R’000 R’000 R’000
10 Property, plant and equipment            
  Land 25 809 – 25 809 25 809 – 25 809
  Buildings 272 193 22 972 249 221 278 452 28 681 249 771
  Computer equipment 136 104 79 720 56 384 113 181 45 826 67 355
  Equipment 134 911 47 059 87 852 113 529 30 019 83 510
  Furniture and fittings 478 444 182 436 296 008 410 444 153 795 256 649
  Motor vehicles 31 405 12 194 19 211 24 848 8 978 15 870
    1 078 866 344 381 734 485 966 263 267 299 698 964
  A register of land and buildings containing the required statutory information is available for inspection on request at the registered office of the company.
   
  All group property is owner-occupied.
   
  Buildings with a net book value of R45 million are encumbered under a mortgage with a carrying amount of R0.1 million as detailed in note 22. Motor vehicles with a net book value of R2 million are encumbered in terms of a loan with a carrying amount of R1.5 million as detailed under note 22. Computer equipment with a net book value of R18.4 million is encumbered under finance leases with a carrying amount of R7.3 million as detailed under note 22.
   
  The carrying amount of the group’s property, plant and equipment can be reconciled as follows:
   
            Land Buildings Computer equipment Equipment Furniture and fittings Motor vehicles Total
         R’000 R’000 R’000 R’000 R’000 R’000 R’000
  Carrying amount at 1 September 2006 24 347 256 058 72 797 50 676 273 214 19 644 696 736
  Additions – 9 756 46 057 36 494 62 939 5 563 160 809
  Disposals – (4 895) (681) (262) (14 581) (522) (20 941)
  Depreciation – (1 857) (42 603) (9 805) (38 670) (5 355) (98 290)
  Reclassification* 1 462 (9 291) – 14 729 – – 6 900
  Transfer to assets held for sale – – (8 215) (8 322) (26 253) (3 460) (46 250)
  Carrying amount at 31 August 2007 25 809 249 771 67 355 83 510 256 649 15 870 698 964
  Additions – 1 184 24 335 27 432 91 795 12 012 156 758
  Disposals – – (3 642) (7 663) (10 591) (3 433) (25 329)
  Depreciation – (1 734) (31 664) (15 427) (41 845) (5 238) (95 908)
  Carrying amount at 31 August 2008 25 809 249 221 56 384 87 852 296 008 19 211 734 485
  During the 2007 year the property at erf 98 Lea Glen was reoccupied by the group and accordingly transferred to property, plant and equipment.