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ILIAD

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annual report

E N E R G Y | P A S S I O N | F O C U S | P E R F O R M A N C E

2007

OPERATION TEL FAX B One – Centurion 0861 008 009 012 664 0404 Bildware Décor Centre – Umhlanga 031 566 5566 031 566 5568 Bildware Natal – Durban 031 332 5764 031 332 7895 Buchel – Menlyn 012 361 8304 012 361 8305 Buchel Designa – Faerie Glen 012 998 4687 012 998 3028 Buchel Hardware – Pretoria 012 300 2700 012 325 5472 Buchel Hardware & Tool Centre – Zambezi Drive – Pretoria 012 543 7500 012 567 6588 Buchel Tool Centre – Pretoria 012 300 3800 012 321 8120 Cachet International – Gauteng 011 201 4600 011 201 4601 Cachet International – KwaZulu-Natal 031 240 8100 031 240 8111 Chipbase – Durbanville 021 982 7810 021 982 7819 Chipbase – George 044 874 1753 044 874 1801 Chipbase – Montagu Gardens 021 551 2035 021 551 1926 Chipbase – Retreat 021 701 1128 021 701 5841 Chipbase – Somerset West 021 854 6810 021 854 6862 Chipbase – Stikland 021 949 1794 021 949 1712 Citiwood – Cape Town 021 930 5923 021 930 5625 Citiwood – Denver 011 622 9360 011 622 7938 Citiwood – Durban 031 579 2274 031 579 2293 Citiwood – Port Elizabeth 041 374 7414 041 373 0749 Citiwood – Pretoria 012 804 3554 012 804 0582 Citiwood – Vereeniging 016 421 1683 016 421 1337 Design Hardware – Boksburg 011 894 1421 011 894 1422 Design Hardware – Northcliff 011 782 3629 011 888 1025 Design Hardware – Strijdom Park 011 792 9900 011 792 5153 Design Hardware – Woodmead 011 804 4293 011 804 6931 Ferreiras Architectural – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Cape Town 021 510 5555 021 510 5666 Ferreiras Décor World – Durban 031 303 8400 031 303 8576 Ferreiras Décor World – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Zambezi Drive – Pretoria 087 754 0500 012 543 2470 Just Tiles – Port Elizabeth 041 451 3602 041 451 1008 National Tile Traders – Bloemfontein 051 432 6360 051 432 1327 National Tile Traders – Boksburg 011 823 3340 011 826 2617 National Tile Traders – Centurion 012 661 6527 012 661 6586 National Tile Traders – Randfontein 011 693 6525 011 693 6907 National Tile Traders – Roodepoort 011 760 2315 011 766 3642 National Tile Traders – Rustenburg 014 597 0391 014 592 1586 National Tile Traders – Southgate 011 942 5978 011 942 5899 National Tile Traders – Strijdom Park 011 791 0206 011 791 0215 National Tile Traders – Vanderbijlpark 016 931 2456 016 931 2467 Q Lite – Pietermaritzburg 033 342 8292 033 342 6456 Q Lite – Strubens Valley 011 475 2412 011 675 2556 Q Lite – Umbilo Road Durban 031 306 9015 031 306 9017 Q Lite – Umhlanga 031 566 4070 031 566 4074 Saflok – Cape Town 021 791 0608 021 791 0608 Saflok – Johannesburg 011 453 5375 011 453 5379 SDT – Cape 021 762 5116 021 762 5164 SDT – Gauteng 011 392 5306 011 974 3455 The Knob & Knocker – Johannesburg 011 201 4800 011 201 4801 The Knob & Knocker – KwaZulu-Natal 031 240 8100 031 240 8111 The Tile Depot – Cape Town 021 510 1248 021 511 7790 The Tile Depot – North Riding 011 462 3774 011 462 9125 Thorpe Timbers 011 724 4200 011 865 2204 Tile & Décor Mart – Alberton 011 907 1383 011 907 1494 Top Form – Somerset West 021 854 4005 021 854 3397 W&B Hardware – Bellville 021 948 4881 021 948 0370 W&B Hardware – Claremont 021 670 7270 021 670 7288 W&B Hardware – Paarden Island 021 510 0700 021 510 0728 W&B – Port Elizabeth 041 373 5993 041 374 5396

contact details specialised building materials division

cont

ents

1 GROUP PROFILE

2 GROUP STRUCTURE AND DISTRIBUTION

3 FIVE-YEAR REVIEW

4 BOARD

5 GROUP STEERING AND EXECUTIVE COMMITTEE

6 CHAIRMAN’S REPORT

8 CHIEF EXECUTIVE’S REPORT

10 GENERAL BUILDING MATERIALS

14 SPECIALISED BUILDING MATERIALS

20 CORPORATE GOVERNANCE

26 VALUE-ADDED STATEMENT

27 ANNUAL FINANCIAL STATEMENTS

64 SHAREHOLDER ANALYSIS

65 CORPORATE INFORMATION

66 SHAREHOLDERS’ DIARY

67 FORM OF PROXY

68 NOTES TO THE PROXY

69 NOTICE OF ANNUAL GENERAL MEETING

72 CONTACT DETAILS

Turnover up 24%

Operating profit up 25%

Earnings per share up 22%

Distribution to shareholders up 30%

salient features

Iliad Africa’s strategic intent

DRIVING FORCEOur strategy is to meet the product needs of the building industry through focused sourcing and redistribution of goods into each identified segment of the market

CORE COMPETENCIESTo survive and prosper we must excel at: • Market intelligence • Procurement • Trading skills

PHILOSOPHY• Owner-manager ethos with strong incentives for performance• Decentralised operating divisions• Tight centralised financial controls• Focus on niche markets without dominating any one segment• Leveraging common expertise between divisions

Iliad Africa Limited focuses on sourcing, distributing, wholesaling

and retailing general and specialised building materials. A range

of customers, from large-scale contractors to do-it-yourself

homeowners, are serviced through 106 stores.

The group’s two focused divisions – general building materials

and specialised building materials – are headed by seasoned

professionals. This structure heightens our ability to leverage

common pools of expertise, extends the depth of senior

management, accelerates the process of succession planning

and enables each division to focus on its core market.

group profile

Ten years ago, Iliad was a small and newly listed group

that produced turnover of R365 million in its first year.

Today, the group is considerably bigger in every respect,

with 2007 turnover of over R4 billion. But Iliad Africa

is still driven by the energy, passion and focus that has

underpinned a decade of above-average compound

growth for its shareholders and transformed it into

a mainstay of the JSE’s industrial goods and

services sector.

a solid platform created by a decade of sustainable growth

01

group structure and distribution

02

BUILDING MATERIALS

SPECIALISED BUILDING

MATERIALS

GENERAL BUILDING

MATERIALS

OUR NATIONAL FOOTPRINT

Earnings and distribution per share (cents)

DISTRIBUTION* EARNINGS

Turnover (Rm)

in summary

* Includes prior year dividends

03

five-year review

2007 2006 2005 2004 2003 R000 R000 R000 R000 R000

Turnover 4 180 355 3 368 388 2 683 398 2 145 571 1 140 019

Profit before interest and taxation 347 433 278 060 221 614 173 612 92 740 Net (finance costs) investment income (7 874) 2 310 5 389 4 041 (1 508)

Profit before taxation 339 559 280 370 227 003 177 653 91 232 Taxation (92 126) (78 186) (65 983) (50 360) 24 680

Profit for the year 247 433 202 184 161 020 127 293 66 552

Headline earnings for the year 246 651 201 091 160 340 130 087 67 573

Number of ordinary shares in issue at year-end including treasury shares 146 433 408 154 284 519 153 427 519 150 737 519 147 200 000 Weighted average number of ordinary shares in issue net of treasury shares 146 433 408 146 240 876 144 933 286 141 995 454 88 478 042

Headline earnings per share (cents) 168,4 137,5 110,6 91,6 76,4 Earnings per share (cents) 169,0 138,3 111,1 89,6 75,2 Fully diluted headline earnings per share (cents) 163,4 133,7 107,1 89,6 71,7 Fully diluted earnings per share (cents) 163,9 134,4 107,6 87,6 70,5 Distribution per share (cents per share) 52,0 40,0 32,0 24,0 19,0

Profit before and after taxation (Rm)

AFTER TAX BEFORE TAX

4 200

3 900

3 600

3 300

3 000

2 700

2 400

2 100

1 800

1 500

1 200

900

600

300

0

03 04 05 06 07

180

170

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

03 04 05 06 07

340

320

300

280

260

240

220

200

180

160

140

120

100

80

60

40

20

0

03 04 05 06 07

board

04

DIRECTORS

NON-EXECUTIVE DIRECTORS

Howard Charles TurnerCA (SA) SEP (Stanford) Non-executive chairmanAppointed director in March 2003

Ralph Trevor RirieBCom (Wits) CA (SA) OPM (Harvard) Non-executive directorAppointed director in March 2003

Makhosazana Khosi SibisiBA (City College of New York)Dip: supply chain management (Michigan, USA) Non-executive directorAppointed director in September 2005

EXECUTIVE DIRECTORS

Ralph Bruce Patmore BCom (Wits) MBL (Unisa) Chief executive officer Appointed director in June 1998

Neil Peter GoosenBCompt (Unisa) CA (SA) MBA (Wits) Group financial director Appointed director in September 1999

FROM L TO R

Howard Turner Neil GoosenKhosi Sibisi Ralph RirieRalph Patmore

JOHN CARLILEBuilders Market East

GERRIT DU PREEzBuilders Market West

ABU OSMANCampwell Western Cape

DAvE YOUNGD&A Eastern Cape

ROLAND MEEKD&A Kwazulu-Natal and Rustenburg

RHONE DIABGauteng

CALIE OLIvIERLaeveldbou Mpumalanga

JOHN LATHWOODPlumbing

GUISEPPE MARTINIInformation Technology

HARRY SMITProcurement

GROUP EXECUTIvE COMMITTEE

JANNIE COETzEEBoards

STEPHEN SCHUTzCeramics

MOHAMED JAMEEL HAMIDCeramics Cash & Carry

ADRIAAN BOOYSENEquipment Hire

KIM DAvIDSONIronmongery

KIM DAvIDSONLighting

LEN STUCKEWholesale Hinges

MAX SACKSWholesale Ironmongery

BRIAN THORPEWholesale Timbers

GAvIN ATKINSONWholesale Plumbing and Hardware

Group steering committee

05

group steering and executive committee

ENHANCED STRATEGIC COMMUNICATION

ANDRIES STRYDOMGeneral building materials

Managing director

NEIL GOOSENGroup financial director

LUIS MENDESGroup company secretary

RALPH PATMOREChief executive officer

MARCO vAN NIEKERKSpecialised building materialsManaging director

chairman’s report

06

THE ILIAD GROUP HAS NOW SUCCESSFULLY COMPLETED TEN YEARS OF DOUBLE-DIGIT EARNINGS GROWTH AND

IS POSITIONED TO CONTINUE THIS TREND FOR THE NEXT FEW YEARS.

I am pleased to report on the Iliad group’s results for the 12

months to 31 December 2007 – a decade since listing and

ten consecutive years of double-digit earnings growth.

For the 2007 financial year, earnings per share were 169

cents, up 22% on 2006. This contributed to the average

annual growth rate of 20% over the decade. The group

once again generated significant positive cash flow from its

operations, enabling it to settle the current year’s and prior

years’ tax liabilities and fund new acquisitions and capital

expenditure without having to gear the balance sheet. This

also enabled the board to increase the annual distribution

to shareholders by 30% to 52 cents a share.

During the year under review Iliad was the target of an

unsolicited bid by Absa Capital and a consortium of private

equity partners. The rationale for this bid was no doubt the

group’s track record of profitability, its strong cash flows

and ungeared balance sheet. The attractiveness of the sector

in which the group operates was also a factor. In order to

manage the bid process, the board established a committee

of two non-executive directors so as to ensure that executive

management could focus their attention on the business of

running the group. Despite this, the process was challenging

for the group executive management and contributed to the

loss of two senior executives. Following the withdrawal of

the bid by the consortium, appointments have been made to

the positions of MD general building materials division and

MD specialised building materials division. The appointees

are both people with successful track records and will no

doubt contribute significantly to the group in the years

to come.

Iliad has long enjoyed a strong base of shareholders, with

our largest institutional investor being Rand Merchant Bank

(page 64).

Black economic empowerment

The broad-based black economic empowerment transaction

concluded in 2005 with the Women’s Private Equity Fund

(One) and vunani Capital for a 10% stake in Iliad continues

to deliver benefits in competitively positioning the group

for tender work and extending the breadth of our business

experience.

At operational level the National Tile Traders acquisition,

which will be implemented towards the end of the first

quarter of 2008, will result in a cash & carry cluster being

managed by an experienced BEE team owning 30% of the

business.

The Campwell Hardware acquisition last year also resulted

in 25% of that operation being owned by the BEE team.

In line with the Codes of Good Practice on Black Economic

Empowerment the group has embarked on the process of

having its broad-based BEE contribution status verified by

Empowerlogic. This evaluation will form the basis for the

group transformation committee to progress in the future.

Macro environment

The favourable trading conditions of the first half of the

review period deteriorated somewhat in the second half as

the impact of interest rate increases, higher inflation and

global economic uncertainty filtered through to the consumer

“ Ten consecutive years of double-digit earnings growth.”

07

level. Increased activity in the commercial sector continues

to offset a definite slowing in the residential market.

The infrastructural market continues to grow, with spending

increases by both the public and private sectors on

infrastructure improvements, mining and electricity.

At this stage it is difficult to predict what effect the

electricity load shedding programme will have and whether

there will be a further increase in interest rates to counter

the inflationary pressures the country is subject to.

Strategy

Iliad’s strategy is clear: to meet the product needs of the

building industry through focused sourcing and redistribution

of goods into each identified segment of the respective

markets. Acquiring suitable businesses to expand our

coverage in South Africa and complementing our niche

market operations remain integral components of this

strategy. Our preference is for owner-managed operations

and funding acquisitions through internal resources. However,

should the possibility of a major acquisition arise the group

is well positioned to gear the balance sheet up to 30%.

In line with this strategy, in July 2007 we acquired

Gauteng-based Thorpe Timbers, a timber merchant with a

20-year track record and annual turnover of R200 million

that imports and buys local raw timber to produce finished

products for a blue-chip client base. Thorpe Timbers

expands Iliad’s international supply network, adding

established source markets in South America, Malaysia and

China.

Subsequent to the year end, Iliad announced the acquisition

of B One Holdings (Pty) Limited, subject to the fulfilment

of certain conditions precedent. With equivalent annual

turnover of some R250 million, B One specialises in letting

and hiring portable ablution facilities, site office containers,

soil compactors and related accessories in the Gauteng

area, and introduces the group to a new growth market

– infrastructural development – with excellent expansion

potential and inter-divisional synergies.

In recent years, Iliad has repeatedly demonstrated its ability

to identify suitable and appropriately priced acquisition

targets, and to integrate these operations smoothly into the

existing group.

With key elements of this strategy now firmly in place and

given the ongoing market potential of the infrastructural

sector the decision has been taken to explore the possibility

of expanding our focus into the industrial sector.

Appreciation

Ralph Patmore and his executive team have over the ten

years continually contributed to the success of our group.

During the period under review the challenges posed by

the unsuccessful unsolicited bid for the group, the slowing

global economy, higher domestic interest rates and rising

inflation have exacerbated their task of continuing to

achieve double-digit growth for the benefit of shareholders.

I thank them and my fellow board members sincerely for

their immense contribution during the past period.

Howard TurnerChairman

chief executive’s report

08

ILIAD HAS POSTED GOOD GROWTH FOR THE 12 MONTHS TO 31 DECEMBER 2007, COMPLETING A DECADE

OF CONTINUOUS GROWTH SINCE LISTING ON THE JSE IN 1998.

OverviewIn the first year as a listed company, the group achieved turnover of R365 million, had a staff complement of 680 and produced profit after tax of R16 million. Today, Iliad is considerably larger in every respect, but still driven by the energy, passion and focus that have underpinned ten years of above-average compound growth for its shareholders.

During the review period, earnings per share rose 22% to 169 cents and turnover by 24% to R4,2 billion while operating profit before investment income rose by 25% to R347,4 million against averaged inflation of around 8% across the group.

Operating margins remained constant in a challenging business environment while working capital levels remained well managed and under targeted levels.

In view of these good results, positive cash flows from operating activities and a strong balance sheet, the directors increased the distribution by 30% to 52 cents per share (2006: 40 cents per share).

It was a challenging but successful year. Material shortages, rising interest rates and the effects of the National Credit Act were compounded by an unsolicited bid for the group’s equity. Given the amount of management time required to deal with these issues, results for the year clearly reflect the trading strength, depth and experience of management in the Iliad group.

Equally, the revised structure of the two focused divisions – general and specialised building materials – has proved its worth as a platform to leverage procurement opportunities

and common pools of expertise. Although the two divisions operate in the same market, their offering to the market, as well as the methodologies employed to move product to market, are quite different.

Selling prices were under pressure as the market slowed, but these were partially countered by the group’s procurement power and ability to contain expenses. While the group’s procurement leverage increases as the market slows there is a lag period of approximately nine months before the full effect filters through.

Performance in contextThe residential market slowed at all levels during the period as the impact of higher interest rates and new credit legislation worked through the system.

In contrast, the commercial market continued to show reasonable growth, as did the market for additions, refurbishment and alterations. Combined, these largely offset the lower activity levels in the residential market.

Inflationary pressure eased in the second half of the financial year as the slower market allowed the group to capitalise on its procurement power.

The upward cycle in the construction industry is well under way, driven by the sheer quantum of infrastructural projects. Given the nature of our business, our direct involvement is limited. However the spin offs, as a result of, for example, contractor housing and the continued need for additions, refurbishment and alterations has a direct positive effect on our business, especially in the outlying areas where most of the projects are located.

“ Iliad is well positioned to optimise its operating efficiencies, capitalise on opportunities for strategic acquisitions and maintain its trajectory towards its short-term target of R5 billion in turnover.”

09

Operational reviewIliad’s solid operating results reflect its unfolding strategic thrust and continued demand in the marketplace, albeit at a slower rate of growth.

The pressure on gross margins during the year was countered by further enhancing internal efficiencies and capitalising on the group’s ever-improving procurement ability.

In the general building materials division, Campwell Hardware (acquired in the last quarter of 2006) exceeded its warranted profits and was smoothly integrated into the division. This has increased Iliad’s presence in the key Western Cape market, on the back of this highly respected regional brand led by Campwell’s existing capable management, who are the empowerment shareholders.

The division performed exceptionally well with all regional clusters contributing in line with or above expectation. New outlets were opened in Kathu, Secunda and Lephalale.

In the last quarter, we expanded the general building materials division’s geographic footprint through the acquisition of Eastern Cape-based USM Building Materials, which has outlets in Uitenhage and Jeffreys Bay.

At the end of the year, we refined the model for the cash & carry cluster (ten existing stores) in our general building materials division as we did not achieve the results we anticipated. The hub-and-spoke model successfully developed during the two-year pilot project was reintroduced. This means key regional, fully fledged builders merchant branches now serve as administrative and procurement ‘hubs’ for these cash-orientated rural stores. This will result in lower costs, greater flexibility, improved supply chains, stronger recognisable brands and credit facilities where required. Once this new model has been consolidated, the store network will be further expanded using regional brandnames. Additional services, such as the supply of trusses, will also be available to these outlets from the hub. This restructuring best fits the group’s overall culture and will provide a competitive advantage for the group in this market space.

Approval has been granted for two new fully fledged merchant outlets to be rolled out. Laeveld Bouhandelaars will open in Lydenberg towards the middle of 2008, while Ferreira’s Buildware will open a store in Pretoria in the last quarter of 2008. Both projects are under construction.

The specialised building materials division houses Iliad’s interests in boards, ceramics, ironmongery, lighting,

plumbing and wholesale. The division recorded solid results for the year after a slow start due mainly to delays in the award of commercial contracts. The boards and ironmongery clusters recorded excellent results, increasing their contribution to group profit despite margin pressures due mainly to the increased percentage of commercial business.

Iliad’s new specialised cash & carry cluster, Tile & Décor Mart, was augmented during the year with the acquisition of National Tile Traders. The National Tile Traders transaction will be implemented towards the end of the first quarter of 2008, adding critical mass through nine outlets and an established customer base. The cash & carry cluster will be managed by an experienced BEE team which owns 30% of this business.

The wholesale cluster performed well above expectations and is fast approaching target operating profit levels. With appropriate supply lines and improved infrastructure in place, this cluster is now well positioned to leverage its capabilities for the benefit of the group and external clients alike.

In the last quarter of 2007 Iliad acquired Gauteng-based Thorpe Timbers, a timber merchant with a 20-year track record that imports and sources local timber for redistribution to the construction, building and industrial market segments. The acquisition brings to the group long-standing relationships and solid supply lines for timber from South America, Malaysia and China, which will prove strategically important in years to come due to the impending timber shortage in South Africa.

After the year-end, the group signed agreements to acquire

B-One, a highly profitable company that focuses on the

hiring of toilets, sheds and offices to the building and

construction industry. It is expected that the deal, which

is subject to Competition Commission approval, will be

implemented before June 2008.

In view of the growing shortage of qualified staff, Iliad

has added another leg to its inhouse training. The existing

Iliad Academy, which is run in conjunction with Unisa for

management training, will continue in the same format. A

new facility has been established in Middelburg where the

group can house 25 full-time students who will undergo

training covering all aspects of the business from product

knowledge to store management. We are extremely excited

about the potential value add that this facility will contribute.


10

“Operating out of 58 stores, the division markets a full range of non-differentiated product for a spread of customers from the mid-sized contractors to the DIY enthusiast. The products are predominantly locally sourced.”

GENERAL BUILDING MATERIALS DIvISION

11

General building materialsThis division accounts for 65% of the group’s turnover and 66% of the profit before interest and tax. Operating out of 58 stores, the division markets a full range of non- differentiated product for a spread of customers from the mid-sized contractors to the DIY enthusiast. The products are predominantly locally sourced.

Turnover rose by 33%, including inflation of 10%, for the review period.

Eight regionally focused clusters are housed in the division, each headed by a seasoned trader. The merits of this focused grouping stood the group in good stead during the year as illustrated by the exceptional results achieved despite the challenging environment described earlier.

All cluster managers are members of the group executive committee.


12

GENERAL BUILDING MATERIALS DIvISION

During the year, Andries Strydom was appointed to head the general building materials division. Andries has been with the Iliad group for ten years and brings proven branch operational as well as financial skills to his new management role. Iliad’s ability to promote internally reinforces the succession planning in place and depth of skill in our group.

Satellite operations were established in Kathu and Lephalale during the review period, to take advantage of spin-off demand generated by large infrastructural projects in the Northern Cape and Limpopo provinces respectively. The hub-and-spoke concept noted earlier takes Iliad closer to its customers while minimising the costs associated with a full branch operation.

Excellent performances were recorded by all the clusters except for Builders Centre, which although profitable, fell short of the group’s expected targets. The restructuring of this cluster is detailed under the operational review.

The rollout of the Builders Centre cash & carry outlets has been a positive learning curve for the group. In line with the decentralised nature of our group, we have refined the model to maximise the synergies of regionalising administrative and procurement functions while enabling individual outlets to function autonomously in meeting the specific needs of their markets. This is already producing benefits in terms of lower costs, smoother supply chains and additional value in the form of credit facilities – an important benefit in this competitive market.

Once this model is fully entrenched, we will continue our

expansion programme. Growth will include both new stores

in key areas and additional products and services, such as

trusses. To leverage regional brand strength, these stores

will operate under established trading names.

A special mention needs to be made of two clusters that

produced all-round commendable performances. Builders

Market East and Builders Market West demonstrated what

can be achieved through focused, controlled trading and this

is testament to the quality of management in these clusters

During the year the Laeveld Bouhandelaars flagship store in

Nelspruit underwent a major renovation which made trading

difficult, but again the management demonstrated focus

and commitment way beyond the normal call of duty.

Procurement is one of Iliad’s core competencies and a

cornerstone of the division’s competitive advantage. The

review period saw the start of the journey to perfect this

area of the business. The cluster managing directors are now

driving the process hard in conjunction with the divisional

negotiating team, which will be significantly strengthened

in the new year. The group expects to see substantial

improvements in this aspect of the business in 2008 which

will go a long way to offsetting margin pressures on the

selling side of the operation.

13

ANDRIES STRYDOMGeneral building materials divisionManaging director

This division also houses the group’s commercial crime unit. Given that theft and fraud are ongoing risks in a business of this nature, our commercial crime team continues to minimise losses to the group through a proactive and reactive approach.

Outlook

The divisional five-year turnover growth target of R1,1 billion was set in January 2005. After three years, we have achieved R800 million, with strong prospects for the new financial year.

While the year ahead is likely to be considerably more challenging – given the impacts of interest rates, inflation and global economic volatility – we believe the division is well placed to leverage off the limited opportunities that will present themselves in a slowing market.

Procurement is one of Iliad’s core competencies and a cornerstone of the division’s competitive advantage. The cluster managing directors are now driving the process hard in conjunction with the divisional negotiating team, which will be significantly strengthened in the new year.


14

SPECIALISED BUILDING MATERIALS DIvISION

“This division accommodates all the differentiated or value-added product offerings in the group. The bulk of product in this division is imported.”

15

Specialised building materials

The specialised building materials division accounts for 35% of the group turnover and 34% of the profit before interest and tax. This division accommodates all the differentiated or value-added product offerings in the group. The bulk of product lines in this division are imported.

Divisional clusters currently comprise boards, ceramics, ironmongery, lighting, plumbing and wholesale. Wholesale is focused into a number of specialised entities, namely plumbing, tools and hardware, hinges and draw slides, and ironmongery.


16


Turnover rose by 10% during the period while inflation ran at about 3%. The slower growth in turnover was due mainly to the following three factors:• B&B Locksmiths, a small business that we felt could not

be expanded, was sold at the start of the year.• The wholesale cluster revamped the line of products on

offer, eliminating high-volume low-margin locally sourced product lines. This strategic move reduced turnovers but substantially improved the profitability of the cluster.

• The year-on-year rate of growth in showroom sales in all clusters slowed in the second half of the year.

Consolidating these clusters into one division has given the group critical mass to leverage its inward-bound logistics and foreign exchange efficiencies. It has also effectively distinguished Iliad’s value-added and exclusive product lines from the non-differentiated products sold by the general building materials division.

During the year, a new divisional head, Marco van Niekerk, was appointed. Marco’s logistical skills are expected to further enhance this core divisional function. As with the general building materials division, all cluster managing directors are members of the group executive committee. The boards cluster recorded excellent results for the year as the flow of work from commercial projects accelerated. There was a smooth management transition from the original vendor on his retirement through effective succession planning. Continuing the trend of recent years, supply lines for local products remained tight with concomitant pressure

on margins. New capacity from major local suppliers is expected to ease this situation in the current year, although Iliad has in recent years established a prudent balance between sourcing products from local manufacturers and imported ranges. The recent exchange rate deterioration will place pressure on imports. More consistent local supply lines should facilitate Iliad’s expansion plans for this cluster although a final decision will be taken only once this new manufacturing capacity is in place and operating at full capacity.

In a challenging year, the ceramics cluster maintained its volumes due to increased activity in the commercial business during the period. However, tighter margins in this segment of the market in turn placed the cluster’s margins under pressure. Given the quality and competitive pricing of markets in the Middle East and east Asia, Iliad is importing a growing proportion of product lines from markets as far afield as Dubai and China in addition to traditional markets in Europe. Several exclusive supply agreements were secured during the year from eastern markets to support our aim of building a consistent supply line of quality products. Upmarket offerings from Europe, however, remain a key element in Iliad’s basket of products although pricing pressures are rising as consumers become increasingly cost-sensitive in the prevailing economic environment. Products landed from the east are significantly lower priced than those sourced from Europe, thus contributing to a deflationary environment.

17

Retail sales slowed in the second half of the year, underlining the twin impact of interest rates and the National Credit Act, while commercial sales reversed their static trend of last year as large projects were commissioned. This trend is expected to continue in 2008.

New boutique outlets were opened in Bloemfontein and Pretoria during the year in line with the group’s geographic rollout plan.

The cash & carry cluster of the specialised building materials division was strengthened after the year end with the acquisition of National Tile Traders, a chain retailing tiles, taps and sanitaryware from nine outlets in three provinces. Subject to regulatory and competition approvals, this acquisition will add approximately R100 million a year to Iliad’s turnover and expand the cash & carry focus of this division. With strategically located outlets in Gauteng, North-West and Free State, National Tile Traders marks the group’s entry into the important middle to lower cash & carry segment of the ceramic tile and sanitaryware market.

The ironmongery cluster produced a solid performance for the year. In line with other clusters, the shift to commercial business put pressure on margins but this was contained through internal efficiency improvements and improved procurement, underlining the focus and commitment of the cluster management team.

A new Buchel hardware outlet was opened in Pretoria late in December.

The lighting cluster, trading as Q Lite, has been smoothly integrated into the group following the profit warranty period. With an established presence in the specification and contract market, Q Lite is now focusing on enhancing its presence in the retail sector.

The plumbing cluster, which primarily serves the needs of the short-term insurance industry, produced good results for the review period and finalised the integration of two small acquisitions that have given it regional presence in Kwazulu-Natal and the Western Cape. As this cluster requires further geographic coverage it will be relocated into the general building materials division so that it can leverage the existing network of over 50 outlets.

The wholesale cluster performed above expectations and is fast approaching its target operating profit levels. With appropriate supply lines and infrastructure in place, this cluster is now well positioned to leverage its capabilities for the benefit of the group and external clients.

Cachet, the plumbing and hardware specialised arm, produced a major turnaround in 2007 and has started to demonstrate its exciting potential. All the other elements of the cluster performed in line with expectations.


18


Thorpe Timbers, the timber wholesaler noted earlier, was acquired at the end of 2007 and will be a major contributor to the cluster in 2008.

Outlook

The five-year turnover growth target for the specialised building materials division was set at R1,3 billion in January 2005. After three years, we have achieved R850 million and will reach our goal in 2008.

Acquisition opportunities are constantly presenting themselves. New additions to the group will help the division achieve growth in what will be a relatively difficult year.

MARCO vAN NIEKERKSpecialised building materials divisionManaging director

Consolidating these clusters into one division has given the group critical mass to leverage its inward-bound logistics and foreign exchange efficiencies. It has also effectively distinguished Iliad’s value-added and exclusive product lines from the non-differentiated products sold by the general building materials division.

19

Group prospects

We expect the new financial year to present a more challenging operating environment given the combined impact of a slowing global economy, higher domestic interest rates, inflation and the unquantifiable effect of South Africa’s power supply issues. Should these power issues temporarily suspend new building development, the immediate position will worsen. However, the medium term will present a growing opportunity in the additions, alterations and refurbishment market – a market Iliad is exceptionally well placed to service.

Despite these challenges, Iliad is well positioned to optimise its operating efficiencies, capitalise on opportunities for strategic acquisitions and maintain its trajectory towards its short-term target of R5 billion in turnover.

Appreciation

Ten years on, Iliad has built an enviable track record of steady growth. This performance owes much to the dedication of our people at all levels. I thank you for the unprecedented passion you continue to bring to our group and the service levels that set Iliad apart. We will continue to thank our customers for their loyalty through superior service, innovation and competitive pricing as we enter our second decade as a listed and growing group.

A special word of thanks to the chairman and the other non-executive directors for their immense contribution and support over the last year.

Ralph PatmoreChief executive officer

corporate governance

20

Iliad and its directors are fully committed to the highest

standards of corporate governance in the conduct of their

business.

Iliad also complies with the spirit and form of continuing

obligations of the JSE Listings Requirements.

The financial highlights, chief executive officer’s report

and the directors’ report contain details of the group’s

performance. The board believes these reports, along with

the chairman’s report and financial statements, reasonably

reflect the group’s position and prospects. The directors’

responsibility for the financial statements is described on

page 30.

Board of directors

The chairman and a further two of the five directors of Iliad

are non-executive and independent.

Non-executive directors have the necessary skills and varied

experience to bring independent and balanced judgement

to group business. Executive directors comprise the chief

executive officer and the group financial director.

The board retains full and effective control of the group.

Management of the day-to-day affairs of the company has

been delegated by the board to the chief executive officer.

Non-executive directors meet independently without

executives present throughout the year, and communicate

regularly both telephonically and electronically. Additional

meetings are convened should any matter arise that requires

consideration by the board outside of the quarterly meetings

scheduled. The chairman and the chief executive officer

meet at least once every month and also communicate

regularly telephonically.

One third of the board retires by rotation each year.

If requested by the board to serve a further term,

retiring directors may offer themselves for re-election

by shareholders at the annual general meeting. Newly

appointed directors cease to hold office at the conclusion

of the annual general meeting following their appointment.

If requested by the board to serve a further term,

those directors may offer themselves for re-election by

shareholders at the annual general meeting.

All directors have access to the advice and services of

the chairman, the chief executive officer, the group

financial director and the group company secretary. The

group company secretary is responsible to the board for

ensuring that board procedures are followed and applicable

regulations are adhered to.

Board operation

The board is responsible to shareholders for the conduct of

the business of the group. It provides leadership and vision

to the group so that shareholder value is enhanced and the

group’s long-term sustainable development and growth may

be achieved. The board approves group strategy, reviews

group performance, approves the interim and annual financial

statements, determines the group’s authority levels, treasury

policies and risk management policies, and approves major

investments and the remuneration of non-executive directors.

Financial reporting is routinely performed. Non-executive

directors are provided with sufficient information to enable

them to formulate independent conclusions on all matters

brought to their attention at board meetings.

The board is ultimately accountable for Iliad’s performance

and affairs.

Board meetings

Board meetings are held at least quarterly or as required.

All directors are invited to add items to agendas for board

meetings. Dates for quarterly board meetings in the following

year are set in November each year.

Conflicts of interest

Directors are required to inform the board timeously of

conflicts or potential conflicts of interest they may have in

relation to particular items of business. Directors are obliged

to recuse themselves from discussions or decisions on

matters in which they have a conflicting interest. Directors

are required to disclose their shareholding in the company

and all other directorships quarterly or as changes occur.

Declarations of interest are tabled at each board meeting.

Board committees Committees are established to assist the board in performing

its duties, and the board is empowered to form or disband

committees as appropriate. Details of the committees are

presented below.

21

Audit and risk management committee

The audit and risk management committee comprises Ralph

Ririe (chairman) and Howard Turner (both independent

non-executive directors). The chief executive officer, group

financial director and representatives, including the head

of the internal audit department, are invited to attend each

committee meeting and have unlimited access to the audit

committee chairman.

The committee functions in terms of a written charter

approved by the board and meets at least three times per

year. It reviews the interim and annual financial statements

before submission to the board. The committee maintains

an objective and professional relationship with the external

auditors and has satisfied itself that the external auditors are

independent.

The committee assists the board, inter alia, in discharging

the following responsibilities;

• operating effective systems of internal control;

• operating an effective risk management process;

• operating effective internal and external audit functions;

• ensuring that timeous, relevant and accurate processes

exist for interim and annual financial reporting;

• nominating for appointment a registered auditor who is

independent of the company;

• determining the fees to be paid to the auditor and the

auditor’s terms of engagement;

• ensuring that the appointment of the auditor complies with

the Companies Act, 1973, as amended, and any other

legislation relating to the appointment of auditors;

• determinating the nature and extent of any non-audit

services which the auditor may provide to the company;

• pre-approving any proposed contract with the auditor for

the provision of non-audit services to the company;

• receiving and dealing appropriately with any complaints

relating to the accounting practices and internal audit

of the company, the content or auditing of the financial

statements or to any related matter.

The chairman of the audit and risk management committee

is required to report to the board after each meeting.

The board has determined that the audit and risk

management committee has satisfied its responsibilities

for the year under review in compliance with its terms of

reference.

Remuneration committee

The committee comprises Ralph Ririe (chairman) and

Howard Turner (independent non-executive directors).

Ralph Patmore (chief executive officer) is invited to attend

committee meetings but may not participate in discussions

on his own remuneration. This committee operates in terms

of a written charter approved by the board.

The main purpose of the committee is to ensure that the

company’s directors and senior executives are appropriately

rewarded for their individual and joint contributions to the

group’s overall performance, having due regard for the

interests of the shareholders, the financial and commercial

wellbeing of the group and recommendations from industry

consultants and surveys. The committee has authority for

matters relating to employee remuneration, benefits and

profit incentives. Employee incentive schemes, at both

executive and divisional level, are subject to the approval of

the committee and are based on market conditions and the

achievement of prescribed, measurable performance targets.

The company’s philosophy is to set remuneration that is

appropriate, taking into account levels of responsibility

and the need to attract, motivate and retain directors,

executives and individuals of high calibre. It also makes

recommendations to the board on fees for independent

and non-executive directors for services to the board. The

determination of fees is based on recommendations from

industry consultants and surveys. This committee meets at

least twice a year.

The activities of the remuneration committee are reported to

the board.

The board has determined that the remuneration committee

has satisfied its responsibilities for the year under review in

compliance with its terms of reference.

Directors’ emoluments and share options are detailed in note

20 to the financial statements.


22

Transformation committee

Khosi Sibisi (non-executive director) has been mandated to

address all transformation issues and chairs the committee.

Other members include the chief executive officer and

divisional management. Selected operational executives

and senior managers are invited to attend meetings and

are co-opted to drive information gathering and assist with

implementation. This committee was formed during the

second half of 2006 and meets twice a year. This committee

operates in terms of a written charter approved by the board.

The objectives of the committee are, inter alia, to ensure

smooth, systematic and meaningful transformation of

employment and social responsibility practices in the group

in harmony with industry charters, legislation and business

profitability and growth objectives.

In line with the Codes of Good Practice on Black Economic

Empowerment (the Codes), the group has embarked on the

process of having its broad-based BEE contribution status

verified by Empowerlogic.

The process was started with workshops to communicate

the information requirements. The transformation committee

expects that the information gathered will be verified during

March 2008, after which the verification certificate and

report will be issued.

The verification will be based on the financial year ending

31 December 2007. Based on the Codes, the group will

be measured on equity ownership, management control,

employment equity, skills development, preferential

procurement, enterprise development and socioeconomic

development. This will form the basis for the group’s

endeavours in the future.

Steering committee

The revised structure of the group as detailed on page 5

and in the chief executive officer’s report has resulted in the

formation of this committee.

The current composition of the committee is as follows:

Ralph Patmore (chief executive officer) – committee

chairman

Members

Neil Goosen (group financial director)

Luis Mendes (group company secretary)

Andries Strydom (MD general building materials division)

Marco van Niekerk (MD specialised building materials division)

The committee:

• is responsible for the day-to-day management of the group

and its two divisions and reports directly to the chief

executive officer;

• provides assurance to the chief executive officer that risk

management policies and strategy set by the board are

operating effectively;

• reviews group performance as well as commercial and

strategic issues affecting the group;

• considers all acquisitions and disinvestment proposals and

manages the process of capital allocation by ensuring that

investments and disinvestments increase shareholder value

and meet Iliad’s financial criteria.

The steering committee meets monthly. Additional ad hoc meetings of the committee are convened whenever necessary.

The activities of the steering committee are reported to the board.

ATTENDANCE OF MEETINGS

Directors Board Audit and riskmanagement

committee

Remunerationcommittee

HC Turner

RB Patmore

RT Ririe

NP Goosen

MY Sibisi

A B A B A B

6

6 6 3 3

6 6 3 3 2 2

6 6 3 3 2 2

6 3 3 2 2

6 5

Column A indicates the number of meetings held during

the period the director was a member of the board and/or

committee. Column B indicates the number of meetings

attended.

23

Executive committee

The composition of the executive committee is set out on page 5.

This broader forum committee gathers and consolidates information obtained from the 18 operating entities, with particular emphasis placed on: Intra-divisional synergies; Market intelligence, and Procurement opportunities.

All matters requiring strategic direction or decision are submitted to the steering committee for deliberation and subsequent referral to the board, where necessary, for final consideration and approval.

Reporting controls

The group has comprehensive monthly financial accounting and reporting routines for its operating divisions. Management of cash and banking relationships is centralised.

Formal monthly meetings are held by the steering committee to review the group’s performance. Formal quarterly meetings are also held between members of the steering committee and each of the 18 operating executives to review performance, commercial and strategic issues. Internal audit

The systems of internal control require directors and employees to maintain the highest ethical standards, ensuring that business practices are conducted in a manner that, in all reasonable circumstances, is beyond reproach. Iliad’s formal organisational structure incorporates suitable segregation of authority, duties and reporting lines, and promotes effective communication of information.

The internal audit division reports directly to the chief executive officer on day-to-day matters and undertakes the function of internal audit of the operating divisions. The internal audit function reports to the audit committee on its findings and has unrestricted access to the audit committee and its chairman.

Internal audit activities principally address the following key issues at each of the business units of the company: Appraising systems, procedures and management controls; Assessing the effectiveness of risk management processes; Assessing the control over assets;

Reviewing compliance with policies and procedures, and evaluating the integrity of management and financial information.

The members of the audit committee meet informally throughout the year with the head of the internal audit department.

Audit plans are drawn up annually and take account of changing business needs and risk assessment. Cognisance is taken of issues highlighted by the audit committee, external auditors and management. Follow-up audits are performed in areas where weaknesses or concerns are identified. The audit committee approves the internal audit plan.

Internal audit responsibilities are clearly defined and approved by the audit committee. Internal audit continued to function throughout the group during the year under review. Internal audit provides management with an independent, objective consulting and assurance service that reviews matters relating to control, risk management, corporate governance and operational efficiencies. The company’s external auditors are involved in this process if required.

During the year under review, no major breakdowns in internal controls were identified.

Risk management

Group risk management is achieved through the identification of the main business and operational risks and ensuring that effective risk management procedures and controls are in place to minimise or eliminate risks that could adversely affect the accomplishment of the group’s business objectives.

The group is committed to managing its risks and opportunities in the interests of all stakeholders. Every business unit and every employee has a responsibility to act proactively in this manner.

The management of group risks and ensuring that the policies and strategies set by the board are operating effectively takes place at the group’s steering committee under the control of the chief executive officer.

The group consists of 106 business units and the management of risks in these units takes place in the 18 operating clusters to which these business units report.


24

The internal audit department is responsible for assessing the effectiveness of the group’s risk management processes and reports its findings to the audit and risk management committee. The quarterly board meetings have a standard agenda item dealing with risk management.

External audit

The external auditors provide an independent assessment of internal financial control and express an independent opinion on the annual financial statements. The external audit function offers reasonable, but not absolute, assurance on the accuracy of financial disclosures. The external auditors’ plan is reviewed by the audit and risk management committee to ensure that significant areas of concern are covered, without infringing on the external auditors’ independence and right to audit. The audit and risk management committee monitors fees paid to the external auditors, which again remained within acceptable levels. There is co-operation between internal and external auditors, to ensure appropriate combined audit coverage and minimisation of duplicated effort.

Going concern

The annual financial statements set out on pages 31 to 63 have been prepared on the going-concern basis. The directors, after due deliberation at the last meeting of the board, have every reason to believe that the company and the group have adequate resources to continue in operation for the foreseeable future.

Ethics

Iliad has adopted a code of ethics to ensure that the group operates, in all respects, as a good corporate citizen. The code requires group employees to perform their duties in good faith and to be trustworthy in all their dealings with customers, suppliers, each other and any other stakeholders, thereby maintaining a reputation for integrity and responsible behaviour.

Iliad accepts the recommendations of King II that the company should conduct its affairs with uncompromising honesty and integrity. The group continues to adopt a zero tolerance approach to theft, fraud and the offering of bribes and favours.

Shareholders

The chief executive officer and group financial director regularly communicate with major shareholders, institutional investors and media analysts. Shareholders are encouraged to attend the annual general meeting. Financial results are published in the press and shareholders receive a copy of these results timeously. A comprehensive website is maintained (www.iliadafrica.co.za), containing extensive information on the company, and an archive of annual and interim results as well as an announcement section.

Dealing in securities The Securities Services Act and the JSE Listings Requirements regulate transactions by directors and officers in securities issued by the company.

Directors and officers may not deal in the company’s shares without first advising and obtaining clearance from the chairman. The chairman may not deal in the company’s shares without first advising and obtaining clearance from the chief executive officer. Details of all share dealings in the company’s shares by directors and officers are disclosed in accordance with the JSE Listings Requirements and at each board meeting.

Directors of the company and its major subsidiaries, the group company secretary, their associate/s or members of their immediate family may not deal, either directly or indirectly, at any time, in the securities of the company on the basis of unpublished price-sensitive information regarding the company’s business or affairs. These persons are made aware of restricted or “closed” periods for dealing in Iliad shares and the provisions of insider trading legislation. Dealing in the securities of the company at any other time is permitted but approval must be obtained from the chairman or chief executive officer in advance of any transaction.

Social report Human capital: Iliad employs 3 806 people and regularly submits statutory reports to the relevant authorities.

Employment equity: Iliad provides equal employment opportunities and has a strong culture of internal promotion and development of its people. The company continues to pursue employment equity through implementation of the plan submitted to the relevant authorities. Annual reports are submitted to the Department of Labour.

25

The group continues to make progress towards its employment equity targets: at the end of September 2007, 54,6% of the overall workforce was black, 6,9% coloured and 4,9% Indian.

At management level, 48,2% (2006: 42,1%) are from designated groups. The rate of progress made in achieving employment equity is partly determined by the rate of growth experienced in the divisional operations. In addition, skills shortages in the employment market of senior managers with the requisite technical and entrepreneurial experience makes it difficult for the group to meet targets in the top management band.

Training and development

Iliad spent 0,30% (2006: 0,24%) of payroll on training and development, mostly at divisional level. Training initiatives range from customer service to product knowledge and personal development.

Through the Iliad Africa Academy, run in partnership with Unisa, the group offers two-year courses with four modules, focused on skills development and technical competence at several levels. The fourth intake began in 2007, bringing the total number of beneficiaries to date to 79. Iliad also conducts apprenticeships at two outlets in technical fields such as truss manufacturing.

Suppliers, support for SMMEs

The nature of Iliad’s business dictates an unusually broad base of suppliers in a number of industries ranging from generic to highly specialised products. Where possible, Iliad supports South African companies, particularly BEE small, medium and micro enterprises. The group’s BEE procurement policies are increasingly used to source goods from empowered companies and we are making progress, although this is clearly more challenging in specialised sectors where the only source is often abroad.

HIV/Aids

The executive committee has under consideration a “life-threatening diseases policy” which will in the future be adopted by all operating divisions. From a benefit point of view the policy will consider HIv/Aids in the same light as any other life-threatening disease and will ensure non-discrimination against HIv-positive employees. Businesses will monitor the incidence of HIv to the extent that they are able to without transgressing the rules of confidentiality. Any employee wishing to attend training or education programmes on HIv/Aids will be encouraged.

Safety, health and environment All businesses in the group are required to report to the executive committee on their compliance with applicable laws and regulations. The group is committed to best practice and each business is required to obtain the applicable ISO standards governing these issues.

The nature of our businesses is such that they have limited negative impact on the environment. The group generates limited noise pollution and, as far as possible, sites are selected with sufficient facilities to prevent vehicle congestion in the surrounding neighbourhoods. All waste generated by the group is disposed of responsibly through waste management companies which either incinerate waste or use it as landfill. The group’s operations do not produce many effluent discharges and during the year none of the group’s operations reported any significant discharge of water. No fines were imposed for water pollution or other issues related to the use of water.

Corporate social investment

Corporate social investment (CSI) is an important business priority and integral to achieving our overall business strategy. The group makes annual donations to a host of NGOs, including children’s welfare organisations, animal welfare organisations, care centres for the aged, associations for the disabled, health care projects and various community initiatives assisting the underprivileged. The group’s initiatives in this regard are mainly directed to the communities in which the group operates.

Overall, the group contributed R2,0 million (R1,3 million – 2006) to CSI projects during the year.

value-added statement

26

2007 2006

2007 value added 2006 value added

R000 % R000 %

“value added” is the value which the group has added to its

products and services. This statement shows how the value

added has been distributed among our various stakeholders.

CREATION OF WEALTH

Group turnover 4 180 355 3 368 388

Cost of merchandise and net expenses 3 348 068 2 681 517

value added 832 287 686 871

Investment income 14 721 8 510 Finance charges (22 595) (6 200)

Total wealth created 824 413 689 181

DISTRIBUTION OF WEALTH

To employees – salaries and benefits 462 091 56,05 386 557 56,09 To government – taxation 92 126 11,17 78 186 11,34 To providers of capital

– Distribution to shareholders 58 574 7,10 46 859 6,80

To maintain and expand the group

– Depreciation 22 763 2,76 22 254 3,23 – Retained for future growth 188 859 22,91 155 325 22,54

Employees 56,05 56,09

Government 11,17 11,34

Providers of capital 7,10 6,80

Maintain and expand group 25,67 25,77

100,00 100,00

Average monthly number of employees which includes executive directors: 3 806 (2006: 3 606)

DISTRIBUTION OF WEALTH

FOR THE YEAR ENDED 31 DECEMBER 2007

2007 2006

27

ILIAD AFRICA LIMITEDannual financial statements

2007

annual financial statements

28

STATEMENT OF COMPLIANCE BY THE COMPANY SECRETARY 28

INDEPENDENT AUDITORS’ REPORT 29

STATEMENT OF DIRECTORS’ RESPONSIBILITY 30

DIRECTORS’ REPORT 31

BALANCE SHEETS 34

INCOME STATEMENTS 35

CASH FLOW STATEMENTS 36

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 37

ACCOUNTING POLICIES 38

NOTES TO THE ANNUAL FINANCIAL STATEMENTS 45


In terms of section 268 6(d) of the Companies Act, Act

61 of 1973 [“the Act”] as amended, I certify that to the

best of my knowledge and belief, the company and the

group has lodged with the Registrar of Companies, for the

financial year ended 31 December 2007, all such returns

as are required of a public company in terms of the Act

and that all such returns are true, correct and up to date.

Luis Mendes

Group company secretary

6 March 2008

contents

statement of compliance by the company secretary

Iliad Africa Annual Report | 2007

30

The annual financial statements, set out on pages 31 to 63,

and other financial information set out in this annual report,

were prepared by management in conformity with International

Financial Reporting Standards and fairly present the state of

affairs of the group. They have been approved by the board

of directors on 6 March 2008, and have been signed on their

behalf by the undermentioned directors.

The manner of presentation of the annual financial statements,

the selection of accounting policies and the integrity of the

financial information are the responsibility of the board

of directors.

To fulfil its responsibilities, the board has developed and

continues to maintain a system of internal controls. These

controls are based on established written policies and

procedures, are implemented by trained, skilled personnel with

an appropriate segregation of duties and are closely monitored

by both the board of directors and the internal auditors.

We believe that the controls in use are adequate to provide

reasonable assurance that assets are safeguarded from loss or

unauthorised use and that the financial records may be relied

on for preparing the financial statements and maintaining

accountability for assets and liabilities.

Nothing has come to the attention of the directors to indicate

that any material breakdown in the functioning of these

controls, procedures and systems has occurred during the year

under review.

After conducting appropriate procedures, the directors are

satisfied that the group will be a going concern for the

foreseeable future and have continued to adopt the going

concern basis in preparing the annual financial statements.

The board of directors is responsible for the financial affairs

of the group. The external auditors are responsible for

independently reviewing and reporting on the group’s annual

financial statements.

The annual financial statements have been examined by the

group’s external auditors and their report is presented on

page 29.

Ralph Patmore Neil Goosen

Chief executive officer Group financial director

statement of directors’ responsibility



31

Your directors are pleased to present their tenth annual report,

which forms part of the audited financial statements of the

company and of the group for the year ended 31 December

2007. This report deals with matters not specifically dealt

with elsewhere in the annual report.

1 Nature of business and review of activities

Iliad Africa Limited is the holding company of Iliad Africa

Investments (Proprietary) Limited and Iliad Africa Trading

(Proprietary) Limited, which has operating divisions and

subsidiaries that focus on the sourcing, distribution, retailing

and wholesaling of a comprehensive range of building materials.

Iliad supplies the full spectrum of building materials in both

the residential and non-residential segments of the market

through a well-established geographic footprint and strong

regional brands. Proven trading skills, as well as the owner-

manager philosophy at operational level, have been positive

contributors to Iliad’s continued success.

1.1 Acquisition of businesses

The trading results of the new businesses acquired during the

year as well as assets and liabilities have been incorporated

into the financial statements from the effective dates of

acquisition. The total cost of the investments was as follows:

R000 2007 2006

Net assets at fair value 22 910 29 954

Trademarks 22 075 53 000

Goodwill 67 065 107 694

Campwell Hardware

minority put option 5 687 51 482

117 737 242 130

Details of the acquisitions are as follows:

1.1.1 On 1 November 2007, in line with the group’s stated

strategic intent, Iliad Africa Trading (Proprietary) Limited

acquired for cash, the business of USM Building Supplies

from USM Building Supplies (Pty) Limited (“USM”) for cash.

USM is a building materials retailer and truss manufacturer

with branches in Uitenhage, Despatch and Jeffreys Bay. The

business is being managed by the building materials division

and is benefiting from the group’s core competencies, namely

market intelligence, procurement and trading skills.

1.1.2 On 1 November 2007 the business of Thorpe Timbers

in Gauteng was purchased from Thorpe Timbers (Kangwane)

(Proprietary) Limited for cash. This Roodekop-based business

imports and purchases timber and hardwoods directly from

sawmills and will be managed in a similar manner to existing

Iliad operations in the wholesale division.

1.1.3 In 2006, Campwell Hardware (Proprietary) Limited

(“Campwell”), a wholly owned subsidiary of Iliad Africa Trading

(Proprietary) Limited, acquired certain assets and liabilities of

the Campwell Hardware businesses from the Campwell vendors

for R165 million in cash.

As part of the acquisition, the Campwell vendors acquired

a 25% interest in Campwell for R41,25 million and at the

same time were granted a put option entitling them to put

the shares in and claims against Campwell back to Iliad in

any year after December 2008 but before 30 December 2011

for a consideration to be calculated on the profits earned by

Campwell and the price earnings ratio of Iliad.

This option has been valued at R61 million and has been

accounted for as a contingent purchase consideration in terms

of IFRS 3. Refer to notes 3 and 10 of the annual financial

statements for further details.

In terms of the put option formula, Iliad’s obligation to acquire

this remaining 25% of Campwell will be at a 30% discount to

the PE ratio of Iliad at the time of the put option exercise.

The PE ratio at the time of the put option exercise is capped

at a maximum of 10.

The directors wish to draw to the attention of stakeholders that

although the Campwell put option is reflected as a R61 million

obligation, this commitment should be viewed as an

opportunity to acquire the remaining 25% of Campwell at a

30% discount to the future listed market value of the Iliad

share. The 25% tranche is also designed to act as a lock-

in incentive for Campwell vendors to remain in managerial

positions in Campwell until 2011 and to achieve and exceed

their earnings projections. As the put liability varies according

to changes in the future Iliad price earnings multiple, the

directors are of the view that Iliad has immunised or hedged

itself against overpaying for this 25% stake. Should Campwell

earnings not materialise, or should the Iliad PE fall in the

future, the purchase consideration will be reduced in direct

proportion to the decrease in either of these two variables.

directors’ report


32

2 Group results

The group’s results and state of affairs for the year under

review are set out on pages 31 to 63 and further information

relating thereto is set out in the CEO’s report.

3 Distribution out of stated capital and dividend

The distribution out of stated capital paid to shareholders of

40 cents per ordinary share during April 2007 is reflected in

the statement of changes in equity.

In view of the good results, future growth opportunities,

positive cash flows from operating activities and a strong

balance sheet, the directors increased the distribution by 30%

to 52 cents per share (2006: distribution out of share capital

of 40 cents per share).

The distribution will be by way of a capital distribution out

of stated capital. The authority to make this payment to

shareholders was obtained at the annual general meeting

held on 24 May 2007.

Set out below are the salient dates applicable to the

distribution:

• Last date to trade “cum” the distribution – Friday,

28 March 2008.

• Trading commences “ex” the distribution – Monday,

31 March 2008.

• Record date – Friday, 4 April 2008.

• Payment date – Monday, 7 April 2008.

Share certificates may not be dematerialised or rematerialised

between Monday, 31 March 2008 and Friday, 4 April 2008,

both dates inclusive.

4 Stated capital

4.1 Iliad Africa Limited

Details of the stated capital are as follows:

4.1.1 Issued ordinary shares

On 31 December 2007 the company had 146 433 408

ordinary shares in issue and the stated capital amounted to

R162 090 492. At the beginning of the year under review the

company had 154 284 519 ordinary shares in issue and the

stated capital amounted to R232 365 804.

By way of a special resolution the company during the year

acquired and cancelled the 7 851 111 treasury shares from its

wholly owned subsidiary Iliad Africa Investments (Pty) Limited.

The treasury shares were bought back at 1 300 cents per

share, a total of R102 064 443, of which R93 380 437

was paid out of distributable reserves and the balance of

R8 684 006 out of stated capital. As a result of this there

were no treasury shares held in the group as at 31 December

2007. At 3l December 2006, Iliad Africa Investments

(Proprietary) Limited, a subsidiary company, held 7 851 111

Iliad ordinary shares.

The issued shares are widely held by the public. An analysis of

shareholders and shareholdings at 31 December 2007 appears

on page 64 of the annual report.

4.1.2 “A” shares

There were no changes to the authorised and issued “A” shares

during the year under review.

5 Share-based payment reserve

In April 2006 the Accounting Practices Board issued

AC 503 – accounting for black economic empowerment (BEE)

transactions, which is effective for annual periods beginning

on or after 1 May 2006.

The statement seeks to clarify certain issues specific to BEE

transactions that arise on the application of IFRS 2 – share-

based payment.

The group has adopted the interpretation retrospectively to the

options granted in terms of the broad-based BEE transaction

concluded on 18 March 2005 in the current year (refer note 9).

6 Special resolutions

No material special resolutions were passed during the year

except those passed at the annual general meeting held on

24 May 2007, which dealt with the repurchase of shares by

the company.

7 Directors and secretary

Non-executive independent directors: HC Turner (chairman),

RT Ririe and MY Sibisi. Executive directors: RB Patmore and

NP Goosen.

In terms of the company’s articles of association HC Turner

and RT Ririe retire by rotation at the forthcoming annual

general meeting.

directors’ report


33

Being eligible, both directors have offered themselves for

re-election.

Secretary: JLD Mendes. Information concerning the secretary

is reflected on page 65.

There were no personnel changes at director and secretary

levels during the year.

8 Directors’ shareholding

The total direct and indirect beneficial and non-beneficial

interest of directors in the shares of the company is:

Direct Indirect and

beneficial non-beneficial

2007

NP Goosen 1 100 000

HC Turner 200 000

200 000 1 100 000

2006

NP Goosen 1 034 400

HC Turner 200 000

200 000 1 034 400

The shareholdings above have not changed between

31 December 2007 and the date of the financial statements.

No director held in excess of 1% of the company’s stated

capital. All major shareholders with beneficial interests in

Iliad greater than 5% at 31 December 2007 are disclosed

on page 64.

9 Subsidiaries

Information relating to the subsidiaries appears on page 63

of this report.

10 Auditors

Grant Thornton will continue in office in accordance with

Section 270 (2) of the Companies Act.

11 Non-current assets

There were no changes to the nature and policies relating to

non-current assets of the group during the period.

12 Post balance sheet events

12.1 Acquisitions

The following acquisition was made after year-end and prior to

the date of this report, and will not have a material effect on

the financial statements.

12.1.1 On 1 February 2008, in line with the group’s stated

strategic intent, Iliad Africa Trading (Pty) Limited acquired for

cash the business of National Tile Traders from National Tile

Traders (Pty) Limited. The acquisition will be effected through

Iliad’s new subsidiary, Tile & Décor Mart, in which previously

disadvantaged management holds 30%. With outlets in key

points in Gauteng, North West and Free State, National

Tile Traders marks Iliad’s entry into the important middle

to lower cash & carry segment of the ceramic tile and

sanitaryware market. The acquisition is however still subject

to conditions precedent.

directors’ report


34

ASSETS

Non-current assets

Property, plant and equipment 2 71 899 56 498

Intangible assets 3 468 288 373 461

Investment in subsidiaries 4 166 489 229 724

Deferred taxation 5 23 041 20 798

Total non-current assets 563 228 450 757 166 489 229 724

Current assets

Inventories 6 735 151 584 638

Trade and other receivables 7 469 279 403 884

Cash and cash equivalents 8 96 238 156 854 8 1

Taxation 1 131 752 1 067 752

Total current assets 1 301 799 1 146 128 1 075 753

Total assets 1 865 027 1 596 885 167 564 230 477

EQUITY AND LIABILITIES

Capital and reserves

Share capital 9 162 090 204 014 162 090 232 489

Retained income (deficit) 733 802 503 019 (35 000) (42 441)

Share-based payment reserve 40 247 40 247 40 247 40 247

Total shareholders’ equity 936 139 747 280 167 337 230 295

Non-current liabilities

Long-term borrowings 10 68 286 53 209

Total non-current liabilities 68 286 53 209

Current liabilities

Trade and other payables 13 854 833 764 552 227 182

Short-term borrowings 10 2 948 1 297

Taxation 2 821 30 547

Total current liabilities 860 602 796 396 227 182

Total equity and liabilities 1 865 027 1 596 885 167 564 230 477

Net asset value per share (cents) 639,3 510,3

Net tangible asset value per share (cents) 319,5 255,3

Based on 146 433 408 ordinary shares at year-end

(2006: 146 433 408 ordinary shares net of treasury shares)

balance sheets

AT 31 DECEMBER 2007

GROUP COMPANY

2007 2006 2007 2006 Notes R000 R000 R000 R000


35


Turnover 4 180 355 3 368 388

Cost of sales 2 977 275 2 398 881

Gross margin 1 203 080 969 507

Administration, selling and distribution expenses 855 647 691 447

Operating profit (loss) before investment income 14 347 433 278 060 (1 243) (899)

Investment income 15 14 721 8 510 102 064 49 371

Operating profit before finance charges 362 154 286 570 100 821 48 472

Finance charges 16 (22 595) (6 200)

Profit before taxation 339 559 280 370 100 821 48 472

Taxation 17 (92 126) (78 186) (310)

Profit for the year 247 433 202 184 100 821 48 162

Number of ordinary shares in issue at year-end

including nil treasury shares

(2006: 7 851 111 treasury shares) 9 146 433 408 154 284 519

Weighted average number of ordinary shares

in issue net of treasury shares 19 146 433 408 146 240 876

Fully diluted weighted average number of ordinary

shares in issue net of treasury shares 19 150 961 099 150 403 056

Earnings per share (cents)

– Basic 19 169,0 138,3

– Fully diluted 19 163,9 134,4

Distribution per share – declared post year-end from

current year’s profit (cents) 18 52,0 40,0

income statements

GROUP COMPANY

2007 2006 2007 2006 Notes R000 R000 R000 R000


36


Cash flows from operating activities 153 236 197 874 100 551 48 088

Profit before taxation 339 559 280 370 100 821 48 472

Adjustments: 29 536 18 851 (102 064) (49 371)

Depreciation 22 763 22 254

Profit on disposal of property, plant and equipment (1 101) (1 093)

Investment income (14 721) (8 510) (102 064) (49 371)

Finance charges 22 595 6 200

Working capital changes during the year (85 511) (10 914) 45 350

Increase in inventories (128 386) (121 564)

(Increase)/decrease in trade and other receivables (19 598) (94 967) 285

Increase in trade and other payables 62 473 205 617 45 65

Cash flows from operations 283 584 288 307 (1 198) (549)

Investment income 14 721 8 510 102 064 49 371

Finance charges (22 595) (6 200)

Taxation paid 25.1 (122 474) (92 743) (315) (734)

Cash flows from investing activities (141 033) (208 128) 63 235 673

Purchase of businesses 25.2 (112 050) (190 648)

Repayments by subsidiaries 63 235 673

Additions to property, plant and equipment to

maintain operations (32 402) (20 531)

Proceeds on disposal of property, plant and equipment 25.3 3 419 3 051

Cash flows from financing activities (53 177) (45 848) (163 779) (48 765)

Net inflows from share issues 606 606

Cancellation of 7 851 111 treasury shares as per

special resolution (102 065)

Increase in short-term borrowings 1 651 83

Distributions out of share capital (58 574) (61 714)

Dividends paid (46 859) (49 371)

Increase in long-term liabilities 3 746 322

Net (decrease) increase in cash and cash equivalents for the year (40 974) (56 102) 7 (4)

Cash and cash equivalents at beginning of the year 156 854 192 623 1 5

Cash and cash equivalents acquired (19 642) 20 333

Cash and cash equivalents at end of the year 96 238 156 854 8 1

cash flow statements

GROUP COMPANY

2007 2006 2007 2006 Notes R000 R000 R000 R000


37


Share- Share-

based Accum- base

Stated “A” Retained payment Stated “A” ulated payment

capital shares income reserve Total capital shares deficit reserve Total

R000 R000 R000 R000 R000 R000 R000 R000 R000 R000

Balance at 1 January 2006,

as previously stated 203 286 122 387 941 591 349 231 761 122 (985) 230 898

Prior year adjustment (see note 22.1) (40 247) 40 247 (40 247) 40 247

Restated balance at 1 January 2006 203 286 122 347 694 40 247 591 349 231 761 122 (41 232) 40 247 230 898

857 000 new shares issued in terms

of company’s share option scheme 606 606 606 606


Dividends paid (note 18) (46 859) (46 859) (49 371) (49 371)

Balance at 1 January 2007 203 892 122 503 019 40 247 747 280 232 367 122 (42 441) 40 247 230 295

7 851 111 shares, held as treasury

shares by a subsidiary, cancelled in

terms of special resolution 16 650 (16 650) (8 684) (93 380) (102 064)


Distributions from stated capital

(note 18) (58 574) (58 574) (61 715) (61 715)

Balance at 31 December 2007 161 968 122 733 802 40 247 936 139 161 968 122 (35 000) 40 247 167 337

statements of changes in shareholders’ equity

GROUP COMPANY



38

1 Accounting policies

The financial statements set out on pages 31 to 63 have been

prepared in accordance with International Financial Reporting

Standards (IFRS) and the Companies Act of South Africa.

The group has adopted all of the new and revised standards

and interpretations issued by the International Accounting

Standards Board (IASB) and the International Financial

Reporting Interpretations Committee (IFRIC) of the IASB

that are relevant to its operations and that are effective for

accounting periods beginning on or after 1 January 2007.

IFRS is continuing to evolve through the issue and/or

endorsement of new standards and interpretations as well as

developments in the application of recently issued standards.

This may impact on future reported results and disclosure. The

basis of preparation is consistent with the prior year, except for

the effects of the new and revised standards adopted as per

note 22 to the financial statements. The financial statements

are prepared on the going-concern basis in accordance with

the historic cost convention, except for certain financial

instruments that are carried at fair value.

1.1 Use of estimates in the preparation of the financial

statements and assumptions made

In preparing the financial statements, management is required

to make estimates and assumptions that affect reported

expenses, assets, liabilities, and disclosure of contingent assets

and liabilities. Use of available information and the application

of judgement are inherent in the formation of estimates. Actual

results in the future could differ from these estimates, which

could be material to the financial statements.

The following have been identified as areas where management

has made significant judgements or estimates:

1.2 Useful lives of tangible and intangible assets

The estimated useful lives as translated into depreciation rates

are detailed in the property, plant and equipment policy in

the annual financial statements. These rates and the residual

lives of the assets are reviewed annually taking cognisance of

the forecasted commercial and economic realities and through

benchmark accounting treatments in the industry.

1.3 Impairment of assets

An assessment of each independent cash-generating unit at an

entity and intangible asset level is performed at each reporting

period. Discounted cash flows are used to assess the cash

operating units. All assumptions and estimates used relating to

the discount and growth rates are disclosed in note 3.3.

1.4 Deferred taxationDeferred tax assets are recognised to the extent that it is

probable that taxable income will be available in the future

against which the assets can be utilised. Future taxable

profits are estimates based on business plans, which include

estimates and assumptions regarding economic growth,

interest, inflation, taxation rates and competitive forces.

1.5 Contingent liabilitiesManagement applies its judgement to facts and advice it

receives from its attorneys, advocates and other advisers in

assessing if an obligation is probable, more than likely not or

remote. This judgement is used to determine if the obligation

is recognised as a liability or disclosed as a contingent liability.

1.6 ProvisionsManagement has applied judgement in estimating various

provisions raised in the operations.

1.7 Valuation of options The valuation of options granted to the Campwell Hardware

vendors (refer note 10.2) and the Woman’s Private Equity Fund

(refer note 9.6) has been valued by the directors with the

assistance of an external valuator.

1.8 Basis of consolidationThe consolidated financial statements incorporate the assets,

liabilities, income, expenses and cash flows of the company

and all entities controlled by the company as if they are a

single economic entity. Control is achieved where the company

has the power to govern the financial and operating policies of

an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the

period are included in the consolidated income statement from

the date of acquisition or up to the date of disposal.

Inter-company transactions and balances between group

entities are eliminated on consolidation.

On acquisition, the group recognises the subsidiary’s

identifiable assets, liabilities and contingent liabilities

at fair value.

Minority interests in the net assets of consolidated subsidiaries

are shown separately from the group equity therein and

consist of the amount of those interests at acquisition plus

the minorities’ subsequent share of changes in equity of the

subsidiary. On acquisition the minorities’ interest is measured

accounting policies


39

at the proportion of the pre-acquisition fair values of the

identifiable assets and liabilities acquired. Losses applicable to

minorities in excess of their interest in the subsidiaries’ equity

are allocated against the group’s interest except to the extent

that the minorities have a binding obligation and the financial

ability to cover losses.

1.9 Business combinationsIn the case of businesses acquired during the year, the results

are included for the period that the group effectively obtained

unrestricted control of the businesses acquired, including the

fulfilment of all conditions. The businesses acquired have

been accounted for in terms of the provisions of IFRS 3, which

requires that the group initially measures the identifiable

assets, liabilities and contingent liabilities acquired at their

fair values as at the date of acquisition.

1.10 Comparative figuresComparative figures are restated in the event of a change in

accounting policy or prior period error.

1.11 Post balance sheet eventsRecognised amounts in the financial statement are adjusted

to reflect events arising after the balance sheet date that

provide evidence of conditions that existed at balance sheet

date. Events after the balance sheet date that are indicative

of conditions that arose after the balance sheet date are dealt

with by way of a note.

1.12 Investment in subsidiariesShares in subsidiaries are accounted for at cost less

accumulated impairment losses. Loans to subsidiaries

that form part of the net investment in subsidiaries, where

settlement is neither planned nor likely in the foreseeable

future, are reflected at full value.

1.13 Property, plant and equipmentThe cost of an item of property, plant and equipment is

recognised as an asset when it is probable that the future

economic benefits associated with the item will flow to the

group and the cost of the item can be measured reliably.

Assets are stated at cost less accumulated depreciation and

any accumulated impairment losses. The useful lives and

residual values are assessed at each balance sheet date, and

adjusted if appropriate.

Depreciation on property, plant and equipment is calculated

using the straight-line basis to write down their cost over their

estimated economic useful lives to estimated residual values,

using a method that reflects the pattern in which the asset’s

future economic benefits are expected to be consumed by

the entity.

The following rates were used during the year to depreciate

property, plant and equipment to estimated residual values:

Machinery and warehouse equipment 3 to 6 years

Vehicles 4 to 5 years

Computer equipment 3 years

Furniture and fixtures 7 to 10 years

Improvements to leased premises and renovations to show-

rooms are depreciated over the period of the lease.

The carrying value of owned assets is reviewed at each

balance sheet date to assess whether there is an indication

of impairment.

The gain or loss arising on the scrapping of property, plant and

equipment and the depreciation charge for each period are

recognised in profit and loss.

1.14 Intangible assets

An intangible asset is an identifiable, non-monetary asset

without physical substance. It includes patents, trademarks

and certain costs of purchase and installation of information

systems (including packaged software).

Intangible assets are initially recognised at cost if acquired

separately or internally generated or at fair value if acquired

as part of a business combination.

Intangibles are carried at cost less any accumulated

amortisation and any impairment losses.

Intangible assets are assessed at the individual asset level as

having either a finite or indefinite life.

If assessed as having an indefinite useful life, the intangible

asset is not amortised but is tested for impairment on an

annual basis, or more frequently if there is an indication

that the carrying value may be impaired, and is impaired if

necessary. If assessed as having a finite useful life, intangible

assets are amortised over their useful lives using the straight-

line basis and tested for impairment if there is an indication

that they may be impaired.



40

Amortisation periods for intangibles with a finite life are

reviewed annually or earlier where an indicator of impairment

exists.

1.14.1 Goodwill

Goodwill represents the future economic benefits arising from

assets that are not capable of being individually identified

and separately recognised in a business combination, and is

determined as the excess of the cost of an acquisition over the

interest in the net fair value of the identified assets, liabilities

and contingent liabilities of the subsidiary or business unit at

the date of acquisition.

Goodwill is assessed as having an indefinite life and

is recognised as an asset and carried at cost less any

accumulated impairment losses. Goodwill is further written

down to the extent that the balances will in all probability no

longer be recovered from expected future economic benefits.

At acquisition date, goodwill acquired is allocated to cash-

generating units and impairment is assessed in relation to

these units.

1.14.2 Trademarks

All trademarks currently held by the group have been assessed

as having indefinite lives.

No valuation is made of internally developed and maintained

trademarks or brandnames. Expenditure incurred to maintain

these brands is recognised in profit and loss.

1.15 Financial instruments

1.15.1 Accounting for financial instruments

The group classifies financial instruments or their component

parts on initial recognition as a financial asset, a financial

liability or an equity instrument in accordance with the

substance of the contractual arrangement. Financial assets and

liabilities are recognised in the company’s balance sheet when

the company becomes party to the contractual provisions of the

instrument.

Financial assets and liabilities are offset and the net amount

reported in the financial statements when the company has

a currently enforceable legal right to set off the recognised

amounts and intends either to realise the assets and settle the

liabilities simultaneously, or to settle on a net basis.

Financial assets, other than hedging instruments, can be

divided into the following categories:

• loans and receivables

• financial assets at fair value through profit or loss

• available-for-sale financial assets

• held-to-maturity investments.

Financial assets are assigned to the different categories on

initial recognition, depending on the characteristics of the

instrument and its purpose. A financial instrument’s category

is relevant for the way it is measured and whether resulting

income and expense are recognised in profit or loss or charged

directly against equity.

An assessment of whether a financial asset is impaired is made

at least at each reporting date. For receivables, this is based

on the last credit information available, i.e. recent counterparty

defaults and external credit ratings. Financial assets that are

substantially past due are also considered for impairment. All

income and expense relating to financial assets are recognised

in the income statement line item “finance charges“ or

“investment income“, respectively.

Loans and receivables are non-derivative financial assets with

fixed or determinable payments that are not quoted in an

active market. They are subsequently measured at amortised

cost using the effective interest method, less provision for

impairment. Any change in their value is recognised in profit

or loss. Iliad’s trade and other receivables fall into this category

of financial instruments.

Individual receivables are considered for impairment when

they are past due at the balance sheet date or when objective

evidence is received that a specific counterparty will default.

All other receivables are reviewed for impairment in groups,

which are determined by reference to the industry and region

of a counterparty. The percentage of the write down is then

based on recent historical counterparty default rates for each

identified group.

Financial assets at fair value through profit or loss include

financial assets that are either classified as held for trading

or are designated by the entity to be carried at fair value

through profit or loss upon initial recognition. By definition, all

derivative financial instruments that do not qualify for hedge

accounting fall into this category. Iliad’s management, however,

does not consider any other financial asset for designation into

this category. Any gain or loss arising from financial assets

held at fair value is based on changes in fair value, which are

determined by direct reference to active market transactions,

and is recognised in profit and loss.

accounting policies


41

Available-for-sale financial assets are non-derivative financial

assets that do not qualify for inclusion in any of the other

categories of financial assets. Iliad has no available-for-sale

financial assets at the reporting date.

Available-for-sale financial assets are subsequently measured

at fair value, with changes in value recognised in equity.

Gains and losses arising from financial instruments classified

as available-for-sale are recognised in the income statement

when they are sold or when the investment is impaired. In the

case of impairment, any loss previously recognised in equity

is transferred to the income statement. Losses recognised in

the income statement on equity instruments are not reversed

through the income statement. Losses recognised in prior

period consolidated income statements resulting from the

impairment of debt securities are reversed through the

income statement.

Held-to-maturity investments are non-derivative financial

assets with fixed or determinable payments and fixed maturity.

Investments are classified as held-to-maturity if it is the

intention of the group’s management to hold them until maturity.

Held-to-maturity investments are subsequently measured at

amortised cost using the effective interest method. In addition,

if there is objective evidence that the investment has been

impaired, the financial asset is measured at the present value

of estimated cash flows. Any changes to the carrying amount

of the investment are recognised in profit or loss.

1.15.2 Financial liabilities

The group’s financial liabilities, which are recognised at fair

value on initial recognition, include trade and other payables

and borrowings (including finance lease liabilities). These are

subsequently measured at amortised cost using the effective

interest rate method.

Financial liabilities are recognised when the group becomes

a party to the contractual agreements of the instrument. All

interest-related charges reported in profit or loss are included

in the income statement line items “finance charges“ or

“investment income“.

1.15.3 Cash and cash equivalents

Cash and cash equivalents comprise cash and balances with

banks net of bank overdrafts, short-term borrowings and

acceptance credits, all of which are available for the group

and are readily convertible into known amounts of cash. Cash

and cash equivalents are measured at fair value.

1.15.4 Loans between companies within the group

Loans between companies within the group are measured at

amortised cost less any impairment loss. On loans receivable

an impairment loss is recognised in the income statement

of the company when there is objective evidence that it is

impaired. Impairment losses are eliminated on consolidation.

Loans to subsidiaries forming part of the net investments in

the subsidiaries and being loans that are not repayable are

included in the carrying value of the investment in

the subsidiary.

1.15.5 Derecognition of financial instruments

Financial instruments are derecognised when the group no

longer controls the contractual obligations of the instrument.

1.16 Impairment of assetsAt each reporting date the carrying amount of the tangible and

intangible assets is assessed to determine whether the assets

may have suffered an impairment loss. If so, the recoverable

amount of the asset is estimated to determine the extent of

the impairment loss.

Irrespective of whether there is an indication of impairment,

the group also:

• tests trademarks with an indefinite life for impairment

annually by comparing their carrying amount with their

recoverable amount,

• tests goodwill acquired in a business combination for

impairment annually by comparing its carrying amount

with its recoverable amount.

Where it is not possible to estimate the recoverable amount

of an individual asset, the recoverable amount of the cash-

generating unit to which the asset belongs is estimated. Value

in use, included in the calculation of the recoverable amount,

is estimated, taking into account future cash flows, forecast

market conditions and the expected lives of the assets.

If the recoverable amount of an asset (or cash-generating

unit) is estimated to be less than its carrying amount, its

carrying amount is reduced to the higher of its recoverable

amount and zero. The impairment loss is first allocated to

reduce the carrying amount of goodwill to zero and then to

the other assets of the cash-generating unit. Subsequent

to the recognition of an impairment loss, the depreciation

or amortisation charge for assets is adjusted to allocate its

remaining carrying value, less any residual value, over its

remaining useful life.



42

Impairment losses on held-to-maturity financial assets as

well as trade and other receivables are determined based on

specific and objective evidence that assets are impaired, and

measured as the difference between the carrying amount of

assets and the present value of the estimated future cash flows

discounted at the effective interest rate computed at initial

recognition. Impairment losses are recognised in profit or loss.

If any impairment loss subsequently reverses, the carrying

amount of the asset (or cash-generating unit) is increased to

the revised estimate of its recoverable amount but limited to

the carrying amount that would have been determined had no

impairment loss been recognised in prior years. A reversal of

an impairment loss is recognised in profit or loss.

For the purpose of impairment testing, goodwill and trademarks

are allocated to each of the cash-generating units expected to

benefit from the synergies of the combination. No goodwill

and trademark impairment losses are subsequently reversed.

The attributable amount of goodwill and trademarks is included in

the profit or loss on disposal when the relevant business is sold.

1.17 LeasesLeases are classified as finance leases or operating leases at

the inception of the lease.

1.17.1 Finance leasesAssets held under finance lease agreements are capitalised

and are depreciated over their expected useful lives or the

term of the relevant lease, where shorter. Leases are classified

as finance leases whenever the terms of the lease transfer

substantially all of the risks and rewards of ownership to the

lessee, whereas all other leases are classified as operating

leases. At the commencement of the lease, these assets are

reflected at the lower of the fair value of the asset and the

present value of the minimum lease payments at the date of

acquisition. The discount rate used in calculating the present

value of the minimum lease payments is the interest rate

implicit in the lease. Any initial direct costs are added to the

amount recognised as an asset. Finance charges represent

the difference between the total lease commitments and the

fair value of the assets acquired. Finance charges are charged

to profit and loss over the term of the lease and at interest

rates applicable to the lease on the remaining balance of

outstanding lease commitments based on the effective rates

of interest.

1.17.2 Operating leasesRentals payable under operating leases are charged to profit

and loss on a straight-line basis over the term of the

relevant lease.

1.18 Inventories

Inventories, comprising merchandise, raw materials and

finished goods, are valued at the lower of cost and estimated

net realisable value. Estimated net realisable value is the

selling price in the ordinary course of business less the

estimated cost necessary to make the sale when inventories

are sold. The carrying amount of the inventories is recognised

as an expense in the period in which the related revenue is

recognised. The amount of any write down of inventories to net

realisable value and all the losses of inventories are recognised

as an expense in the period in which the write down or

loss occurs.

Cost is determined on a first-in first-out basis. Obsolete,

redundant and slow-moving inventories are identified and

written down to their estimated net realisable value. Cost

includes costs of conversion and other costs incurred in

bringing the inventories to their present location and condition.

Provision is made for slow-moving, obsolete and redundant

inventories.

1.19 Provisions

Provisions are recognised when the company has a present

legal or constructive obligation as a result of past events, for

which it is probable that an outflow of economic benefits will

be required to settle the obligation, and a reliable estimate

can be made of the amount of the obligation. Where the

effect of discounting to present value is material, provisions

are adjusted to reflect the time value of money, and where

appropriate, the risk specific to the liability.

1.20 Taxation

1.20.1 Current tax assets and liabilities

Current tax liabilities and assets for the current and prior

periods are measured at the amount expected to be paid or

recovered from the tax authorities, using the tax rates that

have been enacted or substantively enacted by the balance

sheet date.

1.20.2 Secondary taxation on companies

Secondary taxation on companies (STC) is recognised as

part of the current taxation charge when the related dividend

is declared.

1.20.3 Deferred taxation

A deferred taxation asset or liability is recognised for all

deductible or taxable timing differences except to the extent

accounting policies


43

that they arise from the initial recognition of goodwill or an

asset or liability in a transaction that:

• is not a business combination, and

• at the time of the transaction, affects neither accounting

profit nor taxable profit or tax loss.

Deferred taxation assets are recognised for all deductible

temporary differences and unused tax losses to the extent

that it is probable that taxable profit will be available in

future against which they can be utilised. Future tax profits

are estimated based on business plans that include estimates

and assumptions regarding economic growth, interest rates,

inflation, taxation rates and competitive forces.

Deferred taxation is calculated at the tax rates that are

expected to apply to the period when the asset is realised

or the liability is settled, based on tax rates that have been

enacted or substantively enacted by the balance sheet date.

1.20.4 Tax expenses

Current and deferred taxation is recognised as income or as an

expense and included in profit and loss for the period except

to the extent that the tax arises from:

• a transaction or event that is recognised in the same or

different period directly in equity, or

• a business combination.

Current tax and deferred taxes are charged or credited directly

to equity if the tax relates to items that are credited or

charged, in the same or a different period, directly to equity.

1.21 Revenue recognition

Revenue is recognised on the date of sale when significant

risks and rewards of ownership are transferred to the buyer.

Revenue is measured at the fair value of the consideration

received or receivable and represents the amounts receivable

for inventory sold and services provided in the normal course

of business, net of trade discounts, volume rebates and

value added tax. Turnover comprises net sales to customers

and excludes value added tax. Sales within the group are

eliminated on consolidation.

1.22 Cost of sales

Cost of sales consists of the cost of inventory sold during the

period net of trade discounts, volume rebates and value added

tax. Any write down of inventories to net realisable value and

all losses of inventories or reversals of previous write downs or

losses are recognised in cost of sales in the period in which the

write down, loss or reversal occurs.

1.23 Income from investments

Interest is recognised on a time proportion basis that takes

into account the effective yield on the asset and the principal

outstanding.

Dividend income from investments is recognised when the

shareholders’ right to receive payment has been established.

1.24 Borrowing costs

Borrowing costs are expensed in the period in which they are

incurred.

1.25 Translation of foreign currencies

Foreign currency transactions are recorded on initial

recognition in Rand, by applying to the foreign currency the

exchange rate between the Rand and the foreign currency

at the date of the transactions. Uncovered foreign currency

transactions are translated at the spot rates ruling on the date

of the transactions. The related monetary assets and liabilities

at year-end are translated at the spot rates ruling at the

balance sheet date.

Where forward exchange contracts have been entered into

to denominate transactions in Rand, the transactions are

translated at the spot rates at transaction date. The year-end

monetary balances of liabilities are translated at the spot rates

at year-end. Open forward exchange contracts are revalued

at market rates for equivalent period exchange contracts.

Exchange differences are recognised in the results for the year.

1.26 Employee benefits

1.26.1 Short-term employee benefits

The cost of short-term employee benefits (those payable within

one year after the service is rendered, such as paid leave, sick

leave and bonuses) is recognised in the period in which the

service is rendered and is not discounted. The expected cost

of compensated leave is recognised as an expense as the

employees render services that increase their entitlement or,

in the case of non-accumulating leave, when the leave occurs.

The expected cost of profit sharing and bonus payments

is recognised as an expense when there is a legal or

constructive obligation to make such payments as a result

of past performance.



44

1.26.2 Defined contribution plans

Contributions to defined contribution plans in respect of

service in a particular period and current service costs in

respect of a defined benefit plan are recognised as an expense

in the period concerned.

By virtue of the types of schemes operated in the group no

past service costs or experience adjustments will arise in

the retirement funding arrangements.

1.26.3 Defined benefit plans

The defined benefit plan is externally fully funded and the

group is under no obligation to cover any unfunded liabilities.

The group’s contributions to the defined benefit plan are

charged to the income statement in the year to which

they relate.

1.27 Share capital and equity

Any repurchases by the group of its own equity instruments

are treated as treasury shares and are deducted from equity on

consolidation. No gain or loss is recognised in the profit and

loss on the purchase, sale, issue or cancellation of the group’s

own equity instruments. Considerations paid or received are

recognised directly in equity.

1.28 Share-based payments

Goods and services received or acquired in a share-based

payment transaction are recognised when the goods or services

are received. A corresponding increase in equity is recognised

if the goods or services were received in an equity-settled

share-based payment transaction or a liability if the goods or

services were acquired in a cash-settled share-based payment

transaction.

For equity-settled share-based payment transactions, the

goods or services received are measured and the corresponding

increase in equity is recognised at the fair value of the goods

or services received, unless the fair value cannot be measured

reliably, in which case the value is measured by reference to

the fair value of the equity instruments granted.

For cash-settled share-based payment transactions, the goods

or services received and the liability incurred are measured at

the fair value of the liability. Until the liability is settled the

fair value of the liability is remeasured at each reporting date

and at the date of settlement, with any changes in the fair

value recognised in the income statement for the period.

1.29 Statements and interpretations issued but not yet

effective

At the date of approval of these annual financial statements,

certain new accounting standards, amendments and

interpretations to existing standards had been published that

are mandatory for accounting periods beginning on or after

1 January 2008, which the group has elected not to adopt

early. The following standards and interpretations may have an

impact on the group’s operations when they become effective,

but the group believes that the impact will not be material to

the group results:

• IFRS 2 – Share-based payment

(as amended in 2008) 1 January 2009

• IFRS 3 – Business combinations

(revised 2008) 1 July 2009

• IFRS 8 – Operating segments 1 January 2009

• IAS 1 – Presentation of financial

statements (as amended in 2007) 1 January 2009

• IAS 23 – Borrowing costs

(revised 2007) 1 January 2009

• IAS 27 – Consolidated and separate

financial statements (revised 2008) 1 July 2009

• IFRIC 11 – IFRS 2 – Group and treasury

share transactions 1 March 2009

• IFRIC 12 – Service concession

arrangements 1 January 2008

• IFRIC 13 – Customer loyalty

programmes 1 July 2008

• IFRIC 14 – IAS 19 – The limit on a

defined benefit asset, minimum

funding requirements and

their interaction 1 January 2008

accounting policies


45


2007 2006

R000 R000

2.1 Movements during the year

Capital expenditure including acquisitions (see note 25.2) 40 482 28 539

Owned assets

– Machinery and warehouse equipment 4 780 3 995

– Vehicles 4 124 5 693

– Computer equipment 6 133 5 196

– Furniture and fixtures 12 848 7 653

– Improvements to leasehold premises 6 832 5 913

Capitalised leased assets

– Machinery and warehouse equipment 5 765 89

Disposals (2 318) (1 958)

Owned assets

– Machinery and warehouse equipment (305) (296)

– Vehicles (863) (579)

– Computer equipment (328) (201)

– Furniture and fixtures (727) (511)

– Improvements to leasehold premises (1) (3)

Capitalised leased assets

– Machinery and warehouse equipment (94) (368)

Depreciation for the year (22 763) (22 254)

15 401 4 327

2.2 Certain assets are hypothecated under finance lease and instalment sale agreements (see note 10).

2.3 Property, plant and equipment have an estimated replacement cost and insurance value of

R193 million (2006: R128 million)

GROUP

Net Net

Accumulated carrying Accumulated carrying

Cost depreciation value Cost depreciation value

R000 R000 R000 R000 R000 R000

2 Property, plant and equipment Owned assets – Machinery and warehouse equipment 31 088 18 852 12 236 26 408 14 402 12 006 – Vehicles 28 606 19 936 8 670 28 098 19 133 8 965 – Computer equipment 32 903 24 563 8 340 28 335 21 647 6 688 – Furniture and fixtures 41 223 19 706 21 517 30 837 15 274 15 563 – Improvements to leasehold premises 29 475 14 375 15 100 22 539 10 467 12 072 Capitalised leased assets – Machinery and warehouse equipment 11 201 5 165 6 036 4 327 3 123 1 204

Total 174 496 102 597 71 899 140 544 84 046 56 498

notes to the annual financial statements

GROUP

2007 2006


46


3 Intangible assets

Goodwill (refer note 3.1) 393 213 320 461

Trademarks (refer note 3.2) 75 075 53 000

468 288 373 461

3.1 Goodwill

At beginning of the year 320 461 161 285

Acquisitions 67 065 107 694

Contingent purchase consideration (refer note 10.2) 5 687 51 482

At end of the year 393 213 320 461

Goodwill represents the excess of the purchases consideration

over the acquirer’s interest in the net fair value of the

identifiable assets, liabilities and contingent liabilities at the

date of acquisition purchased as part of a business combination.

3.2 Trademarks

– Indefinite useful lives

Cost at beginning of the year 53 000

Acquisitions 22 075 53 000

Cost at end of the year 75 075 53 000

Trademarks represent registered rights to the exclusive use of certain trademarks and brandnames that have been acquired as

part of a business combination and have been stated at their fair value determined by external trademark valuation specialists.

Trademarks with an indefinite life are considered to be indefinite based on the following factors:

– There is a high product life cycle for the trademark;

– There is a high level of maintenance expenditure required to obtain the future economic benefits, and

– The group has the intention and ability to reach the required level of maintenance expenditure.

In terms of IAS 38 Intangible assets, no value has been placed on internally generated trademarks in the Iliad operations.

3.3 Impairmenttestingofgoodwillandtrademarkswithanindefinitelife

Trademarks and goodwill acquired through acquisitions have been allocated to various divisions representing cash-generating units

and have been tested for impairment accordingly.

The recoverable amount of the underlying cash-generating units has been determined based on a value in use calculation using

the cash flow projections for the forthcoming five years, as per the financial budgets approved by senior management, adjusted for

expected annual growth thereafter. The average annual growth rate for the following five years used for the cash-generating units

ranged from 5% to 15% depending on the entity assessed. Thereafter an average range of the perpetuity growth rate was 6% which

approximates the estimated future inflation.


GROUP

2007 2006 R000 R000


47

The after-tax discount rate applied to the cash flow projections

was 14%, being the weighted average cost of capital of Iliad.

In determining the cash flow projections for the forthcoming

financial year, sales, gross margins and costs were based on

historical performance and adjusted for projected synergies

arising from the acquisitions.

Management believes that any reasonable and possible change

in the key assumptions would not cause the carrying amounts

of the cash-generating units to exceed the recoverable amounts.

These calculations indicated that there was no impairment

in the carrying value of trademarks and goodwill at

31 December 2007.

4 Investment in subsidiaries

(for further details see note 27)

Shares at cost 1 1

Loans 271 245 334 479

271 246 334 480

Amount written off (104 757) (104 756)

166 489 229 724

5 Deferred taxation

5.1 – Future tax allowances for trademarks which have

been written off 2 858 4 406

– Straight-line rental adjustment 10 959 6 490

– Other temporary differences 9 224 9 902

23 041 20 798

5.2 Movementsofdeferredtaxassets

Balance at beginning of year 20 798 14 363

Straight-line rental adjustment 4 469 1 310

Reversing temporary differences on trademarks (1 548) (1 548)

Other movements (678) 6 673

At end of the year 23 041 20 798

GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


48


6 Inventories

Merchandise 698 247 561 340

Raw materials 9 734 10 177

Finished goods 27 170 13 121

735 151 584 638

7 Trade and other receivables

Trade receivables 493 871 422 250

less: Impairment provision 24 592 18 366

469 279 403 884

All of Iliad’s trade and other receivables are short-term.

The carrying value of trade receivables is considered a

reasonable approximation of fair value.

The trade receivables have been reviewed for indicators of

impairment. Certain trade receivables were found to be

impaired and a provision of R24,5 million

(2006: R18,4 million) has been recorded accordingly.

The impaired trade receivables are mostly due from customers

in Iliad’s business-to-business market that are experiencing

financial difficulties.

Trade receivables comprise a widespread customer base.

Ongoing credit evaluation of the financial position of customers

is performed, and where appropriate, credit guarantee

insurance is purchased. The granting of credit is made on

application and is approved by management. At year-end,

the group did not consider there to be any significant

concentration of credit risk which has not been insured or

adequately provided for.

In addition, some of the unimpaired trade receivables are past

due at the reporting date. The age of trade receivables past

due but not impaired is as follows:

More than three months but not more than six months

(91 – 180 days) 11 178 15 150

More than six months but not more than a year

(181 – 365 days) 7 435 9 130

18 613 24 280

8 Cash and cash equivalents

Cash and cash equivalent balances 96 238 156 854


GROUP

2007 2006 R000 R000


49

9 Share capital9.1 Authorised 300 000 000 ordinary shares of no par value

12 243 804 “A” shares of no par value

9.2 Issued ordinary shares 146 433 408 (2006: 154 284 519) ordinary shares

of no par value

Balance at beginning of the year 203 892 231 761 232 367 231 761

Nil (2006: 857 000) new shares issued in terms of

company’s share option scheme 606 606

Nil treasury shares (2006: 7 851 111) held by a subsidiary.

7 851 111 shares, held as treasury shares by a subsidiary,

cancelled in terms of special resolution 16 650 (28 475) (8 684)

Distribution out of stated capital (58 574) (61 715)

161 968 203 892 161 968 232 367

9.3 Issued“A”shares 12 243 804 “A” shares issued on 1 April 2005 in terms

of the BEE transaction (refer note 9.6) 122 122 122 122

122 122 122 122

Total issued share capital 162 090 204 014 162 090 232 489

9.4 Rightsof“A”shares

The following rights, privileges and restrictions attach to the “A” shares of no par value:

1 The “A” shares will rank as regards voting rights pari passu in all respects with the ordinary shares in the capital of Iliad;

2 The holders of the “A” shares shall be entitled to receive notice of all meetings of members of Iliad and shall be entitled to be

present and/or vote, either in person or by proxy, at any meeting of shareholders of Iliad;

3 The “A” shares shall not confer any rights to receive any dividend or distribution out of any capital or revenue profits of Iliad;

4 The “A” shares shall not confer any rights to dividends or return on capital, nor shall they confer any rights to participate in any

surplus assets of Iliad, on a winding up;

5 Iliad shall at its option, and within its sole discretion, be entitled to redeem, convert or acquire all or any of the “A” shares at the

stated capital in respect of the “A” shares divided by the number of “A” shares being redeemed, at any time after 31 December

2009 and prior thereto, only under the following circumstances:

5.1 In the event of Iliad exercising its call option in terms of clause 16 of the BEE agreement, at any time after payment (in terms

of clause 16 of the BEE agreement) has been made to the holder of the shares in the issued share capital of Iliad that are the

subject matter of the call option; or

5.2 In the event of any options that are the subject matter of the BEE agreement being exercised by the holder thereof, Iliad shall

be entitled to cause to be redeemed, converted or acquired at any time following the date of issue of ordinary shares in respect

of options exercised, as many “A” shares as correspond with the number of options that are exercised;

6 Iliad shall, at the option of the holder of the “A” shares, be obliged to redeem, convert or acquire all or part of the “A” shares at the

stated capital in respect of the “A” shares divided by the number of “A” shares being redeemed, at any time falling on a date after

that specified in 5 above, which shall apply mutatis mutandis;

7 The terms of the “A” shares may not be modified, altered, varied, added to or abrogated from, and

8 The voting rights referred to in 1 above, shall terminate forthwith upon redemption or purchase of the “A” shares by Iliad.

GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


50


9.5 IliadAfricasecondshareoptionscheme

All options granted to executive directors and operational executives in terms of this scheme (which were granted prior to November

2002) have been exercised at 31 December 2006. No further options were granted to executive directors and operational executives

during the year.

Salient features of the Iliad Africa second share option scheme are:

– It makes provision for the granting of options to employees of the companies in the group and the offering of shares for purchase as

an incentive to promote the continued growth of and interest in the company.

– The scheme shares shall in the aggregate not exceed 20% of the issued share capital of the company. Currently the maximum

number of shares available to this scheme is 11 000 000 shares, of which options have been granted for 9 610 000 shares.

– The number of shares that any participant is entitled to acquire in terms of the scheme shall not exceed 22% of the maximum

number of shares reserved for this scheme.

– The option will remain open for a period of ten years after the date of granting thereof.

Employee and executive director beneficiaries can exercise their options granted after the adoption of this scheme as follows:

– After the expiration of two years from the option date, 33% of such beneficiary scheme shares.

– After the expiration of three years from the option date, a further 33% of such beneficiary scheme shares.

– After the expiration of four years from the option date, the remainder of such beneficiary scheme shares.

9.6 Women’sPrivateEquityFund(WPEF)

On 18 March 2005 the group concluded a broad-based BEE transaction. In terms thereof options were granted for 12 243 804

ordinary shares at a strike price to be calculated in accordance with the undermentioned formula.

Strike price = A + B - C

Where:

A = R6,58, being a 10% discount to the volume weighted average share price of Iliad on the JSE as at 14 October 2004

(being the day after the letter of intent was executed by the parties);

B = The RSA 153 closing daily yield to maturity plus 2,5%, and

C = The accumulated abnormal dividend for the period from the effective date to the payment date.

Based on the above formula the calculated price at 31 December 2007 is 876 cents (2006: 800 cents).

As required by IFRIC 8: Scope of IFRS 2 share-based payment transactions, these options have been valued by the directors and

a share-based payment reserve of R40 246 899 has been raised in respect thereof (refer note 22.1).

9.7 Unissued shares

The unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual

general meeting of members. This authority remains in force until the next annual general meeting.

9.8 Treasuryshares

Shares in Iliad Africa Limited held by a wholly-owned subsidiary and classified as treasury shares were cancelled during the year prior

to this, (refer note 9.2), the number of shares was treated as a deduction from the issued and weighted average number of shares and

the cost price of the shares was deducted from the group equity. Dividends received on these treasury shares were eliminated

on consolidation.



51

10 Long-term borrowings

10.1 Secured liabilities 10 165 3 024

Secured by finance lease and instalment sale agreements

over vehicles and equipment with a net book value of

R6 million (2006: R3 million). The liabilities bear interest

at rates varying from 10,2 % to 13,4 % per annum

(2006: 9,2 % to 11,4 % per annum), which are linked

to the prime bank overdraft rate and are repayable in

monthly instalments of approximately R0,2 million

(2006: R0,1 million), inclusive of finance charges.

10.2Contingentpurchaseconsiderationinrespectof

CampwellHardwarevendors 61 069 51 482

The Campwell vendors retained 25% of the ordinary shares

of Campwell Hardware (Pty) Limited. The Campwell vendors

have been granted a put option by Iliad Africa Trading

(Pty) Ltd in terms of which the Campwell vendors are entitled

to sell this 25% tranche of Campwell Hardware (Pty) Limited

shares back to Iliad. The put can be exercised at any time

between 2009 and 2011. The put strike price is determined

in terms of the put formula which is similar to the earn-out

formula, with the added protection in Iliad’s favour that the

put strike price also varies with future changes in the Iliad

price earnings ratio (“Iliad PE”).

It is the directors’ opinion, that, in all likelihood, the put will

be exercised in 2011. The directors have accordingly

recognised the 25% acquisition, and raised a goodwill asset

in respect of this acquisition in terms of IFRS 3. However, in

future, should Iliad’s acquisition of the 25% Campwell tranche

be considered to be unlikely, the acquisition of this 25%

tranche and associated goodwill asset will be de-recognised,

and a minority stakeholder interest will be recognised.

The financing portion of the put liability has been and will be

recognised as a charge against earnings on an annual basis

in terms of IFRS 3 and IAS 39. The estimated purchase

consideration to acquire the remaining 25% of the Campwell

shares has been estimated in terms of the formula at

R61 million in present value terms.

Significant variables in the put formula (and consequently

in Iliad’s put obligation) are:

– 70% of future Iliad PE ruling on the put exercise date

between 2009 and 2011 (capped to a maximum PE of 10)

– future Campwell earnings between 2008 and 2011.

GROUP

2007 2006 R000 R000


52


10.2Contingentpurchaseconsiderationinrespectof

CampwellHardwarevendors(continued) 61 069 51 482

The estimated put obligation liability in Iliad’s financial

statements will vary in direct linear proportion to 70% of

Iliad’s future PE and will also vary in direct linear proportion

to an increase in the future projected earnings of Campwell

between 2008 and 2011.

The put obligation and underlying financial projections will

be revised annually, and the projected liability will be

adjusted annually.

The net present value of the estimated contingent purchase

consideration is made up as follows:

Initial valuation by the directors in 2006 51 482 51 482

Notional interest representing financing element of liability

(refer note 16) 3 900

Adjustment to the contingent purchase consideration

(refer note 3.1) 5 687

71 234 54 506

10.3 Less:Amountspayablewithinoneyearincludedwith

currentliabilities 2 948 1 297

68 286 53 209

11 Commitments

11.1 Operating leases

Estimated future rentals

– Property 230 856 260 829

– Vehicles and equipment 71 068 45 769

301 924 306 598

Operating leases payable

– within one year 93 847 78 195

– in second to fifth year inclusive 196 912 180 866

– later than five years 11 165 47 537

301 924 306 598

Property commitments are for fixed rate leases for operating and trading premises with an average term of five years. Many lease contracts include a renewal option at the end of the term at fair market rates. Rentals escalate at rates that are in line with historical interest rates applicable to the southern African environment. Lease periods do not exceed ten years.

Motor vehicle and equipment commitments are fixed rate leases in operating business units with an average lease term of four years.

These commitments will be financed from available cash resources, funds generated from operations and available borrowing capacity.


GROUP

2007 2006 R000 R000


53

11.2 Capitalexpenditureapproved

Contracted for 25 721 20 150

Authorised but not contracted for 16 273 13 600

41 994 33 750

Capital expenditure will be financed from available cash

resources, funds generated from operations and available

borrowing capacity.

Commitment for acquisition of businesses 130 000

Total commitments 473 918 340 348

12 Contingent liabilities

Contingent liabilities at balance sheet date, not otherwise

provided for in these annual financial statements, arising from:

12.1 Guarantees issued in the normal course of business for finance

facilities granted to subsidiaries. 920 920

Management has assessed the fair value of these overdraft

guarantees based on a probable weighted outcome and is

of the opinion that due to the high net asset value of the

companies involved, the expected losses under the guarantees

are highly unlikely and therefore a fair value adjustment would

be immaterial.

12.2 Litigation, current or pending, is not considered likely to have

a material adverse effect on the group.

13 Trade and other payables

Trade and other payables 854 833 764 552 227 182

All amounts are short term. The carrying values are considered to be a reasonable approximation of fair value.

GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


54


14 Operating profit before finance charges

After taking into account the following:

Income

Subsidiary companies 102 064 49 371

Foreign exchange profit (loss) 73 (1 045)

Profit on disposal of property, plant and equipment 1 101 1 539

Expenditure

Auditors’ remuneration 4 116 3 623 254 200

– Audit fees 3 885 3 620 220 200

– Underprovision prior year 204

– Other services 27 3 34

Consulting fees for administrative services 1 006 1 164 275 283

Depreciation of property, plant and equipment 22 763 22 254

– Machinery and warehouse equipment 4 222 4 478

– Vehicles 3 557 3 897

– Computer equipment 4 152 5 179

– Furniture and fixtures 5 974 4 859

– Improvements to leased premises 3 997 3 085

– Capitalised leased assets 861 756

Operating lease rentals 105 246 80 685

– Property 82 757 67 633

– Vehicles and equipment 22 489 13 052

Staff costs 462 091 386 557

– Salaries and wages 431 610 361 280

– Retirement benefits 21 236 16 606

– Medical aid contributions 9 245 8 671

15 Investment income

Dividends

– Unlisted investments 12 989 5 155

– Subsidiary companies 102 064 49 371

Interest received 1 732 3 355

14 721 8 510 102 064 49 371


GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


55

16 Finance charges

Bank and short term borrowings 18 144 5 951

Capitalised finance leases 551 249

Notional interest (refer note 10.2) 3 900

22 595 6 200

17 Taxation

Normal taxation – current 94 369 78 407 (261)

Deferred taxation – current (2 243) (4 819)

Secondary tax on companies 4 598 571

92 126 78 186 310

Reconciliation of tax rate % % % %

Standard tax rate 29,00 29,00 29,00 29,00

Reduction in tax rate: (3,44) (2,98) (29,00) (29,54)

– Exempt income (3,44) (2,98) (29,00) (29,54)

Increase in tax rate: 1,58 1,87 1,18

– Disallowable charges 1,58 0,23

– Secondary tax on companies 1,64 1,18

Effective rate of taxation 27,14 27,89 0,00 0,64

18 Distributions out of stated capital and dividends

Distribution out of stated capital – declared on

12 March 2007 at 40,0 cents per share payable on

10 April 2007 to shareholders registered at 29 March 2007 61 714 61 714

Distribution attributable to treasury shares (3 140)

No 8 – dividend declared on 3 March 2006 at 32,0

(2005: 24 cents) cents per share payable on 3 April 2006

to shareholders registered at 24 March 2006 49 371 49 371

Dividend attributable to treasury shares (2 512)

58 574 46 859 61 714 49 371

GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


56


19 Earnings, headline earnings, diluted earnings and diluted

headline earnings per share

Earnings and headline earnings per share are based on the

consolidated earnings and headline earnings attributable to

shareholders of R247 433 848 (2006: R202 184 235)

and R246 652 230 (2006: R201 091 094) respectively

and are calculated using the weighted average number

of 146 433 408 ordinary shares in issue (2006:

146 240 876 ordinary shares in issues, net of treasury shares)

Diluted earnings and diluted headline earnings per share

are based on the consolidated earnings and headline earnings

as stated above and are calculated using 150 961 099

(2006: 150 403 056) ordinary shares in issue.

19.1Dilutedweightedaveragenumberofshares

Weighted average number of ordinary shares

(net of treasury shares) 146 433 408 146 240 876

Increase in number of ordinary shares as a result of

unexercised share options for the BEE transaction 4 527 691 4 162 180

Diluted weighted average number of ordinary shares at

31 December 2007 150 961 099 150 403 056

Account is taken of the number of ordinary shares in issue

for the period in which they are entitled to participate in

the net profit of the group.

19.2Earningspershare

Profits for the year (R000) 247 433 202 184

Earnings per share (cents) 169,0 138,3

Diluted earnings per share (cents) 163,9 134,4

Percentage dilution (%) 3,1 2,8

19.3Headlineearningspershare

Profits for the year (R000) 247 433 202 184

Profit on disposal of plant and equipment (782) (1 093)

Headline earnings (R000) 246 651 201 091

Headline earnings per share (cents) 168,4 137,5

Diluted headline earnings per share (cents) 163,4 133,7

Percentage dilution (%) 3,1 2,8


GROUP

2007 2006 R000 R000


57

Share

Directors’ Fixed Performance incentive

fees remuneration bonuses Total scheme gains

20 Directors’ emoluments

2007

Non-executivedirectors

HC Turner* 513 513

RT Ririe* 309 309

MY Sibisi 98 98

Executivedirectors–paidbyasubsidiary

RB Patmore 2 387 4 506 6 893

NP Goosen 900 1 898 2 798

920 3 287 6 404 10 611

* Additional directors’ fees of R132 000 for HC Turner and R71 500 for RT Ririe were paid for services provided during the Absa

Capital private equity discussions.

2006

Non-executivedirectors

HC Turner 346 346

RT Ririe 216 216

MY Sibisi 89 89

Executivedirectors–paidbyasubsidiary

RB Patmore 2 170 4 295 6 465 3 965

NP Goosen 774 1 551 2 325 2 213

651 2 944 5 846 9 441 6 178

21 Retirement benefit information

The group contributes to defined contribution schemes covering approximately three fifths of the group’s employees. The schemes

are administered in terms of the Pension Funds Act, 1956. Contributions to retirement funding during the year amounted to

R21,2 million (2006: R16,6 million). As the fund is a defined contribution scheme, no actuarial shortage can arise in the future.

All permanent employees are required to become members of this plan unless they are obliged by legislation to be members of various

industry funds.

In addition, the group contributes to a defined benefit fund for 31 members, which fund is currently in the process of being converted

to a defined contribution fund. The last valuation performed in 2004 indicated that the fund had a nil surplus. This was approved by

the Financial Services Board. The next valuation is to be performed in accordance with legislation and will be reported in next year’s

annual financial statements. Based on current information there is no reason to believe that a material surplus or deficit will arise.


58


22 Change in accounting policies

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) on a basis

consistent with the prior year except for the adoption of the following amended standard and new interpretations:

22.1Prioryearadjustment:IFRIC8–ScopeofIFRS2share-basedpaymenttransactions

On 18 March 2005 the group concluded a broad based BEE transaction. In terms thereof options were granted for 12 243 804

ordinary shares at a strike price to be calculated in accordance with a formula (see note 9.6). These options were independently valued

at the date on which they were granted at a value of R40 246 899.

In April 2006 the Accounting Practices Board issued AC 503 – accounting for black economic empowerment (BEE) transactions,

which is effective for annual periods beginning on or after 1 May 2006. The statement seeks to clarify certain issues specific to BEE

transactions that arise on the application of IFRS 2 share-based payment. The group has adopted the interpretation retrospectively

in the current year resulting in the following adjustments:

GROUP COMPANY

R000 R000

Retained earnings as previously stated at 1 January 2006 387 941 (985)

Share-based payment reserve (40 247) (40 247)

Restated retained earnings as at 1 January 2006 347 694 (41 232)

The share-based payment reserve has increased by R40 246 899.

As this is only a reclassification between the various components of shareholders’ equity, there has been no impact on the 2006 or

2007 results.

22.2IFRICinterpretation4:determiningwhetheranarrangementcontainsalease

This interpretation is effective for the group from the current year and prescribes the circumstances where the entity enters into an

arrangement that depends on the use of a specific asset and conveys the right to control this specific asset. This arrangement should

be treated as a lease under IAS 17 leases. Arrangements that are in substance leases should be assessed against the criteria included

in IAS 17 leases to determine if the arrangements should be accounted for as finance leases or operating leases. The transitional

provisions require the group to assess all existing arrangements at the beginning of the comparative period of the first period in which

the interpretation is adopted. The impact on the group of the adoption of this interpretation was not significant.

22.3TheSouthAfricanInstituteofCharteredAccountantscircular8/2007onheadlineearnings

This circular is effective for the group from the current year. It replaces circular 7/2002 and provides a link to IFRS and accounting

policy choices through guidance on the calculation of headline earnings, including rules for every IFRS. The focus is to ensure that

headline earnings reflect the operating/trading earnings of an entity and generally exclude remeasurements (changes – realised and

unrealised – to the initial recognition of assets and liabilities) processed through profit and loss (with certain exceptions). The impact

on the group of the adoption of this circular was not significant.



59

22 Changes in accounting policy (continued)

22.4AmendmentstoIAS1:presentationofIFRS7financialinstruments:capitaldisclosures

This standard has become mandatory for reporting periods beginning 1 January 2007 and so is effective from the current year. It adds

certain new disclosures about financial instruments and replaces those rules as previously set out in IAS 32 financial instruments:

disclosure and presentation.

All disclosures relating to financial instruments, including all comparative information, have been updated to reflect the new

requirements. The first time application of IFRS 7 financial instruments, has not resulted in any prior period adjustments of cash

flows, net income or balance sheet items.

23 Financial risk management

23.1Creditrisk

Iliad’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised

below:

2007 2006

R000 R000

Classes of financial assets – carrying amounts

Cash and cash equivalents 96 238 156 854

Trade and other receivables 469 279 403 884

565 517 560 738

Iliad continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates

this information into credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and

other counterparties are obtained and used. Iliad’s policy is to deal with only creditworthy customers.

Trade receivables consist mainly of a large and widespread customer base. Iliad monitors the financial position of its customers on

an ongoing basis. Where considered appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by

application and account limits.

Iliad’s management considers that all the above financial assets that are not impaired for the reporting dates under review are of good

credit quality, including those that are past due. See note 7 for further information on impairment or financial assets that are past due.

Provision is made for bad debts and at the year-end management did not consider there to be any material credit risk exposure that

was not already covered by credit guarantee insurance or a bad debt provision.

None of Iliad’s financial assets is secured by collateral and other credit enhancements.

In respect of trade and other receivables, Iliad is not exposed to any significant credit risk exposure to any single counterparty or any

group of counterparties having similar characteristics.

Iliad deposits cash only with banks and financial institutions of quality credit standing so the credit risk for liquid funds and other

short-term financial assets is considered negligible, since counterparties are reputable banks and financial institutions with high-quality

external credit ratings.

GROUP


60


23.2Liquidityrisk

The group manages liquidity needs by monitoring daily borrowing levels and forecast cash flows and ensuring that adequate unutilised

borrowing facilities are maintained. There is no restriction on borrowing powers in terms of the articles of association and at

31 December 2007 the group’s banking facilities substantially exceeded its forecast requirements for the forthcoming year.

As at 31 December 2007, Iliad’s liabilities have contractual maturities that are summarised below:

23.3Interestraterisk

Interest payable on long- and short-term borrowings is at variable rates which are linked to the bank prime lending rate (refer note 10).

Iliad’s policy is to minimise interest rate cash flow exposures on its long term financing. At 31 December 2007 Iliad is exposed to

changes in market interest rates through its bank borrowings and long- and short-term borrowings, which fluctuate during the year and

are subject to variable interest rates.

The following table illustrates the sensitivity of the net result for the year to a reasonably possible change in rates of +1% and -1%

(2006: +1%/-1%) with effect from the beginning of the year. These changes are considered to be reasonably possible based on

observations of current market conditions. The calculations are based on Iliad’s financial instruments held at balance sheet date.

All other variables are held constant.

2007 2006

R000 R000

+1% -1% +1% -1%

Net result for the year 962 (962) 1 569 (1 569)

23.4Fairvalueoffinancialassetsandliabilities

All financial instruments are carried at fair value or amounts that approximate fair value, except for the non-current portion of fixed rate

receivables, payables and interest-bearing borrowings, which are carried at amortised cost.

The carrying amounts for investments, cash, cash equivalents, as well as the current portion of receivables, payables and interest-

bearing borrowings, approximate fair value due to the short-term nature of these instruments.

The fair values have been determined using available market information and appropriate valuation methodologies.


GROUP

GROUP

Current Non-current

R000 Within 6 months 6 to 12 months 1 to 5 years later than 5 years Total

Liquidity risk analysis 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Finance lease obligations 1 621 713 1 327 584 7 217 1 727 10 165 3 024

Trade payables 778 640 735 644 76 193 28 908 854 833 764 552

Other financial liabilities 61 069 51 482 61 069 51 482

Total 780 261 736 357 77 520 29 492 7 217 1 727 61 069 51 482 926 067 819 058


61

23.5Foreigncurrencyrisk

Most of Iliad’s foreign transactions are carried out in US Dollars and Euros. Exposures to currency exchange rates arise from the

group’s purchases of goods denominated in foreign currencies and hence exposures to exchange rate fluctuations arise. In line with

Iliad’s risk management procedures the group has partly hedged through the use of forward exchange contracts all of its foreign

currency exposure.

To mitigate the group’s exposure to foreign currency risk, forward exchange contracts are entered into in accordance with risk

management policies.

Foreign currency denominated financial assets and liabilities in US Dollars and Euros translated to Rands at the closing rate, are as follows:

2007 2006

Due within six months Rands Rands

US Dollar denominated financial assets (trade receivables) 107 246 18 941

Euro denominated financial liabilities (trade payables) (31 823 616) (38 045 306)

US Dollar denominated financial liabilities (trade payables) (82 779 458) (50 563 289)

Short-term exposure (due within six months) (114 495 828) (88 589 654)

Due after six months

Financial liabilities (trade payables) (8 846 052) (2 264 937)

Long-term exposure (due after six months) (8 846 052) (2 264 937)

Exchange rate at year-end:

US$1 = R6,80 (2006: R6,9919)

€1 = R10,05 (2006: R9,648)

Due to the fact that the group enters into forward exchange contracts in respect of all its foreign currency transactions, changes in the

exchange rate would not have a material impact on the results.

24 Segment reporting

The group operates in the building materials supply market segment within the southern African building materials industry, therefore

no segmental information is disclosed.

GROUP


62



25 Notes to the cash flow statements

The following convention applies to figures other than

adjustments:

Outflows of cash are represented by figures in brackets.

Inflows of cash are represented by figures without brackets.

25.1Taxationpaid

Amounts (outstanding) advanced at beginning of the year (29 795) (39 533) 752 328

Amounts charged to the income statement (94 369) (83 005) (310)

Amount outstanding (paid in advance) at end of the year 1 690 29 795 (1 067) (752)

(122 474) (92 743) (315) (734)

25.2Purchaseofbusinessescomprisesthefollowing:

Details of the acquisitions made during the year are set out

in the directors’ report on pages 31 to 33. The estimated

purchase considerations totalling R117,7 million have been

allocated to the underlying fair value of the identifiable assets,

liabilities and contingent liabilities as follows:

Property, plant and equipment (8 080) (8 008)

Trademarks (22 075) (53 000)

Goodwill (72 752) (159 176)

Net current assets (40 116) (8 549)

Long-term liabilities 5 644 5 535

Short-term liabilities 1 401

Cash and cash equivalents 19 642 (20 333)

(117 737) (242 130)

Satisfied by:

Cash and cash equivalents (112 050) (190 648)

Contingent purchase consideration (5 687) (51 482)

(117 737) (242 130)

25.3Proceedsondisposalofproperty,plantandequipment

Book value on disposals 2 318 1 958

Profit on disposal 1 101 1 093

3 419 3 051

GROUP COMPANY

2007 2006 2007 2006 R000 R000 R000 R000


63

27 Investment in subsidiary companies Issued % % Cost of Cost of Amount Amount

share held held shares shares owing owing

capital 2007 2006 2007 2006 2007 2006

R R R R000 R000

Held directly

Iliad Africa Trading (Proprietary) Limited 1 100 100 1 1 224 172 170 337

Iliad Africa Investments (Proprietary) Limited 1 000 100 100 1 000 1 000 47 073 164 142

Held indirectly

BYM Building Supplies (Proprietary) Limited 100 100 100

Campwell Hardware (Proprietary) Limited 100 75* 75*

CMG Holdings (Proprietary) Limited 1 000 100 100

D&A Timbers (Proprietary) Limited 1 100 100

D&A Truss (Proprietary) Limited 100 100 100

United Metal Processors (Proprietary) Limited 1 000 80 100

United Steel and Pipe Supplies (Proprietary) Limited 20 000 100 100

United Tube (Proprietary) Limited 100 100 100

1 001 1 001 271 245 334 479

* Although the group holds only 75% of Campwell Hardware (Proprietary) Limited, the 25% minority holds a put option on the shares

held. This option has been accounted for as a contingent purchase consideration, therefore the group’s interest in Campwell Hardware

(Proprietary) Limited has been recognised at 100% (refer notes 3 and 10).

2007 2006

Attributable profits and losses after taxation of subsidiaries R000 R000

Profits 248 676 203 083

26 Related party transactions

The company and its subsidiaries have entered into various transactions with related parties as follows:

Subsidiaries

– Details of income from subsidiaries are disclosed in note 15 on page 54.

– Details of investments in subsidiaries are disclosed in notes 4 and 27 on pages 47 and 63 respectively.

Directors

– Details of directors’ remuneration and directors’ interests in the share option scheme are disclosed in note 20. Directors’

shareholdings are disclosed in the directors’ report.

Key personnel

– Key personnel comprise the directors of the operating subsidiary and certain divisional managers. The remuneration paid to key

personnel during the year was R35 053 570 (2006: R36 157 566).


64

Portfolio size:

Range

1 – 5 000 3 174 81,64 3 478 056 2,38

5 001 – 20 000 393 10,11 4 181 376 2,86

20 001 – 100 000 195 5,02 9 348 555 6,38

100 001 – 1 000 000 95 2,43 33 334 218 22,76

1 000 001 and more 31 0,80 96 091 203 65,62

Totals 3 888 100,00 146 433 408 100,00

Category

Individuals 3 076 79,12 22 908 062 15,64

Companies and other corporate bodies 810 20,83 122 225 346 83,47

Directors 2 0,05 1 300 000 0,89

Totals 3 888 100,00 146 433 408 100,00

Shareholder spread

Public 3 886 99,95 145 133 408 99,11

Directors 2 0,05 1 300 000 0,89

Totals 3 888 100,00 146 433 408 100,00

Major shareholders (5% or more of the shares in issue)

Rand Merchant Bank Asset Management 26 942 885 18,40

Public Investment Commissioner 17 707 027 12,09

The Kalithea Trust 10 500 000 7,17

Investec Fund Managers 7 437 307 5,08

*Supplied by Link Market Services South Africa (Pty) Ltd

shareholder analysis*

Number of % of Number of % of issued

shareholders shareholders shares capital

AS AT 28 DECEMBER 2007


65

Iliad Africa Limited

Incorporated in the Republic of South Africa

Registration number 1997/011938/06

Share code: ILA

ISIN: ZAE000015038

Group company secretary

Luis Mendes

PO Box 2572 Honeydew 2040

Business address and registered office

Iliad Africa Limited

First Floor, East Block

Pineslopes Office Park

cnr The Straight and Witkoppen Road

Lonehill, Sandton

(PO Box 2572 Honeydew 2040)

Transfer secretaries

Link Market Services South Africa (Pty) Limited

11 Diagonal Street

Johannesburg

(PO Box 4844 Johannesburg 2000)

Internet

http://www.iliadafrica.co.za

Attorneys

Fullard Mayer Morrison Incorporated

Second Floor, Office Towers, Sandton City

cnr Rivonia Road and Fifth Street

Sandton 2146

(PO Box 78678 Sandton 2146)

Principal bankers

First National Bank of South Africa

Mercantile Lisbon Bank, a division of

Mercantile Lisbon Bank Holdings Limited

Nedbank, a division of Nedcor Bank Limited

Sponsor

Bridge Capital Advisors (Pty) Limited

Second Floor, 27 Fricker Road

Illovo 2196

(PO Box 651010 Benmore 2010)

Auditors

Grant Thornton

Chartered Accountants (SA)

Registered Auditors

(Member firm of Grant Thornton International)

137 Daisy Street cnr Grayston Drive

Sandown 2196

(Private Bag X28 Benmore 2010)

corporate information


66

Financial year-end 31 December 2007

Declaration of final distribution 10 March 2008

Publication of financial results on Sens 10 March 2008

Annual report posted to shareholders 31 March 2008

Payment of final distribution 7 April 2008

Annual general meeting 29 May 2008

Publication of interim results September 2008

shareholders’ diary


67

ILIAD AFRICA LIMITEDRegistration number 1997/011938/06(Incorporated in the Republic of South Africa)Share code: ILA ISIN: ZAE000015038(“Iliad” or “the company”)

For use by certificated and own-name dematerialised ordinary shareholders and “A” shareholders (“shareholder”) at the annual general meeting to be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 29 May 2008.

I/We (full names in block letters) of (address) being the holder/s of ordinary shares in the company,

and/or “A” shares in the company appoint: (see note 1)

1 or failing him/her

2 or failing him/her

3 the chairman of the annual general meeting, as my/our proxy to attend, speak and vote for me/us on my/our behalf at the annual general meeting of the company to be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 29 May 2008, and at any adjournment thereof. I/we desire to vote as indicated below (see note 2):

Number of shares

In favour Against Abstain

of the the from

resolution resolution voting

Ordinary resolutions:

1 To consider and adopt the annual financial statements

2 Re-election of directors:

2.1 HC Turner

2.2 RT Ririe

3 To approve directors’ remuneration as disclosed in the annual financial statements

4 Placing of unissued shares under the control of the directors for the purpose

of the share incentive scheme

5 General authority to make payments to ordinary shareholders

6 To re-appoint the external auditors

Special resolutions:

1 General authority to repurchase shares

(Indicate instructions to proxy by way of a cross in the appropriate space(s) provided above. Unless indicated above, the proxy may vote as

he/she deems fit.)

Signed at on 2008

Signature

Assisted by (where applicable)Each shareholder is entitled to appoint one or more proxies (who need not be members of the company) to attend, speak and vote in place of that member at the annual general meeting, (Instructions overleaf)

form of proxy


68

INSTRUCTIONS ON SIGNING AND LODGING THE ANNUAL

GENERAL MEETING PROXY FORM:

1 A shareholder may insert the names of two alternative prox-

ies (neither of whom need be a shareholder of the company) in

the space provided, with or without deleting the words “chair-

man of the annual general meeting”. The person whose name

appears first on the form of proxy and has not been deleted and

who is present at the annual general meeting will be entitled to

act as proxy to the exclusion of those whose names follow. In

the event that no names are indicated, the proxy shall be exer-

cised by the chairman of the annual general meeting.

2 A shareholder’s instructions to the proxy must be

indicated by the insertion of an “X” or the relevant number

of votes exercisable by that shareholder in the appropriate

box/boxes provided. If a proxy form, fully signed, is lodged

without specific directions as to which way the proxy is to vote,

the chairman of the annual general meeting will be deemed to

have been authorised as he/she thinks fit. A shareholder or the

proxy is obliged to use all the votes exercisable by the share-

holder or by the proxy.

3 A deletion of any printed matter and the completion of any

blank spaces need not be signed or initialled. Any alteration or

correction must be initialled by the authorised signatory/ies.

4 When there are joint holders of Iliad shares, all joint share-

holders must sign the form of proxy.

5 The completion and lodging of this form of proxy will not

preclude the shareholder, who grants this proxy, from attending

the annual general meeting and speaking and voting in person

thereat to the exclusion of any proxy appointed in terms hereof,

should such shareholder wish to do so.

6 Documentary evidence establishing the authority of the

person signing this form of proxy in a representative capacity

must be attached to this form unless previously recorded by

the transfer secretaries.

7 Where this form is signed under power of attorney, such

power of attorney must accompany this form unless it

has been previously registered with the company or the transfer

secretaries.

8 A minor must be assisted by his/her parent or guardian

unless the relevant document establishing his/her legal capac-

ity has been produced or registered by the transfer secretaries.

9 Completed forms of proxy must be forwarded to the com-

pany’s transfer secretaries, Link Market Services South Africa

(Pty) Limited, PO Box 4844, Johannesburg, 2000 so as to be

received by no later than 13:00 on Tuesday, 27 May 2008.

10 The chairman of the meeting may reject or accept a proxy

that is completed other than in accordance with these instruc-

tions, provided that he/she is satisfied as to the manner in

which a shareholder wishes to vote.

notes to the proxy


69

ILIAD AFRICA LIMITEDRegistration number 1997/011938/06(Incorporated in the Republic of South Africa)Share code: ILAISIN: ZAE000015038(“Iliad” or “the company”)

Notice is hereby given that the annual general meeting of ordinary shareholders and “A” shareholders (“shareholders”) of Iliad Africa Limited will be held at East Block, First Floor, Pineslopes Office Park, cnr The Straight and Witkoppen Road, Lonehill, Sandton at 13:00 on Thursday, 29 May 2008 for the purposes of transacting the following business:

As ordinary resolutions1 To consider and adopt the annual financial statements for the year ended 31 December 2007 together with the directors’ and auditors’ reports.

2 To elect the following directors who retire in accordance with the provisions of the company’s articles of association and being eligible, offer themselves for re-election:2.1 HC Turner2.2 RT Ririe

Set out below are brief CVs of the directors retiring by rotation:

Howard Charles TurnerCA(SA) SEP (Stanford) Non-executive chairman

Howard is a qualified chartered accountant and was the managing partner of Coopers & Lybrand, Johannesburg and a member of the Coopers & Lybrand National Executive Committee. Howard retired in December 2004 as deputy chief executive officer of Group Five Limited. He is the non-executive chairman of the Automobile Association of South Africa.

Ralph Trevor RirieBCom(Wits) CA(SA) OPM Harvard Non-executive director

Ralph has 20 years’ experience in the medical industry where he owned a group of medical manufacturing and distribution companies which were purchased through two leveraged buyouts. Subsequent to the sale of his medical businesses, Ralph acquired interests in Top Flite Asset Management (Pty) Limited. Ralph has an interest in Lesco Manufacturing (Pty) Limited, a company which is a leading manufacturer of electrical adaptors, switches and sockets.

3 To approve the remuneration paid to directors, as disclosed in the annual financial statements.

4 To place the ordinary shares held in reserve for the share incentive scheme under the control of the directors who shall be authorised to allot and issue these shares on such terms and conditions, at such times and for such consideration, whether payable in cash or otherwise, as they deem fit, subject to the Companies Act (Act 61 of 1973) (“the Act”) as amended, and the Listings Requirements of the JSE Limited (“JSE”) until the next annual general meeting of the company.

5 General paymentsTo resolve that, in terms of article 8.10 of the company’s articles of association and subject to the company obtaining a statement by the directors that after considering the effect of such maximum payment the:a Company and the group will be able in the ordinary course of business to pay its debts for a period of 12 months after the date of the notice of the annual general meeting;b Assets of the company and the group will be in excess of the liabilities of the company and the group for a period of 12 months after the date of the notice of the annual general meeting. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements;c Share capital and reserves of the company and the group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of the annual general meeting, andd Working capital of the company and the group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of the annual general meeting.

The directors of the company shall be entitled, from time to time, to pay, by way of a reduction of stated capital, capital distributions to ordinary shareholders of the company in lieu of a dividend. Such distributions shall be made pro rata to all shareholders and shall be amounts equal to the amounts which the directors would have declared and paid out of profits of the company as interim and final dividends. This authority shall not extend beyond the date of the next annual general meeting or 15 months from the date of this resolution, whichever period is shorter.

notice of annual general meeting


70

In terms of the JSE Listings Requirements any general payment(s) may not exceed 20% of the company’s issued share capital, including reserves but excluding minority interests, and revaluations of assets and intangible assets that are not supported by a valuation by an independent professional expert acceptable to the JSE prepared within the last six months, in any one financial year, measured as at the beginning of such financial year. The intention of the company is to utilise the general authority to make a general payment to ordinary shareholders by way of a reduction of stated capital in lieu of a dividend. In this regard the directors will take account of, inter alia, appropriate capitalisation structures for the company as well as the long-term cash needs of the company, and will ensure that any such payments are in the interests of shareholders.

General payments, from time to time, to pay, by way of a reduction of stated capital, capital distributions to ordinary shareholders for the company in lieu of a dividend, shall not be effected before the JSE has received written confirmation from the company’s sponsor to the effect that the directors have considered the solvency and liquidity of the company and the group as required in terms of section 90 (2) of the Act, as amended.

6 To reappoint the external auditors until the conclusion of the next annual general meeting.

As special resolutions1 Special resolution 1: General repurchasesTo consider and, if deemed fit, to pass with or without modification, the following special resolution to give a general authority for the company to repurchase its own shares:

RESOLVED THAT Iliad, or a subsidiary of Iliad, be and is hereby authorised, by way of a general authority, to acquire shares issued by Iliad in terms of sections 85 to 89 of the Act, as amended, and in terms of the JSE Listings Requirements and that any director of the company be and is hereby authorised to sign all such documents and do all such things as may be necessary for or incidental to the implementation of this special resolution. The JSE Listings Requirements currently require that the company may make a general repurchase of its shares only if:• Any such repurchase of shares is effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counterparty (reported trades are prohibited);• The company is authorised thereto by its articles of association;• The general authority shall be valid only until the company’s next annual general meeting; provided that it shall not extend

beyond 15 months from the date of passing of this special resolution;• In determining the price at which the ordinary shares issued by Iliad are acquired by it or its subsidiary in terms of this general authority, the maximum price at which such shares may be acquired will be 10% above the weighted average of the market value for such ordinary shares for the five business days immediately preceding the date on which the repurchase of such shares is effected;• At any point in time, the company may appoint only one agent to effect any repurchase(s) on the company’s behalf;• After such repurchase, the company still complies with paragraphs 3.37 to 3.41 of the JSE Listings Requirements concerning shareholder spread requirements;• The company or its subsidiary may not repurchase shares during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements;• Acquisitions of shares in any one financial year may not exceed 10% of the company’s issued share capital pursuant to this general authority;• Subsidiaries of the company shall not acquire, in aggregate, more than 10% of the company’s issued share capital, and• The company publishes an announcement when it has cumulatively repurchased 3% of the initial number (the number of that class of shares in issue at the time that general authority is granted) of the relevant class of securities, and for each 3% in aggregate of the initial number of that class acquired thereafter. Such announcement must be made not later than 08:30 on the second business day following the day on which the relevant threshold is reached or exceeded.The directors have considered the impact of a repurchase of 10% of Iliad shares, it being the maximum permissible of a particular class in any one financial year, under a general authority in terms of the JSE Listings Requirements, and are of the opinion that such repurchase will not result in: • The company and the group in the ordinary course of

business being unable to pay its debts for a period of 12 months after the date of this notice of annual general meeting;

• The liabilities of the company and the group exceeding the assets of the company and the group for a period of 12 months after the date of the notice of annual general meeting, calculated in accordance with the accounting policies used in the audited financial statements for the year ended 31 December 2007;

• The ordinary capital and reserves of the company and the group, for a period of 12 months after the date of the notice of annual general meeting, being inadequate, and

• The working capital of the company and the group, for a period of 12 months after the date of this notice of annual general meeting, being inadequate.

notice of annual general meeting


71

Reason and effectThe effect of the special resolution and the reason therefor is

to grant directors of the company a general authority in terms

of the Act, as amended, for the acquisition by Iliad, or any

subsidiary of Iliad, of Iliad shares.

At present, the directors have no specific intention with regard

to the utilisation of this authority, which will be used only if

the circumstances are appropriate. No repurchase of shares

under this authority will be implemented until such time as the

company’s sponsor has confirmed in writing to the JSE that the

above working capital statement is valid.

Material changesThere have been no material changes in the financial or trading

position of Iliad and its subsidiaries between Iliad‘s financial

year-end and the date of this notice.

Litigation statementThe directors, whose names are given on page 4 of the annual

report, are not aware of any legal or arbitration proceedings,

including proceedings that are pending or threatened, that may

have or in the previous 12 months had, a material effect on

the group’s financial position.

Directors’ responsibility statementThe directors, whose names are given on page 4 of the annual

report, collectively and individually accept full responsibility for

the accuracy of the information pertaining to the resolutions

and certify that to the best of their knowledge and belief

there are no facts that have been omitted which would make

any statement false or misleading, and that all reasonable

enquiries to ascertain such facts have been made and that

these resolutions contain all information required by the JSE

Listings Requirements.

Voting and proxiesAny member entitled to attend and vote at a meeting of the

company may appoint one or more proxy/ies to attend, speak

and vote in his/her stead. A proxy need not be a member of

the company.

Shareholders, which are companies or other bodies corporate,

may, in terms of section 188(1) of the Act, by resolution of its

directors or other governing body, authorise any person to act

as its representative at the annual general meeting.

The ordinary resolutions are subject to a simple majority vote of shareholders present or represented by proxy at the annual general meeting. Every shareholder present in person or by proxy at the annual general meeting shall, on a show of hands, have one vote only, and on a poll, have one vote for each share of which he/she is the registered holder.

Certificated shareholders and own-name dematerialised shareholders who are unable to attend the annual general meeting but wish to be represented thereat must complete and return the attached form of proxy in accordance with the instructions contained therein so as to be received by the company’s transfer secretaries, Link Market Services South Africa (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000), by no later than 13:00 on Tuesday, 27 May 2008.

Dematerialised shareholders, other than those with own-name registration, who wish to attend the annual general meeting, must request their Central Securities Depository Participant (“CSDP”) or broker to issue them with a letter of representation to enable them to attend the annual general meeting in person. Alternatively, such dematerialised shareholders must instruct their CSDP or broker as to how they wish to vote in this regard. This has to be done in terms of the agreement entered into between the shareholder and his/her CSDP or broker.

By order of the board

Luis MendesGroup company secretaryJohannesburg10 March 2008

Registered officeIliad Africa LimitedFirst Floor, East BlockPineslopes Office ParkCnr The Straight and Witkoppen RoadLonehill, Sandton(PO Box 2572, Honeydew, 2040)

Transfer secretariesLink Market Services South Africa (Pty) Limited11 Diagonal StreetJohannesburg(PO Box 4844, Johannesburg, 2000)

OPERATION TEL FAX BBS – Benoni 011 422 3005 011 422 4256 Builders Market – Bloemfontein 051 434 2241 051 435 2788 Builders Market – Empangeni 035 787 1416 035 787 1375 Builders Market – Kathu 053 723 2670 053 723 2670 Builders Market – Kimberley 053 833 4214 053 831 2840 Builders Market – Klerksdorp 018 462 2521 018 462 5122 Builders Market – Lephalale 014 763 1332 014 763 1351 Builders Market – Middelburg 013 283 6500 013 283 6511 Builders Market – Polokwane 015 292 0614 015 292 1446 Builders Market – Richards Bay 035 789 3592 035 789 3600 Builders Market – Vaal 016 986 2085 016 986 1320 Builders Market – Welkom 057 352 8361 057 357 2035 Builders Market W Miller – Somerset West 021 851 2660 021 852 4312 Building Centre – Brits 012 252 3619 012 252 3619 Building Centre – Burgersfort 013 231 7578 013 231 7578 Building Centre – Bushbuckridge 013 799 0245 013 799 1657 Building Centre – Giyani 015 812 4140 015 812 1855 Building Centre – Isipingo 031 902 9390 031 902 8391 Building Centre – Jane Furse 013 265 1876 013 265 1878 Building Centre – Mafikeng 018 381 5195 018 381 5140 Building Centre – Polokwane 015 297 6814 015 297 4862 Building Centre – Secunda 017 685 3201 017 685 1833 Building Centre – Shayandima 015 964 1664 015 964 1138 Campwell Hardware – Athlone 021 696 5167 021 696 6637 Campwell Hardware – Bergvliet 021 712 4400 021 712 9866 Campwell Hardware – Durbanville 021 975 3585 021 976 5911 Campwell Hardware – Group X 021 376 5968 021 376 5970 Campwell Hardware – Nyanga 021 691 2206 021 691 5534 Campwell Hardware – Parklands 021 556 7631 021 556 7084 Campwell Hardware – Plaza 021 391 5555 021 392 2701 Campwell Hardware – Polka Place 021 392 7004 021 392 7010 Campwell Hardware – Stellenbosch 021 887 6830 021 887 6836 Campwell Hardware – Vasco 021 592 4119 021 592 4138 Campwell Tile & San 021 376 5968 021 376 5970 D&A Timbers – East London 043 743 3733 043 743 7561 D&A Timbers – Grahamstown 046 622 7301 046 622 8739 D&A Timbers – Kenton-on-sea 046 648 1300 046 648 1117 D&A Timbers – Pinetown 031 705 8451 031 705 8030 D&A Timbers – Port Alfred 046 624 1103 046 624 2115 D&A Timbers – Shelly Beach 039 315 0790 039 315 0797 Ferreira's Express – Lyttelton 012 664 5687 012 644 2408 Ferreira's – Honeydew 011 795 3733 011 795 2936 F&F Building Supplies – Krugersdorp 011 762 4284/4316 011 762 7422 Laeveld Bouhandelaars – Hazyview 013 737 7142 013 737 6585 Laeveld Bouhandelaars – Hoedspruit 015 793 0560 015 793 0695 Laeveld Bouhandelaars – Lydenburg 013 753 5349 013 753 5302 Laeveld Bouhandelaars – Malelane 013 790 1670 013 790 1673 Laeveld Bouhandelaars – Nelspruit 013 753 5300 013 753 5301 Laeveld Bouhandelaars – Witrivier 013 750 2090 013 750 0279 Modern Bathrooms 021 592 2190 021 591 4927 Rietpan Hardware – Benoni 011 571 6400 011 973 2996 Rustenburg Building Material – Rustenburg 014 597 1951 014 592 7352 Sanware & Plumbing – Pinetown 031 701 2288 031 701 1056 Suncol – Benoni 011 421 6331 011 421 6539 USM – Jeffreys Bay 042 293 4480 042 293 4489 USM – Manor Heights 041 922 9920 041 922 9920 USM – Uitenhage 041 922 9920 041 922 9505

contact details general building materials division

72

OPERATION TEL FAX B One – Centurion 0861 008 009 012 664 0404 Bildware Décor Centre – Umhlanga 031 566 5566 031 566 5568 Bildware Natal – Durban 031 332 5764 031 332 7895 Buchel – Menlyn 012 361 8304 012 361 8305 Buchel Designa – Faerie Glen 012 998 4687 012 998 3028 Buchel Hardware – Pretoria 012 300 2700 012 325 5472 Buchel Hardware & Tool Centre – Zambezi Drive – Pretoria 012 543 7500 012 567 6588 Buchel Tool Centre – Pretoria 012 300 3800 012 321 8120 Cachet International – Gauteng 011 201 4600 011 201 4601 Cachet International – KwaZulu-Natal 031 240 8100 031 240 8111 Chipbase – Durbanville 021 982 7810 021 982 7819 Chipbase – George 044 874 1753 044 874 1801 Chipbase – Montagu Gardens 021 551 2035 021 551 1926 Chipbase – Retreat 021 701 1128 021 701 5841 Chipbase – Somerset West 021 854 6810 021 854 6862 Chipbase – Stikland 021 949 1794 021 949 1712 Citiwood – Cape Town 021 930 5923 021 930 5625 Citiwood – Denver 011 622 9360 011 622 7938 Citiwood – Durban 031 579 2274 031 579 2293 Citiwood – Port Elizabeth 041 374 7414 041 373 0749 Citiwood – Pretoria 012 804 3554 012 804 0582 Citiwood – Vereeniging 016 421 1683 016 421 1337 Design Hardware – Boksburg 011 894 1421 011 894 1422 Design Hardware – Northcliff 011 782 3629 011 888 1025 Design Hardware – Strijdom Park 011 792 9900 011 792 5153 Design Hardware – Woodmead 011 804 4293 011 804 6931 Ferreiras Architectural – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Cape Town 021 510 5555 021 510 5666 Ferreiras Décor World – Durban 031 303 8400 031 303 8576 Ferreiras Décor World – North Riding 011 699 3500 011 699 3506 Ferreiras Décor World – Zambezi Drive – Pretoria 087 754 0500 012 543 2470 Just Tiles – Port Elizabeth 041 451 3602 041 451 1008 National Tile Traders – Bloemfontein 051 432 6360 051 432 1327 National Tile Traders – Boksburg 011 823 3340 011 826 2617 National Tile Traders – Centurion 012 661 6527 012 661 6586 National Tile Traders – Randfontein 011 693 6525 011 693 6907 National Tile Traders – Roodepoort 011 760 2315 011 766 3642 National Tile Traders – Rustenburg 014 597 0391 014 592 1586 National Tile Traders – Southgate 011 942 5978 011 942 5899 National Tile Traders – Strijdom Park 011 791 0206 011 791 0215 National Tile Traders – Vanderbijlpark 016 931 2456 016 931 2467 Q Lite – Pietermaritzburg 033 342 8292 033 342 6456 Q Lite – Strubens Valley 011 475 2412 011 675 2556 Q Lite – Umbilo Road Durban 031 306 9015 031 306 9017 Q Lite – Umhlanga 031 566 4070 031 566 4074 Saflok – Cape Town 021 791 0608 021 791 0608 Saflok – Johannesburg 011 453 5375 011 453 5379 SDT – Cape 021 762 5116 021 762 5164 SDT – Gauteng 011 392 5306 011 974 3455 The Knob & Knocker – Johannesburg 011 201 4800 011 201 4801 The Knob & Knocker – KwaZulu-Natal 031 240 8100 031 240 8111 The Tile Depot – Cape Town 021 510 1248 021 511 7790 The Tile Depot – North Riding 011 462 3774 011 462 9125 Thorpe Timbers 011 724 4200 011 865 2204 Tile & Décor Mart – Alberton 011 907 1383 011 907 1494 Top Form – Somerset West 021 854 4005 021 854 3397 W&B Hardware – Bellville 021 948 4881 021 948 0370 W&B Hardware – Claremont 021 670 7270 021 670 7288 W&B Hardware – Paarden Island 021 510 0700 021 510 0728 W&B Hardware – Port Elizabeth 041 373 5993 041 374 5396

contact details specialised building materials division

cont

ents

1 GROUPPROFILE

2 GROUPSTRUCTUREANDDISTRIBUTION

3 FIVE-YEARREVIEW

4 BOARD

5 GROUPSTEERINGANDEXECUTIVECOMMITTEE

6 CHAIRMAN’SREPORT

8 CHIEFEXECUTIVE’SREPORT

10 GENERALBUILDINGMATERIALS

14 SPECIALISEDBUILDINGMATERIALS

20 CORPORATEGOVERNANCE

26 VALUE-ADDEDSTATEMENT

27 ANNUALFINANCIALSTATEMENTS

64 SHAREHOLDERANALYSIS

65 CORPORATEINFORMATION

66 SHAREHOLDERS’DIARY

67 FORMOFPROXY

68 NOTESTOTHEPROXY

69 NOTICEOFANNUALGENERALMEETING

72 CONTACTDETAILS

Turnover up 24%

Operating profit up 25%

Earnings per share up 22%

Distribution to shareholders up 30%

salient features

Iliad Africa’s strategic intent

DRIVING FORCEOurstrategyistomeettheproductneedsofthebuildingindustrythroughfocusedsourcingandredistributionofgoodsintoeachidentifiedsegmentofthemarket

CORE COMPETENCIESTosurviveandprosperwemustexcelat:•Marketintelligence•Procurement•Tradingskills

PHILOSOPHY• Owner-managerethoswithstrongincentivesforperformance• Decentralisedoperatingdivisions• Tightcentralisedfinancialcontrols• Focusonnichemarketswithoutdominatinganyonesegment• Leveragingcommonexpertisebetweendivisions

www.iliadafrica.co.za

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annual report

E N E R G Y | P A S S I O N | F O C U S | P E R F O R M A N C E

2007

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