Companies Act, 1973 (Act No. 61 of 1973)The Securities Regulation Code on Takeovers and MergersThe CodeSection K. Profit ForecastsRule 25 |
| 25.1) | Standards of care |
The hazards attached to the forecasting of profits shall in no way detract from the necessity of maintaining the highest standards of accuracy and fair presentation in all communications to holders of relevant securities in an offer. A profit forecast shall be compiled with great care and objectivity by the directors, whose sole responsibility it is.
| 25.2) | Assumptions |
| a) | When a profit forecast appears in any document addressed to holders of relevant securities in connection with an offer, the material assumptions, including the commercial assumptions, upon which the directors have based their profit forecast, shall be stated in the document. |
| b) | When, after an offer document has been posted, a profit forecast is given in a press announcement, any assumptions on which the forecast is based shall be included in the announcement. |
| 25.3) | Reports required in connection with profit forecasts |
| a) | In all cases, the assumptions, accounting policies and calculations for the forecasts shall be examined and reported on by the auditors or reporting accountants. |
| b) | When income from land and buildings is a material element in a forecast, that part of the forecast shall be examined and reported on by an appropriate external valuer: this requirement does not apply where the income is virtually certain, e.g. known rents receivable under existing leases. |
| c) | Exceptionally, the Panel may accept that, because of the uncertainties involved, it is not possible for a forecast previously made to be reported on in accordance with the Code nor for a revised forecast to be made. In these circumstances, the Panel requires that holders of relevant securities be given a full explanation of why the requirements of the Code are not capable of being met. |
| 25.4) | Publication of reports and consent letters |
When an offer document has been posted, the reports shall be included in the document containing the forecast or, when the forecast has been made in a press announcement, in a document which shall be sent to holders of relevant securities with a minimum of delay after the announcement is published. The reports shall be accompanied by a statement that those making them have given and not withdrawn their consent to publication.
| 25.5) | Subsequent documents-continuing validity of forecast |
When a company includes a forecast in a document, any document subsequently sent out by that company in connection with that offer shall, except with the consent of the Panel, contain a statement by the directors that the forecast remains valid for the purpose of the offer and that the accountants and others who reported on the forecast have indicated that they have no objection to their reports continuing to apply.
| 25.6) | Statements which will be treated as profit forecasts |
| a) | When no figure is mentioned |
Even when no particular figure is mentioned or even if the word "profit" is not used, certain forms of words may constitute a profit forecast, particularly when considered in context. Examples are "profits will be somewhat higher than last year" and "performance in the second half-year is expected to be similar to our performance and results in the first half-year" (when interim figures have already been published). Whenever a form of words puts a floor under, or a ceiling on, the likely profits of a particular period or contains the data necessary to calculate an approximate figure for future profits, it will be treated by the Panel as a profit forecast which shall be reported on. In cases of doubt the Panel shall be consulted.
| b) | Forecasts before the offer period |
Except with the consent of the Panel, any relevant profit forecast which has been made before the commencement of the offer period shall be examined, repeated and reported on in the document sent to holders of relevant securities.
| c) | Estimates of profit for a completed period |
An estimate of profit for a period which has already expired shall be treated as a profit forecast.
| d) | Interim and preliminary figures |
Except with the consent of the Panel, any profit figures published during an offer period shall be audited, or, if unaudited, shall be reported on by the auditors on a basis consistent with previous years.
| e) | Forecasts for a limited period |
A profit forecast for a limited period (e.g. the following quarter) is subject to this Rule.
| f) | Dividend forecasts |
Except with the consent of the Panel, a dividend forecast will be considered to be a profit forecast.
| 25.7) | Pre-tax profit forecasts |
When a forecast of profit before taxation appears in a document addressed to holders of relevant securities, it shall be accompanied by a forecast of earnings per share arising from the said profit.
| 25.8) | When a forecast relates to a period which has commenced |
Whenever a profit forecast is made in relation to a period in which trading has already commenced, any previously published profit figures in respect of any expired part of that trading period, together with comparable figures for the same part of the preceding year, shall be stated.
| 25.9) | Inflation-Adjusted forecasts |
In general, all the relevant provisions of this rule apply also to a profit forecast prepared on an inflation adjusted basis. The basis of computation underlying such a forecast shall be stated. Any such forecast shall also be accompanied by a corresponding forecast prepared on an historical cost basis.