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Integrated annual report 2016
Scope and boundary of the reportThe 2016 integrated report includes the operations of Howden Africa Holdings Limited and its subsidiaries (the Company, Group or Howden) in South Africa. The information in this report covers the fi nancial and non-fi nancial performance of the Company for the year ended 31 December 2016. However, where it is relevant to include information post year-end, this has been incorporated and noted.
Howden aims to achieve the highest standards in all disclosures in this report to provide meaningful, accurate, complete, transparent and balanced information to stakeholders. The board and board committees were actively involved in fi nancial disclosures made in this report.
In defi ning the report and information included, we have drawn from the governance guidelines outlined in the King Report on Corporate Governance for South Africa, 2009 (King III), the JSE Listings Requirements, the Companies Act No 71 of 2008 (Companies Act) and the Global Reporting Initiative (GRI 4) sustainability reporting guidelines.
The Group follows International Financial Reporting Standards (IFRS) to compile its annual fi nancial statements. The 2016 fi nancial statements have been prepared under the supervision of the Chief Financial Offi cer, Marinella Vigouroux, and have been audited and assured by Ernst & Young Inc., the Group’s external auditors.
The requirement for sustainability assurance is considered annually and is at this stage not deemed necessary. This will be reviewed annually.
This report contains the most material issues of concern to all our stakeholders. There are no signifi cant changes to the aspect boundaries as contained in the 2015 integrated annual report.
For additional information visit our website:www.howden.co.za
Board responsibility statementThe board of directors acknowledges its responsibility to ensure the integrity of the integrated annual report. The board has accordingly applied its mind to the integrated annual report and, in its opinion, the integrated annual report addresses all material issues, and fairly presents the integrated performance of the organisation and its impacts. The integrated annual report has been prepared in line with best practice and the recommendations of King III (principle 9.1) and contains standard disclosures from the GRI 4 sustainability reporting guidelines. The board authorised the integrated annual report for release on 31 March 2017.
Ian H BranderChairman of the boardDuly authorised by the board
Mitesh PatelIndependent non-executive director and Chairman of the Audit and Risk Committee Duly authorised by the board
Contents
Our values in action 1
Financial and non-fi nancial highlights 4
Performance indicators 4
Business trends 5
Snapshot of Howden 6
Group structure 7
Group at a glance 8
Five-year Group fi nancial summary 10
Value added statement 11
Our stakeholders 12
Stakeholder engagement 13
Our strategy 16
Chairman’s statement 22
Chief Executive Offi cer’s review 24
Chief Financial Offi cer’s review 28
Material issues 32
Corporate governance report 52
Remuneration, nomination, social and ethics report
61
Board of directors 64
Executive management (Exco) 66
Risk management report 68
GRI index 70
Annual fi nancial statements 74
Notice of annual general meeting 136
Form of proxy 143
Corporate information IBC
Our values
For quick access on your mobile to the Howden website, scan this QR code.
01 02
0305
04
The best team wins
Team-oriented, involved associates
are our most valuable resource, and
we are passionate about attracting,
developing and retaining the best
talent. Howden associates win
because we:
Exhibit high integrity and respect
for others
Seek fact-based, root cause
solutions, not blame
Promote from within
Are non-political and not
bureaucratic
Are accountable for best-of-class
results, and deliver
Strive for a safe work environment
Believe that winning is fun
Customers talk, and we listen
The voice of the customer will always
drive the development of our strategic
plan, and this will result in:
A focus on quality and speed always
Unique, value-added and
differentiated solutions
Robust, repeatable processes that
consistently exceed customer
expectations
Positive problem resolution
Competitive customer conversions
Continuous improvement (Kaizen) is our way of life
The COLFAX BUSINESS SYSTEM®
(CBS) is our culture, and we will
deploy it with absolute passion.
Additionally, we will:
Step out of our comfort zone by
setting breakthrough objectives
Experiment and learn everyday
Aggressively and continuously
eliminate waste in every aspect of
our business processes
Benchmark the best, and then
better them
We compete for shareholders based on our performance
To consistently attract and retain loyal
shareholders, we must deliver best-of-
class results for:
Profi ts
Working capital
Cash fl ow
in action
Leading-edge innovation defi nes our future
Individual and organisational creativity
will drive:
Breakthrough ideas for technology,
products, solutions and processes
Differentiated customer solutions
Out-of-the-box ideas, big and
small, that add value to our world
Above-market organic growth
For additional information visit our website:
www.howden.com
1Howden Integrated annual report 2016
Our top six industries
The demand for water treatment plant is growing with the need to process large volumes of waste water from municipal
sewerage systems and industrial processes such as food, drink, pulp and paper, where liquid organic effl uents are
produced as a by-product.
We have developed our turbo compressor technology for the specifi c needs of water treatment plants. Our highly effi cient
design, fi tted with variable inlet guide vanes and variable vane diff user system, off ers a unique high performance across the
entire duty range.
Cement production is one of the world’s most energy intensive industries. Current cement making processes
impose a wide range of demands on process fans, including high abrasion, excessive dust build-up, and
high temperatures.
Howden supplies the many and varied fan types required by the cement industry, ranging from large custom built fans for process critical applications to pre-engineered units for the lower specifi cation and
more general applications.
Some of today’s most arduous applications for Howden products are to be found in the iron and steel industry.
The need to move large volumes of air or gas, in many cases at high pressures and high dust burdens, places
stringent demands on the mechanical design of the impeller.
In ore benefi ciation processes such as sintering and pelletising, as well as in basic oxygen and direct reduction
steelmaking, Howden fans are operating in high temperature and erosive environments.
Iron and Steel
Cement
Waste Water Treatment
2 Howden Integrated annual report 2016
The world is increasingly dependent on having a reliable supply of electric power – and our products play a central role in supporting the power producers who need effi cient, reliable fans, rotary regenerative heat exchangers, compressors and other equipment to keep the generating process running continuously.
Howden has supplied over 40 000 boiler draught fans and almost 5 000 rotary heat exchangers in over 100 countries making it a leading supplier to the industry.
We engineer and construct turnkey ventilation, refrigeration and gas cleaning systems for mine ventilation anywhere throughout the world. We also integrate equipment into existing mines, process plants, or supply standalone units as per our customers’ specifi ed duties.
Howden has over 160 years of experience in meeting our customers’ mining ventilation needs in some of the most remote and diffi cult underground mining environments in the world.
The Petrochemical industry is one of the world’s most complex, and we have matched these unique requirements by engineering products for use at sites that produce liquid fuels, plastics and materials for manufacturing industries.
Bespoke boiler fans are supplied in large numbers to petrochemical customers, and our compressor technologies are well suited for use as utility gas compressors for nitrogen and air, or in large critical process applications. Our experience enables us to support the achievement of customer effi ciency objectives through the optimisation of equipment and systems. .
Power Generation
Mining
Petrochemical
3Howden Integrated annual report 2016
Financial and non-fi nancial highlights
2016 2015 % change
Economic
Revenue R’000 1 604 535 1 483 276 8.2
Earnings per share cents 332.31 327.94 1.3
Earnings retained over reporting period R’000 218 421 215 553 1.3
Total taxes paid including VAT, income tax, rates etc R’000 71 974 81 536 (11.7)
B-BBEE status dti scorecard Level 4 Level 3
B-BBEE status Value-added factor Yes Yes
Social
Total employees number 538 522 3.1
Turnover by employee R’000 2 982 2 842 4.9
Total training spend R’000 3 914 6 897 (43.3)
Average training hours per employee hours 82 75 9.3
Apprentices to date number 338 310 9.0
Total hours worked (Booysens and Port Elizabeth) 1 137 419 1 210 368 (6.0)
Total hours worked (all sites including on customer sites) number 3 696 363 3 012 908 22.7
Employee opinion survey participation number 396 – –
Employees tested for chronic illnesses number 196 176 11.4
Employees tested for medical fi tness number 360 381 (5.5)
SED/CSI spend rand 2 006 420 1 502 819 33.5
Disabling incidents frequency rate (DIFR) ratio 0.34 0.33 3.0
Lost-time injuries (LTI) number 6 5 20.0
Number of fatalities number 1 – –
Fatal injury frequency rate ratio 0.34 – –
Monetary value of signifi cant fi nes paid/imposed due to non-compliance with the law R’000 – – –
Monetary value of fi nes repeatedly paid/imposed due to non-compliance with the law R’000 – – –
Environment (Booysens site)
Diesel/fuel consumed per man hour litres 0.01 0.008 25.0
Total portable and bulk gas consumed per man hour kg 0.087 0.086 1.2
Water consumed litres 8 880 10 591 (16.2)
Electricity consumption kilowatt hour 1 823 017 1 855 909 (1.8)
Year ended 31 December
Performance indicators
Earnings per share
332.31 cents
Cash and cash equivalents
R909.3 million
Revenue
R1 604.5 million
Increased by 1.3% from327.94 cents in 2015
Increased by 24.5% fromR730.2 million in 2015
Increased by 8.2% from R1 483.3 million in 2015
4 Howden Integrated annual report 2016
Our sales into key industries (%)
Business trends
201659%
2%3%4%
10%
2%
20%
Transport
Petrochemical
HVAC
Steel/cement
Industrial
Mining
Power
2015
Transport
Petrochemical
HVAC
Steel/cement
Industrial
Mining
Power
54%
3%3%
7%
14%
2%
17%
201460%
3%3%2%
15%
1%
16%
Transport
Petrochemical
HVAC
Steel/cement
Industrial
Mining
Power
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
Revenue(R’000)
2012 2013 2014 2015 2016
1 31
7 20
0
1 68
2 83
2
1 58
8 02
2
1 48
3 27
6
1 60
4 53
5
0
100
200
300
400
500
Headline earning per
share (cents)
2012 2013 2014 2015 2016
244.
05
474.
67
410.
22
329.
62
332.
36
0
100 000
200 000
300 000
400 000
500 000
Profit before tax(R’000)
2012 2013 2014 2015 2016
229
369
461
808
350
785
302
480
303
105
Our customers’ appetite across all industries for major original equipment manufacturing capital investment remains subdued due to current economic climate and funding shortages.
Africa and world mining markets remain subdued.
5Howden Integrated annual report 2016
Snapshot of Howden
Is to be Africa’s leading application engineer,
providing lifetime solutions in air and gas-handling.
Howden business system
Our vision
Howden Africa is a market-driven, customer-orientated company. Its main business
activities are the design, manufacture and marketing of specialised air and gas-handling
solutions for a wide range of industries. The Group’s major industries supplied include
power generation, petrochemical, mining, iron and steel, cement and water treatment.
Howden Africa is also a distributor of ESAB welding and cutting equipment and
consumables (reported under our new Fabrication Technology division).
Howden Africa is committed to environmental awareness. Accordingly, all product
designs and manufacturing are scrutinised for environmental friendliness. Design and
drawing activities are computerised and manufacturing is concentrated on producing key
components. Manufacturing facilities are located in Booysens (Johannesburg) and
Struandale (Port Elizabeth).
■ Quality
■ Delivery
■ Cost
■ Growth
Vo
ice
of customer
People
Pla
n
Process
CONTINUOUS
IMPROVEMENTWORLD-CLASS
PERFORMANCE
6 Howden Integrated annual report 2016
Group structure
A list of Howden Africa Holdings Limited’s subsidiaries and its interests therein is given on page 113 of this report.
Howden Group South Africa and James Howden & Godfrey Overseas Limited are ultimately held by Colfax Corporation.
HOWDEN AFRICAHOLDINGS LIMITED
47.90%
Howden GroupSouth Africa
Limited
44.61%
Institutional and private investors
100%
FANS AND HEAT EXCHANGERS
100%
ENVIRONMENTAL CONTROL
100%
FABRICATION TECHNOLOGY
7.49%
James Howden & Godfrey Overseas
Limited
7Howden Integrated annual report 2016
Fans and Heat ExchangersRevolving Around YouTM
83.44%Revenue
Fabrication TechnologyRevolving Around YouTM
5.43%Revenue
Environmental ControlRevolving Around YouTM
11.13%Revenue
Group at a glance
8 Howden Integrated annual report 2016
Fans and Heat Exchangers division
The division’s principal products are centrifugal and
axial fans, air and gas rotary heat exchangers and
cleaning equipment. The products as supplied by the
division are integral parts of the coal-fi red boiler and
emission control systems used by the power industry.
Signifi cant sales are also made to the mining,
petrochemical, iron and steel and other process
industries.
Environmental Control division
The division supplies equipment and systems for use
in processes which reduce atmospheric pollution
generated by industrial plants, and in support of
environmental legislation introduced in recent years.
Fabrication Technology division
The division distributes equipment and fi ller metals
for virtually every welding and cutting application. The
products and services are utilised in many industries
including energy, machinery, power generation,
fabrication, construction, ship building, transportation
and many others.
Products Boiler fans Heat exchangers Site services HVAC fans Standard and industrial
fans and blowers Main surface fans Auxiliary mine fans
Centrifugal blowers Dust extraction on coal
mines Mine cooling and heating Ventilation on demand Engineering solutions Application engineering
Products Gas cleaning plant Combustion engineering Furnaces Incinerators Process compressors Refrigeration equipment Water chillers Positive displacement
blowers
Waste water treatment Control and
instrumentation Mine cooling and heating Engineering solutions Application engineering
Products Air gouging and
exothermic cutting Gas equipment Welding consumables Welding equipment
Plasma cutting and
torches Welding automation and
robotics Cutting automation
9Howden Integrated annual report 2016
Five-year Group fi nancial summary
Summarised consolidated statements of comprehensive income
2016R’000
2015R’000
2014R’000
2013R’000
2012R’000
Revenue 1 604 535 1 483 276 1 588 022 1 682 832 1 317 200
Operating profi t 247 611 261 997 326 847 448 885 220 386
Net fi nance income 55 494 40 483 23 938 12 923 8 983
Profi t before income tax 303 105 302 480 350 785 461 808 229 369
Income tax expense (84 684) (86 927) (81 596) (149 811) (68 957)
Profi t for the year 218 421 215 553 269 189 311 997 160 412
Other comprehensive (loss)/income for the year, net of tax (2 716) 1 910 (7 520) (13 736) (3 018)
Total comprehensive income for the year attributable to equity holders of the Company 215 705 217 463 261 669 298 261 157 394
Earnings per share (cents) 332.31 327.94 409.54 474.67 244.05
Dividends per share:
– dividend paid (cents) – – – 30.00 29.00
– special dividend paid (cents) – – – – 146.00
– interim dividend paid (cents) – – – 30.00 25.00
Number of shares (’000)
In issue 65 729 65 729 65 729 65 729 65 729
Weighted average 65 729 65 729 65 729 65 729 65 729
Summarised consolidated statements of fi nancial position
2016R’000
2015R’000
2014R’000
2013R’000
2012R’000
ASSETSNon-current assets 185 931 196 763 201 818 207 432 214 055
Current assets 1 675 109 1 387 607 1 227 645 1 098 945 907 381
Inventories 332 166 235 163 225 405 330 335 369 209
Receivables and prepayments 433 602 422 254 374 552 422 566 389 797
Cash and cash equivalents 909 341 730 190 627 688 346 044 148 375
Total assets 1 861 040 1 584 370 1 429 463 1 306 377 1 121 436
EQUITYCapital and reserves
Shareholders’ funds 1 254 912 1 039 207 821 744 560 075 301 252
LIABILITIESNon-current liabilities 102 066 108 933 118 409 110 245 110 677
Current liabilities 504 062 436 230 489 310 636 057 709 507
Total equity and liabilities 1 861 040 1 584 370 1 429 463 1 306 377 1 121 436
for the year ended 31 December
10 Howden Integrated annual report 2016
Value added statement
2016R’000
2015R’000
Revenue 1 604 535 1 483 276
Investment income 55 566 40 510
Less: Paid to suppliers for materials and services 859 742 (804 665)
Total value added 800 359 719 121
Distributed as follows:
To employees as salaries, wages and other benefi ts 483 812 398 783
To lender’s fi nance costs 72 27
To depreciation and amortisation 16 086 15 921
To government as tax expense 84 684 86 927
Total value added distributed 584 654 501 658
Portion of value added reinvested to sustain and expand the business 215 705 217 463
Total value added distributed and reinvested 800 359 719 121
for the year ended 31 December
Total value added
R800 million
27%Reinvested in Group
11%Government
2%Depreciation and amortisation
0%Providers of capital
60%Employees
11Howden Integrated annual report 2016
Our stakeholders
The management and board acknowledge their responsibilities to their
stakeholders and are committed to communicating in a transparent and
effective manner, while engaging with each stakeholder group in line with
their needs.
Stakeholder engagement is entrenched in the Group and in line with the King III code, local and International Integrated Reporting Council (IIRC)
discussion papers as well as the Global Reporting Initiative (GRI) G4 guidelines.
During the process of identifying the Group’s material issues, the following key stakeholders were identifi ed:
Directors understand that: It is crucial for decision-makers to understand who is affected by their decisions and who has the power to infl uence the outcome
Stakeholder engagement is about careful selection and engagement from the outset so that the views, needs and ideas of stakeholders
infl uence the strategic direction of the Group
OurStakeholders
EmployeesCustomers
Suppliers
Shareholders and investors
Communities
12 Howden Integrated annual report 2016
Stakeholder engagement
Stakeholder Engagement in 2016 Why this engagement is important to us
Employees Employee survey
Surveys on communication, satisfaction and clarity on
aspects such as roles, responsibilities and remuneration
are conducted periodically. A survey was undertaken in
2016 and the Group is working towards developing
action plans to deal with concerns/issues identifi ed by
the survey outcome.
Ad hoc meetings and communication memorandums
Exit interviews
Industrial relations meetings
Howden Hub (internal newsletter produced quarterly
by the Company)
Howden worldnews (internal newsletter produced
quarterly by Howden Global)
“Connect” company intranet
Annual material issues engagement
The Sustainability Committee endeavours to engage
with employees annually on matters of material concern.
Management sent out notices to actively solicit written
and verbal feedback, prompting typical aspects that
might apply to our operations.
Good employee communication is essential to business
success. At the most basic level, employees who do not
know what is expected of them seldom perform to their
potential.
Customers Customer service surveys
Howden utilises a system called Net Promoter System
(NPS) to measure and improve customer engagement
across the Group. NPS is based on a process of short
(two-question) customer surveys and follow-up activities
to act upon the feedback provided by customers. NPS
supports the delivery of our Howden brand, allowing us
to measure how well we are performing in meeting the
promises that we make to customers.
Customer relationship marketing
This is done daily at all customer-facing points. It is one
of our core values that the customer speaks and we
listen.
Annual material issues engagement
The Sustainability Committee endeavours to engage its
customers annually on matters of material concern.
Distributors’ day
The Fabrication Technology division hosted its lead
distributors for a network session. The purpose was to
explain the three Colfax platforms ESAB; Howden and
Colfax Fluid Handling. Also demonstrated was how
Fabrication Technology division can leverage the
entrenched relationships that Howden companies enjoy
with their customers. Since our distributors are an
extension of our sales force, it was important to share
with them our strategy for South Africa and our brand
values. The distributors’ day also afforded us an
opportunity to discuss mutual issues affecting the
distributors.
As a supplier of high-value engineered solutions, it is
imperative that Howden develops a deep understanding
of the individual requirements of customers. Close
relationships with key decision-makers in customers’
management structures is critical to this approach, and
Howden actively pursues these links in the interests of
excellent customer service. Our consistent reviews of
customer requirements and customer feedback are
critical aspects of our business and customer
engagement plan.
13Howden Integrated annual report 2016
Stakeholder engagement continued
Stakeholder Engagement in 2016 Why this engagement is important to us
Suppliers Ad hoc supplier meetings
Meeting on specifi c projects/orders and end user
requirements are held when required.
Annual material issues engagement
The Sustainability Committee endeavours to engage
with suppliers annually to discuss matters of material
concern.
Supplier development
The business actively engages with smaller enterprises
comprising both current and prospective suppliers with
the aim to assist those entities to become sustainable
businesses. Assistance provided is both in the form of
operational and fi nancial assistance.
Suppliers are critical to the success of our business.
Careful selection and monitoring of our suppliers has
ensured our customers receive sustainable value. By
communicating with suppliers and service providers,
we set expectations about how we do business, which
infl uences their practices.
Investors Shareholder meetings
All shareholders have the opportunity to ask questions
at the Company’s annual general meeting, with the
chairmen of all board committees available to answer
questions.
SENS announcements
Shareholders are kept abreast of developments such as
director resignations and appointments, dividend
declarations and trading statements, etc.
Website
Shareholders have direct access to Company
information via the investor relations section of its
website.
Ad hoc investor meetings
The Chief Executive Offi cer and Chief Financial Offi cer
meet with investors and prospective investors to discuss
the Company and published fi nancial and non-fi nancial
reports.
Annual material issues engagement
The Sustainability Committee endeavours to engage the
top fi ve shareholders annually to discuss matters of
material concern to them as shareholders.
It is important to promote effective communications with
shareholders to ensure all relevant information is
disseminated, and maintain their confi dence in our
business.
Communities Corporate social investment (CSI)
Howden focuses much of its CSI effort on education.
This provides a platform to develop the potential of
South African youth. Through the Company CSI
Committee, Howden staff are able to become directly
involved in uplifting communities.
Business and Tourism Forum (South of Johannesburg
(SOJO))
We are founding members of SOJO, which is the
business forum of South Johannesburg and surrounding
areas. We engage with the forum formally each year, but
also actively participate in environmental enhancement
projects initiated by SOJO.
To empower individuals and groups by providing them
with the skills and knowledge they need to grow.
For a detailed discussion on the Company’s selected material issues in the 2016 fi nancial year, please refer to the material issues report on
pages 32 to 51.
14 Howden Integrated annual report 2016
2016 Annual GRI G4 material issues stakeholder engagement outcome matrixThe table below refl ects the number of stakeholders selecting a particular category of concern/interest to them:
Categories of aspects
Economic Environmental Social
Labour
practices Human rights Society
Product
responsibility
Economic performance
75 Materials 21 Employment 40 Investment 43 Community 23 Customer health and safety
54
Market presence 36 Energy 27 Relations 30 No discrimination 77 Corruption 70 Product labelling 26
Indirect econ. impacts
17 Water 29 Health and safety 38 Freedom of association
29 Anti-competitive behaviour
23 Market communication
46
Procurement practices
34 Biodiversity 6 Training 73 Child labour 9 Public policy 16 Compliance 28
Emissions 20 Equal opportunity 39 Forced labour 10 Compliance 22
Effl uents and Waste
23 Equal remuneration for women and men
28
Products impact 37 Supplier labour assessments
14
Compliance 22 Labour practice grievance mechanisms
27
Transport 32
Overall market presence
27
Supplier environmental assessment
17
Environmental grievance mechanisms
28
15Howden Integrated annual report 2016
Our strategy
Howden Africa’s business strategy is to: Expand our revenue growth into the rest of Africa, particularly in the mining industry.
Identify further opportunities for growth by offering our customers additional complementary products and solutions.
Maintain our competitive advantage and market share for the supply of air and gas-handling equipment, service and maintenance in
South Africa.
Grow market share in our Fabrication Technology division.
Apply our experience in supply of products for emission control and water treatment plants and continue to invest in our range of
technologies to respond positively to requests for solutions to customer needs.
Be recognised as a top employer in South Africa.
Proactively address corporate social investment.
Customers talk, we listen Completed 2016 Target for 2017 Target for 2018
One of our fi ve core values is
“customers talk, we listen”.
We ensure customer
satisfaction through service
excellence, innovative
technical solutions that meet
our customers’ operational
requirements, short lead
times, quick and effective
resolution of customer
complaints, world-class
aftermarket support and
customer empathy.
Since continuous
improvement is our way of
life at Howden, we conduct
periodic customer
satisfaction surveys to
assess our performance
against customer
expectations. We believe we
can continuously achieve
improved results through a
more focused approach to
customer management.
Implemented effective use
of daily visual management
within several key customer-
facing areas of the business
to improve customer service
levels and improve focus on
value selling
Monthly on-time delivery
exceeded 95% at some
points in the year but not yet
consistent month on month
Introduced a more effective
pre-contract support team
approach to engineered
projects
Continue Voice of Customer
(VoC) engagements to
improve our customer
service
Drive improvement in
customer account
management via the
in-house CRM system
Continue to focus on key
accounts in targeted
countries in rest of Africa
Focus on practical use of
our continuous
improvement tools. Extend
use of visual management
within the business
Further improve customer
on-time deliveries to achieve
consistent levels of at least
95%
VoC is driving our behaviour
in all aspects of the
customer experience
Achieve 97% of potential
customers selecting
Howden as their supplier of
choice
Exceed 97% on-time
deliveries
16 Howden Integrated annual report 2016
People are our most
valuable assetCompleted 2016 Target for 2017 Target for 2018
Our people are our most
valuable assets. We pride
ourselves in being a
progressive and responsible
employer by constantly
seeking best practice
methods and knowledge in
attracting, developing and
retaining staff. What
contributes to the
sustainability of our business
is the stability of our work
environment and our track
record of retaining
experienced skills.
We realise that for us to
expand strategically as an
organisation, we have to
attract new talent and
provide constant skills
development and other
training to build capacity.
The transfer of knowledge,
currently held by ageing
technical resources, through
succession planning and
mentorship programmes, is
vital and is being
implemented.
By using employee
engagement surveys, we
continue to build on this
information to provide
opportunities to improve our
people management
strengths.
Initiated a formal health and
safety programme utilising
JSA (Job Safety
Assessment)
Continued: All salaried
associates participated in a
Howden Africa total reward
system
Businesses reward systems
reviewed against the latest
industry trends
Promoted and sourced
majority of managerial
positions internally
All identifi ed talent pool
associates have a personal
development plan
Re-awarded the employer of
choice award for the third
year running
Launched a Company-wide
employee engagement
survey and captured the
feedback
Implemented a leadership
programme for middle
management
Reduce job safety risk
assessment levels by at
least 75% from 2016 levels
Review business’s reward
systems yearly and update
in line with the latest
industry trends
Increase the key talent pool
to embrace 30% of
associates
Further develop our
succession planning
programme
Continue to improve internal
teamwork through
collaboration across
business streams and via
active participation in Kaizen
events
Address outputs from the
2106 employee
engagement survey with
objective of improving our
associates’ working
experience and environment
Retain a high rating as a top
employer of choice
Implement a formal
coaching programme
Maintain the strategy to be
in the top 20% of the best
employers to work for in our
industry
Invest in our associates to
drive for 35% of the team to
be in our key talent and
developing talent pools
A minimum of 80% of all
junior and senior
management vacancies to
be fi lled internally
17Howden Integrated annual report 2016
Our strategy continued
People are our most
valuable assetCompleted 2016 Target for 2017 Target for 2018
Our growth will continue to
be spurred by leveraging our
key competitive advantages:
Market leadership based on
technology, reputation and
brand strength
Strong South African
engineering and
manufacturing presence
Market-focused business
units
Excellent relationships with
customers in the power,
energy and mining
industries
Howden’s large installed
base should result in strong
growth in aftermarket
products
Flexible business model,
with manufacturing focused
on critical components
Strong environmental
credentials
Increased revenue by 8.2%
Added Fabrication
Technology (ESAB) products
to our portfolio
Increased our activity in the
rest of Africa by doubling
customer visits compared to
prior year
Maintained a strong
emphasis on reaching
outside of South Africa (rest
of Africa order intake 20%
higher than prior year)
Increase our business in the
rest of Africa by a further
20% through greater
customer engagement
Strengthen links with other
Howden product
businesses to increase
Howden Africa offerings
Increase revenue from
complementary equipment
(bolt-on) to our core
products by 10%
Expand service and spares
supplied to the mining and
industrial markets by 10%
Increase revenue from the
rest of Africa to increase
market share by 40%
Increase revenue from
complementary equipment
(bolt-on) to our core
products by 20%
Make personal customer
contact with 90% of
medium to large industrial
plants
Increase revenue for service
and spares in the mining
and industrial markets
by 20%
18 Howden Integrated annual report 2016
Our offering and our
environmentCompleted 2016 Target for 2017 Target for 2018
Applying our products
remains at the centre of our
development and is
supported by a strong team
of design and application
engineers. Howden Africa
strives to have the capacity
and capabilities to meet any
air and gas-handling
application requirements for
any chosen process in any
industry. We have introduced
systems and processes to
achieve this aim. Customer
education on the benefi ts of
our solutions is vital,
particularly when faced with
the options of cheaper
imports, which are less
environmentally friendly.
Introduced the ESAB brand
to major Howden customers
and suppliers
Commissioned a major
contract for a water
treatment plant
Continued leveraging
Howden’s global footprint to
reach global companies
investing in global mining
ventures where Howden
Africa can provide product
and services
Continue to expand market
awareness of our products,
skills and competitiveness
to South African and rest of
Africa-based customers of
large industrial, mining and
power generation plants
Invest resources in
upgrading external websites
Expand market awareness
of our products, skills and
competitiveness throughout
Africa’s large industrial,
mining and power
generation customers
Actively participate in major
environmental projects
ahead of the 2020 National
Environmental Management:
Air Quality Act
19Howden Integrated annual report 2016
ESAB is the world leader in advanced cutting and welding solutions, consumables and accessories.
Since ESAB Africa became a division of Donkin Fans, part of Howden Africa Holdings Limited, the South African business unit has had access to a countrywide logistics and support network spanning Johannesburg, Cape Town, Durban and Port Elizabeth.
The operation includes marketing and sales, warehousing, service and repairs for ESAB cutting systems and equipment, welding equipment, consumables and automation, and personal protective equipment.
ESAB Africa also offers a process development service through which welding and cutting specialists audit complete metal fabrication processes. Based on these audits they make recommendations to customers on process solutions that improve fabrication productivity, contain costs and boost quality.
Within the umbrella of process development and technical and logistical support is the outstanding ESAB product range that is sourced from multiple manufacturing operations worldwide, and sold on fi ve continents.
The mix of world-class products, well-supported through an established logistics network and offered as part of a process solution, enables ESAB Africa to adopt a sophisticated integrated approach to welding and cutting. This is advantageous to engineering companies which support projects in mining, manufacturing and infrastructure development where world-class fabrication techniques and process are crucial to operational effi ciency and profi tability.
Through the new network ESAB Africa intends to make its complete offering available to customers in southern as well as east and west Africa.
ESAB South Africa
20 Howden Integrated annual report 2016
21Howden Integrated annual report 2016
Chairman’s statement
Non-executive ChairmanIan Brander
In a challenging environment Howden Africa achieved a solid set of results
executivNon-executivIan Brander
In a challenHowden Aset of resu
22 Howden Integrated annual report 2016
I am pleased to report that Howden Africa generated a solid set of results in 2016 with both bookings and revenue growth in challenging market conditions.
During 2016 the Company faced challenges from weak demand in a number of key markets. World-wide mineral price levels inhibited capital expenditure across industries within South Africa.
New build opportunities across mining, power, industrial and environmental control remain subdued.
The management has continued with its strategy of increasing export sales and focusing on additional aftermarket opportunities.
The newly formed fabrication business has been established and integrated into the business during 2016.
Overall the 2016 performance included a solid operating profi t performance (R247.6 million) and the continued focus on working capital ensured that the Company ends the year with a strong balance sheet and is well positioned to take up any opportunities that present themselves in the future.
The Company achieved B-BBEE Level 4, now measured against the amended codes, with plans to improve through a structured transformation plan.
Howden Africa has once again received accreditation as a top employer of choice in the engineering industry.
General reviewTotal revenue in 2016 increased 8.2% to R1 604. 5 million compared to R1 483.3 million in 2015, however operating profi t decreased 5.5% to R247.6 million (2015: R262.0 million).
The Fans and Heat Exchangers division performed well in the 12 months to December 2016. Revenue and operating profi t increased compared to prior year. Revenue was up by 19.8% to R1 338.8 million and operating profi t up by 32.9% to R283.9 million compared to the corresponding period in 2015. Operating profi t margins in this division increased from 19.1% to 21.2% driven by product mix.
Aftermarket, both domestic and export, continues to remain a strategic focus and the Group is well positioned to take advantage of further opportunities on the African continent.
The CEO’s review covers operational aspects in more detail.
Black economic empowermentThe Group continues to focus on its broad-based black economic empowerment (B-BBEE) status, covering ownership, management, skills development, enterprise and supplier development and socio-economic development. The Group has been once again independently verifi ed as a value-adding contributor, audited as Level 4 on the amended codes. The Group is committed to further continuous B-BBEE transformation.
SustainabilitySustainability is an integral part of our business at the economic, social and
The Fans and Heat Exchangers division revenue up
19.8%on prior year
Independently verifi ed as a
B-BBEE value-adding
Level 4 contributor under
the amended code
Howden Africa was
recertifi ed as a top
employer by the Top
Employer Institute
environmental level and spans our employees, suppliers, communities, business partners, media and government. In support of this, the Group requires all operating sites to implement certifi ed environment and health and safety management systems, with signifi cant progress made in recent years.
As recommended in King III, sustainability matters are integrated into various sections of the integrated annual report.
Risk managementIt is the responsibility of the Audit and Risk Committee to assist the board in the governance of risk and to design, implement and monitor a risk management plan. The committee has focused on raising the main risk exposures facing the Group and has implemented systems to ensure continuous risk monitoring and, where possible, exploitation of opportunities. Board of directorsW Thomson joined the board on 1 February 2016 initially as Chief Operating Offi cer before taking over the role of CEO on 1 June 2016. T Bärwald stood down from the CEO role and moved to another senior role within the Howden Global organisation.
K Johnson resigned from his role as CFO on 8 December 2016, with M Vigouroux promoted to the role. As with T Bärwald, K Johnson remains within the wider business and has supported the smooth transition of our new CFO into her role.
In line with best governance practices, an evaluation of the board and subcommittees was completed in 2016. This evaluation and recommendations for improvements have been reviewed and considered by the board.
DividendThe directors have resolved not to declare a dividend.
Management and staffI conclude by thanking management and all employees for their major efforts throughout the year and thanks also to the outgoing and incoming CEOs and CFOs who worked well to ensure a smooth transition of roles. Thanks also extends to the board and committee members, for their guidance, support and commitment throughout the year.
Ian BranderNon-executive Chairman24 March 2017
the e
GenTota
23Howden Integrated annual report 2016
Chief Executive Offi cer’s review
Revenue of
R1 604.5 million
for 2016 is 8.2% up on prior year
Chief Executive Offi cerWilliam Thomson
Howden Africa is part of the Howden Global
engineering group, and has had a presence in
South Africa for over 60 years. The Company
has been listed on the JSE since 1996.
ef Exem Tho
million
er
owden Global
ad a presence in
The Company
ce 1996.
24 Howden Integrated annual report 2016
Achievements Recertifi cation of the International
Environmental Standard ISO 14001, Occupational Health and Safety Standard OHSAS 18001 and Quality Standard ISO 9001
Certifi ed as a Level 4 contributor under the amended B-BBEE Codes of Good Practice (2013)
Certifi ed as a Top Employer in South Africa
ESAB welding and consumable distribution business incorporated into the portfolio
This has been a challenging year for Howden Africa with demand from domestic customers refl ecting the low demand for minerals and the generally diffi cult economic conditions. The decisions on major environmental projects have been delayed due to constraints on customer expenditure and no immediate demand for environmental upgrades on existing plant. However, the order intake in our Fans and Heat Exchangers division has mitigated the drop in business within the Environmental Control division.
The Group has focused on; continuing to drive our strategic objectives ensuring our resources are directed to
profi table areas of business while maintaining presence on longer-term opportunities
Expansion into the rest of Africa continued in 2016 with order intake in excess of R100 million and revenue increasing to R82.7 million from R69.4 million in 2015. I am also pleased to report that the Fabrication Technology (ESAB) business has been fully established and positioned to grow in the coming years. This presents a new revenue stream and growth opportunities for a business with relatively low market share in this region.
Focus Drive the rest of Africa strategy Continue to improve and enhance our
customer service across the business Drive continuous improvement
opportunities using the CBS (Colfax Business System) tools
Improve the skills of our project management on large capital projects
Respond positively to the outputs of our recent employee engagement survey with retention of key skills a major objective
Financial overviewRevenue of R1 604.5 million for 2016 is 8.2% up on the equivalent period in 2015 of R1 483.3 million.
Operating profi t of R247.6 million is a 5.5% decline from the R262.0 million reported in 2015.
Order intake during 2016 increased to R1 572.7 million, an increase of 10.9% compared to the corresponding period (2015: R1 417.7 million). The closing order book for 2016 has remained strong at R770.4 million (2015: R800.0 million).
Please see the Chief Financial Offi cer’s review on pages 28 to 31 for more details.
Operational performance and outlookFans and Heat Exchangers division The division has three business units (Howden Power, Howden Fan Equipment and Howden Donkin) which together meet the demands of a large number of customers and a broad spectrum of industries in South Africa and, increasingly, the rest of Africa.
Howden Power Howden Power specialises in the design,
manufacture, supply, installation and maintenance of boiler fans and rotary regenerative air pre-heaters (air heaters) for the power generation, petrochemical, sugar and paper industries
Howden Power provides a quality, proactive and competitive service to its customers while continuously enhancing its internal processes to drive effi ciency improvements
The Company strategy focuses on expanding the service and maintenance scope of supply with key customers in the power generation and petrochemical markets in Africa
Howden Fan Equipment Howden Fan Equipment (which
incorporates the Safanco and Engart brands) designs, manufactures and maintains fans for mining and industrial clients. The company provides all products, systems and support needed for effi cient fan operation
Howden Fan Equipment is leading the drive into the rest of Africa, while maintaining a leading market share in mine ventilation within South Africa
Howden Donkin Howden Donkin specialises in the design,
manufacture and supply of standard and pre-engineered fans, blowers and accessories to a large number of industries and applications
The company strategy includes alignment with Howden Fan Equipment on aftermarket and rest of Africa initiatives
Environmental Control divisionThe Environmental Control division, Howden Projects, covers a wide range of products and services required on gas cleaning and water treatment applications.
Howden Projects develops large-value turnkey solutions for industrial fl ue gas conditioning (including fl ue gas
desulphurisation), melt-shop dedusting, medical and industrial waste incineration, industrial furnaces, underground mine cooling, industrial cooling and refrigeration plants, waste water treatment and electrical and electronic control systems. Howden Projects support customers within the heavy manufacturing industries to meet their emissions obligations by offering cost effective solutions.
We are confi dent that the large-scale environmental control legislation and general environmental pressure to meet 2020 emissions limits will enhance opportunities for Howden Projects, but short-term market conditions remain challenging
The business continues to proactively expand its product offering and is working on opportunities throughout Africa, leveraging its signifi cant experience and customer references
The business’s strategy continues to maintain a core set of application engineering skills and a fl exible operating model that can expand and retract quickly depending on market conditions
Equipment key investments No major investments were made during the review period. The Group remains liquid and able to capitalise on strategic opportunities.
Principal risksThe main risks facing the business are set out on page 32. To manage these and other risks, Howden Africa operates a Group risk framework. Within the framework, risks are assessed and rated for likelihood and consequence, and mitigated or managed appropriately.
Risks rated as high or major are reviewed at quarterly meetings of the Exco Risk Committee, and then presented to the Audit and Risk Committee, and to the board, as necessary.
Fabrication
Technology (ESAB) fully
integrated into the business
25Howden Integrated annual report 2016
Chief Executive Offi cer’s review continued
Quest ions and answers
Q Has your manufacturing and service footprint changed?
There has been no change to our manufacturing or service
footprint during 2016. We continue to operate two
manufacturing facilities and several service facilities in
South Africa.
Our focus is to use the existing facilities to ensure we can meet
our customers’ changing demands around the clock. We
continue to generate employment opportunities through the
success we have had in upskilling resources within our training
centre and training programmes.
In terms of future “footprint” requirements, we believe we have
suffi cient facilities to cover substantial future business growth
and expect no signifi cant changes in the near future.
The new Fabrication Technology business stream utilises
existing Howden facilities and is a distribution business with
no demand for local manufacture.
Q Describe the Fabrication Technology business and its
strategic signifi cance to the business.
Our Fabrication Technology business is reference to our leading
role in the ESAB business in this region. ESAB is a world leader
in the production of welding and cutting equipment and
consumables. The Howden and ESAB businesses have been
together under common ownership since the mid 1990s.
However the businesses operate as two distinct entities across
the world. In South Africa, ESAB initially set up a relatively small
business, trading directly into Africa, before it transitioned to a
third-party distributor arrangement in an attempt to address the
demands of B-BBEE. However, recognising the strong market
presence of Howden, the signifi cance of B-BBEE rating and a
potential synergy of customers and suppliers, it was decided to
integrate the ESAB distribution business into Howden Africa and
benefi t from shared resources and synergies. Howden procures
machines and consumables from ESAB and operates as the
distribution outlet for the ESAB products.
The ESAB brand has a relatively small market share within
Africa, giving good scope for growth.
Q What key attributes do you believe have contributed to maintaining the performance of high operating
profi ts despite the persistent fl at market conditions?
We invest in our people to enable broadening of skills and
application knowledge thus enabling resources to be directed to
new opportunities in the market.
Over the past years it has been important to retain fl exibility and to
adapt our products and services to changing customer
requirements. We listen to our customers and use our engineering
expertise to tailor-make solutions that fi t their requirements.
We have been active in South Africa for many years. Our products
are often supplied in critical applications on large mines, mineral
process plants and power stations, where failure is not an option.
Hence we are often a repeat supplier of equipment to customers
who recognise our products, reputation and reliability.
The breadth and depth of highly skilled and motivated employees,
good operation systems, superb technology and a deep
understanding of customer plant operations support our strong
brand name in the markets we choose to operate in.
In addition, our quality control standards are very high – we have
been ISO 9001 accredited since the system was introduced. We are
also SABS (South African Bureau of Standards), ISO 14001 and
OHSAS 18001 accredited, and we continue to train our associates
and customers.
Q Why has there been a drop in performance within the Environmental Control division?
A combination of factors. Recognising the longer-term opportunities,
the business redirected resources to other parts of the business but
has retained a skilled core team within the division. There was a
signifi cant drop in order intake during 2016 and in parallel a few of
the larger value projects which were supplied in prior years were
commissioned on site. Against the background of tougher general
economic conditions, the customer relationships during close out of
major projects has been equally tough with less leverage to negotiate
additional scope of work. Nevertheless we remain confi dent on the
longer-term future of the division. In the short term we are absorbing
the lessons learned on recent projects and using the lessons to
upskill our people for future challenges.
Q How important is innovation to your company?
Each project Howden Africa undertakes is unique to the customer
for which it is being developed. This leads to an extremely customer-
oriented approach. We continuously face new challenges, such as
how to eradicate more dust with our dedusting systems, or how we
can supply faster and more competitively, or make our equipment
more effi cient or more reliable. The pace of innovation is increasing
signifi cantly year by year. Continuous improvement and adapting is
our focus and one of our fi ve core values, which all our employees
live by.
26 Howden Integrated annual report 2016
Q What are the current trends and challenges affecting the Company, and how are you responding to them?
We continue to invest extensively in the next generation of our
employees, ensuring we have the right skills in place for further
progress, while meeting our responsibilities as a BEE (black
economic empowerment) company. We also recognise the
importance of proactively managing corporate social investment.
Acquisitions/disposalsThere were no acquisitions or disposals during the review period,
but the Group remains ready to consider appropriate acquisitions
that complement or broaden the scope of the existing Howden
Africa business. Management sets out acquisition criteria and
reviews the pipeline on a regular basis.
AppreciationA note of thanks to Thomas Bärwald, our former CEO, in
acknowledgement of his support in helping my smooth transition
into this role. On behalf of the Company, I also would like to thank
all our loyal customers for their continued support this past year,
and to all our suppliers and service providers: Thank you for being
an important part of another successful year for Howden Africa.
I also thank my colleagues in management and staff for your
support and commitment during a challenging year, and for
maintaining a solid set of results despite the trading challenges we
were faced with.
Finally, I thank all members of the board for their valuable support
during the year. This extends to the members and chairs of the
various board committees, who provide wisdom, good governance
and oversight.
William Thomson
Chief Executive Offi cer
24 March 2017
27Howden Integrated annual report 2016
Chief Financial Offi cer’s review
Increase in revenue by
8.2%to R1 604.5 million
Cash and cash equivalents increased
24.5%to R909.3 million
Aftermarket orders received increased by
14.6%to R1 133.0 million
Chief Financial Offi cerMarinella Vigouroux
I
t
Ci
t
Ai
t
Chief Financial Offi cerMarinella Vigouroux
28 Howden Integrated annual report 2016
IntroductionThe review of the Group’s fi nancial performance for the year ended
31 December 2016 is focused on the order book and key line items
of the statements of comprehensive income and fi nancial position that
management considers to have a material impact on performance.
The following review should be read in conjunction with these
statements as contained on pages 86 to 135
Order book analysis
2016Rm
2015Rm
% change
Orders received 1 572.7 1 417.7 10.9
New build 439.7 429.4 2.4
Aftermarket 1 133.0 988.3 14.6
Order book 770.4 800.0 (3.7)
New build 321.9 372.0 (13.5)
Aftermarket 448.5 428.0 4.8
OrdersOrders received during 2016 have increased to R1 572.7 million an
increase of 10.9% compared to the corresponding period in 2015
(2015: R1 417.7 million). The closing order book for 2016 remains
strong at R770.4 million (2015: R800 million). The aftermarket order
book has increased by 4.8% resulting from additional export and
retrofi t orders received in the 2016 period. New build order book has
reduced 13.5% as customers are deferring any non-essential and
expansionary capital expenditure.
Environmental Control division order intake was R239.9 million
compared to R311.2 million in 2015. The business received some
larger orders in the latter part of 2016. The division continues to have
a large opportunity list, but due to the economic conditions within
sub-Saharan Africa, the award of orders from customers has been
slow.
Fans and Heat Exchangers division orders received during 2016 have
increased by 11.9% to R1 238.3 million compared to the
corresponding period (2015: R1 106.5 million). The increase has been
driven by aftermarket and retrofi t activity, with new build activity being
subdued as customers continue to defer non-essential expenditure.
The new Fabrication Technology division order intake for 2016 is
R94.4 million with R87 million of this converted into revenue in
the period.
Statement of comprehensive income
2016Rm
2015Rm
% change
Revenue 1 604.5 1 483.3 8.2
Operating profi t (EBIT) 247.6 262.0 (5.5)
Operating profi t margin 15.4% 17.7% (2.3)
Net fi nance income 55.5 40.5 37.0
Tax 84.7 86.9 (2.5)
Profi t for the year 218.4 215.6 1.3
RevenueRevenue of R1 604.5 for 2016 is ahead of the equivalent period in
2015 of R1 483.3 million.
The Fans and Heat Exchangers division recorded revenue growth of
19.8% to R1 338.8 million (2015: R1 117.3 million). This revenue
growth has been driven by an improvement in both aftermarket and
retrofi t revenue. The Environmental Control division saw a decline in
revenue of 51.2% due to economic conditions delaying customers’
decisions on environmental control projects. The new Fabrication
Technology division is a contributing factor to the growth in revenue
with revenue for the period of R87 million.
Operating profi t Operating profi t of R247.6 million is a 5.5% decline from the
R262.0 million reported in 2015.
The Environmental Control division moved from an operating profi t of
R51.4 million in the previous year to an operating loss of R12.7
million, this decline resulted from challenging market conditions
adding pressure to project margins and a once-off project warranty of
R26.4 million.
The Fans and Heat Exchangers division’s operating profi t improved by
32.9% to R283.9 million (2015: R213.6 million) driven by increased
revenue volumes and product mix.
Central operations had an increase in costs to R24.8 million largely
due to the recognition of a gain on curtailment of R19.8 million in the
prior year for the defi ned benefi t scheme.
29Howden Integrated annual report 2016
Chief Financial Offi cer’s review continued
Net fi nance incomeThe net fi nance income of R55.5 million (2015: R40.5 million) was due
to higher cash balances being held by the Group during 2016 when
compared to the prior year.
Income taxIncome tax was provided for at the standard rate of 28%. The full tax
reconciliation is shown in the taxation note of the annual report.
Statement of fi nancial position
2016Rm
2015Rm
%change
Non-current assets 185.9 196.5 (5.4)
Current assets 1 675.1 1 387.6 20.7
Total assets 1 861.0 1 584.4 17.5
Equity 1 254.9 1 039.2 20.8
Non-current liabilities 102.1 108.9 (6.2)
Current liabilities 504.0 436.2 15.6
Total equity and liabilities 1 861.0 1 584.4 17.5
AssetsAssets employed in the Group increased 17.5% from R1 584.4 million
to R1 861.0 million. The major changes during 2016 have been a
further increase in the business’ cash and cash equivalents balance,
which has increased to R909.3 million and an inventory increase to
R332.1 million, relating to work-in-progress on a few large projects
and the inventory required for the new Fabrication Technology
division.
LiabilitiesLiabilities increased to R606.1 million from R545.1 million in the prior
year. The major change during 2016 has been an increase in trade
and other payables to ESAB Middle East Limited relating to the new
Fabrication Technology division.
Cash and capital management
Statement of cash fl ows
2016Rm
2015Rm
Cash fl ow from operating activities
Cash generated from operations 216.2 156.8
Interest paid — —
Income tax paid (72.0) (81.5)
Net cash generated from operating activities 144.2 75.2
Net cash generated from investing activities 34.9 27.3
Net cash used in fi nancing activities — —
Net increase in cash and cash equivalents 179.1 102.5
Cash and cash equivalents at beginning of year 730.2 627.7
Cash and cash equivalents at end of year 909.3 730.2
Howden’s continuing focus on sustainable working capital
management has resulted in a satisfactory cash fl ow performance
in 2016. Cash generated from operations for the year was
R216.2 million and cash and cash equivalents are R909.3 million
(2015: R730.2 million).
Capital expenditure was R10.7 million (2015: R7.2 million). During
2016 the business has focused its capital expenditure on the
maintenance of existing facility and equipment and key capital
expenditure for the establishment of the new Fabrication Technology
division. There were no major capital expenditure items required
during the year.
30 Howden Integrated annual report 2016
DividendThe directors have resolved not to declare a dividend.
ConclusionThe performance for 2016 has been challenging for the Howden
Africa business especially in the Environmental Control division which
experienced a squeeze on project margins and signifi cant warranty
issues on plant installed. The Fans and Heat Exchangers division has
seen growth in aftermarket activity, export sales and retrofi t
opportunities. The established of the new Fabrication Technology
division as the distributor for ESAB welding and consumable products
in South Africa presents an additional revenue stream for the business
in 2016, with expectations to grow on the current market share in the
future.
The Company remains focused on its strategies of expanding export
sales, investing in our people, identifying opportunities to grow our
aftermarket and reacting quickly to any deterioration within the various
markets in which we operate.
The Howden Africa business model as in prior years continues to
derive sustainable profi ts and margins from providing well-developed
and trusted engineering solutions to a customer base that demands
integrity and innovation. The Company fi nishes the year debt free with
signifi cant cash reserves and is well placed to take advantage of any
opportunities that present themselves in the future.
The fi nance team across the Group has maintained a high standard of
reporting to our stakeholders, and I thank them for their dedication,
commitment and support during my fi rst few months in the role.
In particular I would like to extend my appreciation to the former CFO
Kevin Johnson, for his mentorship and support over the past four
years and wish him all the best in his new role within Colfax
Corporation.
Marinella Vigouroux
Chief Financial Offi cer
24 March 2017
31Howden Integrated annual report 2016
Material issues
Human capitalThe employee review on page 33
discusses the issues of staff training
and development, retention and
equal opportunity
Operational expansion and revenueA discussion of our commitment to
improving economic performance,
expanding operations beyond South
Africa, supporting local suppliers, and
understanding risks to which our
business is exposed can be found in
various areas within the integrated
annual report
GovernanceFor a discussion on Howden’s
compliance with legislation and
regulations, refer to the corporate
governance and risk management
reports on pages 52 to 60 and 68
and 69 respectively
Health and safetyFocused health and safety
reviews on page 42, detail our
commitment to the health,
well-being and safety of all
employees
Quality management and environmentPage 45 deals with quality management and
environmental aspects, these reports discuss
how Howden improves the quality of its
product and services to be more
environmentally friendly
While guided by the GRI G4 guidelines, the committee
engaged stakeholders in writing to give them the
opportunity to express their concerns relating to economic,
environmental and social factors.
The identifi ed 2016 material issuesWe defi ne the Group’s material issues as those that
are strategic to the business, of substantial risk and
signifi cant to stakeholders. The following material
issues were identifi ed in 2016:
Employees and members met with committee members for
face-to-face discussions while suppliers, customers,
Howden Global and other investors chose to respond either
in writing or through telephonic interviews.
The committee then reviewed and ranked each
issue in line with its level of importance and
frequency from each stakeholder group.
0102
0304 The committee then tested each issue for
completeness and context against the backdrop
of Howden corporate policies, standards and
strategic objectives, and reviewed these in the
face of Howden’s key risks and challenges.
Identifying Howden’s material issues
The Company, through its board, has formed a sustainability committee, chaired by the Chief Executive Offi cer.
This is a subcommittee of the Executive Committee and oversees the determination of material issues,
stakeholder engagement and Global Reporting Initiative (GRI) adherence. For further information on the
committee’s structure and responsibilities, please refer to the corporate governance report on page 54.
Material issues
32 Howden Integrated annual report 2016
Human capitalHowden Africa has been recertifi ed as a top employer of South Africa.
The Top Employers Institute is an independent organisation analysing
the employee offerings of signifi cant employers around the world and
measuring them against the international standard. As such, only the
world’s leading employers are awarded the top employer accolade.
Crucial to the top employer procedure is that participating companies
must complete a stringent research process “the Top Employers
Institute’s international HR Best Practices Survey” and meet the
required high standard in order to achieve the certifi cation. To further
reinforce the validity of the process, all answers were independently
audited, meaning this research has verifi ed our outstanding employee
conditions and earned us a coveted spot among a select group of top
employers.
The Top Employers Institute assessed our employee offerings on the
following criteria:
Talent strategy
Workforce planning
On-boarding
Learning and development
Performance management
Leadership development
Career and succession management
Compensation and benefi ts
Culture
Our approach
Howden is committed to:
Demonstrating honesty, integrity and fairness at all times
Honouring commitments
Continuously growing and developing employees
Caring for the physical and emotional well-being of employees
Valuing, embracing and celebrating diversity
Leading by example
Celebrating successes
Encouraging, developing and empowering employees to take
responsibility for their goals and activities
Providing development and training opportunities for all to further
their careers
Hiring the best talent available in the market
The challenges we faced in 2016
Recruiting of suitable candidates due to scarce skills in
South Africa
Succession planning of senior management
Talent retention
Our employees
Total number of employees as at 31 December
2016 2015
538 522
Percentage of permanent employees by gender
Male Female
76% 24%
Total number of employees by employment contract
and gender
Total Male Female
Permanent salaried employees 362 271 91
Permanent wage employees 119 117 2
Fixed term/part-time employees 57 39 18
Wage contractors 0 0 0
33Howden Integrated annual report 2016
Material issues continued
Percentage of permanent employees by activity
Admin
Services
Factory
Operations
26%
46%
16%
12%
Percentage of permanent employees by region
Cape Town
Port Elizabeth
Middelburg
Johannesburg
63%
10%1%
26%
Percentage of permanent employees by length of service
0 – 5 years
6 – 10 years
11 – 15 years
16 – 20 years
20 years+
57%
20%
7%
6%
10%
Howden Africa carries out a signifi cant amount of customer site
maintenance work. Customer site requirements fl uctuate and is to a
large degree considered seasonal work. As a result of seasonal work
requirements 1 053 technical skilled workers were sourced from
labour brokers in 2016.
Percentage of individuals within the organisation’s governance bodies in each of the following diversity categories
0
2
4
6
8
10
Gender
HAHLboard
Exco
7
5
2
8
6
2
Female
Male
0
1
2
3
4
5
Age
30 – 50 yearsold
Over 50 yearsold
Under 30 years old
0
3
4
0
3
5
HAHL board
Exco
0
1
2
3
4
Ethnicity
African White Indian Coloured Other
00 0
2 2
4 4
1 1 1
4
3
5
HAHL board
Exco
34 Howden Integrated annual report 2016
Percentage of employees per employee category in each of the following diversity categories
Gender
Number of females
Number of males
20%
80%
Age
Under 30 years old
30 – 50 years old
Over 50 years old
20%
57%
23%
Ethnicity
African
White
Indian
Coloured
Other
42%
37%
5%
14%2%
Disability
Persons with disabilities
Persons without disabilities
1%
99%
Hiring policy and talent management strategy The Company does not unfairly discriminate on any arbitrary ground
against individuals or groups of people and supports the principle of
developing and promoting employees from within where vacancies
arise. If no suitably qualifi ed candidates are available, vacancies are
advertised externally.
Our talent management objectives:
Identify and develop high-potential/performing employees
Ensure identifi ed talent is retained
Develop and enrich human capital, continually considering both
the employee’s and the organisation’s needs
Create a common language about our people’s capability and
potential to ensure consistent and focused skills building and
career progression in Howden Africa
Total number and rate of employee turnover during the reporting period
DeceasedDisciplinary
action Retirement
Resignations (other
positions) Redundancy
2016 1 11 8 43 13
2015 0 8 5 41 38
Turnover ratio
2016 2015
17% 21%
Note calculation method = number of departures divided by number of
employees as at 31 December multiplied by 100. Note: Contractors are
excluded from turnover calculation.
35Howden Integrated annual report 2016
Turnover by age
18 – 30 years old
31 – 45 years old
46 – 60 years old
60 – 65 years old
17%
46%
25%
12%
Turnover by gender
Number of females
Number of males
28%
72%
Turnover by region 2016
Cape Town
Porth Elizabeth
Middleburg
Johannesburg58%
0%
24%
18%
Total new employee hires
72 new hires 15%
A high-performance culture is encouraged and all salaried associates
are on the Company’s performance management system. Regular
feedback is provided to staff throughout the year and those meeting
or exceeding objectives are recognised through incentives or
bonuses. All salaried associates have job descriptions in line with the
total rewards programme.
Howden remains committed to the upliftment and recruitment of
historically disadvantaged South Africans (HDSAs), in line with its
broader transformation objective. While there has been substantial
progress in making appointments from the HDSA community at
managerial level, this remains a challenge, especially given the
scarcity of skills and diffi culty of attracting women to this industry.
Senior management representation is also a challenge, and this is
being addressed through the talent management strategy.
Employee benefi ts and remunerationHowden offers market-related benefi ts. These include leave, annual
performance bonuses, medical aid, maternity and paternity leave,
bursaries for children of employees, disability cover, life assurance,
and other benefi ts required in terms of legislative or collective
bargaining agreements.
In addition, provision is made for employees’ post-retirement benefi ts
through pension and provident funds. Provident funds are funded on
an accumulation basis through employer and employee contributions,
which were fi xed when the funds were constituted in South Africa.
The Group’s remuneration philosophy is based on ability and
competence, and is market-related regardless of race or gender.
For more information, please refer to the remuneration report on
pages 61 to 63. Only permanent employees are offered car
allowances/cars, medical aid and pension fund.
The Company seeks to reward employees for their personal
contribution and hence incentive bonuses are given to deserving
employees.
Material issues continued
New hires in age category
18 – 30 years old
31 – 45 years old
46 – 60 years old
60 – 65 years old
25%
57%
18%
0%
New hires by gender
Number of females
Number of males
32%
68%
Percentage of new hires by region
Cape Town
Port Elizabeth
Middelburg
Johannesburg
53%
12%
6%
29%
36 Howden Integrated annual report 2016
A talent management strategy has been developed to manage high performers, talent pools, and poor performers.
Ratio of the basic salary and remuneration of women to men for each employee category
Top management 0:1
Senior management 0.52:1
Professionally qualifi ed 0.92:1
Skilled technical 0.72:1
Semi skilled 0.84:1
Unskilled 0.77:1
Collective bargaining and industrial relationsHowden has established an industrial relations forum which
comprises management and shop stewards and which meets
regularly to discuss matters of concern. The Group Human Resources
Director is responsible for monitoring and managing employee
relations.
Howden pays fair wages and treats its employees with respect. For
decades, Howden has benefi ted from industrial relations policies
aimed at making the workplace a safe and enjoyable experience.
Openness in addressing issues is encouraged and the Group’s
grievance and disciplinary procedures are used when needed.
All employees have the right to freedom of association and are
accordingly entitled to belong to a union.
Percentage unionised based on total number of employees
2016 2015 2014
23% 19% 22%
Percentage of employees entitled to belong to bargaining
unit of union
2016 2015 2014
Total entitled 538 522 558
Total exercising right 27% 23% 21%
Number of employee members per recognised union
2016 2015
NUMSA 73 53
UASA 37 53
Solidarity 9 7
A three-year metal and engineering sector wage agreement was
signed in 2014 and therefore no industrial action took place in 2016.
Wage negotiations will commence in 2017, as the current agreement
expires at the end of June 2017.
Number of lost days due to strike action
2016 2015 2014
0 0 3 009*
* Calculated by multiplying the number of employees on strike by the number
of strike days (20).
37Howden Integrated annual report 2016
Material issues continued
Other labour related mattersThe following notice periods are ordinarily provided to employees (excluding EXCO), in line with applicable collective agreements and labour
legislation:
Resignation/Retirement: 30 days
Retrenchments: 60 days
Total number of employees who were entitled to
parental leave, by gender
Total entitled to parental leave
Number of females
Number of males
538111427
Total number of employees who took parental leave,
by gender
Total number who took parental leave
Number of females
Number of males
541
Total number of employees who returned to work
after parental leave ended
Total returning to work
Number of females
Number of males
541
Total number of employees who returned to work
after parental leave ended who were still employed
12 months after their return to work
Total still employed 12 months after return to work
Number of females
Number of males
541
Return rate of employees who took parental leave Return rate for females
Return rate for males
100%100%
Retention rate of employees who took parental leave Retention rate of females
Retention rate of males
100%100%
LA16 – number of grievances about labour practices fi led, addressed, and resolved through formal grievance mechanisms
Total number of grievances about labour practices fi led through formal grievance mechanisms –
Of the identifi ed grievances, report how many were:
Addressed during the reporting period –
Resolved during the reporting period –
Total number of grievances about labour practices fi led prior to the reporting period that were resolved during the reporting period –
HR3 – Total number of incidents of discrimination and actions taken
Total number of incidents of discrimination during the reporting period –
Report the status of the incidents and the actions taken with reference to the following:
Incident reviewed by the organisation –
Remediation plans being implemented –
Remediation plans have been implemented and results reviewed through routine internal management review processes –
Incident no longer subject to action –
Incident reviewed by the organisation –
38 Howden Integrated annual report 2016
Total number of employees trained
2016 2015 2014
186 273 376
Average training hours per employee per year
2016target
2016actual
2015target
2015actual
82 75 80 7
We will continue to target 82 hours per employee in 2017.
Howden in house training programmes
Apprentices
Our primary initiative is the apprenticeship programme, which
addresses sectoral skills in conjunction with Merseta (the industry
body for training and education).
Apprentice count and turnover
The number of apprentices at 31 December 2016 31
The number of apprentices at 31 December 2015 31
Report absentee rate (AR) for the total workforce (that is,
total employees plus supervised workers by gender)
Ratio 2%
Details of how AR is calculated
Number of absent days – 2 728
Employees – 538
Total number of workdays available – 253
Development and trainingAt the core of Howden’s people management strategies is human
resource development. A concerted effort has been made over a
number of years to establish learning and development as part of a
long-term strategy. Howden aims to develop and train employees to
achieve strategic business objectives while promoting a culture of
learning for career progression.
Percentage of total employees by gender who received a
regular performance and career development review during
the reporting period
Male Female
51% 51%
Percentage of total employees by employee category who
received a regular performance and career development
review during the reporting period
Permanent salaried employees 70%
Permanent wage employees 0%
Fixed term/part-time employees 0%
39Howden Integrated annual report 2016
Material issues continued
The number of apprentices at 31 December 2016
Business unit 2016 Fitters and turners Boiler makers WeldersGrand
total2016 HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total
Number of apprentices 14 0 2 0 16 2 0 0 0 2 9 0 4 0 13 31
2015
Number of apprentices 12 0 4 0 16 2 0 2 0 4 7 0 4 0 11 31
Howden Africa apprentices to section 13 statistics 2004 to 2016
Engagement date
Boiler makers
Trade fi tters and turners Welders
Number of apprentices Certifi ed
Rescinded contracts
2004 2 3 0 5 0 0
2005 0 3 0 3 0 0
2006 3 0 2 5 0 0
2007 3 8 1 12 2 3
2008 4 4 4 12 3 0
2009 3 5 3 11 5 0
2010 2 7 3 11 11 1
2011 3 5 2 10 12 0
2012 3 9 0 12 10 1
2013 1 2 5 8 8 2
2014 0 6 6 12 11 0
2015 0 0 0 0 11 1
2016 2 8 2 12 7 1
Mature workers to artisan training
Many mature workers do not have trade qualifi cations. Howden therefore sponsors a 24 to 28-week full-time theoretical training course for
mature non-Howden subcontract workers with substantial practical boiler making and welding experience. Successful participants receive a
section 28 artisan certifi cation.
Mature workers to artisan training
Total number to date 111
Total committed in 2014 32
Total committed in 2015 10
Total committed in 2016 0
Disabled learner development programme
2015 target intake 8
2015 actual intake 10
2016 target intake 8
2016 actual intake 9
2017 target intake 9
40 Howden Integrated annual report 2016
Howden Africa disabled learner statistics: 2014 to 2016
Engagement date Learnership/qualifi cation
National Qualifi cation Framework
(NQF)level
Number of students
Resignations/ dismissals
Still in training
Total intake per year
2014 Business administration NQF 3 4 1 3 4
2014 Business administration NQF 4 5 1 4 5
2014 Offi ce administration NQF 5 2 1 1 2
2014 Bookkeeping NQF 3 1 0 1 1
2015 Business administration NQF 3 2 0 2 2
2015 Business administration NQF 4 5 1 4 5
2015 Project management NQF 4 4 0 4 4
2016 Business administration NQF 3 3 2 3 5
2016 Business administration NQF 4 1 0 2 2
2016 Project management NQF 4 2 0 2 2
2016 Accounting technician NQF 3 1 0 1 1
Business ethics training
A major part of reputation management is ensuring all management
and employees in areas involving sales, procurement and suppliers,
and customer service are adequately trained and educated in the
principles of anti-bribery and corruption as well as competition law.
In 2016 the Group rolled out code of conduct and anti-bribery and
corruption training modules and continued to provide SOX 404
training to new employees.
Code of conduct – 228
SOX 404 – 305
Anti-bribery and corruption – 285
Bursaries to third parties and employees
Howden believes education is key to ensuring a better future for all
South Africans.
2016 2015 2014
Rand value to tertiary students R345 541 R271 156 R22 672
Number of students sponsored 7 6 2
Rand value of other bursaries R550 990 R619 300 R587 220
41Howden Integrated annual report 2016
Howden provides quality healthcare to all associates through
Company-managed facilities, third-party service providers and
medical aid contributions.
Howden’s two medical centres, in Johannesburg and Port Elizabeth,
provide an effective range of medical support services during working
hours, including occupational and primary healthcare to onsite
employees.
The Company facilitates 24-hour access to casualty departments at
nominated hospitals.
Noise
Howden endeavours at all times to limit and lower noise to tolerable
levels by installing appropriate equipment and providing advanced
hearing-protection devices. Product design, welding methods and
welding preparation processes have been adapted to reduce grinding
noise. This is an ongoing programme initiated some years ago. The
use of paper grinding discs and discontinuation of gouging rods and
cutting torches have reduced grinding noise by 21%.
Special hearing-protection equipment issued to employees for the
past four years aims to eliminate hearing-loss cases. To date,
157 devices have been distributed. In addition to this, moulded ear
plugs have been issued to all associates. An order was placed during
2016 for the delivery of 51 new ear protection moulds and the
calibration of the existing custom-made hearing protection for 2017.
There were no hearing-loss cases identifi ed in 2015 and 2016. Our
target is to maintain a zero hearing loss level for 2017.
General wellness and HIV/Aids
Some years ago, we initiated a wellness programme that includes an
annual wellness day. Held at our Port Elizabeth and Johannesburg
facilities respectively, this event encourages employees to voluntarily
be tested for conditions such as cholesterol, diabetes, blood pressure
and BMI (body mass index).
General wellness and HIV/Aids
Year Number of screenings
2016 196
2015 176
2014 318
Material issues continued
Health, safety, quality and environment reviewHealthTo optimise the health of our people, we have a focused programme in place, with targets and progress set out below.
Strategy 2015 result 2016 target 2016 result 2017 target
To maintain hearing-
loss prevention
programme
No cases recorded/
reported in 2015
No occupational
diseases during 2016
No cases recorded/
reported in 2016
No occupational
diseases during 2017
Promote HIV
awareness and
encourage people to
know their status
Annual testing
completed in October
and the World Aids Day
held in December 2015
Conduct annual
wellness day and test
Annual testing
completed in October
and the World Aids Day
held in December 2016
Conduct annual
wellness day and test
Medical fi tness tests 374 associates
underwent medical
fi tness tests by end of
December 2015
All new associates 360 associates
underwent medical
fi tness tests by end of
December 2016
All new associates
Prevent the spread of
the common cold and
infl uenza
138 associates
vaccinated by end of
June 2015
Vaccinate all associates
for the autumn period
114 associates
vaccinated by end of
June 2016
Vaccinate all associates
for the autumn period
Port Elizabeth and Booysens
Tests conducted 2016 2015 2014 2013
Cholesterol 196 176 318 252
Body mass index 196 176 318 252
Blood glucose 196 175 318 252
Blood pressure 196 172 318 252
HIV 122 108 237 187
42 Howden Integrated annual report 2016
Number of employees participating in annual medical
fi tness test to monitor general health
2016 2015 2014
360 374 430
Number of employees who received fl u vaccinations
2016 2015 2014
114 138 167
The wellness programme is further supported by a patient
management programme operated by a specialist third party. This
covers HIV/Aids awareness and education and is focused on helping
Howden employees’ access antiretroviral treatment through
government facilities.
While HIV is not classifi ed as an occupational illness, notwithstanding,
it is a priority for us given the impact it has on the Company, our
employees and their communities.
Howden Africa recognises that the HIV/Aids pandemic will affect
every workplace, with prolonged staff illness, absenteeism, and death
impacting productivity, employee benefi ts, occupational health and
safety, production costs and workplace morale. An HIV/Aids policy is
in place in order to: Try and eliminate unfair discrimination in the workplace based on
HIV status Promote a non-discriminatory workplace in which people living
with HIV/Aids are able to be open about their HIV status without
fear of stigma or rejection Promote appropriate and effective ways of managing HIV/Aids in
the workplace Protection of human rights and dignity of people living with
HIV/Aids
The said policy deals with:
(a) The promotion of a non-discriminatory work environment
(b) The promotion of a safe workplace
(c) Grievance procedures
(d) HIV testing, confi dentiality and disclosure
Howden Africa will not require any employee, or applicant for
employment, to undertake an HIV test in order to ascertain that
employee’s HIV status. An employee is not legally required to disclose
his or her HIV status to Howden Africa or to any other employees.
Where an employee chooses to voluntarily disclose his or her HIV
status to Howden Africa or to other employees, this information may
not be disclosed to others without the employee’s express consent
(preferably in writing).
We participate in the annual World Aids Awareness Day in December
to maintain awareness levels.
While more intensive focus will be placed on tackling chronic illnesses,
a concerted effort will also be made to assist employees who are well
to maintain their good health. This will include advice, counselling and
ongoing educational and marketing material such as newsletters,
posters and emails. Employees are encouraged to have an annual
medical fi tness test to monitor general health.
The “Ask Nelson” employee assistance wellness programme, run by
an external service provider and introduced in 2009, is aimed at
helping employees and their immediate family members better deal
with emotional distress. It offers employees counselling, advice and
guidance on social and fi nancial issues.
SafetyResponsibility for safety performance vests with general management.
Managers in each Howden business unit are primarily responsible for: Complying with local regulatory requirements Following Howden policies and procedures Assessing and managing operational risks Implementing management systems and driving continuous
improvement
Port Elizabeth Booysens
HIV/Aids 2016 2015 2014 2016 2015 2014
Number of staff screened 72 60 84 124 118 234
Number of staff electing voluntary counselling and testing 34 26 50 88 82 187
Percentage of staff electing to know their status (%) 47.2 43 60 71 69.5 79
Port Elizabeth Booysens
Number of conditions 2016 2015 2014 2016 2015 2014
Unstable BMI 21 18 37 101 29 95
Cholesterol 27 18 31 67 26 79
Hypertension 18 16 22 51 18 51
Heart disease 1 13 4 17 13 10
HIV high risk 3 3 2 39 12 19
Total 70 68 96 275 98 254
Number of alerts 59 30 98 264 30 184
43Howden Integrated annual report 2016
Safety department targets and results
2015 results 2016 targets 2016 results 2017 targets
Five (5) LTIs recorded/reported Zero LTIs One (1) fatality recorded
Six (6) LTIs reported in 2016
Zero fatalities and lost-time
injuries
Achieved the integrated
OHSAS 18001:2007 and
ISO 14001:2004 Management
System and Howden
Middelburg site is also under
the umbrella certifi cate
Maintain our umbrella
certifi cate – integrated
OHSAS 18001:2007 and
ISO 14001:2004
Achieved the integrated
OHSAS 18001:2007 and
ISO 14001:2004 Management
System and Howden
Middelburg site is also under
the umbrella certifi cate
Maintain our umbrella certifi cate
– integrated
OHSAS 18001:2007 and
ISO 14001:2004
Lost-time accident-free hours
fl uctuated across the months
and by end of December 2015
we accumulated 421 114
lost-time-free hours for
Howden Africa (Pty) Limited
Howden Africa to achieve
three million lost-time
accident-free hours
Lost-time accident-free hours
varied throughout the year and
by year-end 2016 –
431 589 lost-time-free hours
were recorded for Howden
Africa (Pty) Limited
Howden Africa to achieve
one million lost time accident
free hours
Material issues continued
Progress
We continue to improve our performance by:
The involvement of employees
Implementation and monitoring of an EHS plan to establish
objectives and targets, and developing programmes
The provision of and enforcement of the use of personal protective
equipment (PPE)
Simplifi cation of our risk methodology
Working towards having an integrated EHS Management System
for all Howden sites
Carrying out safety awareness training
Sponsoring monthly housekeeping competitions in order to
promote safety awareness and compliance
In the last fi ve years, we have signifi cantly improved and maintained
the level of Howden’s health and safety performance. A focused
internal team upgraded health, safety and related systems to comply
with the National Occupational Health and Safety Association (NOSA)
and OHSAS 18001 standards.
Howden maintained its integrated OHSAS 18001:2007 and
ISO 14001:2004 Management System. Commitment to incident
prevention and continual improvement was adequate and the
Company was recommended for continuing registration.
Howden’s cardinal safety rules
The use of lifting equipment by untrained people, or substandard
lifting, is strictly prohibited
No person is allowed onsite if under the infl uence of alcohol or
drugs
No person is permitted to operate any machinery, equipment or
tools without the specifi ed safety guards in place
Working at heights without the appropriate training or correct
equipment is not allowed under any circumstances
Fatality
An incident occurred at a Power Plant on 11 October 2016, when a
contractor, employed by the Company through a labour broker,
stepped onto a loose drain cover and fell down into a pit fi lled with hot
water. He sustained severe burns to the lower part of his body. He
was immediately transported to hospital and remained there for
treatment but sadly passed away on 17 December 2016. The
Company is supporting the accident investigation and in parallel have
reinforced our own site risk assessments and inspections of working
areas including inspection of routes to and from workplaces. We have
raised our associates’ awareness of risks when working in areas
where steam, water or ash may be present.
44 Howden Integrated annual report 2016
Lost-time accident-free hours 2016
2011LTI
2011DIFR
2012LTI
2012DIFR
2013LTI
2013DIFR
2014LTI
2014DIFR
2015LTI
2015DIFR
Total lost-time-free
hours since last in Dec 16
2016LTI
2016DIFR
Booysens offi ces and factories 0 0.0 4 0.79 1 0.19 0 0.0 0 0.0 749 622 0 0
Power site work 0 0.0 2 0.21 4 0.36 3 0.32 4 0.44 2 505 117 5 0.40
Fan and project site work 0 0.0 1 0.58 0 0.0 0 0.0 0 0.0 217 184 0 0
Donkin offi ce and factory 1 0.89 0 0.0 0 0.0 0 0.0 1 1.33 170 613 1 1.17
Total Africa 1 0.07 7 0.40 5 0.25 3 0.18 5 0.33 3 642 536 6 0.34
Unfortunately lost-time incidents increased to six (2015: fi ve).
All incidents were methodically examined for root cause and effect,
and scientifi cally addressed to prevent recurrence. We are confi dent
that corrective actions put in place will have a positive effect in 2017.
Safety on customer sites
In addition to Howden’s safety practices at its Booysens and Port
Elizabeth manufacturing sites, we continue to strive towards and
prioritise a safer work environment on customers’ sites. We work
hand-in-hand with customers and contractors to continuously
improve procedures in performing standard maintenance and
breakdown work on power stations and mines.
Health and safety initiatives
The Company has implemented several local and global health and
safety initiatives across the business as follows:
(a) Digilex system and legal register
(b) Third-party risk audits for Howden Africa Middelburg Services
(c) Environmental awareness to all senior management and all
associates through the induction on boarding process
(d) Global EHS tools, including:
JSA (JOB safety assessment)
EEHSOF (Executive Environmental Health and Safety
Observation form)
FIFI (Find it and fi x it)
Safety Cross
Quality managementHowden’s approachSince the launch of ISO 9001 in 1987, all Howden business units
have retained this certifi cation. We have adopted the principle of total
quality management, which includes domains such as sales and
marketing, concept and detail design, planning, purchasing,
production, customer service, safety, people and asset management.
Customer service excellence was formally incorporated into our
operating systems more than a decade ago. This is entrenched in the
Group’s disciplinary code and promotes business success. By
listening to our customers, we are able to tailor our products to their
needs while continuously enhancing the quality and standards of all
outputs.
Each Howden business unit has its own internal measures of
customer satisfaction, ranging from quantifying numbers of customer
complaints to formal face-to-face discussions and online surveys.
Quality compliance is measured continuously in business units by
internal non-conformance reporting and customer feedback.
By sharing information and benchmarking successes in the Group,
we are able to execute both breakthrough and continuous
improvement programmes across all business units. In living by our
core values of high standards and customer service excellence, we
strive to improve on levels of performance, making Howden a better
place, fostering a culture of mutual respect among staff, customers
and all stakeholders.
What we have learned from our ongoing management of quality is
that to maintain a sustainable business, we have to constantly
improve the status quo. There are several annual awards to be won
for exceptional quality performance – for individuals, teams and
suppliers. Quality management is one of our fundamental practices
and will remain a top priority to combat substitution with cheaper,
inferior imports.
ProgressThe challenges we face as a business are universal and, despite
these, the Company has maintained high levels of compliance to
customer requirements.
The Group has implemented ISO 3834 (quality standards for fusion
welding of metallic materials) and the Howden Power business unit
successfully completed the ISO 3834 audit process in 2016. The
James Howden business unit operates in accordance with the SABS
Quality Management System.
Environmental reviewApproachThe manufacturing processes of Howden Africa Holdings Limited
are relatively “clean” compared to harsher industrial environments
elsewhere and the intention is to keep improving wherever possible.
Accordingly, we continuously identify negative aspects our products
and operations may have on the environment and set reduction
targets to those impacts. In selecting targets for environmental
impacts, Howden has considered government guidelines and global
45Howden Integrated annual report 2016
This complicates analysis of volume trends somewhat when
interpreting the statistics of steel use. However, despite these
circumstantial constraints, the Group initiated several improvement
projects aimed at reducing steel use and maximising recycled
portions.
In 2015 a project team was put together in order to clear customer
returned materials on the Booysens site and to ascertain whether
such materials were useable. This has resulted in the decrease of the
amount of heavy steel being recycled. The further decrease in light
steel removed for recycling is as a result of the proper planning of and
more effi cient material cutting.
All scrap steel is sold to a responsible company for recycling.
Weight of light scrap steel removed for recycling (tonnes)
2016 2015 2014
69.16 132 200.274
Weight of heavy steel removed for recycling (tonnes)
2016 2015 2014
89.38 212.932 113.4
Fibreglass
The manufacturing process is optimal in terms of waste percentages,
but the sheer volume of production causes substantial waste of this
non-biodegradable material.
Fibreglass removed from site (tonnes)
2016 2015 2014
8.12 5.88 13.34
The increase is related to an increase in operations.
All fi breglass has been disposed of at the Holfontein landfi ll site. Safe
disposal certifi cates are kept on record.
Hazardous waste
Medical and other hazardous waste is removed by specialised service
providers for incineration according to national standards.
Shot blast grit
Cleaning painted surfaces to be repainted is done by spraying small
metal grids at high speed onto the surface. Since it is then
contaminated with paint residue, it is classifi ed as hazardous waste.
Shot blast grit is taken to landfi ll sites despite intense efforts to fi nd
innovative applications for used shot blast grit. This remains under
investigation.
Shot blast grit removed from site (tonnes)
2016 2015 2014
8.19 16.54 10.96
concerns on climate change. As a result, the Group has selected the
reduction of direct and indirect energy use and improved recycling
practices as the most relevant performance indicators for our
business:
Secondary environmental contributions: proactive efforts to reduce
use of non-renewable resources
Primary environmental contributions: deploying products and
process systems that support our customers’ efforts to reduce
carbon footprints and air pollution
Formal environmental programmesThe Booysens site, the Howden Power Services Middelburg offi ce
and Port Elizabeth site were successfully assessed against the
provisions of ISO 14001 in 2016.
The Company has proactively identifi ed opportunities to contribute to
the environmental programmes of customers and end-users by
applying its diverse range of technology solutions, particularly in air
pollution control.
Manufacturing materials, products and packagingHowden manufactures products largely made of steel and derivatives.
Steel is bought in as a raw material and processed to form end-
products for sale to customers. The lifecycle of most of our products
exceeds 30 years, during which time they receive continuous care to
maintain designed effi ciencies. At the end of its lifecycle, a product
would typically be available for recycling. Although we do not practise
“cradle-to-grave” follow through to ensure recycling, it is common
practice in the engineering industry to sell scrap metal, both for
storage logistics and cost recovery.
Use of packaging materials is very limited, accordingly the extent of
recycling and reuse of packaging is not signifi cant.
Waste managementSince 2009, we have used a specialist external service provider to
assist in measuring and managing waste through a separation-at-
source policy. Separate waste containers were placed in offi ces,
workshops and yard areas, enabling employees to choose the
method of disposal responsibly. This has substantially improved the
level of awareness among staff and enabled us to quantify the
amounts of waste generated per defi ned category. In 2011, the Group
started measuring waste volumes on all sites and setting targets to
reduce waste and increase recycling potential. Below are some
examples of projects at the Booysens site. Waste management has
been limited to the Booysens site only as this is the only Howden site
which has a signifi cant impact on the environment.
Twelve senior managers received environmental awareness training
in 2016.
Steel
With steel being the dominant material of product construction, the
Group has refi ned the classifi cation of scrap steel grades. This eases
the task of scrap steel collectors. Steel use is affected by product
design, manufacturing process and procurement policies. Repair
work requires less raw steel than new builds.
Material issues continued
46 Howden Integrated annual report 2016
No major oil spills were recorded in 2016. There were, however,
37 minor oil spills reported in 2016 (2015: 57).
Energy, water, gas and fuel managementFollowing the successful reduction of electricity consumed in 2013
and 2014, Howden Africa has engaged the Council for Scientifi c and
Industrial Research (CSIR) to undertake Resource Effi ciency and
Cleaner Production (RECP) assessments on three of its
manufacturing/process facilities with the aim of identifying possible
solutions to further reduce their consumption of energy, water and
waste management.
The CSIR, on behalf of the Department of Trade and Industry (the
DTI), is running the NCPC-SA programme (the National Cleaner
Production Centre South Africa) which is a national programme of
government that promotes the implementation of resource effi ciency
and cleaner production methodologies to assist industry to lower
costs through reduced energy, water and materials usage, and waste
management.
Energy management
Howden’s energy consumption is primarily in the form of electricity,
mainly for the Group’s manufacturing operations (Booysens and Port
Elizabeth).
Energy management initiatives commenced or completed in 2016: Energy saver light bulbs have been installed Drive to ensure the airconditioning systems and lights to be
switched off after hours in offi ces
These initiatives have contributes to further lowering the electricity
consumption in 2016.
Electricity consumption (measured in kilowatt hour)
2016 2015 2014
1 823 017 kWh 1 855 909 KwH 2 421 390 KwH
Water consumption (Litres)
2016 2015 2014
8 880 10 591 10 806
A number of water leaks were identifi ed and repaired during the
course of 2016. As a result water usage was substantially reduced.
Medical waste
Medical waste removed from site (kg)
2016 2015 2014
22.89 39.9 63.63
The decrease in medical waste is as a result of the reduction in
the number of incidents treated at the onsite clinic. Further, better
stock management of the medical stock has resulted in a reduction
of the amount of medication kept onsite and disposed of as a result
of expiring.
Total of hazardous waste (tonnes)
2016 2015 2014
17.72 8.45 7.64
The increase of hazardous waste is as a result of the Company now
combining fi breglass with other waste, including oil tins, paint tins and
used aerosol cans, into one large waste skip.
Non-hazardous waste
Non-hazardous waste removed from site (tonnes)
2016 2015 2014
37.86 37.62 40.12
Total volume of recycled waste (tonnes)
2016 2015 2014
9.867 9.182 8.95
The increase in non-hazardous waste was attributable to better waste
separation, control and recycling from a newly appointed service
provider.
Oil spills
Our approach Kits are placed in every workshop and refi lled regularly after use No vehicles are allowed on site if they have an oil leak A rubber mat is placed at every parking bay, and rubber mats are
also issued by security personnel to all vehicles coming onto site Drip trays for certain machines have been installed and are
monitored and managed by departmental supervisors
Gas and fuel consumption
2016 2015 2014
Total hours worked at Booysens 749 622 1 003 302 969 083
Total portable cylinder gas consumed 8 168.5kg 12 649.3kg 13 316kg
Total portable gas consumed per man hour 0.011kg 0.013kg 0 014kg
Total bulk container gas consumed 57 136.41kg 73 267.642kg 84 782kg
Total bulk container gas consumed per man hour 0.076kg 0.073kg 0.087kg
Total bulk and portable gas consumed 0.087kg 0.086kg 0.101kg
Total diesel/fuel consumed 7 129 litres 7 870 litres 9 393 litres
Total diesel/fuel consumed per man hours 0.010 litres 0.008 litres 0.010 litres
Variations to previous years will always be dependent on production requirements of that year impacting the consumption numbers.
47Howden Integrated annual report 2016
Transport and emissionsParticulate matter and toxic fumes released from manufacturing operations and transport are limited. No dust-related complaints from
communities have been received. Welding fumes at source are extracted through fi lter units. These systems comply with international industrial
health standards.
To reduce transport emissions we carry out regular fl eet maintenance and utilise latest technology. A video event recorder system was installed
in late 2014 and a specialist GPS tracking system was installed in early 2016. These two systems monitor the majority of the Company’s fl eet,
improving driver behaviour and resulting in the reduction of motor vehicle accidents and fuel consumption, thus reducing accident spillages and
fuel emissions.
Material issues continued
FuelCO
2 (kg per unit
of consumption) Estimate Actual use Unit CO
2 (kg)
CO2
(tonnes)
Petrol fuel 2.39kg of CO2
Average car
consumption
12.5 litres/100km
5 865 851 km 14 019 383.89 14 019.38
Diesel fuel 2.7kg of CO2
Average car
consumption
12.5 litres/100km
6 555 322 km 17 699 369.4 17 699.37
Natural gas 2.666kg of
CO2 per kg
65 326.41 59 904.91 kg 159 706.5 159.71
LPG 1.7kg/ litre 16 234.93 5 400 kg 9 180 9.18
Electricity 0.99kg/kWh 1 763 113.55 1 823 017 kWh 1 804 786.83 1 804.79
Air travel Airlines and agent
supplied tonnes CO2
per fl ight for 2016
1 165 947.193 km 192 381.29 192.38
Total carbon
emissions
33 884 807.91 33 884.81
48 Howden Integrated annual report 2016
Emission guide Supportive evaluation
Australian government – Department of the
Environment (estimated greenhouse gas emission on
06/01/2014 www.environmetal.gov.au/settlements/
transport/fuel guide/environmental)
1 litre of petrol weighs 750g. Petrol comprises 87% carbon, or 652g carbon
per litre of petrol. To combust this carbon to CO2, 1 740g of oxygen is
needed. The sum is then 652 + 1 740 = 2 392g CO2/litre of petrol
(06/01/2014 www.ecoscore.be/en/how-calculate-CO2-consumption)
1 litre of diesel weighs 835g. Diesel comprises 86.2% carbon, or 720g carbon
per litre diesel. To combust this carbon to CO2, 1 920g of oxygen is
needed. The sum is then 720 + 1 920 = 2 640g CO2/litre diesel (06/01/2014
www.ecoscore.be/en/how-calculate-CO2-consumption)
Conversion factors by Defra/DECC in 2013
(www.carbontrust.com. +44(0)20 7170 7000)
Low-calorifi c:
1kg L-gas comprises 61.4% carbon, or 614g carbon per kg L-gas. To combust
this carbon to CO2, 1 638g of oxygen is needed. The sum is then 614 + 1 638 =
2 252g CO2/kg L-gas.
High-calorifi c:
1kg H-gas comprises 72.7% carbon, or 727g carbon per kg H-gas. To combust
this carbon to CO2, 1 939g oxygen is needed. The sum is then 727 + 1 939 =
2 666g CO2/kg H-gas (06/01/2014 www.ecoscore.be/en/how-calculate-CO
2-
consumption)
Australian government – Department of the
Environment (estimated greenhouse gas emission on
06/01/2014 www.environmetal.gov.au/settlements/
transport/fuel guide/environmental)
1 litre LPG weighs 550g. LPG comprises 82.5% carbon, or 454g carbon per litre
LPG. To combust this carbon to CO2, 1 211g of oxygen is needed. The sum is
then 454 + 1 211 = 1 665g CO2/litre LPG (06/01/2014 www.ecoscore.be/en/
how-calculate-CO2-consumption)
Eskom factor report 2012. Environmental footprint
0.99kg of CO2/kWh electricity generated according to
Eskom latest calculations (www.carbontrust.com
+44(0)20 7170 7000)
Eskom announces unchanged electricity emission factor for 2012 (Urban Earth,
Eskom integrated report 2012). Energy conversion factors used are kilograms
carbon divide equivalent (kgCO2e) per unit of fuel – (Carbon Trust – Defra/ DECC,
US EPA. www.carbontrust.com +44(0)20 7170 7000 Financialresults.co.
za/2012/Eskom). One tonne CO2 emissions occupies 556m3 of space at 25°C
(https://www.capetown.gov.za)
Formula for a given round trip (round trip miles x emissions factor x radiative
forcing index factor x passenger occupancy rate divided by 2 205lb per ton =
tonnes per round trip (DEFRA, July 2011 greenhouse gas conversion factors).
www.carbontrust.com +44(0)20 7170 7000
Conversion factors by Defra/DECC in 2013.
www.carbontrust.com +44(0)20 7170 7000
Shipping emits 10kg CO2 into the atmosphere per km (www.carbontrust.com
+44(0)20 7170 7000)
49Howden Integrated annual report 2016
Transformation and society Economic transformation and empowermentHowden is fully committed to economic transformation and
empowerment. In 2016 we were certifi ed as a Level 4 contributor in
terms of the more stringent amended B-BBEE Codes of Good
Practice 2013 (amended codes) and related DTI scorecard.
2016 2015
Level 4 Level 3*
(80.41 points) (78.83 points)
* Score calculated in terms of the original codes.
The Group is recognised as a value-adding supplier.
The Group is committed to further continuous B-BBEE transformation
and is actively considering options and plans for transition to the new
DTI B-BBEE codes of good practice.
The Company will be verifi ed in the second quarter of 2017 against
the amended codes and related DTI scorecard, this verifi cation will
remain valid until early 2018. We intend to maintain our Level 4
contributor status in 2017.
Strategy to comply with the amended codesThe amended codes are more stringent and the Company is
implementing various initiatives to ensure we continue to achieve our
transformation targets.
A key area of the strategy relates to the provision of interest- and
security-free supplier development loans and enterprise development
loans in favour of qualifying suppliers and enterprises. These loans
have already been furnished during 2016.
Key areas of focus
Management and control
2016%
2015%
69.8 70.6*
* Number calculated as an average of scores in respect management and
control (92.5%) and employment equity (50.4%) under the original codes.
Management control under the amended codes comprises both
management and control and employment equity from the B-BBEE
Codes of Good Practice 2007 (original codes). Although Howden has
maintained a very similar compliance rating against this element under
the amended codes it continues to aim to improve this in future by
people recruited inside and outside the Company. Howden
successfully identifi es, appoints, mentors and trains talented
individuals for top management positions.
Steady progress is continuing to be made in appointing HDSAs into
non-technical positions, however the skills crisis in the engineering
sector continues to present challenges in improving this rating
materially in the short term. This is compounded by the fact that
engineering has not traditionally attracted skilled females into the
sector. Every effort is made to accommodate disabled people in
productive employment activities.
The organisation continues to recruit, train and develop on merit of
performance the demographic population representation in
employment equity.
Percentage of employees who are previously
disadvantaged South Africans*
2016%
2015%
62 60
* Score calculated in terms of the original codes.
Please refer to our employee review on pages 33 to 41 for
more detail.
Skills developmentCandidates, including women, are recruited annually for in-house
Merseta-approved apprenticeships.
Skills development score
2016%
2015%
93.8 87.7
The business has improved under the amended codes on the 2015
performance and continues to invest heavily on skills development as
indicated by its 93.8% score in 2016.
Please refer to our employee review on pages 33 to 41 for more
detail.
Enterprise and supplier developmentEnterprise and supplier development under the amended codes
comprises preferential procurement and enterprise development from
the original codes. The category is now broken down into three parts,
being preferential procurement, supplier development and enterprise
development.
Preferential procurement
Howden places great importance on procuring from B-BBEE
accredited suppliers. Supply chain managers are appraised on their
consistent purchasing levels from empowered companies to ensure
Howden promotes and stimulates small businesses. The Group
continues to exert pressure on its suppliers to improve their own
B-BBEE credentials.
The business during the course of 2015 met with its major suppliers
indicating the importance of taking steps to improve their contributor
status under the DTI scorecard, specifi cally their ownership scores, as
well as encouraging them to give appropriate consideration to the
more stringent amended codes that are now in effect and the impact
this may have on their businesses.
Material issues continued
50 Howden Integrated annual report 2016
Preferential procurement spend
2016 2015
R529 million R923 million
Number of B-BBEE certifi ed vendors
2016 2015
Number % Number %
665 56.6 655 46.5
Supplier development and enterprise development
2016 2015
80.45% SD
and ED**
46% SD
100% ED*
* Score calculated in terms of the original codes.
** Excluding preferential procurement of this part of the element.
In 2015 two interest- and security-free loans were provided to a
qualifying supplier and enterprise, being a supplier development
loan and an enterprise development loan. These two loans have
resulted in 80.45% of the points being achieved against this portion
of the supplier and enterprise development element under the
amended codes.
We are justifi ably proud of our enterprise development success where
we establish independent suppliers to our Company. We provide
these companies with training and contracts for their long-term
sustainability, and make advance payments on products and services
they render to assist them with cash fl ow.
Socio-economic development spendSocio-economic development (SED) initiatives in recent years have
resulted in greater than a 95% rating being achieved against this
element both under the original codes and the amended codes. We
intend to continue with positive developments beyond the set
requirements.
Total SED spend (excluding advance payments made)
2016 2015
R2 006 420 R1 502 819
Looking to the future, Howden offers bursaries to the children of staff
for studies in selected disciplines. We also support the health of our
people through a comprehensive wellness programme and an
occupational health clinic. Please refer to our health review on
pages 42 and 43 for more detail.
Beyond the confi nes of our Company we contribute to society
through a corporate social investment programme focused on the
education of the underprivileged and help for the destitute.
Total SED spend (excluding SD and ED spend)
2016 2015
Spend on education R668 555 R461 186
Spend on health including HIV/Aids R682 831 R544 045
Spend on basic needs and social development R655 033 R497 587
Corporate social investmentThe Howden corporate social investment (CSI) programme is
continually reviewed and adapted to keep pace with the evolving
business environment and changing needs of the communities the
Company serves.
Upliftment of disadvantaged communities, education and technical
skills training for future growth and development are the cornerstone
of the Company programme, with support channelled to sustainable
projects that address a social need and ultimately offer a better quality
of life to benefi ciaries.
Total ad hoc donations
2016 2015
R50 000 R55 000
Update on previous year’s fl agship projectsMount Pleasant Primary School
We have continued our support of Mount Pleasant Primary School
with a further contribution being made in 2016.
The amount contributed was again utilised towards one classroom
assistant and two student teachers.
2015/2016 fl agship project
A fl agship project was undertaken in 2015/2016 in respect of
Modikwa Platinum Mine and was fi nalised during the course of 2016.
This project was a joint venture between the mine and its key
suppliers whereby the mine provided a maths and science laboratory
affording eight schools in the area access to library equipment. The
maths and science educational software worth R112 000 was
donated by Howden towards the project.
This project will continue to benefi t matriculants in the area on an
ongoing basis.
Future fl agship projects
In 2017, we aim to cooperate with key clients to assist communities
around their operations in stakeholder prioritised areas of concern.
51Howden Integrated annual report 2016
Corporate governance report
The board and management of
Howden Africa Holdings Limited
are committed to the principles
of openness, integrity and
accountability as advocated in the
King Report on Corporate
Governance for South Africa, 2009
(King III) and strives to comply with
all requirements for corporate
governance as set out in the Listings
Requirements of the JSE Limited,
South Africa.
Governance frameworkThe board takes overall responsibility for the Group. Its role is to
exercise leadership and sound judgement in directing the Group to
achieve continued prosperity and to act in the best interests of all
stakeholders. Subject to any limitations imposed by the Companies
Act, JSE Listings Requirements and the memorandum of
incorporation, responsibility for managing the business of the
Company vests in the Group Chief Executive Offi cer, Chief Financial
Offi cer and directors of subsidiary companies (collectively the
Executive Committee or Exco).
Governance policies and practices which apply to Howden Africa
Holdings Limited apply to all subsidiaries.
Board of directorsComposition
The board comprises a balance of executive and non-executive
directors, with a majority of non-executive directors: Two executive directors, the Chief Executive Offi cer (CEO) and
Chief Financial Offi cer (CFO) Five non-executive directors, three of whom are considered
independent
Directors are classifi ed as independent, non-executive or executive in
accordance with the principles set out in both King III and JSE
Listings Requirements.
An annual independence assessment is carried out by the lead
independent director (LID) on all independent directors in order to
ensure that directors classifi ed as independent are indeed
independent.
In November 2016 the LID completed nine years of service with the
board and a rigorous review and independence assessment was
carried out in this regard. The review included a peer review, a self
assessment as well as a due diligence from an external service
provider. After considering these three aspects of the review the
Chairman carried out an assessment into whether the LID should
Audit and Risk Committee
(ARC)
Remuneration,Nomination, Social and
Ethics Committee
(RENSEC)
Exco Risk Committee Governance Committee Sustainability Committee
Executive Committee(Exco)
HAHL boardof directors
52 Howden Integrated annual report 2016
remain part of the board and continue as LID. The Chairman found
that there was no need to refresh the board in this regard and that the
LID’s independence was not impaired.
There are no prescribed offi cers as defi ned by the Minister in terms of
the Companies Act 71 of 2008 (the Companies Act).
Chairman of the board
In line with best practice, the roles of the Chairman and CEO are
separated.
Board members have reviewed the performance of the Chairman of
the board and unanimously re-elected Ian Brander as Chairman for
2017. Ian Brander is a non-executive director who is able to carry out
his duties and responsibilities independently despite the fact that he is
not considered an independent director in terms of King III. The board
believes this appointment is in the best interest of the Company as he
brings technical, business and leadership knowledge gained in his
33-year career with Howden Global, and fully understands and
appreciates the business strategy of the Company.
In line with King III, Morongwe Malebye was re-elected as the lead
independent director for 2017.
Process for the appointment and removal of directors to the
HAHL board of directors
If a vacancy arises the Remuneration, Nomination, Social and Ethics
Committee (RENSEC) identifi es and nominates suitable candidates
through a formal process. New director nominations are then
submitted to the board as a whole for approval prior to appointment.
The appointment of a new director is subject to confi rmation by
shareholders at the next annual general meeting. An induction
programme is established for new directors. On appointment to the
board, new directors visit the Group’s businesses and meet with
senior management to facilitate their understanding of the Group
structure and fi duciary responsibilities.
Despite the provisions of any contract, the Company may by ordinary
resolution remove any director from offi ce and appoint another person
in his/her stead. The Company will at all times comply with section 71
of the Companies Act, 2008, in this regard.
Recent directorate changes
Thomas Bärwald’s contract expired on 30 May 2016. Willie Thomson
was appointed the new Chief Executive Offi cer for the Company with
effect from 1 June 2016.
Kevin Johnson resigned on 8 December 2016 and Marinella
Vigouroux was appointed the new Chief Financial Offi cer for the
Company with effect from 8 December 2016.
Annual rotation and election
In accordance with the Company’s memorandum of incorporation
and King III, Morongwe Malebye, Humphrey Mathe and Mitesh Patel
will retire by rotation and will stand for re-election by shareholders at
the next annual general meeting.
Mr Thomson was elected as Executive Director and Chief Executive
Offi cer at the 2016 AGM held on 1 June 2016. Mrs Vigouroux’s
appointment occurred after the Company’s 2016 AGM and she will
stand for election by shareholders at the next annual general meeting.
(Refer to page 64 for details on qualifi cations and experience).
Gender diversity
The Company has a global reputation for its competitiveness and its
progressive stance towards gender diversity is one component of its
winning formula. Accordingly, in 2016 RENSEC adopted a Gender
Diversity Policy.
The Gender Diversity Policy set a target to increase the Board
composition from one female member to two female members.
The Company achieved this target upon the appointment of
Marinella Vigouroux at the end of 2016. These targets are assessed
annually by RENSEC and the next assessment will be in June 2017.
Director development
Professional development programmes are implemented as and when
required. This ensures directors receive regular briefi ngs on changes
in risks, laws and the environment.
Board powers and responsibilities
The board charter details the responsibilities of the board and is
reviewed and adopted by the board annually. In terms of its charter,
the board is generally responsible for: Acting as a focal point for, and custodian of corporate governance Approving corporate strategy Monitoring and assessing performance Ensuring that strategy will result in sustainable outcomes Ensuring the Company is, and is seen to be, a responsible citizen Providing effective leadership on an ethical foundation Acting in the best interests of the Company
The board gives strategic direction to the Group, retains full and
effective control over the Group, and monitors executive management
in implementing plans and strategies. The executive directors have
the overall responsibility for implementing the Group’s strategy.
Non-executive directors complement the skills and experience of
executive directors and bring independent judgement to the board’s
deliberations and decisions through their knowledge and experience.
All directors have unlimited access to the advice and services of the
Company Secretary, who is responsible for ensuring that board
procedures are followed. All directors are entitled to seek independent
professional advice at the Group’s expense, concerning the affairs of
the Group, after obtaining approval in line with the process set out in
the board charter.
To enable the board to properly discharge its responsibilities and
duties, certain responsibilities have been delegated to board
committees.
Accountability
The board meets at least quarterly. The board monitors management,
ensuring that material matters are subject to board approval.
The board is ultimately responsible for ensuring that the business is a
going concern and, as such, effectively controls the Group, its
management and is involved in all decisions that are material for this
purpose. As noted, the board functions in terms of a charter which
requires an appropriate balance of power and authority on the board.
The CEO is responsible and accountable to the board for all Group
operations. He has a formal role description (with limits of authority)
from the board. To assist in discharging his responsibility, the CEO
has seven key management personnel who form part of the Executive
Management Committee (Exco).
53Howden Integrated annual report 2016
Corporate governance report continued
Subcommittees of the executive committee (Exco)
Committee Composition Main responsibility
Exco Risk
Committee
W Thomson (Chair) and Exco members Assist Exco, the Audit and Risk Committee and the
board to ensure that:
The Group has implemented an effective policy
and plan for risk management that will enhance
its ability to achieve its strategic objectives
Disclosure on risk is comprehensive, timely and
relevant
Sustainability
Committee
W Thomson (Chair)
M Vigouroux
C Masson
A Buys
(T Bärwald, K Johnson, and C Koopman left the
group during the course of 2016)
Implementation of Global Reporting Initiative (GRI
G4) guidelines, including:
Stakeholder engagement
Materiality assessments
Monitoring key performance indicators
Governance
Committee
M Vigouroux (Chair)
C Masson
Recommend to Exco and the board a set of
corporate governance principles (emanating from
King III, the Companies Act and elsewhere)
applicable to the Group as well as to monitor and
update Exco and the board on developments that
may impact on corporate governance principles.
Refer to page 66 for details of the executive management team.
Board committeesThe board has established three principal committees to assist it in
discharging its responsibilities. Specifi c responsibilities have been
formally delegated by the board to the:
Audit and Risk Committee (ARC);
Remuneration, Nomination and Social and Ethics Committee
(RENSEC)
Executive Management Committee (Exco)
The board believes committee members are suffi ciently qualifi ed and
experienced to carry out their duties. Brief details on their
qualifi cations and experience can be found on pages 64 and 66.
ARC and RENSEC
Both committees have formal terms of reference which have been
approved by the board and details on their roles and responsibilities
have been set out on pages:
78 and 79 for the ARC; and
61 for the RENSEC.
The committees may, in fulfi lling its duties, call on the chairmen of
other board committees, any of the executive directors, offi cers or
Company Secretary to provide information, subject to following a
board-approved process.
The creation of board committees does not reduce the directors’
overall responsibilities and therefore all committees must report and
make recommendations to the board.
The Chairman of the board, CEO, CFO, Chief Audit Executive,
external auditor, other board directors and other assurance providers
(legal, compliance, risk, health and safety) attend ARC meetings by
invitation only. Both internal and external auditors have unrestricted
access to the ARC.
Board members (not part of the RENSEC), as well as the head of
human resources for the Howden Africa Group attend RENSEC
meetings by invitation.
Exco
The duties and responsibilities of the members of Exco are in addition
to those as either directors of HAHL or a director of a subsidiary
within the Group and is chaired by the CEO.
Exco’s main role is to assist the CEO in discharging his responsibilities
as CEO and in so doing:
Participating in the determination of budgets and strategic plans
of the Group
Monitoring fi nancial performance of the Group
Monitoring strategy progress/performance
Coordinating the operations of the Group and monitoring the
activities of companies within the Group
Monitoring the relations and interactions of the Group among
themselves
Making recommendations on and monitoring material employment
issues, including remuneration policies
Monitoring:
– Customer relations
– Marketing strategies
– Signifi cant customer complaints/defects
– Consumer protection act complaints/breaches.
Ensuring that there are policies and controls in place to adequately
deal with the Group’s responsibilities and making
recommendations regarding Group policies.
54 Howden Integrated annual report 2016
Meetings and proceduresAgendas and minutes
Board ARC and RENSEC
The board and the ARC and RENSEC have established annual work
plans to ensure all relevant matters are covered by the agendas of
meetings planned for the year. The number, timing, length of
meetings, and agendas, are determined by the annual work plans.
The relevant chairpersons may meet with the CEO, CFO and/or
Company Secretary prior to a meeting to discuss important issues
and agree on the agenda. A detailed agenda, together with
supporting documentation, is circulated at least one week prior to
each meeting to members and other invitees. This ensures all
members are fully prepared for board meetings and able to provide
appropriate and constructive input on matters for discussion.
Minutes are circulated to the relevant chairpersons and members for
review. The minutes are formally approved at the next scheduled
meeting.
Meetings for the coming year are scheduled at the last meeting of the
prior year. Meetings in addition to those scheduled may be held at the
insistence of a member.
Exco
Exco must hold a minimum of two meetings per quarter and
meetings in addition to those scheduled may be held at the request
of an Exco member channelled through the CEO. A standard agenda
will be circulated prior to the meeting by the CEO. The CEO maintains
an action and decision lists.
Quorum requirements
Individuals in attendance at board or committee meetings by invitation
may participate in discussions but do not form part of the quorum for
board or committee meetings.
Board
A representative quorum for meetings may be fi xed by directors from
time to time but is never less than two directors, one of whom must
be a director of the holding company (Howden Group South Africa or
James Howden & Godfrey Overseas Limited).
ARC and RENSEC
A representative quorum for meetings is a majority of members
present.
Exco
Five members will constitute a quorum, one of which must be the
CEO or CFO.
2016 meeting attendance
Member name Date of appointment 23 Mar 16 1 Jun 16 24 Aug 16 7 Dec 16
The board T Bärwald
IH Brander
J Brown
W Thomson
M Malebye
M Vigouroux
H Mathe
M Patel
K Johnson
Appointed 1 January 2009
Appointed 26 July 2011
Appointed 3 March 2005
Appointed 1 February 2016
Appointed 7 November 2007
Appointed 8 December 2016
Appointed 1 July 2012
Appointed 15 December 2014
Appointed 1 March 2012
P
P
P
P*
P
–
P
P
P
P*
P
P
P
P
P*
P
P
P
–
P
P
P
P
–
P
P
P
–
P
P
P
P
P*
P
P
P
ARC M Patel
H Mathe
M Malebye
Appointed 15 December 2014
Appointed 1 July 2012
Appointed 7 November 2007
P
P
P
P
P
P
P
P
P
P
P
P
RENSEC M Malebye
H Mathe
M Patel
IH Brander
J Brown
Appointed 11 June 2009
Appointed 1 July 2012
Appointed 15 December 2014
Appointed 25 August 2011
Appointed 3 December 2010
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P = present; A = absent
* Invited and present as an attendee at the meeting.
55Howden Integrated annual report 2016
Corporate governance report continued
Board, ARC and RENSEC evaluationsPerformance of the board, the ARC and RENSEC was assessed
internally by the board Chairman with the assistance of the Company
Secretary. The objective of this process was to:
Determine how the board or the relevant committee has performed
Ascertain the effectiveness of the board
Identify areas that might require attention as part of the board work
plan for the coming year
The assessments did not reveal any signifi cant areas requiring
immediate attention and concluded that the board, the ARC and the
RENSEC had effectively discharged their respective responsibilities.
The performance of the board, the ARC and RENSEC and individual
directors will be assessed each year.
Directors’ dealingsDirectors, offi cers and other selected employees are prohibited from
dealing in securities for a designated period preceding the
announcement of its fi nancial results or in any other period considered
sensitive. The Chairman, through the Company Secretary, approves
all dealings by directors during open periods. The Group has
developed a formal policy to govern this process.
There were no HAHL share or security dealings by HAHL directors or
Exco members in 2016.
Company SecretaryThe Group Company Secretary is responsible for ensuring all directors
have full and timely access to the information required to properly
discharge their duties so that the board can function effectively. The
board is cognisant of the duties imposed on the Company Secretary,
who is accordingly empowered to properly fulfi l his duties.
In addition to the statutory duties of the Company Secretary, he fulfi ls
the following functions:
Induction of directors
Provides guidance to the board on its duties (collectively and
individually)
Reviews and negotiates contractual terms and conditions agreed
to by the Group
The Group Company Secretary is not a director of Howden Africa
Holdings Limited and the board is satisfi ed that the Company
Secretary maintains an arm’s length relationship with the board as he
is not an associate of any director and is not subject to undue
infl uence of one or more of the directors.
C Masson was appointed as Company Secretary on 1 August 2016
with C Koopman resigning as Company Secretary effective 1 August
2016. He is an admitted attorney of the High Court with a BA Law,
an LLB degree as well as a Higher Diploma in Corporate Law from the
University of Johannesburg and has nine years’ post-admission
experience. C Masson occupied the role of the Company Secretary
for the Company during 2014 whilst C Koopman was on maternity
leave.
The performance of the Company Secretary is evaluated annually in
line with the Howden Africa Group’s standard appraisal process which
entails the identifi cation of SMART objectives (KRAs), a mid-year and
fi nal year-end review to monitor and rate the Company Secretary’s
performance in terms of the set KRAs. The board as a whole has
discussed the performance of the Group Company Secretary and is
satisfi ed with his competence, qualifi cations and experience.
Political contributionsIt is Group policy not to make donations or other contributions to
political parties or causes.
Sustainable development governanceIt is a Company requirement to operate within a sustainable business
environment. We take our sustainable business guidance from the
Global Reporting Initiative (GRI G4) and cover the three development
spheres of economic, social and environmental performance.
Our sustainability policy is based on balanced society rules, local and
global labour practices and international human rights standards. The
Company strives to be economically viable, environmentally
regenerative and accountable for its products and services.
Please refer to the following sections:
Performance on page 4
Stakeholders on page 12
Strategies and targets on page 16
Review of material issues on page 32
Risk management on page 68
Ethics performanceA review by RENSEC of the Group’s ethical performance appears on
page 62 of the integrated annual report.
IT governanceKing III defi nes IT governance as “the effective and effi cient
management of IT resources to facilitate the achievement of corporate
objectives”. The Group has developed and established a set of
comprehensive IT policies and procedures that support these
objectives.
A high-level review of the alignment of the Group’s IT governance
structures and processes to the principles of King III has been
conducted, with results set out below:
56 Howden Integrated annual report 2016
IT governance compliance
King III IT governance recommendation Implementation status
The board should be responsible for information
technology (IT) governance/IT governance
should be placed on the board agenda
Information technology risk, strategy and performance are the responsibility of the
board. In 2016, IT was a regular item on the board’s agenda. The Chief
Information Offi cer updates the board on progress.
IT should be aligned with the performance and
sustainability objectives of the Company
The Group’s IT strategy is formulated by a worldwide Howden Steering
Committee, the ISSG (Information Systems Steering Group). One of the objectives
of the ISSG is to align IT/IS strategy with wider Group objectives. The Group’s
Chief Information Offi cer is a member of this committee.
The board should delegate to management the
responsibility for the implementation of an IT
governance framework
The board has delegated to the Chief Information Offi cer and executive
management the responsibility to control and manage the IT governance
framework.
The board should monitor and evaluate
signifi cant IT investments and expenditure
Large, strategic and signifi cant IT projects are approved by the board, Chief
Information Offi cer and the Howden Global Chief Information Offi cer, to ensure
effective procurement processes and alignment with strategy and technology
standards.
IT should form an integral part of the Company’s
risk management
IT risks are identifi ed, assessed and managed by an IT Risk Committee chaired by
the Group’s Chief Information Offi cer which provides a quarterly report to the Exco
Risk Committee.
The Group has comprehensive IT disaster recovery policies and procedures in
place which are audited by internal audit.
The board should ensure that information assets
are managed effectively
All personal, commercially sensitive and confi dential information stored in systems
have restricted access procedures, eg ERP, fi nance, payroll and HR systems. All
applications are subject to a CIA (confi dentiality, integrity and availability) analysis
to ensure appropriate security controls are implemented.
A risk committee and audit committee should
assist the board in carrying out IT responsibilities
Exco risk management and board audit and risk committees are in place and IT
risks are reported to these committees where applicable.
Legal complianceThe Company has an established legal department with two qualifi ed
legal professionals, one of whom is the Company Secretary and an
admitted attorney, the other being the legal offi cer and an advocate.
The Company Secretary regularly updates members of the board on
changes in applicable laws, rules, codes and standards. The board,
with the assistance of the Company Secretary, regularly monitors the
impact of laws (eg competition law), rules (eg JSE Listings
Requirements), codes (eg SEIFSA, B-BBEE, bargaining council
decisions and agreements), and standards.
Where necessary, members of the board, Exco, Company Secretary
and legal offi cer attend training.
Employees who interact with customers, competitors, suppliers and
vendors have received training on competition law as well as anti-
corruption and anti-bribery laws.
In addition, the Company has access to its ultimate holding
company’s legal department, which is able to assist with compliance
matters.
The Group endeavours to stay abreast of all intended or promulgated
legislation through regular interaction with its legal department.
During the period, the following acts continued to have a signifi cant
impact on the Group:
Competition Act
Occupational Health and Safety Act
Protection of Personal Information Act
Income Tax Act
Tax Administration Act
Employment Equity Act
Broad-based Black Economic Empowerment Act and related
codes of best practice
King III complianceThe Company aims to continually improve compliance and is
committed to complying with King III. During the period, the Group
continued to enhance its governance, assurance and risk
management practices relative to the requirements of King III and the
Companies Act. The Governance Committee will during the course of
2017 prepare its road map for and begin its implementation of the
King IV Report on Corporate Governance for South Africa 2016.
57Howden Integrated annual report 2016
Corporate governance report continued
The Group continues to entrench King III principles into its internal controls, policies, terms of reference and overall procedures. Below is an
overview of the Company’s compliance with King III:
Applied Partially appliedUnder review/
do not apply
Ethical leadership and corporate citizenship
Effective leadership based on an ethical foundation ✔
Responsible corporate citizen ✔
Effective management of Company’s ethics ✔
Assurance statement on ethics in integrated annual report ✔
Boards and directors
The board is the focal point for and custodian of corporate governance
Strategy, risk, performance and sustainability are inseparable ✔
Directors act in the best interests of the Company ✔
The board should consider business rescue proceedings or other turnaround mechanisms as soon as the Company is fi nancially distressed as defi ned in the Companies Act ✔
The Chairman of the board is an independent non-executive director ✔1
Framework for delegation of authority has been established ✔
The board comprises a balance of power, with a majority of non-executive directors who are independent ✔
Directors are appointed through a formal process ✔
Formal induction and ongoing training of directors ✔2
The board is assisted by a competent, suitably qualifi ed and experienced Company Secretary ✔
Regular performance evaluations of the board, its committees and individual directors ✔
Appointment of well-structured committees and oversight of key functions ✔
An agreed governance framework between the Group and its subsidiary boards is in place ✔
Directors and executives are fairly and responsibly remunerated ✔3
Remuneration of directors and senior executives is disclosed ✔4
The Company’s remuneration policy is approved by its shareholders ✔
Audit committee
The board should ensure the Company has an effective and independent Audit Committee ✔
Audit Committee members should be suitably skilled and experienced independent non-executive directors ✔
Chaired by an independent non-executive director ✔
The Audit Committee should oversee integrated reporting ✔5
The Audit Committee should ensure that a combined assurance model is applied to improve effi ciency to provide a coordinated approach to all assurance activities ✔
Satisfy itself of the expertise, resources and experience of the Company’s fi nance function ✔
Responsible for overseeing internal audit ✔
Integral to the risk management process ✔
Oversees the external audit process ✔
Reports to the board and shareholders on how it has discharged its duties ✔
Governance of risk
The board is responsible for the governance of risk and setting levels of risk tolerance ✔
The board should determine the levels of risk tolerance ✔
The Risk Committee assists the board in carrying out its risk responsibilities ✔6
58 Howden Integrated annual report 2016
Applied Partially appliedUnder review/
do not apply
Governance of risk (continued)
The board delegates the process of risk management to management ✔
The board ensures that risk assessments and monitoring is performed continually ✔
Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks ✔
Management implements appropriate risk responses ✔
The board receives assurance on the effectiveness of the risk management process ✔
The board ensures continual risk monitoring by management ✔
Suffi cient risk disclosure to stakeholders ✔
Governance of information technology
The board is responsible for IT governance ✔
IT is aligned with the performance and sustainability objectives of the Company ✔
Management is responsible for implementing an IT governance framework ✔
The board monitors and evaluates signifi cant IT investments and expenditure ✔
IT is an integral part of the Company’s risk management IT assets are managed effectively ✔
The Audit and Risk Committee assists the board in carrying out its IT responsibilities ✔
Compliance with laws, codes, rules and standards ✔
The board ensures the Company complies with relevant laws ✔
The board and directors have a working understanding of the relevance and implications of non-compliance ✔
Compliance risk forms an integral part of the Company’s risk management process ✔
The board has delegated to management the implementation of an effective compliance framework and processes ✔
Internal audit
Effective risk-based internal audit ✔
Internal audit should follow a risk-based approach to its plan ✔
Internal audit should provide a written assessment of the effectiveness of the Company’s system of internal controls and risk management ✔
The Audit Committee should be responsible for overseeing internal audit
Internal audit is strategically positioned to achieve its objectives ✔7
Governing stakeholder relationships
Appreciation that stakeholder perceptions affect a company’s reputation ✔
Management proactively deals with stakeholder relationships ✔
There is an appropriate balance between its various stakeholder groupings ✔
Equitable treatment of stakeholders ✔
Transparent and effective communication to stakeholders ✔
Disputes are resolved effectively and timeously ✔8
Integrated reporting and disclosure
Ensures the integrity of the Company’s integrated annual report ✔
Sustainability reporting and disclosure is integrated with the Company’s fi nancial reporting ✔
Sustainability reporting and disclosure is independently assured ✔9
59Howden Integrated annual report 2016
Corporate governance report continued
Explanation register
Note Main category Subcategory Exception/not applied commentary
1 Chapter 2 Principle 2.16 Howden Africa’s Chairman, Ian Brander, is employed by Howden
Global and is therefore considered a non-executive director in terms
of King III and the JSE Listings Requirements. As per the
recommendations of King III, the Company has appointed a lead
independent director to compensate for any possible lack of an
independent Chairman.
2 Chapter 2 Principle 2.20 Internal mentorship programmes are not implemented due to the
small size of the board and the fact that current board members are
experienced directors. However, directors are encouraged to fi nd a
mentor of their choice.
3 Chapter 2 Principle 2.25 Howden Africa does not have a share-based incentive scheme in
place.
4 Chapter 2 Principle 2.26 We disclose independent non-executive and executive directors’
remuneration on page 134. Remuneration of non-executive directors
(J Brown and I Brander) has not been disclosed as they do not
receive any remuneration for their services as members of the
Howden Africa Holdings Limited board from HAHL and/or its
subsidiaries.
5 Chapter 3 Principle 3.4 The Audit and Risk Committee has not deemed it necessary to
recommend that the board should engage an external assurance
provider to provide assurance on any material elements of the
sustainability part of the integrated annual report. Various parts that
impact sustainability reporting are verifi ed through other processes
(eg health and safety external audits, BEE verifi cation audits).
6 Chapter 4 Principle 4.3 The Risk Committee has been merged with the Audit Committee. In
line with the JSE Listings Requirements, the merged committee
comprises independent non-executive directors. Accordingly
executive directors are not members of the main Risk Committee but
have a standing invitation to attend meetings and provide the
necessary input. Executive directors are members of the Exco Risk
Committee.
7 Chapter 7 Principle 7.5 The Chief Audit Executive is based locally and regularly attends Audit
and Risk Committee meetings. The board does not deem it necessary
to include the Chief Audit Executive in local Executive Committee
monthly meetings.
8 Chapter 8 Principle 8.6 Dispute resolution mechanisms need to be considered on a case-by-
case basis and should be matched with the circumstances. Contracts
concluded with customers often incorporate dispute resolution
procedures. The board is cognisant of the fact that dispute resolution
such as mediation and conciliation should be considered prior to legal
recourse but also understands that sometimes dispute resolution is
not the appropriate forum.
9 Chapter 9 Principle 9.3 There is no specifi c sustainability assurance provider. Various parts
that impact sustainability reporting are verifi ed through other
verifi cation processes (eg health and safety external audits, BEE
verifi cation audits – these are done in accordance with legislation or
codes of good practice).
A detailed King III compliance register is available on the Company’s website: www.howden.co.za.
60 Howden Integrated annual report 2016
The Remuneration, Nomination, Social and Ethics CommitteeThe committee is chaired by an independent non-executive director
and operates under a mandate from the board, with formal terms of
reference approved by the board. The committee meets regularly
during each year and a list of members as at 31 December 2016, and
number of meetings attended, is set out on page 55. The Company
Secretary attends all meetings as secretary. The CEO, CFO and
Human Resources Director of Howden Africa attend all meetings by
invitation. No attendee may participate in any discussion or decision
regarding his or her own remuneration.
MembershipThe committee consists of fi ve non-executive directors, the majority of
whom are independent:
Morongwe Malebye (Chair) – appointed 11 June 2009
James Brown – appointed 3 December 2010
Ian Brander – appointed 25 August 2011
Humphrey Mathe – appointed 31 August 2012
Mitesh Patel – appointed 15 December 2014
Remuneration philosophyThe remuneration philosophy of Howden Africa is to ensure that
employees are rewarded for their contribution according to industry,
market and country benchmarks. The committee is responsible for
the evaluation and approval of the broad remuneration strategy of the
Company.
Remuneration policyEmployee guaranteed pay
Employees are guaranteed a basic salary set at levels that are
competitive in the relevant market. The basic salary and other benefi ts
are reviewed annually and regularly benchmarked against employees
in comparable industry sectors. The Group uses the services of
PwC Remchannel to benchmark employees.
Weekly paid employees are paid in line with industry collective
agreements.
Executive and senior manager remuneration and incentives
Howden Africa seeks to attract, motivate and retain exceptional
executives who have the experience of operating in a complex
engineering and manufacturing environment. The remuneration of
executive directors and senior management is based on a total cost
of employment, which includes a fi xed guaranteed package, which
includes a company car or vehicle allowance, benefi ts such as
pension fund and medical aid and a cash variable incentive linked to
performance.
For further information on the remuneration paid to executive
directors, refer to note 35 of the fi nancial statements. The said note
also includes details on performance requirements which are linked to
bonus entitlements.
Howden Africa does not operate a share incentive scheme; however,
some senior executives participate in a scheme operated by the
Group’s majority shareholder, Colfax.
Employee benefi ts
Pension fund – monthly paid employees
The Group operates both a defi ned benefi t pension fund as well as a
defi ned contribution pension fund.
Defi ned benefi t pension fund
The Group operates a post-retirement scheme that covers all
employees employed before 1 January 2001. The pension fund is a
fi nal salary defi ned benefi t plan. The assets of the fund are held in an
independent trustee administered fund, which is administered in
terms of the Pension Fund Second Amendment Act No 39 of 2001.
The fund is valued annually using the projected unit credit method.
The latest actuarial valuation for accounting purposes was performed
on 31 December 2016 and the most recent statutory actuarial
valuation was performed as at 31 March 2015.
In late 2014 the Fund purchased annuities to back the pensions
payable to existing pensioners. In 2015 approval was obtained from
the Financial Services Board (FSB) for ownership of these annuities to
be transferred to the pensioners themselves. During 2015, the
remaining members (who were all active employees) were offered the
opportunity to join the defi ned contribution pension fund (DC plan)
for future service and to transfer their accrued benefi ts from the fund
into the DC plan. Of the 52 employees, 51 accepted this transfer and
1 retired during the offer window. An annuity has been bought for the
1 new pensioner. In late 2016 approval from the Financial Services
Board (FSB) was obtained to transfer active members to the defi ned
contribution pension fund (DC plan). The active members’ fund was
transferred to the DC plan in November 2016. Six pensioners remain
on the DB plan and the liability is fully insured, the fund purchased
annuities to back the pensions payable to existing pensioners.
Defi ned contribution pension fund
Monthly paid employees joining on or after 1 January 2001 are
required, subject to fund rules eligibility, to join the Howden SA
defi ned contribution pension fund and group life scheme.
The Company contributes the equivalent of 9% based on an
employee’s basic salary, 7.01% of which is allocated toward the
pension fund credit. The remaining 1.99% is allocated towards fund
administration and Group life premiums.
Pension fund – hourly paid employees
Hourly paid employees belong to the metal and engineering
bargaining council funds. These are the Engineering Industries
Pension Fund (a closed fund effective January 2001) and the Metal
Industries Provident Fund. The Company contributes 6,9% of the
member’s wage to these funds.
Medical aid
Medical aid is compulsory for all monthly paid employees. Weekly
paid employees have an option to belong to the medical aid as it is
not a condition of employment in the metal and engineering industries
bargaining council.
The Company contributes a set rand value depending on the
Discovery medical plan selected by an employee. This is regardless of
seniority or salary on which that employee is.
Remuneration, nomination, social and ethics report
61Howden Integrated annual report 2016
Short-term incentive
Employees receive an annual discretionary incentive bonus based on
Company and individual performance targets. Howden Africa has a
formal framework for performance management that is linked to and
supports the annual short-term incentive scheme. Targets are
reviewed regularly to ensure they remain appropriate.
Long-term incentive
A long-term incentive scheme has been implemented which has been
designed:
As a long-term cash plan which tracks company performance
using specifi c key performance indicators (KPIs)
To measure the growth in operating profi t on a year-to-year basis
To award an amount at the outset which will grow or shrink
depending on the Company’s performance against the KPIs, and
will pay out in years two, three and four
This scheme will be applicable to new associates who are identifi ed
as key talent or associates who will occupy roles which would
ordinarily come with a package which is inclusive of an LTIP.
The LTIP will operate as follows:
Each eligible associate will be awarded an initial amount based
upon a percentage of their base pay, which will be held in the
scheme, and which will vest in three equal portions over the
following two, three and four years
At vesting the portion will have grown (or reduced) based upon the
performance of the Company
The mechanics of how the portions grow will be self funding, and
will draw from the success of the business
Non-executive directors’ fees
Independent non-executive directors’ fees are benchmarked on an
annual basis and approved by shareholders at the annual general
meeting of shareholders.
For information on non-executive director fees paid in 2016, refer to
note 35 of the annual fi nancial statements.
Social and ethical performance in 2016 Labour and employment
Employment
The Group recognises that the most important resource is its
employees – the men and women whose commitment, creativity,
skills and energy are central to the business goals.
It is important to the Group that the workplace remains free from all
forms of discrimination, intimidation and harassment. It is believed
that an environment where employees can maximise their potential is
only possible when each person is treated fairly and with respect.
Howden will:
As a minimum, meet all applicable employment laws, rules and
regulations, including laws, rules and regulations governing
working conditions, wages, hours, benefi ts and minimum age for
employment, wherever it conducts business
Take all actions with its employees, in all phases of the
employment relationship, without regard to gender, colour, race,
ethnicity, sexual orientation, physical or mental disability, age,
pregnancy, religion, veteran status, national origin or any other
legally protected status
Broad-based black empowerment and employment equity
The Group has been audited under the amended codes of good
practice and successfully achieved a Level 4 contributor status under
the more stringent amended codes. Notwithstanding this success the
Group continues to strive to improve its performance in this regard.
The Group’s efforts in respect of employment equity, skills
development, preferential procurement and socio-economic
development are more fully dealt with on page 45 under the heading
“Transformation and society”.
It is confi rmed that the Group has complied with its reporting
requirements in terms of the Employment Equity Act 55 of 1998.
Ethics management and code of conduct
Howden has a zero-tolerance approach to unethical behaviour and is
committed to ensuring that the Group and its employees uphold
Howden’s good reputation, as its integrity can only be maintained by
operating its business in accordance with the highest ethical
standards and in compliance with all applicable laws.
The Group code of conduct governs the conduct of all Howden’s
employees throughout the Group and is aligned with the Organisation
for Economic Cooperation and Development’s recommendations
regarding corruption.
The code covers, among others, the following areas:
Reporting violations
Compliance with laws, rules and regulations
Honesty and ethical conduct
Competition and fair dealing
Confl icts of interest
Insider trading
Unfair competition/anti-trust
Employment
Bribes, gifts and gratuities
Political contributions
Safety, health and environmental protection
The code of conduct is available to all employees on the Group’s
intranet.
The Group furthermore expects all suppliers to abide by a supplier’s
code of conduct covering, among others, the following areas:
Legal compliance and business practices
Prohibition of corruption and bribery
Respect for the basic human rights of employees
Health and safety of employees
Environmental protection
Remuneration, nomination, social and ethics report continued
62 Howden Integrated annual report 2016
All managers are responsible for compliance with and enforcement of
this code for their area of operation, including with respect to sales
agents, representatives, independent contractors, distributors and
consultants.
Whistle-blowing procedures are in place to encourage reporting of
unethical behaviour. In mid-2014 the Company changed over from
the US-based Ethics Point platform to the local South African Deloitte
Tip-offs Anonymous platform (Ethics Hotline).
The purpose of the Ethics Hotline is to allow employees and
individuals to report ethics matters to the Company anonymously.
Issues such as ethics violations, theft, fraud, discrimination,
harassment, and substance abuse are reported by an employee to
the Ethics Hotline.
Ethics Hotline is a secure, third-party anonymous incident reporting
system and is available 24 hours a day via the website or by calling
the Ethics Hotline call centre.
Social and economical development and corporate citizenship
Howden believes that being a responsible and contributing corporate
citizen is a key component of the Company’s business strategy.
Through its community investment strategy, the Company is
committed to the empowerment, development and growth of
disadvantaged communities.
The following are commonly shared objectives of Howden Africa’s
corporate social investment programme:
Make a positive, sustainable impact on the communities in which
Howden Africa operates through investing in improving the quality
of life of disadvantaged communities
To develop and empower disadvantaged communities in the
social, economic and environmental spheres for the sustainability
and long-term growth of the Company
To build and improve relationships with the Company’s existing
and potential stakeholders through forming mutually benefi cial
partnerships
To create and enhance the Company’s reputation as a caring
corporate citizen
To attract quality, socially responsible staff to the Company as well
as retain and enhance the loyalty and pride in the Company for
existing staff
To strengthen relationships with major customers through the
strategic positioning of Howden Africa as a contributor in the
development of disadvantaged communities
The Group’s efforts in respect of corporate social investment are more
fully dealt with on page 51 under the heading “Transformation and
society”.
Health, safety and environment
The management and employees of Howden are committed to
maintaining a safe and healthy working environment as a primary
objective and continually identifying negative aspects that their
products and operations may have on the environment.
Furthermore, Howden is committed to meeting the needs of
customers and consumers in an environmentally sound and
sustainable manner, through continuous improvement of our
environmental performance in all our activities.
The Group’s efforts in respect of health, safety and environment are
more fully dealt with on page 42.
Consumer relations
To a large degree, the Consumer Protection Act No 68 of 2008 does
not apply to the Group’s transactions with customers as only a small
percentage of the Group’s transactions fall below the R2 million juristic
consumer threshold as set by the Minister in terms of section 6(1) of
the Consumer Protection Act.
The majority of Group contracts are negotiated extensively with its
customers by the various business units in conjunction with the
Group’s legal department.
There are no known complaints from consumers to the Consumer
Commission and/or Tribunal relating to any of the Group companies.
Committee assuranceThe committee is satisfi ed that it complied with its legal, regulatory or
other responsibilities during the 2016 fi nancial year.
M Malebye
Chairperson
24 March 2017
63Howden Integrated annual report 2016
Board of directors
Non-executive Chairman
BSc (Mech Engineering (Hons), DEng (Honorary Degree)
Ian Brander has been a non-executive director of Howden Africa Holdings Limited since 26 July 2011.
Mr Brander joined Howden in 1983 and has undertaken a diverse range of roles and projects allowing him to be involved in a wide range of technologies, from fans to wind turbines to tunnel boring machines, robotics and compressors, progressing from design and development to engineering management, project management and general management. He was appointed Howden Global technology director in 2006, operations director in 2008 and, in August 2011, he became Howden Global CEO.
Mr Brander also sits on (among others) the boards of Howden Group South Africa Limited, James Howden & Godfrey Overseas Limited, Howden Holdings Limited (UK) and Howden Group Limited (UK).
Independent non-executive director
CA(SA)
Mitesh Patel has been the chairperson of the Audit Committee and independent non-executive director of Howden Africa Holdings Limited since 15 December 2014.
Mr Patel is the managing partner of Nkonki. He is an accomplished audit partner, non-executive director and curator, equipped with a commanding track record over the past 14 years of bringing sound judgement and a strong commercial perspective to business in unlisted markets, listed markets and state-owned entities.
Mr Patel is, in addition to his directorship within Howden, the independent non-executive chairman of Wearne Limited and Imbalie Beauty Limited and an independent non-executive director of Verimark Limited.
Lead independent non-executive director
MSc (Ind Engineering), MBA and BSc (Mech Engineering)
Morongwe Malebye has been independent non-executive director of Howden Africa Holdings Limited since 7 November 2007.
Ms Malebye has worked in senior and executive positions at blue chip engineering companies such as Sasol, TFR-Spoornet, Armscor, and subsidiaries of international and listed companies such as Babcock Africa and PB Africa. Ms Malebye’s expertise are in the utilities sector and manufacturing. She is a valuable contributor to growth strategy, stakeholder engagement and asset management.
Currently, she is also a director and co-founder of Ditiropele, an engineering company and CEO of Dickinsons Industrial Services.
Independent non-executive director
BSc (Hons), MSc (Mineral Exploration), PhD (Applied Geology)
Humphrey Mathe has been an independent non-executive director of Howden Africa Holdings limited since 1 July 2012.
He has in excess of 39 years’ experience in the mining industry and is the chief executive offi cer of Tranter Resources. Previously he was the CEO of Scinta South Africa (Pty) Limited, an executive general manager at Exxaro Resources Limited. He serves on the investment committee of Acrux Resources and is a Fellow of the Geological Society of South Africa and registered with the South African Council for Natural Scientifi c Professions (SACNASP) as a professional scientist.
Dr Mathe also sits on the boards of Ferret Mining and Environmental Services (Pty) Limited, Scinta South Africa (Pty) Limited (non-executive chairman), Tranter Group of companies, Talent10 Holdings, Council for Geoscience (CGS), Wescoal Holdings Limited and Handa Copper Corporation.
(45) Morongwe Malebye (42) Mitesh Patel (66) Humphrey Mathe (55) Ian Brander
64 Howden Integrated annual report 2016
Chief Financial Offi cer (CFO)
CA(SA)
Marinella Vigouroux has been Howden Africa Holdings Limited’s CFO since 8 December 2016.
Mrs Vigouroux moved to the CFO role from a Financial Director role within the Fans and Heat Exchangers division of Howden. She brings with her, extensive knowledge of the Construction and Engineering industry and a key operational understanding of the Howden business.
She has specifi c expertise in fi nancial control, systems implementation, strategic management and fi nancial management and reporting.
Mrs Vigouroux does not sit on any other boards
Non-executive director
CA(UK)
James Brown has been a non-executive director of Howden Africa Holdings Limited since 3 March 2005.
Mr Brown has had various senior fi nancial roles across his 27-year career at Howden. Since 2003, he has been Chief Financial Offi cer of Howden Global. He is responsible for IT and business systems development in Howden, fi nancial control and overall fi nancial performance of the business.
Mr Brown also sits on (among others) the boards of Howden Group South Africa Limited, Howden UK Limited, Howden Group Limited (UK) and Howden Holdings Limited.
Chief Executive Offi cer (CEO)
Bsc (Mech Engineering)
William Thomson was appointed initially as the Chief Operating Offi cer (COO) from 1 February 2016, for a short transition period, and from June 2016 was appointed as the CEO of Howden Africa Holdings Limited, for a period of approximately two years.
Mr Thomson has signifi cant experience running a global heavy fan and heater business and has extensive end-to-end knowledge of procurement, manufacturing and service processes of the Howden core range fans and heaters. He has signifi cant product knowledge and its application in the power and mining industries.
(57) James Brown (35) Marinella Vigouroux (55) William Thomson
65Howden Integrated annual report 2016
Executive management (Exco)
With the Group since 2009
BSc (Hons) Mechanical Engineering, MBA (Finance), graduate diploma in marketing management (IMM), PrEng – registered professional engineer with Engineering Council of South Africa (ECSA), Council Member of ECSA, President of South African Institution of Mechanical Engineering (SAIMechE)
Managing director of James Howden Holdings (Pty) Limited to lead both Howden Projects and Howden Fan Equipment divisions, was director of Howden Africa (Pty) Limited, Executive Committee member of Howden Africa Holdings Limited and Risk Committee member.
With the Group since 2005
B.Phil Hons (Marketing)
National diploma in electrical engineering, MBA general mgt (major – marketing and company strategy) (University of the Free State), advanced business communication (Unisa), advanced business-to-business marketing
Corporate affairs and Group marketing director. Director of James Howden Holdings (Pty)Limited and Howden Donkin (Pty) Limited, Executive Committee member and Exco Risk Committee member.
With the Group since 1995
BComm (Human Resources Management) (University of Port Elizabeth)
Human resources director of Howden Africa (Pty) Limited. Executive Committee member, Exco Risk Committee member and Sustainability Committee member.
With the Group since 1980
National diplomas in mechanical engineering and business management (Unisa)
Managing director of Howden Power, an operating division of Howden Africa (Pty) Limited, director of James Howden Holdings Limited, Executive Committee member and Exco Risk Committee member.
With the Group since 2015
BSc Eng (Mech) (Wits)
General manager of Howden Donkin (Pty) Limited. Director of Howden Donkin (Pty) Limited, Executive Committee member and Exco Risk Committee member.
With the Group since 2011
Admitted Attorney, BA (Law), LLB (Hons), H. Dip Corporate Law
Howden Africa Holdings Ltd Company Secretary, Howden Africa (Pty) Ltd Company Secretary, James Howden Holdings (Pty) Ltd Company Secretary, Howden Donkin (Pty) Ltd Company Secretary, Executive Committee member, Exco Risk Committee member, Sustainability Committee member, Governance Committee member.
(41) Massimo Borello (52) Ancherien du Plessis
For details on directorate changes, please refer to the corporate governance report on page 53.
For Howden Africa Holdings Limited director remuneration, please refer to note 35 of the annual fi nancial statements and the remuneration report on page 61.
Howden Africa Holdings Limited does not have any prescribed offi cers.
(53) Clinton Swaffi eld (47) Geoffrey Chingwaru (34) Craig Masson (46) Kudzai Nyangoni
66 Howden Integrated annual report 2016
67Howden Integrated annual report 2016
Corporate governance
Design and operation of supplied and serviced equipment
Operational
Insurable
General legislation and regulatory compliance
A consistent methodology is applied by each Howden business unit
to identify and rate risks by likelihood and fi nancial impact. Risks are
then categorised as either low, medium, high or major. This rating and
categorisation determines the intensity of the subsequent risk
management process. Mitigating actions are implemented, monitored
and reported on at every level. Reporting is quarterly, starting in
February each year.
At the operational level, identifi ed risks are entered in operational risk
registers in a descriptive but abbreviated form. Risks rated high or
major are then extracted and entered in detail on operational risk logs.
Risk management report process
Businessunits
Exco riskcommittee
Audit and risk
committee
Group register – medium and major risk
Businessunit risk registers
Our risk tolerance levels are set using a likelihood/consequence
assessment table.
For detailed information on the Risk Committee’s composition and
structure, responsibilities, meetings and activities, please refer to the
corporate governance review on page 77.
Our key risk areas
Loss of key customers
Failure to win key contracts
Downturn in a critical industry sector
Industrial action and social unrest
Our approachManaging risk is critical to the success and sustainability of Howden
as it is faced with a wide variety of risks, which can have a strategic,
fi nancial, operational and reputational impact. Effectively managing
risk through a consistent process also supports the delivery of
Howden’s strategic objectives.
Our risk management model is based on:
Regularly reviewing the Company’s risk, capacity, appetite and
tolerance
Monitoring changes, the ongoing effectiveness of business
controls; and the social and political environment that could alter
current and planned operations and objectives
Setting strategic objectives
Identifying risks to achieving those objectives
Assessing the likelihood and consequence of risks
Accepting or mitigating identifi ed risks
Assessing residual risk after mitigation measures
Modifying controls as necessary
Independent risk-based audits and reporting
High and major corporate risks are then added to the Executive
Committee’s risk register and entered into corporate risk logs for
quarterly review by the Risk Committee. Risks are scored to
determine their potential effect. Once this review has taken place, high
and major risks are presented to the Audit and Risk Committee and,
in turn, the board.
Risk, capacity, appetite and tolerance
Our risk capacity is to maintain short and long-term liquidity. Available
cash and loan facilities shall be in place to ensure that the business
does not experience any long-term liquidity issues.
Our risk appetite is focused on ensuring that the business is
sustainable. This includes achieving annual growth through the
strategic plan and supporting initiatives, avoiding negative impact on
brand reputation and mitigating any negative market conditions that
could signifi cantly impact our fi nancial performance.
Our risk tolerance is defi ned as operational. Our tolerances help
ensure that the business does not breach its risk appetite. This is
completed by setting limits and monitoring, mitigating and giving
frequent feedback on performance.
The risk capacity, appetite and tolerance are identifi ed by the CEO
(risk manager) in consultation with the Risk Committee. The CEO
reviews and recommends the risk appetite and tolerance levels to the
Audit and Risk Committee on an annual basis. After consideration the
Audit and Risk Committee will recommend, on an annual basis, to the
board that the risk appetite and tolerance be approved.
Risk types on which risk tolerance limits and controls are set and
monitored are:
Health, safety and environment
Human capital management
Terms and conditions supply and purchase
Markets/customer exposure
Financial control
Risk management report
68 Howden Integrated annual report 2016
Description Mitigation action
Loss of key
customers
A division may lose a major customer.
This could have a signifi cant impact on the Group and
would result in a signifi cant reduction in turnover and
profi ts.
Ongoing active marketing and maintaining a focus on
providing technical solutions to meet customers’ needs.
Continuous gathering of market intelligence and
competitor analysis.
Failure to
win key
contracts
Failure to win a substantial portion of upcoming contracts
would decrease potential turnover and profi t and could
have the effect of establishing long-term competitors.
Maintaining close working relationships with major
customers. Strive to engage early in the customer process
i.e. from the feasibility stage of projects.
Key factors for ensuring this are: Constantly maintaining
high skill levels throughout the organisation, focusing on
high levels of customer service, retaining brand strength
and managing a competitive supply chain.
Downturn in
critical
industry
sector
A reduction in capital investments across the local
industries reduce opportunities to supply new equipment.
Expansion of the customer base, via market growth in the
rest of Africa.
Industrial
action and
social
unrest
Industrial action and social unrest in South Africa may
result in the deferment or cancellation of investment and
shortage of reliable sources of supply in the country. More
looming strikes may further damage investor confi dence.
Maintain a low overhead cost base of key skills, utilising
resources from external contractors to manage peaks in
workload. Reduce reliance on local markets through
expansion into the rest of Africa.
Shortage
qualifi ed
resource
Transfer of core technical skills within the business, and
retention of qualifi ed engineers, in an industry where such
skills are a limited resource.
Howden conducts formal succession planning and skills
development training. A formal appraisal and development
programme supports the retention strategy.
Mentorship programmes are in place for critical skills
transfer from experienced employees. This risk is
constantly monitored.
Non-
compliance
Infringing anti-bribery, anti-competitive and anti-corruption
laws could result in reputational damage, breach of
contract, loss of work and customers, and reduced
turnover and profi tability.
Policies and procedures are in place across the business.
Formal compulsory training is provided to all new starts
and refresher courses issued to associates. This is
monitored by regular audits of existing controls. This risk
has been reduced.
Supply
disruption
There is a risk that industrial action both in-house and at
our subcontractors could result in signifi cant disruption to
our supply chain and result in contract penalties and
reputational damage.
A committee manages business continuity and sets out
contingency plans to mitigate potential disruptive events,
including supply disruption.
Proactive engagement with unions and bargaining councils
are an integral part of the process. The business also has
access to the wider Howden Global supply chain in the
event critical deliveries were at risk through local supply
chain disruption.
69Howden Integrated annual report 2016
This report contains standard disclosures from the GRI sustainability guidelines. A list of the standard disclosures and their locations in this
report is contained hereunder.
Standard
disclosure Standard disclosure titlePage number
Identifi ed
omission(s)
Reason(s) for
omission(s)
General standard disclosuresStrategy and analysis
G4-1 Statement from CEO and chairman of the board about the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability
23
G4-2 Description of key impacts, risks, and opportunities 68 – 69
Organisational profi le
G4-3 Name of the organisation Back cover
G4-4 Primary brands, products, and services 2 and 3
G4-5 Location of the organisation’s headquarters Back cover
G4-6 Number of countries where the organisation operates, and names of countries where either the organisation has signifi cant operations
6
G4-7 Nature of ownership and legal form 7
G4-8 Markets served 6, 9, 23, 25 – 27
G4-9 Scale of the organisation 4, 9
G4-10 Workforce breakdown 33
G4-11 Percentage of total employees covered by collective bargaining agreements
37
G4-12 Organisation’s supply chain 50 and 51
G4-13 Signifi cant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain
7
G4-14 Whether and how the precautionary approach or principle is addressed by the organisation.
45 – 49
G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses.
No endorsements
G4-16 List memberships of associations (such as industry associations) and national or international advocacy organisations in which the organisation:(a) Holds a position on the governance body(b) Participates in projects/committees(c) Provides fi nding beyond membership fees(d) Views the membership as strategic
No membership
Identifi ed material aspects and boundaries
G4-17 List all entities included in the organisation’s consolidated fi nancial statements or equivalent documents
Whether any entity included in the organisation’s consolidated fi nancial statements or equivalent documents is not covered by the report
Contents page, 113
G4-18 Process for defi ning the report content and aspect boundaries.
How the organisation has implemented the reporting principles for defi ning report content.
Contents page, 14, 15, 32
Contents page
GRI index
70 Howden Integrated annual report 2016
Standard
disclosure Standard disclosure titlePage number
Identifi ed
omission(s)
Reason(s) for
omission(s)
G4-19 Process for defi ning report content Contents page, 14, 15, 32
G4-20 Aspect boundary inside the organisation for each material aspect
Contents
G4-21 Aspect boundary outside the organisation for each material aspect
Contents
G4-22 Any restatements and the reasons for such restatements No restatements
G4-23 Signifi cant changes from previous reporting periods in the scope and aspect boundaries.
No changes
Stakeholder engagement
G4-24 List of stakeholder groups engaged by the organisation 12
G4-25 Basis for identifi cation and selection of stakeholders with whom to engage
12
G4-26 Organisation’s approach to stakeholder engagement 12
G4-27 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns
12, 32 to 51
Report profi le
G4-28 Reporting period Contents page
G4-29 Date of most recent previous report Contents page
G4-30 Reporting cycle (such as annual, biennial) Contents page
G4-31 Contact point for questions regarding report contents Back cover
G4-32 Whether report has been externally assured and whether an “in accordance” approach has been adopted
Not assured
G4-33 Organisation’s policy and current practice with regard to seeking external assurance for the report
60
Governance
G4-34 Governance structure of the organisation, including committees of the highest governance body
52 – 60
Ethics and integrity
G4-56 Organisation’s values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics
10, 61 – 63
Specifi c standard disclosuresCategory: economicAspect: economic performance
G4-EC1 Direct economic value generated and distributed 11
G4-EC3 Coverage of the organisation’s defi ned benefi t plan obligations 117 – 119
G4-EC4 Financial assistance received from government 125
Category: environmentalAspect: materials
G4-EN1 Materials used by weight or volume 46 and 47
71Howden Integrated annual report 2016
Standard
disclosure Standard disclosure titlePage number
Identifi ed
omission(s)
Reason(s) for
omission(s)
Aspect: energy
G4-EN3 Energy consumption within the organisation 47
Aspect: emissions
G4-EN16 Energy indirect greenhouse gas (GHG) emissions (Scope 2) 48 and 49
G4-EN17 Other indirect greenhouse gas (GHG) emissions (Scope 3) 48 and 49
Aspect: effl uents and waste
G4-EN23 Total weight of waste by type and disposal method 45 and 46
Aspect: products and services
G4-EN27 Extent of impact mitigation of environmental impacts of products and services
47
Aspect: transport
G4-EN30 Signifi cant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce
48
Category: socialSub-category: labour practices and decent workAspect: employment
G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region
33 – 35
G4-LA2 Benefi ts provided to full-time employees that are not provided to temporary or part-time employees, by signifi cant locations of operation
37 and 38
G4-LA3 Return to work and retention rates after parental leave, by gender
38
Aspect: labour/management relations
G4-LA4 Minimum notice periods regarding operational changes, including whether these are specifi ed in collective agreements
38
Aspect: occupational health and safety
G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender
42 – 45
Aspect: training and education
G4-LA10 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings
39 – 41
G4-LA11 Percentage of employees receiving regular performance and career development reviews, by gender and by employee category
39 – 41
Aspect: diversity and equal opportunity
G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity
34
GRI index continued
72 Howden Integrated annual report 2016
Standard
disclosure Standard disclosure titlePage number
Identifi ed
omission(s)
Reason(s) for
omission(s)
Aspect: equal remuneration for women and men
G4-LA13 Ratio of basic salary and remuneration of women to men by employee category, by signifi cant locations of operation
37
Aspect: labour practices grievance mechanisms
G4-LA16 Number of grievances about labour practices fi led, addressed, and resolved through formal grievance mechanisms
38
Subcategory: human rightsAspect: non-discrimination
G4-HR3 Total number of incidents of discrimination and corrective actions taken
38
Subcategory: societyAspect: anti-corruption
G4-SO4 Communication and training on anti-corruption policies and procedures
41
Aspect: public policy
G4-SO6 Total value of political contributions by country and recipient/benefi ciary
56
Aspect: anti-competitive behaviour
G4-SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes
None
Aspect: compliance
G4-SO8 Monetary value of signifi cant fi nes and total number of non-monetary sanctions for non-compliance with laws and regulations
4
Subcategory: product responsibilityAspect: customer health and safety
G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their lifecycle, by type of outcomes
42 – 45
Aspect: market communication
G4-PR6 Sale of banned or disputed products 45
G4-PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes
45
Aspect: customer privacy
G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data
45
Aspect: compliance
G4-PR9 Monetary value of signifi cant fi nes for non-compliance with laws and regulations concerning the provision and use of products and services
4
73Howden Integrated annual report 2016
74 Howden Integrated annual report 2016
Annual fi nancial statements
Contents
Directors’ responsibility 75
Company Secretary certifi cate of compliance
76
Audit and Risk Committee report 77
Independent auditors’ report 81
Directors’ report 84
Annual fi nancial statements 86
75Howden Integrated annual report 2016
The external auditors are responsible for reporting on the annual
fi nancial statements.
The annual fi nancial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) and incorporate
responsible disclosures in line with the accounting philosophy of the
Group. The annual fi nancial statements are based on appropriate
accounting policies, consistently applied, and supported by
reasonable and prudent judgements and estimates. The directors
believe that the Group will be a going concern in the year ahead. For
this reason, they continue to adopt the going concern basis in
preparing the Group annual fi nancial statements.
The annual fi nancial statements that appear on pages 86 to 135 have
been approved by the board of directors and are
signed on its behalf by:
J Brown W Thomson
Non-executive director Chief Executive Offi cer
The directors are responsible for the integrity of the annual fi nancial
statements and related information in the integrated annual report.
For the board to discharge its responsibilities, management has
developed and maintains a system of internal fi nancial control. The
board has ultimate responsibility for this system of internal control and
reviews the effectiveness of its operations primarily through the Audit
and Risk Committee and other risk-monitoring committees and
functions.
Internal fi nancial controls include risk-based systems of accounting
and administrative controls designed to provide reasonable, but not
absolute, assurance that assets are safeguarded and transactions are
executed and recorded in accordance with generally accepted
business practices and the Group’s written policies and procedures.
These procedures are implemented by trained, skilled staff with clearly
defi ned lines of accountability and appropriate segregation of duties.
The controls are monitored by management and include
comprehensive budgeting and reporting systems operating within
strict deadlines and an appropriate control framework.
Directors’ responsibility
76 Howden Integrated annual report 2016
In my opinion as Company Secretary, I hereby certify, in terms of section 88(2) of the Companies Act 71 of 2008, that for the period ended
31 December 2016, Howden Africa Holdings Limited has lodged with the Registrar of Companies 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.
CR Masson
Company Secretary
24 March 2017
Company Secretary certifi cate of compliance
77Howden Integrated annual report 2016
Audit and Risk Committee report
Overseeing the Group’s relations with the external auditors,
including assessment of independence and effectiveness of the
external auditor
Making recommendations to the board on the appointment,
retention and removal of the external auditors and the tendering of
external audit services
Reviewing and monitoring the effectiveness of the Group’s internal
control and risk-management systems, including reviewing the
process for identifying, assessing and reporting all key risks
Approving the terms of reference and plans of the internal audit
function
Approving the internal audit plan and reviewing regular reports
from the head of internal audit on the effectiveness of the internal
control system
Receiving reports from management on the key risks of the Group
and management of those risks
Performance in main areas of responsibility are detailed below:
Statutory duties
The committee executed its duties in terms of the requirements of
King III. Instances where King III requirements have not been applied
are explained in the corporate governance statement in the integrated
report.
External auditor – appointment and independence
A key factor that may impair auditors’ independence is a lack of
control over non-audit services provided by the external auditors. In
essence, the external auditors’ independence is deemed to be
impaired if the auditors provide a service that:
Results in the auditors acting as a manager or employee of the
Group
Puts the auditors in the role of advocate for the Group
Creates a mutuality of interest between the auditors and the Group
Howden addresses this issue through three primary measures,
namely:
Disclosure of the extent and nature of non-audit services
The prohibition of selected services – this includes the undertaking
of internal audit services
Prior to engagement for the provision of non-audit services,
approvals must be obtained from:
(a) Ernst & Young’s lead audit partner in the US
(b) Howden’s ultimate controlling parent company, Colfax
Corporation
Once above approvals have been obtained, the Howden Africa Audit
and Risk Committee will be required to confi rm the appointment.
Howden’s policy on the provision of non-audit services is regularly
reviewed.
We are pleased to present our report for the fi nancial year ended
31 December 2016.
The Audit and Risk Committee is an independent statutory committee
appointed by shareholders. Further duties are delegated to it by the
board of directors. This report includes both sets of duties and
responsibilities.
About the committee The committee has adopted formal terms of reference approved by
the board. The committee has conducted its affairs and discharged
its responsibilities in compliance with its terms of reference, which are
available on request.
Committee members
The committee is independent and must, under its terms of reference,
comprise three independent, non-executive directors. Committee
members are nominated by the Remuneration, Nomination, and
Social and Ethics committees and then recommended by the board
to shareholders for appointment each year.
The following directors offer themselves up for election by
shareholders in terms of section 94(2) of the Companies Act at the
annual general meeting to be held on 1 June 2016 at 13:30:
Mitesh Patel, as chairman
Morongwe Malebye, as member
Humphrey Mathe, as member
These directors are all considered independent non-executive
directors in terms of both the Companies Act and King III.
The committee meets at least four times in a year as per its terms of
reference. During the review period, four meetings were held. The
Chairman of the board, Chief Executive Offi cer, Chief Financial Offi cer,
Chief Audit Executive, external auditor and other assurance providers
(legal, compliance, risk, health and safety) attend meetings by
invitation only.
Refer to page 55 for attendance and annual assessment details and
page 64 for a brief CV on each director standing for election to the
committee.
Role and responsibilities
The committee’s role and responsibilities include statutory duties
under the Companies Act and further responsibilities assigned by the
board. These responsibilities include, but are not limited to:
Monitoring the integrity of the annual and interim fi nancial
statements, the accompanying reports to shareholders and
corporate governance statements
Making recommendations to the board concerning the adoption of
the annual and interim fi nancial statements
for the year ended 31 December 2016
78 Howden Integrated annual report 2016
standard period for rotation of the audit engagement partner is fi ve
years and, for any key audit partner, seven years. The current audit
engagement partner (Charles Trollope) was fi rst appointed in 2013 in
accordance with this requirement.
It is Howden’s policy that any partner designated as a key audit
partner of Howden shall not be employed by Howden in a key
management position unless a period of at least two years has
elapsed since the conclusion of the last relevant audit.
The committee ensured that the appointment of the auditor complied
with the Companies Act and any other legislation on the appointment
of auditors.
The committee, in consultation with executive management, agreed
to the engagement letter, terms, audit plan and budgeted audit fees
for the 2016 year.
The committee has nominated, for election at the annual general
meeting, Ernst & Young as the external audit fi rm for the 2017 year.
The committee has satisfi ed itself that the audit fi rm and designated
auditor are accredited as such on the JSE list of auditors and their
advisers.
Non-audit services provided by the external auditors
A policy detailing the procedure for appointing external auditors to
carry out non-audit services has been implemented. The following
non-audit fees were paid to Ernst & Young during 2016:
The committee ensures that the scope of the auditors’ work is
suffi cient and that the auditors are fairly remunerated.
The committee has the authority to engage independent counsel and
other advisers as they determine necessary in order to resolve issues
on auditors’ independence. An annual assessment is undertaken of
the auditors’ effectiveness, independence and objectivity. The
effectiveness assessment involves a review, with the senior fi nance
managers in each of the business units and relevant corporate
functions, of the audit process, including the planning, execution and
reporting activities, and an assessment of the quality, quantity and
leadership of each of the external audit teams involved in the audit.
Any improvement opportunities identifi ed are discussed with the
external auditors. The independence and objectivity assessment is
conducted by a review of compliance with the policies in place in the
Group and within the external auditors to maintain independence and
objectivity. The results of the review are shared with the committee.
The committee has satisfi ed itself that the external auditor was
independent of the Company, as set out in section 94(8) of the
Companies Act, which includes considering previous appointments of
the auditor, the extent of other work undertaken by the auditor for the
Company and compliance with criteria relating to independence or
confl icts of interest as prescribed by the Independent Regulatory
Board for Auditors. Requisite assurance was sought and provided by
the auditor that internal governance processes in the audit fi rm
support its claim to independence.
The external auditors are required to adhere to a rotation policy based
on best practice and professional standards in South Africa. The
Audit and Risk Committee report continued
Ernst & Young non-audit work 2016
Date Invoice number Value (ZAR) Work description
26/02/2016 GB20100005097 37 837.82 Thomas Bärwald – tax equalisation and assistance with preparation and review of Australian income tax return
26/02/2016 GB20100005097 19 471.35 Kevin Johnson – Tax equalisation and assistance with preparation and review of Australian income tax return
28/04/2016 GB20100007492 10 850.62 William Thomson – split invoicing for assistance with tax application and UK fi ling requirements for departure from the UK
26/07/2016 GB20100010678 10 305.83 William Thomson – split invoicing for assistance with tax application and UK fi ling requirements for departure from the UK
31/08/2016 GB20100012158 14 043.20 William Thomson – split invoicing for assistance with tax application and UK fi ling requirements for departure from the UK
Total 92 508.82
for the year ended 31 December 2016
79Howden Integrated annual report 2016
Duties assigned by the board
In addition to the statutory duties of the committee, as reported
above, and in line with the provisions of the Companies Act, the
board has determined further functions for the committee, as set out
in the terms of reference. These include:
Integrated reporting
The committee fulfi ls an oversight role on the Company’s integrated
report. The committee considered the Company’s sustainability
information as disclosed in the integrated report and assessed its
consistency with operational and other information known to
committee members, and for consistency with the annual fi nancial
statements. The committee discussed the sustainability information
with management and the Chairman of the Sustainability Committee.
The committee is satisfi ed that the sustainability information is reliable
and consistent with fi nancial results.
The committee has recommended the integrated report for approval
by the board of directors.
Going concern
The committee has reviewed a documented assessment, including
key assumptions, prepared by management of the going concern
status of the Company and has made a recommendation to the
board. The board’s statement on the going concern status of the
Company is on page 75.
Governance of risk
The board has assigned oversight of the Company’s risk management
function to the committee in addition to its oversight role on fi nancial
reporting risks, internal fi nancial controls, fraud risk as it relates to
fi nancial reporting and information technology risk as it relates to
fi nancial reporting.
During the year, the committee monitored the implementation of risk
management systems and processes and has reviewed the Group’s
most signifi cant risks as identifi ed by the Exco Risk Committee each
quarter. The committee believes the risk management systems and
processes in place are appropriate and effective.
Financial statements and accounting practices
The committee has reviewed the annual fi nancial statements of the
Company and Group and is satisfi ed that these comply with
International Financial Reporting Standards.
Internal fi nancial controls
During the year, the Group formally reviewed its key internal fi nancial
controls. Based on the results of this review, information and
explanations given by management, and discussions with the external
auditors on the results of their audit, nothing has come to the
attention of the committee that caused it to believe the Group’s
system of internal fi nancial controls is not effective.
Whistle-blowing
The whistle-blowing programme, which is monitored by the
committee, is designed to enable employees, customers, suppliers,
managers or other stakeholders, on a confi dential basis, to raise
concerns in cases where conduct is deemed to be contrary to our
values. It may include:
Actions that may result in danger to the health and/or safety of
people or damage to the environment
Unethical practice in accounting, internal accounting controls,
fi nancial reporting and auditing matters
Criminal offences, including money laundering, fraud, bribery and
corruption
Failure to comply with any legal obligation
Miscarriage of justice
Any conduct contrary to the ethical principles embraced in our
business principles or any similar policy
Any other legal or ethical concern
Concealment of any of the above
The programme makes available a selection of telephonic, email,
web-based and surface mail communication channels to any person
in the world who has information about unethical practice in Howden
and its managed operations. The multilingual communication facilities
are operated by independent service providers who remove all
indications from information received as to the identity of the callers
before submission to designated persons in the Group.
Reports received were kept strictly confi dential and were referred to
appropriate line managers within the Group for resolution. Where
appropriate, action was taken to address the issues raised. The
reports are analysed and monitored to ensure the process is effective.
80 Howden Integrated annual report 2016
Evaluation of the expertise and experience of the Financial
Director/Chief Financial Offi cer and fi nance function
The committee has satisfi ed itself that the CFO has appropriate
expertise and experience and has considered, and satisfi ed itself, of
the appropriateness of the expertise and adequacy of resources of
the fi nance function and experience of senior members of
management responsible for the fi nancial function.
Committee assuranceThe committee is satisfi ed that it complied with its legal, regulatory or
other responsibilities in the 2016 fi nancial year.
Mitesh Patel
Chairman
24 March 2017
for the year ended 31 December 2016
Audit and Risk Committee report continued
Internal audit
The committee is responsible for ensuring the Group’s internal audit
function is independent and has the necessary resources, standing
and authority to discharge its duties.
The Group has an internal audit department that reports centrally with
responsibility for reviewing and providing assurance on the adequacy
of the internal control environment across all of its operations.
The Chief Audit Executive is responsible for regularly reporting the
fi ndings of internal audit to the committee. The committee also
oversees cooperation between the internal and external auditors, and
serves as a link between the board of directors and these functions.
The internal audit function’s mandate and annual audit coverage plans
have been approved by the committee. A summary of audit results
and risk management information was presented to the committee
and Group senior management at regular intervals throughout the
year. The Group’s Chief Audit Executive reports to the committee on
the internal audit function’s performance against the agreed internal
audit plan.
The committee assesses the internal audit function and Chief Audit
Executive annually. The 2016 assessment did not reveal any areas of
concern and the committee has concluded that:
The internal audit function is adequate and effectively discharged
its responsibilities
The competence, qualifi cations, experience and overall
performance of the Chief Audit Executive are satisfactory
The Group’s internal audit function has a formal collaboration process
in place with the external auditors to ensure effi cient coverage of
internal controls. The Howden internal audit function is responsible for
providing independent assurance to executive management and the
board on the effectiveness of the risk-management process
throughout the Group.
81Howden Integrated annual report 2016
To the shareholders of Howden Africa Holdings LimitedReport on the audit of the consolidated fi nancial statements
Opinion
We have audited the consolidated and separate fi nancial statements
of Howden Africa Holdings Limited and its subsidiaries (the Group) set
out on pages 86 to 135, which comprise the consolidated and
separate statement of fi nancial position as at 31 December 2016, and
the consolidated and separate statement of comprehensive income,
the consolidated and separate statement of changes in equity and the
consolidated and separate statement of cash fl ows for the year then
ended, and notes to the consolidated and separate fi nancial
statements, including a summary of signifi cant accounting policies.
In our opinion, the consolidated and separate fi nancial statements
present fairly, in all material respects, the consolidated and separate
fi nancial position of the Group as at 31 December 2016, and its
consolidated and separate fi nancial performance and consolidated
and separate cash fl ows for the year then ended in accordance with
International Financial Reporting Standards and the requirements of
the Companies Act of South Africa.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the
Consolidated and Separate Financial Statements section of our
report. We are independent of the Group in accordance with the
Independent Regulatory Board for Auditors Code of Professional
Conduct for Registered Auditors (IRBA code), the International Ethics
Standards Board for Accountants Code of Ethics for Professional
Accountants (IESBA code) and other independence requirements
applicable to performing audits of Howden Africa Holdings Limited.
We have fulfi lled our other ethical responsibilities in accordance with
the IRBA code, IESBA code, and in accordance with other ethical
requirements applicable to performing the audit of Howden Africa
Holdings Limited. We believe that the audit evidence we have
obtained is suffi cient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most signifi cance in our audit of the consolidated
and separate fi nancial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated and separate fi nancial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of
how our audit addressed the matter is provided in that context.
We have fulfi lled the responsibilities described in the Auditor’s
responsibilities for the audit of the fi nancial statements section of our
report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the fi nancial
statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the
basis for our audit opinion on the accompanying fi nancial statements.
for the year ended 31 December 2016
Independent auditors’ report
Key audit matter How the matter was addressed in the audit
Revenue recognition
We focused on the recognition of revenue as it requires estimates
and judgements to be made by management in determining the
amount of revenue to be recognised on long-terms revenue
contracts. The disclosures relating to critical accounting estimates
and assumptions are included in Note 4 to the Annual Financial
Statements.
Both the Fans and Heat Exchangers and Environmental Control
divisions operate long-term revenue construction contracts. The
majority of the long-term revenue construction contracts range
between 0 and 5 years. R268.0 million (17%) of the Group revenue
of R1,604.5 billion relates to long-term revenue construction
contracts.
The recognition of revenue is largely dependent on the estimation of
the total contract costs and the stage of completion of each
contract. The stage of completion is determined by management’s
engineering experts based on the proportion of contract costs
incurred for work performed to date compared to the estimated total
contract costs. Changes in the estimate of total contract costs or
the inappropriate recording of costs around the year could result in
material amounts of revenue being recognised in the incorrect
period.
Our procedures included:
Testing the calculation of stage of completion. As part of this
test, we also:
– Agree and vouch the actual costs incurred and recorded
against the contract for occurrence and accuracy,
– Assess the basis for determining the total contract cost; and
– Re-perform the percentage of completion calculation.
Involving our engineering experts in testing the estimated total
contract costs. This includes identifying any practical or legal
matters which may affect the completion of the contracts.
Agreeing that the revenue recognised is consistent with the
calculated stage of completion.
Vouching whether the work allocated to contracts has been
carried out in the period in which the revenue has been
recognised.
Assessing the estimates of costs to complete and also
assessing the historical accuracy of the estimates of contract
costs through comparing current year actual to prior year
estimates.
82 Howden Integrated annual report 2016
Key audit matter How our audit addressed the key matter
There are a few repair and maintenance key contracts within the
two divisions, which have straight line billing arrangements, whilst
revenue is recognised only when work has been performed. The
performance of work is dependent on repairs being requested by a
client and therefore may not take place throughout the year as
planned. Thus, the estimates of total work performed and total
work to be performed changes annually as a result of actual data
being accumulated and the differences between clients and
contracts. The estimation of the future work schedules therefore
may have a signifi cant impact on the amount of revenue to be
recognised. This therefore requires increased audit attention.
The disclosures relating to revenue recognition and amounts due
from and due to customers are included in notes 10 and 22 to the
annual fi nancial statements.
Our procedures included:
Examining any loss-making contracts to evaluate the level of
provisioning required and also assessing the actual profi t or loss
achieved on contracts which were completed in the year
compared to the forecast position in the prior year to identify any
anomalies.
Responsibilities of the directors for the consolidated and separate
fi nancial statements
The directors are responsible for the preparation and fair presentation
of the consolidated and separate fi nancial statements in accordance
with International Financial Reporting Standards and the requirements
of the Companies Act of South Africa, and for such internal control as
the directors determine is necessary to enable the preparation of
consolidated and separate fi nancial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated and separate fi nancial statements, the
directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the consolidated separate
fi nancial statements
Our objectives are to obtain reasonable assurance about whether the
consolidated and separate fi nancial statements as a whole are free
from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material
Other information
The directors are responsible for the other information. The other
information comprises the directors’ report, the Audit Committee’s
report and the Company Secretary’s certifi cate as required by the
Companies Act of South Africa, and the other sections of the
integrated annual report which we obtained prior to the date of this
report. Other information does not include the consolidated and
separate fi nancial statements and our auditor’s report thereon (annual
fi nancial statements section in the integrated annual report).
Our opinion on the consolidated and separate fi nancial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate fi nancial
statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the consolidated and separate fi nancial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed on the other information
obtained prior to the date of this auditor’s report, we conclude that
there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the annual report, if we conclude that there is a
material misstatement therein, we are required to communicate the
matter to those charged with governance.
for the year ended 31 December 2016
Independent auditor’s report continued
83Howden Integrated annual report 2016
We communicate with the directors regarding, among other matters,
the planned scope and timing of the audit and signifi cant audit
fi ndings, including any signifi cant defi ciencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied
with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine
those matters that were of most signifi cance in the audit of the
consolidated and separate fi nancial statements of the current period
and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefi ts of such
communication.
Report on other legal and regulatory requirements
In terms of the IRBA Rule published in Government Gazette Number
39475 dated 4 December 2015, we report that Ernst & Young Inc.
has been the auditor of Howden Africa Holdings Limited for fi ve years.
Ernst & Young Inc.
Director – Charles Trollope
Registered Auditor
Chartered Accountant (SA)
24 March 2017
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to infl uence the economic
decisions of users taken on the basis of these consolidated and
separate fi nancial statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional scepticism throughout the audit.
We also:
Identify and assess the risks of material misstatement of the
consolidated and separate fi nancial statements, whether due to
fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is suffi cient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override
of internal control.
Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the directors.
Conclude on the appropriateness of the directors’ use of the going
concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast signifi cant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated and
separate fi nancial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the
consolidated and separate fi nancial statements, including the
disclosures, and whether the consolidated and separate fi nancial
statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Obtain suffi cient appropriate audit evidence regarding the fi nancial
information of the entities or business activities within the group to
express an opinion on the consolidated and separate fi nancial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
84 Howden Integrated annual report 2016
The new Fabrication Technology division order intake for 2016 is
R94.4 million with R87 million of this converted into revenue in the
period.
Revenue
Revenue of R1 604.5 million for 2016 is 8.2% ahead of the equivalent
period in 2015 of R1 483.3 million.
The Fans and Heat Exchangers division recorded revenue growth of
19.8% to R1 338.8 million (2015: R1 117.3 million). This revenue
growth has been driven by an improvement in both aftermarket and
retrofi t revenue. The Environmental Control division saw a decline in
revenue of 51.2% due to economic conditions delaying customers’
decisions on environmental control projects. The new Fabrication
Technology division was also a contributing factor to the growth in
revenue with revenue for the period of R87 million.
Operating profi t
Operating profi t of R247.6 million is a 5.5% decline from the
R262.0 million reported in 2015.
The Environmental Control division moved from an operating profi t of
R51.4 million (per note 5) in the previous year to operating loss of
R12.7 million, this decline resulted from challenging market conditions
adding pressure to project margins and a once-off project warranty of
R26.4 million.
The Fans and Heat Exchangers division’s operating profi t improved by
32.9% to R283.9 million (2015: R213.6 million). Operating profi t
margins in this division increased from 19.1% to 21.2% driven by
product mix.
Central operations had an increase in costs to R24.8 million largely
due to the recognition of a gain on curtailment of R19.8 million in the
prior year for the company’s defi ned benefi t scheme.
Cash fl ow
Howden’s continuing focus on sustainable working capital
management has resulted in a satisfactory cash fl ow performance in
2016. Cash generated from operations for the year was
R216.2 million and cash and cash equivalents was R909.3 million.
Capital expenditure was R10.7 million (2015: R7.2 million). During
2016 the business has focused its capital expenditure on the
maintenance of existing facility and equipment and key capital
expenditure for the establishment of the new Fabrication Technology
division. There were no major capital expenditure items required
during the year.
The directors’ report forms part of the audited fi nancial statements of
the Company and the Group for the year ended 31 December 2016.
Nature of the businessThe main activities of the Group are the design, manufacture and
marketing of specialised air and gas-handling solutions to a wide
range of industries and a preferred distributor of ESAB welding and
cutting consumables.
The Group’s principal segments include:
Fans and Heat Exchangers
Environmental Control
Fabrication Technology
Major industries supplied include power generation, petrochemical,
mining, construction, refrigeration, water treatment and general
industry.
Business reviewFinancial overview
The Group’s earnings per share were 332.31 cents, compared with
327.94 cents in the corresponding period in 2015. This is made up of
a 5.5% decline in operating profi t, which is explained below, and has
been mitigated by improved net fi nance income of R55.5 million
(2015: R40.5 million).
Orders
Orders received during 2016 have increased to R1 572.7 million, an
increase of 10.9% compared to the corresponding period in 2015
(2015: R1 417.7 million). The closing order book for 2016 remains
strong at R770.4 million (2015: R800 million). The aftermarket order
book has increased by 4.8% resulting from additional export and
retrofi t orders received in the 2016 period. New build order book has
reduced 13.5% as customers are deferring any non-essential and
expansionary capital expenditure.
Environmental Control division order intake was R239.9 million
compared to R311.2 million in 2015. The business received some
larger orders in the latter part of 2016. The division continues to
have a large opportunity list, but due to the economic conditions
within sub-Saharan Africa, the award of orders from customers has
been slow.
Fans and Heat Exchangers division orders received during 2016 have
increased by 11.9% to R1 283.3 million compared to the
corresponding period (2015: R1 106.5 million). The increase has been
driven by aftermarket and retrofi t activity, with new build activity being
subdued as customers continue to defer non-essential expenditure.
for the year ended 31 December 2016
Directors’ report
85Howden Integrated annual report 2016
Subsidiary companies
A list of the Company’s subsidiaries and related interests appears in
note 8 and 34 of the report.
Management by third parties
No business of the Company or its subsidiaries was managed by a
third person or company during the fi nancial year, except for
managerial services the Company provides to its subsidiaries.
Subsequent eventsNone were identifi ed.
DividendThe directors have resolved not to declare a dividend.
Basis of preparationThese fi nancial statements on pages 86 to 89 set out fully the fi nancial
position, results of operations and cash fl ows of the Group for the
fi nancial year ended 31 December 2016.
AuditorsThe board of directors recommend that Ernst & Young be reappointed
as auditors of the Company and the Group in terms of the resolution
to be proposed at the annual general meeting in accordance with
section 270(2) of the Companies Act.
For and on behalf of the board.
W Thomson
Chief Executive Offi cer
24 March 2017
Group results
Order book analysis
2016Rm
2015Rm
% change
Orders received 1 572.7 1 417.7 10.9
New build 439.7 429.4 2.4
Aftermarket 1 133.0 988.3 14.6
Order book 770.4 800.0 (3.7)
New build 321.9 372.0 (13.5)
Aftermarket 448.5 428.0 4.8
Statement of comprehensive income
2016Rm
2015Rm
% change
Revenue 1 604.5 1 483.3 8.2
Operating profi t (EBIT) 247.6 262.0 (5.5)
Operating profi t margin 15.4% 17.7% (2.3)
Net fi nance income 55.5 40.5 37.0
Tax 84.7 86.9 (2.5)
Profi t for the year 218.4 215.6 1.3
Segment analysis
A segment analysis of orders received, revenue and operating profi t
is set out on note 5 of the annual fi nancial statements.
Other mattersShare capital
Details of the Company’s share capital, its holding company and its
shareholders are given in note 18 to the fi nancial statements.
Directorate
The names of the directors, secretary and auditors are listed on
pages 75 and 83 of the report.
Directors’ interests
As at 31 December 2016 the directors and their associates held no
interest in the Company.
At the date of this report, there had been no changes to these
shareholdings.
86 Howden Integrated annual report 2016
as at 31 December 2016
Statement of fi nancial position
Note2016
R’0002015
R’0002016
R’0002015
R’000
ASSETSNon-current assets
Property, plant and equipment 6 92 152 96 099 142 247
Intangible assets 7 44 556 46 191 19 845 21 501
Investment in subsidiaries 8 – – 60 001 60 001
Deferred tax assets 9 18 132 24 452 – –
Amounts due from customers for contract work 10 2 195 1 619 – –
Trade and other receivables 11 11 411 10 690 – –
Pension fund plan surplus 13 17 485 17 712 17 485 17 712
185 931 196 763 97 473 99 461
Current assets
Inventories 16 332 166 235 163 – –
Trade and other receivables 11 351 195 284 901 34 368 13 223
Loans receivable 12 16 050 7 500 – –
Amounts due from customers for contract work 10 34 810 96 935 – –
Other fi nancial assets 14 5 2 964 – 51
Current income tax asset 17 31 542 29 954 – 166
Cash and cash equivalents 15 909 341 730 190 600 566 579 173
1 675 109 1 387 607 634 934 592 613
TOTAL ASSETS 1 861 040 1 584 370 732 407 692 074
EQUITY Share capital 18 657 657 657 657
Retained earnings and other reserves 1 254 255 1 038 550 706 592 669 487
Total equity 1 254 912 1 039 207 707 249 670 144
LIABILITIESNon-current liabilities
Deferred tax liabilities 9 3 069 9 272 3 940 4 336
Amounts due to customers for contract work 10 79 649 78 739 – –
Government grants 20 7 706 8 887 – –
Provisions 21 11 642 12 035 – –
102 066 108 933 3 940 4 336
Current liabilities
Trade and other payables 19 416 019 380 277 16 283 17 594
Amounts due to customers for contract work 10 53 890 34 554 – –
Current income tax liabilities 17 13 123 – 4 935 –
Government grants 20 915 784 – –
Other fi nancial liabilities 14 1 815 1 949 – –
Provisions 21 18 300 18 666 – –
504 062 436 230 21 218 17 594
Total liabilities 606 128 545 163 25 158 21 930
TOTAL EQUITY AND LIABILITIES 1 861 040 1 584 370 732 407 692 074
CompanyConsolidated
87Howden Integrated annual report 2016
for the year ended 31 December 2016
Statement of comprehensive income
Note2016
R’0002015
R’0002016
R’0002015
R’000
Revenue 22 1 604 535 1 483 276 111 890 576 362
Cost of sales (1 176 761) (1 071 717) – –
Gross profi t 427 774 411 559 111 890 576 362
Distribution costs (58 546) (37 583) – –
Administrative expenses (123 827) (117 460) (59 449) (50 264)
Other income 2 210 5 481 – 149
Operating profi t 23 247 611 261 997 52 441 526 247
Investment income 24 55 566 40 510 1 576 2 989
Finance costs 25 (72) (27) (1) (21)
Profi t before income tax 303 105 302 480 54 016 529 215
Income tax expense 26 (84 684) (86 927) (15 613) (18 527)
Profi t for the year 218 421 215 553 38 403 510 688
Other comprehensive income:
Other comprehensive income to be reclassifi ed to profi t or loss in subsequent periods:
Cash fl ow hedge
Reclassifi cation during the year to profi t or loss 262 (592) – –
Net (loss)/gain during the year of the not yet matured contracts (2 231) 1 994 – –
Tax impact of cash fl ow hedges 551 (393) – –
Net other comprehensive (loss)/income to be reclassifi ed to profi t or loss in subsequent periods (1 418) 1 009 – –
Other comprehensive income not to be reclassifi ed to profi t or loss in subsequent periods:
Pension fund plan (loss)/gain 13 (1 803) 1 251 (1 803) 1 251
Tax impact of pension fund plan (gain)/loss 505 (350) 505 (350)
Net other comprehensive (loss)/income not to be reclassifi ed to profi t or loss in subsequent periods (1 298) 901 (1 298) 901
Other comprehensive (loss)/income for the year, net of tax (2 716) 1 910 (1 298) 901
Total comprehensive income for the year 215 705 217 463 37 105 511 589
Cents Cents Cents Cents
Earnings per ordinary share
– basic and diluted 27 332.31 327.94 – –
CompanyConsolidated
88 Howden Integrated annual report 2016
for the year ended 31 December 2016
Statement of changes in equity
Note
Share capitalR’000
Retained earnings
R’000
Pension fund plan surplus/
(defi cit)R’000
Cash fl ow hedge
reserveR’000
CONSOLIDATEDBalance at 1 January 2015 657 826 488 (4 640) (761) 821 744
Comprehensive income for the year – 215 553 901 1 009 217 463
Balance at 31 December 2015 657 1 042 041 (3 739) 248 1 039 207
Balance at 1 January 2016 657 1 042 041 (3 739) 248 1 039 207
Comprehensive income for the year – 218 421 (1 298) (1 418) 215 705
Balance at 31 December 2016 657 1 260 462 (5 037) (1 170) 1 254 912
COMPANYBalance at 1 January 2015 657 162 538 (4 640) – 158 555
Comprehensive income for the year – 510 688 901 – 511 589
Balance at 31 December 2015 657 673 226 (3 739) – 670 144
Balance at 1 January 2016 657 673 226 (3 739) – 670 144
Comprehensive income for the year – 38 403 (1 298) – 37 105
Balance at 31 December 2016 657 711 629 (5 037) – 707 249
TotalR’000
89Howden Integrated annual report 2016
for the year ended 31 December 2016
Statement of cash fl ows
Note2016
R’0002015
R’0002016
R’0002015
R’000
Cash fl ow from operating activities
Cash generated/(utilised) from operations 29 216 297 156 760 (8 516) (26 319)
Interest paid 25 (72) (27) (1) (21)
Income tax paid 17 (71 975) (81 536) (10 403) (12 974)
Net cash generated/(utilised) from operating activities 144 250 75 197 (18 920) (39 315)
Cash fl ow from investing activities
Dividend received – – – 477 680
Interest received 53 990 37 521 40 313 19 752
Redemption of preference share 8 – – – 29 320
Loans issued 12 (8 550) (7 500) –
Purchases of property, plant and equipment* 6 (10 275) (7 192) – –
Government grant received 20 – 4 209 – –
Purchases of intangible assets 7 (375) (17) – –
Proceeds from disposal of property, plant and equipment 30 111 284 – –
Net cash generated from investing activities 34 901 27 305 40 313 526 752
Net increase in cash and cash equivalents 179 151 102 502 21 393 487 437
Cash and cash equivalents at beginning of year 730 190 627 688 579 173 91 736
Cash and cash equivalents at end of year 15 909 341 730 190 600 566 579 173
* The purchases of property, plant and equipment relates to the renovations and improvements of the current buildings and machinery to maintain production
capacity and the establishment of the Fabrication Technology division. Refer to note 6.
CompanyConsolidated
90 Howden Integrated annual report 2016
for the year ended 31 December 2016
Notes to the annual fi nancial statements
1. GENERAL INFORMATION The consolidated annual fi nancial statements of Howden Africa Holdings Limited and its subsidiaries (collectively, the Group), were
authorised for issue by the board of directors on 24 March 2017.
Howden Africa Holdings Limited (HAHL) and its subsidiaries design, manufacture and market specialised air and gas-handling solutions
to a wide range of industries. The Group has manufacturing plants in Johannesburg and Port Elizabeth and sells its products mainly in
South Africa. The major industries it supplies are power generation, petrochemical, mining, agriculture, construction, refrigeration, water
treatment, transportation and general industry.
Howden is also a distributor of ESAB welding and cutting equipment and consumables.
2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the Group consolidated annual fi nancial statements are set out below.
The Group policies have been consistently applied to all the years presented. The Group annual fi nancial statements incorporate the
annual fi nancial statements of the Company (Howden Africa Holdings Limited) and the entities it controls as at 31 December 2016,
using consistent accounting policies at a consolidated and separate company level, where applicable.
2.1 Basis of preparation
The Group and Company annual fi nancial statements of Howden Africa Holdings Limited have been prepared in accordance
with International Financial Reporting Standards (IFRS), the South African Companies Act 71 of 2008, the JSE Listings
Requirements and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee. The consolidated
annual fi nancial statements are prepared on the historical cost basis except for fi nancial assets and fi nancial liabilities (including
derivative instruments) measured at fair value through profi t or loss.
The preparation of annual fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the
consolidated annual fi nancial statements are disclosed in note 4.
New and amended standards and interpretations IAS 8.28
The Group applied for the fi rst time certain standards and amendments, which are effective for annual periods beginning on or
after 1 January 2016.
Although these new standards and amendments applied for the fi rst time in 2016, they did not have a material impact on the
annual consolidated fi nancial statements of the Group. IFRS 14 Regulatory Deferral Accounts
Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests
Amendments to IAS 16 and IAS 38: Clarifi cation of Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
Amendments to IAS 27: Equity Method in Separate Financial Statements
Annual Improvements 2012 – 2014 cycle
These improvements include: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IAS 19 Employee Benefi ts IAS 34 Interim Financial Reporting Amendments to IAS 1 Disclosure Initiative
The amendments to IAS 1 clarify, rather than signifi cantly change, existing IAS 1 requirements. The amendments clarify:
• The materiality requirements in IAS 1
• That specifi c line items in the statement(s) of profi t or loss and OCI and the statement of fi nancial position may be disaggregated
• That entities have fl exibility as to the order in which they present the notes to fi nancial statements
• That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in
aggregate as a single line item, and classifi ed between those items that will or will not be subsequently reclassifi ed to profi t
or loss
Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of
fi nancial position and the statement(s) of profi t or loss and OCI. These amendments do not have any impact on the Group.
91Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued) Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception
The amendments address issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated
Financial Statements. The amendments to IFRS 10 clarify that the exemption from presenting consolidated fi nancial
statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its
subsidiaries at fair value.
Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity
itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity
are measured at fair value. The amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when
applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to
its interests in subsidiaries.
These amendments are applied retrospectively and do not have any impact on the Group as the Group does not apply the
consolidation exception.
Impact of standards and interpretations not yet adopted
At the reporting date, the following new accounting standards were in issue but not yet effective:
Effective for annual periods commencing on or after
IFRIC 22 Foreign Currency Transactions and Advance Consideration – provides
guidance for determining the date of transaction in a foreign currency transaction that
includes consideration denominated in a foreign currency and for which a non-
monetary prepayment asset or deferred income liability is recognised. 1 January 2018
Amendments to IAS 12 Income Taxes – Recognition of Deferred Tax Assets for
Unrealised Losses – clarifi es the deferred tax consequences of debt instruments
measured at fair value; the determination of future taxable profi ts; and the assessment
of deferred tax assets in combination with other deferred tax assets of the same type. 1 January 2017
Amendments to IAS 7 Statement of Cash Flows – Disclosure Initiative – requires
disclosures that enable users to evaluate changes in liabilities arising from fi nancing
activities. 1 January 2017
Amendments to IFRS 2 Share-based Payment – Classifi cation Measurement of
Share-based Payment Transactions – amends IFRS 2 to clarify accounting for cash-
settled share-based payments that include a performance condition, classifi cation of
share-based payments with net settlement features and accounting for modifi cations. 1 January 2018
Annual Improvements to IFRS 2014-2016 Cycle – makes the following amendments:
IFRS 1 – removing short-term exemptions; IFRS 12 – clarifying the scope of the
standard; and IAS 28 – clarifying that the exemption from equity accounting can be
applied on an investment-by-investment basis.
1 January 2017 for IFRS
12 amendments
1 January 2018 for the remaining
amendments
The above amendments are not expected to have a material effect for the Group.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 “Revenue from Contracts with Customers” was issued in May 2015; It is effective for accounting periods beginning
on or before 1 January 2018.
IFRS 15 will require Howden to identify deliverables in contracts with customers that qualify as “performance obligations”.
The transaction price receivable from customers must be allocated between the Company’s performance obligations under
the contracts on a relative stand-alone selling price basis.
The Company is currently assessing the impact of these and other accounting changes that will arise under IFRS 15. It is
expected that the Company will adopt IFRS 15 on 1 January 2018. The Company is considering the clarifi cations issued by
the IASB on 12 April 2016 and will monitor any further developments.
The Group in collaboration with Colfax is assessing the full impact of the standard.
92 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
IFRS 16 Leases
IFRS 16 requires lessees to account for all leases under a single on balance sheet model in a similar way to fi nance leases
under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal
computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,
a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the
underlying asset during the lease term (i.e., the right-of-use asset). The standard is effective for annual periods beginning on
or after 1 January 2019. The new standard, in addition to bringing substantial new assets and liabilitiees onto a lessee’s
balance sheet, will have an impact on reported profi t and performance measures such as EBITDA. It is likely that with the
changed defi nition of leases there will be some additional contracts within the scope of the new standard, which will need to
be considered by lessors as well as lessees, although lessees may be able to use the limited exemptions which may permit
some to remain accounted for as services. The Group is assessing the impact of this standard. Typical area where the
standard will have a signifi cant impact is; vehicle leases.
IFRS 9 Financial Instruments
In July 2014, the IASB issued the fi nal version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments:
Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting
for fi nancial instruments project: classifi cation and measurement, impairment and hedge accounting. IFRS 9 is effective for
annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting,
retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the
requirements are generally applied prospectively, with some limited exceptions.
The standard will have no material impact on the Group.
2.2 Basis of consolidation
The consolidated annual fi nancial statements comprise the annual fi nancial statements of the Company and its subsidiaries as
at 31 December 2016.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
Specifi cally, the Group controls an investee if and only if the Group has: Power over the investee (ie existing rights that give it the current ability to direct the relevant activities of the investee) Exposure, or rights, to variable returns from its involvement with the investee The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangements The Group’s voting rights and potential voting rights
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Income and expenses of a subsidiary acquired or
disposed of during the year are included in the statement of comprehensive income from the date the Group gains control
until the date the Group ceases to control the subsidiary.
The annual fi nancial statements of the subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies.
Inter-company transactions, balances and unrealised gains and dividends on transactions between companies are eliminated.
Investments in subsidiaries are accounted for by the Company at cost less impairment. Cost includes consideration transferred
and direct attributable costs of investment.
93Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued)
2.2 Basis of consolidation (continued)
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest
in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the
acquiree at fair value or at the proportionate share of the acquiree’s identifi able net assets. Acquisition-related costs are
expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the fi nancial assets and liabilities assumed for appropriate classifi cation and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair
value and any resulting gain or loss is recognised in profi t or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent
consideration classifi ed as an asset or liability that is a fi nancial instrument and within the scope of IAS 39 Financial Instruments:
Recognition and Measurement, is measured at fair value with changes in fair value recognised in either profi t or loss or as a
change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in
accordance with the appropriate IFRS. Contingent consideration that is classifi ed as equity is not remeasured and subsequent
settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifi able assets acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profi t or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-
generating units that are expected to benefi t from the combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion of the cash-generating unit retained.
When the Group ceases to have control or signifi cant infl uence, any retained interest in the entity is remeasured to its fair value,
with the change in carrying amount recognised in profi t or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or fi nancial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassifi ed to profi t or loss.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identifi ed as the Howden Africa board.
The operating results of each operating segment are separately monitored for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profi t or loss and is measured
consistently with operating profi t or loss in the consolidated annual fi nancial statements.
The Group’s operations mainly comprise specialised engineering products for air and gas solutions which can be differentiated
into three main reportable segments, namely Fans and Heat Exchangers, Environmental Control and Fabrication Technology.
Revenue by geographic segment is allocated based on the country in which the customer is located. Total assets and capital
expenditure by geographic segment are allocated based on where the assets are located.
94 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued)
2.4 Foreign currency translation
(a) Functional and presentation currency
Items included in the annual fi nancial statements for each of the Group’s entities are measured using the currency of the
primary economic environment in which that entity operates (the functional currency). The consolidated annual fi nancial
statements are presented in rand, which is the functional and presentation currency of Howden Africa Holdings Limited.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of Group entities using the exchange rate
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains or losses
resulting from the settlement of transactions and from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the profi t or loss fi nance income and costs.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on
translation of non-monetary items measured at fair value is treated in line with the recognition of a gain or loss on
change in fair value of the item (ie translation differences on items whose fair value gain or loss is recognised in other
comprehensive income, or profi t or loss are also recognised in other comprehensive income or profi t or loss,
respectively).
2.5 Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and impairments. Land and buildings
comprise mainly factories and offi ces. The cost includes expenditure that is directly attributable to the acquisition of the items
and borrowing costs for long-term construction projects if the recognition criteria are met.
Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, only when it is probable that
future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to profi t or loss in the statements of comprehensive income during the fi nancial
period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method spreading the difference
between cost and residual value over the estimated useful life as follows:
Buildings 50 years
Plant and equipment 2 to 10 years
Patterns and dies 3 years
Offi ce furniture and equipment 3 to 10 years
Motor vehicles 4 years
IT equipment 3 to 5 years
The assets’ residual values, methods of depreciation and useful lives are reviewed, and adjusted prospectively if appropriate, at
each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is
greater than its recoverable amount.
An item of property, plant and equipment and any signifi cant part initially recognised is derecognised upon disposal or when no
future economic benefi ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profi t or loss in the
statements of comprehensive income when the asset is derecognised.
95Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued)
2.6 Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifi able
assets of the acquired subsidiary at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible assets and is tested for impairment as part of the overall
balance. Separately recognised goodwill is tested annually for impairment or more frequently when there is an event that
indicates potential impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill
are not reversed. Gains or losses on disposal of an entity include the carrying amount of goodwill relating to the entity
sold.
Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The allocation is made to
those CGUs or groups of CGUs that are expected to benefi t from the business combination in which the goodwill arose
according to operating segments. Goodwill is tested for impairment on an annual basis; refer to impairment of non-
fi nancial assets below.
(ii) Trademarks
Trademarks acquired in a business combination are recognised at fair value at the acquisition date. Trademarks
have a fi nite useful life and are carried at cost less accumulated amortisation and impairment, and calculated using
the straight-line method to allocate the cost of trademarks over their estimated useful lives which is considered to be
25 years.
(iii) Computer software
Acquired computer software is capitalised on the basis of the costs incurred and subsequently recognised at cost less
accumulated amortisation and impairment. The cost is amortised over the estimated useful life of the software, usually
between three and fi ve years.
2.7 Impairment
(a) Non-fi nancial assets
Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised as an
expense immediately and are written off in the statements of comprehensive income.
The recoverable amount is the higher of an asset’s fair value less costs of disposal or value in use. For the purpose of
assessing impairment, the Group estimates the asset’s or CGU’s recoverable amount. A CGU is the lowest level for
which separately identifi able cash fl ows can be determined.
In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount
rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. In
determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions
can be identifi ed, an appropriate valuation model is used.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of fi ve years. For longer periods, a long-term growth rate is calculated and applied
to project future cash fl ows after the fi fth year.
96 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued)
2.7 Impairment (continued)
(a) Non-fi nancial assets (continued)
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is any
indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the
Group estimates the asset’s or CGU’s recoverable amount. Where an impairment loss subsequently reverses, the
carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, to the extent that
the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised as
income immediately. Goodwill impairments are not reversed.
(b) Financial assets
Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a fi nancial asset or
group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a loss event) and that loss event (or event) has an impact on the estimated future cash
fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include indications
that the debtors or a group of debtors is experiencing signifi cant fi nancial diffi culty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other fi nancial reorganisation, and observable data
indicating that there is a measurable decrease in the estimated future cash fl ows, such as changes in arrears or
economic conditions that correlate with defaults.
The Group fi rst assesses whether objective evidence of impairment exists individually for fi nancial assets that are
individually signifi cant, or collectively for fi nancial assets that are not individually signifi cant. If the Group determines that
no objective evidence of impairment exists for an individually assessed fi nancial asset, whether signifi cant or not, it
includes the asset in a group of fi nancial assets with similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be,
recognised are not included in a collective assessment of impairment.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial
asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is
recognised in the statements of comprehensive income. If a loan has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate determined under the contract.
The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in
profi t or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of
interest used to discount the future cash fl ows for the purpose of measuring the impairment loss. The interest income is
recorded as fi nance income in the statement of comprehensive income. Financial assets, together with the associated
allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realised or has
been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or
decreases because of an event occurring after the impairment was recognised, the previously recognised impairment
loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited
to fi nance costs in the statement of comprehensive income.
97Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued)
2.8 Financial instruments
2.8.1 Financial assets
Initial recognition and measurement
The Group classifi es its fi nancial assets in the following categories: at fair value through profi t or loss, or loans and
receivables, as appropriate. The classifi cation depends on the purpose for which the fi nancial assets were acquired.
The Group determines the classifi cation of its fi nancial assets at initial recognition.
All fi nancial assets are recognised initially at fair value plus transaction costs, except in the case of fi nancial assets
recorded at fair value through profi t or loss.
Subsequent measurement
(a) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in
this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as
held for trading. Assets in this category are classifi ed as current assets.
Financial assets at fair value through profi t or loss are carried in the statement of fi nancial position at fair value with
net changes in fair value presented as fi nance costs (negative net changes in fair value) or fi nance income (positive
net changes in fair value) in the statement of comprehensive income.
(b) Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed or determined payments that are not quoted in
an active market. Trade receivables are amounts due from customers for merchandise sold or services performed
in the ordinary course of business. They are included in the current assets, except for maturities greater than
12 months after the end of the reporting period. These are classifi ed as non-current assets.
The Group’s loans and receivables are subsequently carried at amortised cost using the effective interest rate
method, less impairment. The effective interest rate amortisation is included in fi nance income in profi t or loss. The
losses arising from impairment are recognised in profi t or loss in fi nance costs for loans and in cost of sales or other
operating expenses for receivables.
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of fi nancial position.
For the purpose of the consolidated statement of cash fl ows, cash and cash equivalents consist of cash and
short-term deposits as defi ned above, net of outstanding bank overdrafts.
Derecognition
A fi nancial asset (or, where applicable, a part of a fi nancial asset or part of a group of similar fi nancial assets) is
derecognised when: The rights to receive cash fl ows from the asset have expired The Group has transferred its rights to receive cash fl ows from the asset or has assumed an obligation to pay the
received cash fl ows in full without material delay to a third party under a pass-through arrangement
Either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
98 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued)
2.8 Financial instruments (continued)
2.8.2 Financial liabilities
Initial recognition and measurement
The Group classifi es its fi nancial liabilities in the following categories: at fair value through profi t or loss, or loans and
borrowings, as appropriate. The Group determines the classifi cation of its fi nancial liabilities at initial recognition.
All fi nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings, inclusive of directly
attributable transaction costs.
The Group’s fi nancial liabilities include trade and other payables, derivative fi nancial instruments, bank overdrafts, loans
and borrowings, and fi nancial guarantee contracts.
Subsequent measurement
(a) Loans and borrowings
Borrowings are subsequently stated at amortised cost using the effective interest rate method.
Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
(b) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Accounts payable are classifi ed as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are subsequently measured at amortised cost using the effective interest rate method.
Derecognition
A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When
an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as the derecognition of
the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in profi t or loss in the statement of comprehensive income.
2.8.3 Fair value of fi nancial instruments
The Group measures fi nancial instruments, such as derivatives, as well as other fi nancial assets and liabilities, at fair
value at each reporting date. Also, fair values of fi nancial instruments measured at amortised cost are disclosed in
note 14.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-fi nancial asset takes into account a market participant’s ability to generate economic
benefi ts by using the asset in its highest and best use or by selling it to another market participant that would use the
asset in its highest and best use.
99Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued)
2.8 Financial instruments (continued)
2.8.3 Fair value of fi nancial instruments (continued)
The Group uses valuation techniques that are appropriate in the circumstances and for which suffi cient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or disclosed in the annual fi nancial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is signifi cant to the fair value
measurement as a whole:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is directly
or indirectly observable
Level 3 — Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is
unobservable
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.9 Derivative fi nancial instruments and hedging activities
Derivative fi nancial instruments, principally forward foreign exchange contracts, are used as hedges in the fi nancing and fi nancial
risk management of the Group and are initially measured at fair value on the date a derivative contract is entered into and
subsequently remeasured at their fair value. Derivatives are carried as fi nancial assets when the fair value is positive and as
fi nancial liabilities when the fair value is negative.
Cash fl ow hedges
Foreign currency risk
Foreign exchange forward contracts measured at fair value through other comprehensive income are designated as hedging
instruments in cash fl ow hedges of highly probable forecast transactions in foreign currencies.
While the Group also enters into other foreign exchange forward contracts with the intention of reducing the foreign exchange
risk of expected sales and purchases, these other contracts are not designated in hedge relationships and are measured at fair
value through profi t or loss.
2.10 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined using the average cost basis. The cost of
fi nished goods and work in progress comprise direct expenditure and attributable overheads based on normal operating
capacity, excluding borrowing costs. The cost of raw material is the purchase cost determined on the FIFO basis. Net realisable
value is the estimated selling price less all estimated costs of completion and costs necessary to make the sale.
Where necessary, provision is made for obsolete, slow-moving and defective inventory.
2.11 Share capital
Ordinary shares are classifi ed as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the
proceeds, net of tax.
Where any Group company purchases the Company’s equity share capital, the consideration paid, including any directly
attributable incremental costs (net of income tax), is deducted from equity attributable to the Company’s equity holders until the
shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable incremental transaction costs and the related income tax effects, and are included in
equity attributable to the Company’s equity holders.
100 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued)
2.12 Provisions
Provisions for warranty and product liability are recognised when the Group has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outfl ow of resources will be required to settle the obligation and the
amount can be reliably estimated. When the Group expects some or all of a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in profi t or loss net of any reimbursement. Provisions are not recognised for
future operating losses. If the effect of discounting is material, provisions are determined by discounting the expected value of
future cash fl ows at a pre-tax discount rate that refl ects current market assessments of the time value of money and, where
appropriate, the risks specifi c to the liability. The increase in the provision due to passage of time is recognised as interest
expense.
2.13 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profi t or loss in the statement of
comprehensive income, except to the extent that it relates to items recognised directly in other comprehensive income. In this
case, the tax is also recognised in other comprehensive income.
The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the report date.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax basis of
assets and liabilities and their carrying amounts in the consolidated annual fi nancial statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting, nor taxable profi t, nor loss. Currently and substantially
enacted tax rates are used to determine deferred income tax.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profi ts will be available against
which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to
the extent that it has become probable that future taxable profi ts will allow the deferred tax asset to be recovered.
Deferred tax is not provided on temporary differences arising on subsidiaries where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future or
where the remittance would not give rise to incremental tax liabilities or is otherwise not taxable. Deferred income tax assets and
liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and the
deferred taxes relate to the same taxable entity and the same taxation authority.
2.14 Employee benefi ts
(a) Pension and provident benefi ts
Group companies operate various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defi ned
benefi t and defi ned contribution plans. A defi ned contribution plan is a pension plan under which the Group pays fi xed
contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the
fund does not hold suffi cient assets to pay all employees the benefi ts relating to employee service in the current and
prior periods. A defi ned benefi t plan is a pension plan that is not a defi ned contribution plan. Typically defi ned benefi t
plans defi ne an amount of pension benefi t that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation.
101Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued) 2.14 Employee benefi ts (continued) (a) Pension and provident benefi ts (continued)
The liability/asset recognised in the statement of fi nancial position in respect of defi ned benefi t pension plans is the
present value of the defi ned benefi t obligation at the end of the reporting period less the fair value of plan assets with
the last valuation performed as at 31 March 2015. The defi ned benefi t obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the defi ned benefi t obligation is determined by
discounting the estimated future cash outfl ows using interest rates of government bonds that are denominated in the
currency in which the benefi ts will be paid, and that have terms to maturity approximating to the terms of the related
pension liability. Plan assets are assets that are held by a long-term employee benefi t fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value
is based on market price information and, in the case of quoted securities; it is the published bid price. The value of any
defi ned benefi t asset recognised is restricted to the sum of any unrecognised past service costs and the present value of
any economic benefi ts available in the form of refunds from the plan or reductions in the future contributions to the plan.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions as well as
adjustments relating to the asset ceiling are charged or credited to other comprehensive income in the period in which
they arise. Such actuarial gains and losses are recognised in other comprehensive income and are not reclassifi ed to
profi t or loss in subsequent periods.
Past service costs are recognised immediately in income, unless changes to the pension plan are conditional on the
employees remaining in service for a specifi ed period of time (the vesting period). In this case, the past service costs are
amortised on a straight-line basis over the vesting period.
Net interest is calculated by applying the discount rate to the net defi ned benefi t liability.
For defi ned contribution plans, the Group pays contributions to publicly or privately administered pension insurance
plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee benefi t expense when they are due.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments
is available.
All active members of the defi ned benefi t plan were transferred to the defi ned contribution plan effective 1 April 2015.
Six pensioners remain on the DB plan and the liability is fully insured.
(b) Termination benefi ts
Termination benefi ts are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination benefi ts
when it is demonstrably committed to either: terminating the employment of current employees according to a detailed
formal plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to encourage
voluntary redundancy. Benefi ts falling due more than 12 months after report date are discounted to present value.
(c) Performance bonus plans
The Group recognises a liability and an expense for performance bonuses, based on a formula that takes into
consideration the profi t attributable to the Company’s shareholders after certain adjustments. The Group recognises a
provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(d) Long-service awards
The Group recognises a liability and an expense for long service, based on a formula that takes into account the length
of service of all employees. The long-service award is paid at various stages of employment service and it is a
contractual obligation. These obligations are valued annually by independent qualifi ed actuaries and provided for under
provisions.
102 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2. ACCOUNTING POLICIES (continued) 2.15 Construction contracts
A construction contract is defi ned by IAS 11 as a contract specifi cally negotiated for the construction of an asset. The contract
revenue comprises the initial agreed contract price plus any confi rmed variations. Costs are those that are directly related to the
contract. Where the outcome of the contract can be reliably estimated, revenue and costs are taken to profi t or loss based on
the percentage of completion method. The percentage of completion is determined by measuring the proportion of costs
incurred for work performed to the total expected costs.
The profi t attributable to the stage of completion represents the difference between the revenue and costs attributable to the
stage of completion.
Where the outcome of the contract cannot be reliably estimated, revenue is taken to profi t or loss based on the costs incurred
that are deemed to be recoverable.
Where any contract review shows an expected loss on a contract, then this loss is recognised in profi t or loss immediately.
Losses on contracts are recognised in the period in which they fi rst become foreseeable. Contract losses are determined to be
the amount by which estimated direct and indirect costs of the contract exceed the estimated total revenues that will be
generated by the contract.
During the period until the percentage-of-completion calculation is completed, all contract costs are accumulated in contract
work in progress. The costs of the contract attributable to the stage of contract completion are transferred to cost of sales.
Where the costs incurred plus recognised profi ts are greater than the sum of the recognised losses and progress billings, then
this amount is shown in debtors as amounts due from customers for contract work.
Where the sum of recognised losses and progress billings is greater, then this amount is shown in creditors as amounts due to
customers for contract work.
2.16 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services and the
value of work executed which can be reliably measured during the year in respect of long-term contracts.
Revenue is generated from air and gas-cooling technologies supplied to the coal, gold mining and power generation markets,
together with dust extraction and gas treatment technologies offered from an environmental perspective.
Revenue is recorded net of value added tax, rebates and discounts, and after eliminating inter-group sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic
benefi ts will fl ow to the entity and when specifi c criteria have been met for each of the Group’s activities as described below.
The Group bases its estimates on the historical results, taking into consideration the type of customer, type of transaction and
the specifi cs of each arrangement. (a) Sales of goods and services
Revenue relates to the sale of goods and revenue which are recognised when the Group entities have fulfi lled their
contractual obligations to a customer and have obtained the right to receive consideration. This is usually on dispatch
but is dependent upon the contractual terms that have been agreed with the customer.
(b) Dividend income
Dividend income is recognised when the Company’s right to receive payment is established.
103Howden Integrated annual report 2016
2. ACCOUNTING POLICIES (continued) 2.16 Revenue recognition (continued) (c) Interest income
Interest income earned on fi nancial assets at amortised cost is recognised in profi t or loss as part of fi nance income
using the effective interest rate method. The Group recognises interest income as a part of investment income. The
Company is an investment holding company and recognises interest income as a part of revenue.
(d) Royalty income
Royalty income is recognised when the Group entities have fulfi lled their contractual obligations to a customer and have
obtained a right to receive consideration. The right to receive royalty income is dependent upon the contractual terms of
the royalty agreement concluded. Royalty income is recognised in profi t or loss as part of other income when the
Group’s right to receive payment is established. The Company recognises royalty income as a part of revenue as it is an
investment holding company.
2.17 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis
over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an
asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and
released to profi t or loss over the expected useful life in a pattern of consumption of the benefi t of the underlying asset by equal
annual instalments.
2.18 Leases
Leases in which a signifi cant portion of the risks and rewards of ownership is retained by the lessor are classifi ed as operating
leases. Payments in respect of operating leases are recognised in profi t or loss on a straight-line basis over the lease term.
Leasing agreements which transfer to the Group substantially all the benefi ts and risks of ownership of an asset are treated as
fi nance leases. The assets are included in property, plant and equipment and the capital element of the leasing commitments is
shown as obligations under fi nance leases. The lease rentals are treated as consisting of capital and interest elements. The
capital element is applied to reduce the outstanding obligations and the interest element charged to profi t or loss so as to give a
constant periodic rate of charge on the remaining balance outstanding at each accounting period. Assets held under fi nance
leases are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the
lease term.
2.19 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends are approved
by the Company’s board of directors.
2.20 Dividend withholding tax
Dividend withholding tax is payable at a rate of 15% on dividends distributed to shareholders. This tax is not attributable to the
Company paying the dividend, but is collected by the Company and paid to the tax authorities on behalf of the shareholder.
Dividend withholding tax is included in dividend paid in the statement of changes in equity.
104 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
3. FINANCIAL RISK MANAGEMENT 3.1 Financial risk factors
The Group’s activities expose it to a variety of fi nancial risk: market risk (including foreign exchange risk, interest rate risk and
price risk), credit risk, liquidity risk and cash fl ow risk. The Group’s overall risk management programme focuses on the
unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the Group’s fi nancial performance. Risk
management is carried out by a central treasury department (Colfax Group Treasury) under policies approved by the board of
directors. Group Treasury identifi es, evaluates and hedges fi nancial risks in close cooperation with the Group’s operating units.
The board provides written principles for overall foreign exchange risk, interest rate risk, and credit risk, use of derivative fi nancial
instruments and non-derivative fi nancial instruments, and investing excess liquidity.
(a) Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar (USD), euro and the British pound sterling (GBP). Foreign exchange risk arises
from future commercial transactions and recognised assets and liabilities.
Entities in the Group use forward contracts to manage their foreign exchange risk arising from future commercial
transactions, recognised assets and liabilities. Foreign exchange risk arises when future commercial transactions,
recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Group
manages the position by using external forward currency contracts.
The following assumptions have been in the preparation of the foreign currency sensitivity analysis:
The sensitivity is based on possible changes in the US dollar, euro and GBP. The Group’s exposure to foreign
currency changes for all other currencies is not material
The sensitivity calculation relates to signifi cant foreign currency assets and liabilities on the statement of fi nancial
position as at 31 December 2016
The calculation is based on the net exposure to those foreign currencies
The sensitivity is based on the impact of a 10% currency movement
At 31 December 2016, if the currency had weakened by 10% against the US dollar with all other variables held
constant, pre-tax profi t would have been R3 639 867 lower, mainly as a result of foreign exchange gains on translation
of US dollar-denominated receivables, payables and forward exchange contracts. If the currency were strengthened by
the percentage indicated above there would be an equal and opposite impact on pre-tax profi t.
At 31 December 2016, if the currency had weakened by 10% against the GBP with all other variables held constant,
pre-tax profi t would have been R143 299 lower, mainly as a result of foreign exchange gains on translation of GBP-
denominated receivables, payables and forward exchange contracts. If the currency were strengthened by the
percentage indicated above there would be an equal and opposite impact on pre-tax profi t.
At 31 December 2016, if the currency had weakened by 10% against the euro with all other variables held constant,
pre-tax profi t would have been R1 106 902 lower, mainly as a result of foreign exchange gains on translation of
euro-denominated receivables, payables and forward exchange contracts. If the currency were strengthened by the
percentage indicated above there would be an equal and opposite impact on pre-tax profi t.
105Howden Integrated annual report 2016
3. FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued)
Cash fl ow and interest rate risk
Fluctuations in interest rates impact the value of short-term cash investments and fi nancing activities, giving rise to
interest rate risk. The Group’s income and operating cash fl ows are affected by changes in the market interest rate.
Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk.
In the ordinary course of business, the Company receives cash from its operations and is required to fund working
capital and capital expenditure requirements. This cash is managed to ensure surplus funds are invested in a manner to
achieve maximum returns while minimising risks.
The Group has analysed the effect of a rise/fall of 1% in the prime lending rate (refer to note 15).
Price risk
The Group is exposed to commodity price risk on steel. This risk is mitigated by escalation clauses that are built into
major contracts for steel price variances.
(b) Credit risk
Potential concentrations of credit risk consist principally of cash investments, amounts due from customers and trade
debtors. The Group only deposits cash surpluses with major banks of high quality and with fi nancial institutions located
in South Africa. Trade debtors consist of a large number of customers, spread across diverse industries and
geographical areas. Credit evaluation is performed on the fi nancial condition of the customers before granting credit.
The ongoing creditworthiness of the debtors is assessed from time to time.
The Group has policies that limit the amount of credit exposure to any one fi nancial institution. The Group has assessed
the credit risk with regard to trade receivables with reference to third-party ratings to determine credit quality – refer to
fi nancial assets and liabilities by category note 14.
The Company’s maximum exposure to credit risk is represented by the carrying values of its fi nancial assets on the
statement of fi nancial position.
106 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
3. FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk
The Group manages liquidity risk by monitoring forecast cash fl ows and ensuring that adequate unutilised borrowing
facilities are maintained. Due to the dynamic nature of the underlying businesses, the Group aims to maintain fl exibility in
funding by keeping committed credit lines available.
The maturity analyses of fi nancial liabilities are as follows:
2016R’000
2015R’000
Due within one year
Trade and other payables 278 342 292 215
Amounts due to customers for contract work 53 890 34 554
Forward exchange contracts 1 815 1 950
334 047 328 719
Due within one to two years
Amounts due to customers for contract work 79 649 78 739
79 649 78 739
The Group’s fi nancial liabilities will be settled in the normal operating cycle of the business. For construction contracts,
this would be greater than a year.
3.2 Capital risk management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital
ratios to support its business and maximise the shareholder’s value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue
new shares.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December
2016 and 2015.
4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS Estimates and assumptions
The preparation of the annual fi nancial statements in accordance with IFRS requires the use of certain critical accounting estimates.
It requires management to exercise judgement in the process of applying the Group’s accounting policies. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are signifi cant to the annual fi nancial statements, are mainly the following:
Estimated impairment of goodwill
Goodwill is assessed for impairment at each reporting date. The recoverable amount of the relevant cash-generating units is determined
based on value-in-use calculations. These calculations use cash fl ow projections per budget and strategic plan forecasts. These plans
are revisited every year and are compiled after considering market conditions and the strategic positioning of the business units within
the markets in which they operate.
107Howden Integrated annual report 2016
4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS (continued) Estimated impairment of non-fi nancial assets
An impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of
its fair value less costs of disposal and its value in use. The fair value less costs to sell calculation is based on available data from
binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for
disposing of the asset. The value-in-use calculation is based on a discounted cash fl ow model. These calculations use cash fl ow
projections per budgets and strategic plan forecasts. The recoverable amount is most sensitive to the discount rate used for the
discounted cash fl ow model as well as the expected future cash infl ows and the growth rate used for extrapolation purposes.
Impairment of trade receivables
An allowance for impairment is raised when there is evidence of signifi cant fi nancial diffi culties of the debtor, probability that the debtor
will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments. The allowance raised is based on
management judgement, based on the factors mentioned and the expected recoverability of the amount due.
Revenue recognition
The Group uses the stage of completion, determined by our engineering experts, based on the proportion of contract costs incurred for
work performed to date compared to the estimated total contract costs. Losses on contracts are recognised in the period in which the
loss fi rst becomes foreseeable. Contract losses are determined to be the amount by which estimated direct and indirect costs of the
contract exceed the estimated total revenues that will be granted by the contract.
The Group provides repair and maintenance on key contracts using straight line billing arrangements and the associated revenue is
recognised only when work has been performed. The performance of work is dependent on repairs being requested by a client and
therefore may not take place throughout the year as planned. Thus, the estimates of total work performed and total work to be
performed changes annually as a result of actual data being accumulated and the differences between clients and contracts.
Warranties
The Group provides in full for claims by customers in respect of defects in goods supplied or work performed when such claims are
ascertainable. In addition, certain long-term contract provisions are made for warranties calculated on an appropriate percentage of the
contract price. The estimation of the percentage is based on historical information and management judgement, based on experience
of previous warranty claims on the product type.
Estimation of useful lives of property, plant and equipment and intangible assets
The asset’s residual values and useful lives are reviewed annually and adjusted if appropriate. The useful lives are determined based on
the expected period over which the asset will be used and benefi ts received by the Group from the use of the asset. Residual values are
determined by obtaining observable market prices for the asset with the same age that the asset would be at the end of its useful life.
Deferred tax assets
The recoverability of deferred tax assets is based on the future profi tability of the relevant entity and the ability to generate future taxable
income. These calculations use budget and strategic plan forecasts of profi tability to determine if suffi cient taxable profi t will be available
to allow all or part of the deferred tax asset to be utilised in the future.
Closed jobs accrual
Estimates are made of commitments following the completion of construction contracts based on management’s judgement of the cost
of these commitments where a contractual obligation exists. These are recorded as closed job accruals.
All estimates and underlying assumptions are based on historical experience and various other factors that management believes are
reasonable under the circumstances. The results of these estimates form the basis of judgements about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and any affected future periods.
108 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
5. SEGMENT INFORMATIONThe Group is organised on a world-wide basis into segments based on its products and services:
(1) Fans and Heat Exchangers – focus on air and gas cooling technologies within the coal/gold mining and power generation markets.
(2) Environmental Control – focus on dust extraction and gas treatment technologies from an environmental perspective.
(3) Fabrication Technology – focus on the supply of welding equipment and consumables. The segment is a new product line for the business.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identifi ed as the board of directors.
The board of directors assesses the performance of operating segments based on operating profi t.
Goodwill of R23 717 000 (2015: R23 717 000) is allocated to the Environmental Control division (refer to note 7)
for the year ended 31 December 2016
Externalrevenue
R’000
Operatingprofi t/(loss)
R’000AssetsR’000
LiabilitiesR’000
Inter-segmental
revenueR’000
Fans and Heat Exchangers 1 338 783 283 942 848 304 462 761 26 115
Environmental Control 178 610 (12 744) 166 437 54 908 29 690
Fabrication Technology 87 142 1 257 113 892 63 301 2 783
1 604 535 272 455 1 128 633 580 970 58 588
Central operations – (24 844) 732 407 25 158 –
1 604 535 247 611 1 861 040 606 128 58 588
Capitalexpenditure
R’000Depreciation
R’000Amortisation
R’000
Fans and Heat Exchangers 9 404 13 309 319
Environmental Control – 26 –
Fabrication Technology 1 246 689 –
10 650 14 024 319
Central operations – 87 1 656
10 650 14 111 1 975
109Howden Integrated annual report 2016
for the year ended 31 December 2015
Externalrevenue
R’000
Operatingprofi t/(loss)
R’000AssetsR’000
LiabilitiesR’000
Inter-segmental
revenueR’000
5. SEGMENT INFORMATION (continued)
Fans and Heat Exchangers 1 117 302 213 642 719 670 461 896 18 242
Environmental Control 365 974 51 377 172 626 61 337 22 249
1 483 276 265 019 892 296 523 233 40 491
Central operations – (3 022) 692 074 21 930 –
1 483 276 261 997 1 584 370 545 163 40 491
Capitalexpenditure
R’000Depreciation
R’000Amortisation
R’000
Fans and Heat Exchangers 7 179 13 908 230
Environmental Control 30 57 –
7 209 13 965 230
Central operations – 70 1 656
7 209 14 035 1 886
2016R’000
2015R’000
Segment results (operating profi t) 247 611 261 997
Net fi nance income 55 494 40 483
Profi t before income tax 303 105 302 480
Income tax expense (84 684) (86 927)
Profi t for the year 218 421 215 553
Geographical areas
The Group operates world-wide but primarily in seven main geographical locations:
Revenue by location of customer2016
R’0002015
R’000
South Africa* 1 451 613 1 391 753
United Kingdom and Europe 115 40
North America 8 857 7 359
South America 439 –
Rest of Africa* 82 741 69 364
Middle East 10 286 7 989
Australasia 50 484 6 771
1 604 535 1 483 276
* Sales to a single South African customer comprise R908 million (2015: R742 million) of total revenue, spread across all segments.
Intersegmental transactions are eliminated on consolidation.
Revenue
110 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Assets by locationfor the year ended 31 December 2016
Non-current assetsR’000
Current assetsR’000
TotalassetsR’000
5. SEGMENT INFORMATION (continued)
South Africa 185 931 1 622 435 1 808 366
United Kingdom and Europe – 273 273
North America – 3 197 3 197
South America – 378 378
Rest of Africa – 822 822
Middle East – 2 010 2 010
Australasia – 45 994 45 994
185 931 1 675 109 1 861 040
for the year ended 31 December 2015
South Africa 196 763 1 364 922 1 561 685
North America – 5 903 5 903
Rest of Africa – 9 526 9 526
Middle East – 1 651 1 651
Australasia – 5 605 5 605
196 763 1 387 607 1 584 370
2016R’000
2015R’000
South Africa 10 650 7 209
10 650 7 209
** Capital expenditure consists of additions of property, equipment, vehicles and intangible assets.
Capital expenditure**
111Howden Integrated annual report 2016
Freehold land and buildings
R’000
Plant, equipment
and vehiclesR’000
TotalR’000
6. PROPERTY, PLANT AND EQUIPMENTCONSOLIDATED
At 1 January 2015
Cost 46 816 118 169 164 985
Accumulated depreciation and impairment (9 856) (50 800) (60 656)
Net book amount 36 960 67 369 104 329
Year ended 31 December 2015
Opening net book amount 36 960 67 369 104 329
Additions 261 6 931 7 192
Disposals – (343) (343)
Write off (201) (843) (1 044)
Depreciation (2 568) (11 467) (14 035)
Closing net book amount 34 452 61 647 96 099
At 31 December 2015
Cost 47 077 122 878 169 955
Accumulated depreciation and impairment (12 625) (61 231) (73 856)
Net book amount 34 452 61 647 96 099
Year ended 31 December 2016
Opening net book amount 34 452 61 647 96 099
Additions 362 9 913 10 275
Disposals – (111) (111)
Write off – –
Depreciation (2 500) (11 611) (14 111)
Closing net book amount 32 314 59 838 92 152
At 31 December 2016
Cost 47 439 132 352 179 791
Accumulated depreciation and impairment (15 125) (72 514) (87 639)
Net book amount 32 314 59 838 92 152
COMPANY
At 1 January 2015
Cost – 631 631
Accumulated depreciation and impairment – (314) (314)
Net book amount – 317 317
Year ended 31 December 2015
Opening net book amount – 317 317
Additions –
Write off – – –
Depreciation – (70) (70)
Closing net book amount – 247 247
At 31 December 2015
Cost – 631 631
Accumulated depreciation and impairment – (384) (384)
Net book amount – 247 247
112 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Freehold land and buildings
R’000
Plant, equipment
and vehiclesR’000
TotalR’000
6. PROPERTY, PLANT AND EQUIPMENT (continued)
COMPANY
Year ended 31 December 2016
Opening net book amount – 247 247
Additions – –
Depreciation – (87) (87)
Disposals – (18) (18)
Closing net book amount – 142 142
At 31 December 2016
Cost – 591 591
Accumulated depreciation and impairment – (449) (449)
Net book amount – 142 142
Details in respect of immovable property are set out in a register which may be inspected at the Company’s registered offi ce during normal business hours.
Depreciation of R7 485 000 (2015: R8 027 601) is included under cost of sales.
Goodwill R’000
Trademarks R’000
SoftwareR’000
TotalR’000
7. INTANGIBLE ASSETSCONSOLIDATED
At 1 January 2015
Cost 23 717 41 366 4 659 69 742
Accumulated amortisation – (18 209) (3 473) (21 682)
Net book amount 23 717 23 157 1 186 48 060
Year ended 31 December 2015
Opening net book amount 23 717 23 157 1 186 48 060
Additions – – 17 17
Amortisation charge – (1 656) (230) (1 886)
Closing net book amount 23 717 21 501 973 46 191
At 31 December 2015
Cost 23 717 41 366 4 676 69 759
Accumulated amortisation and impairment – (19 865) (3 703) (23 568)
Net book amount 23 717 21 501 973 46 191
Year ended 31 December 2016
Opening net book amount 23 717 21 501 973 46 191
Additions – – 375 375
Write off – – (35) (35)
Amortisation charge – (1 656) (319) (1 975)
Closing net book amount 23 717 19 845 994 44 556
At 31 December 2016
Cost 23 717 41 366 4 380 69 463
Accumulated amortisation and impairment – (21 521) (3 386) (24 907)
Net book amount 23 717 19 845 994 44 556
113Howden Integrated annual report 2016
7. INTANGIBLE ASSETS (continued)
The trademarks are based on the Howden, Safanco and Donkin names. This asset is to be amortised over its economic useful life which is 25 years, based on the life of the assets to which it attaches.
Goodwill of R23 717 000 arose on purchase of the shares in the fabric fi lter business included in the Howden Projects division of James Howden Holdings (Pty) Limited and represents the difference between the purchase price of R26 320 000 and the fair value of net assets acquired of R2 603 000. The goodwill has been allocated to the Environmental Control business segment.
The Group performed its annual impairment calculation. The projected pre-tax cash fl ow used in the impairment calculation is based on the fi nancial budget and strategic plan approved by management covering a fi ve-year period. Cash fl ows beyond the fi ve-year period are extrapolated using the estimated growth rate of 6% per year. The pre-tax discount rate used was 12.3% using the R186 bond yield of 8.63% as at 31 December 2016.
No reasonable change in any of the key assumptions will result in the recoverable amount of goodwill to be less than the carrying amount.
COMPANY
Company intangible assets comprise all trademarks detailed in the consolidated trademarks listed above. The company does not have any other intangible assets. All trademarks listed in the consolidated trademarks listing are held by the Company.
2016R’000
2015R’000
2016R’000
2015R’000
8. INVESTMENT IN SUBSIDIARIESShares at cost less amounts written off – – 60 001 60 001
Issued ordinary
share capital
Proportion held
Shares at cost or valuation less amounts written off
December 2016
R %
December 2016R’000
December 2015R’000
INTEREST IN SUBSIDIARY COMPANIESSubsidiaries of Howden Africa Holdings Limited
Incorporated in South Africa
Howden Africa (Pty) Limited 1 010 100.00 60 001 60 001
Subsidiaries of Howden Africa (Pty) Limited 60 001 60 001
Incorporated in South Africa
James Howden Holdings (Pty) Limited 1 406 488 100.00 15 298 15 298
Howden Donkin (Pty) Limited 10 000 100.00 8 310 8 310
23 608 23 608
Total indebtedness
Amounts owing by Group companies: Please refer to note 34.
Normal capital loans to or from subsidiaries are unsecured and not subject to any fi xed terms of repayment. No interest is charged on capital loans to/from subsidiaries at present but these arrangements are subject to revision from time to time.
Guarantees
Refer to note 32 for guarantees issued by the Group and Company.
CompanyConsolidated
Details of holding company’s interest
114 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016R’000
2015R’000
2016R’000
2015R’000
9. DEFERRED TAXDEFERRED TAX ASSETS
Balance at beginning of year 24 452 28 745 – 2 010
Charge for the year – current year (5 834) (4 293) – (2 010)
Cash fl ow hedge – charge to equity (486) – –
18 132 24 452 – –
Deferred tax assets comprises
Accelerated depreciation for tax purposes (15 868) (14 841) – –
Cash fl ow hedge 11 – – –
Provisions 20 371 17 073 – –
Working capital 13 618 22 220 – –
18 132 24 452 – –
DEFERRED TAX LIABILITIES
Balance at beginning of year 9 272 1 417 4 336 –
Charge for the year – current year (4 660) 7 113 109 3 986
Pension fund plan surplus – charge to equity (505) 350 (505) 350
Cash fl ow hedge – charge to equity (1 038) 392 – –
3 069 9 272 3 940 4 336
Deferred tax liabilities comprises
Accelerated depreciation for tax purposes 432 1 071 34 46
Pension fund plan surplus 4 896 4 959 4 896 4 959
Assessed loss – (388) – –
Provisions (1 106) (7 470) – –
Working capital (711) 11 003 (990) (669)
Cash fl ow hedge loss (442) 97 – –
3 069 9 272 3 940 4 336
10. CONSTRUCTION CONTRACTSContract revenue recognised in the year 267 955 453 189 – –
Contract costs recognised in the year (193 100) (330 855) – –
Recognised profi ts less recognised losses in the year 74 855 122 334 – –
For contracts in progress at the year-end:
Contract costs incurred and recognised profi ts (less losses) to date 554 328 524 876 – –
Less: Progress billings for work performed (650 862) (539 615) – –
Net amount due to customers for contract work (96 534) (14 739) – –
Amounts due from customers for contract work (non-current) 2 195 1 619 – –
Amounts due from customers for contract work (current) 34 810 96 935 – –
Amounts due to customers for contract work (non-current) (79 649) (78 739) – –
Amounts due to customers for contract work (current) (53 890) (34 554) – –
Net amounts due to customers for contract work (96 534) (14 739) – –
Obligation will be settled in the normal operating cycle of the business. For construction contracts this would be greater than a year.
CompanyConsolidated
115Howden Integrated annual report 2016
2016R’000
2015R’000
2016R’000
2015R’000
11. TRADE AND OTHER RECEIVABLESTrade receivables 337 352 273 489 – –
Less: Provision for impairment of trade receivables (3 121) (3 100) – –
Trade receivables – net 334 231 270 389 – –
Other receivables 25 784 20 615 34 368 13 106
Prepayments 2 591 4 587 – 117
362 606 295 591 34 368 13 223
Less: Non-current portion – trade receivable (11 411) (10 690) – –
Current portion 351 195 284 901 34 368 13 223
All non-current assets are due within fi ve years from reporting date and relate to retentions on construction contracts.
Trade receivables of R337 352 000 (2015: R273 489 000) are pledged as collateral for the general short-term banking facility.
As of 31 December 2016, trade receivables of R25 186 000 (2015: R47 798 000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Up to three months 22 879 41 674 – –
Up to six months 1 306 6 124 – –
Over six months 1 001 – – –
25 186 47 798 – –
As at 31 December 2016, trade receivables of R3 121 000 (2015: R3 100 000) were impaired and provided for. The individually impaired receivables mainly relate to customers which are in unexpectedly diffi cult economic situations. It was assessed that a portion of the receivables is expected to be recovered.
CompanyConsolidated
116 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016R’000
2015R’000
2016R’000
2015R’000
11. TRADE AND OTHER RECEIVABLES (continued)
Movement on the Group provision for impairment of trade receivables is as follows:
At 1 January 3 100 6 300 – –
Utilisation of provision (327) (309) – –
Unused amounts reversed (707) (4 199) – –
Provision for receivables impairment 1 055 1 308 – –
At 31 December 3 121 3 100 – –
The creation and release of provision for impaired receivables has been included in “administrative expenses” in the statements of comprehensive income. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. No debtors terms have been renegotiated during the year.
The Group has analysed the effect of the rise or fall of 1% in the prime lending rate to which the Group’s trade and other receivables are exposed and concluded that this would decrease profi t before income tax by approximately R326 475 (2015: R404 280) and increase in profi t before income tax by approximately R336 000 (2015: R419 142).
Trade receivables of R309 045 000 (2015: R222 591 000) were fully performing.
Trade receivables include foreign balances denominated in the following stated currencies:
The amounts owed by other Howden Group companies are unsecured, interest-free and not subject to any fi xed terms of repayment. Refer to note 34 for balances owing by Group companies.
2016R’000
2015R’000
United States dollar (USD) 47 871 15 802
Australian dollar (AUD) – 182
Canadian dollar (CAD) 2 372 3 186
50 243 19 170
2016R’000
2015R’000
12. LOANS RECEIVABLELoans to BEE companies
Buhle Bethu (Pty) Limited – 2 500
Themba Njalo Camden (Pty) Limited – 5 000
Sindawonye Services (Pty) Limited 5 700 –
Field Service and Engineering 2 850 –
Fidelity Fund* 7 500 –
16 050 7 500
* Loans issued in 2015 were expropriated in a trust fund of an attorney responsible for managing the funds. A claim has been made to the fi delity fund
and it is probable that the amount will be recovered within 12 months.
The loans are interest free, not secured and repayable within 12 months.
The loans were issued for Enterprise and Supplier development in terms of B-BBEE Codes of Good Practice.
CompanyConsolidated
Consolidated
117Howden Integrated annual report 2016
13. RETIREMENT FUNDSDefi ned benefi t fund
The Group operated a post-retirement scheme that covers all employees employed before 1 January 2001 until 31 March 2015. The pension fund is a fi nal salary defi ned benefi t plan. The assets of the fund are held in an independent trustee administered fund, which is administered in terms of the Pension Fund Second Amendment Act No 39 of 2001. The fund is valued annually using the projected unit credit method. The latest actuarial valuation for accounting purposes was performed on 31 December 2016 and the most recent statutory actuarial valuation was performed as at 31 March 2015.
On 15 September 2016 approval from the Financial Services Board (FSB) was obtained to transfer active members to a defi ned contribution pension fund (DC plan). The active members’ fund was transferred to the DC plan in November 2016. Six pensioners remain on the DB plan and the liability is fully insured, the fund purchased annuities to back the pensions payable to existing pensioners.
Defi ned contribution fund
The Group operates a defi ned contribution pension fund for all employees who joined on or after 1 January 2001.
Employees who are not members of either of the Group’s pension funds are covered by the relevant industry fund or through foreign territory statutory funds.
All the funds are managed independently of the Group.
The amounts recognised in the statements of fi nancial position are determined as follows:
2016R’000
2015R’000
Present value of funded obligations 4 893 142 928
Fair value of assets (22 378) (160 640)
Surplus recognised (17 485) (17 712)
According to the rules of the fund all surpluses in the fund will be transferred to the employer surplus account and therefore accrue to the employer.
The movement in the defi ned benefi t obligation over the year is as follows:
Beginning of the year 142 928 308 023
Current service cost – 2 124
Net interest cost – 4 061
Contribution by plan participants – 438
Actuarial losses – 9 126
Settlement (138 035) (122 274)
Curtailment – (19 826)
Benefi ts paid – (38 744)
End of year 4 893 142 928
Company and Consolidated
118 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016R’000
2015R’000
13. RETIREMENT FUNDS (continued)
The movement in the fair value of plan assets for the year is as follows:
Beginning of the year 160 640 303 148
Return on plan assets 1 576 7 050
Actuarial gains/(losses) on plan assets (1 803) 10 377
Employer contributions – 645
Contributions by plan participants – 438
Settlement (138 035) (122 274)
Benefi ts paid – (38 744)
End of year 22 378 160 640
The amounts recognised in the profi t or loss are as follows:
Current service cost – 2 124
Net interest cost (1 576) (2 989)
Curtailments – (19 826)
Total included in employee benefi ts (1 576) (20 691)
The amounts recognised in the other comprehensive income are as follows:
Net actuarial loss recognised during the year 1 803 (1 251)
1 803 (1 251)
The actual return on plan assets was R0.6 million (2015: R17.4 million)
Company and Consolidated
119Howden Integrated annual report 2016
2016R’000
2016%
2015R’000
2015%
13. RETIREMENT FUNDS (continued)
COMPANY AND CONSOLIDATED
Plan assets are comprised as follows:
Cash and cash equivalents 17 485 78 – –
Equity – – 104 470 65
Debt – – 13 777 9
Property – – 647 –
Other 4 893 22 41 746 26
22 378 100 160 640 100
The fund holds no investments in the participating employer.
The major categories of equity plan assets at fair value are as follows:
2016R’000
2015R’000
Healthcare – 3 280
Financials – 28 813
Consumer services – 9 423
Consumer goods – 26 013
Telecommunication – 1 087
Basic materials – 23 777
Industrials – 11 931
Technology – 146
– 104 470
All investments are quoted equity instruments.
Expected contributions to post-employment benefi t plans for the year ending 31 December 2017 are Rnil (31 December 2016: Rnil).
No further contributions are expected to be paid into the fund as a result of a settlement recognised for active members and pensioners.
120 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Fair value hierarchy
Fair value through profi t
or loss R’000
Quoted prices in active marketsLevel 1
R’000
Signifi cant observable
inputs Level 2
R’000
Signifi cant observable
inputs Level 3
R’000
14. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSSCONSOLIDATED
31 December 2016
Financial assets carried at fair value
Foreign exchange contracts – – – –
Foreign exchange contracts in cash fl ow hedges 5 – 5 –
Total 5 – 5 –
COMPANY
31 December 2016
Financial assets carried at fair value
Foreign exchange contracts – – – –
Foreign exchange contracts in cash fl ow hedges – – – –
Total – – – –
CONSOLIDATED
31 December 2016
Financial liabilities carried at fair value
Foreign exchange contracts 17 – 17 –
Foreign exchange contracts in cash fl ow hedges 1 798 – 1 798 –
Total 1 815 – 1 815 –
COMPANY
31 December 2016
Financial liabilities carried at fair value
Foreign exchange contracts – – – –
Foreign exchange contracts in cash fl ow hedges – – – –
Total – – – –
CONSOLIDATED
31 December 2015
Financial assets carried at fair value
Foreign exchange contracts 605 – 605 –
Foreign exchange contracts in cash fl ow hedges 2 359 – 2 359 –
Total 2 964 – 2 964 –
COMPANY
31 December 2015
Financial assets carried at fair value
Foreign exchange contracts 51 – 51 –
Foreign exchange contracts in cash fl ow hedges – – – –
Total 51 – 51 –
121Howden Integrated annual report 2016
Fair value hierarchy
Fair value through profi t
or loss R’000
Quoted prices in active marketsLevel 1R’000
Signifi cant observable
inputs Level 2R’000
Signifi cant unobservable
inputs Level 3R’000
14. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
CONSOLIDATED
31 December 2015
Financial liabilities carried at fair value
Foreign exchange contracts 28 – 28 –
Foreign exchange contracts in cash fl ow hedges 1 921 – 1 921 –
Total 1 949 – 1 949 –
COMPANY
31 December 2015
Financial liabilities carried at fair value
Foreign exchange contracts – – – –
Foreign exchange contracts in cash fl ow hedges – – – –
Total – – – –
The fair value of these recurring fi nancial instruments, is determined through evaluation techniques based on observable inputs, either directly, such as quoted prices, or indirectly, such as derived from quoted prices. The Level 2 instruments are valued based on the forward exchange rates as at 31 December 2016.
2016R’000
2015R’000
2016R’000
2015R’000
15. CASH AND CASH EQUIVALENTSCash and cash equivalents included in the statement of cash fl ows comprised the following statements of fi nancial position amounts:
Bank and cash balances – current 909 341 730 190 600 566 579 173
909 341 730 190 600 566 579 173
At 31 December 2016, the Group had available R50 million (2015: R50 million) of undrawn short-term borrowing facilities.
Trade receivables of R337 352 000 (2015: R273 489 000) are pledged as collateral for the general short-term banking facility.
The Company and its subsidiaries have entered into cross-surety agreements in favour of Standard Bank of South Africa wherein each such entity undertook to stand as surety for and co-principal debtor for any present and future indebtedness of the other Group entities, limited to an aggregate liability of R301 million. These cross-surety agreements incorporated a cession of claims held against other Group entities.
The Group has analysed the effect of a rise/fall of 1% in the prime lending rate to which the Group’s cash and cash equivalents are exposed and concluded that this would increase/decrease profi t before income tax by approximately R9 093 410 (2015: R7 301 900).
The average interest rate earned on bank balances was 6.59% (2015: 5.62%).
CompanyConsolidated
122 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016R’000
2015R’000
2016R’000
2015R’000
16. INVENTORIES
The amounts attributable to the different categories are as follows:– Raw materials, components and consumables 6 169 19 404 – –
– Work in progress 151 097 119 746 – –
– Finished goods 174 900 96 013 – –
332 166 235 163 – –
Inventory amounting to R675 million (2015: R653 million) was included in cost of sales.
17. RECONCILIATION OF TAXATION PAID DURING THE YEAR
Amount due/(owing) at beginning of year 29 954 23 939 166 (277)
Charge in profi t or loss (84 684) (86 927) (15 613) (18 527)
Adjustment for deferred taxation 1 174 11 406 109 5 996
Amount receivable at end of year (31 542) (29 954) – (166)
Amount owing at end of year 13 123 – 4 935 –
(71 975) (81 536) (10 403) (12 974)
18. SHARE CAPITALAuthorised
150 000 000 ordinary shares of 1 cent each 1 500 1 500 1 500 1 500
Issued
65 729 109 ordinary shares of 1 cent each 657 657 657 657
657 657 657 657
Holding company
The holding company of Howden Africa Holdings Limited is Howden Group South Africa Limited, incorporated in South Africa and its ultimate holding company is Colfax Corporation, incorporated in the United States of America.
Shareholders’ analysis at 31 December 2016
2016 Number of
shareholders
2015 Number of
shareholders
2016 Number of
shares
2015 Number of
shares
Holdings
1 – 1 000 shares 626 708 233 070 276 007
1001 – 100 000 shares 492 545 5 138 819 4 848 758
100 001 – 1000 000 shares 30 37 9 423 051 10 707 786
Over 1 000 001 shares 10 9 50 934 169 49 896 558
1 158 1 299 65 729 109 65 729 109
Category of ordinary shareholders
Holding companies 2 2 36 408 743 36 408 743
Individuals 820 929 2 034 319 2 505 469
Banks, nominees and trust companies 150 164 6 850 806 7 073 196
Insurance companies 8 8 752 391 1 544 735
Pension funds and investment companies 40 45 4 649 496 5 338 556
Endowment and mutual funds 58 63 13 164 884 11 255 842
Other corporations and close corporations 26 31 131 723 152 737
Other public and private companies 54 57 1 736 747 1 449 831
1 158 1 299 65 729 109 65 729 109
CompanyConsolidated
123Howden Integrated annual report 2016
2016Number of
shares
2015Number of
shares2016
%2015
%
18. SHARE CAPITAL (continued)
Ordinary share capital
Major shareholders benefi cially interested in 5% or more of the Company’s listed securities
Howden Group South Africa Limited 31 484 981 31 484 981 47.90 47.90
James Howden & Godfrey Overseas Limited 4 923 762 4 923 762 7.49 7.49
Oasis 3 489 836 3 278 555 5.31 4.99
Shareholder spread in terms of section 8.63(e) of the JSE Limited Listings Requirements
Howden Group South Africa Limited 31 484 981 31 484 981 47.90 47.90
James Howden & Godfrey Overseas Limited 4 923 762 4 923 762 7.49 7.49
Directors’ interest in terms of section 8.63(c) of the JSE Limited Listings Requirements
Thomas Bärwald (Contract ended on 31 May 2016) – 909 – –
Public and non-public shareholders
Non-public shareholders
Directors and associates of the Company holdings*# 23 903 23 903 0.04 0.04
Strategic holdings and holding company** 36 408 743 36 408 743 55.39 55.39
Public shareholders 29 296 463 29 296 463 44.57 44.57
65 729 109 65 729 109 100.00 100.00
# Thomas Bärwald’s shares of 909 are included as he works for the Howden Global Group.
* Prior year adjusted to refl ect shares held by a director who was previously an employee.
** Strategic holding is inclusive of Howden Group South Africa Limited and James Howden & Godfrey Overseas Limited.
124 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016R’000
2015R’000
2016R’000
2015R’000
19. TRADE AND OTHER PAYABLESTrade payables 150 242 161 994 – –
Accruals 50 244 53 421 – 193
Income received in advance 106 936 112 479 – –
Amounts owing to other Howden Group companies 72 322 22 150 4 244 4 416
Social security and other taxes 15 111 12 491 – –
Other payables 21 164 17 742 12 039 12 985
416 019 380 277 16 283 17 594
The amounts owing to other Howden Group companies are unsecured, interest-free and not subject to any fi xed terms of repayment. See note 34 for details.
2016R’000
2015R’000
Trade payables include foreign balances denominated in the following stated currencies:
European euro (EUR) 11 286 6 879
British pound (GBP) 1 218 58
United States dollar (USD) 83 927 13 118
Indian rupee (INR) 8 –
Australian dollar (AUD) 649 282
97 088 20 337
CompanyConsolidated
Consolidated
125Howden Integrated annual report 2016
2016R’000
2015R’000
2016R’000
2015R’000
20. GOVERNMENT GRANTS
At 1 January 9 671 6 811 – –
Received during the year – 4 209 – –
Released to the statement of profi t or loss (1 050) (1 349) – –
At 31 December 8 621 9 671 – –
Current 915 784 – –
Non-current 7 706 8 887 – –
8 621 9 671 – –
Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfi lled conditions or contingencies attached to these grants.
21. PROVISIONS Warranty
At beginning of year 29 229 34 666 – –
Additional provision 10 316 13 195 – –
Warranty expenditure in current year (8 589) (12 136) – –
Unused amounts released (1 014) (6 496) – –
At end of year 29 942 29 229 – –
Provisions are made on long-term contracts for warranties calculated on an appropriate percentage of the contract value contractual arrangement.
Restructuring provision
At beginning of year 1 472 – – –
Additional provision – 6 022 – –
Expenditure in current year (1 472) (4 550) – –
Unused amounts released – – – –
At end of year – 1 472 – –
Disclosure:
Non-current liabilities 11 642 12 035 – –
Current liabilities 18 300 18 666 – –
Total provisions 29 942 30 701 – –
CompanyConsolidated
126 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Note 2016R’000
2015R’000
2016R’000
2015R’000
22. REVENUERevenue which excludes value added tax and revenue between Group companies, represents the invoiced value of goods and services supplied and the recognised value of long-term contract work.
Revenue from continuing operations
– Construction contracts 267 955 453 189 – –
– Sale of goods 689 276 530 282 – –
– Services 647 304 499 805 – –
1 604 535 1 483 276 – –
Revenue for the Company includes other income items as follows:
– Dividend income – – – 477 680
– Bank interest – – 40 313 15 332
– Receivables (subsidiaries) – interest – – – 1 431
– Licence fees – – 10 550 18 618
– Management fee income – – 24 690 28 290
– Royalties – – 36 337 35 011
– – 111 890 576 362
23. OPERATING PROFIT IS STATED AFTER CHARGINGAmortisation of intangible assets
– Trademarks and other intangible assets 7 1 975 1 886 1 656 1 656
Auditors’ remuneration 2 605 2 120 2 605 2 120
Depreciation
– Buildings 2 500 2 568 – –
– Plant, equipment and vehicles 11 611 11 467 87 70
Total depreciation 6 14 111 14 035 87 70
Provisions and warranties 21 9 302 12 721 – –
Loss on disposal of plant, equipment, vehicles and software 30 – 59 (18) –
Rental under operating leases 11 937 13 093 – –
Employee benefi ts
– Salaries and wages 459 215 395 701 10 688 14 893
– Social security costs 9 939 6 751 5 497 3 661
– Pension costs – defi ned contribution scheme 13 14 658 14 033 1 143 1 100
– defi ned benefi t scheme 13 – 2 124 – 2 124
– defi ned benefi t scheme curtailment gain 13 – (19 826) – (19 826)
Total employee benefi ts 483 812 398 783 17 328 1 952
Repairs and maintenance 8 363 9 332 5 –
Foreign exchange loss 8 451 4 573 1 528 1 372
CompanyConsolidated
127Howden Integrated annual report 2016
2016R’000
2015R’000
2016R’000
2015R’000
24. INVESTMENT INCOME– Interest income 53 990 37 521 – –
– Defi ned benefi t fund – net of interest paid 1 576 2 989 1 576 2 989
55 566 40 510 1 576 2 989
25. FINANCE COSTS– Interest costs 72 27 1 21
72 27 1 21
26. INCOME TAX EXPENSESouth African normal tax
Current tax
– Current year 83 567 75 881 15 504 12 531
– Prior year (57) (360) – –
Deferred tax
– Current year 1 174 11 406 109 5 996
84 684 86 927 15 613 18 527
Reconciliation of rate of tax % % % %
South African normal tax rate 28.0 28.0 28.0 28.0
Adjusted for:
Other permanent differences (0.1)** 0.7* 0.9** 0.9*
Exempt dividend income – – – (25.4)
Net increase/(reduction) (0.1) 0.7 0.9 (24.5)
Effective rate 27.9 28.7 28.9 3.5
* Permanent differences include learnerships, donations and expenses attributable to dividend income.
** Permanent differences include learnerships and donations.
CompanyConsolidated
128 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
2016 2015
27. EARNINGS PER ORDINARY SHARE
Number of shares in issue (’000) 65 729 65 729
Cents Cents
Earnings per ordinary share 332.31 327.94
Headline earnings per share 332.36 329.62
There is no dilution effect on earnings.
R'000 R'000
Headline earnings reconciliation
Net profi t for the year 218 421 215 553
Loss on sale of property, plant and equipment and intangible assets – 59
Write off of property, plant and equipment and intangible assets 35 1 044
218 456 216 656
Basic EPS amounts are calculated by dividing the profi t for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
2016R’000
2015R’000
2016R’000
2015R’000
28. COMMITMENTSLeases
Operating leases
Payments due within one year 11 600 9 489 311 208
Payments due within two to fi ve years 12 764 6 822 283 213
Payments due after fi ve years 36 – – –
24 400 16 311 594 421
Note:
Operating lease agreements for land and buildings include a clause to renew the lease for a future negotiated period.
Motor vehicles under operating leases are returned to the lessor at the end of the lease period.
Operating lease agreements have escalation clauses linked to infl ation.
Consolidated
CompanyConsolidated
129Howden Integrated annual report 2016
Note 2016R’000
2015R’000
2016R’000
2015R’000
29. CASH GENERATED FROM/(UTILISED IN) OPERATIONSProfi t before income tax 303 105 302 480 54 016 529 215
Adjustments for:
Depreciation 6 14 111 14 035 87 70
Government grant income 20 (1 050) (1 349) – –
Amortisation of intangible assets 7 1 975 1 886 1 656 1 656
Pension fund surplus/(charges) 13 (1 576) (21 336) (1 576) (21 336)
Write off of property, plant and equipment and intangible assets 6, 7 35 1 044 – –
Cash fl ow hedge reclassifi ed to profi t or loss 262 (592) – –
Loss on disposal of property, plant and equipment 30 – 59 18 –
Other non-cash items – – – (11)
Dividend income 22 – – – (477 680)
Net fi nance income (53 917) (37 494) (40 312) (19 730)
Unrealised FEC (gain)/loss 592 (839) 51 (51)
Warranty and restructuring provision in profi t or loss 21 9 302 12 721 – –
272 839 270 615 13 940 12 133
Working capital changes (56 542) (113 855) (22 456) (38 452)
(Increase)/decrease in inventories (97 003) (9 758) – –
(Increase)/decrease in accounts receivable (5 466) (23 716) (21 145) 22 751
Increase/(decrease) in accounts payable 55 988 (63 695) (1 311) (61 203)
Decrease in provisions (10 061) (16 686) – –
216 297 156 760 (8 516) (26 319)
30. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETSBook value 6 111 343 18 –
Loss on disposal 23 – (59) (18) –
Proceeds 111 284 – –
31. CAPITAL COMMITMENTS
Authorised and contracted 774 598 – –
32. GUARANTEESPerformance and retentions guarantees amounting to R86 121 469 (2015: R78 502 848) have been supplied to third parties on projects being executed.
The Company and its subsidiaries have entered into cross-surety agreements in favour of Standard Bank of South Africa wherein each such entity undertook to stand as surety and co-principal debtor for any present and future indebtedness of the other Group entities, limited to an aggregate liability of R301 million. These cross-surety agreements incorporated a cession of claims held against other Group entities.
The Company has undertaken to stand as surety and co-principal debtor with Howden Africa (Pty) Limited (the principal debtor), for the due and proper payment of all sums of money which the principal debtor may now or in the future owe to a specifi ed customer, limited to an amount of R25 million. The exposure at year-end was Rnil (2015: R268 483).
No losses are expected to arise out of the above arrangements.
CompanyConsolidated
130 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
33. LITIGATIONThere are no legal matters which in the opinion of the Group and in consultation with legal counsel would have any material consolidated effect on the Group’s fi nancial position, results of operations or cash fl ow.
34. RELATED PARTY TRANSACTIONSFor details of subsidiary companies and the Group’s interest therein refer to note 8.
Refer to pages 64 and 65 for details of the directors and note 35 to the fi nancial statements for details of emoluments paid to directors.
Refer to note 32 to the fi nancial statements for details of guarantees provided on behalf of the subsidiary companies.
Group 2016R’000
2015R’000
Key management compensation
– Short-term employee benefi ts 26 627 25 787
– Post-employment pension benefi ts 1 730 1 795
28 357 27 582
Related party transactions with entities outside the Howden Africa Group
Sales to related partiesR’000
Purchases from related
partiesR’000
Management fee to related
partyR’000
ERP licence fee to related
partyR’000
Technology licence fee
to related party
R’000
Service fee – shared
service centreR’000
Group
2016
Howden Denmark A/S – 7 758 – – – –
Howden Thomassen Compressors BV Netherlands – 398 – – – –
Howden Australia (Pty) Limited 50 484 404 – – – –
Howden Group Limited UK – 7 15 361 7 758 – –
Howden Holdings Limited UK 73 786 – – 2 560 –
Howden Process Compressors Limited 71 3 157 – – – –
Howden South America 439 – – – – –
FW US Fairfi eld 133 – – – – –
FW Finland – 152 – – – –
Howden Mexico – 20 590 – – – –
ESAB KFT – – – – – 3 380
Howden North America 2 883 – – – – –
Howden Compressors Limited – 1 152 – – – –
ESAB Middle East 273 121 727 – – – –
Howden Hua Engineering – 243 – – – –
Howden BC Compressors – 75 – – – –
54 356 156 449 15 361 7 758 2 560 3 380
Consolidated
131Howden Integrated annual report 2016
Sales to related parties
R’000
Purchasesfrom related
parties R’000
Management fee to related
partyR’000
ERP licence fee to related
partyR’000
Technology licence fee
to related partyR’000
34. RELATED PARTY TRANSACTIONS (continued)
Group
2015
Howden Denmark A/S – 5 496 – – –
Howden Spain S.L – – – – –
Howden Thomassen Compressors BV Netherlands – – – – –
Howden Australia (Pty) Limited 1 963 – – – –
Howden Group Limited UK – – 19 946 16 914 –
Howden Holdings Limited UK – – – – 1 888
Howden Process Compressors Limited – 26 170 – – –
Howden South America 579 – – – –
FW US Fairfi eld 37 – – – –
FW Kolkata 64 – – – –
Howden Mexico – 10 814 – – –
Howden North America 476 – – – –
Howden Compressors Limited – 231 – – –
Howden Hua – 1 297 – – –
Howden BC Compressors – 1 859 – – –
3 119 45 867 19 946 16 914 1 888
Related party transactions at Company level
Management fee to/(from)
related partiesR’000
ERP licence fee to/(from)
related parties R’000
Technology licence fee
to/(from) related parties
R’000
Royalties from related parties
R’000
Servicefees
R’000
Company
2016
ESAB KFT – – – – 3 380
Howden Group Limited UK 15 361 7 758 – – –
Howden Holdings Limited UK – – 2 560 – –
James Howden Holdings (Pty) Limited (3 940) (3 210) (800) (9 247) (1 469)
Howden Donkin (Pty) Limited (1 576) – – (3 602) –
Howden Africa (Pty) Limited (19 173) (4 780) (1 760) (23 489) (1 911)
Exchange rate difference 400 232 – – –
Howden Africa Holdings Limited (8 928) – – (36 338) –
2015
Howden Group Limited UK 19 946 16 914 – – –
Howden Holdings Limited UK – – 1 888 – –
James Howden Holdings (Pty) Limited (7 847) (4 388) 2 (13 899) –
Howden Donkin (Pty) Limited (1 341) – – (2 195) –
Howden Africa (Pty) Limited (19 102) (12 342) (1 890) (18 917) –
Exchange rate difference – (184) – – –
Howden Africa Holdings Limited (8 344) – – (35 011) –
132 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Amounts due
by related parties
Amounts owed to related parties
Amounts due
by related parties
2016R’000
2015R’000
34. RELATED PARTY TRANSACTIONS (continued)
Related party balances as at 31 December 2016
Group
Howden Denmark A/S – 2 518 – 3 675
FW Finland – 128 – 899
Howden Thomassen BV Netherlands – 172 – –
Howden Australia (Pty) Limited 45 994 756 – 1 202
Howden Group Limited UK – 306 – 1 969
Howden Holdings Limited UK 55 3 220 – 1 832
Howden Mexico – – – 4 354
Howden Process Compressors Limited – – – 5 899
Howden North America 2 453 – 4 195 –
Howden HUA Engineering – 37 – –
Howden Compressors Limited 69 1 187 – 1 660
Howden BC Compressors – – – 111
ESAB Middle East 1 421 63 064 2 836 –
ESAB KFT – 388 – –
FW US Fairfi eld – – 31 15
FW Kolkata – – 57 –
Howden South America 378 – – –
James Howden & Co – 487 – 524
Howden India – 8 – 10
50 370 72 271 7 119 22 150
Company
Howden Australia (Pty) Limited – 378 – 1 202
Howden Group Limited UK – 266 – 1 819
Howden Holdings Limited UK – – – 1 395
ESAB KFT – 388 – –
James Howden Holdings Limited – – 108 –
Howden Donkin (Pty) Limited 1 801 – 2 529 –
Howden Africa (Pty) Limited 18 882 652 3 623 –
20 683 1 684 6 260 4 416
Amountsowed to
related parties
133Howden Integrated annual report 2016
34. RELATED PARTY TRANSACTIONS (continued)
Management fees
The management fees are in accordance with management services agreement concluded between Howden Group Limited and Howden Africa Holdings Limited in terms of which the former provides designated management services to Howden Africa Holdings Limited and its subsidiaries.
ERP licence fees
ERP licence fees relate to the licence to utilise designated Howden software.
Shared services fee
Shared service fees are in accordance with an agreement concluded between ESAB KFT and Howden Africa Holdings Limited in terms of which the former provides transactional accounting services to Howden Africa Holdings Limited’s subsidiaries.
Technology licence fees
Technology licence fees relate to use of Howden technology in the manufacturing of goods by Howden Africa.
Royalties
Royalties relate to the use of Howden intellectual property.
Defi ned benefi t fund
There is no contractual agreement or stated policy for charging the net defi ned benefi t cost, in relation to employees on the Howden South Africa Defi ned Benefi t Pension Fund, to Group companies. The Group’s net contribution to the pension fund has been disclosed in note 13.
Relationships
Ultimate holding company Colfax Corporation
Holding company Howden Group South Africa Limited
Subsidiaries – wholly owned James Howden Holdings (Pty) Limited
Howden Donkin (Pty) Limited
Howden Africa (Pty) Limited
134 Howden Integrated annual report 2016
Notes to the annual fi nancial statements continued
for the year ended 31 December 2016
Fees for services as
directorR’000
Basic salaryR’000
Bonuses or performance-
related payments2
R’000
Any other material benefi t
received1
R’000
Contribution to pension
schemeR’000
TotalR’000
35. DIRECTORS’ EMOLUMENTS2016
Executive directors
William Thomson – 2 815 – 1 184 281 4 280
Thomas Bärwald (contract ended 31 May 2016) – 1 924 1 574 467 420 4 385
Kevin Johnson (resigned 8 December 2016) – 2 961 1 021 1 843 478 6 303
Marinella Vigouroux (appointed 8 December 2016) – 90 – 26 6 122
Non-executive directors
H Mathe 251 – – – – 251
M Malebye 280 – – – – 280
M Patel 278 – – – – 278
809 7 790 2 595 3 520 1 185 15 899
2015
Executive directors
Thomas Bärwald – 4 383 2 000 1 357 766 8 506
Kevin Johnson – 2 794 1 343 1 753 497 6 387
Non-executive directors
H Mathe 182 – – – – 182
M Malebye 260 – – – – 260
M Patel 258 – – – – 258
700 7 177 3 343 3 110 1 263 15 593
¹ Benefi ts are inclusive of medical aid, company vehicle costs, leave pay and expat allowances.
² Bonuses relate to the previous fi nancial year.
All directors’ emoluments are paid by Howden Africa Holdings Limited.
The base salaries of the executive directors are reviewed annually to ensure they are supportive of both the Company’s business objectives and the creation of shareholder wealth. Salaries are benchmarked against those paid to directors in companies in comparable sectors which are of a similar size.
135Howden Integrated annual report 2016
35. DIRECTORS’ EMOLUMENTS (continued)
Performance-related payments
Actual bonuses were assessed depending on the achievement of a number of corporate and individual targets. The main areas of measurement were:
Bookings relative to budget and performance against previous year. (In 2015 Howden Africa achieved 90.5% of budget) Operating profi t relative to budget and performance against previous year. (In 2015 Howden Africa achieved 81% of budget) Working capital turns relative to budget and performance against previous year. (In 2015 Howden Africa achieved 111% in excess of
budget) Personal performance based on completion of objectives
Maximum bonus only becomes payable for performance substantially in excess of budget and no bonus would be payable for performance that is substantially below budget.
Share options
There were no share options available for Howden Africa Holdings Limited. Executive directors participate in a scheme operated by the Group’s majority shareholder Colfax Corporation.
Service contract
W Thomson has a single service contract with Howden UK Limited and operates as Chief Executive Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 1 February 2016 as a COO and on 1 June 2016 as CEO covering an initial period of two years ending 31 May 2018.
T Bärwald has a single service contract with Howden Australia (Pty) Limited and operates as Chief Executive Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 1 January 2009 covering an initial period of two years ending 31 December 2010. The contract was initially extended to 31 December 2015 and was subsequently extended and expired on 31 May 2016.
K Johnson has resigned as a director effective 8 December 2016 to take up a position within Colfax Corporation. He had a single service contract with Howden Australia (Pty) Limited and operates as Chief Financial Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 23 October 2011 covering an initial period of two years ended 23 October 2013. The contract was initially extended to 23 October 2014 and was subsequently extended to 30 April 2017 on the terms and conditions below:
M Vigouroux was appointed on 8 December 2016 as Kevin Johnson’s replacement.
Termination periods for executive directors:
Early termination by director• On mutually agreeable notice period to be agreed at the time of the event
Early termination by Howden• Forthwith in the event of – Their inability to carry out his duties for a consecutive period of six (6) months or more on account of physical or mental disability – Their conduct, including dishonesty and being convicted of an offence – Their prejudicial conduct to the business of Howden Africa – If employment with Howden Australia (Pty) Limited ceases at any time for whatsoever reason
There are no local restraints of trade applicable to executive directors.
M Malebye joined the board as an independent non-executive director on 7 November 2007. H Mathe joined the board as an independent non-executive director with effect from 1 July 2012. M Patel joined the board as an independent non-executive director on 15 December 2014.
All independent non-executive directors are appointed under a letter of appointment on a three-year rotation basis. There are no restraints of trade incorporated into independent non-executive director letters of appointment.
Termination periods applicable to independent non-executive directors shall be on mutually agreed periods and shall be in accordance with any applicable legislation.
36. EVENTS AFTER REPORTING DATE
There were no events identifi ed after reporting date that require disclosure or an adjustment to the annual fi nancial statements.
136 Howden Integrated annual report 2016
HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1996/002982/06)
(the Company)
JSE Code: HWN ISIN Code: ZAE 000010583
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that an annual general meeting of shareholders
of the Company will be held at its registered offi ces on Thursday,
1 June 2017 at 1a Booysens Road, Booysens, Johannesburg, South
Africa at 13:30 (the AGM) to consider and, if deemed fi t, passing with
or without modifi cation all ordinary and special resolutions as set
out below.
WHO HAS RECEIVED NOTICE OF THIS ANNUAL
GENERAL MEETING
In accordance with section 59(1) of the Act the Company’s board of
directors has resolved the record date for determining shareholders of
the Company entitled to receive notice of this AGM as being those
recorded as such in the share register of the Company, maintained by
the transfer secretaries, as being the close of business on Friday,
24 March 2017.
WHO MAY ATTEND THIS ANNUAL GENERAL
MEETING
In accordance with section 59(1)(b) of the Act, the Company’s board
of directors has resolved that the record date for determining which
shareholders of the Company are entitled to attend, participate in,
and to vote at this AGM, as Friday, 26 May 2017. Accordingly, the last
date to trade in the Company’s shares on the JSE Limited (JSE) in
order to be eligible to attend, participate in and vote at this AGM is
Tuesday, 23 May 2017.
All meeting participants will be required to provide identifi cation.
The purpose of the meeting is to transact the business below and to
consider and, if deemed fi t, pass the following resolutions with or
without modifi cation the resolutions below.
Ordinary resolution 1: Adoption of annual fi nancial statements
Resolved that the annual fi nancial statements for the Company and
the Howden Africa Group for the year ended 31 December 2016 be
and are hereby adopted.
Explanatory notes
The complete annual fi nancial statements are set out on pages 74 to
135 of the integrated annual report for the year ended 31 December
2016 and have been distributed as required by the Act and the JSE
Listings Requirements (Listings Requirements). In addition to the
annual fi nancial statements, the integrated annual report also
incorporates the external auditors’ report, Audit and Risk Committee
report, directors’ report and the remuneration, nomination, social and
ethics report.
The integrated annual report will also be available on the Company’s
website, www.howden.co.za, and a printed copy can be obtained
from the transfer secretaries and/or Company Secretary.
In order to be adopted this ordinary resolution requires the support of
more than 50% of the voting rights exercised on the resolution.
Ordinary resolution 2: External auditors
Resolved that Ernst & Young be and are hereby appointed as
Howden’s independent auditors, as nominated by its Audit and Risk
Committee.
Explanatory notes
In order to be adopted this ordinary resolution requires the support of
more than 50% of the voting rights exercised on the resolution.
Notice of annual general meeting
137Howden Integrated annual report 2016
Ordinary resolution 3: Re-appointment of Audit and Risk
Committee members
Resolved that each of the following independent directors, who are
eligible and offer themselves for re-election, be and are hereby
re-elected, each by way of a separate vote, as members of the
Company’s Audit and Risk Committee:
3.1 Mitesh Patel (member and chairman)
3.2 Morongwe Malebye (member)
3.3 Humphrey Mathe (member)
Explanatory notes
Biographies of these independent directors appear on page 64 of the
integrated annual report.
The appointments numbered 3.1 to 3.3 constitute separate ordinary
resolutions and will be considered by separate votes.
In order to be adopted each ordinary resolution requires the support
of more than 50% of the voting rights exercised on each resolution.
Ordinary resolution 4: Remuneration policy
Resolved that the Company and its subsidiaries’ remuneration policy
for the 2017 fi nancial year, appearing on pages 61 to 63 of the
integrated annual report, be and is hereby endorsed by a non-binding
advisory vote.
Explanatory notes
Chapter 2 of King III, dealing with boards and directors, requires
companies to table their remuneration policy to shareholders for a
non-binding advisory vote at each annual general meeting. This
enables shareholders to express their views on remuneration policies
adopted for executive directors and their implementation. The
Company’s remuneration policy is detailed on page 61 of this report.
In order to be endorsed this ordinary resolution requires the support
of more than 50% of the voting rights exercised on the resolution.
Ordinary resolution 5: Re-election of directors
Resolved that each of the following directors, who retire from offi ce at
this meeting and offer themselves for re-election, be and are hereby
re-elected, each by way of a separate vote, as a director of the
Company:
5.1 Morongwe Malebye
5.2 Humphrey Mathe
5.3 Mitesh Patel
Explanatory notes
Biographical details for these directors appear on page 64 of this
report. Reasons for re-election are explained on page 53.
The appointments numbered 5.1 to 5.3 constitute separate ordinary
resolutions and will be considered by separate votes.
In order to be adopted each ordinary resolution requires the support
of more than 50% of the voting rights exercised on each resolution.
Ordinary resolution 6: Election of director
Resolved to elect Marinella Vigouroux, who was appointed after the
last annual general meeting, in accordance with the provisions of
clause 39 of the Company’s memorandum of incorporation (MoI)
Explanatory notes
Biographical details for this director appear on page 65 of this report.
In order to be adopted this ordinary resolution requires the support of
more than 50% of the voting rights exercised on the resolution.
Ordinary resolution 7: Control of unissued share capital
Resolved that the authorised but unissued shares in the capital of the
Company be and are hereby placed under the control and authority of
the directors of the Company and that the directors of the Company
are and be hereby authorised and empowered to allot, issue and
otherwise dispose of such shares to such person or persons and on
such terms and conditions and at such times as the directors of the
138 Howden Integrated annual report 2016
Notice of annual general meeting continued
Company may from time to time in their discretion deem fi t subject to
the provisions of the Act and the Listings Requirements, where
applicable, and that such authority remain applicable until the
Company’s next AGM.
Explanatory notes
In terms of the Company’s MoI, shareholders may authorise the
directors to allot and issue authorised but unissued shares as the
directors in their discretion deem fi t.
The existing general authorities granted by shareholders at the
previous annual general meeting, held on 1 June 2016, will expire at
the AGM on 1 June 2017, unless renewed. The authorities will be
subject to the Act. The aggregate number of ordinary shares able to
be allotted and issued in terms of these authorities are limited as set
out in the respective resolutions.
The directors consider it advantageous to renew these authorities to
enable the Company to take advantage of any business opportunity
that may arise.
In order to be adopted this ordinary resolution requires the support of
more than 50% of the voting rights exercised on the resolution.
Ordinary resolution 8: General authority to issue shares for cash
Resolved that the directors are hereby authorised as a general
authority to issue any and all of the authorised but unissued shares in
the capital of the Company, or to allot, issue and grant options to
subscribe for, any and all of the authorised but unissued shares in the
capital of the Company, for cash, subject to the Act, the MoI of the
Company and the Listings Requirements of the JSE, where
applicable, provided that:
(a) the equity securities be of a class already in issue or, where this is
not the case, must be limited to such securities or rights that are
convertible into a class already in issue
(b) the equity securities must be issued to public shareholders, as
defi ned in the Listings Requirements of the JSE, and not to
related parties
(c) the equity securities which are the subject of a general issue for
cash may not exceed 15% of the Company’s listed equity
securities as at the date of the notice of the AGM this number
being 9 859 366 shares, provided that:
(i) the authority shall be valid until Howden’s next annual
general meeting, or for 15 months from the date on which
the general issue for cash ordinary resolution was passed,
whichever period is shorter subject to the Listings
Requirements of the JSE and to any other restrictions set
out in this authority;
(ii) the calculation of the applicant’s listed equity securities must
be a factual assessment of the applicant’s listed equity
securities as at the date of the notice of AGM, excluding
treasury shares;
(iii) any equity securities issued under the authority during the
period contemplated in (c)1(i) above must be deducted from
such number in (c) above; and
(iv) in the event of a subdivision or consolidation of issued equity
securities during the period contemplated in (c)(i), the
existing authority must be adjusted accordingly to represent
the same allocation ratio.
(d) the maximum discount at which equity securities may be issued
is 10% of the weighted average traded price of such equity
securities measured over the 30 business days prior to the date
that the price of the issue is agreed between the issuer and the
party subscribing for the securities. The JSE should be consulted
for a ruling if the applicant’s securities have not traded in such
30-business day period;
(e) a SENS announcement giving full details, including the impact on
net asset value, net tangible asset value, earnings and headline
earnings per share will be published at the time of any issue
representing, on a cumulative basis within a fi nancial year, 5% or
more of the number of securities in issue prior to the issue; and
(f) the authority includes any options/convertible securities that are
convertible into an existing class of equity securities, where
applicable.
139Howden Integrated annual report 2016
Explanatory notes
In terms of the Listings Requirements, the approval of 75% majority of
the votes cast by shareholders present or represented by proxy at this
AGM will be required for this authority to become effective.
Special resolution 1: General approval for acquisition of the
Company’s shares by the Company or a subsidiary
Resolved that, by way of general approval, the Company is authorised
in terms of its MoI or that of any subsidiary to acquire its own shares
in terms of sections 48 of the Act and in accordance with the Listings
Requirements, which currently provide inter alia that:
(a) Any such acquisition of Company shares will be effected through
the order book operated by the JSE trading system and done
without prior understanding or arrangement between the
Company and/or any subsidiary acquiring shares in the Company
and the counterparty (reported trades are prohibited)
(b) This general authority will only be valid until the Company’s next
annual general meeting; or for 15 months from the date of
passing this special resolution, whichever period is shorter
(c) At any point, the Company and/or any subsidiary acquiring
shares in the Company may only appoint one agent to effect any
repurchase/s on its behalf
(d) Repurchase of the Company’s shares during a prohibited period
as defi ned in the Listings Requirements may not occur unless
there is a repurchase programme in place where the dates and
quantities of securities to be traded during the relevant period are
fi xed (not subject to any variation) and has been submitted to the
JSE in writing prior to the commencement of the prohibited
period. The Company or any subsidiary repurchasing shares
must instruct an independent third party, which makes its
investment decisions in relation to the issuer’s securities
independently of, and uninfl uenced by, the Company and any of
its subsidiaries, prior to the commencement of the prohibited
period to execute the repurchase programme submitted to
the JSE
(e) An announcement will be published as soon as the Company
and/or any subsidiary has acquired shares constituting,
cumulatively, 3% of the number of Company shares in issue at
the time the authority is granted and for each subsequent
3% purchased, containing full details of such acquisition;
(f) Repurchases in the aggregate in any one fi nancial year by the
Company or any subsidiary may not exceed 20% of the number
of shares in issue at the start of that fi nancial year;
(g) In determining the price at which Company shares are acquired
by the Company or any of its subsidiaries in terms of this general
authority, the maximum premium at which shares may be
purchased will be 10% of the weighted average of the market
value of Company shares for the fi ve business days immediately
preceding the date of the relevant transactions;
(h) Prior to entering the market to proceed with the repurchase, the
board, by resolution authorising the repurchase, must
acknowledge that it has applied the solvency and liquidity test as
set out in section 4 of the Act and reasonably concluded that the
Company or the relevant subsidiary acquiring shares of the
Company will satisfy the solvency and liquidity test immediately
after completing the proposed repurchase
Explanatory notes
The Company intends to act under the general authority referred to in
this special resolution if prevailing circumstances (including market
conditions) warrant it.
The Howden Africa board has considered the impact that a purchase
of 20% of the Company’s shares (being the maximum number of
Company shares that may be purchased in terms of this special
resolution) would have on the Company and the Howden Africa board
is of the opinion that:
(i) The Company and the Howden Africa Group will be able, in the
ordinary course of business, to pay its debts for a period of
12 months after the date of this integrated annual report
(ii) The assets of the Company and the Howden Africa Group will
exceed the liabilities of the Company and the Howden Africa
Group for a period of 12 months after the date of this notice of
AGM. For this purpose, assets and liabilities will be recognised
and measured in line with accounting policies used in the latest
audited annual group fi nancial statements
(iii) The working capital, share capital and reserves of the Company
and Howden Africa Group will be adequate for a period of
12 months after the date of this notice of AGM
140 Howden Integrated annual report 2016
Notice of annual general meeting continued
The directors have no specifi c intention, at present, for the Company
or its subsidiaries to acquire any of the Company’s shares but
consider that such a general authority should be put in place should
an opportunity present itself to do so during the year, which is in the
best interests of the Company and its shareholders.
The Listings Requirements require, in terms of section 11.26, the
following disclosures, which appear elsewhere in this integrated
annual report:
• Major shareholders on page 123
• Share capital of the Company on page 122
In order to be adopted this special resolution requires the support of
more than 75% of the voting rights exercised on the resolution.
Material changes
Other than the facts and developments noted in this integrated annual
report, there have been no material changes in the fi nancial or trading
position of the Company and its subsidiaries since the date of signing
the audit report and up to the date of this notice of AGM.
Directors’ responsibility statement
The directors of the Company, collectively and individually, accept full
responsibility for the accuracy of information relating to these special
resolutions and certify that, to the best of their knowledge, no facts
have been omitted that would make any statement false or
misleading, and that all reasonable enquiries to ascertain such facts
have been made and that these special resolutions contain all
information required by law and by the Listings Requirements.
Special resolution 2: Increase in directors’ fees
Resolved that in terms of section 66 (9) of the Act, the fees payable to
non-executive directors be and are hereby restructured and increased
as set out below with effect from 1 July 2017:
Proposed 2017 fee
increase (%)
Quarterly fee
Independent non-executive directors 6.5 R9 127.66
Non-executive directors 0 R0
Committee chairperson fee (per meeting) (paid in addition to the committee member fee)
Audit and Risk Committee 6.5 R6 846.54
Remuneration, Nomination, Social and Ethics Committee 6.5 R4 564.36
Lead independent director fee (per meeting) 6.5 R2 737.98
Board of directors (per meeting)
Member fee – Independent non-executive directors 6.5 R18 256.38
Member fee – Non-executive directors 0 R0
Audit and Risk Committee (per meeting)
Member fee 6.5 R18 256.38
Remuneration, Nomination,
Social and Ethics Committee (per meeting)
Member fee – Independent non-executive directors 6.5 R18 256.38
Member fee – Non-executive directors 0 R0
July 2016 – July 2017
141Howden Integrated annual report 2016
Explanatory notes
The reason for and effect of this special resolution is to grant the
Company the authority to pay fees to non-executive directors for their
services as directors over the next 12-month period.
In order to be adopted this special resolution requires the support of
more than 75% of the voting rights exercised on the resolution.
VOTING AND PROXIES
All shareholders will be entitled to attend, speak and vote at the
general meeting.
Each shareholder is entitled to appoint one or more proxies (who
need not be shareholders of the Company), to attend, participate in,
speak and vote in place of that shareholder at the general meeting.
The person appointed need not be a shareholder/member of the
Company. All meeting participants will be required to provide
identifi cation reasonably satisfactory to the chairman of the meeting.
A shareholder is entitled to appoint more than one proxy to exercise
voting rights attached to different shares held by such shareholder.
A form of proxy is attached for any shareholder who is unable to
attend the general meeting, but wishes to be represented thereat.
Proxy forms must be forwarded to reach the registered offi ce of the
Company or its transfer secretaries, Computershare Investor Services
(Proprietary) Limited, 70 Marshall Street, Johannesburg 2001, or
posted to the transfer secretaries at PO Box 61051, Marshalltown
2107, South Africa, to be received by no later than 13:30 on 30 May
2017. Any shareholder who completes and lodges the form of proxy
will nevertheless be entitled to attend and vote in person should such
shareholder afterwards decide to do so.
Shareholders who have not dematerialised their shares in the
Company and therefore hold a share certifi cate, must complete the
attached form of proxy as per the instructions therein and lodge it
with the transfer secretaries of the Company (as detailed in the
previous paragraph) to be received by not later than 13:30 on
30 May 2017.
Shareholders who have already dematerialised their shares in the
Company, and the shares are in their own name, must complete the
attached form of proxy as per instructions therein and lodge it with
the transfer secretaries (detailed above) to be received by not later
than 13:30 on 30 May 2017.
Shareholders who have dematerialised their shares, other than those
members who have dematerialised their shares with own name
registration, who are unable to attend the meeting but wish to be
represented thereat, must contact their central securities depository
participant (CSDP) or broker (as the case may be) in the manner and
time stipulated in the agreement between that member and the
CSDP/broker (as the case may be) to furnish the CSDP or broker (as
the case may be) with their voting instructions and in the event that
such members wish to attend the meeting, to obtain the necessary
letter of representation from their CSDP/broker.
In compliance with the provisions of the Act, the Company intends to
offer shareholders reasonable access, through electronic facilities, to
participate in the AGM by means of a conference call facility.
Shareholders will be able to listen to the proceedings and raise
questions should they wish to do so and are invited to indicate their
intention to make use of this facility by applying in writing (including
details as to how the shareholder or representative can be contacted)
to the Company Secretary at the address set out on the inside back
cover of this integrated annual report. The written application is to be
received by the Company Secretary at least 10 business days prior to
the date of the AGM, namely Thursday, 18 May 2017. The Company
Secretary will, by way of email, provide information enabling
participation to those shareholders who have made application.
Voting will not be possible via the electronic facility and shareholders
wishing to exercise their voting rights at the AGM are required to be
represented at the meeting either in person, by proxy or by letter of
representation as provided for in the notice of AGM.
Shareholders must note that access to electronic communication will
be at their expense.
All meeting participants will be required to provide identifi cation
reasonably satisfactory to the chairman of the meeting.
142 Howden Integrated annual report 2016
Notice of annual general meeting continued
If the instrument appointing a proxy or proxies has been delivered to
the Company, as long as that appointment remains in effect, any
notice required to be delivered by the Company to the shareholder
must be delivered by the Company to:
(a) The shareholder
(b) The proxy or proxies, if the shareholder has:
(i) Directed the Company to do so, in writing
(ii) Paid any reasonable fee charged by the Company for
doing so
A proxy is entitled to exercise, or abstain from exercising, any voting
right of the shareholder without direction, except to the extent that the
MoI, or instrument appointing the proxy, provides otherwise.
INTERPRETATION OF THIS NOTICE
All references in this notice of general meeting of shareholders to the
Listings Requirements mean the Listings Requirements of the JSE, as
amended from time to time and as interpreted and applied or
disapplied by the JSE.
All references in this notice of AGM of shareholders to the “Act”
means the Companies Act No 71 of 2008, as amended.
By order of the board
HOWDEN AFRICA HOLDINGS LIMITED
CR Masson
Group Company Secretary
Johannesburg
24 March 2017
Every member present in person or by proxy and entitled to vote at
the general meeting of the Company will, on a show of hands, have
one vote only, irrespective of the number of shares that member
holds. In a poll, every member will be entitled to that proportion of
total votes in the Company which the aggregate amount of the
nominal value of shares held by that member bears to the aggregate
amount of the nominal value of all shares issued by the Company.
Members registered in their own name are members who elected not
to participate in the issuer-sponsored nominee programme and who
appointed Computershare Custodial Services as their CSDP with the
express instruction that their uncertifi ed shares be registered in the
electronic subregister of members in their own names.
A proxy appointment made must be in writing, dated and signed by
the shareholder and will remain valid only until the end of the meeting
to be held on 1 June 2017, subject to section 58(5) of the Act dealing
with revocation of proxies.
Irrespective of the form of instrument used to appoint a proxy:
(a) The appointment is suspended at any time and to the extent that
the shareholder chooses to act directly and in person in
exercising any rights as a shareholder
(b) The appointment is revocable unless the proxy appointment
expressly states otherwise
(c) If the appointment is revocable, a shareholder may revoke the
proxy appointment by:
(i) cancelling it in writing, or making a later inconsistent
appointment of a proxy
(ii) delivering a copy of the revocation instrument to the proxy,
and to the Company
Revocation of a proxy appointment constitutes a complete and fi nal
cancellation of the proxy’s authority to act on behalf of the shareholder
as of the later of:
(a) The date stated in the revocation instrument, if any
(b) The date on which the revocation instrument was delivered to the
proxy, and to the Company
143Howden Integrated annual report 2016
HOWDEN AFRICA HOLDINGS LIMITED(Incorporated in the Republic of South Africa) Registration number 1996/002982/06) (the Company) JSE Code: HWN ISIN Code: ZAE 000010583
FORM OF PROXY: ANNUAL GENERAL MEETING OF THE COMPANY TO BE HELD AT 13:30 ON 1 JUNE 2017 AT 1A BOOYSENS ROAD, BOOYSENS, JOHANNESBURGFor use by shareholders who:
Hold shares in certifi cated form. Have dematerialised their shares (ie have replaced the paper share certifi cates representing the shares with electronic records of ownership under the JSE’s electronic settlement system (Strate
Limited) and are recorded in the subregister in “own name” dematerialised form) (ie shareholders who have specifi cally instructed their central securities depository participant (CSDP) to hold their shares in their own name).
If you are unable to attend the annual general meeting of members convened for 13:30 on Thursday, 1 June 2017 and wish to be represented thereat, you must complete and return this form of proxy as soon as possible, but in any event to be received by not later than 13:30 on 26 May 2017, to Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 Republic of South Africa (PO Box 61051, Marshalltown, 2017).
Shareholders who have dematerialised their shares and are not registered as own name dematerialised shareholders and who wish to attend the general meeting, must instruct their CSDP or broker to provide them with the relevant letter of representation to enable them to attend such meetings, or, alternatively, should they wish to vote but not attend the general meeting they must provide their CSDP/broker with their voting instructions in terms of the custody agreement between them and the CSDP/broker in the stipulated manner and cut-off time.
I/We (please print full names)
of (address)
Telephone number Cellular phone number
Email address
being the holder(s) of shares in the issued capital of the Company do hereby appoint:
1. of or failing him/her,
2. of or failing him/her,
3. of or failing him/her,
the Chairman of the annual general meeting, as my/our proxy to act for me/us at the annual general meeting of the Company to be held on Thursday, 1 June 2017 at 13:30 and at any adjournment thereof, at the Company’s registered offi ce, 1a Booysens Road, Booysens, Johannesburg and to vote for me/us on my/our behalf in respect of the under mentioned resolutions in accordance with the following instructions:
Number of votes (one per share)
For Against Abstain
Ordinary resolutionsOrdinary resolution 1Adoption of annual fi nancial statements for the year ending 31 December 2016Ordinary resolution 2Appointment of external auditorsOrdinary resolution 3.1Re-appointment of Mitesh Patel as a member and the chairman of the Audit and Risk CommitteeOrdinary resolution 3.2Re-appointment of Morongwe Malebye as a member of the Audit and Risk CommitteeOrdinary resolution 3.3Re-appointment of Humphrey Mathe as a member of the Audit and Risk CommitteeOrdinary resolution 4Non-binding advisory endorsement of Company’s remuneration policyOrdinary resolution 5.1Re-election of Morongwe MalebyeOrdinary resolution 5.2Re-election of Humphrey MatheOrdinary resolution 5.3Re-election of Mitesh PatelOrdinary resolution 6Election of Marinella VigourouxOrdinary resolution 7Control of 15% of unissued share capitalOrdinary resolution 8General authority to issue shares for cash
Special resolutionsSpecial resolution 1General approval for the acquisition of its shares by the Company and/or its subsidiariesSpecial resolution 2Increase of non-executive directors’ fees
Signed at on 2017
Signature Assisted by me (where applicable)
Except as instructed above or if no instructions are inserted above, my proxy may vote as he thinks fi t.
Form of proxy
144 Howden Integrated annual report 2016
Notes to form of proxy
INSTRUCTIONS ON SIGNING AND LODGING THE PROXY FORM:(1) A deletion of any printed matter and completion of any blank spaces need not be signed or initialled. Any other alteration must be signed,
not initialled.
(2) The Chairman will be entitled to decline to accept the authority of the signatory:
(a) under a power of attorney; or
(b) on behalf of a company, if the power of attorney or authority has not been deposited at the offi ce of the Company’s transfer
secretaries, Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001, Republic of South Africa
(PO Box 61051, Marshalltown, 2107), by not later than 13:30 on 30 May 2017.
(3) The signatory may insert the name(s) of any person(s) whom the signatory wishes to appoint as his/her proxy in the blank spaces provided.
(4) When there are joint holders of shares and if more than one of those joint holders is present or represented, the person whose name
stands fi rst in the register in respect of such shares of his/her proxy, as the case may be, will alone be entitled to vote in respect thereof.
(5) The completion and lodging of this form of proxy will not preclude the signatory from attending the meeting and speaking and voting in
person to the exclusion of any proxy appointed in terms hereof should such signatory wish to do so.
(6) Forms of proxy must be deposited at the offi ce of the Company’s transfer secretaries, Computershare Investor Services (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001, Republic of South Africa (PO Box 61051, Marshalltown, 2107), by not later than
13:30 on 30 May 2017.
(7) If the signatory does not indicate in the appropriate place on the face of this form how he/she wishes to vote on a particular resolution, the
proxy will be entitled to vote as he/she deems fi t on that resolution.
(8) The Chairman of the annual general meeting may reject any proxy form which is completed other than in accordance with these
instructions, provided that he may accept such proxy forms where he is satisfi ed on the manner in which a member wishes to vote.
Summary in terms of section 58(8)(b)(i) of the Companies Act 71 of 2008 (Act), as amended:
Section 58(8)(b)(i) provides that if a company supplies a form of instrument for appointing a proxy, the form of proxy supplied by the company to
appoint a proxy must bear a reasonably prominent summary of the rights established by section 58 of the Act, which is set out below:
A shareholder of a company may, at any time, appoint any individual, including an individual who is not a shareholder of that company, as a
proxy, among other things, to participate in, and speak and vote at a shareholders’ meeting on behalf of the shareholder
A shareholder may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights
attached to different securities held by the shareholder
A proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person
A proxy appointment must be in writing, dated and signed by the shareholder; and remains valid only until the end of the meeting at which it
was intended to be used, unless the proxy appointment is revoked, in which case the proxy appointment will be cancelled with effect from
such revocation
A shareholder may revoke a proxy appointment in writing
A proxy appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in exercising any
rights as a shareholder
A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction
Howden Africa Holdings Limited (Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
JSE code: HWN ISIN: ZAE000010583
Registered offi ce 1a Booysens Road
Booysens
South Africa 2091
(PO Box 2239, Johannesburg, 2000)
Telephone: +27 11 240 4000
Telefax: +27 11 493 0545
Transfer secretariesComputershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown 2107)
SponsorPricewaterhouseCoopers Corporate Finance (Proprietary) Limited
2 Eglin Road
Sunninghill
2157
External auditorsErnst & Young Inc.
102 Rivonia Road
Sandton
2194
Shareholder contact informationInvestor Relations
Craig Masson
Company Secretary
+27 11 240 4000
Corporate information
BASTION GRAPHICS
©Howden Group Limited. All rights reserved. 2014Howden and the fl ying H logo are registered trade marks belonging to the Howden Group.
Howden Africa1a Booysens Road
Booysens 2091
PO Box 2239
Johannesburg 2000
South Africa
Tel: +27 11 240 4000
Fax: +27 11 493 0545
Email: [email protected]