FINANCIAL YEAR ENDED 31 MARCH 2015
Group financial performance
as at 31 March 2015
Headline profit per share
Cash generated from operations
Net profit after tax
Net cash from operating activities after finance costs and tax
Group share price performance
as at 31 March 2015
Number of shares in issue
201 224 508
Average volume per month
Share price low (cents)
Average value traded per month (R)
Net assets value per share (cents)
Number of shareholders
Share price at year-end (cents)
Share price high (cents)
Market capitalisation (R)
Métier Mixed Concrete
Click on the infographic to enlarge
The 2015 integrated annual review reports on the core assets which comprise the 100%-owned subsidiary Métier Mixed Concrete Proprietary Limited (Métier) and the 36%-held associate Sephaku Cement Proprietary Limited (SepCem), which collectively with SepHold are referred to as the group. The review provides an overview of the environment in which the group operates, its business strategy and the material risks and opportunities that drive the strategy. It also discusses operational, financial, environmental and social performance of the group, and how these contribute to value creation.
The review covers the period 1 April 2014 to 31 March 2015. It is important to note that SepCem has a 31 December year-end as a subsidiary of Dangote Cement Plc (Dangote). The equity-accounted profit that has been included in these results therefore relates to SepCem’s 2014 financial year for the period ended 31 December 2014.
The group identifies material matters by analysing stakeholder concerns, business risks and opportunities, and how these impact long-term sustainability.
SepHold’s 2015 integrated annual report consists of two volumes:
The integrated annual review as the initial volume provides an overview of the group highlighting key operational matters and performance reviews.
The integrated report can be downloaded here.
The second volume consists of the statutory annual financial statements.
The financial statements can be downloaded here.
© 2015, Sephaku Holdings Limited
ALL RIGHTS RESERVED. This book contains material protected under Copyright Laws. Any unauthorised reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from Sephaku Holdings Limited.
The information provided in this integrated annual review has been based on local and international requirements and frameworks. These include:
The board is ultimately responsible for overseeing the integrity and completeness of the integrated annual review. The board has applied their collective mind to the preparation and presentation of the integrated annual review. On 19 August 2015, the board approved the 2015 integrated annual review, taking into consideration the completeness of the material matters it deals with and the reliability of data and information presented.
Opinions expressed in this review are, by nature, subject to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of SepHold to differ materially from those expressed or implied in any forward-looking statements. Undue reliance should not be placed on such opinions, forecasts or data.
No representation is made on the completeness or correctness of opinions, forecast or data in this review. Neither SepHold nor any of its affiliates, advisors or representatives accept any responsibility for any loss arising from the use of any opinion expressed, forecast or data in this review. Forward-looking statements apply only as of the date on which they are made and SepHold does not undertake any obligation to publicly update or revise any of its opinions or forward-looking statements, whether to reflect new data or future events or circumstances. The financial information on which the forward- looking statements are based has not been audited or reported on by SepHold’s independent external auditors.
We welcome your feedback on our reporting. Any comments, queries and suggestions on the content and form of the integrated annual review may be directed to Sakhile Ndlovu, investor relations officer, at firstname.lastname@example.org.Proceed
SepHold’s portfolio currently constitutes of 36% equity ownership in SepCem and a 100%-owned mixed concrete subsidiary, Métier.
SepCem is a cement producer with modern manufacturing technologies and acute marketing skills. SepCem’s main business activity is the manufacture, marketing and distribution of high-quality cementitious products to a broad spectrum of cement users. Its integrated cement plant in Aganang and grinding plant in Delmas with a combined production capacity of 2,5 million tonnes per annum, commenced production in October and January 2014 respectively. SepCem has established itself as a formidable competitor in the supply of cement through successfully penetrating all the major retailers, numerous second-tier distributors and several bulk cement users, particularly ready- mix concrete manufacturers.
The remaining 64% of SepCem is held by Dangote. Dangote is a fully integrated cement company that has projects and operations in Nigeria and 14 other African countries. Dangote was listed on the Nigerian Stock Exchange in October 2010.Refer to www.dangcem.com
Métier is a market leader in the production of ready-mixed concretes, with a product offering that includes specialised high-margin technical concretes. Métier has a total of 11 plants with four of them situated in the Gauteng province and seven in the KwaZulu-Natal province. Its mission is providing innovative service, quality and reliability based on the following four pillars:
our key milestones
SepCem categorises its operations into cement manufacturing and exploration projects. The cement manufacturing category includes Sephaku Ash, which supplies fly ash as an extender for the bagged cement. The exploration category is for the secured resource assets that are at various stages of development. The most advanced asset in the exploration category is the Dwaalboom calcrete resource.
Aganang is SepCem’s flagship operation consisting of a limestone mine and an integrated cement manufacturing plant. The plant is located approximately 25 km west of Lichtenburg in the North West province. The secured limestone deposit with an expected life of 30 years is on the adjacent farms.
The Delmas plant is located in a town called Delmas in the Mpumalanga province, approximately 50 km from central Gauteng off the N12 freeway. The Delmas plant is approximately 35 km from SepAsh, which is located at the Eskom Kendal Power Station.
The Dwaalboom calcrete deposit is located approximately 8 km southwest of the town Dwaalboom and 80 km west southwest of the town of Thabazimbi in the Limpopo province.
Métier categorises its operations according to geographical location with its head office and seven plants situated in KwaZulu-Natal. The balance of four plants, all constructed in the past two years, are in the Gauteng province. The plants are standardised and strategically situated in areas that management has identified to have a 10 – 15-year construction activity outlook.
The plants are strategically positioned in the greater Durban and Pietermaritzburg areas.
The plant locations are optimally positioned to access key construction sites in the area. The Chloorkop and Midrand operation is a double plant and the two other plants are located near OR Tambo airport and within the Sandton area. The regional administration office is in Centurion, approximately 40 km from Sandton.
We started producing cement and clinker at the SepCem plants during the year, entrenching ourselves as a formidable player in the building and construction materials industry in South Africa. The commencement of production at the SepCem plants and commissioning of an additional Métier ready-mixed plant in the Gauteng market were high on management’s agenda, therefore achievement of these milestones is a key highlight for the year.
We are committed to the creation of shareholder value through sustainable earnings and growth by:
These cornerstones have enabled our operations to be adaptable and to achieve stated objectives from inception to date. To ensure continuity of the founding management team’s success, mentoring and extensive training is practised to close any competence and knowledge gaps identified at lower management levels. In the same vein, the performance management system is structured to not only ensure, but motivate employees to align their output to stated business objectives.
These matters are those that affect the value creation process of the group and have been assessed with regard to:
The assessment below of the material matters pertain to the group. There are, however, additional matters that only impact SepCem – these have been listed separately.
|Material matter and affected strategic priority||Impact||Our response||Our focus for FY2016|
|Weak demand growth due to continuing poor economic growth.|
|Unreliable electricity supply from Eskom.|
|Shortage of requisite technical skills and industry knowledge.|
|Interest rate volatility.|
The following material matters are unique to SepCem:
|Material matter and affected strategic priority||Impact||Our response||Our focus for FY2016|
|Response of incumbents to the entry of SepCem into the market.|
|Management of local communities’ expectations. The interaction needs to be mutually beneficial to ensure the sustainability of both the business and community upliftment initiatives.|
|Ensuring plant reliability and availability at Aganang post the commissioning phase.|
The strategic objectives for engagement are:
The table below highlights the key stakeholder concerns that relate to the group in the reporting period:
|Stakeholder||Why we engage||The concerns raised||How we engage||How often we engage|
|Investors||Investors contribute to the funding of the group and are the principal owners of the business.||
|Employees||Employees are essential to the success and sustainability of the business by providing their skills and competence to execute the strategic objectives.||
|Customers||Customers are the mainstay of our success.
It is our commitment to ensure that both the distributors’ and end-users’ needs are understood and catered for.
|Communities||The local communities in the areas in which we operate are the primary source of labour. More importantly, their support enhances our social licence to operate.||
|Suppliers and contractors||Suppliers and contractors are critical in ensuring the achievement of our strategic objectives.||
|Government||The local authority personnel ensure that the group is well informed on the regulatory requirements and primarily influence our legal licence to operate.||
|Organised labour||Organised labour engages with the operations to ensure that the employee matters are afforded adequate attention and also participates in creating an environment conducive for optimal productivity.||
Industry associations are a platform that present the pertinent matters of concern to the regulators.
They ensure that the association members are regularly updated on the relevant regulatory matters. They also provide information on prevailing global trends on new technology.
New technologically advanced production plants with higher cost efficiencies that enhance competitiveness.
Long-term strategic focus on the building materials sector that offers increased earnings and growth opportunities.
Profitable concrete operations with distinctive technical skills providing solid earnings and positive net operating cash flows.
Key operational management with deep industry skills.
The founding principles of innovation, entrepreneurial aptitude and resilience have seen SepHold achieve good results in a tough economic climate and prove its ability to deliver on the goal of value creation. The year has been an exciting series of small and large milestones. The transition from the development to the operational phase meant constantly reaching for the next challenge, conquering it and attaining the stated objectives. Overall we are pleased with our performance.
Métier furthered its market penetration strategy by increasing its footprint in the Gauteng market through an additional plant. The SepCem Delmas plant performed admirably in spite of the slow ramp-up due to the unusually high rainfall in the first quarter of production. The coming on-stream of Aganang in August 2014 increased SepCem’s cement production capacity to 2,5 million tonnes per annum from the Delmas 1,4 million tonnes per annum as of January 2014.
The acceptance of our brand by the major retailers has been the much needed impetus in our market penetration efforts. Our highly experienced and knowledgeable marketing team was able to appropriately segment the market and offer customised supply solutions. Furthermore, as an indication of the extensive acceptance of our brand in the market, we have continued to receive repeat orders from these retailers and other distributors. We are pleased that our SepCem operations were able to achieve its market share targets and by May 2015 both plants were operating at steady state capacity.
We started implementing our enterprise development programme with the goal to empower the local people through skills development coupled with employment opportunity by offering supply contracts such as plant cleaning and catering services. The programme is well aligned to our main community engagement objective of achieving a mutually beneficial relationship. SepCem trains these enterprises on how to secure additional supply contracts and be sustainable post their tenure with the group.
Our successful entry into the building and materials industry is largely attributable to our innovative strategy of introducing efficient capacity and accurately segmenting the market. Our ability to successfully implement this strategy is due to what we define as the differentiators that set us apart from the other competitors in our industry.
The depth of the industry knowledge and skills as well as the best-in-class manufacturing technologies are the key differentiators that enable us to be relatively more efficient on a per-tonne basis and to achieve our targeted sales volumes. The good quality product and exceptional service offering have expedited the adoption of our brand in a highly contested demand market. Our acumen in deal making and establishing strategic relationships with our customers has catalysed our growth and market penetration activities. Our cement brand is distributed by all major and numerous other second-tier retailers. We continue to innovate in our approach of marketing our brand and believe that it is this agility that will continue to fuel our growth.
As a group we have started proving our ability to deliver on our value proposition in a responsible and sustainable manner. We succeeded in the exploration and development phase of our plan and look toward maximising profits in 2016.
As a newcomer into the cement industry, SepCem had to enter a well-established market in the past year. The business was conceptualised during a time when the world held a negative outlook on potential for newcomers to the industry. The founders sold its proposition in a tough economic climate. Dealing with these challenges meant that SepCem had to take an innovative approach to entering the industry to make a success of itself. Investing in modern, best-in-class manufacturing technologies meant a higher level of operational efficiency. Looking at customers as dynamic entities, with unique needs rather than one-size-fits-all consumers, SepCem was able to identify existing and underutilised opportunities in the market. While it may not have been easy, it’s certainly been a great ride.
As reported in the last integrated review, SepCem had planned to begin clinker production at the Aganang plant in July 2014, but the process was slightly delayed to August 2014 due to minor technical problems identified on the plant fan system as part of the normal hot commissioning. Timelines evolved over the course of the year amid changing conditions and SepCem performed remarkably well against the amended expectations.
The main highlight for SepCem was the Delmas grinding plant reaching steady state production in November 2014 and accounting for the bulk of sales revenue of R919 million for the reporting period.
Métier continued to perform exceptionally well as demonstrated by the increased revenues, growth in the plant footprint and production of high margin specialised concretes. Although participating in an aggressively competitive sector with low barriers to entry, the subsidiary has continued to outperform its peers on measures of profitability and growth in market share. The management has built a renowned and customer-focused brand that enables premium pricing. In addition they have nurtured a strong employee culture that promotes an intense focus on the customer and a high energy “can do” attitude. Métier’s ability in achieving repeat orders in its KwaZulu-Natal market and success in the penetration of new markets is especially gratifying.
In this past year Métier achieved the following positive results:
Our main focus in the coming year is to ensure that we enhance our margins by optimising the logistics between our plants and the market as well as reducing debt. We are cognisant of the fact that a good portion of our shareholders are keen to begin to receive dividends hence increasing free cash flow is a key objective in our short-to-medium-term plan. We also want to ensure that we entrench our position in the market by seeking additional ways to increase our market share.
Slow growth in the economy is a concern. We have observed that as a general rule cement demand in emerging economies is 1,5% higher than the GDP growth. The immediate response in a low growth environment is for producers to increase their efficiencies and, as far as we are concerned, we are well positioned to achieve our production targets through SepCem’s modern plants.
A new cement entrant is expected to start production early 2016 and plans to add 1 million tonnes per annum of cement capacity into the market once it reaches full production. Consequently we expect that its output should be absorbed by the marginal growth in market demand as it continues to ramp up capacity utilisation. We also anticipate the producers with older capacity will re-evaluate their operational processes to identify and implement ways of becoming more efficient, ultimately paving the way to a more cost-effective industry overall.
We acknowledge that as with all other industries in South Africa, the security of electricity supply is of utmost importance to the operations. Although there are generators in all our plants, it is not sustainable to produce on a full-time basis from this source of electricity. The SepCem management regularly negotiates with Eskom to ensure uninterrupted electricity supply during critical production times while voluntarily load shedding during plant off-peak periods. To further manage the risk of outages, the operational management have increased their stockpiling capacity to avoid any stock-outs and are actively seeking viable electricity generation options.
The successful and sustainable existence of the group, to a large extent, depends on the continued cooperation and support of all our stakeholders. We would like to particularly highlight the employees, customers and communities we interact with regularly.
As a relatively young company the group holds the appeal of upward mobility, dynamism and the chance to be a part of something great as it starts out. We bolster morale through various incentives as described in the operational sections of this review. In a harsh socio-economic environment, the chance to hold a position where skills are learned and remunerated well is much sought after. To the higher level employees, we offer employee ownership options, which align them to the shareholder interests by ensuring that they are vested in the overall performance of the group.
We are pleased to have sufficiently skilled teams at SepCem that have established strong relationships with the retailers who distribute the brand to end users in all major markets. The support from the retailers has enabled the group to achieve its targeted volumes to date. We value the continual feedback from the end users through the retailers that enables us to improve on our promise of good quality, consistent cements and concretes.
We experienced a marked increase in the importance of local communities as stakeholders during the reporting period. As a group we have begun making direct and indirect job opportunities available in the areas we operate thereby contributing to efforts to fill the deep employment vacuums. We strive to address community concerns to the best of our ability and ensure that even when we can only offer limited time contracts to workers, they are upskilled and walk away with more marketable skills and abilities than before their interaction with us.
Furthermore we recognise that our operations are located in areas that traditionally have constrained economic development and high levels of poverty. It is on this backdrop that we engage with the local communities and we are pleased to report that we continued to work well with all our communities in the reporting period. The enterprise development programme is our contribution in alleviating the unemployment crisis.
The current board is the right size and holds sufficient skill sets to effectively lead SepHold to its next phase through shared values that filter throughout the organisation. The board regularly interacts with the management of Métier, SepCem and Dangote in order to ensure open channels of communication that facilitate good and ethical business. SepHold is represented on key governance structures of SepCem and Métier and participates in setting appropriate measures to ensure implementation of best practices.
The board is pleased with the mutually respectful relationship, with our business partner Dangote, that is protected on both sides by a relationship agreement.
In the quest to improve its effectiveness, an internal board review process was concluded in November 2014 and the board has begun taking appropriate action regarding its findings.
The group was founded by individuals who hold an entrepreneurial vision and have the resilience that has enabled it to successfully grow from its inception into an income-generative entity. In order to propagate the founding principles, succession planning and retention strategies have been developed and are being implemented. Importantly, we strive towards a higher degree of female representation at all management levels.
We would like to express a deep and sincere gratitude towards every individual who has contributed to bringing the group to where it is today. Without the devotion and tireless work they put in, the vision of SepHold’s success could never have materialised. We thank our board of directors for their leadership and expert counsel, our leadership teams for the skills they add to our business as well as their tireless work, and our employees for their daily contributions towards making the business great.
We extend our appreciation to our other key stakeholders, especially the communities we are becoming part of the suppliers that make our operations possible, and our customers who are the lifeblood of our organisation. We look forward to growing positive relationships with all of our stakeholders in the years ahead.
We are optimistic about the year ahead, because Métier is now firmly cemented in the Gauteng market and SepCem has found its competitive edge in providing product to previously underserviced markets.
The focus for the next few years will be maximising income generation, a mandate that has been performed exceptionally well so far. The group will continue to increase cost efficiencies while still retaining the highest quality product. We will also focus on retention of management skills and assuring long-term sustainability through the addition of new skills.
Dr Lelau Mohuba
Chief executive officer
The summarised financial statements included here are extracted from audited information, but are not in themselves audited. The annual financial statements were audited by Grant Thornton, who expressed an unqualified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the company’s registered office and can be downloaded here.
The directors take full responsibility for the preparation of the summarised financial statements and that the financial information has been correctly extracted from the underlying annual financial statements.
The 2015 financial period was the second year the Métier’s figures are included in the group performance, providing the first set of comparable results for the subsidiary since being acquired in 2013. In the case of SepCem, both plants were successfully commissioned and most importantly income was recognised from all the operations in the year under review.The group’s profit before tax increased from R13,4 million in the past year to R72,1 million and the net profit after tax to R47,2 million from a loss of R2,8 million in the 2014
Métier continued to provide exceptional results from its growing portfolio of operating plants. In September 2014 the subsidiary commissioned its fourth plant in Gauteng, bringing its total plant complement to 11. The additional footprint contributed to the increase in revenue of 36% from R571,5 million to R775,4 million for the financial year. Subsequently the gross profit increased by 35% from R252,4 million to R341,0 million in the same period. The resultant EBITDA of R139,1 million and EBIT of R108,9 million was a pleasing achievement in maintaining the 14% operating margin.
The 36% equity-accounted earnings from SepCem for the year ended 31 December 2014 were R35,9 million, which included a movement in the associate’s deferred tax asset of R154 million, related to a section 12(i) tax incentive. The tax adjustment resulted in an increase of R55,4 million in SepHold’s equity-accounted earnings.
Operationally, the successful market entry of SepCem was demonstrated by the exponential increase in revenues from R55 million in its first quarter of production, to R919 million for the 12-month period. The revenue was predominately from Delmas with contribution from Aganang only in the final quarter of the reporting period.
Gross profit increased from R14,9 million in the first quarter to R188,7 million for the full year with an impressive EBITDA of 26% achieved in the final quarter still during the ramp-up phase. Operating profit of R59,5 million was recorded over the period under review. The depreciation expense on the plant post-commissioning and capitalised interest were charged to the income statement. Typically these two expense items tend to be disproportionate to income during ramp-up and market penetration, hence the resultant loss before taxation of R48,4 million by end of December 2014.
The deferred tax asset and other minor adjustments had a positive effect on earnings, resulting in SepCem recording a profit after tax of R99 million and earnings of R35,9 million were equity-accounted for SepHold.
The group profit before tax of R72 million comprised Métier’s EBIT of R108,9 million, the SepCem equity contribution of R35,9 million, finance charges of R25,3 million and a SepHold operating loss of R46,2 million. This head office operating loss of R46,2 million (2014: R18,7 million) included a non-cash contingent consideration loss of R28,5 million from the issuance of 4 429 196 SepHold shares to the previous owners of Métier. This additional consideration towards the Métier acquisition was due to the 60-day volume weighted average share price being below R9 on 1 December 2014. In addition, a final cash payment of R117 million, consisting of the original R125 million reduced by R8 million for the unrecovered debt from a Métier customer, was settled with the sellers and is now financed through the subsidiary.
Basic earnings per share increased by 25,92 cents to 24,43 cents as compared to 1,49 cents basic loss per share in the previous financial year. The headline earnings per share increased by 26,79 cents per share to 24,43 cents (2014: 2,36 cents headline loss per share). The normalised headline earnings per share were 10,48 cents, excluding the following two one-off non-cash items discussed earlier:
Changes in the financial position of the group, excluding the associate, have been limited. There was a net reduction of R10,1 million in financial liabilities due to debt service payments. The Métier acquisition debt, a current liability of R117 million, was replaced by a non-current bank loan already approved prior to the conclusion of the transaction.
The group net asset value and tangible net asset value increased to 419,8 cents per share (6,6%) and 304,86 cents per share (12,6%) respectively.
The full bank debt facility of R1,95 billion was drawn down during the construction and commissioning period. The facility has a provision for SepCem to capitalise an interest amount of R450 million, approximately R393 million capitalised by end of December 2014. The full debt amount of R2,4 billion is repayable over a period of seven years in equal quarterly instalments from the first quarter of 2016 and attracts an interest change based on a three-month JIBAR plus 3,75%.
Statement of financial position (R’000)
Increased sales volumes resulted in cash generated from operations of R114,2 million (2014: R84,4 million). Finance costs were R19,6 million (2014: R17,9 million) and the taxation expense of R25,8 million (2014: R28,4 million) paid on Métier’s profit before tax resulted in a group effective tax rate in excess of 28%. Expansion of Métier’s plant footprint in Gauteng increased the outflows in plant, property and equipment by R30,4 million.
Statement of cash flows (R’000)
The share price movement has been remarkable from a historic low of R1,90 to R9,44 at the end of the reporting period. During the first six months of the financial year the share was trading within at a narrow band of between R6,50 and R6,80. The lowest price was recoded mid-October at R5,20 before recovering to R6,50 in the first week of November. When the group announced the commencement of production at both SepCem plants, a steady increase in the share price was observed with the highest price of R9,49 recorded for the reporting period. The share price increased by 40% in the financial year based on the closing prices at the beginning (R6,42) and end of the reporting period.
Focus in the next financial year is to grow the earnings and market share through innovative products and efficient manufacturing processes. Cost efficiency also remains a key performance measurement in the operations as we pursue our free cash flow targets.
Share price performance
Métier’s core business is the production, marketing and delivery of ready-mixed concrete products to residential, commercial and industrial customers, including value-added services such as concrete pumping. Métier has a total of 11 plants – seven in KwaZulu-Natal and four in Gauteng – all based on the standard Métier plant configuration to ensure consistent good quality product supply irrespective from which plant the concrete has been manufactured.
Similar to SepCem, the business performance is linked to that of the construction industry which is impacted by the performance of the economy.
The operating environment remained highly competitive as the demand for concretes remained flat and the number of producers increased due to the low barriers to entry associated with the industry. Métier had an increase in delayed payments from customers as the latter continued to experience subdued demand. A case in point is a large contract in KZN for the supply of concrete for the construction of 25 000 units of state-assisted housing that was characterised by inconsistent and delayed payments during the financial year. All key customer accounts were intensively and successfully managed by Métier’s senior management team who ensured receipt of all outstanding payments during the financial year. Métier remains profitable and well positioned to retain and grow its market share in the regions it operates.
Métier continued to perform well as demonstrated by the increased sales revenue and overall operational activity through additional delivery vehicles as well as concrete pumping capacity. The revenue achieved was R775 million, which is an increase of 36% from R572 million in 2014. The subdued overall demand from the construction industry resulted in prices remaining flat on a year-on-year basis. Therefore Métier had to prioritise cost management and the production of high-value concretes to maintain margins.
The delivery fleet increased by 23% and the pumping capacity by 20% compared to the previous period to cater for the additional demand for Métier’s product and service offering. All the concrete plants operated efficiently, contributing to consistent product performance and reliability during the year.
Métier’s order book is robust going into the 2016 year with some larger contracts secured at the end of the reporting period and will continue over an 18-month period. These contracts are Ballito Junction Shopping Mall, Discovery Office Park Sandton, Pearl Sky in Umhlanga and Ambrose Park in Durban Harbour. These contracts are a confirmation of Métier’s ability to produce high-quality concretes, offer exceptional customer service and after sales technical support.
from R572 million in the previous financial year and EBIT increased to R109 million (2014: R75 million).
and concrete pumping capacity by 20%.
Gauteng plant in September 2014, increasing the number of plants to 11.
Kenneth has extensive experience in the ready-mixed concrete and aggregates industry. Kenneth spent 20 years at Lafarge South Africa, holding various management positions. He was directly involved in the development of the ready-mixed concrete and quarrying business as a general manager. Kenneth’s extensive knowledge, expertise and passion for concrete manufacture led him to be a co-founder of Métier Mixed Concrete in KwaZulu-Natal in 2007.
South African Institute of Professional Accountants (SAIPA)
Richard spent 15 years with Stock Owners Co-operative Limited where he ultimately became a member of the executive committee. Richard was then appointed as the managing director of Meadow Meats Proprietary Limited and spent the following several years consulting and marketing the products within the wildlife industry. Richard co-founded Métier Mixed Concrete in 2007. He is responsible for administrative and financial aspects of the business.
BCom (University of Natal, Durban), LDP (University of South Africa School of Business Leadership)
Wayne spent 14 years with Barloworld Equipment Company in various leadership positions. Wayne is a founding member of Métier and has been responsible for the operational aspect of the business, including production, maintenance and logistics facilities.
Commercial manager, Northern region
Glen has extensive experience in the ready-mixed concrete and aggregates industry and has held various senior positions in the technical, production and commercial sectors of Lafarge South Africa for 16 years. He joined Métier in 2011 to contribute to the expansion and establishment of Métier’s footprint in Gauteng.
Commercial manager, Eastern region
NDip (Civil Engineering) (Technikon Natal)
Gregg has extensive experience in the ready-mixed concrete and aggregates industry. He held various management positions in the technical, production and commercial departments of Lafarge South Africa for 10 years. Gregg is a civil technician and concrete technologist and joined Métier in 2007.
Human resources manager, Eastern region
BSocSci (Hons) (University of KwaZulu-Natal) BCom (University of Natal, Durban), LDP (University of South Africa – School of Business Leadership)
Ceri has extensive experience in human resources gained from eight years with the Foschini Retail group. She joined Métier with a key focus on training and development, as well as performance and talent management.
Métier’s employee complement increased slightly from 216 last year to 233 as indicated in the summary table below.
|Total permanent employees||151||29||3||26||6||7||1||10||233|
Métier complies with the Employment Equity Act, 55 of 1998 (EE Act) as well as the Broad-Based Black Economic Empowerment Act, 53 of 2003 (B-BBEE Act) and was awarded level 4 B-BBEE contributor certification in August 2014.
Métier plans to retain its key employees by focusing on succession and career planning that places emphasis on personal growth and leadership development. To ensure that it has the necessary skills required to support growth, Métier has put in place a review process that facilitates performance discussions and for the identification of the employees’ training requirements bi-annually. In this regard, Métier invested R692 000 (2014: R472 000) in training and has budgeted expenditure of R840 000 on skills development in the next financial year.
Métier continues to partner with accredited training providers in specialised fields for employees that have been targeted for development and promotion. The key challenge for Métier going forward is compliance with the new B-BBEE codes. The amendments to the codes have a significant impact on most of Métier’s suppliers which will inevitably negatively impact the compliance level.
Métier continues to explore viable expansion opportunities in all markets to enable it to grow market share and earnings. The short-term strategy is to ensure that the existing operations continue to operate successfully in order to generate earnings, reduce gearing and increase operating cash flows.
SepCem1 is a cement producer with modern manufacturing technologies and acute marketing skills. SepCem’s main business activity is the manufacture, marketing and distribution of high-quality cementitious products to a broad spectrum of cement users and consumers. Its integrated plant in Aganang and grinding plant in Delmas commenced production of cement in October and January 2014 respectively. Aganang and Delmas have a combined production capacity of 2,5 million tonnes per annum.
|1||SepCem has a December year-end as a subsidiary of Dangote.|
Industry cement sales tonnes for 2014 on a year-on-year basis as reported by Levitt Kirson, Business Services DFK Limited*, highlighted negative growth of 0,8% as compared to 5,3% for 2013. This depressed growth is attributed to the anomalously high rainfall in the first quarter of 2014 and the general negative macro-economic outlook.
Based on internal research, imports from Pakistan continued to grow in the coastal markets to an estimated sales volume of 1,3 million tonnes during 2014 compared to 1,1 million tonnes at the end of 2013. In 2014, following preliminary indications that the Pakistan producers were selling their cement below cost, the major local producers approached the International Trade Administration Commission (ITAC) to request for further investigation on the possibility of dumping. ITAC released a provisional decision on 15 May 2015 imposing varied tariff rates on the importers ranging from 14,29% to 77,15%. SepCem is pleased with the decision and looks forward to the final decision to be released in November 2015.
The media release can be accessed here
A new entrant continued the construction of a 1 million tonnes per annum plant in the Limpopo province. The entrant has stated that it plans to commence cement production at the beginning of 2016. Its entry is anticipated to increase downward pressure on margins and may ultimately result in the retirement of inefficient antiquated kiln capacity from the industry.
|*||Nexia Levitt Kirson is a member of DFK International and is commissioned by the industry to report on the cementitious sales statistics for South Africa based on data submitted by local producers. A copy of the full report can be accessed here .|
The financial year ended December 2014 was a landmark year for SepCem, as the company evolved from being a project development business to a fully fledged commercial trading entity.
A key highlight of this initial full production year was the acceptance by the market of SepCem’s brands as demonstrated by the growth in sales volumes in the second half of the year. The main reasons for the market response were and continue to be the good quality consistent cements and exceptional levels of customer service. Although retail sales volumes have been satisfactory, the bulk sales have been expectedly lower because of the longer adoption period required by this segment of the market. The delayed production of clinker also limited SepCem in carrying out trials with potential bulk customers.
commenced at the Delmas grinding plant in January 2014.
at Aganang integrated plant commenced in August and October 2014 respectively.
by end of December 2014 with SepCem brands being distributed through all the major retailers.
by end of December 2014.
During the year SepCem commissioned an independent consultancy to conduct a comparative cement in concrete test and the results confirmed that the SepCem brand performs better than the competitors in the 32,5 strength product and matches the best performing 42,5 strength product.
Delmas grinding plant performed well for the year in spite of a slow start due to the unusually high rainfall experienced in the first quarter of 2014. By the end of the fourth quarter Delmas was at approximately 100% capacity utilisation as Aganang began ramping up cement production. Prior to producing clinker, SepCem was manufacturing cement at Delmas utilising purchased clinker. The introduction of the internally produced clinker significantly improved variable costs by 50%.
Following a slightly delayed start, production of clinker from the Aganang plant started in August 2014 with cement production commencing in October 2014. The delay was essentially due to minor technical problems identified on the plant fan system as part of the normal hot commissioning process.
The modern manufacturing technology at both plants with state-of-the-art components has resulted in relatively higher efficiencies than the industry average. By the end of the fourth quarter, SepCem had achieved 26% quarterly EBITDA even though production was not yet fully ramped up at both plants. SepAsh, the fully consolidated business unit of SepCem, changed from predominantly supplying fly ash to external customers to focusing on Delmas to ensure sufficient supply for SepCem’s burgeoning cement orders.
SepCem recorded a revenue of R521 million for the quarter ended March 2015, an increase of approximately 30% from the fourth quarter of 2014. The EBITDA margin was lower than projected at 23% mainly due to requisite plant maintenance during the quarter.
Pieter Frederick Fourie
Chief executive officer
BCom (Accounting), Executive Development Programme (PRISM) for Global Leaders (Switzerland)
Pieter has extensive experience in the cement industry and assumed his position as chief executive officer of SepCem in May 2007.
Gay de Witt
Chief financial officer
BCom (Hons) (University of Pretoria), CTA (University of South Africa), CA(SA) (SAICA)
Gay has experience in a number of fields, ranging from finance and operations to risk management. She previously worked for Clover Danone before joining SepCem in 2009.
Executive manager operations
BEng (Metallurgical Engineering) (University of Pretoria), Young Managers Programme (INSEAD, France), MDP (Duke University, USA)
Duan completed his graduate engineer training at De Beers before joining Blue Circle Cement. He was involved with Blue Circle Cement’s integration into Lafarge in 1996. He subsequently worked for PPC before joining SepCem in 2008.
Heinrich de Beer
Executive manager projects
BEng Mechanical (PUCHE), MDP (PUCHE), LDP (GIBS)
Heinrich started his career as a project engineer and maintenance manager at Mittal (Iscor) before joining Lafarge, where he held various positions. Heinrich joined SepCem in 2008.
Executive manager commercial
BCom (University of South Africa), Young Managers Programme (INSEAD, France), MBA (GIBS)
Duncan resigned in December 2014 to pursue personal business interests.
Executive manager organisational performance
BAdmin (Hons) (Industrial Psychology), MDP (University of KwaZulu-Natal, formerly University of Durban-Westville), Master in Business Leadership (University of South Africa)
Puseletso has experience in human resource management in the financial and manufacturing sectors. She previously held key positions in Nedcor Electronic Banking, Development Bank and Lafarge Gypsum before joining SepCem in 2008.
Jennifer has been employed by various legal practices as a paralegal. She was previously company secretary for the Platmin group, joined SepHold in 2008 and SepCem in 2010 as company secretary.
The SepCem staff complement as at December 2014 was 345 distributed into Centurion 93 (commercial team 43%), Delmas 73, Aganang 172 and Kendal seven.
SepCem has consistently prioritised recruitment from the pool of trained locally based workers resulting in a significant number of employees from the local communities. Since inception, SepCem has contributed to the development of the skills pool in the communities it operates by identifying people of different ages and gender to be trained on portable skills such as the operation of large machinery and vehicles. To date SepCem has contributed to the development of local employment creation as follows:
At SepCem there is commitment from all levels of employees to translate strategy into measurable outcomes. An innovative feedback process of continuous performance improvement through transparent communication is in place to enhance employee participation. SepCem’s executive management recognises the need to engage with the employees at all levels and has adopted the Sephaku Communication Meeting forums (SEPCOMS) as a platform to discuss the operational, human and structural issues in a focused manner in order to enhance the execution of strategic objectives. It is through this approach that SepCem management creates the opportunity to discuss the right things, involving the right people, at the right time and frequency and in the right way to achieve sustainable business excellence. This methodology has proven to be effective in improving business performance through promoting operational and service excellence. SepCem also recognises the importance of linking employee health and wellness to company needs and strategic priorities. It is therefore a condition of all employees to be on a medical aid scheme and the operational sites have clinics that support employees with occupational health requirements. Employees are encouraged to do medical health assessment annually especially during SepCem’s wellness day.
This extensive employee engagement enhances SepCem’s competitiveness in its ability to attract the requisite skills to sustain the value creation process.
SepCem spent R3,3 million on employee training and development, which was approximately 2,5% of SepCem’s total payroll in 2014. The company’s expenditure targets for training and development over the next four years are approximately 3% of the annual payroll.
SepCem’s skills development programme includes learnerships, internships and mentorships. Portable skills training for workplace qualifications such as mobile operators and engineering skills have been implemented and complemented by the availability of bursary schemes to support talented individuals with their tertiary level studies.
Approximately 63 of the employees at SepCem operations had never worked before and have since been trained on at least one of the following skills:
Furthermore SepCem and the mining contractor trained 77 unemployed individuals from the local communities during the year to become mobile operators and workshop assistants. Important to note is that all these individuals had never operated large machinery or a vehicle before and did not even have driver’s licences. Fifty of the people had to be trained on Code 10 and Code 14 driver’s licence because it is a pre-requisite for the mobile equipment training programme.
Seventy percent of the 77 successfully completed training and qualified to operate the following equipment:
The balance (30%) of the trainees qualified as service truck assistants and 58 successful trainees have been employed at the SepCem operations.
SepCem considers training as an effective way of dealing with the skills gap prevalent in the industry and its commitment to employee development started with the Chinese construction contractor, Sinoma. The major challenge experienced during the on-the-job training with Sinoma was mainly the language barrier. The management made all attempts to overcome this challenge by deliberately setting up communication structures with qualified translators to liaise with team leaders for each work stream.
Despite the language barrier, SepCem was able to provide 213 community members with on-the-job training in the following areas:
SepCem is dedicated to creating a non-discriminatory working environment in which employees are treated with dignity and respect at all levels regardless of their background, race, gender or disability. SepCem supports the principles of employment, development and advancement of historically disadvantaged South Africans as it acknowledges that a lack of deep skills remains a barrier in the industry.
It is SepCem’s goal to achieve equitable representation of designated groups at all employment levels. In this regard following the appointment of an employment equity manager in 2012, the company facilitated the election of an employment equity (EE) and training committee in 2014. Progress on the employment equity targets is assessed on a monthly basis during the executive committee meetings and twice a year by the EE committee.
The role of the EE committee is to develop and implement a plan in compliance with the EE Act as required by the Department of Trade and Industry (dti) and Department of Mineral Resources. SepCem has a five-year equity employment plan that is informed by the dti B-BBEE codes of good practice, Mining Charter and the EE Act.
The table below is a detailed plan on employment equity targets:
|Occupational levels||Target %||Actual EE %||Actual Black %||African||Coloured||Indian||White||Total|
|Skilled (junior management)||80||85||81||48||29||77||1||2||3||3||5||8||16||5||21||68||41||109|
There were no fatalities at all operations and the lost-time injury frequency rates for SepCem’s operations for the year ended 31 December 2014 were 0,109 (2013: 0,109) at Aganang, zero (2013: 0,53) at Delmas and zero (2013: zero) at Sephaku Ash.
Safety management at the operations is underpinned by rigorous risk management systems led by a safety specialist. Regular inspections are conducted to monitor compliance against the developed standards and procedures by dedicated site safety management teams.
SepCem also applies a wellness framework, Employee Assistance Programme (EAP), to promote a healthy lifestyle for all employees and to assist those who experience personal or work-related challenges to achieve optimal performance. The programme-related services have been extended to families because SepCem believes that an effective and healthy employee is supported by an equally healthy family.
SepCem believes that good environmental stewardship involves avoiding, minimising and mitigating the negative environmental impacts at every stage of the mining and cement manufacturing processes while maximising the positive environmental contributions. Comprehensive environmental management plans were completed and engagement with all the interested and affected parties done during the year.
SepCem’s environmental management strategy takes into account water consumption, energy efficiency and the mitigation of carbon emissions. The Aganang and Delmas plants were designed to limit their environmental impact and mitigation measures have been developed for all potential risks. Dust and noise pollution, water consumption and waste generation are monitored and measured periodically in line with legislative requirements at both plants. These measures were approved by the Departments of Mineral Resources as well as the Agriculture and Land Administration. SepCem also complies with all the conditions of its licences issued by the Departments of Water Affairs and Environmental Affairs.
Through extensive stakeholder engagement, a database has been established of the potential environmental risks and concerns. Below are operation-specific environmental concerns as raised by the stakeholders and the related mitigation measures for the reporting period.
|Environmental concern||Potential sources||Mitigation measures|
|Reduced air quality.||
|Increased overall noise levels around the mine and the plant.||
|Although SepCem acknowledges the aesthetic impact of the plant, the light and activity generated by the plant’s presence is likely to contribute positively to security in the area. Furthermore, the Aganang plant is one of three in the area.|
|Water requirements may reduce available supply for local farmers and residents.||
|There is no material risk to any areas of high or sensitive biodiversity within the mine or processing plant area. It has historically been used for cattle grazing and has been severely overgrazed. A thorough study of the area was conducted and reported in the Environmental Management Plan. While threats to biodiversity are not considered material for this operation, SepCem remains committed to regular environmental audits by suitable qualified persons. Should any red-listed species be identified, SepCem will endeavour to relocate such species appropriately.|
|Surface water quality|
|Studies have confirmed that, due to the absence of any well-defined or perennial drainage lines or water courses within the project area, the limestone mine and cement factory will not have a direct impact on the quality of surface water run-off.|
|Excess run-off of dirty water from plant.||
|Management and disposal of waste.||
|Environmental concern||Potential sources||Mitigation measures|
|Ground water quality and quantity|
|Contamination due to leakage.||
|Storm water management|
|Contamination of storm water run-off.||
|Disposal of waste water.||
|Reduced air quality.||
|Management and disposal of waste.||
SepCem has adopted a policy that is aligned with international best practice in relation to resettlement and compensation. By working in partnership with communities, SepCem can develop an understanding of the potential impact its operations may have on adjacent communities, and how to manage the short-term and long-term risks.
This strategy is supported by a number of management systems dealing with impact assessment, community engagement processes, and social investment. The main objective for engagement is to develop a mutually beneficial relationship that will enable SepCem to appropriately deliver on the community expectations while achieving its strategic objectives. The two main community expectations identified have been SepCem’s provision of employment opportunities and support for enterprise development initiatives.
SepCem actively offers skills development opportunities to young people from the local communities in line with the social and labour plan (SLP) submitted in support of the mining right application. In addition to the training opportunities, SepCem is supporting two commercial projects in line with the SLP highlighted in the table below.
|Programme||Progress to date|
|Apprentice training and learnerships||
|Bursaries and internships||
|Core business training||
|Delmas and Aganang pallet repair project||
|Verdwaal bakery project||
In the past financial year ended December 2014, SepCem established a Non-Profit Company (NPC) called Torosesha, meaning “new dream”, to acquire 15% of the entire issued share capital of Sephaku Development Proprietary Limited for the benefit of Verdwaal and Springbokpan communities. Torosesha is a vehicle to distribute the equity income to be generated from mining activities to implement broad community development initiatives in line with its memorandum of incorporation.
To date the outstanding administration process is to finalise the election of two community members as directors on the board of Torosesha. The directors of Torosesha will be responsible for how the earnings generated are used for the benefit of the communities. Management is working closely with local authorities to complete the election process. SepCem was awarded a level 2 B-BBEE contributor certificate in December 2014.
SepCem has identified job creation and supporting the development of small, medium and micro enterprises (SMMEs) as important factors in the sustainability of the local economy and community development strategy. To this end SepCem has developed the Enterprise and Supplier Development programme aimed at mentoring emerging enterprises located in areas it operates in. SepCem provides business opportunities and training to SMMEs through the provision of financial and logistical management support. The programme encompasses entrepreneurship development initiatives that range from the registration of the enterprises to providing basic business management skills through training, mentoring and coaching. Through this programme, community members effectively create jobs through establishing SMMEs, thereby contributing to the empowerment and alleviation of poverty.
Table below highlights the local economic development initiatives that have been introduced in the past year.
SepCem has identified
Summarised below is a selection of the enterprises currently participating in the enterprise development programme.
The cleaning of the cement plants is an essential component of the overall health and safety management process at the operations. The identification and selection of qualifying SMMEs is a rigorous process to ensure that the deserving enterprises are chosen for the programme. SepCem believes that its contribution to these entities will create jobs, develop entrepreneurs and sustain the local economy.
Founded by Mr Gaopalelwe Olebogeng from the Verdwaal Village in the North West province who is the sole managing member of Bodibeng Trading Proprietary Limited. Mr Gaopalelwe has previous experience in plant cleaning that he acquired during his tenure as a plant cleaner at another cement company in Lichtenburg. Bodibeng Trading Proprietary Limited employs 36 employees from the local community and currently has a short-term contract with SepCem which includes mentorship to ensure that it effectively provides the plant cleaning services at Aganang.
Mancamane is a black female-owned enterprise that started operating in 2010 as a plant cleaning, construction and mining supply company. Ms Daisy Maseko, a renowned entrepreneur, founded the enterprise in the Delmas area, Mpumalanga province and currently employs 28 permanent staff. SepCem adopted Mancamane into the enterprise development programme in 2014. The company is currently supplying plant cleaning services to the Delmas grinding plant and has demonstrated the ability to grow sustainably.
In 2014, SepCem contracted the cleaning services of MM&JK Cleaning Projects, an enterprise established in 2013 by Mr Sipho Mazibuko from a village called Springbokpan in the North West province. SepCem identified MM&JK Cleaning Projects as a well-managed enterprise that is appropriately suited to benefit from the programme. In the case of MM&JK, SepCem has partnered with another major industrial organisation to mentor Sipho.
The partner’s role is to assist MM&JK Cleaning Projects with inproving its cleaning skills through training, providing cleaning equipment and required detergents. SepCem’s role is to develop Sipho’s business management skills including cost management, record keeping and negotiation. SepCem is assisting MM&JK to develop a marketing strategy to increase its customer base to reduce the single-customer dependency risk and ensure that the company is sustainable. MM&JK Cleaning Projects currently has a three-year contract with SepCem for general cleaning at Aganang and employs 14 permanent staff.
Millicent’s Enterprise is 100% black female-owned and was founded by Ms Millicent Mahlabe, an entrepreneur from Delmas in the Mpumalanga province. The company was selected for the programme because it has historically demonstrated the ability to supply large contracts but lacks administration skills. Millicent’s has a good reputation and positive track record of being able to cater for large provincial government events.
SepCem secured Millicent’s catering services in 2013 for its canteen at the Delmas plant that provides meals to 150 employees. Millicent’s currently has seven permanent employees and several contract employees who are sourced as and when required.
The original strategy approved by the board of directors remains robust and targets the key areas for growth, while maintaining sound controls and a strong focus on risk management. The board considered future trends as well as economic assumptions and identified key external trends, opportunities and risk that could have an impact on the group’s growth ambitions.
The board of directors provides ethical leadership and is committed to good governance practices that add value to the business. The board oversees the risk, compliance and assurance practices and hold management to account for the responsible delivery of the strategy.
Each business area and every employee of the group is committed to the principles of good corporate governance and to applying the highest ethical standards in conducting business, being a good corporate citizen and generating sustainable levels of performance and returns on shareholders’ investment.
We designed our board objectives to cover not only our strategic objectives, but also to capitalise on the benefits of being part of a broader group, the importance of running the business in an ethical and transparent way as well as the monitoring of our information technology (IT) strategy:
SepHold constantly strives to integrate the key concepts of King III into its business and to adjust structures and processes to comply with the provisions of the Companies Act to ensure continued good governance. Shareholders are also referred to the King III compliance register included on the company’s website for further information on the group’s detailed analysis for the compliance to King III. (King III Governance Register ).
Dr D Twist retired in accordance with SepHold’s memorandum of incorporation. Having been involved with the company since inception and on the board since September 2006, Dr D Twist decided not to make himself available for re-election in order to commit to the company’s unbundled projects.
Mr J Pitt was appointed as the alternative director to Mr MM Ngoasheng on 21 August 2014 and Mr CRDW de Bruin resigned on 21 April 2014.
The SepHold board takes overall responsibility for the success of the group, supports the long-term sustainability of corporate capital, balanced economic, social and environmental performance, and creates and delivers sustainable shareholder value and consideration of legitimate stakeholder involvement. The board reviews and approves the strategic objectives and policies of the group while providing overall strategic direction within a framework of incentives and controls. It ensures that management strikes an appropriate balance between promoting long-term sustainable growth and delivering short-term performance.
The board delegates certain functions to various committees on which independent non-executive, executive and non-executive directors play an active and pivotal role. All committees operate under board-approved terms of reference, which are reviewed regularly to align with best practice and to take the recommendations set out in King III into consideration. The chairpersons of these committees are, in conjunction with the board, elected by the members of each committee.
The audit and risk committee is chaired by an independent non-executive director who attends the annual general meeting (AGM) to respond to shareholder queries and holds office for no longer than five consecutive years, unless the remuneration and nomination committee and the board have sound reason to determine otherwise.
Our board charter summarises our corporate governance practices, details matters reserved for the board and outlines the mandate for our board committees. It further defines the separate roles for the chairperson, the chief executive officer and elaborates on the board’s expectations of the committee chairpersons and all directors.
Among others, the board specifically considered the following matters (as required by the Companies Act and the JSE Listings Requirements):
|Board appointments||The appointment of directors to the board is a formal, transparent process and a matter for the board as a whole, assisted by the nomination committee. The nomination committee consists of a majority of independent non-executive directors and is chaired by the board chairperson.|
|Board composition||The board comprises of nine directors, four of whom are executive, one non-executive and four independent non-executive directors. The board is satisfied that it has the requisite balance of skills, knowledge, experience and diversity to make it effective.|
|Group company secretary||
The group company secretary is responsible for the functions specified in chapter 88 of the Companies Act. The board conducted its annual assessment of the group company secretary in June 2015. It remains satisfied with the competency and experience of Jennifer Bennette as group company secretary. The board is of the opinion that an arm’s length relationship has been maintained between its members and the company secretary.
The group company secretary provides guidance to the board members on the execution of their duties and maintains her knowledge of developments in corporate governance best practice and regulation. All board members have unhindered access to the services of the group company secretary in all aspects of the board’s mandate and the operations in the group.
|Going concern||The directors of the group are of the opinion that the business will remain a going concern in the 12-month period ahead. Their statement in this regard is contained in the directors’ approval to the financial statements.|
|Preparation of the annual financial statements and competency of the financial director||
The audit and risk committee has considered and has satisfied itself of the appropriateness of the expertise and experience of the financial director, Mr Neil Crafford-Lazarus, whose curriculum vitae appears here.
Furthermore, the audit and risk committee has considered and satisfied itself of the appropriateness of the expertise, adequacy of the resources of SepHold’s financial function as well as the experience of the responsible senior members of management.
|Committee||Roles and responsibilities|
|Audit and risk||
|Remuneration and nomination||
|Social and ethics||
Monitoring the group’s activities regarding:
The Summary Governance result is obtained through the utilisation of the Governance Assessment Instrument (GAI), which is trademarked to the Institute of Directors Southern Africa (IoDSA), which compiled its content and rating capability.
The assessment criteria of the IoDSA web-based tool, the Governance Assessment Instrument, have been based on the practice recommendations of the King III report. These criteria are intended to assess quantitative aspects of corporate governance only, and not qualitative governance. For a detailed assessment of the qualitative criteria, shareholders are referred to the register on the company’s website here
|C||Application to be improved|
|Governance office bearers||AAA|
|Board role and duties||AAA|
The assessment criteria of the web-based tool, the Governance Assessment Instrument (GAI), have been based on the practice recommendations of the King III report. These criteria are intended to assess quantitative aspects of corporate governance only and not qualitative governance. As such, the results are proposed to serve as an indication of the structures, systems and processes in place and are not intended to include an indication of the governance culture of an entity.
The responsibility for the input of data in order to attain a result through the use of this is that of the user and the entity in respect of which the user subscription has been granted.
The Global Platform for Intellectual Property (Pty) Ltd (TGPIP), nor the IoDSA, as Licensor of the content of the GAI, makes no warranty or representation as to the accuracy or completeness of either the assessment criteria or the results. Neither TGPIP, nor the IoDSA, nor any of its affiliates, nor the software developer shall be held responsible for any direct, indirect, special, consequential or other damage of any kind suffered or incurred, as a result of reliance on the results produced through the use of the GAI.
|Total number of meetings||4||3||1||1|
|B Williams (chairperson, independent)||3||3||C 1|
|Dr L Mohuba (CEO, executive)||4||EO 3||EO 1|
|NR Crafford-Lazarus (financial director, executive)||4||EO 3||EO 1|
|RR Matjiu (executive)||2||1|
|PF Fourie (non-executive)||4||1|
|MM Ngoasheng (independent)||2||C 0|
|Dr D Twist (resigned 21 August 2014)||1|
|MG Mahlare (independent)||4||C 3||1|
|PM Makwana (independent)||4||3||C*1|
|KJ Capes (executive)||4||1|
|J Bennette (company secretary)||4||3||1||1|
|C||– Committee chairperson|
|C*||– Mr Makwana acted as chairperson of this meeting in the absence of Mr Ngoasheng, the elected committee chairperson|
|EO||– Ex-office member|
The board recognises the importance of an effective risk management process and acknowledges that it is responsible and accountable for ensuring that adequate procedures and processes are in place. The group companies have approved formally documented risk management policies as recommended by King III.
These policies clearly set out:
To ensure the sustainability of its business and to meet the risk tolerance and risk appetite targets defined by the board, the executive committees of SepHold, SepCem and Métier have developed and implemented a policy and plan for a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, and the related internal control, compliance and governance processes within the companies. To assist it in the discharge of its duties and responsibilities in respect of risk management, the board has appointed an audit and risk committee to review the risk management progress of the companies, the effectiveness of risk management activities, the key risks facing the companies, and the responses to address these key risks.
The board is satisfied that SepCem and Métier have and maintain an effective ongoing risk assessment process, consisting of risk identification, risk quantification and risk evaluation. This assessment process identifies risks and measures their potential impact and likelihood. A systematic, documented, formal risk assessment is conducted at least once a year and is continually reviewed, updated and applied. The output of the assessments is provided to the audit and risk committee and the board to provide a realistic perspective of material risks that the companies face.
The risk reports as prepared by the SepCem and Métier executive management are submitted to the SepHold audit and risk committee. An in-depth analysis is then performed on the identified risk areas to develop action plans that are progressively implemented. Strategic reviews of all operational units are conducted periodically by the heads of the operational units. These strategic reviews include an analysis of the main risks to which the operational entities are exposed.
The group incurred no material losses during the financial year.
The board considers risk management as achieving an appropriate balance between realising opportunities for gains while minimising adverse impacts. The board is satisfied that no member of management within the organisation has exceeded his or her authority or acted contrary to the board’s stated risk appetite and in so doing, has exposed the group to unnecessary risk during the financial year and up to the date of this report.
SepHold’s remuneration practices reflect the dynamics of the market and context in which it operates. Remuneration plays a critical role in attracting and retaining high-performing individuals. Remuneration is also used to reinforce, encourage and promote superior performance and achievement of organisational goals. The group’s remuneration management is market-related through market surveys and benchmarks which are applied to maintain the system.
The board is responsible for making decisions regarding the remuneration of directors and the CEO who, in turn, is responsible for decisions relating to total guaranteed remuneration and incentives of all employees. The remuneration committee receives these recommendations and subsequently advises the board on remuneration practices. The committee makes recommendations on long-term employee incentives and submits all policy amendments to the board for approval.
SepHold adopts a total reward strategy in remunerating all its employees. This is to ensure that all employees are appropriately rewarded and are made aware of the terms and conditions under which they are employed. Key principles of the framework are to ensure that SepHold:
Positioning of the total guaranteed package is based on the individual/or candidates’/employees’ level of demonstrated competency, qualification, experience and performance. The total guaranteed package of individuals new to the position will normally be at the point of entry at the low end of the pay range. With increased experience, learning and performance, the total guaranteed package will be adjusted based on the outcomes performance reviews.
The table below is a summary of the performance measurement criteria:
|Entry point||New to the job or building the skill|
|Needs improvement||The skill needs enhancing to improve performance|
|World-class||Expert and fully competent|
The table below summarises the main components of the reward package for all SepHold employees. SepCem, as a subsidiary of Dangote, applies a different reward framework.
|Objective and practice||Award size and performance period|
As the group becomes firmly established as a manufacturer of building materials, the reward structure will be reviewed to reflect the phase of commercial activity in the 2016 financial year.
We aim to attract and retain suitably skilled and experienced non-executive directors. An appropriate level of competitive remuneration is required to reward them appropriately for their time and expertise.
Non-executive directors are remunerated by way of an annual fee paid in recognition of membership of the board and its committees.
Non-executive directors, including the group chairperson, are not eligible to receive any other employment benefits or performance-related remuneration or any form of compensation for loss of office.
The fee structure is reviewed periodically and benchmarked annually to ensure proposed fees are appropriate against the external market and support the attraction and retention of high-quality non-executive directors. Proposed fees are subject to shareholder approval at the AGM each year.
|Fee structure 2015 – annual fee||R|
|Chairperson of the board||320 000|
|Independent non-executive||240 000|
|Proposed fee structure 2016 – annual fee|
|Chairperson of the board||350 000|
|Independent non-executive||262 500|
Directors’ emoluments are set out in note 34 in the annual financial statements . Beneficial shareholding of directors and associates, and directors’ interests in share options are disclosed in the directors’ report .