FINANCIAL YEAR ENDED 31 MARCH 2015
Group financial performance
as at 31 March 2015
Revenue
R775,4m
Operating profit
R59,3m
Headline profit per share
24,43c
Cash generated from operations
R114,2m
EBITDA
R128,9m
Net profit after tax
R47,2m
Total assets
R1,2bn
Net cash from operating activities after finance costs and tax
R70,9m
Operational performance
SepCem
Group share price performance
as at 31 March 2015
Number of shares in issue
201 224 508
Average volume per month
5,1m
Share price low (cents)
520
Average value traded per month (R)
R35,9m
Net assets value per share (cents)
419,79
Number of shareholders
2 286
Share price at year-end (cents)
944
Share price high (cents)
944
Market capitalisation (R)
R1,9bn
Operational performance
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.
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.comMétier 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
OPERATIONAL STRUCTURE
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
.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.
Brent Williams
Chairman
Dr Lelau Mohuba
Chief executive officer
R72,1m
R47,2m
Basic
24,43c
419,8c
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 2014financial year.
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
Neil Crafford-Lazarus
Financial director
Kenneth Capes
Managing director
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.
Richard Thompson
Financial director
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.
Wayne Witherspoon
Operations director
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.
Glen Talmage
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.
Gregg Hollins
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.
Ceri Rayne
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.
2014 |
New employees |
Employees terminated |
Current |
|||||||||
| Male | Female | Total | Male | Female | Total | Male | Female | Total | Male | Female | Total | |
| White | 24 | 10 | 34 | 5 | 3 | 8 | 3 | 3 | 6 | 26 | 10 | 36 |
| African | 141 | 6 | 147 | 44 | – | 44 | 33 | 1 | 34 | 152 | 5 | 157 |
| Coloured | 3 | 1 | 4 | 2 | 1 | 3 | 2 | 1 | 3 | 3 | 1 | 4 |
| Indian | 29 | 6 | 35 | 5 | 1 | 6 | 5 | – | 5 | 29 | 7 | 36 |
| Total | 197 | 23 | 220 | 56 | 5 | 61 | 43 | 5 | 48 | 210 | 23 | 233 |
| Headcount | Male | Female | Total | ||||||
| Employee category | Black | Indian | Coloured | White | Black | Indian | Coloured | White | |
| Executive management | – | – | – | 2 | – | – | – | 1 | 3 |
| Senior management | – | 3 | 1 | 14 | – | – | – | – | 18 |
| Middle management | 6 | 14 | – | 8 | 1 | 1 | – | 4 | 34 |
| Junior management | 16 | 11 | 2 | 2 | 3 | 6 | 1 | 5 | 46 |
| Semi-skilled labour | 74 | 1 | – | – | 1 | – | – | – | 76 |
| Unskilled labour | 55 | – | – | – | 1 | – | – | – | 56 |
| Total permanent employees | 151 | 29 | 3 | 26 | 6 | 7 | 1 | 10 | 233 |
| Total employees | 151 | 29 | 3 | 26 | 6 | 7 | 1 | 10 | 233 |
Metier drivers at the plant preparing for deliveries.
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.
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.
Duan Claassen
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.
Duncan Leith
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.
Puseletso Makhubo
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 Bennette
Company secretary
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 | ||||||||||
| M | F | T | M | F | T | M | F | T | M | F | T | M | F | T | ||||
| Executive management | 60 | 33 | 17 | 0 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 4 | 1 | 5 | 4 | 2 | 6 |
| Senior management | 60 | 57 | 39 | 4 | 0 | 4 | 2 | 0 | 2 | 0 | 1 | 1 | 12 | 4 | 16 | 18 | 5 | 23 |
| Middle management | 75 | 72 | 56 | 15 | 5 | 20 | 0 | 0 | 0 | 3 | 1 | 4 | 12 | 7 | 19 | 30 | 13 | 43 |
| Skilled (junior management) | 80 | 85 | 81 | 48 | 29 | 77 | 1 | 2 | 3 | 3 | 5 | 8 | 16 | 5 | 21 | 68 | 41 | 109 |
| Semi-skilled | 100 | 100 | 94 | 28 | 20 | 48 | 2 | 0 | 2 | 0 | 0 | 0 | 0 | 3 | 3 | 30 | 23 | 53 |
| Unskilled | 100 | 100 | 100 | 85 | 25 | 110 | 0 | 0 | 0 | 1 | 0 | 1 | 0 | 0 | 0 | 86 | 25 | 111 |
| Total | 180 | 80 | 260 | 5 | 2 | 7 | 7 | 7 | 14 | 44 | 20 | 64 | 236 | 109 | 345 | |||
| Fixed-term contractors | 5 | 1 | 6 | 0 | 0 | 0 | 0 | 0 | 0 | 5 | 1 | 6 | 10 | 2 | 12 | |||
| Learnerships | 2 | 1 | 3 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 | 1 | 3 | |||
| Total | 187 | 82 | 269 | 5 | 2 | 7 | 7 | 7 | 14 | 49 | 21 | 70 | 248 | 112 | 360 | |||
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 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.
Mr Bavelile Michael Vilakazi, a Verdwaal livestock farmer grazing his cattle on the SepCem-owned Bethlehem Farm. SepCem has provided this temporary access to pasture as an interim measure for loss of grazing land. A permanent situation is being investigated.
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 |
|
| Portable skills |
|
| Core business training |
|
| Delmas and Aganang pallet repair project |
|
| Verdwaal bakery project |
|
From left: Ezekiel Sepeko, Julius Maredi and Itebeng Mogorosi, beneficiaries of the core business training who are now mining mobile equipment operators.
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 |
| Board |
|
| Executive committee |
|
| 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
Each
AAA
100%
| AAA | Highest application |
| AA | High application |
| BB | Notable application |
| B | Moderate application |
| C | Application to be improved |
| L | Low application |
| Status | Category | Score |
| Board composition | AAA | |
| Remuneration | AAA | |
| Governance office bearers | AAA | |
| Board role and duties | AAA | |
| Accountability | AAA | |
| Performance assessment | AAA | |
| Board committees | AAA | |
| Group boards | AAA |
Disclaimer:
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.
| Members | Board | Audit and risk committee |
Remuneration and nomination committee |
Social and ethics committee |
| 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 |
