Annual Report 2014
Transcription
Annual Report 2014
CONTENTS HIGHLIGHTS SCOPE OF THE REPORT CHAIRMAN’S REPORT CHIEF EXECUTIVE OFFICER’S REPORT STRATEGIC AND OPERATIONAL OVERVIEW NEW PRETORIA DEPOT SUSTAINABILITY REPORT CORPORATE GOVERNANCE REPORT STATEMENT OF ASSURANCE ICG ANNUAL FINANCIAL STATEMENTS 2014 02 03 04 06 08 14 16 24 29 32 2014 INTERGRATED ANNUAL REPORT Total Revenue Increase 22% R605m HIGHLIGHTS Profit Attributable to Shareholders amounted to NET debt decreased to R14m TOTAL assets increased to R214m R405m 11 NEW Intercape COACHES Fleet = 130 Moved to the new Pretoria depot which now serves as a Southern African hub First long-distance bus operator to receive RTMS accreditaion. The information included in this Annual Integrated Report is provided in accordance with International Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs), the South African Companies Act 2008, the King Code of Governance Principles 2009 and related guidance. SCOPE OF THE REPORT We are pleased to present to stakeholders our Annual Integrated Report for the year ended 28 February 2014. This report covers the performance of the Intercape Group, its operating subsidiaries and the branches over whose operating policies and practices it exercises control. The Risk, Audit and Compliance Committee had oversight of the preparation of this Annual Integrated Report. ICG INTERGRATED ANNUAL REPORT 2014 03 CHAIRMAN’S REPORT It pleases me to report on another successful, albeit trying year in the 37 year history of Intercape. The Group continues to comprise the well-known passenger coach business operating in South Africa, as well as subsidiary company operations in Namibia, Mozambique and Botswana and branch operations in Zimbabwe, Zambia and Malawi. It remains a family business deeply grounded in Christian principles and committed to playing an important role in the development of Southern Africa for the benefit of its people. The company continues to focus on the safety of its passengers, dependability of its operations and affordability of journeys at all times. Francois Uys Chairman The past year was again characterized by financial uncertainty and instability in the global arena. South Africa did not escape the knock-on effects of the on-going global battle to overcome the effects of the financial crisis which started in 2008. A deterioration in the exchange rate against all major currencies was exacerbated by violence in the mining sector and a prolonged strike which remains unresolved at the date of this report. The disposable income of consumers is under pressure as a result of the imposition of e-tolling and growing inflation especially of food prices, while the down-grade of the credit rating of South Africa recently, adds to the general concerns regarding further interest rate increases for the year ahead. The combined effect of the aforementioned is a less favorable outlook for growth in the South African economy with concomitant effects for the high levels of unemployment. On the business front the capital expansion programs for greater penetration in both the domestic and the regional markets initiated last year resulted in increased market share. Disposable income, however, continued to shrink, leading to a more competitive market and pressure on margins. The Intercape Group in the process increased the number of passengers carried by 9% to 1,2 million while the total distance covered by coaches increased by 20% to 27,35m. Total revenues for the period increased by 22% to R605.26m, but the increased cost of fuel, and a unilateral imposition of exorbitant passenger handling fees by PRASA in Johannesburg reduced profitability after tax for the year to R13,6m (2013: R 25,8m). The Board remains confident that the present strategy will result in improved profitability for the Group in the years to come whilst maintaining its values of safety, dependability and affordability. While Intercape had another fatality free year of operations for the period under review, it saddens me to report two incidents post balance sheet in which eleven persons lost their lives. In both instances the cause of the accidents was driver error and recruiting, training and operating standards have been raised to provide for a return to the proud safety record for which the company is renowned. ICG INTERGRATED ANNUAL REPORT 2014 We thank God for the grace, through Jesus Christ, to be able to report these results in trying times. My appreciation and gratitude goes to my fellow directors Johann Ferreira CEO and Tenk Loubser, to the executive managers, to our financiers and our suppliers, and especially to every employee who made these results possible. François Uys Chairman of the Board 19 July 2014 05 CHIEF EXECUTIVE OFFICER’S REPORT GROWTH OPPORTUNITIES POSITIONING THE COMPANY FOR THE FUTURE During the course of 2013 Intercape took the bold step of relocating its head office to Pretoria. This bold step will go down in the history books as one of great importance. The new premises in Pretoria West (24 ha) will not only cater for the current infrastructure demand, but will also ensure that the company will be able to expand and support its services in Southern Africa for years to come. The property was bought for R14 million, and so far a further R28 million has been spent on new workshops and renovations. The depot is currently valued at R43 million. Part of the repositioning process was the relocation of certain executive committee members from Cape Town to Pretoria. More key members and staff will follow in 2014 and 2015. Johann Ferreira Chief Executive Officer As in the 2013 financial year, the company had a fatality-free year in 2014. I would like to thank our heavenly Father for His hand of protection and also every staff member for making this possible. Safety still remains, and always will be, the most important cornerstone of the foundations of this company. Despite the current economic conditions, Intercape still managed to see revenue growth of 20% or more in each of the main revenue streams, including the intercity and cross-border routes, parcel services, and the South African coach charter service. We continue to explore new horizons and during 2014/2015 we will explore business opportunities with a BEE initiative (Africa People Mover) and a joint venture in Zimbabwe with an exciting operator by the name of “Pathfinder”. BUILDING THE PRODUCT OFFERING During 2013/2014 we have acquired 11 additional coaches in order to accommodate the growing demand for our superior product offering. These new coaches include two 60-seater full luxury I6-Irizar bodies (Mainliner specs from Brazil) and six 60-seater full luxury G7 Marcopolo bodies (Sleepliner specs from Brazil), both with Volvo B11R chassis (from Sweden). The I6-Irizar coaches can be used for intercity routes as well as charters in South Africa, while the G7 coaches are earmarked for the core routes within South Africa. Two 36-seater full luxury coaches were manufactured by a sister company, SA Coach and Truck. The bodies were designed by SA Coach and are mounted on UD 95 chassis. These coaches have been deployed in Namibia. STAFF LOYALTY The year started out with numerous strikes in the passenger transport sector. As a non-unionised company, Intercape managed to capitalise on a situation that negatively impacted our competitors. A climate study for staff was conducted during the year, the results were communicated to management and recommendations implemented. New staff uniforms were successfully designed to further enhance the company profile. APPRECIATION My sincere appreciation to the non-executive directors, the executive committee and the staff of Intercape for their hard work and dedication during the last year. Personally I went through a very difficult time, but the whole team stood in unity and kept building the business and has, once again, taken it to new heights. To live in God’s purpose must be the greatest honour that any human being can experience. I am of the firm opinion that the Intercape family is doing exactly what God expects from us as summarised in 2 Chronicles 7 verse 14: “if My people, who are called by My name, will humble themselves and pray and seek My face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land”. Thank you to each and every Intercape family member who contributed to making this alignment possible. ICG INTERGRATED ANNUAL REPORT 2014 07 STRATEGIC & OPERATIONAL OVERVIEW Market Trends and Overview OVERVIEW Intercape had another year of solid growth and good top-line performance. Total revenues for the financial year exceeded targets by 3% (R15 million), and intercity revenues grew by 21% on a year-on-year basis. Revenue per kilometre was under pressure for most of the year. This is attributed to the combined effect of increased fuel prices and the weakness in the general economy, making it challenging to pass fare increases to the public. Intercape’s market share, as measured on the Computicket platform, continued to show steady growth during the year, and ended at a market-leading 30%. Next are Greyhound and City to City, both around 20%, followed by Translux at 13% and Citiliner at just under 10%. Roadlink ended at 7%. MARKET TRENDS While the overall result was good, the year was characterised by up-down swings in a fairly volatile market. General strikes of coach-operator personnel during April and May 2013, and again in August, saw Autopax (Translux and City to City) operations come to a virtual standstill, while most other operators were partially affected. Intercape remained fully operational and as a result we experienced a significant lift in sales during these periods. In the weeks following each strike, however, competitors used aggressive pricing in an attempt to recapture lost market share. The general economic climate, as in previous years, continues to dominate the overall industry. Passengers are price-sensitive, and are often forced to travel with their second or third choice of operator as a result. SA Roadlink went into business rescue in the final months of the year. An optimistic business rescue plan was adopted by its creditors in February 2014. EXPANSION OF INTERCITY ROUTES Intercity operations grew on a year-to-year basis as follows: • Core routes (South Africa, Namibia, Botswana and Mozambique) grew in trips by 11,3%, in passengers by 10,6%, in average fares by 9,2%, and in total revenues by 20,8%. • Africa routes (Zimbabwe, Zambia and Malawi) grew in trips by 2,9%, in passengers by 3,5%, in average fares by 19,5%, and in total revenues by 23,7%. Danie du Toit Chief Commercial Officer Growth came through opening new routes and adding more services and departures to existing routes. The number of new routes opened was less than in preceding years as we adopted a strategy of consolidation, aimed primarily at strengthening the foundation of the rapidly growing portfolio of cross-border routes to Africa. The following new routes were opened during the year: • Windhoek – Oshakati/Oshikango (Northern Namibia) • Johannesburg – Mzuzu (Malawi) • Johannesburg – Mangochi (Malawi). Additional departures were added to a number of routes, primarily to the Eastern Cape, on the N1 between Cape Town and Johannesburg, and cross-border between Johannesburg and Malawi. There were also some routes which did not perform well and were suspended during the year. Most noteworthy was the route between Maputo and Beira in Mozambique. Following a variety of setbacks, mostly outside Intercape’s control (political unrest, floods, road blockages, shooting incidents), the route was finally suspended indefinitely at the end of June 2013. A strategic decision was taken to redeploy the four Mozambique-registered front-engine Scanias which serviced the route. Two of these coaches were exported to Malawi, and two to Namibia. In an environment where opportunities for the expansion of routes are becoming scarcer and are generally lower-yielding, our objective will be to remain price-competitive, while maintaining and improving our level of service. ICG INTERGRATED ANNUAL REPORT 2014 09 STRATEGIC & OPERATIONAL OVERVIEW GROWTH OF CHARTERS AND LOGISTICS Revenues from charters and logistics each constitute approximately 4% of Intercape’s total revenues. While comparatively small, these two components contributed more than R10 million of the R15 million by which total revenues exceeded targets. We anticipate that our charter service will sustain its strong performance of the past 2-3 years. GROUP FINANCIAL RESULTS OVERVIEW The 2014 financial year was again characterised strong revenues growth of 22%, from R498 million in 2013 to R605 million in 2014. This was achieved mainly by a 10% increase in the yield (ticket price) and a 9% increase in the number of passengers carried. The growth in revenue came as a result of a 12% increase in kilometres travelled and a 10% increase in revenue per kilometre. The cost of sales increased year-on-year with 26%, from R332 million in 2013 to R420 million in 2014. Fuel price and vehicle repairs-and-maintenance costs increases of 32% and 39% year-on-year respectively resulted in increased pressure on our gross margin which decreased year-on-year from 33% to 31%. Another encumbrance to the gross margin is additional access fees charged by the Passenger Rail Agency of South Africa (PRASA) at Johannesburg Park Station which amounts to almost R1 million per month. Operational expenditure increased by 35% or R39 million year-on-year from R112 million in 2013 to R152 million in 2014. The biggest contributors to the increase in operational expenditure were repairs-and-maintenance costs to buildings, due mostly to the new Pretoria depot, as well as higher employee costs (other than operational and technical staff) – both of which create capacity for future growth. Profit after taxation for the year reduced from R25,8 million in 2013, to R14,6 million in 2014. The decrease was mainly the result of the increase in operating expenditure year-on-year. Transfer pricing policies has been put into place during 2014 to ensure fair but efficient profit sharing structures across the different countries. With a lower amount of coaches purchased and financed in 2014 compared to 2013, the capital investment for 2014 ended at R68 million compared to R142 million in 2013. Net debt (being the difference between cash on hand and interest-bearing debt) therefore also decreased to R214 million from R218 million in the previous year. ICG INTERGRATED ANNUAL REPORT 2014 11 NEW PRETORIA DEPOT Originally an Iscor village, dating back to the 1930’s, the new property comprised a number of old buildings, including a supermarket, post office, hospital, crèche, administration buildings, bioscope hall, industrial kitchens and beer halls, amongst others. These buildings had been vacant for almost 20 years, but have now mostly been renovated and turned into buildings that we can use today. We have, for instance, turned the hospital into living quarters for drivers and hostesses, the crèche into our operations centre, while the bioscope hall has been subdivided into a bulk store on the one side and a functions hall on the other, which can be used for church, conferences and other events (aptly named the Almari Ferreira Hall). The new premises went operational on 16 December 2013, and on the busiest day in December 80 busses were turned through this new depot. The new Pretoria depot sets the platform for future growth, with increased workshop space and complementary facilities. The layout of the workshop area was designed to facilitate the efficient flow of vehicles through the wash bay, fuelling and service sections. The new premises in addition provide accommodation for the drivers and hostesses, as well as a restaurant. New additions to the premises are two state-of-the-art workshops, covering a total area of 2 300 square metres, and is surrounded by 14 500 square metres of concrete paving. The workshop complex boasts amongst others the following facilities: • 6 Pits • 3 Flat bays • 3 Wash bays • 2 Brake testing bays • 3 Body shops • 1 Spray booth • 79 000-litre fuel tank Wynand Jansen van Nieuwenhuizen Chief Operating Officer ICG INTERGRATED ANNUAL REPORT 2014 15 SUSTAINABILITY REPORT As a transport company operating in developing economies across Southern Africa, Intercape aims to strike a balance between the interests of all our stakeholders. Sustainability is at the core of our business. Intercape aims to develop its business in a way that creates lasting value for all our stakeholders: our passengers, the communities they live in, fellow road users, the suppliers to the company and to our employees and shareholders. The long-term interests of both Intercape and the wider community are therefore inextricably linked. It is our conviction that the largest contribution Intercape can make to society is by operating a commercially successful business in a responsible way. ENSURING SOUND GOVERNANCE The governance principles set out under Section 8 hereunder contribute substantially to our sustainability. The wealth of experience contributed by both executive and non-executive directors is invaluable. DEVELOPING OUR PEOPLE The “Intercape Experience” is a journey we guide all our employees on to ensure we create a work environment in which people can be challenged, recognised and rewarded and to assist the workforce to improve their skills while also enjoying their work. Ivor Kettles Chief Information Officer This is achieved by not only attracting people with the right competency set but also, and very important to us, people with the desired character attributes to add value to the business. This process starts with a comprehensive recruitment strategy and continues with a transparent performance appraisal model. We treat all employees equally and value the benefits of employing people of different races, creeds and backgrounds. With business interests in seven countries, we must conform to local laws and regulations on these issues. We aim to ensure transparency and total fairness in our remuneration policies and conduct market-related salary surveys on an annual basis. Various bonus and incentive schemes have been implemented throughout the company in order to drive improved performance and productivity. A training centre was established within Intercape in order to align our training with the National Skills Development Act. It is our vision that Intercape make a contribution towards the road transport industry in Southern Africa in terms of road safety and service excellence. SUCCESSION PLANNING Succession planning is of key importance to the business and enjoys prominence in our strategic thinking. An interim management structure has been defined to ensure continuity in all areas of the business in the event of the absence of key personnel. A leadership development programme (LDP) has been implemented and involves selected senior and middle-management. The purpose of the LDP was to identify future shortagesand succession and to develop leadership for a diverse and demanding workforce. ICG INTERGRATED ANNUAL REPORT 2014 17 PASSENGER SAFETY SUSTAINABILITY REPORT Intercape recognises that passenger safety is at the core of our sustainability and is therefore a top priority. Intercape operates seven technical depots throughout South Africa and safety checks are carried out before each and every departure. Stringent operational and technical policies are in place to ensure that safety is never compromised. A voluntary three-monthly certificate of fitness is performed in terms of Intercape standards, instead of the prescribed six-monthly one required by law. The following processes and items are in place and contribute towards our drive for safety: • Each professional driver has to undergo an alcohol breathalyser test before and after each trip. A zero tolerance policy regarding alcohol and drugs is enforced. • Subjecting our fleet to A-Grade Certificate of Fitness tests, including brake tests on a continuous basis. • Enforcing a strict driver hour management program to eliminate driver fatigue. • State-of-the-art brake test stations have been installed at our major maintenance depots. • Zero tolerance for speeding and drivers are not allowed to exceed 95km/h where the prescribed speed limit is 100km/h for passenger transport vehicles. Additionally the Intercape standard is 45km/h when driving downhill on a mountain pass. • Our professional drivers are trained and continuously re-evaluated by our in-house TETA-accredited Training Academy. • Satellite tracking devices are fitted to all vehicles and monitored on a 24/7 basis. • DriveCam technology is installed on the coach windscreens to monitor and manage driver behaviour as well as outside interventions. • To further enhance safety all drivers must sign a declaration stating that they are fit and rested before commencement of a trip. Nico Bam Chief IR/HR Officer • Intercape complied with all the standards and received the RTMS (Road Transport Management System) accreditation. RTMS is an industry led, voluntary self-regulation scheme that encourages transport operators to implement a vehicle management system that preserves road infrastructure, improves road safety and increases the productivity of the logistics value chain. Intercape was the first intercity bus operator to receive the RTMS accreditation, and this in record time. ICG INTERGRATED ANNUAL REPORT 2014 19 i-FOUNDATION with coach manufacturer Marco Polo. Morestêr Children’s Home, Rustenburg. i-Care has adopted Morestêr, with 40 children aged 6 months to13 years. i-Care donates fresh produce, cleaning materials and clothing, provides daily home-cooked meals, assist with school fees and staff needs. SUSTAINABILITY REPORT CORPORATE AND SOCIAL INVESTMENT The i-Foundation is an Intercape initiative that aims to improve the quality of life of staff and impact and transform communities in Southern Africa. This non-profit organisation (NPC 2012/082516/08), under the leadership of Pastor Hanli Marais, operates through the initiatives of i-Care, Intercede and i-Equip. Blue Bus Project, Hindle High, Delft in Cape Town. Intercape converted a double-decker bus body for use as a trauma centre for young people from informal settlements. Programmes deal with teenage pregnancy, positive life skills, reading rooms, music appreciation and therapeutic drama classes. I-CARE focuses on social responsibility and the initiatives include feeding projects for children, clothing, assistance with transport and improving living conditions. i-Care currently runs projects in four countries and assists with more than 15 000 meals per month. Olievenhoutbosch Christian School in Pretoria, situated in the Olievenhoutbosch informal settlement outside Centurion. i-Care provides daily home-cooked meals for 146 children, as well as blankets and free transport to events. I-CARE PROJECTS INCLUDE: Okalawo Children’s Village & Peace School, Quelimane, Mozambique. i-Care provides 317 meals daily to Okalawo children attending the Peace School throughout the school calendar. These vulnerable children range between ages 5 and 15. Kingdom Kids in Guguletho, Cape Town. Food is being provided weekly, as well as music and drama ministered in partnership with Eagles Rising to more than 350 children of all age groups since 2008. Zoe Academy of Skills in Delft, Cape Town. i-Care partnered with the Zoe Academy of Skills in the Delft community and distributes clothing, donating books for the library, care for the elderly and offers free bus transport to children and seniors. Clever Kids Crèche and Nursery School, Ruyterwacht, Cape Town. i-Care feeds 160 children daily with home-cooked meals. i-Care in addition takes responsibility for maintaining the facilities in partnership Tenk Loubser Non-Executive Director Zambian Childhood Cancer Foundation (ZACCAF): Was founded to assist children diagnosed with cancer/life threatening blood disorders as well as their families through practical and psychosocial support programs. Many families lose their homes or simply cannot cope with the day to day pressures. The i-Foundation has partnered with ZACCAF by donating 4 recliner chairs to the cancer ward and assists with food to the families on a monthly basis. Eric Day Care, Windhoek, Namibia. i-Care provides daily meals, nappies and assists with the maintenance of the facilities, hosting 45 children. Ad Hoc Projects. i-Care makes various donations and assists with ad hoc crisis feeding projects to communities in need in Southern Africa. I-EQUIP endeavours to empower communities through skills transfer at the Zoe Academy of Skills, Delft. i-Equip assists trainees to find employment at Intercape, especially in the Call Centre and as drivers. The mission of Intercape is growing the company through the grace and guidance of God. INTERCEDE assists in fulfilling this through ministry focused on the wellbeing and wholeness of staff through prayer initiatives, counselling as well as organising outreaches to communities in need. Established in 2008, INTERTAINMENT is the entertainment channel on all Intercape coaches. With a vision of Bringing Hope to Southern Africa, INTERTAINMENT strive to keep passengers entertained with wholesome family friendly viewing material. Content Categories include Hollywood A-list Feature Films, Documentaries, Music Videos, Movie Reviews, Talk Shows, Sport Programs, Kids Entertainment and much more. ICG INTERGRATED ANNUAL REPORT 2014 21 SUSTAINABILITY REPORT PROMOTING ENVIRONMENTAL RESPONSIBILITY Intercape continues their endeavours to ensure that all operations are conducted in a responsible manner to minimise any impact on the environment. Replacement of equipment, especially coaches, takes this into account and concentrates on efficiency in consumption and output. Intercape has taken delivery of, and is operating, new-generation coaches with more fuel-efficient engines and a smaller carbon footprint compared to previous generation coaches. New coaches comply with rigorous Euro 3 standards and, where possible, only low sulphur (50ppm diesel) is used. Our main supplier of tyres, SA Coach and Truck, is a member of the Recycling and Economic Development Initiative of South Africa (REDISA) and subscribes to its recently introduced waste tyre management plan. Second-hand and waste tyres produced by Intercape are handed to REDISA agents who collect waste tyres on behalf of large recycling plants. Used oil drained from our vehicles during services is collected and recycled or disposed of in environmentally safe ways by reputable oil disposable companies. Environmentally friendly soap is used in Intercape’s wash bays, and where possible the wash bay areas are fitted with oil trap separators in which the oil is separated from the water. While the clean water is then fed to the municipal drain system, the oil sludge in the separator tanks is sucked out and removed by oil disposal companies. BBBEE Intercape embraces the BBBEE concept under the proviso that it makes economic sense, limits the company’s risk profile and contributes to a sustainable business. Intercape, as a highly specialised family business, decided to concentrate its efforts in this regard on Employment Equity, Skills Development, Preferential Procurement and Enterprise Development. The current overall BEE rating is 47,57% and the company remains a Level 6 contributor. As part of its BBBEE strategy, Intercape assisted in the formation of two BEE companies, namely Munashe Transport Services and Oyama Cleaning and Security Services. Munashe Transport Services recruits and manages drivers and hostesses; while all cleaning, security and porters are recruited and managed by Oyama Cleaning and Security Services, who specialise in the cleaning and security of offices, workshops, sleeping quarters and open yard spaces. These companies were supported to the extent that both now provide outsourced services to the Intercape group of companies. RISK MANAGEMENT Kobus Franck Chief Financial Officer ICG INTERGRATED ANNUAL REPORT 2014 The Board is ultimately responsible for the governance of risk management and for ensuring compliance with legislation and regulations. The Board has delegated certain aspects of its authority pertaining to risk management to the Risk Audit and Compliance Committee (RACC). Management is responsible for the integration of the risks identified and the systems of internal control of such risks. 23 CORPORATE GOVERNANCE The RACC oversees risk management and in fulfilling its mandate calls upon various assurance providers, most notably External Audit, Internal Audit and Corporate Counsel. The role of Internal Audit is to examine, evaluate, report and make recommendations to the committee regarding the adequacy and efficacy of the internal controls that manage company risk. In managing risk, each executive management member performs an annual strategic risk review pertaining to his particular area of responsibility. The results are used to update the Strategic Risk Register. In addition, a fraud risk assessment is performed. Both sets of results are used to inform the internal audit plan. Management remains the first line of defence in managing risk, and given the dynamic environment in which the company operates, the management of risk forms part of normal management duties. CORPORATE GOVERNANCE Intercape is aware of its responsibilities to all its stakeholders and therefore subscribes and applies all the substantive recommendations of the King III report on corporate governance. Through this the Board of Directors adheres to the key principles of ethical leadership, sustainability and corporate citizenship, and considers all legislation, codes and practices to ensure that its actions achieve good corporate governance. BOARD OF DIRECTORS The Board of Directors is responsible for monitoring the group’s performance and determining group strategy. Their responsibilities include setting governance policies and strategies and monitoring the sustainability of Intercape within the broader community and environment. The Board of Directors is also responsible for ensuring legislative and regulatory compliance as well as for effective risk management and internal controls. The composition of the Board of Directors follows the prescriptios of King III, including the necessary independence and experience. It comprises three non-executive directors (one vacancy exists), and one executive director. The roles of the Chairman and Chief Executive Officer do not vest in the same person. The Board met four times during the past financial year and were fully attended. The composition of the Board is as follows: Francois Uys 67 Non-Executive BA, Chairman MComm (Independent) Tenk Loubser 66 Non-Executive CA(SA), Director MComm (Independent) Johann Ferreira 47 CEO The directors have delegated specific responsibilities to the following subcommittees in order to assist the Board in the discharge of its duties: • • • Risk, Audit and Compliance Committee, Remuneration and Nomination Committee, and Social and Ethics Committee. All responsibilities delegated to the respective board committees are governed by charters stipulating their applicable purpose, authority and responsibilities, which in turn are subject to Board review and approval on an annual basis. The directors confirm that the committees have functioned in accordance with these written terms of reference during the year. The directors are eligible for re-election during the 2014 calendar year. ICG INTERGRATED ANNUAL REPORT 2014 25 CORPORATE GOVERNANCE RISK, AUDIT AND COMPLIANCE COMMITTEE The Risk, Audit and Compliance Committee comprises the two non-executive directors and the Chief Financial Officer. The committee is responsible for identifying, managing and evaluating the necessary risk management and internal controls relating to Intercape and its business processes. The committee also ensures that the accounting policies and annual reporting is in accordance with applicable standards, and that Intercape complies with relevant legislation, codes and practices. The committee meets at least three times a year and all meetings were fully attended during the current year. The Chief Executive Officer, Chief Operating Officer and other senior executives as well as the internal and external auditors have attended these meetings on invitation. REMUNERATION AND NOMINATION COMMITTEE The Remuneration and Nomination Committee comprises the two non-executive directors. The committee reviews the performance of the directors, executive committee members and the subcommittees annually. The committee plays a leading role in identifying risks and acting pro-actively to mitigate any threats. The committee is also responsible for reviewing and recommending the remuneration policies and packages of executive management. The committee meets at least twice a year and all meetings were fully attended during the current year. SOCIAL AND ETHICS COMMITTEE (SEC) Intercape is devoted to conducting business in adherence with the highest standards of integrity, behaviour and ethics in its interaction with all its stakeholders. The Social and Ethics Committee comprises the two non-executive directors and the Chief Executive Officer. The committee is responsible for monitoring and reporting on the procedures, practices and activities implemented to ensure that it is socially and ethically acceptable. The company social and ethics charter underscores the values and programs that bear out Intercape’s ethical and social responsibilities. Training, programmes and Christian based pastoral services serve to instil good ethical conduct and includes regular church meetings, prayer meetings, as well as character transformation and leadership programmes which serve to not only instil values and good ethical conduct but also to develop human capital. Intercape’s employment policies and procedures support fair employment practices with fair and market related wages and all training is done through SETA accredited academies. The company is vigilant against the risks of criminal activity such as fraud, corruption, theft and the transport of illicit goods and with a view to address potential criminal activities on internal as well as cross-border operations an expert in the field of countering the transport of illicit goods have assisted the company in adopting practical measures to vigilantly counter such risks, whilst the internal investigative team was further strengthened by additional appointments led by the Internal Audit department. All corporate and social investment programmes are driven by the values of Intercape. The programmes are implemented through the I-Foundation, an Intercape initiative, by means of the I-equip, I-Care and Intercede programmes which are aimed at education, child welfare and socio-economic upliftment programmes. Intercape is cognizant of its environmental footprint and fleet replacement is consistently done on the most fuel efficient vehicles available and on the highest Euro standard available in the market subject to the availability of the most efficient fuel in South Africa and the African countries served by Intercape. Intercape has also in the development of its head office held at Pretoria Industrial restored and rehabilitated derelict land. EXECUTIVE COMMITTEE The Executive Committee is responsible for managing and reviewing the daily operations and performances of Intercape, and assists the Board in the identification of risks and the formulating of strategy. The committee meets at least once a month and comprises the following senior executives: Executive Committee Johann Ferreira ICG INTERGRATED ANNUAL REPORT 2014 47 Chief Executive Officer Wynand Jansen van NTC 4, Nat 54 Nieuwenhuizen Transport Dipl Chief Operating Officer Danie du Toit 45 PhD Eng Chief Commercial Officer Kobus Franck 39 CA (SA), BA, MBL Chief Financial Officer Ivor Kettles 52 N4 (Electronics) Nico Bam 47 BA Law, Hons (Bus & Admin) Chief Information Officer Chief HR & IR Officer 27 CORPORATE GOVERNANCE INTERNAL AUDIT The Internal Audit Department is an independent assurance function and an integral part of the risk management framework. The Chief Internal Auditor reports directly to the RACC and meets regularly with executive management. Internal Audit is mandated by the internal audit charter to perform independent assessments and provide assurance on the adequacy and efficacy of internal controls. The internal audit plan is annually approved by the RACC. During the period under review there were no material fines, penalties or prosecutions relating to non-compliance with regulations or legislation applicable to the company’s operations. GOING CONCERN The Board of Directors considers Intercape to be a going concern. The Board considers the financial statements, together with detailed forecasts and budgets, to support their opinion on Intercape’s ability to continue as a going concern. Adequate financial facilities are in place to cover operational expenses for the year ahead, while facilities for envisaged capital expenses are being negotiated. The annual financial statements are prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SME) and these policies are applied consistently. Reports from the various assurance providers, combined with verification and sign-off by Intercape’s executive management, are the key components upon which the statement of assurance is based. Executive management’s conclusion is that there is sufficient evidence to support Intercape’s claims regarding its performance. The Integrated Report 2014 was reviewed by the Intercape Risk, Audit and Compliance Committee and recommended for approval to the Board who provided final approval. Therefore, we believe that this report offers stakeholders the necessary basis to make considered evaluations of the performance and sustainability of the company. ICG INTERGRATED ANNUAL REPORT 2014 STATEMENT OF ASSURANCE Intercape’s 2014 integrated report is the result of combined input from all the different departments reporting on their activities and achievements for the year. Our external auditors, PricewaterhouseCoopers Inc, provide assurance over the annual financial statements included in this report. Internal audit provided assurance on some aspects of the Corporate Governance Report. 29 CONTENTS DIRECTORS’ RESPONSIBILITIES AND APPROVAL DIRECTOR’S REPORT INDEPENDENT AUDITORS’ REPORT STATEMENT OF FINANCIAL POSITION STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS ACCOUNTING POLICIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 34 35 36 37 38 39 40 41 50 INTERCAPE ANNUAL FINANCIAL STATEMENTS 2014 DIRECTORS’ RESPONSIBILITIES AND APPROVAL The directors are required by the Companies Act of South Africa, 71 of 2008, to maintain adequate accounting records and are responsible for the content and integrity of the consolidated financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with the International Financial Reporting Standard for Small and Medium-sized Entities. The external auditors are engaged to express an independent opinion on the consolidated financial statements. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the company’s cash flow forecast for the year to 28 February 2015 and, in the light of this review and the current financial position, they are satisfied that the company has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the company’s consolidated financial statements. The consolidated financial statements have been examined by the company’s external auditors and their report is presented on page 36. The consolidated financial statements set out on pages 37 to 63, which have been prepared on the going concern basis, were approved by the board on 1 August 2014 and were signed on its behalf by: J FERREIRA The directors submit their report for the year ended 28 February 2014. The Company is incorporated in South Africa, whilst its subsidiaries are incorporated in South Africa, Namibia, Botswana and Mozambique. The company’s subsidiaries consist of Intercape Ferreira Mainliner (Pty) Ltd, Intercape Namibia (Pty) Ltd, Intercape Botswana Bus Services (Pty) Ltd and Intercape Mozambique Limitada. The group also operates through branches in Zimbabwe, Zambia and Malawi. There were no changes in the nature of the group’s business during the year under review. The company is mainly engaged in transport of passengers per bus nationally and internationally. The operating results and state of affairs of the company are fully set out in the attached consolidated financial statements and do not in our opinion require any further comment. 2. GOING CONCERN The consolidated financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 3. EVENTS AFTER THE REPORTING PERIOD The directors are not aware of any matter or circumstance arising since the end of the financial year which are material to the financial affairs of the company. 4. AUTHORISED AND ISSUED SHARE CAPITAL There were no changes in the authorised or issued share capital of the company during the year under review. 5. DIVIDENDS No dividends were declared or paid to the shareholder during the year and none is recommended. 6. DIRECTORS The directors of the company during the year and to the date of this report are as follows: J Ferreira, F Uys, JS Loubser DIRECTORS’ REPORT 1. REVIEW OF ACTIVITIES Main business and operations 7. SECRETARY The secretary of the company is R van der Walt. 8. AUDITORS PricewaterhouseCoopers Inc. will continue in office in accordance with the Companies Act of South Africa, 71 of 2008. ICG ANNUAL FINANCIAL STATEMENTS 2014 35 INDEPENDANT AUDITORS’ REPORT TO THE SHAREHOLDER OF INTERCAPE GROUP (PTY) LTD AND ITS SUBSIDIARIES We have audited the consolidated financial statements of Intercape Group (Pty) Ltd and its subsidiaries, as set out on pages 37 to 61, which comprise the statement of financial position as at 28 February 2014, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The company’s directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and requirements of the Companies Act of South Africa, 71 of 2008, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error. AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Intercape Group (Pty) Ltd and its subsidiaries as at 28 February 2014, and its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and the requirements of the Companies Act of South Africa, 71 of 2008. OTHER REPORTS REQUIRED BY THE COMPANIES ACT As part of our audit of the consolidated financial statements for the year ended 28 February 2014, we have read the Directors’ Report for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated financial statements. This report is the responsibility of the respective preparer. Based on reading this report we have not identified material inconsistencies between this report and the audited consolidated financial statements. However, we have not audited this report and accordingly do not express an opinion on this report. PricewaterhouseCoopers Inc. Director: Bram Goossens Registered Auditor Cape Town 1 August 2014 INTERCAPE GROUP INTERGRATED ANNUAL REPORT 2014 TEL EMAIL WEB HEAD OFFICE +27 (0) 21 380 4400 [email protected] www.intercape.co.za C/o Staal & Research Roads, Pretoria INTERCAPE GROUP ANNUAL REPORT 2014