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
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INTERCAPE GROUP ANNUAL REPORT 2014