Integrated annual report 2016

Transcription

1 Integrated annual report 2016

2 Contents Our values in action 1 Financial and non-fi nancial highlights 4 Performance indicators 4 Business trends 5 Snapshot of Howden 6 Group structure 7 Group at a glance 8 Five-year Group fi nancial summary 10 Value added statement 11 Our stakeholders 12 Stakeholder engagement 13 Our strategy 16 Chairman s statement 22 Chief Executive Offi cer s review 24 Chief Financial Offi cer s review 28 Material issues 32 Corporate governance report 52 Remuneration, nomination, social and ethics report 61 Board of directors 64 Executive management (Exco) 66 Risk management report 68 GRI index 70 Annual financial statements 74 Notice of annual general meeting 136 Form of proxy 143 Corporate information IBC Scope and boundary of the report The 2016 integrated report includes the operations of Howden Africa Holdings Limited and its subsidiaries (the Company, Group or Howden) in South Africa. The information in this report covers the fi nancial and non-fi nancial performance of the Company for the year ended 31 December However, where it is relevant to include information post year-end, this has been incorporated and noted. Howden aims to achieve the highest standards in all disclosures in this report to provide meaningful, accurate, complete, transparent and balanced information to stakeholders. The board and board committees were actively involved in fi nancial disclosures made in this report. In defi ning the report and information included, we have drawn from the governance guidelines outlined in the King Report on Corporate Governance for South Africa, 2009 (King III), the JSE Listings Requirements, the Companies Act No 71 of 2008 (Companies Act) and the Global Reporting Initiative (GRI 4) sustainability reporting guidelines. The Group follows International Financial Reporting Standards (IFRS) to compile its annual fi nancial statements. The 2016 fi nancial statements have been prepared under the supervision of the Chief Financial Offi cer, Marinella Vigouroux, and have been audited and assured by Ernst & Young Inc., the Group s external auditors. The requirement for sustainability assurance is considered annually and is at this stage not deemed necessary. This will be reviewed annually. This report contains the most material issues of concern to all our stakeholders. There are no signifi cant changes to the aspect boundaries as contained in the 2015 integrated annual report. For additional information visit our website: Board responsibility statement The board of directors acknowledges its responsibility to ensure the integrity of the integrated annual report. The board has accordingly applied its mind to the integrated annual report and, in its opinion, the integrated annual report addresses all material issues, and fairly presents the integrated performance of the organisation and its impacts. The integrated annual report has been prepared in line with best practice and the recommendations of King III (principle 9.1) and contains standard disclosures from the GRI 4 sustainability reporting guidelines. The board authorised the integrated annual report for release on 31 March Ian H Brander Chairman of the board Duly authorised by the board Mitesh Patel Independent non-executive director and Chairman of the Audit and Risk Committee Duly authorised by the board

3 Our values The best team wins Team-oriented, involved associates are our most valuable resource, and we are passionate about attracting, developing and retaining the best talent. Howden associates win because we: Exhibit high integrity and respect for others Seek fact-based, root cause solutions, not blame Promote from within Are non-political and not bureaucratic Are accountable for best-of-class results, and deliver Strive for a safe work environment Believe that winning is fun Customers talk, and we listen The voice of the customer will always drive the development of our strategic plan, and this will result in: A focus on quality and speed always Unique, value-added and differentiated solutions Robust, repeatable processes that consistently exceed customer expectations Positive problem resolution Competitive customer conversions 05 Leading-edge innovation defines our future Individual and organisational creativity will drive: Breakthrough ideas for technology, products, solutions and processes Differentiated customer solutions Out-of-the-box ideas, big and small, that add value to our world Above-market organic growth in action 04 We compete for shareholders based on our performance To consistently attract and retain loyal shareholders, we must deliver best-ofclass results for: Profi ts Working capital Cash fl ow 03 Continuous improvement (Kaizen) is our way of life The COLFAX BUSINESS SYSTEM (CBS) is our culture, and we will deploy it with absolute passion. Additionally, we will: Step out of our comfort zone by setting breakthrough objectives Experiment and learn everyday Aggressively and continuously eliminate waste in every aspect of our business processes Benchmark the best, and then better them For additional information visit our website: For quick access on your mobile to the Howden website, scan this QR code. Howden Integrated annual report

4 Our top six industries Waste Water Treatment The demand for water treatment plant is growing with the need to process large volumes of waste water from municipal sewerage systems and industrial processes such as food, drink, pulp and paper, where liquid organic effl uents are produced as a by-product. We have developed our turbo compressor technology for the specifi c needs of water treatment plants. Our highly effi cient design, fi tted with variable inlet guide vanes and variable vane diffuser system, off ers a unique high performance across the entire duty range. Cement Cement production is one of the world s most energy intensive industries. Current cement making processes impose a wide range of demands on process fans, including high abrasion, excessive dust build-up, and high temperatures. Howden supplies the many and varied fan types required by the cement industry, ranging from large custom built fans for process critical applications to pre-engineered units for the lower specifi cation and more general applications. Iron and Steel Some of today s most arduous applications for Howden products are to be found in the iron and steel industry. The need to move large volumes of air or gas, in many cases at high pressures and high dust burdens, places stringent demands on the mechanical design of the impeller. In ore benefi ciation processes such as sintering and pelletising, as well as in basic oxygen and direct reduction steelmaking, Howden fans are operating in high temperature and erosive environments. 2 Howden Integrated annual report 2016

5 Power Generation The world is increasingly dependent on having a reliable supply of electric power and our products play a central role in supporting the power producers who need effi cient, reliable fans, rotary regenerative heat exchangers, compressors and other equipment to keep the generating process running continuously. Howden has supplied over boiler draught fans and almost rotary heat exchangers in over 100 countries making it a leading supplier to the industry. Mining We engineer and construct turnkey ventilation, refrigeration and gas cleaning systems for mine ventilation anywhere throughout the world. We also integrate equipment into existing mines, process plants, or supply standalone units as per our customers specifi ed duties. Howden has over 160 years of experience in meeting our customers mining ventilation needs in some of the most remote and diffi cult underground mining environments in the world. Petrochemical The Petrochemical industry is one of the world s most complex, and we have matched these unique requirements by engineering products for use at sites that produce liquid fuels, plastics and materials for manufacturing industries. Bespoke boiler fans are supplied in large numbers to petrochemical customers, and our compressor technologies are well suited for use as utility gas compressors for nitrogen and air, or in large critical process applications. Our experience enables us to support the achievement of customer effi ciency objectives through the optimisation of equipment and systems.. Howden Integrated annual report

6 Financial and non-fi nancial highlights Earnings per share cents Cash and cash equivalents R909.3 million Revenue R million Increased by 1.3% from cents in 2015 Increased by 24.5% from R730.2 million in 2015 Increased by 8.2% from R million in 2015 Performance indicators Year ended 31 December % change Economic Revenue Earnings per share cents Earnings retained over reporting period Total taxes paid including VAT, income tax, rates etc (11.7) B-BBEE status dti scorecard Level 4 Level 3 B-BBEE status Value-added factor Yes Yes Social Total employees number Turnover by employee Total training spend (43.3) Average training hours per employee hours Apprentices to date number Total hours worked (Booysens and Port Elizabeth) (6.0) Total hours worked (all sites including on customer sites) number Employee opinion survey participation number 396 Employees tested for chronic illnesses number Employees tested for medical fi tness number (5.5) SED/CSI spend rand Disabling incidents frequency rate (DIFR) ratio Lost-time injuries (LTI) number Number of fatalities number 1 Fatal injury frequency rate ratio 0.34 Monetary value of signifi cant fi nes paid/imposed due to non-compliance with the law Monetary value of fi nes repeatedly paid/imposed due to non-compliance with the law Environment (Booysens site) Diesel/fuel consumed per man hour litres Total portable and bulk gas consumed per man hour kg Water consumed litres (16.2) Electricity consumption kilowatt hour (1.8) 4 Howden Integrated annual report 2016

7 Africa and world mining markets remain subdued. Business trends Our customers appetite across all industries for major original equipment manufacturing capital investment remains subdued due to current economic climate and funding shortages. Our sales into key industries (%) 4% 3% 2% 2% 10% 2% 3% 3% 7% 1% 2% 3% 3% 15% 59% % % 60% % 16% 17% Transport Petrochemical HVAC Steel/cement Industrial Mining Power Transport Petrochemical HVAC Steel/cement Industrial Mining Power Transport Petrochemical HVAC Steel/cement Industrial Mining Power Revenue () Headline earning per share (cents) 500 Profit before tax () Howden Integrated annual report

8 Snapshot of Howden Our vision Is to be Africa s leading application engineer, providing lifetime solutions in air and gas-handling. Howden Africa is a market-driven, customer-orientated company. Its main business activities are the design, manufacture and marketing of specialised air and gas-handling solutions for a wide range of industries. The Group s major industries supplied include power generation, petrochemical, mining, iron and steel, cement and water treatment. Howden Africa is also a distributor of ESAB welding and cutting equipment and consumables (reported under our new Fabrication Technology division). Howden Africa is committed to environmental awareness. Accordingly, all product designs and manufacturing are scrutinised for environmental friendliness. Design and drawing activities are computerised and manufacturing is concentrated on producing key components. Manufacturing facilities are located in Booysens (Johannesburg) and Struandale (Port Elizabeth). Howden business system Voice of customer People CONTINUOUS IMPROVEMENT Process Plan Quality Delivery Cost Growth WORLD-CLASS PERFORMANCE 6 Howden Integrated annual report 2016

9 Group structure Howden Group South Africa Limited 47.90% James Howden & Godfrey Overseas Limited 7.49% Institutional and private investors 44.61% HOWDEN AFRICA HOLDINGS LIMITED 100% 100% 100% FANS AND HEAT EXCHANGERS ENVIRONMENTAL CONTROL FABRICATION TECHNOLOGY A list of Howden Africa Holdings Limited s subsidiaries and its interests therein is given on page 113 of this report. Howden Group South Africa and James Howden & Godfrey Overseas Limited are ultimately held by Colfax Corporation. Howden Integrated annual report

10 Group at a glance Fans and Heat Exchangers Revolving Around You TM 83.44% Revenue Environmental Control Revolving Around You TM 11.13% Revenue Fabrication Technology Revolving Around You TM 5.43% Revenue 8 Howden Integrated annual report 2016

11 Fans and Heat Exchangers division The division s principal products are centrifugal and axial fans, air and gas rotary heat exchangers and cleaning equipment. The products as supplied by the division are integral parts of the coal-fired boiler and emission control systems used by the power industry. Significant sales are also made to the mining, petrochemical, iron and steel and other process industries. Products Boiler fans Heat exchangers Site services HVAC fans Standard and industrial fans and blowers Main surface fans Auxiliary mine fans Centrifugal blowers Dust extraction on coal mines Mine cooling and heating Ventilation on demand Engineering solutions Application engineering Environmental Control division The division supplies equipment and systems for use in processes which reduce atmospheric pollution generated by industrial plants, and in support of environmental legislation introduced in recent years. Products Gas cleaning plant Combustion engineering Furnaces Incinerators Process compressors Refrigeration equipment Water chillers Positive displacement blowers Waste water treatment Control and instrumentation Mine cooling and heating Engineering solutions Application engineering Fabrication Technology division The division distributes equipment and filler metals for virtually every welding and cutting application. The products and services are utilised in many industries including energy, machinery, power generation, fabrication, construction, ship building, transportation and many others. Products Air gouging and exothermic cutting Gas equipment Welding consumables Welding equipment Plasma cutting and torches Welding automation and robotics Cutting automation Howden Integrated annual report

12 Five-year Group fi nancial summary for the year ended 31 December Summarised consolidated statements of comprehensive income Revenue Operating profi t Net fi nance income Profit before income tax Income tax expense (84 684) (86 927) (81 596) ( ) (68 957) Profit for the year Other comprehensive (loss)/income for the year, net of tax (2 716) (7 520) (13 736) (3 018) Total comprehensive income for the year attributable to equity holders of the Company Earnings per share (cents) Dividends per share: dividend paid (cents) special dividend paid (cents) interim dividend paid (cents) Number of shares ( 000) In issue Weighted average Summarised consolidated statements of financial position ASSETS Non-current assets Current assets Inventories Receivables and prepayments Cash and cash equivalents Total assets EQUITY Capital and reserves Shareholders funds LIABILITIES Non-current liabilities Current liabilities Total equity and liabilities Howden Integrated annual report 2016

13 Value added statement for the year ended 31 December Revenue Investment income Less: Paid to suppliers for materials and services ( ) Total value added Distributed as follows: To employees as salaries, wages and other benefi ts To lender s fi nance costs To depreciation and amortisation To government as tax expense Total value added distributed Portion of value added reinvested to sustain and expand the business Total value added distributed and reinvested Total value added R800 million 27% Reinvested in Group 11% Government 60% Employees 2% Depreciation and amortisation 0% Providers of capital Howden Integrated annual report

14 Our stakeholders The management and board acknowledge their responsibilities to their stakeholders and are committed to communicating in a transparent and effective manner, while engaging with each stakeholder group in line with their needs. Stakeholder engagement is entrenched in the Group and in line with the King III code, local and International Integrated Reporting Council (IIRC) discussion papers as well as the Global Reporting Initiative (GRI) G4 guidelines. During the process of identifying the Group s material issues, the following key stakeholders were identified: Employees Customers Our Stakeholders Communities Suppliers Shareholders and investors Directors understand that: It is crucial for decision-makers to understand who is affected by their decisions and who has the power to infl uence the outcome Stakeholder engagement is about careful selection and engagement from the outset so that the views, needs and ideas of stakeholders infl uence the strategic direction of the Group 12 Howden Integrated annual report 2016

15 Stakeholder engagement Stakeholder Engagement in 2016 Why this engagement is important to us Employees Customers Employee survey Surveys on communication, satisfaction and clarity on aspects such as roles, responsibilities and remuneration are conducted periodically. A survey was undertaken in 2016 and the Group is working towards developing action plans to deal with concerns/issues identifi ed by the survey outcome. Ad hoc meetings and communication memorandums Exit interviews Industrial relations meetings Howden Hub (internal newsletter produced quarterly by the Company) Howden worldnews (internal newsletter produced quarterly by Howden Global) Connect company intranet Annual material issues engagement The Sustainability Committee endeavours to engage with employees annually on matters of material concern. Management sent out notices to actively solicit written and verbal feedback, prompting typical aspects that might apply to our operations. Customer service surveys Howden utilises a system called Net Promoter System (NPS) to measure and improve customer engagement across the Group. NPS is based on a process of short (two-question) customer surveys and follow-up activities to act upon the feedback provided by customers. NPS supports the delivery of our Howden brand, allowing us to measure how well we are performing in meeting the promises that we make to customers. Customer relationship marketing This is done daily at all customer-facing points. It is one of our core values that the customer speaks and we listen. Annual material issues engagement The Sustainability Committee endeavours to engage its customers annually on matters of material concern. Distributors day The Fabrication Technology division hosted its lead distributors for a network session. The purpose was to explain the three Colfax platforms ESAB; Howden and Colfax Fluid Handling. Also demonstrated was how Fabrication Technology division can leverage the entrenched relationships that Howden companies enjoy with their customers. Since our distributors are an extension of our sales force, it was important to share with them our strategy for South Africa and our brand values. The distributors day also afforded us an opportunity to discuss mutual issues affecting the distributors. Good employee communication is essential to business success. At the most basic level, employees who do not know what is expected of them seldom perform to their potential. As a supplier of high-value engineered solutions, it is imperative that Howden develops a deep understanding of the individual requirements of customers. Close relationships with key decision-makers in customers management structures is critical to this approach, and Howden actively pursues these links in the interests of excellent customer service. Our consistent reviews of customer requirements and customer feedback are critical aspects of our business and customer engagement plan. Howden Integrated annual report

16 Stakeholder engagement continued Stakeholder Engagement in 2016 Why this engagement is important to us Suppliers Investors Communities Ad hoc supplier meetings Meeting on specifi c projects/orders and end user requirements are held when required. Annual material issues engagement The Sustainability Committee endeavours to engage with suppliers annually to discuss matters of material concern. Supplier development The business actively engages with smaller enterprises comprising both current and prospective suppliers with the aim to assist those entities to become sustainable businesses. Assistance provided is both in the form of operational and fi nancial assistance. Shareholder meetings All shareholders have the opportunity to ask questions at the Company s annual general meeting, with the chairmen of all board committees available to answer questions. SENS announcements Shareholders are kept abreast of developments such as director resignations and appointments, dividend declarations and trading statements, etc. Website Shareholders have direct access to Company information via the investor relations section of its website. Ad hoc investor meetings The Chief Executive Offi cer and Chief Financial Offi cer meet with investors and prospective investors to discuss the Company and published fi nancial and non-fi nancial reports. Annual material issues engagement The Sustainability Committee endeavours to engage the top fi ve shareholders annually to discuss matters of material concern to them as shareholders. Corporate social investment (CSI) Howden focuses much of its CSI effort on education. This provides a platform to develop the potential of South African youth. Through the Company CSI Committee, Howden staff are able to become directly involved in uplifting communities. Business and Tourism Forum (South of Johannesburg (SOJO)) We are founding members of SOJO, which is the business forum of South Johannesburg and surrounding areas. We engage with the forum formally each year, but also actively participate in environmental enhancement projects initiated by SOJO. Suppliers are critical to the success of our business. Careful selection and monitoring of our suppliers has ensured our customers receive sustainable value. By communicating with suppliers and service providers, we set expectations about how we do business, which infl uences their practices. It is important to promote effective communications with shareholders to ensure all relevant information is disseminated, and maintain their confi dence in our business. To empower individuals and groups by providing them with the skills and knowledge they need to grow. For a detailed discussion on the Company s selected material issues in the 2016 fi nancial year, please refer to the material issues report on pages 32 to Howden Integrated annual report 2016

17 2016 Annual GRI G4 material issues stakeholder engagement outcome matrix The table below refl ects the number of stakeholders selecting a particular category of concern/interest to them: Categories of aspects Economic Environmental Social Labour practices Human rights Society Product responsibility Economic performance 75 Materials 21 Employment 40 Investment 43 Community 23 Customer health and safety 54 Market presence 36 Energy 27 Relations 30 No discrimination 77 Corruption 70 Product labelling 26 Indirect econ. impacts 17 Water 29 Health and safety 38 Freedom of association 29 Anti-competitive behaviour 23 Market communication 46 Procurement practices 34 Biodiversity 6 Training 73 Child labour 9 Public policy 16 Compliance 28 Emissions 20 Equal opportunity 39 Forced labour 10 Compliance 22 Effluents and Waste 23 Equal remuneration for women and men 28 Products impact 37 Supplier labour assessments Compliance 22 Labour practice grievance mechanisms Transport 32 Overall market presence Supplier environmental assessment Environmental grievance mechanisms Howden Integrated annual report

18 Our strategy Howden Africa s business strategy is to: Expand our revenue growth into the rest of Africa, particularly in the mining industry. Identify further opportunities for growth by offering our customers additional complementary products and solutions. Maintain our competitive advantage and market share for the supply of air and gas-handling equipment, service and maintenance in South Africa. Grow market share in our Fabrication Technology division. Apply our experience in supply of products for emission control and water treatment plants and continue to invest in our range of technologies to respond positively to requests for solutions to customer needs. Be recognised as a top employer in South Africa. Proactively address corporate social investment. Customers talk, we listen Completed 2016 Target for 2017 Target for 2018 One of our five core values is customers talk, we listen. We ensure customer satisfaction through service excellence, innovative technical solutions that meet our customers operational requirements, short lead times, quick and effective resolution of customer complaints, world-class aftermarket support and customer empathy. Since continuous improvement is our way of life at Howden, we conduct periodic customer satisfaction surveys to assess our performance against customer expectations. We believe we can continuously achieve improved results through a more focused approach to customer management. Implemented effective use of daily visual management within several key customerfacing areas of the business to improve customer service levels and improve focus on value selling Monthly on-time delivery exceeded 95% at some points in the year but not yet consistent month on month Introduced a more effective pre-contract support team approach to engineered projects Continue Voice of Customer (VoC) engagements to improve our customer service Drive improvement in customer account management via the in-house CRM system Continue to focus on key accounts in targeted countries in rest of Africa Focus on practical use of our continuous improvement tools. Extend use of visual management within the business Further improve customer on-time deliveries to achieve consistent levels of at least 95% VoC is driving our behaviour in all aspects of the customer experience Achieve 97% of potential customers selecting Howden as their supplier of choice Exceed 97% on-time deliveries 16 Howden Integrated annual report 2016

19 People are our most valuable asset Completed 2016 Target for 2017 Target for 2018 Our people are our most valuable assets. We pride ourselves in being a progressive and responsible employer by constantly seeking best practice methods and knowledge in attracting, developing and retaining staff. What contributes to the sustainability of our business is the stability of our work environment and our track record of retaining experienced skills. We realise that for us to expand strategically as an organisation, we have to attract new talent and provide constant skills development and other training to build capacity. The transfer of knowledge, currently held by ageing technical resources, through succession planning and mentorship programmes, is vital and is being implemented. Initiated a formal health and safety programme utilising JSA (Job Safety Assessment) Continued: All salaried associates participated in a Howden Africa total reward system Businesses reward systems reviewed against the latest industry trends Promoted and sourced majority of managerial positions internally All identifi ed talent pool associates have a personal development plan Re-awarded the employer of choice award for the third year running Launched a Company-wide employee engagement survey and captured the feedback Implemented a leadership programme for middle management Reduce job safety risk assessment levels by at least 75% from 2016 levels Review business s reward systems yearly and update in line with the latest industry trends Increase the key talent pool to embrace 30% of associates Further develop our succession planning programme Continue to improve internal teamwork through collaboration across business streams and via active participation in Kaizen events Address outputs from the 2106 employee engagement survey with objective of improving our associates working experience and environment Retain a high rating as a top employer of choice Implement a formal coaching programme Maintain the strategy to be in the top 20% of the best employers to work for in our industry Invest in our associates to drive for 35% of the team to be in our key talent and developing talent pools A minimum of 80% of all junior and senior management vacancies to be fi lled internally By using employee engagement surveys, we continue to build on this information to provide opportunities to improve our people management strengths. Howden Integrated annual report

20 Our strategy continued People are our most valuable asset Completed 2016 Target for 2017 Target for 2018 Our growth will continue to be spurred by leveraging our key competitive advantages: Market leadership based on technology, reputation and brand strength Strong South African engineering and manufacturing presence Market-focused business units Excellent relationships with customers in the power, energy and mining industries Howden s large installed base should result in strong growth in aftermarket products Flexible business model, with manufacturing focused on critical components Strong environmental credentials Increased revenue by 8.2% Added Fabrication Technology (ESAB) products to our portfolio Increased our activity in the rest of Africa by doubling customer visits compared to prior year Maintained a strong emphasis on reaching outside of South Africa (rest of Africa order intake 20% higher than prior year) Increase our business in the rest of Africa by a further 20% through greater customer engagement Strengthen links with other Howden product businesses to increase Howden Africa offerings Increase revenue from complementary equipment (bolt-on) to our core products by 10% Expand service and spares supplied to the mining and industrial markets by 10% Increase revenue from the rest of Africa to increase market share by 40% Increase revenue from complementary equipment (bolt-on) to our core products by 20% Make personal customer contact with 90% of medium to large industrial plants Increase revenue for service and spares in the mining and industrial markets by 20% 18 Howden Integrated annual report 2016

21 Our offering and our environment Completed 2016 Target for 2017 Target for 2018 Applying our products remains at the centre of our development and is supported by a strong team of design and application engineers. Howden Africa strives to have the capacity and capabilities to meet any air and gas-handling application requirements for any chosen process in any industry. We have introduced systems and processes to achieve this aim. Customer education on the benefits of our solutions is vital, particularly when faced with the options of cheaper imports, which are less environmentally friendly. Introduced the ESAB brand to major Howden customers and suppliers Commissioned a major contract for a water treatment plant Continued leveraging Howden s global footprint to reach global companies investing in global mining ventures where Howden Africa can provide product and services Continue to expand market awareness of our products, skills and competitiveness to South African and rest of Africa-based customers of large industrial, mining and power generation plants Invest resources in upgrading external websites Expand market awareness of our products, skills and competitiveness throughout Africa s large industrial, mining and power generation customers Actively participate in major environmental projects ahead of the 2020 National Environmental Management: Air Quality Act Howden Integrated annual report

22 ESAB South Africa ESAB is the world leader in advanced cutting and welding solutions, consumables and accessories. Since ESAB Africa became a division of Donkin Fans, part of Howden Africa Holdings Limited, the South African business unit has had access to a countrywide logistics and support network spanning Johannesburg, Cape Town, Durban and Port Elizabeth. The operation includes marketing and sales, warehousing, service and repairs for ESAB cutting systems and equipment, welding equipment, consumables and automation, and personal protective equipment. ESAB Africa also offers a process development service through which welding and cutting specialists audit complete metal fabrication processes. Based on these audits they make recommendations to customers on process solutions that improve fabrication productivity, contain costs and boost quality. Within the umbrella of process development and technical and logistical support is the outstanding ESAB product range that is sourced from multiple manufacturing operations worldwide, and sold on fi ve continents. The mix of world-class products, well-supported through an established logistics network and offered as part of a process solution, enables ESAB Africa to adopt a sophisticated integrated approach to welding and cutting. This is advantageous to engineering companies which support projects in mining, manufacturing and infrastructure development where world-class fabrication techniques and process are crucial to operational effi ciency and profi tability. Through the new network ESAB Africa intends to make its complete offering available to customers in southern as well as east and west Africa. 20 Howden Integrated annual report 2016

23 Howden Integrated annual report

24 Chairman s statement In a challenging environment Howden Africa achieved a solid set of results Non-executive Chairman Ian Brander 22 Howden Integrated annual report 2016

25 I am pleased to report that Howden Africa generated a solid set of results in 2016 with both bookings and revenue growth in challenging market conditions. During 2016 the Company faced challenges from weak demand in a number of key markets. World-wide mineral price levels inhibited capital expenditure across industries within South Africa. New build opportunities across mining, power, industrial and environmental control remain subdued. The management has continued with its strategy of increasing export sales and focusing on additional aftermarket opportunities. The newly formed fabrication business has been established and integrated into the business during Overall the 2016 performance included a solid operating profi t performance (R247.6 million) and the continued focus on working capital ensured that the Company ends the year with a strong balance sheet and is well positioned to take up any opportunities that present themselves in the future. The Company achieved B-BBEE Level 4, now measured against the amended codes, with plans to improve through a structured transformation plan. Howden Africa has once again received accreditation as a top employer of choice in the engineering industry. General review Total revenue in 2016 increased 8.2% to R million compared to R million in 2015, however operating profi t decreased 5.5% to R247.6 million (2015: R262.0 million). The Fans and Heat Exchangers division performed well in the 12 months to December Revenue and operating profi t increased compared to prior year. Revenue was up by 19.8% to R million and operating profi t up by 32.9% to R283.9 million compared to the corresponding period in Operating profi t margins in this division increased from 19.1% to 21.2% driven by product mix. Aftermarket, both domestic and export, continues to remain a strategic focus and the Group is well positioned to take advantage of further opportunities on the African continent. The Fans and Heat Exchangers division revenue up 19.8% on prior year Independently verified as a B-BBEE value-adding Level 4 contributor under the amended code Howden Africa was recertified as a top employer by the Top Employer Institute The CEO s review covers operational aspects in more detail. Black economic empowerment The Group continues to focus on its broad-based black economic empowerment (B-BBEE) status, covering ownership, management, skills development, enterprise and supplier development and socioeconomic development. The Group has been once again independently verifi ed as a value-adding contributor, audited as Level 4 on the amended codes. The Group is committed to further continuous B-BBEE transformation. Sustainability Sustainability is an integral part of our business at the economic, social and environmental level and spans our employees, suppliers, communities, business partners, media and government. In support of this, the Group requires all operating sites to implement certifi ed environment and health and safety management systems, with signifi cant progress made in recent years. As recommended in King III, sustainability matters are integrated into various sections of the integrated annual report. Risk management It is the responsibility of the Audit and Risk Committee to assist the board in the governance of risk and to design, implement and monitor a risk management plan. The committee has focused on raising the main risk exposures facing the Group and has implemented systems to ensure continuous risk monitoring and, where possible, exploitation of opportunities. Board of directors W Thomson joined the board on 1 February 2016 initially as Chief Operating Offi cer before taking over the role of CEO on 1 June T Bärwald stood down from the CEO role and moved to another senior role within the Howden Global organisation. K Johnson resigned from his role as CFO on 8 December 2016, with M Vigouroux promoted to the role. As with T Bärwald, K Johnson remains within the wider business and has supported the smooth transition of our new CFO into her role. In line with best governance practices, an evaluation of the board and subcommittees was completed in This evaluation and recommendations for improvements have been reviewed and considered by the board. Dividend The directors have resolved not to declare a dividend. Management and staff I conclude by thanking management and all employees for their major efforts throughout the year and thanks also to the outgoing and incoming CEOs and CFOs who worked well to ensure a smooth transition of roles. Thanks also extends to the board and committee members, for their guidance, support and commitment throughout the year. Ian Brander Non-executive Chairman 24 March 2017 Howden Integrated annual report

26 Chief Executive Offi cer s review Revenue of R million for 2016 is 8.2% up on prior year Howden Africa is part of the Howden Global engineering group, and has had a presence in South Africa for over 60 years. The Company has been listed on the JSE since Chief Executive Offi cer William Thomson 24 Howden Integrated annual report 2016

27 Achievements Recertifi cation of the International Environmental Standard ISO 14001, Occupational Health and Safety Standard OHSAS and Quality Standard ISO 9001 Certifi ed as a Level 4 contributor under the amended B-BBEE Codes of Good Practice (2013) Certifi ed as a Top Employer in South Africa ESAB welding and consumable distribution business incorporated into the portfolio This has been a challenging year for Howden Africa with demand from domestic customers refl ecting the low demand for minerals and the generally diffi cult economic conditions. The decisions on major environmental projects have been delayed due to constraints on customer expenditure and no immediate demand for environmental upgrades on existing plant. However, the order intake in our Fans and Heat Exchangers division has mitigated the drop in business within the Environmental Control division. The Group has focused on; continuing to drive our strategic objectives ensuring our resources are directed to profi table areas of business while maintaining presence on longer-term opportunities Expansion into the rest of Africa continued in 2016 with order intake in excess of R100 million and revenue increasing to R82.7 million from R69.4 million in I am also pleased to report that the Fabrication Technology (ESAB) business has been fully established and positioned to grow in the coming years. This presents a new revenue stream and growth opportunities for a business with relatively low market share in this region. Focus Drive the rest of Africa strategy Continue to improve and enhance our customer service across the business Drive continuous improvement opportunities using the CBS (Colfax Business System) tools Improve the skills of our project management on large capital projects Respond positively to the outputs of our recent employee engagement survey with retention of key skills a major objective Financial overview Revenue of R million for 2016 is 8.2% up on the equivalent period in 2015 of R million. Operating profi t of R247.6 million is a 5.5% decline from the R262.0 million reported in Order intake during 2016 increased to R million, an increase of 10.9% compared to the corresponding period (2015: R million). The closing order book for 2016 has remained strong at R770.4 million (2015: R800.0 million). Please see the Chief Financial Offi cer s review on pages 28 to 31 for more details. Operational performance and outlook Fans and Heat Exchangers division The division has three business units (Howden Power, Howden Fan Equipment and Howden Donkin) which together meet the demands of a large number of customers and a broad spectrum of industries in South Africa and, increasingly, the rest of Africa. Howden Power Howden Power specialises in the design, manufacture, supply, installation and maintenance of boiler fans and rotary regenerative air pre-heaters (air heaters) for the power generation, petrochemical, sugar and paper industries Howden Power provides a quality, proactive and competitive service to its customers while continuously enhancing its internal processes to drive effi ciency improvements The Company strategy focuses on expanding the service and maintenance scope of supply with key customers in the power generation and petrochemical markets in Africa Howden Fan Equipment Howden Fan Equipment (which incorporates the Safanco and Engart brands) designs, manufactures and maintains fans for mining and industrial clients. The company provides all products, systems and support needed for effi cient fan operation Howden Fan Equipment is leading the drive into the rest of Africa, while maintaining a leading market share in mine ventilation within South Africa Howden Donkin Howden Donkin specialises in the design, manufacture and supply of standard and pre-engineered fans, blowers and accessories to a large number of industries and applications The company strategy includes alignment with Howden Fan Equipment on aftermarket and rest of Africa initiatives Environmental Control division The Environmental Control division, Howden Projects, covers a wide range of products and services required on gas cleaning and water treatment applications. Howden Projects develops large-value turnkey solutions for industrial fl ue gas conditioning (including fl ue gas Fabrication Technology (ESAB) fully integrated into the business desulphurisation), melt-shop dedusting, medical and industrial waste incineration, industrial furnaces, underground mine cooling, industrial cooling and refrigeration plants, waste water treatment and electrical and electronic control systems. Howden Projects support customers within the heavy manufacturing industries to meet their emissions obligations by offering cost effective solutions. We are confi dent that the large-scale environmental control legislation and general environmental pressure to meet 2020 emissions limits will enhance opportunities for Howden Projects, but short-term market conditions remain challenging The business continues to proactively expand its product offering and is working on opportunities throughout Africa, leveraging its signifi cant experience and customer references The business s strategy continues to maintain a core set of application engineering skills and a fl exible operating model that can expand and retract quickly depending on market conditions Equipment key investments No major investments were made during the review period. The Group remains liquid and able to capitalise on strategic opportunities. Principal risks The main risks facing the business are set out on page 32. To manage these and other risks, Howden Africa operates a Group risk framework. Within the framework, risks are assessed and rated for likelihood and consequence, and mitigated or managed appropriately. Risks rated as high or major are reviewed at quarterly meetings of the Exco Risk Committee, and then presented to the Audit and Risk Committee, and to the board, as necessary. Howden Integrated annual report

28 Chief Executive Offi cer s review continued Questions and answers Q Has your manufacturing and service footprint changed? There has been no change to our manufacturing or service footprint during We continue to operate two manufacturing facilities and several service facilities in South Africa. Our focus is to use the existing facilities to ensure we can meet our customers changing demands around the clock. We continue to generate employment opportunities through the success we have had in upskilling resources within our training centre and training programmes. In terms of future footprint requirements, we believe we have suffi cient facilities to cover substantial future business growth and expect no signifi cant changes in the near future. The new Fabrication Technology business stream utilises existing Howden facilities and is a distribution business with no demand for local manufacture. Q Describe the Fabrication Technology business and its strategic significance to the business. Our Fabrication Technology business is reference to our leading role in the ESAB business in this region. ESAB is a world leader in the production of welding and cutting equipment and consumables. The Howden and ESAB businesses have been together under common ownership since the mid 1990s. However the businesses operate as two distinct entities across the world. In South Africa, ESAB initially set up a relatively small business, trading directly into Africa, before it transitioned to a third-party distributor arrangement in an attempt to address the demands of B-BBEE. However, recognising the strong market presence of Howden, the signifi cance of B-BBEE rating and a potential synergy of customers and suppliers, it was decided to integrate the ESAB distribution business into Howden Africa and benefi t from shared resources and synergies. Howden procures machines and consumables from ESAB and operates as the distribution outlet for the ESAB products. The ESAB brand has a relatively small market share within Africa, giving good scope for growth. Q What key attributes do you believe have contributed to maintaining the performance of high operating profits despite the persistent flat market conditions? We invest in our people to enable broadening of skills and application knowledge thus enabling resources to be directed to new opportunities in the market. Over the past years it has been important to retain fl exibility and to adapt our products and services to changing customer requirements. We listen to our customers and use our engineering expertise to tailor-make solutions that fi t their requirements. We have been active in South Africa for many years. Our products are often supplied in critical applications on large mines, mineral process plants and power stations, where failure is not an option. Hence we are often a repeat supplier of equipment to customers who recognise our products, reputation and reliability. The breadth and depth of highly skilled and motivated employees, good operation systems, superb technology and a deep understanding of customer plant operations support our strong brand name in the markets we choose to operate in. In addition, our quality control standards are very high we have been ISO 9001 accredited since the system was introduced. We are also SABS (South African Bureau of Standards), ISO and OHSAS accredited, and we continue to train our associates and customers. Q Why has there been a drop in performance within the Environmental Control division? A combination of factors. Recognising the longer-term opportunities, the business redirected resources to other parts of the business but has retained a skilled core team within the division. There was a signifi cant drop in order intake during 2016 and in parallel a few of the larger value projects which were supplied in prior years were commissioned on site. Against the background of tougher general economic conditions, the customer relationships during close out of major projects has been equally tough with less leverage to negotiate additional scope of work. Nevertheless we remain confi dent on the longer-term future of the division. In the short term we are absorbing the lessons learned on recent projects and using the lessons to upskill our people for future challenges. Q How important is innovation to your company? Each project Howden Africa undertakes is unique to the customer for which it is being developed. This leads to an extremely customeroriented approach. We continuously face new challenges, such as how to eradicate more dust with our dedusting systems, or how we can supply faster and more competitively, or make our equipment more effi cient or more reliable. The pace of innovation is increasing signifi cantly year by year. Continuous improvement and adapting is our focus and one of our fi ve core values, which all our employees live by. 26 Howden Integrated annual report 2016

29 Q What are the current trends and challenges affecting the Company, and how are you responding to them? We continue to invest extensively in the next generation of our employees, ensuring we have the right skills in place for further progress, while meeting our responsibilities as a BEE (black economic empowerment) company. We also recognise the importance of proactively managing corporate social investment. Acquisitions/disposals There were no acquisitions or disposals during the review period, but the Group remains ready to consider appropriate acquisitions that complement or broaden the scope of the existing Howden Africa business. Management sets out acquisition criteria and reviews the pipeline on a regular basis. Appreciation A note of thanks to Thomas Bärwald, our former CEO, in acknowledgement of his support in helping my smooth transition into this role. On behalf of the Company, I also would like to thank all our loyal customers for their continued support this past year, and to all our suppliers and service providers: Thank you for being an important part of another successful year for Howden Africa. I also thank my colleagues in management and staff for your support and commitment during a challenging year, and for maintaining a solid set of results despite the trading challenges we were faced with. Finally, I thank all members of the board for their valuable support during the year. This extends to the members and chairs of the various board committees, who provide wisdom, good governance and oversight. William Thomson Chief Executive Officer 24 March 2017 Howden Integrated annual report

30 Chief Financial Offi cer s review Increase in revenue by 8.2% to R million t Cash and cash equivalents increased 24.5% Chief Financial Offi cer Marinella Vigouroux to R909.3 million Aftermarket orders received increased by 14.6% to R million 28 Howden Integrated annual report 2016

31 Introduction The review of the Group s fi nancial performance for the year ended 31 December 2016 is focused on the order book and key line items of the statements of comprehensive income and fi nancial position that management considers to have a material impact on performance. The following review should be read in conjunction with these statements as contained on pages 86 to 135 Order book analysis 2016 Rm 2015 Rm % change Orders received New build Aftermarket Order book (3.7) New build (13.5) Aftermarket Orders Orders received during 2016 have increased to R million an increase of 10.9% compared to the corresponding period in 2015 (2015: R million). The closing order book for 2016 remains strong at R770.4 million (2015: R800 million). The aftermarket order book has increased by 4.8% resulting from additional export and retrofi t orders received in the 2016 period. New build order book has reduced 13.5% as customers are deferring any non-essential and expansionary capital expenditure. Environmental Control division order intake was R239.9 million compared to R311.2 million in The business received some larger orders in the latter part of The division continues to have a large opportunity list, but due to the economic conditions within sub-saharan Africa, the award of orders from customers has been slow. Fans and Heat Exchangers division orders received during 2016 have increased by 11.9% to R million compared to the corresponding period (2015: R million). The increase has been driven by aftermarket and retrofi t activity, with new build activity being subdued as customers continue to defer non-essential expenditure. Statement of comprehensive income 2016 Rm 2015 Rm % change Revenue Operating profi t (EBIT) (5.5) Operating profi t margin 15.4% 17.7% (2.3) Net fi nance income Tax (2.5) Profi t for the year Revenue Revenue of R for 2016 is ahead of the equivalent period in 2015 of R million. The Fans and Heat Exchangers division recorded revenue growth of 19.8% to R million (2015: R million). This revenue growth has been driven by an improvement in both aftermarket and retrofi t revenue. The Environmental Control division saw a decline in revenue of 51.2% due to economic conditions delaying customers decisions on environmental control projects. The new Fabrication Technology division is a contributing factor to the growth in revenue with revenue for the period of R87 million. Operating profit Operating profi t of R247.6 million is a 5.5% decline from the R262.0 million reported in The Environmental Control division moved from an operating profi t of R51.4 million in the previous year to an operating loss of R12.7 million, this decline resulted from challenging market conditions adding pressure to project margins and a once-off project warranty of R26.4 million. The Fans and Heat Exchangers division s operating profi t improved by 32.9% to R283.9 million (2015: R213.6 million) driven by increased revenue volumes and product mix. Central operations had an increase in costs to R24.8 million largely due to the recognition of a gain on curtailment of R19.8 million in the prior year for the defi ned benefi t scheme. The new Fabrication Technology division order intake for 2016 is R94.4 million with R87 million of this converted into revenue in the period. Howden Integrated annual report

32 Chief Financial Offi cer s review continued Net finance income The net fi nance income of R55.5 million (2015: R40.5 million) was due to higher cash balances being held by the Group during 2016 when compared to the prior year. Income tax Income tax was provided for at the standard rate of 28%. The full tax reconciliation is shown in the taxation note of the annual report. Statement of financial position 2016 Rm 2015 Rm % change Non-current assets (5.4) Current assets Total assets Equity Non-current liabilities (6.2) Current liabilities Total equity and liabilities Assets Assets employed in the Group increased 17.5% from R million to R million. The major changes during 2016 have been a further increase in the business cash and cash equivalents balance, which has increased to R909.3 million and an inventory increase to R332.1 million, relating to work-in-progress on a few large projects and the inventory required for the new Fabrication Technology division. Liabilities Liabilities increased to R606.1 million from R545.1 million in the prior year. The major change during 2016 has been an increase in trade and other payables to ESAB Middle East Limited relating to the new Fabrication Technology division. Cash and capital management Statement of cash flows 2016 Rm 2015 Rm Cash fl ow from operating activities Cash generated from operations Interest paid Income tax paid (72.0) (81.5) Net cash generated from operating activities Net cash generated from investing activities Net cash used in fi nancing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Howden s continuing focus on sustainable working capital management has resulted in a satisfactory cash fl ow performance in Cash generated from operations for the year was R216.2 million and cash and cash equivalents are R909.3 million (2015: R730.2 million). Capital expenditure was R10.7 million (2015: R7.2 million). During 2016 the business has focused its capital expenditure on the maintenance of existing facility and equipment and key capital expenditure for the establishment of the new Fabrication Technology division. There were no major capital expenditure items required during the year. 30 Howden Integrated annual report 2016

33 Dividend The directors have resolved not to declare a dividend. Conclusion The performance for 2016 has been challenging for the Howden Africa business especially in the Environmental Control division which experienced a squeeze on project margins and signifi cant warranty issues on plant installed. The Fans and Heat Exchangers division has seen growth in aftermarket activity, export sales and retrofi t opportunities. The established of the new Fabrication Technology division as the distributor for ESAB welding and consumable products in South Africa presents an additional revenue stream for the business in 2016, with expectations to grow on the current market share in the future. The Company remains focused on its strategies of expanding export sales, investing in our people, identifying opportunities to grow our aftermarket and reacting quickly to any deterioration within the various markets in which we operate. The Howden Africa business model as in prior years continues to derive sustainable profi ts and margins from providing well-developed and trusted engineering solutions to a customer base that demands integrity and innovation. The Company fi nishes the year debt free with signifi cant cash reserves and is well placed to take advantage of any opportunities that present themselves in the future. The fi nance team across the Group has maintained a high standard of reporting to our stakeholders, and I thank them for their dedication, commitment and support during my fi rst few months in the role. In particular I would like to extend my appreciation to the former CFO Kevin Johnson, for his mentorship and support over the past four years and wish him all the best in his new role within Colfax Corporation. Marinella Vigouroux Chief Financial Officer 24 March 2017 Howden Integrated annual report

34 Material issues The Company, through its board, has formed a sustainability committee, chaired by the Chief Executive Officer. This is a subcommittee of the Executive Committee and oversees the determination of material issues, stakeholder engagement and Global Reporting Initiative (GRI) adherence. For further information on the committee s structure and responsibilities, please refer to the corporate governance report on page 54. Identifying Howden s material issues 01 While guided by the GRI G4 guidelines, the committee engaged stakeholders in writing to give them the opportunity to express their concerns relating to economic, environmental and social factors. 02 Employees and members met with committee members for face-to-face discussions while suppliers, customers, Howden Global and other investors chose to respond either in writing or through telephonic interviews. 03 The committee then reviewed and ranked each issue in line with its level of importance and frequency from each stakeholder group. The identified 2016 material issues We defi ne the Group s material issues as those that are strategic to the business, of substantial risk and signifi cant to stakeholders. The following material issues were identifi ed in 2016: Quality management and environment Page 45 deals with quality management and environmental aspects, these reports discuss how Howden improves the quality of its product and services to be more environmentally friendly Human capital The employee review on page 33 discusses the issues of staff training and development, retention and equal opportunity Material issues 04 The committee then tested each issue for completeness and context against the backdrop of Howden corporate policies, standards and strategic objectives, and reviewed these in the face of Howden s key risks and challenges. Operational expansion and revenue A discussion of our commitment to improving economic performance, expanding operations beyond South Africa, supporting local suppliers, and understanding risks to which our business is exposed can be found in various areas within the integrated annual report Health and safety Focused health and safety reviews on page 42, detail our commitment to the health, well-being and safety of all employees Governance For a discussion on Howden s compliance with legislation and regulations, refer to the corporate governance and risk management reports on pages 52 to 60 and 68 and 69 respectively 32 Howden Integrated annual report 2016

35 Human capital Howden Africa has been recertifi ed as a top employer of South Africa. The Top Employers Institute is an independent organisation analysing the employee offerings of signifi cant employers around the world and measuring them against the international standard. As such, only the world s leading employers are awarded the top employer accolade. Crucial to the top employer procedure is that participating companies must complete a stringent research process the Top Employers Institute s international HR Best Practices Survey and meet the required high standard in order to achieve the certifi cation. To further reinforce the validity of the process, all answers were independently audited, meaning this research has verifi ed our outstanding employee conditions and earned us a coveted spot among a select group of top employers. The Top Employers Institute assessed our employee offerings on the following criteria: Talent strategy Workforce planning On-boarding Learning and development Performance management Leadership development Career and succession management Compensation and benefi ts Culture Our approach Howden is committed to: Demonstrating honesty, integrity and fairness at all times Honouring commitments Continuously growing and developing employees Caring for the physical and emotional well-being of employees Valuing, embracing and celebrating diversity Leading by example Celebrating successes Encouraging, developing and empowering employees to take responsibility for their goals and activities Providing development and training opportunities for all to further their careers Hiring the best talent available in the market The challenges we faced in 2016 Recruiting of suitable candidates due to scarce skills in South Africa Succession planning of senior management Talent retention Our employees Total number of employees as at 31 December Percentage of permanent employees by gender Male Female 76% 24% Total number of employees by employment contract and gender Total Male Female Permanent salaried employees Permanent wage employees Fixed term/part-time employees Wage contractors Howden Integrated annual report

36 Material issues continued Percentage of permanent employees by activity 12% Percentage of permanent employees by length of service 10% 6% 46% 26% 16% Admin Services Factory Operations 7% 20% 57% 0 5 years 6 10 years years years 20 years+ Percentage of permanent employees by region 1% 10% Howden Africa carries out a signifi cant amount of customer site maintenance work. Customer site requirements fl uctuate and is to a large degree considered seasonal work. As a result of seasonal work requirements technical skilled workers were sourced from labour brokers in % 63% Cape Town Port Elizabeth Middelburg Johannesburg Percentage of individuals within the organisation s governance bodies in each of the following diversity categories Gender Age Ethnicity Female Male HAHL board Exco Under 30 years old HAHL board Exco years old Over 50 years old 0 HAHL board Exco African White Indian Coloured Other 34 Howden Integrated annual report 2016

37 Percentage of employees per employee category in each of the following diversity categories Gender Ethnicity 20% 14% 2% Number of females Number of males 5% 42% African White Indian Coloured Other 80% 37% Age Disability 1% 23% 20% Under 30 years old years old Over 50 years old Persons with disabilities Persons without disabilities 57% 99% Hiring policy and talent management strategy The Company does not unfairly discriminate on any arbitrary ground against individuals or groups of people and supports the principle of developing and promoting employees from within where vacancies arise. If no suitably qualifi ed candidates are available, vacancies are advertised externally. Our talent management objectives: Identify and develop high-potential/performing employees Ensure identifi ed talent is retained Develop and enrich human capital, continually considering both the employee s and the organisation s needs Create a common language about our people s capability and potential to ensure consistent and focused skills building and career progression in Howden Africa Total number and rate of employee turnover during the reporting period Resignations Deceased Disciplinary action Retirement (other positions) Redundancy Turnover ratio % 21% Note calculation method = number of departures divided by number of employees as at 31 December multiplied by 100. Note: Contractors are excluded from turnover calculation. Howden Integrated annual report

38 Material issues continued Turnover by age New hires in age category 12% 17% 18% 0% 25% 25% years old years old years old years old years old years old years old years old 46% 57% Turnover by gender New hires by gender 28% 32% 72% Number of females Number of males Number of females Number of males 68% Turnover by region 2016 Percentage of new hires by region 0% 18% 6% 12% 58% 24% Cape Town Porth Elizabeth Middleburg Johannesburg 53% Cape Town Port Elizabeth Middelburg Johannesburg 29% Total new employee hires 72 new hires 15% A high-performance culture is encouraged and all salaried associates are on the Company s performance management system. Regular feedback is provided to staff throughout the year and those meeting or exceeding objectives are recognised through incentives or bonuses. All salaried associates have job descriptions in line with the total rewards programme. Howden remains committed to the upliftment and recruitment of historically disadvantaged South Africans (HDSAs), in line with its broader transformation objective. While there has been substantial progress in making appointments from the HDSA community at managerial level, this remains a challenge, especially given the scarcity of skills and diffi culty of attracting women to this industry. Senior management representation is also a challenge, and this is being addressed through the talent management strategy. Employee benefits and remuneration Howden offers market-related benefi ts. These include leave, annual performance bonuses, medical aid, maternity and paternity leave, bursaries for children of employees, disability cover, life assurance, and other benefi ts required in terms of legislative or collective bargaining agreements. In addition, provision is made for employees post-retirement benefi ts through pension and provident funds. Provident funds are funded on an accumulation basis through employer and employee contributions, which were fi xed when the funds were constituted in South Africa. The Group s remuneration philosophy is based on ability and competence, and is market-related regardless of race or gender. For more information, please refer to the remuneration report on pages 61 to 63. Only permanent employees are offered car allowances/cars, medical aid and pension fund. The Company seeks to reward employees for their personal contribution and hence incentive bonuses are given to deserving employees. 36 Howden Integrated annual report 2016

39 A talent management strategy has been developed to manage high performers, talent pools, and poor performers. Ratio of the basic salary and remuneration of women to men for each employee category Top management 0:1 Senior management 0.52:1 Professionally qualifi ed 0.92:1 Skilled technical 0.72:1 Semi skilled 0.84:1 Unskilled 0.77:1 Collective bargaining and industrial relations Howden has established an industrial relations forum which comprises management and shop stewards and which meets regularly to discuss matters of concern. The Group Human Resources Director is responsible for monitoring and managing employee relations. Howden pays fair wages and treats its employees with respect. For decades, Howden has benefi ted from industrial relations policies aimed at making the workplace a safe and enjoyable experience. Openness in addressing issues is encouraged and the Group s grievance and disciplinary procedures are used when needed. All employees have the right to freedom of association and are accordingly entitled to belong to a union. Percentage unionised based on total number of employees % 19% 22% Number of employee members per recognised union NUMSA UASA Solidarity 9 7 A three-year metal and engineering sector wage agreement was signed in 2014 and therefore no industrial action took place in Wage negotiations will commence in 2017, as the current agreement expires at the end of June Number of lost days due to strike action * * Calculated by multiplying the number of employees on strike by the number of strike days (20). Percentage of employees entitled to belong to bargaining unit of union Total entitled Total exercising right 27% 23% 21% Howden Integrated annual report

40 Material issues continued Other labour related matters The following notice periods are ordinarily provided to employees (excluding EXCO), in line with applicable collective agreements and labour legislation: Resignation/Retirement: 30 days Retrenchments: 60 days Total number of employees who were entitled to parental leave, by gender Total number of employees who took parental leave, by gender Total number of employees who returned to work after parental leave ended Total number of employees who returned to work after parental leave ended who were still employed 12 months after their return to work Return rate of employees who took parental leave Retention rate of employees who took parental leave Total entitled to parental leave Number of females Number of males Total number who took parental leave Number of females Number of males Total returning to work Number of females Number of males Total still employed 12 months after return to work Number of females Number of males Return rate for females Return rate for males Retention rate of females Retention rate of males % 100% 100% 100% LA16 number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms Total number of grievances about labour practices fi led through formal grievance mechanisms Of the identifi ed grievances, report how many were: Addressed during the reporting period Resolved during the reporting period Total number of grievances about labour practices fi led prior to the reporting period that were resolved during the reporting period HR3 Total number of incidents of discrimination and actions taken Total number of incidents of discrimination during the reporting period Report the status of the incidents and the actions taken with reference to the following: Incident reviewed by the organisation Remediation plans being implemented Remediation plans have been implemented and results reviewed through routine internal management review processes Incident no longer subject to action Incident reviewed by the organisation 38 Howden Integrated annual report 2016

41 Report absentee rate (AR) for the total workforce (that is, total employees plus supervised workers by gender) Ratio 2% Total number of employees trained Details of how AR is calculated Number of absent days Employees 538 Total number of workdays available 253 Average training hours per employee per year 2016 target 2016 actual 2015 target 2015 actual Development and training At the core of Howden s people management strategies is human resource development. A concerted effort has been made over a number of years to establish learning and development as part of a long-term strategy. Howden aims to develop and train employees to achieve strategic business objectives while promoting a culture of learning for career progression. Percentage of total employees by gender who received a regular performance and career development review during the reporting period Male Female 51% 51% We will continue to target 82 hours per employee in Howden in house training programmes Apprentices Our primary initiative is the apprenticeship programme, which addresses sectoral skills in conjunction with Merseta (the industry body for training and education). Apprentice count and turnover The number of apprentices at 31 December The number of apprentices at 31 December Percentage of total employees by employee category who received a regular performance and career development review during the reporting period Permanent salaried employees 70% Permanent wage employees 0% Fixed term/part-time employees 0% Howden Integrated annual report

42 Material issues continued The number of apprentices at 31 December 2016 Business unit 2016 Fitters and turners Boiler makers Welders Grand 2016 HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total total Number of apprentices Number of apprentices Howden Africa apprentices to section 13 statistics 2004 to 2016 Engagement date Boiler makers Trade fi tters and turners Welders Number of apprentices Certifi ed Rescinded contracts Mature workers to artisan training Many mature workers do not have trade qualifi cations. Howden therefore sponsors a 24 to 28-week full-time theoretical training course for mature non-howden subcontract workers with substantial practical boiler making and welding experience. Successful participants receive a section 28 artisan certifi cation. Mature workers to artisan training Total number to date 111 Total committed in Total committed in Total committed in Disabled learner development programme 2015 target intake actual intake target intake actual intake target intake 9 40 Howden Integrated annual report 2016

43 Howden Africa disabled learner statistics: 2014 to 2016 Engagement date Learnership/qualifi cation National Qualifi cation Framework (NQF) level Number of students Resignations/ dismissals Still in training Total intake per year 2014 Business administration NQF Business administration NQF Offi ce administration NQF Bookkeeping NQF Business administration NQF Business administration NQF Project management NQF Business administration NQF Business administration NQF Project management NQF Accounting technician NQF Business ethics training A major part of reputation management is ensuring all management and employees in areas involving sales, procurement and suppliers, and customer service are adequately trained and educated in the principles of anti-bribery and corruption as well as competition law. In 2016 the Group rolled out code of conduct and anti-bribery and corruption training modules and continued to provide SOX 404 training to new employees. Code of conduct 228 SOX Anti-bribery and corruption 285 Bursaries to third parties and employees Howden believes education is key to ensuring a better future for all South Africans Rand value to tertiary students R R R Number of students sponsored Rand value of other bursaries R R R Howden Integrated annual report

44 Material issues continued Health, safety, quality and environment review Health To optimise the health of our people, we have a focused programme in place, with targets and progress set out below. Strategy 2015 result 2016 target 2016 result 2017 target To maintain hearingloss prevention programme No cases recorded/ reported in 2015 No occupational diseases during 2016 No cases recorded/ reported in 2016 No occupational diseases during 2017 Promote HIV awareness and encourage people to know their status Annual testing completed in October and the World Aids Day held in December 2015 Conduct annual wellness day and test Annual testing completed in October and the World Aids Day held in December 2016 Conduct annual wellness day and test Medical fitness tests 374 associates underwent medical fi tness tests by end of December 2015 All new associates 360 associates underwent medical fi tness tests by end of December 2016 All new associates Prevent the spread of the common cold and influenza 138 associates vaccinated by end of June 2015 Vaccinate all associates for the autumn period 114 associates vaccinated by end of June 2016 Vaccinate all associates for the autumn period Howden provides quality healthcare to all associates through Company-managed facilities, third-party service providers and medical aid contributions. Howden s two medical centres, in Johannesburg and Port Elizabeth, provide an effective range of medical support services during working hours, including occupational and primary healthcare to onsite employees. The Company facilitates 24-hour access to casualty departments at nominated hospitals. Noise Howden endeavours at all times to limit and lower noise to tolerable levels by installing appropriate equipment and providing advanced hearing-protection devices. Product design, welding methods and welding preparation processes have been adapted to reduce grinding noise. This is an ongoing programme initiated some years ago. The use of paper grinding discs and discontinuation of gouging rods and cutting torches have reduced grinding noise by 21%. Special hearing-protection equipment issued to employees for the past four years aims to eliminate hearing-loss cases. To date, 157 devices have been distributed. In addition to this, moulded ear plugs have been issued to all associates. An order was placed during 2016 for the delivery of 51 new ear protection moulds and the calibration of the existing custom-made hearing protection for There were no hearing-loss cases identifi ed in 2015 and Our target is to maintain a zero hearing loss level for General wellness and HIV/Aids Some years ago, we initiated a wellness programme that includes an annual wellness day. Held at our Port Elizabeth and Johannesburg facilities respectively, this event encourages employees to voluntarily be tested for conditions such as cholesterol, diabetes, blood pressure and BMI (body mass index). General wellness and HIV/Aids Year Number of screenings Port Elizabeth and Booysens Tests conducted Cholesterol Body mass index Blood glucose Blood pressure HIV Howden Integrated annual report 2016

45 Port Elizabeth Booysens HIV/Aids Number of staff screened Number of staff electing voluntary counselling and testing Percentage of staff electing to know their status (%) Port Elizabeth Booysens Number of conditions Unstable BMI Cholesterol Hypertension Heart disease HIV high risk Total Number of alerts Number of employees participating in annual medical fitness test to monitor general health Number of employees who received flu vaccinations The wellness programme is further supported by a patient management programme operated by a specialist third party. This covers HIV/Aids awareness and education and is focused on helping Howden employees access antiretroviral treatment through government facilities. While HIV is not classifi ed as an occupational illness, notwithstanding, it is a priority for us given the impact it has on the Company, our employees and their communities. Howden Africa recognises that the HIV/Aids pandemic will affect every workplace, with prolonged staff illness, absenteeism, and death impacting productivity, employee benefi ts, occupational health and safety, production costs and workplace morale. An HIV/Aids policy is in place in order to: Try and eliminate unfair discrimination in the workplace based on HIV status Promote a non-discriminatory workplace in which people living with HIV/Aids are able to be open about their HIV status without fear of stigma or rejection Promote appropriate and effective ways of managing HIV/Aids in the workplace Protection of human rights and dignity of people living with HIV/Aids The said policy deals with: (a) The promotion of a non-discriminatory work environment (b) The promotion of a safe workplace (c) Grievance procedures (d) HIV testing, confi dentiality and disclosure Howden Africa will not require any employee, or applicant for employment, to undertake an HIV test in order to ascertain that employee s HIV status. An employee is not legally required to disclose his or her HIV status to Howden Africa or to any other employees. Where an employee chooses to voluntarily disclose his or her HIV status to Howden Africa or to other employees, this information may not be disclosed to others without the employee s express consent (preferably in writing). We participate in the annual World Aids Awareness Day in December to maintain awareness levels. While more intensive focus will be placed on tackling chronic illnesses, a concerted effort will also be made to assist employees who are well to maintain their good health. This will include advice, counselling and ongoing educational and marketing material such as newsletters, posters and s. Employees are encouraged to have an annual medical fi tness test to monitor general health. The Ask Nelson employee assistance wellness programme, run by an external service provider and introduced in 2009, is aimed at helping employees and their immediate family members better deal with emotional distress. It offers employees counselling, advice and guidance on social and fi nancial issues. Safety Responsibility for safety performance vests with general management. Managers in each Howden business unit are primarily responsible for: Complying with local regulatory requirements Following Howden policies and procedures Assessing and managing operational risks Implementing management systems and driving continuous improvement Howden Integrated annual report

46 Material issues continued Safety department targets and results 2015 results 2016 targets 2016 results 2017 targets Five (5) LTIs recorded/reported Zero LTIs One (1) fatality recorded Six (6) LTIs reported in 2016 Zero fatalities and lost-time injuries Achieved the integrated OHSAS 18001:2007 and ISO 14001:2004 Management System and Howden Middelburg site is also under the umbrella certifi cate Maintain our umbrella certifi cate integrated OHSAS 18001:2007 and ISO 14001:2004 Achieved the integrated OHSAS 18001:2007 and ISO 14001:2004 Management System and Howden Middelburg site is also under the umbrella certifi cate Maintain our umbrella certifi cate integrated OHSAS 18001:2007 and ISO 14001:2004 Lost-time accident-free hours fl uctuated across the months and by end of December 2015 we accumulated lost-time-free hours for Howden Africa (Pty) Limited Howden Africa to achieve three million lost-time accident-free hours Lost-time accident-free hours varied throughout the year and by year-end lost-time-free hours were recorded for Howden Africa (Pty) Limited Howden Africa to achieve one million lost time accident free hours Progress We continue to improve our performance by: The involvement of employees Implementation and monitoring of an EHS plan to establish objectives and targets, and developing programmes The provision of and enforcement of the use of personal protective equipment (PPE) Simplifi cation of our risk methodology Working towards having an integrated EHS Management System for all Howden sites Carrying out safety awareness training Sponsoring monthly housekeeping competitions in order to promote safety awareness and compliance In the last fi ve years, we have signifi cantly improved and maintained the level of Howden s health and safety performance. A focused internal team upgraded health, safety and related systems to comply with the National Occupational Health and Safety Association (NOSA) and OHSAS standards. Howden maintained its integrated OHSAS 18001:2007 and ISO 14001:2004 Management System. Commitment to incident prevention and continual improvement was adequate and the Company was recommended for continuing registration. Howden s cardinal safety rules The use of lifting equipment by untrained people, or substandard lifting, is strictly prohibited No person is allowed onsite if under the infl uence of alcohol or drugs No person is permitted to operate any machinery, equipment or tools without the specifi ed safety guards in place Working at heights without the appropriate training or correct equipment is not allowed under any circumstances Fatality An incident occurred at a Power Plant on 11 October 2016, when a contractor, employed by the Company through a labour broker, stepped onto a loose drain cover and fell down into a pit fi lled with hot water. He sustained severe burns to the lower part of his body. He was immediately transported to hospital and remained there for treatment but sadly passed away on 17 December The Company is supporting the accident investigation and in parallel have reinforced our own site risk assessments and inspections of working areas including inspection of routes to and from workplaces. We have raised our associates awareness of risks when working in areas where steam, water or ash may be present. 44 Howden Integrated annual report 2016

47 Lost-time accident-free hours LTI 2011 DIFR 2012 LTI 2012 DIFR 2013 LTI 2013 DIFR 2014 LTI 2014 DIFR 2015 LTI 2015 DIFR Total losttime-free hours since last in Dec LTI 2016 DIFR Booysens offi ces and factories Power site work Fan and project site work Donkin offi ce and factory Total Africa Unfortunately lost-time incidents increased to six (2015: fi ve). All incidents were methodically examined for root cause and effect, and scientifi cally addressed to prevent recurrence. We are confi dent that corrective actions put in place will have a positive effect in Safety on customer sites In addition to Howden s safety practices at its Booysens and Port Elizabeth manufacturing sites, we continue to strive towards and prioritise a safer work environment on customers sites. We work hand-in-hand with customers and contractors to continuously improve procedures in performing standard maintenance and breakdown work on power stations and mines. Health and safety initiatives The Company has implemented several local and global health and safety initiatives across the business as follows: (a) Digilex system and legal register (b) Third-party risk audits for Howden Africa Middelburg Services (c) Environmental awareness to all senior management and all associates through the induction on boarding process (d) Global EHS tools, including: JSA (JOB safety assessment) EEHSOF (Executive Environmental Health and Safety Observation form) FIFI (Find it and fi x it) Safety Cross Quality management Howden s approach Since the launch of ISO 9001 in 1987, all Howden business units have retained this certifi cation. We have adopted the principle of total quality management, which includes domains such as sales and marketing, concept and detail design, planning, purchasing, production, customer service, safety, people and asset management. Customer service excellence was formally incorporated into our operating systems more than a decade ago. This is entrenched in the Group s disciplinary code and promotes business success. By listening to our customers, we are able to tailor our products to their needs while continuously enhancing the quality and standards of all outputs. Each Howden business unit has its own internal measures of customer satisfaction, ranging from quantifying numbers of customer complaints to formal face-to-face discussions and online surveys. Quality compliance is measured continuously in business units by internal non-conformance reporting and customer feedback. By sharing information and benchmarking successes in the Group, we are able to execute both breakthrough and continuous improvement programmes across all business units. In living by our core values of high standards and customer service excellence, we strive to improve on levels of performance, making Howden a better place, fostering a culture of mutual respect among staff, customers and all stakeholders. What we have learned from our ongoing management of quality is that to maintain a sustainable business, we have to constantly improve the status quo. There are several annual awards to be won for exceptional quality performance for individuals, teams and suppliers. Quality management is one of our fundamental practices and will remain a top priority to combat substitution with cheaper, inferior imports. Progress The challenges we face as a business are universal and, despite these, the Company has maintained high levels of compliance to customer requirements. The Group has implemented ISO 3834 (quality standards for fusion welding of metallic materials) and the Howden Power business unit successfully completed the ISO 3834 audit process in The James Howden business unit operates in accordance with the SABS Quality Management System. Environmental review Approach The manufacturing processes of Howden Africa Holdings Limited are relatively clean compared to harsher industrial environments elsewhere and the intention is to keep improving wherever possible. Accordingly, we continuously identify negative aspects our products and operations may have on the environment and set reduction targets to those impacts. In selecting targets for environmental impacts, Howden has considered government guidelines and global Howden Integrated annual report

48 Material issues continued concerns on climate change. As a result, the Group has selected the reduction of direct and indirect energy use and improved recycling practices as the most relevant performance indicators for our business: Secondary environmental contributions: proactive efforts to reduce use of non-renewable resources Primary environmental contributions: deploying products and process systems that support our customers efforts to reduce carbon footprints and air pollution Formal environmental programmes The Booysens site, the Howden Power Services Middelburg offi ce and Port Elizabeth site were successfully assessed against the provisions of ISO in The Company has proactively identifi ed opportunities to contribute to the environmental programmes of customers and end-users by applying its diverse range of technology solutions, particularly in air pollution control. Manufacturing materials, products and packaging Howden manufactures products largely made of steel and derivatives. Steel is bought in as a raw material and processed to form endproducts for sale to customers. The lifecycle of most of our products exceeds 30 years, during which time they receive continuous care to maintain designed effi ciencies. At the end of its lifecycle, a product would typically be available for recycling. Although we do not practise cradle-to-grave follow through to ensure recycling, it is common practice in the engineering industry to sell scrap metal, both for storage logistics and cost recovery. Use of packaging materials is very limited, accordingly the extent of recycling and reuse of packaging is not signifi cant. Waste management Since 2009, we have used a specialist external service provider to assist in measuring and managing waste through a separation-atsource policy. Separate waste containers were placed in offi ces, workshops and yard areas, enabling employees to choose the method of disposal responsibly. This has substantially improved the level of awareness among staff and enabled us to quantify the amounts of waste generated per defi ned category. In 2011, the Group started measuring waste volumes on all sites and setting targets to reduce waste and increase recycling potential. Below are some examples of projects at the Booysens site. Waste management has been limited to the Booysens site only as this is the only Howden site which has a signifi cant impact on the environment. Twelve senior managers received environmental awareness training in Steel With steel being the dominant material of product construction, the Group has refi ned the classifi cation of scrap steel grades. This eases the task of scrap steel collectors. Steel use is affected by product design, manufacturing process and procurement policies. Repair work requires less raw steel than new builds. This complicates analysis of volume trends somewhat when interpreting the statistics of steel use. However, despite these circumstantial constraints, the Group initiated several improvement projects aimed at reducing steel use and maximising recycled portions. In 2015 a project team was put together in order to clear customer returned materials on the Booysens site and to ascertain whether such materials were useable. This has resulted in the decrease of the amount of heavy steel being recycled. The further decrease in light steel removed for recycling is as a result of the proper planning of and more effi cient material cutting. All scrap steel is sold to a responsible company for recycling. Weight of light scrap steel removed for recycling (tonnes) Weight of heavy steel removed for recycling (tonnes) Fibreglass The manufacturing process is optimal in terms of waste percentages, but the sheer volume of production causes substantial waste of this non-biodegradable material. Fibreglass removed from site (tonnes) The increase is related to an increase in operations. All fi breglass has been disposed of at the Holfontein landfi ll site. Safe disposal certifi cates are kept on record. Hazardous waste Medical and other hazardous waste is removed by specialised service providers for incineration according to national standards. Shot blast grit Cleaning painted surfaces to be repainted is done by spraying small metal grids at high speed onto the surface. Since it is then contaminated with paint residue, it is classifi ed as hazardous waste. Shot blast grit is taken to landfi ll sites despite intense efforts to fi nd innovative applications for used shot blast grit. This remains under investigation. Shot blast grit removed from site (tonnes) Howden Integrated annual report 2016

49 Medical waste Medical waste removed from site (kg) The decrease in medical waste is as a result of the reduction in the number of incidents treated at the onsite clinic. Further, better stock management of the medical stock has resulted in a reduction of the amount of medication kept onsite and disposed of as a result of expiring. Total of hazardous waste (tonnes) The increase of hazardous waste is as a result of the Company now combining fi breglass with other waste, including oil tins, paint tins and used aerosol cans, into one large waste skip. Non-hazardous waste Non-hazardous waste removed from site (tonnes) Total volume of recycled waste (tonnes) The increase in non-hazardous waste was attributable to better waste separation, control and recycling from a newly appointed service provider. Oil spills Our approach Kits are placed in every workshop and refi lled regularly after use No vehicles are allowed on site if they have an oil leak A rubber mat is placed at every parking bay, and rubber mats are also issued by security personnel to all vehicles coming onto site Drip trays for certain machines have been installed and are monitored and managed by departmental supervisors No major oil spills were recorded in There were, however, 37 minor oil spills reported in 2016 (2015: 57). Energy, water, gas and fuel management Following the successful reduction of electricity consumed in 2013 and 2014, Howden Africa has engaged the Council for Scientifi c and Industrial Research (CSIR) to undertake Resource Effi ciency and Cleaner Production (RECP) assessments on three of its manufacturing/process facilities with the aim of identifying possible solutions to further reduce their consumption of energy, water and waste management. The CSIR, on behalf of the Department of Trade and Industry (the DTI), is running the NCPC-SA programme (the National Cleaner Production Centre South Africa) which is a national programme of government that promotes the implementation of resource effi ciency and cleaner production methodologies to assist industry to lower costs through reduced energy, water and materials usage, and waste management. Energy management Howden s energy consumption is primarily in the form of electricity, mainly for the Group s manufacturing operations (Booysens and Port Elizabeth). Energy management initiatives commenced or completed in 2016: Energy saver light bulbs have been installed Drive to ensure the airconditioning systems and lights to be switched off after hours in offi ces These initiatives have contributes to further lowering the electricity consumption in Electricity consumption (measured in kilowatt hour) kwh KwH KwH Water consumption (Litres) A number of water leaks were identifi ed and repaired during the course of As a result water usage was substantially reduced. Gas and fuel consumption Total hours worked at Booysens Total portable cylinder gas consumed kg kg kg Total portable gas consumed per man hour 0.011kg 0.013kg 0 014kg Total bulk container gas consumed kg kg kg Total bulk container gas consumed per man hour 0.076kg 0.073kg 0.087kg Total bulk and portable gas consumed 0.087kg 0.086kg 0.101kg Total diesel/fuel consumed litres litres litres Total diesel/fuel consumed per man hours litres litres litres Variations to previous years will always be dependent on production requirements of that year impacting the consumption numbers. Howden Integrated annual report

50 Material issues continued Transport and emissions Particulate matter and toxic fumes released from manufacturing operations and transport are limited. No dust-related complaints from communities have been received. Welding fumes at source are extracted through fi lter units. These systems comply with international industrial health standards. To reduce transport emissions we carry out regular fl eet maintenance and utilise latest technology. A video event recorder system was installed in late 2014 and a specialist GPS tracking system was installed in early These two systems monitor the majority of the Company s fl eet, improving driver behaviour and resulting in the reduction of motor vehicle accidents and fuel consumption, thus reducing accident spillages and fuel emissions. Fuel CO 2 (kg per unit of consumption) Estimate Actual use Unit CO 2 (kg) CO 2 (tonnes) Petrol fuel 2.39kg of CO 2 Average car consumption 12.5 litres/100km km Diesel fuel 2.7kg of CO 2 Average car consumption 12.5 litres/100km km Natural gas 2.666kg of CO 2 per kg kg LPG 1.7kg/ litre kg Electricity 0.99kg/kWh kwh Air travel Airlines and agent supplied tonnes CO 2 per fl ight for km Total carbon emissions Howden Integrated annual report 2016

51 Emission guide Supportive evaluation Australian government Department of the Environment (estimated greenhouse gas emission on 06/01/ transport/fuel guide/environmental) Conversion factors by Defra/DECC in 2013 ( +44(0) ) 1 litre of petrol weighs 750g. Petrol comprises 87% carbon, or 652g carbon per litre of petrol. To combust this carbon to CO 2, 1 740g of oxygen is needed. The sum is then = 2 392g CO 2 /litre of petrol (06/01/ consumption) 1 litre of diesel weighs 835g. Diesel comprises 86.2% carbon, or 720g carbon per litre diesel. To combust this carbon to CO 2, 1 920g of oxygen is needed. The sum is then = 2 640g CO 2 /litre diesel (06/01/ consumption) Low-calorific: 1kg L-gas comprises 61.4% carbon, or 614g carbon per kg L-gas. To combust this carbon to CO 2, 1 638g of oxygen is needed. The sum is then = 2 252g CO 2 /kg L-gas. High-calorific: 1kg H-gas comprises 72.7% carbon, or 727g carbon per kg H-gas. To combust this carbon to CO 2, 1 939g oxygen is needed. The sum is then = 2 666g CO 2 /kg H-gas (06/01/ consumption) Australian government Department of the Environment (estimated greenhouse gas emission on 06/01/ transport/fuel guide/environmental) Eskom factor report Environmental footprint 0.99kg of CO 2 /kwh electricity generated according to Eskom latest calculations ( +44(0) ) 1 litre LPG weighs 550g. LPG comprises 82.5% carbon, or 454g carbon per litre LPG. To combust this carbon to CO 2, 1 211g of oxygen is needed. The sum is then = 1 665g CO 2 /litre LPG (06/01/ how-calculate-co 2 -consumption) Eskom announces unchanged electricity emission factor for 2012 (Urban Earth, Eskom integrated report 2012). Energy conversion factors used are kilograms carbon divide equivalent (kgco 2 e) per unit of fuel (Carbon Trust Defra/ DECC, US EPA (0) Financialresults.co. za/2012/eskom). One tonne CO 2 emissions occupies 556m 3 of space at 25 C ( Formula for a given round trip (round trip miles x emissions factor x radiative forcing index factor x passenger occupancy rate divided by 2 205lb per ton = tonnes per round trip (DEFRA, July 2011 greenhouse gas conversion factors) (0) Conversion factors by Defra/DECC in (0) Shipping emits 10kg CO 2 into the atmosphere per km ( +44(0) ) Howden Integrated annual report

52 Material issues continued Transformation and society Economic transformation and empowerment Howden is fully committed to economic transformation and empowerment. In 2016 we were certifi ed as a Level 4 contributor in terms of the more stringent amended B-BBEE Codes of Good Practice 2013 (amended codes) and related DTI scorecard. * Score calculated in terms of the original codes. The Group is recognised as a value-adding supplier Level 4 Level 3* (80.41 points) (78.83 points) The Group is committed to further continuous B-BBEE transformation and is actively considering options and plans for transition to the new DTI B-BBEE codes of good practice. The Company will be verifi ed in the second quarter of 2017 against the amended codes and related DTI scorecard, this verifi cation will remain valid until early We intend to maintain our Level 4 contributor status in Strategy to comply with the amended codes The amended codes are more stringent and the Company is implementing various initiatives to ensure we continue to achieve our transformation targets. A key area of the strategy relates to the provision of interest- and security-free supplier development loans and enterprise development loans in favour of qualifying suppliers and enterprises. These loans have already been furnished during Key areas of focus Management and control 2016 % 2015 % * * Number calculated as an average of scores in respect management and control (92.5%) and employment equity (50.4%) under the original codes. Management control under the amended codes comprises both management and control and employment equity from the B-BBEE Codes of Good Practice 2007 (original codes). Although Howden has maintained a very similar compliance rating against this element under the amended codes it continues to aim to improve this in future by people recruited inside and outside the Company. Howden successfully identifi es, appoints, mentors and trains talented individuals for top management positions. Steady progress is continuing to be made in appointing HDSAs into non-technical positions, however the skills crisis in the engineering sector continues to present challenges in improving this rating materially in the short term. This is compounded by the fact that engineering has not traditionally attracted skilled females into the sector. Every effort is made to accommodate disabled people in productive employment activities. The organisation continues to recruit, train and develop on merit of performance the demographic population representation in employment equity. Percentage of employees who are previously disadvantaged South Africans* * Score calculated in terms of the original codes % Please refer to our employee review on pages 33 to 41 for more detail % Skills development Candidates, including women, are recruited annually for in-house Merseta-approved apprenticeships. Skills development score 2016 % 2015 % The business has improved under the amended codes on the 2015 performance and continues to invest heavily on skills development as indicated by its 93.8% score in Please refer to our employee review on pages 33 to 41 for more detail. Enterprise and supplier development Enterprise and supplier development under the amended codes comprises preferential procurement and enterprise development from the original codes. The category is now broken down into three parts, being preferential procurement, supplier development and enterprise development. Preferential procurement Howden places great importance on procuring from B-BBEE accredited suppliers. Supply chain managers are appraised on their consistent purchasing levels from empowered companies to ensure Howden promotes and stimulates small businesses. The Group continues to exert pressure on its suppliers to improve their own B-BBEE credentials. The business during the course of 2015 met with its major suppliers indicating the importance of taking steps to improve their contributor status under the DTI scorecard, specifi cally their ownership scores, as well as encouraging them to give appropriate consideration to the more stringent amended codes that are now in effect and the impact this may have on their businesses. 50 Howden Integrated annual report 2016

53 Preferential procurement spend Total SED spend (excluding SD and ED spend) Number of B-BBEE certified vendors R529 million R923 million Number % Number % Supplier development and enterprise development % SD and ED** * Score calculated in terms of the original codes. ** Excluding preferential procurement of this part of the element. 46% SD 100% ED* In 2015 two interest- and security-free loans were provided to a qualifying supplier and enterprise, being a supplier development loan and an enterprise development loan. These two loans have resulted in 80.45% of the points being achieved against this portion of the supplier and enterprise development element under the amended codes. We are justifi ably proud of our enterprise development success where we establish independent suppliers to our Company. We provide these companies with training and contracts for their long-term sustainability, and make advance payments on products and services they render to assist them with cash fl ow. Socio-economic development spend Socio-economic development (SED) initiatives in recent years have resulted in greater than a 95% rating being achieved against this element both under the original codes and the amended codes. We intend to continue with positive developments beyond the set requirements. Total SED spend (excluding advance payments made) R R Looking to the future, Howden offers bursaries to the children of staff for studies in selected disciplines. We also support the health of our people through a comprehensive wellness programme and an occupational health clinic. Please refer to our health review on pages 42 and 43 for more detail Spend on education R R Spend on health including HIV/Aids R R Spend on basic needs and social development R R Corporate social investment The Howden corporate social investment (CSI) programme is continually reviewed and adapted to keep pace with the evolving business environment and changing needs of the communities the Company serves. Upliftment of disadvantaged communities, education and technical skills training for future growth and development are the cornerstone of the Company programme, with support channelled to sustainable projects that address a social need and ultimately offer a better quality of life to benefi ciaries. Total ad hoc donations R R Update on previous year s flagship projects Mount Pleasant Primary School We have continued our support of Mount Pleasant Primary School with a further contribution being made in The amount contributed was again utilised towards one classroom assistant and two student teachers. 2015/2016 flagship project A fl agship project was undertaken in 2015/2016 in respect of Modikwa Platinum Mine and was fi nalised during the course of This project was a joint venture between the mine and its key suppliers whereby the mine provided a maths and science laboratory affording eight schools in the area access to library equipment. The maths and science educational software worth R was donated by Howden towards the project. This project will continue to benefi t matriculants in the area on an ongoing basis. Future flagship projects In 2017, we aim to cooperate with key clients to assist communities around their operations in stakeholder prioritised areas of concern. Beyond the confi nes of our Company we contribute to society through a corporate social investment programme focused on the education of the underprivileged and help for the destitute. Howden Integrated annual report

54 Corporate governance report The board and management of Howden Africa Holdings Limited are committed to the principles of openness, integrity and accountability as advocated in the King Report on Corporate Governance for South Africa, 2009 (King III) and strives to comply with all requirements for corporate governance as set out in the Listings Requirements of the JSE Limited, South Africa. Governance framework The board takes overall responsibility for the Group. Its role is to exercise leadership and sound judgement in directing the Group to achieve continued prosperity and to act in the best interests of all stakeholders. Subject to any limitations imposed by the Companies Act, JSE Listings Requirements and the memorandum of incorporation, responsibility for managing the business of the Company vests in the Group Chief Executive Offi cer, Chief Financial Offi cer and directors of subsidiary companies (collectively the Executive Committee or Exco). Governance policies and practices which apply to Howden Africa Holdings Limited apply to all subsidiaries. Board of directors Composition The board comprises a balance of executive and non-executive directors, with a majority of non-executive directors: Two executive directors, the Chief Executive Offi cer (CEO) and Chief Financial Offi cer (CFO) Five non-executive directors, three of whom are considered independent Directors are classifi ed as independent, non-executive or executive in accordance with the principles set out in both King III and JSE Listings Requirements. An annual independence assessment is carried out by the lead independent director (LID) on all independent directors in order to ensure that directors classifi ed as independent are indeed independent. In November 2016 the LID completed nine years of service with the board and a rigorous review and independence assessment was carried out in this regard. The review included a peer review, a self assessment as well as a due diligence from an external service provider. After considering these three aspects of the review the Chairman carried out an assessment into whether the LID should HAHL board of directors Audit and Risk Committee (ARC) Remuneration, Nomination, Social and Ethics Committee (RENSEC) Executive Committee (Exco) Exco Risk Committee Governance Committee Sustainability Committee 52 Howden Integrated annual report 2016

55 remain part of the board and continue as LID. The Chairman found that there was no need to refresh the board in this regard and that the LID s independence was not impaired. There are no prescribed offi cers as defi ned by the Minister in terms of the Companies Act 71 of 2008 (the Companies Act). Chairman of the board In line with best practice, the roles of the Chairman and CEO are separated. Board members have reviewed the performance of the Chairman of the board and unanimously re-elected Ian Brander as Chairman for Ian Brander is a non-executive director who is able to carry out his duties and responsibilities independently despite the fact that he is not considered an independent director in terms of King III. The board believes this appointment is in the best interest of the Company as he brings technical, business and leadership knowledge gained in his 33-year career with Howden Global, and fully understands and appreciates the business strategy of the Company. In line with King III, Morongwe Malebye was re-elected as the lead independent director for Process for the appointment and removal of directors to the HAHL board of directors If a vacancy arises the Remuneration, Nomination, Social and Ethics Committee (RENSEC) identifi es and nominates suitable candidates through a formal process. New director nominations are then submitted to the board as a whole for approval prior to appointment. The appointment of a new director is subject to confi rmation by shareholders at the next annual general meeting. An induction programme is established for new directors. On appointment to the board, new directors visit the Group s businesses and meet with senior management to facilitate their understanding of the Group structure and fi duciary responsibilities. Despite the provisions of any contract, the Company may by ordinary resolution remove any director from offi ce and appoint another person in his/her stead. The Company will at all times comply with section 71 of the Companies Act, 2008, in this regard. Recent directorate changes Thomas Bärwald s contract expired on 30 May Willie Thomson was appointed the new Chief Executive Offi cer for the Company with effect from 1 June Kevin Johnson resigned on 8 December 2016 and Marinella Vigouroux was appointed the new Chief Financial Offi cer for the Company with effect from 8 December Annual rotation and election In accordance with the Company s memorandum of incorporation and King III, Morongwe Malebye, Humphrey Mathe and Mitesh Patel will retire by rotation and will stand for re-election by shareholders at the next annual general meeting. Mr Thomson was elected as Executive Director and Chief Executive Offi cer at the 2016 AGM held on 1 June Mrs Vigouroux s appointment occurred after the Company s 2016 AGM and she will stand for election by shareholders at the next annual general meeting. (Refer to page 64 for details on qualifi cations and experience). Gender diversity The Company has a global reputation for its competitiveness and its progressive stance towards gender diversity is one component of its winning formula. Accordingly, in 2016 RENSEC adopted a Gender Diversity Policy. The Gender Diversity Policy set a target to increase the Board composition from one female member to two female members. The Company achieved this target upon the appointment of Marinella Vigouroux at the end of These targets are assessed annually by RENSEC and the next assessment will be in June Director development Professional development programmes are implemented as and when required. This ensures directors receive regular briefi ngs on changes in risks, laws and the environment. Board powers and responsibilities The board charter details the responsibilities of the board and is reviewed and adopted by the board annually. In terms of its charter, the board is generally responsible for: Acting as a focal point for, and custodian of corporate governance Approving corporate strategy Monitoring and assessing performance Ensuring that strategy will result in sustainable outcomes Ensuring the Company is, and is seen to be, a responsible citizen Providing effective leadership on an ethical foundation Acting in the best interests of the Company The board gives strategic direction to the Group, retains full and effective control over the Group, and monitors executive management in implementing plans and strategies. The executive directors have the overall responsibility for implementing the Group s strategy. Non-executive directors complement the skills and experience of executive directors and bring independent judgement to the board s deliberations and decisions through their knowledge and experience. All directors have unlimited access to the advice and services of the Company Secretary, who is responsible for ensuring that board procedures are followed. All directors are entitled to seek independent professional advice at the Group s expense, concerning the affairs of the Group, after obtaining approval in line with the process set out in the board charter. To enable the board to properly discharge its responsibilities and duties, certain responsibilities have been delegated to board committees. Accountability The board meets at least quarterly. The board monitors management, ensuring that material matters are subject to board approval. The board is ultimately responsible for ensuring that the business is a going concern and, as such, effectively controls the Group, its management and is involved in all decisions that are material for this purpose. As noted, the board functions in terms of a charter which requires an appropriate balance of power and authority on the board. The CEO is responsible and accountable to the board for all Group operations. He has a formal role description (with limits of authority) from the board. To assist in discharging his responsibility, the CEO has seven key management personnel who form part of the Executive Management Committee (Exco). Howden Integrated annual report

56 Corporate governance report continued Refer to page 66 for details of the executive management team. Board committees The board has established three principal committees to assist it in discharging its responsibilities. Specifi c responsibilities have been formally delegated by the board to the: Audit and Risk Committee (ARC); Remuneration, Nomination and Social and Ethics Committee (RENSEC) Executive Management Committee (Exco) The board believes committee members are suffi ciently qualifi ed and experienced to carry out their duties. Brief details on their qualifi cations and experience can be found on pages 64 and 66. ARC and RENSEC Both committees have formal terms of reference which have been approved by the board and details on their roles and responsibilities have been set out on pages: 78 and 79 for the ARC; and 61 for the RENSEC. The committees may, in fulfi lling its duties, call on the chairmen of other board committees, any of the executive directors, offi cers or Company Secretary to provide information, subject to following a board-approved process. The creation of board committees does not reduce the directors overall responsibilities and therefore all committees must report and make recommendations to the board. The Chairman of the board, CEO, CFO, Chief Audit Executive, external auditor, other board directors and other assurance providers (legal, compliance, risk, health and safety) attend ARC meetings by invitation only. Both internal and external auditors have unrestricted access to the ARC. Board members (not part of the RENSEC), as well as the head of human resources for the Howden Africa Group attend RENSEC meetings by invitation. Exco The duties and responsibilities of the members of Exco are in addition to those as either directors of HAHL or a director of a subsidiary within the Group and is chaired by the CEO. Exco s main role is to assist the CEO in discharging his responsibilities as CEO and in so doing: Participating in the determination of budgets and strategic plans of the Group Monitoring fi nancial performance of the Group Monitoring strategy progress/performance Coordinating the operations of the Group and monitoring the activities of companies within the Group Monitoring the relations and interactions of the Group among themselves Making recommendations on and monitoring material employment issues, including remuneration policies Monitoring: Customer relations Marketing strategies Signifi cant customer complaints/defects Consumer protection act complaints/breaches. Ensuring that there are policies and controls in place to adequately deal with the Group s responsibilities and making recommendations regarding Group policies. Subcommittees of the executive committee (Exco) Committee Composition Main responsibility Exco Risk Committee Sustainability Committee Governance Committee W Thomson (Chair) and Exco members W Thomson (Chair) M Vigouroux C Masson A Buys (T Bärwald, K Johnson, and C Koopman left the group during the course of 2016) M Vigouroux (Chair) C Masson Assist Exco, the Audit and Risk Committee and the board to ensure that: The Group has implemented an effective policy and plan for risk management that will enhance its ability to achieve its strategic objectives Disclosure on risk is comprehensive, timely and relevant Implementation of Global Reporting Initiative (GRI G4) guidelines, including: Stakeholder engagement Materiality assessments Monitoring key performance indicators Recommend to Exco and the board a set of corporate governance principles (emanating from King III, the Companies Act and elsewhere) applicable to the Group as well as to monitor and update Exco and the board on developments that may impact on corporate governance principles. 54 Howden Integrated annual report 2016

57 Meetings and procedures Agendas and minutes Board ARC and RENSEC The board and the ARC and RENSEC have established annual work plans to ensure all relevant matters are covered by the agendas of meetings planned for the year. The number, timing, length of meetings, and agendas, are determined by the annual work plans. The relevant chairpersons may meet with the CEO, CFO and/or Company Secretary prior to a meeting to discuss important issues and agree on the agenda. A detailed agenda, together with supporting documentation, is circulated at least one week prior to each meeting to members and other invitees. This ensures all members are fully prepared for board meetings and able to provide appropriate and constructive input on matters for discussion. Minutes are circulated to the relevant chairpersons and members for review. The minutes are formally approved at the next scheduled meeting. Meetings for the coming year are scheduled at the last meeting of the prior year. Meetings in addition to those scheduled may be held at the insistence of a member. Exco Exco must hold a minimum of two meetings per quarter and meetings in addition to those scheduled may be held at the request of an Exco member channelled through the CEO. A standard agenda will be circulated prior to the meeting by the CEO. The CEO maintains an action and decision lists. Quorum requirements Individuals in attendance at board or committee meetings by invitation may participate in discussions but do not form part of the quorum for board or committee meetings. Board A representative quorum for meetings may be fi xed by directors from time to time but is never less than two directors, one of whom must be a director of the holding company (Howden Group South Africa or James Howden & Godfrey Overseas Limited). ARC and RENSEC A representative quorum for meetings is a majority of members present. Exco Five members will constitute a quorum, one of which must be the CEO or CFO meeting attendance Member name Date of appointment 23 Mar 16 1 Jun Aug 16 7 Dec 16 The board T Bärwald IH Brander J Brown W Thomson M Malebye M Vigouroux H Mathe M Patel K Johnson Appointed 1 January 2009 Appointed 26 July 2011 Appointed 3 March 2005 Appointed 1 February 2016 Appointed 7 November 2007 Appointed 8 December 2016 Appointed 1 July 2012 Appointed 15 December 2014 Appointed 1 March 2012 P P P P* P P P P P* P P P P P* P P P P P P P P P P P P P P P* P P P ARC M Patel H Mathe M Malebye Appointed 15 December 2014 Appointed 1 July 2012 Appointed 7 November 2007 P P P P P P P P P P P P RENSEC M Malebye H Mathe M Patel IH Brander J Brown Appointed 11 June 2009 Appointed 1 July 2012 Appointed 15 December 2014 Appointed 25 August 2011 Appointed 3 December 2010 P P P P P P P P P P P P P P P P P P P P P = present; A = absent * Invited and present as an attendee at the meeting. Howden Integrated annual report

58 Corporate governance report continued Board, ARC and RENSEC evaluations Performance of the board, the ARC and RENSEC was assessed internally by the board Chairman with the assistance of the Company Secretary. The objective of this process was to: Determine how the board or the relevant committee has performed Ascertain the effectiveness of the board Identify areas that might require attention as part of the board work plan for the coming year The assessments did not reveal any signifi cant areas requiring immediate attention and concluded that the board, the ARC and the RENSEC had effectively discharged their respective responsibilities. The performance of the board, the ARC and RENSEC and individual directors will be assessed each year. Directors dealings Directors, offi cers and other selected employees are prohibited from dealing in securities for a designated period preceding the announcement of its fi nancial results or in any other period considered sensitive. The Chairman, through the Company Secretary, approves all dealings by directors during open periods. The Group has developed a formal policy to govern this process. There were no HAHL share or security dealings by HAHL directors or Exco members in Company Secretary The Group Company Secretary is responsible for ensuring all directors have full and timely access to the information required to properly discharge their duties so that the board can function effectively. The board is cognisant of the duties imposed on the Company Secretary, who is accordingly empowered to properly fulfi l his duties. In addition to the statutory duties of the Company Secretary, he fulfi ls the following functions: Induction of directors Provides guidance to the board on its duties (collectively and individually) Reviews and negotiates contractual terms and conditions agreed to by the Group The Group Company Secretary is not a director of Howden Africa Holdings Limited and the board is satisfi ed that the Company Secretary maintains an arm s length relationship with the board as he is not an associate of any director and is not subject to undue infl uence of one or more of the directors. C Masson was appointed as Company Secretary on 1 August 2016 with C Koopman resigning as Company Secretary effective 1 August He is an admitted attorney of the High Court with a BA Law, an LLB degree as well as a Higher Diploma in Corporate Law from the University of Johannesburg and has nine years post-admission experience. C Masson occupied the role of the Company Secretary for the Company during 2014 whilst C Koopman was on maternity leave. The performance of the Company Secretary is evaluated annually in line with the Howden Africa Group s standard appraisal process which entails the identifi cation of SMART objectives (KRAs), a mid-year and fi nal year-end review to monitor and rate the Company Secretary s performance in terms of the set KRAs. The board as a whole has discussed the performance of the Group Company Secretary and is satisfi ed with his competence, qualifi cations and experience. Political contributions It is Group policy not to make donations or other contributions to political parties or causes. Sustainable development governance It is a Company requirement to operate within a sustainable business environment. We take our sustainable business guidance from the Global Reporting Initiative (GRI G4) and cover the three development spheres of economic, social and environmental performance. Our sustainability policy is based on balanced society rules, local and global labour practices and international human rights standards. The Company strives to be economically viable, environmentally regenerative and accountable for its products and services. Please refer to the following sections: Performance on page 4 Stakeholders on page 12 Strategies and targets on page 16 Review of material issues on page 32 Risk management on page 68 Ethics performance A review by RENSEC of the Group s ethical performance appears on page 62 of the integrated annual report. IT governance King III defi nes IT governance as the effective and effi cient management of IT resources to facilitate the achievement of corporate objectives. The Group has developed and established a set of comprehensive IT policies and procedures that support these objectives. A high-level review of the alignment of the Group s IT governance structures and processes to the principles of King III has been conducted, with results set out below: 56 Howden Integrated annual report 2016

59 IT governance compliance King III IT governance recommendation The board should be responsible for information technology (IT) governance/it governance should be placed on the board agenda IT should be aligned with the performance and sustainability objectives of the Company The board should delegate to management the responsibility for the implementation of an IT governance framework The board should monitor and evaluate significant IT investments and expenditure IT should form an integral part of the Company s risk management Implementation status Information technology risk, strategy and performance are the responsibility of the board. In 2016, IT was a regular item on the board s agenda. The Chief Information Offi cer updates the board on progress. The Group s IT strategy is formulated by a worldwide Howden Steering Committee, the ISSG (Information Systems Steering Group). One of the objectives of the ISSG is to align IT/IS strategy with wider Group objectives. The Group s Chief Information Offi cer is a member of this committee. The board has delegated to the Chief Information Offi cer and executive management the responsibility to control and manage the IT governance framework. Large, strategic and signifi cant IT projects are approved by the board, Chief Information Offi cer and the Howden Global Chief Information Offi cer, to ensure effective procurement processes and alignment with strategy and technology standards. IT risks are identifi ed, assessed and managed by an IT Risk Committee chaired by the Group s Chief Information Offi cer which provides a quarterly report to the Exco Risk Committee. The Group has comprehensive IT disaster recovery policies and procedures in place which are audited by internal audit. The board should ensure that information assets are managed effectively A risk committee and audit committee should assist the board in carrying out IT responsibilities All personal, commercially sensitive and confi dential information stored in systems have restricted access procedures, eg ERP, fi nance, payroll and HR systems. All applications are subject to a CIA (confi dentiality, integrity and availability) analysis to ensure appropriate security controls are implemented. Exco risk management and board audit and risk committees are in place and IT risks are reported to these committees where applicable. Legal compliance The Company has an established legal department with two qualifi ed legal professionals, one of whom is the Company Secretary and an admitted attorney, the other being the legal offi cer and an advocate. The Company Secretary regularly updates members of the board on changes in applicable laws, rules, codes and standards. The board, with the assistance of the Company Secretary, regularly monitors the impact of laws (eg competition law), rules (eg JSE Listings Requirements), codes (eg SEIFSA, B-BBEE, bargaining council decisions and agreements), and standards. Where necessary, members of the board, Exco, Company Secretary and legal offi cer attend training. Employees who interact with customers, competitors, suppliers and vendors have received training on competition law as well as anticorruption and anti-bribery laws. In addition, the Company has access to its ultimate holding company s legal department, which is able to assist with compliance matters. The Group endeavours to stay abreast of all intended or promulgated legislation through regular interaction with its legal department. During the period, the following acts continued to have a signifi cant impact on the Group: Competition Act Occupational Health and Safety Act Protection of Personal Information Act Income Tax Act Tax Administration Act Employment Equity Act Broad-based Black Economic Empowerment Act and related codes of best practice King III compliance The Company aims to continually improve compliance and is committed to complying with King III. During the period, the Group continued to enhance its governance, assurance and risk management practices relative to the requirements of King III and the Companies Act. The Governance Committee will during the course of 2017 prepare its road map for and begin its implementation of the King IV Report on Corporate Governance for South Africa Howden Integrated annual report

60 Corporate governance report continued The Group continues to entrench King III principles into its internal controls, policies, terms of reference and overall procedures. Below is an overview of the Company s compliance with King III: Applied Partially applied Under review/ do not apply Ethical leadership and corporate citizenship Effective leadership based on an ethical foundation Responsible corporate citizen Effective management of Company s ethics Assurance statement on ethics in integrated annual report Boards and directors The board is the focal point for and custodian of corporate governance Strategy, risk, performance and sustainability are inseparable Directors act in the best interests of the Company The board should consider business rescue proceedings or other turnaround mechanisms as soon as the Company is fi nancially distressed as defi ned in the Companies Act The Chairman of the board is an independent non-executive director 1 Framework for delegation of authority has been established The board comprises a balance of power, with a majority of non-executive directors who are independent Directors are appointed through a formal process Formal induction and ongoing training of directors 2 The board is assisted by a competent, suitably qualifi ed and experienced Company Secretary Regular performance evaluations of the board, its committees and individual directors Appointment of well-structured committees and oversight of key functions An agreed governance framework between the Group and its subsidiary boards is in place Directors and executives are fairly and responsibly remunerated 3 Remuneration of directors and senior executives is disclosed 4 The Company s remuneration policy is approved by its shareholders Audit committee The board should ensure the Company has an effective and independent Audit Committee Audit Committee members should be suitably skilled and experienced independent non-executive directors Chaired by an independent non-executive director The Audit Committee should oversee integrated reporting 5 The Audit Committee should ensure that a combined assurance model is applied to improve effi ciency to provide a coordinated approach to all assurance activities Satisfy itself of the expertise, resources and experience of the Company s fi nance function Responsible for overseeing internal audit Integral to the risk management process Oversees the external audit process Reports to the board and shareholders on how it has discharged its duties Governance of risk The board is responsible for the governance of risk and setting levels of risk tolerance The board should determine the levels of risk tolerance The Risk Committee assists the board in carrying out its risk responsibilities 6 58 Howden Integrated annual report 2016

61 Applied Partially applied Under review/ do not apply Governance of risk (continued) The board delegates the process of risk management to management The board ensures that risk assessments and monitoring is performed continually Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks Management implements appropriate risk responses The board receives assurance on the effectiveness of the risk management process The board ensures continual risk monitoring by management Suffi cient risk disclosure to stakeholders Governance of information technology The board is responsible for IT governance IT is aligned with the performance and sustainability objectives of the Company Management is responsible for implementing an IT governance framework The board monitors and evaluates signifi cant IT investments and expenditure IT is an integral part of the Company s risk management IT assets are managed effectively The Audit and Risk Committee assists the board in carrying out its IT responsibilities Compliance with laws, codes, rules and standards The board ensures the Company complies with relevant laws The board and directors have a working understanding of the relevance and implications of non-compliance Compliance risk forms an integral part of the Company s risk management process The board has delegated to management the implementation of an effective compliance framework and processes Internal audit Effective risk-based internal audit Internal audit should follow a risk-based approach to its plan Internal audit should provide a written assessment of the effectiveness of the Company s system of internal controls and risk management The Audit Committee should be responsible for overseeing internal audit Internal audit is strategically positioned to achieve its objectives 7 Governing stakeholder relationships Appreciation that stakeholder perceptions affect a company s reputation Management proactively deals with stakeholder relationships There is an appropriate balance between its various stakeholder groupings Equitable treatment of stakeholders Transparent and effective communication to stakeholders Disputes are resolved effectively and timeously 8 Integrated reporting and disclosure Ensures the integrity of the Company s integrated annual report Sustainability reporting and disclosure is integrated with the Company s fi nancial reporting Sustainability reporting and disclosure is independently assured 9 Howden Integrated annual report

62 Corporate governance report continued Explanation register Note Main category Subcategory Exception/not applied commentary 1 Chapter 2 Principle 2.16 Howden Africa s Chairman, Ian Brander, is employed by Howden Global and is therefore considered a non-executive director in terms of King III and the JSE Listings Requirements. As per the recommendations of King III, the Company has appointed a lead independent director to compensate for any possible lack of an independent Chairman. 2 Chapter 2 Principle 2.20 Internal mentorship programmes are not implemented due to the small size of the board and the fact that current board members are experienced directors. However, directors are encouraged to fi nd a mentor of their choice. 3 Chapter 2 Principle 2.25 Howden Africa does not have a share-based incentive scheme in place. 4 Chapter 2 Principle 2.26 We disclose independent non-executive and executive directors remuneration on page 134. Remuneration of non-executive directors (J Brown and I Brander) has not been disclosed as they do not receive any remuneration for their services as members of the Howden Africa Holdings Limited board from HAHL and/or its subsidiaries. 5 Chapter 3 Principle 3.4 The Audit and Risk Committee has not deemed it necessary to recommend that the board should engage an external assurance provider to provide assurance on any material elements of the sustainability part of the integrated annual report. Various parts that impact sustainability reporting are verifi ed through other processes (eg health and safety external audits, BEE verifi cation audits). 6 Chapter 4 Principle 4.3 The Risk Committee has been merged with the Audit Committee. In line with the JSE Listings Requirements, the merged committee comprises independent non-executive directors. Accordingly executive directors are not members of the main Risk Committee but have a standing invitation to attend meetings and provide the necessary input. Executive directors are members of the Exco Risk Committee. 7 Chapter 7 Principle 7.5 The Chief Audit Executive is based locally and regularly attends Audit and Risk Committee meetings. The board does not deem it necessary to include the Chief Audit Executive in local Executive Committee monthly meetings. 8 Chapter 8 Principle 8.6 Dispute resolution mechanisms need to be considered on a case-bycase basis and should be matched with the circumstances. Contracts concluded with customers often incorporate dispute resolution procedures. The board is cognisant of the fact that dispute resolution such as mediation and conciliation should be considered prior to legal recourse but also understands that sometimes dispute resolution is not the appropriate forum. 9 Chapter 9 Principle 9.3 There is no specifi c sustainability assurance provider. Various parts that impact sustainability reporting are verifi ed through other verifi cation processes (eg health and safety external audits, BEE verifi cation audits these are done in accordance with legislation or codes of good practice). A detailed King III compliance register is available on the Company s website: 60 Howden Integrated annual report 2016

63 Remuneration, nomination, social and ethics report The Remuneration, Nomination, Social and Ethics Committee The committee is chaired by an independent non-executive director and operates under a mandate from the board, with formal terms of reference approved by the board. The committee meets regularly during each year and a list of members as at 31 December 2016, and number of meetings attended, is set out on page 55. The Company Secretary attends all meetings as secretary. The CEO, CFO and Human Resources Director of Howden Africa attend all meetings by invitation. No attendee may participate in any discussion or decision regarding his or her own remuneration. Membership The committee consists of fi ve non-executive directors, the majority of whom are independent: Morongwe Malebye (Chair) appointed 11 June 2009 James Brown appointed 3 December 2010 Ian Brander appointed 25 August 2011 Humphrey Mathe appointed 31 August 2012 Mitesh Patel appointed 15 December 2014 Remuneration philosophy The remuneration philosophy of Howden Africa is to ensure that employees are rewarded for their contribution according to industry, market and country benchmarks. The committee is responsible for the evaluation and approval of the broad remuneration strategy of the Company. Remuneration policy Employee guaranteed pay Employees are guaranteed a basic salary set at levels that are competitive in the relevant market. The basic salary and other benefi ts are reviewed annually and regularly benchmarked against employees in comparable industry sectors. The Group uses the services of PwC Remchannel to benchmark employees. Weekly paid employees are paid in line with industry collective agreements. Executive and senior manager remuneration and incentives Howden Africa seeks to attract, motivate and retain exceptional executives who have the experience of operating in a complex engineering and manufacturing environment. The remuneration of executive directors and senior management is based on a total cost of employment, which includes a fi xed guaranteed package, which includes a company car or vehicle allowance, benefi ts such as pension fund and medical aid and a cash variable incentive linked to performance. For further information on the remuneration paid to executive directors, refer to note 35 of the fi nancial statements. The said note also includes details on performance requirements which are linked to bonus entitlements. Howden Africa does not operate a share incentive scheme; however, some senior executives participate in a scheme operated by the Group s majority shareholder, Colfax. Employee benefits Pension fund monthly paid employees The Group operates both a defi ned benefi t pension fund as well as a defi ned contribution pension fund. Defi ned benefi t pension fund The Group operates a post-retirement scheme that covers all employees employed before 1 January The pension fund is a fi nal salary defi ned benefi t plan. The assets of the fund are held in an independent trustee administered fund, which is administered in terms of the Pension Fund Second Amendment Act No 39 of The fund is valued annually using the projected unit credit method. The latest actuarial valuation for accounting purposes was performed on 31 December 2016 and the most recent statutory actuarial valuation was performed as at 31 March In late 2014 the Fund purchased annuities to back the pensions payable to existing pensioners. In 2015 approval was obtained from the Financial Services Board (FSB) for ownership of these annuities to be transferred to the pensioners themselves. During 2015, the remaining members (who were all active employees) were offered the opportunity to join the defi ned contribution pension fund (DC plan) for future service and to transfer their accrued benefi ts from the fund into the DC plan. Of the 52 employees, 51 accepted this transfer and 1 retired during the offer window. An annuity has been bought for the 1 new pensioner. In late 2016 approval from the Financial Services Board (FSB) was obtained to transfer active members to the defi ned contribution pension fund (DC plan). The active members fund was transferred to the DC plan in November Six pensioners remain on the DB plan and the liability is fully insured, the fund purchased annuities to back the pensions payable to existing pensioners. Defi ned contribution pension fund Monthly paid employees joining on or after 1 January 2001 are required, subject to fund rules eligibility, to join the Howden SA defi ned contribution pension fund and group life scheme. The Company contributes the equivalent of 9% based on an employee s basic salary, 7.01% of which is allocated toward the pension fund credit. The remaining 1.99% is allocated towards fund administration and Group life premiums. Pension fund hourly paid employees Hourly paid employees belong to the metal and engineering bargaining council funds. These are the Engineering Industries Pension Fund (a closed fund effective January 2001) and the Metal Industries Provident Fund. The Company contributes 6,9% of the member s wage to these funds. Medical aid Medical aid is compulsory for all monthly paid employees. Weekly paid employees have an option to belong to the medical aid as it is not a condition of employment in the metal and engineering industries bargaining council. The Company contributes a set rand value depending on the Discovery medical plan selected by an employee. This is regardless of seniority or salary on which that employee is. Howden Integrated annual report

64 Remuneration, nomination, social and ethics report continued Short-term incentive Employees receive an annual discretionary incentive bonus based on Company and individual performance targets. Howden Africa has a formal framework for performance management that is linked to and supports the annual short-term incentive scheme. Targets are reviewed regularly to ensure they remain appropriate. Long-term incentive A long-term incentive scheme has been implemented which has been designed: As a long-term cash plan which tracks company performance using specifi c key performance indicators (KPIs) To measure the growth in operating profi t on a year-to-year basis To award an amount at the outset which will grow or shrink depending on the Company s performance against the KPIs, and will pay out in years two, three and four This scheme will be applicable to new associates who are identifi ed as key talent or associates who will occupy roles which would ordinarily come with a package which is inclusive of an LTIP. The LTIP will operate as follows: Each eligible associate will be awarded an initial amount based upon a percentage of their base pay, which will be held in the scheme, and which will vest in three equal portions over the following two, three and four years At vesting the portion will have grown (or reduced) based upon the performance of the Company The mechanics of how the portions grow will be self funding, and will draw from the success of the business Non-executive directors fees Independent non-executive directors fees are benchmarked on an annual basis and approved by shareholders at the annual general meeting of shareholders. For information on non-executive director fees paid in 2016, refer to note 35 of the annual fi nancial statements. Social and ethical performance in 2016 Labour and employment Employment The Group recognises that the most important resource is its employees the men and women whose commitment, creativity, skills and energy are central to the business goals. It is important to the Group that the workplace remains free from all forms of discrimination, intimidation and harassment. It is believed that an environment where employees can maximise their potential is only possible when each person is treated fairly and with respect. Howden will: As a minimum, meet all applicable employment laws, rules and regulations, including laws, rules and regulations governing working conditions, wages, hours, benefi ts and minimum age for employment, wherever it conducts business Take all actions with its employees, in all phases of the employment relationship, without regard to gender, colour, race, ethnicity, sexual orientation, physical or mental disability, age, pregnancy, religion, veteran status, national origin or any other legally protected status Broad-based black empowerment and employment equity The Group has been audited under the amended codes of good practice and successfully achieved a Level 4 contributor status under the more stringent amended codes. Notwithstanding this success the Group continues to strive to improve its performance in this regard. The Group s efforts in respect of employment equity, skills development, preferential procurement and socio-economic development are more fully dealt with on page 45 under the heading Transformation and society. It is confi rmed that the Group has complied with its reporting requirements in terms of the Employment Equity Act 55 of Ethics management and code of conduct Howden has a zero-tolerance approach to unethical behaviour and is committed to ensuring that the Group and its employees uphold Howden s good reputation, as its integrity can only be maintained by operating its business in accordance with the highest ethical standards and in compliance with all applicable laws. The Group code of conduct governs the conduct of all Howden s employees throughout the Group and is aligned with the Organisation for Economic Cooperation and Development s recommendations regarding corruption. The code covers, among others, the following areas: Reporting violations Compliance with laws, rules and regulations Honesty and ethical conduct Competition and fair dealing Confl icts of interest Insider trading Unfair competition/anti-trust Employment Bribes, gifts and gratuities Political contributions Safety, health and environmental protection The code of conduct is available to all employees on the Group s intranet. The Group furthermore expects all suppliers to abide by a supplier s code of conduct covering, among others, the following areas: Legal compliance and business practices Prohibition of corruption and bribery Respect for the basic human rights of employees Health and safety of employees Environmental protection 62 Howden Integrated annual report 2016

65 All managers are responsible for compliance with and enforcement of this code for their area of operation, including with respect to sales agents, representatives, independent contractors, distributors and consultants. Whistle-blowing procedures are in place to encourage reporting of unethical behaviour. In mid-2014 the Company changed over from the US-based Ethics Point platform to the local South African Deloitte Tip-offs Anonymous platform (Ethics Hotline). The purpose of the Ethics Hotline is to allow employees and individuals to report ethics matters to the Company anonymously. Issues such as ethics violations, theft, fraud, discrimination, harassment, and substance abuse are reported by an employee to the Ethics Hotline. Ethics Hotline is a secure, third-party anonymous incident reporting system and is available 24 hours a day via the website or by calling the Ethics Hotline call centre. Social and economical development and corporate citizenship Howden believes that being a responsible and contributing corporate citizen is a key component of the Company s business strategy. Through its community investment strategy, the Company is committed to the empowerment, development and growth of disadvantaged communities. The following are commonly shared objectives of Howden Africa s corporate social investment programme: Make a positive, sustainable impact on the communities in which Howden Africa operates through investing in improving the quality of life of disadvantaged communities To develop and empower disadvantaged communities in the social, economic and environmental spheres for the sustainability and long-term growth of the Company To build and improve relationships with the Company s existing and potential stakeholders through forming mutually benefi cial partnerships To create and enhance the Company s reputation as a caring corporate citizen To attract quality, socially responsible staff to the Company as well as retain and enhance the loyalty and pride in the Company for existing staff To strengthen relationships with major customers through the strategic positioning of Howden Africa as a contributor in the development of disadvantaged communities Health, safety and environment The management and employees of Howden are committed to maintaining a safe and healthy working environment as a primary objective and continually identifying negative aspects that their products and operations may have on the environment. Furthermore, Howden is committed to meeting the needs of customers and consumers in an environmentally sound and sustainable manner, through continuous improvement of our environmental performance in all our activities. The Group s efforts in respect of health, safety and environment are more fully dealt with on page 42. Consumer relations To a large degree, the Consumer Protection Act No 68 of 2008 does not apply to the Group s transactions with customers as only a small percentage of the Group s transactions fall below the R2 million juristic consumer threshold as set by the Minister in terms of section 6(1) of the Consumer Protection Act. The majority of Group contracts are negotiated extensively with its customers by the various business units in conjunction with the Group s legal department. There are no known complaints from consumers to the Consumer Commission and/or Tribunal relating to any of the Group companies. Committee assurance The committee is satisfi ed that it complied with its legal, regulatory or other responsibilities during the 2016 fi nancial year. M Malebye Chairperson 24 March 2017 The Group s efforts in respect of corporate social investment are more fully dealt with on page 51 under the heading Transformation and society. Howden Integrated annual report

66 Board of directors (45) Morongwe Malebye (42) Mitesh Patel (66) Humphrey Mathe (55) Ian Brander Lead independent non-executive director MSc (Ind Engineering), MBA and BSc (Mech Engineering) Morongwe Malebye has been independent non-executive director of Howden Africa Holdings Limited since 7 November Ms Malebye has worked in senior and executive positions at blue chip engineering companies such as Sasol, TFR-Spoornet, Armscor, and subsidiaries of international and listed companies such as Babcock Africa and PB Africa. Ms Malebye s expertise are in the utilities sector and manufacturing. She is a valuable contributor to growth strategy, stakeholder engagement and asset management. Currently, she is also a director and co-founder of Ditiropele, an engineering company and CEO of Dickinsons Industrial Services. Independent non-executive director CA(SA) Mitesh Patel has been the chairperson of the Audit Committee and independent non-executive director of Howden Africa Holdings Limited since 15 December Mr Patel is the managing partner of Nkonki. He is an accomplished audit partner, non-executive director and curator, equipped with a commanding track record over the past 14 years of bringing sound judgement and a strong commercial perspective to business in unlisted markets, listed markets and state-owned entities. Mr Patel is, in addition to his directorship within Howden, the independent non-executive chairman of Wearne Limited and Imbalie Beauty Limited and an independent non-executive director of Verimark Limited. Independent non-executive director BSc (Hons), MSc (Mineral Exploration), PhD (Applied Geology) Humphrey Mathe has been an independent non-executive director of Howden Africa Holdings limited since 1 July He has in excess of 39 years experience in the mining industry and is the chief executive offi cer of Tranter Resources. Previously he was the CEO of Scinta South Africa (Pty) Limited, an executive general manager at Exxaro Resources Limited. He serves on the investment committee of Acrux Resources and is a Fellow of the Geological Society of South Africa and registered with the South African Council for Natural Scientifi c Professions (SACNASP) as a professional scientist. Dr Mathe also sits on the boards of Ferret Mining and Environmental Services (Pty) Limited, Scinta South Africa (Pty) Limited (non-executive chairman), Tranter Group of companies, Talent10 Holdings, Council for Geoscience (CGS), Wescoal Holdings Limited and Handa Copper Corporation. Non-executive Chairman BSc (Mech Engineering (Hons), DEng (Honorary Degree) Ian Brander has been a non-executive director of Howden Africa Holdings Limited since 26 July Mr Brander joined Howden in 1983 and has undertaken a diverse range of roles and projects allowing him to be involved in a wide range of technologies, from fans to wind turbines to tunnel boring machines, robotics and compressors, progressing from design and development to engineering management, project management and general management. He was appointed Howden Global technology director in 2006, operations director in 2008 and, in August 2011, he became Howden Global CEO. Mr Brander also sits on (among others) the boards of Howden Group South Africa Limited, James Howden & Godfrey Overseas Limited, Howden Holdings Limited (UK) and Howden Group Limited (UK). 64 Howden Integrated annual report 2016

67 (57) James Brown (35) Marinella Vigouroux (55) William Thomson Non-executive director CA(UK) James Brown has been a non-executive director of Howden Africa Holdings Limited since 3 March Mr Brown has had various senior fi nancial roles across his 27-year career at Howden. Since 2003, he has been Chief Financial Offi cer of Howden Global. He is responsible for IT and business systems development in Howden, fi nancial control and overall fi nancial performance of the business. Mr Brown also sits on (among others) the boards of Howden Group South Africa Limited, Howden UK Limited, Howden Group Limited (UK) and Howden Holdings Limited. Chief Financial Officer (CFO) CA(SA) Marinella Vigouroux has been Howden Africa Holdings Limited s CFO since 8 December Mrs Vigouroux moved to the CFO role from a Financial Director role within the Fans and Heat Exchangers division of Howden. She brings with her, extensive knowledge of the Construction and Engineering industry and a key operational understanding of the Howden business. She has specifi c expertise in fi nancial control, systems implementation, strategic management and fi nancial management and reporting. Mrs Vigouroux does not sit on any other boards Chief Executive Officer (CEO) Bsc (Mech Engineering) William Thomson was appointed initially as the Chief Operating Offi cer (COO) from 1 February 2016, for a short transition period, and from June 2016 was appointed as the CEO of Howden Africa Holdings Limited, for a period of approximately two years. Mr Thomson has signifi cant experience running a global heavy fan and heater business and has extensive end-to-end knowledge of procurement, manufacturing and service processes of the Howden core range fans and heaters. He has signifi cant product knowledge and its application in the power and mining industries. Howden Integrated annual report

68 Executive management (Exco) (53) Clinton Swaffield (47) Geoffrey Chingwaru (34) Craig Masson (46) Kudzai Nyangoni With the Group since 1980 National diplomas in mechanical engineering and business management (Unisa) Managing director of Howden Power, an operating division of Howden Africa (Pty) Limited, director of James Howden Holdings Limited, Executive Committee member and Exco Risk Committee member. With the Group since 2005 B.Phil Hons (Marketing) National diploma in electrical engineering, MBA general mgt (major marketing and company strategy) (University of the Free State), advanced business communication (Unisa), advanced business-tobusiness marketing Corporate affairs and Group marketing director. Director of James Howden Holdings (Pty) Limited and Howden Donkin (Pty) Limited, Executive Committee member and Exco Risk Committee member. With the Group since 2011 Admitted Attorney, BA (Law), LLB (Hons), H. Dip Corporate Law Howden Africa Holdings Ltd Company Secretary, Howden Africa (Pty) Ltd Company Secretary, James Howden Holdings (Pty) Ltd Company Secretary, Howden Donkin (Pty) Ltd Company Secretary, Executive Committee member, Exco Risk Committee member, Sustainability Committee member, Governance Committee member. With the Group since 2009 BSc (Hons) Mechanical Engineering, MBA (Finance), graduate diploma in marketing management (IMM), PrEng registered professional engineer with Engineering Council of South Africa (ECSA), Council Member of ECSA, President of South African Institution of Mechanical Engineering (SAIMechE) Managing director of James Howden Holdings (Pty) Limited to lead both Howden Projects and Howden Fan Equipment divisions, was director of Howden Africa (Pty) Limited, Executive Committee member of Howden Africa Holdings Limited and Risk Committee member. For details on directorate changes, please refer to the corporate governance report on page 53. (41) Massimo Borello (52) Ancherien du Plessis With the Group since 2015 BSc Eng (Mech) (Wits) General manager of Howden Donkin (Pty) Limited. Director of Howden Donkin (Pty) Limited, Executive Committee member and Exco Risk Committee member. With the Group since 1995 BComm (Human Resources Management) (University of Port Elizabeth) Human resources director of Howden Africa (Pty) Limited. Executive Committee member, Exco Risk Committee member and Sustainability Committee member. For Howden Africa Holdings Limited director remuneration, please refer to note 35 of the annual fi nancial statements and the remuneration report on page 61. Howden Africa Holdings Limited does not have any prescribed offi cers. 66 Howden Integrated annual report 2016

69 Howden Integrated annual report