Integrated annual report 2016 - Howden 2016.pdf · The 2016 integrated report includes the...

Integrated annual report 2016

Scope and boundary of the reportThe 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 2016. 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:www.howden.co.za

Board responsibility statementThe 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 2017.

Ian H BranderChairman of the boardDuly authorised by the board

Mitesh PatelIndependent non-executive director and Chairman of the Audit and Risk Committee Duly authorised by the board

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 fi nancial statements 74

Notice of annual general meeting 136

Form of proxy 143

Corporate information IBC

Our values

For quick access on your mobile to the Howden website, scan this QR code.

01 02

0305

04

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

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

We compete for shareholders based on our performance

To consistently attract and retain loyal

shareholders, we must deliver best-of-

class results for:

Profi ts

Working capital

Cash fl ow

in action

Leading-edge innovation defi nes 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

For additional information visit our website:

www.howden.com

1Howden Integrated annual report 2016

Our top six industries

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 diff user system, off ers a unique high performance across the

entire duty range.

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.

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.

Iron and Steel

Cement

Waste Water Treatment

2 Howden Integrated annual report 2016

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 40 000 boiler draught fans and almost 5 000 rotary heat exchangers in over 100 countries making it a leading supplier to the industry.

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.

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. .

Power Generation

Mining

Petrochemical


Financial and non-fi nancial highlights

2016 2015 % change

Economic

Revenue R’000 1 604 535 1 483 276 8.2

Earnings per share cents 332.31 327.94 1.3

Earnings retained over reporting period R’000 218 421 215 553 1.3

Total taxes paid including VAT, income tax, rates etc R’000 71 974 81 536 (11.7)

B-BBEE status dti scorecard Level 4 Level 3

B-BBEE status Value-added factor Yes Yes

Social

Total employees number 538 522 3.1

Turnover by employee R’000 2 982 2 842 4.9

Total training spend R’000 3 914 6 897 (43.3)

Average training hours per employee hours 82 75 9.3

Apprentices to date number 338 310 9.0

Total hours worked (Booysens and Port Elizabeth) 1 137 419 1 210 368 (6.0)

Total hours worked (all sites including on customer sites) number 3 696 363 3 012 908 22.7

Employee opinion survey participation number 396 – –

Employees tested for chronic illnesses number 196 176 11.4

Employees tested for medical fi tness number 360 381 (5.5)

SED/CSI spend rand 2 006 420 1 502 819 33.5

Disabling incidents frequency rate (DIFR) ratio 0.34 0.33 3.0

Lost-time injuries (LTI) number 6 5 20.0

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 R’000 – – –

Monetary value of fi nes repeatedly paid/imposed due to non-compliance with the law R’000 – – –

Environment (Booysens site)

Diesel/fuel consumed per man hour litres 0.01 0.008 25.0

Total portable and bulk gas consumed per man hour kg 0.087 0.086 1.2

Water consumed litres 8 880 10 591 (16.2)

Electricity consumption kilowatt hour 1 823 017 1 855 909 (1.8)

Year ended 31 December

Performance indicators

Earnings per share

332.31 cents

Cash and cash equivalents

R909.3 million

Revenue

R1 604.5 million

Increased by 1.3% from327.94 cents in 2015

Increased by 24.5% fromR730.2 million in 2015

Increased by 8.2% from R1 483.3 million in 2015


Our sales into key industries (%)

Business trends

201659%

2%3%4%

10%

2%

20%

Transport

Petrochemical

HVAC

Steel/cement

Industrial

Mining

Power

2015

Transport

Petrochemical

HVAC

Steel/cement

Industrial

Mining

Power

54%

3%3%

7%

14%

2%

17%

201460%

3%3%2%

15%

1%

16%

Transport

Petrochemical

HVAC

Steel/cement

Industrial

Mining

Power

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2 000 000

Revenue(R’000)

2012 2013 2014 2015 2016

1 31

7 20

0

1 68

2 83

2

1 58

8 02

2

1 48

3 27

6

1 60

4 53

5

0

100

200

300

400

500

Headline earning per

share (cents)

2012 2013 2014 2015 2016

244.

05

474.

67

410.

22

329.

62

332.

36

0

100 000

200 000

300 000

400 000

500 000

Profit before tax(R’000)

2012 2013 2014 2015 2016

229

369

461

808

350

785

302

480

303

105

Our customers’ appetite across all industries for major original equipment manufacturing capital investment remains subdued due to current economic climate and funding shortages.

Africa and world mining markets remain subdued.


Snapshot of Howden

Is to be Africa’s leading application engineer,

providing lifetime solutions in air and gas-handling.

Howden business system

Our vision

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).

■ Quality

■ Delivery

■ Cost

■ Growth

Vo

ice

of customer

People

Pla

n

Process

CONTINUOUS

IMPROVEMENTWORLD-CLASS

PERFORMANCE


Group structure

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 AFRICAHOLDINGS LIMITED

47.90%

Howden GroupSouth Africa

Limited

44.61%

Institutional and private investors

100%

FANS AND HEAT EXCHANGERS

100%

ENVIRONMENTAL CONTROL

100%

FABRICATION TECHNOLOGY

7.49%

James Howden & Godfrey Overseas

Limited


Fans and Heat ExchangersRevolving Around YouTM

83.44%Revenue

Fabrication TechnologyRevolving Around YouTM

5.43%Revenue

Environmental ControlRevolving Around YouTM

11.13%Revenue

Group at a glance


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-fi red boiler and

emission control systems used by the power industry.

Signifi cant sales are also made to the mining,

petrochemical, iron and steel and other process

industries.

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.

Fabrication Technology division

The division distributes equipment and fi ller 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 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

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

Products Air gouging and

exothermic cutting Gas equipment Welding consumables Welding equipment

Plasma cutting and

torches Welding automation and

robotics Cutting automation


Five-year Group fi nancial summary

Summarised consolidated statements of comprehensive income

2016R’000

2015R’000

2014R’000

2013R’000

2012R’000

Revenue 1 604 535 1 483 276 1 588 022 1 682 832 1 317 200

Operating profi t 247 611 261 997 326 847 448 885 220 386

Net fi nance income 55 494 40 483 23 938 12 923 8 983

Profi t before income tax 303 105 302 480 350 785 461 808 229 369

Income tax expense (84 684) (86 927) (81 596) (149 811) (68 957)

Profi t for the year 218 421 215 553 269 189 311 997 160 412

Other comprehensive (loss)/income for the year, net of tax (2 716) 1 910 (7 520) (13 736) (3 018)

Total comprehensive income for the year attributable to equity holders of the Company 215 705 217 463 261 669 298 261 157 394

Earnings per share (cents) 332.31 327.94 409.54 474.67 244.05

Dividends per share:

– dividend paid (cents) – – – 30.00 29.00

– special dividend paid (cents) – – – – 146.00

– interim dividend paid (cents) – – – 30.00 25.00

Number of shares (’000)

In issue 65 729 65 729 65 729 65 729 65 729

Weighted average 65 729 65 729 65 729 65 729 65 729

Summarised consolidated statements of fi nancial position

2016R’000

2015R’000

2014R’000

2013R’000

2012R’000

ASSETSNon-current assets 185 931 196 763 201 818 207 432 214 055

Current assets 1 675 109 1 387 607 1 227 645 1 098 945 907 381

Inventories 332 166 235 163 225 405 330 335 369 209

Receivables and prepayments 433 602 422 254 374 552 422 566 389 797

Cash and cash equivalents 909 341 730 190 627 688 346 044 148 375

Total assets 1 861 040 1 584 370 1 429 463 1 306 377 1 121 436

EQUITYCapital and reserves

Shareholders’ funds 1 254 912 1 039 207 821 744 560 075 301 252

LIABILITIESNon-current liabilities 102 066 108 933 118 409 110 245 110 677

Current liabilities 504 062 436 230 489 310 636 057 709 507

Total equity and liabilities 1 861 040 1 584 370 1 429 463 1 306 377 1 121 436

for the year ended 31 December


Value added statement

2016R’000

2015R’000

Revenue 1 604 535 1 483 276

Investment income 55 566 40 510

Less: Paid to suppliers for materials and services 859 742 (804 665)

Total value added 800 359 719 121

Distributed as follows:

To employees as salaries, wages and other benefi ts 483 812 398 783

To lender’s fi nance costs 72 27

To depreciation and amortisation 16 086 15 921

To government as tax expense 84 684 86 927

Total value added distributed 584 654 501 658

Portion of value added reinvested to sustain and expand the business 215 705 217 463

Total value added distributed and reinvested 800 359 719 121

for the year ended 31 December

Total value added

R800 million

27%Reinvested in Group

11%Government

2%Depreciation and amortisation

0%Providers of capital

60%Employees


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 identifi ed:

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

OurStakeholders

EmployeesCustomers

Suppliers

Shareholders and investors

Communities


Stakeholder engagement

Stakeholder Engagement in 2016 Why this engagement is important to us

Employees 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.

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.

Customers 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.


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.

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.


Stakeholder engagement continued

Stakeholder Engagement in 2016 Why this engagement is important to us

Suppliers Ad hoc supplier meetings

Meeting on specifi c projects/orders and end user

requirements are held when required.


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.

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.

Investors 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.


The Sustainability Committee endeavours to engage the

top fi ve shareholders annually to discuss matters of

material concern to them as shareholders.

It is important to promote effective communications with

shareholders to ensure all relevant information is

disseminated, and maintain their confi dence in our

business.

Communities 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.

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 51.


2016 Annual GRI G4 material issues stakeholder engagement outcome matrixThe 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

Effl uents and Waste

23 Equal remuneration for women and men

28

Products impact 37 Supplier labour assessments

14

Compliance 22 Labour practice grievance mechanisms

27

Transport 32

Overall market presence

27

Supplier environmental assessment

17

Environmental grievance mechanisms

28


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 fi ve 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 customer-

facing 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


People are our most

valuable assetCompleted 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.

By using employee

engagement surveys, we

continue to build on this

information to provide

opportunities to improve our

people management

strengths.

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


Our strategy continued

People are our most

valuable assetCompleted 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%


Our offering and our

environmentCompleted 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 benefi ts 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


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.

ESAB South Africa



Chairman’s statement

Non-executive ChairmanIan Brander

In a challenging environment Howden Africa achieved a solid set of results

executivNon-executivIan Brander

In a challenHowden Aset of resu


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 2016.

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 reviewTotal revenue in 2016 increased 8.2% to R1 604. 5 million compared to R1 483.3 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 2016. Revenue and operating profi t increased compared to prior year. Revenue was up by 19.8% to R1 338.8 million and operating profi t up by 32.9% to R283.9 million compared to the corresponding period in 2015. 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 CEO’s review covers operational aspects in more detail.

Black economic empowermentThe Group continues to focus on its broad-based black economic empowerment (B-BBEE) status, covering ownership, management, skills development, enterprise and supplier development and socio-economic 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.

SustainabilitySustainability is an integral part of our business at the economic, social and

The Fans and Heat Exchangers division revenue up

19.8%on prior year

Independently verifi ed as a

B-BBEE value-adding

Level 4 contributor under

the amended code

Howden Africa was

recertifi ed as a top

employer by the Top

Employer Institute

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 managementIt 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 directorsW Thomson joined the board on 1 February 2016 initially as Chief Operating Offi cer before taking over the role of CEO on 1 June 2016. 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 2016. This evaluation and recommendations for improvements have been reviewed and considered by the board.

DividendThe directors have resolved not to declare a dividend.

Management and staffI 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 BranderNon-executive Chairman24 March 2017

the e

GenTota


Chief Executive Offi cer’s review

Revenue of

R1 604.5 million

for 2016 is 8.2% up on prior year

Chief Executive Offi cerWilliam Thomson

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 1996.

ef Exem Tho

million

er

owden Global

ad a presence in

The Company

ce 1996.


Achievements Recertifi cation of the International

Environmental Standard ISO 14001, Occupational Health and Safety Standard OHSAS 18001 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 2015. 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 overviewRevenue of R1 604.5 million for 2016 is 8.2% up on the equivalent period in 2015 of R1 483.3 million.

Operating profi t of R247.6 million is a 5.5% decline from the R262.0 million reported in 2015.

Order intake during 2016 increased to R1 572.7 million, an increase of 10.9% compared to the corresponding period (2015: R1 417.7 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 outlookFans 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 divisionThe 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

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 risksThe 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.

Fabrication

Technology (ESAB) fully

integrated into the business


Chief Executive Offi cer’s review continued

Quest ions and answers

Q Has your manufacturing and service footprint changed?

There has been no change to our manufacturing or service

footprint during 2016. 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 signifi cance 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

profi ts despite the persistent fl at 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 14001 and

OHSAS 18001 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 customer-

oriented 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.


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/disposalsThere 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.

AppreciationA 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 Offi cer

24 March 2017


Chief Financial Offi cer’s review

Increase in revenue by

8.2%to R1 604.5 million

Cash and cash equivalents increased

24.5%to R909.3 million

Aftermarket orders received increased by

14.6%to R1 133.0 million

Chief Financial Offi cerMarinella Vigouroux

I

t

Ci

t

Ai

t

Chief Financial Offi cerMarinella Vigouroux


IntroductionThe 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

2016Rm

2015Rm

% change

Orders received 1 572.7 1 417.7 10.9

New build 439.7 429.4 2.4

Aftermarket 1 133.0 988.3 14.6

Order book 770.4 800.0 (3.7)

New build 321.9 372.0 (13.5)

Aftermarket 448.5 428.0 4.8

OrdersOrders received during 2016 have increased to R1 572.7 million an

increase of 10.9% compared to the corresponding period in 2015

(2015: R1 417.7 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 2015. The business received some

larger orders in the latter part of 2016. 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 R1 238.3 million compared to the

corresponding period (2015: R1 106.5 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.

The new Fabrication Technology division order intake for 2016 is

R94.4 million with R87 million of this converted into revenue in

the period.

Statement of comprehensive income

2016Rm

2015Rm

% change

Revenue 1 604.5 1 483.3 8.2

Operating profi t (EBIT) 247.6 262.0 (5.5)

Operating profi t margin 15.4% 17.7% (2.3)

Net fi nance income 55.5 40.5 37.0

Tax 84.7 86.9 (2.5)

Profi t for the year 218.4 215.6 1.3

RevenueRevenue of R1 604.5 for 2016 is ahead of the equivalent period in

2015 of R1 483.3 million.

The Fans and Heat Exchangers division recorded revenue growth of

19.8% to R1 338.8 million (2015: R1 117.3 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 profi t Operating profi t of R247.6 million is a 5.5% decline from the

R262.0 million reported in 2015.

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.


Chief Financial Offi cer’s review continued

Net fi nance incomeThe 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 taxIncome 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 fi nancial position

2016Rm

2015Rm

%change

Non-current assets 185.9 196.5 (5.4)

Current assets 1 675.1 1 387.6 20.7

Total assets 1 861.0 1 584.4 17.5

Equity 1 254.9 1 039.2 20.8

Non-current liabilities 102.1 108.9 (6.2)

Current liabilities 504.0 436.2 15.6

Total equity and liabilities 1 861.0 1 584.4 17.5

AssetsAssets employed in the Group increased 17.5% from R1 584.4 million

to R1 861.0 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.

LiabilitiesLiabilities 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 fl ows

2016Rm

2015Rm

Cash fl ow from operating activities

Cash generated from operations 216.2 156.8

Interest paid — —

Income tax paid (72.0) (81.5)

Net cash generated from operating activities 144.2 75.2

Net cash generated from investing activities 34.9 27.3

Net cash used in fi nancing activities — —

Net increase in cash and cash equivalents 179.1 102.5

Cash and cash equivalents at beginning of year 730.2 627.7

Cash and cash equivalents at end of year 909.3 730.2

Howden’s continuing focus on sustainable working capital

management has resulted in a satisfactory cash fl ow performance

in 2016. 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.



ConclusionThe 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 Offi cer

24 March 2017


Material issues

Human capitalThe employee review on page 33

discusses the issues of staff training

and development, retention and

equal opportunity

Operational expansion and revenueA 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

GovernanceFor 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

Health and safetyFocused health and safety

reviews on page 42, detail our

commitment to the health,

well-being and safety of all

employees

Quality management and environmentPage 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

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.

The identifi ed 2016 material issuesWe 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:

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.

The committee then reviewed and ranked each

issue in line with its level of importance and

frequency from each stakeholder group.

0102

0304 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.

Identifying Howden’s material issues

The Company, through its board, has formed a sustainability committee, chaired by the Chief Executive Offi cer.

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.

Material issues


Human capitalHowden 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

2016 2015

538 522

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 362 271 91

Permanent wage employees 119 117 2

Fixed term/part-time employees 57 39 18

Wage contractors 0 0 0


Material issues continued

Percentage of permanent employees by activity

Admin

Services

Factory

Operations

26%

46%

16%

12%

Percentage of permanent employees by region

Cape Town

Port Elizabeth

Middelburg

Johannesburg

63%

10%1%

26%

Percentage of permanent employees by length of service

0 – 5 years

6 – 10 years

11 – 15 years

16 – 20 years

20 years+

57%

20%

7%

6%

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 1 053 technical skilled workers were sourced from

labour brokers in 2016.

Percentage of individuals within the organisation’s governance bodies in each of the following diversity categories

0

2

4

6

8

10

Gender

HAHLboard

Exco

7

5

2

8

6

2

Female

Male

0

1

2

3

4

5

Age

30 – 50 yearsold

Over 50 yearsold

Under 30 years old

0

3

4

0

3

5

HAHL board

Exco

0

1

2

3

4

Ethnicity

African White Indian Coloured Other

00 0

2 2

4 4

1 1 1

4

3

5

HAHL board

Exco


Percentage of employees per employee category in each of the following diversity categories

Gender

Number of females

Number of males

20%

80%

Age

Under 30 years old

30 – 50 years old

Over 50 years old

20%

57%

23%

Ethnicity

African

White

Indian

Coloured

Other

42%

37%

5%

14%2%

Disability

Persons with disabilities

Persons without disabilities

1%

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

DeceasedDisciplinary

action Retirement

Resignations (other

positions) Redundancy

2016 1 11 8 43 13

2015 0 8 5 41 38

Turnover ratio

2016 2015

17% 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.


Turnover by age

18 – 30 years old

31 – 45 years old

46 – 60 years old

60 – 65 years old

17%

46%

25%

12%

Turnover by gender

Number of females

Number of males

28%

72%

Turnover by region 2016

Cape Town

Porth Elizabeth

Middleburg

Johannesburg58%

0%

24%

18%

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 benefi ts and remunerationHowden 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.


New hires in age category

18 – 30 years old

31 – 45 years old

46 – 60 years old

60 – 65 years old

25%

57%

18%

0%

New hires by gender

Number of females

Number of males

32%

68%

Percentage of new hires by region

Cape Town

Port Elizabeth

Middelburg

Johannesburg

53%

12%

6%

29%


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 relationsHowden 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

2016 2015 2014

23% 19% 22%

Percentage of employees entitled to belong to bargaining

unit of union

2016 2015 2014

Total entitled 538 522 558

Total exercising right 27% 23% 21%

Number of employee members per recognised union

2016 2015

NUMSA 73 53

UASA 37 53

Solidarity 9 7

A three-year metal and engineering sector wage agreement was

signed in 2014 and therefore no industrial action took place in 2016.

Wage negotiations will commence in 2017, as the current agreement

expires at the end of June 2017.

Number of lost days due to strike action

2016 2015 2014

0 0 3 009*

* Calculated by multiplying the number of employees on strike by the number

of strike days (20).



Other labour related mattersThe 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 entitled to parental leave

Number of females

Number of males

538111427

Total number of employees who took parental leave,

by gender

Total number who took parental leave

Number of females

Number of males

541

Total number of employees who returned to work

after parental leave ended

Total returning to work

Number of females

Number of males

541

Total number of employees who returned to work

after parental leave ended who were still employed

12 months after their return to work

Total still employed 12 months after return to work

Number of females

Number of males

541

Return rate of employees who took parental leave Return rate for females

Return rate for males

100%100%

Retention rate of employees who took parental leave Retention rate of females

Retention rate of males

100%100%

LA16 – number of grievances about labour practices fi led, 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 –


Total number of employees trained

2016 2015 2014

186 273 376

Average training hours per employee per year

2016target

2016actual

2015target

2015actual

82 75 80 7

We will continue to target 82 hours per employee in 2017.

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 2016 31

The number of apprentices at 31 December 2015 31

Report absentee rate (AR) for the total workforce (that is,

total employees plus supervised workers by gender)

Ratio 2%

Details of how AR is calculated

Number of absent days – 2 728

Employees – 538

Total number of workdays available – 253

Development and trainingAt 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%

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%



The number of apprentices at 31 December 2016

Business unit 2016 Fitters and turners Boiler makers WeldersGrand

total2016 HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total HPO HPR HFE Donkin Total

Number of apprentices 14 0 2 0 16 2 0 0 0 2 9 0 4 0 13 31

2015

Number of apprentices 12 0 4 0 16 2 0 2 0 4 7 0 4 0 11 31

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

2004 2 3 0 5 0 0

2005 0 3 0 3 0 0

2006 3 0 2 5 0 0

2007 3 8 1 12 2 3

2008 4 4 4 12 3 0

2009 3 5 3 11 5 0

2010 2 7 3 11 11 1

2011 3 5 2 10 12 0

2012 3 9 0 12 10 1

2013 1 2 5 8 8 2

2014 0 6 6 12 11 0

2015 0 0 0 0 11 1

2016 2 8 2 12 7 1

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 2014 32



Disabled learner development programme

2015 target intake 8

2015 actual intake 10


2016 actual intake 9



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 3 4 1 3 4


2014 Offi ce administration NQF 5 2 1 1 2

2014 Bookkeeping NQF 3 1 0 1 1



2015 Project management NQF 4 4 0 4 4



2016 Project management NQF 4 2 0 2 2

2016 Accounting technician NQF 3 1 0 1 1

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 404 – 305

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.

2016 2015 2014

Rand value to tertiary students R345 541 R271 156 R22 672

Number of students sponsored 7 6 2

Rand value of other bursaries R550 990 R619 300 R587 220


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 2017.

There were no hearing-loss cases identifi ed in 2015 and 2016. Our

target is to maintain a zero hearing loss level for 2017.

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

2016 196

2015 176

2014 318


Health, safety, quality and environment reviewHealthTo 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 hearing-

loss 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 fi tness 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

infl uenza

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

Port Elizabeth and Booysens

Tests conducted 2016 2015 2014 2013

Cholesterol 196 176 318 252

Body mass index 196 176 318 252

Blood glucose 196 175 318 252

Blood pressure 196 172 318 252

HIV 122 108 237 187


Number of employees participating in annual medical

fi tness test to monitor general health

2016 2015 2014

360 374 430

Number of employees who received fl u vaccinations

2016 2015 2014

114 138 167

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 emails. 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.

SafetyResponsibility 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

Port Elizabeth Booysens

HIV/Aids 2016 2015 2014 2016 2015 2014

Number of staff screened 72 60 84 124 118 234

Number of staff electing voluntary counselling and testing 34 26 50 88 82 187

Percentage of staff electing to know their status (%) 47.2 43 60 71 69.5 79

Port Elizabeth Booysens

Number of conditions 2016 2015 2014 2016 2015 2014

Unstable BMI 21 18 37 101 29 95

Cholesterol 27 18 31 67 26 79

Hypertension 18 16 22 51 18 51

Heart disease 1 13 4 17 13 10

HIV high risk 3 3 2 39 12 19

Total 70 68 96 275 98 254

Number of alerts 59 30 98 264 30 184


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


ISO 14001:2004

Achieved the integrated


ISO 14001:2004 Management

System and Howden

Middelburg site is also under

the umbrella certifi cate

Maintain our umbrella certifi cate

– integrated


ISO 14001:2004

Lost-time accident-free hours

fl uctuated across the months

and by end of December 2015

we accumulated 421 114

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 2016 –

431 589 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 18001 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 2016. 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.


Lost-time accident-free hours 2016

2011LTI

2011DIFR

2012LTI

2012DIFR

2013LTI

2013DIFR

2014LTI

2014DIFR

2015LTI

2015DIFR

Total lost-time-free

hours since last in Dec 16

2016LTI

2016DIFR

Booysens offi ces and factories 0 0.0 4 0.79 1 0.19 0 0.0 0 0.0 749 622 0 0

Power site work 0 0.0 2 0.21 4 0.36 3 0.32 4 0.44 2 505 117 5 0.40

Fan and project site work 0 0.0 1 0.58 0 0.0 0 0.0 0 0.0 217 184 0 0

Donkin offi ce and factory 1 0.89 0 0.0 0 0.0 0 0.0 1 1.33 170 613 1 1.17

Total Africa 1 0.07 7 0.40 5 0.25 3 0.18 5 0.33 3 642 536 6 0.34

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 2017.

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 managementHowden’s approachSince 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.

ProgressThe 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 2016. The

James Howden business unit operates in accordance with the SABS

Quality Management System.

Environmental reviewApproachThe 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


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)

2016 2015 2014

69.16 132 200.274

Weight of heavy steel removed for recycling (tonnes)

2016 2015 2014

89.38 212.932 113.4

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)

2016 2015 2014

8.12 5.88 13.34

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)

2016 2015 2014

8.19 16.54 10.96

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 programmesThe Booysens site, the Howden Power Services Middelburg offi ce

and Port Elizabeth site were successfully assessed against the

provisions of ISO 14001 in 2016.

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 packagingHowden manufactures products largely made of steel and derivatives.

Steel is bought in as a raw material and processed to form end-

products 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 managementSince 2009, we have used a specialist external service provider to

assist in measuring and managing waste through a separation-at-

source 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 2016.

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.



No major oil spills were recorded in 2016. There were, however,

37 minor oil spills reported in 2016 (2015: 57).

Energy, water, gas and fuel managementFollowing 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 2016.

Electricity consumption (measured in kilowatt hour)

2016 2015 2014

1 823 017 kWh 1 855 909 KwH 2 421 390 KwH

Water consumption (Litres)

2016 2015 2014

8 880 10 591 10 806

A number of water leaks were identifi ed and repaired during the

course of 2016. As a result water usage was substantially reduced.

Medical waste

Medical waste removed from site (kg)

2016 2015 2014

22.89 39.9 63.63

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)

2016 2015 2014

17.72 8.45 7.64

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)

2016 2015 2014

37.86 37.62 40.12

Total volume of recycled waste (tonnes)

2016 2015 2014

9.867 9.182 8.95

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

Gas and fuel consumption

2016 2015 2014

Total hours worked at Booysens 749 622 1 003 302 969 083

Total portable cylinder gas consumed 8 168.5kg 12 649.3kg 13 316kg

Total portable gas consumed per man hour 0.011kg 0.013kg 0 014kg

Total bulk container gas consumed 57 136.41kg 73 267.642kg 84 782kg

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 7 129 litres 7 870 litres 9 393 litres

Total diesel/fuel consumed per man hours 0.010 litres 0.008 litres 0.010 litres

Variations to previous years will always be dependent on production requirements of that year impacting the consumption numbers.


Transport and emissionsParticulate 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 2016. 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.


FuelCO

2 (kg per unit

of consumption) Estimate Actual use Unit CO

2 (kg)

CO2

(tonnes)

Petrol fuel 2.39kg of CO2

Average car

consumption

12.5 litres/100km

5 865 851 km 14 019 383.89 14 019.38

Diesel fuel 2.7kg of CO2

Average car

consumption

12.5 litres/100km

6 555 322 km 17 699 369.4 17 699.37

Natural gas 2.666kg of

CO2 per kg

65 326.41 59 904.91 kg 159 706.5 159.71

LPG 1.7kg/ litre 16 234.93 5 400 kg 9 180 9.18

Electricity 0.99kg/kWh 1 763 113.55 1 823 017 kWh 1 804 786.83 1 804.79

Air travel Airlines and agent

supplied tonnes CO2

per fl ight for 2016

1 165 947.193 km 192 381.29 192.38

Total carbon

emissions

33 884 807.91 33 884.81


Emission guide Supportive evaluation

Australian government – Department of the

Environment (estimated greenhouse gas emission on

06/01/2014 www.environmetal.gov.au/settlements/

transport/fuel guide/environmental)

1 litre of petrol weighs 750g. Petrol comprises 87% carbon, or 652g carbon

per litre of petrol. To combust this carbon to CO2, 1 740g of oxygen is

needed. The sum is then 652 + 1 740 = 2 392g CO2/litre of petrol

(06/01/2014 www.ecoscore.be/en/how-calculate-CO2-consumption)

1 litre of diesel weighs 835g. Diesel comprises 86.2% carbon, or 720g carbon

per litre diesel. To combust this carbon to CO2, 1 920g of oxygen is

needed. The sum is then 720 + 1 920 = 2 640g CO2/litre diesel (06/01/2014

www.ecoscore.be/en/how-calculate-CO2-consumption)

Conversion factors by Defra/DECC in 2013

(www.carbontrust.com. +44(0)20 7170 7000)

Low-calorifi c:

1kg L-gas comprises 61.4% carbon, or 614g carbon per kg L-gas. To combust

this carbon to CO2, 1 638g of oxygen is needed. The sum is then 614 + 1 638 =

2 252g CO2/kg L-gas.

High-calorifi c:

1kg H-gas comprises 72.7% carbon, or 727g carbon per kg H-gas. To combust

this carbon to CO2, 1 939g oxygen is needed. The sum is then 727 + 1 939 =

2 666g CO2/kg H-gas (06/01/2014 www.ecoscore.be/en/how-calculate-CO

2-

consumption)

Australian government – Department of the

Environment (estimated greenhouse gas emission on

06/01/2014 www.environmetal.gov.au/settlements/

transport/fuel guide/environmental)

1 litre LPG weighs 550g. LPG comprises 82.5% carbon, or 454g carbon per litre

LPG. To combust this carbon to CO2, 1 211g of oxygen is needed. The sum is

then 454 + 1 211 = 1 665g CO2/litre LPG (06/01/2014 www.ecoscore.be/en/

how-calculate-CO2-consumption)

Eskom factor report 2012. Environmental footprint

0.99kg of CO2/kWh electricity generated according to

Eskom latest calculations (www.carbontrust.com

+44(0)20 7170 7000)

Eskom announces unchanged electricity emission factor for 2012 (Urban Earth,

Eskom integrated report 2012). Energy conversion factors used are kilograms

carbon divide equivalent (kgCO2e) per unit of fuel – (Carbon Trust – Defra/ DECC,

US EPA. www.carbontrust.com +44(0)20 7170 7000 Financialresults.co.

za/2012/Eskom). One tonne CO2 emissions occupies 556m3 of space at 25°C

(https://www.capetown.gov.za)

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).

www.carbontrust.com +44(0)20 7170 7000

Conversion factors by Defra/DECC in 2013.

www.carbontrust.com +44(0)20 7170 7000

Shipping emits 10kg CO2 into the atmosphere per km (www.carbontrust.com

+44(0)20 7170 7000)


Transformation and society Economic transformation and empowermentHowden 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.

2016 2015

Level 4 Level 3*

(80.41 points) (78.83 points)

* Score calculated in terms of the original codes.

The Group is recognised as a value-adding supplier.

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 2018. We intend to maintain our Level 4

contributor status in 2017.

Strategy to comply with the amended codesThe 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 2016.

Key areas of focus

Management and control

2016%

2015%

69.8 70.6*

* 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*

2016%

2015%

62 60


Please refer to our employee review on pages 33 to 41 for

more detail.

Skills developmentCandidates, including women, are recruited annually for in-house

Merseta-approved apprenticeships.

Skills development score

2016%

2015%

93.8 87.7

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 2016.

Please refer to our employee review on pages 33 to 41 for more

detail.

Enterprise and supplier developmentEnterprise 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.



Preferential procurement spend

2016 2015

R529 million R923 million

Number of B-BBEE certifi ed vendors

2016 2015

Number % Number %

665 56.6 655 46.5

Supplier development and enterprise development

2016 2015

80.45% SD

and ED**

46% SD

100% ED*


** Excluding preferential procurement of this part of the element.

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 spendSocio-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)

2016 2015

R2 006 420 R1 502 819

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.

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.

Total SED spend (excluding SD and ED spend)

2016 2015

Spend on education R668 555 R461 186

Spend on health including HIV/Aids R682 831 R544 045

Spend on basic needs and social development R655 033 R497 587

Corporate social investmentThe 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

2016 2015

R50 000 R55 000

Update on previous year’s fl agship projectsMount Pleasant Primary School

We have continued our support of Mount Pleasant Primary School

with a further contribution being made in 2016.

The amount contributed was again utilised towards one classroom

assistant and two student teachers.

2015/2016 fl agship project

A fl agship project was undertaken in 2015/2016 in respect of

Modikwa Platinum Mine and was fi nalised during the course of 2016.

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 R112 000 was

donated by Howden towards the project.

This project will continue to benefi t matriculants in the area on an

ongoing basis.

Future fl agship projects

In 2017, we aim to cooperate with key clients to assist communities

around their operations in stakeholder prioritised areas of concern.


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 frameworkThe 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 directorsComposition

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

Audit and Risk Committee

(ARC)

Remuneration,Nomination, Social and

Ethics Committee

(RENSEC)

Exco Risk Committee Governance Committee Sustainability Committee

Executive Committee(Exco)

HAHL boardof directors


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

2017. 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 2017.

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 2016. Willie Thomson

was appointed the new Chief Executive Offi cer for the Company with

effect from 1 June 2016.

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 2016.

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 2016. 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 2016. These targets are assessed

annually by RENSEC and the next assessment will be in June 2017.

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).


Corporate governance report continued

Subcommittees of the executive committee (Exco)

Committee Composition Main responsibility

Exco Risk

Committee

W Thomson (Chair) and Exco members 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

Sustainability

Committee

W Thomson (Chair)

M Vigouroux

C Masson

A Buys

(T Bärwald, K Johnson, and C Koopman left the

group during the course of 2016)

Implementation of Global Reporting Initiative (GRI

G4) guidelines, including:


Materiality assessments

Monitoring key performance indicators

Governance

Committee

M Vigouroux (Chair)

C Masson

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.

Refer to page 66 for details of the executive management team.

Board committeesThe 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.


Meetings and proceduresAgendas 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.

2016 meeting attendance

Member name Date of appointment 23 Mar 16 1 Jun 16 24 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 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 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 25 August 2011


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.



Board, ARC and RENSEC evaluationsPerformance 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’ dealingsDirectors, 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 2016.

Company SecretaryThe 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

2016. 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 contributionsIt is Group policy not to make donations or other contributions to

political parties or causes.

Sustainable development governanceIt 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 performanceA review by RENSEC of the Group’s ethical performance appears on

page 62 of the integrated annual report.

IT governanceKing 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:


IT governance compliance

King III IT governance recommendation Implementation status

The board should be responsible for information

technology (IT) governance/IT governance

should be placed on the board agenda

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.

IT should be aligned with the performance and

sustainability objectives of the Company

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 should delegate to management the

responsibility for the implementation of an IT

governance framework

The board has delegated to the Chief Information Offi cer and executive

management the responsibility to control and manage the IT governance

framework.

The board should monitor and evaluate

signifi cant IT investments and expenditure

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 should form an integral part of the Company’s

risk management

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

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.

A risk committee and audit committee should

assist the board in carrying out IT responsibilities

Exco risk management and board audit and risk committees are in place and IT

risks are reported to these committees where applicable.

Legal complianceThe 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 anti-

corruption 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 complianceThe 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 2016.



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 appliedUnder 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


Applied Partially appliedUnder 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



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-by-

case 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: www.howden.co.za.


The Remuneration, Nomination, Social and Ethics CommitteeThe 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.

MembershipThe 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 philosophyThe 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 policyEmployee 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 benefi ts

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 2001. 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 2001.

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 2015.

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 2016. 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.

Remuneration, nomination, social and ethics report


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 1998.

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

Remuneration, nomination, social and ethics report continued


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

The Group’s efforts in respect of corporate social investment are more

fully dealt with on page 51 under the heading “Transformation and

society”.

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 assuranceThe 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


Board of directors

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 2011.

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).

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 2014.

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.

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 2007.

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

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 2012.

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.

(45) Morongwe Malebye (42) Mitesh Patel (66) Humphrey Mathe (55) Ian Brander


Chief Financial Offi cer (CFO)

CA(SA)

Marinella Vigouroux has been Howden Africa Holdings Limited’s CFO since 8 December 2016.

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

Non-executive director

CA(UK)

James Brown has been a non-executive director of Howden Africa Holdings Limited since 3 March 2005.

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 Executive Offi cer (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.

(57) James Brown (35) Marinella Vigouroux (55) William Thomson


Executive management (Exco)

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.


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-to-business 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.


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.


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.


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.


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.

(41) Massimo Borello (52) Ancherien du Plessis

For details on directorate changes, please refer to the corporate governance report on page 53.

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.

(53) Clinton Swaffi eld (47) Geoffrey Chingwaru (34) Craig Masson (46) Kudzai Nyangoni



Corporate governance

Design and operation of supplied and serviced equipment

Operational

Insurable

General legislation and regulatory compliance

A consistent methodology is applied by each Howden business unit

to identify and rate risks by likelihood and fi nancial impact. Risks are

then categorised as either low, medium, high or major. This rating and

categorisation determines the intensity of the subsequent risk

management process. Mitigating actions are implemented, monitored

and reported on at every level. Reporting is quarterly, starting in

February each year.

At the operational level, identifi ed risks are entered in operational risk

registers in a descriptive but abbreviated form. Risks rated high or

major are then extracted and entered in detail on operational risk logs.

Risk management report process

Businessunits

Exco riskcommittee

Audit and risk

committee

Group register – medium and major risk

Businessunit risk registers

Our risk tolerance levels are set using a likelihood/consequence

assessment table.

For detailed information on the Risk Committee’s composition and

structure, responsibilities, meetings and activities, please refer to the

corporate governance review on page 77.

Our key risk areas

Loss of key customers

Failure to win key contracts

Downturn in a critical industry sector

Industrial action and social unrest

Our approachManaging risk is critical to the success and sustainability of Howden

as it is faced with a wide variety of risks, which can have a strategic,

fi nancial, operational and reputational impact. Effectively managing

risk through a consistent process also supports the delivery of

Howden’s strategic objectives.

Our risk management model is based on:

Regularly reviewing the Company’s risk, capacity, appetite and

tolerance

Monitoring changes, the ongoing effectiveness of business

controls; and the social and political environment that could alter

current and planned operations and objectives

Setting strategic objectives

Identifying risks to achieving those objectives

Assessing the likelihood and consequence of risks

Accepting or mitigating identifi ed risks

Assessing residual risk after mitigation measures

Modifying controls as necessary

Independent risk-based audits and reporting

High and major corporate risks are then added to the Executive

Committee’s risk register and entered into corporate risk logs for

quarterly review by the Risk Committee. Risks are scored to

determine their potential effect. Once this review has taken place, high

and major risks are presented to the Audit and Risk Committee and,

in turn, the board.

Risk, capacity, appetite and tolerance

Our risk capacity is to maintain short and long-term liquidity. Available

cash and loan facilities shall be in place to ensure that the business

does not experience any long-term liquidity issues.

Our risk appetite is focused on ensuring that the business is

sustainable. This includes achieving annual growth through the

strategic plan and supporting initiatives, avoiding negative impact on

brand reputation and mitigating any negative market conditions that

could signifi cantly impact our fi nancial performance.

Our risk tolerance is defi ned as operational. Our tolerances help

ensure that the business does not breach its risk appetite. This is

completed by setting limits and monitoring, mitigating and giving

frequent feedback on performance.

The risk capacity, appetite and tolerance are identifi ed by the CEO

(risk manager) in consultation with the Risk Committee. The CEO

reviews and recommends the risk appetite and tolerance levels to the

Audit and Risk Committee on an annual basis. After consideration the

Audit and Risk Committee will recommend, on an annual basis, to the

board that the risk appetite and tolerance be approved.

Risk types on which risk tolerance limits and controls are set and

monitored are:

Health, safety and environment

Human capital management

Terms and conditions supply and purchase

Markets/customer exposure

Financial control

Risk management report


Description Mitigation action

Loss of key

customers

A division may lose a major customer.

This could have a signifi cant impact on the Group and

would result in a signifi cant reduction in turnover and

profi ts.

Ongoing active marketing and maintaining a focus on

providing technical solutions to meet customers’ needs.

Continuous gathering of market intelligence and

competitor analysis.

Failure to

win key

contracts

Failure to win a substantial portion of upcoming contracts

would decrease potential turnover and profi t and could

have the effect of establishing long-term competitors.

Maintaining close working relationships with major

customers. Strive to engage early in the customer process

i.e. from the feasibility stage of projects.

Key factors for ensuring this are: Constantly maintaining

high skill levels throughout the organisation, focusing on

high levels of customer service, retaining brand strength

and managing a competitive supply chain.

Downturn in

critical

industry

sector

A reduction in capital investments across the local

industries reduce opportunities to supply new equipment.

Expansion of the customer base, via market growth in the

rest of Africa.

Industrial

action and

social

unrest

Industrial action and social unrest in South Africa may

result in the deferment or cancellation of investment and

shortage of reliable sources of supply in the country. More

looming strikes may further damage investor confi dence.

Maintain a low overhead cost base of key skills, utilising

resources from external contractors to manage peaks in

workload. Reduce reliance on local markets through

expansion into the rest of Africa.

Shortage

qualifi ed

resource

Transfer of core technical skills within the business, and

retention of qualifi ed engineers, in an industry where such

skills are a limited resource.

Howden conducts formal succession planning and skills

development training. A formal appraisal and development

programme supports the retention strategy.

Mentorship programmes are in place for critical skills

transfer from experienced employees. This risk is

constantly monitored.

Non-

compliance

Infringing anti-bribery, anti-competitive and anti-corruption

laws could result in reputational damage, breach of

contract, loss of work and customers, and reduced

turnover and profi tability.

Policies and procedures are in place across the business.

Formal compulsory training is provided to all new starts

and refresher courses issued to associates. This is

monitored by regular audits of existing controls. This risk

has been reduced.

Supply

disruption

There is a risk that industrial action both in-house and at

our subcontractors could result in signifi cant disruption to

our supply chain and result in contract penalties and

reputational damage.

A committee manages business continuity and sets out

contingency plans to mitigate potential disruptive events,

including supply disruption.

Proactive engagement with unions and bargaining councils

are an integral part of the process. The business also has

access to the wider Howden Global supply chain in the

event critical deliveries were at risk through local supply

chain disruption.


This report contains standard disclosures from the GRI sustainability guidelines. A list of the standard disclosures and their locations in this

report is contained hereunder.

Standard

disclosure Standard disclosure titlePage number

Identifi ed

omission(s)

Reason(s) for

omission(s)

General standard disclosuresStrategy and analysis

G4-1 Statement from CEO and chairman of the board about the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability

23

G4-2 Description of key impacts, risks, and opportunities 68 – 69

Organisational profi le

G4-3 Name of the organisation Back cover

G4-4 Primary brands, products, and services 2 and 3

G4-5 Location of the organisation’s headquarters Back cover

G4-6 Number of countries where the organisation operates, and names of countries where either the organisation has signifi cant operations

6

G4-7 Nature of ownership and legal form 7

G4-8 Markets served 6, 9, 23, 25 – 27

G4-9 Scale of the organisation 4, 9

G4-10 Workforce breakdown 33

G4-11 Percentage of total employees covered by collective bargaining agreements

37

G4-12 Organisation’s supply chain 50 and 51

G4-13 Signifi cant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain

7

G4-14 Whether and how the precautionary approach or principle is addressed by the organisation.

45 – 49

G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses.

No endorsements

G4-16 List memberships of associations (such as industry associations) and national or international advocacy organisations in which the organisation:(a) Holds a position on the governance body(b) Participates in projects/committees(c) Provides fi nding beyond membership fees(d) Views the membership as strategic

No membership

Identifi ed material aspects and boundaries

G4-17 List all entities included in the organisation’s consolidated fi nancial statements or equivalent documents

Whether any entity included in the organisation’s consolidated fi nancial statements or equivalent documents is not covered by the report

Contents page, 113

G4-18 Process for defi ning the report content and aspect boundaries.

How the organisation has implemented the reporting principles for defi ning report content.

Contents page, 14, 15, 32

Contents page

GRI index


Standard


Identifi ed

omission(s)

Reason(s) for

omission(s)

G4-19 Process for defi ning report content Contents page, 14, 15, 32

G4-20 Aspect boundary inside the organisation for each material aspect

Contents

G4-21 Aspect boundary outside the organisation for each material aspect

Contents

G4-22 Any restatements and the reasons for such restatements No restatements

G4-23 Signifi cant changes from previous reporting periods in the scope and aspect boundaries.

No changes


G4-24 List of stakeholder groups engaged by the organisation 12

G4-25 Basis for identifi cation and selection of stakeholders with whom to engage

12

G4-26 Organisation’s approach to stakeholder engagement 12

G4-27 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns

12, 32 to 51

Report profi le

G4-28 Reporting period Contents page

G4-29 Date of most recent previous report Contents page

G4-30 Reporting cycle (such as annual, biennial) Contents page

G4-31 Contact point for questions regarding report contents Back cover

G4-32 Whether report has been externally assured and whether an “in accordance” approach has been adopted

Not assured

G4-33 Organisation’s policy and current practice with regard to seeking external assurance for the report

60

Governance

G4-34 Governance structure of the organisation, including committees of the highest governance body

52 – 60

Ethics and integrity

G4-56 Organisation’s values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics

10, 61 – 63

Specifi c standard disclosuresCategory: economicAspect: economic performance

G4-EC1 Direct economic value generated and distributed 11

G4-EC3 Coverage of the organisation’s defi ned benefi t plan obligations 117 – 119

G4-EC4 Financial assistance received from government 125

Category: environmentalAspect: materials

G4-EN1 Materials used by weight or volume 46 and 47


Standard


Identifi ed

omission(s)

Reason(s) for

omission(s)

Aspect: energy

G4-EN3 Energy consumption within the organisation 47

Aspect: emissions

G4-EN16 Energy indirect greenhouse gas (GHG) emissions (Scope 2) 48 and 49

G4-EN17 Other indirect greenhouse gas (GHG) emissions (Scope 3) 48 and 49

Aspect: effl uents and waste

G4-EN23 Total weight of waste by type and disposal method 45 and 46

Aspect: products and services

G4-EN27 Extent of impact mitigation of environmental impacts of products and services

47

Aspect: transport

G4-EN30 Signifi cant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce

48

Category: socialSub-category: labour practices and decent workAspect: employment

G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region

33 – 35

G4-LA2 Benefi ts provided to full-time employees that are not provided to temporary or part-time employees, by signifi cant locations of operation

37 and 38

G4-LA3 Return to work and retention rates after parental leave, by gender

38

Aspect: labour/management relations

G4-LA4 Minimum notice periods regarding operational changes, including whether these are specifi ed in collective agreements

38

Aspect: occupational health and safety

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

42 – 45

Aspect: training and education

G4-LA10 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

39 – 41

G4-LA11 Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

39 – 41

Aspect: diversity and equal opportunity

G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

34

GRI index continued


Standard


Identifi ed

omission(s)

Reason(s) for

omission(s)

Aspect: equal remuneration for women and men

G4-LA13 Ratio of basic salary and remuneration of women to men by employee category, by signifi cant locations of operation

37

Aspect: labour practices grievance mechanisms

G4-LA16 Number of grievances about labour practices fi led, addressed, and resolved through formal grievance mechanisms

38

Subcategory: human rightsAspect: non-discrimination

G4-HR3 Total number of incidents of discrimination and corrective actions taken

38

Subcategory: societyAspect: anti-corruption

G4-SO4 Communication and training on anti-corruption policies and procedures

41

Aspect: public policy

G4-SO6 Total value of political contributions by country and recipient/benefi ciary

56

Aspect: anti-competitive behaviour

G4-SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes

None

Aspect: compliance

G4-SO8 Monetary value of signifi cant fi nes and total number of non-monetary sanctions for non-compliance with laws and regulations

4

Subcategory: product responsibilityAspect: customer health and safety

G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their lifecycle, by type of outcomes

42 – 45

Aspect: market communication

G4-PR6 Sale of banned or disputed products 45

G4-PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

45

Aspect: customer privacy

G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

45

Aspect: compliance

G4-PR9 Monetary value of signifi cant fi nes for non-compliance with laws and regulations concerning the provision and use of products and services

4



Annual fi nancial statements

Contents

Directors’ responsibility 75

Company Secretary certifi cate of compliance

76

Audit and Risk Committee report 77

Independent auditors’ report 81

Directors’ report 84

Annual fi nancial statements 86


The external auditors are responsible for reporting on the annual

fi nancial statements.

The annual fi nancial statements are prepared in accordance with

International Financial Reporting Standards (IFRS) and incorporate

responsible disclosures in line with the accounting philosophy of the

Group. The annual fi nancial statements are based on appropriate

accounting policies, consistently applied, and supported by

reasonable and prudent judgements and estimates. The directors

believe that the Group will be a going concern in the year ahead. For

this reason, they continue to adopt the going concern basis in

preparing the Group annual fi nancial statements.

The annual fi nancial statements that appear on pages 86 to 135 have

been approved by the board of directors and are

signed on its behalf by:

J Brown W Thomson

Non-executive director Chief Executive Offi cer

The directors are responsible for the integrity of the annual fi nancial

statements and related information in the integrated annual report.

For the board to discharge its responsibilities, management has

developed and maintains a system of internal fi nancial control. The

board has ultimate responsibility for this system of internal control and

reviews the effectiveness of its operations primarily through the Audit

and Risk Committee and other risk-monitoring committees and

functions.

Internal fi nancial controls include risk-based systems of accounting

and administrative controls designed to provide reasonable, but not

absolute, assurance that assets are safeguarded and transactions are

executed and recorded in accordance with generally accepted

business practices and the Group’s written policies and procedures.

These procedures are implemented by trained, skilled staff with clearly

defi ned lines of accountability and appropriate segregation of duties.

The controls are monitored by management and include

comprehensive budgeting and reporting systems operating within

strict deadlines and an appropriate control framework.

Directors’ responsibility


In my opinion as Company Secretary, I hereby certify, in terms of section 88(2) of the Companies Act 71 of 2008, that for the period ended

31 December 2016, Howden Africa Holdings Limited has lodged with the Registrar of Companies all such returns as are required of a public

company in terms of the Act and that all such returns are true, correct and up to date.

CR Masson

Company Secretary

24 March 2017

Company Secretary certifi cate of compliance


Audit and Risk Committee report

Overseeing the Group’s relations with the external auditors,

including assessment of independence and effectiveness of the

external auditor

Making recommendations to the board on the appointment,

retention and removal of the external auditors and the tendering of

external audit services

Reviewing and monitoring the effectiveness of the Group’s internal

control and risk-management systems, including reviewing the

process for identifying, assessing and reporting all key risks

Approving the terms of reference and plans of the internal audit

function

Approving the internal audit plan and reviewing regular reports

from the head of internal audit on the effectiveness of the internal

control system

Receiving reports from management on the key risks of the Group

and management of those risks

Performance in main areas of responsibility are detailed below:

Statutory duties

The committee executed its duties in terms of the requirements of

King III. Instances where King III requirements have not been applied

are explained in the corporate governance statement in the integrated

report.

External auditor – appointment and independence

A key factor that may impair auditors’ independence is a lack of

control over non-audit services provided by the external auditors. In

essence, the external auditors’ independence is deemed to be

impaired if the auditors provide a service that:

Results in the auditors acting as a manager or employee of the

Group

Puts the auditors in the role of advocate for the Group

Creates a mutuality of interest between the auditors and the Group

Howden addresses this issue through three primary measures,

namely:

Disclosure of the extent and nature of non-audit services

The prohibition of selected services – this includes the undertaking

of internal audit services

Prior to engagement for the provision of non-audit services,

approvals must be obtained from:

(a) Ernst & Young’s lead audit partner in the US

(b) Howden’s ultimate controlling parent company, Colfax

Corporation

Once above approvals have been obtained, the Howden Africa Audit

and Risk Committee will be required to confi rm the appointment.

Howden’s policy on the provision of non-audit services is regularly

reviewed.

We are pleased to present our report for the fi nancial year ended

31 December 2016.

The Audit and Risk Committee is an independent statutory committee

appointed by shareholders. Further duties are delegated to it by the

board of directors. This report includes both sets of duties and

responsibilities.

About the committee The committee has adopted formal terms of reference approved by

the board. The committee has conducted its affairs and discharged

its responsibilities in compliance with its terms of reference, which are

available on request.

Committee members

The committee is independent and must, under its terms of reference,

comprise three independent, non-executive directors. Committee

members are nominated by the Remuneration, Nomination, and

Social and Ethics committees and then recommended by the board

to shareholders for appointment each year.

The following directors offer themselves up for election by

shareholders in terms of section 94(2) of the Companies Act at the

annual general meeting to be held on 1 June 2016 at 13:30:

Mitesh Patel, as chairman

Morongwe Malebye, as member

Humphrey Mathe, as member

These directors are all considered independent non-executive

directors in terms of both the Companies Act and King III.

The committee meets at least four times in a year as per its terms of

reference. During the review period, four meetings were held. The

Chairman of the board, Chief Executive Offi cer, Chief Financial Offi cer,

Chief Audit Executive, external auditor and other assurance providers

(legal, compliance, risk, health and safety) attend meetings by

invitation only.

Refer to page 55 for attendance and annual assessment details and

page 64 for a brief CV on each director standing for election to the

committee.

Role and responsibilities

The committee’s role and responsibilities include statutory duties

under the Companies Act and further responsibilities assigned by the

board. These responsibilities include, but are not limited to:

Monitoring the integrity of the annual and interim fi nancial

statements, the accompanying reports to shareholders and

corporate governance statements

Making recommendations to the board concerning the adoption of

the annual and interim fi nancial statements

for the year ended 31 December 2016


standard period for rotation of the audit engagement partner is fi ve

years and, for any key audit partner, seven years. The current audit

engagement partner (Charles Trollope) was fi rst appointed in 2013 in

accordance with this requirement.

It is Howden’s policy that any partner designated as a key audit

partner of Howden shall not be employed by Howden in a key

management position unless a period of at least two years has

elapsed since the conclusion of the last relevant audit.

The committee ensured that the appointment of the auditor complied

with the Companies Act and any other legislation on the appointment

of auditors.

The committee, in consultation with executive management, agreed

to the engagement letter, terms, audit plan and budgeted audit fees

for the 2016 year.

The committee has nominated, for election at the annual general

meeting, Ernst & Young as the external audit fi rm for the 2017 year.

The committee has satisfi ed itself that the audit fi rm and designated

auditor are accredited as such on the JSE list of auditors and their

advisers.

Non-audit services provided by the external auditors

A policy detailing the procedure for appointing external auditors to

carry out non-audit services has been implemented. The following

non-audit fees were paid to Ernst & Young during 2016:

The committee ensures that the scope of the auditors’ work is

suffi cient and that the auditors are fairly remunerated.

The committee has the authority to engage independent counsel and

other advisers as they determine necessary in order to resolve issues

on auditors’ independence. An annual assessment is undertaken of

the auditors’ effectiveness, independence and objectivity. The

effectiveness assessment involves a review, with the senior fi nance

managers in each of the business units and relevant corporate

functions, of the audit process, including the planning, execution and

reporting activities, and an assessment of the quality, quantity and

leadership of each of the external audit teams involved in the audit.

Any improvement opportunities identifi ed are discussed with the

external auditors. The independence and objectivity assessment is

conducted by a review of compliance with the policies in place in the

Group and within the external auditors to maintain independence and

objectivity. The results of the review are shared with the committee.

The committee has satisfi ed itself that the external auditor was

independent of the Company, as set out in section 94(8) of the

Companies Act, which includes considering previous appointments of

the auditor, the extent of other work undertaken by the auditor for the

Company and compliance with criteria relating to independence or

confl icts of interest as prescribed by the Independent Regulatory

Board for Auditors. Requisite assurance was sought and provided by

the auditor that internal governance processes in the audit fi rm

support its claim to independence.

The external auditors are required to adhere to a rotation policy based

on best practice and professional standards in South Africa. The

Audit and Risk Committee report continued

Ernst & Young non-audit work 2016

Date Invoice number Value (ZAR) Work description

26/02/2016 GB20100005097 37 837.82 Thomas Bärwald – tax equalisation and assistance with preparation and review of Australian income tax return

26/02/2016 GB20100005097 19 471.35 Kevin Johnson – Tax equalisation and assistance with preparation and review of Australian income tax return

28/04/2016 GB20100007492 10 850.62 William Thomson – split invoicing for assistance with tax application and UK fi ling requirements for departure from the UK



Total 92 508.82



Duties assigned by the board

In addition to the statutory duties of the committee, as reported

above, and in line with the provisions of the Companies Act, the

board has determined further functions for the committee, as set out

in the terms of reference. These include:

Integrated reporting

The committee fulfi ls an oversight role on the Company’s integrated

report. The committee considered the Company’s sustainability

information as disclosed in the integrated report and assessed its

consistency with operational and other information known to

committee members, and for consistency with the annual fi nancial

statements. The committee discussed the sustainability information

with management and the Chairman of the Sustainability Committee.

The committee is satisfi ed that the sustainability information is reliable

and consistent with fi nancial results.

The committee has recommended the integrated report for approval

by the board of directors.

Going concern

The committee has reviewed a documented assessment, including

key assumptions, prepared by management of the going concern

status of the Company and has made a recommendation to the

board. The board’s statement on the going concern status of the

Company is on page 75.

Governance of risk

The board has assigned oversight of the Company’s risk management

function to the committee in addition to its oversight role on fi nancial

reporting risks, internal fi nancial controls, fraud risk as it relates to

fi nancial reporting and information technology risk as it relates to

fi nancial reporting.

During the year, the committee monitored the implementation of risk

management systems and processes and has reviewed the Group’s

most signifi cant risks as identifi ed by the Exco Risk Committee each

quarter. The committee believes the risk management systems and

processes in place are appropriate and effective.

Financial statements and accounting practices

The committee has reviewed the annual fi nancial statements of the

Company and Group and is satisfi ed that these comply with

International Financial Reporting Standards.

Internal fi nancial controls

During the year, the Group formally reviewed its key internal fi nancial

controls. Based on the results of this review, information and

explanations given by management, and discussions with the external

auditors on the results of their audit, nothing has come to the

attention of the committee that caused it to believe the Group’s

system of internal fi nancial controls is not effective.

Whistle-blowing

The whistle-blowing programme, which is monitored by the

committee, is designed to enable employees, customers, suppliers,

managers or other stakeholders, on a confi dential basis, to raise

concerns in cases where conduct is deemed to be contrary to our

values. It may include:

Actions that may result in danger to the health and/or safety of

people or damage to the environment

Unethical practice in accounting, internal accounting controls,

fi nancial reporting and auditing matters

Criminal offences, including money laundering, fraud, bribery and

corruption

Failure to comply with any legal obligation

Miscarriage of justice

Any conduct contrary to the ethical principles embraced in our

business principles or any similar policy

Any other legal or ethical concern

Concealment of any of the above

The programme makes available a selection of telephonic, email,

web-based and surface mail communication channels to any person

in the world who has information about unethical practice in Howden

and its managed operations. The multilingual communication facilities

are operated by independent service providers who remove all

indications from information received as to the identity of the callers

before submission to designated persons in the Group.

Reports received were kept strictly confi dential and were referred to

appropriate line managers within the Group for resolution. Where

appropriate, action was taken to address the issues raised. The

reports are analysed and monitored to ensure the process is effective.


Evaluation of the expertise and experience of the Financial

Director/Chief Financial Offi cer and fi nance function

The committee has satisfi ed itself that the CFO has appropriate

expertise and experience and has considered, and satisfi ed itself, of

the appropriateness of the expertise and adequacy of resources of

the fi nance function and experience of senior members of

management responsible for the fi nancial function.

Committee assuranceThe committee is satisfi ed that it complied with its legal, regulatory or

other responsibilities in the 2016 fi nancial year.

Mitesh Patel

Chairman

24 March 2017


Audit and Risk Committee report continued

Internal audit

The committee is responsible for ensuring the Group’s internal audit

function is independent and has the necessary resources, standing

and authority to discharge its duties.

The Group has an internal audit department that reports centrally with

responsibility for reviewing and providing assurance on the adequacy

of the internal control environment across all of its operations.

The Chief Audit Executive is responsible for regularly reporting the

fi ndings of internal audit to the committee. The committee also

oversees cooperation between the internal and external auditors, and

serves as a link between the board of directors and these functions.

The internal audit function’s mandate and annual audit coverage plans

have been approved by the committee. A summary of audit results

and risk management information was presented to the committee

and Group senior management at regular intervals throughout the

year. The Group’s Chief Audit Executive reports to the committee on

the internal audit function’s performance against the agreed internal

audit plan.

The committee assesses the internal audit function and Chief Audit

Executive annually. The 2016 assessment did not reveal any areas of

concern and the committee has concluded that:

The internal audit function is adequate and effectively discharged

its responsibilities

The competence, qualifi cations, experience and overall

performance of the Chief Audit Executive are satisfactory

The Group’s internal audit function has a formal collaboration process

in place with the external auditors to ensure effi cient coverage of

internal controls. The Howden internal audit function is responsible for

providing independent assurance to executive management and the

board on the effectiveness of the risk-management process

throughout the Group.


To the shareholders of Howden Africa Holdings LimitedReport on the audit of the consolidated fi nancial statements

Opinion

We have audited the consolidated and separate fi nancial statements

of Howden Africa Holdings Limited and its subsidiaries (the Group) set

out on pages 86 to 135, which comprise the consolidated and

separate statement of fi nancial position as at 31 December 2016, and

the consolidated and separate statement of comprehensive income,

the consolidated and separate statement of changes in equity and the

consolidated and separate statement of cash fl ows for the year then

ended, and notes to the consolidated and separate fi nancial

statements, including a summary of signifi cant accounting policies.

In our opinion, the consolidated and separate fi nancial statements

present fairly, in all material respects, the consolidated and separate

fi nancial position of the Group as at 31 December 2016, and its

consolidated and separate fi nancial performance and consolidated

and separate cash fl ows for the year then ended in accordance with

International Financial Reporting Standards and the requirements of

the Companies Act of South Africa.

Basis for opinion

We conducted our audit in accordance with International Standards

on Auditing (ISAs). Our responsibilities under those standards are

further described in the Auditor’s Responsibilities for the Audit of the

Consolidated and Separate Financial Statements section of our

report. We are independent of the Group in accordance with the

Independent Regulatory Board for Auditors Code of Professional

Conduct for Registered Auditors (IRBA code), the International Ethics

Standards Board for Accountants Code of Ethics for Professional

Accountants (IESBA code) and other independence requirements

applicable to performing audits of Howden Africa Holdings Limited.

We have fulfi lled our other ethical responsibilities in accordance with

the IRBA code, IESBA code, and in accordance with other ethical

requirements applicable to performing the audit of Howden Africa

Holdings Limited. We believe that the audit evidence we have

obtained is suffi cient and appropriate to provide a basis for our

opinion.

Key audit matters

Key audit matters are those matters that, in our professional

judgement, were of most signifi cance in our audit of the consolidated

and separate fi nancial statements of the current period. These

matters were addressed in the context of our audit of the

consolidated and separate fi nancial statements as a whole, and in

forming our opinion thereon, and we do not provide a separate

opinion on these matters. For each matter below, our description of

how our audit addressed the matter is provided in that context.

We have fulfi lled the responsibilities described in the Auditor’s

responsibilities for the audit of the fi nancial statements section of our

report, including in relation to these matters. Accordingly, our audit

included the performance of procedures designed to respond to our

assessment of the risks of material misstatement of the fi nancial

statements. The results of our audit procedures, including the

procedures performed to address the matters below, provide the

basis for our audit opinion on the accompanying fi nancial statements.


Independent auditors’ report

Key audit matter How the matter was addressed in the audit

Revenue recognition

We focused on the recognition of revenue as it requires estimates

and judgements to be made by management in determining the

amount of revenue to be recognised on long-terms revenue

contracts. The disclosures relating to critical accounting estimates

and assumptions are included in Note 4 to the Annual Financial

Statements.

Both the Fans and Heat Exchangers and Environmental Control

divisions operate long-term revenue construction contracts. The

majority of the long-term revenue construction contracts range

between 0 and 5 years. R268.0 million (17%) of the Group revenue

of R1,604.5 billion relates to long-term revenue construction

contracts.

The recognition of revenue is largely dependent on the estimation of

the total contract costs and the stage of completion of each

contract. The stage of completion is determined by management’s

engineering experts based on the proportion of contract costs

incurred for work performed to date compared to the estimated total

contract costs. Changes in the estimate of total contract costs or

the inappropriate recording of costs around the year could result in

material amounts of revenue being recognised in the incorrect

period.

Our procedures included:

Testing the calculation of stage of completion. As part of this

test, we also:

– Agree and vouch the actual costs incurred and recorded

against the contract for occurrence and accuracy,

– Assess the basis for determining the total contract cost; and

– Re-perform the percentage of completion calculation.

Involving our engineering experts in testing the estimated total

contract costs. This includes identifying any practical or legal

matters which may affect the completion of the contracts.

Agreeing that the revenue recognised is consistent with the

calculated stage of completion.

Vouching whether the work allocated to contracts has been

carried out in the period in which the revenue has been

recognised.

Assessing the estimates of costs to complete and also

assessing the historical accuracy of the estimates of contract

costs through comparing current year actual to prior year

estimates.


Key audit matter How our audit addressed the key matter

There are a few repair and maintenance key contracts within the

two divisions, which have straight line billing arrangements, whilst

revenue is recognised only when work has been performed. The

performance of work is dependent on repairs being requested by a

client and therefore may not take place throughout the year as

planned. Thus, the estimates of total work performed and total

work to be performed changes annually as a result of actual data

being accumulated and the differences between clients and

contracts. The estimation of the future work schedules therefore

may have a signifi cant impact on the amount of revenue to be

recognised. This therefore requires increased audit attention.

The disclosures relating to revenue recognition and amounts due

from and due to customers are included in notes 10 and 22 to the

annual fi nancial statements.

Our procedures included:

Examining any loss-making contracts to evaluate the level of

provisioning required and also assessing the actual profi t or loss

achieved on contracts which were completed in the year

compared to the forecast position in the prior year to identify any

anomalies.

Responsibilities of the directors for the consolidated and separate

fi nancial statements

The directors are responsible for the preparation and fair presentation

of the consolidated and separate fi nancial statements in accordance

with International Financial Reporting Standards and the requirements

of the Companies Act of South Africa, and for such internal control as

the directors determine is necessary to enable the preparation of

consolidated and separate fi nancial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the consolidated and separate fi nancial statements, the

directors are responsible for assessing the Group’s ability to continue

as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless the

directors either intend to liquidate the Group or to cease operations,

or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the consolidated separate

fi nancial statements

Our objectives are to obtain reasonable assurance about whether the

consolidated and separate fi nancial statements as a whole are free

from material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs will always detect a material

Other information

The directors are responsible for the other information. The other

information comprises the directors’ report, the Audit Committee’s

report and the Company Secretary’s certifi cate as required by the

Companies Act of South Africa, and the other sections of the

integrated annual report which we obtained prior to the date of this

report. Other information does not include the consolidated and

separate fi nancial statements and our auditor’s report thereon (annual

fi nancial statements section in the integrated annual report).

Our opinion on the consolidated and separate fi nancial statements

does not cover the other information and we do not express an audit

opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate fi nancial

statements, our responsibility is to read the other information and, in

doing so, consider whether the other information is materially

inconsistent with the consolidated and separate fi nancial statements

or our knowledge obtained in the audit, or otherwise appears to be

materially misstated.

If, based on the work we have performed on the other information

obtained prior to the date of this auditor’s report, we conclude that

there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard.

When we read the annual report, if we conclude that there is a

material misstatement therein, we are required to communicate the

matter to those charged with governance.


Independent auditor’s report continued


We communicate with the directors regarding, among other matters,

the planned scope and timing of the audit and signifi cant audit

fi ndings, including any signifi cant defi ciencies in internal control that

we identify during our audit.

We also provide the directors with a statement that we have complied

with relevant ethical requirements regarding independence, and to

communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where

applicable, related safeguards.

From the matters communicated with the directors, we determine

those matters that were of most signifi cance in the audit of the

consolidated and separate fi nancial statements of the current period

and are therefore the key audit matters. We describe these matters in

our auditor’s report unless law or regulation precludes public

disclosure about the matter or when, in extremely rare circumstances,

we determine that a matter should not be communicated in our report

because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefi ts of such

communication.

Report on other legal and regulatory requirements

In terms of the IRBA Rule published in Government Gazette Number

39475 dated 4 December 2015, we report that Ernst & Young Inc.

has been the auditor of Howden Africa Holdings Limited for fi ve years.

Ernst & Young Inc.

Director – Charles Trollope

Registered Auditor

Chartered Accountant (SA)

24 March 2017

misstatement when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the aggregate,

they could reasonably be expected to infl uence the economic

decisions of users taken on the basis of these consolidated and

separate fi nancial statements.

As part of an audit in accordance with ISAs, we exercise professional

judgement and maintain professional scepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the

consolidated and separate fi nancial statements, whether due to

fraud or error, design and perform audit procedures responsive to

those risks, and obtain audit evidence that is suffi cient and

appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher

than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override

of internal control.

Obtain an understanding of internal control relevant to the audit in

order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the

reasonableness of accounting estimates and related disclosures

made by the directors.

Conclude on the appropriateness of the directors’ use of the going

concern basis of accounting and based on the audit evidence

obtained, whether a material uncertainty exists related to events or

conditions that may cast signifi cant doubt on the Group’s ability to

continue as a going concern. If we conclude that a material

uncertainty exists, we are required to draw attention in our

auditor’s report to the related disclosures in the consolidated and

separate fi nancial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on

the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the group to

cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the

consolidated and separate fi nancial statements, including the

disclosures, and whether the consolidated and separate fi nancial

statements represent the underlying transactions and events in a

manner that achieves fair presentation.

Obtain suffi cient appropriate audit evidence regarding the fi nancial

information of the entities or business activities within the group to

express an opinion on the consolidated and separate fi nancial

statements. We are responsible for the direction, supervision and

performance of the Group audit. We remain solely responsible for

our audit opinion.


The new Fabrication Technology division order intake for 2016 is

R94.4 million with R87 million of this converted into revenue in the

period.

Revenue

Revenue of R1 604.5 million for 2016 is 8.2% ahead of the equivalent

period in 2015 of R1 483.3 million.

The Fans and Heat Exchangers division recorded revenue growth of

19.8% to R1 338.8 million (2015: R1 117.3 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 was also a contributing factor to the growth in

revenue with revenue for the period of R87 million.

Operating profi t

Operating profi t of R247.6 million is a 5.5% decline from the

R262.0 million reported in 2015.

The Environmental Control division moved from an operating profi t of

R51.4 million (per note 5) in the previous year to 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). Operating profi t

margins in this division increased from 19.1% to 21.2% driven by

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 company’s defi ned benefi t scheme.

Cash fl ow

Howden’s continuing focus on sustainable working capital

management has resulted in a satisfactory cash fl ow performance in

2016. Cash generated from operations for the year was

R216.2 million and cash and cash equivalents was R909.3 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.

The directors’ report forms part of the audited fi nancial statements of

the Company and the Group for the year ended 31 December 2016.

Nature of the businessThe main activities of the Group are the design, manufacture and

marketing of specialised air and gas-handling solutions to a wide

range of industries and a preferred distributor of ESAB welding and

cutting consumables.

The Group’s principal segments include:

Fans and Heat Exchangers

Environmental Control

Fabrication Technology

Major industries supplied include power generation, petrochemical,

mining, construction, refrigeration, water treatment and general

industry.

Business reviewFinancial overview

The Group’s earnings per share were 332.31 cents, compared with

327.94 cents in the corresponding period in 2015. This is made up of

a 5.5% decline in operating profi t, which is explained below, and has

been mitigated by improved net fi nance income of R55.5 million

(2015: R40.5 million).

Orders

Orders received during 2016 have increased to R1 572.7 million, an

increase of 10.9% compared to the corresponding period in 2015

(2015: R1 417.7 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 2015. The business received some

larger orders in the latter part of 2016. 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 R1 283.3 million compared to the

corresponding period (2015: R1 106.5 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.


Directors’ report


Subsidiary companies

A list of the Company’s subsidiaries and related interests appears in

note 8 and 34 of the report.

Management by third parties

No business of the Company or its subsidiaries was managed by a

third person or company during the fi nancial year, except for

managerial services the Company provides to its subsidiaries.

Subsequent eventsNone were identifi ed.


Basis of preparationThese fi nancial statements on pages 86 to 89 set out fully the fi nancial

position, results of operations and cash fl ows of the Group for the

fi nancial year ended 31 December 2016.

AuditorsThe board of directors recommend that Ernst & Young be reappointed

as auditors of the Company and the Group in terms of the resolution

to be proposed at the annual general meeting in accordance with

section 270(2) of the Companies Act.

For and on behalf of the board.

W Thomson

Chief Executive Offi cer

24 March 2017

Group results

Order book analysis

2016Rm

2015Rm

% change

Orders received 1 572.7 1 417.7 10.9

New build 439.7 429.4 2.4

Aftermarket 1 133.0 988.3 14.6

Order book 770.4 800.0 (3.7)

New build 321.9 372.0 (13.5)

Aftermarket 448.5 428.0 4.8


2016Rm

2015Rm

% change

Revenue 1 604.5 1 483.3 8.2

Operating profi t (EBIT) 247.6 262.0 (5.5)

Operating profi t margin 15.4% 17.7% (2.3)

Net fi nance income 55.5 40.5 37.0

Tax 84.7 86.9 (2.5)

Profi t for the year 218.4 215.6 1.3

Segment analysis

A segment analysis of orders received, revenue and operating profi t

is set out on note 5 of the annual fi nancial statements.

Other mattersShare capital

Details of the Company’s share capital, its holding company and its

shareholders are given in note 18 to the fi nancial statements.

Directorate

The names of the directors, secretary and auditors are listed on

pages 75 and 83 of the report.

Directors’ interests

As at 31 December 2016 the directors and their associates held no

interest in the Company.

At the date of this report, there had been no changes to these

shareholdings.


as at 31 December 2016

Statement of fi nancial position

Note2016

R’0002015

R’0002016

R’0002015

R’000

ASSETSNon-current assets

Property, plant and equipment 6 92 152 96 099 142 247

Intangible assets 7 44 556 46 191 19 845 21 501

Investment in subsidiaries 8 – – 60 001 60 001

Deferred tax assets 9 18 132 24 452 – –

Amounts due from customers for contract work 10 2 195 1 619 – –

Trade and other receivables 11 11 411 10 690 – –

Pension fund plan surplus 13 17 485 17 712 17 485 17 712

185 931 196 763 97 473 99 461

Current assets

Inventories 16 332 166 235 163 – –

Trade and other receivables 11 351 195 284 901 34 368 13 223

Loans receivable 12 16 050 7 500 – –

Amounts due from customers for contract work 10 34 810 96 935 – –

Other fi nancial assets 14 5 2 964 – 51

Current income tax asset 17 31 542 29 954 – 166

Cash and cash equivalents 15 909 341 730 190 600 566 579 173

1 675 109 1 387 607 634 934 592 613

TOTAL ASSETS 1 861 040 1 584 370 732 407 692 074

EQUITY Share capital 18 657 657 657 657

Retained earnings and other reserves 1 254 255 1 038 550 706 592 669 487

Total equity 1 254 912 1 039 207 707 249 670 144

LIABILITIESNon-current liabilities

Deferred tax liabilities 9 3 069 9 272 3 940 4 336

Amounts due to customers for contract work 10 79 649 78 739 – –

Government grants 20 7 706 8 887 – –

Provisions 21 11 642 12 035 – –

102 066 108 933 3 940 4 336

Current liabilities

Trade and other payables 19 416 019 380 277 16 283 17 594

Amounts due to customers for contract work 10 53 890 34 554 – –

Current income tax liabilities 17 13 123 – 4 935 –

Government grants 20 915 784 – –

Other fi nancial liabilities 14 1 815 1 949 – –

Provisions 21 18 300 18 666 – –

504 062 436 230 21 218 17 594

Total liabilities 606 128 545 163 25 158 21 930

TOTAL EQUITY AND LIABILITIES 1 861 040 1 584 370 732 407 692 074

CompanyConsolidated




Note2016

R’0002015

R’0002016

R’0002015

R’000

Revenue 22 1 604 535 1 483 276 111 890 576 362

Cost of sales (1 176 761) (1 071 717) – –

Gross profi t 427 774 411 559 111 890 576 362

Distribution costs (58 546) (37 583) – –

Administrative expenses (123 827) (117 460) (59 449) (50 264)

Other income 2 210 5 481 – 149

Operating profi t 23 247 611 261 997 52 441 526 247

Investment income 24 55 566 40 510 1 576 2 989

Finance costs 25 (72) (27) (1) (21)

Profi t before income tax 303 105 302 480 54 016 529 215

Income tax expense 26 (84 684) (86 927) (15 613) (18 527)

Profi t for the year 218 421 215 553 38 403 510 688

Other comprehensive income:

Other comprehensive income to be reclassifi ed to profi t or loss in subsequent periods:

Cash fl ow hedge

Reclassifi cation during the year to profi t or loss 262 (592) – –

Net (loss)/gain during the year of the not yet matured contracts (2 231) 1 994 – –

Tax impact of cash fl ow hedges 551 (393) – –

Net other comprehensive (loss)/income to be reclassifi ed to profi t or loss in subsequent periods (1 418) 1 009 – –

Other comprehensive income not to be reclassifi ed to profi t or loss in subsequent periods:

Pension fund plan (loss)/gain 13 (1 803) 1 251 (1 803) 1 251

Tax impact of pension fund plan (gain)/loss 505 (350) 505 (350)

Net other comprehensive (loss)/income not to be reclassifi ed to profi t or loss in subsequent periods (1 298) 901 (1 298) 901

Other comprehensive (loss)/income for the year, net of tax (2 716) 1 910 (1 298) 901

Total comprehensive income for the year 215 705 217 463 37 105 511 589

Cents Cents Cents Cents

Earnings per ordinary share

– basic and diluted 27 332.31 327.94 – –

CompanyConsolidated



Statement of changes in equity

Note

Share capitalR’000

Retained earnings

R’000

Pension fund plan surplus/

(defi cit)R’000

Cash fl ow hedge

reserveR’000

CONSOLIDATEDBalance at 1 January 2015 657 826 488 (4 640) (761) 821 744

Comprehensive income for the year – 215 553 901 1 009 217 463

Balance at 31 December 2015 657 1 042 041 (3 739) 248 1 039 207

Balance at 1 January 2016 657 1 042 041 (3 739) 248 1 039 207

Comprehensive income for the year – 218 421 (1 298) (1 418) 215 705

Balance at 31 December 2016 657 1 260 462 (5 037) (1 170) 1 254 912

COMPANYBalance at 1 January 2015 657 162 538 (4 640) – 158 555

Comprehensive income for the year – 510 688 901 – 511 589

Balance at 31 December 2015 657 673 226 (3 739) – 670 144

Balance at 1 January 2016 657 673 226 (3 739) – 670 144

Comprehensive income for the year – 38 403 (1 298) – 37 105

Balance at 31 December 2016 657 711 629 (5 037) – 707 249

TotalR’000



Statement of cash fl ows

Note2016

R’0002015

R’0002016

R’0002015

R’000

Cash fl ow from operating activities

Cash generated/(utilised) from operations 29 216 297 156 760 (8 516) (26 319)

Interest paid 25 (72) (27) (1) (21)

Income tax paid 17 (71 975) (81 536) (10 403) (12 974)

Net cash generated/(utilised) from operating activities 144 250 75 197 (18 920) (39 315)

Cash fl ow from investing activities

Dividend received – – – 477 680

Interest received 53 990 37 521 40 313 19 752

Redemption of preference share 8 – – – 29 320

Loans issued 12 (8 550) (7 500) –

Purchases of property, plant and equipment* 6 (10 275) (7 192) – –

Government grant received 20 – 4 209 – –

Purchases of intangible assets 7 (375) (17) – –

Proceeds from disposal of property, plant and equipment 30 111 284 – –

Net cash generated from investing activities 34 901 27 305 40 313 526 752

Net increase in cash and cash equivalents 179 151 102 502 21 393 487 437

Cash and cash equivalents at beginning of year 730 190 627 688 579 173 91 736

Cash and cash equivalents at end of year 15 909 341 730 190 600 566 579 173

* The purchases of property, plant and equipment relates to the renovations and improvements of the current buildings and machinery to maintain production

capacity and the establishment of the Fabrication Technology division. Refer to note 6.

CompanyConsolidated



Notes to the annual fi nancial statements

1. GENERAL INFORMATION The consolidated annual fi nancial statements of Howden Africa Holdings Limited and its subsidiaries (collectively, the Group), were

authorised for issue by the board of directors on 24 March 2017.

Howden Africa Holdings Limited (HAHL) and its subsidiaries design, manufacture and market specialised air and gas-handling solutions

to a wide range of industries. The Group has manufacturing plants in Johannesburg and Port Elizabeth and sells its products mainly in

South Africa. The major industries it supplies are power generation, petrochemical, mining, agriculture, construction, refrigeration, water

treatment, transportation and general industry.

Howden is also a distributor of ESAB welding and cutting equipment and consumables.

2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the Group consolidated annual fi nancial statements are set out below.

The Group policies have been consistently applied to all the years presented. The Group annual fi nancial statements incorporate the

annual fi nancial statements of the Company (Howden Africa Holdings Limited) and the entities it controls as at 31 December 2016,

using consistent accounting policies at a consolidated and separate company level, where applicable.

2.1 Basis of preparation

The Group and Company annual fi nancial statements of Howden Africa Holdings Limited have been prepared in accordance

with International Financial Reporting Standards (IFRS), the South African Companies Act 71 of 2008, the JSE Listings

Requirements and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee. The consolidated

annual fi nancial statements are prepared on the historical cost basis except for fi nancial assets and fi nancial liabilities (including

derivative instruments) measured at fair value through profi t or loss.

The preparation of annual fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates.

It requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas

involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the

consolidated annual fi nancial statements are disclosed in note 4.

New and amended standards and interpretations IAS 8.28

The Group applied for the fi rst time certain standards and amendments, which are effective for annual periods beginning on or

after 1 January 2016.

Although these new standards and amendments applied for the fi rst time in 2016, they did not have a material impact on the

annual consolidated fi nancial statements of the Group. IFRS 14 Regulatory Deferral Accounts

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

Amendments to IAS 16 and IAS 38: Clarifi cation of Acceptable Methods of Depreciation and Amortisation

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

Amendments to IAS 27: Equity Method in Separate Financial Statements

Annual Improvements 2012 – 2014 cycle

These improvements include: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IAS 19 Employee Benefi ts IAS 34 Interim Financial Reporting Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 clarify, rather than signifi cantly change, existing IAS 1 requirements. The amendments clarify:

• The materiality requirements in IAS 1

• That specifi c line items in the statement(s) of profi t or loss and OCI and the statement of fi nancial position may be disaggregated

• That entities have fl exibility as to the order in which they present the notes to fi nancial statements

• That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in

aggregate as a single line item, and classifi ed between those items that will or will not be subsequently reclassifi ed to profi t

or loss

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of

fi nancial position and the statement(s) of profi t or loss and OCI. These amendments do not have any impact on the Group.


2. ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued) Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The amendments address issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated

Financial Statements. The amendments to IFRS 10 clarify that the exemption from presenting consolidated fi nancial

statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its

subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity

itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity

are measured at fair value. The amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when

applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to

its interests in subsidiaries.

These amendments are applied retrospectively and do not have any impact on the Group as the Group does not apply the

consolidation exception.

Impact of standards and interpretations not yet adopted

At the reporting date, the following new accounting standards were in issue but not yet effective:

Effective for annual periods commencing on or after

IFRIC 22 Foreign Currency Transactions and Advance Consideration – provides

guidance for determining the date of transaction in a foreign currency transaction that

includes consideration denominated in a foreign currency and for which a non-

monetary prepayment asset or deferred income liability is recognised. 1 January 2018

Amendments to IAS 12 Income Taxes – Recognition of Deferred Tax Assets for

Unrealised Losses – clarifi es the deferred tax consequences of debt instruments

measured at fair value; the determination of future taxable profi ts; and the assessment

of deferred tax assets in combination with other deferred tax assets of the same type. 1 January 2017

Amendments to IAS 7 Statement of Cash Flows – Disclosure Initiative – requires

disclosures that enable users to evaluate changes in liabilities arising from fi nancing

activities. 1 January 2017

Amendments to IFRS 2 Share-based Payment – Classifi cation Measurement of

Share-based Payment Transactions – amends IFRS 2 to clarify accounting for cash-

settled share-based payments that include a performance condition, classifi cation of

share-based payments with net settlement features and accounting for modifi cations. 1 January 2018

Annual Improvements to IFRS 2014-2016 Cycle – makes the following amendments:

IFRS 1 – removing short-term exemptions; IFRS 12 – clarifying the scope of the

standard; and IAS 28 – clarifying that the exemption from equity accounting can be

applied on an investment-by-investment basis.

1 January 2017 for IFRS

12 amendments

1 January 2018 for the remaining

amendments

The above amendments are not expected to have a material effect for the Group.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 “Revenue from Contracts with Customers” was issued in May 2015; It is effective for accounting periods beginning

on or before 1 January 2018.

IFRS 15 will require Howden to identify deliverables in contracts with customers that qualify as “performance obligations”.

The transaction price receivable from customers must be allocated between the Company’s performance obligations under

the contracts on a relative stand-alone selling price basis.

The Company is currently assessing the impact of these and other accounting changes that will arise under IFRS 15. It is

expected that the Company will adopt IFRS 15 on 1 January 2018. The Company is considering the clarifi cations issued by

the IASB on 12 April 2016 and will monitor any further developments.

The Group in collaboration with Colfax is assessing the full impact of the standard.


Notes to the annual fi nancial statements continued



2.1 Basis of preparation (continued)

IFRS 16 Leases

IFRS 16 requires lessees to account for all leases under a single on balance sheet model in a similar way to fi nance leases

under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal

computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,

a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the

underlying asset during the lease term (i.e., the right-of-use asset). The standard is effective for annual periods beginning on

or after 1 January 2019. The new standard, in addition to bringing substantial new assets and liabilitiees onto a lessee’s

balance sheet, will have an impact on reported profi t and performance measures such as EBITDA. It is likely that with the

changed defi nition of leases there will be some additional contracts within the scope of the new standard, which will need to

be considered by lessors as well as lessees, although lessees may be able to use the limited exemptions which may permit

some to remain accounted for as services. The Group is assessing the impact of this standard. Typical area where the

standard will have a signifi cant impact is; vehicle leases.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the fi nal version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments:

Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting

for fi nancial instruments project: classifi cation and measurement, impairment and hedge accounting. IFRS 9 is effective for

annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting,

retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the

requirements are generally applied prospectively, with some limited exceptions.

The standard will have no material impact on the Group.

2.2 Basis of consolidation

The consolidated annual fi nancial statements comprise the annual fi nancial statements of the Company and its subsidiaries as

at 31 December 2016.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has

the ability to affect those returns through its power over the investee.

Specifi cally, the Group controls an investee if and only if the Group has: Power over the investee (ie existing rights that give it the current ability to direct the relevant activities of the investee) Exposure, or rights, to variable returns from its involvement with the investee The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and

circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangements The Group’s voting rights and potential voting rights

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one

or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the

subsidiary and ceases when the Group loses control of the subsidiary. Income and expenses of a subsidiary acquired or

disposed of during the year are included in the statement of comprehensive income from the date the Group gains control

until the date the Group ceases to control the subsidiary.

The annual fi nancial statements of the subsidiaries are prepared for the same reporting period as the parent company, using

consistent accounting policies.

Inter-company transactions, balances and unrealised gains and dividends on transactions between companies are eliminated.

Investments in subsidiaries are accounted for by the Company at cost less impairment. Cost includes consideration transferred

and direct attributable costs of investment.



2.2 Basis of consolidation (continued)

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the

aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest

in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the

acquiree at fair value or at the proportionate share of the acquiree’s identifi able net assets. Acquisition-related costs are

expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the fi nancial assets and liabilities assumed for appropriate classifi cation and

designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition

date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair

value and any resulting gain or loss is recognised in profi t or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent

consideration classifi ed as an asset or liability that is a fi nancial instrument and within the scope of IAS 39 Financial Instruments:

Recognition and Measurement, is measured at fair value with changes in fair value recognised in either profi t or loss or as a

change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in

accordance with the appropriate IFRS. Contingent consideration that is classifi ed as equity is not remeasured and subsequent

settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount

recognised for non-controlling interest over the net identifi able assets acquired and liabilities assumed. If the fair value of the net

assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profi t or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment

testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-

generating units that are expected to benefi t from the combination, irrespective of whether other assets or liabilities of the

acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit and part of the operation

within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the

operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the

relative values of the disposed operation and the portion of the cash-generating unit retained.

When the Group ceases to have control or signifi cant infl uence, any retained interest in the entity is remeasured to its fair value,

with the change in carrying amount recognised in profi t or loss. The fair value is the initial carrying amount for the purposes of

subsequently accounting for the retained interest as an associate, joint venture or fi nancial asset. In addition, any amounts

previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly

disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income

are reclassifi ed to profi t or loss.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-

maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the

operating segments, has been identifi ed as the Howden Africa board.

The operating results of each operating segment are separately monitored for the purpose of making decisions about resource

allocation and performance assessment. Segment performance is evaluated based on operating profi t or loss and is measured

consistently with operating profi t or loss in the consolidated annual fi nancial statements.

The Group’s operations mainly comprise specialised engineering products for air and gas solutions which can be differentiated

into three main reportable segments, namely Fans and Heat Exchangers, Environmental Control and Fabrication Technology.

Revenue by geographic segment is allocated based on the country in which the customer is located. Total assets and capital

expenditure by geographic segment are allocated based on where the assets are located.





2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the annual fi nancial statements for each of the Group’s entities are measured using the currency of the

primary economic environment in which that entity operates (the functional currency). The consolidated annual fi nancial

statements are presented in rand, which is the functional and presentation currency of Howden Africa Holdings Limited.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency of Group entities using the exchange rate

prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains or losses

resulting from the settlement of transactions and from the translation at year-end exchange rates of monetary assets

and liabilities denominated in foreign currencies are recognised in the profi t or loss fi nance income and costs.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency

are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on

translation of non-monetary items measured at fair value is treated in line with the recognition of a gain or loss on

change in fair value of the item (ie translation differences on items whose fair value gain or loss is recognised in other

comprehensive income, or profi t or loss are also recognised in other comprehensive income or profi t or loss,

respectively).

2.5 Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation and impairments. Land and buildings

comprise mainly factories and offi ces. The cost includes expenditure that is directly attributable to the acquisition of the items

and borrowing costs for long-term construction projects if the recognition criteria are met.

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, only when it is probable that

future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All

other repairs and maintenance are charged to profi t or loss in the statements of comprehensive income during the fi nancial

period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method spreading the difference

between cost and residual value over the estimated useful life as follows:

Buildings 50 years

Plant and equipment 2 to 10 years

Patterns and dies 3 years

Offi ce furniture and equipment 3 to 10 years

Motor vehicles 4 years

IT equipment 3 to 5 years

The assets’ residual values, methods of depreciation and useful lives are reviewed, and adjusted prospectively if appropriate, at

each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is

greater than its recoverable amount.

An item of property, plant and equipment and any signifi cant part initially recognised is derecognised upon disposal or when no

future economic benefi ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated

as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profi t or loss in the

statements of comprehensive income when the asset is derecognised.



2.6 Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifi able

assets of the acquired subsidiary at the date of acquisition.

Goodwill on acquisitions of subsidiaries is included in intangible assets and is tested for impairment as part of the overall

balance. Separately recognised goodwill is tested annually for impairment or more frequently when there is an event that

indicates potential impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill

are not reversed. Gains or losses on disposal of an entity include the carrying amount of goodwill relating to the entity

sold.

Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The allocation is made to

those CGUs or groups of CGUs that are expected to benefi t from the business combination in which the goodwill arose

according to operating segments. Goodwill is tested for impairment on an annual basis; refer to impairment of non-

fi nancial assets below.

(ii) Trademarks

Trademarks acquired in a business combination are recognised at fair value at the acquisition date. Trademarks

have a fi nite useful life and are carried at cost less accumulated amortisation and impairment, and calculated using

the straight-line method to allocate the cost of trademarks over their estimated useful lives which is considered to be

25 years.

(iii) Computer software

Acquired computer software is capitalised on the basis of the costs incurred and subsequently recognised at cost less

accumulated amortisation and impairment. The cost is amortised over the estimated useful life of the software, usually

between three and fi ve years.

2.7 Impairment

(a) Non-fi nancial assets

Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the

amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised as an

expense immediately and are written off in the statements of comprehensive income.

The recoverable amount is the higher of an asset’s fair value less costs of disposal or value in use. For the purpose of

assessing impairment, the Group estimates the asset’s or CGU’s recoverable amount. A CGU is the lowest level for

which separately identifi able cash fl ows can be determined.

In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount

rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. In

determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions

can be identifi ed, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared

separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast

calculations generally cover a period of fi ve years. For longer periods, a long-term growth rate is calculated and applied

to project future cash fl ows after the fi fth year.





2.7 Impairment (continued)

(a) Non-fi nancial assets (continued)

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is any

indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the

Group estimates the asset’s or CGU’s recoverable amount. Where an impairment loss subsequently reverses, the

carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, to the extent that

the increased carrying amount does not exceed the carrying amount that would have been determined had no

impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised as

income immediately. Goodwill impairments are not reversed.

(b) Financial assets

Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a fi nancial asset or

group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is impaired and impairment losses

are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the

initial recognition of the asset (a loss event) and that loss event (or event) has an impact on the estimated future cash

fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include indications

that the debtors or a group of debtors is experiencing signifi cant fi nancial diffi culty, default or delinquency in interest or

principal payments, the probability that they will enter bankruptcy or other fi nancial reorganisation, and observable data

indicating that there is a measurable decrease in the estimated future cash fl ows, such as changes in arrears or

economic conditions that correlate with defaults.

The Group fi rst assesses whether objective evidence of impairment exists individually for fi nancial assets that are

individually signifi cant, or collectively for fi nancial assets that are not individually signifi cant. If the Group determines that

no objective evidence of impairment exists for an individually assessed fi nancial asset, whether signifi cant or not, it

includes the asset in a group of fi nancial assets with similar credit risk characteristics and collectively assesses them for

impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be,

recognised are not included in a collective assessment of impairment.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of

estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial

asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is

recognised in the statements of comprehensive income. If a loan has a variable interest rate, the discount rate for

measuring any impairment loss is the current effective interest rate determined under the contract.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in

profi t or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of

interest used to discount the future cash fl ows for the purpose of measuring the impairment loss. The interest income is

recorded as fi nance income in the statement of comprehensive income. Financial assets, together with the associated

allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realised or has

been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or

decreases because of an event occurring after the impairment was recognised, the previously recognised impairment

loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited

to fi nance costs in the statement of comprehensive income.



2.8 Financial instruments

2.8.1 Financial assets

Initial recognition and measurement

The Group classifi es its fi nancial assets in the following categories: at fair value through profi t or loss, or loans and

receivables, as appropriate. The classifi cation depends on the purpose for which the fi nancial assets were acquired.

The Group determines the classifi cation of its fi nancial assets at initial recognition.

All fi nancial assets are recognised initially at fair value plus transaction costs, except in the case of fi nancial assets

recorded at fair value through profi t or loss.

Subsequent measurement

(a) Financial assets at fair value through profi t or loss

Financial assets at fair value through profi t or loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in

this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as

held for trading. Assets in this category are classifi ed as current assets.

Financial assets at fair value through profi t or loss are carried in the statement of fi nancial position at fair value with

net changes in fair value presented as fi nance costs (negative net changes in fair value) or fi nance income (positive

net changes in fair value) in the statement of comprehensive income.

(b) Loans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determined payments that are not quoted in

an active market. Trade receivables are amounts due from customers for merchandise sold or services performed

in the ordinary course of business. They are included in the current assets, except for maturities greater than

12 months after the end of the reporting period. These are classifi ed as non-current assets.

The Group’s loans and receivables are subsequently carried at amortised cost using the effective interest rate

method, less impairment. The effective interest rate amortisation is included in fi nance income in profi t or loss. The

losses arising from impairment are recognised in profi t or loss in fi nance costs for loans and in cost of sales or other

operating expenses for receivables.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid

investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within

borrowings in current liabilities on the statement of fi nancial position.

For the purpose of the consolidated statement of cash fl ows, cash and cash equivalents consist of cash and

short-term deposits as defi ned above, net of outstanding bank overdrafts.

Derecognition

A fi nancial asset (or, where applicable, a part of a fi nancial asset or part of a group of similar fi nancial assets) is

derecognised when: The rights to receive cash fl ows from the asset have expired The Group has transferred its rights to receive cash fl ows from the asset or has assumed an obligation to pay the

received cash fl ows in full without material delay to a third party under a pass-through arrangement

Either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither

transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.





2.8 Financial instruments (continued)

2.8.2 Financial liabilities

Initial recognition and measurement

The Group classifi es its fi nancial liabilities in the following categories: at fair value through profi t or loss, or loans and

borrowings, as appropriate. The Group determines the classifi cation of its fi nancial liabilities at initial recognition.

All fi nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings, inclusive of directly

attributable transaction costs.

The Group’s fi nancial liabilities include trade and other payables, derivative fi nancial instruments, bank overdrafts, loans

and borrowings, and fi nancial guarantee contracts.

Subsequent measurement

(a) Loans and borrowings

Borrowings are subsequently stated at amortised cost using the effective interest rate method.

Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the

liability for at least 12 months after the reporting date.

(b) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of

business from suppliers. Accounts payable are classifi ed as current liabilities if payment is due within one year or

less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are subsequently measured at amortised cost using the effective interest rate method.

Derecognition

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When

an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms

of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as the derecognition of

the original liability and the recognition of a new liability. The difference in the respective carrying amounts is

recognised in profi t or loss in the statement of comprehensive income.

2.8.3 Fair value of fi nancial instruments

The Group measures fi nancial instruments, such as derivatives, as well as other fi nancial assets and liabilities, at fair

value at each reporting date. Also, fair values of fi nancial instruments measured at amortised cost are disclosed in

note 14.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when

pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-fi nancial asset takes into account a market participant’s ability to generate economic

benefi ts by using the asset in its highest and best use or by selling it to another market participant that would use the

asset in its highest and best use.



2.8 Financial instruments (continued)

2.8.3 Fair value of fi nancial instruments (continued)

The Group uses valuation techniques that are appropriate in the circumstances and for which suffi cient data are

available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable

inputs.

All assets and liabilities for which fair value is measured or disclosed in the annual fi nancial statements are categorised

within the fair value hierarchy, described as follows, based on the lowest level input that is signifi cant to the fair value

measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is directly

or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is

unobservable

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the

nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

2.9 Derivative fi nancial instruments and hedging activities

Derivative fi nancial instruments, principally forward foreign exchange contracts, are used as hedges in the fi nancing and fi nancial

risk management of the Group and are initially measured at fair value on the date a derivative contract is entered into and

subsequently remeasured at their fair value. Derivatives are carried as fi nancial assets when the fair value is positive and as

fi nancial liabilities when the fair value is negative.

Cash fl ow hedges

Foreign currency risk

Foreign exchange forward contracts measured at fair value through other comprehensive income are designated as hedging

instruments in cash fl ow hedges of highly probable forecast transactions in foreign currencies.

While the Group also enters into other foreign exchange forward contracts with the intention of reducing the foreign exchange

risk of expected sales and purchases, these other contracts are not designated in hedge relationships and are measured at fair

value through profi t or loss.

2.10 Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined using the average cost basis. The cost of

fi nished goods and work in progress comprise direct expenditure and attributable overheads based on normal operating

capacity, excluding borrowing costs. The cost of raw material is the purchase cost determined on the FIFO basis. Net realisable

value is the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

Where necessary, provision is made for obsolete, slow-moving and defective inventory.

2.11 Share capital

Ordinary shares are classifi ed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the

proceeds, net of tax.

Where any Group company purchases the Company’s equity share capital, the consideration paid, including any directly

attributable incremental costs (net of income tax), is deducted from equity attributable to the Company’s equity holders until the

shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration

received, net of any directly attributable incremental transaction costs and the related income tax effects, and are included in

equity attributable to the Company’s equity holders.





2.12 Provisions

Provisions for warranty and product liability are recognised when the Group has a present legal or constructive obligation as a

result of past events, it is more likely than not that an outfl ow of resources will be required to settle the obligation and the

amount can be reliably estimated. When the Group expects some or all of a provision to be reimbursed, for example, under an

insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.

The expense relating to a provision is presented in profi t or loss net of any reimbursement. Provisions are not recognised for

future operating losses. If the effect of discounting is material, provisions are determined by discounting the expected value of

future cash fl ows at a pre-tax discount rate that refl ects current market assessments of the time value of money and, where

appropriate, the risks specifi c to the liability. The increase in the provision due to passage of time is recognised as interest

expense.

2.13 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in profi t or loss in the statement of

comprehensive income, except to the extent that it relates to items recognised directly in other comprehensive income. In this

case, the tax is also recognised in other comprehensive income.

The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the report date.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations

are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the

tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax basis of

assets and liabilities and their carrying amounts in the consolidated annual fi nancial statements. However, the deferred income

tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business

combination that at the time of the transaction affects neither accounting, nor taxable profi t, nor loss. Currently and substantially

enacted tax rates are used to determine deferred income tax.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profi ts will be available against

which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date

and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the

deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to

the extent that it has become probable that future taxable profi ts will allow the deferred tax asset to be recovered.

Deferred tax is not provided on temporary differences arising on subsidiaries where the timing of the reversal of the temporary

difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future or

where the remittance would not give rise to incremental tax liabilities or is otherwise not taxable. Deferred income tax assets and

liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and the

deferred taxes relate to the same taxable entity and the same taxation authority.

2.14 Employee benefi ts

(a) Pension and provident benefi ts

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance

companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defi ned

benefi t and defi ned contribution plans. A defi ned contribution plan is a pension plan under which the Group pays fi xed

contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the

fund does not hold suffi cient assets to pay all employees the benefi ts relating to employee service in the current and

prior periods. A defi ned benefi t plan is a pension plan that is not a defi ned contribution plan. Typically defi ned benefi t

plans defi ne an amount of pension benefi t that an employee will receive on retirement, usually dependent on one or

more factors such as age, years of service and compensation.


2. ACCOUNTING POLICIES (continued) 2.14 Employee benefi ts (continued) (a) Pension and provident benefi ts (continued)

The liability/asset recognised in the statement of fi nancial position in respect of defi ned benefi t pension plans is the

present value of the defi ned benefi t obligation at the end of the reporting period less the fair value of plan assets with

the last valuation performed as at 31 March 2015. The defi ned benefi t obligation is calculated annually by independent

actuaries using the projected unit credit method. The present value of the defi ned benefi t obligation is determined by

discounting the estimated future cash outfl ows using interest rates of government bonds that are denominated in the

currency in which the benefi ts will be paid, and that have terms to maturity approximating to the terms of the related

pension liability. Plan assets are assets that are held by a long-term employee benefi t fund or qualifying insurance

policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value

is based on market price information and, in the case of quoted securities; it is the published bid price. The value of any

defi ned benefi t asset recognised is restricted to the sum of any unrecognised past service costs and the present value of

any economic benefi ts available in the form of refunds from the plan or reductions in the future contributions to the plan.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions as well as

adjustments relating to the asset ceiling are charged or credited to other comprehensive income in the period in which

they arise. Such actuarial gains and losses are recognised in other comprehensive income and are not reclassifi ed to

profi t or loss in subsequent periods.

Past service costs are recognised immediately in income, unless changes to the pension plan are conditional on the

employees remaining in service for a specifi ed period of time (the vesting period). In this case, the past service costs are

amortised on a straight-line basis over the vesting period.

Net interest is calculated by applying the discount rate to the net defi ned benefi t liability.

For defi ned contribution plans, the Group pays contributions to publicly or privately administered pension insurance

plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the

contributions have been paid. The contributions are recognised as an employee benefi t expense when they are due.

Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments

is available.

All active members of the defi ned benefi t plan were transferred to the defi ned contribution plan effective 1 April 2015.

Six pensioners remain on the DB plan and the liability is fully insured.

(b) Termination benefi ts

Termination benefi ts are payable when employment is terminated before the normal retirement date, or when an

employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination benefi ts

when it is demonstrably committed to either: terminating the employment of current employees according to a detailed

formal plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to encourage

voluntary redundancy. Benefi ts falling due more than 12 months after report date are discounted to present value.

(c) Performance bonus plans

The Group recognises a liability and an expense for performance bonuses, based on a formula that takes into

consideration the profi t attributable to the Company’s shareholders after certain adjustments. The Group recognises a

provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(d) Long-service awards

The Group recognises a liability and an expense for long service, based on a formula that takes into account the length

of service of all employees. The long-service award is paid at various stages of employment service and it is a

contractual obligation. These obligations are valued annually by independent qualifi ed actuaries and provided for under

provisions.




2. ACCOUNTING POLICIES (continued) 2.15 Construction contracts

A construction contract is defi ned by IAS 11 as a contract specifi cally negotiated for the construction of an asset. The contract

revenue comprises the initial agreed contract price plus any confi rmed variations. Costs are those that are directly related to the

contract. Where the outcome of the contract can be reliably estimated, revenue and costs are taken to profi t or loss based on

the percentage of completion method. The percentage of completion is determined by measuring the proportion of costs

incurred for work performed to the total expected costs.

The profi t attributable to the stage of completion represents the difference between the revenue and costs attributable to the

stage of completion.

Where the outcome of the contract cannot be reliably estimated, revenue is taken to profi t or loss based on the costs incurred

that are deemed to be recoverable.

Where any contract review shows an expected loss on a contract, then this loss is recognised in profi t or loss immediately.

Losses on contracts are recognised in the period in which they fi rst become foreseeable. Contract losses are determined to be

the amount by which estimated direct and indirect costs of the contract exceed the estimated total revenues that will be

generated by the contract.

During the period until the percentage-of-completion calculation is completed, all contract costs are accumulated in contract

work in progress. The costs of the contract attributable to the stage of contract completion are transferred to cost of sales.

Where the costs incurred plus recognised profi ts are greater than the sum of the recognised losses and progress billings, then

this amount is shown in debtors as amounts due from customers for contract work.

Where the sum of recognised losses and progress billings is greater, then this amount is shown in creditors as amounts due to

customers for contract work.

2.16 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services and the

value of work executed which can be reliably measured during the year in respect of long-term contracts.

Revenue is generated from air and gas-cooling technologies supplied to the coal, gold mining and power generation markets,

together with dust extraction and gas treatment technologies offered from an environmental perspective.

Revenue is recorded net of value added tax, rebates and discounts, and after eliminating inter-group sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic

benefi ts will fl ow to the entity and when specifi c criteria have been met for each of the Group’s activities as described below.

The Group bases its estimates on the historical results, taking into consideration the type of customer, type of transaction and

the specifi cs of each arrangement. (a) Sales of goods and services

Revenue relates to the sale of goods and revenue which are recognised when the Group entities have fulfi lled their

contractual obligations to a customer and have obtained the right to receive consideration. This is usually on dispatch

but is dependent upon the contractual terms that have been agreed with the customer.

(b) Dividend income

Dividend income is recognised when the Company’s right to receive payment is established.


2. ACCOUNTING POLICIES (continued) 2.16 Revenue recognition (continued) (c) Interest income

Interest income earned on fi nancial assets at amortised cost is recognised in profi t or loss as part of fi nance income

using the effective interest rate method. The Group recognises interest income as a part of investment income. The

Company is an investment holding company and recognises interest income as a part of revenue.

(d) Royalty income

Royalty income is recognised when the Group entities have fulfi lled their contractual obligations to a customer and have

obtained a right to receive consideration. The right to receive royalty income is dependent upon the contractual terms of

the royalty agreement concluded. Royalty income is recognised in profi t or loss as part of other income when the

Group’s right to receive payment is established. The Company recognises royalty income as a part of revenue as it is an

investment holding company.

2.17 Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached

conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis

over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an

asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and

released to profi t or loss over the expected useful life in a pattern of consumption of the benefi t of the underlying asset by equal

annual instalments.

2.18 Leases

Leases in which a signifi cant portion of the risks and rewards of ownership is retained by the lessor are classifi ed as operating

leases. Payments in respect of operating leases are recognised in profi t or loss on a straight-line basis over the lease term.

Leasing agreements which transfer to the Group substantially all the benefi ts and risks of ownership of an asset are treated as

fi nance leases. The assets are included in property, plant and equipment and the capital element of the leasing commitments is

shown as obligations under fi nance leases. The lease rentals are treated as consisting of capital and interest elements. The

capital element is applied to reduce the outstanding obligations and the interest element charged to profi t or loss so as to give a

constant periodic rate of charge on the remaining balance outstanding at each accounting period. Assets held under fi nance

leases are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain

ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the

lease term.

2.19 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends are approved

by the Company’s board of directors.

2.20 Dividend withholding tax

Dividend withholding tax is payable at a rate of 15% on dividends distributed to shareholders. This tax is not attributable to the

Company paying the dividend, but is collected by the Company and paid to the tax authorities on behalf of the shareholder.

Dividend withholding tax is included in dividend paid in the statement of changes in equity.




3. FINANCIAL RISK MANAGEMENT 3.1 Financial risk factors

The Group’s activities expose it to a variety of fi nancial risk: market risk (including foreign exchange risk, interest rate risk and

price risk), credit risk, liquidity risk and cash fl ow risk. The Group’s overall risk management programme focuses on the

unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the Group’s fi nancial performance. Risk

management is carried out by a central treasury department (Colfax Group Treasury) under policies approved by the board of

directors. Group Treasury identifi es, evaluates and hedges fi nancial risks in close cooperation with the Group’s operating units.

The board provides written principles for overall foreign exchange risk, interest rate risk, and credit risk, use of derivative fi nancial

instruments and non-derivative fi nancial instruments, and investing excess liquidity.

(a) Market risk

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,

primarily with respect to the US dollar (USD), euro and the British pound sterling (GBP). Foreign exchange risk arises

from future commercial transactions and recognised assets and liabilities.

Entities in the Group use forward contracts to manage their foreign exchange risk arising from future commercial

transactions, recognised assets and liabilities. Foreign exchange risk arises when future commercial transactions,

recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Group

manages the position by using external forward currency contracts.

The following assumptions have been in the preparation of the foreign currency sensitivity analysis:

The sensitivity is based on possible changes in the US dollar, euro and GBP. The Group’s exposure to foreign

currency changes for all other currencies is not material

The sensitivity calculation relates to signifi cant foreign currency assets and liabilities on the statement of fi nancial

position as at 31 December 2016

The calculation is based on the net exposure to those foreign currencies

The sensitivity is based on the impact of a 10% currency movement

At 31 December 2016, if the currency had weakened by 10% against the US dollar with all other variables held

constant, pre-tax profi t would have been R3 639 867 lower, mainly as a result of foreign exchange gains on translation

of US dollar-denominated receivables, payables and forward exchange contracts. If the currency were strengthened by

the percentage indicated above there would be an equal and opposite impact on pre-tax profi t.

At 31 December 2016, if the currency had weakened by 10% against the GBP with all other variables held constant,

pre-tax profi t would have been R143 299 lower, mainly as a result of foreign exchange gains on translation of GBP-

denominated receivables, payables and forward exchange contracts. If the currency were strengthened by the

percentage indicated above there would be an equal and opposite impact on pre-tax profi t.

At 31 December 2016, if the currency had weakened by 10% against the euro with all other variables held constant,

pre-tax profi t would have been R1 106 902 lower, mainly as a result of foreign exchange gains on translation of

euro-denominated receivables, payables and forward exchange contracts. If the currency were strengthened by the

percentage indicated above there would be an equal and opposite impact on pre-tax profi t.


3. FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued)

Cash fl ow and interest rate risk

Fluctuations in interest rates impact the value of short-term cash investments and fi nancing activities, giving rise to

interest rate risk. The Group’s income and operating cash fl ows are affected by changes in the market interest rate.

Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk.

In the ordinary course of business, the Company receives cash from its operations and is required to fund working

capital and capital expenditure requirements. This cash is managed to ensure surplus funds are invested in a manner to

achieve maximum returns while minimising risks.

The Group has analysed the effect of a rise/fall of 1% in the prime lending rate (refer to note 15).

Price risk

The Group is exposed to commodity price risk on steel. This risk is mitigated by escalation clauses that are built into

major contracts for steel price variances.

(b) Credit risk

Potential concentrations of credit risk consist principally of cash investments, amounts due from customers and trade

debtors. The Group only deposits cash surpluses with major banks of high quality and with fi nancial institutions located

in South Africa. Trade debtors consist of a large number of customers, spread across diverse industries and

geographical areas. Credit evaluation is performed on the fi nancial condition of the customers before granting credit.

The ongoing creditworthiness of the debtors is assessed from time to time.

The Group has policies that limit the amount of credit exposure to any one fi nancial institution. The Group has assessed

the credit risk with regard to trade receivables with reference to third-party ratings to determine credit quality – refer to

fi nancial assets and liabilities by category note 14.

The Company’s maximum exposure to credit risk is represented by the carrying values of its fi nancial assets on the

statement of fi nancial position.




3. FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk

The Group manages liquidity risk by monitoring forecast cash fl ows and ensuring that adequate unutilised borrowing

facilities are maintained. Due to the dynamic nature of the underlying businesses, the Group aims to maintain fl exibility in

funding by keeping committed credit lines available.

The maturity analyses of fi nancial liabilities are as follows:

2016R’000

2015R’000

Due within one year

Trade and other payables 278 342 292 215

Amounts due to customers for contract work 53 890 34 554

Forward exchange contracts 1 815 1 950

334 047 328 719

Due within one to two years

Amounts due to customers for contract work 79 649 78 739

79 649 78 739

The Group’s fi nancial liabilities will be settled in the normal operating cycle of the business. For construction contracts,

this would be greater than a year.

3.2 Capital risk management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital

ratios to support its business and maximise the shareholder’s value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or

adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue

new shares.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December

2016 and 2015.

4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS Estimates and assumptions

The preparation of the annual fi nancial statements in accordance with IFRS requires the use of certain critical accounting estimates.

It requires management to exercise judgement in the process of applying the Group’s accounting policies. Uncertainty about these

assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities

affected in future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates

are signifi cant to the annual fi nancial statements, are mainly the following:

Estimated impairment of goodwill

Goodwill is assessed for impairment at each reporting date. The recoverable amount of the relevant cash-generating units is determined

based on value-in-use calculations. These calculations use cash fl ow projections per budget and strategic plan forecasts. These plans

are revisited every year and are compiled after considering market conditions and the strategic positioning of the business units within

the markets in which they operate.


4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS (continued) Estimated impairment of non-fi nancial assets

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of

its fair value less costs of disposal and its value in use. The fair value less costs to sell calculation is based on available data from

binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for

disposing of the asset. The value-in-use calculation is based on a discounted cash fl ow model. These calculations use cash fl ow

projections per budgets and strategic plan forecasts. The recoverable amount is most sensitive to the discount rate used for the

discounted cash fl ow model as well as the expected future cash infl ows and the growth rate used for extrapolation purposes.

Impairment of trade receivables

An allowance for impairment is raised when there is evidence of signifi cant fi nancial diffi culties of the debtor, probability that the debtor

will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments. The allowance raised is based on

management judgement, based on the factors mentioned and the expected recoverability of the amount due.

Revenue recognition

The Group uses the stage of completion, determined by our engineering experts, based on the proportion of contract costs incurred for

work performed to date compared to the estimated total contract costs. Losses on contracts are recognised in the period in which the

loss fi rst becomes foreseeable. Contract losses are determined to be the amount by which estimated direct and indirect costs of the

contract exceed the estimated total revenues that will be granted by the contract.

The Group provides repair and maintenance on key contracts using straight line billing arrangements and the associated revenue is

recognised only when work has been performed. The performance of work is dependent on repairs being requested by a client and

therefore may not take place throughout the year as planned. Thus, the estimates of total work performed and total work to be

performed changes annually as a result of actual data being accumulated and the differences between clients and contracts.

Warranties

The Group provides in full for claims by customers in respect of defects in goods supplied or work performed when such claims are

ascertainable. In addition, certain long-term contract provisions are made for warranties calculated on an appropriate percentage of the

contract price. The estimation of the percentage is based on historical information and management judgement, based on experience

of previous warranty claims on the product type.

Estimation of useful lives of property, plant and equipment and intangible assets

The asset’s residual values and useful lives are reviewed annually and adjusted if appropriate. The useful lives are determined based on

the expected period over which the asset will be used and benefi ts received by the Group from the use of the asset. Residual values are

determined by obtaining observable market prices for the asset with the same age that the asset would be at the end of its useful life.

Deferred tax assets

The recoverability of deferred tax assets is based on the future profi tability of the relevant entity and the ability to generate future taxable

income. These calculations use budget and strategic plan forecasts of profi tability to determine if suffi cient taxable profi t will be available

to allow all or part of the deferred tax asset to be utilised in the future.

Closed jobs accrual

Estimates are made of commitments following the completion of construction contracts based on management’s judgement of the cost

of these commitments where a contractual obligation exists. These are recorded as closed job accruals.

All estimates and underlying assumptions are based on historical experience and various other factors that management believes are

reasonable under the circumstances. The results of these estimates form the basis of judgements about the carrying value of assets

and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and

underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the

estimate is revised and any affected future periods.




5. SEGMENT INFORMATIONThe Group is organised on a world-wide basis into segments based on its products and services:

(1) Fans and Heat Exchangers – focus on air and gas cooling technologies within the coal/gold mining and power generation markets.

(2) Environmental Control – focus on dust extraction and gas treatment technologies from an environmental perspective.

(3) Fabrication Technology – focus on the supply of welding equipment and consumables. The segment is a new product line for the business.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identifi ed as the board of directors.

The board of directors assesses the performance of operating segments based on operating profi t.

Goodwill of R23 717 000 (2015: R23 717 000) is allocated to the Environmental Control division (refer to note 7)


Externalrevenue

R’000

Operatingprofi t/(loss)

R’000AssetsR’000

LiabilitiesR’000

Inter-segmental

revenueR’000

Fans and Heat Exchangers 1 338 783 283 942 848 304 462 761 26 115

Environmental Control 178 610 (12 744) 166 437 54 908 29 690

Fabrication Technology 87 142 1 257 113 892 63 301 2 783

1 604 535 272 455 1 128 633 580 970 58 588

Central operations – (24 844) 732 407 25 158 –

1 604 535 247 611 1 861 040 606 128 58 588

Capitalexpenditure

R’000Depreciation

R’000Amortisation

R’000

Fans and Heat Exchangers 9 404 13 309 319

Environmental Control – 26 –

Fabrication Technology 1 246 689 –

10 650 14 024 319

Central operations – 87 1 656

10 650 14 111 1 975



Externalrevenue

R’000

Operatingprofi t/(loss)

R’000AssetsR’000

LiabilitiesR’000

Inter-segmental

revenueR’000

5. SEGMENT INFORMATION (continued)

Fans and Heat Exchangers 1 117 302 213 642 719 670 461 896 18 242

Environmental Control 365 974 51 377 172 626 61 337 22 249

1 483 276 265 019 892 296 523 233 40 491

Central operations – (3 022) 692 074 21 930 –

1 483 276 261 997 1 584 370 545 163 40 491

Capitalexpenditure

R’000Depreciation

R’000Amortisation

R’000

Fans and Heat Exchangers 7 179 13 908 230

Environmental Control 30 57 –

7 209 13 965 230

Central operations – 70 1 656

7 209 14 035 1 886

2016R’000

2015R’000

Segment results (operating profi t) 247 611 261 997

Net fi nance income 55 494 40 483

Profi t before income tax 303 105 302 480

Income tax expense (84 684) (86 927)

Profi t for the year 218 421 215 553

Geographical areas

The Group operates world-wide but primarily in seven main geographical locations:

Revenue by location of customer2016

R’0002015

R’000

South Africa* 1 451 613 1 391 753

United Kingdom and Europe 115 40

North America 8 857 7 359

South America 439 –

Rest of Africa* 82 741 69 364

Middle East 10 286 7 989

Australasia 50 484 6 771

1 604 535 1 483 276

* Sales to a single South African customer comprise R908 million (2015: R742 million) of total revenue, spread across all segments.

Intersegmental transactions are eliminated on consolidation.

Revenue




Assets by locationfor the year ended 31 December 2016

Non-current assetsR’000

Current assetsR’000

TotalassetsR’000

5. SEGMENT INFORMATION (continued)

South Africa 185 931 1 622 435 1 808 366

United Kingdom and Europe – 273 273

North America – 3 197 3 197

South America – 378 378

Rest of Africa – 822 822

Middle East – 2 010 2 010

Australasia – 45 994 45 994

185 931 1 675 109 1 861 040


South Africa 196 763 1 364 922 1 561 685

North America – 5 903 5 903

Rest of Africa – 9 526 9 526

Middle East – 1 651 1 651

Australasia – 5 605 5 605

196 763 1 387 607 1 584 370

2016R’000

2015R’000

South Africa 10 650 7 209

10 650 7 209

** Capital expenditure consists of additions of property, equipment, vehicles and intangible assets.

Capital expenditure**


Freehold land and buildings

R’000

Plant, equipment

and vehiclesR’000

TotalR’000

6. PROPERTY, PLANT AND EQUIPMENTCONSOLIDATED

At 1 January 2015

Cost 46 816 118 169 164 985

Accumulated depreciation and impairment (9 856) (50 800) (60 656)

Net book amount 36 960 67 369 104 329

Year ended 31 December 2015

Opening net book amount 36 960 67 369 104 329

Additions 261 6 931 7 192

Disposals – (343) (343)

Write off (201) (843) (1 044)

Depreciation (2 568) (11 467) (14 035)

Closing net book amount 34 452 61 647 96 099

At 31 December 2015

Cost 47 077 122 878 169 955


Net book amount 34 452 61 647 96 099


Opening net book amount 34 452 61 647 96 099

Additions 362 9 913 10 275

Disposals – (111) (111)

Write off – –

Depreciation (2 500) (11 611) (14 111)

Closing net book amount 32 314 59 838 92 152

At 31 December 2016

Cost 47 439 132 352 179 791


Net book amount 32 314 59 838 92 152

COMPANY

At 1 January 2015

Cost – 631 631

Accumulated depreciation and impairment – (314) (314)

Net book amount – 317 317


Opening net book amount – 317 317

Additions –

Write off – – –

Depreciation – (70) (70)

Closing net book amount – 247 247

At 31 December 2015

Cost – 631 631






Freehold land and buildings

R’000

Plant, equipment

and vehiclesR’000

TotalR’000

6. PROPERTY, PLANT AND EQUIPMENT (continued)

COMPANY


Opening net book amount – 247 247

Additions – –

Depreciation – (87) (87)

Disposals – (18) (18)

Closing net book amount – 142 142

At 31 December 2016

Cost – 591 591



Details in respect of immovable property are set out in a register which may be inspected at the Company’s registered offi ce during normal business hours.

Depreciation of R7 485 000 (2015: R8 027 601) is included under cost of sales.

Goodwill R’000

Trademarks R’000

SoftwareR’000

TotalR’000

7. INTANGIBLE ASSETSCONSOLIDATED

At 1 January 2015

Cost 23 717 41 366 4 659 69 742

Accumulated amortisation – (18 209) (3 473) (21 682)

Net book amount 23 717 23 157 1 186 48 060


Opening net book amount 23 717 23 157 1 186 48 060

Additions – – 17 17

Amortisation charge – (1 656) (230) (1 886)

Closing net book amount 23 717 21 501 973 46 191

At 31 December 2015

Cost 23 717 41 366 4 676 69 759

Accumulated amortisation and impairment – (19 865) (3 703) (23 568)

Net book amount 23 717 21 501 973 46 191


Opening net book amount 23 717 21 501 973 46 191

Additions – – 375 375

Write off – – (35) (35)

Amortisation charge – (1 656) (319) (1 975)

Closing net book amount 23 717 19 845 994 44 556

At 31 December 2016

Cost 23 717 41 366 4 380 69 463

Accumulated amortisation and impairment – (21 521) (3 386) (24 907)

Net book amount 23 717 19 845 994 44 556


7. INTANGIBLE ASSETS (continued)

The trademarks are based on the Howden, Safanco and Donkin names. This asset is to be amortised over its economic useful life which is 25 years, based on the life of the assets to which it attaches.

Goodwill of R23 717 000 arose on purchase of the shares in the fabric fi lter business included in the Howden Projects division of James Howden Holdings (Pty) Limited and represents the difference between the purchase price of R26 320 000 and the fair value of net assets acquired of R2 603 000. The goodwill has been allocated to the Environmental Control business segment.

The Group performed its annual impairment calculation. The projected pre-tax cash fl ow used in the impairment calculation is based on the fi nancial budget and strategic plan approved by management covering a fi ve-year period. Cash fl ows beyond the fi ve-year period are extrapolated using the estimated growth rate of 6% per year. The pre-tax discount rate used was 12.3% using the R186 bond yield of 8.63% as at 31 December 2016.

No reasonable change in any of the key assumptions will result in the recoverable amount of goodwill to be less than the carrying amount.

COMPANY

Company intangible assets comprise all trademarks detailed in the consolidated trademarks listed above. The company does not have any other intangible assets. All trademarks listed in the consolidated trademarks listing are held by the Company.

2016R’000

2015R’000

2016R’000

2015R’000

8. INVESTMENT IN SUBSIDIARIESShares at cost less amounts written off – – 60 001 60 001

Issued ordinary

share capital

Proportion held

Shares at cost or valuation less amounts written off

December 2016

R %

December 2016R’000

December 2015R’000

INTEREST IN SUBSIDIARY COMPANIESSubsidiaries of Howden Africa Holdings Limited

Incorporated in South Africa

Howden Africa (Pty) Limited 1 010 100.00 60 001 60 001

Subsidiaries of Howden Africa (Pty) Limited 60 001 60 001

Incorporated in South Africa

James Howden Holdings (Pty) Limited 1 406 488 100.00 15 298 15 298

Howden Donkin (Pty) Limited 10 000 100.00 8 310 8 310

23 608 23 608

Total indebtedness

Amounts owing by Group companies: Please refer to note 34.

Normal capital loans to or from subsidiaries are unsecured and not subject to any fi xed terms of repayment. No interest is charged on capital loans to/from subsidiaries at present but these arrangements are subject to revision from time to time.

Guarantees

Refer to note 32 for guarantees issued by the Group and Company.

CompanyConsolidated

Details of holding company’s interest




2016R’000

2015R’000

2016R’000

2015R’000

9. DEFERRED TAXDEFERRED TAX ASSETS

Balance at beginning of year 24 452 28 745 – 2 010

Charge for the year – current year (5 834) (4 293) – (2 010)

Cash fl ow hedge – charge to equity (486) – –

18 132 24 452 – –

Deferred tax assets comprises

Accelerated depreciation for tax purposes (15 868) (14 841) – –

Cash fl ow hedge 11 – – –

Provisions 20 371 17 073 – –

Working capital 13 618 22 220 – –

18 132 24 452 – –

DEFERRED TAX LIABILITIES

Balance at beginning of year 9 272 1 417 4 336 –

Charge for the year – current year (4 660) 7 113 109 3 986

Pension fund plan surplus – charge to equity (505) 350 (505) 350

Cash fl ow hedge – charge to equity (1 038) 392 – –

3 069 9 272 3 940 4 336

Deferred tax liabilities comprises

Accelerated depreciation for tax purposes 432 1 071 34 46

Pension fund plan surplus 4 896 4 959 4 896 4 959

Assessed loss – (388) – –

Provisions (1 106) (7 470) – –

Working capital (711) 11 003 (990) (669)

Cash fl ow hedge loss (442) 97 – –

3 069 9 272 3 940 4 336

10. CONSTRUCTION CONTRACTSContract revenue recognised in the year 267 955 453 189 – –

Contract costs recognised in the year (193 100) (330 855) – –

Recognised profi ts less recognised losses in the year 74 855 122 334 – –

For contracts in progress at the year-end:

Contract costs incurred and recognised profi ts (less losses) to date 554 328 524 876 – –

Less: Progress billings for work performed (650 862) (539 615) – –

Net amount due to customers for contract work (96 534) (14 739) – –

Amounts due from customers for contract work (non-current) 2 195 1 619 – –

Amounts due from customers for contract work (current) 34 810 96 935 – –

Amounts due to customers for contract work (non-current) (79 649) (78 739) – –

Amounts due to customers for contract work (current) (53 890) (34 554) – –

Net amounts due to customers for contract work (96 534) (14 739) – –

Obligation will be settled in the normal operating cycle of the business. For construction contracts this would be greater than a year.

CompanyConsolidated


2016R’000

2015R’000

2016R’000

2015R’000

11. TRADE AND OTHER RECEIVABLESTrade receivables 337 352 273 489 – –

Less: Provision for impairment of trade receivables (3 121) (3 100) – –

Trade receivables – net 334 231 270 389 – –

Other receivables 25 784 20 615 34 368 13 106

Prepayments 2 591 4 587 – 117

362 606 295 591 34 368 13 223

Less: Non-current portion – trade receivable (11 411) (10 690) – –

Current portion 351 195 284 901 34 368 13 223

All non-current assets are due within fi ve years from reporting date and relate to retentions on construction contracts.

Trade receivables of R337 352 000 (2015: R273 489 000) are pledged as collateral for the general short-term banking facility.

As of 31 December 2016, trade receivables of R25 186 000 (2015: R47 798 000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

The ageing analysis of these trade receivables is as follows:

Up to three months 22 879 41 674 – –

Up to six months 1 306 6 124 – –

Over six months 1 001 – – –

25 186 47 798 – –

As at 31 December 2016, trade receivables of R3 121 000 (2015: R3 100 000) were impaired and provided for. The individually impaired receivables mainly relate to customers which are in unexpectedly diffi cult economic situations. It was assessed that a portion of the receivables is expected to be recovered.

CompanyConsolidated




2016R’000

2015R’000

2016R’000

2015R’000

11. TRADE AND OTHER RECEIVABLES (continued)

Movement on the Group provision for impairment of trade receivables is as follows:

At 1 January 3 100 6 300 – –

Utilisation of provision (327) (309) – –

Unused amounts reversed (707) (4 199) – –

Provision for receivables impairment 1 055 1 308 – –

At 31 December 3 121 3 100 – –

The creation and release of provision for impaired receivables has been included in “administrative expenses” in the statements of comprehensive income. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. No debtors terms have been renegotiated during the year.

The Group has analysed the effect of the rise or fall of 1% in the prime lending rate to which the Group’s trade and other receivables are exposed and concluded that this would decrease profi t before income tax by approximately R326 475 (2015: R404 280) and increase in profi t before income tax by approximately R336 000 (2015: R419 142).

Trade receivables of R309 045 000 (2015: R222 591 000) were fully performing.

Trade receivables include foreign balances denominated in the following stated currencies:

The amounts owed by other Howden Group companies are unsecured, interest-free and not subject to any fi xed terms of repayment. Refer to note 34 for balances owing by Group companies.

2016R’000

2015R’000

United States dollar (USD) 47 871 15 802

Australian dollar (AUD) – 182

Canadian dollar (CAD) 2 372 3 186

50 243 19 170

2016R’000

2015R’000

12. LOANS RECEIVABLELoans to BEE companies

Buhle Bethu (Pty) Limited – 2 500

Themba Njalo Camden (Pty) Limited – 5 000

Sindawonye Services (Pty) Limited 5 700 –

Field Service and Engineering 2 850 –

Fidelity Fund* 7 500 –

16 050 7 500

* Loans issued in 2015 were expropriated in a trust fund of an attorney responsible for managing the funds. A claim has been made to the fi delity fund

and it is probable that the amount will be recovered within 12 months.

The loans are interest free, not secured and repayable within 12 months.

The loans were issued for Enterprise and Supplier development in terms of B-BBEE Codes of Good Practice.

CompanyConsolidated

Consolidated


13. RETIREMENT FUNDSDefi ned benefi t fund

The Group operated a post-retirement scheme that covers all employees employed before 1 January 2001 until 31 March 2015. 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 2001. 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 2015.

On 15 September 2016 approval from the Financial Services Board (FSB) was obtained to transfer active members to a defi ned contribution pension fund (DC plan). The active members’ fund was transferred to the DC plan in November 2016. 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 fund

The Group operates a defi ned contribution pension fund for all employees who joined on or after 1 January 2001.

Employees who are not members of either of the Group’s pension funds are covered by the relevant industry fund or through foreign territory statutory funds.

All the funds are managed independently of the Group.

The amounts recognised in the statements of fi nancial position are determined as follows:

2016R’000

2015R’000

Present value of funded obligations 4 893 142 928

Fair value of assets (22 378) (160 640)

Surplus recognised (17 485) (17 712)

According to the rules of the fund all surpluses in the fund will be transferred to the employer surplus account and therefore accrue to the employer.

The movement in the defi ned benefi t obligation over the year is as follows:

Beginning of the year 142 928 308 023

Current service cost – 2 124

Net interest cost – 4 061

Contribution by plan participants – 438

Actuarial losses – 9 126

Settlement (138 035) (122 274)

Curtailment – (19 826)

Benefi ts paid – (38 744)

End of year 4 893 142 928

Company and Consolidated




2016R’000

2015R’000

13. RETIREMENT FUNDS (continued)

The movement in the fair value of plan assets for the year is as follows:

Beginning of the year 160 640 303 148

Return on plan assets 1 576 7 050

Actuarial gains/(losses) on plan assets (1 803) 10 377

Employer contributions – 645

Contributions by plan participants – 438

Settlement (138 035) (122 274)

Benefi ts paid – (38 744)

End of year 22 378 160 640

The amounts recognised in the profi t or loss are as follows:

Current service cost – 2 124

Net interest cost (1 576) (2 989)

Curtailments – (19 826)

Total included in employee benefi ts (1 576) (20 691)

The amounts recognised in the other comprehensive income are as follows:

Net actuarial loss recognised during the year 1 803 (1 251)

1 803 (1 251)

The actual return on plan assets was R0.6 million (2015: R17.4 million)

Company and Consolidated


2016R’000

2016%

2015R’000

2015%

13. RETIREMENT FUNDS (continued)

COMPANY AND CONSOLIDATED

Plan assets are comprised as follows:

Cash and cash equivalents 17 485 78 – –

Equity – – 104 470 65

Debt – – 13 777 9

Property – – 647 –

Other 4 893 22 41 746 26

22 378 100 160 640 100

The fund holds no investments in the participating employer.

The major categories of equity plan assets at fair value are as follows:

2016R’000

2015R’000

Healthcare – 3 280

Financials – 28 813

Consumer services – 9 423

Consumer goods – 26 013

Telecommunication – 1 087

Basic materials – 23 777

Industrials – 11 931

Technology – 146

– 104 470

All investments are quoted equity instruments.

Expected contributions to post-employment benefi t plans for the year ending 31 December 2017 are Rnil (31 December 2016: Rnil).

No further contributions are expected to be paid into the fund as a result of a settlement recognised for active members and pensioners.




Fair value hierarchy

Fair value through profi t

or loss R’000

Quoted prices in active marketsLevel 1

R’000

Signifi cant observable

inputs Level 2

R’000


inputs Level 3

R’000

14. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSSCONSOLIDATED

31 December 2016

Financial assets carried at fair value

Foreign exchange contracts – – – –

Foreign exchange contracts in cash fl ow hedges 5 – 5 –

Total 5 – 5 –

COMPANY

31 December 2016



Foreign exchange contracts in cash fl ow hedges – – – –

Total – – – –

CONSOLIDATED

31 December 2016

Financial liabilities carried at fair value

Foreign exchange contracts 17 – 17 –

Foreign exchange contracts in cash fl ow hedges 1 798 – 1 798 –

Total 1 815 – 1 815 –

COMPANY

31 December 2016




Total – – – –

CONSOLIDATED

31 December 2015




Total 2 964 – 2 964 –

COMPANY

31 December 2015




Total 51 – 51 –


Fair value hierarchy

Fair value through profi t

or loss R’000

Quoted prices in active marketsLevel 1R’000


inputs Level 2R’000

Signifi cant unobservable

inputs Level 3R’000

14. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

CONSOLIDATED

31 December 2015




Total 1 949 – 1 949 –

COMPANY

31 December 2015




Total – – – –

The fair value of these recurring fi nancial instruments, is determined through evaluation techniques based on observable inputs, either directly, such as quoted prices, or indirectly, such as derived from quoted prices. The Level 2 instruments are valued based on the forward exchange rates as at 31 December 2016.

2016R’000

2015R’000

2016R’000

2015R’000

15. CASH AND CASH EQUIVALENTSCash and cash equivalents included in the statement of cash fl ows comprised the following statements of fi nancial position amounts:

Bank and cash balances – current 909 341 730 190 600 566 579 173

909 341 730 190 600 566 579 173

At 31 December 2016, the Group had available R50 million (2015: R50 million) of undrawn short-term borrowing facilities.

Trade receivables of R337 352 000 (2015: R273 489 000) are pledged as collateral for the general short-term banking facility.

The Company and its subsidiaries have entered into cross-surety agreements in favour of Standard Bank of South Africa wherein each such entity undertook to stand as surety for and co-principal debtor for any present and future indebtedness of the other Group entities, limited to an aggregate liability of R301 million. These cross-surety agreements incorporated a cession of claims held against other Group entities.

The Group has analysed the effect of a rise/fall of 1% in the prime lending rate to which the Group’s cash and cash equivalents are exposed and concluded that this would increase/decrease profi t before income tax by approximately R9 093 410 (2015: R7 301 900).

The average interest rate earned on bank balances was 6.59% (2015: 5.62%).

CompanyConsolidated




2016R’000

2015R’000

2016R’000

2015R’000

16. INVENTORIES

The amounts attributable to the different categories are as follows:– Raw materials, components and consumables 6 169 19 404 – –

– Work in progress 151 097 119 746 – –

– Finished goods 174 900 96 013 – –

332 166 235 163 – –

Inventory amounting to R675 million (2015: R653 million) was included in cost of sales.

17. RECONCILIATION OF TAXATION PAID DURING THE YEAR

Amount due/(owing) at beginning of year 29 954 23 939 166 (277)

Charge in profi t or loss (84 684) (86 927) (15 613) (18 527)

Adjustment for deferred taxation 1 174 11 406 109 5 996

Amount receivable at end of year (31 542) (29 954) – (166)

Amount owing at end of year 13 123 – 4 935 –

(71 975) (81 536) (10 403) (12 974)

18. SHARE CAPITALAuthorised

150 000 000 ordinary shares of 1 cent each 1 500 1 500 1 500 1 500

Issued

65 729 109 ordinary shares of 1 cent each 657 657 657 657

657 657 657 657

Holding company

The holding company of Howden Africa Holdings Limited is Howden Group South Africa Limited, incorporated in South Africa and its ultimate holding company is Colfax Corporation, incorporated in the United States of America.

Shareholders’ analysis at 31 December 2016

2016 Number of

shareholders

2015 Number of

shareholders

2016 Number of

shares

2015 Number of

shares

Holdings

1 – 1 000 shares 626 708 233 070 276 007

1001 – 100 000 shares 492 545 5 138 819 4 848 758

100 001 – 1000 000 shares 30 37 9 423 051 10 707 786

Over 1 000 001 shares 10 9 50 934 169 49 896 558

1 158 1 299 65 729 109 65 729 109

Category of ordinary shareholders

Holding companies 2 2 36 408 743 36 408 743

Individuals 820 929 2 034 319 2 505 469

Banks, nominees and trust companies 150 164 6 850 806 7 073 196

Insurance companies 8 8 752 391 1 544 735

Pension funds and investment companies 40 45 4 649 496 5 338 556

Endowment and mutual funds 58 63 13 164 884 11 255 842

Other corporations and close corporations 26 31 131 723 152 737

Other public and private companies 54 57 1 736 747 1 449 831

1 158 1 299 65 729 109 65 729 109

CompanyConsolidated


2016Number of

shares

2015Number of

shares2016

%2015

%

18. SHARE CAPITAL (continued)

Ordinary share capital

Major shareholders benefi cially interested in 5% or more of the Company’s listed securities

Howden Group South Africa Limited 31 484 981 31 484 981 47.90 47.90

James Howden & Godfrey Overseas Limited 4 923 762 4 923 762 7.49 7.49

Oasis 3 489 836 3 278 555 5.31 4.99

Shareholder spread in terms of section 8.63(e) of the JSE Limited Listings Requirements

Howden Group South Africa Limited 31 484 981 31 484 981 47.90 47.90

James Howden & Godfrey Overseas Limited 4 923 762 4 923 762 7.49 7.49

Directors’ interest in terms of section 8.63(c) of the JSE Limited Listings Requirements

Thomas Bärwald (Contract ended on 31 May 2016) – 909 – –

Public and non-public shareholders

Non-public shareholders

Directors and associates of the Company holdings*# 23 903 23 903 0.04 0.04

Strategic holdings and holding company** 36 408 743 36 408 743 55.39 55.39

Public shareholders 29 296 463 29 296 463 44.57 44.57

65 729 109 65 729 109 100.00 100.00

# Thomas Bärwald’s shares of 909 are included as he works for the Howden Global Group.

* Prior year adjusted to refl ect shares held by a director who was previously an employee.

** Strategic holding is inclusive of Howden Group South Africa Limited and James Howden & Godfrey Overseas Limited.




2016R’000

2015R’000

2016R’000

2015R’000

19. TRADE AND OTHER PAYABLESTrade payables 150 242 161 994 – –

Accruals 50 244 53 421 – 193

Income received in advance 106 936 112 479 – –

Amounts owing to other Howden Group companies 72 322 22 150 4 244 4 416

Social security and other taxes 15 111 12 491 – –

Other payables 21 164 17 742 12 039 12 985

416 019 380 277 16 283 17 594

The amounts owing to other Howden Group companies are unsecured, interest-free and not subject to any fi xed terms of repayment. See note 34 for details.

2016R’000

2015R’000

Trade payables include foreign balances denominated in the following stated currencies:

European euro (EUR) 11 286 6 879

British pound (GBP) 1 218 58

United States dollar (USD) 83 927 13 118

Indian rupee (INR) 8 –

Australian dollar (AUD) 649 282

97 088 20 337

CompanyConsolidated

Consolidated


2016R’000

2015R’000

2016R’000

2015R’000

20. GOVERNMENT GRANTS

At 1 January 9 671 6 811 – –

Received during the year – 4 209 – –

Released to the statement of profi t or loss (1 050) (1 349) – –

At 31 December 8 621 9 671 – –

Current 915 784 – –

Non-current 7 706 8 887 – –

8 621 9 671 – –

Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfi lled conditions or contingencies attached to these grants.

21. PROVISIONS Warranty

At beginning of year 29 229 34 666 – –

Additional provision 10 316 13 195 – –

Warranty expenditure in current year (8 589) (12 136) – –

Unused amounts released (1 014) (6 496) – –

At end of year 29 942 29 229 – –

Provisions are made on long-term contracts for warranties calculated on an appropriate percentage of the contract value contractual arrangement.

Restructuring provision

At beginning of year 1 472 – – –

Additional provision – 6 022 – –

Expenditure in current year (1 472) (4 550) – –

Unused amounts released – – – –

At end of year – 1 472 – –

Disclosure:

Non-current liabilities 11 642 12 035 – –

Current liabilities 18 300 18 666 – –

Total provisions 29 942 30 701 – –

CompanyConsolidated




Note 2016R’000

2015R’000

2016R’000

2015R’000

22. REVENUERevenue which excludes value added tax and revenue between Group companies, represents the invoiced value of goods and services supplied and the recognised value of long-term contract work.

Revenue from continuing operations

– Construction contracts 267 955 453 189 – –

– Sale of goods 689 276 530 282 – –

– Services 647 304 499 805 – –

1 604 535 1 483 276 – –

Revenue for the Company includes other income items as follows:

– Dividend income – – – 477 680

– Bank interest – – 40 313 15 332

– Receivables (subsidiaries) – interest – – – 1 431

– Licence fees – – 10 550 18 618

– Management fee income – – 24 690 28 290

– Royalties – – 36 337 35 011

– – 111 890 576 362

23. OPERATING PROFIT IS STATED AFTER CHARGINGAmortisation of intangible assets

– Trademarks and other intangible assets 7 1 975 1 886 1 656 1 656

Auditors’ remuneration 2 605 2 120 2 605 2 120

Depreciation

– Buildings 2 500 2 568 – –

– Plant, equipment and vehicles 11 611 11 467 87 70

Total depreciation 6 14 111 14 035 87 70

Provisions and warranties 21 9 302 12 721 – –

Loss on disposal of plant, equipment, vehicles and software 30 – 59 (18) –

Rental under operating leases 11 937 13 093 – –

Employee benefi ts

– Salaries and wages 459 215 395 701 10 688 14 893

– Social security costs 9 939 6 751 5 497 3 661

– Pension costs – defi ned contribution scheme 13 14 658 14 033 1 143 1 100

– defi ned benefi t scheme 13 – 2 124 – 2 124

– defi ned benefi t scheme curtailment gain 13 – (19 826) – (19 826)

Total employee benefi ts 483 812 398 783 17 328 1 952

Repairs and maintenance 8 363 9 332 5 –

Foreign exchange loss 8 451 4 573 1 528 1 372

CompanyConsolidated


2016R’000

2015R’000

2016R’000

2015R’000

24. INVESTMENT INCOME– Interest income 53 990 37 521 – –

– Defi ned benefi t fund – net of interest paid 1 576 2 989 1 576 2 989

55 566 40 510 1 576 2 989

25. FINANCE COSTS– Interest costs 72 27 1 21

72 27 1 21

26. INCOME TAX EXPENSESouth African normal tax

Current tax

– Current year 83 567 75 881 15 504 12 531

– Prior year (57) (360) – –

Deferred tax

– Current year 1 174 11 406 109 5 996

84 684 86 927 15 613 18 527

Reconciliation of rate of tax % % % %

South African normal tax rate 28.0 28.0 28.0 28.0

Adjusted for:

Other permanent differences (0.1)** 0.7* 0.9** 0.9*

Exempt dividend income – – – (25.4)

Net increase/(reduction) (0.1) 0.7 0.9 (24.5)

Effective rate 27.9 28.7 28.9 3.5

* Permanent differences include learnerships, donations and expenses attributable to dividend income.

** Permanent differences include learnerships and donations.

CompanyConsolidated




2016 2015

27. EARNINGS PER ORDINARY SHARE

Number of shares in issue (’000) 65 729 65 729

Cents Cents

Earnings per ordinary share 332.31 327.94

Headline earnings per share 332.36 329.62

There is no dilution effect on earnings.

R'000 R'000

Headline earnings reconciliation

Net profi t for the year 218 421 215 553

Loss on sale of property, plant and equipment and intangible assets – 59

Write off of property, plant and equipment and intangible assets 35 1 044

218 456 216 656

Basic EPS amounts are calculated by dividing the profi t for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

2016R’000

2015R’000

2016R’000

2015R’000

28. COMMITMENTSLeases

Operating leases

Payments due within one year 11 600 9 489 311 208

Payments due within two to fi ve years 12 764 6 822 283 213

Payments due after fi ve years 36 – – –

24 400 16 311 594 421

Note:

Operating lease agreements for land and buildings include a clause to renew the lease for a future negotiated period.

Motor vehicles under operating leases are returned to the lessor at the end of the lease period.

Operating lease agreements have escalation clauses linked to infl ation.

Consolidated

CompanyConsolidated


Note 2016R’000

2015R’000

2016R’000

2015R’000

29. CASH GENERATED FROM/(UTILISED IN) OPERATIONSProfi t before income tax 303 105 302 480 54 016 529 215

Adjustments for:

Depreciation 6 14 111 14 035 87 70

Government grant income 20 (1 050) (1 349) – –

Amortisation of intangible assets 7 1 975 1 886 1 656 1 656

Pension fund surplus/(charges) 13 (1 576) (21 336) (1 576) (21 336)

Write off of property, plant and equipment and intangible assets 6, 7 35 1 044 – –

Cash fl ow hedge reclassifi ed to profi t or loss 262 (592) – –

Loss on disposal of property, plant and equipment 30 – 59 18 –

Other non-cash items – – – (11)

Dividend income 22 – – – (477 680)

Net fi nance income (53 917) (37 494) (40 312) (19 730)

Unrealised FEC (gain)/loss 592 (839) 51 (51)

Warranty and restructuring provision in profi t or loss 21 9 302 12 721 – –

272 839 270 615 13 940 12 133

Working capital changes (56 542) (113 855) (22 456) (38 452)

(Increase)/decrease in inventories (97 003) (9 758) – –

(Increase)/decrease in accounts receivable (5 466) (23 716) (21 145) 22 751

Increase/(decrease) in accounts payable 55 988 (63 695) (1 311) (61 203)

Decrease in provisions (10 061) (16 686) – –

216 297 156 760 (8 516) (26 319)

30. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETSBook value 6 111 343 18 –

Loss on disposal 23 – (59) (18) –

Proceeds 111 284 – –

31. CAPITAL COMMITMENTS

Authorised and contracted 774 598 – –

32. GUARANTEESPerformance and retentions guarantees amounting to R86 121 469 (2015: R78 502 848) have been supplied to third parties on projects being executed.

The Company and its subsidiaries have entered into cross-surety agreements in favour of Standard Bank of South Africa wherein each such entity undertook to stand as surety and co-principal debtor for any present and future indebtedness of the other Group entities, limited to an aggregate liability of R301 million. These cross-surety agreements incorporated a cession of claims held against other Group entities.

The Company has undertaken to stand as surety and co-principal debtor with Howden Africa (Pty) Limited (the principal debtor), for the due and proper payment of all sums of money which the principal debtor may now or in the future owe to a specifi ed customer, limited to an amount of R25 million. The exposure at year-end was Rnil (2015: R268 483).

No losses are expected to arise out of the above arrangements.

CompanyConsolidated




33. LITIGATIONThere are no legal matters which in the opinion of the Group and in consultation with legal counsel would have any material consolidated effect on the Group’s fi nancial position, results of operations or cash fl ow.

34. RELATED PARTY TRANSACTIONSFor details of subsidiary companies and the Group’s interest therein refer to note 8.

Refer to pages 64 and 65 for details of the directors and note 35 to the fi nancial statements for details of emoluments paid to directors.

Refer to note 32 to the fi nancial statements for details of guarantees provided on behalf of the subsidiary companies.

Group 2016R’000

2015R’000

Key management compensation

– Short-term employee benefi ts 26 627 25 787

– Post-employment pension benefi ts 1 730 1 795

28 357 27 582

Related party transactions with entities outside the Howden Africa Group

Sales to related partiesR’000

Purchases from related

partiesR’000

Management fee to related

partyR’000

ERP licence fee to related

partyR’000

Technology licence fee

to related party

R’000

Service fee – shared

service centreR’000

Group

2016

Howden Denmark A/S – 7 758 – – – –

Howden Thomassen Compressors BV Netherlands – 398 – – – –

Howden Australia (Pty) Limited 50 484 404 – – – –

Howden Group Limited UK – 7 15 361 7 758 – –

Howden Holdings Limited UK 73 786 – – 2 560 –

Howden Process Compressors Limited 71 3 157 – – – –

Howden South America 439 – – – – –

FW US Fairfi eld 133 – – – – –

FW Finland – 152 – – – –

Howden Mexico – 20 590 – – – –

ESAB KFT – – – – – 3 380

Howden North America 2 883 – – – – –

Howden Compressors Limited – 1 152 – – – –

ESAB Middle East 273 121 727 – – – –

Howden Hua Engineering – 243 – – – –

Howden BC Compressors – 75 – – – –

54 356 156 449 15 361 7 758 2 560 3 380

Consolidated


Sales to related parties

R’000

Purchasesfrom related

parties R’000

Management fee to related

partyR’000

ERP licence fee to related

partyR’000


to related partyR’000

34. RELATED PARTY TRANSACTIONS (continued)

Group

2015

Howden Denmark A/S – 5 496 – – –

Howden Spain S.L – – – – –

Howden Thomassen Compressors BV Netherlands – – – – –

Howden Australia (Pty) Limited 1 963 – – – –

Howden Group Limited UK – – 19 946 16 914 –

Howden Holdings Limited UK – – – – 1 888

Howden Process Compressors Limited – 26 170 – – –

Howden South America 579 – – – –

FW US Fairfi eld 37 – – – –

FW Kolkata 64 – – – –

Howden Mexico – 10 814 – – –

Howden North America 476 – – – –

Howden Compressors Limited – 231 – – –

Howden Hua – 1 297 – – –

Howden BC Compressors – 1 859 – – –

3 119 45 867 19 946 16 914 1 888

Related party transactions at Company level

Management fee to/(from)

related partiesR’000

ERP licence fee to/(from)

related parties R’000


to/(from) related parties

R’000

Royalties from related parties

R’000

Servicefees

R’000

Company

2016

ESAB KFT – – – – 3 380

Howden Group Limited UK 15 361 7 758 – – –

Howden Holdings Limited UK – – 2 560 – –

James Howden Holdings (Pty) Limited (3 940) (3 210) (800) (9 247) (1 469)

Howden Donkin (Pty) Limited (1 576) – – (3 602) –

Howden Africa (Pty) Limited (19 173) (4 780) (1 760) (23 489) (1 911)

Exchange rate difference 400 232 – – –

Howden Africa Holdings Limited (8 928) – – (36 338) –

2015

Howden Group Limited UK 19 946 16 914 – – –

Howden Holdings Limited UK – – 1 888 – –

James Howden Holdings (Pty) Limited (7 847) (4 388) 2 (13 899) –

Howden Donkin (Pty) Limited (1 341) – – (2 195) –

Howden Africa (Pty) Limited (19 102) (12 342) (1 890) (18 917) –

Exchange rate difference – (184) – – –

Howden Africa Holdings Limited (8 344) – – (35 011) –




Amounts due

by related parties

Amounts owed to related parties

Amounts due

by related parties

2016R’000

2015R’000


Related party balances as at 31 December 2016

Group

Howden Denmark A/S – 2 518 – 3 675

FW Finland – 128 – 899

Howden Thomassen BV Netherlands – 172 – –

Howden Australia (Pty) Limited 45 994 756 – 1 202

Howden Group Limited UK – 306 – 1 969

Howden Holdings Limited UK 55 3 220 – 1 832

Howden Mexico – – – 4 354

Howden Process Compressors Limited – – – 5 899

Howden North America 2 453 – 4 195 –

Howden HUA Engineering – 37 – –

Howden Compressors Limited 69 1 187 – 1 660

Howden BC Compressors – – – 111

ESAB Middle East 1 421 63 064 2 836 –

ESAB KFT – 388 – –

FW US Fairfi eld – – 31 15

FW Kolkata – – 57 –

Howden South America 378 – – –

James Howden & Co – 487 – 524

Howden India – 8 – 10

50 370 72 271 7 119 22 150

Company

Howden Australia (Pty) Limited – 378 – 1 202

Howden Group Limited UK – 266 – 1 819

Howden Holdings Limited UK – – – 1 395

ESAB KFT – 388 – –

James Howden Holdings Limited – – 108 –

Howden Donkin (Pty) Limited 1 801 – 2 529 –

Howden Africa (Pty) Limited 18 882 652 3 623 –

20 683 1 684 6 260 4 416

Amountsowed to

related parties



Management fees

The management fees are in accordance with management services agreement concluded between Howden Group Limited and Howden Africa Holdings Limited in terms of which the former provides designated management services to Howden Africa Holdings Limited and its subsidiaries.

ERP licence fees

ERP licence fees relate to the licence to utilise designated Howden software.

Shared services fee

Shared service fees are in accordance with an agreement concluded between ESAB KFT and Howden Africa Holdings Limited in terms of which the former provides transactional accounting services to Howden Africa Holdings Limited’s subsidiaries.

Technology licence fees

Technology licence fees relate to use of Howden technology in the manufacturing of goods by Howden Africa.

Royalties

Royalties relate to the use of Howden intellectual property.

Defi ned benefi t fund

There is no contractual agreement or stated policy for charging the net defi ned benefi t cost, in relation to employees on the Howden South Africa Defi ned Benefi t Pension Fund, to Group companies. The Group’s net contribution to the pension fund has been disclosed in note 13.

Relationships

Ultimate holding company Colfax Corporation

Holding company Howden Group South Africa Limited

Subsidiaries – wholly owned James Howden Holdings (Pty) Limited

Howden Donkin (Pty) Limited

Howden Africa (Pty) Limited




Fees for services as

directorR’000

Basic salaryR’000

Bonuses or performance-

related payments2

R’000

Any other material benefi t

received1

R’000

Contribution to pension

schemeR’000

TotalR’000

35. DIRECTORS’ EMOLUMENTS2016

Executive directors

William Thomson – 2 815 – 1 184 281 4 280

Thomas Bärwald (contract ended 31 May 2016) – 1 924 1 574 467 420 4 385

Kevin Johnson (resigned 8 December 2016) – 2 961 1 021 1 843 478 6 303

Marinella Vigouroux (appointed 8 December 2016) – 90 – 26 6 122

Non-executive directors

H Mathe 251 – – – – 251

M Malebye 280 – – – – 280

M Patel 278 – – – – 278

809 7 790 2 595 3 520 1 185 15 899

2015

Executive directors

Thomas Bärwald – 4 383 2 000 1 357 766 8 506

Kevin Johnson – 2 794 1 343 1 753 497 6 387

Non-executive directors

H Mathe 182 – – – – 182

M Malebye 260 – – – – 260

M Patel 258 – – – – 258

700 7 177 3 343 3 110 1 263 15 593

¹ Benefi ts are inclusive of medical aid, company vehicle costs, leave pay and expat allowances.

² Bonuses relate to the previous fi nancial year.

All directors’ emoluments are paid by Howden Africa Holdings Limited.

The base salaries of the executive directors are reviewed annually to ensure they are supportive of both the Company’s business objectives and the creation of shareholder wealth. Salaries are benchmarked against those paid to directors in companies in comparable sectors which are of a similar size.


35. DIRECTORS’ EMOLUMENTS (continued)

Performance-related payments

Actual bonuses were assessed depending on the achievement of a number of corporate and individual targets. The main areas of measurement were:

Bookings relative to budget and performance against previous year. (In 2015 Howden Africa achieved 90.5% of budget) Operating profi t relative to budget and performance against previous year. (In 2015 Howden Africa achieved 81% of budget) Working capital turns relative to budget and performance against previous year. (In 2015 Howden Africa achieved 111% in excess of

budget) Personal performance based on completion of objectives

Maximum bonus only becomes payable for performance substantially in excess of budget and no bonus would be payable for performance that is substantially below budget.

Share options

There were no share options available for Howden Africa Holdings Limited. Executive directors participate in a scheme operated by the Group’s majority shareholder Colfax Corporation.

Service contract

W Thomson has a single service contract with Howden UK Limited and operates as Chief Executive Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 1 February 2016 as a COO and on 1 June 2016 as CEO covering an initial period of two years ending 31 May 2018.

T Bärwald has a single service contract with Howden Australia (Pty) Limited and operates as Chief Executive Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 1 January 2009 covering an initial period of two years ending 31 December 2010. The contract was initially extended to 31 December 2015 and was subsequently extended and expired on 31 May 2016.

K Johnson has resigned as a director effective 8 December 2016 to take up a position within Colfax Corporation. He had a single service contract with Howden Australia (Pty) Limited and operates as Chief Financial Offi cer of the Company based on an agreement for an international assignment. The assignment commenced on 23 October 2011 covering an initial period of two years ended 23 October 2013. The contract was initially extended to 23 October 2014 and was subsequently extended to 30 April 2017 on the terms and conditions below:

M Vigouroux was appointed on 8 December 2016 as Kevin Johnson’s replacement.

Termination periods for executive directors:

Early termination by director• On mutually agreeable notice period to be agreed at the time of the event

Early termination by Howden• Forthwith in the event of – Their inability to carry out his duties for a consecutive period of six (6) months or more on account of physical or mental disability – Their conduct, including dishonesty and being convicted of an offence – Their prejudicial conduct to the business of Howden Africa – If employment with Howden Australia (Pty) Limited ceases at any time for whatsoever reason

There are no local restraints of trade applicable to executive directors.

M Malebye joined the board as an independent non-executive director on 7 November 2007. H Mathe joined the board as an independent non-executive director with effect from 1 July 2012. M Patel joined the board as an independent non-executive director on 15 December 2014.

All independent non-executive directors are appointed under a letter of appointment on a three-year rotation basis. There are no restraints of trade incorporated into independent non-executive director letters of appointment.

Termination periods applicable to independent non-executive directors shall be on mutually agreed periods and shall be in accordance with any applicable legislation.

36. EVENTS AFTER REPORTING DATE

There were no events identifi ed after reporting date that require disclosure or an adjustment to the annual fi nancial statements.


HOWDEN AFRICA HOLDINGS LIMITED

(Incorporated in the Republic of South Africa)

Registration number 1996/002982/06)

(the Company)

JSE Code: HWN ISIN Code: ZAE 000010583

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that an annual general meeting of shareholders

of the Company will be held at its registered offi ces on Thursday,

1 June 2017 at 1a Booysens Road, Booysens, Johannesburg, South

Africa at 13:30 (the AGM) to consider and, if deemed fi t, passing with

or without modifi cation all ordinary and special resolutions as set

out below.

WHO HAS RECEIVED NOTICE OF THIS ANNUAL

GENERAL MEETING

In accordance with section 59(1) of the Act the Company’s board of

directors has resolved the record date for determining shareholders of

the Company entitled to receive notice of this AGM as being those

recorded as such in the share register of the Company, maintained by

the transfer secretaries, as being the close of business on Friday,

24 March 2017.

WHO MAY ATTEND THIS ANNUAL GENERAL

MEETING

In accordance with section 59(1)(b) of the Act, the Company’s board

of directors has resolved that the record date for determining which

shareholders of the Company are entitled to attend, participate in,

and to vote at this AGM, as Friday, 26 May 2017. Accordingly, the last

date to trade in the Company’s shares on the JSE Limited (JSE) in

order to be eligible to attend, participate in and vote at this AGM is

Tuesday, 23 May 2017.

All meeting participants will be required to provide identifi cation.

The purpose of the meeting is to transact the business below and to

consider and, if deemed fi t, pass the following resolutions with or

without modifi cation the resolutions below.

Ordinary resolution 1: Adoption of annual fi nancial statements

Resolved that the annual fi nancial statements for the Company and

the Howden Africa Group for the year ended 31 December 2016 be

and are hereby adopted.

Explanatory notes

The complete annual fi nancial statements are set out on pages 74 to

135 of the integrated annual report for the year ended 31 December

2016 and have been distributed as required by the Act and the JSE

Listings Requirements (Listings Requirements). In addition to the

annual fi nancial statements, the integrated annual report also

incorporates the external auditors’ report, Audit and Risk Committee

report, directors’ report and the remuneration, nomination, social and

ethics report.

The integrated annual report will also be available on the Company’s

website, www.howden.co.za, and a printed copy can be obtained

from the transfer secretaries and/or Company Secretary.

In order to be adopted this ordinary resolution requires the support of

more than 50% of the voting rights exercised on the resolution.

Ordinary resolution 2: External auditors

Resolved that Ernst & Young be and are hereby appointed as

Howden’s independent auditors, as nominated by its Audit and Risk

Committee.

Explanatory notes



Notice of annual general meeting


Ordinary resolution 3: Re-appointment of Audit and Risk

Committee members

Resolved that each of the following independent directors, who are

eligible and offer themselves for re-election, be and are hereby

re-elected, each by way of a separate vote, as members of the

Company’s Audit and Risk Committee:

3.1 Mitesh Patel (member and chairman)

3.2 Morongwe Malebye (member)

3.3 Humphrey Mathe (member)

Explanatory notes

Biographies of these independent directors appear on page 64 of the

integrated annual report.

The appointments numbered 3.1 to 3.3 constitute separate ordinary

resolutions and will be considered by separate votes.

In order to be adopted each ordinary resolution requires the support

of more than 50% of the voting rights exercised on each resolution.

Ordinary resolution 4: Remuneration policy

Resolved that the Company and its subsidiaries’ remuneration policy

for the 2017 fi nancial year, appearing on pages 61 to 63 of the

integrated annual report, be and is hereby endorsed by a non-binding

advisory vote.

Explanatory notes

Chapter 2 of King III, dealing with boards and directors, requires

companies to table their remuneration policy to shareholders for a

non-binding advisory vote at each annual general meeting. This

enables shareholders to express their views on remuneration policies

adopted for executive directors and their implementation. The

Company’s remuneration policy is detailed on page 61 of this report.

In order to be endorsed this ordinary resolution requires the support

of more than 50% of the voting rights exercised on the resolution.

Ordinary resolution 5: Re-election of directors

Resolved that each of the following directors, who retire from offi ce at

this meeting and offer themselves for re-election, be and are hereby

re-elected, each by way of a separate vote, as a director of the

Company:

5.1 Morongwe Malebye

5.2 Humphrey Mathe

5.3 Mitesh Patel

Explanatory notes

Biographical details for these directors appear on page 64 of this

report. Reasons for re-election are explained on page 53.

The appointments numbered 5.1 to 5.3 constitute separate ordinary

resolutions and will be considered by separate votes.

In order to be adopted each ordinary resolution requires the support

of more than 50% of the voting rights exercised on each resolution.

Ordinary resolution 6: Election of director

Resolved to elect Marinella Vigouroux, who was appointed after the

last annual general meeting, in accordance with the provisions of

clause 39 of the Company’s memorandum of incorporation (MoI)

Explanatory notes

Biographical details for this director appear on page 65 of this report.



Ordinary resolution 7: Control of unissued share capital

Resolved that the authorised but unissued shares in the capital of the

Company be and are hereby placed under the control and authority of

the directors of the Company and that the directors of the Company

are and be hereby authorised and empowered to allot, issue and

otherwise dispose of such shares to such person or persons and on

such terms and conditions and at such times as the directors of the


Notice of annual general meeting continued

Company may from time to time in their discretion deem fi t subject to

the provisions of the Act and the Listings Requirements, where

applicable, and that such authority remain applicable until the

Company’s next AGM.

Explanatory notes

In terms of the Company’s MoI, shareholders may authorise the

directors to allot and issue authorised but unissued shares as the

directors in their discretion deem fi t.

The existing general authorities granted by shareholders at the

previous annual general meeting, held on 1 June 2016, will expire at

the AGM on 1 June 2017, unless renewed. The authorities will be

subject to the Act. The aggregate number of ordinary shares able to

be allotted and issued in terms of these authorities are limited as set

out in the respective resolutions.

The directors consider it advantageous to renew these authorities to

enable the Company to take advantage of any business opportunity

that may arise.



Ordinary resolution 8: General authority to issue shares for cash

Resolved that the directors are hereby authorised as a general

authority to issue any and all of the authorised but unissued shares in

the capital of the Company, or to allot, issue and grant options to

subscribe for, any and all of the authorised but unissued shares in the

capital of the Company, for cash, subject to the Act, the MoI of the

Company and the Listings Requirements of the JSE, where

applicable, provided that:

(a) the equity securities be of a class already in issue or, where this is

not the case, must be limited to such securities or rights that are

convertible into a class already in issue

(b) the equity securities must be issued to public shareholders, as

defi ned in the Listings Requirements of the JSE, and not to

related parties

(c) the equity securities which are the subject of a general issue for

cash may not exceed 15% of the Company’s listed equity

securities as at the date of the notice of the AGM this number

being 9 859 366 shares, provided that:

(i) the authority shall be valid until Howden’s next annual

general meeting, or for 15 months from the date on which

the general issue for cash ordinary resolution was passed,

whichever period is shorter subject to the Listings

Requirements of the JSE and to any other restrictions set

out in this authority;

(ii) the calculation of the applicant’s listed equity securities must

be a factual assessment of the applicant’s listed equity

securities as at the date of the notice of AGM, excluding

treasury shares;

(iii) any equity securities issued under the authority during the

period contemplated in (c)1(i) above must be deducted from

such number in (c) above; and

(iv) in the event of a subdivision or consolidation of issued equity

securities during the period contemplated in (c)(i), the

existing authority must be adjusted accordingly to represent

the same allocation ratio.

(d) the maximum discount at which equity securities may be issued

is 10% of the weighted average traded price of such equity

securities measured over the 30 business days prior to the date

that the price of the issue is agreed between the issuer and the

party subscribing for the securities. The JSE should be consulted

for a ruling if the applicant’s securities have not traded in such

30-business day period;

(e) a SENS announcement giving full details, including the impact on

net asset value, net tangible asset value, earnings and headline

earnings per share will be published at the time of any issue

representing, on a cumulative basis within a fi nancial year, 5% or

more of the number of securities in issue prior to the issue; and

(f) the authority includes any options/convertible securities that are

convertible into an existing class of equity securities, where

applicable.


Explanatory notes

In terms of the Listings Requirements, the approval of 75% majority of

the votes cast by shareholders present or represented by proxy at this

AGM will be required for this authority to become effective.

Special resolution 1: General approval for acquisition of the

Company’s shares by the Company or a subsidiary

Resolved that, by way of general approval, the Company is authorised

in terms of its MoI or that of any subsidiary to acquire its own shares

in terms of sections 48 of the Act and in accordance with the Listings

Requirements, which currently provide inter alia that:

(a) Any such acquisition of Company shares will be effected through

the order book operated by the JSE trading system and done

without prior understanding or arrangement between the

Company and/or any subsidiary acquiring shares in the Company

and the counterparty (reported trades are prohibited)

(b) This general authority will only be valid until the Company’s next

annual general meeting; or for 15 months from the date of

passing this special resolution, whichever period is shorter

(c) At any point, the Company and/or any subsidiary acquiring

shares in the Company may only appoint one agent to effect any

repurchase/s on its behalf

(d) Repurchase of the Company’s shares during a prohibited period

as defi ned in the Listings Requirements may not occur unless

there is a repurchase programme in place where the dates and

quantities of securities to be traded during the relevant period are

fi xed (not subject to any variation) and has been submitted to the

JSE in writing prior to the commencement of the prohibited

period. The Company or any subsidiary repurchasing shares

must instruct an independent third party, which makes its

investment decisions in relation to the issuer’s securities

independently of, and uninfl uenced by, the Company and any of

its subsidiaries, prior to the commencement of the prohibited

period to execute the repurchase programme submitted to

the JSE

(e) An announcement will be published as soon as the Company

and/or any subsidiary has acquired shares constituting,

cumulatively, 3% of the number of Company shares in issue at

the time the authority is granted and for each subsequent

3% purchased, containing full details of such acquisition;

(f) Repurchases in the aggregate in any one fi nancial year by the

Company or any subsidiary may not exceed 20% of the number

of shares in issue at the start of that fi nancial year;

(g) In determining the price at which Company shares are acquired

by the Company or any of its subsidiaries in terms of this general

authority, the maximum premium at which shares may be

purchased will be 10% of the weighted average of the market

value of Company shares for the fi ve business days immediately

preceding the date of the relevant transactions;

(h) Prior to entering the market to proceed with the repurchase, the

board, by resolution authorising the repurchase, must

acknowledge that it has applied the solvency and liquidity test as

set out in section 4 of the Act and reasonably concluded that the

Company or the relevant subsidiary acquiring shares of the

Company will satisfy the solvency and liquidity test immediately

after completing the proposed repurchase

Explanatory notes

The Company intends to act under the general authority referred to in

this special resolution if prevailing circumstances (including market

conditions) warrant it.

The Howden Africa board has considered the impact that a purchase

of 20% of the Company’s shares (being the maximum number of

Company shares that may be purchased in terms of this special

resolution) would have on the Company and the Howden Africa board

is of the opinion that:

(i) The Company and the Howden Africa Group will be able, in the

ordinary course of business, to pay its debts for a period of

12 months after the date of this integrated annual report

(ii) The assets of the Company and the Howden Africa Group will

exceed the liabilities of the Company and the Howden Africa

Group for a period of 12 months after the date of this notice of

AGM. For this purpose, assets and liabilities will be recognised

and measured in line with accounting policies used in the latest

audited annual group fi nancial statements

(iii) The working capital, share capital and reserves of the Company

and Howden Africa Group will be adequate for a period of

12 months after the date of this notice of AGM



The directors have no specifi c intention, at present, for the Company

or its subsidiaries to acquire any of the Company’s shares but

consider that such a general authority should be put in place should

an opportunity present itself to do so during the year, which is in the

best interests of the Company and its shareholders.

The Listings Requirements require, in terms of section 11.26, the

following disclosures, which appear elsewhere in this integrated

annual report:

• Major shareholders on page 123

• Share capital of the Company on page 122

In order to be adopted this special resolution requires the support of


Material changes

Other than the facts and developments noted in this integrated annual

report, there have been no material changes in the fi nancial or trading

position of the Company and its subsidiaries since the date of signing

the audit report and up to the date of this notice of AGM.

Directors’ responsibility statement

The directors of the Company, collectively and individually, accept full

responsibility for the accuracy of information relating to these special

resolutions and certify that, to the best of their knowledge, no facts

have been omitted that would make any statement false or

misleading, and that all reasonable enquiries to ascertain such facts

have been made and that these special resolutions contain all

information required by law and by the Listings Requirements.

Special resolution 2: Increase in directors’ fees

Resolved that in terms of section 66 (9) of the Act, the fees payable to

non-executive directors be and are hereby restructured and increased

as set out below with effect from 1 July 2017:

Proposed 2017 fee

increase (%)

Quarterly fee

Independent non-executive directors 6.5 R9 127.66

Non-executive directors 0 R0

Committee chairperson fee (per meeting) (paid in addition to the committee member fee)

Audit and Risk Committee 6.5 R6 846.54

Remuneration, Nomination, Social and Ethics Committee 6.5 R4 564.36

Lead independent director fee (per meeting) 6.5 R2 737.98

Board of directors (per meeting)

Member fee – Independent non-executive directors 6.5 R18 256.38

Member fee – Non-executive directors 0 R0

Audit and Risk Committee (per meeting)

Member fee 6.5 R18 256.38

Remuneration, Nomination,

Social and Ethics Committee (per meeting)

Member fee – Independent non-executive directors 6.5 R18 256.38

Member fee – Non-executive directors 0 R0

July 2016 – July 2017


Explanatory notes

The reason for and effect of this special resolution is to grant the

Company the authority to pay fees to non-executive directors for their

services as directors over the next 12-month period.

In order to be adopted this special resolution requires the support of


VOTING AND PROXIES

All shareholders will be entitled to attend, speak and vote at the

general meeting.

Each shareholder is entitled to appoint one or more proxies (who

need not be shareholders of the Company), to attend, participate in,

speak and vote in place of that shareholder at the general meeting.

The person appointed need not be a shareholder/member of the

Company. All meeting participants will be required to provide

identifi cation reasonably satisfactory to the chairman of the meeting.

A shareholder is entitled to appoint more than one proxy to exercise

voting rights attached to different shares held by such shareholder.

A form of proxy is attached for any shareholder who is unable to

attend the general meeting, but wishes to be represented thereat.

Proxy forms must be forwarded to reach the registered offi ce of the

Company or its transfer secretaries, Computershare Investor Services

(Proprietary) Limited, 70 Marshall Street, Johannesburg 2001, or

posted to the transfer secretaries at PO Box 61051, Marshalltown

2107, South Africa, to be received by no later than 13:30 on 30 May

2017. Any shareholder who completes and lodges the form of proxy

will nevertheless be entitled to attend and vote in person should such

shareholder afterwards decide to do so.

Shareholders who have not dematerialised their shares in the

Company and therefore hold a share certifi cate, must complete the

attached form of proxy as per the instructions therein and lodge it

with the transfer secretaries of the Company (as detailed in the

previous paragraph) to be received by not later than 13:30 on

30 May 2017.

Shareholders who have already dematerialised their shares in the

Company, and the shares are in their own name, must complete the

attached form of proxy as per instructions therein and lodge it with

the transfer secretaries (detailed above) to be received by not later

than 13:30 on 30 May 2017.

Shareholders who have dematerialised their shares, other than those

members who have dematerialised their shares with own name

registration, who are unable to attend the meeting but wish to be

represented thereat, must contact their central securities depository

participant (CSDP) or broker (as the case may be) in the manner and

time stipulated in the agreement between that member and the

CSDP/broker (as the case may be) to furnish the CSDP or broker (as

the case may be) with their voting instructions and in the event that

such members wish to attend the meeting, to obtain the necessary

letter of representation from their CSDP/broker.

In compliance with the provisions of the Act, the Company intends to

offer shareholders reasonable access, through electronic facilities, to

participate in the AGM by means of a conference call facility.

Shareholders will be able to listen to the proceedings and raise

questions should they wish to do so and are invited to indicate their

intention to make use of this facility by applying in writing (including

details as to how the shareholder or representative can be contacted)

to the Company Secretary at the address set out on the inside back

cover of this integrated annual report. The written application is to be

received by the Company Secretary at least 10 business days prior to

the date of the AGM, namely Thursday, 18 May 2017. The Company

Secretary will, by way of email, provide information enabling

participation to those shareholders who have made application.

Voting will not be possible via the electronic facility and shareholders

wishing to exercise their voting rights at the AGM are required to be

represented at the meeting either in person, by proxy or by letter of

representation as provided for in the notice of AGM.

Shareholders must note that access to electronic communication will

be at their expense.

All meeting participants will be required to provide identifi cation

reasonably satisfactory to the chairman of the meeting.



If the instrument appointing a proxy or proxies has been delivered to

the Company, as long as that appointment remains in effect, any

notice required to be delivered by the Company to the shareholder

must be delivered by the Company to:

(a) The shareholder

(b) The proxy or proxies, if the shareholder has:

(i) Directed the Company to do so, in writing

(ii) Paid any reasonable fee charged by the Company for

doing so

A proxy is entitled to exercise, or abstain from exercising, any voting

right of the shareholder without direction, except to the extent that the

MoI, or instrument appointing the proxy, provides otherwise.

INTERPRETATION OF THIS NOTICE

All references in this notice of general meeting of shareholders to the

Listings Requirements mean the Listings Requirements of the JSE, as

amended from time to time and as interpreted and applied or

disapplied by the JSE.

All references in this notice of AGM of shareholders to the “Act”

means the Companies Act No 71 of 2008, as amended.

By order of the board

HOWDEN AFRICA HOLDINGS LIMITED

CR Masson

Group Company Secretary

Johannesburg

24 March 2017

Every member present in person or by proxy and entitled to vote at

the general meeting of the Company will, on a show of hands, have

one vote only, irrespective of the number of shares that member

holds. In a poll, every member will be entitled to that proportion of

total votes in the Company which the aggregate amount of the

nominal value of shares held by that member bears to the aggregate

amount of the nominal value of all shares issued by the Company.

Members registered in their own name are members who elected not

to participate in the issuer-sponsored nominee programme and who

appointed Computershare Custodial Services as their CSDP with the

express instruction that their uncertifi ed shares be registered in the

electronic subregister of members in their own names.

A proxy appointment made must be in writing, dated and signed by

the shareholder and will remain valid only until the end of the meeting

to be held on 1 June 2017, subject to section 58(5) of the Act dealing

with revocation of proxies.

Irrespective of the form of instrument used to appoint a proxy:

(a) The appointment is suspended at any time and to the extent that

the shareholder chooses to act directly and in person in

exercising any rights as a shareholder

(b) The appointment is revocable unless the proxy appointment

expressly states otherwise

(c) If the appointment is revocable, a shareholder may revoke the

proxy appointment by:

(i) cancelling it in writing, or making a later inconsistent

appointment of a proxy

(ii) delivering a copy of the revocation instrument to the proxy,

and to the Company

Revocation of a proxy appointment constitutes a complete and fi nal

cancellation of the proxy’s authority to act on behalf of the shareholder

as of the later of:

(a) The date stated in the revocation instrument, if any

(b) The date on which the revocation instrument was delivered to the

proxy, and to the Company


HOWDEN AFRICA HOLDINGS LIMITED(Incorporated in the Republic of South Africa) Registration number 1996/002982/06) (the Company) JSE Code: HWN ISIN Code: ZAE 000010583

FORM OF PROXY: ANNUAL GENERAL MEETING OF THE COMPANY TO BE HELD AT 13:30 ON 1 JUNE 2017 AT 1A BOOYSENS ROAD, BOOYSENS, JOHANNESBURGFor use by shareholders who:

Hold shares in certifi cated form. Have dematerialised their shares (ie have replaced the paper share certifi cates representing the shares with electronic records of ownership under the JSE’s electronic settlement system (Strate

Limited) and are recorded in the subregister in “own name” dematerialised form) (ie shareholders who have specifi cally instructed their central securities depository participant (CSDP) to hold their shares in their own name).

If you are unable to attend the annual general meeting of members convened for 13:30 on Thursday, 1 June 2017 and wish to be represented thereat, you must complete and return this form of proxy as soon as possible, but in any event to be received by not later than 13:30 on 26 May 2017, to Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 Republic of South Africa (PO Box 61051, Marshalltown, 2017).

Shareholders who have dematerialised their shares and are not registered as own name dematerialised shareholders and who wish to attend the general meeting, must instruct their CSDP or broker to provide them with the relevant letter of representation to enable them to attend such meetings, or, alternatively, should they wish to vote but not attend the general meeting they must provide their CSDP/broker with their voting instructions in terms of the custody agreement between them and the CSDP/broker in the stipulated manner and cut-off time.

I/We (please print full names)

of (address)

Telephone number Cellular phone number

Email address

being the holder(s) of shares in the issued capital of the Company do hereby appoint:

1. of or failing him/her,



the Chairman of the annual general meeting, as my/our proxy to act for me/us at the annual general meeting of the Company to be held on Thursday, 1 June 2017 at 13:30 and at any adjournment thereof, at the Company’s registered offi ce, 1a Booysens Road, Booysens, Johannesburg and to vote for me/us on my/our behalf in respect of the under mentioned resolutions in accordance with the following instructions:

Number of votes (one per share)

For Against Abstain

Ordinary resolutionsOrdinary resolution 1Adoption of annual fi nancial statements for the year ending 31 December 2016Ordinary resolution 2Appointment of external auditorsOrdinary resolution 3.1Re-appointment of Mitesh Patel as a member and the chairman of the Audit and Risk CommitteeOrdinary resolution 3.2Re-appointment of Morongwe Malebye as a member of the Audit and Risk CommitteeOrdinary resolution 3.3Re-appointment of Humphrey Mathe as a member of the Audit and Risk CommitteeOrdinary resolution 4Non-binding advisory endorsement of Company’s remuneration policyOrdinary resolution 5.1Re-election of Morongwe MalebyeOrdinary resolution 5.2Re-election of Humphrey MatheOrdinary resolution 5.3Re-election of Mitesh PatelOrdinary resolution 6Election of Marinella VigourouxOrdinary resolution 7Control of 15% of unissued share capitalOrdinary resolution 8General authority to issue shares for cash

Special resolutionsSpecial resolution 1General approval for the acquisition of its shares by the Company and/or its subsidiariesSpecial resolution 2Increase of non-executive directors’ fees

Signed at on 2017

Signature Assisted by me (where applicable)

Except as instructed above or if no instructions are inserted above, my proxy may vote as he thinks fi t.

Form of proxy


Notes to form of proxy

INSTRUCTIONS ON SIGNING AND LODGING THE PROXY FORM:(1) A deletion of any printed matter and completion of any blank spaces need not be signed or initialled. Any other alteration must be signed,

not initialled.

(2) The Chairman will be entitled to decline to accept the authority of the signatory:

(a) under a power of attorney; or

(b) on behalf of a company, if the power of attorney or authority has not been deposited at the offi ce of the Company’s transfer

secretaries, Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001, Republic of South Africa

(PO Box 61051, Marshalltown, 2107), by not later than 13:30 on 30 May 2017.

(3) The signatory may insert the name(s) of any person(s) whom the signatory wishes to appoint as his/her proxy in the blank spaces provided.

(4) When there are joint holders of shares and if more than one of those joint holders is present or represented, the person whose name

stands fi rst in the register in respect of such shares of his/her proxy, as the case may be, will alone be entitled to vote in respect thereof.

(5) The completion and lodging of this form of proxy will not preclude the signatory from attending the meeting and speaking and voting in

person to the exclusion of any proxy appointed in terms hereof should such signatory wish to do so.

(6) Forms of proxy must be deposited at the offi ce of the Company’s transfer secretaries, Computershare Investor Services (Proprietary)

Limited, 70 Marshall Street, Johannesburg, 2001, Republic of South Africa (PO Box 61051, Marshalltown, 2107), by not later than

13:30 on 30 May 2017.

(7) If the signatory does not indicate in the appropriate place on the face of this form how he/she wishes to vote on a particular resolution, the

proxy will be entitled to vote as he/she deems fi t on that resolution.

(8) The Chairman of the annual general meeting may reject any proxy form which is completed other than in accordance with these

instructions, provided that he may accept such proxy forms where he is satisfi ed on the manner in which a member wishes to vote.

Summary in terms of section 58(8)(b)(i) of the Companies Act 71 of 2008 (Act), as amended:

Section 58(8)(b)(i) provides that if a company supplies a form of instrument for appointing a proxy, the form of proxy supplied by the company to

appoint a proxy must bear a reasonably prominent summary of the rights established by section 58 of the Act, which is set out below:

A shareholder of a company may, at any time, appoint any individual, including an individual who is not a shareholder of that company, as a

proxy, among other things, to participate in, and speak and vote at a shareholders’ meeting on behalf of the shareholder

A shareholder may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights

attached to different securities held by the shareholder

A proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person

A proxy appointment must be in writing, dated and signed by the shareholder; and remains valid only until the end of the meeting at which it

was intended to be used, unless the proxy appointment is revoked, in which case the proxy appointment will be cancelled with effect from

such revocation

A shareholder may revoke a proxy appointment in writing

A proxy appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in exercising any

rights as a shareholder

A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction

Howden Africa Holdings Limited (Incorporated in the Republic of South Africa)

(Registration number 1996/002982/06)

JSE code: HWN ISIN: ZAE000010583

Registered offi ce 1a Booysens Road

Booysens

South Africa 2091

(PO Box 2239, Johannesburg, 2000)

Telephone: +27 11 240 4000

Telefax: +27 11 493 0545

Transfer secretariesComputershare Investor Services (Proprietary) Limited

Ground Floor

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown 2107)

SponsorPricewaterhouseCoopers Corporate Finance (Proprietary) Limited

2 Eglin Road

Sunninghill

2157

External auditorsErnst & Young Inc.

102 Rivonia Road

Sandton

2194

Shareholder contact informationInvestor Relations

Craig Masson

Company Secretary

+27 11 240 4000

[email protected]

Corporate information

BASTION GRAPHICS

©Howden Group Limited. All rights reserved. 2014Howden and the fl ying H logo are registered trade marks belonging to the Howden Group.

Howden Africa1a Booysens Road

Booysens 2091

PO Box 2239

Johannesburg 2000

South Africa

Tel: +27 11 240 4000

Fax: +27 11 493 0545

Email: [email protected]

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