PRESENTATION TO THE
PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES
19 September 2007
AGENDA
• OPENING REVIEW BY CHAIRMAN
FRED PHASWANA
• OVERVIEW OF PERFORMANCE OF TRANSNET
MARIA RAMOS
• REVIEW OF FINANCIAL PERFORMANCE
CHRIS WELLS
• HUMAN RESOURCES STRATEGY AND PROGRESS
PRADEEP MAHARAJ
• OPERATING DIVISIONS REVIEW
CHIEF EXECUTIVE OFFICERS
• CONCLUSION AND WAY FORWARD
MARIA RAMOS
2
OPENING REVIEW: CHAIRMAN OF TRANSNET
The compact with the Shareholder sets out:
• Transnet’s mandate
• The strategic objectives to be attained by Transnet
• The Key Performance Areas and Indicators to measure Transnet’s performance during a
certain period
3
SHAREHOLDERS COMPACT: MANDATE
“The mandate for Transnet remains as determined by the company’s founding
documents, by prevailing legislation and by this Compact”
Transnet’s key role is to assist in lowering the cost of doing business in South Africa
and enabling economic growth through providing appropriate ports, rail and pipeline
infrastructure and operations in a cost effective and efficient manner and within
acceptable benchmark standards
4
SHAREHOLDERS COMPACT: STRATEGIC OBJECTIVES
4 KEY AREAS
1. Capital and financial
efficiency
2. Operating efficiency &
effectiveness
3. Infrastructure
Investments
4. Development
- Strong balance sheet
- Appropriate gearing
- Cost effective funding
- Volume growth (especially GFB)
- Operating margin improvement
- Business re-engineering
- Exit non-core businesses
- Competitively priced services
- Correlation between budget and actual
capital spending
- Implement maintenance plan
- Investment program (ASGISA); logistics
cost reduction
- Skills development
- BEE
5
SHAREHOLDERS COMPACT: FINANCIAL KPI’s
Performance Area
Capital/financial
efficiency
Key performance indicator
(KPI)/measure
EBITDA margin(%)
Cash interest cover (times)
Gearing ratio(%)
CFROI(%)
Infrastructure
investment
% of actual capital expenditure
compared to budget expenditure
% of total maintenance spent
compared to budget
2007 Target
34.8
5,3
47.9
5.8
> 90%
> 90%
6
CONCLUSION: TRANSNET PERFORMANCE 2006/07
• Pleasing progress made in implementing Transnet’s Strategy
•
Significant investment in human and physical capital
•
Strong governance and risk processes
•
Achieved all the financial objectives – strong balance sheet
•
Now focussed on core Businesses – major non-core assets disposed off
• Platform created for future growth and service delivery
7
MARIA RAMOS
OVERVIEW OF PERFORMANCE OF TRANSNET
TRANSNET’S VISION AND MISSION
Transnet is a focused freight transport company delivering:
• Integrated, efficient, safe, reliable and cost effective services which help
promote economic growth in South Africa
INCREASED
Market share
IMPROVED
PROVIDING
Productivity and profitability
Capacity for customers ahead of
demand
9
TRANSNET VALUES
TRANSNET’S CUSTOMERS PREFER US BECAUSE:
We are:
•
•
•
•
Reliable
Trustworthy
Responsive
Safe service provider
OUR EMPLOYEES ARE:
• Ethical
• Committed
• Safety conscious
• Accountable
• Thinking
• Disciplined
• Results orientated
10
4-POINT TURNAROUND STRATEGY
Strategic
Intent
4-point
Turnaround
Strategy
Focused freight
transport company
Redirecting &
re-engineering
the Business
• Improving
efficiencies &
effectiveness of core
divisions
• Realising port-rail
synergies
• Customer focus
• Infrastructure and
maintenance
Delivering efficient &
Competitive services
Ensure Corporate
Governance &
Risk Management
Strategic Balance
Sheet Management
• Dispose all non-core
•
•
•
•
activities and focus on
core business units
Appropriate rate of
return on invested
capital (>WACC)
Post retirement funding
Optimise cash flow and
cash management
Strategic asset/liability
management
Enabling economic
growth
• Highest standards of
•
corporate governance
Improvement in risk
management, especially
safety in all operations
Develop
Human capital
• Revitalising HR by
transforming culture &
behaviour of staff.
• Be a preferred and
sustainable employer.
• Focusing on:
- Talent management
- Leadership
- Transformation
- Performance and
reward management
11
RATIONALE FOR REBRANDING
•
We chose the monolithic route to mirror the new corporate strategy
and structure of the Company
•
To communicate the integrated and customer-centric approach of the
new Company
•
Enforcement of the consistent application of the new Transnet identity
throughout the organization
•
To present a consistent face to customers as a platform to build and
sustain momentum as Transnet gears itself for sustainable growth
•
To consolidate employee energies, and maximise economies of scale
and brand assets in building Transnet and its unique offerings, and
•
To create a singular platform to leverage and reinforce the “One
Company, One Vision” philosophy
12
FINDINGS AND RECOMMENDATIONS
• The current name, Transnet, should be retained
• Transnet should refresh its brand image to reflect:
- Customer centeredness
- Reliability
- Cost-efficiency
- Transparency
- Competitiveness
- Flexibility
- OD alignment
- Improved communication
• Preference for a monolithic or endorsed brand architecture,
particularly amongst customers. In particular, customers, preferred
one dominating name for Transnet with reference to its ODs to
emphasize unity but distinguish between the core businesses
13
NEW TRANSNET BRAND ARCHITECTURE
Discontinued Businesses
Supporting businesses: Transnet Properties and Transnet Projects
14
THE WAY FORWARD: BRANDING
Use the brand to:
•
Underpin the growth strategy
•
Drive integration
•
Support Transnet’s new culture
•
Establish Transnet as a leading corporate in South Africa
•
Enabling growth by optimising the efficiency and
competitiveness of the country’s freight transport and logistics
•
Act as a catalyst for the growth of the economy
15
STRUCTURE TO SUPPORT STRATEGY
TRANSNET COMPANY
Operational divisions
(continued businesses)
Discontinued Businesses
•Discontinued
SA Express businesses
RAIL
Freight
Rail
Rail
Engineering
PORTS
National
Ports
Authority
Port
Terminals
• Transtel Telecoms
PIPELINE
• Viamax
• Autopax
Pipelines
• freightdynamics
• Housing Lending Book
Supporting businesses: Transnet Property and Transnet
Projects
• Shosholoza Meyl
• Arivia.kom
16
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Investment
On target with 2007 (R11,7 bn) roll out of five-year investment plan
• Replacement of assets (R8,2 billion)
• Expansion investments (R3,5 billion)
Major projects commenced and spending next five years per Corporate Plan
• New Multi Product Pipeline (NMPP) from Durban to Johannesburg (R9,3
billion; latest estimate R11.2bn)
• Widening and deepening of the entrance channel at the Port of Durban
(R2,6 billion)
• New container terminal at Durban Pier 1 (R1,3 billion)
17
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Investment continued
Major projects commenced and spending next five years per Corporate Plan
• Durban container terminal re-engineering (R1,4 billion)
• Cape Town container terminal expansion (R4,2 billion)
• Ngqura Container terminal (capacity from 2010 onwards) (R6,1 billion)
• Coal line capacity expansion to 86 mtpa (R3,3 billion)
• Ore line expansion to 47 mtpa (R3,8 billion)
• Acquisition of 404 new locomotives (R4,9 billion)
Project management: Establishment of Transnet Projects
• Focus on: Co-ordination, implementation, skills, planning and delivery
18
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Disposal of non-core assets
Businesses disposed
Buyer
Price
South African Airways (Pty)
Ltd (100%)
Department of Public Enterprises
R2 billion (no cash flow –
transaction effected by share
buy-back)
V&A Waterfront Holdings (Pty)
Ltd (26%)
London & Regional Consortium
R1.8 billion
Transtel Telecom FSN
Metro assets
Neotel (Pty) Ltd (formerly the
Second Network Operator)
Equity Aviation Services (Pty)
Ltd (49%)
Equity Aviation Services (Pty) Ltd
(and employee share scheme)
R250 million (funded by issue of
equity of 15% in Neotel (Pty)
Ltd via Transpoint Properties
(Pty) Ltd)
R70 million
VAE Perway (Pty) Ltd (35%)
VAE SA (Pty) Ltd
R30 million
Transnet Pension Fund
Administrators (100% administration and investment
services)
Metropolitan Life (including
Kagiso Trust Investments) and
Fifth Quadrant respectively
R20 million and R3 million,
respectively
19
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Disposal of non-core assets – Subsequent events
Businesses
Buyer
Price
“C” Preference share
Newshelf 664 (Pty) Ltd
R5,7 billion
– Cash received
Viamax Pty Ltd (100%)
Bidvest Ltd
Approximate R1,0 billion
− Cash to be received shortly
Transnet Housing
Loan Book
FirstRand Bank Ltd
Fair value of R1,4 billion
– Subject to Competition
Commission approval
Total proceeds of disposals approximately R10bn
20
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Human capital development
Focus on:
Achievements:
• Skills demand planning
Skills mapping completed
• Capacity building and skills development
Leadership development plans
• Talent management
Prioritising skills and succession planning
• Performance management
SPO’s defined for all managers and performance
assessed
• Attract critical skills
HR processes in place to become employer of
choice
• Organisational culture
Change management programmes in place
• HR Enablement
New HR policies, standardised supporting
procedures
Additional capacity building
175 additional engineering bursaries
173 students at institutions of technology (to be increased to 300)
1 261 additional apprentices in different trades
20 Thuthuka bursaries through SA Institute of Chartered Accountants
21
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Re-engineering the business: Vulindlela projects
Second year of implementation
•
•
•
•
•
•
Improve productivity levels and operational efficiencies
Orientate businesses towards customers
Address safety
Culture of planned maintenance
Increase in market share – volume growth (especially GFB in Spoornet)
Savings of more than R2 billion have been achieved since inception
Success/achievements in 2007
• Improved GFB freight flows (3 mt) – current tempo
- First year for a decade where volumes did not decrease
• Capacity created on Iron Ore and Coal Line that exceeds current demand from clients
• Increase in monthly port handling capacity at DCT (TEU’s 186 000 vs 158 000)
• Procurement savings of R500 million p.a. and reduction in safety incidents (R200 million)
22
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Efficiency improvement: Transnet Business Intelligence projects (TBI)
• Implementation of TBI projects
- Effective use of technology, world class systems and processes
- Financial management and reporting
- Improving processes and systems that enable information management
• Identified KPI’s across businesses to measure key value drivers
• Benchmarking against international companies to ensure world class performance
• Implemented Key Performance Indicator project to measure:
- Key volume drivers
- KPI performance weekly/monthly
- Performance vs benchmarks – all areas of business
23
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Transnet Second Defined Benefit Fund (TSDBF)
• Active management and leadership from Transnet
• Currently in surplus of R1,7 billion as opposed to being in deficit in 2006 of R1,6 billion (aided
by the sale of MTN shares-M Cell and V&A Waterfront)
• Rule amendments approved by the Minister
- Generally to enable bonus amounts to be paid to pensioners to exceed 2% pension
increase (subject to affordability)
• Transnet paid ex-gratia bonuses of R125 million to pensioners
- All received an additional 1%
- Previously disadvantaged widows and members with >15 years service who receive low
pensions and/or also over 65 years old received additional amounts
24
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Transnet Pension Fund
• Act changes have received presidential approval to enable non-Transnet employees of
businesses transferred to Government to remain members
• Rule amendments approved by Minister
• Fund will become multi-employer with new employers guaranteeing
the obligations of its employees and pensioners
• Fund now in substantial surplus (R 2.4 billion of which R 1.1 billion relates to the Transnet
sub-fund)
Transnet Retirement Fund
• Act changes have received presidential approval to enable non-Transnet employees of
businesses transferred to Government to remain members
• Rule amendments approved by Minister
25
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Economic Regulation
National Ports Act
• Act in place from November 2006
• Places responsibility on NPA to ensure safe, efficient and effective functioning of ports
system
• Independent Regulator oversees NPA’s functions, approves tariffs, hears complaints and
appeals from port users
• Transnet is investing in systems and capacities to perform additional functions prescribed
by legislation
• Interacting with shareholder in certain aspects of Act
26
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Economic Regulation continued
Pipelines
• NERSA (energy regulator), declined Petronet’s application for 5,6% increase
• Regulations for, amongst other issues, determining tariff increases not yet finalised
• Transnet engaging with relevant authorities; important that tariff methodology enables
Transnet to earn a fair return on invested capital (> WACC)
Have formed a regulation policy unit to lead Transnet’s
strategy and interactions with the Regulator
27
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Risk Management
Operational Risk
• Established a Risk Committee of the Board and appointed a Chief Risk Officer that serves
on EXCO
• Appointed GE Human Resources and HR Sub-Committee dealing with human capital in
sustaining the turnaround
• Improved safety measures and roll out safety awareness and training programmes
• Reviewed safety procedures and strengthened capacity in problematic areas
• Improved controls and campaign against fraud
28
STRATEGY IMPLEMENTATION:
ACHIEVEMENTS TO DATE
Risk Management
Financial Risk
• Financial Risk Framework in place covering all risks (interest, currency, market)
• Asset and Liability Committee ensures that financial risks are effectively managed
• Stringent financial objectives are set to ensure that targeted financial ratios are
achieved/maintained
• Improved internal financial and system controls
29
CAPEX SPENDING FIVE-YEAR PLAN: R78 billion
(continuing businesses)
RAIL
Freight Rail R34,8 bn
• Coal Line – R4,9 bn
• Ore Line – R3,8 bn
• General Freight – R15,3 bn
• Maintenance
Capitalisation – R10,8 bn
PIPELINE
Pipelines R10 bn
*
• Multi-product pipeline – R9,3 bn
• Gas line upgrading – R0,2 bn
Pipelines
13%
Port Terminals
12%
Freight Rail
45%
24%
5%
RAIL
Rail Engineering R4,1 bn
• Equipment - R2 bn
• Upgrade of facilities – R1,1 bn
* Latest estimate R11.2bn
Rail Engineering
NPA
PORTS
Port Terminals R9,5 bn
• Durban – R0,9 bn
• Richards Bay – R0,7 bn
• Ngqura – R1,5 bn
• Cape Town – R0,4 bn
• Saldanha – R2,9 bn
PORTS
NPA R18,5 bn
• Richards Bay – R0,8 bn
• Ngqura – R4,7 bn
• Cape Town – R3,8 bn
• Durban – R7,6 bn
• Floating craft – R0,7 bn
30
CAPEX FIVE-YEAR PLAN: R78 billion*
Annual spending over five years
Cumulative
R78 bn
R21.5 bn
R17.5 bn
R16.9 bn
R12.7 bn
R9.4 bn
2008
2009
2010
Pipeline and other
2011
Ports
2012
Five-year
plan
Rail
* Continuing businesses
31
SHAREHOLDER’S COMPACT
Performance
area
Key performance indicator
(KPI)/measure
Capital/financial
efficiency**
EBITDA margin(%) #
Benchmark
Cash interest cover (times)#
Gearing ratio(%)
-2007
-2007
% of actual capital
expenditure compared to
budget expenditure
-2007
40.7
Achieved
>5***
5,4*
5.4
Achieved
40 - 50***
47.9
39
Achieved
59.0
47
Achieved
5.8
6.8
Achieved
4.1
5.8
Achieved
R11 847
million
R11
674
million
>6***
>90% of
target
-2006
% of total maintenance
spent compared to budget
#
Performance
34.8
-2006
Infrastructure investment
2007
Actual
> 35***
-2006
CFROI(%)
2007
Target
99% Achieved
100% Achieved
>90% of
target
R3 890
million
R5 495
million
141%
Achieved
* Including sale of shares
** Discontinued business -SAA, freightdynamics,Viamax and Autopax
*** These benchmarks are the target of performance in the medium term (next three years)
# Key performance indicators not applicable in prior year
32
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Policy:
• Transnet fully endorses and supports the Government’s Broad-based Black Economic
Empowerment Programme and has aligned its policies with the DTI’s Codes of Good
Practice which were gazetted on 9 February 2007. (Some alignments need to take place
between the DTI Codes and the DoT’s new draft Rail Transport Charter)
• Transnet encourages join ventures with- and sub-contracting to BBBEE companies
Achievements:
• During the 2006/07 financial year, Transnet’s operating divisions spent R10.6 billion
externally with suppliers, of which R3.9 billion went to broad based BEE companies, up
R600 million from 2006
33
BROAD-BASED BLACK ECONOMIC
EMPOWERMENT
Strategy – BBBEE going Forward:
• Transnet will participate in the Rail Transport Charter workgroup to ensure alignment
between the DTI- and DoT scorecards
• Transnet has had most of its high-value suppliers accredited against the DTI scorecard
and will continue to encourage all its tenderers / suppliers to do so
• Having had itself accredited, Transnet scored 56.8 on BBBEE, equating to a “Level 5”, recognition level of 80%. A BBBEE Task team has subsequently been created at Transnet
Corporate office to improve this score by driving strategy and coordinating all elements of
the DTI Scorecard
• Over and above Transnet’s BBBEE and Supplier Development strategies, we will implement a plan for Competitive Supplier Development (“CSDP”) in alignment with our support
of AsgiSA. This plan will consider opportunities to develop globally competitive local suppliers (especially from the BBBEE ranks) through various strategic initiatives
34
SUBSTANTIAL IMPROVEMENTS IN FINANCIAL
PERFORMANCE DEMONSTRATED
Transnet Performance Highlights: Three-Year View
Measures
2004
Actual
2007
Actual
Operating profit
R4 750m
R8 470m
EBITDA (%)
17%
40,7%
Cash interest cover
3,5 times
5,4 times
54%
Cash flow return on
investment (CFROI in
real returns)
4,0%
6,8%
70%
Gearing
83%
39%
53%
Capex
(excl. Aviation)
R3,8 bn
R11,7 bn
208%
Shareholders equity
R9,9 bn
R37,4 bn
278%
Four-point
turnaround plan
starting point
Improvement
vs 2004
78%
139%
All measurements exceeded
Shareholder Compact
requirements
35
CHRIS WELLS
FINANCIAL OVERVIEW 2006/07
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
for the year ended 31 March
Revenue
2007
R million
2006
R million
28 214
26 034
Revenue contribution for 2007 Fin Yr
8%
4%
15%
51%
• Revenue growth of 8,4%
• Strong volume growth from all divisions
except Freight Rail
22%
Freight Rail
National Port Authority
Port Terminals
Piplines
Other
37
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
for the year ended 31 March
Revenue
Net operating expenses
• Operating expenses increase by 6,3%
• Operating expenses contain certain onceoff costs, notably
• R125 million bonus payout to TSDBF
members
• R100 million additional contribution to
TPF
• R165 million in respect of provisions
• Adjusting for the above costs, operating
expenses would have increased by only
3,8%, well below the inflation rate
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
22%
2%
2%
52%
7%
15%
Personnel and benefits
Energy
Operating Leases
Material costs
Maintenance costs
Other
38
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
for the year ended 31 March
Revenue
Net operating expenses
EBITDA
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
11 488
10 301
EBITDA increased by 12%, margin increased to 40,7% (2006: 39,6%)
SAA 953
8,000
6 489
7 333
10 301
11 488
10,000
4,000
8 269
28 214
6,000
26 034
15,000
10,000
25 260
20,000
27 298
25,000
SAA 17 342
30,000
23 936
35,000
SAA 16 339
12,000
45,000
40,000
EBITDA (R million)
SAA 768
Revenue (R million)
2003
2004
2005
2006
2007
2,000
5,000
0
0
2003
2004
2005
2006
2007
39
GROUP FINANCIAL RESULTS: 2006/07
Five-year EBITDA Margin Growth
50
86% growth
40
30
%
40
41
29
2006
2007
17
10
22
20
0
2003
2004
2005
40
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
EBITDA
11 488
10 301
Depreciation & amortisation
(3 018)
(2 163)
for the year ended 31 March
Revenue
Net operating expenses
• Depreciation and amortisation for the year increased by 39,5%.
• Acceleration of the capital expenditure programme and depreciation on
capitalised maintenance in terms of IFRS
41
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
EBITDA
11 488
10 301
Depreciation and amortisation
(3 018)
(2 163)
2 189
1 105
for the year ended 31 March
Revenue
Net operating expenses
Profit on sale of interest in businesses, impairment of assets,
dividends received and fair value adjustments
The fair value adjustments:
- “C” class preference share
- Increase in the carrying value of investment properties
42
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
EBITDA
11 488
10 301
Depreciation and amortisation
(3 018)
(2 163)
2 189
1 105
Profit from operations before net finance costs
10 659
9 243
Net finance costs
(2 437)
(2 406)
for the year ended 31 March
Revenue
Net operating expenses
Profit on sale of interest in businesses, impairment of assets,
dividends received and fair value adjustments
Interest cover (times)
3.5
1
2.6
2
3.4
• The Group’s WACD of 11,9% is high due to legacy debt
3
2.1
• Finance costs remain at similar levels to the prior year
and interest cover increased to 3,5 times (2006: 3,4
times)
4
2.5
• Profit from operations before finance costs increased by
15% to R10,7 billion
2006
2007
0
2003
2004
2005
43
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
EBITDA
11 488
10 301
Depreciation and amortisation
(3 018)
(2 163)
2 189
1 105
Profit from operations before net finance costs
10 659
9 243
Net finance costs
(2 437)
(2 406)
Taxation
(1 902)
(2 042)
for the year ended 31 March
Revenue
Net operating expenses
Profit on sale of interest in businesses, impairment of assets,
dividends received and fair value adjustments
• Current taxation charge of R0,9 billion and deferred taxation charge of
R1,0 billion
44
GROUP FINANCIAL RESULTS: 2006/07
Consolidated income statement
2007
R million
2006
R million
28 214
26 034
(16 726)
(15 733)
EBITDA
11 488
10 301
Depreciation and amortisation
(3 018)
(2 163)
2 189
1 105
Profit from operations before net finance costs
10 659
9 243
Net finance costs
(2 437)
(2 406)
Taxation
(1 902)
(2 042)
2
33
Profit for the year from continuing operations
6 322
4 828
Profit for the year from discontinued operations
1 082
102
Profit for year
7 404
4 930
40,7%
39,6%
for the year ended 31 March
Revenue
Net operating expenses
Profit on sale of interest in businesses, impairment of assets,
dividends received and fair value adjustments
Income from associates
EBITDA margin (%)
45
GROUP FINANCIAL RESULTS: 2006/07
Consolidated balance sheet
2007
R million
2006
R million
Capital and Reserves
37 433
29 526
Non-current liabilities
22 832
22 189
Borrowings and provisions
18 703
17 789
for the year ended 31 March
EQUITY AND LIABILITIES
Capital and Reserves (R billion)
Gearing (%)
40
90
35
80
30
70
60
25
20
39
46
61
30
10
5
40
65
37
30
18
10
22
15
83
50
20
10
0
0
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
46
GROUP FINANCIAL RESULTS: 2006/07
2007
R million
2006
R million
Capital and Reserves
37 433
29 526
Non-current liabilities
22 832
22 189
Borrowings and provisions
18 703
17 789
2 422
4 348
Consolidated balance sheet
for the year ended 31 March
EQUITY AND LIABILITIES
Post-retirement benefit obligation
Transnet Pension Fund (a) (fully funded)
–
–
Transnet Second Defined Benefit Fund (a) (fully funded)
–
1 628
1 369
1 607
Transnet employees
717
765
Other
(a) Restructuring and funding plan in progress
(b) Funding monthly including Transnet subsidy
336
348
Post-retirement Medical Benefits (b)
SATS Pensioners
47
GROUP FINANCIAL RESULTS: 2006/07
Consolidated balance sheet
2007
R million
2006
R million
Capital and Reserves
37 433
29 526
Non-current liabilities
22 832
22 189
Borrowings and provisions
18 703
17 789
Post-retirement benefit obligation
2 422
4 348
Deferred taxation
1 707
52
for the year ended 31 March
EQUITY AND LIABILITIES
• The deferred taxation liability increase in the year is due to increased temporary differences as a
result of:
• Capital expenditure programme
• Post retirement benefit obligation
• Taxation on increased carrying value of PPE recorded at fair values
• Depreciation changes announced in budget speech by the Minister of Finance to reduce the taxation
deprecation periods:
• New rolling stock from 14 years to 5 years,
• New quay wall and other port facilities to qualify for deductions over 20 years rather than nondepreciation for taxation purposes
48
GROUP FINANCIAL RESULTS: 2006/07
Consolidated balance sheet
2007
R million
2006
R million
Capital and Reserves
37 433
29 526
Non-current liabilities
22 832
22 189
Borrowings and provisions
18 703
17 789
Post-retirement benefit obligation
2 422
4 348
Deferred taxation
1 707
52
Current liabilities
16 989
26 631
Payables and other
16 559
13 699
430
12 932
77 254
78 346
for the year ended 31 March
EQUITY AND LIABILITIES
Liabilities classified as held-for-sale
TOTAL EQUITY AND LIABILITIES
49
GROUP FINANCIAL RESULTS: 2006/07
2007
R million
2006
R million
Non-current assets
57 843
50 144
PPE and other
57 720
48 125
123
2 019
19 411
28 202
Inventory, receivable assets and cash
9 841
7 588
Derivative financial assets
5 658
3 874
Assets classified as held-for-sale
3 912
16 740
77 254
78 346
Consolidated balance sheet
for the year ended 31 March
ASSETS
Long term loans and advances
CURRENT ASSETS
TOTAL ASSETS
12
Return on average total assets (%)
10
7
4
7
9
10
6
2004
2005
11
8
2
50
0
2003
2006
2007
GROUP FINANCIAL RESULTS: 2006/07
Abridged consolidated cash flow statement
2007
R million
2006
R million
8 851
5 865
Cash generated from operations
13 488
11 244
Other
(4 637)
(5 379)
for the year ended 31 March
Cash flow from operating activities
• Cash generated from operations before working capital changes increased by 20% to R13,5 billion
• Net cash generated from operating activities increased by 51% to R8,9 billion
Cash generated from operations (R million)
Cash interest cover (times)
14,000
6
12,000
5
10,000
4
8,000
3,5
4,8
4,5
5,4
2
4,3
13 488
11 244
10 089
7 040
4,000
7 178
3
6,000
2003
2004
2005
2006
2007
1
2,000
0
0
2003
2004
2005
2006
2007
51
FUNDING REQUIREMENTS: NEXT 5 YEARS
2007
R million
2008-2012
R million
8 851
69 805
(11 674)
(78 014)
Cash shortfall
(1 904)
(5 122)
Loan redemptions
(1 860)
(10 085)
Funding requirements
(3 764)
(15 207)*
39%
40% – 45%
Cash flows from operating activities
Gross capital expenditure
* Funding requirements over 3 years approximately R25 billion
Gearing
• ECA umbrella facility
• DMTN program – 30 billion facility rated by Moody’s
• Raise cost effective borrowings at the appropriate tenors
52
KEY FEATURES OF FUNDING PROGRAM
Key funding objectives:
• Minimize funding costs – Reduce weighted average cost of debt (WACD)
• Financing directly in Rand preferred
• Reduce reliance on government guarantee
• Diversify Transnet’s debt portfolio and lengthen debt maturity profile
• Improve the liquidity position
• Access diverse financing sources for specific projects:
-
Asset backed finance incorporated in ECA facility
ECA financing – ECA umbrella facility
Development funding
Project financing
DMTN program for local funding
53
FINANCIAL STRATEGY – FORTHCOMING YEARS
Focus will be on:
Strong control environment
• Reliable, timely and relevant information
Improved operational efficiency
• Managing key performance drivers
• Margins improvement
Capital investment roll out
• Returns exceeding WACC
Funding plan
• Adequately address borrowing requirements
• Reduce the cost of debt
54
HR STRATEGY
PRADEEP MAHARAJ
2007/08 PRIORITIES
Capacity and skills
HR
Enablement
Performance and Reward
Talent Management
and
Leadership Development
Culture Change
56
ACHIEVEMENTS AND AGENDA
HR
Enablement
2006:
• Audit and review policies
• Standard HR Processes
• Improve quality of HR management
Performance and Reward
information
2007:
• Implementation of policies across Transnet
• Alignment of procedures
• New supporting Processes
• Standard application of SAP HR modules
• Clean-up of employee data
57
ACHIEVEMENTS AND AGENDA
Capacity and skills development
2006:
• Skills demand planning
• Implement Engineering and Technicians bursary programme
• Training centre review
2007:
Culture
• Development of a competency based career ladder
• Optimize training delivery through academy management
58
ACHIEVEMENTS AND AGENDA
Talent and Leadership Development
Leadership Philosophy: Leadership for Transformation to enable leaders to
achieve particular outcomes to contribute to Transnet’s successful
turnaround and performance excellence
2006:
• Develop Talent Management Framework
• Roll-out of Navigator Leadership Development Programme
• 2000 leaders identified for training
Culture
2007:
• Increase talent management capacity
• Launch Innovator Leadership Development Programme
59
ACHIEVEMENTS AND AGENDA
2006:
• Short term incentives
• Contract conversions
• New reward philosophy
• Introduce performance management system
2007:
Critical skills retention
Performance and Reward
• Technicians
• Specialists
• Artisans
• Train drivers
Incentive scheme for train movement
Enhance organisational and
individual performance
Standardise remuneration practices
60
EXECUTIVE REMUNERATION
•Transnet is currently reviewing the executive reward philosophy
• Benchmark remuneration information for the Executive Management of Transnet is
sourced and will encompass:
- Detailed market data schedules per position reflecting all elements of guaranteed
and variable pay as well as job size
- Awarded and anticipated market pay adjustments
- Detailed analysis of short and long term incentive practices
• For this purpose, the services of a leading management consulting firm in South Africa
providing local and international employers with remuneration consulting advice have
been appointed
• It is planned that a detailed report including factors such as impact of the economy;
nature of competition; complexity of industry and strategic freedom to act, will be
presented to the Transnet Board of Directors during October 2007
61
2007/8 PRIORITIES
Purpose: The main purpose is the development of a
consolidated Transnet Group Culture and Behaviours which
will facilitate the success of the turnaround strategy
2006:
Culture charter wheel
Leadership behaviours charter
Leadership alignment with strategy
2007:
Rebranding
Transnet Culture Charter
Employee survey-bottom up approach
Change management process to implement
Culture Change
62
NUMBER OF EMPLOYEES
Operating
Division
Transnet Freight Rail
Nonbargaining
Bargaining
Number
Fixed
terms
Total
Employees
1,765
23,046
661
25,472
Transnet Rail Engineering
719
13,010
1,217
14,946
Transnet Port Terminals
292
4,757
310
5,359
Transnet national Port
Authority
908
2,343
148
3,399
Transnet Projects
254
433
6,215
6,902
Transnet Pipelines
94
389
46
529
239
32
29
300
4,271
44,010
8,626
56,907
Transnet H/O
Totals
63
PROFILE TRANSNET EMPLOYEES 2007
Profile of Transnet Permanent Employees 2007 (48,281 )
White
29%
Coloured
9%
Indian
4%
African
58%
Female
16%
Male
84%
64
RACE PROFILE 2001 to 2007
1.4%
100%
0.4%
8.6%
10.5%
90%
0.5%
9.7%
33.2%
80%
43.1%
38.6%
43.6%
45.2%
50.2%
54.8%
70%
63.1%
3.2%
60%
8.6%
7.5%
15.7%
3.4%
50%
13.0%
6.3%
9.0%
40%
8.2%
7.4%
10.4%
8.5%
89.7%
79.4%
9.3%
7.4%
8.9%
30%
55.0%
8.1%
20%
43.3%
43.1%
36.7%
35.0%
33.0%
25.9%
21.4%
10%
0%
2001 - Top &
Sen Mngt
2007 - Top &
2001 2007 2001 - Skilled 2007 - Skilled
Sen Mngt
Professionals Professionals
Technical
Technical
African
Coloured
Indian
2001 - Semi
Skilled
2007 - Semi
Skilled
2001 Unskilled
2007 Unskilled
White
65
GENDER PROFILE 2001 to 2007
100%
90%
80%
70%
60%
78.8%
79.8%
79.3%
75.9%
83.5%
80.1%
84.1%
90.6%
50%
97.5%
97.3%
2.5%
2.7%
2001 Unskilled
2007 Unskilled
40%
30%
20%
10%
21.2%
20.2%
20.7%
24.1%
16.5%
19.9%
15.9%
9.4%
0%
2001 - Top &
Sen Mngt
2001 - Skilled 2007 - Skilled
2007 2001 2007 - Top &
Technical
Technical
Professionals Professionals
Sen Mngt
Female
2001 - Semi
Skilled
2007 - Semi
Skilled
Male
66
EE TARGETS 2007 to 2012
Occupational level
Status quo
representation
Proposed 2010
representation
Black
Female
Black
Female
Management (101-106)
58%
24%
65%
30%
Professional (108-109)
54%
24%
60%
30%
Skilled technical (610)
51%
18%
60%
25%
Semi-skilled
65%
23%
70%
30%
Unskilled
90%
8%
90%
15%
67
CAPACITY BUILDING OVERVIEW
Transnet’s skills forecast process through detailed workforce planning led
to the following skills targets for the period 2007-2012 :
Transnet Targets for Skills per annum
Skills required
2007
2008
2009
2010
2011
2012
Total
Engineer Degree
100
100
100
100
100
100
600
Technician Diploma
300
300
300
300
300
300
1 800
Artisan
800
800
800
800
800
800
4 800
Managers
20
20
20
20
20
20
120
Specialist
143
100
100
100
100
100
643
45
20
20
20
20
20
145
Operations
1 878
1 610
1 563
1 561
1 412
1 000
8 024
Grand Total
3 286
2 950
2 903
2 901
2 752
2 340
17 132
First-line Management
68
PROGRESS TO DATE
Capacity building continues to be integrally involved in the delivery of skills
required by Transnet and progress thus far is :-
Entry Levels
• R20 million spend from a CSI perspective in regard to education and development,
• Forged a relationship with Denel and have put 50 youth on a Youth Foundation and Schools
outreach programme for enhancing the math and science output.
• Currently unpacking our approach for the adoption of 10 Dinaledi Schools to further increase the
math and science pool of prospective, future learners for Transnet skills programmes
• Transnet awarded an additional 98 bursars in 2007 to give us a total of 176 engineering
bursars. We will continue awarding 100 bursars p.a. over the next five years to ensure that we
have a steady outflow and absorption in terms of engineering skills required by the organisation
• Recruitment and development of these bursars has been consolidated to central office to ensure that we
promote standardised, qualitative approaches in terms of skills transfer, remunerations,
Engineers
allowances, and the general management and administration of the feeder channels.
• Transnet GPM and the OD’s are currently busy with a recruitment drive in terms of the 100 Engineers and 300
Technicians p.a. that Transnet requires. The focus of the drive will be on
exploiting our present relationships with Universities and Universities of Technology to obtain
the “best” candidates available in the market. We will also adopt a rigorous assessment process
for the candidates.
69
PROGRESS TO DATE
• At present we have 200 Technicians who are on a bursar programme or serving
Technicians
internship within the organization. Transnet has a history of absorbing more than 95%
of these candidates into full time employment with the organization
• Progress has also been made in terms of consolidating this area of capacity building
under central office.
• The recruitment drive will facilitate progress in achieving the annual intake of 300
• We have 1261 Artisans in our apprenticeship schools. This is approximately a 40%
Artisans
increase in our year on year intakes. The candidates are predominantly from FET’s with
N2 qualifications. The target is approximately 800 apprentices pa. until 2012.
• The on-the-job training framework has been adopted and being piloted
• Transnet has instituted a Graduate in Training programme that targets commercial
Specialist
graduates. The graduates are taken through a structured two-year programme and
absorbed by our OD’s in line with their expertise. Transnet will be employing 25
candidates p.a into this programme until 2012.
• Currently concluding the intake of 12 GIT’s for Supply Chain and HR
• In addition Transnet sponsors 20 TOPP students – program to develop mainly black
charter accountants
• First line managers and Managers will be internally allocated through the Talent
Managers and First
Line Supervisors
management process and be developed through the Leadership Development
programmes
• We have launched our leadership programmes which targets approximately 1800
management employees for 2007.
70
PROGRESS TO DATE
• Currently there is a 62% achievement in terms of priority skills (Movement, Control and
Operations –
Rail
Yards) target for 2007.
• Delegation of candidates from Train Movement and Infrastructure maintenance will also
attend training in Australia and India. The key objective is to build organizational
operational and technical competence in the train driving, create a pipeline of critical
skills in the operational and technical arena; learning from international best practice
and forging partnerships.
• The Marine pilot training is currently done in partnership with STC. A process is
Operations Maritime
underway to ensure that the training will be delivered locally (Port Academy) as from
2008.
• A sufficient number of delegates have been indentured into the Tugmaster and Marine
Engineering Officer (CMEO) skills pipelines
• Currently there is a 71% achievement in terms of priority skills (OLE’s, Cargo Coordinators and AV Drivers) target for 2007.
Operations –
Port Operations
71
TRANSNET FREIGHT RAIL
SIYABONGA GAMA
FREIGHT RAIL OPERATES IN 14 CORRIDORS
IN 3 REGIONS
Northcor
Capecor
Southcor
Natalcor
R.Baycor
N.WestcorEastcor
(Maputo)
N.Eastcor
Sishen-Saldanha
Sentracor
South East Cor
Westcor
Freestate
Namibia
Central
Beit
Bridge
Messina
East
Louis Trichardt
Ellisras
West
Soekmekaar
Thabazimbi
Pietersbu
rg
Drummondlea
Vaalwater
Chroomvallei
Zebediela
Naboomspruit
Middelwit
Nylstroom
Northam
Rustenburg
Mafikeng
Lichtenburg
Coligny Welverdiend
Vermaas
Potchestroom
Ottosdal
Klerksdo
Orkney
rp
Schweizer-Reneke
Vierfontein
Hotazel
Erts
Ancona
Sishe
n Manganore
Naroegas
Upington
Warrenton
Palingpan Postmasburg
Kimberley
Kakamas
Belmont
Bloemfontein
Sannaspos
Koffiefontein
Standerton
Charlestown
Vrede
Newcastle
Utrecht
Arlington
Warden
Bethlehem
WinburgMarquard
Douglas
Prieska
Wolwehoek
Glen H Whites
Virginia
Bultfontein
Theunisen
Harrismith
Bergville
Golela
Hlobane
Vryheid
Glencoe
Ladysmith
Nkwalini
Kranskop Eshowe
Moorleigh
Ladybrand
Maseru
Howick
Greytown
Stanger
Hilton
Copperton
Springfontein
Bethulie
De Aar
Aliwal North
Sakrivier
Bitterfontein
Dreunberg
Jamestown
Noupoort
Kootjieskolk
Calvinia
Hutchinson
Rosmead
Beaufort West
Klawer
Somerset East
Cookhouse
Klipplaat
Porterville
Prins Alfred
Hamlet
Touwsrivier
Ladysmith Calitzdorp
Worcester
Oudtshoorn
George Avontuur
Franschhoek
Riversdale
Stellenbosch
Knysna
Mosselbaai
Protem
Strand
Atlantis
Source: Spoornet NOC
Cape Town
Simonstad
Umtata
Queenstown
Qamata
Tarkastad
Saldanha
Underberg
Donnybrook Richmond
Mid Ilovo
Durban
Mandonela
Matatiele
Franklin
Kelso
Kokstad
HardingSimuma
Port Shepstone
Barkley East
Maclear
Schoombee
Hofmeyer
Bredasdorp
Seymour
Amabele
Blaney
Fort
Beaufort
Kirkwood
Uitenhage
Patensie
Alexandria
Port Alfred
Port Elizabeth
Komatipoort
Welgedag
B/plaas
Hawerklip
Breyten
Bethal
Lothair
J’burg
WestleighKroonst
ad
Graskop
Plaston
Belfast
Machadodorp
Baberton
Rayton Witbank
Sentrarand Ogies
Makwassie
Pudimoe
Nako
p
Krugersdorp
Steelpoort
Marble Hall
Roossenekal
Cullinan
Pretoria
O/fontein
Phalaborwa
Hoedspruit
East London
Empangeni
Richards Bay
BUSINESS OVERVIEW
Rail freight
Transportation of
Iron ore
People
Total = 25 270
Employees transferred to
Rail engineering
Coal line
General Freight
Facilities
22 277 km rail network
1500km heavy haul lines
Connectivity to all ports
Revenue
R 14 574m
Discontinued
Shosoloza Meyl
Blue Train
EBITDA
R 3 737m
74
We have taken successful actions to stabilise the
business and have structured and sequenced the
path to world class
Re-engineer and transform
Stabilise and analyse
Defined corporate
strategy
Divestment of
non-core business
New leadership
and organisational
structure
2005: Inefficient,
shrinking, and
unprofitable
Safety-first
mindset
Operating loss of
R21 million
Perform and grow
Skill and capability
improvements
Volume and
market share
growth
Investment of
capital for
sustainability
Strategic
investment for
better
performance
2012: Scheduled,
efficient, and
profitable
Operating profit of
R5.7 billion
Motivated, valueadding employees
Improved
operational
performance
New operating
principles
2005
2007
2008
2009
75
2012
WE CRAFTED OUR CURRENT BUSINESS PLAN AROUND
FIVE KEY OBJECTIVES, SUPPORTED BY A NUMBER OF
STRATEGIC INITIATIVES
“The what”
“The how”
Customer Service
Delivery
•Retain the desired
customer base and
improve service delivery
Leadership & Employee
Capability
•Optimise human capital
deployment and
development
The people project and
governance initiatives
• Enterprise Performance
• Enabling Programme
Safety
•Transform Freight Rail
into a safe railway
‘Safety first’ programme
Freight Rail
Strategic
Objectives
Drive high yield general freight growth
• Key account plans for strategic accounts
• Yield management
• Collaboration projects
Scheduled Freight
Railway
•Implement efficiency
improvements
Corridor optimisation rollout programme
Creating Capacity
•Invest to maintain,
replace and increase
capacity
Capital investment and
optimisation
programme
76
CORE OPERATING DIVISION PERFORMANCE
Operating divisions
Freight Rail
Revenue (R million)
EBITDA (R million)
2006
%▲
2007
2006
%▲
2007
14 055
4%
14 574
2 910
28%
3 737
Freight Rail contribution to Group EBITDA 33%
• 4% increase in revenue.
• Total volumes 176,6 mt (2006:178,1 mt)
- GFB
79,6
(2006: 79.8)
- Iron ore 30,0
(2006: 29,6)
- Coal
67,0
(2006: 68,7)
33%
• Volumes negatively impacted by
- Customer’s production constraints,
- Capacity constraints
- Derailments
• 3% decrease in operating cost compared
to prior year – improvements from the
re-engineering programme
67%
• Capital expenditure R7,4 billion
77
CORE OPERATING DIVISION PERFORMANCE
Freight Rail
Maintenance
Total expenditure
Maintenance per income statement
COPEX*
• Rolling stock
• Infrastructure
• Coaches
• Ballast cleaning
• Property maintenance interventions
(R million)
(R million)
2006
%▲
2007
2 073
165%
5 495
1 225
82%
2 230
848
285%
3 265
2 453
633
16
100
63
* Capitalised operating expenditure
78
KPI’s – FREIGHT RAIL
2006
Actual
2007
Target
2007 Performance
Actual
Revenue (Rmillion)
14 055
16 478
14 574 Not achieved*
EBITDA (Rmillion)
2 910
3 715
3 737 Achieved
3 809
7 253
7 387 Achieved
Volume – iron ore (mt)
29.6
32.8
30.0 Not achieved*
Volume – coal (mt)
68.7
74.0
67.0 Not achieved*
Volume – general freight (mt)
79.8
81.0
79.6 Not achieved
Financial
Infrastructure
Capital expenditure (Rmillion)
Efficiency
* Non-achievement primarily due to lack of iron ore and coal to rail
79
TRANSNET FREIGHT RAIL: ACTION PLANS TO
CREATE CAPACITY AND IMPROVE SERVICE
DELIVERY
Capacity creation

5 Year Investment Plan
- 404 locomotives
• General Freight (262)
• Coal (110)
• Ore-line (32)

Efficiency improvement
- Vulindlela initiatives – 1.5mV improvement in General Freight Volumes
- Transnet Rail Engineering -Improved availability and reliability of all
wagon and loco fleets

Sufficient capacity to meet demand from Iron ore and Coal exports
Improved service delivery
- Stabilised the operational platform
- General Freight tempo to date is at a level + 82mV per annum - strong
growth compared to previous year
- Improved service delivery to identified key account customers
80
TRANSNET RAIL ENGINEERING
RICHARD VALLIHU
BUSINESS OVERVIEW
Product focused businesses
specializing in Maintenance
Locomotives
Running Maintenance
Upgrading
Refurbishment
Wagons
Running Maintenance
Upgrading
Conversions
New Build
Coaches
Running Maintenance Shosholoza Meyl
Upgrading
Other Rail Rolling Stock
People
Total = 13 729
Increase by 114% due
to 6 253 Maintenance
Integration
Facilities
7 Centres
150 sites
Revenue
R 7 317m
EBITDA
R1 088m
Refurbishment of rail rolling stock related
Components (wheels, traction motors etc.)
82
BUSINESS OVERVIEW
CUSTOMER MANAGEMENT
Customers
Transnet
Freight Rail
Main
Locomotives Business
Wagons Business
Wagon Build
African
Markets
Freight Rail
Mainline Services
SARCC
Metrorail
Internal Support
• Wheels
• Rotating Machines
Coach Business
• Rolling Stock Equip
• Tarpaulins
83
RAILWAY ENGINEERING STARTED VARIOUS
INITIATIVES TO SUPPORT THE GROWTH STRATEGY
FROM FREIGHT RAIL
Customer Service
Delivery
Strategic focus on:
Transnet Rail freight objectives
• Maintenance of assets servicing high yield commodities
• Technology and capacity upgrades of assets
• Development of new rolling stock products and services
for enhanced service
Transnet Rail engineering support
Leadership & Employee
Capability
Building a lean taskforce with
a strong focus on leadership
capabilities and core
competencies
Scheduled Freight
Railway
How to
support
Freight Rail
Safety
Improvement in reliability of rolling stock through:
• Application of world class maintenance practices
• Technology upgrades (E.g. Fitment of roller bearings
and air brakes).
• Application of standard operating procedures (e.g. PPE)
• Geographic alignment of maintenance
facilities with corridor strategy.
• Mobile maintenance crews.
• Adherence to Scheduled Maintenance
Creating Capacity
•
•
•
•
•
•
Optimization of maintenance processes
Faster turn-around time in maintenance facilities
Implement preparation depots
Capacity increase through upgrading and modernisation of
rolling stock.
Build A-shed depots in yards
Improved feeding and de-feeding in depots and yards
84
CORE OPERATING DIVISIONS
PERFORMANCE
Operating divisions
Revenue (R million)
2006
Rail Engineering
3 845
EBITDA (R million)
%▲
2007
2006
%▲
2007
90%
7 317
738
47%
1 088
• Revenue increase mainly due to integration of
Spoornet maintenance operation.
Rail Engineering contribution to Group EBITDA 9%*
9%
• Locomotive reliability and availability exceeded
targets
• Annual number of wagon maintenance lifting
increased from 12 000 to 20 000
•
• Record production of 1 022 new iron ore and coal
wagons
• Capital expenditure R623 million
91%
* Mainly internal and eliminated on consolidation
85
KPI’s – RAIL ENGINEERING
2007
Target
2007
Actual
Performance
Financial
Revenue (Rmillion)
5 241
7 317
Achieved
EBITDA (Rmillion)
1 118
1 088
Not achieved*
375
623
Achieved
Infrastructure
Capital expenditure (Rmillion)
Efficiency
Locomotive reliability
General freight
43
43
Achieved
(faults per million km)
Coal
61
54
Achieved
Iron ore
30
41
Not achieved
General freight
82
85
Achieved
Coal
88
85
Not achieved
Iron ore
81
86
Achieved
Locomotive availability (%)
*Internal profit mainly – focus is primarily on productivity
86
TRANSNET RAIL ENGINEERING : ACTION PLANS TO CREATE
CAPACITY AND IMPROVE SERVICE DELIVERY
Capacity creation
Investment 5 year plan
 Replacement /expansion of equipment/infrastructure to create capacity
- Machinery and equipment (R1.7bn)
- Rotable components (R0.8bn)
- Buildings/structures for expanding operations (R0.9bn)
- Efficiency improvements in all areas of operations
Improved service delivery
 Wagon liftings increased from 12 000 to 20 000 in 2006/07 (18 000 liftings
planned for 2007/08)
 Locomotive availability for coal improved from 85.2% in 2006/07 to 86%
currently
 Locomotive reliability remains a challenge and numerous action plans are being
implemented to improve reliability e.g. mobile teams (average locomotive fleet
age is 29 years)
87
TRANSNET NATIONAL PORT AUTHORITY
KHOMOTSO PHIHLELA
BUSINESS OVERVIEW
Transnet National Ports Authority is responsible for the safe, efficient and effective
economic functioning of the national ports system which it manages, controls and
administers on behalf of the South African Government
OPERATIONAL STRUCTURE
Transnet National Ports Authority provides services
within a Infrastructure and Maritime environment;
• Infrastructure:
– Own, manage, control and administer ports;
– Plan, provide, maintain and improve port infrastructure;
– Port tariff authority that determines and charges fees for
• Cargo segments:
–
–
–
–
–
Containers
Automotive
Bulk
Dry bulk
Liquid bulk
provision of infrastructure and port services;
– Controller of operations/services within the port.
• Maritime:
– Marine Operations – Provide Tug Services, Pilotage, Berthing
Services;
– Lighthouse Services – Provide, maintain and operate
lighthouses and other aids to navigation around the coast of
Richards
Bay
South Africa;
– Ship Repair Facilities – Provision of repair facilities for ships
calling at ports;
Durban
Saldanha
– Dredging Services – Maintenance dredging and hydrographic
surveys;
– Harbour Master – Port Control and Vessel Traffic Services.
East London
Cape Town
Port
Elizabeth
Ngqura
Mossel Bay
90
PORTS AUTHORITY: STRATEGIC OBJECTIVES
2005 - 2006
Ports Authority
• South Africa a regional
leader in port
management and
operational expertise
• Imports and exports are
the key driver of volume
growth
• Medium to long term
growth prospects remain
favourable
• SA ports under threat as
new port developments in
the region capture market
share
• Transshipment
opportunities
• Complementary ports
that offer specialised
services to natural
hinterlands
• Marine services
competency
• Ability to invest and
create port infrastructure
capacity
• The Ports Act and a new
regulatory environment
2007/2008
Strategic Objectives
1
Improve vessel
and cargo
turnaround
2
Provision of Port
Infrastructure
ahead of demand
3 Improve
productive use
of assets
Develop human
capital and 6
skills to achieve
objectives
Enterprise-wide
Risk
5
Management
2009 - 2012
Safe, efficient and
effective functioning of
the port system
• Sustained infrastructure
capacity provision, ahead
of growth demands
• Integrated planning for
port infrastructure
• Safe and secure worldclass port system,
preserving the environment
• Competitive and efficient
port system that drives
volume growth
• Growing, productive and
committed workforce
Increase the
Market 4
Planning to lead
growth
A Port system
leading growth
demands
91
GROWTH STRATEGY
1
Infrastructure
capacity
2
Efficiency : port
management
and port
operations
3
Enhancing
ports’ position
as gateways for
trade
Aimed at leading
and growing
trade through the
SA ports
The guiding principles of our Growth Strategy are :
Efficiency : Improving efficiency of port
services to best meet demand
Competitiveness : To support and enhance
competitiveness of the port authority’s port
and related service offers
Partnership : Working with stakeholders in
the logistics chain to ensure delivery of
world-class port services
Rebalancing our revenue by increasing real
estate income
92
CORE OPERATING DIVISION PERFORMANCE
Operating divisions
NPA
Revenue (R million)
%▲
2006
5 438
12%
EBITDA (R million)
%▲
2006
2007
6 107
4 242
9%
2007
4 627
NPA contribution to Group EBITDA 40%
40%
• Increase in revenue mainly due to volume
increases
- Containers 13% in TEU’s
- Vehicles 18% in units
• Capital expenditure R1 026 million
60%
• Berth occupancy 66% (2006: 58,9%)
93
KPI’s - NPA
2007
Target
2007
Actual
Performance
Financial
Revenue (Rmillion)
5 915
6 107
Achieved
EBITDA (Rmillion)
4 383
4 627
Achieved
1 964
1 026
Not Achieved
58.9
66
Infrastructure
Capital expenditure (Rmillion)
Efficiency
Berth Occupancy (%)
Achieved
94
TRANSNET NPA: ACTION PLANS TO CREATE CAPACITY
AND IMPROVE SERVICE DELIVERY
•
Capacity creation at the Ports ahead of time:
Investment 5 year plan:
•
Durban: Widening and deepening of entrance channel (R3bn) to enable future growth
Pier 1 resurfacing and berth deepening (R1bn) to create capacity
Remodelling of Maydon Wharf (R3.5bn)
Car terminal to increase capacity from 10 000 parking bays to 14 000 parking bays total
cost of project is R0.66bn of which R0.18bn relates to NPA
Cape Town container terminal expansion to increase capacity from 700 000 teu’s to 1
400 000 teu’s. Total cost of project R4.2bn of which R2.7bn relates to NPA
Ngqura: - New container terminal with capacity of 800 000 teu’s. Total costs of project
R7.9bn of which R3.8bn relates to NPA
4 Berths for bulk/ore
Sufficient capacity to support future growth in imports/exports
95
TRANSNET PORTS TERMINALS
TAU MORWE
BUSINESS OVERVIEW
•Transnet Port Terminals manages 15 cargo terminal operations situated across 6
South African ports with a staff compliment of 5,049
• Operations are divided into four cargo sectors
-
Containers
Dry Bulk
Break Bulk
Automotive
• Transnet Port Terminals provides an efficient and reliable service to a wide
spectrum of customers including shipping lines and cargo owners
97
TRANSNET PORT TERMINALS
STRATEGIC OBJECTIVES
“The what”
“The how”
Create a performance
management culture and skills
base that enables the
execution of SAPO business
plan
Enter into strategic
partnerships to exploit new
business opportunities that
grow our revenue base
Talent management, skills
recruitment and selection
Maintain our market dominance
by ensuring we are recognized as
an efficient and cost competitive
operator
Productivity improvement and
initiatives to increase capacity
and grow revenue
Joint ventures and partnerships
to gain skills and processes and
to retain and grow the revenue
Port Terminals
Strategic
Objectives
Contain operating costs per unit of
volume to an increase of less than
CPIX cost increases
Cost maps to understand costs
per unit per commodity
Business Process reengineering
Understand customer requirements,
translate these into consistent and
personalised service offerings that
exceed their expectations
Corridor approach
Port –rail service packages
Create capacity ahead of
demand
Strategic investments that
inform and support growth
initiatives
98
WE HAVE TAKEN SUCCESSFUL ACTIONS TO STABILISE
THE BUSINESS AND HAVE STRUCTURED AND
SEQUENCED THE PATH TO WORLD CLASS
Stabilise and privatise
Defined corporate
strategy
Re-engineer and transform
New leadership
and organisational
structure
Operational
improvement and
efficiencies
Customer
focus
and
stakeholder
management
Volume and
market share
growth
Strategic
investment for
better
performance
2012: Double
capacity and
Revenue base to
R8.9bn
Corridor
performance
Motivated, valueadding employees
Financial results:
R1,3bn
Financial results:
R50m loss
2000
Injected Skills and
developing
existing people
Investment of
capital for
sustainability
Business
Turnaround and
prepare to sell
2000 – concession
and close shop
Perform and grow
2004
2007
2009
99
2012
3
CORE OPERATING DIVISION PERFORMANCE
Operating division
Port Terminals
Revenue (R million)
%▲
2006
3 585
14%
EBITDA (R million)
%▲
2006
2007
4 098
1 193
31%
2007
1 561
Port Terminals contribution to Group EBITDA 14%
14%
• Revenue increase 14% vs 2006
- Containers (13% in TEU’s)
- Automotive (18% in Units)
- Bulk (2% in tons)
• Capital expenditure R1 740 million
86%
100
KPI’s – PORT TERMINALS
2007
Target
2007
Actual
Performance
Financial
Revenue (Rmillion)
4 052
4 098
Achieved
EBITDA (Rmillion)
1 543*
1 561
Achieved
1 415
1 740
Achieved
Durban container terminal
20
17
Not achieved
Cape town container
terminal
20
21
Achieved
Durban container terminal
32
33
Achieved
Cape town container
terminal
33
33
Achieved
4 349
3 951
Infrastructure
Capital expenditure (Rmillion)
Efficiency
Moves per crane hour
Moves per ship hour
Tons loaded per hour
Iron ore terminal
Not achieved**
*Adjusted to be consistent with bonus costs
** As a result of ship loader failure and lack of iron ore for export
101
TRANSNET PORT TERMINALS: ACTION PLANS TO CREATE
CAPACITY AND IMPROVE SERVICE DELIVERY
•
Capacity creation:
Investment 5 year plan
- New container terminal at Pier 1 (Durban) to create additional capacity of 720
000 teu’s (R1.8bn)
- Durban container expansion and replacement (R1,4bn) to create additional 600
000 teu’s
- Ngqura container terminal (additional 800 000 teu’s)
- Cape Town container terminal (additional 700 000 teu’s)
•
Improved service delivery
-
DCT: Improved teu’s handled from 158 000 to 186 000 per month in 2006/07.
Currently for the past 5 months DCT averaged 180 000 teu’s per month. The
moves per ship working hour increased from an average of 33 to 38 peaking at
80 moves per ship working hour
102
PIPELINES
CHARL MOLLER
BUSINESS OVERVIEW
• Transnet Pipelines (Pipelines) can best be described as an energy carrier.
We transport a range of petroleum products and gas though 3000km of
strategic underground pipelines traversing five provinces.
The pipeline network consists of 4 main lines: a Multi-product line, the
Crude oil pipeline, Gas pipeline and Jet-fuel pipeline plus a network of
pipelines mainly in the Gauteng area of South Africa
• Pipelines plays an important role in ensuring the secure supply of
petroleum products in South Africa. It currently transports approx 17bn
litres of petroleum products and 14m gigajoules of gas annually. Products
currently transported by Pipelines include methane rich gas, crude oil,
aviation turbine fuel, diesel and various grades of petrol (ULP and LRP)
• Clients consist of major oil companies operational in SA: BP, Chevron,
Engen, Sasol Oil, Sasol Gas, Shell and Total
104
TRANSNET PIPELINES’ STRATEGY FOR GROWTH
Transnet pipelines will grow into a totally new business over the
next five years. We are presently in the period of transition as
depicted below
NEW
TRANSNET PIPELINES
PETRONET
WE KNEW
FULL REGULATION
2011 ONWARDS
CHARACTERISTICS
1.
2.
3.
4.
5.
6.
7.
8.
Cash flush
500 Employees
Limited Capacity available
Informal Regulation (DME)
Volumes transported: 17bl/a
Interruptible production process
Total Net Assets : R5,4 billion
Annual turnover : R1,2 billion
1.
2.
3.
4.
5.
Cash Constrained
500  650 Employees
Capacity constrained
Developing formal Regulation
Volumes transported :Maximum 18
bl/a
6. Interruptible production process
7. Total Net Assets : Changing
8. Annual turnover : Increasing
1.
2.
3.
4.
5.
Cash transition
700 Employees
Capacity in abundance
Formal Regulation (NERSA)
Volumes transported upwards of 22
bl/a
6. Uninterrupted production process
(Trunkline and Terminals)
7. Total Net Assets : R20 billion
105
8. Annual turnover : R2,4 billion
TRANSNET PIPELINES’ STRATEGY FOR GROWTH
Our strategic Objectives are now focused on moving
towards the bigger Transnet Pipelines business
beyond 2011 - from a small, constrained division to a
bigger and growing division of Transnet Limited
Develop new business
portfolio
Full alignment:
Regulation
• Expanding terminals
• Run depots for clients
• Optimisation of
facilities
Ensuring Sustainable
Business Support
Systems
Fit for purpose SAP and
Telecontrol features
Finalise rules
Obtain all licences
Embed sound
relationship
Pipelines’
Strategic
Objectives
Optimally manage
Capacity
• Bridging Plan until
2010 (DRA’s & DIC)
• Complete and
Commission NMPP by
Q3 2010
Effective and Efficient
Employee Capabilities
• New look skill-set for
Pipelines beyond 2010
• New Operations and
Terminals
• Huge Pipeline and
Equipment
Ensuring highest quality
of maintenance
Ensuring a sustainable
and legally compliant set
of older assets and
getting to grips with
challenges of NMPP
106
MAP OF TRANSNET PIPELINES’ NETWORK
(ALSO INDICATING THE ROUTE AND POSITION OF THE NEW
MULTI-PRODUCTS (NMPP)
GAUTENG
Ø219,1 (8”)
WALTLOO
PRETORIA WEST
ø323,8 (12”)
RUSTENBURG
Ø219,1 (8”)
LANGLAAGTE
KLERKSDORP
SASOLBURG
ø323,8 (12”)
JAMESON
PARK
ø323,8 (12”)
Ø219,1 (8”)
LESOTHO
ø502 (20”)
ALRODE
MEYERTON
SOUTH AFRICA
MPUMALANGA
Ø168,3 (6”)
ø323,8 (12”)
SECUND
A
WITBANK
KENDAL
AIRPORT
TARLTON
NORTH - WEST
GAUTENG
ELARDUS PARK
ø457,2 (18”)
Ø406,4
COALBROOK (16”)
CAPE TOWN
SECUNDA
STANDERTON
Ø457,2 (18”)
ø457,2
(18")
ø457,2 (18”)
WILGE
AFRICA
VOLKSRUST
FREE
STATE
MAGDALA
KROONSTAD
VREDE
“T” QUAGGA
Ø406,4 (16”)
INGOGO
ø457,2 (18”)
Ø457,2 (18”)
NEWCASTLE
BETHLEHEM
FORT
MISTAKE
BHT
KWAZULU /
NATAL
VAN
REENEN
CRUDE OIL
GAS
VRYHEID
SCHEEPERSNEK
ø406,4 (16”)
ø323,8 (12”)
REFINED PRODUCTS
RICHARDS
BAY
DURBAN
N
MAHLABATINI
LADYSMITH
AVTUR
EMPANGENI
NOT IN USE
FUTURE NMPP PIPELINES
FUTURE PUMPSTATIONS
Ø
LESOTHO
RICHARDS BAY
ø323,8 (12”)
MOOIRIVER
ø406,4 (16”)
Ø457,2 (18”)
FUTURE TERMINALS
DOUBLE PUMP STATION
HOWICK
INDIAN
OCEAN
DUZI
PUMP STATIONS
DELIVERY STATIONS / METERS
INTAKE STATIONS
HILLCREST
MNGENI
Page 107
FYNNLAND
DURBAN
107
CORE OPERATING DIVISIONS PERFORMANCE
Operating division
Revenue (R million)
%▲
2006
Pipelines
1 060
15%
2007
1 218
EBITDA (R million)
%▲
2006
2007
860
931
8%
Pipelines contribution to Group EBITDA 8%
8%
• 15% increase in revenue vs 2006
- Petroleum volumes (8,1%)
- Gas (14,6%)
- Tariff increase 2,5%
• Capital expenditure R310 million
• Board approval to commence with the
Multi Product Pipeline subject to certain
governance issues being resolved
92%
108
KPI’s - PIPELINES
2007
Target
2007
Actual
Performance
Financial
Revenue (Rmillion)
EBITDA (Rmillion)
1 154
1 218
Achieved
860
931
Achieved
226
310
Achieved
43.5
38.6
Achieved
Infrastructure
Capital expenditure (Rmillion)
Efficiency
Total operating costs per Ml km of
product conveyed (R)
109
TRANSNET PIPELINES: ACTION PLANS TO CREATE CAPACITY
AND IMPROVE SERVICE DELIVERY
•
Capacity creation: Investment 5 year plan
-
•
New pipeline (NMPP) to increase capacity to meet future demand (2010
onwards) at an estimated cost of R11.2bn
Improved throughput on existing lines (DRA and DIC initiatives) to create
additional capacity until NMPP completed
Sufficient capacity will be created up to 2030 with a yoy growth
volume of 5%
110
MARIA RAMOS - CONCLUSION
THE FOUR-POINT TURNAROUND PLAN WAS
DEVELOPED TO STABALISE TRANSNET
Transnet situation in
2004/05
• Lack of clear strategic
direction
Growing a
focused freight
transport
company
Strategic
intent
Delivering
efficient &
competitive
services
Enabling
economic
growth
• Weak financial
performance and controls
1
2
3
4
• Unfocussed and inefficient
business structure –
significant non-core
investments
Four-
• Low morale: Lack of
Turn-
investment in Human
Capital
• Poor risk management
point
around
Strategy
Redirecting
Strategic
and Reengi-
Balance
neering
Sheet
the Business
Management
Ensure
Corporate
Governance &
Risk
Develop
Human
Capital
Management
and governance
• Lack of capital investment
112
FROM FOUR-POINT TURNAROUND TO
FOUR-POINT GROWTH STRATEGY
Growth through:
Reengineering –
integration,
productivity
and efficiency
• Priority corridors
• Integrated
commercial
management
• Cross-divisional
operational
integration
Capital
optimisation
and financial
management
operations, and
financial customer
planning
• Focused
investment for
growth
• Capital portfolio
• Planned
• Strategic
• Cost effective
• Funding strategy
maintenance
in all divisions
Human
capital
execution
• Integrated capital, • Delivery on safety • Accelerate
• Efficient asset
utilisation
Safety, risk
and effective
governance
optimisation
asset/liability
management
performance
• Complying to the
highest standards
of corporate
governance
• Enterprise risk
management
• Enterprise
performance
management
(EPM)
implementation
of HC strategy
• Talent
management
including critical
skills
• Remuneration
based on
performance
against strategic
outcomes
• Value and culture
procurement
• Shared services
113
SUMMARY OF STRATEGY
• Drive cross-divisional capital
projects and capacity planning
• Focus Vulindlela on integrated
cross-functional corridor rollout
• Implement integrated commercial
management
• Implement focused management
reporting and EPM
• Efficient asset utilisation
• Enhance safety, risk and
governance
• Accelerate HC strategy
implementation
114
THE SHAREHOLDER MANDATE IS ADDRESSED WITHIN
THE NEXT HORIZON OF THE TRANSFORMATION
PROCESS
Transformation horizons for a networked organisation
‘Expand competitive
advantage’
Current
position
‘Optimise and extend growth’
‘Stabilise the core’
• Accelerate HC strategy
implementation
• Implement integrated commercial
‘Stop the
bleeding’
• Financial restructuring
• New freight strategy and
disposal of non-core assets
management
capacity management and
supply chain integration
products)
• Strategic organisational
initiatives
• Develop and implement long
term network improvement
concepts
• Implement critical infrastructure
• Long-term capacity planning
• Launch Vulindlela to stabilise key
• Focus Vulindlela on integrated, cross • Achieve world-class performance
projects
operational functions and capture
productivity
• Implement critical capability
building
• Restructure corporate centre
• Complete disposals
• Create HC strategy
• Shareholder Compact
• Risk and governance
• Develop customer services (e,g,.
functional corridor rollout (using
‘standardised” improvements)
• Improve cross-divisional capital
projects and financial planning
• Implement focussed management
levels
• Build long term stakeholder
relationships
• Explore international expansion
reporting, KPI analysis and
Enterprise Performance
Management (EPM)
• Best practice CAPEX
• Funding strategy
115
THERE ARE SEVEN MAJOR LEVERS FOR GROWTH
Major levers
Key drivers for success
•1 Increase in investment to create
• Roll out of Capex plan: Optimal
•2 Productivity/efficiency improvement
• Vulindlela re-engineering initiatives
•3 Customer focus and orientation
• Integrated commercial management
•4 Sustainable service delivery
• Integrated commercial management
•5 Financial strength and sustainability
• Volume growth and optimal asset
capacity
integration and allocation across
divisions
utilisation
Key enablers
•6 Safety
• Embedding safety culture in
•7 Human capital
• Navigator and Group HC programmes
organisation (ERM)
116
THE END
117