ANNUAL FINANCIAL STATEMENTS 2017 - Transnet

1 ANNUAL FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2017 AdmiredAgileDigitalUnitedPERFORMANCEHIGH LIGHTS1 Transnet ANNUAL FINANCIAL STATEMENTS 201750 19456 6066115262 16765 478 Revenue (R million)2017201620152014201321 05123 63925 58826 25027 557 EBITDA (R million)2017201620152014201344,645,940,0 43,144,4 Gearing (%)2017201620152014201327 47131 76633 56529 56121 438 Capital investment(R million)201720162015201420133,73,73,63,1 2,9 Cash interest cover (times)2017201620152014201333 44938 84845 24943 48136 960B-BBEE spend as perDTI codes (R million)20172016201520142013 PERFORMANCE HIGHLIGHTS1 STATUTORY INFORMATIONA pproval of the ANNUAL FINANCIAL statements2 Group Company Secretary certificate3 INDEPENDENT AUDITOR S REPORT4 AUDIT COMMITTEE REPORT10 REPORT OF THE DIRECTORS12 ANNUAL FINANCIAL STATEMENTSA ccounting policies30 Income statements40 STATEMENTS of comprehensive income41 Disclosure of components of other comprehensive income42 STATEMENTS of FINANCIAL position43 STATEMENTS of changes in equity44 STATEMENTS of cash flows45 Segmental report46 Notes to the ANNUAL FINANCIAL statements48 Annexure A90 Annexure B106 Annexure C108 Annexure D110 Annexure E112 Annexure F115 Annexure G116 ABBREVIATIONS AND ACRONYMS118 GLOSSARY OF TERMS119 CORPORATE INFORMATION120 Revenue increased by 5,3% to R65.

2 5 billion mainly due to a 4,9% increase in general freight volumes, a 2,4% increase in export coal railed volumes, a 24,3% increase in railed automotive and container volumes and a record 12,1 mt transported for expenses were contained at a 5,6% increase to R37,9 billion notwithstanding a 10,1% increase in electricity costs and a 7,5% increase in personnel costs representing a R2,4 billion saving in planned before interest, taxation, depreciation, derecognition and amortisation (EBITDA) increased by 5,0% to R27,6 billion, 7,1 times SA s GDP growth of 0,7% for the FINANCIAL year. Profit for the year increased to R2,8 billion (2016: R393 million) more than 600% than the prior at 44,4% and cash interest cover at 2,9 times, are significantly within loan covenant requirements.

3 Borrowings of R17,0 billion during the year, and R24,9 billion was repaid, reflecting the strength of Transnet s FINANCIAL position. Cash generated from operations after working capital changes increased by 16,4% to R32,8 billion, reflecting our strong cash generating investment of R21,4 billion brought expenditure during the MDS period to R145 billion. Since the inception of the locomotive acquisition contracts in 2014, 452 locomotives have been accepted into focus on operational improvements resulted in the Group operational efficiency increasing by 14,9%. Energy efficiency increased by 1,2% with new electric locomotives regenerating 242 788 spend amounted to R37,0 billion or 103,1% of total measured procurement spend, per DTI Company spent 3,1% of its labour costs on training, focusing on artisans, engineers and engineering Company recorded a disabling injury frequency rate (DIFR) of 0,69 the sixth consecutive year of recording a positive safety performance that outperformed the target of 0,75 and the global benchmark of 1.

4 However, with an increase in the number of fatalities during the year, Transnet is redoubling its efforts and investment in safety management. R234 million was invested in sustainable community development programmes across South Africa with 438 807 individuals from rural and needy communities, benefiting from the Phelophepa healthcare trains outreach informationAll references to forward looking information and targets in the 2017 reports are extracted from the 2018 Transnet Corporate Plan approved by the Board of s Integrated Report 2017 , ANNUAL FinancialStatements 2017 and Sustainability Report 2017 areavailable in PDF on on this reportWe welcome feedback on our Integrated Report to ensure that we continue to disclose information that is pertinent to all our in print format and full online HTMLThe 2017 Integrated Report is the Company s primary report to all Report 2017 Available onlinein PDF format The 2017 ANNUAL FINANCIAL STATEMENTS includereports of the directors and independent 2017 Sustainability Report documentsTransnet s sustainability performance in FINANCIAL Statements2017 SustainabilityReport2017 Operating DivisionReports2017 Integrated Report 2017 CONTENTSR eporting formats3 Transnet ANNUAL FINANCIAL STATEMENTS 20172 GROUP COMPANY SECRETARY CERTIFICATE for the

5 Year ended 31 March 2017 APPROVAL OF THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2017 Directors responsibilitiesThe Board of Directors (Board) is required by the Companies Act, No 71 of 2008 of South Africa (Companies Act), and the Public Finance Management Act, No 1 of 1999 (PFMA), to prepare ANNUAL FINANCIAL STATEMENTS which fairly present the state of affairs of Transnet SOC Ltd ( Transnet or the Company) and its subsidiaries (the Group) as at the end of the FINANCIAL year, as well as the profit or loss and cash flows of the Company and the Group for the FINANCIAL year then preparing these ANNUAL FINANCIAL STATEMENTS , the directors are required to: Select suitable accounting policies and apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed; and Prepare the ANNUAL FINANCIAL STATEMENTS on the going-concern basis unless it is inappropriate to presume that the Company and/or the Group will continue in business for the foreseeable Board of Directors of the Company is responsible for the maintenance of adequate accounting records, maintenance of appropriate systems of internal control, as well as the preparation and integrity of the ANNUAL FINANCIAL STATEMENTS and related statementsThe Audit Committee has evaluated the Company and Group ANNUAL FINANCIAL STATEMENTS and has recommended their approval to the Board.

6 In preparing the Company and Group ANNUAL FINANCIAL STATEMENTS , the Company and the Group have complied with International FINANCIAL Reporting Standards (IFRS) and the Companies Act. In addition, the Group has complied with the reporting requirements of the PFMA, except as set out in the Report of the Directors on pages 17 to Group has used appropriate accounting policies supported by reasonable and prudent judgements and estimates. Judgements and estimates made in the application of IFRS, that have a significant impact on the ANNUAL FINANCIAL STATEMENTS , are disclosed in the notes to the ANNUAL FINANCIAL Board has every reason to believe that the Company and Group have adequate resources and facilities in place to be able to continue in operation for the foreseeable future.

7 Therefore, the Board is satisfied that Transnet is a going concern and has continued to adopt the going-concern basis in preparing the ANNUAL FINANCIAL external auditors, SizweNtsalubaGobodo, are responsible for independently auditing and reporting on the ANNUAL FINANCIAL STATEMENTS in conformity with International Standards on Auditing. Their unmodified audit report on the ANNUAL FINANCIAL STATEMENTS , prepared in terms of the Public Audit Act of South Africa, No 25 of 2004 (PAA), appears on pages 4 to internal audit activities are in accordance with the pre-approved internal audit plan. The internal audit plan is reviewed and approved by the Audit Committee annually. Transnet Internal Audit (TIA) has executed the internal audit plan during the year and has provided assurance to the Board as to the state of the internal controls of the Company.

8 Their assessment of the internal controls of the Company is included in the Audit Committee Report. The Audit Committee has reviewed the effectiveness of the Company s internal controls and considers the systems appropriate for the effective operation of the Board is of the opinion that the Company and the Group have complied with applicable laws and regulations except as disclosed in the Report of the Directors as set out on pages 16 to Board is of the opinion that these ANNUAL FINANCIAL STATEMENTS fairly present the FINANCIAL position of the Company and the Group as at 31 March 2017 , and the results of their operations and cash flow information for the year then ANNUAL FINANCIAL STATEMENTS have been prepared under the supervision of the Group Chief Executive.

9 LC MabasoChairperson SI GamaGroup Chief Executive GJ PitaChief FINANCIAL Officer1 June 2017 JohannesburgI hereby certify that in terms of section 88(2)(e) of the Companies Act, the Company has filed with the Companies and Intellectual Property Commission all such returns and notices for the year ended 31 March 2017 , as required in terms of this Act, and that all such returns are true, correct and up to date. However, the Company has been unable to file the latest CoR39 Form and CoR44 Form on time due to administrative delays. NE KhumaloGroup Company Secretary1 June 2017 Johannesburg5 Transnet ANNUAL FINANCIAL STATEMENTS 2017 INDEPENDENT AUDITOR S REPORT TO PARLIAMENT ON Transnet SOC LTDfor the year ended 31 March 20174 Report on the consolidated and separate ANNUAL FINANCIAL statementsOpinionWe have audited the consolidated and separate ANNUAL FINANCIAL STATEMENTS of Transnet SOC Ltd and its subsidiaries as set out on pages 30 to 117, which comprise the consolidated and separate STATEMENTS of FINANCIAL position as at 31 March 2017 , the consolidated and separate STATEMENTS of comprehensive income, STATEMENTS of changes in equity and STATEMENTS of cash flows for the year then ended, and the notes.

10 Comprising a summary of significant accounting policies and other explanatory our opinion, the consolidated and separate ANNUAL FINANCIAL STATEMENTS present fairly, in all material respects, the FINANCIAL position of Transnet SOC Ltd and its subsidiaries as at 31 March 2017 , and their FINANCIAL performance and cash flows for the year then ended in accordance with International FINANCIAL Reporting Standards and the requirements of the Public Finance Management Act (PFMA) and the Companies Act of South conducted our audit in accordance with the 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 are independent of the entity in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA code) and other independence requirements applicable to performing audits of the FINANCIAL STATEMENTS in South Africa.