Denel Group Integrated Report Twenty 15/16
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DENEL GROUP INTEGRATED REPORT TWENTY 15/16 Reliable Defence Security and Technology Solutions Partner “He who refuses to obey cannot command.” ~Kenyan proverb DENEL ABOUT THIS REPORT REPORTING FRAMEWORKS REPORTING BOUNDARY ASSURANCE » This report takes cognisance of the » This integrated report presents a » The external auditors were engaged integrated reporting requirements transparent, comprehensive and to assure financial information, of the King III Report on Corporate comparable view of the financial, whilst most of the non-financial Governance and the International operating, social and sustainability information presented in this integrated Integrated Reporting Framework. performance of Denel SOC Ltd to a report was assured by a number of » This report contains some elements broad range of stakeholders for the service providers through various of standard disclosures of one of the year ended 31 March 2016. processes, i.e. B-BBEE verification, ISO globally recognised best reporting » Non-financial information presented certification, organisational climate practices frameworks, the Global in the report relates to Denel, its assessment, etc. Reporting Initiative (GRI G4). operating business units, subsidiaries » The GRI G4 indicators are included and associated companies, unless in the GRI content index. The otherwise stated. This report outlines the index is provided on pages 230 » Financial information includes to 234 and indicates Denel’s full, information regarding associated group’s outlook and partially or non compliance against companies. reporting indicators. Where data further aims to highlight measurement techniques are not in opportunities and challenges faced by Denel, place, descriptions of the relevant compliance activities are provided. as well as planned actions to address the same. In line with Denel’s inclusive approach, corporate contact details are provided on page 236. Key acronyms used in this report are listed below 1 ACI African, Coloured and Indian MEDDS Mechem explosives and drug detection system AGM Annual general meeting MRAP Mine-resistant ambush protected B-BBEE Broad-based black economic empowerment MRO Maintenance, repair and overhaul DAe Denel Aerostructures SOC Ltd OEM Original equipment manufacturer DAv Denel Aviation OHSAS Occupational health safety assessment series DD Denel Dynamics OTR Denel Overberg Test Range Denel Asia Denel Asia LLC PLS Pioneer Land Systems LLC Denel ISM Denel Integrated Systems and Maritime PMP Denel Pretoria Metal Pressings DLS Denel Land Systems R&D Research and development DoD Department of Defence R/Rand/ZAR South African Rand DoD&MV Department of Defence and Military Veterans RDM Rheinmetall Denel Munition (Pty) Ltd DPE Department of Public Enterprises SA South Africa(n) DTA Denel Technical Academy SAAF South African Air Force dti Department of Trade and Industry SANDF South African National Defence Force DVS Denel Vehicle Systems (Pty) Ltd SANSA South African National Space Agency EBIT Earnings before interest and taxation SOC State-owned company EE Employment equity TD Tawazun Dynamics LLC ESD Enterprise supplier development TMA Turbomeca Africa (Pty) Ltd GCEO Group Chief Executive Officer UAV Unmanned aerial vehicle GCFO Group Chief Financial Officer UAVS Unmanned aerial vehicle system ISO International Standards Organization UN United Nations LMT LMT Holdings SOC Ltd (RF) 1. A list of abbreviations and acronyms is provided in glossary on pages 234 to 235. DENEL CONTENTS 04 PART ONE - GROUP OVERVIEW 06 Denel is proudly South African This report outlines the group’s 08 Our vision, strategic drivers and values outlook and focuses on opportunities 09 Organisational structure and risks faced by Denel, as well as 10 Business model planned actions to address the same 11 Denel capabilities (refer pages 80 to 81). The planned actions take into account business 12 PART TWO - DIRECTORS’ STATEMENTS priorities, risks and recommendations 14 Chairman’s report made by various stakeholders. 16 Group chief executive officer’s report Denel is committed to sustainable 20 PART THREE - PERFORMANCE REVIEW development and strives to respond 22 Financial performance positively to the economic, social and 27 Value added statement natural environmental imperatives 28 Ten-year review where it conducts business. These 30 Performance against the Shareholder’s Compact principles are embedded in the 32 Business units group’s corporate strategy and 42 Associated companies values, which are reflected in the financial and economic decisions 48 PART FOUR - CORPORATE GOVERNANCE made by the group. Denel actively 50 Denel board of directors identifies material matters through 54 Denel executives engagements with both internal and 58 Denel business units’ deputy chief executive officers external stakeholders, and considers 59 Denel group managers the group’s risk management 60 How we are governed processes and feedback from 75 Remuneration report sustainability indices in managing 78 Risk governance the group. This process ensures 86 Stakeholder engagements that Denel’s corporate responsibility programmes remain relevant 92 PART FIVE - SOCIAL RESPONSIBILITY and meaningful to the group’s 94 People and transformation stakeholders, and reflects the 110 Corporate social investment changing landscape of its corporate 114 Supply chain management responsibility. 116 Occupational health and safety The board of directors, through 120 PART SIX - ENVIRONMENTAL RESPONSIBILITY the audit and risk, social and ethics 122 Managing material environmental impacts and personnel, remuneration 123 Energy and carbon emissions and transformation committees, 125 Energy efficiency programme acknowledges, oversees and reports 127 Water on the key strategies, risks and 127 Land stewardship and nature conservation sustainability matters of the group. 127 Denel Overberg Test Range land conversation Denel’s most significant and material issues are discussed throughout the 130 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS integrated report, as well as in the 132 Report of the audit and risk committee directors’ report on pages 137 to 140. 134 Independent auditors’ report to Parliament 136 Statements of responsibility 137 Directors’ report 142 Consolidated statements of financial position 143 Consolidated income statements and statements of comprehensive income 144 Consolidated statements of changes in equity 145 Consolidated statements of cash flows 146 Notes to the consolidated annual financial statements 228 INFORMATION SERVICE 230 GRI content index 234 Glossary 236 Corporate contact details This integrated report is available on Denel’s website www.denel.co.za DENEL GROUP INTEGRATED REPORT 2015/16 PART ONE Group overview DENEL GROUP 04 INTEGRATED REPORT 2015/16 Group overview PART ONE PART ONE GROUP OVERVIEW ONEDENEL GROUP INTEGRATED REPORT 2015/16 05 PART ONE Group overview DENEL IS PROUDLY SOUTH AFRICAN Denel is a high-tech global defence and security equipment manufacturer and provider of related services and solutions, as well as full lifecycle support. The group has been a turnkey defence solution supplier for more than two decades, cutting across land, sea and air domains. COMMERCE AND INDUSTRY EMPLOYMENT AND SKILLS TECHNOLOGY » Product, service and solution DEVELOPMENT ADVANCEMENT offerings continue to evolve, taking » Provides quality employment » R&D and intellectual property into account Denel’s strategy and opportunities in a high-tech development investment of R550m client requirements; environment, as well as artisan (2014/15: R467m); » Denel’s approach to foreign markets competency development; » Contribution through programmes transcends beyond selling products; » Denel plays a key role in SA’s skills like Rooivalk in peacekeeping » Solutions are designed to meet development initiatives, spending initiatives; end-user requirements, including R65m (2014/15: R65m) towards skills » Knowledge-based value added capability transfers; development; manufacturing; » Denel also provides full lifecycle » Denel, including associated » Partnerships with global OEMs; support which reduces the cost of companies, employs 7 164 (2014/15: » Rejuvenating space capability via ownership; 6 931) employees; Spaceteq; and » Innovative applications have been » Supports an estimated 21 000 » Advanced high-technology leveraged from our defence indirect jobs; manufacturing, i.e. contribution to technology base, amongst others to » Schools outreach programme: the success of the Airbus A400M, improve rail safety, crime prevention • Denel’s youth development the world’s most advanced military and surveillance, asset protection, etc.; flagship programme focussing on airlifter. » The successful deployment of the mathematics, science, English and Rooivalk combat helicopter during life science; UN peacekeeping operations in Africa • 400 (2014/15: 455) learners has focused international attention supported by the programme; Ranked among the on the technological capabilities of • Matriculants who participated world’s top the SA defence industry; and in Denel’s Maths and Science » Denel has expanded its RG-vehicle enrichment programmes, received 100 range (family of mine-resistant 4×4 a 100% pass rate during the 2015 global defence light armoured vehicles), as well as year-end exams. manufacturers its armoured personnel carriers (APC) • The 230 Grade 12 learners raked in based on the well-known Casspir 117 distinctions and more than 60% mine-resistant vehicle. As a result, of the class received exemptions keen interest was shown by clients,