2019 ANNUAL REPORT ANNUAL With us you are Number One you are With us
ANNUAL REPORT | 2019 With us you are Number One
Contents
Financial Highlights 4
About Engen Botswana 5 Limited
Our Preseace 6
Board of Directors 8
Chairman’s Report 12
Managing Director’s Report 16 3 Governance 28
King III Compliance Review 30
Management 52
5 Year Review 56
Annual Consolidated 58 Financial Statements Engen Botswana - Driving together Shareholders Information 120 towards a brighter future
Engen Botswana, one of the country’s leading energy brands, is an essential component of Botswana’s progress, serving all sectors of the economy and driving the country’s development strategy.
Engen Botswana supplies businesses, industry, farmers and all Batswana with all their energy needs. As the country advances, Engen Botswana will continue to play a pivotal role in all spheres of Botswana’s development. ENGEN remains committed to delivering its vision through its statement of purpose
A Progressive Energy Progressive A dynamic Southern Africa brand that is passionate about and Solutions Partner Enriching Lives progress and places customers at the heart of all the things for a Sustainable Future that we do.
“WITH US YOU ARE NUMBER ONE” Energy We provide a range of energy solutions for our customers’ COMMERCIAL EXCELLENCE OPERATIONAL EXCELLENCE energy requirements with the ambition to add renewables to our customer offering.
2 3
Solutions From a provider of products and services to delivering partner innovative solutions and becoming a trusted partner to deliver value.
EO & SOURCING RETAIL: FUELS ORG INTEGRATION COMMERCIAL & IBD RETAIL: NON-FUELS SUPPLY CHAIN OER2 Enriching lives Committed to improving the quality of life for all our LUBRICANTS NEW ENERGY PROCUREMENT REFINERY OPTIMISATION stakeholders and ultimately, we help society to reach its full potential for a prosperous future. KEY ENABLERS PEOPLE & BUSINESS PROCESS CULTURAL BELIEFS BBBEE ACCREDITATION DIGITAL
HSEQ Sustainable Creating and protecting value across the eco system BRILLIANT AT BASICS PASSIONATE ABOUT PROGRESS Future consisting of Manufacturing, Human, Intellectual, Natural, Social and Financial capitals. Annual Report 2019
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FINANCIAL ABOUT HIGHLIGHTS ENGEN LIMITED
Engen Botswana Limited NET ASSET VALUE PER SHARE ATTRIBUTABLE PROFIT Net Asset Value Per Share = 406.3 thebe Attributable Profit = 129.165 Mil Engen Limited’s majority continued to deliver BARRELS 326.5 317.1 333.4 384.4 406.3 109.667 132.744 147.508 127.352 129.165 shareholder is Petronas, 135,000 PER DAY THEBE THEBE THEBE THEBE THEBE MIL MIL MIL MIL MIL robust financial results 450 160 Engen supplies the bulk fuel volume 400 the Malaysian national oil requirements of our South African market, our in 2019, in the face of 140 affiliates in Lesotho, Botswana and Eswatini, 350 and gas company, which 120 and half of our Namibian operation’s needs. a challenging business 300 100 holds 74% of shares and 250 environment. 80 200 is one of the leading sixty 60 This was driven by a clear and 150 corporations in the world. 1500 40TONS 40 focused strategy underpinned 100 SERVICE AND of product per hour 4 by astute fiscal management, an 50 20 7 FILLING STATIONS including Lubricating 5 Oils Blending Plant (in industry-leading management 0 0 600 ENGEN filling 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC Through this association, Engen stations have Durban, SA) 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 team, balanced and accountable has access to global resources and convenience stores corporate governance structures, technology that enable it to become carefully selected dealers and a leading player in the downstream a best in sector logistics and EARNINGS PER SHARE ORDINARY SHAREHOLDERS INTEREST Earnings Per Share = 80.9 Ordinary Shareholders Interest = 648.9 Million petroleum industry in sub Saharan ENGEN LIMITED distribution capability. Our Africa and the Indian Ocean Islands. Incorporated in commercial and retail channels 68.7 83.1 92.4 79.7 80.9 521.416 506.515 648.9 613.982 648.9 THEBE THEBE THEBE THEBE THEBE MIL MIL MIL MIL MIL Extensive storage 100% South Africa 100.0 700 continued to operate optimally Today, Engen enjoys a significant 90.0 and distribution providing value, adding solutions 600 presence in 7 Sub-Saharan African 80.0 infrastructure, including: and offering excellent customer 70.0 500 countries and the Indian Ocean Island depots, terminals, service. 60.0 States. 400 70% 30% 50.0 lubricant warehouses, PETROLEUM INVESTMENT LOCAL SHAREHOLDERS 300 HOLDING Ltd. [Mauritius] 40.0 a bitumen plant and 30.0 200 aviation facilities. 20.0 100 ENGEN BOTSWANA 10.0 LIMITED Incorporated 100% in Botswana 0 0 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 DEC 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 ENGEN MARKETING BOTSWANA (PTY) LTD 100% Incorporated in Botswana Our Presence
Engen Botswana Limited is the only oil company listed on the Botswana Stock Exchange. Our citizen empowerment drive is demonstrated by our broad- based shareholding, with over 800 Batswana holding 6 30% of our equity.
Our majority shareholder, Petroleum Investment Holding Limited, 7 Mauritius, holds 70% of equity, and it in turn is 100% owned by Engen Limited, based in South Africa. As a result, we have access to relevant infrastructure in South Africa and around the region. This ensures improved product availability.
KANYE THAMAGA
RAMOTSWA
ENGEN FILLING STATIONS Annual Report 2019
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BOARD OF DIRECTORS
Directors of Engen Botswana Limited Shabani Ndzinge | Chairman Chimweta Monga | Managing Director Stephen Williams | Member continued to focus on ensuring the business mandate was delivered upon, providing strategic direction at 8 every turn. 9
Anthony Siwawa | Member Heather Morrison | Member Leonard Makwinja | Member
Frederik Kotze | Member Robert Matthews | Member Annual Report 2019
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BOARD OF DIRECTORS PROFILES
Shabani Ndzinge Chimweta Monga served as the Chairman of the board Capital Association. He is the Chairman Committee, He has had an illustrious retail pricing executive and has served Chairman Managing Director of South African Oil Refinery (Pty) Ltd, of the Remuneration Committee career in the mining field spanning in various capacities throughout the a base oil refinery in Durban owned and a member of the Board Audit over 30-years, with the past 15-years group. He is currently the Head of the Independent Non-Executive Director Executive Director jointly by Engen, Total and Chevron. Committee. spent in management positions. He International Business Division and BA, (Dar Es Salaam), MS, (Delaware), MBA (University of Lincolnshire and PhD (Kent) Humberside - UK), Bachelor of Accounting He has worked in the downstream oil has been the General Manager of is a member of the Remuneration and Finance (Zambia) industry for over 35 years, initially with Orapa and Letlhakane Mines, and Committee of the board of Engen ------the then Mobil Oil in 1984, and more Heather Morrison was the Deputy Managing Director at Botswana Limited. ------recently as GM of Engen Africa Middle Member Debswana Diamond Company (Pty) Shabani is an experienced leader, Chimweta studied Accounting and East for PLI. Ltd. from 2005 to 2007. administrator and academic, with Finance at the University of Zambia Non-Executive Director Robert Matthews over 30 years of work experience. In and worked briefly as a computer BCom (Hons) (University of Natal), BCom He has served several directorships Member 2011, he was appointed Deputy Vice programmer before joining first (UCT). Registered Chartered Accountant Chancellor of Botswana International Anthony Siwawa (SAICA) in listed and non-listed entities, Citibank and then Caltex. He was Independent Non-Executive Director Member including Chairman of Morupule University of Science and Technology rapidly promoted to Managing ------Fellow: Botswana Institute of Chartered Colliery, Chairman of Botswana (BIUST), where he oversaw finance and Director of Caltex Zambia before Independent Non-Executive Director Heather has served on the boards Accountants (BICA) BSc(Hons) Comp. Sc. (Aston, UK) ACCA Telecommunications Corporation administration. He executed a similar joining Chevron as a Regional Manager of Engen Petroleum Zambia Fellow: Institute of Chartered Accountants (UK), MBA Chicago Booth Limited (2006 to 2014), Director in England and Wales (ICAEW). 10 role at the University of Botswana for Commercial Business in Chevron’s Limited, Engen Rwanda Limited (as 11 of Botswana Telecommunications and previously headed the Business associated companies based in South ------Chairperson); Engen Namibia (Pty) ------Corporation Limited, and Non- Faculty at the same institution. Africa. Chimweta has over 30 years Anthony has extensive experience Ltd, where she chaired the Audit Robert has served as the chairman of Executive Director in African Banking Shabani is a member of several boards, of experience in the oil industry in in developing and formulating Committee; Engen International several audit committees of private Corporation. He served as Executive including the Botswana Accountancy Southern Africa and was appointed business strategy, economics and Holdings Limited; and is a member and public companies. He is an Director of Six Plus One Consulting College, the Institute of Development Managing Director of Engen Botswana finance and is a sought-after speaker of the Board Audit Committee. She Independent Non-Executive Board (Pty) Ltd. He serves as the Chief Management, Bryte Risk Services Limited in 2012. throughout Africa and the United began her career at Ernst & Young in Member and is the Chairman of the Botswana and TA Sebube (Proprietary) States. He has worked in private Cape Town in 1999 and joined Engen Executive Officer of Botswana Board Audit Committee. A retired Limited. equity, venture capital, investment Petroleum Limited in 2005. She was Railways. partner of PricewaterhouseCoopers Stephen Williams banking and corporate finance and appointed Planning, Performance and Gaborone, in charge of audit and He is a former board member of the Member management consulting, and has Reporting Manager (Finance Division) business advisory services, he has Frederik Kotze Botswana Development Corporation, developed a thorough understanding in 2017. gained extensive professional and Non-Executive Director the University of Botswana and BIUST. Member BA (Hons) Philosophy of Leadership, BA of the Southern African region. He is commercial experience in audit, Economics and Industrial Psychology, the founder and Managing Director Non-Executive Director taxation and business services. Post Graduate Diploma in Industrial of private equity fund manager VPB Leonard Makwinja BA (Hons) Business Science, MBA Relations, (University of Natal), Diploma (Proprietary) Limited and founded Member (Stellenbosch) in Strategic Transformation (University of corporate finance company AMS Independent Non-Executive Director ------Stellenbosch, Business School) Capital. BSc Hons (Cardiff), MBA (London) Frederik has been a director of three ------Petronas subsidiaries in Malaysia, ------Stephen was appointed to the board He sits on various boards in Botswana Leonard has been an Independent namely Petronas Ethylene Malaysia, of Engen Petroleum Limited in and across the region, including Non-Executive Director of Engen Petronas Polyethylene Malaysia, and December 2008 and is a member of the South African Venture Capital Botswana Limited since August 2016 Petronas Polypropylene Malaysia. He the Remuneration Committee. He Association, and the African Venture and is a member of the Remuneration joined Engen Petroleum in 1993 as a Annual Report 2019
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Chairman’s Report
12 Business Environment 13 On behalf of the Board of Directors, it is my The difficult circumstances were Global business sentiment and pleasure to present the Engen Botswana Ltd 2019 greatly alleviated in November activity was adversely affected by 2019 when the government settled rising trade barriers and associated annual report. its long-outstanding pricing slate uncertainty, magnified by cyclical and levy mechanism arrears. The structural slowdowns already under way in some advanced economies, slate has been fully paid by the particularly China. Further pressures Although Engen Botswana Ltd encountered several government and the business came from country-specific weakness challenges, I am happy to report that despite a testing 15% is currently in a slate payable in large emerging market economies, trading environment, the Company performed well in 2019. position. INCREASE macroeconomic stress related to Against a backdrop of the slowest pace of global economic in Revenue geopolitical tensions, and social growth in more than a decade, a stagnant local economy unrest in several countries. In and the continued absence of any government regulated response, the US Federal Reserve, the European Central Bank (ECB), margin adjustments, Engen Botswana Ltd was able to and large emerging market central achieve positive results despite the challenging market banks cut interest rates over the conditions. course of the year. Annual Report 2019
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Chairman’s Report [continued]
Global oil demand increased by 900 Botswana’s GDP growth saw a Covid-19 will reduce global and term economic impact is severe, The unresolved trade tensions I would like to thank my fellow kb/d year-on-year in QTR 3 of 2019, slowdown in the second half of regional inflation. The 22% increase and the international economic between the USA and China, the Board members for their support the strongest annual growth in a 2019 in anticipation of the highly in electricity prices is likely to push slowdown will dramatically reduce two major markets for diamond throughout the year. I believe that year, particularly in China and India, contested elections which were held Botswana inflation to around 3% in economic activity. A wide range exports, will continue to undermine with their continued support and but OECD deliveries fell for the in October. The air of uncertainty 2020. of economic variables are already the country’s economic performance guidance, Engen Botswana Ltd will fourth straight quarter and were before the elections resulted in being negatively affected, including and fiscal position, underlining the navigate the challenges ahead. I also expected to decline 75 kb/d overall some private sector companies Industry Developments GDP, exports, imports, employment, need to diversify the economy and extend my thanks to our investors, in 2019. Positive global oil demand being reluctant to make any incomes, and government revenues. to reduce reliance on diamonds. partners and all stakeholders for The instability at the Botswana growth forecasts had not yet transformational investments due their loyalty and patronage. Energy Regulatory Authority was a adjusted to the likely impact that the to future policy uncertainty. In the The Botswana Government has As part of the transformation cause for concern as this resulted disturbing spread of the Covid-19 public sector, some CEO’s were put several supporting measures in agenda, in the new year, Finally, I extend my thanks to the in the authority being inwardly virus would have on global economic reluctant to take binding long- place with the aim of cushioning the Government will be focusing on management team and employees focused and being distracted from activity and the consequences for term decisions because they were impact on household incomes and developing the agriculture and for their dedication and hard work. performing their core mandate of the energy industry. not confident that an incoming businesses. Interventions include manufacturing sectors in an effort Together we will ensure that Engen providing economic regulation to administration would follow them a basic salary subsidy, deferment to boost economic growth, promote Botswana Ltd will continue to the energy sector. Brent crude oil, an international through. of corporate Self Assessed Tax exports development, create job command its place in the market 14 industry benchmark, averaged (SAT), the establishment of a loan opportunities and reduce poverty. and show a satisfactory return for its 15 I am happy to report that a dividend around $64 per barrel for 2019 As a result, overall annual GDP guarantee fund for companies to We believe that despite the shareholders. of 15% of net profit after tax against an average of $71 per barrel growth for the year to September facilitate access to bank loans (with pandemic, there is still considerable has been approved by the Board in 2018, ending the year at $67 2019 slowed by 1.3% to 3.6% on the an 80% government guarantee), the growth potential in the local market for 2019. However, due to the per barrel. As a result, Faced with back of declining diamond exports, provision of food baskets for eligible and will continue to invest in an Company’s favourable cash position potential oversupply in early 2020, while non-mining private sector low-income households and the expanded business footprint and in the wake of government’s full OPEC+ countries agreed to deepen growth slowed by a similar margin to allocation of additional funds to deal retail presence across the country. payment of the pricing mechanism existing cuts to 2.1 mb/d in QTR 4.2% compared to the same period with demands related to Covid-19. Shabani Ndzinge slate arrears, a higher percentage 1 of 2020, and according to the in the prior year. The downward We continuously seek to achieve Chairman dividend is a possibility for the International Energy Agency’s (IEA) trend is worrisome, and current Most estimates see economic sustainable results and to improve coming year, and options for Oil Market Report for December forecasts are mixed regarding activity decreasing by 30-60% in our operating performance, with an increased investment will be 2019, this implies a reduction in the impact that the coronavirus the short-term, and the decline in emphasis on health, safety, security, considered. supply of 500 kb/d from current pandemic will have on growth Botswana’s GDP during April 2020 the environment, values and cultural levels. The sharp drop in refining prospects. is likely to be around 50%. The beliefs. Engen Botswana Ltd prides Outlook margins in November in all markets longer-term impact into 2021 and itself in being an employer of choice, revealed the delicate balancing Headline inflation declined in 2018, The impact of the Covid-19 crisis beyond is as yet unfathomable. attracting and retaining highly act between global crude oil and ending the year at 2.2%, well below is huge and its effect on economic Recovery in the diamond industry qualified and motivated employees product markets. the Bank of Botswana’s target prospects, both globally and and the resumption of international who are encouraged to maximise range of between 3 and 6 percent. locally, is impossible to predict as travel and tourism will be dependent their potential. Expectations were that inflation the evolving situation becomes on developments in the global would rise in 2020, however lower ever more serious. The short- economy. fuel and commodity prices due to Annual Report 2019
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Managing Director’s Report
16 Engen Botswana Ltd delivered confidence globally and concurrent 17 Overview strong performance despite these cyclical adjustments in some challenges, enabling the Company advanced economies such as China combined to magnify the 2019 was a challenging year for the market. No to achieve positive financial results under difficult market conditions. slow growth. Additionally, some adjustment was made to the government-controlled emerging market economies such margins throughout the period under review, resulting Global growth in 2019 recorded as Brazil, India, Mexico, and Russia in pressure on profitability as a result of inflationary its weakest pace since the global experienced country-specific weakness during the year while increases in industry operating expenses. The pricing financial crisis more than a decade 7% ago, reflecting several influences tighter financial conditions in slate under-recovery amount owed to the industry, INCREASE common across multiple countries Argentina, geopolitical tensions in the Gulf, as well as social unrest in which had reached record levels, was settled to the in Profit Before Tax as well as country-specific factors. relief of the industry, and the Company is now in a Increasing trade barriers, trade Iran, Venezuela, Libya and Yemen contributed to the worsening slate net payable position. Increasing uncertainty in the tensions and geopolitical factors combined to dent business macroeconomic stress. global economy and the consequent negative impact on Botswana’s diamond exports saw a slowdown in the local economy towards the end of the year. Annual Report 2019
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Managing Director’s Report [continued]
The slow pace of global growth 15% over 2018, earnings before Macroeconomic Review the year on 2.2%. However, the While some economic indicators impacted on the local economy interest and tax (EBIT) were up 7% recent adjustment of the Pula’s were encouraging, such as the The global economy has suffered particularly as the USA and China are while net profit after tax increased downward crawl will result in Botswana Stock Exchange domestic a significant slowdown amid the largest consumers of diamonds by 1%, resulting in attributable upward inflationary pressure, and companies index (DCI) rising prolonged trade disputes and wide- and their economic performance earnings per share increasing from inflation is expected to rise in the marginally in QTR4 2019, following ranging policy uncertainties. The impacts directly on this market. 79.7 to 80.9 thebe. These results medium term but will remain within a long period of declining share growth of the global economy in These developments underscore demonstrate that the Company’s the Bank’s objective range of 3-6%. prices, there is some concern in 2019 was subdued and saw only a the need to diversify Botswana’s performance continues to be robust Interest rates declined by some the banking sector, where lending 2.9% rise compared to 3.4% in 2018. economy which is overly reliant on under very challenging operating 25 basis points in QTR3, reducing to the private business sector fell Much of this was due to continuing diamonds. Reduced diamond exports conditions. bank lending rates and making the by 5.2% over the year to October, trade tensions between the USA and result in reduced government environment more attractive for a degree of contraction that has China, compounded by geopolitical revenue which in turn leads to The retail sales channel continued borrowers. not been experienced for over 20 tensions and numerous varied issues reduced government infrastructure to be the cornerstone of the years. This reflected both increased facing individual countries. At the and development spend and all Company’s business in Botswana The negative economic sentiment impairments as well as a reduction end of the year, the outbreak of the these in turn impact negatively on during 2019, with volumes was exacerbated by a downbeat in borrowing by the energy sector Covid-19 virus in Wuhan, China, cast energy consumption. increasing by 9%, while commercial year for the international market following government’s settlement an ominous shadow on prospects 18 volumes declined by over 8% for rough diamonds in 2019, of the slate. 19 for 2020. The impact on the global The Botswana economy recorded compared to 2018 due largely to characterised by weak demand, economy is wide-reaching and modest growth in the mining sector non-availability of LPG for a portion falling prices, reduced sales Credit Ratings agency Moody’s compounds existing economic risks in 2019, in addition the continued of the year. The Company continued and increasing stocks of unsold maintained Botswana’s credit that were strongly tilted to the drought had a negative impact to grow its retail and convenience inventory. Rough diamond sales rating at A2 stable, while the S&P downside, aggravated by deepening on agricultural production. These network through prudent through De Beers Global Sightholder rating remained at A- with stable political polarisation and increasing are energy dependent economic investment of capital resources, Sales (DBGSS) in Gaborone declined outlook. The rating agencies’ scepticism over the benefits of activities whose decline impacts on strengthening Engen’s competitive by a very substantial 25% in 2019, positive view was influenced by the multilateralism. The current lack energy consumption. The services advantage in the retail space. The impacting negatively on Botswana’s country’s good institutional strength of global leadership in combatting sector, particularly hotels tourism consolidated convenience income export earnings and government supported by strong governance the coronavirus at a time when and the financial services sub- recorded an overall growth of 10% revenues. Demand increased slightly indicators and the peaceful global cooperation is paramount is sectors, continued to make a sizable compared to 2018. towards the end of the year with a conduct of the 2019 election. The likely to exacerbate the pandemic’s contribution to GDP. Unfortunately, shift to increased sales and stable government continued to have a severe and long- lasting damage on these sectors are not high energy The new international reporting prices. With the Covid-19 global transparent and rule based fiscal development prospects worldwide. consumers and their economic standard for leases, called IFRS16, pandemic it is now recognised that policy, low debt stock with a small activities have little impact on energy which came into effect at the a worldwide recession is inevitable, foreign currency exposure and a This sombre global picture impacted consumption except indirectly via beginning of 2019 was been and it is clear that 2020 will be an strong government balance sheet. on the Botswana economy which increased consumer spend. adopted for the preparation of extremely challenging year. saw GDP growth estimated at Against this backdrop the Company the Financial Statements. The new 3.7% in 2019. Micro economic performed well. Overall Group standard resulted in a significant indicators were stable with inflation revenue for the year increased by increase in depreciation and interest for the year at 3% and ending expense. Annual Report 2019
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Managing Director’s Report [continued]
Economic Outlook which marks the start of the second need for the business environment activities, with Convenience income installation of ATMs at various Engen by lucky customers over a period The impact of Covid-19 on the half of the National Development to be transformed through recording an overall growth of 10% service stations have been initiated of four months. The promotion Botswana economy is almost Plan (NDP) 11 period. This phase deregulation and improved co- compared to the prior year, with and will start billing in QTR 1 2020. was well received in the market certain to be severe, with a drop in begins in a most challenging fiscal ordination between different Quick Shops, Fast Food and APOs all During the year, Engen Botswana and contributed to the excellent GDP of 10-15% expected in 2020. environment, with reduced mineral government departments in order showing some level of growth. Ltd increased the number of its performance achieved in December The impact is likely to persist for revenues due to pre-pandemic to stimulate economic activity and convenience outlets and is looking 2019, and this is expected to extend a lengthy period, and some of weakness in the diamond market promote an increasingly diversified Quick Shop income in 2019 at increasing retail initiatives in 2020 through January and March 2020. the damage may be irreversible, coupled and increased government economy. Achieving this will require increased by 14% over 2018, in to continue to grow the nonfuel with some businesses closing expenditure following the commitment to public sector part due to Coca-Cola beverages revenue stream. While no new Our Growing Footprint down, permanently lost jobs and substantial public sector pay rise reform that is central to improving being able to stabilise their stock service stations streamed in 2019, Engen Diagoroga in Mahalapye significantly increased government which is spread over 2019 and 2020. the ease of doing business in availability to consistently supply two will stream in early 2020, and was reopened in QTR 2 2019, budget deficits. Total economic This must be seen in conjunction Botswana. There have not yet been Engen Quick Shops. Disruption in despite considerable competitor and a number of new retail sites losses are likely to be in the region with the cost of the initial relief enough reforms to the business the supply of small pack water was activity in this channel, the Company are expected to stream in 2020. of P250 – P300 million a day in measures taken by Government to environment to jump-start private also alleviated through the signing managed to maintain its robust Several sites were upgraded during terms of lost GDP, and therefore lost date being in excess of P4 billion, sector growth or attract significantly up of a new local supplier, and this market position. The Engen brand the course of the year and in QTR income for households, businesses with uncertainty about how much more foreign investment, and much contributed to increased Quick has strong equity, and this is 4 of 2019 the upgrade of Engen 20 and government. Fortunately, thus more intervention may be required, of the required enabling legislation Shop revenue during QTR 4. These the Company’s key competitive 21 Southbridge Quick Shop and the far there has been little community is still in process. developments were significant as advantage. The brand reassures forecourt and Quick Shop at Engen transmission of the virus and case Following the general election Coca-Cola beverages and small pack consumers that the product and Charleshill were completed, while numbers in Botswana remain low. in October 2019, the public Retail Performance water products are key revenue service quality level they receive the Engen Palapye non-branded expectation for new infrastructural generating products in convenience at Engen retail outlets will be The retail market continued shop was converted into a Quick As in other countries, in Botswana development projects is high, but outlets. internationally comparable and to be the cornerstone of the Shop. Additional service stations are Covid-19 has caused a substantial reduced availability of funds will locally competitive. Engen Botswana Ltd business, earmarked for 2020, and we expect shock to income and wealth, the necessitate that some envisaged Fast Food income achieved growth contributing around 70% of total to continue to grow our retail facility burden of which will leave no projects be put on hold. In order to of 4% compared to 2018. Corner The retail department continues to portfolio revenues compared to footprint during 2020 and beyond. sector of the economy unaffected. minimise the need to raise taxes to Bakeries performed exceptionally manage credit prudently, ensuring approximately 30% of revenues Clearly the energy sector will be balance the budget, government well and recorded overall growth that sites remain well stocked and contributed by the commercial Commercial Performance heavily impacted by the reduction in will need to focus on improving of 27% compared to prior year. reducing organisational exposure market. economic activity. efficiencies, enhancing the delivery The period under review saw an and risk. The commercial segment of public services and increasing increase in the level of partnerships experienced a decline of 8% in 2019 saw a 9% increase in retail Apart from the Covid-19 crisis, value for money in the public sector. between energy companies and The retail business unit ran several volume in 2019, due largely to volume generated from our existing many other challenges face the Much has been said about the food franchises in order to provide promotions during the year, the non-availability of LPG for a network on the back of enhanced new government in the year ahead, this offering at retail outlets. including the Engen Blue Monday certain portion of the year. With operational efficiencies derived promotion that commenced in subdued overall economic activity, from dealer realignment, improved Alternate Profitability Opportunity February of 2019 and ended in April a number of ongoing government inventory holding and productive (APO) income performed well 2019 and the national Win a Truck civil construction projects in promotional activity. The retail compared to prior year, achieving promotion in QTR 4 of 2019 which Botswana were delayed, while the 9% 14% channel also had significant growth overall growth of 6%. New is due to end in March 2020, and implementation of other projects INCREASE INCREASE in its nonfuel revenue generating agreements with banks for 4 KIA 1-tonne trucks will be won was deferred. The slowdown in in retail volume Quick Shop income generated from our in 2019 existing network Annual Report 2019
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Managing Director’s Report [continued]
activity in this energy dependent scored below par due to the Areas of Excellence be increased periodically to keep business conduct. Our aim is for our and other key stakeholders are sector resulted in depressed demand decommissioning of the Dumela pace with inflation, and the lack of culture to reflect our sense of duty engaging with the Botswana Police Engen Botswana Ltd credit for energy products and increased depot tank for maintenance, margin adjustment continues to and responsibility in upholding our Service to bring greater focus management continued to be competition. which reduced the depot stock place undue pressure on profitability commitment towards contributing on these incidents, investigating among the best managed parts holding from July to December of the industry. to the well-being of the community the suspected involvement of of the business on the back of The commercial segment continued 2019. Operations successfully in which we conduct business in an organised crime and coordinating prudent decision making and a to be an important part of the implemented a Just in Time (JIT) The Pricing Slate Mechanism ethical manner. response measures that would make focus on minimising organisational business portfolio and contributed stock management system to service stations safer places for all exposure and risk. Return on We are happy to report that in 30% of the volume generated by manage demand while Dumela was Service stakeholders. average capital employed showed November 2019 the government Engen Botswana Ltd. While diesel partially out of service. partially positive movement for the paid the slate under-recovery Engen Botswana Ltd undertook a remained the focal point of the Engen Marketing Botswana year. The Company scored very well amount owing to the Oil Marketing net promoter score (NPS) for the commercial offering, the lubricants The maintenance of storage tanks continued to uphold the national on metrics for governance, audit, Companies (OMCs) in full, bringing commercial part of the business subchannel continued to be a strong, at Dumela depot was undertaken in statutes throughout all its road transport, safety operations to an end a period of extreme and came out as the top performer contributor to channel’s gross order to keep up with international operations. In our endeavour to and HSE compliance. No Loss of pressure on liquidity in the industry. among the Engen International profit, which increased by 6% over best practices, ensuring that vigorously pursue expansion of Primary Containment (LOPC), or Business entities. Along with the 2018. Towards the end of 2019, the equipment is safe and improving our retail network, we have always contaminations were recorded The Property Portfolio highest standards of fuel sales 22 company acquired a number of new both depot capacity and through- ensured that all required permits 23 during the year. customer service, our excellent retail customers who will add additional put, thereby enhancing overall Revamps at some retail sites were such as environmental authorisation and convenience offerings continued volumes in 2020. efficiency. concluded during 2019, including and building permits are acquired Industry Developments to provide our customers with a upgrades at Engen Thamaga, prior to commencement of planned differentiated offering consistent Distribution The selection process for a new The industry margins have not been Engen Southbridge, Engen Palapye developments. Our Legal Register with our value proposition. transporter is underway as the increased at all since March 2017, and the Quick Shop at Engen is the guiding tool at all times, There were no disruptions to the existing transport contractor’s while the oil companies have been Charleshill, while construction of hence its periodic review to ensure supply of primary products during SUSTAINABILITY HSE contract came to an end. The tender impacted by inflationary increases several new sites which will be Engen Marketing Botswana is up to the year under review, and the process is nearing completion and a in operating expenses over the completed in 2020 commenced at A significant area of concern was the date with any newly promulgated only product that experienced selection will be made in early 2020. same period, and this has impacted various locations across Botswana. number of robberies, particularly statutes. We have engaged constrained supply during 2019 There is obvious need to be careful on operational profitability. The A number of land bank sites were armed robberies, which occurred at reputable companies to conduct was LPG. This was as a result of two in the selection process to ensure margin remains at 55.007t per acquired for future development. Engen service stations during the regular environmental sampling at refinery shut downs for maintenance that the highest technical and HSE litre; yet in the meantime haulage year and which constituted 32% our establishments to ensure that in March – April and September – standards are observed. During the rates have risen, operating costs Corporate Culture of the total number of reportable we abide by the ideals of our HSEQ October; and there were further year under review the Company have grown and there have been incidents. The concern is that the Policy. instances of limited product supply The entire Engen Group operates operated an average of 101 trucks increased spare parts, maintenance number of incidents seems to be during November and December. under a single cultural banner known in both North and South operations and equipment costs for service increasing, with heavier weaponry, as the Petronas Cultural Beliefs, with an average of 2 drops per load. stations. In an ideal situation in a the use of explosives and a greater Average On Time In Full (OTIF) and these have been disseminated The number of loads increased in regulated industry, margins should degree of violence, putting staff, ratings were above target and to all staff, allowing the values to QTR 4 requiring additional trucks to dealers and customers at ever achieved good scores, while be embedded in the Company’s cater for increased demand. greater risk, with increased levels Inventory Days of Supply (IDOS) culture as the backbone of our of trauma and the possibility of fatalities. Engen Botswana Ltd Annual Report 2019
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Managing Director’s Report [continued]
Excellence in all our activities, requirements. While requiring perform independent health risk Engen International Business. The Internship Programme are to explore Corporate Social Responsibility wherever we operate substantial financial investment, assessments, focusing on identifying new structure takes effect from 1st and develop talent pools at entry Having realigned its CSR strategy implementation of these protocols concentrations of airborne January 2020. level positions in order to build skills Through our adherence to in 2018, the Company continues ensures the wellbeing and safety of contaminants within all operational for sustainable growth and equity; national environmental legislation its involvement in initiatives to our staff, partners and customers, sites, including depots, warehouses, Learning and Development to cultivate and develop scarce and (Environment Act 2011, and improve the lives of people in the protection of the environment offices and retail sites. Our policies The Company has an integrated critical skills, thereby expanding the Environmental Regulations 2012) the communities within which from adverse environmental ensure that any Engen employee Talent Management programme capabilities of the core functions in the development of all facilities it operates. In 2018 Engen impacts, and a comprehensive has the right to refuse to perform which seeks to provide a well- within Engen Marketing Botswana; – service stations, depots and Marketing Botswana identified approach to quality throughout the unsafe work instructions on health structured and prepared leadership and to provide graduates with administrative buildings, Engen HOPE Worldwide, Botswana’s Early organisation; all assessed through and safety grounds. In addition, all pipeline within the organisation. exposure within their field of study, Botswana Ltd aims to maintain, Childhood Development project the establishment and regular employees exposed to airborne This programme provides training thus bridging the gap between promote and protect the health, at Molepolole, as one of its CSR review of clear objectives, plans and contamination undergo routine and development interventions, tertiary education and the work safety and well-being of all projects, which was rolled out in QTR measurable targets. Contingency health checks every year, including which endeavour to up-skill and environment. stakeholders in the communities in 1 of 2019. plans are in place to deal with during the period under review, and multi-skill the workforce to allow which we operate. emergencies in the unlikely event no negative impacts were detected. for opportunities for growth and Compensation and Benefits HOPE Worldwide Botswana of a major incident, and Engen development within the Company. Engen Marketing Botswana We continue to make efficient Sponsorship 24 staff take individual and personal Human Resources participates in the Mercer annual 25 use of natural resources, thereby responsibility for adherence to safe The Company continues to recover Total Remuneration Survey (TRS) In March 2019, Engen Marketing proactively minimising damage to Labour relations remained work practices and procedures. In training costs from the Human and incorporates the results of Botswana launched the first the environment, our assets and harmonious during the period 2014, Engen introduced the LOPC Resources Development Fund for the survey to ensure it remains community development CSR investments. Where legislation under review. Engen Botswana’s (Loss of Primary Containment) skills development through short- competitive in Botswana’s dynamic project through sponsorship to does not cover certain parts of our realignment of organisational programme intended to reduce term training. Engen Botswana labour market. There is a need HOPE Worldwide Botswana’s operations, we apply international capabilities within the Company, spills to the environment. Since Ltd endeavours to close skills to remain competitive within the Early Childhood Development best practices, developed through designed to deliver superior service inception, this programme has been gaps and keep employees up industry and in the market in order project at Molepolole. The project our experience in the sector. to customers in Botswana, was highly effective, and no spills were to date with the latest market to retain key talent. Engen strives covers more than 200 children in rolled out in December 2019 and will recorded in 2019. trends in their respective areas of to offer not just monetary but Molepolole (Borakalalo ward) and We strive to meet expectations compensate for reduced support operation. During the onboarding also value-adding benefits to its in seven neighbouring settlements and customer standards, leading structures provided by the regional Environmental Health and Safety process, new employees are employees. who do not have access to any to satisfaction with our products company. The indications are that trained on operational and systems early childhood development and services, and service excellence All possible efforts are made to customer expectations are being requirements to improve their While we cultivate a positive programmes. The project covered through ongoing stakeholder eradicate or minimise hazards met. productivity and quality of service. professional environment at Engen, the purchase of furniture, engagement. All construction and through the implementation of we also have a Zero Tolerance books, blankets, learning and operational activities, manufacturing the Mandatory Control Framework During the year Engen Botswana The Graduate Internship Programme (ZeTo) policy, in that any actions playing materials, transport and and processing, and services comply (MCF) management system. Ltd recorded a staff turnover of The Graduate Internship or behaviour of an individual communication costs for facilitators with appropriate legislation and Fuel storage, distribution, and 2.3% due to the retirement of Programme has been designed staff member or group thereof as well as training for parents of relevant industry best practices. delivery are high-risk activities one employee. During the last to provide tertiary graduates that compromises the business, enrolled children. Engen applies the international in terms of health and safety for quarter of the year, the company with requisite work experience in reputation or health and safety of Petronas Group Health, Safety, employees, suppliers, distributors embarked on a Refocus Project to their various fields of study. The other employees will be subject to Environment and Quality (HSEQ) and customers, and external align Engen Marketing Botswana specific objectives of the Graduate strict disciplinary action. protocols, which far exceed national consultants are employed to (Pty) Ltd organisational structure to Annual Report 2019
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Managing Director’s Report [continued]
Ethics sectors is likely to create further standards of HSE performance. growth opportunities. Despite Engen Botswana continues to strive All Engen employees are required global uncertainties, we expect for zero accidents or incidents that to maintain the highest ethical the Company to show strong will affect employees, customers, or standards, to adhere to the terms of performance in 2020 in both the the public at large. Engen’s formal Code of Ethics, and retail and commercial arms of the to conduct all Company business in a business. Despite the uncertainties, we are manner that is above reproach. confident that the Botswana market The successful conduct of the still has room for expansion and that Going Concern general election in October 2019 the Company will continue to grow The Directors believe the business leaves us optimistic about the its market position in the years to will be a going concern for the standard of governance of the come. foreseeable future. For this reason, country, while a stable policy they continue to adopt the going programme augers well for the Acknowledgements concern basis in preparing the Botswana economy in the future. On behalf of Engen Botswana, I Annual Financial Statements. We believe that Engen Botswana Ltd would like to express my gratitude 26 will be able to continue to grow in 27 to all our stakeholders - our Outlook the years to come. customers, dealers and strategic It is difficult to ignore the yet partners for their continued loyalty The Way Forward unknown impact that the Covid-19 and support. I would also like to Engen Botswana will continue virus will have on the global thank the management team and to develop its retail network economy, and how it will affect staff. Your dedication and hard until it reaches a level of critical Botswana. Taking a conservative work are the critical driver of the concentration that will be consistent view, we expect that there will be Company’s continued success. with its strategic objectives. some economic slowdown in the While the bulk of the Company’s coming months, which may extend business is in the retail market, to years. However, despite this attention will be given to ensure uncertainty, the Company looks that the commercial arm of the forward to another successful year business continues to be an in 2020. important component of the overall Chimweta Monga performance of the Company The government’s stated aim to Managing Director and that it is developed to its full create a conducive environment potential. in which the private sector can develop augurs well for future The Company is determined to economic growth. Continued ensure stakeholder health and safety economic diversification away from and environmental protection and mining output to other non-mining will continue to focus on stringent Annual Report 2019
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GOVERNANCE
Committed to the highest possible Engen also has its own code of Chwayita Mareka and Mr Vhulahani The Remuneration Committee Meeting Attendance Directors Fees governance standards ethics, which substantially complies Bvumbi resigned from Board on comprises three Non-Executive For the Year Ended with the recommendations in the 28 June 2019 and 26 August 2019 Directors and is chaired by Mr Board Meetings 2019 31 December 2019 The Directors believe King IV Report and continues to respectively. Mr Stephen Williams Anthony Siwawa. It meets at least Total that effective corporate review areas requiring further and Ms Heather Morrison were twice a year. Its mandate is to S Ndzinge (Chairman) 4/4 P governance is an essential attention. The following information appointed on 27 August 2019. regulate policy, approve senior C Monga (Managing Director) 4/4 management appointments A Siwawa 4/4 Non-Executive requirement for the is provided to give our stakeholders a better appreciation of Engen The Management Committee is and compensation, determine F Kotze 3/4 Directors successful realisation of Botswana’s current procedures to chaired by Mr Chimweta Monga, remuneration levels of staff, V Bvumbi (Resigned 1/2 S Ndzinge 288,180 Engen Botswana’s business ensure a high standard of corporate the Managing Director, and includes including incentives, and ensure 26 August 2019) A M Siwawa 282,590 R Matthews 4/4 objectives. The Board is governance. The 2019 audit once all Group divisional managers. The appropriate preparation for A M Bryce 1,625 1/2 again provided excellent results, Management Committee meets at Management succession. C Mareka (Resigned C Mareka 45,436 committed to the principles 28 June 2019) without any material contraventions least eleven times a year and deals V Bvumbi 66,528 L Makwinja 4/4 of openness, integrity and the or points for review, a result of with all operational, business and Accountability and Control FJ Kotze 108,714 S Williams (Appointed 2/2 highest of ethical standards, which we can be proud. strategic development issues of the R N Matthews 234,273 The Directors are required by the 27 August 2019) Group not specifically reserved for L Makwinja 212,552 standing in fulfilment of Companies Act to prepare Annual H Morrison (Appointed 2/2 28 Board and Committee Structure the Board. 27 August 2019) H Morrison 60,842 29 Engen’ Botswana’s corporate Financial Statements, which fairly S Williams 60,842 The Engen Botswana Board present the financial position of responsibilities. The Audit Committee comprises 1,361,582 comprises seven Non-Executive Engen Botswana Ltd at the end Audit Committee three Non-Executive Directors, The Group is committed to the Directors, and one Executive of the financial year. The Annual Meetings 2019 chaired by Mr Robert Matthews, Executive Director highest standards of corporate Director, and meets at least four Financial Statements are presented and meets at least twice a year. C Monga 1,782,085 governance and is implementing times per year. Dr Shabani Ndzinge in conformity with the Companies R Matthews (Chairman) 2/2 The Audit Committee is regulated Total 3,143,667 the King IV Code of Corporate is the Chairman of the Board. All Act; the Botswana Stock Exchange V Bvumbi (Resigned 1/1 by specific terms of reference, 26 August 2019) Governance, published in Non-Executive Directors have a (BSE) listing requirements and which include the reviewing of the A Siwawa 2/2 November 2016. We have been wide range of skills and significant International Financial Reporting effectiveness of the Company’s H Morrison (Appointed 1/1 able to implement some of the commercial and operational Standards. The Board has put in internal controls, combined 27 August 2019) recommendations already as experience, enabling them to place a structure with clearly defined assurance model, the monitoring we comply with all international bring independent judgment to lines of responsibility, segregation of and approval of accounting policies, Remuneration Committee accounting regulations and the Board deliberations and decisions. duties and delegation of authority. corporate governance matters, Meetings 2019 Engen Group standard best practices The Directors have access to the and financial reporting. The Audit in corporate governance, while being advice and services of the Company Committee receives reports from A Siwawa (Chairman) 2/2 sensitive to country context. Secretary and are entitled, at the Company’s internal and external F Kotze 2/2 the Company’s expense, to seek auditors, who attend its meetings C Mareka (Resigned 0/1 independent professional advice and who have unrestricted access to 28 June 2019) regarding the business. During the the Chairman and Audit Committee L Makwinja 2/2 year under review, there were two members. This ensures their S Williams (Appointed 1/1 resignations and two appointments 27 August 2019) independence is in no way impaired. to the the Board of Directors. Ms Annual Report 2019
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KING III COMPLIANCE REVIEW
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 1. Ethical Leadership and Corporate Citizenship: 2. Boards and Directors: [continued] Responsible 1.1 The board should Responsible Responsible Leadership; the Board’s Roles and Responsibilities 2.2 The board should Applied In assessing the strategy and performance Leadership; provide effective Leadership; the Responsibilities and Ethical Foundation. of the Board appreciate that of Engen Botswana Limited, the Board takes the Board’s leadership based Board’s Respon- strategy, risk, reports on sustainable development and risk Responsibilities and on an ethical sibilities and performance and management, which are managed and assessed Ethical Foundation. foundation. Ethical Founda- sustainability are mainly by management and the Board Audit tion. inseparable. Committee and reported during Board meetings conducted. 1.2 The board should Applied The Engen Botswana Limited Board continuously ensure that the discusses the provision for dismantling, 2.3 The board should Applied The Board has a board charter and appropriate company is and decommissioning and rehabilitation of sites and provide effective structures and processes in place to ensure that is seen to be Safety, Health and Environment processes of leadership based the business is conducted in an ethical manner. a responsible which a report on that is shared with the Board on an ethical The Group’s seven values are integrated into corporate citizen. during all Board meetings. The Directors Report foundation. the performance management system that is in the Annual Reports provides a comprehensive reviewed annually. It is ensured that all Engen update on Corporate Social Responsibility Plans employees adhere to the Petronas Code of 30 and progress within the Company. Conduct of which Ethical behaviour is greatly 31 covered and forms part of the Company's values and culture. 1.3 The board should Applied Engen Botswana Limited ensures it adheres to the ensure that the Petronas Code Of Conduct and Business Ethics. company’s ethics are The Code covers core values and culture, issues 2.4 The board should Applied The Engen Botswana Limited Board continuously managed effectively. of conflict of interest, financial integrity, fighting ensure that the discusses the provision for dismantling, corruption and unethical behaviour, disclosure company is and decommissioning and rehabilitation of sites and duties, confidentiality obligations, Etc. The is seen to be Safety, Health and Environment processes of Directors Report in the Annual Report discloses a responsible which a report on that is shared with the Board the expected use of the Code by the relevant corporate citizen. during all Board meetings. The Directors Report Engen employees. in the Annual Reports provides a comprehensive update on Corporate Social Responsibility Plans and progress within the Company. 2. Boards and Directors: Roles and 2.1 The board should Applied In accordance with the Engen Botswana Responsibilities of the act as the focal point Limited Board Charter, the Board has made it 2.5 The board should Applied Engen Botswana Limited ensures it adheres to the Board for and custodian its responsibility to act as the focal point for, ensure that the Petronas Code Of Conduct and Business Ethics. of corporate and custodian of, corporate governance by company’s ethics are The Code covers core values and culture, issues governance. managing its relationship with management, managed effectively. of conflict of interest, financial integrity, fighting the shareholders and other stakeholders of the corruption and unethical behaviour, disclosure Company along sound corporate governance duties, confidentiality obligations, Etc. The principles. Directors Report in the Annual Report discloses the expected use of the Code by the Engen Staff members. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 2. Boards and Directors: [continued] 2. Boards and Directors: [continued] Roles and 2.6 The board should Applied Engen Botswana Limited has established the Board Roles and 2.10 The board should Applied Internal Audit is conducted at Group Level by the Responsibilities of the ensure that the Audit Committee. The Board Audit Committee ToR Responsibilities of ensure that there is Group Internal Audit team that is based in Cape Town. Board company has an has not yet been approved by the Board as at 14 the Board an effective risk-based The Engen subsidiaries (Engen Botswana Limited effective and April 2020. As per the ToR, the Committee shall internal audit. included) is regularly audited at Group level of which independent audit have a minimum of two (02) meetings in a year of process / control efficiency is reviewed and a report is committee which the Managing Director, representatives from shared with the subsidiaries. the external auditor, other assurance providers, 2.11 The board should Applied The Board receives regular presentations on Corporate professional advisors and other Board members appreciate that Social Investment and Stakeholder Engagements / may be in attendance at Board Audit Committee stakeholders’ Partnerships. meetings, but by invitation only and may not vote. perceptions affect the The Committee has two (02) Independent Non- company’s reputation. Executive Members and one (01) Non Executive Member. 2.12 The board should Not Applied The company has not developed an Integrated Report ensure the integrity during the prior financial reporting periods. of the company’s Note: The Annual Report which provides a broad and 2.7 The board should be Applied In accordance with the Engen Botswana Limited 32 integrated report. comprehensive view of the Engen Botswana Limited's 33 responsible for the Board Charter, the Board is responsible for operational, financial and non-financial status is governance of risk. the Governance of Risk. The company has a formally reviewed and approved by the Board upon comprehensive risk register which is continuously the recommendation of the Board Audit Committee. updated by the Managing Director and shared The Annual Report is then shared with the Botswana with the Board. Risk Management Is periodically Stock Exchange and published as public information. discussed with the Board during the Board meetings held. 2.13 The board should report Not Applied Internal Audit provides a written assessment on the on the effectiveness of design, implementation and effectiveness of the 2.8 The board should Applied The Board has stated in its Charter the governance the company’s system company’s system of internal financial controls on an be responsible of Information Technology as one of its of internal controls. annual basis. Based on the results of this assessment, for information responsibilities. The establishment of appropriate the Board Audit committee is able to form an technology (IT) IT policies, framework and strategy is done at Group opinion on whether the internal financial controls governance. level but having the Board as the Decision point. form a sound basis for the preparation of reliable financial statements. However, no statement on the effectiveness and adequacy of the internal controls are being reported in the annual report published. 2.9 The board should Applied The Managing Director ensures that an update Note: Management is in the process of developing ensure that the on the applicable Laws and Regulations is shared a suitable report on internal controls which will be company complies with the Board and a Dashboard Report on the disclosed in the Annual Report for the financial year with applicable Compliance with the Laws and Regulations is shared 2020. laws and considers / presented during Board Meetings conducted. adherence to non- binding rules, codes and standards. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 2. Boards and Directors: [continued] 2. Boards and Directors: [continued] Roles and 2.14 The board and its Applied The Board comprises of an appropriate mix of skills, Composition of the 2.18 The board should Applied The Board has eight (08) Directors in the Board as at 30 Responsibilities of directors should act in enabling it to interrogate all aspects of the company’s Board comprise a balance April 2020 comprising of one (01) Executive Director, the Board the best interests of operations and provide the required leadership. A of power, with a three (03) Non executive Directors and four (04) the company. Policy on Dealings has been implemented of which majority of non- Independent Non Executive Directors Directors are required to comply with the provisions executive directors. made within the policy that covers dealings in relation The majority of to securities and dealing conducted during prohibited nonexecutive periods. directors should be independent. 2.15 The board should Applied The liquidity of the company is continuously monitored consider business by Management and the Board Audit Committee. Cash Board Appointments 2.19 Directors should be Applied In accordance with the Board Charter, the Chairman rescue proceedings flow is monitored by the Finance Manager on a regular Process. appointed through a of the Board is responsible for the final authorisation or other turnaround basis. The company also assesses the “going concern” formal process. and appointment of new Board candidates. mechanisms as soon status of the at the financial year end. PricewaterhouseCoopers Botswana in the capacity of as the company is Company Secretary assists Engen Botswana Limited in 34 financially distressed. The Board Audit Committee is frequently updated the process of appointment of new Directors in-country. 35 by the Auditors as well as Finance Manager on the Appointed Directors are then given approval forms of potential risks that would likely affect the going which they are required to sign. Renewal of the terms concern of the company. The potential financial risks of appointment of one-third of the Board of Directors and performance / conduct of the Finance Team is takes place during the Annual General Meeting ("AGM"). presented and shared with the Board. The Board will consider such procedures or other turnaround mechanisms in the event that such circumstances arise. Director 2.20 The induction of and Applied The Directors Induction Policy of Engen Botswana Appointment ongoing training Limited prescribes the requirement for newly appointed 2.16 The board should Applied The Board of Engen Botswana Limited has appointed and development of Directors to undergo a comprehensive and formal elect a chairman of Mr. Shabani Ndzinge who is an Independent Non directors should be induction training. The induction program includes the board who is an Executive Director of the Board to the role of conducted through briefings on the company and its operations by the independent non- Chairman of the Board of Directors of Engen Botswana formal processes. Managing Director and the company secretary. Newly executive director. The Limited. The Board has appointed Mr.Chimweta appointed directors are also provided with written CEO of the company Monga as the Managing Director of Engen Botswana background information about the company and should not also fulfil Limited. Accordingly, the role and the functions of the duties of Directors. Further, the Induction Policy the role of chairman of the Chairperson and the Managing Director / CEO is prescribed the requirement for Director Trainings and the board. separated. is conducted by Engen Botswana Limited as deemed necessary. 2.17 The board should Applied The Board has Appointed Mr.Chimweta C. Monga as appoint the CEO and the Managing Director (MD) who is accountable to the establish a framework Board on the implementation of strategies, objectives for the delegation of and decisions of the Board within the framework of authority the delegated authorities, values and policies of the Company. A "Delegation of Authority" Manual has been implemented within the Company which outlines the detailed responsibilities of the Managing Director in regards to the company's polices and procedures. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 2. Boards and Directors: [continued] 2. Boards and Directors: [continued] Company Secretary 2.21 The board should Applied As per the Charter, the Board is responsible for Group Boards 2.24 A governance Applied Engen Botswana has implemented and adopted be assisted by the appointment of a Company Secretary that framework should various policies, processes and procedures of a competent, shall be responsible for Ensuring that relevant be agreed between the parent / holding company into the local suitably qualified laws and rules for the conduct of the affairs of the group and its subsidiary company. Limits of Authority has been and experienced the Board are adhered to and provide guidance to subsidiary boards. implemented during the year 2018 to ensure company secretary. the board on the duties of the directors and good all departments are aware of their roles and governance, etc. Engen Botswana Limited has responsibilities in each process carried out. The appointed PricewaterhouseCoopers Botswana as manual shows delegation in all the company's the Company Secretary. processes.
Performance Assessment 2.22 The evaluation Applied Engen Botswana Limited has requested Remuneration of 2.25 Companies should Applied As per the Remuneration Committee Terms of of the board, its PricewaterhouseCoopers Botswana to perform a Directors and Senior remunerate directors Reference, the Committee is responsible for committees and the Board Evaluation during the year 2020. The last Executives and executives fairly the deliberation on remuneration activities of individual directors Board Evaluation was performed in 2017 as an and responsibly. which final approval will be done by the Board. 36 should be performed internal evaluation of a which the Questionnaire Non-executive Directors fee policy has been 37 every year. was based on King III Code on Corporate put in place to assist the Board with regard to Governance. The evaluation was internalised and remuneration of Non-executive Directors. conducted by the Board Secretary.
2.26 Companies should Applied The remuneration of Executive and Non- Board Committees 2.23 The board should Applied As per the Charter, the Board has the authority disclose the executive Directors has been disclosed publicly to delegate certain to delegate certain functions to well-structured remuneration of Stakeholders under "Directors Fees" section in the functions to committees without abdicating its own each individual most recent Annual Report of the company. well structured responsibilities. Engen currently has two (02) director and each committees Board Committees comprising of the Board Audit prescribed officer. but without Committee and the Remuneration Committee. abdicating its own The Committees have Terms of Reference that responsibilities. clearly state the roles and responsibilities of each 2.27 Shareholders Applied In accordance with standard market practices, of the Committees and its Members. should approve Engen Botswana Limited seeks annually approval the company’s on its remuneration policy and remuneration for remuneration policy. the prior financial year from shareholders at the Annual General Meeting. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 3. Audit Committee: 3. Audit Committee: [continued] 3.1 The board should Applied Engen Botswana has established the Board Audit Responsibilities of the 3.4 The audit committee Not Applied The company has not developed an Integrated ensure that the Committee. As per the Committee's ToR, the Audit Committee should oversee Annual Report during the prior financial reporting company has an Committee shall have a minimum of two (02) integrated reporting periods. effective and meetings annually and whereby the Managing independent audit Director, external statutory auditors and other Note:The Annual Report of Engen Botswana committee. assurance providers, professional advisors Limited provides a broad and comprehensive and other Board Members is required to be in view of the Engen Botswana's operational, attendance at Board Audit Committee meetings financial and non-financial status which is formally subject to invitation only and may not vote on any reviewed and approved by the Board upon the resolutions set forth. recommendation of the Board Audit Committee. However, no process has been implemented for the preparation of an Integrated Annual Membership and 3.2 Audit committee Applied The Board Audit Committee consist of three (03) Report for the company in accordance with an Resources of the Audit members should skilled members which comprises of one (01) applicable Integrated Reporting framework (E.g. Committee be suitably skilled Executive Directors and two (02) Independent International Integrated Reporting Council). 38 and experienced Non Executive Directors as indicated below as at 39 independent non- 30 April 2020: executive directors. 3.5 The audit committee Applied The Board Audit Committee monitors the 1) H. Morrison (Non -Executive Director) a should ensure relationship between each internal and external Planning, Performance and Reporting that a combined assurance providers and regular reports are given Manager at Engen Petroleum Limited assurance model is on high risk matters during Committee meetings
applied to provide held and the Board focuses on a co-ordinated 2) Anthony Siwawa ( Independent Non- Executive a coordinated approach to managing risks. Director) is the founder and Managing approach to all Director of Private Equity Fund manager VPB assurance activities. Note: Management is committed to the (Proprietary) Limited and founded Corporate development of a formalised process on Finance company AMS Capital; documenting the combined assurance work
performed / framework in the proceeding 3) Robert Matthews (Independent Non financial period. Executive Director) is a retired partner of PricewaterhouseCoopers Botswana and in charge of audit and business advisory services.
3.3 The audit committee Applied The Chairman of the Committee is an Independent should be chaired by Non Executive Director and attends all Annual an independent non- General Meeting as per the Board Charter. executive director. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 3. Audit Committee: [continued] 3. Audit Committee: [continued] Internal Assurance 3.6 The audit committee Applied Engen Botswana has established the Board Audit Reporting 3.10 The audit committee Applied The Board Audit Committee provides regular Providers should satisfy itself Committee. As per the Committee's ToR, the should report to updates of its activities to the Board during all of the expertise, following responsibilities have been set for the the board and Board meetings held during the financial year. resources and Committee: shareholders on how A summary Directors Report comprising of the experience of the it has discharged its financial performed (i.e. annual audited financial company’s finance 1) The Board Audit Committee shall review the duties. statements) is presented in the company's Annual function. expertise, resources and experience of the Report and the Chairman of the Board Audit Company's finance function, and Committee is present at the Annual General Meeting to address stakeholder questions. 2) The Board Audit Committee shall also consider and satisfy itself of the suitability of the expertise and experience of the Finance 4. The Governance of Risk: Manager annually. The Board’s 4.1 The board should be Applied In accordance with the Engen Botswana Limited Responsibility responsible for the Board Charter, the Board is responsible for the 3.7 The audit Applied As per the Board Audit Committee ToR, the for Risk Governance governance of risk. Governance of Risk within the company. Engen 40 committee should committee shall approve the annual Internal Botswana Limited has a comprehensive Enterprise 41 be responsible Audit Plan in conjunction with the Chief Internal Risk Register which is continuously updated by for overseeing of Auditor and make recommendations to the Board the Managing Director and Heads of Departments internal audit. for approval. Internal Audit is performed by the and presented to the Board regularly. Matters parent / holding company at group level. pertaining to Enterprise Risk Management is periodically discussed with the Board during the 3.8 The audit committee Applied The mission of the Board Audit Committee is to Board meetings held. should be an integral ensure that it has identified and understands the component of the areas of business which, due to their nature or risk management exposure to risk, are critical to its operations and 4.2 The board should Not Applied Engen Botswana Limited has an Enterprise Risk process. success. With such consideration the departments determine the levels Register which is continuously updated by the within Engen Botswana Limited have developed of risk tolerance. Managing Director and Heads of Departments Enterprise Departmental Risk Registers which are and presented to the Board regularly. However, shared with the Committee during meetings held the Risk Register of the company is not indicative for identification and assessment of risks. of specific Risk Ratings for each of the risks identified. Further, there is currently no Risk External Assurance 3.9 The audit committee Applied As stated in the Board Audit Committee ToR, Tolerances levels established to determine Providers is responsible for the Committee must recommend the External the acceptable level of risks. The Group recommending the Statutory Auditor for appointment by the Risk Committee is currently in the process appointment of the Shareholders during the Annual General Meeting implementing risk tolerance / appetite for each external auditor held. The Board Audit Committee recommended of the affiliates of which guidelines / roadmaps and overseeing Ernst and Young (Botswana) as the External relating to what has been shared with the Engen the external audit Statutory Auditors. An external audit plan Botswana Limited. process. presented by Ernst and Young (Botswana) was presented to the Board Audit Committee for recommendation. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 4. The Governance of Risk: [continued] 4. The Governance of Risk: [continued] The Board’s 4.3 The risk committee Applied The Board Audit Committee ensures that all Risk Assessment 4.6 The board should Applied The Board implements Risk Management via the Responsibility or audit committee Audits have a risk based approach of which ensure that Board Audit Committee. The Board approved the for Risk Governance should assist the Internal Audit identifies potential inherent and frameworks and Business Continuity Management Policy to ensure board in carrying operational risks within the audit plan and further methodologies any unpredicted risks are managed. Entries Risk out its risk the External Statutory Audit effectively addresses are implemented Management Frameworks and policies have been responsibilities. the critical / significant risk areas in the business. to increase the developed, with risk tolerance levels. In addition probability of regular visits is conducted with the Affiliate by anticipating Engen Group Risk from South Africa. Management’s 4.4 The board should Applied In accordance with the Engen Botswana Limited unpredictable risks. Responsibility delegate to Board Charter, the Board is responsible for for Risk Management management the the Governance of Risk within the company. responsibility to Engen Botswana Limited has an Enterprise Risk The board should Applied The Engen Botswana Limited Enterprise Risk design, implement Register which is continuously updated by the Risk Response 4.7 ensure that Register has detailed a section of which Action and monitor the risk Managing Director and Heads of Departments management Plans are given by the responsible persons of the management plan. and presented to the Board regularly. Matters considers and risk identified (i.e. Risk Owners). pertaining to Enterprise Risk Management is implements 42 periodically discussed with the Board during the 43 appropriate risk Board meetings held. The Board Audit Committee responses. approves the Internal Audit Plan and considers the level of risk management assurance necessary for inclusion in the plan. Risk Monitoring 4.8 The board should Applied Matters relating to Enterprise Risk Management ensure continual are standing agenda items on Board Audit risk monitoring by Committee meetings. The Managing Director Risk Assessment 4.5 The board should Applied In accordance with the Engen Botswana Limited management. and Executive Management provides detailed ensure that risk Board Charter, the Board is responsible for reports on strategic and operational risks for assessments are the Governance of Risk within the company. the Company. The Enterprise Risk Register is a performed on a Engen Botswana Limited has an Enterprise Risk document continuously being updated as per the continual basis. Register which is continuously updated by the Chairman's advise of which updates are given on Managing Director and Heads of Departments every Committee and Board meetings held. and presented to the Board regularly. Matters pertaining to Enterprise Risk Management is periodically discussed with the Board during the Risk Assurance 4.9 The board should Applied The Board receives assessment of the Board meetings held. receive assurance effectiveness of the system of internal controls regarding the and risk management through Internal Audit effectiveness of the Reports shared / presented by the Group's risk management In-house Internal Audit Function based in Cape process. Town, South Africa. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 4. The Governance of Risk: [continued] 5. The Governance of Information Technology: [continued] Risk Disclosure 4.10 The board should Applied Potential Risks that affect the Financial 5.3 The board should Applied Governance of Information Technology is done ensure that there performance of the Company are disclosed in the delegate to at Group Level of which a framework has been are processes in Annual Financial Statements section of the Annual management the developed and implemented. The Technology place enabling Report. Disclosure of Directors Opinion on the responsibility for Steering Committee and IT Department are complete, timely, Company's going concern is Highlighted on the the implementation responsible for the implementation of all the relevant, accurate Managing Directors Report section of the Annual of an IT governance structures, processes and mechanisms of the IT and accessible Report framework. strategy. The Chief Information Officer has access risk disclosure to to and regular interaction on strategic matters stakeholders. with the Engen Botswanan Limited Board and executive management. The Chief Information Officer is currently at Group Level who as per 5. The Governance of Information Technology: the Limits of Authority makes recommendations pertaining to the IT strategy. 5.1 The board should Applied The Board has stated in its Charter the be responsible governance of Information Technology as one for information of its responsibilities. The establishment of 5.4 The board should Applied IT investments and expenditure are governed 44 technology (IT) appropriate IT policies, Framework and Strategy is monitor and in terms of the Limits of authority and major 45 governance. done at Engen Group level but having the Board evaluate significant IT projects are monitored continually by as the Decision point. IT investments and management and reports of such investments expenditure. and expenditure are shared with the Board during Board meetings held. 5.2 IT should be Applied The Groups IT function and strategy is aligned aligned with the to the Groups organisational strategy. Engen performance and Botswana Limited's IT requirements and processes 5.5 IT should form an Applied As per the Engen Botswana Limited Enterprise sustainability are aligned to the Group's central IT business integral part of Risk Register, relevant information technology objectives of the division located in Cape Town, South Africa. The the company’s risk and information related risks are included as part company. Board Audit Committee holds regular meetings management. of the operational risks of the company for which with the Chief of IT to discuss any impending action plans have been developed to help mitigate IT related matters. All IT related decisions are such identified risks. aligned to Group IT and systems are integrated and helpdesk assist the Affiliate where needed with IT related issues. 5.6 The board should Applied Engen Botswana has implemented the Group's ensure that policies and procedures that ensure adequate information assets data protection. These policies include the are managed Information Security Policy, Corporate Privacy effectively. Policy, Data Backup Policy and Disaster Recovery Plan, etc. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 5. The Governance of Information Technology: [continued] 6. Compliance with Laws, Rules, Codes and Standards: [continued] 5.7 A risk committee Applied The Risk and Compliance and Audit committee 6.3 Compliance risk Applied Statutory Compliance assessments for Engen and audit committee at Board Level assist the Board in carrying out should form an Botswana Limited are done at Group Level as should assist the its IT responsibilities. The Risk and Compliance integral part of per the Management Agreement signed by both board in carrying out Committee ensures that IT risks are adequately the company’s parties. All compliance related issues / items its IT responsibilities. addressed through its risk management and risk management are reviewed at Group Level and implemented monitoring processes for all of its Affiliates. process. within Engen Botswana Limited. In addition, Additionally, any Internal IT related issues are the compliance function monitors and reports discussed with the Board through the Board Audit on compliance at Board level. The Report Committee. gives a detailed description of the Legislative requirements, offenses that may arise from the requirement as well as the penalties the Company 6. Compliance with Laws, Rules, Codes and Standards: is likely to face should they not abide by the 6.1 The board should Applied The Managing Director ensures that regular requirements. ensure that the updates on applicable Laws and Regulations is company complies shared with the Board and a Dashboard Report on 6.4 The board should Applied Statutory Compliance assessments for Engen 46 with applicable the Compliance with the Laws and Regulations is 47 laws and considers presented during Board Meetings. delegate to Botswana Limited are done at Group Level as adherence to management the per the Management Agreement signed by both nonbinding rules implementation parties. All compliance related issues / items codes and standards. of an effective are reviewed at Group Level and implemented compliance within Engen Botswana Limited. In addition, framework and the compliance function monitors and reports 6.2 The board and each Applied The Board is regularly kept informed of the processes. on compliance at Board level. The Report individual director regulatory compliance status of the Company gives a detailed description of the Legislative should have a through a dashboard developed by management. requirements, offenses that may arise from the working The Managing Director ensures that regular requirement as well as the penalties the Company understanding of updates on applicable Laws and Regulations is is likely to face should they not abide by the the effect of the shared with the Board and a Dashboard Report on requirements. applicable laws, the Compliance with the Laws and Regulations is rules, codes and presented during Board Meetings. 7. Internal Audit: standards on the company and its The Need for and the 7.1 The board should Applied Internal Audit is conducted by the Group Internal business. Role of Internal Audit ensure that there Audit team based in Cape Town, South Africa. The is an effective risk Engen subsidiary companies (Engen Botswana based internal audit. Limited included) is regular audited at group level whereby process / control efficiency is reviewed and a report is shared with the subsidiarity companies in accordance with an approved Internal Audit Plan. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 7. Internal Audit: [continued] 8. Governing Stakeholder Relationships: Internal Audit’s Approach 7.2 Internal audit should Applied The Internal Audit plan and approach are informed 8.1 The board should Applied Important stakeholder groups have been and Plan follow a risk based by the strategy and risks of the Group. The appreciate that identified and include shareholders, employees, approach to its plan. Internal Audit Plan for the company is developed stakeholders’ customers, suppliers and government bodies. The centrally by the parent / holding company's Group perceptions affect Board Members receive regular presentations Internal Audit (Cape Town, South Africa). a company’s and updates on matters pertaining to Corporate reputation. Social Investment and stakeholder engagements / 7.3 Internal audit should Applied Internal Audit is conducted at Group Level by partnerships. provide a written the Group Internal Audit team that is based in assessment of the Cape Town, South Africa. The Engen subsidiary 8.2 The board should Applied Engen Botswana has an Engagement Policy effectiveness of the companies (Engen Botswana Limited included) is delegate to drafted to allow for the management of company’s system of regular audited at group level whereby process management to stakeholder relationships. The Engen Botswana internal controls and / control efficiency is reviewed and a report proactively deal Limited Board has delegated to the Managing risk management. is shared with the subsidiarity companies in with stakeholder Director to proactively deal with Stakeholder accordance with an approved Internal Audit Plan. relationships. relationships by ensuring that the Policy properly implemented and operationalised. The company 48 issues a notice on its Annual Report of annual 49 7.4 The audit Applied The Board Audit Committee oversees the general meetings in appropriate time, allowing for committee should engagements with the Group Internal Audit. The consideration by shareholders. be responsible for Board Audit Committee makes use of co-sourced overseeing internal solutions to supplement in-house skills from 8.3 The board should Applied Through the Stakeholder Engagement Policy, audit. time-to-time as and when required. Internal audit strive to achieve the Engen will be guided by the best practice reports at Board Audit Committee meetings. appropriate balance principles (AA1000SES), of which the principle of between its various responsiveness ensures that Stakeholder issues Internal Audit’s Status in 7.5 Internal audit should Applied The Board Audit Committee satisfies itself stakeholder that could have a material impact on Engen the Company be strategically that the internal audit process is independent, groupings, in the and/or the relevant Stakeholder are escalated positioned to achieve objective and strategically positioned to achieve best interests of the appropriately within Engen. The Policy goes its objectives. its objectives and execute the approved Internal company. on to categorize stakeholders into four (04) Audit Plan. Internal Audit is conducted by the groups; Authorisers, Partners, Influencers and Group Internal Audit team based in Cape Town, Associations. South Africa. The Engen subsidiary companies (Engen Botswana Limited included) is regular 8.4 Companies should Applied In line with the Botswana Stock Exchange Listing audited at group level whereby process / control ensure the equitable Requirements, the Board makes every effort to efficiency is reviewed and a report is shared with treatment of treat all shareholders equally and disclose the the subsidiarity companies in accordance with an shareholders. earnings per share and the profits attributable approved Internal Audit Plan. to ordinary shareholders. The Annual Reports prepared in prior periods also provides a summary on Economic Value Added to various stakeholders of the Company inclusive of the shareholders. Annual Report 2019
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KING III COMPLIANCE REVIEW [continued]
Compliance Compliance Area Ref. Requirement Detailed Comments / Remarks Area Ref. Requirement Detailed Comments / Remarks Status Status 8. Governing Stakeholder Relationships: [continued] 9. Integrated Reporting and Disclosure: 8.5 Transparent Applied Engen Botswana Limited as a Listed Company 9.2 Sustainability Not Applied The company has not developed an Integrated and effective is expected by the Botswana Stock Exchange reporting and Annual Report during the prior financial reporting communication to submit Interim Reports and Annual Reports disclosure should be periods. with stakeholders is inclusive of relevant financial information and integrated with the essential for building other significant information to stakeholders company’s financial Note: Information relating to Health and Safety and maintaining their for decision making purposes. These reports reporting. is commented upon on the Annual Report in the trust and confidence. are published and publicly available through the Managing Directors report section with updates Botswana Stock Exchange. The shareholders are on incidents occurred during the year that also informed of and invited to the Annual General would have impacted Health and Safety of the Meetings conducted with adequate notice. The company. Potential Risks that affect the financial company also releases and publishes special performance of the company is disclosed in the notices and announcements to stakeholders as Annual Financial Statements section of the Annual deemed necessary. Report. Disclosure of Directors opinion on the company's going concern is Highlighted on the Dispute Resolution 8.6 The board should Applied Through the Stakeholder Engagement Policy, Managing Directors Report section of the Annual 50 ensure that disputes Engen will be guided by the best practice Report 51 are resolved principles (AA1000SES), of which the principle as effectively, of responsiveness ensures that Stakeholder 9.3 Sustainability Not Applied The company has not developed an Integrated efficiently and issues that could have a material impact on reporting and Annual Report during the prior financial reporting expeditiously as Engen Botswana Limited and/or the relevant disclosure should periods. possible. Stakeholders are escalated appropriately within be independently the company. assured. Note: As a way of assuring sustainability a Health, Safety, Environment and Quality (“HSEQ”) Report 9. Integrated Reporting and Disclosure: is shared with the Board on an annual basis. The Report feeds on the Health and Environmental Transparency and 9.1 The board should Not Applied The company has not developed an Integrated disclosures made in the Annual Report. However, Accountability ensure the integrity Annual Report during the prior financial reporting reporting data is compiled by management with of the company’s periods. no independent assurance provided. integrated report. Note: The company prepares an Annual Report that give a broad view of the Engen Botswana operational, financial and on-financial status is formally reviewed and approved by the board upon the review of the Audit Committee and the external auditors. The Annual Report is then shared with the Botswana Stock Exchange and published for the public to view. The Annual Reports are prepared to be in compliance with the requirements prescribed by the Botswana Stock Exchange and the Company's Act of Botswana. Annual Report 2019
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MANAGEMENT
At Engen we pride ourselves in bringing Botswana’s captains of the industry who hold the wisdom, credentials and passion to lead our people to drive both 52 53 results and innovation.
With backgrounds derived from a variety of different corporate cultures and experiences, our strong leaders and champions of the Engen Botswana Limited brand are committed towards ensuring that each and every customer experience transcends the level of excellence even they may expect. G E D H
A Chimweta Monga E Thuso Pule C Managing Director Distribution Manager F
B Patrick Matshane F Refilwe Rakgabo Commercial Manager Property Consultant B
C Brian Sameke G Tawanda Kitsi Finance Manager Retail Manager
D Francinah Tswai H Modiri Garenamotse Human Capital Manager HSEQ Manager A ENGEN BOTSWANA LIMITED STAFF
54 55 Annual Report 2019
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Five Year Financial Review Value Added Statement FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec The value added statement is a summary of the wealth the Group has created and its distribution. 2019 2018 2017 2016 2015 P’000 P’000 P’000 P’000 P’000 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2019 2018 2017 2016 2015 P’000 P’000 P’000 P’000 P’000 BASED ON HISTORICAL COST
Revenue 2,924,784 2,534,340 2,217,465 2,054,060 2,236,373 Revenue 2,924,784 2,534,340 2,217,465 2,054,060 2,236,373 Operating profit 189,967 174,209 207,321 190,998 150,400 Net cost of products (2,199,925 ) (1,870,704 ) (1,571,629 ) (1,498,723 ) (1,780,131 ) Finance (costs)/income (9,781 ) (5,168 ) (3,818 ) (3,409 ) (3,471 ) Duties and levies (424,930 ) (398,420 ) (346,669 ) (285,774 ) (219,724 ) Profit before taxation 180,186 169,041 203,503 187,589 146,929 Taxation (51,021 ) (41,689 ) (55,995 ) (54,845 ) (37,252 ) Total value added 299,929 265,216 299,167 269,563 236,518 Other comprehensive income - - - - - Attributable profit 129,165 127,352 147,508 132,744 109,677 To pay employees’ gross salaries, wages and benefits 16,557 15,785 15,519 14,251 14,028 To pay income taxes 51,021 41,689 55,995 54,845 37,252 Earnings per share (thebe) 80.87 79.73 92.35 83.11 68.67 To pay providers of capital 75,277 42,418 122,459 145,654 22,262 Headline earnings per share (thebe) 80.87 79.73 92.35 83.11 68.67 - net finance costs/(income) (5,785 ) (3,382) 866 (1,991 ) (11,719 ) Dividend per share (thebe) - dividends 81,062 45,800 121,593 147,645 33,981 - Paid and provided (include special dividend) 54.9 79.7 92.35 83.11 68.67 Retained in the Group for future growth 157,074 165,324 105,194 54,813 162,976 - Paid and proposed - not provided 62.6 31.00 77.20 99.90 23 - depreciation 29,961 24,684 21,443 19,039 20,001 - retained income for the year 127,113 140,640 83,751 35,774 142,975 56 Dividend cover (times) 57 - Paid and provided 1.47 1.00 1.00 1.00 1.00 - Paid and proposed - not provided 1.29 2.57 1.20 0.83 2.99 Total value added 299,929 265,216 299,167 269,563 236,518
Net asset value per share (thebe) 406.26 384.41 333.35 317.12 326.45 Supplementary Statement of Comprehensive Income BSE price of share (thebe) FOR THE YEAR ENDED 31 DECEMBER 2019 - Closing 1037 1,040 1,050 980 851 - Highest 1037 1,040 1,060 989 950 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec - Lowest 1037 1,040 1,040 800 817 2019 2018 2017 2016 2015 P’000 P’000 P’000 P’000 P’000 Earnings yield (%) 7.80 7.67 8.80 8.48 8.07 Historical cost net profit 129,165 127,532 147,508 132,744 109,677 Dividend yield (%) Less: Inventory effects net of taxation (81,657 ) (59,136 ) (66,610 ) (49,674 ) (27,550 ) - Paid and provided 5.29 7.66 8.80 8.48 8.07 Inventory profits (104,689 ) (75,815 ) (85,398 ) (63,684 ) (35,321 ) - Paid and proposed - not provided 6.04 2.98 7.35 10.19 2.70 Taxation @ 22% 23,032 16,679 18,788 14,010 7,771 Price earnings ratio 12.82 13.04 11.37 11.79 12.39 Replacement cost net profit 47,508 68,396 80,898 83,070 82,127
Total assets (thousands) 1,065,019 948,209 867,106 788,210 817,013 Weighted average number of shares in issue 159,722,220 159,722,220 159,722,220 159,722,220 159,722,220 Replacement cost earnings per share 29.7 42.8 50.6 52.0 51.4 Ordinary shareholders’ interest 648,879 613,982 532,430 506,515 521,416 (thebe per share)
Historical cost earnings per share 80.9 79.7 92.4 83.1 68.7 Shares in issue (thousands) 159,722 159,722 159,722 159,722 159,722 (thebe per share) Return on shareholders’ funds (%) 19.9 20.7 27.7 26.2 21.0 Dividend per share paid and provided 54.9 31 77.2 99.9 23 (thebe per share) Return on total assets employed (%) 12.1 13.4 17.0 16.8 13.4 Total dividend per share including proposed 62.6 70.9 108.2 126.5 45.3 amount not provided for Annual Consolidated Financial Statements For the Year Ended 31 December 2019
CONTENTS 58 59
Directors’ report 62 Statement of profit or loss and other 63 comprehensive income Statement of financial position 64 Statement of cash flows 65 Statement of changes in equity 66 Notes to the financial statements 67 Report of the independent auditor 68 Annual Report 2019
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General Information Approval of Consolidated Annual Financial Statements Directors: S Ndzinge Motswana (Chairman) C C Monga Zambian (Managing Director) A M Siwawa Motswana The annual consolidated financial statements for the year ended 31 December 2019 were authorised for issue in F J Kotze South African accordance with a resolution of the directors and are signed on their behalf by: V Bvumbi South African (Resigned 26 August 2019) R N Matthews British C Mareka South African (Resigned 28 June 2019) L Makwinja Motswana S Williams South African (Appointed 27 August 2019) H Morrison South African (Appointed 27 August 2019) ...... DIRECTOR DIRECTOR Principal Activities: Petrochemical investments and property operations
Parent Company: Petroleum Investment Holding Limited (Incorporated in Mauritius) 17 March 2020
Ultimate Parent Company: Petroliam Nasional Berhad (PETRONAS) (Incorporated in Malaysia) 60 61 Company Secretary: PricewaterhouseCoopers (Pty) ltd Fairgrounds Office Park Plot 50371 P O Box 1453, Gaborone
Company Number: BW00000748780
Registered Office: Plot 54026 Western Bypass P O Box 867 Gaborone
Auditor: Ernst & Young, Botswana
Bankers: First National Bank of Botswana Limited Absa Bank Botswana Limited Standard Chartered Bank Botswana Limited Stanbic Bank Botswana Limited
Country of Incorporation and Domicile: Botswana
Currency: Botswana Pula Annual Report 2019
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Directors’ Report Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 31 DECEMBER 2019 NATURE OF BUSINESS DIRECTORS
The core business of the group is Foreign exchange gains decreased Ms C Mareka and Mr V Bvumbi Group Company petrochemical investments and from P 14 million at the end of 2018 resigned from the Board on 28 to P 8.8 million at the end of 2019. property operations. June 2019 and 26 August 2019 2019 2018 2019 2018 respectively. Mr S Williams and Ms Notes P ’000 P ’000 P ’000 P ’000 There have been no material changes The group exercised good margin H Morrison were appointed on 27 to the nature of the group’s business management and cost control August 2019. There were no other Revenue 2 2 924 784 2 534 340 88 501 50 285 from the prior year. throughout the year. changes to directors during the year. Cost of goods sold (2 624 855 ) (2 269 124 ) - - Overall the group’s performance Gross profit 299 929 265 216 88 501 50 285 REVIEW OF ACTIVITIES DIVIDENDS reflects a 1% increase in net profit The annual financial statements have after tax. Dividends amounting to P81 062 Other income 3.1 1 399 26 - - been prepared in accordance with 181 (2018: P45 800 347) were paid Foreign currency gains 3.4 8 769 14 056 - - International Financial Reporting GOING CONCERN during the year. Administrative expenses (20 954 ) (17 817 ) - - Standards and the requirements of Distribution and marketing expenses (100 748 ) (93 563 ) - - The annual financial statements the Companies Act of Botswana. EVENTS AFTER THE Other operating expenses (2 592 ) (2 834 ) (2 592 ) (2 834 ) have been prepared on the basis of 62 The accounting policies have been REPORTING PERIOD Profit before finance costs and tax 185 803 165 084 85 909 47 451 63 accounting policies applicable to a Share of profit of joint ventures 8 4 164 9 125 - - applied consistently compared to the The directors are not aware of any going concern. Finance costs 3.3 (9 781 ) (5 168 ) - - prior year. material event which occurred after Profit before tax 3 180 186 169 041 85 909 47 451 This basis presumes that funds the reporting date and up to the Full details of the financial position, Taxation 4 (51 021 ) (41 689 ) (7 477 ) (4 737 ) will be available to finance future date of the approval of the annual results of operations and cash flows Profit for the year 129 165 127 352 78 432 42 714 operations and that the realisation financial statements except as of the company are set out in these Profit for the year attributable to equity 129 165 127 352 78 432 42 714 of assets and settlement of disclosed on Note 24 of the financial annual financial statements. holders of the parent liabilities, contingent obligations statements. and commitments will occur in the Other comprehensive income for the current year - - - - FINANCIAL RESULTS CONCLUSION ordinary course of business. Total comprehensive income for the year 129 165 127 352 78 432 42 714 Revenue increased by 15% mainly The Directors would like to thank due to volume growth of 3% STATED CAPITAL our valued customers, suppliers, Total comprehensive income for the year attributable between 2018 and 2019. Retail sales There were no changes to the stated shareholders, management and to equity holders of the parent 129 165 127 352 78 432 42 714 increased by 9% whilst commercial capital during the year under review. staff and all other stakeholders for sales declined by 8% between 2018 their ongoing support towards the Earnings per share (thebe) and 2019. There were no price or performance of Engen Botswana margin adjustments during the year Limited. Basic earnings, profit for the year attributable to for price controlled products. Non ordinary equity holders of the parent 5 80.9 79.7 price controlled products had market related price adjustments. Diluted earnings, profit for the year attributable to ordinary equity holders of the parent 5 80.9 79.7 Annual Report 2019
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Statement of Financial Position Statement of Cash Flows AS AT 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
Group Company Group Company
Dec 2019 Dec 2018 Dec 2019 Dec 2018 2019 2018 2019 2018 Notes P ’000 P ’000 P ’000 P ’000 Notes P ’000 P ’000 P ’000 P ’000
ASSETS Cash flows from operating activities Non-Current Assets Profit before tax 180 186 169 041 85 909 47 451 Property, plant and equipment 7 318 485 323 005 1 056 1 097 Adjustments for: Right of use of assets 22 63 623 - - - Interest received 2 (3 996 ) (1 786 ) (758 ) (708 ) Investments in joint ventures 8 43 850 39 686 4 524 4 524 Profit on disposal and scrapping of property, Prepaid leases 9 - 14 998 - - plant and equipment 3.1 (1 152 ) - - - Investments 10 37 37 10 10 Dividends income from subsidiary 2 - - (87 635 ) (49 514 ) Investments in subsidiaries 11 - - 72 209 72 209 Finance costs 3.3 9 781 5 168 - - 425 995 377 726 77 799 77 890 Fair value on forward exchange contracts (842 ) 4 234 - - Current Assets Share of profit of joint ventures 8 (4 164 ) (9 125 ) - - Inventories 12 18 743 14 084 - - Depreciation on property, plant and equipment 7 28 790 24 684 41 40 Trade and other receivables 13 138 985 430 017 - 9 Depreciation on right of use of assets 22 1 171 Tax receivable 4 - 5 402 406 296 Deferred lease liability - (384 ) - - Health, safety and environment provision - (577 ) - - 64 Prepaid leases 9 - 1 706 - - 65 Forward exchange contract asset 965 - - - Amortisation of prepaid leases 9 - 878 - - Cash and cash equivalents 14 480 331 119 274 29 060 31 547 Operating profit/(loss) before working capital changes 209 774 192 133 (2 443 ) (2 731 ) 639 024 570 483 29 466 31 852 Decrease/(Increase) in trade and other receivables 291 032 (124 538 ) 10 (8 ) TOTAL ASSETS 1 065 019 948 209 107 265 109 692 Increase in inventories (4 659 ) (281 ) - - Increase in trade and other payables 12 499 681 204 94 EQUITY AND LIABILITIES Cash generated from (used in) operations 508 646 67 995 (2 229 ) (2 645 ) Equity Interest received 2 3 996 1 786 758 708 Stated capital 15 8 138 8 138 8 138 8 138 Finance costs 3.3 (4 263 ) (642 ) - - Non distributable reserves 2 200 2 200 344 344 Income taxes paid 4 (43 113 ) (60 000 ) (1 015 ) (915 ) Retained earnings 638 541 603 644 97 050 99 680 Net cash flows from/(used in) operating activities 465 266 9 139 (2 486 ) (2 852 ) Total equity 648 879 613 982 105 532 108 162 Cash flows from investing activities
Acquisition of property, plant and equipment Non-Current Liabilities to expand operations 7 (23 158 ) (26 297 ) - - Deferred tax liabilities 4 4 131 8 638 20 21 Proceeds on the sale of property, plant and equipment 1 766 - Right of use lease liability 22 63 691 - - - Prepaid leases 9 - (434 ) - - Deferred operating lease liability 19.2 - 595 - - Dividends received from subsidiary - - 81 062 45 800 Provisions 16 75 328 69 189 - - Net cash flows (used in)/from investing activities (21 392 ) (26 731 ) 81 062 45 800 143 150 78 422 20 21 Current Liabilities Cash flows from financing activities Trade and other payables 17 267 415 254 916 1 71 3 1 509 Dividends paid 6 (81 062 ) (45 800 ) (81 062 ) (45 800 ) Tax payable 4 3 288 - - - Payment of lease liabilities (1 755 ) - - - Right of use lease liability 22 2 197 - - - Net cash flows used in financing activities (82 817 ) (45 800 ) (81 062 ) (45 800 ) Deferred operating lease liability 19.2 - 480 - - Net increase/(decrease) in cash and cash equivalents 361 057 (63 392 ) (2 486 ) (2 852 ) Forward exchange contract liability 90 409 - - Cash and cash equivalents at the beginning of the year 119 274 182 666 31 546 34 399 272 990 255 805 1 713 1 509 Cash and cash equivalents at end of the year 14 480 331 119 274 29 060 31 546 Total Liabilities 416 140 334 227 1 733 1 530 TOTAL EQUITY AND LIABILITIES 1 065 019 948 209 107 265 109 692 Annual Report 2019
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Statement of Changes in Equity Statement of Changes in Equity [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
GROUP COMPANY Attributable to equity holders of the parent Non Non Distri Distri Stated butable Retained Total Stated butable Retained Total capital Reserves (2) earnings equity capital Reserves (2) earnings equity Notes P ‘000 P ‘000 P ‘000 P ‘000 Notes P ‘000 P ‘000 P ‘000 P ‘000
31 December 2019 31 December 2019 Balance, beginning of year 8 138 2 200 603 644 613 982 Balance, beginning of year 8 138 344 99 680 108 162 Effect of adoption of IFRS 16 Leases - - (13 206 ) (13 206 ) Profit for the year - - 78 432 78 432 Restated opening balance after adoption of IFRS 16 Leases 8 138 2 200 590 438 600 776 Other comprehensive income for the year - - - - Profit for the year - - 129 165 129 165 Total comprehensive income for the year - - 78 432 78 432 Other comprehensive income for the year - - - - Dividends (1) 6 - - (81 062 ) (81 062 ) Total comprehensive income for the year - - 129 165 129 165 At 31 December 2019 8 138 344 97 050 105 532 Dividends (1) 6 - - (81 062 ) (81 062 ) 66 At 31 December 2019 8 138 2 200 638 541 648 879 31 December 2018 67 Balance, beginning of year 8 138 344 102 766 111 248 31 December 2018 Profit for the year - - 42 714 42 714 Balance, beginning of year 8 138 2 200 522 092 532 430 Other comprehensive income for the year - - - - Profit for the year - - 127 352 127 352 Total comprehensive income for the year - - 42 714 42 714 Other comprehensive income for the year - - - - Dividends (1) 6 - - (45 800 ) (45 800 ) Total comprehensive income for the year - - 127 352 127 352 At 31 December 2018 8 138 344 99 680 108 162 Dividends (1) 6 - - (45 800 ) (45 800 ) At 31 December 2018 8 138 2 200 603 644 613 982 (1) The holders of ordinary shares are entitled to receive dividends as and when declared by the company. All ordinary shares carry one vote per share without restriction. All ordinary shares have similar rights. (1) The holders of ordinary shares are entitled to receive dividends as and when declared by the company. All ordinary shares carry one vote per share without restriction. All ordinary shares have similar rights. (2) Non distributable reserves arose on the revaluation of property, plant and equipment in 1993. This valuation was a once off valuation. (2) Non distributable reserves arose from the capitalisation of a shareholder loan account and on the revaluation of property, plant and equipment in 1993. This revaluation was a once off valuation. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [ continued ] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
Basis of consolidation [continued]
1 SUMMARY OF SIGNIFICANT IASB and the requirements of the year are included in the statement of • Recognises the fair value of the Investments in subsidiaries part of the Group’s OCI. In addition, ACCOUNTING POLICIES Companies Act of Botswana (CAP profit or loss and other consideration received Investments in subsidiaries are when there has been a change 42:01). comprehensive income from the • Recognises the fair value of any measured at cost in the separate recognised directly in the equity Basis of preparation date the Group gains control until investment retained financial statements of the of the joint venture, the Group The financial statements are Basis of consolidation the date the Group ceases to control • Recognises any surplus or deficit Company. recognises its share of any changes, presented in Botswana Pula. The The consolidated financial the subsidiary. in profit or loss when applicable, in the statement functional currency is also the statements comprise the financial • Reclassifies the parent’s share Investments in joint ventures of changes in equity. Unrealised Botswana Pula. The amounts in statements of the Group and its Profit or loss and each component of of components previously A joint venture is a type of joint gains and losses resulting from the financial statements have been subsidiaries as at 31 December 2019. other comprehensive income (OCI) recognised in OCI to profit arrangement whereby the parties transactions between the Group and rounded to the nearest thousand. Control is achieved when the Group are attributed to the equity holders or loss or retained earnings, that have joint control of the the joint venture are eliminated to The financial statements have is exposed, or has rights, to variable of the parent of the Group and to as appropriate, as would be arrangement have rights to the the extent of the interest in the joint been prepared on a historical cost returns from its involvement with the non-controlling interests, even required if the Group had directly net assets of the joint venture. venture. basis except as modified by the the investee and has the ability to if this results in the non-controlling disposed of the related assets or Joint control is the contractually revaluation of certain financial affect those returns through its interests having a deficit balance. liabilities. agreed sharing of control of an The aggregate of the Group’s instruments to fair value as indicated power over the investee. Specifically, When necessary, adjustments are arrangement, which exists only share of profit or loss of a joint in the notes below. the Group controls an investee if and made to the financial statements of Foreign currency translation when decisions about the relevant venture is shown on the face of 68 only if the Group has: subsidiaries to bring their accounting Functional currency activities require unanimous consent the statement of profit or loss 69 The consolidated and separate • Power over the investee (i.e. policies into line with the Group’s Transactions in foreign currency are of the parties sharing control. The and other comprehensive income financial statements are prepared on existing rights that give it accounting policies. All intra-group initially recorded in the functional considerations made in determining outside operating profit and the going concern basis. the current ability to direct assets and liabilities, equity, income, currency at a rate of exchange ruling joint control are similar to those represents profit or loss after tax the relevant activities of the expenses and cash flows relating to on transaction date. Monetary necessary to determine control over and non-controlling interests in the The accounting policies adopted are investee) transactions between members of assets and liabilities designated in subsidiaries. subsidiaries of the joint venture. consistent with those applied in the • Exposure, or rights, to variable the Group are eliminated in full on foreign currencies are subsequently prior period, except for those noted returns from its involvement consolidation. translated at rates of exchange The Group’s investments in joint The financial statements of the joint in Note 22, related to new standards with the investee, and ruling at the reporting date. Non ventures are accounted for using the venture are prepared for the same effective for the reporting period • The ability to use its power over A change in the ownership interest monetary assets and liabilities that equity method. reporting period as the Group. When beginning on or after 1 January the investee to affect its returns of a subsidiary, without a loss of are measured in terms of historical necessary, adjustments are made to 2019. The Group applied IFRS 16 control, is accounted for as an equity cost in a foreign currency are Under the equity method, the bring the accounting policies in line The Group re-assesses whether or Leases for the first time. transaction. If the Group loses translated at the exchange rate at investment in a joint venture is with those of the Group. not it controls an investee if facts control over a subsidiary, it: the date of the initial transaction. initially recognised at cost. The and circumstances indicate that Statement of compliance • Derecognises the assets and Foreign exchange translation gains carrying amount of the investment After application of the equity there are changes to one or more The financial statements have been liabilities of the subsidiary or losses arising on the settlement is adjusted to recognise changes method, the Group determines of the three elements of control. prepared in compliance with the • Derecognises the carrying of monetary items or on translating in the Group’s share of net assets whether it is necessary to recognise Consolidation of a subsidiary begins International Financial Reporting amount of any non-controlling monetary items at rates different of the joint venture since the an impairment loss on its investment when the Group obtains control Standards issued by the International interests from those used when translating at acquisition date. The statement of in its joint venture. At each reporting over the subsidiary and ceases Accounting Standards Board • Derecognises the cumulative initial recognition during the period profit or loss reflects the Group’s date, the Group determines whether when the Group loses control of (“IASB”), Interpretations issued by translation differences recorded or in previous financial statements share of the results of operations there is objective evidence that the the subsidiary. Assets, liabilities, the International Financial Reporting in equity are taken to the statement of profit of the joint venture. Any change in investment in the joint venture is income and expenses of a subsidiary Interpretations Committee of the or loss and other comprehensive Other Comprehensive Income (OCI) impaired. acquired or disposed of during the income in the year they arise. of those investees is presented as Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] Property, plant and equipment [continued]
Investments in joint ventures Costs also include the estimated that the asset is derecognised. asset) is included in the statement independent of those from other Impairment losses of continuing [continued] costs of dismantling and removing The residual value of an asset may of profit or loss and other assets or groups of assets. When the operations, including impairment on the assets where the obligation has increase to an amount equal to or comprehensive income in the year carrying amount of an asset or CGU inventories, are recognised in the If there is such evidence, the been incurred when the asset was greater than the asset’s carrying the asset is derecognized. exceeds its recoverable amount, the statement of profit or loss and Group calculates the amount of acquired or as a consequence of amount. If it does, the asset’s asset is considered impaired and other comprehensive income in impairment as the difference using the asset. depreciation charge is zero until Improvements to assets held under is written down to its recoverable expense categories consistent with between the recoverable amount its residual value subsequently operating leases are capitalized and amount. the function of the impaired asset, of the joint venture and its carrying Subsequent costs are included decreases to an amount below the depreciated over the remaining lease except for properties previously value, then recognises the loss as in the asset’s carrying amount or asset’s carrying amount. term. In assessing value in use, the revalued with the revaluation taken ‘Share of loss of a joint venture’ in recognised as a component, as estimated future cash flows are to OCI. For such properties, the the statement of profit or loss and appropriate, only when it is probable Useful lives of the property, plant Capital work in progress is carried at discounted to their present value impairment is recognised in OCI other comprehensive income. that future economic benefits and equipment, the depreciation cost less accumulated impairment. using a pre-tax discount rate that up to the amount of any previous associated with the item will flow method, depreciation rates, and Cost comprises of amounts incurred reflects current market assessments revaluation. Upon loss of the joint control to the Group and the cost of the residual values are reviewed on an in constructing property, plant of the time value of money and over the joint venture, the Group item can be measured reliably. All annual basis. Estimated useful lives and equipment that are directly the risks specific to the asset. In An assessment is made at each measures and recognises any other repairs and maintenance of the assets are as follows: attributable to the construction of determining fair value less costs of reporting date to determine 70 retained investment at its fair value. expenditures are charged to the the asset. Assets remain in capital disposal, recent market transactions whether there is an indication that 71 Any difference between the carrying statement of comprehensive income Leasehold shorter of period work in progress until they are are taken into account. If no previously recognised impairment amount of the joint venture upon during the financial period in which buildings of lease or 50 available for use. At that time they such transactions can be identified, losses no longer exist or have loss of joint control and the fair they are incurred. years are transferred to the appropriate an appropriate valuation model decreased. If such indication exists, value of the retained investment and class of property, plant and is used. These calculations are the Group estimates the asset’s Plant, 4 – 30 years proceeds from disposal is recognised Depreciation commences when equipment additions. corroborated by valuation multiples, or CGU’s recoverable amount. A equipment, in the statement of profit or loss and the assets are available for their quoted share prices for publicly previously recognised impairment and other other comprehensive income. Joint intended use. Property, plant and Impairment of non-financial assets traded companies or other available loss is reversed only if there has ventures are carried at cost in the equipment are depreciated on a The Group assesses, at each fair value indicators. been a change in the assumptions Land is not depreciated as it is separate financial statements of the straight-line basis over the expected reporting date, whether there is used to determine the asset’s deemed to have an indefinite life. company. useful lives of the various classes an indication that an asset may be The Group bases its impairment recoverable amount since the last No depreciation is provided on of assets, after taking into account impaired. If any indication exists, or calculation on detailed budgets impairment loss was recognised. capital work-in-progress. Property, plant and equipment residual values. Each part of an item when annual impairment testing and forecast calculations, which are The reversal is limited so that the Property, plant and equipment is of property, plant and equipment for an asset is required, the Group prepared separately for each of the carrying amount of the asset does An item of property, plant and carried is cost less accumulated with a cost that is significant in estimates the asset’s recoverable Group’s CGUs to which the individual not exceed its recoverable amount, equipment is derecognized depreciation. It is stated at historical relation to the total cost of the item amount. An asset’s recoverable assets are allocated. These budgets nor exceed the carrying amount that upon disposal or when no future cost excluding the costs of day to is depreciated separately. amount is the higher of an asset’s and forecast calculations generally would have been determined, net economic benefits are expected day servicing that are expensed, less or cash-generating unit’s (CGU) fair cover a period of five years. For of depreciation, had no impairment from its use or disposal. Any gain accumulated depreciation and any Depreciation of an asset ceases at value less costs of disposal and its longer periods, a long-term growth loss been recognised for the asset in or loss on derecognition of the impairment in value. Cost includes the earlier of the date that the asset value in use. Recoverable amount is rate is calculated and applied to prior years. asset (calculated as the difference the cost of replacing part of such is classified as held for sale or is determined for an individual asset, project future cash flows after the between the net disposal proceeds plant and equipment when that cost included in a disposal group that is unless the asset does not generate fifth year. and the carrying amount of the is incurred if the recognition criteria classified as held for sale or the date cash inflows that are largely are met. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] Inventories [continued]
Impairment of non-financial assets timing or amount of the outflow Restoration (DRR) costs will be The amount of any write-down of Employee benefits Long term benefits [continued] of resources embodying economic released to the statement of profit inventory to net realisable value and During the year, employees Long-term employee benefits are benefits required to settle the or loss and other comprehensive all losses of inventory are recognised contributed to the Engen Botswana those benefits that are expected Such reversal is recognised in the obligation or a change in the income. as an expense in the period that Retirement Fund. The fund is a to be settled more than 12 months statement of profit or loss and discount rate are added to or the write-down or loss occurs and defined contribution fund. The after the end of the reporting other comprehensive income unless deducted from the cost of the Health, safety and environment is included under distribution and fund is governed by the Retirement period, in which the services have the asset is carried at a revalued related asset in the current period. costs marketing expenses. Funds Act of 2014. Membership been rendered and are discounted amount, in which case, the reversal Costs associated with the of this fund is compulsory for all to their present value. An accrual is is treated as a revaluation increase. Where the change results in a remediation of the environment The carrying value of inventories employees. recognised for accumulated leave reduction in the liability, the cost where the company operates derecognised is included in the cost and other employee benefits when The carrying amounts of assets deducted from the asset shall not retail and commercial sites and of sales in the statement of profit In terms of the rules of the Fund, the the Group has a present legal or are reviewed at each reporting exceed the carrying amount of the depots are recognized in the or loss and other comprehensive company is committed to contribute constructive obligation as a result date to assess if there are any related asset. If a decrease in the statement of profit or loss and other income. 9.5% of the employees’ pensionable of past service provided by the indications of impairment. If any liability exceeds the carrying amount comprehensive income. The best emoluments. The defined employee, and a reliable estimate of such indication exists and where of the related asset, the excess estimate of the cost is made taking Cost of goods sold contribution funds are not required the amount can be made. assets are recorded in excess of is recognised immediately in the into account probabilities of the Cost of goods sold is normally to be actuarially valued. The Group’s 72 their recoverable amounts, assets statement of profit or loss and other occurrence of spillages. the carrying value of inventories contributions to the defined Revenue from contracts with 73 or cash generating units are written comprehensive income. sold and any net realizable value contribution plan are charged to the customers down to their recoverable amounts. Inventories adjustments. Upon re-measurement statement of profit or loss and other A cash generating unit is considered Where the change results in an Inventories consist of petroleum product loaned/borrowed is revalued comprehensive income in the year to Performance obligations and timing only when the recoverable amount increase in the cost of the asset, the products and are initially recognised and the corresponding entry is which they relate. of revenue recognition for the individual asset cannot be amount is capitalised as part of the at cost and subsequently measured included in the cost of sales in the The majority of the Group’s revenue determined. cost of the item and depreciated at the lower of cost and net statement of profit or loss and other Employee entitlements to annual is derived from the marketing and prospectively over the remaining realisable value. Cost is determined comprehensive income. leave, bonuses, and pension and distribution of petroleum products, Decommissioning and life of the item to which they relate. on the first-in-first-out (FIFO) severance benefits are recognised as as well as convenience store rehabilitation of assets If there is any indication that the method. The cost of inventories Dividend distribution incurred. A provision is made for the income. Revenue from contracts The provision for dismantling carrying amount of the related comprises of all costs of purchase, Dividend distributions to the Group’s estimated liability for annual leave with customers is recognised when and restoration costs is initially asset is not fully recoverable, an cost of conversion and other costs shareholders are recognized as as a result of services rendered by control of the goods is transferred recognised at the expected cost of impairment test is conducted in incurred in bringing the inventories a liability in the period in which employees up to the reporting date. to the customer at an amount that any committed decommissioning accordance with the impairment to their present location and the dividends are declared by the Provision for bonuses is recognised reflects the consideration which or restoration programme and is policy. These estimates are condition. Group’s shareholders. Dividends when a present obligation exists to the Group expects to be entitled in discounted to its net present value reviewed annually. distributed are recognized in make such payments and a reliable exchange for those goods. Revenue using a real pre tax discount rate Net realisable value is the estimated equity. Tax is withheld on dividends estimate of the amount can be is recognised at a point in time when provided at the beginning of each The cost of ongoing programmes to selling price in the ordinary course distributed at the statutory rate of made. control of the goods has transferred project. prevent and control pollution and of business, less estimated costs of 7.5%. to the customer. to rehabilitate the environment is completion and the estimated costs Subsequent changes in the initial taken to profit or loss as incurred. necessary to make the sale. estimates of rehabilitation and Where a retail site or a depot is decommissioning costs that results disposed of, the unutilised portion from changes in the estimated of the Disaster, Remediation and Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
Performance obligations and timing is subsequently resolved. Certain placed at a specific time. Therefore, Contract balances (other than Recognition and measurement Deferred tax liabilities are of revenue recognition [continued] contracts for the sale of petroleum there is no judgement involved in contract assets) of rental income, interest income recognised for all taxable temporary and related products provide allocating the contract price to each and dividend income are scoped differences, except: The point at which control customer elements of variable unit ordered in such contracts. Contract liabilities and described in other accounting passes depends on the terms consideration in the form of volume A contract liability is the obligation policies (leases and financial • when the deferred tax liability and conditions of the contract rebates and discounts. Where a customer orders more to transfer goods or services to instruments, respectively). arises from the initial recognition and related transport terms and than one product line, the Group is a customer for which the Group of goodwill or an asset or liability is effective either once physical Customers are entitled to volume able to determine the split of the has received consideration (or an Taxes in a transaction that is not a delivery or receipt of the products at rebates and discounts, provided total contract price between each amount of consideration is due) business combination and, at the Current income tax the agreed location has occurred, or that they meet specific criteria. product line by reference to each from the customers. If a customer time of the transaction, affects Current income tax assets and when products are loaded onto the Historical experience enables the product’s standalone selling prices, pays consideration before the Group neither the accounting profit nor liabilities for the current and prior specific mode of transport. Transfer Group to estimate reliably the value as all product lines are capable of transfers the goods or services to the taxable profit or loss periods are measured at the amount of control usually coincides with title of discount to be granted or rebates being, and are, sold separately. the customer, a contract liability • in respect of taxable temporary expected to be recovered from or passing to the customer. The normal to be paid and restrict the amount is recognised when the payment differences associated with paid to the taxation authorities. credit term is 30 days upon delivery. of revenue that is recognised such Practical expedients applied is made or the payment is due investments in subsidiaries, The tax rates and tax laws used to that it is highly probable that there The Group’s contracts with (whichever is earlier). Contract associates and interests in compute the amount are those that 74 The Group acts as principal in its will not be a reversal of previously customers are short term in nature liabilities are recognised as revenue joint arrangements, when the 75 are enacted or substantively enacted revenue arrangements as it typically recognised revenue when goods are (less than 12 months). Using the when the Group performs under the timing of the reversal of the by the reporting date. controls the goods and services returned. In its estimation, the Group practical expedient in IFRS 15, the contract. temporary differences can be before transferring to the customer. considers the expected value of Group does not adjust the promised controlled and it is probable that Current income tax relating to discounts or rebates that would be amount of the consideration for Refund liabilities the temporary differences will items recognised directly in other Determining the transaction price applicable to the transaction. the effects of a significant financing A refund liability is the obligation not reverse in the foreseeable comprehensive income or equity is The majority of the Group’s revenue Rebates are not offset against component if it expects at contract to refund some or all of the future. recognised in other comprehensive is derived from contracts which the customer but recognised as a inception that the period between consideration received (or income or equity and not in profit define a fixed price per unit sold. separate refund liability. the transfer of the promised goods receivable) from the customer and The carrying amount of deferred or loss. Withholding taxes are paid to the customer and when the is measured at the amount the tax assets is reviewed at each to the government and they are a In certain contracts the Allocating amounts to performance customer pays for the goods will be Group ultimately expects it will reporting date and reduced to the portion of the total dividend that is consideration includes a variable obligations one year or less. have to return to the customer. extent that it is no longer probable declared. Where the Group receives element in the form of retrospective The Group considers whether there The Group updates its estimates that sufficient taxable profit will be a dividend on which withholding volume rebates and discounts. are other promises in the contract Furthermore, the Group has elected of refund liabilities at the end of available to allow all or part of the tax is levied, that withholding tax is The variable consideration is that are separate performance to apply the optional practical each reporting period. Refer to deferred tax asset to be utilised. recognised as a current tax expense. estimated at contract inception obligations to which a portion of expedient for costs incurred to the accounting policy on variable Unrecognised deferred income
and constrained until it is highly the transaction price needs to be obtain a contract and expenses consideration. tax assets are reassessed at each Deferred tax probable that a significant revenue allocated. any incremental costs related to a reporting date and are recognised Deferred tax is provided using reversal in the amount of cumulative contract when they are incurred as Other revenue streams of the Group to the extent that it has become the liability method on temporary revenue recognised will not occur For most contracts, there is a quoted the amortisation period would be include the following: probable that future taxable profit differences at the reporting date when the associated uncertainty per unit price for each product sold, less than one year. • Rental income; will allow the deferred tax asset to between the tax bases of assets and with the variable consideration with reductions given for bulk orders • Interest income; and be recovered. liabilities and their carrying amounts • Dividend income; for financial reporting purposes.
Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] Financial instruments [continued]
Deferred tax [continued] to settle the obligation and a reliable Financial instruments Purchases or sales of financial assets The Group’s financial assets at transferred control of the asset, the estimate can be made of the amount that require delivery of assets amortised cost includes trade Group continues to recognise the Deferred tax assets and liabilities of the obligation. When the Group Initial recognition and measurement within a time frame established receivables, long term receivables transferred asset to the extent of are measured at the tax rates that expects some or all of a provision Financial assets are classified, at by regulation or convention in the and debt instruments. its continuing involvement. In that are expected to apply to the year to be reimbursed, for example, initial recognition, as subsequently market place (regular way trades) are case, the Group also recognises an when the asset is realised or the under an insurance contract, the measured at amortised cost and fair recognised on the trade date. Derecognition associated liability. The transferred liability is settled, based on tax reimbursement is recognised as a value through profit or loss (FVTPL). A financial asset (or, where asset and the associated liability are rates (and tax laws) that have been separate asset, but only when the Subsequent measurement applicable, a part of a financial asset measured on a basis that reflects enacted or substantively enacted at reimbursement is virtually certain. The classification of financial assets For purposes of subsequent or part of a group of similar financial the rights and obligations that the the reporting date. Also taking into The expense relating to a provision is at initial recognition depends on the measurement, financial assets are assets) is primarily derecognised Group has retained. account the manner of recovery of presented in the statement of profit financial asset’s contractual cash classified in two categories: when: the underlying asset or liability. or loss and other comprehensive flow characteristics and the Group’s • Financial assets at amortised cost • The rights to receive cash flows Continuing involvement that takes Deferred tax relating to items income net of any reimbursement. business model for managing (debt instruments); and from the asset have expired; or the form of a guarantee over the recognised outside profit or loss is The Group has recognised provisions them. With the exception of trade • Financial assets at FVTPL • The Group has transferred its transferred asset is measured at recognised outside profit or loss. for dismantling and restoration costs receivables that do not contain a rights to receive cash flows from the lower of the original carrying and health, safety and environment significant financing component This category is the most relevant the asset or has assumed an amount of the asset and the 76 Deferred tax items are recognised costs. or for which the Group has applied to the Group. The Group measures obligation to pay the received maximum amount of consideration 77 in correlation to the underlying the practical expedient, the Group financial assets at amortised cost if cash flows in full without that the Group could be required to transaction either in other If the effect of the time value of initially measures a financial asset both of the following conditions are a material delay to a third repay. comprehensive income or directly in money is material, provisions are at its fair value plus, in the case met: party under a ‘pass-through’ equity. discounted using a current pre-tax of a financial asset not at FVTPL, • The financial asset is held within arrangement; and either (a) Impairment of financial assets rate that reflects, when appropriate, transaction costs. Trade receivables a business model with the the Group has transferred The Group recognises an allowance Deferred tax assets and deferred the risks specific to the liability. that do not contain a significant objective to hold financial assets substantially all the risks and for expected credit losses (ECLs) tax liabilities are offset if a legally When discounting is used, the financing component or for which in order to collect contractual rewards of the asset, or (b) the for all debt instruments not held enforceable right exists to set off increase in the provision due to the the Group has applied the practical cash flows; and Group has neither transferred at FVTPL. ECLs are based on the current tax assets against current passage of time is recognised as a expedient are measured at the • The contractual terms of the nor retained substantially all the difference between the contractual income tax liabilities and the finance cost. transaction price determined under financial asset give rise on risks and rewards of the asset, cash flows due in accordance with deferred taxes relate to the same IFRS 15. specified dates to cash flows that but has transferred control of the contract and all the cash flows taxable entity and the same taxation Finance income and finance costs are solely payments of principal the asset. that the Group expects to receive, authority. Interest income on deposits is The Group’s business model for and interest on the principal discounted at an approximation included in finance income. managing financial assets refers to amount outstanding. When the Group has transferred its of the original EIR. The expected Provisions how it manages its financial assets rights to receive cash flows from an cash flows will include cash flows Provisions are recognised when Finance costs consist of interest in order to generate cash flows. The Financial assets at amortised cost are asset or has entered into a pass- from the sale of collateral held or the Group has a present obligation expense on term loans and bank business model determines whether subsequently measured using the through arrangement, it evaluates if, other credit enhancements that are (legal or constructive) as a result of overdraft and the unwinding of the cash flows will result from collecting effective interest rate (EIR) method and to what extent, it has retained integral to the contractual terms. a past event, it is probable that an discount of the dismantling and contractual cash flows, selling the and are subject to impairment. Gains the risks and rewards of ownership. outflow of resources embodying removal provision. financial assets, or both. and losses are recognised in profit or When it has neither transferred economic benefits will be required loss when the asset is derecognised, nor retained substantially all of the modified or impaired. risks and rewards of the asset, nor Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] Offsetting of financial instruments [continued]
Impairment of financial assets Financial liabilities Amortised cost is calculated by Accounting policy applicable on and unchanged. Details of these new - recognised a lease liability, [continued] taking into account any discount or after 1 January 2019: requirements are described in the measured at the present value of Initial recognition and measurement premium on acquisition and fees or The annual financial statements have accounting policy for leases. The the remaining lease payments, Financial liabilities are classified, ECLs are recognised for those credit costs that are an integral part of the been prepared in accordance with impact on the adoption of IFRS discounted at the Group’s at initial recognition, as financial exposures for which there has been EIR. The EIR amortisation is included International Financial Reporting 16 on the Group’s annual financial incremental borrowing rate at liabilities at FVTPL, loans and a significant increase in credit risk as finance costs in the statement of Standards on a basis consistent statements is described below. the date of initial application borrowings, payables, or as since initial recognition, over the profit or loss. with the prior year except for the - recognised right of use assets derivatives designated as hedging remaining life of the exposure, adoption of the following new The Group has applied the practical measured on a lease by lease instruments in an effective hedge, as irrespective of the timing of the Derecognition standard. expedient available in IFRS 16 which basis, at either the carrying appropriate. default (a lifetime ECL). A financial liability is derecognised provides that for contracts which amount (as if IFRS 16 applied when the obligation under the Application of IFRS 16 Leases exist at the initial application date, from the commencement All financial liabilities are recognised For trade receivables, the Group liability is discharged or cancelled In the current year, the Group has an entity is not required to reassess date but discounted at the initially at fair value and, in the applies a simplified approach in or expires. When an existing adopted IFRS 16 Leases (as issued whether they contain a lease. This incremental borrowing rate at case of loans and borrowings and calculating ECLs. The entity is not financial liability is replaced by by the IASB in January 2016) with means that the practical expedient the date of initial application) or payables, net of directly attributable required to keep track of significant another from the same lender on the date of initial application being allows an entity to apply IFRS 16 to at an amount equal to the lease transaction costs. changes to credit risk given that only substantially different terms, or 01 January 2019. IFRS 16 replaces contracts identified by IAS 17 and liability adjusted for accruals or 78 lifetime. ECLs are measured the terms of an existing liability IFRS 17 Leases, IFRIC 4 Determining IFRIC 4 as containing leases; and to prepayments relating to that 79 The Group’s financial liabilities The Group has established a are substantially modified, such an whether an Arrangement contains not apply IFRS 16 to contracts that lease prior to the date of initial include trade and other payables, provision matrix that is based on exchange or modification is treated a Lease, SIC-15 Operating Leases – were not previously identified by IAS application loans and borrowings including bank its historical credit loss experience, as the derecognition of the original Incentives and SIC-27 – Evaluating 17 and IFRIC 4 as containing leases. overdrafts, and derivative financial adjusted for forward-looking factors liability and the recognition of a new the Substance of Transactions The Group applied IAS 36 to instruments. specific to the debtors and the liability. Involving the Legal Form of a Lease. IFRS 16 has been adopted by consider of these right of use assets economic environment. applying the modified retrospective are impaired as at the date of initial Subsequent measurement The difference in the respective IFRS 16 introduces new or amended approach, whereby the comparative application. The measurement of financial The Group considers a financial carrying amounts is recognised in requirements with respect to lease figures are not restated. Instead, liabilities depends on their asset in default when contractual the statement of profit or loss. accounting. It introduces significant cumulative adjustments to retained The Group applied the following classification, as described below: payments are past due. However, changes to the lessee accounting by earnings have been recognized in practical expedients when applying in certain cases, the Group may also Offsetting of financial instruments removing the distinction between retained earnings as at 01 January IFRS 16 to leases previously Loans and borrowings consider a financial asset to be in Financial assets and financial operating and finance leases and 2019. classified as operating leases in After initial recognition, interest- default when internal or external liabilities are offset and the requiring the recognition of a right terms of IAS 17. Where necessary, bearing loans and borrowings are information indicates that the Group net amount is reported in the of use asset and lease liability at Leases where Group is lessee they have been applied on a lease by subsequently measured at amortised is unlikely to receive the outstanding consolidated statement of financial the lease commencement for all lease basis: cost using the EIR method. Gains Leases previously classified as contractual amounts in full before position if there is a currently leases, except for short term leases - when a portfolio of leases and losses are recognised in profit operating leases taking into account any credit enforceable legal right to offset the and leases of low value assets. contained reasonable similar or loss when the liabilities are The Group undertook the following enhancements held by the Group. recognised amounts and there is an In contrast to lessee accounting, characteristics, the Group derecognised as well as through the at the date of initial application A financial asset is written off when intention to settle on a net basis, the requirements for the lessor applied a single discount rate to EIR amortisation process. for leases which were previously there is no reasonable expectation to realise the assets and settle the accounting have remained largely that portfolio; recognized as operating leases: of recovering the contractual cash liabilities simultaneously. flows.
Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
Leases previously classified as Leases previously classified as finance disclosures required, in particular Impact on the financial statements operating leases [continued] leases regarding how a lessor manages the The aggregate effect of the changes in accounting policy on the consolidated annual financial statements for the year For leases that were classified as risks arising from its residual interest ended 31 December 2018 is as follows: - leases which were expiring finance leases applying IAS 17, in the leased assets. These additional with 12 months of 01 January the group measured the carrying disclosures have been made by the Statement of Financial Position 2019 were treated as short amount of the right of use of asset Group. 01 January term leases, with remaining and the lease liability at the date 2019 lease payments recognised as of initial application as the carrying Under IFRS 16, an intermediate P’000 an expense on a straight-line amount of the leased asset and lessor accounts for the head lease Net deferred lease liability basis or another systematic basis lease liability immediately before and the sublease as two separate Previously reported 1 075 which is more representative that measured applying IAS 17. For contracts. The intermediate lessor Effect of adoption of IFRS 16 67 652 of the pattern of benefits those leases, the Group accounts for is required to classify the sublease 66 577 consumed; the right of use asset and the lease as a finance or operating lease - initial direct costs were excluded liability applying IFRS 16 from the by reference to the right of use Prepaid leases from the measurement of the date of initial application. of asset arising from the head Previously reported 16 704 right of use of assets at the date lease (and not by reference to the Effect of adoption of IFRS 16 - 80 of initial application. Leases where group is lessor underlying assets as the case under (16 704) 81 - hindsight was applied where IFRS 16 does not change IAS 17). Because of this change, the appropriate. This was specifically substantially how a lessor accounts Group has reclassified certain of Right of Use Asset the case for determining leases. Under IFRS 16, a lessor its sublease agreements as finance Previously reported - the lease term for leases continues to classify leases as either leases. As required by IFRS 9, an Effect of adoption of IFRS 16 50 720 which contained extension or finance leases or operating leases allowance for expected credit loss 50 720 termination options. and account for those two types of has been recognised on the finance leases differently. However, IFRS lease receivables. Deferred tax asset 16 has changed and expanded the Previously reported - Effect of adoption of IFRS 16 3 725 3 725
Opening retained earnings Previously reported - Effect of adoption of IFRS 16 (13 206) (13 206)
When measuring lease liabilities, Group discounted lease payments using its incremental borrowing rate at 01 January 2019. The weighted average rate applied is 6.72%. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
Reconciliation of previous operating lease commitments to lease liabilities under IFRS 16 cost or net realisable values of the Management judgement is exercised Slate receivable 01 January 2019 product. Refer to note 12. when determining the present Management makes a significant P’000 value of expected future cash flows degree of judgment in assessing the Operating lease commitment as at 31 December 2018 as previously disclosed 5 839 Allowances for credit losses when the obligation to dismantle recoverability of the slate receivable Discounted using the incremental borrowing rate at 01 January 2019 4 033 The expected loss rates derived or restore the sites arises as well balance by assessing available Leases not included in previous commitments 19 320 are based on the payment profiles as the estimated useful life of the evidence based on negotiations Less recognition exemption for: of sales over a 36-month period related asset. The useful lives of the with the Government. If indications - Low value assets (83 ) before 31 December 2019 (being 1 assets are considered to be equal exist that the balance will not Add extension and options reasonably certain to be exercised 44 382 January 2017 to 31 December 2019) to the remaining lease term under be recoverable, an impairment Lease liabilities recognised at 01 January 2019 67 652 and the corresponding historical the assumption that the lease will allowance is raised to reflect the credit losses that occurred over not be renewed, and this impacts on balance which will be recovered NEW STANDARDS, NEW INTERPRETATIONS AND AMENDMENTS TO STANDARDS ADOPTED IN THE CURRENT PERIOD the same period. The historical loss the obligation. The provision for the from Government. rates are adjusted to reflect current costs of decommissioning these sites On 1 January 2019, Engen Botswana Limited adopted the following new standards, new Interpretations and and forward-looking information at the end of their economic lives Estimating the incremental amendments to Standards. affecting the ability of the customers has been estimated using existing borrowing rate used in lease Effective for accounting period to settle the receivables. The group technology, at current prices and liabilities beginning on or after 82 has identified the gross domestic discounted using a real discount rate The Group applied judgement 83 product, consumer price index and of 7.14% (December 2018 – 7.96%). in determining the interest rate IFRS 16 Leases 1 January 2019 the unemployment rate of Botswana implicit in its lease liabilities. New or revised standards to be the most relevant indicators The Group’s asset retirement The Group uses its incremental affecting a customers’ ability to pay, obligations are coupled with the borrowing rate, which reflects Definition of a Business – Amendments to IFRS 3 1 January 2020 and accordingly adjusts the historical estimated remaining useful lives of what the Group would have to pay Definition of Material – Amendments to IAS 1 and IAS 8 1 January 2020 loss rates based on expected the asset to which they relate. The to borrow over a similar term, and The Conceptual Framework of Financial Reporting 1 January 2020 changes in these factors. Refer to carrying value of the dismantling with a similar security, the funds IFRS 17 Insurance Contracts 1 January 2021 note 13. and removal costs provision as at necessary to obtain an asset of a 31 December 2019 is P75 254 479 similar value to the right-of-use asset The above new standards and amendments to existing standards issued but not yet effective are not expected to have Asset retirement and removal December 2018: P69 189 431) (Note in a similar economic environment. an impact on the Company. obligations 16). There is uncertainty regarding This requires estimation when no Estimating the future costs of these both the amount and timing of observable rates are available or obligations is complex and requires incurring these costs. when they need to be adjusted to Significant accounting judgments continually evaluated and are based Significant accounting judgments management to make estimates reflect the terms and conditions and estimates on historical factors coupled with and estimates and judgments regarding future Allowance for health safety and of the lease. The Group estimates expectations about future events cash flows and discount rates environment the incremental borrowing rate The preparation of financial that are considered reasonable. In Allowances for slow moving because most of the obligations This allowance is based on using observable inputs, such as statements in conformity with the process of applying the groups inventory will only be fulfilled in the future. probabilities of spillages of comparable market interest rates for International Financial Reporting accounting policies, management Based on prior management Changing technologies, political, petroleum products occurring at similar financed transactions (where Standards requires the use of certain has made the following estimates practice, inventory that has not environmental, safety, business and each retail, commercial or fuel and when available), and is required critical accounting estimates and that have a significant risk of causing moved for a 12-month period is statutory considerations, could also depot. The costs are based on the to make certain entity specific judgments concerning the future. material adjustment to the carrying considered to be obsolete. Obsolete influence the resulting provisions. point in time costs. estimates, such as the adjustments Estimates and judgments are amount of assets and liabilities and discontinued products are to the rates for the subsidiaries’ within the next year. considered to have no value. The stand-alone credit rating and provision is raised based on the full country specific risks. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
2 REVENUE AND REVENUE FROM CONTRACTS WITH CUSTOMERS Group Company Petroleum and related Convenience Dec 2019 Dec 2018 Dec 2019 Dec 2018 products income Total P ‘000 P ‘000 P ‘000 P ‘000 P’000 P’000 P’000
2018 Revenue from contracts with customers Primary geographic markets Petroleum turnover 2 891 060 2 505 142 - - Botswana 2 505 142 14 164 2 519 3064 Convenience income 15 560 14 164 - -
Revenue from contracts with customers 2 906 620 2 519 306 - - Product type Rental income 14 168 13 248 108 63 Petroleum products 2 410 520 - 2 410 520 Interest: bank and term deposits 3 996 1 786 758 708 Petrochemical products 34 777 - 34 777 Dividend income from subsidiary - - 87 635 49 514 Lubricants 59 845 - 59 845 2 924 784 2 534 340 88 501 50 285 Convenience - 14 164 14 164
2 505 142 14 164 2 519 306 Disaggregation of revenue
The company has disaggregated revenue into various categories in the following table which is intended to depict how Timing of transfer of goods or services the nature, amount and uncertainty of revenue and cash flows are affected by economic date. Point in time 2 505 142 14 164 2 519 306
84 Petroleum 85 3 PROFIT BEFORE TAX and related Convenience
products income Total Profit before tax is stated after the following: P’000 P’000 P’000
2019 3.1 Other income Primary geographic markets Application fees for service station dealership - 26 - - Botswana 2 891 060 15 560 2 906 620 Profit on disposal and scrapping of property, plant and equipment 1 152 - - - Product type Claim for loss of profits 247 - - - Petroleum products 2 807 574 - 2 807 574 1 399 26 - - Petrochemical products 27 208 - 27 208 Lubricants 56 378 - 56 378 3.2 Expenses Convenience - 15 560 15 560 Auditors Remuneration 2 891 060 15 560 2 906 620 - current year 941 913 174 291 Depreciation of Property, Plant & Equipment (Note 7) 28 790 24 684 41 40 Depreciation of Right of Use Asset (Note 22) 1 171 - - - Timing of transfer of goods or services Amortisation of prepaid rentals (Note 9) - 878 - - Point in time 2 891 060 15 060 2 906 6206 Operating lease rentals - service stations - 4 846 - - - land and buildings - 990 - - - plant and equipment - 191 - - Management and computer fees (Note 18) 12 135 11 892 - - Provision for bad & doubtful debts (Note 13) 669 1 095 - - Salaries and employment benefits 16 557 15 785 - - Contributions to defined contribution funds 1 053 1 085 - - Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
Group Company Group Company Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 3 PROFIT BEFORE TAX [continued]
4 TAXATION [continued] 3.3 Finance costs Unwinding of dismantling, removal and restoration Deferred tax liability provision (Note 16) 5 518 4 526 - - Origination of temporary differences from: Property, Finance costs arising from financial liabilities 61 642 - - plant and equipment (8 353 ) (9 578 ) (20 ) (21 ) Interest expense on right of use lease liability 4 202 - - - Trade accounts receivable 1 059 1 022 - - 9 781 5 168 - - Trade accounts payable (602 ) (82 ) - - Right of use asset and liability 3 765 - - - 3.4 Foreign exchange gains Deferred tax liability (4 131 ) (8 638 ) (20 ) (21 ) Foreign exchange gains (Including gains on fair value movements due to financial assets and Reconciliation of deferred tax liabilities liabilities that are at fair value through profit Opening balance (8 638 ) (3 436 ) (21 ) (22 ) 86 and loss (P1 965 686) 2017: P9 661 316) 8 769 14 056 - - Opening balance adjustment due to IFRS 16 3 725 - - - 87 Tax expense recognised in profit or loss 782 (5 202 ) 1 1 4 TAXATION Closing balance (4 131 ) (8 638 ) (20 ) (21 ) Botswana normal taxation Current Tax payable/(receivable) Company tax at statutory rate 45 230 31 976 905 842 Opening balance (5 402 ) 18 111 (296 ) (405 ) Withholding tax on dividends from subsidiary 6 573 3 714 6 573 3 714 Tax paid (43 113 ) (60 000 ) (1 015 ) (915 ) Prior year under provision - 797 - 182 Charge for the year 51 803 36 487 905 1 024 Deferred Closing balance 3 288 (5 402 ) (406 ) (296 ) Attributable to temporary differences arising (782 ) 5 202 (1 ) (1 ) 5 EARNINGS PER SHARE in the current year 51 021 41 689 7 477 4 737 Basic earnings per share is calculated by dividing the group’s total comprehensive income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The following Reconciliation of tax rate % % % % reflects the income and share data used in the basic earnings per share computations for the years 31 December 2019 Standard tax rate 22.0 22.0 22.0 22.0 and 31 December 2018. Adjusted for: Profit for the year 129 165 127 350 Exempt income (0.5 ) (1.0 ) (14.8 ) (14.0 ) Non-allowable expenses 1.7 1.1 1.5 1.6 Profit for the year attributable to ordinary shareholders 129 165 127 350 Withholding tax on dividends from subsidiary 5.1 2.1 - - Weighted average number of ordinary shares in issue 159 722 220 159 722 220 Prior year under provision - 0.5 - 0.4 Earnings Per Share 80.9 79.7 Effective tax rate 28.3 24.7 8.7 10.0 There have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements. There is no dilution effect. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
Group Company 7 PROPERTY, PLANT & EQUIPMENT – GROUP
Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 Plant, equip- Capital work Freehold Leasehold ment and in progress 6 DIVIDENDS PAID AND PROPOSED Land Buildings other (1) Total P’000 P’000 P’000 P’000 P’000 Dividends declared during the year 81 062 45 800 81 062 45 800 Amount paid 81 062 45 800 81 062 45 800 31 December 2019 Balance at beginning of year The total gross amounts of dividends paid in 2019 was P81 062 181 (2018: P45 800 347). Withholding taxes of 7.5% At cost 6 078 208 249 266 339 20 988 501 654 of gross dividends were deducted and paid to Botswana Unified Revenue Service and these amounted to P6 572 609. Accumulated depreciation - (77 789 ) (100 860 ) - (178 649 ) (2018: P3 713 542) in total. Withholding taxes are paid by Engen Marketing Botswana (Pty) Ltd, the subsidiary company. Net carrying amount 6 078 130 460 165 479 20 988 323 005 Additions - 2 893 6 531 13 734 23 158 Declared and paid in the year Disposals - At cost - (723 ) (7 062 ) - (7 785 ) - final dividend related to the prior year 39.9 31.0 39.9 31.0 - Accumulated depreciation - 344 6 828 - 7 172 - interim dividend for the current year 15.0 - 15.0 - Dismantling and restoration costs (Note 16) - - 1 725 - 1 725 Proposed (not recognised as a liability) Transfers - 10 501 1 483 (11 984 ) - 88 - final dividend for the current year 25.4 39.9 28.5 39.9 Depreciation (Note 3.2) - (15 473 ) (13 317 ) - (28 790 ) 89 - special dividend 93.9 - 93.9 - Balance at end of year, net of 6 078 128 002 161 667 22 738 318 485 accumulated depreciation Balance at end of year At cost 6 078 220 920 269 016 22 738 518 752 Accumulated depreciation - (92 918 ) (107 349 ) - (200 267 ) Net carrying amount 6 078 128 002 161 667 22 738 318 485
31 December 2018 Balance at beginning of year At cost 6 078 183 662 243 580 33 955 467 275 Accumulated depreciation - (68 915 ) (85 05 ) - (153 965 ) Net carrying amount 6 078 114 747 158 530 33 955 313 310 Additions - 24 587 1 710 - 26 297 Dismantling and restoration costs (Note 16) - - 8 082 - 8 082 Transfers - - 12 967 (12 967 ) - Depreciation (Note 3.2) - (8 874 ) (15 810 ) - (24 684 ) Balance at end of year, net of 6 078 130 460 165 479 20 988 323 005 accumulated depreciation Balance at end of year At cost 6 078 208 249 266 339 20 988 501 654 Accumulated depreciation - (77 789 ) (100 860 ) - (178 649 ) Net carrying amount 6 078 130 460 165 479 20 988 323 005
Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
7 PROPERTY, PLANT & EQUIPMENT – COMPANY 8 INTERESTS IN JOINT VENTURES Group Company
Plant, equip- Dec 2019 Dec 2018 Dec 2019 Dec 2018 Freehold Leasehold ment and P ‘000 P ‘000 P ‘000 P ‘000 Land Buildings other Total P’000 P’000 P’000 P’000 The Group has a 40% and 25% interest in the joint arrangements, Engen Palapye Partnership and Engen Maun Partner- 31 December 2019 ship, respectively, which are involved in property letting. Balance at beginning of year The Group’s interest in both joint arrangements is accounted for using the equity method in the consolidated financial At cost 568 731 352 1 651 statements. The financial year end of both joint ventures is 31 December and is the same as the group. Summarised fi- Accumulated depreciation - (202 ) (352 ) (554 ) nancial information of the joint arrangements, based on their IFRS financial statements, and the reconciliations with the Net carrying amount 568 529 - 1 097 carrying amounts of the investments in the consolidated financial statements are set out below: Depreciation (Note 3.2) - (41 ) - (41 ) Balance at end of year, net of Engen Palapye Partnership accumulated depreciation 568 498 - 1 066 Current assets; Including cash and cash equivalents 15 813 12 664 - - Balance at end of year of P15 269 014 (2018: P12 040 848) At cost 568 731 352 1 651 Non current assets 74 855 88 912 - - 90 Accumulated depreciation - (243 ) (352 ) (595 ) Current liabilities (1 149 ) (4 131 ) - - 91 Net carrying amount 568 974 - 1 056 Equity 89 519 97 445 - - Group’s carrying amount of the investment 34 103 30 869 - - 31 December 2018 Balance at beginning of year Engen Maun Partnership At cost 568 731 352 1 651 Current assets; Including cash and cash equivalents 8 900 6 082 - - Accumulated depreciation - (162 ) (352 ) (514 ) of P8 574 623 (2018: P5 884 568) Net carrying amount 568 569 - 1 137 Non current assets 30 109 29 501 - - Depreciation (Note 3.2) - (40 ) - (40 ) Current liabilities (775 ) (603 ) - - Balance at end of year, net of Equity 38 234 34 980 - - accumulated depreciation 568 529 - 1 097 Group’s carrying amount of the investment 9 747 8 817 - - Balance at end of year At cost 568 731 352 1 651 Total carrying amount of the investments 43 850 39 686 - - Accumulated depreciation - (202 ) (352 ) (554 ) Net carrying amount 568 529 - 1 097 Engen Palapye Partnership Rental income 7 406 7 580 - - (1) Capital work in progress includes all assets that are under construction and not yet in use as at the reporting date. These items Rentals 6 752 6 916 - - of property, plant and equipment will be reallocated to the respective asset class on completion of the construction. Other 654 664 - - Fair value gains on property 2 100 11 541 - - (2) No items of property, plant and equipment have been pledged as security for liabilities. Interest income 420 529 - - (3) There was no revaluation of property, plant and equipment in 2019. Direct operating expenses (1 842 ) (1 505 ) - - Profit for the year 8 084 18 145 - - (4) The gross carrying amount of fully depreciated property, plant and equipment that is still in use was Nil (2018: P2 308 797). Share of profit of joint venture – Palapye 3 234 7 258 - - The useful lives of these assets were reassessed in 2019 and an adjustment to depreciation was recognised in the financial statements hence the gross carrying amount of fully depreciated assets was nil in 2019. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
8 INTERESTS IN JOINT VENTURES [Continued] 9 PREPAID LEASES Group Company Group Company
Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000
Engen Maun Partnership Balances at beginning of the year 16 704 17 148 - - Rental income 3 920 3 624 - - Reallocation to Right of Use Assets (16 704 ) - - - Rentals 3 593 3 334 - - Charge for the year (Note 3.2) - (878 ) - - Other 327 290 - - Additions - 434 Fair value gains on property 800 4 900 - - - 16 704 - - Interest income 198 145 - - Other income - 4 - - Balances to be amortised within one year - 1 706 - - Direct operating expenses (1 195 ) (1 205 ) - - Balances to be amortised after one year - 14 998 - - Profit for the year 3 723 7 468 - - - 16 704 - - Share of profit of joint venture - Maun 930 1 867 - - Total share of profits of the joint ventures 4 164 9 125 - - Prepaid leases represent payments made for land use rights and are amortised over 15 to 20 years. 92 – Palapye and Maun 93 10 INVESTMENTS
Non current assets comprise of the total investment properties owned by the joint arrangements. Unlisted The Engen Maun investment property is held by way of a 50 year lease with the Tawana Land Board commencing 12 - School debentures (At amortised cost) 37 37 10 10 November 2003 with an option to renew for a further 50 years. The joint arrangement was entered into on 16 July 1993. 37 37 10 10 The Engen Palapye investment property comprises of a shopping complex erected on Lot 68 in Palapye, measuring
16500 square metres held in terms of Tribal Lease Number L/E/4/788, commencing on 6 June 1982, for fifty years The investments in debentures have no maturity date and no interest applies to them. and registered under title deed number 9/83 dated 7 September 1983. The joint arrangement was entered into on 7
November 1991. 11 INVESTMENT IN SUBSIDIARIES
Investment properties are stated at fair value, which has been determined, based on valuations performed by an Unlisted Holding independent professionally qualified valuer, as at 31 December 2019 and 31 December 2018 for the current and Shares at cost: previous year respectively. The valuer has recent experience in the location and category of the investment property - Engen Marketing Botswana (Pty) Ltd 100% - - 72 209 72 209 being valued. The fair value represents 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 is based on recent prices of A listing of the Group’s principal subsidiaries is set out in Note 23. similar properties in the same category and location.
The joint arrangements had no contingent liabilities or capital commitments as at 31 December 2019 and 2018. The joint 12 INVENTORIES arrangements cannot distribute their profits until they obtain consent from the four venture partners. Petroleum products purchased for resale - at cost 19 046 14 387 - - The values of the investment in joint arrangements in the company are shown below: Provision for obsolete stock (303 ) (303 ) - - Unlisted 18 743 14 084 - - - Engen Palapye Partnership (At cost) - - 2 762 2 762
- Engen Maun Partnership (At cost) - - 1 762 1 762 - - 4 524 4 524 Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
13 TRADE AND OTHER RECEIVABLES 14 CASH AND CASH EQUIVALENTS Group Company Group Company
Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000
Financial assets For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following: Trade receivables, net of allowance for impairment 104 203 124 110 - - Other receivables 682 1 545 - - Cash on hand and at bank 251 048 88 672 2 047 2 203 104 885 125 655 - - Short term deposits 229 283 30 602 27 013 29 344 Non-financial assets Cash resources 480 331 119 274 29 060 31 547 Slate receivable 29 419 297 727 - - Other receivables 4 681 6 635 - 9 The short term deposits had variable effective interest rates of between 1.1% and 3.65% (December 2018 – 1.1% 138 985 430 017 - 9 and 1.6%) for the year. At year end the short-term deposits were maturing within 60 days (December 2018:60 days). No interest is earned on cash amounts maintained in the Group’s current accounts. The Group has unutilised banking Trade and other receivables are non-interesting bearing and are generally on 30-60 days’ terms with the exception of the facilities with First National Bank of Botswana Limited of Nil (December 2017: P2 500 000) and unutilised contingent slate receivable from Government which has no set terms. The directors consider the carrying value to approximate the guarantee facilities of P2 100 000 (December 2018: P2 100 000). 94 fair value. Other receivables comprise of staff loans and value added tax receivable. 95 15 STATED CAPITAL Trade and other receivables at 31 December Neither past due nor impaired 100 679 100 395 - - 159 722 220 authorised and issued ordinary Past due but not impaired shares at no par value 8 138 8 138 8 138 8 138 Less than 30 days 2 066 23 720 - - 8 138 8 138 8 138 8 138 Between 30 days and 60 days 14 497 - - Between 60 days and 90 days 64 904 - - For capital management disclosures refer to Note 21. More than 90 days 2 062 139 - - 16 DISMANTLING AND RESTORATION COSTS Total 104 885 125 655 - - Balance at beginning of year 69 189 56 581 - - Past due but not impaired is based on time since recognition and after 30 days, the balances have no factors that would 1 725 8 082 - - evidence impairment, management still considers these balances as fully recoverable. The directors consider the carrying Additional provision (Note 7) 2 211 4 981 amount to approximate the fair value. Change in estimate (Note 7) (486) 3 101 - - As at 31 December 2019, trade receivables at nominal value of P10 878 619 (December 2018: P3 878 930) were impaired Finance costs (Note 3.3) 5 518 4 526 - - and fully provided for. Movements in the allowance for expected credit losses of receivables were as follows: Utilised during the year (1 178) - - - 75 254 69 189 - - At beginning of year 3 879 2 784 - -
Charge for the year 8 861 1 095 - - Long term leave liability Utilised during the year (95 ) - - - Balance at the beginning of the year - - - - Reversal of unused provision (1 766 ) - - - Charge for the year 74 - - - At end of year 10 879 3 879 - - Balance at the end of the year 74 - - - The allowance represents impairment losses on individually assessed financial assets and expected credit losses. 75 328 69 189 - - Refer to Note 21 for additional information in respect of allowances for expected credit losses. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
17 TRADE AND OTHER PAYABLES 18 RELATED PARTY DISCLOSURES Group Company Group Company
Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000
Financial liabilities Related party transactions where control exists include Petroleum Investment Holdings Limited, which owns 70% of the Trade payables 48 380 18 547 - - Company’s shares. The remaining 30% of the shares are widely held. The ultimate parent of the Group is PETRONAS of Related party payables (Note 18) 157 741 182 519 - - Malaysia. Other payables 4 983 5 854 1 713 1 509 During the year, the Group entered into transactions with fellow subsidiaries. Those transactions along with related 211 104 206 920 1 713 1 509 balances at 31 December 2019 and 31 December 2018 are presented in the following table: Non-financial liabilities Duties & Levies 44 994 41 612 - - (i) Purchase of goods/services: Leave pay 765 920 - - Other payables 10 552 5 464 - - Purchase of refined oil products 2 729 544 2 344 93 - - 267 415 254 916 1 713 1 509 - Engen Petroleum Limited
96 Trade payables are non interest bearing and are normally settled on 30-60 day terms. Service fees for the provision of technical, accounting 12 135 11 892 - - 97 and computer support - Engen Petroleum Limited Other payables, duties and levies are non-interest bearing and have an average term of 30 – 60 day terms. Other (Note 3.2) payables consist of accruals, value added tax payable, provision for bonus and the health and safety provision.
Dividends received from Engen Marketing Botswana - - 87 635 49 514 For terms and conditions relating to related parties, refer to Note 18. (Proprietary) Limited
Rent paid to Joint Ventures 210 203 - -
Engen Petroleum Limited, a company incorporated in the Republic of South Africa, is a subsidiary of PETRONAS of Malaysia and is therefore an entity related through common control. The above transactions were carried out on commercial terms and conditions.
(ii) Outstanding balances arising from purchases of goods/services Purchase of refined oil products and services fees for technical, accounting and computer support - Engen Petroleum Limited (Note 17) 157 741 182 519
Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
18 RELATED PARTY DISCLOSURES [contined] 19 COMMITMENTS AND CONTINGENCIES Group Company Group Company
Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 Dec 2019 Dec 2018 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000 P ‘000
(iii) Compensation of key management personnel 19.1 Capital expenditure commitments The Group has the following purchase commitments for Short-term employee benefits 6 500 7 188 1 362 1 592 property, plant and equipment incidental to the ordinary Post-employment benefits 272 340 - - course of business. Total compensation of key management personnel 6 772 7 528 1 362 1 592 Approved and committed - - - - The non-executive directors do not receive pension entitlement from the Group. A listing of the members of the Board Approved but not committed 80 385 67 810 - - of Directors is shown on page 1 of the financial statements 80 385 67 810 - -
Terms and conditions of transactions with related parties 19.2 Operating lease commitments - group as a lessee The sales to and purchases from related parties are made at normal market prices. Outstanding balances at the year Future minimum rentals under non-cancellable leases are as follows: end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for Within one year - 1 650 - - 98 any related party receivables or payables. For year ended 31 December 2019, the Group has not made any provision for 99 More than one year but not more than five years - 4 189 - - doubtful debts relating to amounts owed by related parties (December 2018: Nil). This assessment is undertaken every More than five years - - - - financial year through examining the financial position of the related parties and the market in which the related parties - 5 839 - - operate. Related party balances are normally settled on 30 -60 days terms. The majority of leases between Engen Marketing Botswana (Pty) Ltd and the various lessors are in respect of premises on which service stations have been built and sub-let by the Group to its dealers. These leases are for periods ranging between 3 and 50 years with annual escalations of between 7% and 10% per annum with renewal options. Due to straight lining, the difference between the expense and cash payments will lead to prepaid amounts or accruals on the statement of financial position. The rental expense as disclosed in Note 3.2 is higher that the lease commitments shown above as it includes contingent rentals.
19.3 Contingent liabilities The Group, through its bankers, has provided the following guarantees at 31 December: Bond to the Department of Customs & Excise for the movement of petroleum products from the Republic of South Africa and Namibia to Botswana and whilst in transit. 248 248 - - Guarantee to Botswana Railways in respect of security for compliance with performance obligations in accordance with the fuel supply contract 300 300 - - 548 548 - -
The Group’s bankers issued guarantees in favour of the Department of Customs and Excise and Botswana Railways in terms of which the bankers (as guarantors) will reimburse the Department of Customs and Excise and Botswana Railways in the unlikely event that Engen default on their payments. This is limited to P248 000 and P300 000 respectively. In accordance with the agreed terms, any amounts paid by the bankers will be recovered from Engen. No liability is expected to arise. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
19 COMMITMENTS AND CONTINGENCIES [contined] 20 SEGMENT REPORTING
19.5 Lease rentals receivable – group as a lessor Year ended 31 December 2019 The Group, through its bankers, has provided the following guarantees at 31 December: Contingent lease rentals receivable are based on volumes sold and a value has not been attributed to these agreements. Petrochemical Property Total contingent rentals recognised as income in the year amounted to P13 889 406 (2018: P12 843 045). Other lease Activities Letting Consolidated rentals which are under cancellable lease arrangements relate to commercial property leases from third parties. P’000 P’000 P’000
19.6 Legal claims Segment Revenue In the ordinary course of business, the Group is a defendant in a litigation arising from trade claims. Although there can External sales 2 906 620 - 2 906 620 be no assurances, the Group believes, based on information currently available, that the ultimate resolution of the legal Total Segment Revenue (Note 2) 2 906 620 - 2 906 620 proceedings would not likely have a material adverse effect on the results of its operations, financial position or liquidity Results of the Group. The Group has not raised any liability in respect of these claims which amount to nil (2018: nil). Depreciation (Note 3.2) 31 536 - 31 536 Foreign exchange gains (Note 3.5) 8 769 - 8 769 20 SEGMENT REPORTING Finance costs (Note 3.3) (9 781 ) - (9 781 ) Taxation (Note 4) (51 021 ) - (51 021 ) Operating segment information Share of profit of joint ventures - 4 164 4 164 The property letting segment is made up of the two joint ventures (Refer to Note 8). The Directors consider that on Profit for the year after tax 125 001 4 164 129 165 100 the basis of risks and returns and the Group’s organisational and reporting structure for management purposes there Total assets 1 021 169 43 850 1 065 019 101 are primarily two operating segments, petrochemical activities and property letting business. Within the petrochemical Total liabilities 416 140 - 416 140 activities there are two main business units, Commercial and Retail, the two segments have similar economic Capital Expenditure (Note 7) 23 158 - 23 158 characteristics and the distribution channel is similar and as such have been aggregated as one segment; petrochemical activities segment. Petrochemical activities primarily involve the selling and distribution of fuel. All revenue is earned in Year ended 31 December 2019 Botswana and all assets are situated in Botswana. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Amounts disclosed are based on the numbers included in the Segment Revenue consolidated financial statements. External sales 2 519 306 - 2 519 306 Total Segment Revenue (Note 2) 2 519 306 - 2 519 306 Results Depreciation (Note 3.2) 24 684 - 24 684 Foreign exchange gains (Note 3.5) 14 056 - 14 056 Finance costs (Note 3.3) (5 168 ) - (5 168 ) Taxation (Note 4) (41 689 ) - (41 689 ) Share of profit of joint ventures - 9 125 9 125 Profit for the year after tax 118 227 9 125 127 352 Total assets 908 523 39 686 948 209 Total liabilities 334 227 - 334 227 Capital Expenditure (Note 7) 26 297 - 26 297 Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
20 SEGMENT REPORTING [contined] 21 FINANCIAL INSTRUMENTS [contined]
Group [ continued ] Dec 2019 Dec 2018 P ‘000 P ‘000 Financial Assets/ liabilities (liabilities) measured at held at Total Geographic information Loans and amortised fair value carrying Revenues from external customers 2 906 620 2 519 306 receivables cost through P& amount Botswana (Note 2) Note P’000 P’000 P’000 P’000 Total revenue from external customers per the consolidated statement of 2 906 620 2 519 306 profit or loss and other comprehensive income (Note 2) 31 December 2018 Financial assets The revenue information above is based on the location of the customers. Investments – unlisted debentures 10 37 - - 37 Trade and other receivables 13 125 655 - - 125 655 21 FINANCIAL INSTRUMENTS Cash at bank and in hand 14 119 274 - - 119 274 Financial liabilities Group Trade and other payables 17 - (206 92 ) - (206 920 ) Forward exchange contract liability - - (409 ) (409 ) 102 Financial Assets/ 244 966 (206 920 ) (409 ) 37 637 103 liabilities (liabilities) measured at held at Total Company Loans and amortised fair value carrying receivables cost through P& amount The accounting classification of each category of financial instruments, and their carrying amounts, are set out below. Note P’000 P’000 P’000 P’000 Financial 31 December 2019 liabilities measured at Total Financial assets Loans and amortised carrying Investments – unlisted debentures 10 37 - - 37 receivables cost amount Trade and other receivables 13 104 885 - - 104 885 Note P’000 P’000 P’000 Cash at bank and in hand 14 480 331 - - 480 331 Forward exchange contract asset - - 965 965 31 December 2019 Financial liabilities Financial assets Trade and other payables 17 - (211 104 ) - (211 104 ) Investments – unlisted debentures 10 10 - 10 Forward exchange contract liability - - (90 ) (90 ) Cash at bank and in hand 14 29 060 - 29 060 585 253 (211 104 ) 875 375 024 Trade and other payables 17 (1 713 ) (1 713 ) 29 070 (1 713 ) 27 357
31 December 2018 Financial assets Investments – unlisted debentures 10 10 - 10 Cash at bank and in hand 14 31 547 - 31 547 Financial liabilities Trade and other payables 17 - (1 509 ) (1 509 ) 31 557 (1 509 ) 30 048 Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
21 FINANCIAL INSTRUMENTS [continued] 21 FINANCIAL INSTRUMENTS [continued]
Total interest income and total interest expense calculated using the effective interest method for financial assets Financial risk management objectives and policies or financial liabilities that are not at fair value through profit or loss are as follows: The main risks arising from the group’s and company’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. Group Company Interest rate risk Total net Total net Interest Interest gains and Interest Interest gains and Financial instruments that are sensitive to interest rate risk are bank balances and cash (refer note 14). Interest rates income expense losses income expense losses applicable to these financial instruments compare favourably with those currently available in the market and are only applicable to Botswana interest rates. The group’s policy is to minimise the interest rate risk exposure as such the group December 2019 has no external debt and invests in the best interest yielding call and fixed deposits accounts. Loans and receivables/ payables 3 996 61 3 935 758 - 758 The following table demonstrates the sensitivity to a reasonable possible change in interest rates at reporting date, December 2018 with all other variables held constant, of the group’s and company’s profit before tax (through the impact on floating Loans and receivables/ payables 1 786 642 1 144 708 - 708 rate financial instruments) and equity at reporting date. The reasonable possible change is based on past trends of interest rates and expected future changes. The impact was calculated by applying the reasonable possible change to Total exchange gains and losses for financial assets or financial liabilities that are at fair value through profit the exposures at reporting date, and with reference to the next 12 months. There is no direct impact on the group’s and loss are as follows: company’s equity apart from the after tax amount of the statement of profit or loss and other comprehensive income 104 impact. 105 Group Company Group Company Total net Dec 2019 Dec 2018 Dec 2019 Dec 2018 Fair value fair value Total net gains/ gains/ Interest gains and P ‘000 P ‘000 P ‘000 P ‘000 (losses) (losses) income losses
December 2019 Effect on profit before tax Forward exchange contracts 9 175 9 175 - - Increase of 1% in interest rates 4 803 1 192 291 315 Decrease of 1% in interest rates (4 803 ) (1 192 ) (291 ) (315 ) December 2018 Forward exchange contracts (1 966 ) (1 966 ) - - Foreign currency risk The group purchases its petroleum products in other countries and, as a result, is exposed to movements in foreign currency exchange rates. Foreign currency risk is managed at a senior level and monitored by the group management. Foreign currency risk is only with regard to transactions with a fellow subsidiary in South Africa payable in Rands. The group and company use foreign currency forward exchange to manage foreign exchange exposure.
The following table demonstrates the sensitivity to a reasonably possible change in the South African Rand exchange rate, with all other variables held constant, of the group’s and company’s profit before tax (due to changes in the fair value of monetary assets and liabilities). The reasonable possible change is based on past trends of foreign exchange rates and expected future changes. The impact was calculated by applying the reasonable possible change to the exposures at reporting date, and with reference to the next 12 months. There is no effect on the group’s and company’s equity apart from the after tax amount of the statement of profit or loss and other comprehensive income impact. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
21 FINANCIAL INSTRUMENTS [continued] 21 FINANCIAL INSTRUMENTS [continued]
Credit risk management Dec 2019 Dec 2018 Transactions are only conducted with approved counterparties that satisfy the assessment in terms of specific P ‘000 P ‘000 guidelines, rules, and parameters in terms of an approved counterparty selection list and limits. The purpose of credit risk policies and processes is to set the foundation for the establishment of effective credit risk management across the Group. Effect on profit before tax Increase of 10% in the ZAR rate (18 019 ) (16 904 ) The Group’s credit risk is primarily attributable to trade and other receivables. The amounts presented in the Statement Decrease of 10% in the ZAR rate 18 019 16 904 of Financial Position are net of allowances for expected credit losses. For allowances for doubtful receivables disclosure, refer to note 12. An allowance for impairment is made based on historical credit loss experience adjusted for forward- Financial Risk Management looking factors specific to the receivable and the economic environment. The group mitigates the risk of foreign exchange rate movements through the use of forward exchange contracts. The notional amount of coverage from forward contracts as at 31 December 2019 was P128 285 022 (31 December 2018: An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. P171 082 898). The provision rates are based on days past due for various customer segments with similar loss patterns, specifically with respect to geographical region, customer type and rating. The calculation reflects the probability-weighted outcome, Currency profile current conditions and forecasts of future economic conditions. 106 The Pula equivalent values of amounts translated from foreign currencies at year end are as follows: 107 Group Company The Group has collateral against some of its trade and other receivables in the form of cessions over trade and other receivables, bonds over movable and immovable property and letters of guarantee. Dec 2019 Dec 2018 Dec 2019 Dec 2018
P ‘000 P ‘000 P ‘000 P ‘000 With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents and certain derivative instruments, the Group’s exposure to credit risks arises from default of the counter party. The credit Related party payables (Note 17) 157 741 865 209 796 681 182 519 125 246 583 338 quality of these counterparties is good as all of these counterparties are reputable banking institutions. Exchange rate 1.000 1.330 1.000 1.351 Maximum credit risk exposure per class in total is the carrying values of loans and receivables and financial assets at fair value disclosed in Note 13.
For trade and other receivables, all new counterparties are subject to a credit risk assessment. This is a process whereby a counterparty’s credit worthiness is evaluated using qualitative and quantitative weighted criteria. Use is made of outside vetting agencies to vet new potential customers. The information obtained from these agencies is used in the Group’s own credit risk rating system.
As a result of these evaluations the customers are assigned a risk rating. The credit risk rating framework is used as the primary credit evaluation tool. Exposure limits, credit terms and security requirements are all set according to these risk ratings.
All customers are grouped according to their risk category. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
21 FINANCIAL INSTRUMENTS [continued] 21 FINANCIAL INSTRUMENTS [continued]
Credit risk management [continued] Debtors in government and industry and commerce category are the main trade categories that fall into low risk, with The risk rating determines how often the counterparties risk rating will be reviewed. If the counterparties risk rating industry and commerce being the main trade category in minimal risk. Industry and commerce and retail are the main is rated as average risk, low risk, or minimal risk the review takes place every 6 months. High risk counter parties are trade categories in average risk; and sales and distribution companies, fleet, retail and export debtors are the main reviewed every month. Each business stream and division will monitor their credit exposure and credit risk for reporting categories in significant risk. to management on a monthly basis. Listed below is the age analysis of trade and other receivables. The age analysis is based on credit terms. The following is a table highlighting the credit quality of Engen’s trade and other receivables that are neither past due nor impaired. 2019 Less than Between Between More than P’000 Carrying Amount Current 30 days 30 and 60 days 60 and 90 days 90 days
Significant/ Expected credit % Low Risk Minimal Risk Average Risk High risk Total loss rate
2019 98% - - 2% 100% Trade receivables and gross carrying 115 764 100 679 2 066 123 5 210 7 686 amount The following is a table highlighting the credit quality of Engen’s trade and other receivables that are neither past due Expected credit nor impaired. (10 879) - - (109) (5 146) (5 624) 108 losses 109 104 885 100 679 2 066 14 64 2 062 Significant/ % Low Risk Minimal Risk Average Risk High risk Total
2018 97% - - 3% 100% 2018 Less than Between Between More than P’000 Carrying Amount Current 30 days 30 and 60 days 60 and 90 days 90 days
Expected credit loss rate
Trade receivables and gross carrying 129 534 100 395 23 720 497 904 4 018 amount Expected credit (3 879) - - - - (3 879) losses 125 655 100 395 23 720 497 904 139
Impairment refers to individual and collective impairment in accordance with the Group’s accounting policies.
The movement in the allowance account for impaired receivables is set out in Note 13. Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
21 FINANCIAL INSTRUMENTS [continued] 21 FINANCIAL INSTRUMENTS [continued] Liquidity risk Liquidity risk is the risk that the group and company have insufficient funds available to fulfil their existing and future FAIR VALUE MEASUREMENTS cash flow obligations. Several elements are regarded as fundamental in the management of liquidity. These include the The following table provides fair value measurement hierarchy of the group’s assets and liabilities. maintenance of minimum levels of marketable and liquid assets; effective cash flow management; implementation of Quantitative disclosures fair value measurement hierarchy for instruments as at 31 December 2018: long term funding strategies; diversification of funding; and adequate contingency plans.
The group and company have access to banking facilities in excess of their current and anticipated future requirements. Fair value measurement using: The group’s and company’s borrowing powers are not limited by its Articles of Association. Quoted
prices in active Significant Significant The following table summarises the maturity profile of the group’s financial liabilities at 31 December 2019 based on markets observable unobservable contractual undiscounted payments: Total (Level 1) inputs (Level 2 inputs (Level 3) Assets measured at fair Less than 1 to 3 3 to 12 1 to 5 > 5 value: 1 month months months years years Total Date of valuation P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Foreign exchange forward 31 December 2019 965 - 965 - contracts Group 110 31 December 2019 Liabilities measured 111 Trade and other payables - 211 104 - - - 211 104 at fair value: Foreign exchange forward Forward exchange contract liability - 90 - - - 90 31 December 2019 90 - 90 - contracts - 211 194 - - - 211 194 There have been no transfers between level I and 2 during the year. 31 December 2018 Trade and other payables - 206 920 - - - 206 920 Quantitative disclosures fair value measurement hierarchy for instruments as at 31 December 2017: Forward exchange contract liability - 409 - - - 409 - 207 329 - - - 207 329 Fair value measurement using:
Quoted Company prices in active Significant Significant markets observable unobservable 31 December 2019 Total (Level 1) inputs (Level 2 inputs (Level 3) Trade and other payables - 1 713 - - - 1 7139 Assets measured at fair value: 31 December 2018 Trade and other payables - 1 509 - - - 1 509 Date of valuation P’000 P’000 P’000 P’000 Foreign exchange forward 31 December 2018 - - - - contracts
Liabilities measured at fair value: Foreign exchange forward 31 December 2018 409 - 409 - contracts Annual Report 2019
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Notes to the Financial Statements Notes to the Financial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2019
21 FINANCIAL INSTRUMENTS [continued] 22 LEASES (GROUP AS LESEE)
Fair values Details pertaining to leasing arrangements, where the Group is lessee are presented below: The directors consider the carrying amount of all financial instruments to approximate their fair value since the financial assets and liabilities have a short term to maturity and the interest rate on other receivables approximate the market Net carrying amounts of right of use assets rate. The fair value of foreign forward exchange contracts (FEC) is determined by using quoted prices in a market that The carrying amounts of right of use assets are as follows: is not active for the identical item held by another party as an asset. The fair value is measured using a valuation model. The input to this model being exchange rates are taken from observable markets where possible, but where this is not Lease Properties Total feasible, a degree of judgement is required in establishing fair values. Cost P’000 P’000 1 January 2019 (initial recognition) 50 720 50 720 Capital management Transfers from prepaid leases 16 704 16 704 The group and company define capital as the total equity of the group and company as noted in the statement of 67 424 67 424 changes in equity. The group’s and company’s long-term objective for managing capital is to deliver competitive, secure Accumulated depreciation and sustainable returns to maximise long-term shareholder value. Management is of the view that these objectives are 1 January 2019 (initial recognition) 2 630 2 630 being met. The group and company are not subject to any externally-imposed capital requirements. Current year 1 171 1 171 3 801 3 801 The group and company aim to maintain capital discipline in relation to investing activities while growing the dividend per share. The Group and company do not have any long term debt. Cash retained in the group and company is used to 112 Net carry amount 63 623 63 623 113 self-fund investing activities. 2019 2018 P’000 P’000
Other disclosures Interest expense on lease liabilities 4 202 - Total cash outflow from leases within the scope of IFRS 16 (5 957 ) -
Lease liabilities
The maturity analysis of lease liabilities is as follows:
Within one year 2 197 480 Two to five years 6 780 595 More than five years and less than ten years 13 825 - More than ten years 43 086 - 65 888 1 075
Non-current liabilities 2 197 480 Current liabilities 63 691 595 65 888 1 075 Annual Report 20182019
With us you are Number One Notes to theFinancial Statements [continued] FOR THE YEAR ENDED 31 DECEMBER 2018 Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2019 Independent auditor’s report TO THE SHAREHOLDERS OF ENGEN BOTSWANA LIMITED 22 LEASES (GROUP AS LESEE) [continued]
REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS Comparative information for lease liabilities under IAS 17 The information presented for lease liabilities for the comparative period has been prepared on the basis of IAS17, and therefore represents the liability as at that date for operating leases and not for finance leases in the table below. Opinion We have audited the consolidated and separate financial statements of Engen Botswana Limited and its subsidiaries (the Group) 2018 and company set out on pages 63 to 114, which comprise the consolidated and separate statements of financial position as Minimum lease payments P’000 at 31 December 2019, and the consolidated and separate statements of profit or loss and other comprehensive income, and - Within one year 480 theconsolidated and separate statements of changes in equity and the consolidated and separate statements of cash flowsfor - In second to fifth year inclusive 595 the year then ended, and the notes to the consolidated and separate financial statements, including a summary of significant 1 075 accounting policies.
Nature of leasing activities (in the capacity as lessee) In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Engen Botswana Limited as at 31 December 2019, and its consolidated and separate financial performance and The Group leases a number of properties in Botswana. It is customary for the lease contracts to provide for payments to its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards increase each year by inflation or a constant percentage. {IFRSs) and the requirements of the Companies Act (CAP 42:01 ).
Basis for Opinion 23 SUBSIDIARY COMPANY 114 We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards 115 The subsidiary company of Engen Botswana Limited which is incorporated in Botswana, is as follows: 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 and Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and other independence requirements applicable % Holding Business Description toperforming audits of the Group and Company. We have fulfilled our other ethical responsibilities in accordance with the IESBA Engen Marketing Botswana (Pty) Ltd 100 Marketing of petroleum Code, and in accordance with other ethical requirements applicable to performing the audits of the Group and Company. We believe products that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The major portion of the group’s activities are conducted by Engen Marketing Botswana (Pty) Ltd. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit 24 EVENTS AFTER THE REPORTING PERIOD of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separateopinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that The effects of the Corona Virus (Covid-19) which was declared a global pandemic by the World Health Organisation that started context. in the last few weeks of 2019 and continued in 2020 have been evaluated and require no adjustment or disclosure in the annual financial statements. There have been no reported Covid-19 cases in Botswana to date. The Government of Botswana We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated and separate has introduced a raft of measures to curb the potential spread of the virus in Botswana such as border control, closure of financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of public areas and limitation of social contact amongst others. As such, it is anticipated that these measures will have a negative procedures designed to respond to our assessment of the risks of material misstatement of the consolidated and separate financial effect on the business of the group in 2020, however, it is still too early to quantify the impact. The group has prepared a statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the business continuity plan to ensure that operations continue despite the limitations imposed by the measures to curb the virus. basis for our audit opinion on the accompanying consolidated and separate financial statements. In addition, other measures have been implemented to ensure that the impact on the group is minimised. There are no other events that occurred after the reporting period that may require adjustment or disclosure in the annual financial statements. Annual Report 2019
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Independent auditor’s report [CONTINUED] Independent auditor’s report [CONTINUED] TO THE SHAREHOLDERS OF ENGEN BOTSWANA LIMITED TO THE SHAREHOLDERS OF ENGEN BOTSWANA LIMITED
Other Information Key Audit Matter How the matter was addressed in the audit The directors are responsible for the other information. The other information comprises the Directors’ Report included on page 62 as required by the Companies Act (CAP 42:01 }, which we obtained prior to the date of this report and the annual report, which is Provision for dismantling and restoration cost of sites Our audit procedures comprised the following in expected to be made available to us after that date. The other information does not include the consolidated and separate financial (Consolidated financial statements) addressinQ the key audit matter: statements and our auditor’s report thereon. As described in note 16-Dismantling and Restoration Cost, the Group has a • We recalculated the provision based on the significant provision for the dismantling and restoration cost of sites stated inputs used by management. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an at P75.3 million at 31 December 2019 representing 18.1 % of the Group’s • We assessed the provision and the audit opinion or any form of assurance conclusion thereon. total liabilities. appropriateness of the discount rate assumption used to arrive at the liability by In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other We considered the provision to be significant to the audit of Engen performing a sensitivity analysis of changes in information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate Botswana Limited (Group) due to the following reasons: the discount rate. financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that • The calculation of this provision requires Management’s judgement • We involved our internal specialists in the fact. We have nothing to report in this regard. in estimating future costs and events, both internal and external to evaluation of the Group discount rate used in the Group, for which small changes can result in a material impact the calculation of the provision. Responsibilities of the Directors for the Consolidated and Separate Financial Statements to the valuation of the future obligation. The determination of the • We assessed whether the Group discount rate The directors are responsible for the preparation and fair presentation of consolidated and separate financial statements in assumptions requires Management’s judgement and estimation. was adjusted for country specific risks. accordance with International Financial Reporting Standards and the requirements of the Companies Act (CAP42:01 ), and for such • The judgement required to estimate the dismantling and rehabilitation • We analysed management’s estimate of future internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements 116 costs is primarily compounded by the fact that the restoration and 117 costs by comparing the estimated amounts to that are free from material misstatement, whether due to fraud or error. rehabilitation of each site is unique and there has been limited quotes from third parties, considering inflation restoration and rehabilitation activity, thus there is limited historical and exchange rates over time. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group and precedent against which to benchmark estimates of future costs. company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going • We agreed the lease terms used in the concern basis of accounting unless the directors either intends to liquidate the group or company or to cease operations, or have no • The assumptions that we consider having a significant impact on the calculation to the terms in the lease contracts. provision recognised are: realistic alternative but to do so. • We evaluated the reasonability of - Risk discount rate management’s assumptions in revising the Those charged with governance are responsible for overseeing the Group and Company’s financial reporting processes. - Estimates of future costs useful life of some of the sites in terms of - Useful lives of sites and the principles of IAS 16 “Property, Plant and Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements - Site lease terms Equipment by comparing the revised useful life Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole • The influence of ongoing activity resulting in the establishment of new to the new lease agreements. are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. sites and the annual changes to costs, the significant judgements and • We tested the accuracy of the inputs used by Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will estimates relating to the rehabilitation obligation are revised each year. management in the calculation, for example, always detect a material 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 influence the economic decisions of users taken on the basis • In the current year, the discount rate was adjusted due to a decrease in evaluating the completeness of the number of of these consolidated and separate financial statements. the prime lending rate and the useful lives of some of the sites included sites used in the calculation against underlying in the provision were revised. information. • The provision for dismantling and restoration cost of sites is disclosed in • We performed a recalculation of the unwinding Note 16 to the financial statements together with the key judgements of the discount rate arising from the present and estimates described in Note 1. value calculations applied to the future cash flows. • We assessed the completeness and accuracy of the disclosures relating to the provision in terms of the requirements of IFRS. Annual Report 2019
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Independent auditor’s report [CONTINUED] Independent auditor’s report [CONTINUED] TO THE SHAREHOLDERS OF ENGEN BOTSWANA LIMITED TO THE SHAREHOLDERS OF ENGEN BOTSWANA LIMITED
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the the audit. We also: consolidated and separate financial statements of the current period and are therefore the eyk 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 • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and so would e expected to outweigh the public interest benefits of such communication. 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 and Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related Ernst & Young disclosures made by the directors. Practicing Member: Bakani Ndwapi Partner • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence Certified Auditor obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group Membership number:19980026 and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw Gaborone attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such 118 disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of 119 our auditor’s report. However, future events or conditions may cause the group and company to cease to continue as a going Date:...... concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated and separate financial statements. eW are responsible for the direction, supervision and performance of the group and company audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies 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. Annual Report 2019
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Share Analysis- Ordinary Shareholders
Shareholders Shares held Number % of Shares % of issued SHAREHOLDERS of holders holders held shares 1- 5,000 577 75.03% 604,145 0.4% 5,001-10,000 62 8.06% 489,422 0.3% INFORMATION 10,001- 50,000 61 7.93% 1,354,420 0.8% 50,001-100,000 22 2.86% 1,743,398 1.1% 100,001- 500,000 33 4.29% 7,103,991 4.4% 500,001 - 1,000,000 5 0.65% 3,078,052 1.9% OVER 1,000,000 9 1.17% 145,348,792 91.0% Total 769 100.00% 159,722,220 100.00%
Top ten shareholders STANBIC NOMINEES BOTSWANA RE INVESTEC DEBSWANA PENSION FUND 739,609 0.46% FNB NOMS BW (PTY) LTD RE: BPOPF EQUITY PORTFOLIO C - ALLAN GRAY 1,254,011 0.79% 120 STANBIC NOMINEES BOTSWANA RE BIFM MLF 1,972,947 1.24% STANBIC NOMINEES BOTSWANA RE BIFM PLEF 2,172,944 1.36% FNB BOTSWANA NOMINEES (PTY) LTD RE:IAM BPOPF EQUITY 2,408,455 1.51% FNB BOTSWANA NOMINEES (PTY) LTD RE: ALLANGRAY BPOPF EQUITY PORTFOLIO B 3,064,401 1.92% MOTOR VEHICLE ACCIDENT FUND 6,858,692 4.29% FNB BOTSWANA NOMINEES (PTY) LTD RE:AG BPOPF EQUITY 7,944,919 4.97% FNB BOTSWANA NOMINEES (PTY) LTD RE:BIFM BPOPF-EQUITY 8,016,873 5.02% PETROLEUM INVESTMENT HOLDING LIMITED 111,655,550 69.91%
OTHERS 13,633,819 8.54% 159,722,220 100.00%
Shareholders Shares held Category Number % Number % Non - Public shareholders 1 0.13% 111,655,550 69.91% Public shareholders comprsing of:
Corporate bodies 83 10.79% 7,806,688 4.89% Nominees companies 75 9.75% 37,608,627 23.55% Private individuals 610 79.32% 2,651,355 1.66% 769 100.00% 159,722,220 100.00% Annual Report 2019
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Notice of Annual General Meeting Proxy form
Notice is hereby given that the 54th Annual General Meeting of Engen Botswana Limited will be held virtually on 29 June 2020 For completion by holders of Ordinary shares at 08h30 GMT+2 (Botswana). In compliance with national health guidelines, the Annual General Meeting will be hosted online via Microsoft Teams to facilitate social distancing. All shareholders who would like to attend the meeting either by proxy or in person Please read the notes overleaf before completing this form. must forward their email address to Francois Mintoor ([email protected]) in order for a link to be provided for the For use at the Annual General Meeting of Shareholders of the company to be held by virtual meeting through Miscrosoft Teams on meeting. the on 29th June 2020. I/We Agenda (Name in block letters) Of (Address) 1. To read the notice convening the meeting. 2. To receive and consider the audited financial statements for the year ended 31 December 2019. Hereby appoint 1.
3. To approve the dividends as recommended by the directors. or failing him/her, 4. To approve the appointment the following directors who were appointed during the year: 4a) To confirm the appointment of Mr S Williams or failing him/her,
4b) To confirm the appointment of Ms H Morrison The Chairman of the meeting 5. To elect directors of the company who are retiring by rotation in terms of the Articles of Association: As my /our proxy to act for me/us at the virtual meeting through Miscrosoft Teams the on 29th June 2020 at 08:30hrs and at any Messrs S Ndzinge, A Siwawa, and R Matthews being eligible have offered themselves for re-election. adjournment thereof to vote for or against the resolutions and/or abstain from voting in respect of the Ordinary Shares registered 5a) To confirm the re-election of Mr S Ndzinge who retires in accordance with Article 62 of the Constitution and being in my/our name in accordance with the following instruction eligible, offers himself for re-election. 5b) To confirm the re-election of Mr A Siwawa who retires in accordance with Article 62 of the Constitution and being eligible, Number of ordinary shares 122 123 offers himself for re-election. For Against Abstain 5c) To confirm the re-election of Mr R Matthews who retires in accordance with Article 62 of the Constitution and being eligible, offers himself for re-election. Ordinary resolution 1 Agenda No 2 6. To approve the remuneration of the directors for the year ended 31 December 2019. Ordinary resolution 2 Agenda No 3 7. To approve the auditor’s remuneration for the 2019 audit. Ordinary resolution 3a) Agenda No 4 8. To appoint Ernst & Young as auditors for the 2020 audit. Ordinary resolution 3b) Agenda No 4 9. To transact such other business as may be transacted at an Annual General Meeting. Ordinary resolution 4a) Agenda No 5 Ordinary resolution 4b) Agenda No 5 Every member entitled to attend and vote at the meeting may appoint one or more persons as a proxy to attend, speak and vote in Ordinary resolution 4c) Agenda No 5 his/her stead. A proxy need not be a member of the company. The instructions appointing such a proxy must be deposited at the company’s transfer offices or registered offices at least 48 hours before the meeting. Ordinary resolution 5 Agenda No 6 Ordinary resolution 6 Agenda No 7 Proxies should be sent by email to the Transfer Office for the attention of Dolly Mmereki ([email protected]) or by mail to Ordinary resolution 7 Agenda No 8 P O Box 294 Gaborone.
Signed at By order of the Board.
Date: Signature: PricewaterhouseCoopers (Proprietary) Limited Assisted by (where applicable) Company Secretaries Gaborone Each shareholder who is entitled to attend and vote at a General Meeting is entitled to appoint one or more persons as proxy to attend speak and vote in place of the shareholder at the Annual General Meeting and the proxy so appointed need not be a member 02 June 2020 of the company.
Please read notes 1 - 7 on the reverse side hereof. Proxy form [CONTINUED]
1. A Shareholder must insert the names of two alternative proxies of the Shareholders choice in the space provided with or without deleting “Chairman of the Annual General Meeting”. The person whose name appears first on the form of proxy and whose name has not been deleted shall be entitled to act as proxy to the exclusion of those whose names follow.
2. A shareholders instruction to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the Shareholder in the appropriate space provided. Failure to comply herewith will be deemed to authorize the proxy to vote at the General Meeting as he/she deems fit in respect of the Shareholders votes exercisable thereat, but where the proxy is the Chairman, failure to comply will be deemed to authorize the proxy to vote in favour of the resolution. A Shareholder or his/her proxy is obliged to use all the votes exercisable by the Shareholder or by his/her proxy.
3. The completion and lodging of this form will not preclude the relevant Shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms thereof.
4. The Chairman of the Annual General Meeting may reject or accept any form of proxy not completed and/or received other than in accordance with these notes provided that he/she is satisfied as to the manner in which the Shareholder concerned wishes to vote.
5. An instrument of proxy shall be valid for the Annual General Meeting as well as for any adjournment thereof, unless the contrary is stated thereon.
124 6. The authority of a person signing the form of proxy under power of attorney or on behalf of a company must be attached to the form of proxy.
7. Where Ordinary Shares are held jointly, all Shareholders must sign. A minor must be assisted by his/her guardian. Plot 54026, Western Bypass P O Box 867, Gaborone