Transnet Online Integrated Report 2018

Market Demand Strategy (MDS) themes
  • Financial sustainability
  • Capacity creation and maintenance
  • Market segment competitiveness
  • Operational excellence
  • Human capital
  • Organisational readiness
  • Sound governance and ethics
  • Constructive stakeholder relations
  • Sustainable developmental outcomes
Sustainable Developmental Outcomes (SDOs)
  • Employment
  • Skills development
  • Industrial capability building
  • Investment leveraged
  • Regional integration
  • Transformation
  • Health and safety
  • Community development
  • Environmental stewardship
The Capitals
  • Financial Capital
  • Manufactured Capital
  • Intellectual Capital
  • Human Capital
  • Social and Relationship Capital

Creating value through the capitals


Financial capital

Our financial sustainability relies on the availability and management of our own and borrowed funds. Financial capital – as a stock of value – enables value creation with all other capitals. Through the combined use of capital inputs, such as share capital, cash reserves and borrowings, we fund our infrastructure projects, build manufactured assets, such as rolling stock and wagons, enhance the productive capacity of our people through training, innovate around technology and services, and benefit our community relationships through our investment in CSI initiatives. The current business strategy, as encapsulated in the MDS, aims to create pre-emptive long-term capacity ahead of validated demand.

Value through the capitals


1. Inputs
  • Cash and cash equivalents: R6,4 billion
  • Share capital and reserves: R144,6 billion
  • Long- and short-term borrowings: R124,8 billion
  • Revenue from commodity volumes: R66,2 billion
  • Non-commodity revenue: R9,4 billion
    (Engineering, Property and other revenue at Freight Rail, National Ports Authority, Port Terminals and Pipelines)
  • Yields from tariffs: R1,7 billion
  • Negative regulator clawbacks: R909 million
2. Structuring our capital
  • Maintain acceptable capital and debt structure parameters:
  • Adequate reinvestment to sustain infrastructure and expand capacity
  • Optimal cost of capital, including external debt
  • Optimal utilisation of working capital
  • Maintain a maximum capital-to-debt structure (gearing) at <50%
  • Maintain cash interest cover of at least 3 times

Structuring our capital
3. Approaches to managing financial capital outcomes
  • Diversify revenue sources
  • Stringent cost management and cost optimisation (balance capital expenditure)
  • Aggressive working capital management
  • Generate a return on assets equal to the risk
  • Maintain cost-effective structured funding
  • ‘Take-or-pay’ contracts with customers
  • Maintain credit ratings
  • Attract funding from diverse sources
4. Influences/risks
Influences/risks
5. Mitigation strategies
  • Management of working capital
  • Diversify revenue sources > including driving Africa revenue
  • Diversify funding
  • Holistic portfolio of measures > optimise the business to buffer market stress
  • Risk modelling and management > align with the overall capital portfolio (particularly co-dependencies)
  • De-risk capital projects > ensure positive returns (even under market pressure)
6. Financial value created
Financial value created
7. Approaches to managing financial capital outcomes
  • R5,4 billion
    Investment spend
    New equipment
    Waste/natural biosphere used
  • Capital investment in expanding infrastructure
    investment
    spend
    new
    equipment
    waste/natural
    biosphere used
    Decreased Increased
  • R23,5 billion
    Investment spend
    New equipment
    Waste/natural biosphere used
    Investment spend
  • Investment in
    personnel cost
    investment
    spend
    increase
    in employees
    employee
    competency pool
    increased
    human productivity
    and ingenuity enables
    business
  • R63,4 billion
    Investment spend
    Social
    Intelectual
     
  • Committed Supplier
    Development (SD)
    investment
    spend
    develop new suppliers and economic opportunities
    develop new supplier skills to apply to Transnet business
     
  • R147 million
    Investment spend
    Investment spend
    Waste/natural biosphere used
    New equipment
  • Investment in
    research and
    development
    investment
    spend
    new products
    and services
    develop new
    learnings and
    innovation
    more empowered,
    competent people
  • 86,9%
    Investment spend
    Social
    Intelectual
     
  • B-BBEE spend as
    % of total measured
    procurement spend
    B-BBEE
    spend
    develop new entrepreneurs
    develop new skills in the wider economy
     
  • R335,5 billion
    Investment spend
    Manufactured
     
     
  • Investment in property, plant and equipment
    investment
    spend
    new infrastructure equipment
     
     
  • R741 million
    Investment spend
    Human
     
     
  • Investment in skills development
    investment
    spend
    increase employee competency pool
     
     
  • R219 million
    Investment spend
    Social
     
     
  • CSI spend
    investment
    spend
    community goodwill and social development + reputational gain
     
     
8. Key outputs
  • EBITDA R32,5 billion (2017: R27,6 billion)
  • Operating profit R18,8 billion (2017: R14,1 billion)
  • Cash generated from operations (after working capital changes) R34,9 billion (2017: R32,8 billion)
  • EBITDA margin 44,6% (2017: 42,1%)
  • Gearing 43,4% (2017: 44,2%)
  • Cash interest cover 3,0 times (2017: 2,8 times)
  • Cash and cash equivalents R4,4 billion (2017: R6,4 billion)
  • Share capital and reserves R156,9 billion (2017: R144,6 billion)
  • Capital investment R21,8 billion (2017: R21,4 billion)
  • Long- and short-term borrowings R122,6 billion (2017: R124,8 billion)
  • Stand-alone credit rating
    – Moody’s Baa3
    – Standard and Poor’s BBB
  • Pipelines allowable revenue for 2019 1,43% increase in allowable revenue compared to prior tariff period
  • National Ports Authority granted an average tariff increase of 6,0% for 2019