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Investor Fact Sheet

Performance over the last 12 months

Financial Overview

It has been an extremely challenging year for Sanyati.  The Group produced disappointing financial results with headline earnings per share of 8.46 cents a share (a reduction of 52% on the prior year.)  Turnover of R1.53b was 30% down on the prior year.  Our EBITDA margin of 4.8% (8.65% in the prior year) is also a reflection of tight trading conditions and reduced volumes of activity.

The trading result of our core civil construction operations resulted in a reduction in EBITDA of 40% on the prior year.  The Sanyati North division was the poorest performer as a result of its inability to secure sufficient contract opportunities following completion of two major projects early in the financial year and mobilisation delays on the Medupi contract.  The Coastal business was severely impacted by the delay with the award of the Western Aqueduct project by eThekwini Municipality and the holding costs of key resources associated therewith.  Sanyati Central produced a very credible result in difficult trading conditions.

The Specialist Contracting businesses were even more severely impacted by lack of activity in their chosen markets resulting in an aggregate EBITDA loss of R14m for the 12 month period.

The reduction in activity levels called for decisive right sizing action resulting in an aggregate reduction of 260 permanent salaries and staff wages during the year.  The total cost of these retrenchments was R4.7m.  Every effort has nevertheless been made to retain core skills as a platform for future expansion.

The Group’s net cash position deteriorated by the amount of R114.8m during the year as a result of the following:

• A net increase in working capital of R86.2m mainly due to a change in the type of work undertaken this year as compared to the prior year.  This is a temporary situation brought about by a conscious change in the nature of project work secured in a changing environment.  A number of key projects with strong cash profiles throughout their project life cycles were completed early in the financial year.  These contracts have been replaced with similar high value contracts that offer attractive margins but encompass negative cash flow profiles in the initial stages of the contracts, a major cause of the deterioration in our cash position.  We are confident that this situation will be reversed in accordance with the underlying contracted payment terms and as the project life cycles mature in the months ahead
• The settlement of R20m of vendor liabilities during the year.

Goodwill Impairment

In the light of the economic climate facing the South African construction industry, and with regard to Sanyati’s short, medium and long term new business prospects, the Board felt it prudent to accept the independent valuation and recommendation for an impairment of R155m to the carrying value of the intangibles (goodwill) on the statement of financial position date at 28 February 2011.  The impact of this impairment has zero impact on the net tangible asset value and/or cash flow of the Group.  The negative impact of this impairment on the Group’s earnings per share at a fully diluted level is a loss of 26.71cents for the period under review.

Order book and Prospects

The order book at 28 February was R886m with imminent orders of R1 114m and close prospects of a further R1 740m.  The timely conversion of imminent orders and close prospects remain the key to our short and medium term success.  A pleasing aspect was the order book of Conform which as at R43m at the time of writing already exceeds the prior year’s otal turnover.  Similarly, the order book (R41m) and prospects of the piling and geotechnical business are significantly improved on from this time last year.

Future Prospects

Our stated strategy of geographical diversification is clearly gaining momentum with final negotiations in Uganda regarding a significant roads project underway.  The Ugandan opportunity was identified nearly 12 months ago following the notification by the Ugandan National Roads Authority that it would be investing in the upgrade of 9 roads across the country.  We decided early in the process that it would be prudent to secure a JV partnership with Raubex Construction in light of this venture.  We are extremely positive regarding this relationship given their wealth of experience in the successful execution of roads projects across Africa.  The project value is approximately R720m (our share therefore is R360m).  We are also waiting for the outcome of the adjudication on a second roads project in Uganda of a similar scope and value in which we also tendered in a joint venture with Raubex.