Basil Read Front - ShareData · Basil Read Annual Report 2006 03 2006 R’000 2005 R’000 2004...

Basil Read Annual Report 2006 01

FIN

AN

CIA

L H

IGH

LIG

HT

S

RECORD RESULTS

STRONG BALANCE SHEET

Revenue(R million)

Earnings and headline earnings (per share cents)

Net asset value and tangible net asset value(per share cents)

Cash on hand and cash generated by operating activities(R million)

Basil Read Annual Report 200602

2006R’000

2005R’000

2004R’000

2003R’000

2002R’000

INCOME STATEMENT

Revenue 1 162 198 617 332 469 148 540 674 612 128

Contracting 1 016 193 563 478 469 148 532 182 604 401

Other 146 005 53 854 – 8 492 7 727

Contracting and other costs (1 016 810) (530 955) (481 181) (434 859) (484 293)

Gross profi t/(loss) 145 388 86 377 (12 033) 105 815 127 835

Admin and other operating overheads (93 488) (50 451) (80 723) (95 375) (96 544)

Other income 18 – – 1 007 1 043

Other gains/(losses) – net 1 832 500 – – –

Profi t on sale of subsidiaries – – 54 780 – –

Profi t on sale of unlisted investment – – – 28 412 –

Profi t on sale of associates – 877 1 793 – –

Operating profi t/(loss) 53 750 37 303 (36 183) 39 859 32 334

Net fi nance income/(costs) 3 479 (13 195) (4 680) 14 109 (11 191)

Profi t/(loss) before share of associates 57 229 24 108 (40 863) 53 968 21 143

Share of profi t/(loss) from associates – 158 287 (3 261) (1 116)

Profi t/(loss) before taxation 57 229 24 266 (40 576) 50 707 20 027

Taxation (2 269) 709 (1 039) (10 597) (8 392)

Net profi t/(loss) for the year 54 960 24 975 (41 615) 40 110 11 635

Net profi t/(loss) for the year attributable to:

Equity shareholders of the company 54 103 24 975 (42 338) 40 329 11 634

Minority interests 857 – 723 (219) 1

Net profi t/(loss) for the year 54 960 24 975 (41 615) 40 110 11 635

STATISTICS

Earnings/(loss) per share (cents) 93,53 45,31 (76,84) 73,19 21,11

Headline earnings/(loss) per share (cents) 89,62 42,71 (179,41) 18,08 8,74

Dividend per share (cents) – – 80,00 – –

FIV

E Y

EA

R R

EV

IEW FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

0

1 000

2 000

3 000

4 000

5 000

6 000

January June December

200

400

600

800

1 000

1 200

1 400

■ Volume of share traded– Share priceShare price and volume (cents)


2006R’000

2005R’000

2004R’000

2003R’000

2002R’000

BALANCE SHEET

AssetsNon-current assets 215 007 106 933 116 654 160 851 210 828Property, plant and equipment 176 438 82 293 91 271 126 072 125 395Other non-current assets 38 569 24 640 25 383 34 779 85 433Current assets 415 941 159 896 85 146 188 720 275 620Contract debtors and retentions 120 069 64 762 38 005 88 840 173 709Cash and cash equivalents 270 518 91 249 43 889 84 197 67 758Other current assets 25 354 3 885 3 252 15 683 34 153

630 948 266 829 201 800 349 571 486 448Equity and liabilitiesCapital and reserves 193 231 33 385 6 533 90 713 58 490Minority interests 6 232 – – (723) (504)Non-current liabilities 55 775 24 045 33 521 12 098 72 913Interest-bearing borrowings 49 982 22 808 33 189 12 098 72 913Other non-current liabilities 5 793 1 237 332 – –Current liabilities 375 710 209 399 161 746 247 483 355 549Trade and other payables 281 844 156 202 90 204 142 578 275 933Interest-bearing borrowings 32 996 23 539 17 892 93 612 56 288Bank overdraft 4 081 – 37 897 – 4 315Other current liabilities 56 789 29 658 15 753 11 293 19 013

630 948 266 829 201 800 349 571 486 448STATISTICSNumber of shares in issue (’000) 70 720 55 304 55 100 55 100 55 100Net asset value per share (cents) 282,05 60,37 11,86 164,63 106,15Current ratio (times) 1,11 0,76 0,53 0,76 0,78Return on shareholders’ interests (%) 28,00 74,81 (648,06) 44,46 19,89Return on total average tangible assets (%) 12,11 15,92 (13,12) 9,29 7,02Average price per share (cents) 825 174 138 141 151Debt equity ratio (times)* 0,42 1,39 7,82 1,17 2,23* Debt equity ratio is calculated using interest-bearing borrowings.

Current ratio and debt equity ratio (times)


OP

EN

CA

ST

MIN

ING

RO

AD

S A

ND

CIV

IL E

NG

INE

ER

ING

OPENCAST MINING

Opencast Mining has operated medium- and long-term contracts across Africa using the latest operating equipment

and employing innovative mining techniques to satisfy the needs

of their clients.

CONTRIBUTION TO REVENUE

MANAGEMENT

Eugene du Toit, Managing Director Derek Leatherbarrow, Rolf Koller, McDonald Tisane, Danny Stopforth

EMPLOYEES

275

KEY PROJECTSRössing Uranium, NamibiaMupane Mine, Botswana

GR

OU

P A

T A

GL

AN

CE

ROADS AND CIVIL ENGINEERING

The development and implementation of technical and fi nancial

engineering skills has reinforced Basil Read’s Roads and

Civil Engineering position as a front-runner.


MANAGEMENT

Chris Erasmus, Managing Director Deon de Jager, Willem Meyer, Logan Moodley,

André van Tonder, Morné van Schalkwyk, Antonie Fourie, Paul Walker, Jimmy Strydom, Hugo Carlier

EMPLOYEES

1 125

KEY PROJECTSBerth 306, Richards Bay

Main Road 435, Port ElizabethHans Strydom Drive, Randburg

Pier 1 Container Terminal, Durban

53% 24%


DE

VE

LO

PM

EN

TS

BU

ILD

ING

S

BUILDINGS

Using a total quality approach to projects, the Building division adds

value through offering turnkey solutions, innovative methods of construction,

effective cost control, design alternatives and fi nancing options.


MANAGEMENT

Reinoud Oranje, Managing DirectorGeorge de Sousa, Gerry Hanna,

Louise Cornelessen

EMPLOYEES

617

KEY PROJECTSHydro Park on Grayston

Chris Hani Baragwanath HospitalSchools at Cosmo City

Paarl Hospital

DEVELOPMENTS

Basil Read has developed strong expertise in the construction,

development and project management of large housing schemes for low- and middle-

income earners.


MANAGEMENT

Des Hughes, Managing DirectorRussell Zama, Brian Mulherron

EMPLOYEES

7

KEY PROJECTCosmo City

16%7%

Basil Read Annual Report 200606B

OA

RD

AN

D M

AN

AG

EM

EN

T

BOARD

1

2

4

5

3

67

Bulelani Thandabantu NgcukaNon-executive director, Chairman

Marius Lodewucus HeynsChief Executive Offi cer,Managing Director

Lungisa Brian DyosiNon-executive director

Sango Siviwe NtsalubaNon-executive director

Thabiso Alexander TlelaiNon-executive director

Charles Peter DaviesIndependent non-executive director

Sindile Lester Leslie PeteniIndependent non-executive director

Basil Read Annual Report 2006 07MANAGEMENT

A

C

E

G

D

H

B

F

I

J

K

Jacobus Frederick van BiljonChief Operating Offi cer

Christopher John Erasmus Managing Director: Roads and

Civil Engineering

Deon de JagerDirector: Roads

James Stephen JohnstonTechnical Director

Willem Sterrenberg MeyerDirector: Civils

Eugene du ToitManaging Director: Opencast Mining and Special Projects

Reinoud Cornelius OranjeManaging Director: Buildings

Terence Desmond HughesManaging Director:

Developments

Norman MilneCommercial Director

Manuel Donnell Grota GouveiaGroup Finance Director

Bernard Melvin JohnsonHuman Resources Director

Basil Read Annual Report 200608BOARD

1

2

4

5

3

6

1. Bulelani Thandabantu Ngcuka (52)Non-executive director, ChairmanBProc (Fort Hare), LLB (Unisa), MA (Webster University, Switzerland)

Bulelani was admitted as an attorney in June 1980. He held various positions in different law fi rms until 1989. Thereafter he was involved in various committees until 1994 when he was elected to the Senate as Chief Whip of the ANC. In 1997 he was elected as Deputy Chairman of the National Council of Provinces. Bulelani was the former National Director of Public Prosecutions, a position he was appointed to in 1998. Formerly the executive chairman of Amabubesi Investments (Pty) Limited, he co-founded Vuwa Investments (Pty) Limited in 2006 and was appointed Executive Chairman. He was appointed to the Basil Read board on 1 February 2006.

2. Marius Lodewucus Heyns (47)Chief Executive Offi cer, Managing DirectorBSC Civ Eng, PR Eng, MSAICE

Marius has twenty-eight years experience in the construction industry across the full spectrum of activities. He has held various executive management positions for leading public and private companies in the sector and was reappointed at Basil Read in 2004 in his current position.

3. Lungisa Brian Dyosi (36)Non-executive directorBA Law (University of Cape Town), SEP (Wits & Harvard Business Schools)

Advocate of the High Court of South Africa

Lungisa was admitted as an attorney in 1997. He worked for the Bureau of Justice Assistance as a Senior Project Planner from 1997 to 1998. He then worked for the National Prosecuting Authority as a strategic and legal adviser to the National Director of Public Prosecutions for six years. In 2004 he joined Amabubesi Investments (Pty) Limited as a director. In 2006, he co-founded Vuwa Investments (Pty) Limited and was appointed as a director. He was appointed to the board on 1 February 2006.

BO

AR

D C

V’s

7

4. Sango Siviwe Ntsaluba (46)Non-executive directorBCom, BCompt Hon (Unisa), CA(SA), HDip Tax Law (UJ)

Sango has wide experience in various areas of business acquired over a period of more than 20 years. He is a founding member of SizweNtsaluba VSP, a successful fi rm of accountants and auditors, and Neotel, the second fi xed line operator in South Africa. He serves on various public sector boards, including the National Energy Regulator of South Africa (NERSA) and National Housing Finance Corporation (NHFC). He is a founding member of Amabubesi Investments (Pty) Limited and has held the post of Chief Executive Offi cer since incorporation. He was appointed Executive Chairman of Amabubesi Investments (Pty) Limited in 2006 and was appointed to the board of Basil Read in July 2006.

5. Thabiso Alexander Tlelai (43)Non-executive directorBCom (Memorial University of Newfoundland, Canada)

Thabiso is a founding member of Amabubesi Investments (Pty) Limited and has been a director of the company since incorporation. He is the Chief Executive Offi cer of The Don Group, having assumed the role in early 2000 following his acquisition of a signifi cant shareholding. He has been involved in the hotel industry for more than 15 years. Besides his interest in the Don Group, he is a founder member and chairman of the Tourism Business Council of South Africa (TBCSA). He was appointed to Basil Read’s board in July 2006.

6. Charles Peter Davies (60)Independent non-executive directorCharles began his career in the insurance industry, culminating in his appointment as Chief Executive Offi cer of Norwich Holdings, a post he held from their incorporation in 1995 until his retirement in 1999. He currently serves on various boards in a non-executive capacity. He was appointed to the board of Basil Read in July 2006.

7. Sindile Lester Leslie Peteni (62)Independent non-executive directorBSc (Building Science) (University of Cape Town)

Lester has numerous years of experience in various roles at construction and property development companies. He is a founding member and director of Thebe Investment Corporation, an ANC-owned investment company, primarily focusing on business development. He is an active member of the ANC assisting with executive management and fundraising. He was appointed to the board in July 2006.

Basil Read Annual Report 2006 09MANAGEMENT

A

B

F

C

E

G

D

H

I

K

J

A. Jacobus Frederick van Biljon (50)Chief Operating Offi cerBComm (Hons)

Kobus has twenty-seven years experience in the building and construction industry. Following a successful tenure as managing director of the Building division, he was appointed Chief Operating Offi cer in 2006. His responsibilities include the running of the operational divisions as well as the active marketing and maintaining of Basil Read’s image in the marketplace.

B. Christopher John Erasmus (45)Managing Director: Roads and Civil EngineeringNHD Civil Eng, PR Techni Eng, PrCM

Chris has twenty-three years experience in the construction industry and has been with Basil Read for this period. He has acted as Contracts and Design Manager on roads and civils contracts, mainly in South Africa, with some exposure to cross-border infrastructural development. Chris was appointed managing director of the Roads and Civil Engineering division during 2004.

C. Deon de Jager (37)Director: RoadsNHD Civil Eng, PrCM

Deon has worked in the construction industry for the past seventeen years and has been with Basil Read for this period. He started with Basil Read in 1990 as a bursary student and has since held numerous managerial positions. He was appointed managing director of the Roads division in 2006.

D. Willem Sterrenberg Meyer (46)Director: CivilsBSc Eng Hons

Willem has twenty years experience in the industry, where he has been responsible for a variety of contracts at some of the largest construction companies in South Africa. He joined Basil Read in 2006 where he took responsibility for the civils division in his current post as Director: Civil Engineering.

E. Eugene du Toit (52)Managing Director: Opencast Mining and Special ProjectsBSc Eng Hons, Diploma in Arbitration

Eugene has thirty years experience in the industry, where he has held various senior executive positions with some of the largest construction companies in South Africa. He joined Basil Read in 2006 as managing director of Special Projects with Opencast Mining being added to his portfolio a few months later.

F. Reinoud Cornelius Oranje (45)Managing Director: BuildingsNHD QS:MAQS

Reinhoud joined the group in 1989 where he was involved with the Building division until 2001 after which he became group management accountant until 2003. He subsequently spent two years in the legal department as group contractual and QS manager after which he returned to the Building division. He was appointed managing director of the division in 2006.

G. Terence Desmond Hughes (58)Managing Director: DevelopmentsPEng (UK), PrCM, MSE, ACIOB

Des has thirty-six years experience in the construction industry ranging from consulting practices and contracting to project developments. His main focus is on projects that meet the requirements of the government’s “Breaking New Ground” policy, such as the highly successful Cosmo City development. Des joined Basil Read in 1996 and was appointed managing director of the division in 2006.

H. Norman Milne (52)Commercial DirectorNHD:QS A Arb

Norman has over 30 years experience in the local and cross-border construction industry with the main focus on the commercial and contractual management of heavy civil engineering and building projects. Norman joined Basil Read in 2006 and is responsible for the commercial, contractual and risk management functions of the group.

I. Manuel Donnell Grota Gouveia (31)Group Finance DirectorBCompt (Hons), CA(SA)

Donny has worked in the fi nance fi eld for 13 years, seven of which were in the auditing profession. He joined Basil Read in 2001 and is responsible for group fi nancial reporting, taxation planning and group treasury and fi nance. Donny was appointed to his current post in 2004.

J. Bernard Melvin Johnson (39)Director: Employee benefi ts and HRDiploma: HR Management & IR/Labour Law

Bernard joined the group in 1988 as payroll administrator and assumed the role of remuneration manager during 2004. He is currently responsible for managing employee relations and good governance in terms of all employee remuneration. He is also actively involved in managing the group’s employee benefi ts. He was appointed as a director in 2006.

K. James Stephen Johnston (54)Technical DirectorBSc Civ Eng, CEng, PrEng, MICE, MSAICE

Jimmy has over thirty years experience in the management and construction of roads, civils, infrastructure and building works throughout Southern Africa. His responsibilities include management of the technical, estimating and purchasing departments of Basil Read. He joined Basil Read in 1975 and was appointed as a director in 2006.

MA

NA

GE

ME

NT

CV

’s


OR

GA

NO

GR

AM

– D

IVIS

ION

S

Chief Executive Offi cer Marius Heyns

E X E C U T I V E C O M M I T T E E C O M P R I S I N G

Chief Operating Offi cer Kobus van Biljon

ROADS AND CIVILENGINEERING

OPENCAST MINING BUILDINGS DEVELOPMENTS

Managing DirectorChris Erasmus

Managing DirectorEugene du Toit

Managing DirectorDes Hughes

Director: RoadsDeon de Jager

Director: CivilsWillem Meyer

Earthworks

Bridges

Pipelines

Harbour and marine works

Industrial plants

Stadiums

Roads and highways

Airports

Spray Pave (Pty) Limited – supply and spraying of bitumen and related products

Stone and Allied Industries Limited – supply and spraying of bitumen and related products

Opencast contract mining

Mine spoils rehabilitation

Bulk earthmoving

Thin, thick and multiple seam mining

Hard rock selective mining

Materials handling

Retail and offi ce complexes

Apartment blocks

Educational facilities

Hospitals

Prisons

Residential housing

Property development

Housing schemes for low and middle-income earners

Public private partnerships

O P E R AT I O N S

Managing DirectorReinoud Oranje


Group Risk DirectorNorman Milne

Group Finance Director Donny Gouveia

Technical Director Jimmy Johnston

S U P P O R T

GROUP RISK FINANCE HUMAN RESOURCES TECHNICAL

Group policies and procedures

Group commercial and risk

Legal

Group insurance

Group QSE


Shared services – fi nance

Group fi nance and treasury

Group tax

Statutory reporting

Investor relations and reporting


Shared services – payroll

Bursary student management

Employee relations

Employee benefi ts

Group training and development

HIV/AIDS management


Buying and logistics

Group tendering

Design and build

Director: Employee Benefi ts and HR

Bernard Johnson


ROADS AND CIVIL ENGINEERING

Name of project: Berth 306, Richards Bay

Client: National Ports Authority

Contract value: R250 million

Duration: 28 months

Major quantities: Land based excavation – 250 000 m3

Concrete – 20 000 m3

Reinforcing – 3 100 tons

Dredging – 3,6 million m3

Reclamation – 500 000 m3


OPENCAST MINING

Name of project: Rössing Uranium Mine, Namibia

Client: Rio Tinto


Duration: 21 months

Major quantities: Rock mined to date – 6,5 million tons

Rock still to be mined – 7,5 million tons

Opencast Mining has previously worked for Rio Tinto at their Phalaborwa Mine. The contract was extremely successful.


OC

S

Basil Read Annual Report 2006 17BUILDINGS

Name of project: Hydro Park on Grayston

Details of project: 17 storey building, including four

basements, comprising

234 apartments

Client: Hydro Holdings


Duration: 24 months

Major quantities: Bulk excavations – 43 000 m3

Concrete – 16 500 m3

Reinforcing steel – 1 600 tons

Formwork – 52 600 m2

Bricks – 3 million

Plaster – 83 400 m2


DEVELOPMENTS

Name of project: Cosmo City

Client: City of Johannesburg, Gauteng

Department of Housing


Duration: 10 years

Sites to be developed: 11 490 sites in total, including public open space, municipal and conservation sites.

– 5 000 RDP homes

– 3 000 fi nance credit linked

– 3 360 bonded homes


S

Basil Read Annual Report 200620C

HA

IRM

AN

’S R

EV

IEW

It gives me great pleasure to present this year’s annual

report, as Basil Read has built on the successes

of 2005 to produce record results in 2006. In our

twentieth year since listing, we have completed our

turnaround in a convincing manner and are well

positioned to face the challenges that lie ahead.

The construction industry is currently experiencing an

unprecedented boom, one which, in my opinion, looks

set to continue well beyond 2010. The group’s business

is concentrated in the South African market, although

work for selected private clients in sub-Saharan Africa

will continue for the foreseeable future. This focus

continues to work well for Basil Read, given buoyant

infrastructure spending in the local market.

Although a high level of organic growth was

experienced during the year, we are monitoring

opportunities for expansion through acquisition.

Following on from the strategic investments made in

2006, we have reached agreement with Blasting &

Excavating Group to acquire their entire issued

share capital, subject to the fulfi lment of certain

conditions precedent, for a purchase consideration of

R100 million. Blasting & Excavating’s core business is

the provision of specialised drill and blast services for

clients including mines, construction contractors and

commercial quarries. As they currently do all the drilling

and blasting for the Opencast Mining division, synergies

exist and we expect this acquisition to signifi cantly

enhance earnings.

Market support for our performance and potential

has seen our share price rise from R3,89 at the

beginning of the year to R12,60 at the end of the year,

convincingly outperforming both the JSE All Share

index and our peers in the construction and materials

sector for the second consecutive year.

Despite Metallon Ventures (Pty) Limited’s departure as

a black economic empowerment partner, we continue

to be the leading black-empowered construction group

in South Africa. Collectively, Amabubesi Investments

(Pty) Limited, Vuwa Investment (Pty) Limited and

Mquanda Trust hold 39% of Basil Read. In addition

to the long-standing relationship with our international

partner, Bouygues Travaux Publics SA, our group is well

positioned to compete in the domestic construction and

materials sector, for the benefi t of all stakeholders.

“Basil Read has built on the success of 2005 to produce record results in 2006”

Bulelani Thandabantu NgcukaChairman


ever produced. As we move forward into a robust era

at Basil Read, I know that the group is in capable

hands. The ongoing efforts of all concerned have been

acknowledged and recognised.

Bulelani Ngcuka

Chairman

The change in shareholding has led to a change in

the composition of the board of directors. Non-

executive directors Mr A J Reve and Mrs N H Maliza

resigned from the board and were replaced by

Messrs S Ntsaluba and T Tlelai. Messrs C Davies and

L Peteni were appointed as independent non-executive

directors on 5 July 2006.

The directors and senior managers of the group

endorse the Code of Corporate Practices and

Conduct as set out in the King II report on Corporate

Governance. Having regard for the size of the group,

the board is of the opinion that the group substantially

complies with the Code as well as with the Listings

Requirements of the JSE Limited. The group performs

regular reviews of its corporate governance policies and

practices and strives for continuous improvement in

this regard.

During my tenure as chairman of Basil Read, it has

become clear that the group’s strength is its people. It is

also apparent that the skills shortage in the construction

industry is fast approaching a critical level. To this

end, 2 058 600 shares were issued to the Basil Read

Share Incentive Trust in January 2007, to be distributed

amongst staff as part of a staff retention incentive and

as acknowledgement for their loyalty and dedication,

despite the hardships of recent years.

In closing, I would like to thank Marius and his team,

encompassing all staff of Basil Read, for the exceptional

efforts that gave rise to the best results the group has


HIE

F E

XE

CU

TIV

E O

FF

ICE

R’S

RE

VIE

W

Building on the strong results recorded at the interim stage, Basil Read has produced record results for the 12 months to 31 December 2006, refl ecting both the foundation laid in 2005 and a favourable economic environment.

The board is proud to report an after-tax profi t of R55 million (December 2005: R25 million), a commendable increase of 120%. Turnover increased by 88% to R1,2 billion (December 2005: R617 million), by far the highest in the group’s 54-year history. Cash on hand rose to R266 million (December 2005: R91 million).

New contracts secured during the year totalled R2 billion (December 2005: R1 billion) and the order book at the end of the period is strong at R2,3 billion (December 2005: R1,3 billion), underpinning our forecasts of sustainable growth. At the time of writing, the group was negotiating additional work worth R1,5 billion that was not included in the order book.

Importantly, Basil Read maintained its category 9 grading from the Construction Industry Development

Board during the year. This prime grading is only accorded to companies capable of managing contracts exceeding R100 million and places our group fi rmly among the industry forerunners in tendering for large-scale projects.

Against increased current and projected activity levels, Basil Read invested in new plant worth R99 million (December 2005: R33 million). Ongoing plant acquisition is guided by prudent assessments of expected activity levels and a comprehensive maintenance programme to ensure the optimal use of existing plant. The group has budgeted for capital expenditure of R150 million in 2007.

During the year, the group’s issued guarantees amounted to R320 million (December 2005: R175 million). These guarantees have arisen in the ordinary course of business and it is not expected that any loss will arise out of their issue. The group increased all banking facilities to accommodate expected growth and at year end had a guarantee facility of R1 billion in place.

In the second half of the year, Basil Read initiated a clawback offer to existing shareholders, effectively a fully underwritten rights issue. This increased the group’s capital base by R105,5 million at a time when the number, scale and average duration of contracts in all divisions had increased materially following a period of low activity levels in the construction and contract-mining sectors. Being well capitalised enables Basil Read to effectively manage the inherent fi nancial challenges of the construction industry, pay regular dividends and raise competitive performance bonds when required.

“Basil Read has emerged from a challenging period in recent years as a well capitalised, appropriately structured and managed group”

Marius Lodewucus HeynsChief Executive Offi cer, Managing Director


Dividends

Given Basil Read’s excellent results for the year and balance sheet strength that collectively signal the completion of its turnaround and resumption of steady growth, the directors declared a dividend of 30 cents per share for the year to 31 December 2006.

Strategic investments

Despite the high level of organic growth being experienced, the group monitors opportunities for expansion through acquisition. In light of this, Basil Read increased its shareholding in two associate companies, BR-Tsima Construction (Pty) Limited and Newport Construction (Pty) Limited, to 51%. These subsidiaries have been consolidated into the annual results, giving rise to a contract-based intangible asset that will be amortised over the period of the longest existing contract at date of acquisition.

To complement its steady organic growth and scope of operations, the group made two strategic investments during the review period. Effective 1 July 2006, Basil Read is now a majority shareholder in Spray Pave (Pty) Limited, a bitumen supplier and sprayer, and Stone and Allied Industries Limited, a stone-crushing company. These acquisitions were internally funded and their results consolidated into the group’s results for the review period.

OPERATIONAL REVIEW

Buildings

Continuing the growth trend of late 2005 and favourable market conditions, the Building division secured several new contracts during the year, including the construction of Paarl Hospital, valued

at R200 million. The division has been active in Cape Town since early 2006 following the award of the Paarl Hospital contract. Substantial growth is projected in this region during 2007.

The division started and completed, in eight months, the construction of three schools in Cosmo City, the fl agship project in partnership with government. This design-and-construct project included furnishing the buildings, enabling the Gauteng Education Department to open the schools in the new year.

Good progress on the Grayston Apartments and renovations to Chris Hani/Baragwanath Hospital was made during the year. The division also completed the extension to our own head offi ces which were opened in January 2007.

Current projects are evenly spread between private and public sectors, and prospects for sustainable growth are promising. The slowdown in the residential housing market has not affected this division as it has limited exposure to this segment.

From a base of R350 million in 2005, work secured for 2007 has risen to R650 million, excluding a number of large projects that are expected to be awarded in the second quarter of the new fi nancial year. The division will also be involved in the construction of sports stadiums in Nelspruit and Mogale City.

The division has been restructured to manage an increased current and expected workload, and its ability to attract top-calibre senior professionals despite well-publicised shortages of skills in the construction sector underscores the group’s reputation for delivery.


HIE

F E

XE

CU

TIV

E O

FF

ICE

R’S

RE

VIE

W (

cont

inue

d)

Developments

Phase two of Cosmo City, the fl agship project in partnership with government, is progressing well. Given the success of this project, the division is investigating similar property developments with limited property risk, with particular emphasis on Public Private Partnership (PPP) initiatives.

Roads and Civil Engineering

The Roads and Civil Engineering division produced outstanding results for the year and performed on numerous contracts, ranging from infrastructure development with the Coega Development Zone in Port Elizabeth, upgrading Pier 1 in Durban Harbour in KwaZulu-Natal, road-building in most provinces in South Africa to marine works at Richards Bay harbour.

The divisional focus remains on infrastructure development projects for both public and private clients in South Africa.

In January 2007 the division, in partnership with Bouygues, was awarded the contract to build the 2010 Soccer World Cup stadium in Nelspruit. This is a 24-month contract valued at R810 million. In addition, it has an ongoing contract for elements of the Gautrain project in partnership with Intrafor and secured the contract for the Khangela Bridge joint venture in KwaZulu-Natal.

The Civil Engineering division was strengthened during the year with the appointment of a divisional managing director responsible for building capacity in this unit.

The Roads division recorded steady growth and improved results during the review period, successfully completing projects in Limpopo, Gauteng and Eastern Cape. The Cosmo City project is ongoing, and contracts

secured during the period included the R200 million Sasolburg rehabilitation project and two road projects valued at R500 million.

The empowerment companies, BR-Tsima Construction (Pty) Ltd and Newport Construction (Pty) Ltd posted good results for the year with Newport securing two new contracts from the Coega Development Corporation starting in March 2007.

Stone and Allied Industries Ltd and Spray Pave (Pty) Ltd returned to profi tability under the leadership of this division and have recorded signifi cant growth since becoming members of the Basil Read group.

The momentum of infrastructural development is well under way, and with industry grading implemented in tender processes the increased scale of projects presents excellent opportunities for larger contractors. With an order book exceeding R1 billion for 2007 (2006: R500 million), the divisional outlook is extremely positive. Both the Civil Engineering and Roads units are building capacity through recruitment and purchasing major plant and equipment.

Opencast mining

The Opencast Mining division recorded acceptable results after a challenging year, securing an order book of R452 million (2006: R27 million) with potential extensions on existing contracts.

The contract with Rössing Uranium in Namibia, secured in the fi rst half, is a pioneering contract on the existing mine and is progressing well. At year end, the division and its joint-venture local partners were awarded contracts for two Debswana opencast diamond mines, in Botswana. The division remains well positioned to capitalise on a strong resources market.


The most signifi cant challenge during the year was the termination of a major contract with Lonmin Platinum, outside Brits. The division is currently negotiating monies outstanding relating to escalation and additional claims relating to a change in scope of works with Lonmin. Discussions are ongoing. The division recognised an additional loss of R4,1 million during the current year (2005: R14 million loss recognised) on the Lonmin contract.

The Mupane Gold Mine in Botswana was acquired by a competitor mining group during the year. Following major production challenges, we have reduced our risk exposure on this contract by changing it to an alliance contract which is expected to run into 2008.

The group identifi ed the increased risk of owning specialised mining trucks and excavators and is currently exploring options to mitigate this risk.

The performance of contracts in hand is expected to support improved results for the division, which has an order book of R296 million for 2007 and will remain focused on southern Africa for expansion and growth.

Plant and corporate expenses

Basil Read’s plant unit is a fully functional, integrated service department to the operating divisions, tasked with maintaining and acquiring plant and equipment to accommodate the group’s growing business. This is a disciplined process based fi rstly on a comprehensive maintenance programme to optimise the life of existing assets and, secondly, on an acquisition strategy that balances fi nancial and technical considerations.

During the year, Basil Read spent R96 million on plant and equipment, 55% of which was mining equipment. Three-year plant replacement plans are being fi nalised

and additional staff placements were made to improve service levels to group sites. The roll-out of group plant management systems into subsidiaries is also under way.

In the past two years, Basil Read has signifi cantly reduced its overhead structure. This process was largely completed with the opening of the new head offi ce complex in Boksburg but the focus on cost management will be ongoing.

APPRECIATION

At every level, our group is characterised by people who bring their passion and professionalism to every board meeting and site conference, and into our workplace every day. Your contributions are invaluable in achieving our goals. With your continued support, we will achieve them even sooner.

PROSPECTS

Basil Read has emerged from a challenging period in recent years as a well capitalised, appropriately structured and managed group, ideally positioned to capitalise on buoyant conditions in the construction sector, and the accelerated programme of infrastructural development under way. Results for the year underscore the solid base now in place to sustain steady organic and acquisitive growth ahead.

Marius Heyns

Chief Executive Offi cer


OR

PO

RA

TE

GO

VE

RN

AN

CE

Basil Read endorses the values of good corporate governance and standards recommended in the Code of Corporate Practices and Conduct in King II, as well as the Listings Requirements of the JSE Limited. Corporate governance remains a permanent item on the board’s agenda, and the board believes the group substantially complies with the Listings Requirements in a manner commensurate with the size of the group.

Further details of the group’s corporate governance practices are set out elsewhere in this report, most notably in the sustainable development section on page 31, and the statutory disclosures on pages 40 and 92. The framework within which the group implements its corporate governance policies is detailed below.

Board of directors

The board retains effective control over the group and monitors the implementation of strategies and policies by the executive management team through various committees and processes. The information provided to the board is suffi cient to enable the directors to consider decisions on material matters.

Following the disposal of Metallon Ventures (Pty) Limited’s interest in the group, non-executive directors Mr A J Reve and Mrs N H Maliza resigned from the board and were replaced by Messrs S Ntsaluba and T Tlelai. Messrs C Davies and L Peteni were appointed as independent non-executive directors on 5 July 2006.

Basil Read retains a unitary board structure. At the reporting date the board comprised one executive director, four non-executive directors and two independent non-executive directors.

None of the directors has a service contract with the group. Three directors retire each year by rotation with reappointment subject to the approval of shareholders at the annual general meeting. No restraint of trade payments are made to directors.

Chairman and chief executive offi cer

The roles of chairman and chief executive offi cer are separate.

Strategy

The group operates according to a business plan, compiled by the executive management team and approved by the board of directors.

A documented and tested business continuity plan, which details the procedure to be followed to prevent the loss of essential business data in the case of an IT system malfunction or collapse, is included in the quality/safety/environmental procedural system. In addition, adequate business interruption insurance to cover the cost of the restoration and recovery of lost data as well as other related items is also in place.

Committees

While the board ultimately remains responsible for the performance and affairs of the group, audit/risk and remuneration committees assist the board in discharging its duties and responsibilities.

The board and external auditors have unrestricted access to all records, assets and employees, as well as to each committee and its chairman.

Dates of meetings and attendance by the members of these committees appear on page 27.

“Basil Read is committed to being a responsible corporate citizen in the communities and environment in which it operates”

Enna KrugerCompany Secretary


Schedule of meetings held – during 2006Basil Read Board of Directors

DATE MEETING HELD DIRECTOR’S NAME ATTENDED APOLOGIES

02 February 2006 BT Ngcuka ✓

ML Heyns ✓

LB Dyosi ✓

NH Maliza ✓

AJ Reve ✓

13 April 2006 BT Ngcuka ✓

AGM ML Heyns ✓

LB Dyosi ✓

NH Maliza ✓

AJ Reve ✓

05 July 2006 BT Ngcuka ✓

ML Heyns ✓

S Ntsaluba ✓

T Tlelai ✓

C Davies ✓

SLL Peteni ✓

LB Dyosi ✓

16 August 2006 BT Ngcuka ✓

ML Heyns ✓

S Ntsaluba ✓

T Tlelai ✓

C Davies ✓

SLL Peteni ✓

LB Dyosi ✓

05 October 2006 BT Ngcuka ✓

ML Heyns ✓

S Ntsaluba ✓

T Tlelai ✓

C Davies ✓

SLL Peteni ✓

LB Dyosi ✓

15 March 2007 BT Ngcuka ✓

ML Heyns ✓

S Ntsaluba ✓

T Tlelai ✓

C Davies ✓

SLL Peteni ✓

LB Dyosi ✓

Schedule of meetings held – during 2006Basil Read Audit/Risk Committee

DATE MEETING HELD MEMBER’S NAME ATTENDED APOLOGIES

02 February 2006 A Reve ✓

M Booi ✓

P Wolmarans ✓

M Heyns ✓

13 August 2006 S Ntsaluba ✓

SLL Peteni ✓

ML Heyns ✓

20 November 2006 ML Heyns (by proxy)

✓

S Ntsaluba ✓

SLL Peteni ✓

14 March 2007 ML Heyns ✓

S Ntsaluba ✓

SLL Peteni ✓

Schedule of meetings held – during 2006Basil Read Remuneration Committee

DATE MEETING HELD MEMBER’S NAME ATTENDED APOLOGIES

19 January 2006 OJP Giot ✓

L Pienaar ✓

BM Johnson ✓

E Kirsten ✓

24 January 2006 OJP Giot ✓

L Pienaar ✓

BM Johnson ✓

E Kirsten ✓

07 February 2006 OJP Giot ✓

L Pienaar ✓

BM Johnson ✓

04 October 2006 CP Davies ✓

AT Tlelai ✓

OJP Giot ✓

BM Johnson ✓

22 November 2006 CP Davies ✓

AT Tlelai ✓

OJP Giot ✓

BM Johnson ✓

07 February 2007 CP Davies ✓

AT Tlelai ✓

OJP Giot ✓

BM Johnson ✓


OR

PO

RA

TE

GO

VE

RN

AN

CE

(co

ntin

ued)

Audit/risk committee

The audit/risk committee comprises two non-executive directors, one of whom is independent, and one executive director.

The committee meets periodically throughout the year to review the fi nancial statements, the scope of external audit functions, risk management and the effectiveness of management information, internal controls and corporate governance procedures and reports to the board on its fi ndings. It is also responsible for reviewing the group’s accounting policies and statutory compliance and recommending changes, where appropriate.

The board is satisfi ed that the audit risk committee has fulfi lled its responsibilities under its terms of reference.

Remuneration committee

The remuneration committee, which comprises two non-executive directors, one of whom is independent, and two members of management, meets periodically throughout the year.

Its objectives are to assist the board in determining conditions of employment and to review and approve remuneration policies and practices for executive directors and senior management of the group. The committee is also responsible for establishing the policy for, and operation of, the group’s share incentive scheme. This committee is satisfi ed that executive directors are remunerated in line with their responsibilities and performance, and in line with the market.

Remuneration philosophy

Basil Read’s philosophy is to encourage sustainable long-term performance. The purpose of remuneration is to attract, retain, motivate and reward staff to achieve the group’s objectives.

Remuneration is reviewed at appropriate intervals to motivate staff to perform to a required standard and to retain their services by offering and maintaining at least market-related remuneration in line with their performance and outputs for particular jobs.

Remuneration increases are granted for all staff annually in March, considering individual performance and output and appropriate market increases. Performance bonuses depend on the achievement of fi nancial and operational targets.

Basil Read’s performance bonuses

Basil Read has an organisational bonus plan that offers short-term incentives to executives and management, based on group performance levels. A bonus pool will be created only if certain criteria/fi nancial standards are met, and its size is a function of productivity and improved performance in real terms.

The executive directors and management are allocated bonuses from the organisational pool based on:

• divisional performance; and

• individual performance.

The chief executive offi cer’s performance is reviewed by the chairman and the board, together with the remuneration committee. The performances of other directors are reviewed by the chief executive offi cer and the chairman. Details on the remuneration of directors appear on page 42.

Code of ethics

The group’s code of ethics requires employees to abide by the highest ethical principles and standards in all transactions and all interactions with stakeholders.

Basil Read realises that its strength lies in its people, its capital and its reputation.

Through the group’s stringent procedural system, employees’ performance in relation to the company’s ethics is monitored. Any reported breaches of this code are managed through the group’s internal disciplinary procedure.

The integrity of new employees is evaluated through careful screening and checking references from past employers. New employees receive an induction manual which highlights, inter alia, what is expected from them regarding corporate ethics and values. A summary of their experience is featured in a welcome notice published on notice boards at all sites and head offi ce.


Financial statements

The directors are responsible for preparing fi nancial statements which fairly present the state of affairs of the group at the end of each fi nancial period. For detailed commentary on the directors’ responsibilities, refer to page 38.

The board ensures the consistent use of appropriate accounting policies, supported by reasonable and prudent judgements and estimates. Basil Read implemented International Financial Reporting Standards (IFRS) in terms of the Listings Requirements of the JSE Limited in 2005.

The board recognises that it is responsible for compliance with IFRS and has prepared the fi nancial statements set out in the annual report accordingly.

Auditing

The primary responsibility of the group’s external auditors is to express an opinion on whether fi nancial statements are fairly presented. The external auditors were also formally engaged by the board to perform other services on behalf of the group. Fees paid for these services are disclosed in note 3 to the fi nancial statements and include:

• Advice on various tax issues including transfer pricing, VAT and capital gains taxation.

• Factual fi ndings reports for tender documentation.

The external independent auditors have also reviewed the non-fi nancial aspects of this annual report to ensure consistency with their knowledge of the business, particularly those aspects embodied in the King Report on Corporate Governance for South Africa 2002. They do not, however, express an opinion on these aspects.

Unless otherwise stated, the non-fi nancial aspects of this annual report have not been subject to external validation.

Company secretary and professional advice

The company secretary is appointed by the board and duties include providing guidance to the directors of the group on their duties and ensuring awareness

of all relevant legislation and statutory requirements. The company secretary’s statement of compliance is set out on page 38 of the fi nancial statements.

The company secretary is suitably qualifi ed and experienced and is responsible for, among others, the duties stipulated in section 268G of the Companies Act and for the certifi cate to be signed in terms of sub-section (d).

All directors have access to the advice and services of the company secretary, who is responsible to the board for ensuring that board procedures are followed.

All directors are entitled to seek independent professional advice about the affairs of the group at the group’s expense.

Internal control and risk management

Financial risk management

The board has established controls and procedures to provide a high standard, but not absolute assurance, on the accuracy and integrity of the group’s fi nancial information.

These controls are designed to safeguard, verify and maintain accountability of the group’s assets and to detect and minimise fraud, liability and loss or unauthorised use. All joint ventures, associates and partnerships are subject to the same risk profi le procedure as any other project undertaken by the group.

Operational risk management

Basil Read takes its quality, safety and environmental policies extremely seriously, refl ected in the systems and procedures that govern its daily conduct. All controls and procedures are formalised in line with a comprehensive quality and safety management system, and certifi ed under the following accreditations: ISO 9001:2000 and OHSAS 18001:1999. The group’s safety record on sites is testimony to the success of this aspect of its risk management.

The group also believes that clear and distinct designation of responsibility and authority is essential.


OR

PO

RA

TE

GO

VE

RN

AN

CE

(co

ntin

ued)

The risk management process incorporates:

• clearly defi ned responsibilities incorporated into the system of corporate governance;

• clear communication of the group’s philosophy, strategy, objectives and values to all employees;

• clear written policies and procedures; and

• the empowerment and incentivisation of staff according to the group’s long-term objectives.

No signifi cant internal control issues were identifi ed during the year.

Going concern

The board of directors confi rms that the group has adequate resources to continue to operate for the foreseeable future and will remain a going concern in the year ahead.

Share dealings

Basil Read operates two closed periods from 31 December and 30 June each year until the publication of its year-end and interim results, respectively. To ensure that dealings are not carried out at a time when other price sensitive information may be known, directors and named offi cers must at all times obtain permission from the chairman before dealing in the shares of the company at any time. Dealings in company shares by directors and named offi cers are, as required, disclosed to the JSE and published on SENS.

Share incentive scheme

A share incentive scheme for employees and directors was launched in 2002. After the balance sheet date, the company issued a further 2 058 600 shares to the Basil Read Share Incentive Trust.

Stakeholders

The directors recognise the importance of strong relationships with all the group’s stakeholders, whose needs are balanced against the group’s accountability to its shareholders. The group subscribes to a policy of open and timeous communication in accordance with the JSE Listings Requirements.

Corporate responsibility

Basil Read is committed to being a responsible corporate citizen in the communities and environment in which it operates. It has a commitment to maintain positive relationships with all stakeholders, the well-being of the environment and uphold universal human rights. Basil Read realises that its continued success is not just a factor of economic performance, but also relates to its investment in corporate, social and environmental sustainability initiatives.

Further details are included in our inaugural sustainable development report on page 31, which we intend to expand incrementally to comply with international reporting standards in this fi eld.


The Basil Read group acknowledges and accepts its corporate social responsibility, extending its contribution from building the roads, bridges and dams that underpin the economic fabric of our society to enhancing the quality of life of people we employ and those touched by our operations.

Building on the family values that have guided our group since inception 54 years ago, we are adopting the triple bottom-line approach to reporting to our stakeholders by integrating our economic, social and environmental performance in our annual report. In doing so, we are guided by the recommendations of King II, the Global Reporting Initiative and the Global Compact. In many areas of the triple bottom-line approach, we have already made signifi cant progress, particularly in creating an equitable working environment for our people and in developing their full potential. In others, such as standardising our data-collection processes across the group for meaningful analyses of our environmental management, we still have some way to go. Beyond complying with relevant legislation, as a group we are committed to playing a role in South Africa’s transformation. This commitment will guide our corporate social investment initiatives as we embed sustainable development into every facet of our business.

Our people

The Basil Read group’s human resources charter includes:

• being strategic proponents of change;

• recruiting the best talents and instilling a sense of loyalty;

• sharing network opportunities; and

• appreciating that people are our greatest asset.

We fi rmly believe that the needs of our shareholders and management are best met when we also cater for the needs of our employees. The basis of the relationship between management and employees is embodied in our code of employment:

• Basil Read is a multiracial and non-discriminatory organisation;

• Basil Read creates and maintains equal opportunity for all its employees based on merit and skill; and

• Basil Read believes in the development of its people and will do whatever necessary to eradicate past inequalities in education and training and to maintain a balanced and highly skilled workforce.

SU

STA

INA

BL

E D

EV

EL

OP

ME

NT

Career growth and advancement is based on merit and structures are in place to ensure equal and accelerated opportunities for all.

Training and development

Basil Read remains committed to the continuous development of all its employees. Diverse training of high quality is ensured by only contracting with accredited training providers. Our training programmes cover a broad range:

• management development

• learnerships

• foreman development

• adult basic education

Employees are also encouraged to embark on further education and training with fi nancial support from the group through:

• further education and training college sponsorship

• group bursary scheme

• group study loan scheme

Other means of developing the group’s employees include mentorship programmes, on-site technical training and opportunities to gain experience through international exposure.

Comprehensive training programmes for all mechanics and plant operators are closely monitored and pro-actively implemented to guarantee that Basil Read’s plant team remains among the best in the fi eld.

Recognising our responsibility to assist in developing the skills of employees from previously disadvantaged backgrounds, over 90% of the annual budget is spent on training and development for these individuals.

Basil Read continues its Student Bursary Programme. During 2006, seven benefi ciaries were on the group’s scheme, inclusive of historically disadvantaged individuals.

The group also offers Technikon students the opportunity to do their practical year within the structure of the group and it is envisaged that Basil Read will partner with the Construction Education Training Authority (CETA) in offering these students a CETA bursary to assist them with their studies. A strong emphasis is being placed on assisting historically disadvantaged students with their careers and these students will continue their careers in Basil Read, upon the completion of their studies.


Employment equity

Basil Read maintains an environment that provides equal opportunities for all employees. An employment equity committee with representation by workers and management oversees the implementation of employment equity policies and procedures group-wide. The committee is responsible for monitoring our transformation progress, discussing items such as recruitment, development, promotion, resignation and dismissals. The committee meets twice annually.

Our employment equity objectives are to:

• ensure compliance with legislation;

• monitor the attainment of targets and objectives set out in the employment equity plan;

• monitor employment equity programmes such as training, mentoring and skills development;

• review targets, appointments, promotions and general employment equity matters; and

• communicate the company’s employment equity activities to relevant target audiences.

The employment equity committee has formulated its plan for the next few years, which includes special attention to career development planning for historically disadvantaged employees as part of the group’s continued training and development.

Progress towards employment equity targets

More than 90% of the group’s current employees are previously disadvantaged individuals. We continue to focus on sourcing and promoting people from designated categories into middle and senior management categories.

Industrial relations

Basil Read is recognised for sound labour relations and ongoing adherence to its industrial relations policy. Employees at all levels of management ensure they understand the company’s industrial relations policies and procedures, and implement them correctly and fairly.

SU

STA

INA

BL

E D

EV

EL

OP

ME

NT

(co

ntin

ued)

PLAN

ACTUAL

■ Male ■ Female

■ Male ■ Female

■ Black ■ White ■ Asian ■ Coloured

■ Black ■ White ■ Asian ■ Coloured

10% 1%4%

85%

10% 1%4%

85%

8%

92%

8%

92%


HIV/Aids

Basil Read acknowledges the seriousness of the HIV/Aids pandemic in South Africa and its signifi cant impact on the workplace. We share the understanding that HIV causes Aids, which is a chronic, life-threatening disease with severe social, economic and human rights implications. As a group, our desire is to become an example in the marketplace and to positively infl uence customers, suppliers and competitors in their response to the serious challenge that is HIV/Aids.

Accordingly, Basil Read is implementing various initiatives and policies:• Ensuring that, as far as possible, employees’ rights

to confi dentiality on their HIV status is maintained during any incapacity proceedings.

• Ensuring that employees with HIV or Aids are reasonably accommodated in the workplace.

• Assisting infected employees in remaining employed for as long as possible.

• Ensuring that employees with HIV are governed without discrimination or distinction to existing sick leave allocations.

• Committing to making free voluntary testing and counselling available to the entire staff.

• Not requiring an HIV test as a pre-condition of employment or admission.

• Keeping abreast of best practices and communicating updated policies and strategies from time to time.

The group’s established HIV/Aids workplace programme is managed by an independent institution which is assisting in implementing a holistic HIV management programme. This programme entails:• displaying the group HIV/Aids policy at every site;• conducting HIV/Aids surveys;• implementing a condom programme;• training peer facilitators to: – impart basic knowledge about HIV and relevant

issues to colleagues and – assist in the practical roll out of the HIV workplace

programme. • refer staff members to the appropriate solution/

service provider; and• encourage colleagues to participate in all facets of the

programme, particularly the awareness, counselling and testing programme.

In 2006, our group embarked on an extensive educational programme whereby posters and pamphlets supplied by the Department of Health were distributed to all sites and made available to all employees. As part of this programme, free condoms were handed out to staff in an effort to promote safe and healthy sexual habits. A similar programme is planned for 2007.

Basil Read is also represented on the Construction Industry Aids Forum, which focuses on Aids issues that impact the industry. The forum is facilitated by the South African Federation of Civil Engineering Contractors (SAFCEC). Working with external partners such as LoveLife, various concepts are being investigated and implemented. Basil Read is fully committed to supporting the forum in its continued efforts.

Corporate Social Investment

Basil Read is committed to contributing to the social upliftment of the communities in which we operate. Various initiatives were undertaken during the year, the most signifi cant of which was the contribution to the Mother’s Choice Day Care Centre.

The Mother’s Choice Day Care Centre is a local crèche caring for approximately 75 children between the ages of 18 months and six years. The facility is closely situated to our head offi ce in Boksburg. Through a serious of donations and undertakings, Basil Read refurbished the premises, improved the security through the erection of palisade fencing and supplied blankets and mattresses. We continue to monitor the needs of the crèche on a regular basis.

Other initiatives supported during the year include fundraising efforts by local schools and community projects, particularly in Cosmo City.

In an effort to improve our contribution to social investment a committee was formed during 2006 with the sole responsibility of identifying and proposing projects and initiatives that uphold the values of our group. In partnership with the Greater Good Society, Basil Read aims to focus on sustainable projects through enterprise development, with specifi c emphasis on previously disadvantaged communities and individuals.


Risk management

In mid-2006, Basil Read secured the services of Marsh Vikela as its insurance and risk services provider. Marsh Vikela is the South African arm of the global franchise Marsh & McLennan Companies, the world’s largest risk management and services provider.

After this appointment, Basil Read’s senior management conducted a comprehensive risk focus identifi cation exercise, facilitated by Marsh Vikela’s risk management specialists. This exercise identifi ed the probability, impact and controls of various risk and failure-type scenarios within Basil Read across operations, general management, fi nancial practices, asset management, compliance, strategy, people, environment, information and services.

This information was collated and analysed to identify priority areas that would be systematically addressed over the ensuing six to nine months. Three key areas successfully addressed to date are:

• Conducting a business continuity assessment and formulating a business continuity management plan at both head offi ce and site level.

• Reviewing the commercial and contractual risks that could be encountered from time of tender to contract completion, and identifying and documenting a number of interventions specifi cally aimed at mitigating or transferring these risks.

• Combining the various specialist service departments primarily tasked with risk identifi cation and management – commercial, legal, safety and quality assurance/quality control – into one department under one leadership.

In 2007, the focus will be on:

• Establishing a separate risk management committee that will meet regularly to oversee a common set of risk principles across the Basil Read business portfolio and group of companies to promote greater consistency and diligence in the way risk is managed in the group.

• Conducting further risk prioritisation and mitigating exercises in group subsidiaries to determine their respective risk exposures.

The risk mitigation and management portfolio is championed by the commercial director who is a member of the risk and audit committee and accountable to the board for performance in this area.

Quality, safety and environment

Basil Read has an integrated approach to quality, safety and environmental (QSE) management, with an annually updated QSE system that focuses on:

• strict supervision of project performance;

• workplace and operational safety; and

• respect for the environment, its protection and management.

The group applies a “fi rst time right” principle on every project, with the QSE system functioning as the procedural tool during project management. This means our QSE approach is fully integrated into the way we work by:

• setting objectives and defi ning indicators;

• individual managers formulating their own action plans;

• measuring progress regularly and analysing results; and

• measuring risk and reviewing action plans.

All employees are committed to achieving the QSE objectives set in their areas of responsibility, with operational staff and line management working together to ensure these are met. Basil Read’s QSE system allows it to anticipate client needs, control risks and enhance effi ciency.

The safety and health practices and procedures of the Basil Read group are fully compliant with the requirements of the Occupational Health and Safety Act, the Construction Regulations and the Mine Health and Safety Act as is evidenced by the group’s OHSAS 18001:1999 (safety) accreditation being renewed for the next three years.

Basil Read has also taken the lead in the construction sector by engaging a full time health practitioner to address all health-related issues and to establish a surveillance programme that ensures the health status of all employees is monitored on a regular basis.

SU

STA

INA

BL

E D

EV

EL

OP

ME

NT

(co

ntin

ued)


All employees undergo an induction programme to ensure they are familiar with OHSAS 18001 requirements. Follow up audits and training are carried out on site on a regular basis.

Basil Read’s Quality Assurance and Quality Control procedures have also been certifi ed as ISO 9001 compliant and our accreditation extended for a further three years.

Safety

Given that our employees are our most valuable asset, ensuring their health and safety is both a duty and commitment.

All activities are undertaken in accordance with the group’s safety policy and all related legislation, including the Occupational Health and Safety Act.

By taking the initiative and recognising the importance of quality and safety in the workplace, Basil Read ensures productivity. Risk analysis is the cornerstone of our safety management programme. It entails identifying risks related to human factors for each project and taking measures to control them. It is our prompt to ask the right questions at the right time, and to fi nd the right answers. This approach enables the group to identify risks pro-actively and to implement measures to control them, thus continually improving its safety standards.

Environment

Environmental protection is the foundation of sustainable development and Basil Read is committed to presenting the best possible planet to future generations. We aim to achieve this by reconciling short-term profi tability targets with long-term perspectives.

Our environmental policy is rooted in local, national and international legislation, and considers the expectations of communities affected by or involved in any of the company’s activities.

The implementation of this policy includes conducting the appropriate environmental impact assessment before embarking on a project for a clear understanding of the possible impact of planned actions. Once completed, designs or plans are amended to ensure the best method of least disturbance.

CONTENTS

38 Directors’ responsibility statement

38 Certifi cate by company secretary

39 Report of the independent auditors

40 Directors’ report

44 Consolidated income statement

45 Consolidated balance sheet

46 Consolidated statement of changes in equity

47 Consolidated cash fl ow statement

48 Accounting policies

57 Notes to the consolidated fi nancial statements

86 Company income statement

87 Company balance sheet

88 Company statement of changes in equity

88 Company cash fl ow statement

89 Notes to the company fi nancial statements

92 Shareholder information

Form of proxy (attached)

CO

NT

EN

TS

OF

TH

E F

INA

NC

IAL

STA

TE

ME

NT

S


38 Basil Read Annual Report 2006

DIR

EC

TO

RS

’ RE

SP

ON

SIB

ILIT

Y S

TA

TE

ME

NT

AN

D C

ER

TIF

ICA

TE

BY

CO

MP

AN

Y S

EC

RE

TA

RY

DIRECTORS’ RESPONSIBILITY STATEMENT

The directors are responsible for the preparation, integrity and fair presentation of the fi nancial statements of Basil Read Holdings Limited and its subsidiaries. The fi nancial statements presented on pages 40 to 92 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), and include amounts based upon judgements and estimates made by management.

The directors consider that in preparing the fi nancial statements they have used the most appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all IFRS that they consider to be applicable have been followed. The directors are satisfi ed that the information contained in the fi nancial statements fairly presents the results of operations for the year and the fi nancial position of the group at year end. The directors also prepared the other information included in the annual report and are responsible for both its accuracy and consistency with the fi nancial statements.

The directors are responsible for ensuring that proper accounting records are kept. The accounting records should disclose with reasonable accuracy the fi nancial position of the group companies to enable the directors to ensure that the fi nancial statements comply with the relevant legislation.

Basil Read Holdings Limited and its subsidiaries operate in a well-established control environment, which is well documented and regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but not absolute, assurance that assets are safeguarded and the risks facing the business are being controlled.

The fi nancial statements have been prepared on the going concern basis, since the directors have no reason to believe that the group will not be a going concern in the foreseeable future, based on forecasts and available cash resources. These fi nancial statements support the viability of the company and the group.

The group’s external auditors, PricewaterhouseCoopers Inc, audited the fi nancial statements and their report is presented on page 39.

The fi nancial statements were approved by the board of directors on 15 March 2007 and are signed on their behalf by:

BT NGCUKA ML HEYNS

Chairman Chief Executive Offi cer

15 March 2007 15 March 2007

CERTIFICATE BY COMPANY SECRETARY

I certify that the requirements as stated in section 268G(d) of the Companies Act 61 of 1973, as amended, have been met and that all returns, as are required of a public company in terms of the aforementioned Act, have been submitted to the Registrar of Companies and that such returns are true, correct and up to date.

E KRUGER

Company secretary

15 March 2007

39Basil Read Annual Report 2006

RE

PO

RT

OF

TH

E IN

DE

PE

ND

EN

T A

UD

ITO

RS

REPORT OF THE INDEPENDENT AUDITORS

To the members of Basil Read Holdings Limited

We have audited the annual fi nancial statements and group annual fi nancial statements of Basil Read Holdings Limited, which comprise the directors’ report, the balance sheet and the consolidated balance sheet as at 31 December 2006, the income statement and the consolidated income statement, the statement of changes in equity and the consolidated statement of changes in equity, the cash fl ow statement and the consolidated cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 40 to 92.

Directors’ responsibility for the fi nancial statements

The company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements present fairly, in all material respects, the fi nancial position of the company and of the group as of 31 December 2006, and of their fi nancial performance and their cash fl ows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

PRICEWATERHOUSECOOPERS INC

Director: JP van Staden

Registered Auditor

Johannesburg

15 March 2007


The directors present their twenty-second annual report, which forms part of the audited fi nancial statements of the company and of the group for the year ended 31 December 2006.

NATURE OF BUSINESSThe company is listed on the JSE Limited and its subsidiary companies are active in the areas of civil engineering, road construction, building, housing, property development, stone crushing, bitumen distribution and opencast mining. These subsidiaries operate throughout Africa.

DIVIDENDSOn 15 March 2007, the directors declared a fi nal dividend of 30 cents per share in respect of the year ended 31 December 2006. No dividend was declared in the 2005 fi nancial year.

SHARE CAPITALThe company issued 419 545 shares of R1,40 each, during the year, in terms of The Basil Read Share Incentive Scheme.

The company proceeded with a clawback rights offer to shareholders in terms of which 27 shares were offered for every 100 shares held. The company issued all shares on offer being 15 111 777 shares at R7,25. The company raised R105 million in share capital, nett of offer expenses.

OPERATING RESULTSThe financial position, results of operations and cash flows of the company and that of the group for the year ended 31 December 2006 are set out on pages 44 to 91.

The group made a profi t after taxation of R55 million (2005: R25 million) during the year under review.

PROPERTY, PLANT AND EQUIPMENTThe group acquired property, plant and equipment to the amount of R98,5 million (2005: R33,0 million).

INVESTMENT PROPERTYThe group recognised a R2,0 million (2005: R0,5 million) gain on the revaluation of investment properties during the year. The investment property was subsequently sold during the fi nancial year for its revalued amount of R3,5 million.

SUBSIDIARIES AND JOINT VENTURESOn 1 January 2006, the group acquired 100% of the share capital of Basil Read Civils Namibia (Pty) Limited for R10. The company is a civil engineering, earthworks and construction company, specialising in projects in Namibia.

On 1 July 2006, the group acquired 60,8% of the share capital of Stone and Allied Industries Limited for R10 million. The company is a stone crushing company.

On 1 July 2006, the group acquired 61% of the share capital of Spray Pave (Pty) Limited, a supplier and sprayer of bitumen and related products for R4,8 million.

The information relating to the company’s fi nancial interest in its subsidiaries and joint ventures is set out in notes 34, 36, 37 and 40 to the fi nancial statements.

DIR

EC

TO

RS

’ RE

PO

RT FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6


INVESTMENTS IN ASSOCIATESDuring the year the group purchased an additional 11 shares in Newport Construction (Pty) Limited for a total consideration of R150 000. This effectively took the group’s share in the company to 51%. The results of Newport Construction (Pty) Limited have been consolidated into the group accounts for the fi rst time in 2006.

In addition, the group increased its shareholding in BR-Tsima Construction (Pty) Limited to 51% through the purchase of an additional 19 shares for a total consideration of R450 000. The results of BR-Tsima Construction (Pty) Limited have been consolidated into the group accounts for the fi rst time in 2006.

Through the acquisition of Spray Pave (Pty) Limited, the group acquired a minority interest in Mmila Projects (Pty) Limited, a supplier and sprayer of bitumen and related products.

For more information on the group’s associates, refer to notes 3, 11, 25 and 35 to the fi nancial statements.

OTHER INVESTMENTSThe group acquired an industry related investment in Top Fix Holdings Limited during the year under review (2005: RNil). The group purchased 200 000 shares, representing less than 1% of the total issued share capital of Top Fix Holdings Limited, for a purchase consideration of R200 000.

The group did not dispose of any investments during the year (2005: R10 000), but did impair the investment in Binga Constuçoes Mozambique Limitada in the amount of R168 296 due to the expected non-recoverability of the investment (2005: RNil).

Through the acquisition of Stone and Allied Industries Limited, the group acquired an investment in Investec Limited representing less than 1% of the total issued share capital of Investec Limited.

BORROWINGSInterest-bearing borrowings comprise bank borrowings and instalment sale agreements. During the year interest-bearing borrowings increased due to new instalment sale agreements entered into to fund capital expenditure, partly offset by the repayment of banking loans and other instalment sale agreements.

EVENTS SUBSEQUENT TO THE BALANCE SHEET DATEAfter the balance sheet date, the company issued 2 058 600 shares in terms of the Basil Read Share Incentive Scheme. No other material events have occurred between the balance sheet date and the date of these results that would have a material effect on the fi nancial statements of the group.

SHAREHOLDER SPREADDetails of shareholder categories are set out on page 92 of this report.


DIRECTORATE The following were directors of the company during the year under review:

Bulelani Thandabantu Ngcuka Non-executive Director, Chairman

Marius Lodewucus Heyns Chief Executive Offi cer, Managing Director

Lungisa Brian Dyosi Non-executive Director

Nonkqubela Helen Maliza Non-executive Director(Resigned 19 May 2006)

Andile Joy Reve Non-executive Director(Resigned 19 May 2006)

Sango Siviwe Ntsaluba Non-executive Director(Appointed 5 July 2006)

Alexander Thabiso Tlelai Non-executive Director(Appointed 5 July 2006)

Charles Peter Davies Independent Non-executive Director(Appointed 5 July 2006)

Sindile Lester Leslie Peteni Independent Non-executive Director(Appointed 5 July 2006)

DIRECTORS’ EMOLUMENTS

Executive directors

Cash portion of package

R Benefi ts*

R

Incentive bonus

R Total

R2006Paid by Basil Read (Pty) LimitedMarius Lodewucus Heyns 1 292 169 189 760 1 200 000 2 681 929

1 292 169 189 760 1 200 000 2 681 9292005Paid by Basil Read (Pty) LimitedMarius Lodewucus Heyns 866 033 132 963 588 970 1 587 966

866 033 132 963 588 970 1 587 966* Benefi ts include the group’s contribution towards medical aid and provident fund.

Non-executive directors

Services as director

R Total

R 2006Bulelani Thandabantu Ngcuka 725 000 725 000 Lungisa Brian Dyosi 87 500 87 500 Nonkqubela Helen Maliza – –Andile Joy Reve – –Sango Siviwe Ntsaluba 152 500 152 500 Alexander Thabiso Tlelai 122 500 122 500 Charles Peter Davies 150 000 150 000 Sindile Lester Leslie Peteni 107 500 107 500

1 345 000 1 345 000 2005None – –

DIR

EC

TO

RS

’ RE

PO

RT FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

(con

tinu

ed)


INTERESTS OF DIRECTORS AND OFFICERS IN SHARE CAPITALThe interests, direct and indirect, of the directors and offi cers at the date of this report are as follows:

Number of shares held

% of shares held

2006Direct and indirectBulelani Thandabantu Ngcuka 500 978 0,70Sango Siviwe Ntsaluba 5 829 968 8,20Alexander Thabiso Tlelai 5 820 011 8,19Lungisa Brian Dyosi 166 993 0,23Enna Kruger (Company Secretary) 6 357 0,012005Direct and indirectBulelani Thandabantu Ngcuka 1 430 384 2,57

The company’s directors did not trade in shares between year-end and the date the fi nancial statements were authorised for issue.

INTERESTS OF DIRECTORS AND OFFICERS IN SHARE INCENTIVE SCHEMEThe interests, direct and indirect, of the directors and offi cers at the date of this report are as follows:

Number of unissued

shares

% of unissued

shares

% held once shares

issued

2006Direct and indirectEnna Kruger (Company Secretary) 5 000 1,39 0,01 2005Direct and indirectEnna Kruger (Company Secretary) 20 000 2,79 0,04

The right to the unissued shares are in terms of the Basil Read Share Incentive Scheme. For further details, refer to note 29(e).

SPECIAL RESOLUTIONSThere was one special resolution approved by the shareholders of the group during the year. During the annual general meeting dated 13 April 2006, the resolution to authorise the increase of the company’s authorised share capital from 70 000 000 shares to 76 000 000 shares was approved.

AUDITORSPricewaterhouseCoopers Inc will continue in offi ce in accordance with section 270(2) of the Companies Act, 1973.

COMPANY SECRETARYThe Company Secretary is Enna Kruger.

REGISTERED OFFICE POSTAL ADDRESS388 Gild Road Private Bag X170Lilianton BedfordviewBoksburg 20081459


Notes2006R’000

2005R’000

Revenue 1 162 198 617 332

Contracting revenue 1 016 193 563 478

Other 146 005 53 854

Contracting and other costs (1 016 810) (530 955)

Gross profi t 145 388 86 377

Admin and other operating overheads (93 488) (50 451)

Other income 1 18 –

Other gains/(losses) – net 2 1 832 500

Profi t on sale of associates 3 – 877

Operating profi t 4 53 750 37 303

Interest paid 5 (5 078) (7 117)

Interest received 5 6 428 3 106

Foreign exchange profi t/(loss) 5 2 129 (9 184)

Profi t before share of profi ts of associates 57 229 24 108

Share of profi ts from associates 11 – 158

Profi t before taxation 57 229 24 266

Taxation 6 (2 269) 709

Net profi t for the year 54 960 24 975

Net profi t for the year attributable to the following:

Equity shareholders of the company 54 103 24 975

Minority interests 857 –

Net profi t for the year 54 960 24 975

Earnings per share (cents) 7 93,53 45,31

Fully diluted earnings per share (cents) 7 93,05 45,19

CO

NS

OL

IDA

TE

D IN

CO

ME

STA

TE

ME

NT FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6


Notes2006R’000

2005R’000

ASSETSNon-current assets 215 007 106 933Property, plant and equipment 8 176 438 82 293Investment properties 9 – 1 500Intangible assets 10 10 444 –Investments in associates 11 66 428Deferred income tax assets 12 27 409 22 542Available-for-sale fi nancial assets 13 650 170

Current assets 415 941 159 896Inventories 14 6 659 1 141Contract and trade debtors 15 120 069 64 762Receivables and pre-payments 16 17 623 2 454Current income tax assets 1 072 290Cash and cash equivalents 17 270 518 91 249

TOTAL ASSETS 630 948 266 829

EQUITY AND LIABILITIESCapital and reserves 199 463 33 385Stated capital 18 164 537 58 550Retained earnings/(accumulated loss) 24 430 (29 673)Other reserves 4 264 4 508Minority interests 6 232 –

Non-current liabilities 55 775 24 045Interest bearing borrowings 19 49 982 22 808Provisions for other liabilities and charges 20 2 818 –Deferred income tax liabilities 12 2 975 1 237

Current liabilities 375 710 209 399Trade and other payables 21 281 844 156 202Current income tax liabilities 4 258 5 264Current portion of interest bearing borrowings 19 32 996 23 539Provisions for other liabilities and charges 20 52 531 24 394Bank overdraft 17 4 081 –

TOTAL EQUITY AND LIABILITIES 630 948 266 829C

ON

SO

LID

AT

ED

BA

LA

NC

E S

HE

ET

AS

AT

31

DE

CE

MB

ER

20

06


SharecapitalR’000

TreasurysharesR’000

Foreigncurrency

translationreserve

R’000

Fair valueadjustment

reserveR’000

Retainedearnings

R’000

Minorityinterest

R’000Total

R’000

Balance at 1 January 2005 58 264 – 2 917 – (54 648) – 6 533

Consideration received for issue of shares to Basil Read Share Incentive Trust 630 – – – – – 630

Shares held by the trust – (344) – – – – (344)

Currency translation differences – – 1 591 – – – 1 591

Profi t for the year – – – – 24 975 – 24 975

Balance at 31 December 2005 58 894 (344) 4 508 – (29 673) – 33 385

Consideration received for issue of shares to Basil Read Share Incentive Trust 587 – – – – – 587

Share held by the trust – (162) – – – – (162)

Consideration received for issue of shares in terms of clawback offer 109 560 – – – – – 109 560

Costs relating to the clawback offer (3 998) – – – – – (3 998)

Fair value gain net of tax– available-for-sale fi nancial assets – – – 231 – – 231

Acquisition of subsidiary – – – – – 5 450 5 450

Currency translation differences – – (475) – – – (475)

Profi t for the year – – – – 54 103 857 54 960

Dividends paid to minorities – – – – – (75) (75)

Balance at 31 December 2006 165 043 (506) 4 033 231 24 430 6 232 199 463

CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

OF

CH

AN

GE

S IN

EQ

UIT

Y FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006


CO

NS

OL

IDA

TE

D C

AS

H F

LO

W S

TA

TE

ME

NT

FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

Notes2006R’000

2005R’000

CASH FLOW FROM OPERATING ACTIVITIES 140 292 103 872

Cash generated by operating activities 22 143 309 117 495

Net fi nance costs 5 3 479 (13 195)

Dividends paid 23 (75) (52)

Taxation paid 24 (6 421) (376)

CASH FLOW FROM INVESTING ACTIVITIES (40 767) 3 746

Acquisitions of property, plant and equipment (35 659) (21 373)

Proceeds on disposal of property, plant and equipment 1 768 19 043

Acquisition of subsidiaries 37 (11 865) –

Advances repaid by associates 11 1 689 6 066

Proceeds on disposal of investment property 9 3 500 –

(Acquisition)/sale of investments 13 (200) 10

CASH FLOW FROM FINANCING ACTIVITIES 75 663 (22 361)

Repayments of interest bearing borrowings (30 324) (22 647)

Proceeds from issue of shares – nett of costs 18 105 987 286

MOVEMENT IN CASH AND CASH EQUIVALENTS 175 188 85 257

CASH AND CASH EQUIVALENTS – AT THE BEGINNING OF THE YEAR 91 249 5 992

CASH AND CASH EQUIVALENTS – AT THE END OF THE YEAR 17 266 437 91 249


AC

CO

UN

TIN

G P

OL

ICIE

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

BASIS OF PREPARATIONThe consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

The consolidated fi nancial statements have been prepared on the historical cost basis as modifi ed by the revaluation of investment properties and available-for-sale investments. The following principal accounting policies are in accordance with International Financial Reporting Standards and are used by the group. These policies have been consistently applied to all the years presented unless otherwise stated.

The preparation of fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the consolidated fi nancial statements, are disclosed in note 33.

ACCOUNTING STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS THAT ARE NOT YET EFFECTIVEThe following standards and interpretations which have been recently issued or revised have not been adopted early by the group. Their expected impact is discussed below:

• IFRS 7 – Financial Instruments Disclosure (effective for annual periods beginning on or after 1 January 2007)The objective of this IFRS is to require entities to provide disclosures in their fi nancial statements that enable users to evaluate the signifi cance of fi nancial instruments for the entity’s fi nancial position and the nature and extent of risks arising from fi nancial instruments to which the entity is exposed during the period and at the reporting date, and how the entity manages those risks. The effect of the adoption of the standard is currently being assessed. However, a signifi cant impact on disclosures is expected.

• IFRIC Interpretation 8 – Scope of IFRS 2 (effective for annual periods beginning on or after 1 May 2007)The interpretation determines whether IFRS 2 applies to transactions in which the entity cannot identify specifi cally some or all of the goods or services received. The company will apply IFRIC 8 from 1 January 2007, but it is not expected to have any impact on the company or group’s accounts.

• IFRIC Interpretation 9 – Reassessment of Embedded Derivatives (effective for annual periods beginning on or after 1 June 2006)The interpretation applies to all embedded derivatives under IAS 39 ‘Financial Instruments: Recognition and Measurement’ and clarifi es certain aspects of their treatment. The company will apply IFRIC 9 from 1 January 2007, but it is not expected to have any impact on the company or group’s accounts.

• IFRIC Interpretation 10 – Interim Financial Reporting and Impairment (effective for annual periods beginning on or after 1 November 2006)An entity is required to assess goodwill for impairment at every reporting date, to assess investments in equity instruments and in fi nancial assets carried at cost for impairment at every balance sheet date and, if required, to recognise an impairment loss at that date in accordance with IAS 36 and IAS 39. However, at a subsequent reporting or balance sheet date, conditions may have so changed that the impairment loss would have been reduced or avoided had the impairment assessment been made only at that date. This Interpretation provides guidance on whether such impairment losses should ever be reversed. The company will apply IFRIC 10 from 1 January 2007, but it is not expected to have any impact on the company or group’s accounts.


• IFRIC Interpretation 11 – IFRS 2 Share-based Payment – Group and Treasury Share Transactions (effective for annual periods beginning on or after 1 March 2007)This interpretation addresses the classifi cation of a share-based payment transaction (as equity or cash settled), in which equity instruments of the parent or another group entity are transferred, in the fi nancial statements of the entity receiving the services. The company will apply IFRIC 11 from 1 January 2008, but it is not expected to have any impact on the company or group’s accounts.

• IFRIC Interpretation 12 – Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008)This interpretation provides guidance to private sector entities on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements. The company will apply IFRIC 12 from 1 January 2008, but it is not expected to have a signifi cant impact on the company or group’s accounts.

The following standards were not relevant to the group on adoption:

• IFRIC Interpretation 6 – Liabilities arising from participation in a specifi c market – waste electrical and electrical equipment (effective for fi nancial periods beginning on or after 1 December 2005).

• IFRIC Interpretation 7 – Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinfl ationary Economies (effective for annual periods beginning on or after 1 March 2006).

The group has adopted the following standards and interpretations which are effective for the fi rst time this year without any signifi cant impact:

• IAS 1a Amendment – Actuarial gains and losses and disclosures (January 2006).

• IFRIC Interpretation 4 – Determining whether an arrangement contains a lease (effective 1 January 2006).

• IFRIC Interpretation 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (effective 1 January 2006).

HOLDING COMPANY INVESTMENTSBasil Read Holdings Limited’s investment in subsidiaries is recognised at cost.

GROUP ACCOUNTINGSubsidiariesSubsidiaries, which are those entities (including the Share Incentive Trust) in which the group has an interest of more than one half of the voting rights or otherwise has power to govern the fi nancial and operating policies, are consolidated. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. Goodwill is not amortised but tested for impairment annually. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated.


AC

CO

UN

TIN

G P

OL

ICIE

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

AssociatesAssociates are entities over which the group generally has between 20% and 50% of the voting rights, or over which the group has signifi cant infl uence, but which it does not control. Investments in associates are accounted for by the equity method of accounting and includes goodwill identifi ed on acquisition (net of any accumulated impairment loss). Under this method the company’s share of the post-acquisition profi ts or losses of associates is recognised in the income statement and its share of post-acquisition equity movements are adjusted against the cost of the investment. Unrealised gains or losses on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates, except where unrealised losses provide evidence of an impairment of the asset. When the group’s share of losses in an associate equals or exceeds its interest in the associate, the group does not recognise further losses, unless the group has incurred obligations or made payments on behalf of the associates.

Joint venturesThe group’s interest in jointly controlled entities is accounted for by proportionate consolidation. The group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash fl ows on a line-by-line basis with similar items in the group’s fi nancial statements.

Unrealised profi ts and losses are eliminated to the extent of the group’s interest in the joint venture, except where unrealised losses provide evidence of an impairment.

FOREIGN CURRENCIESFunctional and presentation currencyItems included in the fi nancial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The group’s fi nancial statements are presented in South African Rand, which is the company’s functional and presentation currency.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges.

Group companiesThe results and fi nancial position of all the group entities (none of which has the currency of a hyperinfl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;• income and expenses for each income statement are translated at average exchange rates (unless this average is not a

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transaction); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(con

tinu

ed)


OTHER INVESTMENTSThe group classifi es its investments in equity securities as available-for-sale. Management re-evaluates such designation on a regular basis. Investments are held for an indefi nite period of time, which may be sold in response to needs for liquidity, and are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date, in which case they are included in current assets.

Purchases of investments are recognised at cost on the trade date, which is the date that the group commits to purchase the asset. Cost of purchase includes transaction costs. Investments are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of these investments are included in equity. The fair value of listed investments are based on quoted market prices. Fair values for unlisted equity securities are estimated using applicable price/earnings or price/cash fl ow ratios refi ned to refl ect the specifi c circumstances of the issuer. Equity securities for which fair values cannot be measured reliably are recognised at cost less impairment.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment (except for investment properties) are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Immovable properties are classifi ed as either owner-occupied property or investment property and are accounted for accordingly.

Depreciation is calculated to write off the assets to their residual values over their expected useful lives on the following basis:• Owner-occupied buildings – Straight-line basis over twenty years• Major plant and equipment – Straight-line basis over periods ranging from two to fi fteen years• Other plant and equipment – Straight-line basis over periods ranging from three to fi ve years• Furniture and fi ttings – Straight-line basis over periods ranging from three to fi ve years• Freehold property is not depreciated.

Residual values and useful lives are reassessed annually and any effect of changes in residual values and useful lives are accounted for as a change in estimate, prospectively.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in operating profi t.

Repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefi ts associated with the item will fl ow to the group and the cost of the item can be measured reliably. Major renovations are depreciated over the remaining useful life of the related asset.

INVESTMENT PROPERTIESInvestment properties are held to appreciate in capital value. Investment properties are treated as long-term investments and carried at market value determined annually by the directors based on current real estate prices for similar properties. Every three years an external independent valuer carries out an independent valuation. Investment properties are not subject to depreciation. Increases and decreases in their carrying amount are included in net profi t or loss for the period.


INTANGIBLE ASSETSGoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifi able assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates and is tested for impairment as part of the overall balance.

Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefi t from the business combination in which the goodwill arose.

Contract based intangiblesContract based intangibles represent construction contracts existing at date of acquisition and are recognised at fair value. Amortisation is calculated using the straight-line method to allocate the cost of the contract based intangible over the period of the related contracts.

LEASED ASSETSFinance leasesLeases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased plant and equipment or the present value of the minimum lease payments. Each lease payment is allocated between the liability and fi nance charges so as to achieve a constant rate on the fi nance balance outstanding. The corresponding rental obligations, net of fi nance charges, are included in other long-term payables. The interest element of the fi nance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The plant and equipment acquired under fi nance leases is depreciated over the useful life of the asset unless ownership is not assured, in which case the item of plant and equipment is depreciated over the lease term.

Operating leasesLeases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classifi ed as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made by the lessee by way of penalty is recognised as an expense in the period in which termination takes place.

IMPAIRMENTProperty, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of fair value less cost to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifi able cash fl ows.

AC

CO

UN

TIN

G P

OL

ICIE

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

(con

tinu

ed)


INVENTORIESInventories are stated at the lower of cost or net realisable value. Cost is determined using the weighted average cost basis. Net realisable value is determined on the latest replacement cost for consumable goods.

LONG-TERM CONSTRUCTION CONTRACTS AND CONTRACT REVENUE RECOGNITIONContract costs are recognised when incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profi table, contract revenue is recognised over the period of the contract. When it is probable that total costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

The group uses the “percentage of completion method” to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract and physical completion. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, pre-payments or other assets, depending on their nature.

The group presents as an asset (work in progress) the gross amount due from customers for contract work for all contracts in progress for which costs plus recognised profi ts (less recognised losses) exceed progress billings. Work in progress, progress billings not yet paid by customers and retentions are included within contract debtors and retentions.

The group presents as a liability (advance payments received for contract work) the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profi ts (less recognised losses).

Contract debtorsContract debtors comprise progress billings certifi ed to date less payments received. Retention debtors are also raised as part of debtors at the time. Contract debtors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of contract debtors is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables.

OTHER REVENUE RECOGNITIONOther revenue represents amounts receivable for project management services, development fees and subsidies receivable for the development of low cost housing. It also includes amounts receivable for the supply of construction related goods and services.

Other revenue is measured at the fair value of the consideration received or receivable net of discounts, VAT and other sales-related taxes.

Other revenue is recognised when the risks and rewards of ownership are transferred.

Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the group.

Dividends are recognised when the right to receive payment is established.


BORROWINGSBorrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest rate method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as interest. Borrowing costs are recognised in income as incurred.

DEFERRED TAXATIONDeferred taxation is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for fi nancial reporting purposes. Currently enacted tax rates are used to determine deferred income tax.

The principal temporary differences arise from depreciation on property, plant and equipment, provisions, assessed losses, contract related income and expenditure and foreign dividends.

Deferred taxation assets are recognised to the extent that it is probable that future taxable profi t will be available against which the temporary differences can be utilised.

FINANCIAL INSTRUMENTSFinancial instruments carried on the balance sheet include cash and cash equivalents, investments, contract debtors, receivables, trade payables, leases and borrowings. The particular recognition methods are disclosed in the individual policy statements or notes to the fi nancial statements.

HEDGE ACCOUNTINGFor fi nancial reporting purposes forward exchange contracts are designated as fair value hedges or cash fl ow hedges as appropriate and are designated at group level as hedges of foreign exchange risk on specifi c assets, liabilities or future transactions.

When forward exchange contracts are entered into as fair value hedges, no hedge accounting is applied. All gains and losses on such contracts are recognised in the income statement.

Where a derivative instrument is designated as a cash fl ow hedge of an expected future transaction, the effective part of any gain or loss arising on the derivative instrument is classifi ed as a hedging reserve in the statement of changes in equity until the underlying transaction occurs. The ineffective part of any gain or loss is immediately recognised in the income statement.

When the expected future transaction results in the recognition of an asset or liability, the associated gain or loss is transferred from the hedging reserve to the underlying asset or liability. Other cash fl ow hedge gains or losses are recognised in the income statement at the same time as the hedged transaction occurs.

Other derivative fi nancial instruments (including interest rate swaps) are initially recorded at fair value on the date that the contract is entered into and are subsequently measured at their fair value with resulting gains or losses being accounted for in the income statement.

AC

CO

UN

TIN

G P

OL

ICIE

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

(con

tinu

ed)


CASH AND CASH EQUIVALENTSCash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash fl ow statement, cash and cash equivalents comprise cash on hand and bank balances, net of bank overdrafts.

PROVISIONSProvisions are recognised when the group has a present legal or constructive obligation as a result of past events and it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

EMPLOYEE BENEFITSPension obligationsGroup companies have various pension schemes in accordance with the local conditions and practices in the countries in which they operate. A defi ned benefi t plan is a pension plan that defi nes an amount of pension benefi t to be provided based on a function of various factors such as age, years of service and compensation. A defi ned contribution plan is a privately administered pension insurance plan under which the group pays fi xed contributions into a fund and will have no legal or constructive obligations to pay further contributions if the fund does not hold suffi cient assets to pay all employees benefi ts relating to employee service in the current and prior periods.

The asset or liability in respect of defi ned benefi t pension plans is the net surplus or defi cit between present value of the defi ned benefi t obligation at the balance sheet date and the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The defi ned benefi t obligation is calculated every three years by independent actuaries using the projected unit credit method. The present value of the defi ned benefi t obligation is determined by the estimated future cash outfl ows using interest rates approximating the terms of the related liability.

Termination benefi tsTermination benefi ts are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The group recognises termination benefi ts when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefi ts as a result of an offer made to encourage voluntary redundancy.

Leave payAccrual is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees.

DIVIDENDSDividends are recorded in the group’s fi nancial statements in the period in which they are declared by the board of directors.


SEGMENT REPORTINGThe group’s primary format for reporting segment information is business segments and its secondary format is geographical segments. A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

Inter-segment transfersSegment revenue, segment expenses and segment results include transfers between geographical and business segments. Such transfers are accounted for based on commercial terms and conditions at market-related prices. These transfers are eliminated on consolidation.

Segment revenue and expensesAll segment revenue and expenses are directly attributable to the segments and are disclosed at the operating profi t level.

Segment assets and liabilitiesSegment assets include all operating assets and consist principally of property, plant and equipment, inventory, contract debtors and retentions and receivables and prepayments.

Segment liabilities include all operating liabilities and consist principally of interest bearing borrowings, trade and other payables and taxation.

ENVIRONMENTAL OBLIGATIONSLong-term environmental obligations are based on the group’s stone crushing activities, in compliance with current environmental and regulatory requirements and contractual agreements.

Full provision is made on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date. Increases due to additional environmental disturbances are capitalised and amortised over the period of the contractual agreement. These increases are accounted for on a net present value basis.

Annual increases in the provision relating to the change in the net present value of the provision and infl ationary increases are accounted for in earnings.

The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure.

AC

CO

UN

TIN

G P

OL

ICIE

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

(con

tinu

ed)


2006R’000

2005R’000

1. OTHER INCOME

Dividend income 5 –

Rent received 13 –

18 –

2. OTHER GAINS/(LOSSES) – NET

Impairment of investment (168) –

Gross amount (168) –

Taxation – –

Fair value gain on investment property 1 710 427

Gross amount 2 000 500

Taxation (290) (73)

Total gross amount 1 832 500

The impairment of the investment relates to the group’s investment in Binga Constuçoes Mozambique Limitada. The directors are of the opinion that this investment is no longer recoverable and as a result the carrying value has been written down to zero (refer note 13).

The investment property was disposed of in the current year for an amount of R3 500 000. As a result the property was revalued to its sale value prior to the sale taking place (refer note 9).

3. PROFIT ON SALE OF ASSOCIATES

Contribution to earnings after taxation – 877

Gross amount – 877

Taxation – –

On 1 August 2005, Ilima Projects (Pty) Limited was disposed of to Monono-Wa-Rona Investments (Pty) Limited for a consideration of R30. (Refer note 25)

On 30 June 2005, Mesure Facilities Management (Pty) Limited was disposed of to ETDE SA, a company incorporated in France, for a consideration of R30. (Refer note 25)

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S F

OR

TH

E Y

EA

R E

ND

ED

31 D

EC

EM

BE

R 2

006


2006R’000

2005R’000

4. OPERATING PROFIT

The following items have been (charged)/credited in arriving at operating profi t:

Depreciation of property, plant and equipment

Owned assets (10 956) (12 344)

Plant and equipment and rehabilitation asset (10 358) (11 815)

Furniture and fi ttings (579) (529)

Land and buildings and surface properties (19) –

Leased assets

Plant, equipment and rehabilitation asset (12 528) (7 226)

Profi t of sale of property, plant and equipment 554 129

Gross amount 579 1 181

Taxation (25) (1 052)

Amortisation of intangible assets (522) –

Gross amount (735) –

Taxation 213 –

Auditors’ remuneration (1 798) (1 144)

For services as auditors (1 636) (1 039)

For other services (162) (105)

Operating leases (1 061) (1 680)

Offi ce equipment (784) (704)

Offi ce space – contractual (277) (976)

Staff costs (Refer to note 29)

5. NET FINANCE COSTS

Interest paid (5 078) (7 117)

Bank loans and other borrowings (2 411) (5 195)

Finance leases (2 667) (1 922)

Interest received

Bank 6 428 3 106

Foreign exchange 2 129 (9 184)

Realised loss incurred on interest rate swap (2 087) (2 258)

Unrealised profi t/(loss) incurred on interest rate swap 2 233 (4 004)

Profi t/(loss) on foreign exchange – other 1 983 (2 922)

3 479 (13 195)

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


2006R’000

2005R’000

6. TAXATION

South African normal taxation

Current taxation (1 683) –

Current year (1 644) –

Prior year (39) –

Deferred taxation 1 488 3 664

Current year (553) 3 664

Prior year 2 041 –

Secondary Taxation on Companies (STC)

Current year (19) –

Foreign taxation

Current taxation (2 627) (2 142)

Current year (3 361) (2 142)

Prior year 734 –

Deferred taxation 572 (813)

Current year 181 14

Prior year 391 (827)

Total taxation (charged)/credited (2 269) 709

Capital gains of R0,1 million (2005: R0,2 million) have been utilised against assessed losses in the current year.

Reconciliation of the standard rate of taxation to effective rate % %

South African normal rate of taxation 29,0 29,0

Change in tax rate – 2,6

Foreign normal taxation – current year 4,6 0,5

Foreign deferred taxation – current year 2,5 0,5

Losses utilised (32,6) –

Secondary Taxation on Companies (STC) – –

Capital gains tax (0,5) –

Timing differences not accounted for under deferred tax 0,9 (31,0)

Non-taxable items 0,1 (4,3)

Effective tax rate 4,0 (2,7)

Timing differences not accounted for under deferred taxation include the result of certain subsidiaries where deferred taxation on assessed losses have not been provided.

Estimated tax lossesTotal estimated tax losses of subsidiaries at the end of the fi nancial year available for utilisation against future taxable income of those companies 90 304 86 696


2006 2005

7. EARNINGS PER SHARE

Earnings per share (cents) 93,53 45,31

The calculation of earnings per share is based on the consolidated profi t after taxation of R54 103 482 (2005: R24 975 472) and the weighted average number of shares in issue during the year of 57 846 362 (2005: 55 125 520) shares.

Headline earnings per share (cents) 89,62 42,71

The calculation of headline earnings per share is based on the consolidated headline profi t after taxation of R51 839 466 (2005: R23 541 934) and the weighted average number of shares in issue during the year of 57 846 362 (2005: 55 125 520) shares.

Fully diluted earnings per share (cents) 93,05 45,19

The calculation of fully diluted earnings per share is based on the consolidated profi t after taxation of R54 103 682 (2005: R24 975 472) and the weighted average number of shares in issue during the year of 58 146 376 (2005: 55 265 694) shares.

Fully diluted headline earnings per share (cents) 89,15 42,60

The calculation of fully diluted headline earnings per share is based on the consolidated headline profi t after taxation of R51 839 866 (2005: R23 541 934) and the weighted average number of shares in issue during the year of 58 146 376 (2005: 55 265 694) shares.

R’000 R’000

Reconciliation between basic earnings, diluted earnings and headline earnings is as follows:

Basic and diluted earnings 54 103 24 975

Adjusted by the after tax effect of the following:

Profi t on sale of associates (refer note 3) – (877)

Profi t on sale of property, plant and equipment (refer note 4) (554) (129)

Fair value gain – investment properties (refer note 2) (1 710) (427)

Headline earnings 51 839 23 542

Number’000

Number’000

Reconciliation between weighted average number of shares and diluted weighted average number of shares:

Weighted average number of shares 57 846 55 126

Adjusted by: Basil Read Share Incentive Scheme (refer note 29(e)) 300 140

Diluted weighted average number of shares 58 146 55 266

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


Land andbuildings

and surfaceproperties

R’000

Plant andequipment

andrehabilitation

assetR’000

Furnitureand fi ttings

R’000Total

R’000

8. PROPERTY, PLANT AND EQUIPMENT

Cost price – 1 January 2005 7 160 210 735 10 094 227 989

Additions – 32 469 555 33 024

Disposals – (66 260) (4 591) (70 851)

Net exchange movements – (5 098) (4) (5 102)

Cost price – 31 December 2005 7 160 171 846 6 054 185 060

Additions 7 675 89 367 1 506 98 548

Acquisition of subsidiaries 2 160 43 595 1 086 46 841

Disposals – (9 437) (694) (10 131)

Net exchange movements – (41) (1) (42)

Cost price – 31 December 2006 16 995 295 330 7 951 320 276

Accumulated depreciation – 31 December 2006 1 535 136 193 6 110 143 838

Accumulated depreciation – 1 January 2005 660 126 711 9 347 136 718

Depreciation – 19 041 529 19 570

Disposals – (48 419) (4 570) (52 989)

Net exchange movements – (529) (3) (532)

Accumulated depreciation – 31 December 2005 660 96 804 5 303 102 767

Acquisition of subsidiaries 856 24 764 910 26 530

Depreciation 19 22 886 579 23 484

Disposals – (8 261) (681) (8 942)

Net exchange movements – – (1) (1)

Book value – 31 December 2006 15 460 159 137 1 841 176 438

Book value – 31 December 2005 6 500 75 042 751 82 293


2006R’000

2005R’000

8. PROPERTY, PLANT AND EQUIPMENT (continued)

Book value of plant and equipment subject to instalment sale agreements and loan agreements (refer note 19) are as follows:Instalment sale agreements 70 533 22 542Cost 87 554 30 437Accumulated depreciation (17 021) (7 895)

Banking loan 14 491 18 592Cost 48 719 48 549Accumulated depreciation (34 228) (29 957)

Total 85 024 41 134Land and buildings and surface properties comprise the following: R’000– Structures and improvements on Erf 386, 387,

389, 391, 392, 393, 497, 499, 498 Lilianton Township consisting of 23 655 m2 acquired in 1997 for a purchase consideration of

R4,5 million. 13 430 Acquired in 1997 4 540 Improvements in 2003 660 IFRS transition 2004 1 960 Cost at beginning of year 7 160 Improvements in 2006 6 930 Cost at end of year 14 090 Accumulated depreciation at beginning and end of year (660)

– Stand 5202 Thabong in Welkom measuring 250 m2

Acquired in 1982 18– A portion of the farm Hartebeestfontein 422 Acquired in 2006 41– Erf 193 Alrode South Extension 1 Township,

Province of Gauteng measuring 2 000 m2

Acquired in 2006 745– Erf 448 Wells Estate, Nelson Mandela Metropolitan

Municipality, Division of Port Elizabeth, Eastern Cape Province measuring 8 094 m2

Acquired in 2005 1 060– Surface properties and permits 166 Improvements 1 041 Depreciation (875)

Book value of land and buildings and surface properties at the end of the year 15 460

Assets-under-construction, included in plant and equipment, amount to R4,4 million.

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


R’000

9. INVESTMENT PROPERTIES

Fair value – 1 January 2005 1 000

Fair value adjustments (refer note 2) 500

Fair value – 31 December 2005 1 500

Fair value adjustments (refer note 2) 2 000

Disposals (3 500)

Fair value – 31 December 2006 –

Investment properties consisted of the following:– Freehold land being portions 145, 31 and 39 of the farm Witkoppie

64IR consisting of 2.3962 hectares acquired by the group in 1994 for a purchase consideration of R576 000.

The property was sold during the year for an amount of R3 500 000.

GoodwillR’000

Contractbased

intangiblesR’000

TotalR’000

10. INTANGIBLE ASSETS

Year ended 31 December 2006

Acquisition of subsidiaries 9 742 1 437 11 179

Amortisation charge – (735) (735)

Closing net book value 9 742 702 10 444

At 31 December 2006

Cost 9 742 1 437 11 179

Accumulated amortisation – (735) (735)

Net book value 9 742 702 10 444

The goodwill relates to the acquisition of two subsidiaries and is attributable to the workforce of the acquired businesses and the signifi cant synergies that are expected to arise in the future (refer note 37).

The goodwill is considered to have an indefi nite life. At year end the carrying amount of goodwill is tested for impairment and any subsequent losses are taken to the income statement.

The contract-based intangible asset arose on the acquisition of two subsidiaries. The asset has been determined to have a fi nite life based on the longest contract in each of the two companies. It is being amortised over a maximum period of 30 months, of which 18 months are remaining.

The amortisation charge has been included in ‘Admin and other operating overheads’ in the income statement (refer note 4).


2006R’000

2005R’000

11. INVESTMENTS IN ASSOCIATES66 428

Shares at cost 66 1Attributable post-acquisition net accumulated loss – (1 262)Advances made to associates – 1 689Reconciliation of opening and closing balancesAt the beginning of the year 428 5 459Acquisition of subsidiary 66 –Share of profi ts for the year after tax – 158 Gross amount – 247 Taxation – (89)Advances recovered from associates (1 689) (6 066)Sale of associates during the year – 877Associates reclassifi ed as subsidiaries 1 261 –Balance at the end of the year 66 428The following information relates to the company’s direct and indirect interest in associate companies including the group’s net investment in the associate:Newport Construction (Pty) Limited – –Number of shares held: 51 (2005: 40)Proportion owned: 51% (2005: 40%)Nature of business: Civil engineering and buildingDuring the year the group acquired an additional 11 shares at a total cost of R150 000, resulting in Newport Construction (Pty) Limited being reclassifi ed as a subsidiary. The results of Newport Construction (Pty) Limited have been consolidated into the Group’s results for the fi rst time in 2006. For further details relating to the acquisition, refer to note 37.BR-Tsima Construction (Pty) Ltd – 428Number of shares held: 51 (2005: 32)Proportion owned: 51% (2005: 32%)Nature of business: Civil engineering and buildingDuring the year the group acquired an additional 19 shares at a total cost of R450 000, resulting in BR-Tsima Construction (Pty) Limited being reclassifi ed as a subsidiary. The results of BR-Tsima Construction (Pty) Limited have been consolidated into the Group’s results for the fi rst time in 2006. For further details relating to the acquisition, refer to note 37.Through the acquisition of Spray Pave (Pty) Limited, the group acquired an investment in Mmila Projects (Pty) Limited, details of which are as follows:Mmila Projects (Pty) Limited 66 –Number of shares held by Spray Pave (Pty) Limited: 30 (2005: 30)Proportion owned by Spray Pave (Pty) Limited: 30% (2005: 30%)Nature of business: Manufacturer, distributor and sprayer of bituminous and tar productsBalance at the end of the year 66 428The directors value the unlisted investment in associates at R65 947 (2005: R428 184). This approximates its fair value.

Refer to note 35 for further details regarding the investments in associates.

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


2006R’000

2005R’000

12. DEFERRED TAXATIONDeferred taxation is calculated on all temporary differences under the liability method using a principal tax rate of the fi scal authority as indicated below:Botswana: 25% (2005: 25%)Namibia: 35% (2005: 35%)South Africa: 29% (2005: 29%)Zambia: 35% (2005: 35%)The movement on the deferred taxation account is as follows:Balance at the beginning of the year 21 305 18 412Movements during the year attributable to: Acquisition of subsidiaries 1 069 – Temporary differences 2 060 3 518 Change in tax rate – (625)Balance at the end of the year 24 434 21 305The movement in the group’s deferred taxation asset during the year is as follows:

Acceleratedtax

depreciationR’000

Provisionsand

accrualsR’000

Assessedlosses and

otherR’000

TotalR’000

Balance as at 1 January 2005 (2 816) 6 243 15 317 18 744Credited/(charged) to the income statement 2 626 3 843 (2 046) 4 423Effect of rate change 94 (208) (511) (625)Balance as at 31 December 2005 (96) 9 878 12 760 22 542Acquisition of subsidiaries (554) – 3 684 3 130Credited/(charged) to the income statement (4 066) 9 135 (3 332) 1 737Balance as at 31 December 2006 (4 716) 19 013 13 112 27 409The movement in the group’s deferred taxation liability during the year is as follows:

Acceleratedtax

depreciationR’000

Provisionsand

accrualsR’000

Assessedlosses and

otherR’000

TotalR’000

Balance as at 1 January 2005 – – (332) (332)Credited/(charged) to the income statement (2 258) – 1 311 (947)Forex adjustment 95 – (53) 42Balance as at 31 December 2005 (2 163) – 926 (1 237)Acquisition of subsidiaries (3 436) 977 398 (2 061)Credited/(charged) to the income statement (623) 982 (36) 323Balance as at 31 December 2006 (6 222) 1 959 1 288 (2 975)Deferred taxation assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fi scal authority.

Deferred tax has not been provided on estimated assessed losses of subsidiary companies amounting to R41,9 million (2005: R50,9 million).


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

2006R’000

2005R’000

13. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Unlisted investments

At the beginning of the year 168 178

Disposals during the year – (10)

Impairment of investment during the year (168) –

At the end of the year – 168

The following information relates to the group’s interest in unlisted investments:

The group holds an industry-related investment in Binga Constuçoes Mozambique Limitada. The details of the investment are as follows:

Number of shares held: 490Proportion owned: 49%Nature of business: Civil engineering and building

The group does not exercise signifi cant infl uence over the operational and fi nancial activities of Binga Constuçoes Mozambique Limitada. The company has not traded since incorporation.

The directors value the unlisted investment at RNil (2005: R168 000). This approximates its fair value.

Listed investments

At the end of the year 650 2

At the beginning of the year 2 2

Additions during the year 200 –

Acquisition of subsidiary 217 –

Mark-to-market adjustment through equity 231 –

The following information relates to the company’s interest in listed investments:

The group purchased 200 000 shares in Top Fix Holdings Limited during the year. This investment represents less than 1% of the total issued share capital in Top Fix Holdings Limited. The company is listed on the JSE Limited on the ALTX exchange.

Through the acquisition of Stone and Allied Industries Limited, the group acquired an investment in Investec Limited, comprising 3 240 shares. This investment represents less than 1% of the total issued share capital in Investec Limited.The company is listed on the JSE Limited under the Investment Banks sector.

The carrying value of listed investments approximates their fair value.

650 170

(con

tinu

ed)


2006R’000

2005R’000

14. INVENTORIES

Consumables at cost 6 659 1 141

15. CONTRACT AND TRADE DEBTORS

Contract debtors 73 348 36 848

Contract debtors 77 398 40 210

Provision for impairment of contract debtors (4 050) (3 362)

Trade receivables 22 371 18 881

Trade receivables 23 875 18 881

Provision for impairment of trade receivables (1 504) –

Retention debtors 11 657 –

Work in progress 12 693 9 033

Costs incurred to date 411 912 320 751

Profi t recognised to date 3 958 6 883

Progress payments received and receivable (403 177) (318 601)

120 069 64 762

The trade receivables of Stone and Allied Industries Limited, amounting to R5,7 million, have been ceded as security for bank guarantees issued, currently totalling R3,1 million (refer note 26).

The trade receivables of Spray Pave (Pty) Limited, amounting to R12,6 million, have been ceded as security for the bank overdraft facility in place, currently totalling R4,1 million (refer note 17).

16. RECEIVABLES AND PRE-PAYMENTS

Other receivables 7 789 1 764

Pre-payments 9 834 690

17 623 2 454

17. CASH AND CASH EQUIVALENTS

Bank balances 270 062 90 988

Cash on hand 456 261

270 518 91 249

Bank overdraft (4 081) –

266 437 91 249

The bank overdraft is secured by a cession over trade receivables of Spray Pave (Pty) Limited (refer note 15).


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

18. STATED CAPITAL

Authorised

Ordinary shares

76 000 000 ordinary no par value shares (2005: 70 000 000)

No parvalue

ordinarysharesR’000

TreasurysharesR’000

TotalR’000

Issued

Ordinary shares


55 100 000 ordinary no par value shares at the beginning of the year 58 264 – 58 264

450 000 ordinary no par value shares issued to Basil Read

Share Incentive Scheme 630 – 630

Less: 245 837 ordinary no par value shares held as treasury stock – (344) (344)

55 304 163 ordinary no par value shares at the end of the year 58 894 (344) 58 550


55 304 163 ordinary no par value shares at the beginning of the year 58 894 (344) 58 550

419 545 ordinary no par value shares issued to Basil Read

Share Incentive Scheme 587 – 587

15 111 777 ordinary no par value shares issued in terms of the clawback offer – nett of costs 105 562 – 105 562

Less: 115 497 ordinary no par value shares held as treasury stock – (162) (162)

70 719 988 ordinary no par value shares at the end of the year 165 043 (506) 164 537

The directors are authorised, by resolution of the shareholders and until the forthcoming annual general meeting, to dispose of the unissued shares for any purpose and upon such terms and conditions as they deem fi t.

(con

tinu

ed)


2006R’000

2005R’000

19. INTEREST BEARING BORROWINGS

Instalment sale agreements

Total amount outstanding 67 501 19 549

The instalment sale agreements for plant and equipment bear interest between the prime overdraft rate and prime less 2% per annum and are repayable in monthly instalments of between R5 800 and R180 136 over a period of between one and four years.

The agreements are secured by plant and equipment with a book value of R70 532 606 (2005: R22 542 007). Refer to note 8 for further details.

Banking loan

Total amount outstanding 15 477 26 798

Banking loan 11 997 20 536

Interest rate swap 3 480 6 262

A swap agreement was concluded in 2005 (refer note 28) in terms of which interest is charged at 7,2% in US Dollar terms and is repayable in monthly instalments of $192 250, with the fi nal payment being made in October 2007.

The original banking loan bears interest at the Botswanan prime overdraft rate less 1,75% per annum and is repayable in monthly instalments of BWP833 333, with the fi nal payment being made in October 2007.

A second banking loan, originated in 2005, is for a nominal amount of US$ 553 846 at a rate of 6%. The term of the loan is 36 months, with the fi nal payment being made in August 2008.

The facilities are secured by plant and equipment with a book value of R14 491 730 (2005: R18 592 790). Refer to note 8 for further details.

82 978 46 347

Less: Current portion transferred to current liabilities (32 996) (23 539)

Instalment sale agreements (18 457) (5 177)

Banking loan (14 539) (18 362)

Total non-current interest bearing borrowings 49 982 22 808

The present value of future minimum payments on instalment sale agreements is as follows:

Due within the next 12 months 18 457 5 177

Due between 1 and 3 years 49 044 14 372

Thereafter – –

67 501 19 549

The present value of future minimum payments on banking loans is as follows:

Due within the next 12 months 14 539 18 362

Due between 1 and 2 years 938 8 436

Thereafter – –

15 477 26 798


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

2006R’000

2005R’000

20. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Non-current provisions

Environmental rehabilitation provisions

Balance at the beginning of the year – –

Acquisition of subsidiaries 2 562 –

Additional provision due to establishment of new site 103 –

Infl ation charge 153 –

Balance at the end of the year – non-current provisions 2 818 –

Environmental rehabilitation provisions relate to end-of-site restoration costs. The following key assumptions were used when calculating the provision:Infl ation rate: 4,4%Discount rate: between 11,25% and 12,5% depending on the expected life of the site.

Current provisions

Employee provisions

Balance at the beginning of the year 1 833 4 191

Acquisition of subsidiaries 864 –

Provisions created 32 031 11 478

Provisions utilised (13 661) (13 836)

Balance at the end of the year 21 067 1 833

Employee provisions consist mainly of employee incentives.

Contract provisions

Balance at the beginning of the year 22 561 8 172

Provisions created 16 717 16 457

Provisions utilised (7 814) (2 068)

Balance at the end of the year 31 464 22 561

Contract provisions consist mainly of provision for losses to end-of-site and provision for end-of-site maintenance period.

Balance at the end of the year – current provisions 52 531 24 394

21. TRADE AND OTHER PAYABLES

Trade creditors and accruals 190 501 117 330

Shareholders for dividend 229 229

Advance payments received for contract work 91 114 38 643

281 844 156 202

The carrying value of trade and other payables approximate their fair value due to the short-term maturities of these balances.

(con

tinu

ed)


2006R’000

2005R’000

22. CASH GENERATED BY OPERATING ACTIVITIES

Operating profi t 53 750 37 303

Adjustment for non-cash items: 19 026 23 274

Depreciation 23 484 19 570

Impairment loss 168 –

Profi t on sale of property, plant and equipment (579) (1 181)

Fair value adjustment – investment properties (2 000) (500)

Profi t on sale of associates – (877)

Amortisation of intangible asset 735 –

Unrealised portion of interest rate swap (2 782) 6 262

Operating cash fl ow 72 776 60 577

Movements in working capital: 70 533 56 918

Inventories (1 454) (655)

Contract and trade debtors (48 142) (26 757)

Receivables and pre-payments 16 664 130

Trade and other payables 75 506 66 050

Provisions for other liabilities and charges 28 393 12 031

Foreign currency translation differences (434) 6 119

Cash generated by operating activities 143 309 117 495

Excluded from the cash fl ow statement are additions to fi xed assets amounting to R62,9 million (2005: R11,7 million) which were funded by instalment sale agreements.

23. DIVIDENDS PAID

Dividends due at the beginning of the year (229) (281)

Dividends declared per the statement of changes in equity (75) –

Dividends due at the end of the year 229 229

Dividends paid (75) (52)

24. TAXATION PAID

Net taxation due at the beginning of the year (4 974) (3 208)

Normal and STC taxation charged to the income statement (4 329) (2 142)

Acquisition of subsidiaries (304) –

Net taxation due at the end of the year 3 186 4 974

Taxation paid (6 421) (376)


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

2006R’000

2005R’000

25. PROCEEDS ON DISPOSAL OF ASSOCIATE

Cost of investment – –

Share of losses taken to date of disposal – (877)

Book value of investment at date of disposal – (877)

Profi t on date of sale – 877

Proceeds on disposal of associate – –

26. GUARANTEES AND CONTINGENT LIABILITIES

The group has the following guarantees and suretyships outstanding at the year end:

Payment guarantees 21 980 144

Performance and construction guarantees 202 445 130 484

Bond retention guarantees 41 089 18 925

Bid and other bonds 54 562 25 230

320 076 174 783

The bank guarantees of Stone and Allied Industries Limited are secured by a cession over trade receivables. Total issued bank guarantees at year end amounted to R3,1 million.

It is not expected that any loss will arise out of the issue of the above guarantees.

27. CAPITAL AND OPERATING LEASE COMMITMENTS

Capital expenditure contracted for at the balance sheet date 63 809 15 083

The above capital expenditure will be fi nanced from funds generated from operations and borrowings.

Operating lease commitments contracted for at the balance sheet date:Due within the next 12 months 1 004 851

Due between 1 and 2 years 909 775

Thereafter 793 –

2 706 1 626

The operating leases for offi ce equipment are payable in monthly instalments of between R2 870 and R72 787, escalating annually by 5% and 9% respectively, over a period of between two and three years.

The operating lease for offi ce space is payable in monthly instalments of R12 957. The current lease expires in January 2008.

(con

tinu

ed)


28. FINANCIAL INSTRUMENTS

Details of forward exchange contracts included in the balance sheet at year-end are as follows:

Foreignamount

2006’000

Rand amount

2006’000

Foreignamount

2005’000

Rand amount

2005’000

Foreign currency sold – US Dollars – – 152 963

Foreign currency sold – Botswana Pula – – 1 866 2 148

Foreign currency sold – Euros – – 395 2 981

Foreign currency bought – Euros – – 395 2 987

The above forward exchange contracts have been marked-to-market at balance sheet date.

The group used an interest rate swap to manage its exposure to interest rate movements on its bank borrowings in Botswana. The fair value of the swap entered into at 31 December 2006 is estimated at a loss of R3 480 476 (2005: R6 262 207). The fair value adjustment has been included in profi t for the year.


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

2006R’000

2005R’000

29. EMPLOYEE BENEFITS

a) Staff costs 194 969 118 970

Salaries and wages 178 971 105 927

Pension costs – defi ned contribution plans 11 411 7 425

Pension costs – defi ned benefi t plan 224 182

Termination benefi ts – 1 788

Social security costs 4 363 3 648

Segment employees analysis Number Number

Number of employees employed by the group: Geographical 2 193 827

Local 1 953 685

International 240 142

b) Defi ned contribution and defi ned benefi t planThe Basil Read Group Pension Fund, the Basil Read Group Provident Fund or the Construction Industry Retirement Benefi t Plan covers permanent employees of the group and its subsidiary companies. The Pension Fund is a defi ned benefi t plan while the Provident Fund and Construction Industry Retirement Benefi t Plan are both defi ned contribution plans. All three funds are registered under the Pension Funds Act of 1965 as privately administered funds.

The Basil Read Group Pension Fund was actuarially valued on 1 September 2002. The surplus apportionment, as required by the Pension Funds Second Amendment Act 2001, was approved by the Financial Services Board during January 2007. Due to the delay in approval, a provisional actuarial valuation was undertaken as at 31 August 2005. The information below relates to this provisional valuation.

R’000

Present value of funded obligations (34 510)

Fair value of plan assets 60 430

Surplus 25 920

The principal actuarial assumptions used for valuation purposes were as follows:

Discount rate 7,90%

Expected return on assets 7,20%

Future salary increases 8,10%

Future pension increases 6,60%

The group has not recognised any portion of the pension fund surplus in its balance sheet. The directors do not expect a signifi cant portion of this surplus to be allocated to the group once the fi nal apportionment has been approved by the trustees of the fund.

(con

tinu

ed)


29. EMPLOYEE BENEFITS (continued)

c) Company contributionThe company, on the advice of the Actuary, determines the company contribution rate in respect of the Basil Read Group Pension Fund.

d) Medical aidThe company continuously reviews its contribution and benefi t structures in its various medical aid schemes to ensure that these are well positioned against steeply rising healthcare costs. The group has no current exposure to post-retirement medical aid costs.

e) Share incentive schemeIn terms of the Basil Read Share Incentive Scheme, the group’s share incentive trust holds the right to issue shares to employees who exercised this option in September 2002. The qualifying employees are able to acquire such shares at a price of R1,40 per share when the group issues these shares at the vesting periods indicated below. The scheme is administered through the Basil Read Share Trust. The fair value of these unissued shares amounted to R4 552 767 (2005: R2 439 034) based on the group’s year end share price.

The movement in the rights to acquire Basil Read shares is as follows:

Number2006’000

Number2005’000

Rights outstanding at the beginning of the year 717 1 052

Rights exercised during the year (300) (204)

Lapsed during the year due to resignations (56) (131)

Rights outstanding at the end of the year 361 717

The maturity date and maximum amount of shares that can be purchased are limited to the following vesting periods:

September 2005 94 275



361 717


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

30. FINANCIAL RISK MANAGEMENTFinancial risk exposureThe group’s activities expose it to a variety of fi nancial risks, including foreign currency exchange rates and interest rates. The group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the fi nancial performance of the group. From time to time the group uses derivative fi nancial instruments such as foreign exchange contracts to hedge certain exposures.

Risk management is carried out by fi nancial management under policies approved by the board of directors. This function identifi es, evaluates and, in certain circumstances, hedges fi nancial risks in close co-operation with the group’s various operating divisions. The board provides principles for overall risk management, as well as policies covering specifi c areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative fi nancial instruments and investing excess liquidity.

Foreign exchange riskThe group operates internationally and is exposed to foreign exchange risk arising from various currency exposures from the dates that foreign currency transactions are entered into (foreign sales and purchases) and the dates they are consummated (cash receipts and cash disbursements in foreign currencies). Companies within the group may from time to time use forward exchange contracts, approved through treasury and the board of directors, to hedge their exposure to foreign currency risk in connection with the measurement currency.

Interest rate riskThe group is exposed to interest rate risk through its cash and cash equivalents and interest bearing long-term liabilities. The group manages this risk through adequate working capital policies and an effective treasury function. Companies within the group may from time to time use interest rate swaps to manage their exposure to interest rate movements on their bank borrowings.

Credit riskThe group has no signifi cant concentrations of credit risk after taking into account provisions created. The group has policies in place to ensure that contract activity and the sales of products and services are only made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality fi nancial institutions within South Africa, after evaluating the credit rating of these respective fi nancial institutions. The group has policies that limit the amount of credit exposure to any one fi nancial institution.

Liquidity riskPrudent liquidity risk management implies maintaining suffi cient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, treasury aims at maintaining fl exibility in funding by keeping committed credit lines available.

Fair value of fi nancial instrumentsThe fair value of a fi nancial instrument is defi ned as the amount at which the instrument could be exchanged in an arm’s length transaction between willing parties. The estimated values of the group’s fi nancial instruments are:

2006R’000

2006R’000

2005R’000

2005R’000

Carryingvalue

Fairvalue

Carryingvalue

Fairvalue

Financial assetsAvailable-for-sale fi nancial assets 650 650 170 170Contract and trade debtors 120 069 120 069 64 762 64 762Receivables and pre-payments 17 623 17 623 2 454 2 454Cash and cash equivalents 270 518 270 518 91 249 91 249

Financial liabilitiesInterest bearing borrowings 82 978 82 978 46 347 46 347Provisions for other liabilities and charges 55 349 55 349 24 394 24 394Trade and other payables 281 844 281 844 156 202 156 202Bank overdraft 4 081 4 081 – –

(con

tinu

ed)


31. SEGMENT REPORT

The group classifi es its primary activities into fi ve distinct operating areas, namely civil engineering and roads, opencast mining, buildings, developments and plant and head offi ce.

Business segmentation

Civilengineering

and roadsR’000

OpencastminingR’000

BuildingsR’000

DevelopmentsR’000

Plant andhead offi ce

R’000Total

R’000

2006

Revenue 624 187 274 666 180 757 82 588 – 1 162 198

Operating profi t 39 677 5 085 4 977 4 011 – 53 750

Total assets – – – – 630 948 630 948

Total liabilities – – – – 431 485 431 485

Capital expenditure – – – – 98 548 98 548

Depreciation – – – – 23 484 23 484

2005

Revenue 195 413 302 034 66 028 53 857 – 617 332

Operating profi t/(loss) 29 831 6 449 (1 261) 2 284 – 37 303

Total assets – – – – 266 829 266 829

Total liabilities – – – – 233 444 233 444

Capital expenditure – – – – 33 024 33 024

Depreciation – – – – 19 570 19 570

Geographical segmentation

LocalR’000

InternationalR’000

TotalR’000

2006

Revenue 971 243 190 955 1 162 198

Operating profi t 40 786 12 964 53 750

Total assets 515 227 115 721 630 948

Capital expenditure 65 630 32 918 98 548

2005

Revenue 480 633 136 699 617 332

Operating profi t 24 396 12 907 37 303

Total assets 202 950 63 879 266 829

Capital expenditure 27 466 5 558 33 024

Segment assets and liabilities are not allocated to operating divisions as the group operates under a centralised working capital structure.


NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

32. RELATED PARTY TRANSACTIONS

The following transactions have been entered into with related parties during the year:

Costs incurred by the group:

Nature of relationship/Amounts paid to Nature of transaction2006R’000

2005R’000

Amabubesi Investments (Pty) Limited Directors’ fees 775 –

Vuwa Investments (Pty) Limited Directors’ fees 312 –

Amounts paid to other non-executive directors Directors’ fees 258 –

Amounts paid to key management Remuneration and incentives 13 064 4 763

33. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

Provision for impairment of contract debtorsA provision for impairment of contract debtors is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments are considered indicators that the contract debtor is impaired. The amount of the provision is the difference between the contract debtor’s carrying amount and the present value of estimated future cash fl ows, discounted at the effective interest rate. Refer to note 15 for the carrying value.

Accounting for construction contractsThe group makes estimates and assumptions concerning the future, particularly as regards construction contract profi t taking, provisions, arbitrations and claims. The resulting accounting estimates can, by defi nition, only approximate the actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Refer to note 20 for details of the group’s contract provisions.

Property, plant and equipmentProperty, plant and equipment is depreciated on a straight line basis over its useful life to residual value. Residual values and useful lives are based on management’s best estimate and actual future outcomes may differ from these estimates. Refer to note 8 for details of the group’s property, plant and equipment.

Deferred taxationA deferred tax asset is recognised with the carry-forward of unused tax losses to the extent that it is probable that future taxable profi t will be available against which the unused tax losses can be utilised.

The group considered the following criteria in assessing the probability that taxable profi t will be available against which the unused tax losses can be utilised:– whether the entity has suffi cient taxable temporary differences relating to the same taxation authority and the same

taxable entity, which will result in taxable amounts against which the unused tax losses can be utilised;– whether it is probable that the entity will have taxable profi ts before the unused tax losses expire; and– whether the unused tax losses result from identifi able causes which are unlikely to recur.

To the extent that it is not probable that taxable profi t will be available against which the unused tax losses or unused tax credits can be utilised, the deferred tax asset is not recognised. To determine the probability that taxable profi t will be available against which the unused tax losses can be utilised, the group has reviewed its forecasts of secured work for the foreseeable future and compared that to its total tax losses.

Refer to note 12 for details of the group’s deferred tax assets.

(con

tinu

ed)


33. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)Defi ned benefi t planThe defi ned benefi t obligation calculation is subject to estimates of future contributions, mortality tables and discount rates. These estimates could change materially over time. The principal actuarial assumptions used for valuation purposes of the group’s defi ned benefi t plan can be found in note 29(b) of this report.

Provision for environmental rehabilitation costsThe group’s stone crushing activities are subject to various laws and contractual agreements with supply partners. The Group recognises management’s best estimate for environmental rehabilitation costs in the period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes to environmental laws, contractual agreements and discount rates could affect the carrying amount of this provision. Refer to note 20 for the carrying value of the environmental rehabilitation provisions.

Financial instrumentsThe estimated fair value of derivatives is determined at discreet points in time based on relevant market information. These estimates are calculated with reference to market rates using appropriate valuation techniques and models. Refer to note 28 for details of the group’s derivatives.

ContingenciesBy their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves an exercise of signifi cant judgement and estimates of the outcome of future events (refer to note 26).

34. INVESTMENT IN JOINT VENTURES

Joint venture name Nature of work % of joint venture

BRSB joint venture Marine works 70%

Basil Read Quinisa joint venture Building works 50%

Basil Read Sivukile joint venture Building works 70%

Basil Read Bothakga Burrow joint venture Opencast mining 70%

Basil Read Newport joint venture Civil engineering 76%

2006R’000

2005R’000

The group’s aggregate proportionate share of joint ventures:

ASSETS

Non-current assets – –

Current assets 34 604 25 790

34 604 25 790

EQUITY AND LIABILITIES

Reserves (15 641) 97

Current liabilities 50 245 25 693

34 604 25 790

INCOME STATEMENT

Revenue 129 300 80 689

Cost (140 186) (79 397)

Net (loss)/profi t for the year (10 886) 1 292


2006R’000

2005R’000

35. ASSOCIATES

The group’s proportionate share of associates:

Assets

Non-current assets 12 424

Current assets 696 8 916

708 9 340

Equity and liabilities

Reserves 66 (1 262)

At end of year 66 (2 139)

Sale of interest in associate during the year – 877

Current liabilities 642 10 602

708 9 340

INCOME STATEMENT

Revenue 6 092 62 780

Cost (6 092) (62 622)

Net profi t for the year – 158

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


36. SCHEDULE OF GROUP COMPANIESThe following information relates to the group’s fi nancial interest in direct and indirect investments that are material to the group.

Issuedordinary Proportion held

Currencyshare

capital2006

%2005

%

African Road Maintenance and Construction (Pty) Limited R 1 100 100

Basil Read (Pty) Limited R 200 100 100

Basil Read Botswana (Pty) Limited (incorporated in Botswana) BWP 2 100 100

Basil Read Civils Namibia (Pty) Limited (incorporated in Namibia) N$ 10 100 –

Basil Read Contracting (Pty) Limited R 20 000 100 100

Basil Read Homes (Pty) Limited R 2 100 100

Basil Read International (Pty) Limited R 100 100 100

Basil Read Mozambique Limitada (incorporated in Mozambique) MT 1 500 000 100 100

Basil Read Properties No. 2 (Pty) Limited R 389 000 100 100

Basil Read Zambia Limited (incorporated in Zambia) K 5 000 100 100

Basil Read Zimbabwe (Pvt) Limited (incorporated in Zimbabwe) Z$ 2 000 100 100

Binga Constuçoes Mozambique Limitada (incorporated in Mozambique) MT 30 000 000 49 49

BR-Tsima Construction (Pty) Limited R 100 51 32

BR-Ijima Construction (Pty) Limited R 100 31,5 31,5

BRM Services Limited (incorporated in Mauritius) US$ 100 100 100

Codevco (Pty) Limited R 1 50 50

Newport Construction (Pty) Limited R 100 51 40

Protea Parkway Concession (Pty) Limited R 100 25 25

SBB Mozambique Limitada (incorporated in Mozambique) MT 10 000 000 30 30

Spray Pave (Pty) Limited R 200 61 –

Stone and Allied Industries Limited R 250 60,8 –

Swaziland Construction Company (Pty) Limited (incorporated in Swaziland) E 2 100 100

The holding company’s interest in the aggregate net profi ts earned by subsidiaries amounted to R54,1 million for the year (2005: R25 million).


37. BUSINESS COMBINATIONS

Newport Construction (Pty) LimitedOn 1 January 2006, the group acquired 11% of the share capital of Newport Construction (Pty) Limited, thereby giving the group an effective 51% interest in the company. Newport Construction (Pty) Limited is a civil engineering and construction company, specialising in projects in the Coega Development Zone in Port Elizabeth. The acquired business contributed revenues of R46,9 million and net profi t of R1,0 million. These amounts have been calculated using the group’s accounting policies.

Details of net assets acquired and goodwill are as follows:R’000

Purchase consideration:– cash paid 150

Fair value of net assets acquired (150)

Goodwill –

The assets and liabilities as of 1 January 2006 arising from the acquisition are as follows:

FairvalueR’000

Acquiree’scarryingamountR’000

Cash and cash equivalents 1 312 1 312

Property, plant and equipment (note 8) 1 060 1 060Contract-based intangible asset 1 170 –Deferred tax assets 1 004 –Contract debtors and retentions 2 922 2 922Receivables and prepayments 10 476 10 476Trade and other payables and provisions (19 357) (19 357)Net liabilities (1 413) (3 587)Equity accounted 1 563 1 563Minority interests (49%) – –Net assets acquired 150 (2 024)

R’000

Purchase consideration settled in cash 150

Cash and cash equivalents in subsidiary acquired (1 312)

Cash infl ow on acquisition (1 162)

BR-Tsima Construction (Pty) LimitedOn 1 January 2006, the group acquired 19% of the share capital of BR-Tsima Construction (Pty) Limited, thereby giving the group an effective 51% interest in the company. BR-Tsima Construction (Pty) Limited is a civil engineering and construction company, specialising in projects in the North-West Province, Limpopo Province and Mpumalanga. The acquired business contributed revenues of R78,8 million and net profi t of R0,4 million. These amounts have been calculated using the group’s accounting policies.

Details of net assets acquired and goodwill are as follows:

R’000

Purchase consideration:– cash paid 450

Fair value of net assets acquired (450)

Goodwill –NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


FairvalueR’000


37. BUSINESS COMBINATIONS (continued)

The assets and liabilities as of 1 January 2006 arising from the acquisition are as follows:

Cash and cash equivalents 2 822 2 822

Contract-based intangible asset 267 –

Contract debtors and retentions 3 218 3 218

Receivables and prepayments 5 486 5 486

Trade and other payables and provisions (10 101) (10 101)

Deferred tax liabilities (224) (224)

Taxation (249) (249)

Net assets 1 219 952

Equity accounted (302) (302)

Minority interests (49%) (467) (467)

Net assets acquired 450 183

R’000

Purchase consideration settled in cash 450


Cash infl ow on acquisition (2 372)

Basil Read Civils Namibia (Pty) LimitedOn 1 January 2006, the group acquired 100% of the share capital of Basil Read Civils Namibia (Pty) Limited. The company is a civil engineering and construction company, specialising in projects in Namibia. The acquired business contributed revenues of R53,4 million and net profi t of R7,3 million. These amounts have been calculated using the group’s accounting policies.

Details of net assets acquired and goodwill are as follows:

Purchase consideration:– cash paid –

Fair value of net assets acquired –

Goodwill –


FairvalueR’000



The assets and liabilities as of 1 January 2006 arising from the acquisition are as follows:Cash and cash equivalents 514 514Deferred tax assets 1 248 1 248Contract debtors and retentions 1 025 1 025Receivables and prepayments 263 263Trade and other payables and provisions (3 050) (3 050)Net assets acquired – –

R’000

Purchase consideration settled in cash –

Cash and cash equivalents in subsidiary acquired (514)

Cash infl ow on acquisition (514)

Stone and Allied Industries LimitedOn 1 July 2006, the group acquired 60,8% of the share capital of Stone and Allied Industries Limited. The company is a stone crushing company. The acquired business contributed revenues of R27,0 million and net profi t of R1,7 million. These amounts have been calculated using the group’s accounting policies.Details of net assets acquired and goodwill are as follows:

R’000Purchase consideration:– cash paid 10 032Fair value of net assets acquired (7 728)Goodwill 2 304

The goodwill is attributable to the workforce of the acquired business and the signifi cant synergies expected to arise following the acquisition of Stone and Allied Industries Limited.The assets and liabilities as of 1 July 2006 arising from the acquisition are as follows:

FairvalueR’000


Cash and cash equivalents 3 823 3 823Property, plant and equipment (note 8) 13 893 13 893Available-for-sale investments 217 217Inventories 2 460 2 460Receivables and prepayments 6 364 6 364Environmental rehabilitation provision (2 562) (2 562)Borrowings (3 839) (3 839)Trade and other payables and provisions (5 753) (5 753)Deferred tax liabilities (1 837) (1 837)Taxation (55) (55)Net assets 12 711 12 711Minority interests (39,2%) (4 983) (4 983)Net assets acquired 7 728 7 728

NO

TE

S T

O T

HE

CO

NS

OL

IDA

TE

D F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)



R’000

Purchase consideration settled in cash 10 032


Cash outfl ow on acquisition 6 209

Spray Pave (Pty) LimitedOn 1 July 2006, the group acquired 61% of the share capital of Spray Pave (Pty) Limited, a supplier and sprayer of bitumen and related products. The acquired business contributed revenues of R36,4 million and net profi t of R1,0 million. These amounts have been calculated using the group’s accounting policies.

Details of net assets acquired and goodwill are as follows:R’000

Purchase consideration:– cash paid 4 800

Fair value of net liabilities acquired 2 638

Goodwill 7 438

The goodwill is attributable to the workforce of the acquired business and the signifi cant synergies expected to arise following the acquisition of Spray Pave (Pty) Limited.

The assets and liabilities as of 1 July 2006 arising from the acquisition are as follows:

FairvalueR’000


Cash and cash equivalents (4 904) (4 904)

Property, plant and equipment (note 8) 5 358 5 358

Investments in associates 66 66

Deferred tax assets 878 878

Inventories 1 604 1 604

Receivables and prepayments 9 244 9 244

Borrowings (3 009) (3 009)

Trade and other payables and provisions (11 875) (11 875)

Net liabilities (2 638) (2 638)

Minority interests (39%) – –

Net liabilities acquired (2 638) (2 638)

R’000

Purchase consideration settled in cash 4 800

Cash and cash equivalents in subsidiary acquired 4 904

Cash outfl ow on acquisition 9 704


CO

MP

AN

Y IN

CO

ME

STA

TE

ME

NT

FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

00

6

Notes2006R’000

2005R’000

Revenue – –

Contracting revenue – –

Other – –

Contracting and other costs – –

Gross profi t – –

Other losses 38 – (4)

Operating loss – (4)

Interest paid 39 (3 146) (1 262)

Interest received 39 3 146 1 262

Loss before taxation – (4)

Taxation – –

Loss after taxation – (4)


Notes2006

R’000 2005

R’000

ASSETS

Non-current assets 104 942 (493)

Investments in subsidiaries 40 104 940 (495)

Available-for-sale fi nancial assets 41 2 2

Current assets 61 600 60 844

Receivables and pre-payments 42 219 –

Cash and cash equivalents 43 61 381 60 844

TOTAL ASSETS 166 542 60 351

EQUITY AND LIABILITIES

Capital and reserves 166 271 60 122

Stated capital 44 165 043 58 894

Retained earnings 1 228 1 228

Current liabilities

Trade and other payables 45 271 229

TOTAL EQUITY AND LIABILITIES 166 542 60 351

CO

MP

AN

Y B

AL

AN

CE

SH

EE

T A

S A

T 3

1 D

EC

EM

BE

R 2

00

6


Notes2006R’000

2005R’000

CASH FLOW FROM OPERATING ACTIVITIES (177) 55

Cash utilised in operating activities 46 (177) –

Net fi nance costs – –

Dividends paid 47 – (52)

Taxation received 48 – 107

CASH FLOW FROM INVESTING ACTIVITIES

Loans (advanced to)/repaid by subsidiaries (105 435) 94 384

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of shares 106 149 630

MOVEMENT IN CASH AND CASH EQUIVALENTS 537 95 069

CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR 60 844 (34 225)

CASH AND CASH EQUIVALENTS – END OF YEAR 43 61 381 60 844

COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2006

SharecapitalR’000

Retainedearnings

R’000Total

R’000

Balance at 1 January 2005 58 264 1 232 59 496

Consideration received for the issue of shares to Basil Read Share Incentive Scheme 630 – 630

Loss for the year – (4) (4)

Balance at 31 December 2005 58 894 1 228 60 122

Consideration received for the issue of shares to Basil Read Share Incentive Scheme 587 – 587

Consideration received for the issue of shares in terms of the clawback offer 109 560 – 109 560

Costs relating to the clawback offer (3 998) – (3 998)

Profi t for the year – – –

Balance at 31 December 2006 165 043 1 228 166 271


NO

TE

S T

O T

HE

CO

MP

AN

Y F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

2006R’000

2005R’000

38. OTHER LOSSES

Impairment of subsidiary – (4)

39. NET FINANCE COSTS

Interest paid

Bank loans and other borrowings (3 146) (1 262)

Interest received

Bank 3 146 1 262

– –

40. INVESTMENTS IN SUBSIDIARIES

Unlisted investments

Shares at cost 1 1

Loans to/(from) subsidiaries 104 939 (496)

104 940 (495)

Details of the group’s investments in subsidiaries are as follows:

Basil Read (Pty) Limited 101 410 (1 884)

Shares at cost 1 1

Loans to subsidiary 101 409 (1 885)

Basil Read Properties No. 1 (Pty) Limited – –

Shares at cost – 4

Impairment of subsidiary due to deregistration – (4)

Basil Read Contracting (Pty) Limited

Loans to subsidiary 1 427 1 045

Basil Read Share Incentive Scheme

Loans to trust 1 988 344

African Road Maintenance and Construction (Pty) Limited

Loans to subsidiary 115 –

104 940 (495)

At 31 December 2006, the net asset value of the group was R199,5 million and the market capitalisation was R895,6 million, based on the group’s year end share price.


2006R’000

2005R’000

41. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Listed investments

At beginning and at the end of the year 2 2

The carrying value of listed investments approximates their fair value.

42. RECEIVABLES AND PRE-PAYMENTS

Other receivables 219 –

43. CASH AND CASH EQUIVALENTS

Bank balances 61 381 60 844

Cash on hand – –

61 381 60 844

44. STATED CAPITAL

AuthorisedOrdinary shares76 000 000 ordinary no par value shares (2005: 70 000 000)

No parvalue

ordinarysharesR’000

IssuedOrdinary shares


55 100 000 ordinary no par value shares at the beginning of the year 58 264

450 000 ordinary no par value shares issued to Basil Read Share Incentive Scheme 630

55 550 000 ordinary no par value shares at the end of the year 58 894


55 550 000 ordinary no par value shares at the beginning of the year 58 894

419 545 ordinary no par value shares issued to Basil Read Share Incentive Scheme 587

15 111 777 ordinary no par value shares issued in terms of the clawback offer – nett of costs 105 562

71 081 322 ordinary no par value shares at the end of the year 165 043

The directors are authorised, by resolution of the shareholders and until the forthcoming annual general meeting, to dispose of the unissued shares for any purpose and upon such terms and conditions as they deem fi t.

NO

TE

S T

O T

HE

CO

MP

AN

Y F

INA

NC

IAL

STA

TE

ME

NT

S FO

R T

HE

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

006

(con

tinu

ed)


2006R’000

2005R’000

45. TRADE AND OTHER PAYABLES

Trade creditors and accruals 42 –

Shareholders for dividend 229 229

271 229

The carrying value of trade and other payables approximate their fair value due to the short-term maturities of these balances.

46. CASH UTILISED IN OPERATING ACTIVITIES

Operating loss – (4)

Adjustment for non-cash items: impairment loss – 4

Operating cash fl ow – –

Movements in working capital: (177) –

Receivables and pre-payments (219) –

Trade and other payables 42 –

Cash utilised in operating activities (177) –

47. DIVIDENDS PAID

Dividends due at the beginning of the year (229) (281)

Dividends declared per the statement of changes in equity – –

Dividends due at the end of the year 229 229

Dividends paid – (52)

48. TAXATION RECEIVED

Taxation receivable at the beginning of the year – 107

Normal and STC taxation charged to the income statement – –

Taxation due at the end of the year – –

Taxation received – 107

49. BORROWING POWERS

The company has unlimited borrowing powers in terms of its articles of association.

50. GUARANTEES AND CONTINGENT LIABILITIES

The company has issued sureties for unlimited amounts in respect of amounts advanced to and sureties issued on behalf of subsidiary companies. It is not expected that any loss will arise out of the issue of the above guarantees.


SH

AR

EH

OL

DE

R IN

FO

RM

AT

ION

Number of shares held

% of shares held

Amabubesi Investments (Pty) Limited 21 825 041 30,70

Bouygues Travaux Publics SA (France) 10 308 188 14,50

Mquanda Trust 3 043 231 4,28

Vuwa Investments (Pty) Limited 2 783 210 3,92

Stanlib Asset Managers 2 241 115 3,15

Sanlam Industrial Fund 1 829 429 2,57

DESCRIPTION OF SHAREHOLDERS

Number of shareholders

% ofshareholders

Number ofshares held

% of shares held

Public shareholding

Corporate entities/Nominees/Trusts/Individuals 2 739 99,89 46 002 783 64,72

2 739 99,89 46 002 783 64,72

Non-public shareholding

Share Incentive Scheme 1 0,04 470 288 0,66

Major Black Economic Empowerment Partners 2 0,07 24 608 251 34,62

3 0,11 25 078 539 35,28

Total 2 742 100,00 71 081 322 100,00

SHAREHOLDER SPREADNumber of

shareholders% of

shareholdersNumber of

shares held% of

shares held

1 – 1 000 shares 706 25,74 342 203 0,48

1 001 – 5 000 shares 1 153 42,07 2 994 707 4,21

5 001 – 10 000 shares 427 15,57 2 970 020 4,18

10 001 – 50 000 shares 361 13,16 7 198 683 10,13

50 001 – 100 000 shares 36 1,31 2 494 822 3,51

Over 100 001 shares 59 2,15 55 080 887 77,49

2 742 100,00 71 081 322 100,00

ORDINARY SHAREHOLDERS’ ANALYSIS

The following are the shareholders benefi cially holding, directly or indirectly, in excess of 2% of the share capital:


NO

TIC

E T

O S

HA

RE

HO

LD

ER

S

Notice is hereby given that the twenty-second annual general meeting of the shareholders of Basil Read Holdings Limited which will be held at their offi ces on 388 Gild Road, Lilianton, Boksburg, on 10 May 2007 at 10:00 to consider and if deemed fi t, to pass, with or without modifi cation, the following ordinary resolutions:

AS ORDINARY RESOLUTIONS

1. To consider and adopt the annual fi nancial statements for the year ended 31 December 2006 and the reports of the directors and auditors.

2. To elect the following directors who retire in accordance with the provisions of the group’s articles of association and being eligible offer themselves for re-election. Their short CV’s are detailed on page 8 of the annual report:

2.1 SS Ntsaluba (appointed 05/07/2006)

2.2 CP Davies (appointed 05/07/2006)

2.3 SLL Peteni (appointed 05/07/2006)

2.4 AT Tlelai (appointed 05/07/2006)

3. To confi rm fees payable to the directors (refer page 42).

4. To authorise the directors to approve the remuneration of the auditors PricewaterhouseCoopers Inc for the year under review.

5. To re-appoint PricewaterhouseCoopers Inc as auditors until the conclusion of the next annual general meeting.

6. To place the unissued ordinary shares in the authorised ordinary share capital of the company under the control of the directors in terms of sections 221 and 222 of the Companies Act, 1973, as amended (“the Act”), who are authorised to allot and issue these shares on such terms and conditions as they deem fi t until the next annual general meeting, subject to the provisions of the Act and the JSE Limited regulations.

7. “Resolved that the directors have the powers to allot and issue ordinary shares for cash as and when the directors consider it appropriate in the circumstances, subject to the Act, any share incentive trust deed entered into by the company, the articles of association of the company and the JSE Listings Requirements, when applicable, and the following limitations, namely that:

• this authority shall not endure beyond the earlier of the next annual general meeting of the company or beyond 15 (fi fteen) months from the date of this meeting;

• there will be no restrictions in regard to the persons to whom the shares may be issued, provided that such shares are to be issued to public shareholders (as defi ned by the JSE Listings Requirements) but not to related parties;

• upon any issue of ordinary shares representing on a cumulative basis within a fi nancial year, 5% (fi ve percent) or more of the number of ordinary shares in issue, the company shall, by way of a paid press announcement in terms of 11.22 of the JSE Listings Requirements, give full details thereof, including the effect on the net asset value of the company and earnings per share, the number of securities issued and the average discount to the weighted average traded price of the securities over the 30 days prior to the date that the price of such issue was determined or agreed by the company’s directors;

• that issues in the aggregate in any one fi nancial year shall not exceed 15% (fi fteen percent) of the number of issued ordinary shares of the company (including instruments which are compulsorily convertible into ordinary shares) at the date of application less any ordinary shares issued, or to be issued in the future arising from options/convertible securities issued during the current fi nancial year;

• the maximum discount at which ordinary shares may be issued is 10% (ten percent) of the weighted average traded price of the ordinary shares over the 30 (thirty) business days prior to the date that the price of the issue is determined or agreed by the directors, and

• under the JSE Listings Requirements, a 75% (seventy-fi ve percent) majority of votes cast by the ordinary shareholders present or represented by proxy at the general meeting is required to approve the resolution.”


NO

TIC

E T

O S

HA

RE

HO

LD

ER

S (

cont

inue

d)

8. SPECIAL RESOLUTION NUMBER 1

It is resolved hereby that the company be authorised to increase its Authorised Ordinary Share Capital presently consisting of 76 000 000 ordinary shares of no par value, to 100 000 000 authorised ordinary shares of no par value, representing an increase of 24 000 000 ordinary shares of no par value.

Reasons for and Effect of the Special Resolution

The increase in the authorised share capital of the company by 24 000 000 new ordinary shares of no par value shall enable the company, in due course, to proceed with increasing its issued ordinary share capital, as may be deemed necessary from time to time to fund expansion and growth of the company, and to enable the company to maintain an appropriate equity: debt ratio.

9. To transact such other business as may be transacted at an annual general meeting.

Voting

The ordinary resolutions are subject to a simple majority vote of shareholders present or represented by proxy at the annual general meeting. Every shareholder present in person or by proxy at the annual general meeting shall, on a show of hands, have one vote only, and on a poll, have one vote for each share of which he/she is the registered holder.

A shareholder entitled to attend, speak and vote at the annual general meeting is entitled to appoint a proxy (who need not be a shareholder of the company) to attend, speak and vote in his/her stead.

Shareholders which are companies or other bodies corporate may, in terms of section 188(1) of the Act, by resolution of its directors or other governing body, authorise any person to act as its representative at the annual general meeting.

Certifi cated shareholders and own-name dematerialised shareholders who are unable to attend the annual general meeting but wish to be represented thereat should complete and return the attached form of proxy in accordance with the instruction contained therein so as to be received before the annual general meeting by the Transfer Secretaries, Link Market Services (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 by no later than 10h00 on Tuesday, 8 May 2007.

Ordinary shareholders who have dematerialised their shares through a CSDP or broker, other than by own name registration who wish to vote by way of proxy, must provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between such shareholders and their CSDP or broker. These instructions must be provided to their CSDP or broker by the cut-off time or date advised by their CSDP or broker for instructions of this nature.

Dematerialised shareholders who wish to attend the annual general meeting must request their CSDP or broker to vote by proxy on their behalf in terms of the agreement entered into between the shareholder and their CSDP or broker.

By order of the board

E KRUGER

Company Secretary

Boksburg

18 April 2007


FO

RM

OF

PR

OX

Y

BASIL READ HOLDINGS LIMITEDRegistration number 1984/007758/06

(Incorporated in the Republic of South Africa)(“the company”)

For use by certifi cated and own-name dematerialised shareholders at the annual general meeting to be held at 10:00 on Thursday, 10 May 2007 at 388 Gild Road, Lilianton, Boksburg.

I/We (name in full)

being the holder/s of ordinary shares in the company appoint: (see note 1)

1. or failing him/her

2. or failing him/her

3. the chairman of the annual general meeting,

as my/our proxy to attend, speak and vote for me/us at the annual general meeting of the company to be held at 10:00 on Thursday, 10 May 2007 at 388 Gild Road, Lilianton, Boksburg and at any adjournment thereof. I/We desire to vote as indicated below (see note 2):

Number of shares

Ordinary resolution In favour of Against Abstain

1. Adopt the annual fi nancial statements

2. Re-elect the directors as listed/below

2.1 SS Ntsaluba

2.2 CP Davies

2.3 SLL Peteni

2.4 AT Tlelai

3. To confi rm the fees payable to the directors

4. Approve auditors’ remuneration

5. Re-appoint PricewaterhouseCoopers Inc as auditors

6. Place unissued shares under the control of directors

7. To grant the directors a general authority to issue ordinary shares for cash

8. Special resolution number 1: increase in authorised share capital

Indicate instructions to proxy by way of a cross in the appropriate space(s) provided above

Signed at on 2007

Signature:

Each shareholder is entitled to appoint one or more proxies (who need not be a member of the company), to attend, speak and vote in place of that member at the annual general meeting.


NO

TE

S T

O F

OR

M O

F P

RO

XY

INSTRUCTIONS ON SIGNING AND LODGING THE ANNUAL GENERAL MEETING PROXY FORM

1. A shareholder may insert the name(s) of two alternative proxies (neither of whom need be a shareholder of the company) in the space provided, with or without deleting the words “chairman of the annual general meeting”. The person whose name stands fi rst on the form of proxy and has not been deleted and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. In the event that no names are indicated, the proxy shall be exercised by the chairman of the annual general meeting.

2. A shareholder’s instructions to the proxy must be indicated by the insertion of an “X” or the relevant number of votes exercisable by that shareholder in the appropriate box/boxes provided. If a proxy form, fully signed, is lodged without specifi c directions as to which way the proxy is to vote, the chairman of the annual general meeting will be deemed to have been authorised as he/she thinks fi t. A shareholder or the proxy is obliged to use all the votes exercisable by the shareholder or by the proxy.

3. A deletion of any printed matter and the completion of any blank spaces need not be signed or initialled. Any alteration or correction must be initialled by the authorised signatory/ies.

4. When there are joint holders of Basil Read shares, all joint Basil Read shareholders must sign the form of proxy.

5. The completion and lodging of this form of proxy will not preclude the shareholders, who grants this proxy, from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.

6. Documentary evidence establishing the authority of the person signing this form of proxy in a representative capacity must be attached to this form unless previously recorded by the transfer secretaries.

7. Where this form is signed under power of attorney, such power of attorney must accompany this form unless it has been previously registered with the company or the transfer secretaries.

8. A minor must be assisted by his/her parent or guardian unless the relevant document establishing his/her legal capacity has been produced or registered by the transfer secretaries.

9. Completed forms of proxy must be forwarded to the company’s transfer secretaries, Link Market Services (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 so as to be received at least 48 hours, excluding Saturdays, Sundays and public holidays, before the annual general meeting.

10. The chairman of the annual general meeting may in his absolute discretion, accept or reject any form of proxy, which is completed other than in accordance with these notes.

11. If required, additional forms of proxy are available from the transfer secretaries of Basil Read.

12. Dematerialised shareholders, other than by own name registration, must NOT complete this form of proxy but must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between such shareholders and their CSDP or broker.

Basil Read Front - ShareData · Basil Read Annual Report 2006 03 2006 R’000 2005 R’000 2004...

Documents

Transcript of Basil Read Front - ShareData · Basil Read Annual Report 2006 03 2006 R’000 2005 R’000 2004...