9425 protech cover:layout 1 - sharedata.co.za · 52 employee culture // 53 broad-based black...

>>09

09annual report

FAST-TRACKCONTRACTINGSPECIALIST

>>

Protech A

nnual Report

9425 Protech cover:Layout 1 6/2/09 2:15 PM Page 2

contents

02 Group history // 04 Financial highlights // 06 Board and executive committee // 07 Group structure

08 Strategy at a glance // 14 Chairman’s report // 18 Chief executive officer’s report

24 Chief financial officer’s report // 26 Case studies // 30 Operational review // 42 Sustainability review

44 Economic value added statement // 45 Corporate governance // 49 Stakeholder engagement

52 Employee culture // 53 Broad-based black economic empowerment // 56 Safety, health, environment

and quality // 61 Annual financial statements // 127 Notice of annual general meeting

133 Form of proxy // ibc Corporate information

AND IS A FOCUSED CIVIL ENGINEERING GROUP WITHSPECIFIC EMPHASIS ON FAST-TRACK CONTRACTING.THE GROUP IS INVOLVED IN CONTRACTS IN THE PRIVATE,PUBLIC AND MINING SECTORS.

>> PROTECH WAS ESTABLISHED

20 YEARS AGO


01

>>

Pro

tech

Ann

ual R

epor

t 09

9425 Protech AR prf 7a:session 3 6/2/09 2:20 PM Page 1

02

Within four years ofbusiness, the group addsan extra five units of plantand expands its scope toinclude a wider spread ofcivil engineering contracts,including small roads.

Turnover is just underR10 million a year.

Protech (the group) is startedby Gerald Chapman, a civilengineer, within the context of a very depressed South Africanconstruction sector.

The company launches as ProtechProjects on the back of onlyR100 000 and three units of plant.

In its early incarnation, the groupfocuses on small civil engineeringwork, such as primary waterreticulation.

For the next 20 years, civilengineering remains thefoundation of the group.

The group diversifiesits services by joining

forces with a smallbuilding company.

The group decides that itwants to make fast-trackbulk earthworks itsfocus, with the strategicdecision to use primarilynew equipment. In theensuing years, this becomesthe cornerstone of thegroup’s steady growthand financial success.

1999

1993

1996

1989

1992

20 YEARS OF STEADY GROWTH>>

1998

2000

1995

During its tenthanniversary year, the group’s industrysuccess means fundingbecomes easier to secure,and the ability to acquire more plant allows thecompany to move even more aggressively into road contracts.

In addition, as the localconstruction downturnintensifies, the groupsuccessfully executescontracting work in the rest of Africa, whichincludes roads and civilengineering work inMozambique, Botswanaand Ethiopia.

While still carrying out some building contracts, the group starts to focus

on upping the frequency of major contracts in the civil

engineering space, specificallyroads. Civil engineering

now makes up about 80% of revenue.

After nine years ofbusiness, the group is

establishing a strongmarket reputation.

The group’s split betweenlocal and African business

is 60/40. The company

decides to specialise to

differentiate itself fromindustry rivals.

The strategy identified in1996 is fully implemented

and the group starts tofocus exclusively on fast-

track bulk earthworks

and operates according

to a reputation strategy

rather than competing on price.

The company movescompletely out of the

building segment.

As civil engineering rates comeunder pressure, the group

branches out into buildingconstruction and takes up a

multi-disciplinary position in themarket. It starts to work on

several residential contracts andbecomes involved in the

building of small office blocks.Turnover doubles to

R20 million.

The need for a commercial soilslaboratory is identified and theindependent laboratory group

Gauteng Road TestingServices (GRTS) becomes

part of the group.


03

>>

Pro

tech

Ann

ual R

epor

t 09

2002

The group features

increasingly on

preferred bidder lists,especially amongst

mining houses due toits ability to generatecost savings through

high-quality, fast-trackdelivery.

As its South Africanstrategy bears fruit, the

company’s Africanpresence recedes.

2003 2004

-05

2006 2007

The Readymix deal

becomes effective in

February 2008. The group isstill enjoying a significantly

widened contract pipeline and2008 is a very successful year

featuring massive organicgrowth.

The group acquires

Impact Compaction.

During the latter part of theyear, the global economic

crisis builds momentum – butits impact on the construction

industry is still not clear.

2008 2009

The group becomes

involved in a significantly

expanded range of

contracts, including

roads, harbours and

airports.

The bulk of turnovercomes from private sector

contracts such as shoppingcentres and office parks.

Several trade players seekto buy the group,

or to secure a significantshareholding. Protech

seeks instead to remainindependent to guaranteethe longevity of the group

and the people whocreated it.

Turnover increases to

R194,2 million.

With the construction boomnow entrenched, and withinfrastructure contractdelivery increasingnationally, the group takesadvantage of significantlyimproved availability offunding and focuses onmaximising the growthopportunities available.

The group lists in August

on the JSE Limited with

a market capitalisation

of R362 million.

Following listing, the groupgrows further, increasingturnover to R245,6 million.

During August, negotiationsfor the acquisition ofReadymix start.

The group achieves a CIDB

rating of 9CE. During thefinancial year to February2009, the group weathers thetough economic climate well. It delivers robust results,

with turnover up 91%,

operating profit up 61%,

margins remaining above

20% at 22% and with

R735 million of work in

progress.

Due to its flexible businessmodel, the group manages toshift even more into thegrowing infrastructure sectorwhile private sector growthremains constrained. Embracing empowerment

initiatives, the group

forms a staff incentive

trust, ensuring that

employees are part of its

future growth. Pela Plantcommences operations,adding additional focus tothe group.

With political and economicmomentum building inSouth Africa (including theWorld Cup Soccer bid, theGautrain and increasingcommercial growth), thecompany realises that aconstruction boom isimminent and positionsaccordingly with a moreaggressive approach.

The group focuses onputting a quality teamin place.

The group’s fast-track

ability is extended from

bulk earthworks to all

aspects of civil

engineering. By the end

of 2005, the company’s

turnover is R158,7 million.


04

FINANCIAL HIGHLIGHTS>>

+91%Revenue

+61%Operating profit

+47%Earnings per share

+55%Headline earnings

per share

+59%Net tangible asset

value per share

+40%Cash generated by

operations*

* Before changes in working capital.

The group has a strong five-year performance with compound average profit after tax

growth of 66%.


05

>>

Pro

tech

Ann

ual R

epor

t 09

’09salient financial informationyear ended 28 February

2009 2008

GROUP SUMMARY (R MILLIONS)

Revenue 702,7 368,5

Earnings before exceptional items, interest and taxation 156,0 97,2

Total assets 692,0 492,8

Total borrowings 274,4 164,5

Operating cash flow 142,9 98,8

Total number of employees – 28 February 1 381 1 225

ORDINARY SHARE PERFORMANCE (CENTS)

Basic earnings per share 25,6 17,4

Headline earnings per share 26,0 16,8

Operating cash flow per share 39,4 27,7

Net tangible asset value per share – 28 February 55,0 34,7

FINANCIAL STATISTICS

Operating margin 22,2% 26,4%

Attributable earnings on shareholders’ funds (%) 39,6% 43,8%

Interest cover (times) 5,6 12,0

Return on average assets 15,7% 18,8%

RATIOS

Net total debt:equity (%) – excluding common control reserve 99,8% 97,7%

Days receivable outstanding (days) – excluding retentions 69 67

Current (times) 1,4 0,9


06

Proof 4 • 11 May

Dirk Ackerman

Non-executive chairman

BOARD OF DIRECTORS EXECUTIVE COMMITTEE (EXCO)

Gerald Chapman

Chief executive officer

Nellis Wolmarans

Chief financial officer

Julian DoveyChief operating officer

John le Roux

Managing directorProtech Khuthele

Hardie Swanepoel

Managing director Pela Plant and Impact Compaction

Chris PorterCommercial director Managing director SARTS

Dieter RothmanManaging director Protech Readymix

Mafahle Mareletse

Independent non-executivedirector

Constance (Connie) Nkosi

Non-executive director

Vincent Raseroka

Non-executive director

Pieter van TonderNon-executive director

Matsotso VusoIndependent non-executivedirector

Gerald Chapman

Executive director

Nellis Wolmarans

Executive director

BOARD AND EXECUTIVE COMMITTEE>>


>> GROUP STRUCTURE

Protech

Khuthele

(Pty) Ltd

Protech

Readymix

(Pty) Ltd

Contracting Geotech Readymix

Pela Plant

(Pty) Ltd

South African

Road Testing

Services

(Pty) Ltd

Impact

Compaction

(Pty) Ltd

PROTECH KHUTHELE HOLDINGS LIMITED

SUPPLIER OFCONCRETE AND

CONCRETEPUMPINGSERVICES

SPECIALISTIMPACT

COMPACTION

FAST-TRACKCONTRACTING

SPECIALIST

GEOTECHNICALLABORATORYAND SURVEY

SERVICES

PLANT HIRE AND

LOGISTICALSERVICES

PROTECH HAS BUILT ITS STRONG REPUTATION ON AN ABILITY TO COMMENCE WORK WITHIN 24 – 48 HOURS AFTER AWARDINGOF A CONTRACT AND TO COMPLETE WORK AHEAD OF SCHEDULE – RESULTING IN SIGNIFICANT COST SAVINGS TO THE CLIENT.

07

>>

Pro

tech

Ann

ual R

epor

t 09


08

STRATEGY AT A GLANCE>>Introduction

Protech is a bulk earthworks and civil engineering group that offers fast-track

contracting. It operates in an industry where there are extensive barriers to entry.

The group’s established track record, built up over 20 years, its proven quality

delivery to clients, a CIDB rating of 9CE, ownership of borrow and spoil facilities

that are in strategic locations, as well as a top quality fleet of plant and

equipment, make duplicating its business model difficult.

is delivered within a few hours. The maintenance andwarranty risk is also offset to suppliers.

A further significant market advantage is the ownership,

lease or off-take of borrow and spoil facilities at

strategically positioned locations. This was establishedover a number of years based on an analysis of the industry’sgeographic growth, detailed analysis of national, regionaland local authority guide plans and a close workingrelationship with relevant industries.

The group services only blue-chip clients, resulting

in a very low incidence of bad debt. The group has

consistently maintained a percentage of bad debts of

less than 1% of turnover.

Business model

The group guarantees successful implementation of itsclient delivery model in every engagement, resulting in theability to cherry-pick contracts and ensuring client loyaltythrough significant cost savings on contracts.

The group’s contracts are primarily sourced through itsextensive and long-standing relationships in the industry,as well as through tender processes. These relationshipsensure continuous and timeous identification of workopportunities and the ability to negotiate prime contracts.The average duration of contracts is six months.

The group has a very flexible business model, which

enables it to anticipate market changes and to

proactively and quickly shift its focus from markets

under pressure to growth or active markets. During thelast year, it increased its exposure to infrastructure andmining to over 73% (2008: 43%) of contracts away fromthe private sector where there has been pressure.

The group has the ability to be on site within 24 – 48 hoursafter being awarded a contract. It also has an entrenchedtrack record of never finishing jobs late. This has allowedthe group to compete on reputation, not only price, whichcommands a higher margin – resulting in higher marginsthan those normally found in its industry. As the group is

first on and first off site before construction operations

start, it is less affected by contract delays than general

construction companies.

Furthermore, the group operates only new plant. Plant isreplaced every 24 months, resulting in over 100% plantutilisation and minimum downtime for the client – a uniquefeature in the construction industry. The group only procuresfrom leading suppliers, such as Bell, Hitachi and Mercedes,and has excellent service level agreements in place. Thisensures that if plant breaks down on site, a replacement


09

>>

Pro

tech

Ann

ual R

epor

t 09

High margins

> Proven quality assurance– Compete on reputation– 20 years’ experience

> Margins underpinned by:– Margin = price + efficiency– Unique plant policy and

exceptional utilisation– Cherry-picking work

Group delivery model

The group’s service delivery model has been developed and tailored

over 20 years.

> Reputation as fastest in sector– Guaranteed to be on site in 24 – 48 hrs– 100% track record for finishing on or

before schedule– Proactively manage adversities – Strategically positioned borrow and

spoil facilities– Benefits of first on and first off site

> Flexibility– Able to shift markets within

three months– Able to adapt to nature of work


>> Strategy at a glance continued

Strong skills set, including:

Structured for delivery

> Owns and operates a fleet ofjust over 300 units of plant

> Operates only new plant, replacing after 24 months, resulting in minimal downtime

> Unique industry plant utilisationof more than 100%

Asset management Professional engineering and

project management skills

Resource planning and

logistics

> Exco consists of a young,motivated team of professionals

> Highly experienced seniormanagement, with solidacademic qualifications

– More than 10 years of closely working together

> Entrenched culture of providinga professional service that leadsto time and cost saving

> Ability to start on site within 24 – 48 hours after awardingof a contract

> Ability to fast-track, resulting in early completion

> Innovative solutions that createcost savings

Fast-trackcontractingReadymix Civils and

Earthworks

Plant hire and logistics

Impact Compaction

> Enhances fast-trackability throughcheapest, fastestcompaction

> Enhances fast-track abilitythroughinternal supplyto contracts

> Enhances fast-trackability throughefficient testing

Geotech

10

The group has built a focused structure for its clients toensure one-stop contracting ability, with several subsidiariesfeeding services into the core of fast-track contracting.These include state-of-the-art laboratories that enhance thegroup’s fast-track ability through prompt soil testing, aswell as plant hire and logistics that support the group’soperations with quality plant.

Most recently, the group acquired Impact Compaction,which is one of only a few companies in the world withcompaction technology that is much faster and cost-effective than historical methods. Its readymix businessalso assists the core by providing concrete, when required.

> Enhances fast-track abilitythroughquality plant


11

>>

Pro

tech

Ann

ual R

epor

t 09

Bulk earthworks

> Site clearance

> Demolitions

> Fast-track bulk earthworks

> Basement excavation

> Canal/river rehabilitation

> Earthworks for commercial, industrial and retaildevelopments

> Crushing and screening

Roads and civil works

> Road construction

> Community infrastructure services

> Dams and attenuation ponds

> Airports and airfields

> Harbour and reclamation works

Mining infrastructure

> Mine infrastructure development

> Earthworks

> Topsoil and overburden stripping

> Rehabilitation

> Slime dams

> Dump reclamation

> Materials handling

Plant hire and logistics

Geotechnical laboratory and survey services

Impact compaction

Readymix concrete and concrete

pumping services

Core focus areas

Although the current 30% hired plant is higher than the group’s strategic aim of 10 – 15%, the group is comfortablewith this level as a buffer in uncertain times.

The group is currently working on improving its BBBEE rating by focusing on certain key areas. A supplier database has been developed to track suppliers, sub-contractors and their empowerment status. It is envisaged thatthe supplier database will make a significant contribution to the future measurement of verified preferentialprocurement.

Strategy is measured against nine key indicators:Achieved in

Goal 2009

Return on shareholders’ funds 20% 39,6%Return on assets 10% 15,7%Group operating margin 20% 22,2%Total net debt to equity ratio 70% 99,8%Cash generated equal to net income 100% 153,8%Plant utilisation 100% 103%Hired plant to owned plant 15% 30%BBBEE Level 5 Level 7CIDB rating Level 9 Level 9


12

Economies of scale are achieved by delivering the key support functions of IT,

finance, HR and legal from head office. However, a strong subsidiary culture is

maintained. Arms-length, market-related pricing between divisions creates a

healthy competitive environment, whilst at the same time maintaining

excellent service levels between different group entities – all of which is essential

in delivering quality fast-track contracting solutions.

Risk factors Mitigating factors

Under-utilisation of plant and To mitigate the risk of plant not being utilised fully, the group follows plant standing idle a strategy of renting in a portion of its fleet from selected external plant

hire operators. The rented portion of the fleet serves as a buffer in timesof strong, as well as weak, demand for plant. Rented plant can be hiredor returned within 24 hours.

Availability of financing facilities The group has secured financing facilities of R400,5 million from largefinanciers. A credit rating is performed annually by an independent ratingagency. In the most recent rating during August 2008, the group wasrated BBB investment grade.

Competition and pressure on rates The group provides a specialised fast-track contracting solution toits clients. This work is generally less price sensitive than traditionalconstruction-related work.

Depressed economy The group has the ability to shift focus between market sectors in three months.

BBBEE rating A suitable BBBEE rating is essential to secure large contracts.The group is constantly striving to improve its BBBEE status through focused programmes, particularly in the areas of preferentialprocurement, enterprise development, skills development and socio economic development projects.

Non-delivery of suppliers As a specialist fast-track contractor, it is imperative that the suppliers to the group are very efficient. The group therefore forms strategicalliances with suppliers and through continuous interaction with them,the efficiency of the supply chain is maintained.

Skills shortage The group follows a policy of training and development of employees on a continuous basis. The group also runs several learnershipprogrammes and has its own mobile training unit. The group has lessthan 1% staff turnover.

Risk matrix

>> Strategy at a glance continued

Risk and business processes>>


13

>>

Pro

tech

Ann

ual R

epor

t 09


14

>> Chairman’s report

OVERVIEW

The group achieved a solid set of results in a difficult economic context, as outlined in more detail in the CEO’sand CFO’s reports.

This performance can be largely ascribed to the group’s ability to follow through

on its strategy of offering rapid, high-value, reliable solutions to its clients.

Delivering on its market promise creates a competitive advantage, which has

over the years resulted in an above-average operating margin, which is especially

beneficial during challenging market conditions.

MACRO CONTEXT

The state of the global economy is the subject of much speculation anddebate, and at the time of writing, there were no clear indicators of the truedepth of the crisis, or its full future impact on the broad market within whichthe group operates. The South African government’s reaction to the crisiswill be significant and, moving forward, the ability of government to clearlycommunicate its strategy (and the detail of how it will act on that strategy)will have an important bearing on the operating context for the group, as wellas for other industry players. Developments in this area will be keenlyobserved by the group.

An important point of strategic focus for the group is to ensure it remainsflexible to adapt to market conditions and to maintain a solid forward pipelineof work. In this context, Protech has clearly noted that, notwith standing theglobal economic downturn, infrastructure development spend across sub-Saharan Africa is likely to continue to gather momentum over the medium term.


15

>>

Pro

tech

Ann

ual R

epor

t 09

THE GROUP’S SUCCESSFUL TEAM CULTURE ANDFORWARD-LOOKING APPROACH TO CAREER PATHS ANDPEOPLE DEVELOPMENT HAS CLEARLY BEEN KEY TO ITSABILITY TO STRENGTHEN ITS MARKET POSITION AS ANEMPLOYER OF CHOICE.

Reports from a range of sources bear out this view:

> According to Reuters reports in April 2009, western

nations and lending agencies stated that they will

provide $1,4 billion to expand transport and trade links

in eastern and southern Africa to help the region

boost economic growth

> South Africa’s current infrastructure investment

programme was expanded in the 2009 budget to

R787 billion

> Government investment in transport-related infra -

structure projects alone will total more than R50 billion

over the next three years

> A 2008 report by Morgan Stanley reaffirms the growing

infrastructure development across emerging markets.

The firm forecasts an emerging market infrastructure

spend of $21,7 trillion over the next decade. While Asia

is responsible for 67% of this figure, spend across sub-

Saharan Africa remains significant

Recent shifts in the market have given the group further

opportunity to put its strategy into practice. Since listing,

the management team has placed specific focus on the

transition of the group from private sector-driven growth

to the current context, where public infrastructure develop-

ment and mining are the dominant forces. Adapting to

this shift has required not only efficient and proactive

senior management skills, but also strong on-the-ground

operational ability.

As outlined in the CEO’s Report, given current market

conditions, the group will enter a phase of consolidation,

focusing on organic growth.

Protech is run by South Africans with a passion for

participating in the strengthening of the African continent’s

socio economic fabric. The group thus continues to ensure

that it is abreast of political and economic developments

in these markets, and that it is well positioned to maximise

new opportunities as they emerge across the SADC region.

PEOPLE

Protech has delivered on its long term strategy of sustaininga nurturing environment for the people who work with andfor the group. While difficult to quantify directly, the impactof the group’s successful team culture and forward-lookingapproach to career paths and people development hasclearly been key to its ability to strengthen its marketposition as an employer of choice.

The group has less than 1% staff turnover, significanttraining and human development programmes in placeand has always featured an exceptionally safe operatingenvironment. In 20 years of business, no contract has everbeen penalised or affected due to failure to meet healthand safety requirements. This is an achievement the groupis particularly proud of.

GOVERNANCE

The group is committed to upholding strict corporategovernance principles. During the year, the groupevaluated the recently released King III Report onCorporate Governance, and will strive to ensure fullcompliance in 2010.

LOOKING FORWARD

The South African economic climate will remain a point ofongoing strategic focus. An important area to observe isthe South African government’s ability to finance its publicinfrastructure development programme in the context ofthe global economic meltdown. The group remains positiveabout government’s ability to finance its programmes andits assertion that domestic capital markets have both thedepth and liquidity to support the required financing needs.

Few business people are currently brave enough to predictthe full scope and extent of the economic crisis. However,there is little doubt that market conditions will be challenging


16for the sector as a whole over the medium term. Clearly,it would be difficult to maintain the growth rates the grouphas produced over the last two years, but Protech’s strongoperating margin will create some latitude for the groupand, although margins are likely to come under pressure,the group remains committed to maintaining its operatingmargin above the industry average.

At the time of writing, the board again evaluated thepayment of dividends and continues to believe, especiallyin the current context, that its policy of preserving cashin the business remains the most prudent strategy. Asoutlined last year, the group remains committed to payinga dividend once total net debt:equity reaches the 70%mark, or before.

APPRECIATION

I would like to take this opportunity to thank everyone at Protech for their ongoing commitment to, and passionfor, the business. Special thanks must go to the CEO andhis management team for their enthusiasm and theprofessionalism with which they continue to guide thecompany, often through challenging market conditions.

A special word of appreciation to my fellow board membersfor their sound advice. I have enjoyed working with you.A warm welcome to our new board member, MatsotsoVuso, who joined us during the year. She has extremelysound financial skills and also joins the audit committee.

I believe this annual report accurately reflects the long termvibrancy of the group’s business model and the skill anddedication of everyone working at the group. I am sure Ispeak on behalf of everyone at Protech when I say I lookforward to addressing the challenges of the coming yearand to making the most of opportunities to extend thegroup’s success.

Dirk Ackerman

Chairman

>> Chairman’s report continued


17

>>

Pro

tech

Ann

ual R

epor

t 09


18

>> Chief executive officer’s report

INTRODUCTION

Against increasingly troubled global and local markets, it is extremely satisfying to be able to report on anotherstrong result for Protech. With 91% revenue growth, operating profit up 61% and an operating margin of 22%,the group is clearly well positioned even in these difficult times.

While the global economic crisis is in full force, it is still not possible to accurately

predict the full emerging macro economic context – locally or globally – over the

short term. The group, as other companies across the world, continues to operate

in a very fluid and uncertain environment. This notwithstanding, Protech has

benefited from higher volumes of work seen over the last few years and enjoys

a significantly wider contract pipeline compared to five years ago.

The flexibility of the group’s business model was key to the strong performanceduring the period under review; with the group’s ability to anticipate marketchanges and pro-actively shift its focus to cater to markets central to itsongoing vibrancy. Illustrating this has been the manner in which the groupincreased its exposure to the fast-growing sectors of infrastructure and mining(which currently account for 73% of contracts from 43% a year ago) awayfrom the private sector, where pressure continued on development activity.

Significantly, further augmentation of the business model was achieved inthe previous year with the acquisition of Readymix, and during this year withImpact Compaction, both of which allow the group to strengthen its ability offast-track contracting.

PERFORMANCE

As is outlined in detail in the CFO’s Report on page 24, the group delivereda sterling result, with the operations focusing on key growth areas amid themarket turmoil. For a review of operational performance, turn to page 30.


work exists in several countries, with spend in stableSouthern African countries, such as Namibia and Botswana,enabling interest from key local players. This opens upnew opportunities in the rest of Africa for players such asProtech. In line with its strong focus on risk mitigation,the group will apply stringent evaluation criteria to anyAfrican contracts, including guaranteed payments andprotection of assets.

19

>>

Pro

tech

Ann

ual R

epor

t 09

STRATEGIC CONTEXT

A full review of the group’s strategy can be found on page 8.I would however like to briefly run through a few aspectsof Protech’s strategy that continue to allow the group todeliver both strong results and an undisputed quality serviceto clients.

The group has an entrenched market reputation as a

niched operator delivering exceptional and an ultimately

cost-saving service. This positions the group well in

the context of the current global turmoil, with its lean,

operationally fit status and healthy margin structure

offering an effective cushion against the slump. Theseare loss control times for most industry players and thegroup’s ability to deliver on its market promise means itoffers important additional value to clients in an economiccontext that demands high levels of efficiency and minimalcontract downtime.

Although its quality fleet of 310 units of plant is core tothe group’s strategy, with plant utilisation remaining above100%, the strategy around hired plant also acts as aneffective safety cushion for the group. The group seeks tohire in 10 – 15% of plant fleet requirements. At no pointin the last two years has this number been under 30%,indicating the group’s flexibility of supplementing its corefleet with hires to meet contract demand and to downgradethe fleet quickly if demand slows.

As previously indicated, the group will now enter a consoli -dation phase, focusing on integrating its acquisitions andoptimising its already successful business model of supportingthe core business to deliver fast-track contracting.

OUTLOOK

A great deal of development activity remains on schedulein sub-Saharan Africa. Key infrastructure developmentprojects (both related to and well after the 2010 WorldCup) are on track in South Africa, with mining activity inthe coal sector still prevalent in South Africa and across its borders. The possibility of significant redevelopment

THE FLEXIBILITY OF THE GROUP’S BUSINESS MODEL WAS KEYTO THE STRONG PERFORMANCE DURING THE PERIOD UNDERREVIEW; WITH ITS ABILITY TO ANTICIPATE MARKET CHANGESAND PRO-ACTIVELY SHIFT ITS FOCUS TO CATER TO THESEMARKETS CENTRAL TO ITS ONGOING VIBRANCY.


20

THESE ARE LOSS-CONTROL TIMES FOR MOST INDUSTRYPLAYERS. THE GROUP IS ABLE TO OFFER ADDITIONAL VALUETO CLIENTS IN AN ECONOMIC CONTEXT THAT DEMANDSMINIMAL CONTRACT DOWNTIME.


21

>>

Pro

tech

Ann

ual R

epor

t 09

While the group’s operational segmentation is currentlyweighted towards infrastructure development, it will remainactive in all its current markets. This approach is set tocontinue over the medium term. The group’s businessmodel allows for swift moves from one market to another,depending on where growth is the strongest.

The group remains well positioned, with a solid R735 millionof work-in-progress.

While the uncertain global context is an undeniable factor,it remains likely that the South African government willlargely stick to its timetable with respect to essential spendand delivery on key infrastructure develop ment projects.

At the end of 2008, South Africa’s four largest constructionplayers had combined order books of around R120 billion.Their annual turnover is currently around R80 billion. It istherefore clear that the R787 billion budget for infrastructurespend – even if a marked slowdown in governmentspending was to occur – will remain a key source of growthand sustainability for not only the big players, but forthe sector as a whole. There is, simply put, significant

momentum behind infrastructure development inSouth Africa.

Furthermore, the global energy crisis will continue to place

increasing demands on fossil fuels. The group’s involve -

ment in the coal mining sector will therefore continue to

produce a profitable revenue stream, with coal-related

contracts already comprising a solid portion of work-in-

progress. The growth in certain private markets such as

the hospitality industry and office and retail developments,

also offers sustained activity for the group looking forward.

Importantly, the group also remains well positioned to

explore other African markets over the short term.

While Protech is certainly not immune to the market forces,

over the 20 years of its existence the group has successfully

steered the business through several tough markets. In the

current market pressure, Protech will therefore continue

to drive a mindset geared for successfully combating the

recession. The group has a robust financial position, with

extremely low bad debts of less than 1% due to its blue-

chip client base, only 68% of facilities currently utilised,

>> Chief executive officer’s report continued

In the table below, the group outlines National Treasury‘s key areas of infrastructure spend going forward.

Public sector infrastructure expenditure and estimates

Medium-term estimates

R million 2009/10 2010/11 2011/12 Total

National departments 8 024 8 641 12 867 29 532Provincial departments 39 899 46 517 52 439 138 855Municipalities 49 496 53 738 59 074 162 308Public private partnerships 13 897 11 692 11 727 37 316Extra-budgetary public entities 6 971 7 509 8 112 22 592

General government 118 287 128 097 144 219 390 603State owned enterprises 119 585 131 335 145 842 396 762

Total 237 872 259 432 290 061 787 365

Source: 2009/10 – 2011/12 are based on National Treasury estimations.


22

strong internal cash generation and significant equity in itsfleet of premium-quality equipment.

Although the group is confident of weathering the marketdynamics, it is however cognisant of the fact that thecurrent high levels of growth will be difficult to maintain inthese unpredictable markets. Against an outlook that iscertainly more challenging than a year ago, the groupwill therefore continue to focus on proactively managingits environment.

APPRECIATION

Although the statement of people being a company’sgreatest asset often sounds hollow, at Protech we trulybelieve this and endeavour to run our business in thisfashion. I cannot operate without my team around me andeveryone plays a very specific role. Over the last 20 years

since I started the group, I have been constantly inspiredby the dedication of my team and I thank everyone workingfor this group. It has not been an easy year, but no one hastaken his or her eyes off the ball and everyone soldiered onduring these tough times. I look forward to continue workingwith such a quality team.

I also wish to thank the board members for their input andto all our stakeholders, from clients to shareholders,your interest in the group and continued support is muchappreciated.

Gerald Chapman

Chief executive officer

>> Chief executive officer’s report continued


23

>>

Pro

tech

Ann

ual R

epor

t 09


24

>> Chief financial officer’s report

INTRODUCTION

The group achieved another year of strong growth against increasingly difficult markets. The majority of businessesperformed well, with strong contract activity seen in the core business Protech Khuthele.

Noteworthy was the continued strong cash generation, profit and earnings growth

and the maintenance of the operating margin above 20% at 22%.

DELIVERY AGAINST FINANCIAL MEASURES

The group uses a number of key financial indicators to measure its performance.The most significant of the key financial indicators and the group’s goals regardingthese indicators appear below:

Key measure Goal Achieved

Return on shareholders’ funds 20% 39,6%

Return on assets 10% 15,7%

Group operating margin 20% 22,2%

Total net debt to equity ratio 70% 99,8%

Cash generated equal to net income 100% 153,8%

Very pleasingly, the group exceeded most of its goals. The profitability indicators –return on shareholders’ funds and return on assets – are significantly above the goalsset and bear testament to the group’s ability to maintain efficiency and profitabilityin tough trading conditions.

Although total net debt:equity remains higher than the 70% goal, the group iscomfortable with its current level as high gearing is in line with its plant policy of runningnew equipment. All long term debt on the balance sheet relates to asset-backed financeand the group generates sufficient cash to comfortably service this debt.

YEAR UNDER REVIEW

Income statement

Revenue increased by 91% over the prior year to R702,7 million which includes, forthe first time, revenue from the acquired Readymix operations of R108,1 million.


25

>>

Pro

tech

Ann

ual R

epor

t 09Organic revenue growth, after elimination of inter-group

transactions, was 62%. This strong growth was madepossible by the group’s ability to shift its focus quickly frommarket sectors under pressure to growth markets.

Operating profit increased by 61% to R156,0 million (2008:R97,2 million). The group operating profit is largely generatedby the Contracting division (the combination of ProtechKhuthele, Pela Plant and Impact Compaction). The growth inoperating profit is therefore in line with the organic growthrate of the Contracting division. The Readymix operationcontributed only R977 000 to operating profit, as this divisionoperates in a severely depressed market. Against thesemarkets, this division managed to contain costs, whilst atthe same time shifting its focus away from the residentialmarket to the industrial and commercial sectors.

The group achieved an overall operating margin of 22%compared to 26% in 2008. The reduction in margin wasmainly due to a reduced margin from the Readymixoperation. The operating margin for the contracting division(Protech Khuthele, Pela Plant and Impact Compactioncombined) remained unchanged at 26%. The groupoperating margin remains higher than that of industry peersand is in line with the group’s goal of maintaining operatingmargin above 20%.

The group’s effective tax rate was 27,5% compared to30,3% in 2008.

The group reported earnings of R92,9 million compared toR62,1 million in 2008, which translates into earnings pershare growth of 47% to 25,6 cents (2008: 17,4 cents). Therewas no material difference between headline earnings andearnings per share.

Balance sheet

The group invested R162 million in capital expenditurein 2009 (2008: R179 million). This included R54 million torenew the vehicle and plant fleet in line with the groupplant replacement policy, as well as R108 million to expandthe fleet to 310 units at the end of the 2009 financial year(2008: 237 units).

Net tangible asset value per share increased by 59% to55,0 cents per share (2008: 34,7 cents per share).

Interest bearing liabilities increased to R274,4 million fromR164,5 million in 2008. Included in the interest-bearingliabilities is R54 million which relates to the financing of theReadymix acquisition. The increase in interest-bearing

Nellis Wolmarans

Chief financial officer

FINANCIAL HIGHLIGHTS

> Group revenue up 91% to R702,7 million(2008: R368,5 million)

– 62% organic revenue growth

> Operating profit up 61% to R156,0 million(2008: R97,2 million )

> Operating margin of 22% (2008: 26%)

> Cash generated by operations beforeworking capital changes up 40% to R177,4 million (2008: R126,7 million)

liabilities, which relate to capital expenditure incurredto renew and expand the vehicle and plant fleet, wasR55 million.

Working capital increased to R77,0 million from a networking capital deficit of R17,1 million in 2008. This wasmainly as a result of:

> The improved cash position of the group

> The increase in accounts receivable in line with theincrease in revenue

Cash flow statement

Cash generated before working capital changes increased by40% to R177,4 million (2008: R126,7 million). Cash on handat 28 February 2009 was R101,6 million (2008: R93,2 million).

Dividend

In line with the group’s current policy, no dividend wasdeclared or paid in 2009. However, the group remainscommitted to paying dividends once the total net debt:equityratio reaches 70%, or before. In the current market, thegroup is focusing on preserving cash resources.

THE GROUP INCREASED EARNINGS PER SHARE BY 47%,OPERATING PROFIT BY 61% AND ORGANIC REVENUEGROWTH OF 62%.


26

CASE STUDIES>>

Protech has built its reputation on an unparalleled ability to deliver fast-track

contracting solutions.The group’s client service model includes engaging at a

very early stage of the design and costing phases, which results in cost benefits

for clients.

PROTECH HAS BEEN INVOLVED IN SEVEN CORE CONTRACTS ATGOEDGEVONDEN, AN OPEN-CAST COAL MINE SITUATED NEAROGIES IN MPUMALANGA, OPERATED BY XSTRATA COAL SA.


27

>>

Pro

tech

Ann

ual R

epor

t 09

> Goedgevonden

Goedgevonden has a total contract value of R210 million.The contracts (launched in August 2007 and still running atthe time of writing) include access roads, new provincialroads, the upgrade of existing haul roads and the develop -ment of bridges, a retaining dam, a run of mine (ROM)platform and overland pipelines.

The Goedgevonden contracts illustrate the success

of the group’s effective partnership model and its

ability to deliver services according to evolving client

specifications and contract timeframes. Protech’sinvolvement with Goedgevonden began as a R28 millionroad diversion contract, where six kilometres of newprovincial road was constructed to free up coal resourcesfor the mine occupied by the existing provincial road. Thecontract value then increased to R79 million as the contractwas expanded with additional works and design changesdue to the highly saturated ground conditions. The group’sfast-track ability and flexibility to adapt to changes werecentral to its ability to meet the changing scope of thecontract and to accelerate timeframes according to theclient’s request.

Hand-over dates of the new road were re-negotiated and a phased handover with accelerated dates wereimplemented. Protech’s success in handing over both

phases ahead of the client’s accelerated schedule

meant that Xstrata enjoyed early access to parts of the

plant that fell on critical delivery paths. This included the

construction of a railway line and the freeing up of reserves,thereby minimising production impact.

The mine road upgrades were done without affecting thesmooth running of the mine’s operations and within verystrict safety guidelines. Earthworks for a storm water

retaining dam of 20 million litres were done during the

above-average summer rainfall conditions, and this,

together with the installation of an overland pipeline,

further added to the value of work awarded. The ROMplatform was done in partnership with the client, resultingin a unique construction solution and further time savingfor the client.

Throughout these construction activities, the topsoilstripping above the coal reserves continued. Protechstripped on average 250 000 tons of topsoil per month,placing this on stockpile for re-use during the rehabilitationof the mine.

Protech’s world-leading impact compaction technologywas at the time of writing adding further cost and timesavings for the client.


28

> Waterkloof Airforce Base

The Waterkloof Airforce Base reconstruction is aR730 million public works contract. Protech is part of theRunway Contractors Joint Venture. The group is involvedin the construction of the 3,4 kilometre runway, as well astaxiways, up to sub-base level (i.e. all earthworks-relatedconstruction activities). The contract commenced in July2008 and is scheduled to conclude at the end of 2010.

Protech’s expertise in materials management has

been an integral part of the contract. It is utilising bothcrushing and screening to recycle as much existingmaterial as possible and to modify this material for optimalre-use, a Protech speciality. The group’s top-quality fleetenabled the use of crushing and screening operations toaid in this materials modification process.

The group was instrumental in construction methodology

changes that resulted in further significant time saving.

In addition, the use of Protech’s world-leading impact

compaction technology again proved to be central

to its ability to further accelerate timeframes.

The group also developed an innovative and alternativemethod of constructing the upper layer works, leading toeven more time savings on the contract in accordancewith the client’s request for accelerated delivery. Based

on the group’s innovation, the contract was accelerated

by two months for an earlier completion date of the

main runway.

>> Case studies continued


29

>>

Pro

tech

Ann

ual R

epor

t 09

> Gautrain

Protech is responsible for the earthworks for the BombelaConsortium Gautrain Rapid Railway Link between Modder -fontein Road and the OR Tambo International Airport.The contract value is around R90 million.

This contract is an example of the group’s ability to workunder very challenging conditions, with much poorer soilquality than anticipated and a higher than expected rainfall,leading to an increase in the value and scope of work by30% following the start of the contract. Protech is never -theless still within the client’s required timeframe dueto its proven ability of fast-tracking contracts. The contract,scheduled to be concluded in mid 2009, involves5,5 kilometres of earthworks for the rail formation.

The contract is also a good example of the group’s abilityto perform a wide range of services within the civilengineering industry. Key components of the contractinvolve 275 000 m3 of cut and fill with a zero tolerance for settlement of material, 65 000 linear metres of ductingfor services, 5 200 m of sub-soil drainage, 6 750 m2 ofreinforced earth walling and 90 000 m3 of backfilling toviaducts, as well as 22 000 m3 of layer works and over 10 kilometres of concrete lined channels and open drains.

Significant sub-surface drainage and earthworks wererequired, with the terrain offering challenges such as rockblasting in restricted areas, sub-surface water, saturatedsoil conditions and material generally unsuitable for re-use.Hauling material from as far as 23 kilometres in busy trafficand the construction of a rail formation over busy roadsalso made the earthworks more challenging. The Protechimpact compaction technology was again critical to achievingtime savings on bulk fills.

GAUTRAIN IS AN EXAMPLE OF THE GROUP’S ABILITY TO WORKUNDER VERY CHALLENGING CONDITIONS, WITH MUCH POORERSOIL QUALITY THAN ANTICIPATED AND A HIGHER THANEXPECTED RAINFALL.


30

Proof 4 • 11 May

OPERATIONAL REVIEW>>Introduction

The group has three main business areas:

> Contracting > Geotechnical laboratory> Readymix


31

>>

Pro

tech

Ann

ual R

epor

t 09

Introduction

CONTRACTING

The Contracting arm of the group consists of the contract driver Protech Khuthele, the plant hire company Pela Plant andthe impact compaction business Impact Compaction. During the year, Contracting contributed 87% to group revenue and98% to group operating profit. Turnover was up 54% from R499,1 million to R770,0 million (before elimination of inter-group revenue) and operating profit up 55% from R96,3 million to R148,8 million.

The group’s contracting services consist of interlocking divisions, which collectively give

the company the ability to service clients across bulk earthworks, civil works and services,

as well as mining-related infrastructure development.


32

PROTECH KHUTHELE (PTY) LTD

BULK EARTHWORKS AND FAST-TRACK CONTRACTING

>

2009 2008Revenue (R’000) 580 122 382 870

Operating profit (R’000) 66 607 36 086

Operating margin 11% 9%

Contribution to group operating profit 43% 37%

Protech Khuthele is the main contributor to Contracting and is serviced by the other

companies in the group.

STRATEGIC FOCUS

This business’ strategic focus is to compete on reputationand not only price by providing the best fast-track, hassle-free service and solutions to clients. (See case studies onpage 26). Protech Khuthele’s entrenched market positionhas ensured cash and profit generation for several years.

COMPETITIVE ADVANTAGE

Protech Khuthele has established itself as a unique fast-track contracting company, with a reputation of being ableto compete in all disciplines within the earthworks and civilengineering industry. The business has a track record offorming partnerships with its clients to ensure ground-breaking solutions, resulting in cost and time savings. Thebusiness has also built an unparalleled status of not beinga claims-orientated operator.

VALUE TO GROUP

Protech Khuthele operates at the heart of the group. Asthe contracts division, it drives business into the group,with the support and services of the internal groupcompanies to ensure delivery.

MARKET CONTEXT DURING THE YEAR

A further slowdown in the private sector was mirrored byincreased opportunities in the infrastructure developmentmarkets. Although the platinum sector slowed significantlyin line with the general downward turn in all base metals,the coal mining sector continued to strengthen on theback of the global energy supply focus. In the privatesector, the impact of the slowdown was negative, butkey contracts, such as the Montecasino Hotel andOffice development in Gauteng and the Royal BafokengSports Complex in North West, were still active.

>> Operational overview: Contracting continued


33

>>

Pro

tech

Ann

ual R

epor

t 09

The business’ split between sectors was 43% in miningand infrastructure and 57% in the private sector at thestart of the year. At the end of the year, the business was73% exposed to mining and infrastructure and only 27%to the private sector, proving its ability to quickly shift fromdownward markets to growth areas. This flexible strategyagain allowed Protech Khuthele to weather the marketdynamics to deliver a robust result.

PERFORMANCE DURING THE YEAR

Revenue grew by 52% from R382,9 million to R580,1 millionon the back of continued strong roll out of contracts.

Operating profit pleasingly increased by 84% fromR36,1 million to R66,6 million. The operating marginincreased from 9% to 11%.

LOOKING FORWARD

The global recession will continue to impact both thecountry and the industry in general. The historic growthlevels achieved by Protech Khuthele will be difficult tomaintain in these tough markets and margin is expected tocome under pressure. However, the business’ robust marginmeans it has scope to manoeuvre and still maintain marginabove the industry average.


34

PELA PLANT (PTY) LTD

PLANT HIRE AND LOGISTICAL SERVICES

>

Pela Plant (Pela) provides quality equipment and logistical services, such as transport

and diesel supplies, to Protech Khuthele. The Pela business maintains a fleet of roughly

300 units, with each item of plant fully backed by extended manufacturer warranties

and full service plans.

2009 2008Revenue (R’000) 189 845 116 265

Operating profit (R’000) 82 227 60 219


Contribution to group operating profit 53% 62%

STRATEGIC FOCUS

Pela’s strategy is to offer an uninterrupted supply of plantand equipment to the contracting business to ensure it canfast-track contract delivery. As the business only runs newplant and equipment, it has a proven ability to deliver on itsstrategy of 100% plant utilisation – something unheard ofin the industry.


The business replaces plant and equipment after two yearsor 4 000 hours, and trucks after 150 000 kilometres orthree years. This ensures unparalleled service and 100%availability, with maximum utilisation and minimal down -time. Pela’s state-of-the-art equipment and tracking systemsalso ensure effective operational management and control.

VALUE TO GROUP

Pela’s quality fleet, supplemented with external hires,guarantees availability of required equipment. Pela provideshighly skilled operators to Protech Khuthele to ensure theoptimal use of equipment, as well as continuous researchinto new technology and operational efficiencies.


Although sales in the global capital equipment sector weredown since last year as a result of the credit crunch andthe global economic downturn, Pela’s established trade-back agreements with equipment suppliers limited theeffect on the business. In line with these agreements,the business managed to continue rolling out its qualityplant policy to ensure no compromise on its efficient fleet.



35

>>

Pro

tech

Ann

ual R

epor

t 09

As Pela is renowned for the demo quality of its usedfleet, its plant remained highly sought after even againsttough markets.


During the year, Pela continued to supplement its internalfleet with external hires. In line with a more conservativeapproach to new capital expenditure due to marketconditions, the business supplemented its fleet witharound 30% of external hires. Rates on external plant hireremained low due to high levels of competition and Pelawas therefore able to capitalise on this when hiring in plant.

Pela experienced exceptional revenue growth of 63%from R116,3 million to R189,8 million over the prior year.Operating profit increased by 37% from R60,2 million to R82,2 million, in line with the organic growth experienced.Operating margin decreased from 52% to a still veryhealthy 43% due to the normalisation of the contributionsplit between Pela and Protech Khuthele.

LOOKING FORWARD

During the year, established relationships with suppliersand bankers helped Pela to negotiate the credit crunch,with its business model proving its resilience in toughmarkets. Given the strained market context, the ownedfleet size will not increase substantially from the current310. However, no compromises will be made on its currentplant policy and agreement with suppliers to replace plantand equipment after two years or 4 000 hours, and trucksafter 150 000 kilometres or three years. This policy willcontinue to be supplemented with external hires, allowinga risk-free approach without sacrificing quality.

PELA WORKS HAND IN HAND WITH PROTECH KHUTHELEAND IS CRUCIAL TO THE BUSINESS’ ABILITY TO DELIVERFAST-TRACK CONTRACTING.


36

Impact Compaction is one of only a few companies in the world with impact compaction

technology patents. The business features superior compaction ability with three- and five-

sided compactors built to the highest specifications, ensuring maximum availability on site

and reducing compaction and programme time, creating significant cost savings for clients.

IMPACT COMPACTION (PTY) LTD

SOIL COMPACTION

STRATEGIC FOCUS

Impact Compaction’s strategy is to provide a complete soilimprovement solution through highly effective compactiontechnology. The business has successfully deliveredon its strategy of providing a faster and more cost-effective alternative to traditional soil compaction since itsestablishment in 1970.


Impact Compaction is one of only a few companies in theworld with impact compaction technology patents. It alsohas a management team with 30 years’ experience in thecompaction business, allowing it to offer solutions and notonly equipment. This business therefore has huge barriersto entry, as well as significant growth potential.

VALUE TO GROUP

Although small, Impact Compaction is crucial to ProtechKhuthele in further improving its ability to provide fast-trackcontracting. It provides Protech Khuthele with solutionsand technology to feed into contracts to cut down on time and costs when doing bulk earthworks. Furthermore,

Impact Compaction is an independent company that addsto the operating profit of the group.


Although private sector development has experienced asignificant slump, general activity across industrial,commercial, mining and infrastructure sectors remainedstrong. As Impact Compaction enables significant cost andtime savings on contracts, during tough economic times thisbusiness assists Protech Khuthele to fight difficult markets.


During the year, this business doubled its market sharebased on mining and infrastructure activity and establisheda marketing department to further improve service levelsand to educate the market on this unique technology. The business was effectively structured with improvedsystems to cope with higher demand and to facilitateorganic growth.

The business’ financial results are not disclosed separately,as they are included with that of Pela Plant.


>


37

>>

Pro

tech

Ann

ual R

epor

t 09LOOKING FORWARD

Significant potential remains to develop this businessfurther through educating the market on the benefits ofimpact compaction. Impact Compaction’s technology alsoopens up new opportunities for the group, both locally andoutside of South Africa.

Infrastructure development looks likely to offer stronggrowth opportunities for players such as Protech Khuthele,although companies will need to improve efficiency andservice levels to compete effectively – an advantage thatImpact Compaction provides to the group. The expense fornew machines has already been incurred, bringing thefleet to 15. The business is therefore well positioned to bea profitable, stand-alone division within the group stable.

IMPACT COMPACTION’S STRATEGY IS TO PROVIDE ACOMPLETE SOIL IMPROVEMENT SOLUTION THROUGH HIGHLY EFFECTIVE COMPACTION TECHNOLOGY.


38

2009 2008Revenue (R’000) 11 347 6 639

Operating profit (R’000) 754 893


Contribution to group operating profit 0,5% 0,9%

STRATEGIC FOCUS

This business has an established strategy of highly efficientservice delivery to allow Protech Khuthele to acceleratecontract completion. The business delivers on this strategythrough a talented and experienced team with world-class products, services and standards.


SARTS is highly competitive as one of the fastest geo -technical laboratories in the industry. Its efficient service,

Introduction

SOUTH AFRICAN ROAD TESTING SERVICES (PTY) LTD

SARTS is in the final stages of accreditation from the South African National Accreditation Systems (SANAS) – a prestigiousrecognition of the company’s ability. SANAS is recognised by the government and the construction industry as the onlysingle national accreditation body for laboratories.

South African Road Testing Services (SARTS) was established in 1995 to overcome

delays from outsourced laboratories. The company delivers exceptional service to

contractors and consulting engineers in the areas of survey and soil investigations and

analysis, quality control and testing for associated earthworks, roadworks and impact

compaction contracts.

>> Operational overview continued

quality technology and equipment allow Protech Khuthele

to deliver fast-track contracting by ensuring quality control

information and analysis are provided in a timeous manner.

VALUE TO GROUP

The survey division sets out the position and levels of roads,

platforms, excavations and trenches to be constructed.

This is done with speed and accuracy, utilising the latest

technology and equipment, enabling Protech Khuthele to

construct the works. The soils geotechnical division provides


39

>>

Pro

tech

Ann

ual R

epor

t 09

a quality control service during construction to ensureconformance to client specifications. In addition, SARTS isable to provide investigative analysis for soils and materials.


SARTS was not adversely affected by the negative marketcontext during the year, continuing to grow in both itsdivisions. To meet the growing industry demand and tomeet the stringent requirements of a SANAS accreditation,the business significantly increased employees andimproved technology.


SARTS increased revenue by 71% to R11,3 million (2008:R6,6 million) due to the strong growth seen in ProtechKhuthele. Operating profit and operating margin werehowever impacted due to an increased cost base followingadditional investment in human capital, systems andequipment to satisfy the criteria required for SANAS

accreditation. Operating profit therefore decreased by 11%to R0,8 million (2008: R0,9 million). Operating margindecreased from 14% to 7%. The SANAS accreditationpositions the business well to generate additional revenueand earnings from sources outside the group.

LOOKING FORWARD

Going forward, SARTS will nurture its strong marketposition by continuing to develop technology to remain anefficient service provider. The SANAS accreditation withinthis year will further strengthen SARTS’ ability to broadenits external client base.


40

STRATEGIC FOCUS

Protech Readymix’ aim is to be the preferred supplier ofquality readymix concrete in its areas of operation. Thebusiness has evolved its strategy over the last year andcontinues to diversify away from a majority residentialexposure to a more balanced spread that includescommercial, industrial and infrastructure.

The business has an aggressive first to market strategy,proactively procuring business through its talented salesteam across all industrial sectors. This is supported bytraining to ensure the best skills in the industry. The businesshas flexibility in terms of re-locating plants to expand itsfootprint and volumes. The business also continues topursue contracts where volumes validate a mobile batchingplant to further extend growth in industrial sectors.

Introduction

PROTECH READYMIX (PTY) LTD

Protech Readymix manufactures and delivers readymix concrete and concrete pumping

services. The company operates six batching plants, all situated in strategic locations.

Each plant is supported by computer-controlled batching operations, assuring customers

of precisely metered concrete to their specific requirements.

>> Operational overview continued


Protech Readymix is a niched, quality-driven operator withestablished relationships and direct client contact. It hasproven itself as an operator with the shortest lead timesin the industry and a flexible business model to ensureclient delivery, as well as an ability to shift gradually awayfrom markets that are under pressure to more growth-orientated sectors.

VALUE TO GROUP

This business is another part of the group’s strategy ofbuilding bolt-on businesses to feed services, solutions andproducts into the contracting business. This business’prominent vehicles also raise the group’s brand and improveits market positioning.

2009*Revenue (R’000) 108 127

Operating profit (R’000) 977

Operating margin 0,9%

Contribution to group operating profit 0,6%

*2009 is the first year of contribution to the group.


41

>>

Pro

tech

Ann

ual R

epor

t 09


Industry cement sales in the first three quarters of F2009were buoyed by infrastructure spend, but fell in the fourthquarter by 18%, mainly due to the significant decline inthe housing sector and based on some smaller to medium-sized commercial and industrial contracts being postponed.The industry also experienced cement shortages duringNovember and December 2008, which negatively impactedtrade, as well as significant rain during the fourth quarter.Suppliers’ 14% cement price increase in January 2009 hada significant impact on margins within the readymixindustry, exacerbated by extended debtor terms andgeneral funding delays across the economy.


The year under review was the first full year of contributionfrom Protech Readymix. As Readymix has traditionallybeen very exposed to the residential market, this businesswas severely impacted by the extreme downturn in thissector. However, in line with Protech’s flexible businessmodel of quickly shifting between sectors, Readymixmanaged to shift away from a 95% exposure to theresidential sector upon acquisition in 2008 to that of anaverage of 80% of revenue now being generated from thecommercial and industrial sectors.

This business achieved turnover of R108,1 million andcontributed 12% to group revenue. Operating profit wasR1 million, with operating margin at 0,9% in line with thechallenging market conditions.

LOOKING FORWARD

During the year, a number of corrective actions have beentaken. These include the relocation of operations toChloorkop, which has extended the business’ Gautengfootprint by 15%. Further relocations will be evaluated.Procurement has been diversified to reduce the business’reliance on a single key supplier and a shift to the latestgeneration add-mixtures will continue to enhanceReadymix’s product quality and reduce input costs.Aggregate sourcing and costs will remain an area of focusand an expanded sales team has been put in place tooptimise growth opportunities.

Market conditions are set to remain challenging across allsectors, with the housing sector not expected to reboundat all over the coming year. Readymix will continue to focuson shifting into growth sectors, relocating plants to areaswith greater opportunity and further expansion into thecommercial, industrial and infrastructure sectors. However,operating margin will remain under pressure while theglobal recession continues to impact on the local markets.

IN LINE WITH THE GROUP’S FLEXIBLE BUSINESS MODEL,READYMIX SHIFTED FROM A 95% EXPOSURE TO THERESIDENTIAL SECTOR LAST YEAR TO 80% EXPOSURE TO THECOMMERCIAL AND INDUSTRIAL SECTORS THIS YEAR.


42

SUSTAINABILITY REVIEW>>

When Protech started 20 years ago, I wanted to create

a company where people would be happy to work; a

place where they were rewarded for working hard and

where they all shared in the company’s success.

Today, I am happy to report that we continue to entrench this culture. I am proud to say that we have a staff turnover of less than 1% and amanagement team who has worked closely together for over 10 years.

One of the pillars we built this business on was to operate responsibly for ourpeople and those around us. Again, I am extremely proud to report thatthe group has had an exceptional safety record, with no contract havingever been penalised or affected due to failure to meet health and safetyrequirements. Our injuries have remained very low even though we havegrown significantly over the years.

In this section of the report, we outline information to you in terms of howProtech runs its business. We welcome feedback on both the informationand our business processes.

Gerald Chapman

Message from the CEO


43

>>

Pro

tech

Ann

ual R

epor

t 09


44

SUSTAINABILITY INDICATOR 2009 2008% (R’000) % (R’000)

Revenue 702 745 368 495

Less: purchased cost of goods and services (378 016) (173 521)

Value added 99 324 729 98 194 974

Other income 1 3 938 2 3 630

Wealth created 100 328 667 100 198 604

Employees 43 140 495 43 86 134

Providers of funding 8 27 869 4 8 093

Government 11 35 207 14 26 989

Reinvested in the group 38 125 096 39 77 388

Wealth distribution 100 328 667 100 198 604

Number of employees 1 381 1 225

Wealth created per employee (R) 237 992 162 126

Weighted average number of shares (thousands) 362 500 357 070

Wealth created per share (R) 0,91 0,56

ECONOMIC VALUE ADDED STATEMENT>

’09year ended 28 February


45

>>

Pro

tech

Ann

ual R

epor

t 09

The Board of Protech Khuthele Holdings Limited (thegroup) is committed to the recommendations of the Codeof Corporate Practices and Conduct (Code) as set outin the King Report on Corporate Governance for SouthAfrica 2002 (King II). The board acts in line with therecommendations contained in the Code in its dealingswith all stakeholders and carries out its responsibilitiesbased on these recommendations. The board is of theopinion that the group complies with the Code in allmaterial respects, unless otherwise stated in this report.The board has furthermore noted the content of King III,and will review its practices and procedures to ensurecompliance by March 2010, the effective date of King III.

BOARD OF DIRECTORS

At the date of this annual report, the board comprisedeight directors. Two directors are independent non-executive directors, four non-executive and two executive.The board is chaired by Mr D Ackerman. Mrs M Vuso wasappointed as an independent non-executive director on1 September 2008. The board reviews its compositionon a continuous basis to consider its compliancewith statutory requirements, as well as best practicerecommendations, where appropriate. The chairman, MrAckerman, is not an independent non-executive director asrecommended in the Code. The board is however of theopinion that Mr Ackerman is currently well suited to leadthe board. This matter is reassessed on a regular basis.

Terms of reference

The board charter sets out the following responsibilities ofthe board of directors:

> Retain full and effective control of the group

> Give strategic direction to the group

> Monitor management in implementing plans andstrategies, as approved by the board

> Appoint the chief executive officer

> Ensure that succession is planned

> Identify and regularly monitor key risk areas and keyperformance indicators of the business

> Ensure that the group complies with relevant laws,regulations and codes of business practice

> Ensure that the group communicates with shareholdersand other relevant stakeholders openly and promptly

> Identify and monitor relevant non-financial matters

> Establish a formal and transparent procedure forappointment to the board, as well as a formal orientationprogramme for incoming directors

> Regularly review processes and procedures to ensureeffectiveness of internal systems of control and acceptresponsibility for the total process of risk management

> Assess the performance of the board, its committeesand its individual members on a regular basis

BOARD MEETINGS

The board had four formal meetings during the year. Alldirectors are informed of major developments affectingthe group. The record of attendance is reflected in thetable below:

Director 09/05/08 01/08/08 31/10/08 06/02/09

D Ackerman † † † †G Chapman † † † †M Mareletse † † A AC Nkosi † † † †V Raseroka A A † †P van Tonder † † † †M Vuso * * † †N Wolmarans † † † †

† – Present at meeting; A – Apology;* – Appointed 1 September 2008.

The executive directors have service contracts with thegroup.

The non-executive directors’ payments are based on in-depth research to ensure remuneration is market related.

Directors’ interest in the shares of the company is set outon page 65 of the report. In addition, Mr N Wolmarans isa participant in the Protech BEE share trust. None of theother directors participate in the company’s share scheme.

Chairman and group chief executive

The roles of the chairman and CEO are separate, in linewith the Code.

BOARD EFFECTIVENESS

As recommended in the Code, the board performs anassessment of its performance on an annual basis. Thespecific areas reviewed in September 2008 included itsstructure, responsibilities, processes and culture. As aresult of the findings of the assessment, a full day sessionwas held with the board to address the areas of concern.The assessment process is steered by the companysecretary, Mrs A van der Merwe, who serves on theKing Committee.

BOARD COMMITTEES

The board has established and mandated two committeesto perform work on its behalf in key areas affecting thebusiness of the group.

CORPORATE GOVERNANCE>


46

The committees are:

> Remuneration and nomination committee

> Audit and risk management committee

The board and committees give attention to both existingand new matters pertaining to governance and complianceissues within their respective mandates. Each committeeoperates according to its terms of reference approved bythe board.

The non-executive and independent non-executive directorsprovide input in terms of governance, strategy and interna -tional best practice through their diverse experience,background and expertise.

The attendance records for each committee are set outover the next few pages.

REMUNERATION AND NOMINATION COMMITTEE

The remuneration and nomination committee operatesunder an approved charter in accordance with King II,assisting the board to adhere to its corporate governancesupervision responsibilities. The committee mustensure that:

> Directors, senior managers and employees areremunerated fairly and appropriately to attract, retainand motivate its workforce

> Directors who are nominated, are selected andevaluated in accordance with the board’s approvedpolicy on nomination and selection

Composition

The committee consists of three non-executive directors– Messrs D Ackerman, M Mareletse (independent) andV Raseroka. It is chaired by Mr Ackerman, chairman of the board. As with the chairmanship of the board, thechairmanship of this committee is also reviewed on aregular basis in view of the fact that Mr Ackerman is notdefined as an independent non-executive director.

Terms of reference

The committee’s terms of reference are outlined below:

> To ensure alignment of the remuneration and humanresources strategies and policies with the group’sbusiness strategy and the desired culture

> To determine the group’s general policy on executiveand senior management remuneration

> To consider and recommend for approval by the boardthe remuneration of the chief executive and executivedirectors

> To determine any grants to executive directors andother senior employees made pursuant to the group’smanagement share option scheme

> To approve salary increases for non-bargaining employeesand mandates for negotiations with trade unions

>> Corporate governance continued

> To ensure the adequacy of retirement and healthcarefunding for executives and senior management

> To ensure that the structures, policies and proceduresfacilitate good management and utilisation of humanresources

> To ensure adequate succession planning for theexecutive and senior management

> To ensure adequate consideration of policies for thegroup in respect of HIV/AIDS management

> To ensure compliance to all statutory and best practicerequirements regarding labour and industrial relationsmanagement

> To make recommendations to the board on theappointment of the chief executive, new executivesand non-executive directors, including making recom -mendations on the composition of the board generallyand the balance between executive and non-executivedirectors appointed to the board

> To regularly review the board structure, size andcomposition and make recommendations to the boardwith regard to any adjustments that are deemednecessary

> To identify and nominate candidates for the approval ofthe board to fill board vacancies, as and when theyarise, as well as put in place plans for succession, inparticular for the chairman and chief executive

> To recommend directors that are retiring by rotation forre-election

> To consider recommendations by management inrelation to non-executive director remuneration for finalrecommendation to shareholders

> To consult other directors in its evaluation of the chairmanof the board, the chief executive and individual directors

> To liaise with the board in relation to the preparation ofthe committee’s report to shareholders

Attendance of meetings

The committee met four times during the year under review.

Directors 11/04/08 21/07/08 03/10/08 03/02/09

D Ackerman (chairman) † † † †M Mareletse † † † †V Raseroka † † † †

† – Present at meeting, A = Apology.

Since its inception in 2007, the committee has beeninvolved in the approval of salary increases and bonuspayments in terms of the group’s approved bonus scheme.The committee has also approved an annual work plan toensure that all important matters are addressed.


47

>>

Pro

tech

Ann

ual R

epor

t 09

> Determine the nature and extent of non-audit serviceswhich the external auditors may provide, subject to theprovisions of the Act, and ensuring proper disclosure ofsuch services and related fees in the annual financialstatements, as required

> Pre-approve any proposed contract with the externalauditors for the provision of non-audit services tothe group

> Discuss with the external auditor before the annualaudit commences the nature and scope of the audit,and ensure co-ordination where more than one auditfirm is involved

> Review the interim and annual financial statementsbefore submission to the board

> Discuss problems and reservations arising from theinterim (if and when applicable) and final audits, and anymatters incidental thereto which the external auditorsmay wish to discuss (in the absence of managementwhere necessary)

> Review any accounting or auditing concerns identifiedas a result of the internal or external audits

> Review the external auditor’s management letter andmanagement’s response, if available, and/or to considerthe matters to be dealt with therein

> Review the company’s statement on internal controlsystems prior to endorsement by the board

Internal audit> Approve the internal audit charter and the internal audit

plan, as well as the resources required

> Review the functioning of the internal audit programmeto ensure co-ordination between the internal and externalauditors, and to ensure that any internal audit function isadequately resourced and has appropriate standingwithin the group

> Consider the major findings of internal investigationsand management’s response

Risk management and compliance> Review the processes and procedures for risk identi -

fication, analysis and quantification

> Review the processes implemented to monitor theongoing management of risks

> Review reports from internal audit on the effectivenessof the processes and procedures of risk management

> Submit an annual report to the board on the total riskmanagement and assessment process and outcomes

> Review the group’s compliance with legal and regulatoryprovisions, its articles of association, code of ethics andthe rules established by the board and any significantbreaches thereof

Organisational integrity/ethics> Review any statements on ethical standards or

requirements for the company and the procedures orreview system implemented to promote and enforcecompliance

AUDIT AND RISK MANAGEMENT COMMITTEE

The audit committee operates under an approved charterin accordance with King II. It assists the board in meetingits corporate governance supervision responsibilitiesrelating to accurate financial reporting and adequatefinancial systems and controls. It does so by evaluatingthe findings of internal and external audits, actions takenand the appropriateness and adequacy of the systems ofinternal financial and operational controls.

The independence of the external auditor is reviewedregularly and all non-audit related services are pre-approvedand reported on.

The committee is satisfied that the external auditor wasindependent for the year under review and has thereforenominated the re-appointment of Deloitte & Touche asindependent auditors, for shareholders’ voting at theannual general meeting.

Composition

As required in terms of the Corporate Laws AmendmentAct, the committee consists of two independent non-executive directors, Mr M Mareletse (Chairman) and MrsM Vuso, and functions according to its terms of referenceas approved by the board. Mr P van Tonder was a memberuntil the appointment of Mrs Vuso.

The committee met three times during the year underreview. The group chairman, group chief executive, groupchief financial officer, internal and external auditors attendmeetings by invitation. The external auditor has unrestrictedaccess to the committee and the committee chairman.

Terms of reference

The committee’s responsibilities pertain to the followingareas:

External auditors, audit process and annualfinancial statements> Consider the appointment and/or termination of the

external auditors and to nominate for appointment aregistered auditor who is independent of the group, asand when required

> Determine the annual audit fee and terms of engagementof the external auditors

> Annually review the independence, objectivity andeffectiveness of the external auditors

> Ensure that the appointment of the external auditorscomplies with the provisions of the Companies Act of1973 as amended (“the Act”) and any other applicablelegislation

> Consider and set, if appropriate and subject to relevantlegislative requirements, mandatory term limits on thelength of time the external auditors or audit partner mayserve the company and ensure a managed rotationprocess in respect of the audit partner after everyfive years


48

> Review significant cases of employee conflicts ofinterest, misconduct or fraud, or any other unethicalactivity by employees or the group

> Where requested, make recommendations on anymaterial potential conflict of interest or questionablesituation

The committee’s terms of reference, internal audit charterand policy for non-audit services were reviewed andapproved by the board during the year.

Attendance of meetings

Directors 06/05/08 31/07/08 24/10/08

M Mareletse (chairman) † † †P van Tonder † † **M Vuso * * †

† Present at meeting, A = Apology, * Appointed 1 September 2008. ** Resigned on 1 September 2008.

ETHICS

The group is committed to the highest ethical and legalstandards and expects all its stakeholders to act inaccordance with personal and professional integrity in allaspects of their occupation and activity, as well as tocomply with all applicable laws, regulations and policies ofthe company. The board has adopted a code of ethicswhich provides firm and clear guidance as to the level ofethical conduct expected.

The services of Grant Thornton South Africa have beenemployed to provide all stakeholders with an anonymouschannel of communication to report any deviations fromthe principles set out in the code of ethics.

SHARE DEALINGS

The group has an insider trading policy that requires directorsand officers who could have access to price sensitiveinformation to be precluded from dealing in the group’sshares for the period, as required by the JSE Limited.

Directors and officers must at all times obtain permissionfrom the chairman, company secretary and a groupexecutive before dealing in the shares of the company.Approved dealings in the company’s shares by directorsare disclosed to the JSE Limited and published on theSecurities Exchange News Service (SENS). All approveddealings are reported in arrears to the regular meetings ofthe board.

COMPANY SECRETARY

The company secretary is responsible for ensuring groupcompliance with all applicable regulations and legislation.Her functions include regulatory compliance and closeliaison with the group’s listings sponsor. The companysecretary has nearly 20 years’ experience as a corporatelawyer and company secretary, mostly in the listedenvironment, and is also a member of the King Committee.

SUCCESSION PLANNING

The group has extensive succession planning in place, withidentified successors for all key management positions.The identified successors are understudies to thepersons whom they will succeed. Mentorship of identifiedsuccessors is an ongoing process within the group.

RISK MANAGEMENT, SYSTEMS OF INTERNAL

CONTROL AND INTERNAL AUDIT

The board is responsible for the group’s systems ofinternal control and risk management and is assisted inthis regard by the Audit and Risk Committee. Thesesystems of internal control are designed to providereasonable, but not absolute, assurance as to:

> The integrity and reliability of the annual financialstatements

> The safeguarding and maintenance of accountability ofthe group’s assets

> The identification and minimisation of significant fraud,potential liability, loss and material misstatement

There are inherent limitations to the effectiveness ofany system of internal control, including the possibilityof human error and the circumvention or overriding ofcontrols. These systems are therefore designed to managerather than eliminate the risk of failure and opportunity risk.

The internal audit function of Protech is outsourced toGrant Thornton South Africa. They assisted the groupduring the year to develop a risk register to identify risksinherent to the business and its operations. The riskregister forms the basis of the group’s risk managementprocess and ensures risks are adequately identified,evaluated and managed at the appropriate level in thedivisions. Based on the risk register, a three-year revolvinginternal audit plan was developed. The audit plan will focuson the major subsidiaries within the group and includesthe review and testing of key focus areas.

The internal audit function reports to the Audit and RiskCommittee on its findings and has unrestricted access tothat committee and its chairman. Two audits were conductedduring the year and the findings and recommendationsreported to the Audit and Risk committee.

The Audit and Risk committee regularly reviews the mainrisks and risk management processes and advises theboard accordingly.

GOING CONCERN

The directors are of the opinion that the business will remaina going concern in the year ahead and information in thisregard is contained in the statement of the responsibility ofthe directors in the annual financial statements.

>> Corporate governance continued


49

>>

Pro

tech

Ann

ual R

epor

t 09

INTRODUCTION

Protech values all stakeholders and endeavours to engagewith them in a pro-active and value-adding manner.

The group’s main stakeholders are:

> Employees

> Shareholders, analysts and media

> Clients

> Suppliers and sub-contractors

> Communities

EMPLOYEES

Employees are considered Protech’s most importantstakeholder. The group has an entrenched culture ofensuring employee growth and rewards. These includestudy programmes and incentive bonuses.

All sites have been provided with suggestion boxes whereemployees can anonymously provide information and/orsuggestions to enhance communication and conditions ofemployment.

During the 2009 financial year, the group’s internal newslettercalled FAST-TRACK was created, which has enhancedformal communications channels. The group also has along service awards programme.

STAKEHOLDER ENGAGEMENT>


50

>> Sustainability review continued

The group has a number of teambuilding initiatives,including sports activities.

Once every three months, outside of normal operationalsite visits, several senior management members visit sitesto focus exclusively on enhancing employee involvementand participation in the group.

SHAREHOLDERS, ANALYSTS AND MEDIA

These stakeholders are considered crucial to the group’smarket positioning.

During the year, the group conducted feedback with theseaudiences to map a strategy of continuous improvementin terms of engagement with them. Based on the feedback,the group further structured its interaction with theseaudiences. The investing audience has been broken downinto the constituents of institutional fund managers andanalysts, sell-side analysts and retail wealth managers.

One of the key aims of the group’s investor commu -nications programme is to broaden the shareholderbase so that each of these key audiences is adequatelyrepresented on the shareholders’ register.

Protech aims to pro-actively engage with these audiencesand the media through meetings, written communicationand events such as presentations and educational visitsto the group’s operations. As the group is listed, commu -nication with these stakeholders takes place within theparameters of the JSE Listings Requirements.

Both positive and negative news is communicated on afactual basis, enabling stakeholders to get to know thegroup better and to make informed investment decisions.

CLIENTS

Clients form the cornerstone of the group’s delivery model

and are seen as important partners. The group’s fast-track

contracting strategy has been built in collaboration with

clients over the last 20 years to ensure an entrenched

reputation for effective client delivery.

The group’s client base includes corporate institutions,

government departments, state-owned enterprises, mining

houses, large businesses, other contractors and private

developers.

The group engages clients through early involvement in

contracts. It aims to offer client solutions, not merely a

service or products. See case studies on page 26.

SUPPLIERS AND SUB-CONTRACTORS

The success of the group is largely dependent on the

strategic partnerships with suppliers and sub-contractors.

The group has policies and procedures in place in terms

of selection of suppliers and/or sub-contractors.

Key performance areas considered in the selection

process are:

> Pricing of goods and services

> Quality of goods/services provided

> Reliability and availability

> Back-up service

> Safety and environmental records

> Empowerment status


51

>>

Pro

tech

Ann

ual R

epor

t 09

THE GROUP AIMS TO BE SENSITIVE TO THE COMMUNITIESAROUND ITS OPERATIONS. IT ENSURES THAT SITES ARECLEARLY DEMARCATED AND THAT SAFETY, HEALTH ANDENVIRONMENTAL REQUIREMENTS ARE MET TO PREVENT ANY IMPACT ON COMMUNITIES.

The performance of suppliers is monitored on a regular basisfrom the start of engagement until the completion of anorder or contract. Timeous and regular feedback is providedto suppliers to address any difficulties experienced.

Supplier relationship management is essential in maintainingfuture growth and success and a great deal of timeis therefore invested to ensure these relationships arecarefully managed.

COMMUNITIES

The group aims to be sensitive to the communities aroundits operations. It ensures that sites are clearly demarcatedand that safety, health and environmental requirementsare met to prevent any impact on communities.

When contracts are undertaken in an area, labour and othersupport services such as accommodation and security aresourced from within the community.

The group is actively involved in the community around itshead office, with a partnership with an organisation thatserves a disadvantaged community of only black people inthe Lanseria area, north of Johannesburg.

The group also provides equipment and assistance to ruralschools in the area to assist them with upgrading theirroads to and from school.


EMPLOYEE CULTURE>

52

REX MOHLALA

Rex started at the group in 1988 as

an assistant mechanic and is now

a site manager.

“Working for Protech is a great careeropportunity. You get motivated to achievemore and more and so you progress in thework place. Protech turns a person from beinglazy into someone who is a hard worker, withgreat knowledge.”

MARY MODIBA

RIAAN AGULHAS

Riaan started at the group in 1999 as a plant logistics

assistant. Today he is an accountant in the finance

department.

“Protech has been my family for almost a decade now. The group hasbeen mutually dedicated to my family and has delivered on all of itspromises. The group is a company where principles are hammered andhoned on the anvil of everyday living. I have learned loyalty andperseverance. I tell people if they want a challenge and a rewarding workexperience then this group is an ideal place to work for.”

Protech’s staff turnover is less than 1% and the samemanagement team has been with the group for more than10 years. The group retains and attracts skills due to itspolicy of regarding people as its primary asset and bytreating its employees accordingly.

The group offers several study opportunities to employeeswho want to enhance their careers.

The group believes in remunerating staff for their efforts.Employees’ remuneration therefore includes incentivebonuses on an ongoing basis. These include performanceand attendance bonuses that are paid monthly throughoutall occupational categories.

Mary joined the group in 1993 as a

part-time cleaner and tea lady. Today,

she is the group’s receptionist.

“The directors think about the employees’financial, emotional and social needs. I feellike Protech is my family, so when I am atwork I feel like I am at home. The only time Iwould like to leave the group is when I am atmy retirement age.”


BROAD-BASED BLACK ECONOMIC EMPOWERMENT (BBBEE)

>

53

>>

Pro

tech

Ann

ual R

epor

t 09

EMPOWERMENT RATING

During the year, the group was rated as a B or a level 7

contributor by Empowerdex. The group is currently

working on improving this rating by focusing on certain

key areas. A supplier database has been developed to

track suppliers, sub-contractors and their empowerment

status. It is envisaged that the supplier database will make

a significant contribution to the future measurement of

verified preferential procurement. The supplier database

will also assist in categorising suppliers by size and

turnover to facilitate enterprise development.

OWNERSHIP

30,1% of the group’s shares is owned by black share -

holders with broad-based beneficiaries. These shareholders

include the Tumsedi Share Trust (5,1%), the Lidonga

Women’s Group (5%) and the Protech BEE Employee

Trust (20%).

MANAGEMENT

The group is committed to the transformation of its

management team. It aims to grow people from within

into management positions, with the current management

members having all come up through the ranks of the

organisation. 54% of top and senior management is

currently empowered.

EMPLOYMENT EQUITY

Almost R2,6 million was spent on training during the 2009

financial year (2008: R2,5 million). 90% was spent on the

training of black employees.

Over 150 new skills programmes were offered during 2009

(2008: 100), including 10 new learnerships (2008: 15) to

develop black female employees into general management.

The group has a mobile training unit to conduct on-site

training. This is beneficial to the company and its employees,


54

as employee training is carried out within the context ofongoing business productivity.

The group is proud of the progression in its employmentequity profile during the year and remains committed tocontinue improving on this going forward.

During the year, two black males moved into top manage -ment (the level that includes exco). 29 black males, oneIndian male and one Indian female was appointed tosenior management positions, defined as technical,associated professional or professional levels.

30 black males moved from skilled technical to profes -sionally qualified positions. Four coloured males, oneIndian male and five white females were appointed tomiddle management.

200 black males moved from unskilled to semi-skilledlevels. The group also appointed seven female semi-skilledemployees. There is still a huge scarcity in the civil

engineering industry in terms of female representation andthe group will continue to focus on female development.

The group’s sites are construction areas, which make it

difficult for disabled employees to be employed at a site

level. However, six disabled employees were appointed in

2009 at head office.

SKILLS DEVELOPMENT

The group’s culture is strongly centred on continuous

development and training of employees. During the year,

R2,6 million was spent on training (2008: R2,5 million).

Training is often conducted at the group’s mobile training

unit, which allows on-site training and minimal interruption

to operations.

During the year, 416 employees were trained, with a

particular focus on developing lower-level employees. The

group also focused on health and safety training.

30,1% OF THE GROUP’S SHARES IS OWNED BY BLACKSHAREHOLDERS. DURING 2009, 47% OF THE GROUP’SPURCHASES WAS PROCURED FROM BLACK EMPOWEREDORGANISATIONS.

2009

White

Occupational levels Male Female male Total

A C I A C I W W

African Coloured Indian African Coloured Indian White

Top management 4 0 0 2 0 0 1 10 17

Senior management 29 1 1 0 0 1 3 18 53

Professionally qualified and experienced specialists and mid-management 38 4 2 0 0 0 7 24 75

Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents 99 6 0 2 0 1 10 18 136

Semi-skilled and discretionary decision making 558 0 0 11 0 0 0 1 570

Unskilled and defined decision making 508 0 0 22 0 0 0 0 530

Total permanent 1 236 11 3 37 0 2 21 71 1 381

Non-permanent employees 0 0 0 0 0 0 0 0 0

Grand total 1 236 11 3 37 0 2 21 71 1 381



55

>>

Pro

tech

Ann

ual R

epor

t 09

During 2009, there was a pleasing increase in employeesfurthering their studies, including studies towards diplomassuch as the National Diploma: Civil Engineering.

PREFERENTIAL PROCUREMENT

During 2009, 47% of the group’s purchases was procuredfrom black empowered organisations, up from 35% in2008. The group maintains a supplier database thatcaptures and updates the BEE status of all suppliers.Preference is given to empowered suppliers when goodsand services are procured.

ENTERPRISE DEVELOPMENT

The group has a strong focus on enterprise developmentand is actively involved with a number of emergingcontractors.

Some of the difficulties experienced by South Africanemerging contractors are:

> Lack of capital

> Difficulty in accessing finance

> Lack of experience

> Lack of general and financial management training

Protech provides financial, commercial, accounting andtender support to contractors where it identifies a need.A major problem often experienced by emerging contractorsis healthy cash flow. To address this, Protech coachesthese contractors to ensure that all payment documen -tation is prepared and submitted for payment timeously tofast-track the payment process.

SOCIO ECONOMIC DEVELOPMENT (SED)

In line with the dti Codes of Good Practice, corporatesocial investment has changed to socio economic develop -ment (SED). SED is an important part of the group’s businessstrategy. In line with the Codes, the group aims to spend1% of net profit after tax each year. During the year, itachieved that.

To ensure sustainable impact, during the year the groupfocused on one project close to its head office. Refilwe isa registered section 21 company with non-profit and publicbenefit status. This organisation serves a disadvantagedcommunity of only black people in the Lanseria area, northof Johannesburg. The organisation focuses on childcareand community care programmes.

A partnership between Refilwe and Protech was started atthe beginning of 2008. The group specifically recognisedthe need to help the young school leavers who are withouta future. 50 learnerships were offered during 2008 and2009 to unemployed people. 15 learners are close tosuccessful completion of this programme.

The group is also actively involved in supporting theGodparent Project by providing transport to get childrenfrom a place of safety to school. The group also invests inthe upgrade of the place of safety and establishingsustainable income-generating projects.


SAFETY, HEALTH, ENVIRONMENT AND QUALITY (SHEQ)>

TO PASS AN INTERNAL SHEQ AUDIT, BUSINESSES NEED TO ACHIEVE A MINIMUM SCORE OF 80%. DURING THEYEAR, AN AVERAGE OF 82% WAS ACHIEVED.

INTRODUCTION

Protech implemented standardised group policies andprocedures in 2002. The group’s internal safety, health,environment and quality (SHEQ) system is in line with ISO9001:2000, ISO 14001:2004 and OSHAS 18001:2007.

The group will be applying for a formal rating during the2009 calendar year.

POLICY

The group’s policy is regularly updated and signed off bythe group chief operating officer.

Adherence to this policy is ensured through:

> Senior management commitment to health and safety

> Director responsibility for health and safety

> Linking safety and health to business performance

> A programme that is proactively managed to ensurecontinual improvement

> Ensuring employee involvement, responsibility andadherence through training

> Regular communication

> Provision of dedicated resources to implement the policy

The group continuously revises policies and updatesstandards. It provides regular training to ensure employeesare familiar with these policies. The group aims to maintaina disabling injury frequency rate (DIFR) of less than 1.During the year under review, the DIFR was 0,89.

Regular internal audits are conducted and correctiveactions implemented. Safety training is provided to identifyand address risk behaviour and risk reduction measuresare constantly implemented. Risks are reviewed on anongoing basis, including environmental, health andcommunity hazards, to ensure measures are in place toaddress these.

AUDITS

All sites, offices, work and storage areas are periodicallyaudited to evaluate adherence to SHEQ.

Preliminary audits are conducted before the start of anyactivities on a new site. Monthly internal audits areconducted to ensure compliance with client and regulatoryrequirements.

INFORMATION GATHERING

Information is currently managed by the group’s safetyofficer.

During the coming year, to improve on this system:

> SHE officers will be employed to specific areas toensure all relevant SHE information is communicatedto the areas of responsibility

> An electronic index will be compiled for relevantemployees to have read-only access to

> An incident/accident database will be compiled

> SHE officers will use this information to compile riskassessments to ensure that incidents arecommunicated between sites to reduce thepossibility of recurrence

>56


57

>>

Pro

tech

Ann

ual R

epor

t 09

SAFETY TRAINING IS PROVIDEDTO IDENTIFY AND ADDRESS RISKBEHAVIOUR. RISK REDUCTIONMEASURES ARE CONSTANTLYIMPLEMENTED.


58SHEQ POLICY

“The board of directors, management and employees are committed to providing

a work environment that is safe, healthy and environmentally friendly. We accept

our responsibility and accountability towards the attainment and maintenance of

high standards related to health and safety.

This will be achieved by:

> Conducting our business in a manner that:

– Safeguards our employees, customers and affected parties againstunacceptable risks with regard to occupational health and safety, as wellas the environment

> Communicating openly with our employees and all other parties to createuniform objectives to perform our duties in accordance with:

– Legislative requirements

– Established policies and guidelines

– Acknowledged standards and procedures

– Best practice

– Good corporate governance

– Sustaining a process of hazard identification and risk assessment

– Supporting the provision of appropriate resources, information, training and supervision

– Integrating health, safety, environment, community and quality aspectsinto all workplace activities

> Giving employees the necessary resources and training to meet theresponsibility and accountability requirements on all aspects related to healthand safety

> Striving towards continuous improvement around the health and safety of ourworking environment”



59

>>

Pro

tech

Ann

ual R

epor

t 09

increase in the employee base and more minor incidentsbeing reported. However, even though the group’s activitiesincreased significantly, no major incidents have occurred,indicating the robustness of the group’s safety practices.The group is focusing on training new employees to ensurethey adhere to the group’s stringent safety standards. Thegroup’s short term target of DIFR of less than one remainsin place, with an added target of reducing LTIFR from 0,89to 0,6 over a period of two years.

Although incidents have increased over the years, as thetable above outlines, this is commensurate with the increasein employees.

ENVIRONMENT

The group’s environmental system is based on ISO14001:2004. The group adopts clients’ environmentalrequirements on site, including very stringent standards inmost sectors, especially in mining.

the mobile clinic evaluated 2 867 people, with 3,13%being declared unfit to work.

The group currently conducts 90% of its own medicalfitness evaluations, which allows it to have a very hands-on approach in terms of medical assistance and/or chronicmedication. The group plans to have its on-site clinic ISOaccredited during calendar 2009. The clinic received theirdispensing permit during 2008.

SAFETY

The group focuses on maintaining a safe workingenvironment in which employees can execute theiractivities with zero harm to themselves or those in theirimmediate vicinity.

To date, the group has had an exceptional safety record,with no contract having ever been penalised or affecteddue to failure to meet health and safety requirements.During 2008, the increase in contracts resulted in an

HEALTH

The group has a formal occupational health and safetypolicy and strives to prevent occupational illness amongstemployees by providing personal protective equipment,ongoing training and by conducting medical evaluations,as required.

The biggest occupational health risks to the group areeyesight problems in terms of operators and enforcingcontinued health and medical assessments, as someemployees do not continue with follow-up appointments.

During 2008, the group created a mobile clinic as part of itsstrategy to improve the health of employees and to ensurethat they are fit for work. The clinic assists employeesthrough the provision of primary healthcare and supportwith regard to chronic health problems. During the year,

PROTECH KHUTHELE (PTY) LTD – LOST-TIME INCIDENT FREQUENCY (LTIFR) RATE

Average Total Minor Moderate LTIFR ratenumber of man hours accidents accidents LTI*200000/

Year employees worked – non LTI – LTI man hours

2000 288 645 000 8 2 0,62022001 335 799 800 4 6 1,50042002 418 959 760 8 3 0,62522003 440 1 057 800 13 4 0,75632004 511 1 209 600 10 5 0,82672005 520 1 219 705 6 5 0,81992006 622 1 411 657 9 6 0,85012007 893 2 076 000 12 9 0,86712008 1 334 2 483 992 40 11 0,8857

THE GROUP CURRENTLYCONDUCTS 90% OF ITS OWNMEDICAL FITNESSEVALUATIONS, WHICHALLOWS IT TO HAVE A VERYHANDS-ON APPROACH


60

To minimise risk during activities, the group makes hazardidentification and risk assessment a group effort. Theobjective is to ensure that no environmental impact is of aserious nature. During the year, two minor environmentalincidents were reported.

The group’s actions to minimise environmental impactinclude:

> Environmentally friendly materials are used to cleanplant and equipment

> Hazardous chemicals are used within strict regulations

> The group’s plant policy of using only new equipmentmeans that smaller quantities of lubricants need to bekept in stock, as maintenance work is carried out by thegroup’s service providers

> New plant and equipment result in less noise and airpollution

– Tier 3 emission-certified engines result in loweremissions

> Site camps are fenced to keep activities that couldcause disturbance inside a specific area

> Traffic management plans keep operators ondesignated haul roads to ensure surrounding areasremain undisturbed

> Hazardous waste on sites is collected and recycled byan accredited service provider

> Chemical toilets are serviced, with chemicalsremoved by an accredited service provider

> Normal domestic waste is discarded separately andremoved from site by an accredited service provider

QUALITY

The group ensures compliance to quality by adopting theclient’s quality specifications to ensure no deviations inrespect of the client’s quality management plan. The group’sblue-chip client base implements very stringent and diversequality programmes, which the group has succeeded tomeet in all instances.



61

>>

contents

62 Responsibility of directors for annual financial statements // 62 Certificate by company

secretary // 63 Audit and risk management committee report // 64 Independent auditor’s

report // 65 Directors’ report // 66 Consolidated balance sheet // 67 Consolidated income

statement // 68 Consolidated cash flow statement // 69 Consolidated statement of

changes in equity // 70 Operational segment reporting // 72 Accounting policies

82 Notes to the consolidated financial statements // 111 Company balance sheet

112 Company income statement // 112 Company statement of changes in equity

113 Company cash flow statement // 114 Notes to the company financial statements

annual financial statements

Pro

tech

Ann

ual R

epor

t 09

9425 AR Financials (R):PROTECH A/R 2451 6/2/09 2:30 PM Page 61

62

responsibilityof directors for the annual financial statementsfor the year ended 28 February 2009

The directors are responsible for the preparation offinancial statements that fairly present the state ofaffairs of the group at the end of the period and of the profit or loss for that period in conformity withInternational Financial Reporting Standards and in themanner required by the Companies Act in South Africa.

To enable the directors to meet these responsibilitiesthe board and management set standards and manage - ment implements systems of internal controls,accounting and information systems.

The directors are responsible for the systems of internalcontrol. These are designed to provide reasonable, ifnot absolute, assurance as to the reliability of thefinancial statements and to adequately safeguard, verifyand maintain accountability of assets, and to preventand detect material misstatement and loss. Thesystems are implemented and monitored by suitablytrained personnel with an appropriate segregation of authority and duties. Nothing has come to theattention of the directors to indicate that any materialbreakdown in the functioning of these controlprocedures and systems has occurred during the yearunder review.

The annual financial statements have been prepared inaccordance with the Companies Act, 1973, as amended,and International Financial Reporting Standards and are

certificateby company secretary

In terms of Section 268G(d) of the Companies Act of 1973, as amended, I hereby certify that the company haslodged with the Registrar of Companies all such returns as are required of a public company, in terms of theCompanies Act, No 61 of 1973, as amended, and that all such returns are true, correct and up to date.

A van der MerweCompany secretary

8 May 2009

based on appropriate accounting policies, supported byreasonable and prudent judgements.

The directors are of the opinion that the company has adequate resources to continue in operation forthe foreseeable future and accordingly the financialstatements have been prepared on a going concernbasis.

It is the responsibility of the auditors to express anopinion on the financial statements. Their report to themembers of the company is set out on page 64.

APPROVAL OF ANNUAL FINANCIAL

STATEMENTS

The financial statements for the year ended 28 February2009, set out on pages 65 to 125 were approved bythe board of directors on 8 May 2009 and are signedon its behalf by:

D Ackerman G ChapmanChairman Chief executive officer

8 May 2009Lanseria


63

>>

audit and risk management committee report

The Corporate Laws Amendment Act, 24 of 2006(“CLAA”) which came into effect on 14 December2007 requires the establishment of an Audit Committeeand furthermore prescribes the composition andfunctions of such a committee. The Audit & RiskManagement Committee of the company is fullycompliant with the requirements of the CLAA. Thiscommittee comprises Mr M Mareletse (Chairman) andMs M Vuso (CA) SA both of whom are independentnon-executive directors.

As part of its function in assisting the Board ofDirectors in the discharge of its duties relating tocorporate accountability, the duties of the Audit &Risk Management Committee include, inter alia, the following:

– Review the annual financial statements to ensure thatthey present a true, balanced and understandableassessment of the financial position and performanceof the company;

– Evaluate the company’s risks, the measures takento mitigate those risks and the treatment of theresidual risk;

– Ensure effective internal control environment in thecompany;

– Nominate the external auditor for appointment asthe registered independent auditor after satisfyingitself through enquiry that the external audit firm andthe designated audit partner are independent asdefined in terms of the CLAA;

– Determine the fees to be paid to the external auditoras well as their terms of engagement;

– Ensure that the appointment of the external auditorcomply with the provisions of the CLAA and any otherlegislation relating to the appointment of auditors;

– Evaluate the independence and effectiveness of theinternal and external auditors;

– Approve a non-audit service policy which determinesthe nature and extent of any non-audit services whichthe external auditor may provide to the company; and

– Pre-approve any proposed contract with the externalauditor for the provision of non-audit services to the company.

The committee also monitors the performance of thefinancial director on a continuous basis and is more thancomfortable with the experience and expertise ofMr Wolmarans.

The committee has implemented an annual workplan to ensure that all duties and responsibilities ofthe committee are dealt with during an annual cycle.The committee confirms that all its duties andresponsibilities had been attended to during the 2009 financial year. The Audit & Risk ManagementCommittee has furthermore satisfied itself throughenquiry that the external audit firm, Deloitte & Touche,is independent from the company.

The Audit & Risk Management Committee recom -mended the annual financial statements for the yearended 28 February 2009 for approval to the board. Theboard has subsequently approved the annual financialstatements which will be open for discussion at theforthcoming annual general meeting.

M MareletseAudit & Risk Management Committee Chairman

8 May 2009

Pro

tech

Ann

ual R

epor

t 09


64

independentauditors’ report

TO THE MEMBERS OF PROTECH KHUTHELE

HOLDINGS LIMITED

We have audited the annual financial statements andgroup annual financial statements of Protech KhutheleHoldings Limited, which comprise the directors’report, the balance sheet and the consolidated balancesheet as at 28 February 2009, the income statementand the consolidated income statement, the statementof changes in equity and the consolidated statementof changes in equity and cash flow statement and theconsolidated cash flow statement for the year thenended, a summary of significant accounting policies andother explanatory notes, as set out on pages 65 to 125.

Directors’ responsibility for the financial

statements

The company’s directors are responsible for thepreparation and fair presentation of these financialstatements in accordance with International FinancialReporting Standards, and in the manner required bythe Companies Act of South Africa. This responsibilityincludes: designing, implementing and maintaininginternal control relevant to the preparation and fairpresentation of financial statements that are free frommaterial misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies;and making accounting estimates that are reasonablein the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on thesefinancial statements based on our audit. We conductedour audit in accordance with International Standardson Auditing. Those Standards require that we complywith ethical requirements and plan and perform the auditto obtain reasonable assurance whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtainaudit evidence about the amounts and disclosures in the financial statements. The procedures selecteddepend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s

preparation and fair presentation of the financialstatements in order to design audit procedures thatare appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includesevaluating the appropriateness of accounting principlesused and the reasonableness of accounting estimatesmade by the directors, as well as evaluating the overallfinancial statement presentation.

We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for ouraudit opinion.

Opinion

In our opinion, the financial statements present fairly,in all material respects, the financial position of thecompany and of the group as at 28 February 2009, andof their financial performance and their cash flows forthe year then ended in accordance with InternationalFinancial Reporting Standards, and in the mannerrequired by the Companies Act of South Africa.

Deloitte & TouchePer Martin BiermanPartner

Registered AuditorBuilding 2Deloitte PlaceThe WoodlandsWoodlands DriveWoodmead, Sandton

8 May 2009

National executive: GG Gelink Chief Executive,AE Swiegers Chief Operating Officer, GM PinnockAudit, DL Kennedy Tax & Legal and Financial Advisory,L Geeringh Consulting, L Bam Corporate Finance,CR Beukman Finance, TJ Brown Clients & Markets,NT Mtoba Chairman of the Board.

A full list of partners and directors is available on request.


65

>>

Pro

tech

Ann

ual R

epor

t 09

directors’ reportfor the year ended 28 February 2009

The directors present their annual report which formspart of the audited annual financial statements of thegroup for the year ended 28 February 2009.

NATURE OF BUSINESS

The group’s business operations revolves aroundconstruction and construction related services includingfast-track bulk earthworks and contracting, plant hireand logistical services, geotechnical laboratory andsurvey services and readymix concrete.

OPERATING RESULTS

The earnings of the group for the year was R92,9 million(2008: R62,1 million) after taking into account taxationof R35,2 million (2008: R26,9 million).

Full details of the financial position and results of thegroup are set out in these financial statements.

The annual financial statements have been preparedin accordance with International Financial ReportingStandards.

SHARE CAPITAL

Full details of the authorised and issued capital of thecompany at 28 February 2009 are contained in note 9of the financial statements.

DIVIDENDS

No dividends have been declared or proposed and it isnot suggested that any dividends be paid.

SUBSIDIARIES

Acquisition

The group acquired Impact Compaction (Pty) Ltd on1 June 2008.

Details of the acquisition are disclosed in note 25 ofthese financial statements.

POST BALANCE SHEET EVENTS

The directors are not aware of any matter orcircumstances arising since the end of the financialyear, not otherwise dealt with in the annual financialstatements, which significantly affect the financialposition of the company or the results of its operations.

DIRECTORATE AND SECRETARY

At the date of this report, the directors of the companywere:

Independent non-executive

M MareletseM Vuso (appointed 1 September 2008)

Non-executiveD Ackerman (chairman)C Nkosi (appointed 10 March 2008)V RaserokaP van Tonder

ExecutiveG Chapman (group chief executive)N Wolmarans (chief financial officer)

The company secretary is Mrs A van der Merwe.

Interests of directors

At 28 February 2009, the present directors of thecompany held direct and indirect beneficial interest in118 224 795 of the company’s issued ordinary shares.Details of the ordinary shares held per individualdirectors are listed below:

Beneficial Direct IndirectD Ackerman 25 294 960 –C Nkosi – 18 100 000V Raseroka 18 487 500P van Tonder 9 375 000 3 007 335G Chapman 40 000 000 –N Wolmarans 960 000 3 000 000

At the date of this report, these interests remainunchanged.

AUDITORS

Deloitte & Touche will continue in office in accordancewith section 270 (2) of the Companies Act.

8 May 2009


66

’09

consolidatedbalance sheetat 28 February

2009 2008 Notes R’000 R’000

ASSETSNon-current assets 393 143 279 413

Property, plant and equipment 1 354 172 256 964Goodwill 2 33 549 16 045Other intangible assets 3 1 817 –Other financial assets 7 3 605 –Deferred tax 12 – 6 404

Current assets 298 839 213 339

Inventory 4 16 946 13 781Amounts due from contract customers 5 9 290 11 899Trade and other receivables 6 163 088 90 326Other financial assets 7 7 927 4 095Bank balances and cash 8 101 588 93 238

Total assets 691 982 492 752

EQUITY AND LIABILITIESTotal equity 234 614 141 703

Share capital and share premium 9 228 598 228 598Common control reserve 10 (122 053) (122 053)Retained earnings 128 069 35 158

Total liabilities 457 368 351 049

Non-current liabilities 235 566 120 629

Borrowings 11 186 517 95 451Deferred tax 12 49 049 25 178

Current liabilities 221 802 230 420

Borrowings 11 87 839 69 092Trade and other payables 13 88 629 49 178Subcontractor liabilities 14 9 704 8 898Provisions 15 5 496 18 312Vendor liability 16 – 71 356Current tax liabilities 30 134 13 584

Total equity and liabilities 691 982 492 752

SUPPLEMENTARY BALANCE SHEET INFORMATIONTotal number of shares in issue (thousands) 362 500 362 500Net asset value per share (cents) 64,7 39,1

Capital expenditure (R’000)– Spent 162 102 179 161 – Commitments – Authorised but unspent 128 302 43 675

Performance guarantees issued (R’000) 49 210 19 894


67

>>

Pro

tech

Ann

ual R

epor

t 09

consolidatedincome statementfor the year ended 28 February

’092009 2008

Notes R’000 R’000

Revenue 18 702 745 368 495

Cost of sales (354 468) (173 035)

Gross profit 348 277 195 460

Sundry income 3 938 3 630

Operating expenses (164 043) (86 620)

Earnings before amortisation, depreciation and interest 188 172 112 470

Amortisation of intangible assets 3 (147) –

Depreciation 1 (32 038) (15 278)

Earnings before interest and taxation 155 987 97 192

Interest received 19 2 097 654

Interest paid 20 (29 966) (8 747)

Earnings before taxation 21 128 118 89 099

Taxation 22 (35 207) (26 989)

Earnings for the year 92 911 62 110

Attributable to ordinary shareholders 92 911 62 110

– prior to listing – 26 952

– subsequent to listing 92 911 35 158

Earnings per share (cents)

Basic earnings per share 23 25,6 17,4

Diluted earnings per share 23 25,6 17,4


68

’09

consolidatedcash flow statementfor the year ended 28 February

2009 2008 Notes R’000 R’000

Cash flows from operating activities 114 667 81 085

Cash receipts from customers 635 929 332 977

Cash paid to suppliers and employees (492 999) (234 181)

Cash generated by operations 26 142 930 98 796

Interest received 2 097 654

Interest paid (29 966) (8 747)

Income taxes paid 27 (394) (9 618)

Cash flows from investing activities (145 655) (119 753)

Purchase of property, plant and equipment (162 102) (179 161)

Proceeds on disposal of property, plant and equipment 32 768 47 937

Assets acquired through acquisition 25 (7 000) –

Cash received from acquisition – 8 695

(Increase)/decrease in loans granted (9 321) 2 776

Cash flows from financing activities 39 338 129 462

Share issue – 12 500

Decrease in net loans from shareholders – 7 931

Settlement of Vendor liability 25 (71 356) –

Increase in bank borrowings 62 200 –

Payments in terms of bank borrowings (8 146) –

Increase in borrowings related to instalment sale agreements

and finance leases 163 381 191 393

Payments in terms of instalment sale agreements

and finance leases (106 741) (82 362)

Net increase in cash and cash equivalents 8 350 90 794

Cash and cash equivalents at the beginning of the year 93 238 2 444

Cash and cash equivalents at the end of the year 101 588 93 238

Cash and cash equivalents comprise:Bank balances and cash 8 101 588 93 238


69

>>

Pro

tech

Ann

ual R

epor

t 09

consolidatedstatement of changes in equityfor the year ended 28 February

’09Common

Share Share Control RetainedCapital Premium Reserve Earnings Total

R’000 R’000 R’000 R’000 R’000

Balance at 28 February 2007 –* – – – –*

Share issues

23 May 2007 – 20 000 0003 – – –

– 41 869 3622 –* – –*

Common control share issues

28 May 2007 – 288 130 6381 1 216 096 216 097

Common control reserve (149 005) (149 005)

Reviewed pro forma group 2 216 096 (149 005) – 67 093

Share issues

6 August 2007 – 12 500 0002 –* 12 500 12 500


Transfer earnings at acquisition

date to reserve 26 952 (26 952) –

Balance at 29 February 2008 2 228 596 (122 053) 35 158 141 703


Balance at 28 February 2009 2 228 596 (122 053) 128 069 234 614

1 Issued to acquire common control subsidiaries.2 Issued for cash.3 Share split of 200 000 to 1.* Amounts below R1 000.


70

’09

operationalsegmental reportingfor the year ended 28 February

SERVICES WITHIN EACH BUSINESS SEGMENTFor management purposes, the group is organised into four major operating divisions – earthworks, plant hire,geotechnical laboratory and readymix. These divisions are the basis on which the group reports its primary segmentinformation. The principal services and products of each of these divisions are as follows:

Earthworks – bulk earthworks and roads and civil engineering contractors.

Plant hire – plant hire, impact compaction and logistical services.

Geotechnical laboratory – geotechnical laboratory and surveying services.

Readymix – supplier of ready mixed concrete and concrete pumping services.

The group acquired the impact compaction business on 1 June 2008 and the assets and liabilities of the businessare included in the plant hire segment’s assets and liabilities reported below.

Segment revenue and segment result

Segment Revenue Segment Result

2009 2008 2009 2008R’000 R’000 R’000 R’000

Earthworks 580 122 382 870 66 607 36 086

Plant hire 189 845 116 265 82 227 60 219

Geotechnical laboratory 11 347 6 639 754 893

Readymix 108 127 – 977 –

889 441 505 774 150 565 97 198

Corporate* 13 460 600 (5) (6)

Eliminations (200 156) (137 879) 5 427 –

702 745 368 495

Earnings before interest and tax 155 987 97 192

Net interest paid (27 869) (8 093)

Earnings before tax 128 118 89 099

Taxation (35 207) (26 989)



71

>>

Pro

tech

Ann

ual R

epor

t 09

Segment assets and liabilities

Segment assets Segment liabilities

2009 2008 2009 2008R’000 R’000 R’000 R’000

Earthworks 211 411 138 872 119 206 85 384

Plant hire 413 734 289 575 302 231 215 880

Geotechnical laboratory 5 102 4 921 2 649 3 012

Readymix 82 629 100 103 86 326 100 103

712 876 533 471 510 412 404 379

Corporate* 357 719 84 312 112 009 71 701

Eliminations (378 613) (125 031) (165 053) (125 031)

691 982 492 752 457 368 351 049

Other segment information

Depreciation and amortisation Additions to non-current assets

2009 2008 2009 2008R’000 R’000 R’000 R’000

Earthworks 1 380 726 1 880 1 833

Plant hire 25 777 14 253 164 087 176 172

Geotechnical laboratory 521 299 1 482 1 156

Readymix 4 507 – 1 577 39 235

32 185 15 278 169 026 218 396

* Corporate includes the transactions of the holding company.

Segment revenue reported above represents revenue generated from external customers. Intersegment sales amountedto R200,2 million (2008: R137,9 million). Segment result reported above represents operating profit per segment.

The accounting policies of the reportable segments are the same as the group’s accounting policies.


72

accounting policiesfor the year ended 28 February

GENERAL INFORMATION

Protech Khuthele Holdings Limited (the company) is alimited company incorporated in South Africa. Theaddresses of its registered office and principal placeof business are disclosed in the introduction to theannual report.

The company is the holding company of a number of subsidiary companies principally engaged in fast-track bulk earthworks, ready mixed concrete and civilengineering contracting activities.

ADOPTION OF NEW AND REVISED STATEMENTS

Standards and Interpretations effective in the

current period

Two Interpretations issued by the International FinancialReporting Interpretations Committee are effectivefor the current period. These are: IFRIC 12 ServiceConcession Arrangements (effective 1 January 2008)and IFRIC 14 (IAS 19) – The Limit on a Defined BenefitAsset, Minimum Funding Requirements and theirInteraction (effective 1 January 2008). The adoption ofthese Interpretations has not led to any changes in thecompany’s accounting policies.

Standards and Interpretations in issue not

yet adopted

At the date of authorisation of these financial state -ments, other than the Standards and Interpretationsadopted by the group in advance of their effectivedates the following Interpretations were in issue butnot yet effective:

– IAS 1 (Revised) Presentation of financial statements(effective for accounting periods beginning on orafter 1 January 2009);

– IAS 1 Presentation of financial statements: Puttablefinancial instruments and obligations arising onliquidation (effective for accounting periods beginningon or after 1 January 2009);

– IAS 23 (Revised) Borrowing Costs (effective foraccounting periods beginning on or after 1 January2009);

– IAS 27 (Revised) Consolidated and separate financialstatements (effective for accounting periodsbeginning on or after 1 July 2009);

– IAS 28 Investment in Associates (effective foraccounting periods beginning on or after 1 July 2009);

– IAS 31 Interest in Joint Ventures (effective foraccounting periods beginning on or after 1 July 2009);

– IAS 39 Financial Instruments: Recognition andmeasurement (effective for accounting periodsbeginning on or after 1 July 2009);

– IFRS 2 – Share based payments: Vesting Conditionsand Cancellations (amendments effective on or after1 January 2009);

– IFRS 3 (Revised) – Business Combinations (thestatement is effective on or after 1 July 2009);

– IFRS 8 Operating Segments (effective for accountingperiods beginning on or after 1 January 2009);

– IFRIC 13 Customer Loyalty Programmes (effective foraccounting periods beginning on or after 1 July 2008);

– IFRIC 16 Hedges of a Net Investment in a ForeignOperation (effective for accounting periods beginningon or after 1 October 2008);

– IFRIC 17 Distributions of Non-cash Assets to Owners(effective for accounting periods beginning on orafter 1 July 2009); and

– IFRIC 18 Transfers of Assets from Customers(effective for accounting periods beginning on orafter 1 July 2009).

The directors anticipate that all of the above inter -pretations will be adopted in the group’s financialstatements for the year in which they becomeeffective and that the adoption of those interpretationswill have no material impact on the financial statementsof the group in the year of initial application.

SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These consolidated financial statements are preparedin accordance with IFRS and Interpretations adoptedby the International Accounting Standards Board (IASB),the International Financial Reporting InterpretationsCommittee (IFRIC) of the IASB and the Companies Actin South Africa.


73

>>Basis of consolidation

The consolidated financial statements incorporate thefinancial statements of the company and entities(including special purpose entities) controlled by thecompany (its subsidiaries). Control is achieved wherethe company has the power to govern the financialand operating policies of an entity so as to obtainbenefits from its activities.

Where necessary, adjustments are made to the financialstatements of subsidiaries to bring their accountingpolicies into line with those used by other membersof the group.

All intra-group transactions, balances, income andexpenses are eliminated in full on consolidation.

Basis of preparation

The financial statements have been prepared on thehistorical cost basis. The principal accounting policiesare set out below.

The preparation of financial statements requires theuse of estimates and assumptions that affect thereported amounts of assets and liabilities, and disclosureof contingent assets and liabilities at the date of thefinancial statements and the reported amounts ofrevenues and expenses during the reporting period.Although these estimates are based on management’sbest knowledge of current events and actions, actualresults may ultimately differ from those estimates.

The estimates and underlying assumptions are reviewedon an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate isrevised if the revision affects only that period, or in theperiod of the revision and future periods if the revisionaffects both current and future periods.

Business combinations

The IFRS on business combinations (IFRS3) does notapply to business combinations effected betweenparties that are ultimately controlled by the sameshareholders, otherwise known as common controltransactions. When Protech acquired its initial operatingsubsidiaries on 1 July 2007 the company elected toapply “predecessor accounting” as determined by theprinciples generally accepted in the United States of America.

All other business combinations will be subject to theconditions and recognition criteria as stipulated byIFRS 3 Business Combinations.

Acquisitions of subsidiaries and businesses areaccounted for using the purchase method. The cost ofthe business combination is measured as the aggregateof the fair values (at the date of exchange) of assetsgiven, liabilities incurred or assumed, and equityinstruments issued by the group in exchange for controlof the acquiree, plus any costs directly attributable tothe business combination. The acquiree’s identifiableassets, liabilities and contingent liabilities that meetthe conditions for recognition under IFRS 3 BusinessCombinations are recognised at their fair values at theacquisition date, except for non-current assets (ordisposal groups) that are classified as held for sale inaccordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which arerecognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as anasset and initially measured at cost, being the excessof the cost of the business combination over the group’sinterest in the net fair value of the identifiable assets,liabilities and contingent liabilities recognised. If, afterreassessment, the group’s interest in the net fair valueof the acquiree’s identifiable assets, liabilities andcontingent liabilities exceeds the cost of the businesscombination, the excess is recognised immediatelyin profit or loss.

The interest of minority shareholders in the acquiree isinitially measured at the minority’s proportion of thenet fair value of the assets, liabilities and contingentliabilities recognised.

Interest in joint ventures

Joint ventures are contractual agreements wherebythe company and other parties undertake an economicactivity that is subject to joint control, that is whenthe strategic financial and operating policy decisionsrelating to the activities require the unanimous consentof the parties sharing control. These joint venturesmay take the form of jointly controlled operations suchas construction contracts, jointly controlled assets,jointly controlled partnerships or companies.

Pro

tech

Ann

ual R

epor

t 09


74

accounting policies continuedfor the year ended 28 February

Joint ventures are accounted for by means of the

proportionate consolidation method whereby the

company’s share of the assets, liabilities, income,

expenses and cash flows of joint ventures are included

on a line by line basis in the financial statements.

Goodwill

Goodwill arising on the acquisition of a subsidiary or a

jointly controlled entity represents the excess of the

cost of acquisition over the group’s interest in the

net fair value of the identifiable assets, liabilities and

contingent liabilities of the subsidiary or jointly controlled

entity recognised at the date of acquisition. Goodwill

is initially recognised as an asset at cost and is

subsequently measured at cost less any accumulated

impairment losses.

For the purpose of impairment testing, goodwill is

allocated to each of the group’s cash-generating

units expected to benefit from the synergies of the

combination. Cash-generating units to which goodwill

has been allocated are tested for impairment annually,

or more frequently when there is an indication that the

unit may be impaired. If the recoverable amount of the

cash-generating unit is less than the carrying amount

of the unit, the impairment loss is allocated first to

reduce the carrying amount of any goodwill allocated

to the unit and then to the other assets of the unit

pro-rata on the basis of the carrying amount of each

asset in the unit. An impairment loss recognised for

goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or a jointly controlled entity,

the attributable amount of goodwill is included in the

determination of the profit or loss on disposal.

Revenue

Revenue is the aggregate of the turnover of subsidiaries

and is measured at the fair value of the consideration

received or receivable and represents amounts

receivable for goods and services provided in the normal

course of business, net of rebates, discounts and sales

related taxes.

Sale of goods

Revenue from the sale of goods is recognised when all

the following conditions are satisfied:

– the group has transferred to the buyer the significant

risks and rewards of ownership of the goods;

– the group retains neither continuing managerial

involvement to the degree usually associated with

ownership nor effective control over the goods sold;

– the amount of revenue can be measured reliably;

– it is probable that the economic benefits associated

with the transaction will flow to the entity; and

– the costs incurred or to be incurred in respect of the

transaction can be measured reliably.

Rendering of services

Revenue from services is recognised over the period

during which the services are rendered.

Construction contracts

Where the outcome of a construction contract can be

reliably measured, revenue and costs are recognised by

reference to the stage of completion of the contract at

the balance sheet date, as measured by the surveys of

work performed. Variations in contract work, claims and

incentive payments are included to the extent that

collection is probable and the amounts can be reliably

measured. Anticipated losses to completion are

immediately recognised as an expense in contract costs.

Where the outcome of the long term construction

contracts cannot be estimated reliably, contract revenue

is recognised to the extent that the recoverability of

incurred costs is probable.

When it is probable that total contract costs will exceed

total contract revenue, the expected loss is recognised

as an expense immediately.

Interest revenue

Interest is recognised on a time proportion basis, taking

account of the principal outstanding and the effective

rate over the period to maturity.

Leasing

Leases are classified as finance leases whenever the

terms of the lease transfer substantially all the risks

and rewards of ownership to the lessee. All other leases

are classified as operating leases.


75

>>Group as lessee

Assets held under finance leases are initially recognisedas assets of the group at their fair value at the inceptionof the lease or, if lower, at the present value of theminimum lease payments. The corresponding liabilityto the lessor is included in the balance sheet as afinance lease obligation.

Lease payments are apportioned between financecharges and reduction of the lease obligation so as toachieve a constant rate of interest on the remainingbalance of the liability. Finance charges are chargeddirectly to profit or loss, unless they are directlyattributable to qualifying assets, in which case they arecapitalised in accordance with the group’s generalpolicy on borrowing costs. Contingent rentals arerecognised as expenses in the periods in which theyare incurred.

Operating lease payments are recognised as an expenseon a straight-line basis over the lease term, exceptwhere another systematic basis is more representativeof the time pattern in which economic benefits fromthe leased asset are consumed. Contingent rentalsarising under operating leases are recognised as anexpense in the period in which they are incurred.

In the event that lease incentives are received to enterinto operating leases, such incentives are recognisedas a liability. The aggregate benefit of incentives isrecognised as a reduction of rental expense on astraight-line basis, except where another systematicbasis is more representative of the time pattern in whicheconomic benefits from the leased asset are consumed.

Borrowing costs

Borrowing costs are not capitalised but recognised inthe income statement in the period incurred.

Taxation

Income tax expense represents the sum of the taxcurrently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit forthe year. Taxable profit differs from profit as reportedin the income statement because it excludes items ofincome or expense that are taxable or deductible in

other years and it further excludes items that are nevertaxable or deductible. The company’s liability for currenttax is calculated using tax rates that have been enactedor substantively enacted by the balance sheet date.

Deferred taxDeferred tax is recognised on differences between thecarrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used inthe computation of taxable profit, and is accounted forusing the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxabletemporary differences, and deferred tax assets aregenerally recognised for all deductible temporarydifferences to the extent that it is probable that taxableprofits will be available against which those deductibletemporary differences can be utilised. Such assetsand liabilities are not recognised if the temporarydifference arises from goodwill or from the initialrecognition (other than in a business combination) ofother assets and liabilities in a transaction that affectsneither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxabletemporary differences associated with interests in jointventures, except where the company is able to controlthe reversal of the temporary difference and it isprobable that the temporary difference will not reversein the foreseeable future. Deferred tax assets arisingfrom deductible temporary differences associated withsuch investments and interests are only recognisedto the extent that it is probable that there will besufficient taxable profits against which to utilise thebenefits of the temporary differences and they areexpected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewedat each balance sheet date and reduced to the extentthat it is no longer probable that sufficient taxable profitswill be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at thetax rates that are expected to apply in the period inwhich the liability is settled or the asset realised, basedon tax rates (and tax laws) that have been enacted orsubstantively enacted by the balance sheet date. Themeasurement of deferred tax liabilities and assets

Pro

tech

Ann

ual R

epor

t 09


76

reflects the tax consequences that would follow fromthe manner in which the company expects, at thereporting date, to recover or settle the carrying amountof its assets and liabilities.

Deferred tax assets and liabilities are offset whenthere is a legally enforceable right to set off current taxassets against current tax liabilities and when theyrelate to income taxes levied by the same taxationauthority and the company intends to settle its currenttax assets and liabilities on a net basis.

Secondary tax on companies (STC)

A liability for STC will be recognised when a dividendhas been declared that results in such STC becomingpayable.

Current and deferred tax for the period

Current and deferred tax are recognised as an expenseor income in profit or loss, except when they relate toitems credited or debited directly to equity, in whichcase the tax is also recognised directly in equity, orwhere they arise from the initial accounting for abusiness combination. In the case of a businesscombination, the tax effect is taken into account incalculating goodwill or in determining the excess ofthe acquirer’s interest in the net fair value of theacquiree’s identifiable assets, liabilities and contingentliabilities over cost.

Property, plant and equipment

Measurement

Property, plant and equipment are initially recognisedat cost.

Property, plant and equipment are subsequentlymeasured at historical cost less accumulateddepreciation and accumulated impairment losses.

Depreciation

Depreciation is calculated on the straight-line or unitsof production basis at rates considered appropriate toreduce the carrying value of each component of anasset to its estimated residual value over its estimateduseful life. The residual values and useful lives of allitems of property, plant and equipment are reviewed,and adjusted if necessary, at each balance sheet date.Depreciation is charged to profit or loss.

Equipment is depreciated on a unit of output method

over the estimated useful lives, which is expressed

in distances travelled or hours of production. The

estimated useful lives of equipment are considered to

be 500 000 km or 15 000 hours of production.

The estimated lives of the other categories of assets

are set out below:

Computer equipment – 3 years

Furniture and fittings – 6 years

Office equipment – 3 years

Communication equipment – 3 years

Small tools and equipment – 3 years

Readymix trucks – 5 years

Mixer drums – 3 years

Batching plant – 10 years

Assets held under finance leases are depreciated over

their expected useful lives on the same basis as owned

assets or, where shorter, the term of the relevant lease.

Gains or losses on disposal are determined by

comparing the proceeds with the carrying amount of

the asset.

Impairments

Where the carrying value of an asset is greater than

its estimated recoverable amount, an impairment

provision is raised immediately to bring the carrying

value in line with the recoverable amount.

Revaluations

Property, plant and equipment are not revalued other

than at acquisition of subsidiaries in terms of a business

combination.

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are reported at

cost less accumulated amortisation and accumulated

impairment losses. Amorti sation is charged on a

straight-line basis over their estimated useful lives. The

estimated useful life and amortisation method are

reviewed at the end of each annual reporting period,

with the effect of any changes in estimate being

accounted for on a prospective basis.



77

>>Intangible assets acquired in a business combinationIntangible assets acquired in a business combinationare identified and recognised separately from goodwillwhere they satisfy the definition of an intangible assetand their fair values can be measured reliably. The costof such intangible assets is their fair value at theacquisition date.

Subsequent to initial recognition, intangible assetsacquired in a business combination are reported atcost less accumulated amortisation and accumulatedimpairment losses, on the same basis as intangibleassets acquired separately.

Amortisation of intangible assetsAmortisation is charged to the income statement on a systematic basis over the estimated useful lifeof the intangible asset from the date that they areavailable for use unless the useful lives are indefinite.Intangible assets with indefinite lives are tested annuallyfor impairment.

The estimated lives of the other categories of assetsare set out below:

Technical drawings and designs – 10 years

Impairment of tangible and intangible assets

excluding goodwill

At each balance sheet date, the group reviews thecarrying amounts of its tangible and intangible assetsto determine whether there is any indication that thoseassets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the assetis estimated in order to determine the extent of theimpairment loss (if any). Where it is not possible toestimate the recoverable amount of an individualasset, the group estimates the recoverable amount ofthe cash-generating unit to which the asset belongs.Where a reasonable and consistent basis of allocationcan be identified, corporate assets are also allocated toindividual cash-generating units, or otherwise they areallocated to the smallest group of cash-generating unitsfor which a reasonable and consistent allocation basiscan be identified.

Intangible assets with indefinite useful lives andintangible assets not yet available for use are tested

for impairment annually, and whenever there is anindication that the asset may be impaired.

Recoverable amount is the higher of fair value lesscosts to sell and value in use. In assessing value inuse, the estimated future cash flows are discountedto their present value using a pre-tax discount ratethat reflects current market assessments of the timevalue of money and the risks specific to the asset forwhich the estimates of future cash flows have notbeen adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than itscarrying amount, the carrying amount of the asset (orcash-generating unit) is reduced to its recoverableamount. An impairment loss is recognised immediatelyin profit or loss, unless the relevant asset is carried ata revalued amount, in which case the impairment lossis treated as a revaluation decrease.

Inventories

Inventories comprise raw materials, consumables andwork-in-progress. Inventories are valued at the lowerof cost and net realisable value.

The cost of inventories is determined using the followingcost formulas:

– raw materials – first-in, first-out cost basis– consumables – average cost– contract work in progress – actual cost

Net realisable value represents the estimated sellingprice in the ordinary course of business less allestimated costs of completion and costs to be incurredin marketing, selling and distribution.

Provisions

Provisions are recognised when the group has apresent obligation (legal or constructive) as a result ofa past event, it is probable that the group will berequired to settle the obligation, and a reliable estimatecan be made of the amount of the obligation.

The amount recognised as a provision is the bestestimate of the consideration required to settle thepresent obligation at the balance sheet date, takinginto account the risks and uncertainties surrounding

Pro

tech

Ann

ual R

epor

t 09


78

the obligation. Where a provision is measured using the

cash flows estimated to settle the present obligation,

its carrying amount is the present value of those

cash flows.

When some or all of the economic benefits required to

settle a provision are expected to be recovered from a

third party, the receivable is recognised as an asset

if it is virtually certain that reimbursement will be

received and the amount of the receivable can be

measured reliably.

Onerous contracts

Present obligations arising under onerous contracts

are recognised and measured as provisions. An onerous

contract is considered to exist where the group has

a contract under which the unavoidable costs of

meeting the obligations under the contract exceed the

economic benefits expected to be received under it.

Contingent liabilities acquired in

a business combination

Contingent liabilities acquired in a business combination

are initially measured at fair value at the date of

acquisition. At subsequent reporting dates, such

contingent liabilities are measured at the higher of the

amount that would be recognised in accordance with

IAS 37 Provisions, Contingent Liabilities and Contingent

Assets and the amount initially recognised less

cumulative amortisation recognised in accordance with

IAS 18 Revenue.

Financial instruments

Financial assets and liabilities are recognised on the

balance sheet when the group has become a party to

the contractual provisions of the instruments.

Financial assets

Investments are recognised and derecognised on trade

date where the purchase or sale of an investment is

under a contract whose terms require delivery of the

investment within the timeframe established by the

market concerned, and are initially measured at fair

value, plus transaction costs, except for those financial

assets classified as at fair value through profit or loss,

which are initially measured at fair value.

Financial assets for the group comprise loans andreceivables.

Loans and receivablesLoans and receivables are stated at amortised cost.Amortised cost represents the original invoice amountless principle repayments received, the impact ofdiscounting to net present value and a provision forimpairment, where applicable.

The provision for impairment is established when thereis objective evidence that the group will not be able tocollect all amounts due according to the original terms ofthe loan or receivable.

When a loan has a fixed maturity date but carries nointerest, the carrying value reflects the time value ofmoney, and the loan is discounted to its net presentvalue. The unwinding of the discount is subsequentlyreflected in the income statement as part of interestincome.

Contract receivables and retentionsContract receivables and retentions are initiallyrecognised at fair value, and are subsequently classifiedas loans and receivables and measured at amortisedcost using the effective interest rate method. Retentionreceivables are shown at the net present value of futurecash flows.

Contract and retention receivables comprise amountsdue in respect of certified or approved certificates bythe client or consultant at the balance sheet date forwhich payment has not been received, and amountsheld as retentions on certified certificates at the balancesheet date.

Trade receivablesTrade receivables are initially recognised at fair value,and are subsequently classified as loans and receivablesand measured at amortised cost using the effectiveinterest rate method.

The provision for impairment of trade receivables isestablished when there is objective evidence thatthe group will not be able to collect all amounts due inaccordance with the original terms of the credit givenand includes an assessment of recoverability based onhistorical trend analysis and events that exist at balance



79

>>sheet date. The amount of the provision is the difference

between the carrying value and the present value of

estimated future cash flows, discounted at the effective

interest rate computed at initial recognition.

Cash and cash equivalentsCash and cash equivalents comprise cash on deposits

and other short term highly liquid investments readily

convertible to a known amount of cash and subject to

an insignificant risk of changes in value.

Bank overdrafts are not offset against positive bank

balances unless a legally enforceable right of offset

exists, and there is an intention to settle the overdraft

and realise the net cash simultaneously, or to settle on

a net basis.

All short term cash investments are invested with major

financial institutions in order to manage credit risk.

Financial liabilities and equities

Financial liabilities and equity are classified according

to the substance of the contractual arrangements

entered into and the definitions of a financial liability

and an equity instrument. An equity instrument is any

contract that evidences a residual interest in the assets

of the group after deducting all of its liabilities.

Subcontractor liabilitiesSubcontractor liabilities represent the actual unpaid

liability owing to subcontractors for work performed

including retention monies owed. Subcontractor

liabilities are initially recognised at fair value, and are

subsequently classified as non-trading financial liabilities

and carried at amortised cost using the effective interest

rate method.

Equity instrumentsEquity instruments issued by the company are

recognised at the proceeds received, net of direct

issue costs.

Non-trading financial liabilitiesNon-trading financial liabilities are recognised at

amortised cost. Amortised cost represents the original

debt less principle payments made, the impact of

discounting to net present value and amortisations of

related costs.

Trade payablesTrade payables are liabilities to pay for goods or servicesthat have been received or supplied and have beeninvoiced or formally agreed with the supplier. Tradepayables are initially recognised at fair value, and aresubsequently classified as non-trading financial liabilitiesand carried at amortised cost using the effective interestrate method.

Related party transactions

Related parties are considered to be related if one partyhas the ability to control or jointly control the other partyor exercise significant influence over the other party in making financial and operating decisions. Keymanagement personnel are also regarded as relatedparties. Key management personnel are those personshaving authority and responsibility for planning,directing, and controlling the activities of the group,directly or indirectly, including all executive and non-executive directors.

Related party transactions are those where a transferof resources or obligations between related partiesoccurs, regardless of whether or not a price is charged.

Contracts in progress

Contracts in progress represent those costs recognisedby the stage of completion of the contract activity at thebalance sheet date. Anticipated losses to completionare deducted.

Advance payments receivedAdvance payments received are assessed on initialrecognition to determine whether it is probable that itwill be repaid in cash or another financial asset. In thisinstance, the advance payment is classified as a non-trading financial liability that is carried at amortisedcost. If it is probable that the advance payment will berepaid with goods or services, the liability is carried athistoric cost.

Segmental reporting

A business segment is a group of assets and operationsengaged in providing products or services that aresubject to risks and returns that are different from thoseof other business segments. A geographical segmentis engaged in providing products or services within aparticular economic environment that is subject to risksand returns that are different from those of segmentsoperating in other economic environments.

Pro

tech

Ann

ual R

epor

t 09


80

The group’s primary format for reporting segmental

information is determined in accordance with the nature

of business. The group’s operations are all based in

South Africa, hence no reporting is required in terms of

geographical location.

Inter-segment transfers

Segment revenue, segment expenses and segment

results include transfers between business segments

and between geographical segments. Such transfers

are accounted for at arms-length prices. These transfers

are eliminated on consolidation.

Segmental revenue and expenses

All segment revenue and expenses are directly

attributable to the segments. Segment revenue and

expenses are allocated to the business segments based

on the nature of the business operations.

Segmental assets

All operating assets used by a segment, principally

property, plant and equipment, investments, inventories,

contracts in progress, and receivables, net of

allowances. Segment assets are allocated to the

business segments based on the nature of the

business operations.

Segmental liabilities

All operating liabilities of a segment, principally accounts

payable, subcontractor liabilities and external interest

bearing borrowings.

Contingent liabilities

A contingent liability is a possible obligation that arises

from past events and which existence will be confirmed

only by the occurrence or non-occurrence of one or

more uncertain future events not wholly within the

control of the group, or a present obligation that arises

from past events but is not recognised because it is

not probable that an outflow of resources embodying

economic benefits will be required to settle the

obligation; or the amount of the obligation cannot be

measured with sufficient reliability.

If the likelihood of an outflow of resources is remote,

the possible obligation is neither a provision nor a

contingent liability and no disclosure is made.

Contingent assets

A contingent asset is a possible asset that arises from

past events and whose existence will be confirmed

only by the occurrence or non-occurrence of one

or more uncertain future events not wholly within the

control of the group.

In the ordinary course of business the group may pursue

a claim against a subcontractor or client.

Such contingent assets are only recognised in the

financial statements where the realisation of income is

virtually certain. If the inflow of economic benefits is

only probable, the contingent asset is disclosed as a

claim in favour of the group but not recognised on the

balance sheet.

Comparative figures

Comparative figures are reclassified or restated where

necessary to afford a proper and more meaningful

comparison of results as set out in the affected notes

to the financial statements.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY

SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group’s accounting policies the

directors are required to make judgements,

estimates and assumptions about the carrying amounts

of assets and liabilities that are not readily apparent

from other sources. The estimates and associated

assumptions are based on historical experience and

other factors that are considered to be relevant. Actual

results may differ from these estimates.

The estimates and underlying assumptions are reviewed

on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimate is

revised if the revision affects only that period, or in the

period of the revision and future periods if the revision

affects both current and future periods.

Key sources of estimation uncertainty

The following are the key assumptions concerning the

future, and other key sources of estimation uncertainty

at the balance sheet date, that have a significant risk of

causing a material adjustment to the carrying amounts

of assets and liabilities within the next financial year.



81

>>Impairment of goodwillDetermining whether goodwill is impaired requires an

estimation of the value in use of the cash-generating

units to which goodwill has been allocated. The value

in use calculation requires the directors to estimate

the future cash flows expected to arise from the cash-

generating unit and a suitable discount rate in order to

calculate present value.

The carrying amount of goodwill at the balance sheet

date was R33,5 million.

Useful lives and residual values of property, plantand equipmentThe group reviews the estimated useful lives and

residual values of property, plant and equipment at the

end of each annual reporting period.

Pro

tech

Ann

ual R

epor

t 09


82

’09Group at 2009

Furnitureand fittings Small tools

Plant and and site andmachinery accommodation equipment

R’000 R’000 R’000

1. PROPERTY, PLANT AND EQUIPMENTYear ended 28 February 2009

CostAt 28 February 2007 108 548 92 815Additions 175 720 920 1 352Acquisition of subsidiary 32 792 1 192 –Disposals – at cost (55 339) (22) (2)Reclassification – 50 –

At 29 February 2008 261 721 2 232 2 165Additions 157 616 724 1 585Acquisition of subsidiary 4 960 – –Fair value adjustments (note 25) (2 564) (460)Disposals – at cost (41 346) (26)

At 28 February 2009 380 387 2 496 3 724

Accumulated depreciationAt 28 February 2007 (10 512) (51) (503)Disposals 10 478 – –Depreciation charge (14 108) (377) (327)Reclassification (2) (6) –

At 29 February 2008 (14 144) (434) (830)Disposals 6 592 – 13Depreciation charge (29 589) (564) (595)

At 28 February 2009 (37 141) (998) (1 412)

Net book valueAt 28 February 2009 343 246 1 498 2 312

At 29 February 2008 247 577 1 798 1 335

1.1 Assets pledged as security

The group’s obligations under instalment sale liabilities and finance lease liabilities (see note 11) are secured by the lessors’ title to the financed assets, which have a carrying amount of R320,9 million (2008: R214,8 million).

The term loan facility is secured by a notarial bond of R30 million over fixed assets held by Protech Readymix (Pty) Ltd and unlimited cross suretyship by group companies.

1.2 Freehold land carried at fair value

The freehold land was valued on 3 October 2007 by an independent professional valuer TL van der Linde to determine the fair value of the property. The comparable sales method of valuation has been followed in determining the market value of the property.

The property has not been pledged as security.

notes to the consolidated financial statementsfor the year ended 28 February


83

>>

Pro

tech

Ann

ual R

epor

t 09

Office Computer Computer Communicationequipment equipment software equipment Property Total

R’000 R’000 R’000 R’000 R’000 R’000

110 483 – 107 – 110 155114 743 271 41 – 179 16173 178 – – 5 000 39 235

(41) (91) – – – (55 495)(66) 8 – 8 – –

190 1 321 271 156 5 000 273 05610 1 437 393 337 162 102

– – – – – 4 960(3 024)

(25) – – – – (41 397)

175 2 758 664 493 5 000 395 697

(50) (148) – (45) – (11 309)17 – – – – 10 495

(15) (342) (57) (52) – (15 278)14 (6) – – – –

(34) (496) (57) (97) – (16 092)– – – – – 6 605

(63) (786) (354) (87) – (32 038)

(97) (1 282) (411) (184) – (41 525)

78 1 476 253 309 5 000 354 172

156 825 214 59 5 000 256 964


84

’092009 2008

R’000 R’000

2. GOODWILLCostBalance at the beginning of the year 16 045 –Additional amounts recognised from business combinations occurring during the year – 16 045Fair value adjustments (note 25) 17 504 –

Balance at the end of the year 33 549 16 045

Accumulated impairment lossesNo impairment losses were recognised during the current year.

Carrying amountAt the beginning of the year 16 045 –

At the end of the year 33 549 16 045

Business segmentationReadymix 33 549 16 045

Goodwill is not amortised but subject to an annual impairment test.

2.1 Annual test for impairment

The company acquired the Readymix business on 29 February 2008 through a business combination, hence aportion of the purchase price was recognised as goodwill. At year end the directors assessed the recoverableamount of goodwill and believe that the profits generated over the next couple of years attributable to the acquiredbusiness is sufficient to recover goodwill.

The key assumptions used in testing for impairment can be summarised as follows:

– Earnings before interest, tax, depreciation and amortisation is used as the basis of the calculation as this equatesroughly to cash generated by operations.

– The average price increase per cubic metre was taken as 8% over the next five years with a consistent increasein sales volumes of 10% per annum.

– The discount rate applied is indicative of the cost for capital of the cash-generating unit.

2.2 Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to the Readymix cash-generating unit.

The goodwill associated with the Readymix business arose when that business was acquired by the group on 28 February 2009. The directors are of the opinion that the business operations are performing in line withexpectations. No impairment of goodwill is expected.

2.3 Goodwill arising on acquisition

Goodwill arose in the business combination because the cost of the combination included a control premium paidto acquire the Readymix businesses. In addition, the consideration paid for the combination effectively includedamounts in relation to the benefit of expected synergies, revenue growth, future market development and theassembled workforce of the Readymix business. These benefits are not recognised separately from goodwill as thefuture economic benefits arising from them cannot be measured reliably.

notes to the consolidated financial statements continuedfor the year ended 28 February


85

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

3. INTANGIBLE ASSETS

Cost

Balance at 1 March 2008 –

Acquisitions through business combinations (note 25) 1 964

Balance at 28 February 2009 1 964

Accumulated amortisation and impairment

Balance at 1 March 2008 –

Amortisation – current year (147)

Balance at 28 February 2009 (147)

Carrying amount

As at 28 February 2009 1 817

The intangible asset recognised relates to technical drawings

and designs and the remaining useful life is estimated at 9,25 years.

4. INVENTORY

Inventories consist of:

Raw materials 3 709 5 845

Consumables 3 627 2 323

Contract work in progress 9 610 5 613

16 946 13 781

The cost of inventories recognised as an expense during the year

was R84,4 million (2008: R2,6 million).

Contract Work In Progress comprises work completed but not yet

certified and will be recognised as an expense in the following period.

5. CONTRACTS-IN-PROGRESS AND CONTRACT RECEIVABLES

Contracts in progress at the balance sheet date:

Construction costs incurred plus recognised profits 357 820 182 395

Less: progress billings (348 530) (170 496)

9 290 11 899

Recognised and included in the financial statements as amounts due:

From customers under construction contracts 9 290 11 899


86

’092009 2008

R’000 R’000

6. TRADE AND OTHER RECEIVABLES

Trade receivables 135 250 66 814

Less: Allowance for bad debts (5 435) (5 280)

129 815 61 534

VAT 2 643 2 573

Retention receivables 30 820 23 067

Less: Unearned finance income (3 491) –

Prepayments 700 –

Other receivables 2 601 3 152

163 088 90 326

The directors consider that the carrying amount of the trade and other receivables approximate their fair value.

6.1 Trade receivables

Total trade receivables (net of allowances) held by the group at 28 February 2009 amounted to R129,8 million (2008:

R61,5 million).

The average credit period on construction contracts is between 30 and 60 days. Retention receivables have an

average ageing of 84 days. No interest is charged on the trade receivables or retention amounts. The group has

provided fully for certain trade receivables over 90 days, not paid to date, because these receivables have been

assessed as not recoverable.

Before accepting any new customer, the group assesses the credit quality of each customer. Exposure to customers

with a high percentage of the total trade receivables is constantly monitored. 78% of the trade receivables (excluding

retention) are current. Of the trade receivables balance (excluding retention) at the end of the year, R94,9 million are

due from companies which individually make up more than 5% of the trade receivables. Of this amount R72,8 million

have been paid up to 30 April 2009. At 30 April 2009 R97,2 million was collected in respect of trade receivables

subsequent to February 2009.

Included in the group’s trade receivable balance are debtors with a carrying amount of R60,1 million (2008: R15,9 million)

which are past due for which the company has not provided as there has not been a significant change in credit

quality and the amounts are still considered recoverable. At 30 April 2009 R45,2 million of this amount was collected

after February 2009. The group does not hold any collateral over these balances.



87

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

6. TRADE AND OTHER RECEIVABLES continued6.1 Trade receivables continued

Ageing of past due but not impaired30 – 60 days 16 511 3 24560 – 90 days 21 475 1 095More than 90 days 22 080 11 515

Total 60 066 15 855

Movement in the allowance for doubtful debtsBalance at the beginning of the year 5 280 2 245Impairment losses recognised on receivables 2 594 568Provision for doubtful debts acquired – 2 467Amounts written off (2 439) –

Balance at the end of the year 5 435 5 280

In determining the recoverability of a trade receivable, the group considers each past due receivable individually. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

7. OTHER FINANCIAL ASSETSLoans carried at amortised costLoans to entities: 8 297 1 800

– PPK Services (Pty) Ltd 51 –– Lidonga Construction (Pty) Ltd 5 420 –– Protech Khuthele Property Investments (Pty) Ltd 2 826 1 800

(Previously known as Dunrose Investments (Pty) Ltd)

Loans to trusts: 3 235 2 295

– Protech Khuthele BEE Trust 3 235 410– Starling Trust – 1 885

11 532 4 095Less: Non-current portion (3 605) –

7 927 4 095

Loans granted to companies, other than Lidonga Construction (Pty) Ltd, are unsecured and bear no interest. Loansgranted to related parties are disclosed in note 30, Related Parties.

The loan to Lidonga Construction (Pty) Ltd is secured by a notarial bond registered over the plant purchased. Thecurrent value of the plant is R4,5 million. The loan is payable over 36 months at the prime overdraft rate as chargedby ABSA Bank Limited.

The loans to trusts are interest free and unsecured. No fixed date for repayment has been set.


88

’09


2009 2008 R’000 R’000

8. BANK BALANCES AND CASHFor the purposes of the cash flow statement, cash and cash equivalentsinclude cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in the balance sheet as follows:

Bank balances 101 468 88 077Call accounts – 5 096Cash on hand 120 65

101 588 93 238

Cash and cash equivalents comprise cash and cash at bank. The carrying amount of these assets approximatestheir fair value.

9. SHARE CAPITAL AND PREMIUM9.1 Issued Capital

Authorised1 000 000 000 ordinary shares of R0,000005 5 5

Issued Share capital Share premium

2009 2008 2009 2008

R’000 R’000 R’000 R’000

22 September 2000 –* –* – –

23 May 200720 000 000 fully paid ordinary

shares – share split –* –* – –41 869 362 fully paid ordinary shares –* –* – –

28 May 2007288 130 638 fully paid ordinary shares 1 1 216 096 216 096

6 August 200712 500 000 fully paid ordinary shares –* –* 12 500 12 500

362 500 000 fully paid ordinary shares 2 2 228 596 228 596

The directors are authorised, by resolution of the shareholders until the forthcoming annual general meeting, toissue of the unissued shares for any purpose and upon such terms and conditions as they see fit.

20% of the issued share capital of the group is owned by employees through the BEE Share Trust.* Amounts below R1 000.


89

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

10. RESERVES

Common control reserve (note 10.1) (122 053) (122 053)

(122 053) (122 053)

10.1 Common control reserve

Balance at the beginning of the year (122 053) (149 005)

Movement for the year – 26 952

Balance at the end of the year (122 053) (122 053)

This reserve is a result of predecessor accounting applied after the

company acquired its subsidiaries in 2008 as detailed in the accounting

policy note on Business Combinations. The difference between the

consideration given and the share capital (including share premium)

of the acquired entities were recorded as a separate reserve in the

statement of changes in equity (“the common control reserve”).

As a result no goodwill was recognised on acquisition. There were

no movements during the 2009 financial year.

11. BORROWINGS

Borrowings comprise:Secured at amortised cost

Instalment sale liabilities (note 11.1) 220 302 162 776

Finance lease liabilities (note 11.2) – 1 767

Interest bearing bank loans (note 11.3) 54 054 –

Total borrowings 274 356 164 543

Less: Current portion of borrowings (87 839) (69 092)

Non-current portion of borrowings 186 517 95 451


90

’09 Minimum instalment Present value of minimumsale payments instalment sale payments

2009 2008 2009 2008

R’000 R’000 R’000 R’000

11. BORROWINGS continued

11.1 Instalment sale liabilities

Payable:

Within 1 year 101 295 84 398 79 292 68 402

Within years 2 – 5 159 577 111 493 141 010 94 374

Later than 5 years – – – –

260 872 195 891

Less: Future interest charges (40 570) (33 115)

220 302 162 776 220 302 162 776

Less: Current portion (79 292) (68 402)

141 010 94 374

Minimum finance Present value of minimumlease payments finance lease payments

2009 2008 2009 2008

R’000 R’000 R’000 R’000

11.2 Finance lease liabilities

Payable:

Within 1 year – 912 – 690

Within years 2 – 5 – 1 192 – 1 077

Later than 5 years – – – –

– 2 104

Less: Future interest charges – (337)

– 1 767 – 1 767

Less: Current portion – (690)

– 1 077



91

>>

Pro

tech

Ann

ual R

epor

t 09

Minimum loan Present value of minimumrepayments loan repayments

2009 2008 2009 2008

R’000 R’000 R’000 R’000

11. BORROWINGS continued

11.3 Interest bearing bank loans

(Revolving and term

loan facilities)

Payable:

Within 1 year 14 392 – 8 547 –

Within years 2 – 5 50 488 – 38 699 –

Later than 5 years 7 222 – 6 808 –

72 102 –

Less: Future interest charges (18 048) –

54 054 – 54 054 –

Less: Current portion (8 547) –

45 507 –

The interest bearing bank loans comprise a Revolving loan facility and a Term loan facility.

The Revolving loan facility of R32,2 million bears interest at prime minus 1% and is payable over 84 months.

At 28 February 2009 there were 73 monthly instalments still payable. The facility is secured by cession of debtors

and unlimited cross suretyship by group companies (refer to note 17).

The Term loan facility of R30 million bears interest at prime minus 1,5% and is payable over 60 months.

At 28 February 2009 there were 49 monthly instalments still payable. The facility is secured by a notarial bond of

R30 million over fixed assets held by Protech Readymix (Pty) Ltd and unlimited cross suretyship by group companies

(refer to note 17).

Instalment sale and finance lease liabilities bear interest at rates ranging from 12,50% to 13,50% per annum.

All finance lease liabilities were settled during the financial year.

The assets encumbered to secure the loans are detailed in note 1. Details of the company’s interest rate risk

management policies as set out in note 24, Financial instruments.

The fair values of these liabilities are equal to their carrying amount.


92

’092009 2008

R’000 R’000

12. DEFERRED TAXATION12.1 Deferred tax reconciliation

Balance at beginning of year 18 774 12 086Deferred tax asset – Acquisition – (6 404)Adjustment to goodwill (note 25) 12 012 –Timing differences during the year 18 263 13 092

Balance at end of year 49 049 18 774

Disclosed as:Deferred tax asset – (6 404)Deferred tax liability 49 049 25 178

49 049 18 774

12.2 Deferred tax liabilities/(assets)

Opening Charged Charged Closingbalance to income Acquisitions to goodwill balance

2009 R’000 R’000 R’000 R’000 R’000

Temporary differencesRetention debtors 7 212 440 – – 7 652Accelerated wear and tear 19 003 14 468 – 12 012 45 483Timing differences on finance leases (1 265) 1 265 – – –Provision for leave pay and bonuses (5 082) 3 544 – – (1 538)Doubtful debts (1 094) 1 004 – – (90)Estimated tax losses – (2 458) – – (2 458)

18 774 18 263 – 12 012 49 049

Opening Charged Change in Closingbalance to income Acquisitions tax rate balance

2008 R’000 R’000 R’000 R’000 R’000

Temporary differencesRetention debtors 2 538 4 762 – (88) 7 212Accelerated wear and tear 13 504 11 971 (6 006) (466) 19 003Timing differences on finance leases (3 512) 2 028 98 121 (1 265)Provision for leave pay and bonuses (136) (4 795) (156) 5 (5 082)Doubtful debts (308) (457) (340) 11 (1 094)

12 086 13 509 (6 404) (417) 18 774

12.3 Unused taxation losses

At balance sheet date, the group had estimated unused taxation losses of R8,8 million available for offset againstfuture profits. Future profits are expected hence a deferred taxation asset of R2,5 million has been recognised inrespect of the unused losses.



93

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

13. TRADE AND OTHER PAYABLESTrade payables 45 716 44 349Accruals 37 479 2 991VAT payable 5 434 1 838

88 629 49 178

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. Trade and other payables are normally settled within 30 days.

The directors consider that the carrying amount of the trade and other payables approximate their fair value.

Interest charged on outstanding balances varies from client to client. The group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

14. SUBCONTRACTOR LIABILITIESCurrent subcontractor liabilities 9 704 8 898

Contracts-in-progress and contract receivables include claims against clients in respect of subcontractor liabilities. These liabilities are only settled when payment has been received from clients.

15. PROVISIONSBonus 2 190 16 894Leave pay 3 306 1 418

5 496 18 312

Bonus Leave pay TotalR’000 R’000 R’000

Balance at 1 March 2007 270 341 611Additional provisions recognised 16 470 1 285 17 755Acquisition of subsidiary 424 133 557Reductions arising from payments (270) (341) (611)

Balance at 1 March 2008 16 894 1 418 18 312Additional provisions recognised 21 851 4 299 26 150Reductions arising from payments (36 555) (2 411) (38 966)

Balance at 28 February 2009 2 190 3 306 5 496

The provision for employee benefits represents annual leave, vested long service leave entitlements accrued and bonuses.


94

’092009 2008

R’000 R’000

16. VENDOR LIABILITY

Amount owed to vendors – 71 356

The Vendor Liability was raised on 29 February 2008 and related to the

purchase price of the Readymix acquisition. The full amount was settled

through a combination of cash and debt during March 2008

(refer note 25).

17. NON-CASH TRANSACTIONS AND FINANCING FACILITIES17.1 Non-cash investing and financing transactions

There were no such transactions during the current financial year.

17.2 Financing facilities

Secured bank overdraft facility

– Facility 11 200 3 380

– Utilised – –

– Unutilised 11 200 3 380

The facilities above are secured as follows:

– Cession of debtors

– Limited surety of R3 million by each of the following entities:

> Protech Khuthele (Pty) Ltd

> Pela Plant (Pty) Ltd

– Unlimited cross suretyships, including cession of loan accounts by and

between the following entities:

> Protech Khuthele Holdings Ltd

> Protech Khuthele (Pty) Ltd

> Pela Plant (Pty) Ltd

> South African Road Testing Services (Pty) Ltd

> Protech Readymix (Pty) Ltd

> Impact Compaction (Pty) Ltd

> Protech Khuthele Properties (Pty) Ltd

Secured bank loan facilities

– Facility 400 529 229 508

– Utilised (274 356) (153 901)

– Unutilised 126 173 75 607



95

>>

Pro

tech

Ann

ual R

epor

t 09

17. NON-CASH TRANSACTIONS AND FINANCING FACILITIES continued

17.2 Financing facilities continuedThe balances indicated above as being secured, are secured as follows:

Plant and equipment financed serve as security for the loan facilities utilised.

Suretyship has been provided for the above loans at each financial institution:

ABSA – Unlimited cross suretyships including cession of loan accounts by and between the following companies:Protech Khuthele Holdings Ltd, Protech Khuthele (Pty) Ltd, Protech Readymix (Pty) Ltd and Pela Plant (Pty) Ltd.

Wesbank – Unlimited suretyship excluding cession of loan account dated 12/09/2007 by Protech Khuthele (Pty)Ltd, Umvundla Investments No. 2 (Pty) Ltd, South African Road Testing Services (Pty) Ltd and Protech ProjectsHolding (Pty) Ltd.

Imperial Bank – Suretyship by Protech Khuthele Holdings Limited, Protech Khuthele (Pty) Ltd, South AfricanRoad Testing Services (Pty) Ltd, Protech Readymix (Pty) Ltd and Protech Khuthele Properties (Pty) Ltd, limitedto R50 million per company.

Daimler Chrysler Financial Services South Africa (Pty) Ltd – Cross guarantees between Protech Khuthele (Pty)Ltd, Protech Projects Holding (Pty) Ltd and Pela Plant (Pty) Ltd.

2009 2008 R’000 R’000

Guarantee facilitiesTotal guarantee facilities in place 122 433 72 433Current utilisation (49 210) (19 894)

Guarantee facilities not utilised 73 223 52 539

Of the current facilities utilised R22,9 million relates to retention guarantees whilst the remaining portion of R26,3 million relates to performance guarantees. Details are listed below:

ABSAGuarantee facility 2 433 2 433Current utilisation – –


– Limited surety as per the overdraft facility

Guarantee Placings (Pty) LtdGuarantee facility 20 000 20 000Current utilisation (1 336) (1 336)


Cross guarantees exist between the subsidiaries for the aforementioned facility.

SGI Guarantee Acceptances (Pty) LtdGuarantee facility 100 000 50 000Current utilisation (47 874) (18 558)


– Limited surety by Protech Khuthele Holdings Ltd for R60 million.


96

’092009 2008

R’000 R’000

18. REVENUERevenue comprises:Contract income 590 605 353 915Sale of goods 107 015 –Retentions 5 125 14 580

702 745 368 495

19. INVESTMENT REVENUEInterest revenue:– Bank account 1 970 654– Loans and receivables 127 –

2 097 654

Investment revenue earned on financial assets, analysed by category of asset, is as follows:

Loans and receivables (including cash and bank balances) 2 097 654

20. INTEREST PAIDInterest on outstanding amounts owed to suppliers 11 24Interest on interest bearing borrowings 29 955 8 723

29 966 8 747

The weighted average rate paid on funds borrowed was 13,2% per annum (2008: 12,9%).

21. EARNINGS BEFORE TAXATIONThe following items are included in earnings before tax

Income:Profit on disposal of property, plant and equipment – 2 937

Expenses:Auditors’ remuneration 1 473 1 183

– Audit services 1 180 750– Non-audit services 293 433

Amortisation of intangible assets (note 3) 147 –Depreciation (note 1) 32 038 15 278Directors’ remuneration (note 29)– For management services 7 761 5 530Loss on disposal of property, plant and equipment 2 024 –Operating lease costs 336 –Subcontractor costs 16 925 –Employee costs 137 137 83 797



97

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

22. INCOME TAXES22.1 Income tax recognised in profit

Current tax expense 16 944 13 897

Deferred taxation 18 263 13 092

– Current year 18 263 11 702

– Tax rate change – (417)

– Prior year adjustment – 1 807

35 207 26 989

The total charge for the year can be reconciled to the accounting

profit as follows:

Accounting profit 128 118 89 099

Income tax expense calculated at 28% (2008: 29%) 35 873 25 839

Permanent differences:

Tax effect of income and expenses that are not taxable or

deductible in determining taxable profit (666) 178

Prior year deferred tax adjustment – 1 807

Rate differential in current year deferred tax due to change

in income tax rate from 29% to 28% – (418)

Effect on opening deferred tax balances due to the change in

income tax rate from 29% to 28% – (417)

Income tax expense recognised in profit 35 207 26 989

Effective tax rate 27,5% 30,3%

The tax rate used for the 2009 reconciliation above is the corporate tax

rate of 28% (2008: 29%) payable by corporate entities in South Africa

on taxable profits under tax law in that jurisdiction.


98

’092009 2008

R’000 R’000

23. EARNINGS PER SHARE

Basic earnings per share (cents) 25,6 17,4

Diluted earnings per share (cents) 25,6 17,4

Headline earnings per share (cents) 26,0 16,8

23.1 Basic earnings per share

The earnings and weighted average number of ordinary shares used

in the calculation of basic earnings per share are as follows:

Earnings for the year attributable to ordinary shareholders

of the parent 92 911 62 110

Weighted average number of ordinary shares for the purposes of

basic earnings per share 362 500 357 070

23.2 Headline earnings per share

Attributable earnings 92 911 62 110

Adjust for:

Loss/(profit) on disposal of assets 2 024 (2 937)

Tax effect thereof (567) 852

Headline earnings 94 368 60 025



99

>>

Pro

tech

Ann

ual R

epor

t 09

24. FINANCIAL INSTRUMENTS24.1 Capital risk management

The group manages its capital to ensure that entities in the group will be able to continue as going concerns while

maximising the return to stakeholders through the optimisation of the debt and equity balances.

The capital structure of the group consists of debt, which includes the borrowings disclosed in note 11, cash and

cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and

retained earnings as disclosed.

24.1.1 Gearing ratioThe group’s Audit and Risk Management Committee reviews the capital structure on a semi-annual basis. As part

of this review, the committee considers the cost of capital and the risks associated with each class of capital.

2009 2008 R’000 R’000

The gearing ratio at the year end was as follows:

Interest bearing debt: equity

Debt 274 356 164 543

Cash and cash equivalents 101 588 93 238

Net debt 172 768 71 305

Equity 234 614 141 703

Debt to equity ratio 74% 50%

During the year loans to the value of R62,2 million were raised to fund

the payment to the vendors in the Readymix acquisition. The amounts

due to the vendors were included in current liabilities in the prior year.

Had the amounts due to the vendors been included in long term debt

the prior year the comparative gearing ratios, on a pro-forma basis

would have been 101%.

(i) Debt comprises the long and short term borrowings as disclosed

in note 11, Borrowings.

(ii) Equity includes all capital and reserves of the group.

Total debt: equity (excluding common control reserve)

Debt 457 368 351 049

Cash and cash equivalents 101 588 93 238

Net debt 355 780 257 811

Equity 356 667 263 756

Debt to equity ratio 100% 98%

(i) Debt comprises total liabilities as per the balance sheet.

(ii) Equity comprises total equity excluding common control reserve.


100

’092009 2008

R’000 R’000

24. FINANCIAL INSTRUMENTS continued

24.2 Significant accounting policies

Details of the significant accounting policies and methods adopted,

including the criteria for recognition, the basis of measurement

and the basis on which income and expenses are recognised, in

respect of each class of financial asset, financial liability and equity

instrument are disclosed in the accounting policy notes to the

financial statements.

24.3 Categories of financial instruments

Financial assets

Loans and receivables (including cash and cash equivalents) 285 498 199 558

Financial liabilities

Borrowings – at amortised cost 274 356 164 543

Trade and other payables 87 129 49 178

Subcontractor liabilities 9 704 8 898

Provisions 5 496 18 312

Vendor liability – 71 356

Current tax liabilities 30 134 13 584

The carrying amount reflected above represents the group’s maximum

exposure to credit risk for such loans and receivables.

24.4 Financial risk management objectives

The group’s treasury function provides services to the business, co-ordinates access to domestic financial markets

and monitors and manages the financial risks relating to the operations of the group. Operational and business risks

are reviewed and addressed on a weekly basis. These risks include market risk (including currency risk, fair value

interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

To mitigate medium to long term risks in terms of currency, interest rate and price risk, budgeting is performed up

to twelve months in advance to ensure access to cash and financing facilities.

The group does not enter into or trade in financial instruments, including derivative financial instruments, for

speculative purposes.

24.5 Market risk

The group’s activities expose it primarily to the financial risks of changes in interest rates and liquidity.

24.6 Interest rate risk management

The group is exposed to interest rate risk as entities in the group borrow funds at floating interest rates. The risk is

managed by the group by using an access deposit account for its instalment sale liabilities. By using an access

deposit account, excess cash is kept in this account to minimise the interest expense.

The group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk

management section of this note.



101

>>

Pro

tech

Ann

ual R

epor

t 09


24.6 Interest rate risk management continued

24.6.1 Interest rate sensitivity analysisThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives

and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming

the amount of the liability outstanding at the balance sheet date was outstanding for the whole year. A 100 basis

point increase or decrease is used when reporting interest rate risk internally to key management personnel and

represents management’s assessment of a reasonable and possible change in interest rates.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the group’s profit

after tax for the year ended 28 February 2009 would decrease/increase by R1,975 million (2008: R1,168 million). This

is attributable to the group’s exposure to interest rates on its variable rate borrowings.

24.7 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss

to the group. The group prefers dealing with creditworthy counterparties only and obtaining sufficient collateral,

where appropriate, as a means of mitigating the risk of financial loss from defaults. The group uses other publicly

available financial information and its own trading records to rate its major customers. The group exposure and the

credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded

is spread amongst approved counterparties.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.

Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate,

credit guarantee insurance cover is purchased.

The group has a significant credit risk exposure to a single counterparty where a substantial part of the fleet is financed.

24.8 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate

liquidity risk management framework for the management of the group’s short, medium and long term funding and

liquidity management requirements. The group manages liquidity risk by maintaining adequate reserves, banking

facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching

the maturity profiles of financial assets and liabilities. Included in note 17 is a listing of additional undrawn facilities

that the group has at its disposal to further reduce liquidity risk.


102

’0924. FINANCIAL INSTRUMENTS continued

24.8 Liquidity risk management continued

24.8.1 Liquidity and interest risk tablesThe following tables detail the group’s remaining contractual maturity for its non-derivative financial liabilities. The

tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date

on which the group can be required to pay. The table includes both interest and principal cash flows.

Weightedaverageeffectiveinterest Less than 1 – 3 3 months 1 – 5

rate 1 month months to 1 year years 5+ years TotalR’000 R’000 R’000 R’000 R’000 R’000

2009

Instalment sale

liabilities 13,4% 8 441 16 882 75 972 159 577 – 260 872

Interest bearing

bank loans 12,8% 1 199 2 398 10 795 50 488 7 222 72 102

Trade and

other payables – 79 766 8 863 – – – 88 629

Subcontractor

liabilities – 8 734 970 – – – 9 704

Taxation – – – 30 134 – – 30 134

98 140 29 113 116 901 210 065 7 222 461 441

2008

Instalment sale

liabilities 12,9% 17 795 12 110 54 493 111 493 – 195 891

Finance lease

liabilities 15,5% 76 152 684 1 192 – 2 104

Trade and

other payables – 44 260 4 918 – – – 49 178

Subcontractor

liabilities – 8 008 890 – – – 8 898

Vendor liability – 71 356 – – – – 71 356

Taxation – – – 13 584 – – 13 584

141 495 18 070 68 761 112 685 – 341 011

The group has access to financing facilities, the total unused amount which is R126,2 million (note 17) at the balance

sheet date. The group expects to meet its other obligations from operating cash flows.



103

>>

Pro

tech

Ann

ual R

epor

t 09



24.8.1 Liquidity and interest risk tables continued

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortisedcost in the financial statements approximate their fair values:

2009 2008Carrying Fair Carrying Fairamount value amount value

R’000 R’000 R’000 R’000

Financial assetsLoans and receivables 285 498 285 498 199 558 199 558

Financial liabilitiesInterest bearing borrowings – instalment sale liabilities 220 302 220 302 162 776 162 776Interest bearing borrowings – finance leases – – 1 767 1 767Interest bearing bank loans 54 054 54 054 – –Trade and other payables 88 629 88 629 49 178 49 178Subcontractor liabilities 9 704 9 704 8 898 8 898Vendor liability – – 71 356 71 356Taxation 30 134 30 134 13 584 13 584

2009Proportion

Principal Date of of shares Cost ofactivity acquisition acquired acquisition

R’000

25. ACQUISITION OF BUSINESSES25.1 Subsidiaries acquired

Impact Compaction (Pty) Ltd Supplier of impact

compaction services 01/06/2008 100% 7 000

7 000


104

’092009

Book valueR’000

25. ACQUISITION OF BUSINESSES continued

25.2 Analysis of assets acquired

Current assets:Inventories 47

Non-current assets:Property, plant and equipment (note 1) 4 960Intangible assets – related to technical drawings and designs (note 3) 1 964

Current assets:Prepayments 29

7 000

25.3 Cost of the acquisition

The cost of acquisition of Impact Compaction (Pty) Ltd of R7 million was paid in cash

during 2009. Included in the purchase price is an amount of R1,964 million that was

allocated to intangible assets. An additional amount of R3 million is payable once certain

patents are registered in line with the purchase agreement. At the date of this report,

these patents were not registered.

25.4 Net cash outflow on acquisition

Total purchase consideration 7 000

Amount settled in cash (7 000)

–

2008R’000

25.5 Prior year acquisition

Protech Readymix (Pty) LtdOn 29 February 2008 the group acquired the assets and liabilities of the Rockcrete and

Instant Concrete businesses.

Details of the nets assets acquired and the goodwill are as follows:

Purchase consideration:

– cash paid 71 356

Fair value of net assets acquired 37 807

Goodwill (note 2) 33 549



105

>>

Pro

tech

Ann

ual R

epor

t 09

25. ACQUISITION OF BUSINESSES continued

The net assets acquired and the goodwill arising, are as follows:

Preliminary Fair value Final fairfair value at adjustments – values atacquisition1 IFRS 3 01/03/08

R’000 R’000 R’000

Current assets

Cash and cash equivalents 8 695 – 8 695

Trade and other receivables 21 996 (630) 21 366

Loans granted 1 884 (1 884) –

Inventories 5 844 – 5 844

Non-current assets

Property, plant and equipment (note 1) 39 235 (3 024) 36 211

Deferred tax (note 12) 6 404 (12 012) (5 608)

Current liabilities

Trade and other payables (18 106) (835) (18 941)

Non-current liabilities

Short term loans (10 641) 881 (9 760)

55 311 (17 504) 37 807

Goodwill (note 2) 16 045 17 504 33 549

Total purchase consideration 71 356 – 71 356

1 These amounts represent the fair value of assets and liabilities acquired in terms of the Readymix acquisition on 29 February 2008. These amounts wereincluded in the comparative amounts of the balance sheet for the financial year ended 29 February 2008.

2009 2008 R’000 R’000

Net cash outflow arising on acquisition:

Balance at the beginning of the year 71 356 –

Total purchase consideration – 71 356

Settled through debt raised (62 200) –

Settled through cash (9 156) –

Total vendor liability – 71 356

Cash and cash equivalents acquired – 8 695


106

’092009 2008

R’000 R’000

26. CASH GENERATED BY OPERATIONSReconciliation of profit before taxation to cash generated by operations:

Profit before taxation 128 118 89 099Adjusted for:Amortisation on intangible assets 147 –Loss/(profit) on disposal of plant and equipment 2 024 (2 937)Interest received (2 097) (654)Interest paid 29 966 8 747Provisions (12 816) 17 144Depreciation 32 038 15 278

Operating cash flow before working capital changes 177 380 126 677

Increase in inventories (3 118) (4 315)Increase in trade and other receivables (70 754) (36 212)Increase in trade and other payables 38 616 11 183Increase in subcontractor liabilities 806 1 463

Cash generated by operations 142 930 98 796

27. INCOME TAXES PAIDOpening balance 13 584 9 305Current year tax charge 16 944 13 897Closing balance (30 134) (13 584)

Amount paid (394) (9 618)

28. OPERATING LEASE ARRANGEMENTS28.1 General operating leases

Operating lease payments represent rentals payable for the rental of freehold land. These leases have varying terms, escalation clauses and renewal periods.

Operating lease costsOperating lease costs recognised in the income statement are set out in note 21.

Operating lease commitmentsThe future minimum lease payments under non-cancellable operating leases are:

Due within one year 363 –Due between two and five years 1 200 –Due thereafter – –

1 563 –



107

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

29. DIRECTORS’ EMOLUMENTS29.1 Directors’ remuneration

Paid by the companyNon-executive directors 775 70

– Director’s fees 560 –– Committee fees 215 70

Paid by subsidiariesExecutive directors 6 986 5 460

– Salaries 3 178 2 457– Incentive bonuses 3 808 2 943– Other fees – 60

Total directors’ emoluments 7 761 5 530

2009Incentive Retirement Other fees/

Salaries bonuses and medical benefits TotalR’000 R’000 R’000 R’000 R’000

DirectorsExecutiveG Chapman 1 765 2 270 – – 4 035N Wolmarans 1 413 1 538 – – 2 951

3 178 3 808 – – 6 986

Director’s Committeefees fees Total

R’000 R’000 R’000

Non-executiveD Ackerman 140 45 185M Mareletse 120 65 185C Nkosi 60 20 80V Raseroka 60 35 95P van Tonder 60 35 95M Vuso 120 15 135

560 215 775

Total emoluments 7 761


108

’092008

Incentive Retirement Other fees/Salaries bonuses and medical benefits Total

R’000 R’000 R’000 R’000 R’000

29. DIRECTORS’ EMOLUMENTS continued

29.1 Directors’ remuneration continued

DirectorsExecutive

G Chapman 1 545 1 635 41 – 3 221

N Wolmarans 912 1 308 19 – 2 239

2 457 2 943 60 – 5 460

Director’s Committeefees fees Total

R’000 R’000 R’000

Non-executive

D Ackerman – – –

M Mareletse – 70 70

V Raseroka – – –

P van Tonder – – –

70 70

Total emoluments – 70 5 530

The remuneration of directors is determined by the remuneration and nomination committee having regard to the

performance of individuals and market trends.

Executive directors do not receive directors’ fees and the directors have service contracts with group companies.

Executive directors are subject to the company’s standard conditions of employment.

29.2 Interest of directors’ in contracts

A register detailing directors’ interests in the company is available for inspection at the company’s registered office.

29.3 Share purchases and sales by directors and director controlled entities

During 2009 no main board directors traded in any shares of the company. However the following trades in the

company shares were conducted by directors of major subsidiaries:

Shares and securities bought by directors and or spouses of directors:

Director Volume Type

Mr H Swanepoel 27 000 Shares

Mrs JA Porter (wife of Chris Porter) 100 000 Shares



109

>>

Pro

tech

Ann

ual R

epor

t 09

30. RELATED PARTIES30.1 Identity of related parties

Transactions between the company and its subsidiaries, which are related parties of the company, have beeneliminated on consolidation and are not disclosed in this note. Details of transactions between the group and otherrelated parties are disclosed below.

Directors of the companies stated below are involved with Protech Khuthele Holdings Limited:

– PPK Services (Pty) Ltd– Panamo Properties (Pty) Ltd– Circle Seven Plant (Pty) Ltd– Big Cedar Trading (Pty) Ltd– Millcliff Trading (Pty) Ltd– Straightprops 57 (Pty) Ltd– Protech Khuthele BEE Trust– Lidonga Construction (Pty) Ltd– Protech Khuthele Property Investments (Pty) Ltd

30.2 Related party transactions and balances

During the year in the ordinary course of business, the company and its related parties entered into various relatedparty sale and purchase transactions. These transactions are no less favourable than those arranged with independentthird parties.

Amounts owed by Amounts owed toRevenue Expenses related parties related parties

2009 2008 2009 2008 2009 2008 2009 2008R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

PPK Services (Pty) Ltd – – – 23 442 512 –2 23 –Panamo Properties (Pty) Ltd – – – 42 – – – –Circle Seven Plant (Pty) Ltd 3 17 28 1 758 – – 3273 –Big Cedar Trading (Pty) Ltd – – – 1 195 – – – –Straightprops 57 (Pty) Ltd 172 58 420 55 1461 – 173 –Protech Khuthele BEE Trust – – – – 3 2352 4102 – –Lidonga Construction (Pty) Ltd 18 654 – 15 036 – 9 6371&2 – 3 3973 –Protech Khuthele Property Investments (Pty) Ltd – – 480 – 2 8262 1 8002 – –

18 829 75 15 964 26 492 12 660 2 210 3 743 –

The amounts outstanding are unsecured and will be settled in cash within the normal operating cycle of the company.No guarantees have been given or received.

All the abovementioned transactions were made on terms equivalent to those that prevail in arm’s length transactions.

1 Details of these amounts are disclosed in note 6, Trade and other receivables.2 Details of these amounts are disclosed in note 7, Other financial assets.3 Details of these amounts are disclosed in note 13, Trade and other payables.


110

’09


2009 2008 R’000 R’000

30. RELATED PARTIES continued30.3 Compensation to key management personnel

The remuneration of directors and other key management personnel during the year was as follows:

Short term benefits– Directors (note 29) 7 761 5 530– Other key management personnel 14 682 5 006

22 443 10 536

The remuneration of directors and key management personnel is determined by the remuneration committee havingregard to the performance of individuals and market trends.

Key management personnel relate to the executive management team of the group.

31. SUBSIDIARIESDetails of the company’s subsidiaries at 28 February 2009 are as follows:

Proportion of ProportionPlace of ownership of voting

Name of subsidiary incorporation interests power held Principal activity

Protech Khuthele (Pty) Ltd South Africa 100% 100% Bulk and fast-trackearthworks

Pela Plant (Pty) Ltd South Africa 100% 100% Plant hire

South African Road Testing Services (Pty) Ltd South Africa 100% 100% Geotechnical and

Laboratory services

Umvundla Investments No. 2 (Pty) Ltd South Africa 100% 100% Plant hire

Protech Projects Holding (Pty) Ltd South Africa 100% 100% Contracting

Protech Readymix (Pty) Ltd South Africa 100% 100% Ready mixed concrete

Protech Khuthele Properties (Pty) Ltd South Africa 100% 100% Property company

New subsidiaries acquiredImpact Compaction (Pty) Ltd South Africa 100% 100% Impact compaction

services

32. EVENTS AFTER THE BALANCE SHEET DATEThe directors are not aware of any matter or circumstances arising since the end of the financial year, not otherwisedealt with in the annual financial statements, which significantly affect the financial position of the company or theresults of its operations.


111

>>

Pro

tech

Ann

ual R

epor

t 09

companybalance sheetat 28 February

’092009 2008

Notes R’000 R’000

ASSETS

Non-current assets 266 732 216 098

Investment in subsidiaries 2 216 098 216 098

Other financial assets 3 49 112 –

Deferred tax 10 1 522 –

Current assets 139 243 84 312

Other financial assets 3 31 207 987

Trade and other receivables 4 8 583 3

Bank balances and cash 5 99 453 83 322

Total assets 405 975 300 410

EQUITY AND LIABILITIES

Total equity 228 853 228 709

Share capital 228 598 228 598

Retained earnings 255 111

Total liabilities 177 122 71 701

Non-current liabilities 45 507 –

Borrowings 6 45 507 –

Current liabilities 131 615 71 701

Borrowings 6 124 501 71 656

Trade and other payables 7 4 884 –

Current tax liabilities 2 230 45

Total equity and liabilities 405 975 300 410


112

’09

companyincome statementfor the year ended 28 February

2009 2008 Notes R’000 R’000

Revenue 8 13 460 600

Operating expenses (13 466) (606)

Interest received 8 8 887 162

Interest paid 9 (8 074) –

Earnings before tax 807 156

Taxation 10 (663) (45)

Earnings for the year 144 111

’09

statementof changes in equityfor the year ended 28 February

Share Share Retainedcapital premium earnings TotalR’000 R’000 R’000 R’000

Balance at 28 February 2007 –* – – –*

Share issue

23 May 2007 – 20 000 0003 – – – –

– 41 869 3622 –* – – –*

28 May 2007 – 288 130 6381 2 216 096 – 216 098

6 August 2007 – 12 500 0002 –* 12 500 – 12 500

Earnings for the year – – 111 111

Balance as at 29 February 2008 2 228 596 111 228 709

Earnings for the year – – 144 144

Balance as at 28 February 2009 2 228 596 255 228 853

1 Issued to acquire subsidiaries.2 Issued for cash.3 Share split of 200 000 to 1.* Amount below R 1 000.


113

>>

Pro

tech

Ann

ual R

epor

t 09

companycash flow statementfor the year ended 28 February

’092009 2008

Note R’000 R’000

Cash flows from operating activities 2 547 153

Cash receipts from customers 4 880 597

Cash paid to suppliers and employees (3 146) (606)

Cash generated from/(utilised by) operations 12 1 734 (9)

Finance costs paid (8 074) –


Cash flows from investing activities –* –*

Acquisition of subsidiaries –* –*

Cash flows from financing activities 13 584 83 169

Share issue – 12 500

Receipts from secured borrowings 62 200 –

Payments in respect of secured borrowings (8 146) –

Receipts from loans granted 5 563 –

Payments of loans granted (90 331) (987)

Loans from subsidiaries 44 298 71 656

Net increase in cash and cash equivalents 16 131 83 322

Cash and cash equivalents at the beginning of the year 83 322 –

Cash and cash equivalents at the end of the year 99 453 83 322

* Amount below R1 000.


114

’09

notes to thecompany financial statementsfor the year ended 28 February

2009 2008 R’000 R’000

1. ACCOUNTING POLICIES

The accounting policies are the same as the

group and are set out on pages 72 to 81.

2. INVESTMENT IN SUBSIDIARIES

Reflected as non-current assets

Shares at cost 216 098 216 098

– Protech Khuthele (Pty) Ltd 159 920 159 920

– Pela Plant (Pty) Ltd 38 276 38 276

– South African Road Testing Services (Pty) Ltd 4 378 4 378

– Umvundla Investments No.2 (Pty) Ltd 5 036 5 036

– Protech Projects Holding (Pty) Ltd 8 488 8 488

– Protech Readymix (Pty) Ltd –* –*

– Protech Khuthele Properties (Pty) Ltd –* –

– Impact Compaction (Pty) Ltd –* –

* Amount below R1 000.

Investments in subsidiaries are accounted for at cost.

In terms of Protech’s group funding policy, subsidiaries are funded by way of equity from the holding company as

well as long term interest free loans.


115

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008

R’000 R’000 R’000 R’000

Current Non-current Current Non-current

3. OTHER FINANCIAL ASSETSLoans to companies

Non-interest bearing loans 26 281 – 987 –

Unsecured – at amortised cost– Protech Khuthele BEE Trust 3 224 – 375 –

– South African Road Testing

Services (Pty) Ltd – – 612 –

– PPK Labour Services (Pty) Ltd 50 – – –

– Protech Khuthele Property

Investments (Pty) Ltd 435 – – –

– Impact Compaction (Pty) Ltd* 4 664 – – –

– Protech Khuthele Properties

(Pty) Ltd 3 408 – – –

– Protech Readymix (Pty) Ltd* 14 500 – – –

Impairment of loans (5 436) – – –

Interest bearing loans 10 362 49 112 – –

Secured – at amortised cost– Lidonga Construction (Pty) Ltd 1 815 3 605 – –

Unsecured – at amortised cost– Protech Readymix (Pty) Ltd

(Acquisition loan) 8 547 45 507 – –

31 207 49 112 987 –

* These loans have been sub-ordinated in favour of other providers of credit to the various companies.

Loans to companies are unsecured and interest free. No fixed date of repayment has been set.

The loan to Lidonga Construction (Pty) Ltd is secured by a notarial bond registered over the plant purchased. The

current value of the plant is R4,5 million. The loan is payable over 36 months at the prime overdraft rate as charged

by ABSA Bank Limited.

The acquisition loan to Protech Readymix (Pty) Ltd is payable in line with terms from ABSA Bank Ltd as per note 6.2.

Loans receivable comprises net amounts receivable after provision for impairment. The directors consider that the

carrying amount of the loans receivable approximate to their fair value.


116

’092009 2008

R’000 R’000

4. TRADE AND OTHER RECEIVABLES

Trade receivables 8 377 –

Other 206 3

8 583 3

The directors consider that the carrying amount of the trade and other

receivables to approximate their fair value.

Trade receivables owing by related parties amount to R8,4 million

(2008: R nil) as disclosed in note 14, Related Parties.

4.1 Trade receivables

Total trade receivables (net of allowances) held by the company at

28 February 2009 amounted to R8,4 million which relate to

receivables from group companies.

No interest is charged on the trade receivables.

5. BANK BALANCES AND CASHFor the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in

Bank balances and cash 99 453 83 322

Cash and cash equivalents comprise cash and cash at bank. The carrying amount of these assets approximate to their fair value.

notes to the company financial statements continuedfor the year ended 28 February


117

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 R’000 R’000

6. BORROWINGS

Borrowings comprise:

Non-interest bearing borrowings (note 6.1) 115 954 71 656

Interest bearing borrowings (note 6.2) 54 054 –

Total borrowings 170 008 71 656

Less: Current portion of borrowings (124 501) (71 656)

Non-current portion of borrowings 45 507 –

2009 2008R’000 R’000 R’000 R’000

Current Non-current Current Non-current

6.1 Non-interest bearing borrowings

Unsecured – at amortised costLoans from entities

– Protech Khuthele (Pty) Ltd 43 474 – 38 452 –

– Pela Plant (Pty) Ltd 54 761 – 33 163 –

– Protech Projects Holding (Pty) Ltd 9 691 – 41 –

– South African Road Testing

Services (Pty) Ltd 1 268 – – –

– Umvundla Investments No. 2

(Pty) Ltd 6 760 – – –

115 954 – 71 656 –

The loans from entities are interest free and unsecured and have no fixed terms of repayment.


118

’09


6. BORROWINGS continued6.2 Interest bearing borrowings

Minimum loan Present value of minimumrepayments loan repayments

2009 2008 2009 2008

R’000 R’000 R’000 R’000

Interest bearing bank loans

Payable:Within 1 year 14 392 – 8 547 –

Within years 2 – 5 50 488 – 38 699 –

Later than 5 years 7 222 – 6 808 –

72 102 –

Less: Future interest charges (18 048) –

54 054 – 54 054 –

Less: Current portion (8 547) –

45 507 –

The interest bearing bank loans comprise a Revolving loan facility and a Term loan facility.

The Revolving loan facility of R32,2 million bears interest at prime minus 1% and is payable over 84 months. At

28 February 2009 there were 73 monthly instalments still payable. The facility is secured by cession of debtors and

unlimited cross suretyship by group companies.

The Term loan facility of R30 million bears interest at prime minus 1,5% and is payable over 60 months. At

28 February 2009 there were 49 monthly instalments still payable. The facility is secured by a notarial bond of

R30 million over fixed assets held by Protech Readymix (Pty) Ltd and unlimited cross suretyship by group companies.


119

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008

R’000 R’000

7. TRADE AND OTHER PAYABLES

Trade payables 4 884 –

4 884 –

Trade and other payables comprise amounts outstanding for trade

purchases and ongoing costs.

The directors consider that the carrying amount of the trade and other

payables approximate their fair value.

Trade payables due to related parties of R2,0 million (2008: R nil) are

included in the above amount. These amounts are disclosed in

note 14, Related Parties.

8. REVENUE

Revenue comprises:

Management fees 13 460 600


22 347 762

9. INTEREST PAID

– Banking institutions 7 758 –

– Other 316 –

8 074 –


120

’092009 2008

R’000 R’000

10. INCOME TAX EXPENSE10.1. Income tax recognised in profit

Current tax expense 2 185 45

Deferred taxation

– Current year (1 522) –

663 45

The total charge for the year can be reconciled to the accounting

profit as follows:

Accounting profit 807 156

Income tax expense calculated at 28% (2008: 29%) 226 45

Permanent differences:

Tax effect of expenses that are not deductible in

determining taxable profit 437 –

Income tax expense recognised in profit 663 45

Effective tax rate 82,1% 28,8%

10.2 Deferred tax

Balance at beginning of year – –

Timing differences during the year (1 522) –

Balance at end of year (1 522) –

Opening Charged to Change in Closingbalance income tax rate balance

2009 R’000 R’000 R’000 R’000

Temporary differences

Impairment on loans receivable – (1 522) – (1 522)

– (1 522) – (1 522)



121

>>

Pro

tech

Ann

ual R

epor

t 09

11. FINANCIAL INSTRUMENTS11.1 Capital risk management

The company manages its capital to ensure that the company will be able to continue as a going concern while

maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the company consists of debt, which includes loans to subsidiaries, cash and cash equivalents

and equity, comprising issued capital, reserves and retained earnings as disclosed.

Short term borrowings pertain to the treasury loans from subsidiaries.

11.2 Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis

of measurement and the basis on which income and expenses are recognised, in respect of each class of financial

asset, financial liability and equity instrument are consistent with those applied in the group financial statements.

2009 2008R’000 R’000

11.3 Categories of financial instruments

Financial assets

Loans and receivables (including cash and cash equivalents) 188 355 84 312


Trade and other payables 4 884 –

Borrowings 170 008 71 656

Tax payable 2 230 45

The carrying amount reflected above represents the company’s maximum exposure to credit risk for such loans and

receivables.

11.4 Financial risk management objectives

The company does not enter into or trade financial instruments, including derivative financial instruments, for

speculative purposes.

11.5 Market risk

The company’s activities do not expose it to major financial risks.

11.6 Interest rate risk management

The company is exposed to interest rate risk as it has loan facilities linked to floating interest rates. The risk is

managed by the company by keeping excess cash in an access deposit account linked to these facilities to minimise

the interest expense.


122

’0911. FINANCIAL INSTRUMENTS continued

11.6 Interest rate risk management continued

11.6.1 Interest rate sensitivity analysisThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives

and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming

the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 100 basis point

increase or decrease is used when reporting interest rate risk internally to key management personnel and represents

management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the company’s

profit for the year ended 28 February 2009 would decrease/increase by R0,5 million (2008: R nil). This is mainly

attributable to the company’s exposure to interest rates on its variable rate borrowings.

11.7 Credit risk management

The company does not have any credit risk as it has no debtors pertaining to the selling of goods and services. The

company is the holding company of the group and fulfil a treasury function.

11.8 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which provides sufficient guidance

for the management of the company’s short, medium and long term funding and liquidity management requirements.

11.8.1 Liquidity and interest risk tablesThe following tables detail the company’s remaining contractual maturity for its non-derivative financial liabilities. The

tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date

on which the company can be required to pay. The table includes both interest and principal cash flows.

Weightedaverageeffectiveinterest Less than 1 – 3 3 months 1 – 5

rate 1 month months to 1 year years 5+ years TotalR’000 R’000 R’000 R’000 R’000 R’000

2009

Interest bearing

bank loans 12,8% 1 199 2 398 10 795 50 488 7 222 72 102

Loans to and from subsidiaries are interest free except for the acquisition loan to Protech Readymix (Pty) Ltd.

Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and

financial liabilities recorded at amortised cost in the financial statements approximate their fair values:



123

>>

Pro

tech

Ann

ual R

epor

t 09

2009 2008 Carrying Fair Carrying Fairamount value amount value

R’000 R’000 R’000 R’000



Financial assets

Loans and receivables

(excl. cash and cash equivalents) 88 902 88 902 990 990


Trade and other payables 4 884 4 884 – –

Borrowings 170 008 170 008 71 656 71 656

Tax payable 2 230 2 230 45 45

Due to the short term nature of these instruments the current value approximate its fair value.

2009 2008R’000 R’000

12. CASH GENERATED FROM/(UTILISED BY) OPERATIONS

Reconciliation of profit before taxation to cash generated

from/(utilised by) operations:

Earnings before taxation 807 156

Adjusted for:

Interest received (8 887) (162)

Interest paid 8 074 –

Impairment of loans granted 5 436

Operating cash flow before working capital changes 5 430 (6)

Working capital changes:

Increase in trade and other payables 4 884 –

Increase in trade and other receivables (8 580) (3)

Cash generated from/(utilised by) operations 1 734 (9)

13. DIRECTORS’ EMOLUMENTS

At the date of this report, the company had eight directors.

Details of directors’ emoluments are set out in note 29 to the consolidated financial statements.


124

’09


14. RELATED PARTIES14.1 Identity of related parties

The company has a related party relationship with its subsidiaries (see note 2) and with its directors.

14.2 Related party transactions and balances

During the year in the ordinary course of business, the company and its related parties entered into various inter-group

sale and purchase transactions. These transactions are no less favourable than those arranged with third parties.

Revenue Expenses

2009 2008 2009 2008R’000 R’000 R’000 R’000

Pela Plant (Pty) Ltd 8 230 – – –

South African Road Testing

Services (Pty) Ltd 696 – – –

Protech Khuthele (Pty) Ltd 4 534 600 480 –

Protech Readymix (Pty) Ltd 7 623* – – –

Lidonga Construction (Pty) Ltd 312* – – –

21 395 600 480 –

* Details of these amounts are disclosed in note 8, Revenue: Interest received.


125

>>

Pro

tech

Ann

ual R

epor

t 09

14. RELATED PARTIES continued

Amounts owed by Amounts owed torelated parties related parties

2009 2008 2009 2008R’000 R’000 R’000 R’000

Pela Plant (Pty) Ltd 5 6891 – 54 7614 33 1634

South African Road Testing

Services (Pty) Ltd 3971 6122 1 2684 –

Protech Khuthele (Pty) Ltd 2 2911 – 45 4583&4 38 4524

Protech Khuthele BEE Trust 3 2242 3752 – –

Protech Projects Holding (Pty) Ltd – – 9 6914 414

PPK Labour Services (Pty) Ltd 502 – – –

Lidonga Construction (Pty) Ltd 5 4202 – – –

Protech Khuthele Property

Investments (Pty) Ltd 4352 – – –

Protech Khuthele Properties (Pty) Ltd 3 4082 – – –

Umvundla Investments No. 2 (Pty) Ltd – – 6 7604 –

Impact Compaction (Pty) Ltd 4 6642 – – –

Protech Readymix (Pty) Ltd 68 5532 – – –

94 131 987 117 938 71 656

The amounts outstanding are unsecured and will be settled in cash within the normal operating cycle of the company.

Apart from the loans to and from companies disclosed above there were no other loans to or from related parties.

1 Details of these amounts are disclosed in note 4, Trade and other receivables. 2 Details of these amounts are disclosed in note 3, Other financial assets. 3 Details of these amounts are disclosed in note 7, Trade and other payables. 4 Details of these amounts are disclosed in note 6, Borrowings.


126

’09

shareholderinformationat 28 February

Number % of Number % of totalof total of issued

shareholders shareholders shares share capital

ANALYSIS OF SHAREHOLDINGS

1 – 5 000 408 27,38 358 832 0,10

5 001 – 10 000 451 30,27 1 493 089 0,41

10 001 – 50 000 166 11,14 1 404 254 0,39

50 001 – 100 000 359 24,09 13 352 790 3,68

100 001 – 1 000 000 77 5,17 22 773 133 6,28

1 000 001 – and more 29 1,95 323 117 902 89,14

Totals 1 490 100,00 362 500 000 100,00

MAJOR SHAREHOLDERS

(5% and more of the shares in issue)

Protech Khuthele BEE (Pty) Ltd 73 740 552 20,34

GDC Business Trust 40 000 000 11,03

Platinum/JMD Business Trust 32 735 667 9,03

Stanlib Asset Management 27 067 428 7,47

Metc Metlife Main Account 20 723 500 5,72

Peregrine Structuring 19 000 000 5,24

Strategy Systems Consulting (Pty) Ltd 18 927 295 5,22

Tumsedi Share Trust 18 487 500 5,10

SHAREHOLDER SPREAD

Non-public: 7 0,48 206 601 014 56,99

Directors 5 0,34 100 124 795 27,62

Associates 1 0,07 32 735 667 9,03

Share trust 1 0,07 73 740 552 20,34

Public 1 483 99,52 155 898 986 43,01

Totals 1 490 100,00 362 500 000 100,00

DISTRIBUTION OF SHAREHOLDERS

Number of % of all Number of % of sharesmembers members shares held issued

Trusts 93 6,24 133 471 475 36,81

Investment funds 33 2,21 13 911 445 3,84

Companies 35 2,35 128 681 276 35,50

Retirement funds 3 0,20 105 000 0,03

Individuals 1 308 87,79 86 022 070 23,73

Close corporations 18 1,21 308 734 0,09

Totals 1 490 100,00 362 500 000 100,00


127

>>

Pro

tech

Ann

ual R

epor

t 09

notice ofannual general meeting

Notice is hereby given that the second annual generalmeeting of members of Protech Khuthele HoldingsLimited, registration number 2000/024352/06, will beheld at the Hertford Country Hotel, corner of the R512to Lanseria and Elandsdrift Road, on Monday, 20 July2009 at 08h00 to conduct the following business:

ORDINARY RESOLUTION 1

To receive and adopt the consolidated audited annualfinancial statements of the company and its subsidiaries,incorporating the reports of the auditors, auditcommittee and directors for the financial year ended28 February 2009.


To elect by way of separate resolutions directors in theplace of those retiring in accordance with the company’sarticles of association.

An abbreviated curriculum vitae in respect of eachdirector retiring is contained in the explanatory notesto this notice.


To sanction the fees paid to non-executive directorsfor the period 1 March 2008 to 28 February 2009, asset out in the table contained in the explanatory notesto this notice.


To re-appoint Deloitte & Touche as independent auditorsof the company for the ensuing year, with Mr MartinBierman as auditor, and to authorise the directors to determine the remuneration of the auditors for thepast year’s audit as reflected in note 21 on the annualfinancial statements.


To approve that, subject to the provisions of theCompanies Act, 61 of 1973, as amended (“the Act”)and the Listings Requirements of the JSE Limited, thedirectors are hereby authorised to allot and issue at theirdiscretion up to a maximum of 5% of the total numberof issued ordinary shares in the share capital of thecompany for such purposes as they may determine.


To approve that, as required in terms of the JSE ListingsRequirements, the directors be authorised to issue

up to a maximum of 5% of the total number of issuedordinary shares in the share capital of the company forcash, without restrictions as to any public shareholder,as defined by the JSE Listings Requirements, as and when suitable opportunities arise, subject to thefollowing conditions:

1 that this authority shall only be valid until the nextannual general meeting of the company but shallnot extend beyond 15 months from the date ofthis meeting;

2 that a paid press announcement giving full details,including the impact on net asset value and earningsper share, be published after any issue representing,on a cumulative basis within one financial year,5% of the number of shares in issue prior to theissue concerned;

3 that the issues in aggregate in any one financial yearshall not exceed 5% of the number of shares of thecompany’s issued ordinary share capital; and

4 that in determining the price at which an issue of shares for cash will be made in terms of thisauthority, the maximum discount permitted shallbe 10% of the weighted average traded price ofthe ordinary shares on the JSE, (adjusted for anydividend declared but not yet paid or for anycapitalisation award made to shareholders) over the30 business days prior to the date that the price ofthe issue is determined or agreed by the directorsof the company.

SPECIAL RESOLUTION 1

To consider and, if deemed fit, to pass, with or withoutmodification, the following special resolution:

“RESOLVED that the directors be and are hereby

authorised to approve and implement the

acquisition by the company (or by a subsidiary of

the company) up to a maximum of 10% (ten

percent) of the number of issued ordinary shares

of the company), of ordinary shares issued by the

company by way of a general authority, which

shall only be valid until the company’s next annual

general meeting, unless it is then renewed,

provided that it shall not extend beyond 15 (fifteen)


128

notice of annual general meeting continued

months from the date of the passing of the special

resolution, whichever period is the shorter, in

terms of the Companies Act 1973, and the rules

and requirements of the JSE Limited (JSE) which

provide, inter alia, that the company may only

make a general repurchase of its ordinary shares

subject to:

– the repurchase being implemented through the

order book operated by the JSE trading system,

without prior understanding or arrangement

between the company and the counterparty;

– the company being authorised thereto by its

articles of association;

– repurchases not being made at a price greater than

10% (ten percent) above the weighted average of

the market value of the ordinary shares for the

5 (five) business days immediately preceding the

date on which the transaction was effected;

– an announcement being published as soon as

the company has repurchased ordinary shares

constituting, on a cumulative basis, 3% (three

percent) of the initial number of ordinary shares,

and for each 3% (three percent) in aggregate of

the initial number of ordinary shares repurchased

thereafter, containing full details of such

repurchases;

– repurchases not exceeding 20% (twenty percent)

in aggregate of the company’s issued ordinary

share capital in any one financial year;

– the company’s sponsor confirming the adequacy

of the company’s working capital for purposes of

undertaking the repurchase of ordinary shares in

writing to the JSE upon entering the market to

proceed with the repurchase;

– the company remaining in compliance with

paragraphs 3.37 to 3.41 of the JSE Listings

Requirements concerning shareholder spread

after such repurchase;

– the company and/or its subsidiaries not re -

purchasing securities during a prohibited period

as defined in paragraph 3.67 of the JSE Listings

Requirements, unless it has in place a repurchase

programme where the dates and quantities of

securities to be traded during the relevant period

are fixed and full details of the programme have

been disclosed in an announcement published

on SENS prior to the commencement of the

prohibited period; and

– the company only appointing one agent to effect

any repurchases on its behalf.”

The directors, having considered the effects of the

repurchase of the maximum number of ordinary

shares in terms of the aforegoing general authority,

are of the opinion that for a period of 12 (twelve)

months after the date of the notice of the annual

general meeting:

– the company and the group will be able, in the

ordinary course of business, to pay its debts;

– the working capital of the company and the group

will be adequate for ordinary business purposes;

– the assets of the company and the group, fairly

valued, will exceed the liabilities of the company

and the group; and

– the company’s and the group’s ordinary share

capital and reserves will be adequate for ordinary

business purposes.

The following additional information, some of which

may appear elsewhere in the annual report, is

provided in terms of the JSE Listings Requirements

for purposes of this general authority:

– directors and management – page 6;

– major beneficial shareholders – page 126;

– directors’ interests in ordinary shares – page 65;

and

– share capital of the company – page 88.

The directors in office whose names appear on pages 6

and 65 of the annual report, are not aware of any legal

or arbitration proceedings, including proceedings that


129

>>

Pro

tech

Ann

ual R

epor

t 09

are pending or threatened, that may have or have

had in the recent past, being at least the previous

12 (twelve) months, a material effect on the group’s

financial position.

Directors’ responsibility statement

The directors in office, whose names appear on

pages 6 and 65 of the annual report, collectively and

individually accept full responsibility for the accuracy

of the information pertaining to this special resolution

and certify that, to the best of their knowledge and

belief, there are no facts that have been omitted which

would make any statement false or misleading, and

that all reasonable enquiries to ascertain such facts

have been made and that the special resolution

contains all information required by law and the JSE

Listings Requirements.

Material changes

Other than the facts and developments reported on in

the annual report, there have been no material changes

in the affairs or financial position of the company and its

subsidiaries since the date of signature of the audit

report and up to the date of this notice.

The directors have no specific intention, at present, for

the company to repurchase any of its shares but

consider that such a general authority should be put in

place should an opportunity present itself to do so

during the year which is in the best interests of the

company and its shareholders.

The reason for and effect of the special resolution is to

grant the directors of the company a general authority

in terms of the Companies Act 1973 and the JSE

Listings Requirements for the repurchase by the

company (or by a subsidiary of the company) of the

company’s shares.


To authorise any one director or the secretary of the

company to do all such things and sign all such

documents as are deemed necessary to implement

the resolutions set out in the notice convening the

annual general meeting at which this ordinary resolution

will be considered.

Any shareholder holding shares in certificated form or

recorded on the company’s sub-register in electronic

dematerialised form in “own name” and entitled to

attend, speak and vote at the meeting is entitled to

appoint a proxy to attend, speak and on a poll vote in his

stead. A proxy need not be a member of the company.

Proxy forms must be lodged at the registered office of

the company at Lanseria or at the offices of the transfer

secretaries, Link Market Services South Africa (Pty)

Ltd, by no later than 08h00 on Thursday, 16 July 2009.

All beneficial owners whose shares have been

dematerialised through a Central Securities Depository

Participant (“CSDP”) or broker other than with “own

name” registration, must provide the CSDP or broker

with their voting instructions in terms of their custody

agreement should they wish to vote at the annual

general meeting. Alternatively, they may request

the CSDP or broker to provide them with a letter of

representation, in terms of their custody agreements,

should they wish to attend the annual general meeting.

By order of the Board

Annamarie van der Merwe

Company secretary

Lanseria8 May 2009


130

annual general meeting – explanatory notes

ORDINARY RESOLUTION 1 – ADOPTION OF

ANNUAL FINANCIAL STATEMENTS

At the annual general meeting, the directors must

present the annual financial statements for the year

ended 28 February 2009 to shareholders, together

with the reports of the directors, the audit committee

and the auditors. These are contained within the

Annual Report.

ORDINARY RESOLUTION 2 – RE-ELECTION

OF DIRECTORS

In accordance with the company’s Articles of

Association, one third of the directors is required to

retire at each annual general meeting and may offer

themselves for re-election. In addition, any person

appointed to the board of directors is similarly required

to retire and is eligible for re-election at the next annual

general meeting.

Brief biographical details of each of the directors retiring

by rotation, are set out hereunder:

New appointment

Matsotso Vuso (35) CA(SA)Matsotso qualified as a CA(SA) in 1999 and has

extensive experience in Audit (financial & IT), financial

investments analysis and financial restructurings. She

was responsible for major IT Audit assignments in

the Aviation, Telecommunications, Manufacturing and

Motoring sectors. She passed her Certified Information

System Auditor exams in 1998. Matsotso also worked

for the Industrial Development Corporation (IDC).

Her competencies include evaluating investments

oppor tunities, due diligence reviews, client care

manage ment issues (including credit control),

restructuring distressed investments (especially in

mining, tourism, wood and paper) and attending to

legal aspects of liquidations. Matsotso worked for

Manase and Associates as an Executive Director and

has recently left Manase to establish Nyamezela

Business Advisory Services, a black female owned

firm of business advisors.

Existing directors

Connie Nkosi (63) BA Psychology MBA

(Wits Business School)

Connie is the first black SA woman to graduate with

an MBA from Wits Business School. She has been a

member of the boards of British American Tobacco,

Lonhro Africa, Kollosus and Sota International, to name

a few. She also held the position of Chief Executive

Officer for the National Empowerment Corporation (now

called African Legend) which is a BEE investment

company. Connie is a non-executive director for Pick n

Pay Ltd, a position she has held for the past 10 years;

a director for Spescom Limited as well as Placecol

Holdings Limited. Presently she is executive chair and

major shareholder at Lidonga Group Holdings a black

women’s investment company.


131

>>

Pro

tech

Ann

ual R

epor

t 09

Vincent Raseroka (49) BA (Hons) Public Administration and Economics (Fisk University, Nashville)Vincent’s extensive management experience encom passes executive positions at companies as varied as theDevelopment Bank of SA, South African Breweries, Shell Oil, Nampak, SAA and Cell C. He was the managing directorof Main-Tin, Spicers and then Petpak – all divisions within Nampak. From 1999 to 2003 he was chief executive officerof SAA Cargo and SAA Technical. Vincent presently advises corporations on BEE and transformation strategies.

ORDINARY RESOLUTION 3 – CURRENT FEES OF NON-EXECUTIVE DIRECTORS

Shareholders are requested to sanction the fees that were paid to non-executive directors for the period 1 March2008 to 28 February 2009 as set out in the table hereunder. Full particulars of all fees and remuneration for the pastfinancial year are contained on page 107 and 108 of the annual report.

Category Fees paid Note

Protech Khuthele Holdings Board

Chairman R140 000 annual retainer R5 000 per meeting attended

Board members (1)Non-executive R60 000 annual retainer

R5 000 per meeting attended (2)Independent non-executive R120 000 annual retainer

R5 000 per meeting attended

Audit & Risk Management Committee

Chairman R10 000 per meeting attended (3)

Audit and Risk Management Committee member (ACM) R5 000 per meeting attended (4)

Remuneration and Nomination Committee

Chairman R5 000 per meeting attended (5)Remuneration and Nomination Committee member (RCM) R5 000 per meeting attendedNotes

1 It is proposed that a distinction be made between non-executive directors who are independent and those who do not meet the test of independence.2 The company holds minimum four board meetings during any 12-month period. 3 The audit and risk management committee chairman receives a higher fee than the fee payable to non-executive directors who serve on the audit committee.4 The company holds three audit and risk management committee meetings during any 12-month period.5 The company holds three remuneration and nomination committee meetings during any 12-month period.


132

annual general meeting – explanatory notes continued

ORDINARY RESOLUTION 4 – AUDITORS

Deloitte & Touche has indicated its willingness to

continue in office and resolution 5 proposes the re-

appointment of that firm as the company’s auditors

with effect from 21 July 2009 until the next annual

general meeting. As required in terms of the Corporate

Laws Amendment Act of 2006, the resolution specifies

the name of the designated auditor. The resolution

also gives authority to the directors to fix the auditors

remuneration.

ORDINARY RESOLUTIONS 5 AND 6 – PLACEMENT

AND ISSUE OF SHARES

In terms of Sections 221 and 222 of the Companies

Act No. 61 of 1973, as amended, the shareholders

have to approve the placement of the unissued shares

under the control of the directors. The authority will

be subject to the Companies Act No. 61 of 1973, as

amended, and the JSE Listings Requirements. The

authority is furthermore limited to a maximum of 5%

of the issued share capital.

Ordinary resolution number 7 is required in order for

the JSE Listings Requirements to be complied with.

The approval of a 75% majority of the votes cast by

shareholders present or represented by proxy at this

annual general meeting is required for this ordinary

resolution to become effective. The authority is again

limited to a maximum of 5% of the issued share capital.

SPECIAL RESOLUTION 1

As current economic conditions may warrant the

consideration of a share buy back, the board of directors

believe that it is prudent to obtain a general authority

from shareholders to buy back shares by way of a

special resolution, subject to the relevant provisions of

the JSE Listings Requirements and the Companies Act

of 1973 as set out in the proposed resolution.

As this is a special resolution, the approval of a 75%

majority of the votes cast by shareholders present or

represented by proxy at this annual general meeting

is required for this resolution to become effective.


Any one director or the secretary of the company be

authorised to do all such things and sign all documents

and take all such action as they consider necessary

to implement the resolutions set out in the notice

convening the annual general meeting at which this

ordinary resolution will be considered.


133

>>

Pro

tech

Ann

ual R

epor

t 09

form of proxyPROTECH KHUTHELE HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Registration No 2000/024352/06)(“Protech” or “the company”)JSE share code: PKHISIN code: ZAE 000101986

TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH “OWNNAME” REGISTRATION ONLYFor completion by registered members of Protech unable to attend the annual general meeting of the company to be heldat the Hertford Country Hotel, corner of the R512 to Lanseria and Elandsdrift Road, on 20 July 2009, at 08h00 or at anyadjournment thereof.

I/We

of (address)

being the holder/s of shares in the company, do hereby appoint:

1 or, failing him/her

2 or, failing him/her

the chairman of the annual general meeting, as my/our proxy to attend, speak and, on a poll, vote on my/our behalf at theannual general meeting of members to be held at the Hertford Country Hotel on 20 July 2009, at 08h00 or at any adjournmentthereof, and to vote or abstain from voting as follows on the ordinary and special resolutions to be proposed at such meeting:

For Against Abstain

Ordinary business

1. Ordinary resolution 1 – To adopt the 2009 audited group financial statements

2. Ordinary resolution 2 – To re-elect the directors required to retire in terms

of the articles of association:

2.1 Ms C Nkosi

2.2 Mr V Raseroka

2.3 Ms M Vuso

3. Ordinary resolution 3 – To approve the non-executive directors’ fees paid

for the period 1 March 2008 to 28 February 2009

4. Ordinary resolution 4 – To approve the re-appointment of the external auditors

5. Ordinary resolution 5 – To authorise directors to allot and issue unissued

ordinary shares

6. Ordinary resolution 6 – To authorise directors to allot and issue unissued

ordinary shares for cash

7. Special resolution 1 – Authority to acquire the company’s own shares

8. Ordinary resolution 7 – To authorise implementation of all approved resolutions

Please indicate with an “X” in the appropriate spaces provided above how you wish your vote to be cast. If no indicationis given, the proxy may vote or abstain as he/she sees fit.

Signed at this day of 2009

Signature

Assisted by me, where applicable (name and signature)

Please read the notes on the reverse side hereof.


134

notes to proxy

1. A form of proxy is only to be completed by those ordinary shareholders who are:

1.1 holding ordinary shares in certificated form; or

1.2 recorded on sub-register electronic form in ”own name”.

2. If you have already dematerialised your ordinary shares through a Central Securities Depository Participant (CSDP) or

broker and wish to attend the annual general meeting, you must request your CSDP or broker to provide you with a

Letter of Representation or you must instruct your CSDP or broker to vote by proxy on your behalf in terms of the

agreement entered into between yourself and your CSDP or broker.

3. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the

space. The person whose name stands first on the form of proxy and who is present at the annual general meeting

of shareholders will be entitled to act to the exclusion of those whose names follow.

4. On a show of hands, a member of the company present in person or by proxy shall have one (1) vote irrespective of

the number of shares he/she holds or represents, provided that a proxy shall, irrespective of the number of members

he/she represents, have only one (1) vote. On a poll, a member who is present in person or represented by proxy shall

be entitled to that proportion of the total votes in the company, which the aggregate amount of the nominal value of

the shares held by him/her bears to the aggregate amount of the nominal value of all the shares issued by the company.

5. A member’s instructions to the proxy must be indicated by the insertion of the relevant numbers of votes exercisable

by the member in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy

to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the member’s votes

exercisable thereat. A member or the proxy is not obliged to use all the votes exercisable by the member or by the

proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the

votes exercisable by the member or by the proxy.

6. Forms of proxy must be lodged at, or posted to Link Market Services South Africa (Pty) Limited, to be received not

later than 48 hours before the time fixed for the meeting (excluding Saturdays, Sundays and public holidays).

Contact details

Link Market Services South Africa (Pty) Limited

11 Diagonal Street

Johannesburg, 2001

PO Box 4844

Johannesburg, 2000

www.linkmarketservices.co.za

Tel: +27 (0)11 630 0800

Fax: +27 (0)86 674 3330

7. The completion and lodging of this form of proxy will not preclude the relevant member from attending the annual

general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.

8. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity

or other legal capacity must be attached to this form of proxy, unless previously recorded by the transfer secretaries

or waived by the chairman of the annual general meeting.

9. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

10. Notwithstanding the aforegoing, the chairman of the annual general meeting may waive any formalities that would

otherwise be a prerequisite for a valid proxy.

11. If any shares are jointly held, all joint members must sign this form of proxy. If more than one of those members is

present at the annual general meeting either in person or by proxy, the person whose name appears first in the register

shall be entitled to vote.


corporateinformation

DIRECTORS

Executive directors Date of appointmentG ChapmanN Wolmarans

Non-executive directorsD AckermanM MareletseC Nkosi 10 March 2008V RaserokaP van TonderM Vuso 1 September 2008

AUDITORS

Deloitte & ToucheRegistered AuditorsBuildings 1 and 2, Deloitte Place, The WoodlandsWoodlands Drive, Woodmead, Sandton

Telephone: 011 806 5000Facsimile: 011 806 5111

SPONSORS

Deloitte & Touche Sponsor Services (Pty) LtdBuilding 6, Deloitte Place, The WoodlandsWoodlands Drive, Woodmead, Sandton


COMMERCIAL BANKERS

ABSA Corporate & Business Bank – Sandton11 Diagonal StreetNewtownJohannesburg2001


REGISTERED OFFICES

Cnr R512 to Lanseria& Elandsdrift RoadLanseria 1748Private Bag X6Lanseria 1748

COMPANY SECRETARY

A van der MerweMonument Office Park2nd floor, Block 3, Suite 20279 Steenbok AvenueMonument Park 0181Pretoria

9425


>>09

09

www.pkh.co.za

>>

Protech A

nnual Report


9425 protech cover:layout 1 - sharedata.co.za · 52 employee culture // 53 broad-based black...

Documents