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Annual Report 2007

ContentsVision, mission, market position, strategic position 1Group structure 2Highlights 3Board of Directors 4Management 6Chairman’s statement 8Message from the Chief Executive Officer 10Review of operations 12• Rural Development Programme (RDP)• Breaking New Ground (BNG)• GAP – Housing (Credit Linked)• Institutional Housing• Bonded Housing• Up-market Housing• Ibuyile Development Consortium• Sedibeng Bricks• Other• Summary contribution to revenueFinancial review 20Corporate governance report 21Social responsibility 24Financials 2007 25Shareholders’ diary 60Shareholder analysis 61Notice to shareholders 62Proxy form InsertedAdministration IBC

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Annual Report 2007(formerly Pilvest CO 1 (Proprietary) Limited)

Strategic positioningIn order to ensure cost effective and timeous delivery of

projects the group has invested heavily in the supply chain.

Sea Kay manufactures its own bricks at Sedibeng and has

several site-based concrete, plaster and mortar batch plants.

The group will continue to invest in the areas of pre-cast

concrete manufacture, roofing systems and other

construction elements.

Research and Development in partnership with

professionals ensures Sea Kay continues to innovate in the

areas of construction methodology, quality improvement

and cost reduction. This focus is the cornerstone of the

group’s success and a major strategic differentiator when

compared with other players in the sector.

Sea Kay Annual Report 2007 1

VisionTo be the leading turnkey developer and constructor of subsidised, affordable and bonded mass housing.

MissionTo produce sustainable earnings growth at superior margins from professional, cost effective delivery of

subsidised affordable and bonded mass housing projects.

Market positionSea Kay operates in South Africa and works for various

central and local Government bodies in the delivery of their

housing needs and related infrastructure. The Financial

Services Charter committed banks to R42 billion

expenditure on social housing in South Africa. Sea Kay

plays a pivotal role in the delivery of this commitment.

In addition Sea Kay provides services to large industrial

enterprises that have employee accommodation

requirements.

2 Sea Kay Annual Report 2007

Group structure

Seriso 474 (Proprietary) Limited t/aSedibeng Bricks

Development Consortium

(An additional 45% was purchasedsubsequent to year end)

100%

90%

100%

Sea Kay is a construction and developmentgroup that has delivered consistent growththrough leadership, innovation and quality


Highlights

Major acquisitionsSea Kay acquired Sea Kay Engineering and Sedibeng Bricks in terms of a restructure process, partly on a share-for-share basiswith certain of the original shareholders of those subsidiaries effectively receiving shares in Sea Kay in lieu of their shares in therespective subsidiaries and the existing shareholders receiving a cash purchase price.

Sea Kay Engineering, the main operating subsidiary of the Sea Kay Group, increased its turnover by more than 100% comparedto the prior year on the back of increased Government and private sector spending. Earnings before interest, taxation anddepreciation (EBITDA) increased by 125%, with a slight increase of 1,25% on the EBITDA margin.

The continued expansion of Sea Kay Engineering has facilitated the simultaneous expansion of Sedibeng Bricks. Revenuegenerated from Sea Kay Engineering’s operations represents approximately 89% of total revenue for Sedibeng Bricks. Thecompany’s growth has resulted in a change in operating results from a loss before tax of approximately R810 000 for the yearended 28 February 2006 to a corresponding profit before tax of approximately R2,840 million for the year ended June 2007.The directors are confident that this growth will continue in the year ahead.

BEE partner A BEE consortium, namely Phatsima Housing Investments (Proprietary) Limited represented by Mr Herman Mashaba, haspurchased a 25,1% stake in Sea Kay.

Phatsima Housing Investments (Proprietary) Limited profilePhatsima Housing Investments (Proprietary) Limited is a BEE company formed and led by prominent businessman, Herman Mashaba, for the purpose of acquiring an equity position in Sea Kay.

Herman Mashaba is a successful black businessman and entrepreneur in his own right and has already built a successfulinvestment portfolio in various sectors of the South African economy. His investment portfolio includes the following companies:Black Like Me Mogale AlloysOasys Innovations Stocks Building AfricaAerosud Holdings JHI Real EstateGrowthpoint Limited Peregrine HoldingsConsolidated Power Projects Widney Transport ComponentsDrift Super Sand West End Clay & Brick

Herman serves on the board of Sea Kay as a Non-executive Director.

Human resourcesKey management positions have been filled to enable the company to strengthen the capacity of Sea Kay on project delivery,financial management, management of the day-to-day operations and grow business in the private and public sectors of theSA economy post the listing.

Key projects allocated to Sea KayThe allocation to Sea Kay of 14 361 housing units to the value of R580 million during the year 2007/2008 is a clear indication ofthe confidence both the private and public sector have in the company.

Proven track record in delivering quality construction and housing products.The 8GB award to Sea Kay is a major milestone for the company as this is recognition for successfully delivering individualprojects of more than R100 million.


Board of Directors

Pieter van der SchyfExecutive Director

Pieter received the degrees BLC, LLB from the University of Pretoria in 1986. He practised law until

2003 when he joined Sea Kay Engineering as a director. He has been involved in businesses

throughout his career. After concluding Sea Kay Engineering’s first empowerment transaction in

2003 he became involved with the company on a full-time basis. Pieter played an important role in

a number of successful negotiations which have led to the current success enjoyed by Sea Kay

Engineering. With Corné, Pieter has given Sea Kay Engineering strategic direction during the past

few years.

Corné holds a National Diploma in Civil Engineering and has vast experience spanning over

18 years in the civil engineering and construction field. Corné succeeded in building a profitable

business through his practical and academic construction knowledge. Corné is a natural leader

with great networking and interpersonal skills and is the founder member of Sea Kay Engineering.

He has built up a reputation as an astute businessman with a keen interest in a variety of business-

related topics. Corné not only achieved success in building up Sea Kay Engineering from its

inception to a large well-known and respected construction company but also succeeded in

putting together the Ibuyile Development Consortium, which is a driving force behind the well-

known N2 Gateway project in the Western Cape.

Corné KrugerChief Executive Officer

Mike is a professional engineer with Honours degrees in Civil and Structural Engineering and a

post-graduate degree in Water Utilisation Engineering. He also attended Stanford University

Business School in California.

Mike has more than 30 years’ industry experience. In 1977 he joined a construction group which was

to become a subsidiary of Group Five. Mike occupied several senior management positions within the

group during which period he was involved in large multidisciplinary projects. In 1997 he was

appointed as Chief Executive Officer, a position he held until his retirement in 2007. During his period

of tenure as CEO, Mike took the group through significant change, internationalisation and growth.

He acts as adviser to various industrial businesses and serves as Chairman of the joint civils division

of the South African Institution of Civil Engineers.Michael Harry LomasIndependent Non-executive Chairman

The board is committed to adding value to thecompany so that all stakeholders can benefit


Karin brings to the board a wealth of 23 years’ experience in the accounting and auditing market

to the board.She has extensive experience in financial management, auditing, accounting, taxation

and business consulting. She holds a BCom (Acc) degree and is a registered Professional

Accountant (SA). She joined Sea Kay from JCB Incorporated in January 2007 where she undertook

her work with drive and passion and was responsible for business consulting, training and

managing the financial team. Her integrity and hard work is an inspiration to her colleagues.

Karin van der VyverFinancial Director

Herman is a true entrepreneur who started from small beginnings working as a clerk. He sold

various products until he started Black Like Me hair products company, which became a household

name in South Africa. This manufacturing business enjoyed massive growth from inception. In July

1997, the business was sold to Colgate Palmolive and repurchased in 1999. In 2001, the products

were successfully launched in London. In 2002, a decision was taken to join the BEE arena and

Herman formed Leswikeng Minerals & Energy (Proprietary) Limited. Herman resigned as CEO of

Black Like Me in January 2004, however, he remained a major shareholder of that company until

2005 when he sold his 49,9% holding to Amka Products. Herman was elected Chairman of the

Cosmetic Industry in SA in 2004 – his brief being to guide and develop BEE initiatives.

Herman Samtseu Philip MashabaNon-executive Director

Webber combines an academic financial background with a strong entrepreneurial approach to

business. In recent years he has succeeded in building a number of profitable businesses through

knowledge of the financial markets and the balance between risk and business ventures. His keen

sense for market opportunities and the strategic approaches required to capitalise on such

opportunities will contribute significantly to the sustained future of Sea Kay. He is a natural leader

with great networking and interpersonal skills.

He founded Top Fix Holdings Limited which listed on the JSE Alternative Exchange in December

2006. This company provides scaffolding and personnel to the civil engineering industry. Webber

holds degrees in BCom (Accounting), BCompt (Hons) and MCom in taxation.

Benjamin Webber MaraisIndependent Non-executive Director


Management

Coenraad GeldenhuisContracts Manager: Sea Kay Engineering

Ivone BarnardManaging Director: Sedibeng Bricks

Jenny KrugerFinancial Director: Sedibeng Bricks

Maxala VilakaziExecutive Director: Sea Kay Engineering

Shimi MaimelaMarketing and Procurement Manager: Sea Kay Engineering

Johan WilkenGeneral Manager: Sea Kay Engineering

The senior management of Sea Kay haveextensive experience in the mass housing market


Head Office staff

Khabele MahaseContracts and Training Officer: Sea Kay Engineering

Through dedicated team effort Sea Kaystrives for industry leadership


Chairman’s statement

ListingSea Kay commenced operations at Sedibeng in the Vaal Triangle in 1998 and has enjoyedeight years of uninterrupted profit growth. A significant milestone was achieved on16 August 2007 when the group successfullylisted on the JSE Limited main board.

Sea Kay is the only listed constructioncompany focused on the delivery ofsubsidised (RDP), affordable (GAP) andbonded mass housing projects.

Transformation of Sea Kay from a privatecompany to a public entity supports the group’sgrowth strategy in the current rapidlyexpanding construction environment.

ResultsThe group produced a solid set of resultswith headline earnings per share (HEPS) andearnings per share (EPS) amounting to12,59 cents. The pre-listing statementearnings estimate was exceeded by 31%.

The listing raised R47,9 million before expensesand the group has 477 530 895 shares in issue.The market capitalisation of Sea Kay at close of

business on listing date was R883,4 million whichrepresented R1,85 per share. Marketcapitalisation has increased substantially sincethe listing to more than R1,2 billion.

Acquisition and expansionSea Kay’s stated strategy is to grow bothorganically and acquisitively. The focus goingforward is to strengthen all aspects of the housebuilding supply chain, thereby ensuringschedules and budgets are met. Continuousinnovation and project selection will delivermargin enhancement. To this end, Sea Kaybought out the other joint venture partner in theIbuyile Development Consortium on thegovernment flagship N2 Gateway project.The benefits arising from this transaction willflow in the next financial year. Capitalexpenditure programmes to the value ofR19,5 million have been approved and includethe purchase of a pre-cast concretemanufacturing facility and a roof truss assemblyplant. Both plants will be commissioned early in2008 calendar year.

Macro economic environmentFollowing many years of neglect, there is arenewed commitment to the upgrading ofSouth Africa’s infrastructure which isunderpinned by Government’s proposedexpenditure programme of R402 billion overthe next five years.

Gross domestic fixed investment has increasedfrom 14% of gross domestic product in the latenineteen nineties to 19% in 2007 with anexpectation of 25% by 2014.

More specifically for Sea Kay, the Department ofHousing intends spending R39 billion in thedelivery of affordable housing and relatedinfrastructure over the next three years.Government is committed to the long-termobjective of housing nine million people overthe next seven years.

Delivery mechanisms have changed and thecurrent trend is towards a lesser number butlarger housing schemes. This trend ideally suitsSea Kay’s business model, growth strategy andnational footprint.

Mike Lomas Independent Non-executiveChairman


Mike LomasNon-executive Chairman

ProspectsSea Kay commences the 2008 financial yearwith a record 12 month secured order book ofR728 million and additional exciting prospectsin the pipeline.

The group will focus on the furtherimplementation of IT systems and selectiverecruitment and training to support thegrowth strategy. Cashflow and working capitalwill receive focused attention in the yearahead through the negotiation of morefavourable payment terms and timeouscollection of debtors.

A firm base was established in 2007 and thegroup remains very positive about the futureand looks forward to solid growth in bothrevenue and earnings in the year ahead.

Black Economic EmpowermentSea Kay is committed to transformation of thegroup.

Subsequent to the listing, Phatsima HousingInvestments (Proprietary) Limited, led byDeputy Chairman, Herman Mashaba, held a25% BEE equity ownership of Sea Kay.

The other elements of the transformationinitiative are receiving high priority and goodprogress is being made.

Corporate governanceDuring the year the board of directors wasconstituted and now comprises of threeexecutives and three non-executives. Furtherexpansion of the board is anticipated in the

year ahead to broaden the skills andexperience base.

The board is committed to transparency,good corporate governance and standardsrecommended in the Code of CorporatePractices and Conduct in the King II Reportas well as the Listings Requirements of theJSE Limited.

The directors have pro-actively taken steps toensure that all elements required to make SeaKay fully compliant with the recommendationsincorporated in the Code have beenimplemented.

AppreciationOn behalf of the board I wish to take thisopportunity to thank Corné and his team fortheir efforts and enthusiastic commitment to thegroup. Appreciation is extended to the board fortheir guidance and support. I look forward toworking closely with them in the future.

We thank our new shareholders for supportingthe Sea Kay listing and look forward to a longand mutually beneficial relationship.

In conclusion we thank our customers andsuppliers for their loyal support and lookforward to building closer relationships in theyear ahead.

Sea Kay is the only listed constructioncompany focused on the delivery ofsubsidised affordable mass housing projects


Message from the Chief

Executive Officer

As CEO – it gives me great pleasure to presentSea Kay’s maiden annual report.

The year under review has been exciting forSea Kay, culminating in the JSE approvingthe listing of a total of 477 530 895 shares on16 August 2007 on the main board.

This past year has also been both challengingand exciting for Sea Kay, as the groupbecame the first mass housing constructioncompany to list on the main board of the JSE.This has greatly increased the group’s visibility,profile and reputation. Sea Kay’s strategy is togrow both organically and throughacquisitions. Opportunities have made thispossible, along with the hard work of our staff.

I would like to take this opportunity to thankthe management and all employees across allour operating divisions for all their supportand enthusiastic commitment.

The construction industry is currentlyexperiencing an unprecedented boom, which

in our minds, will continue past the hype of2010. There is every indication that thedemand for the products and services thatparticularly suit the capability of the group willremain positive for the foreseeable future.The buoyant South African market has thrivedand our results reflect the market conditions.

The past year has seen the group makeprogress in its long-term strategy to developand manufacture a supply chain of products toimprove the quality and delivery of finalproducts to the market.

In order to support the growth of the group,Sea Kay embarked on the implementation ofnew software. The new IT system is functionaland is currently being stress tested in parallelwith the existing system. It is anticipated thatthe switchover will be made in February 2008.The new software will improve response timesthereby enabling management and operationsto increase productivity, reduce waste andimprove cost control.

Corné Kruger Chief Executive Officer

Mike Lomas Non-executive Chairman

The company continued to perform well in thearea of its core business by focusing ondevelopment and construction of subsidised,affordable and bonded housing forGovernment and financial institutions. AlthoughSea Kay is a mass housing constructioncompany, it has undertaken the building ofschools in the areas in which it operates.Sea Kay has been able to meet crucialmilestones in the construction of 14 sites inGauteng, Mpumalanga and Western Cape.Sea Kay enjoys long standing and reliable rawmaterial supply agreements for sand, stone,cement and other essential raw materials.

The directors and senior management of thegroup endorse the Code of CorporatePractices as set out in the King ll report onCorporate Governance.

Our eight years of experience combined withinnovative practice and recent acquisitionswill drive Sea Kay to greater heights in 2008.

Corné KrugerChief Executive Officer

Our strategyis to grow bothorganicallyand throughacquisitions



Review of operations

Rural Development Programme(RDP) – Houses CONTRIBUTION TO

GROUP REVENUE 68%

The traditional RDP

house as known in the

market has undergone a

number of changes over

the past five years and

Sea Kay Engineering was a major role player

in this regard. Sea Kay Engineering improved

the RDP house by providing this market with a

metal roof truss solution, and cement tiles as

cladding material. Delivery of quality product,

in the entry level market, has resulted in a

definite upliftment of communities.

HIGHLIGHT

Some success has also been achieved in

introducing alternate topologies in order to

expand the division’s existing range of

improved products to clients.

The group is focused on subsidised,affordable and bonded housing

Sea Kay is focused on the provision of subsidy housing, more commonly known as the low cost andaffordable housing market (including the so-called “credit linked” products) as well as excellentquality bonded housing products, schools and other construction products in turnkey developments(such as hospitals, clinics, police stations and shopping centres). This construction market is bothviable and lucrative and has proven to be economically sustainable.

An improvement in operational efficiencies, coupled with higher delivery volumes, has resulted in

improved earnings.


BNG – Breaking New GroundCONTRIBUTION TO

GROUP REVENUE 8,2%

BNG stands for

“breaking new ground”

and is a term initiated

by the National

Department of Housing

for the new Government

housing policy

regarding integrated sustainable human

settlements. To ensure sustainability,

Government has decided to move away from

the traditional RDP housing units that were

very basic in concept, to the improved and

more expensive BNG model. The new BNG

housing unit will ensure that the entry level

housing unit in the integrated model allows

for different types of more expensive houses

to be built within the same area because it

was developed to fit in with more expensive

and upmarket houses. In this regard Sea Kay

(through Ibuyile) played a major role in the

development of the BNG model in the

N2 Gateway project that serves as a pilot

project for the policy of integrated

sustainable human settlements. The National

Department of Housing’s idea is to enable

families to work, live and play in the same

area with the possibility of upgrading to

bigger and better housing opportunities

without the need to leave the area every time

the family can afford a better home.

Efforts to increase offerings in the improved

housing topology have been favourably

received on certain of our larger customer

sites.

HIGHLIGHT

The N2 Gateway Delft Symphony pilot

project is the first to develop the product

intended to replace the early RDP housing

model.


Review of operations continued

Traditionally banks viewed this sector as toorisky and only funded houses and householdswith an income of more than R10 000 permonth. However, it remains a very seriouschallenge to provide housing at an affordableprice within the price range of R180 000 toR300 000 for people earning between R3 500 and R10 000 per month. Sea Kay haspositioned itself over the past few years toachieve this aim and remains one of thebiggest role players in implementingGovernment’s housing policy in this regard.

Sea Kay Engineering is currently involved in a

number of these projects, of which Cosmo-

City and Evaton West are probably the best

known.

Cosmo-City is Sea Kay Engineering’s first

major project in this market sector, with great

growth potential.

Evaton West is a fine example of quality GAP

houses currently being built.

HIGHLIGHT

This is a totally new market for Sea Kay with

great possibilities for future revenue

contribution.

GAP – Housing (Credit Linked)CONTRIBUTION TO GROUP REVENUE 0,22%GAP housing refers tothe gap that exists inthe combined incomeof people earningbetween R3 500 andR10 000. To house thisgroup of people posesan enormouschallenge to the National Department ofHousing as well as the construction industry.People earning less than R3 500 per monthqualify for full subsidised housing (BNG) andthose earning more than R10 000 wouldnormally qualify through financial institutionsfor bonds that enable them to afford normalbonded houses or flats. The challenge toprovide GAP housing has begun in order tofulfil and complete the National Departmentof Housing’s integrated model that bridgesBNG fully subsidised housing and normalentry level bonded houses. Governmentovercame the major part of this challengewhen it reached an agreement with the majorfinancial institutions through the BankingCharter whereby the major banks and otherfinancial institutions agreed with Governmentto provide financial assistance to householdswithin the income gap.


Institutional HousingCONTRIBUTION TO

GROUP REVENUEThe Social Housing model was created tobuild housing for occupation on an affordablerental basis.

Sea Kay Engineering successfully completed a

number of these units after financial year end,

of which Pennyville is currently under

construction.

HIGHLIGHT

This market is more difficult and has

challenges with management of completed

units. Expansion opportunities in this market

are very limited.

Bonded HousingCONTRIBUTION TO

GROUP REVENUE

The bonded house market is a totally new

market for Sea Kay Engineering, with great

opportunities due to the fact that it forms

part of the integrated town development

policy.

This market serves the first-time homeowner

earning in excess of R10 000 and the price of

these units ranges from R500 000 upwards.

Sea Kay is currently building bonded units in

the Cosmo-City project and this market is

expanding rapidly.

HIGHLIGHT

This is a totally new market for Sea Kay with

great possibilities for future revenue

contribution.



Up-market HousingCONTRIBUTION TO

GROUP REVENUE 8%

Mass housing projects

for corporate clients

with fast track delivery

(cost effective) is

becoming more and

more attractive and the Steelpoort

development for Xstrata is a fine example of

this kind of development. These housing

units range from 160 – 260 m2 and the

standard of finishing is high.

Xstrata Housing Project. R153 million project.

Completed within one year.

Ibuyile Development ConsortiumCONTRIBUTION TO

GROUP REVENUE 12%

Ibuyile was formed in

January 2005 with the

submission of a proposal

cum tender for the

N2 Gateway ministerial

project. The aim of this

project, approved at

Cabinet level, is to create sustainable

settlements to replace the squatter camps

along the borders of the N2 highway from

Macassar to the city of Cape Town at District

Six. It had been approved at the highest level

of government since the project is a BNG

principle deviating from previous government

policies regarding the provision of low cost

housing to the poor. The National Department

of Housing is aiming to provide a bigger and

better equipped house to replace the so-called

traditional RDP metal sheeting roof house of

30m2. A special budget has been allocated to

the project to accommodate the difference

between the subsidy amount of a traditional

RDP unit and the superior product that Ibuyile

is currently constructing on its first site in this

project. The current product is costing the

National `Department of Housing almost

double the subsidy amount available for the

traditional RDP units but has a substantially

better quality and volume – the units measure

40m2 with a tiled roof, plastered and painted

outside, a full bathroom inside with ceilings

and electrical wiring and lighting. The units

have two outside doors and the final product is

of such a superior nature that with little effort

and money spent by the owner these units

could easily be bonded by the banks. The first

phase of the project consists of a planned

22 000 units or households to be constructed

at some greenfield sites (open undeveloped

and unused areas) and some existing informal

settlements (squatter camps).


From the over 80 proposals submitted, Ibuyile

was invited to join a select panel of four

consortia that had been adjudicated to be the

best four proposals. One of the four soon

withdrew from the panel and subsequently

work had been allocated to the remaining

three consortia. The N2 Gateway project has

been plagued with funding problems widely

reported in the media and serious project

management problems. This issue was a result

of both political strain between the City of

Cape Town and the National Department of

Housing as well as non-performance by the

project management appointment by the

so-called “3m”. The 3m had been formed by

representatives of the three spheres of

Government previously led by a project

management company that has since been

replaced by Thubelisha (a section 21 non-profit

company owned by the government).

Thubelisha is currently doing a splendid job on

behalf of the National Minister of Housing.

During the latter part of 2006 Thubelisha also

managed to overcome the lack of funding by

securing an amount of R372 million directly

from the Treasury for the N2 Gateway project.

Although the project only started recently interms of the “visible” effect of the housesbeing constructed, Ibuyile has already spentmore than R130 million on its first project –called Delft Symphony precincts 1 to 6 – a 180 hectare piece of land adjacent to theCape Town airport on the north eastern side.These funds have been spent in terms ofgovernment funding for servicing land interms of MIG (municipal infrastructure grants)and UISP (upliftment of the informalsettlement programme) with civil services andprofessional design and planning (urban andarchitectural designs).

Ibuyile and all of its activities are driven bySea Kay which is also one of the two maincontractors officially employed at the projectto construct the 6 242 units together with thesocial housing component of approximately444 units. The total value of the work, which isto be completed by the end of 2008, is inexcess of R600 million.

The N2 Gateway development projectinvolves the design and construction of 6 400 residential erven, complete with bulk,linked and internal emergency services.

Land rehabilitation involved the movement of

approximately 1,3 million m3 of dune sand.



Sedibeng BricksCONTRIBUTION TO

GROUP 1%

This excellently

positioned plant

delivers bricks

throughout Gauteng

as well as parts of the

North-West,

Mpumalanga and Free State provinces.

Currently producing approximately 2,4 million

bricks per month, Sedibeng would be able to

increase this amount to 5 million bricks per

month by increasing the speed of production

of the automated machines.

High levels of service were installed by sub-

contractors, G4 Civils and Exeo Khokela who had

delivered high quality work on the Delft Symphony

Precincts.


OtherPinnacle Computer CentresCONTRIBUTION TO

GROUP REVENUE 2,58%

Construction of

51 classrooms throughout Gauteng.

Summary contribution to revenue• RDP 68,00%

• BNG 8,20%

• GAP 0,22%

• Upmarket 8,00%

• Ibuyile 12,00%

• Sedibeng Bricks 1,00%

• Other 2,58%

100,00%


Financial review

The directors are pleased to report asuccessful year for Sea Kay in terms of thegroup’s maiden results. The successfulintegration of the acquisition of thesubsidiaries resulted in an exceptionalperformance by the group.

The results only include trading activities for asix month period ended 30 June 2007 as priorto this period, Sea Kay was a dormantcompany which, on 1 January 2007, acquiredits two (wholly owned) subsidiaries, namelySea Kay Engineering Services (Proprietary)Limited and Seriso 474 (Proprietary) Limited(Sedibeng Bricks).

No comparative figures are therefore presented.

Revenue and operating profitThe group achieved a profit after taxof R41,1 million and revenue of R250 million.Effective control measures implemented duringthe year throughout the group also contributedto the bottom line. The company concludedsignificant new contracts in the latter part of thefinancial period under review and consequentlyit is anticipated by the directors that there willbe a continuing growth trend in the subsequentperiod. The mass house market is buoyant atpresent and the turnover for the next financialyear is expected to increase by about 45%(comparing month to month). The order bookfor the next year has been secured and thegroup is in a strong position to produce goodresults in 2008.

Earnings per share and dividendsBoth headline earnings per share (HEPS) andearnings per share (EPS) amounted to12,59 cents. The earnings estimate contained inthe pre-listing statement was exceeded by 31%.

No dividends were paid during the year exceptfor dividends of R2,8 million declared and paidby Sea Kay Engineering to one of the ex-shareholders prior to the listing. Currentlythe cash available and cash generated by thebusiness will be invested in the continuedgrowth of the group’s activities.

Net assetsAt the year end, net assets were R144,8 million(of which goodwill amounted to R77,6 million)which arose on acquisition of the variousbusinesses. Goodwill was evaluated and isconsidered to be fairly valued.

Current assetsAt year end current assets were R146,6 million.A significant proportion of this balance wastrade and other receivables amounting toR121,7 million. Provision for bad debts ofR3,3 million was made as the recoverabilityis uncertain.

Shareholders’ fundAt the year end shareholders’ funds stood atR144,8 million of which R38,2 millionrepresented distributable reserves.

Cash flowAt year end the group was cash negative witha balance of R7,4 million.

Despite the exceptional performance inoperating profit, the cash generated fromoperations was negative of R48 million. This isprimarily due to the rapid expansion andgrowth in revenue and due to contractconditions in terms of payment. This is notunexpected and the short- to medium-termtarget of the group is to increase the cashposition in operations going forward.

Cash inflows from investing activitiesamounted to R17,7 million. Investment inproperty, plant and equipment throughbusiness combinations of R12,2 million wasspent. In addition cash inflows of R30,5 millionwere recorded on acquisition of the twosubsidiaries.

Net cash generated from financing activities ofR29,3 million reflects the raising of additionaldebt and dividends paid of R2,8 million.

All of the above resulted in net cash used ofR7,4 million. Finance costs of R4,8 million ismainly made up of financial liabilities andloans. The effective tax rate of 7,2% is lowerthan the South African statutory tax rate of29% due to the effect of section 24C onallowances for construction contracts. Nodeferred tax asset has been recognised onallowances in previous years due to theunpredictability of future profit streams.

The group will continue to review its currentbusinesses as well as further opportunities:– to enhance profit margins– to generate cash– to take an interest in strategic investments– to supply itself with all the essential building

methods and materials in the supply chain.


Corporate governance report

Compliance with the King IIReport on Corporate GovernanceThe board of directors confirms that the

company is in the process of ensuring

compliance with the provisions of the Code

of the King Report on Corporate Governance.

An internal audit function has been

established and functions independently from

the audit and financial management of the

company.

Code of ethicsSea Kay is in the process of establishing its

own code of ethics and aims to have this

code fully implemented before the end of the

next financial year. Some of the broad

principles underlying the proposed code are:

• Compliance with all relevant statutory and

regulatory provisions;

• Operating and managing the group’s

affairs with the highest standards of

professional and business ethics in a

transparent manner;

• Respecting the environment in which the

company operates as well as contributing

towards the relevant stakeholders living in

and sharing that environment;

• Avoiding all potential conflicts of interest

by being transparent in the declaration of

all such interests; and

• Providing a working environment that will

provide all employees the opportunity to

grow and advance themselves.

Board meetingsThe first two board meetings were held on

12 September 2007 and 29 October and

attended by the full board of directors. The

board will in future, meet at least four times

during the financial year.

Operation of the boardThe board sets strategic objectives and agrees

performance criteria. It further delegates the

planning, implementation and management,

within relevant risk parameters, to

management. Achievements and conformance

with agreed parameters is monitored through

regular performance reports. The board will

retain full and effective control over the

business of Sea Kay.

Matters reserved for the boardThe board reserves the approval of certainmatters to itself. These matters include, butare not restricted to:• Approval of financial statements;• Payment of dividends;• Capital expenditure plan;• Major capital intensive projects; and• Major changes to the group’s management

and control structure.

Company secretaryAll directors have access to the advice of thecompany secretary and through his office toindependent professional advice, at thecompany’s expense.

The company secretary is responsible forproviding the chairman and directors,individually and collectively, with advice oncorporate governance, compliance withlegislation and the JSE Listing Requirements.

Separation of the roles of chairmanand chief executive officerThe board is chaired by Mr MH Lomas, anindependent non-executive director. Thechairman is responsible for providingleadership to the board, overseeing itsefficient operation and has been tasked withensuring effective Corporate Governancepractices.

The chief executive officer, Corné Kruger, isresponsible for formulating, implementing andmaintaining the strategic direction of Sea Kay,as well as ensuring that the day-to-day affairsof the Group are appropriately supervisedand controlled.


Corporate governance report continued

determining policies and processes whichseek to ensure the integrity of Sea Kay’s riskmanagement and internal controls,implementing and maintaining Sea Kay’scommunication policy and overseeingdirector selection, orientation and evaluation.

Board committeesThe responsibilities delegated to thecommittees have been formally documentedin terms of reference for that committee,which have been approved by the board andwill be reviewed annually. The effectiveness ofthe committees will be reviewed annually bythe board, based on a self-evaluationundertaken by each committee of the degreeto which that committee has fulfilled its termsof reference.

Audit committeeThe audit committee is chaired by BW Marais,a non-executive director. The committeeconsists of two independent non-executivedirectors. The other member is MH Lomasand it is the intention of the committee to co-opt other suitably qualified persons to thecommittee. It is intended that the committeewill meet at least four times a year and isresponsible for assisting the board in fulfillingits responsibilities in respect of financialreporting issues, internal and external auditmanagement, ensuring compliance with lawsand regulations, risk management anddevelopment/maintenance of an effectiveinternal control system. Committee membershave unrestricted access to information andmanagement of Sea Kay and, whereappropriate, may seek the advice ofindependent professionals on mattersconcerning the affairs of Sea Kay, at theexpense of Sea Kay.

The audit committee sets the principles forrecommending the use of the externalauditors for non-audit purposes, whichinclude:• Tax services, including advice on tax

planning and transfer pricing issues;

The roles of chairman and chief executiveofficer of the company are separate.

Stakeholders communicationThe directors promote dialogue with businessanalysts and other stakeholders and appreciatethe value of good media relationships. Theexecutive directors and the chairman have beentasked with promoting these relationships.

In all communications with stakeholders, theboard aims to present a balanced andunderstandable assessment of Sea Kay’sposition. This will be achieved throughadhering to principles of openness andsubstance over form and striving to addressmaterial matters of significant interest andconcern to all stakeholders.

The board will encourage shareholderattendance at general meetings and whereappropriate, provide full and understandableexplanations of the effects of resolutions tobe proposed.

Communication with institutional shareownersand investment analysts will be maintainedthrough periodic presentations of financialresults, one-on-one visits, trading statementsand press announcements of interim andfinal results, as well as the pro-activedissemination of any messages consideredrelevant to investors.

BoardThe board comprises of three executivedirectors (Messrs C Kruger, P van der Schyfand Ms K van der Vyver) and three non-executive directors (Messrs MH Lomas, BW Marais and HSP Mashaba, with MessrsMH Lomas and BW Marais beingindependent).

The board’s responsibilities include providingSea Kay with clear strategic direction,ensuring that there is adequate successionplanning at senior levels, overseeingoperational performance and management,


• Corporate restructuring;• Merger and acquisition advice; and• Training.Remuneration and nomination committeeThe remuneration and nomination committeeis chaired by MH Lomas, an independentnon-executive director. The committeeconsists of three non-executive directors,two of whom are independent. The currentmembers are:• MH Lomas;• BW Marais; and• HSP Mashaba.

The committee will meet at least once a yearand is responsible for assisting the board infulfilling its responsibilities in respect ofmaintaining an appropriate remunerationstrategy, ensuring Sea Kay’s directors andsenior executives are fairly rewarded,providing for succession planning, assessingthe effectiveness of the composition of theboard and evaluating the performances ofthe board and individual directors. Theremuneration strategy is aimed at ensuringthat levels of remuneration are sufficient toattract, retain and motivate executives and,where appropriate, aimed at aligning theexecutives’ interests with those ofshareholders. Consequently, an element ofthe strategy is aimed at ensuring that theperformance-related elements of theexecutives’ remuneration should constitute agrowing portion of total remuneration.

This committee is responsible for vetting theindividuals proposed for directorship andmaking recommendations to its full board forapproval. New directors will be taken througha formal induction programme.


Social responsibility

EnvironmentSea Kay recognises that its activities have an

impact on the environment. Prior to

commencing construction activities, Sea Kay

will plan the effect that construction activities

will have on the area, and then undertake an

Environmental Management Plan, to be used

during the construction phase to protect the

environment. The group will regularly review

its activities and compliance with all relevant

legislation.

HIV/AidsSea Kay acknowledges the seriousness of the

HIV/Aids pandemic in the workplace and its

impact in South Africa.

Employment equityThe group is committed to providing equal

opportunities to all its employees.

A transformation committee will be

established to support and oversee the

employment process of all new employees.

Sea Kay maintains an environment that

provides equal opportunities for all

employees. The transformation committee

will oversee the implementation of

employment equity policies and procedures

within the group. The committee will be

responsible for monitoring transformation

progress, discussing items such as

recruitment, development, promotion,

resignation and dismissals.

The committee will meet quarterly.

The transformation committee’s objectives

are to:

• Ensure compliance with legislation;

• Monitor the attainment of targets and

objectives set out in the employment

equity plan;

• Monitor employment equity programmes

such as training, mentoring and skills

development;

• Review targets, appointments, promotions

and general employment equity matters;

and

• Communicate the company’s employment

equity activities to relevant target

audiences.

The transformation committee will formulate

its plan for the next few years, which will

include special attention to career

development planning for historically

disadvantaged employees as part of the

group’s continued training and development.

Skills development/trainingSite training and a skills development

programme in place to create the necessary

skills within the local communities in which

Sea Kay works. A dedicated lecturer has been

appointed to prepare proper work instructions

and an integrated learning programme. Sea

Kay is currently in the process of introducing a

bursary system, which will come into effect

during the next year.

Health and safetyGiven that its employees are its most

valuable asset, ensuring their health and

safety is both a duty and a commitment for

Sea Kay.

All activities are undertaken in accordance with

Sea Kay’s safety policy and all related

legislation, including the Occupational Health

and Safety Act. By taking the initiative and

recognising the importance of quality and

safety in the workplace, Sea Kay ensures

productivity. Risk analysis is the cornerstone of

the company’s safety management programme.


ContentsDirectors’ responsibilities and approval 26

Report of the independent auditors 27

Declaration by company secretary 28

Directors’ report 29

Balance sheet 32

Income statement 33

Statement of changes in equity 34

Cash flow statement 35

Accounting policies 36

Notes to the financial statements 47

Financials 2007


The directors are required by the Companies Act of South Africa, 1973, to maintain adequateaccounting records and are responsible for the content and integrity of the financial statementsand related financial information included in this report. It is their responsibility to ensure thatthe financial statements fairly present the state of affairs of the company as at the end of thefinancial year and the results of its operations and cash flows for the period then ended, inconformity with International Financial Reporting Standards. The external auditors are engagedto express an independent opinion on the financial statements.

The financial statements are prepared in accordance with International Financial ReportingStandards and are based upon appropriate accounting policies consistently applied andsupported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financialcontrol established by the company and place considerable importance on maintaining a strongcontrol environment. To enable the directors to meet these responsibilities, the board of directorssets standards for internal control aimed at reducing the risk of error or loss in a cost effectivemanner. The standards include the proper delegation of responsibilities within a clearly definedframework, effective accounting procedures and adequate segregation of duties to ensure anacceptable level of risk. These controls are monitored throughout the company and all employeesare required to maintain the highest ethical standards in ensuring the company’s business isconducted in a manner that in all reasonable circumstances is above reproach. The focus of riskmanagement in the company is on identifying, assessing, managing and monitoring all knownforms of risk across the company. While operating risk cannot be fully eliminated, the companyendeavours to minimise it by ensuring that appropriate infrastructure, controls, systems andethical behaviour are applied and managed within pre-determined procedures and constraints.

The directors are of the opinion, based on the information and explanations given bymanagement, that the system of internal control provides reasonable assurance that the financialrecords may be relied on for the preparation of the financial statements. However, any system ofinternal financial control can provide only reasonable, and not absolute, assurance againstmaterial misstatement or loss.

The directors have reviewed the company’s cash flow forecast for the year to 30 June 2008 and, inthe light of this review and the current financial position, they are satisfied that the company hasaccess to adequate resources to continue in operational existence for the foreseeable future.

Although the board of directors is primarily responsible for the financial affairs of the company,they are supported by the company's external auditors.

The external auditors are responsible for independently reviewing and reporting on thecompany's financial statements. The financial statements have been examined by the company'sexternal auditors and their report is presented on page 27.

The financial statements set out on pages 29 to 60, which have been prepared on the goingconcern basis, were approved by the board of directors on 20 September 2007 and were signedon its behalf by:

C Kruger P van der SchyfDirector Director

Directors’ responsibilitiesand approval


Report of the independent auditors

TO THE SHAREHOLDERS OF SEAKAY HOLDINGS LIMITED

Report on the financial statementsWe have audited the annual financial statements of Seakay Holdings Ltd which comprise thedirectors' report, the balance sheet as at 30 June 2007, the income statement, the statement ofchanges in equity and cash flow statement for the period then ended, a summary of significantaccounting policies and other explanatory notes.

Directors' responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these financialstatements in accordance with the International Financial Reporting Standards, and in themanner required by the Companies Act of South Africa. This responsibility includes: designing,implementing and maintaining internal control relevant to the preparation and fair presentationof financial statements that are free from material misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies; and making accounting estimates thatare reasonable in the circumstances.

Auditor's responsibilityOur responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgement, including the assessment of the risks of material misstatement of the financialstatements, 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 thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the directors, as well asevaluating the overall presentation of the financial statements.

OpinionIn our opinion, the financial statements fairly present, in all material aspects, the financialposition of the company at 30 June 2007, and the results of its operations and cash flows for theperiod then ended in accordance with International Financial Reporting Standards, and in themanner required by the Companies Act in South Africa.

SAB & T Inc.Chartered Accountants (SA)Registered Accountants and Auditors

Johannesburg20 September 2007


Declaration by company secretary

I certify that the requirements as stated in section 268G(d) of the Companies Act have been met

and that all returns, as are required of a public company in terms of the aforementioned Act,

have been submitted and that such returns are, to the best of my knowledge, true, correct and

up to date.

MN Hattingh

Company Secretary

Centurion

20 September 2007


The directors submit their report for the year ended 30 June 2007.

IncorporationThe company was incorporated on 20 February 2006 and obtained its certificate to commencebusiness on the same day. On 20 July 2007, the company was converted into a public companyand changed its name to Sea Kay Holdings Limited.

Review of activitiesSea Kay is a holding company of a number of subsidiary companies and joint ventures,

principally engaged in construction and engineering, materials, services and building contract

activities.

The operating results and state of affairs of the group are fully set out in the attached financialstatements and do not in our opinion require any further comment.

Net profit of the group was R41,1 million after taxation of R4,3 million.

Post balance sheet eventsThe company listed on the JSE Limited on 16 August 2007, and has since completed theacquisition of an additional 45% of the Ibuyile Development Consortium.

Special resolutionsSubsequent to year end, special resolutions were passed relating to:• the conversion of the company into a public company;• the adoption of new Memorandum and Articles of Association; and• the restructure of the authorised and issued share capital.

Authorised and issued share capitalThe authorised and issued share capital of the company was subdivided during the period underreview. The authorised shares were increased to 3 000 000 000 shares with a par value ofR0,0000003334. The number of issued shares increased from 100 to 424 530 895.

In terms of the company listing, 47 948 790 shares were privately placed at an issue price ofR1,00 each.

As a result of the above issues and conversions, share premium of R106,5 million was raised afteraccounting for share issue expenses.

Dividends paidThe dividends already declared and paid to shareholders during the period are as reflected inthe attached statement of changes in equity.

Directors’ report


Directors’ report continued

Directors’ emolumentsCompany

Basic Expense contri-salary Bonus allowances butions Total

Executive directors R’000 R’000 R’000 R’000 R’000

2007Paid by Sea Kay Engineering Services(Proprietary) Limited

C Kruger 638 – 24 23 685P van der Schyf 557 – – – 557K van der Vyver 212 – – – 212

1 407 – 24 23 1 454

Paid by Seriso 474(Proprietary) Limited

C Kruger 122 – – – 122

122 – – – 122

Servicesas director Total

Non-executive directors R’000 R’000

2007 – –None

Interests of directorsAt 30 June 2007, the directors of the company held direct and indirect beneficial interest in thecompany’s issued ordinary shares. Subsequent to year end, additional shares were issued priorto or on the listing date. Details of ordinary shares held per individual director are listed below.

30 June 30 June 16 August 16 August2007 2007 2007 2007

Beneficial Direct Indirect Direct IndirectC Kruger and associates – 57 878 091 – 60 003 696P van der Schyf and associates – 45 790 499 – 45 790 499HS Mashaba and associates – 119 382 825 – 119 382 825BW Marais and associates – 25 001 943 – 25 371 161K van der Vyver – – – 1 500 000MH Lomas – – 3 000 000 –

Total – 248 053 358 3 000 000 252 048 181

At the date of this report, these interests remain unchanged.


Interest in subsidiariesName of subsidiary Country of incorporation Net income after tax (R)Sea Kay Engineering Services (Proprietary) South Africa 39,1 millionLimitedSeriso 474 (Proprietary) Limited South Africa 2 million

Details of the group's investment in subsidiaries are set out in note 4.

AuditorsSAB&T will continue in office in accordance with section 270(2) of the Companies Act.

Balance sheetas at 30 June 2007

Group Company2007 2007

NOTES R’000 R’000

ASSETSNon-current assetsProperty, plant and equipment 2 10 991 –Goodwill 3 77 588 –Investments in subsidiaries 4 – 104 485Loans to group companies 6 – 2 431

88 579 106 916

Current assetsInventories 10 9 940 –Other financial assets 8 573 –Current tax receivable 18 1 050 –Construction contracts and receivables 11 12 184 –Trade and other receivables 12 121 698 –Cash and cash equivalents 13 1 147 –

146 592 –

Total assets 235 171 106 916

EQUITY AND LIABILITIESEquityShare capital 14 106 536 106 536Distributable reserve 38 280 –

144 816 106 536

LiabilitiesNon-current liabilitiesOther financial liabilities 15 13 243 –Finance lease obligation 16 3 120 –Deferred tax 9 2 896 –

19 259 –

Current liabilitiesLoans from shareholders 7 10 761 –Other financial liabilities 15 3 185 –Finance lease obligation 16 1 909 –Trade and other payables 19 45 901 380Provisions 17 747 –Bank overdraft 13 8 593 –

71 096 380

Total liabilities 90 355 380

Total equity and liabilities 235 171 106 916


Income statement



Revenue 20 250 301 –Cost of sales (183 725) –

Gross profit 66 576 –Other income 195 –Operating expenses (18 830) –

Operating profit 21 47 941 –Investment revenue 22 2 370 –Finance costs 23 (4 882) –

Profit before taxation 45 429 –Taxation 24 (4 318) –

Profit for the period 41 111 –

for the year ended 30 June 2007


Statement of changes in equityfor the year ended 30 June 2007

Share Share Total share Distributable Total capital premium capital reserve equityR’000 R’000 R’000 R’000 R’000

GroupBalance at 01 July 2006 – – – – –Changes in equityfor the year 41 111 41 111Issue of shares – 106 536 106 536 106 536Dividends paid – (2 831) (2 831)

Total changes – 106 536 106 536 38 280 144 816

Balance at 30 June 2007 – 106 536 106 536 38 280 144 816

NOTE 14 14 14

CompanyBalance at 01 July 2006 – – – – –Changes in equityIssue of shares – 106 536 106 536 106 536

Total changes – 106 536 106 536 – 106 536

Balance at 30 June 2007 – 106 536 106 536 – 106 536

NOTE 14 14 14


Cash flow statement for the year ended 30 June 2007




Cash flow from operating activitiesCash receipts from customers 135 106 –Cash paid to suppliers and employees (183 161) 380

Cash (used in)/generated from operations 25 (48 055) 380Interest income 2 370 –Finance costs (4 846) –Tax paid 26 (3 935) –Other non-cash item – –

Net cash from operating activities (54 466) 380

Cash flows from investing activitiesPurchase of property, plant and equipment 2 (12 282) –Sale of property, plant and equipment 2 67 –Acquisition of businesses (includingsubsidiaries, joint ventures and associates) 28 30 458Loans advanced to group companies – (2 431)Repayment of loans (573) –

Net cash from investing activities 17 670 (2 431)

Cash flows from financing activitiesAdvances of other financial liabilities 16 428 –Advances of shareholders' loans 10 761 –Finance lease payments 4 992 –Dividends paid 27 (2 831) –Other non-cash item – 2 051

Net cash from financing activities 29 350 2 051

Total cash movement for the period (7 446) –Cash at beginning of the period – –

Total cash at end of the period 13 (7 446) –


Accounting policies

1. PRESENTATION OF FINANCIAL STATEMENTS

The financial statements have been prepared in accordance with International Financial

Reporting Standards, and the Companies Act of South Africa, 1973. The financial statements

have been prepared on the historical cost basis, and incorporate the principal accounting

policies set out below.

These accounting policies are consistent with the previous period.

1.1 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:

• It is probable that future economic benefits associated with the item will flow to the

company; and

• The cost of the item can be measured reliably.

Costs include costs incurred initially to acquire or construct an item of property, plant

and equipment and costs incurred subsequently to add to, replace part of, or service

it. If a replacement cost is recognised in the carrying amount of an item of property,

plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the

site on which it is located is also included in the cost of property, plant and equipment.

Property, plant and equipment is carried at cost less accumulated depreciation and

any impairment losses.

Item Average useful life

Plant and machinery 7

Furniture and fixtures 6

Motor vehicles 5

Office equipment 6

IT equipment 3

The residual value and the useful life of each asset are reviewed at each financial

period end.

Each part of an item of property, plant and equipment with a cost that is significant in

relation to the total cost of the item shall be depreciated separately.

The depreciation charge for each period is recognised in profit or loss unless it is

included in the carrying amount of another asset.



1.1 Property, plant and equipment (continued)

The gain or loss arising from the derecognition of an item of property, plant and

equipment is included in profit or loss when the item is derecognised. The gain or loss

arising from the derecognition of an item of property, plant and equipment is

determined as the difference between the net disposal proceeds, if any, and the

carrying amount of the item.

1.2 Investment in joint ventures

Group financial statements

An investment in a joint venture is accounted for by using the proportionate

consolidation method, except when the asset is classified as held-for-sale. Under the

proportionate consolidation method the group’s share of each of the assets, liabilities,

income and expenses of the investment is combined line by line with similar items in

the group financial statements. The use of proportionate consolidation is discontinued

from the date on which it ceases to have joint control over a jointly controlled entity.

An investment in a joint venture is accounted for by using the equity method, except

when the asset is classified as held-for-sale. Under the equity method, the investment

in a joint venture is initially recognised at cost and the carrying amount is increased or

decreased to recognise the group's share of the profits or losses of the investee after

acquisition date. The use of the equity method is discontinued from the date on which

it ceases to have joint control over, or have significant influence in, a jointly controlled

entity.

Company financial statements

An investment in a joint venture is carried at cost less any accumulated impairment.

Profits and losses resulting from contributions or sale of assets to joint ventures are

only recognised to the extent of other venturers' interests in the joint venture.

The group's share of profits or losses, resulting from purchase of assets from joint

ventures, are recognised only when the assets are resold to an independent party.

In respect of its interests in jointly controlled operations, the company recognises in its

financial statements:

• The assets that it controls and the liabilities that it incurs; and

• The expenses that it incurs and its share of the income that it earns from the sale of

goods or services by the joint venture.

In respect of its interest in jointly controlled assets, the company recognises in its

financial statements:


Accounting policies continued

1.2 Investment in joint ventures (continued)

• Its share of the jointly controlled assets, classified according to the nature of the assets;

• any liabilities that it has incurred;

• Its share of any liabilities incurred jointly with the other venturers in relation to the

joint venture;

• Any income from the sale or use of its share of the output of the joint venture,

together with its share of any expenses incurred by the joint venture; and

• Any expenses that it has incurred in respect of its interest in the joint venture.

1.3 Financial instruments

Initial recognition

The company classifies financial instruments, or their component parts, on initial

recognition as a financial asset, a financial liability or an equity instrument in

accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the group's balance sheet

when the group becomes party to the contractual provisions of the instrument.

Loans to/from group companies

These include loans to holding companies, fellow subsidiaries, subsidiaries, joint ventures

and associates and are recognised initially at fair value plus direct transaction costs.

Subsequently these loans are measured at amortised cost using the effective interest

rate method, less any impairment loss recognised to reflect irrecoverable amounts.

On loans receivable an impairment loss is recognised in profit or loss when there is

objective evidence that it is impaired. The impairment is measured as the difference

between the investment’s carrying amount and the present value of estimated future

cash flows discounted at the effective interest rate computed at initial recognition.

Impairment losses are reversed in subsequent periods when an increase in the

investment’s recoverable amount can be related objectively to an event occurring after

the impairment was recognised, subject to the restriction that the carrying amount of

the investment at the date the impairment is reversed shall not exceed what the

amortised cost would have been had the impairment not been recognised.

Loans to shareholders, directors, managers and employees

These financial assets are measured initially at fair value plus direct transaction costs.

Subsequently these loans are measured at amortised cost using the effective interest

rate method, less any impairment loss recognised to reflect irrecoverable amounts.



1.3 Financial instruments (continued)

On loans receivable an impairment loss is recognised in profit or loss when there is

objective evidence that it is impaired. The impairment is measured as the difference








Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are

subsequently measured at amortised cost using the effective interest rate method.

Appropriate allowances for estimated irrecoverable amounts are recognised in profit

or loss when there is objective evidence that the asset is impaired. The allowance

recognised is measured as the difference between the asset’s carrying amount and the

present value of estimated future cash flows discounted at the effective interest rate

computed at initial recognition.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at

amortised cost, using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other

short-term highly liquid investments that are readily convertible to a known amount of

cash and are subject to an insignificant risk of changes in value. These are initially and

subsequently recorded at fair value.

Bank overdrafts and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are

subsequently measured at amortised cost, using the effective interest rate method.

Any difference between the proceeds (net of transaction costs) and the settlement or

redemption of borrowings is recognised over the term of the borrowings in accordance

with the group’s accounting policy for borrowing costs.

The borrowing powers of Sea Kay and its subsidiaries are set out in their Articles of

Association and are unlimited.



1.3 Financial instruments (continued)

Held to maturity and loans and receivables

These financial assets are initially measured at fair value plus direct transaction costs.

At subsequent reporting dates these are measured at amortised cost using the

effective interest rate method, less any impairment loss recognised to reflect

irrecoverable amounts. An impairment loss is recognised in profit or loss when there is

objective evidence that the asset is impaired, and is measured as the difference








1.4 Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a

liability. If the amount already paid in respect of current and prior periods exceeds the

amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the

amount expected to be paid to (recovered from) the tax authorities, using the tax rates

(and tax laws) that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to

the extent that the deferred tax liability arises from the initial recognition of an asset or

liability in a transaction which at the time of the transaction, affects neither accounting

profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences to the

extent that it is probable that taxable profit will be available against which the

deductible temporary difference can be utilised. A deferred tax asset is not recognised

when it arises from the initial recognition of an asset or liability in a transaction that, at

the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for the carry forward of unused tax losses and

unused STC credits to the extent that it is probable that future taxable profit will be

available against which the unused tax losses and unused STC credits can be utilised.



1.4 Tax (continued)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

to the period when the asset is realised or the liability is settled, based on tax rates (and

tax laws) that have been enacted or substantively enacted by the balance sheet date.

Tax expenses

Current and deferred taxes are recognised as income or an expense and included in

profit or loss for the period, except to the extent that the tax arises from:

• A transaction or event which is recognised, in the same or a different period, directly

in equity; or

• A business combination.

Current tax and deferred taxes are charged or credited directly to equity if the tax

relates to items that are credited or charged, in the same or a different period, directly

to equity.

1.5 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and

rewards incidental to ownership. A lease is classified as an operating lease if it does

not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the balance sheet at amounts

equal to the fair value of the leased property or, if lower, the present value of the

minimum lease payments. The corresponding liability to the lessor is included in the

balance sheet as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease

payments is the interest rate implicit in the lease.

The lease payments are apportioned between the finance charge and reduction of the

outstanding liability.The finance charge is allocated to each period during the lease

term so as to produce a constant periodic rate of interest on the remaining balance

of the liability.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over

the lease term. The difference between the amounts recognised as an expense and

the contractual payments are recognised as an operating lease asset. This liability is

not discounted.



1.6 Inventories

Inventories are measured at the lower of cost and net realisable value.

Inventories are measured at the lower of cost and net realisable value on the first-in,

first-out basis.

1.6 Inventories (continued)

Net realisable value is the estimated selling price in the ordinary course of business less

the estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories comprises all costs of purchase, costs of conversion and other

costs incurred in bringing the inventories to their present location and condition.

The cost of inventories of items that are not ordinarily interchangeable and goods or

services produced and segregated for specific projects is assigned using specific

identification of the individual costs.

The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same

cost formula is used for all inventories having a similar nature and use to the entity.

When inventories are sold, the carrying amount of those inventories are recognised as

an expense in the period in which the related revenue is recognised. The amount of

any write-down of inventories to net realisable value and all losses of inventories are

recognised as an expense in the period the write-down or loss occurs. The amount of

any reversal of any write-down of inventories, arising from an increase in net realisable

value, are recognised as a reduction in the amount of inventories recognised as an

expense in the period in which the reversal occurs.

1.7 Construction contracts and receivables

Where the outcome of a construction contract can be estimated reliably, contract

revenue and costs are recognised by reference to the stage of completion of the

contract activity at the balance sheet date, as measured by surveys of work done.

Variations in contract work, claims and incentive payments are included to the extent

that they have been agreed with the customer.

When the outcome of a construction contract cannot be estimated reliably, contract

revenue is recognised to the extent that contract costs incurred are recoverable.

Contract costs are recognised as an expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the

expected loss is recognised as an expense immediately.



1.8 Impairment of assets

The company assesses at each balance sheet date whether there is any indication that

an asset may be impaired. If any such indication exists, the company estimates the

recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the group also:

• Tests intangible assets with an indefinite useful life or intangible assets not yet

available for use for impairment annually by comparing its carrying amount with its

recoverable amount. This impairment test is performed during the annual period

and at the same time every period; and

• Tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is

estimated for the individual asset. If it is not possible to estimate the recoverable

amount of the individual asset, the recoverable amount of the cash-generating unit to

which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair

value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying

amount of the asset is reduced to its recoverable amount. That reduction is an

impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or

amortisation is recognised immediately in profit or loss. Any impairment loss of a

revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to

each of the cash-generating units, or groups of cash-generating units, that are

expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable amount of

the unit is less than the carrying amount of the unit. The impairment loss is allocated to

reduce the carrying amount of the assets of the unit in the following order:

• First, to reduce the carrying amount of any goodwill allocated to the cash-

generating 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 entity assesses at each reporting date whether there is any indication that an

impairment loss recognised in prior periods for assets other than goodwill may no

longer exist or may have decreased. If any such indication exists, the recoverable

amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal

of an impairment loss does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation

or amortisation other than goodwill is recognised immediately in profit or loss. Any

reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.9 Provisions and contingencies

Provisions are recognised when:

• The company has a present obligation as a result of a past event;

• It is probable that an outflow of resources embodying economic benefits will be

required to settle the obligation; and

• A reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be

required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be

reimbursed by another party, the reimbursement shall be recognised when, and only

when, it is virtually certain that reimbursement will be received if the entity settles the

obligation. The reimbursement shall be treated as a separate asset. The amount

recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract

shall be recognised and measured as a provision.

A constructive obligation to restructure arises only when an entity:

• Has a detailed formal plan for the restructuring, identifying at least:

– the business or part of a business concerned;

– the principal locations affected;

– the location, function, and approximate number of employees who will be

compensated for terminating their services;

– the expenditures that will be undertaken; and

– when the plan will be implemented; and



1.9 Provisions and contingencies (continued)

• Has raised a valid expectation in those affected that it will carry out the restructuring

by starting to implement that plan or announcing its main features to those affected

by it.

After their initial recognition contingent liabilities recognised in business combinations

that are recognised separately are subsequently measured at the higher of:

• The amount that would be recognised as a provision; and

• The amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are

disclosed in note 30.

1.10 Revenue

Revenue from the sale of goods is recognised when all the following conditions have

been satisfied:

• The company has transferred to the buyer the significant risks and rewards of

ownership of the goods;

• The company 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 group; and

• The costs incurred or to be incurred in respect of the transaction can be measured

reliably.

When the outcome of a transaction involving the rendering of services can be

estimated reliably, revenue associated with the transaction is recognised by reference

to the stage of completion of the transaction at the balance sheet date. The outcome

of a transaction can be estimated reliably when all the following conditions are

satisfied:

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to

the company;

• The stage of completion of the transaction at the balance sheet date can be

measured reliably; and

• The costs incurred for the transaction and the costs to complete the transaction can

be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be

estimated reliably, revenue shall be recognised only to the extent of the expenses

recognised that are recoverable.

1.10 Revenue (continued)

Service revenue is recognised by reference to the stage of completion of the

transaction at balance sheet date. Stage of completion is determined by surveys of

work performed.

Contract revenue comprises:

• The initial amount of revenue agreed in the contract; and

• Variations in contract work, claims and incentive payments:

– to the extent that it is probable that they will result in revenue; and

– they are capable of being reliably measured.

Revenue is measured at the fair value of the consideration received or receivable and

represents the amounts receivable for goods and services provided in the normal

course of business, net of trade discounts, volume rebates, and value added tax.

Interest is recognised, in profit or loss, using the effective interest rate method.

Dividends are recognised, in profit or loss, when the company’s right to receive

payment has been established.

1.11 Turnover

Turnover comprises sales to customers and service rendered to customers. Turnover is

stated at the invoice amount and is exclusive of value added taxation.

1.12 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as

an expense in the period in which the related revenue is recognised. The amount of

any write-down of inventories to net realisable value and all losses of inventories are

recognised as an expense in the period the write-down or loss occurs. The amount of

any reversal of any write-down of inventories, arising from an increase in net realisable

value, is recognised as a reduction in the amount of inventories recognised as an

expense in the period in which the reversal occurs.

Contract costs comprise:

• Costs that relate directly to the specific contract;

• Costs that are attributable to contract activity in general and can be allocated to the

contract; and

• Such other costs as are specifically chargeable to the customer under the terms of

the contract.

1.13 Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.


Accounting policies continuedfor the year ended 30 June 2007


Notes to the financial statementsfor the year ended 30 June 2007

2007Cost/ Accumulated Carrying

valuation depreciation valueGroup R’000 R’000 R’000

2. PROPERTY, PLANT AND EQUIPMENTPlant and machinery 10 592 (2 324) 8 268Furniture and fixtures 34 (30) 4Motor vehicles 3 664 (1 075) 2 589Office equipment 149 (103) 46IT equipment 225 (141) 84

Total 14 664 (3 673) 10 991

Reconciliation of property, plant and equipment – Group – 2007

Additionsthrough

Opening businessbalance combinations Depreciation Total

Plant and machinery – 9 037 (769) 8 268Furniture and fixtures – 8 (4) 4Motor vehicles – 3 072 (483) 2 589Office equipment – 57 (11) 46IT equipment – 108 (24) 84

Total – 12 282 (1 291) 10 991

Assets subject to finance lease (netcarrying amount)

Plant and machinery 1 989 1 614Motor vehicles 1 844 1 562

3 833 3 176

A register containing the information required by paragraph 22(3) of Schedule 4 of theCompanies Act is available for inspection at the registered office of the company.

3. GOODWILL2007

Cost/ Accumulated CarryingGroup valuation depreciation value

Goodwill 77 588 – 77 588

Reconciliation of good will – Group – 2007

Additionsthrough

Opening businessGroup balance combinations Total

Goodwill – 77 588 77 588


4. INVESTMENTS IN SUBSIDIARIES

Carrying% holding amount

Name of company Held by 2007 2007R’000

Sea Kay Engineering Services Sea Kay Holdings Limited 100 94 485(Proprietary) Limited

Seriso 474 (Proprietary) Limited Sea Kay Holdings Limited 100 10 000

104 485

The carrying amount of subsidiaries are shown net of impairment losses.

5. INVESTMENT IN JOINT VENTURESTrading

% holding results June June

Name of company 2007 2007R’000

Ibuyile Development Consortium 45 12 773

The carrying amount of joint ventures are shown net of impairment losses.

Summary of group's interest in the joint venture R’000

Non-current assets 2Current assets 63 015Long-term liabilities – interest bearing (4 544)Current liabilities – interest bearing (48 814)Current liabilities – non–interest bearing (2 702)Revenue 99 459Expenses (93 712)Net profit 5 747Cash generated by operating activities (13 717)Cash flows from investing activities (609)Cash flows from financing activities 10 597



R’000 R’000

6. LOANSSubsidiariesSea Kay Engineering Services (Proprietary) Limited – 2 431The loan is unsecured, bears interest at prime less 2% andhas no fixed terms of repayment.

7. LOANS PAYABLECorné Kruger Familie Trust (9 437) –The loan is unsecured, bears interest at prime less 2% andhas no fixed terms of repayment.

P van der Schyf (1 324) –The loan is unsecured, bears interest at prime less 2% andhas no fixed terms of repayment.

(10 761) –

8. OTHER FINANCIAL ASSETSLoans and receivablesMontpatton Properties CC 262 –The loan is unsecured, bears interest at prime less 2% andhas no fixed terms of repayment.

Ibuyile Development Consortium 311 –The loan is unsecured, bears interest at prime less 2% and has no fixed terms of repayment.

573 –

Current assetsLoans and receivables 573 –

9. DEFERRED TAXDeferred tax asset/(liability)Accelerated capital allow for tax purposes (845) –Other deferred tax (2 051) –

(2 896) –

Reconciliation of deferred tax asset/(liability)

At beginning of the year – –Increase/(decrease) in tax losses available for set off againstfuture taxable incomeSection 24C allowances (2 051) –Capital allowances (845) –

(2 896) –




R’000 R’000

10. INVENTORIESRaw materials, components 8 962 –Finished goods 978 –

9 940 –

11. CONSTRUCTION CONTRACTS AND RECEIVABLESContracts in progress at balance sheet dateConstruction contracts and receivables 12 184 –

Contract debtors were pledged as security for overdraft facilities and other liabilities of the group. The value of debtors ceded was R121,7 million as at 30 June 2007.

12. TRADE AND OTHER RECEIVABLESTrade receivables 117 697 –Retention debtors 3 998 –Sundry receivable 3 –

121 698 –

Trade and other receivables pledged as security

Trade and other receivables were pledged as security for overdraft facilities of the group.

Trade receivables for particular contracts are ceded to other financiers as surety for theirfacility granted to finance individual projects. See note 11 for details.

The following contracts revenue, contract rights and debtors have been ceded to NURCHAas surety for facilities granted to the company as disclosed in note 12.

Contracts affected by the note above are:Project 2455 – New Claremont 483Project 2668 – Delft Symphony 2374Project 2412 – KagisoProject 2497 – KananaProject 2498 – EvatonProject 2177 – Johandeo



R’000 R’000

13. CASH AND CASH EQUIVALENTSCash and cash equivalents consist of:Cash on hand 18 –Bank balances 23 –Short-term deposits 1 106 –Bank overdraft (8 593) –

(7 446) –

Current assets 1 147 –Current liabilities (8 593) –

(7 446) –

Bank facilities secured by:

ABSA Bank Limited

Unlimited surety from Corné Kruger Familie Trust, including loan accountUnlimited surety from Pieter van der Schyf Family Trust,including loan accountUnlimited surety from Seriso 651 (Proprietary) Limited, including loan accountUnlimited personal surety from C Kruger, including loan accountUnlimited personal surety from P van der Schyf, including loan accountUnlimited personal surety from M Vilakazi, including loan accountUnlimited personal surety from D Mthetwa, including loan accountUnlimited personal surety from D Mathe, including loan accountGeneral cession of interest in income and debtors

Standard Bank Limited

Unlimited surety from Corné Kruger Family TrustUnlimited personal surety from C KrugerUnrestricted pledge of investment accountUnrestricted cession of book debts in favour of Standard Bank LimitedUnrestricted cession of contract monies in favour of Standard Bank Limited




R’000 R’000

14. SHARE CAPITALAuthorised3 000 000 000 ordinary shares of R0,0000003334 each 1 1

Reconciliation of number of shares issued:Reported as at 01 July 2006 – –Issue of shares – ordinary shares – –

– –

Issued424 530 895 ordinary shares of R0,0000003334 each – –Share premium 106 536 106 536

106 536 106 536

Subsequent to the period end the company issued an additional 50 000 000 shares in terms of the listing of the company on the JSE Limited.

15. OTHER FINANCIAL LIABILITIESHeld at amortised costNURCHA Equity Services (Proprietary) Limited 4 544 –The loan is secured by cession over debtors, developmentrights and contracting income on certain projects asconducted by the company, as well as a cession of a callaccount. The loan bears interest at prime overdraft rate plusone percent and will be settled over the duration of therespective projects.

NURCHA Finance Company (Proprietary) Limited 8 699 –The loan is secured by cession over debtors, developmentrights and contracting income on certain projects asconducted by the company, as well as a cession of a callaccount. The loan bears interest at prime overdraft rate plusone percent and will be settled over the duration of therespective projects.

Transgariep Infra (Proprietary ) Limited 3 185 –The loan is unsecured, bears interest at prime minus 1%and has no fixed terms of repayment.

16 428 –



R’000 R’000

15. OTHER FINANCIAL LIABILITIES (continued)The loans from NURCHA Equity Services (Proprietary) Limited and NURCHA Finance Company (Proprietary) Limited, are secured by unlimited surety from Mr C Kruger and Mr P van der Schyf. The loan is also secured by cession over debtors, development rights and contracting income on certain projects as conducted by the company, as well as a cession of a call account. The loan bears interest at prime overdraft rate plus one percent and will be settled over the duration of the respective projects.

Non-current liabilitiesAt amortised cost 13 243 –

Current liabilitiesAt amortised cost 3 185 –

16 428 –

16. FINANCE LEASE OBLIGATIONPresent value of minimum lease payments due– within one year 1 909 –– in second to fifth year inclusive 3 120 –

5 029 –

Non-current liabilities 3 120 –Current liabilities 1 909 –

5 029 –

It is group policy to lease certain motor vehicles and equipment under finance leases.

The average lease term was three to five years and the average effective borrowing ratewas 12%.

Interest rates are linked to prime at the contract date. All leases have fixed repayments andno arrangements have been entered into for contingent rent.

The company's obligations under finance leases are secured by the lessor's charge over theleased assets. Refer to note 2.



Openingbalance Additions Total

R’000 R’000 R’000

17. PROVISIONSReconciliation of provisions – Group – 2007Leave pay – 747 747


R’000 R’000

18. CURRENT TAX PAYABLE/(RECEIVABLE)The taxation receivable relates to overpayments in previous years.The amounts will be corrected retrospectively by applying to the South African Revenue Services to revise the prior year assessments.

19. TRADE AND OTHER PAYABLESTrade payables 39 054 –VAT 6 467 –Other payables 380 380

45 901 380

20. REVENUESale of goods 4 143 –Construction contracts 246 158 –

250 301 –

21. OPERATING PROFITOperating profit for the year is stated after accounting for the following:

Operating lease chargesPremises– Contractual amounts 572 –

Profit on sale of property, plant and equipment 67 –Depreciation on property, plant and equipment 1 246 –Employee costs 5 235 –

22. INVESTMENT REVENUEInterest revenueLoans 31 –Bank 47 –Debtors 2 292 –

2 370 –



R’000 R’000

23. FINANCE COSTSLoans 177 –Non-current borrowings 1 553 –Finance leases 36 –Bank 608 –Late payment of tax 53 –Creditors 2 455 –

4 882 –

24. TAXATIONMajor components of the tax expense

CurrentLocal income tax – current period 2 532 –Secondary tax on companies 354 –

2 886 –

DeferredOriginating and reversing temporary differences 613 –Other deferred tax 819 –

1 432 –

4 318 –

Reconciliation of the tax expenseReconciliation between applicable tax rate and average effective tax rate.Applicable tax rate (%) 29,00 29,00Sec 24C allowance (%) (19,00) (26,00)Accelerated wear and tear (%) (2,80) (3,00)

Effective tax rate (%) 7,20 –

25. CASH (USED IN)/GENERATED FROM OPERATIONSBefore taxation 45 429 –Adjustments for:Depreciation and amortisation 1 245 –on sale of assets (67) –Interest received (2 370) –Finance costs 4 882 –Movements in provisions 747 –Changes in working capital:Inventories (9 940) –Trade and other receivables (121 698) –Construction contracts and receivables (12 184) –Trade and other payables 45 901 380

(48 055) 380




R’000 R’000

26. TAX (PAID)Current tax for the period recognised in income statement (2 886) –Balance at end of the period (1 049) –

(3 935) –

27. DIVIDENDS PAIDDividends (2 831) –

28. ACQUISITION OF BUSINESSESFair value of assets acquiredProperty, plant and equipment 8 239 –Deferred tax assets/(liabilities) (2 064) –Other non-current assets 2 517 –Goodwill 77 079 –Inventories 1 949 –Trade and other receivables 60 876 –Trade and other payables (32 384) –Tax assets/(liabilities) 3 705 –Sundry current assets 1 853 –Borrowings (13 079) –Cash (4 206) –

104 485 –

Consideration paidCash 34 664 –Equity – ordinary shares in Sea Kay Holdings Limited (139 149) –

(104 485) –

Net cash outflow on acquisitionCash consideration paid 34 664 –Cash acquired (4 206) –

30 458 –

29. COMMITMENTSCapital expenditureAlready contracted for but not provided for– Property, plant and equipment 2 554 –

Not yet contracted for and authorised for 2008 by directors– Property, plant and equipment 16 946 –


30. CONTINGENCIESThe claim arose as a result of disputed terms of engagement between a subcontractor andSea Kay Engineering. The directors are of the opinion that the claim will beunsuccessful.The claim for work not granted to claimant amounts to R6,3 million.

The second claim arose as a result of a dispute over the settlement of amounts due to thesame subcontractor as in the aforementioned dispute. The directors are of the opinion thatthe claim will be unsuccessful.The claim for outstanding work amounts to R437 000.

An application has been submitted by Sea Kay Engineering against Groenewers CC inconnection with Willow Creek Development. There has been a ruling in favour of Sea KayEngineering, however, it is subject to the outcome of arbitration, hence the uncertainty inthe recognition of the asset.

31. RELATED PARTIESRelationshipsSubsidiaries Refer to note 4Joint ventures Refer to note 5Group companies Refer to note 4Shareholder with significant influence C KrugerClose family member of key management DF KrugerJoint venture of key management Ibuyile Development consortium [Mr P van

der Schyf]Associate of close family member of key Trans Gariep Infra (Proprietary) Limited management [Mr DF Kruger]

Group2007

R’000

Related party balances

Loan accounts – Owing (to)/by related partiesIbuyile Development Consortium 311Trans Gariep Infra (Proprietary) Limited (3 185)Corné Kruger Familie Trust (9 437)P van der Schyf (1 323)



Group2007

R’000

31. RELATED PARTIES (continued)Amounts included in Trade receivable (Trade payable) regarding related partiesSeriso 474 (Proprietary) Limited (6 791)Seriso 581 (Proprietary) Limited (845)Broadbrush Investments 81 (Proprietary) Limited (329)Cape Gannet (Proprietary) Limited (2 438)Autumn Storm Investments 61 (Proprietary) Limited (609)Seriso 474 (Proprietary) Limited 6 790Trans Gariep Infra (Proprietary) Limited 16Seriso 651 (Proprietary) Limited (236)C Kruger 2

Amounts included in construction contractsC Kruger 2 193

Related party transactions

Purchases from (sales to) related partiesSeriso 474 (Proprietary) Limited 19 468Seriso 581 (Proprietary) Limited 8 154Broadbrush Investments 81 (Proprietary) Limited 23 331Cape Gannet (Proprietary) Limited 5 825Seriso 651 (Proprietary) Limited (15 977)Trans Gariep Infra (Proprietary) Limited 49 718Collude Property CC 931Autumn Storm Investments 61 (Proprietary) Limited 349Sea Kay Engineering Services (Proprietary) Limited (74 509)Ibuyile Development Consortium 74 509

Rent paid to/(received from) related partiesMontpatton Properties CC 402

Administration fees paid to (received from) related partiesKusasa Commodities (Proprietary) Limited 500Sea Kay Engineering Services (Proprietary) Limited 539

Compensation to other key managementShort-term employee benefits 1 102


Emoluments2007

Group R’000

32. DIRECTORS' EMOLUMENTSExecutives 1 553

33. COMPARATIVE FIGURESNo comparative figures have been presented as these are the first financial statements ofthe company.

34. RISK MANAGEMENTLiquidity riskThe company’s risk to liquidity is a result of the funds available to cover futurecommitments. It manages liquidity risk through an ongoing review of future commitmentsand credit facilities.

Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored.

Interest rate riskDeposit and cash balances all attract interest at rates that vary with prime. The companypolicy is to manage interest rate risk so that fluctuations in variable rates do not have amaterial impact on profit (loss).

Credit riskCredit risk consists mainly of cash deposits, cash equivalents and trade debtors. Thecompany only deposits cash with major banks with high quality credit standing and limitsexposure to any one counter-party.

Trade receivables comprise a widespread customer base. Management evaluates credit riskrelating to customers on an ongoing basis. Credit guarantee insurance is purchased whendeemed appropriate.

35. POST BALANCE SHEET EVENTSThe company was successfully listed on the main board of the JSE Limited on 16 August2007.

The company acquired an additional 45% share in the Ibuyile Development Consortium.

36. SHARE INCENTIVE SCHEMEThe Sea Kay Share Trust was approved and adopted by the company on 20 July 2007. No shares have, as yet, been issued in terms of the share incentive scheme.



Shareholders’ diary


37. EARNINGS PER SHAREHeadline earnings (R’000) 41 –Weighted average number of shares 326 653 –Basic earnings per share (cents) 12,59 –Headline earnings per share (cents) 12,59 –Diluted earnings per share (cents) 12,59 –

Profit after taxation equals headline earnings.


Financial year end 30 June

Preliminary announcement September

Annual Report posted September

Annual General Meeting October

Interim results announced February


Shareholder analysis

Number of Number ofCategory of shareholder shareholders % shares held %

Analysis of shareholdings1 – 1 000 66 7,78 42 411 0,011 001 – 10 000 372 43,87 1 703 116 0,3610 001 – 100 000 285 33,61 10 872 482 2,28100 001 – 1 000 000 89 10,50 28 537 694 5,981 000 001 – and above 36 4,25 436 375 192 91,38

Totals 848 100,00 477 530 895 100,00

Categories of shareholdersBanks 2 0,24 44 000 0,01Insurance Companies 6 0,71 9 002 382 1,89Collective investment schemes and mutual funds 53 6,25 241 281 007 50,53Trusts 58 6,84 154 515 787 32,36Pension funds and medical schemes 6 0,71 8 726 349 1,83Private companies 25 2,95 27 345 713 5,73Close corporations 26 3,07 1 336 642 0,28Other corporate bodies 26 3,07 3 455 056 0,72Individuals 645 76,06 29 023 959 6,08Share trust 1 0,12 2 800 000 0,59

Totals 848 100,00 477 530 895 100,00

Shareholder spreadNon-public 14 1,65 257 848 181 54,00

Directors and associates 12 1,42 135 665 356 28,41Staff trust 1 0,12 2 800 000 0,59BEE shareholder – Phatsima HousingInvestment (Pty) Limited 1 0,12 119 382 825 25,00

Public 834 98,35 219 682 714 46,00

Totals 848 100,00 477 530 895 100,00

Major shareholders (excluding directors and associates)5% and more of the shares in issuePraesidium Capital Management (Pty) Limited 41 545 843 8,70Spyglass Fund 31 382 932 6,57


Notice to shareholders

SEA KAY HOLDINGS LIMITEDformerly Pilvest CO 1 (Proprietary) Limited

(Incorporated in the Republic of South Africa)

(Registration Number: 2006/004967/06)

JSE code: SKY

ISIN: ZAE000102380

(Sea Kay or the Company)

Notice is hereby given that the first annual general meeting of members of Sea Kay will be held

at Barnard Jacobs Mellet, BJM House, 1st Floor, 5 Sturdee Avenue, Rosebank on Wednesday,

23 January 2008 at 10:00, to consider and, if deemed fit, pass, with or without modification, the

following ordinary resolutions:

Ordinary resolution number 1"Resolved that the audited consolidated financial statements of the Company for the year

ended 30 June 2007 and the auditors’ and directors’ reports in regard thereto be received and

adopted."

Ordinary resolution number 2“Resolved that all the directors of the Company (namely, C Kruger, K van der Vyver,

P van der Schyf, MH Lomas, HSP Mashaba and BW Marais) who are required, in terms of the

Company’s Articles of Association, to retire at the first annual general meeting of the Company

and who, being eligible, offer themselves for re-election, be re-elected.”

A brief curriculum vitae of each director is set out on pages 4 and 5 of this Annual Report.

Ordinary resolution number 3“Resolved that SAB&T be re-appointed as auditors of the Company for the ensuing year.”

Ordinary resolution number 4“Resolved that the directors’ remuneration in respect of the year ended 30 June 2007 be

ratified.”

Ordinary resolution number 5"Resolved that, in terms of section 221 of the Companies Act, the authorised but unissued

ordinary shares in the capital of the Company be placed under the control of the directors and

that such authority remain in place until the next annual general meeting of the Company.”

Ordinary resolution number 6“Resolved that, in terms of the Listings Requirements of the JSE Limited (JSE), the directors be

given a renewable mandate in terms of a general authority to issue securities for cash, as and

when suitable opportunities arise, subject to the following conditions:


• That the general authority be valid until the Company’s next annual general meeting provided

that it shall not extend beyond fifteen months from the date of the passing of this ordinary

resolution (whichever period is shorter);

• That the securities be of a class already in issue;

• That securities be issued to public shareholders as defined in the JSE Listings Requirements

and not to related parties;

• That issues in the aggregate in any one financial year shall not exceed 15% of the Company’s

issued share capital of that class;

• That, in determining the price at which an issue of securities will be made in terms of this

authority, the maximum discount permitted shall be 10% of the weighted average traded price

of those securities over the 30 business days prior to the date that the price of the issue is

agreed between the Company and the party subscribing for the securities;

• That a paid press announcement giving full details, including the impact on net asset value,

net tangible asset value, earnings and headline earnings per share and, if applicable, diluted

earnings and headline earnings per share, be published at the time of any issue representing,

on a cumulative basis within a financial year, 5% or more of the number of securities in issue

prior to the issue/s.”

Voting In terms of the JSE Listings Requirements:

• The approval of a 75% majority of the votes of all shareholders, present or represented by

proxy, is required to approve ordinary resolution number 6;

• Any shares held by the Sea Kay Share Trust will not have their votes at the annual meeting

taken into account in determining the results of voting on ordinary resolution number 6; and

• Votes of shareholders of any unlisted Sea Kay ordinary shares will not be taken into

consideration in determining the quorum for, or in respect of determining the results of voting

on the resolutions tabled at the annual general meeting.

Each shareholder of the Company who, being an individual, is present in person or by proxy, or,

being a company, is represented at the annual general meeting is entitled to one vote on a

show of hands. On a poll, each shareholder present in person or by proxy or represented shall

have one vote for every share held.

ProxiesA shareholder entitled to attend and vote at the annual general meeting may appoint one or

more proxies to attend, speak and vote in his stead. A proxy need not be a shareholder of the

Company.

Certificated shareholders and "own name" dematerialised shareholders who are unable to

attend the annual general meeting, but wish to be represented thereat must complete the

attached form of proxy and return it to the transfer secretaries of the Company, Link Market

Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844,

Johannesburg 2000), to reach them by no later than 10:00 on Monday, 21 January 2008.


Notice to shareholders

The completion of a form of proxy will not preclude a shareholder from attending, speaking and

voting at the general meeting to the exclusion of the proxy so appointed.

Dematerialised shareholders, other than those with "own name" registration, must inform their

Central Securities Depository Participant (CSDP) or broker of their intention to attend the annual

general meeting and obtain the necessary Letter of Representation from their CSDP or broker to

attend the annual general meeting or provide their CSDP or broker with their voting instructions

should they not be able to attend the annual general meeting in person. This must be done in

terms of the agreement entered into between the shareholder and the CSDP or the broker

concerned.

By order of the board

MN Hattingh

Company Secretary

20 September 2007


Proxy form

SEA KAY HOLDINGS LIMITED(formerly Pilvest CO 1 (Proprietary) Limited)(Incorporated in the Republic of South Africa)(Registration Number: 2006/004967/06)JSE code: SKYISIN: ZAE000102380(Sea Kay or the Company)

For use by certificated shareholders and “own name” dematerialised shareholders of Sea Kay (members) atthe first annual general meeting of Sea Kay to be held at 10:00 (SA time) on Wednesday, 23 January 2008,at Barnard Jacobs Mellet, BJM House, 1st Floor, 5 Sturdee Avenue, Rosebank and any adjournment thereof.

I/We (Full name in block letters)

of: (Address)

Telephone: Work ( ) Home ( )

being the holder/s of: shares in the Company, do hereby appoint: (see note 1):

1. or failing him/her

2. or failing him/her

3. the chairman of the general meetingas my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will beheld for the purpose of considering and, if deemed fit, passing, with or without modification, theordinary resolutions to be proposed thereat and at any adjournment thereof, and to vote for or againstthe ordinary resolutions and/or abstain for voting in respect of the shares registered in my/our name/s,in accordance with the following instructions (see note 2):

Ordinary business For Against Abstain

Ordinary resolution 1: Adoption of the annual financial statements for the year ended 30 June 2007

Ordinary resolution 2: Re-election of the executive and non-executive directors of the Company C Kruger, K van der Vyver, P van der Schyf, MH Lomas, HSP Mashaba and BW Marais

Ordinary resolution 3: Re-appointment of SAB&T as auditors for the ensuing year

Ordinary resolution 4: Ratification of directors’ remuneration

Ordinary resolution 5: Authority to place shares under control of the directors

Ordinary resolution 6: General authority to issue shares for cash

Signed at: on 2007/8

Signature:

Assisted by me (where applicable):

(Note: A shareholder entitled to attend and vote is entitled to appoint a proxy to attend, speak andvote in his/her stead. Such proxy need not also be a shareholder of the Company).

Please read the notes on the following page.


Notes to form of proxy

Please read the following notes.

1. A member may insert the name of a proxy or the names of two alternate proxies of themember's choice in the space/s provided, with or without deleting “the chairman of theannual general meeting”. The person whose name appears first on the form of proxy andwho is present at the annual general meeting will be entitled to act as proxy to the exclusionof those whose names follow.

2. A member's instructions to the proxy must be indicated by the insertion of the relevantnumber of votes exercisable by that member in the appropriate box provided. Failure tocomply with the above will be deemed to authorise the proxy to vote or abstain from votingat the annual general meeting as he/she deems fit in respect of all the member's votesexercisable thereat.

3. A member or his/her proxy is not obliged to use all the votes exercisable by the member or byhis/her proxy, but the total of the votes cast and in respect of which abstention is recordedmay not exceed the total of votes exercisable by the member or by his/her proxy.

4. This duly completed form of proxy must be received by the Company's transfer secretaries,Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg,2001 (PO Box 4844, Johannesburg, 2000) 48 hours before the time fixed for the meeting.

5. The completion and lodging of this form of proxy will not preclude the relevant member fromattending the annual general meeting and speaking and voting in person thereat to theexclusion of any proxy appointed in terms hereof.

6. Documentary evidence establishing the authority of a person signing this form of proxy in arepresentative or other legal capacity must be attached to this form of proxy unless previouslyrecorded by the Company's transfer secretaries or waived by the chairman of the generalmeeting.

7. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

8. The chairman of the annual general meeting may reject or accept any form of proxy, which iscompleted and/or received, other than in compliance with these notes.

9. A minor must be assisted by his/her parent or guardian, unless the relevant documentsestablishing his/her capacity are produced or have been recorded by the Company.

10. Where there are joint holders of shares:• Any one holder may sign the form of proxy; and• The vote of the senior joint holder who tenders a vote, as determined by the order in which

the names stand in the Company’s register of members, will be accepted.

Administration

DirectorsC Kruger (executive) MH Lomas, Chairman (non-executive)BW Marais (non-executive)HSP Mashaba (non-executive)P van der Schyf (executive)K van der Vyver (executive)

SecretaryMN Hattingh, BCom, LLB6 Topaz StreetLyttelton ManorCenturion, 0157(Postal address as per above)

Registered office7 Patton RoadDuncanvilleVereeniging, 1930(PO Box 925, Meyerton, 1960)

SponsorErnst & Young Sponsors (Proprietary) Limited(Registration number 2000/031843/07)Wanderers Office Park52 Corlett DriveIllovo, 2196(PO Box 2322, Johannesburg, 2000)

Transfer secretariesLink Market Services South Africa (Proprietary)Limited(formerly Ultra Registrars (Proprietary)Limited)(Registration number 2000/007239/07)11 Diagonal StreetJohannesburg, 2001(PO Box 4844, Johannesburg, 2000)

AuditorsSAB&T Inc(Registration number 1997/018869/21)119 Witch-Hazel AvenueHighveld TechnoparkCenturion, 0046(PO Box 10512, Centurion, 0046)

Legal adviserTW Ferguson (Proprietary) Limited(Registration number 2003/021147/07)6a Sandown Valley CrescentSandownSandton, 2196(PO Box 781493, Sandton, 2146)

Designed by

Printed by I

www.seakay.co.za

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