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Our approach allowed us to include only material matters in the printed report, which has reduced volume. However, as the remainder of the report is contained in an electronic format to support the printed report, we have not reduced any previous disclosure provided.

The printed report focuses on the group’s key issues against fundamental market changes and tough market conditions. It outlines how we reviewed our strategy and re-aligned our structure and operating systems to improve internal fitness during these tough times and to be correctly positioned for when trading conditions improve.

Stakeholder reporting requirements

These stakeholder issues are discussed throughout the printed and online section of the report.

Clients Government strategy, including localisation requirements and managing exposure Challenges during the year Key growth areas, including geographic focus Organisational improvements Sustainability issues, including health and safety, skills development and empowerment credentials Future development focus in property developments and construction contracts International strategy Strategy around renewable energy and nuclear contracts Contract updates Shareholders, analysts and media Financial measures, such as order book, margins, cash flows and cost management Maximisation of value over the long term Management’s view on market conditions How the multi-disciplinary full-service approach will create value Balancing the investment in growth opportunities against a weak trading market, together with a lack of clarity on the timing of return on investment International strategy, including rest of Africa and the Middle East Update on discontinued operations Risk management issues, i.e. loss-making ratio slippage and problem contracts Effect of carbon tax on operations Traction on concessions strategy in light of government delays BBBEE ownership elements with the loss of one partner and potential loss of another

Employees Managing change in the tough environment Remuneration practices Job security The group’s ability to continue its employee value proposition, including training and quality of leadership and management Transformation and broad-based black economic empowerment (BBBEE) Financial institutions (debt providers) and credit rating agencies Loss-making ratio and loss-making contracts Risk management, including sub-contractors and African strategy Protection of capital and equity investments into Africa Risk of changed balance sheet structure and weakening of liquidity profile following limited market activity Managing the operational losses in Construction Materials

Suppliers Group strategy and opportunities for growth with the group Extent of enterprise development initiatives Government Increased communication around successes Private sector role in enabling public and other infrastructure contracts BBBEE ownership elements with the loss of one partner and potential loss of another Socio-economic impact of projects and addressing government’s social agenda

Regulatory bodies Transparent disclosure on levels of compliance with regulations Evidence of transformation in line with commitments, both in terms of BBBEE and employment equity Insurers Change in risk profile as business offering changes from single discipline to multi-disciplinary, as well as increased offerings such as engineer, procure and construct (EPC) contracting Protection of capital investments into AfricaProtection of capital investments into Africa

A further source for the identification of material issues for disclosure was the risks addressed with the group’s first combined assurance risk plan.

Further details of this can be found on the online section of the report at www.groupfive.co.za.

The documented risks include:

Risk	Action
Resilience and relevance of strategy	The board and exco evaluate the group’s strategy every six months
Align the group to market changes and strategy focus	Complete the group’s restructuring programme as soon as possible Formal company-wide change management programmes have been launched in parallel to the business optimisation process
Skills shortage, including attraction and retention of key skills	The remuneration committee has tasked management with revising the group’s remuneration structures to retain its competitiveness in the industry. This will cater for incentives to key black candidates South African employees will be incentivised to travel over-border to support the group’s growth strategy The group has also further increased communication with employees and has implemented a change management programme. With the restructuring of the group, a number of employees have been moved to new roles with increased opportunities provided. We also reviewed our incentivisation programmes. Even against tough market conditions, we still invested in people through our Academy programmes
Manage weakened and changed market conditions	The group’s internal efficiency programme is designed to lower the group’s cost base and enhance its competitiveness in current market conditions New markets that offer more favourable conditions and enhanced returns are continually sought Relevant conditions of contracts are assessed by the commercial team (as a function within the risk review process) and are considered relative to the returns and benefits of the contract before authority is granted to proceed. Cash flow projections are signed off before the contract bid to maximise cash generation
Over-border complexity, including rest of Africa and the Middle East	During the year, the group reassessed the various risks it experiences in Africa and the Middle East through a formal and stringent risk evaluation process. In line with this, it amended its structure and policies to cater for changed market conditions and the increased presence of the business units in the rest of Africa Country, client and contract screening already forms part of the group’s risk review process
Focus on strategic business development needed	The group’s new structure caters for a strategic project development executive responsible for driving large contract opportunities in key sectors and geographies that can provide benefits across the group
Execution risk with reduced margins	Continued focus is placed on clients in key sectors and geographies that provide long term opportunities for mutually beneficial strategic relationships across more of the group’s businesses. These include multi-disciplinary contracts, operations and maintenance and concessions opportunities that provide better combined returns A disciplined approach to our execution policies and procedures from bid phase though to close out is in place The revised operating structure will ensure that the Construction cluster is more integrated and effective. Contract performance will be monitored regularly

The material issues identified through an internal strategy evaluation process include:

Risk	Action
Sub-contractor risk of nonperformance	More weight is currently placed on the assessment of the sustainability of sub-contractors, with the focus not only on price, but also on the ability to perform Where appropriate, sub-contractors are required to furnish security in respect of their performance obligations. Their performance is monitored regularly, with a renewed focus on adequate subcontractor management to ensure clarity of contract terms and recourse
Inadequate return on investment and equity	The cost base is being driven down and lazy assets eradicated Under-performing business units are being disposed of Lessons learnt are used to minimise and eliminate loss-making contracts The group’s capital rationing programme has been refined, with a focus on returns which are the responsibility of not only the group executive, but also of the business unit management
Risk of lack of transformation	The group maintained its level 2 BBBEE certification A new ownership structure is being developed A key focus of the group’s succession planning for senior management is the requirement to transform Optimising employment equity, preferential procurement and enterprise development remains a constant focus
Amended risk management practices to account for a changed environment	As part of the group’s internal efficiency drive, the risk processes, policies and procedures are amended to cater for changes in risks relevant to the current market Time has been spent on working with business segments in the re-evaluation of their risk profiles to ensure that mitigation procedures are in place to address identified risks
Increased SHEQ* requirements when entering new markets and businesses	The group has a comprehensive set of policies and procedures that cover health, safety and quality. The team is driving this strongly in each market to adhere to uniform standards across all businesses in all geographies
Delayed, postponed and cancelled South African contract awards and the effect on the group’s resources	The group has focused on clients in key sectors and geographies that provide long term opportunities for mutually beneficial strategic relationships across more of the group’s businesses. These include multi-disciplinary contracts, operations and maintenance and concessions opportunities that provide better combined returns Continued engagement with public sector clients to obtain a deeper understanding of the realistic timing of government’s infrastructure roll out plan

* Safety, health, environment and quality.