prospects

The group’s core business of Construction continues to be strategically well positioned in active market sectors, as detailed above. The Construction one-year order book as at 30 June 2011 stands at R5,9 billion (2010: R7,1 billion). The group’s total secured Construction order book stands at R8,8 billion (2010: R9,2 billion).

The Construction Materials business has been restructured and sized to suit current market activity. With new management in place and signs of a tentative recovery coming through, the group’s guidance of a return to operating profit over the next 12 to 18 months appears reasonable. Manufacturing is expected to recover over the next 12 months as volumes in Everite have stabilised based on increases in exports, social housing demand and demand improvements from retailers. The steel businesses are likely to experience more pressure in the short term. Investments and Concessions is well positioned for growth. The Power sector looks likely to pick up with the call for tenders for renewable energy plants under the government’s REFIT programme. The PPP process through treasury seems to be moving closer to making long awaited awards, the N1/N2 toll road award is expected during calendar 2011 and the African appetite for concessions-driven infrastructure is gaining momentum.

The value of the group’s longer term target opportunity pipeline as at 30 June 2011 stood at R134 billion, up from R104 billion in February 2011, with activity in all its chosen sectors. The short term prospects arising from the pipeline amount to R23 billion.

On a group level, the South African government’s public works programme has the potential to create growth opportunities within the South African construction sector. However, the lack of certain timing will further plague the domestic construction sector’s ability to plan and forecast and hence employment levels continue to decline. Against this, the group will continue to grow its expertise and capacity in sectors where it has developed multidisciplinary delivery capability, namely power generation, energy, transport, water, housing, mining and large public infrastructure works. The group’s geographic diversification will continue, with active trading in 22 countries in the period under review with developing business in 7 new countries.

Certain African markets offer good prospects, with the outlook for private sector fixed investment and primary infrastructure starting to improve. Spending is however only likely to come through during the 2012 calendar year and at a slow pace, with more certainty emerging from calendar 2013 onwards. In the Middle East, the group has moved into new territories outside of Dubai. These markets provide technically attractive opportunities aligned to the group’s capabilities in infrastructure and industrial contracts. However, it will take some time to secure contracts.

The group’s strategic focus, its specialist skills, its current order book and its pipeline of opportunities support a positive medium and long term outlook, although short term earnings are likely to remain under pressure.

Board changes

Subsequent to the year-end the following changes were made to the board of directors as non-executive directors:

	Mr OA Mabandla was appointed to the board on 1 August 2011
	Mr DDS Robertson was appointed to the board on 1 August 2011

Acknowledgments

The group wishes to recognise the hard work and commitment of its employees, without whom these results would not have been achieved.

On behalf of the board

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