· Our VIsIOn aNd valuES CORE VALUES How we live our values unITY • Cohesive group Wastevalues in place • Employee culture effectively revitalised • Improved employment equity

InTEGrATEd REpoRT 2014

Our COMPETITIVE STRENGTHS

Level 3 B-BBEESuperior gradings and accreditations

Cohesive group values

Segmental focus

Standardised reporting systems

Diversified but not divergent

Well-established businesses

Our VIsIOn aNd valuES

CORE VALUES How we live our values

unITY•Cohesivegroupvaluesinplace

• Employeecultureeffectivelyrevitalised

• Improvedemploymentequitypractices

InTEGrITY

• AchievedB-BBEELevel3accreditation

• Investmentinenterprisedevelopment

• Anti-competitivelegislationtraining

•CodeofEthics

ACCOunTABILITY• Standardreportingsystems

• Contractingpracticeseffectivelyrevisedtopreventrecurrenceofcontractlosses

COMMITMEnT

• Enterprisedevelopmentspend

•CSI

• Skillsdevelopmentprogramme

• ISO9001,14001and18001accreditations

Esorisamulti-disciplinaryconstructionbusinessfocusingonsouthernAfricaninfrastructuredevelopmentprojectsthroughourdivisionalisedcapabilities.MaintainingsynergiesbetweenoperationsbutfocuseddeliverythroughtheCivils,PipelinesandDevelopmentsdivisions.

VIsIOnTobethebenchmarkconstructiongroupinSouth

Africa,committedtothefulfilmentofallourstakeholders’aspirations.

Continuing operations Operations

Competitive advantages Key markets Output

Order book at 28 February 2014

Financial performance

GROUPCEO: BernieKroneTeam:35

Small, strong and efficient central corporate head office team

• Highlyskilledandexperiencedmanagementteam

• Well-establishedbusinessprocesses

Group’sdivisions Strategicdirection,groupfinance,tax,riskmanagement,governance,HR,IR,IT,payroll,insuranceandothersupportservices

r2,6 billion

Revenue R1,6 billion

Net operating loss

CIVILSManagingDirector:MarkRippon

Diversified range of construction services

• Superiorsafetyrecord

• Plantcapacityandcapability

• Strongrelationshipswithmines,consultingengineersandclients

• Experiencedandtalentedmanagementteam

• Restructureddivisionwithrenewedenergy

• Bulkearthworks• Roadbuilding• Miningandtownship

infrastructurework• Housing• Micro-building• Waterandsewerage

reticulationcontracts• Concreteprojectsfor

government,majormininghousesandtheprivatesector

Client profile:

Key clients• Eskom• Sanral• AngloCoal• Xstrata• RAL• GautengProvince• Government

σ Central σ Provincial σ Municipallevels

• Privatedevelopers• BakwenaConcessions

• Roads• Bridgesandculvert

construction• Townshipinfrastructure• Mininginfrastructure• Waterandsewerage

reticulation• Watertowersand

reservoirs• Bulkearthworks• Housingand

developments• Wastewatertreatment

plantsandoxidationponds

r1,2 billion

Revenue R1 billion

Net operating loss due mainly to three loss-making projects

Segment assets R789 million

PIPELINES ManagingDirector:DaveGibbons

Construction and rehabilitation of onshore pipelines with specialist experience in continuous welded steel and large bore pipelines

• Nicheleaderinweldedpipelines

• Newlyinvigoratedmanagementteam

• Trackrecordincomplexprojects

• Excellentsafetyrecord

• Onshorepipelinesmainlyinthegasandpetrochemicalandwatersectors

• Pipejacking• PipeliningClient profile:100%governmentsector

Key clients• AlllevelsofGovernment• Parastatals:

σ Transnet σ RandWater σ UmgeniWater σ Portnet σ TCTAandDWAF

• Miningsector• Privateclients

σ RBM σ Foscor σ Mondi

• Cross-border σ Botswana σ Zimbabwe σ Swaziland σ Zambia

• Gasandpetrochemicalsteelpipelines

• Waterandwastewaterpipelines

• Sewerpipelines• Cementmortarlining• Valvechambers• Associatedconcrete

structures• Associated

infrastructure• Testingandpiggingof

completedpipelinesections

• Pumpstations• Pipejacking

σ Augerboring σ Bridgejacking σ Culvertjacking

r655 million

Revenue R579 million

Operating margins 8,5%

Segment assets R254,9 million

DEVELOP-MENTS Managing Director:Kevin Duncan

Township and land development for affordable and low income housing projects

• Landownership• Landavailability• Turnkey

capabilities• Commercial

landownership• Lowcostof

ownership• Strengthen

internalvaluechain

• Subsidised(government)housingwhichincludeslarge“greenfields”integratedprojectsandnon-subsidised(bankfinanced)affordablehousingsegments

• Clients σ Government σ Miningsector σ Privateclients

• Turnkeypropertydevelopments

• Integratedinfrastructureandtownshipdevelopments

• Turnkeyaffordablehousingdevelopments

r4,0 billionwith r725 million over two years

Revenue R63,4 million



VIsIOn

ThE GRoup

Continuing operations Operations

Competitive advantages Key markets Output

Order book at 28 February 2014

Financial performance

GROUPCEO: BernieKroneTeam:35

Small, strong and efficient central corporate head office team

• Highlyskilledandexperiencedmanagementteam

• Well-establishedbusinessprocesses

Group’sdivisions Strategicdirection,groupfinance,tax,riskmanagement,governance,HR,IR,IT,payroll,insuranceandothersupportservices

r2,6 billion

Revenue R1,6 billion

Net operating loss

CIVILSManagingDirector:MarkRippon

Diversified range of construction services

• Superiorsafetyrecord

• Plantcapacityandcapability

• Strongrelationshipswithmines,consultingengineersandclients

• Experiencedandtalentedmanagementteam

• Restructureddivisionwithrenewedenergy

• Bulkearthworks• Roadbuilding• Miningandtownship

infrastructurework• Housing• Micro-building• Waterandsewerage

reticulationcontracts• Concreteprojectsfor

government,majormininghousesandtheprivatesector

Client profile:

Key clients• Eskom• Sanral• AngloCoal• Xstrata• RAL• GautengProvince• Government

σ Central σ Provincial σ Municipallevels

• Privatedevelopers• BakwenaConcessions

• Roads• Bridgesandculvert

construction• Townshipinfrastructure• Mininginfrastructure• Waterandsewerage

reticulation• Watertowersand

reservoirs• Bulkearthworks• Housingand

developments• Wastewatertreatment

plantsandoxidationponds

r1,2 billion

Revenue R1 billion

Net operating loss due mainly to three loss-making projects

Segment assets R789 million

PIPELINES ManagingDirector:DaveGibbons

Construction and rehabilitation of onshore pipelines with specialist experience in continuous welded steel and large bore pipelines

• Nicheleaderinweldedpipelines

• Newlyinvigoratedmanagementteam

• Trackrecordincomplexprojects

• Excellentsafetyrecord

• Onshorepipelinesmainlyinthegasandpetrochemicalandwatersectors

• Pipejacking• PipeliningClient profile:100%governmentsector

Key clients• AlllevelsofGovernment• Parastatals:

σ Transnet σ RandWater σ UmgeniWater σ Portnet σ TCTAandDWAF

• Miningsector• Privateclients

σ RBM σ Foscor σ Mondi

• Cross-border σ Botswana σ Zimbabwe σ Swaziland σ Zambia

• Gasandpetrochemicalsteelpipelines

• Waterandwastewaterpipelines

• Sewerpipelines• Cementmortarlining• Valvechambers• Associatedconcrete

structures• Associated

infrastructure• Testingandpiggingof

completedpipelinesections

• Pumpstations• Pipejacking

σ Augerboring σ Bridgejacking σ Culvertjacking

r655 million

Revenue R579 million



DEVELOP-MENTS Managing Director:Kevin Duncan

Township and land development for affordable and low income housing projects

• Landownership• Landavailability• Turnkey

capabilities• Commercial

landownership• Lowcostof

ownership• Strengthen

internalvaluechain

• Subsidised(government)housingwhichincludeslarge“greenfields”integratedprojectsandnon-subsidised(bankfinanced)affordablehousingsegments

• Clients σ Government σ Miningsector σ Privateclients

• Turnkeypropertydevelopments

• Integratedinfrastructureandtownshipdevelopments

• Turnkeyaffordablehousingdevelopments

r4,0 billionwith r725 million over two years

Revenue R63,4 million



Employees:1969(includingLimitedDurationContractors)

Employees:1163

Employees:3

Client profile (%)

24 57

19

Parastatals

Government

Private sector

Esor Limited integrated report 2014 1

TABLE OF CoNTENTS

6

18

29

42

53

111

IFC Ourcompetitivestrengths

2 Definitions

3 Scopeandboundary

Group overview

6 Theyearinsnapshot

7 Milestones

8 Five-yearreview

10 Ourbusinessmodel

12 Ourmostmaterialissues

14 Stakeholderengagement

17 Ourkeyrisks

Strategic review

18 Chairman’sandCEO’sreport

20 Divisionalreviews

26 CFO’sreport

Accountability

29 Ethicalleadership

30 Directorateandexecutivemanagement

32 Corporategovernance

38 Riskmanagementreport

40 Remunerationreport

How we add value

42 Value-addedstatement

44 Transformation

48 Ourpeople

50 Theenvironment

51 SocialandEthicsCommitteereport

Financial statements

Shareholder information

111 Analysisofshareholders

112 Shareholders’diary

113 Noticeofannualgeneralmeeting

124 Formofproxy

126 Annexure:KingIIIapplication

IBC Corporateinformation

GROUP

OVERV

IEWACCOUNTABILITy

SHAREH

OLD

ER

INFO

RMATIO

NSTR

ATEG

ICREV

IEWFIN

ANCIALSTA

TEMEN

TSHOWW

EADDVA

LUE

Esor Limitedintegratedreport20142

dEFInITIOns

“affordable housing” TheaffordablehousingmarketinSouthAfricacompriseshouseholdswhichtypicallyearnbetweenR15000andR25000permonth,qualifyingthemforbanknotstateassistance

“BCAWU” BuildingConstructionandAlliedWorkersUnion.11%ofEsor’sworkforcearemembers“the board” TheboardofdirectorsofEsorLimited,assetoutonpages30to31“CEO” ChiefExecutiveOfficer.Esor’sCEOisBernieKrone“CFO” ChiefFinancialOfficer.Esor’sCFOisWesselvanZyl“CIDB” ConstructionIndustryDevelopmentBoard,whichsetsmembercompanygradings.

EsorConstructionhasthehighestpossible‘9CE’and‘9GB’gradings“CIO” ChiefInformationOfficer.Esor’sCIOisGaryBrown“the company” or “Esor” EsorLimited,listedontheJSELimitedintheConstructionandBuildingMaterialssector“DEKRA” DEKRACertificationGmbH“EIA” EnvironmentalImpactAssessment“EMP” EnvironmentalManagementPlan“Esor Africa” EsorAfrica(Pty)Limited,nowcomprisingthecompany’spropertiesinGermiston“Esor Civils” or “Civils” Adivisionoftheoperatingcompany,EsorConstruction,whichoffersadiversified

rangeofconstructionandbuildingservices“Esor Construction” EsorConstruction(Pty)Limited,theoperatingcompanyofthegroupeffective

1March2012“Esor Developments” Anewventureestablishedin2013,whichoffersservicesintheintegratedhousing

market“Esor Pipelines” or“Pipelines”

Adivisionofthegroup’soperatingcompany,EsorConstruction,whichfocusesononshorepipelineconstructionandrehabilitation

“Esorfranki Limited” Theformergroupname,whichwaschangedtoEsorLimitedeffective19December2013

“Esorfranki Geotechnical” Aformerdivisionofthegroup’soperatingcompany,EsorConstruction,whichwassoldbythecompanyforR0,5billioneffectiveNovember2013

“EXCO” ExecutivecommitteeofEsorConstruction,assetoutonpage32“gap housing” ThegaphousingmarketinSouthAfricacomprisespeoplewhotypicallyearnbetween

R3500andR15000permonth,whichistoolittletoenablethemtoparticipateintheprivatepropertymarket,yettoomuchtoqualifyforstateassistance

“GRI” GlobalReportingInitiative,abestpracticebenchmarkinreporting“the group” Esoranditssubsidiariesandassociates“IT” Informationtechnology“JSE” JSELimitedincorporatingtheJohannesburgStockExchange,themainboursein

SouthAfrica“Keller” KellerGroupplc,aBritish-basedgroundengineeringcompany.Itislistedonthe

LondonStockExchange“King III Report” KingReportonCorporateGovernanceforSouthAfrica2009“LTIFR” LostTimeInjuryFrequencyRate“MOU” MemorandumofUnderstanding“NUM” NationalUnionofMineworkers,19,5%ofEsor’sworkforcearemembers“the previous year” Theyearended28February2013“RDP” ReconstructionandDevelopmentProgramme,aSouthAfricansocio-economicpolicy

frameworkaimedataddressingpovertyandshortfallsinsocialservices“SABS” SouthAfricanBureauofStandards“SAFCEC” SouthAfricanFederationofCivilEngineeringContractors“SAICE” SouthAfricanInstitutionofCivilEngineers“SENS” StockExchangeNewsService,theregulatoryinformationdisseminationplatformfor

theJSE“SHEQ” Safety,Health,EnvironmentandQuality“the year” or “the year under review”

Theyearended28February2014

Financial definitions“EBITDA” Earningsbeforeinterest,taxation,depreciationandamortisation“Fy” Financialyear,forEsorending28February“H1” Periodfrom1March–31August“H2” Periodfrom1September–28February“HEPS” Headlineearningspershare“IFRS” InternationalFinancialReportingStandards“PAT” Profitaftertax“ROI” Returnoninvestment“STC” Secondarytaxoncompanies

Esor Limitedintegratedreport2014 3

sCOPE And BOundArY oF REpoRT

• Esor Civilsfocusesonroadbuilding,miningandtownshipinfrastructurework,waterandseweragereticulationcontractsandconcreteprojectsforgovernment,majormininghousesandtheprivatesector.

• Esor Pipelinesfocusesonconstructionandrehabilitationofonshorepipelines,andfurtherincorporatesthepipejackingbusiness.

• Esor Developments,establishedduringtheyear,focusesontheresidentialdevelopmentsectorbothforgovernmentandprivatedevelopmentprojects.

EsorlistedontheJSE’sAltXboardin2006andprogressedtotheMainBoard,“ConstructionandBuildingMaterials”sector,in2009.

Thisthirdintegratedannualreportpresentstheannualfinancialresultsandtheeconomic,environmental,socialandgovernanceperformanceofthegroupfortheyear1March2013to28February2014,andfollowsourreportforthepreviousyearpublishedinMay2013.Thecontentencompassesalldivisionsandsubsidiariesofthecompany,asillustratedinthegroupstructureonpage5,acrossallregionsofoperationinSouthAfrica,SwazilandandZimbabwe.

Thereportendeavourstopresentaholisticoverviewofthecompanyandseekstocommunicateallmaterialissuesinanopenandbalancedmanner.Webelieveitprojectsanhonestandbalancedapproachtosustainabilitythatencompassesafairaccountofallofthecapitalsemployedbythegroupinourbusinessactivitiesandwhichweinturnaffect.

SignificanteventsThedisposalofthegroup’sGeotechnicaldivisiontoKellerinNovember2013droveconsiderablechanges,includingareversiontothegroup’soriginallistednameofEsorwitheffect20January2014.

Whilethegeotechnicalbusinesswasoriginallythecorefoundingbusinessofthegroup,atthetimeofthetransactionwiththeKellerGroup,CivilsandPipelineswerecontributingtwothirdsofthegroup’srevenuestream.

DuringtheyearthegrouprestructuredtheshareholdingofthesubsidiaryinZimbabwetocomplywiththecountry’sindigenisationlaws.

GovernancestructureThegroup’sexecutivedirectorsareBernie Krone(CEO)andWessel Van Zyl(CFO).Theycanbecontactedattheregisteredofficeofthecompany(seeIBC).

Thegroup’sgovernancestructureatyear-endwasasfollows:

BasisofpreparationThereportisprimarilytargetedatcurrentstakeholdersandpotentialinvestorsinthegroup.

EsorhasconsideredandappliedmanyoftherecommendationscontainedintheDiscussionPaperontheFrameworkforIntegratedReportingandtheIntegratedReportissuedbytheIRCSouthAfrica,andtheInternationalIntegratedReportingFrameworkissuedinDecember2013.ThecompanyhasalsoappliedthemajorityofprinciplesintheKingIIIReport.Inrespectofthosewhichhavenotbeenapplied,explanationisoffered.ThereportwasfurtherpreparedbasedonprinciplesandguidancefromtheGRI.

Esorisawell-establishedSouthAfricancivilengineeringandconstructiongroup,todaycomprisingthreecoredivisions

Esorisawell-establishedSouthAfricancivilengineeringandconstructiongroup,todaycomprisingthreecoredivisions

Key company dataEsor Limited(formerly Esorfranki Limited)

(Registration number: 1994/000732/06)

ISIN: ZAE000184669

JSE Main Board sector: Construction and Building Materials

Share code: ESR

Listing date: 14 March 2006

Shares in issue: 395 185 430

Divisions:

Esor Civils

Esor Pipelines

Esor Developments

Navigationkey

WWW.ESOR.CO.ZA

VALUES

MaterialissuesPROJECT EXECUTION

LIQUIDITy

SKILLS SHORTAGE

REPUTATION

SHEQ

GROWTH

BOARD OF DIRECTORS

EXECUTIVE MANAGEMENT

SOCIAL AND ETHICS

COMMITTEE

HUMAN RESOURCES

AND NOMINATIONS

RISK COMMITTEE

AUDIT COMMITTEE


sCOPE And BOundArY oF REpoRT (COnTInuEd)

AssuranceToensuretheintegrityofsustainabilityreportinginthegroup,thefollowingassurancehasbeenundertaken:

BUSINESS PROCESSNature of assurance Status

Assurance provider

Operational /financial risk

Valueofconstructionworkssecured(tobeexecutedasat28February2014)

Constructionsecuredorderbookconfirmed

Reviewed KPMGInc.

Extentofconstructioncontractprofitability Contractprofitorlossratio

Reviewed KPMGInc.

Fairpresentationinallmaterialaspects–financialpositionandperformanceofthegroupandcompany

Externalauditreport

Assured KPMGInc.

Internalaudit Qualityreview Assured KPMGInc.

Empowerment

Employmentequityprocesses EEreport Assured DepartmentofLabour

B-BBEE B-BBEEscorecard Assured BEEVerificationAgencycc

Safety

ISO18001 Externalaudit Assured Dekra

Quality

ISO9001 Externalaudit Assured SABS

Environment

ISO14001 Externalaudit Assured Dekra

TheboardisultimatelyresponsibleforoverseeingtheintegrityoftheIntegratedReport.TheboardmembershaveappliedtheircollectivemindtothepreparationandpresentationoftheIntegratedReportandhaveconcludedthattheIntegratedReportispresentedinaccordancewiththeInternationalIntegratedReportingFrameworkV1.0.

TheIntegratedReportwasapprovedbytheboardandsignedonitsbehalfby:

Dr O Franks Bernie Krone Wessel van ZylAudit Committee Chairman CEO CFO

22May2014

(GRIG3.1Guidelines)andiscompiledbasedonaself-declaredApplicationLevelC.(seeAssurancebelow).TheGRIindexisavailableonourwebsite.

TheannualfinancialstatementshavebeenpreparedinaccordancewithIFRS,theSAICAFinancialReportingGuidesasissuedbytheAccountingPracticesCommittee,therequirementsoftheCompaniesActandtheListingsRequirementsoftheJSE.

WWW.ESOR.CO.ZA


GROUPOVERV

IEW

GrOuP ovERviEw

Esor is a well-established South African civil engineering and construction group, ‘Masters of Construction’, today comprising three core divisions:

• Esor Civilsfocusesonroadbuilding,miningandtownshipinfrastructurework,waterandseweragereticulationcontractsandconcreteprojectsforgovernment,majormininghousesandtheprivatesectorandhasanin-housebuildingdivision.

• Esor Pipelinesfocusesonconstructionandrehabilitationofonshorepipelines,andfurtherincorporatesthe35yearoldveteranpipejackingbusiness.

• Esor Developments,establishedduringthepreviousyear,focusesontheresidentialdevelopmentsector,bothfromgovernmentandprivatedevelopers.

The group has a comprehensive plant fleet, specialist pipeline equipment and fully equipped workshops.

The sale of the Geotechnical division during the year has enabled Esor to refocus on higher margin markets with the benefit of a strengthened financial platform.

Angola

Botswana

DRC

Madagascar

Malawi

MauritiusMozambique

Zambia

Seychelles

Zimbabwe

Tanzania

Namibia

Swaziland

South AfricaCurrentfocusedfootprint

Esor Limited

ESOR CONSTRUCTION

CIVILS DIVISION

BUILDING

SHARED SERVICES

DEVELOPMENTS DIVISION

PIPELINES DIVISION

PIPEJACKING

Esor Limited integrated report 20146

COnTInuInG OPErATIOnsThE YEAr iN SNapSHoT

ACHIEVEMENTS By CAPITAL Challenges

FINANCIAL

CAPITA

L

• R202,5 millionHighyieldBondProgrammesuccessfullysettled

• RevenueR1,6 billion•Orderbook(excl.Geotechnical)

up18,6%toR2,6 billion–like-for-likebasis•Gearingimprovedto27,0%• Pipelinesrevenuegrowth79%• 8%operatingmarginsinPipelines

• Effectivereviewofcontractingpractices• DisposalofGeotechnicalforR592 millionincluding

fairvalueofcontingentconsideration

• Specialdividendof38centspershare

• Finalisingthreeproblemprojects:

σ Hwelereng σ KrielBlock7MainCivils,BoxholeandHighwall

σ N4MooinooiBakwena

•Cashandworkingcapitalmanagement

HUMAN

CAPITA

L

• Zero harm(fatalityfree)

• ISO 18001accreditationmaintainedinalldivisions

• LTIFRof0,86significantlybetterthanindustryaverageof1,33

• Revitalisedemployeeculture

• InternallabourunrestatCivils

• Industry-relatedstrikesatsomesites

SOCIAL

CAPITA

L

• AchievedaLevel 3B-BBEErating• 1 284employeestrained

•GroupsupportingnineSMMEsinenterprisedevelopmentinitiatives

• Blackrepresentationofindependentnon-executivedirectorsmaintained(DrOswaldFranks)

•MoretangibleresultsofB-BBEEinitiatives

• Continuedimprovementindiversityrepresentationatboardlevel

INTELLEC

TUAL

CAPITA

L

• ManagementrevitalisedinCivilsdivision

• Skillsdevelopment,learnershipsandbursaries• Skillsscarcity

MANUFACTURED

CAPITAL

• ISO 9001Qualityaccreditationmaintainedinalldivisions

• Plantfleetrationalisedwitholder,redundantplantdisposedof

• EstablishedZimbabweancompanytocomplywithindigenisationlaws

NATURAL

CAPITA

L • ISO 14001accreditationobtainedinalldivisions


MilESToNES

2007 – 2008

2002 – 2006

1994 – 1995

1976 – 1981

2009 – 2011

2013 – 2014

2007EsorachievesR1billionrevenue

2013GeotechnicaldivisionsoldtoKellerforR578millionExternaldebtsettledinthemajorityStrengthenedfinancialplatformSpecialdividendpaidtoshareholders

2014RefocusonhighermarginoperationsRevertstobrandingEsorLimited,comprisingthecoredivisionsofCivils,PipelinesandDevelopments

2011Groupstructureisstreamlinedforgreaterefficiencyandtransparency

1976EsorGroundEngineeringestablishedinDurbanasageotechnicalspecialist

1994Esor(Pty)Limitedestablishedfollowinganinternalrestructuring

1995Patulagroupestablished(Civils)

2002Shearwatergroupestablished(Pipelines)

1981EsorGroundEngineeringexpandstoTransvaal

2006EsorlistsonAltX

EsoracquiresFrankiAfrica(Pty)LimitedandbolstersitsgeotechnicalofferingandfootprintinAfrica

2008EsoracquiresPatulaandShearwatergroups,diversifyingintocivilengineeringandpipelineconstruction

Esorwins‘AltXNationalBusinessAward’

2009EsortransferstoJSEMainBoard

EsorrebrandedEsorfrankiLimited

GROUPOVERV

IEW


FIVE-YEAr REviEw

2014* 2013 2012 2011 2010Consolidated statements of profit or loss R’000 R’000 R’000 R’000 R’000

Revenue 1 592 835 2325958 1771692 1366433 1857817Costofsales (1 611 624) (1950798) (1549955) (1204988) (1361041)

Gross(loss)/profit (18 789) 375160 221737 161445 496776Otherincome 10 564 27239 1705 3654 3937Operatingexpenses (127 117 ) (133134) (90786) (116033) (111661)

(Loss)/profitbeforeinterest,depreciationandtaxation (135 342) 269265 132656 49066 389052Depreciation,impairmentsandamortisations (146 419) (118271) (79510) (65489) (83478)

(Loss)/profitbeforeinterestandtaxation (281 761) 150994 53146 (16423) 305574Financeincome 4 980 42369 49726 23703 63281Financecosts (42 420) (86684) (73233) (54371) (93106)

(Loss)/profitbeforetaxation (319 201) 106679 29639 (47091) 275749Taxation 102 862 (18969) (11423) 6330 (78108)

(Loss)/profitfromcontinuingoperations (216 339) 87710 18216 (40761) 197641

DiscontinuedoperationsProfitfromdiscontinuedoperations,netofincometax 50 178 – – – –

(Loss)/profitfortheyear (166 161) 87710 18216 (40761) 197641

Headline(loss)/earningsreconciliation:(Loss)/profitfortheyear (166 161) 87710 18216 (40761) 197641Loss/(profit)ondisposalofpropertyandequipment 294 (16988) 5830 4609 5396Lossondisposalofdiscontinuedoperations 38 190 – – – –Gainondisposalofsubsidiary – – – (3654) –Impairmentofassets 84 638 6305 – 2032 –

Headline(loss)/earnings (43 039) 77027 24046 (37774) 203037

EarningspershareBasic(loss)/earningspershare (cents) (43,5) 23,5 4,7 (13,9) 69,4Diluted(loss)/earningspershare (cents) (43,5) 23,5 4,7 (13,8) 68,6Headline(loss)/earningspershare (cents) (11,3) 20,5 6,2 (12,9) 71,3Dividendpershare (cents) 38,0 – – – 15,0

* Continuing operations


Consolidated statements 2014 2013 2012 2011 2010of financial position R’000 R’000 R’000 R’000 R’000

AssetsNon-current assets 613 660 1237461 1151181 966187 999551

Property,plantandequipment 320 135 822678 737312 565775 596429Intangibleassets – 86336 88226 90117 93737Goodwill 185 062 305715 305715 305715 305715Financialassetsheldatfairvaluethroughprofitorloss 64 923 3 1291 – –Deferredtaxassets 11 457 22729 18637 4580 3670Loansandlong-termreceivables 32 083 – – – –

Current assets 935 151 1006320 665288 498164 648273

Inventories 221 345 69721 20622 16983 14827Non-currentassetheld-for-sale – – 3293 – –Loansandlong-termreceivables – 27726 – 420 6762Taxation 13 455 14513 15617 3855 9952Tradeandotherreceivables 659 928 826713 529103 413768 499869Cashandcashequivalents 40 423 67647 96653 63138 116863

Total assets 1 548 811 2243781 1816469 1464351 1647824

EquityandliabilitiesShare capital and reserves 777 219 1053262 937432 703156 808028

Sharecapitalandpremium 586 145 571300 592045 389449 396956Equitycompensationreserve 19 213 18606 16188 14444 8253Foreigncurrencytranslationreserve 23 665 3850 (21395) (33188) (14296)Accumulatedprofits 148 196 459506 350594 332451 417115

Non-current liabilities 207 802 540326 316658 195562 405711

Securedborrowings 163 043 368507 179911 84516 275031Preferenceshares 23 424 21000 – – –Post-retirementbenefits – 1913 1806 1657 1665Deferredtaxliabilities 21 335 148906 134941 109389 129015

Current liabilities 563 790 650193 562379 565633 434085

Currentpositionofsecuredborrowings 74 350 79481 105923 241527 121677Taxation 19 583 4508 15872 9953 6644Bankoverdraft 19 131 34059 3047 – –Provisions 13 713 38329 16350 3213 21087Tradeandotherpayables 437 013 493816 421187 310940 284677

Total equity and liabilities 1 548 811 2243781 1816469 1464351 1647824

Numberofordinarysharesinissue (’000) 395 185 395185 395185 302162 302162Weightedaveragenumberofordinaryshares (’000) 381 970 375289 386731 293763 284743Dilutedweightedaveragenumberofshares (’000) 381 970 375289 386731 293763 294555Netassetvaluepershare (cents) 203,5 280,3 241,5 238,9 275,6Nettangibleassetpershare (cents) 168,6 205,2 168,5 142,1 177,5

GROUPOVERV

IEW


INPUTS BUSINESS ACTIVITIES

Our BusInEss ModEl

Carbonfootprint

Capex

Waterandelectricityconsumption

Fullyequippedworkshop

Specialisedpipeline

equipment

Rationalisedplantfleet

Debt/equity

INTELLECTUAL

SOCIAL AND RELATIONSHIP

MANUFACTURED

HUMAN

NATURAL

Construction services for infrastructure developments such as roads, buildings, housing and mines infrastructure

Construction of onshore pipelines

Developments: construction services for low cost housing developments

Engineeringskills

Managementexpertise

Specialisedpipeline

experience

Employees

Government

Customers

Infrastructure

developers

Communities

Funders

Unions

CIVILS

PIPELINES

DEV

ELOPM

ENTS

FINANCIAL


OUTPUTS OUTCOMES

Shareholdervalue

Trainingoflimiteddurationcontractors

Carbonfootprint

ROADS

BRIDGES

SCHOOLS

HOSPITALS

MINEANDPOWERSTATIONINFRASTRUCTURE

RDPHOUSING

AFFORDABLEHOUSING

GAPHOUSING

WATERPIPES

FUELPIPES

GASPIPES

Housing,schools,roadinfrastructure

Pipelineinfrastructureforwater,gasandpetrochemicals

Skillsdevelopment

Transformation

SupportSMMEs

Watersupply

Enterprisedevelopment

Jobcreation

Housing,schools,roadinfrastructure

GROUPOVERV

IEW


Our MOsT MaTERial iSSuES

Esorcontinuestoassessriskfromabottom-upandtop-downapproach.Riskassessmentsareperformedcontinuouslyatfourlevelsinthegroup:

Enterprise•Conductedbi-annuallyatenterpriselevelbythegroup’sexecutivemanagementteamandboardofdirectors.

Operational•Conductedeveryquarterbythedivisionalmanagementteamwiththeassistanceoftheriskmanager.

Project•Conductedmonthlybytherelevantprojectteamsanddiscussedatdivisionalmanagementmeetings.

Tender evaluation• Aspartofthetenderingprocess,adetailedriskassessmentisperformedontheproposedprojectandassessedat

tenderfinalisationmeetings.

Themajorissuesareescalatedfromprojecttodivisionalandgroupcommittees.

Theimpactsofthegroupontheworldatlarge,anditsimpactonus,havebeenidentifiedandevaluatedtodeterminewhicharemostmaterialtothegroup’slong-termsustainability.Thesethenhelptoshapeourstrategy,governanceframeworks,riskmanagementsystemandmanagementprocesses,andaremonitoredthroughourintegratedassuranceprogramme.

Determiningourmostmaterialissuesinvolvesacontinuousreviewofevolvingsustainabilityimpactsandglobalbestpracticeguidelines,andisacombinationofinternalperformancemeasurementandexternalmonitoring.Ourongoingstakeholderengagementprogrammesarecriticaltothisprocess.

Thespecificresourceswereviewedincluded:

• Esor’sriskmanagementframework

• Stakeholderfeedback•GRIG3Guidelines• KingIII• TheMillenniumDevelopmentGoals

• UNUniversalDeclarationofHumanRights

• TheUNGlobalCompact

MATERIAL ISSUES Challenge Our strategy

Project execution • Abilitytostartprojectsefficientlyandmanagelimitedseniorresources

• Completeandproperhand-overfromestimatingtoprojectowners

• Identifyingandmanagingchanges

• Commercialastuteness

• Clientrelationship

• Efficientrisk-controlleddeliveryofqualityprojectsontimeandonbudget

• VisibleFeltLeadership(VFL)• Daily/weeklysitecostings•Monthlycostmeetings

• ClaimsconsciousNOTclaimsorientated

Liquidity

(Financialmanagementduringtimesofgrowth)

• Balancingthegroup’sgrowthwithfinancialliquiditytoserviceinvestmentsinhousinganddevelopment

• Sufficientliquidityandcapitaltomeetbusinessobjectivesthroughadditionalbankingfacilities

• Providingcompanyandinstitutionalguaranteestofreeupcashretentions

• UtilisationoftheDomesticMediumTermNoteProgramme,whichremainsavailable,shouldtheneedarise


MATERIAL ISSUES Challenge Our strategy

Skills shortage • Scarceresourcesunderminedeliveryandexpansion

• Creatinganattractiveemploymentproposition,apeople-centredculture,skillsdevelopmentprogrammeandsuccessionplanning

• In-housetrainingprogrammes

Reputation • RetainintegrityasareputablecontractorfollowingtheCompetitionCommissionenquiry

• Compliancewithlegislation,whistleblowingprocess

• Investorrelations• Corporategovernancebest

practice

• CodeofConduct/ethicalpolicy•Managementofexpectations

• Customerrelations

• Fraudawarenesscampaigns

• ZerotoleranceSHEQ • SHEQissuesmaypose

athreattoemployees,customers,theenvironment(naturalresources)andultimatelygroupreputation

• ISO9001,14001and18001accreditations

• Superiorsafetyrecord(LTIFR<1.00comparedtoindustryaverageof1.33andactualFebruary2014rollingaverageof0.86)

• Regularinternalandexternalaudits

• HealthandSafetytraining• Strategiesforreducing,re-using

andrecyclingresources

• Environmentaltraining

Growth

• Trade/marketconditions

• AppropriateB-BBEE

• Intensifyingcompetitionandmargincontraction

• ConstructionCharterrequirements,essentialforsecuringgovernmentandparastatalcontracts

• RefocusedonhighermarginbusinessesofCivilsandPipelines

• Targetinghighermarginprivatesectorprojectseglowcosthousing

• Takingequityshareindevelopments

• AchievedLevel3B-BBEEstatus

GROUPOVERV

IEW


sTAkEhOLdEr ENGaGEMENT

WeacknowledgethatEsorisaninterdependententity,whichisimpactedbyandhasanimpactonmanydifferentgroups.Wethereforebuildandmaintainstrategicrelationshipswithabroadrangeofstakeholderstoenableproactiveengagement,manageexpectations,minimisereputationalriskandpositivelyinfluencethebusinessenvironment.Wearecommittedtoopenandtimeouscommunicationwithourstakeholderswhoarealltreatedequitably.Wehaveidentifiedourkeystakeholdersanddeterminedthemosteffectiveandstrategicmethodsofcommunicatingaroundkeyissueswiththem,asfollows:

STAKEHOLDER What matters to them Tools of engagement Responsibility Our response

Shareholders• Profitability• ROI(shareprice

anddividends)• Cashgeneration• Corporate

governanceandcompliance

• Riskmanagement•Growthprospects• Reputationalissues

• Annualandinterimresultsreports

• SENS•Website•Groupresults

presentations• 1:1meetings• Roadshows• AGM•Media

• CEO&CFO Feedbackfromresultspresentationsand1:1meetingsisrelayedtoanddealtwithatboardlevel

Lenders/providers of capital

•Capitalmanagement

• Sustainability• Profitability• ROI(shareprice

anddividends)• Cashgeneration• Corporate

governanceandcompliance

• Riskmanagement•Growthprospects

• Contractuallyrequiredinformationflow

• Regularad hoc meetings

• CEO&CFO Feedbackfrommeetingsisrelayedtoanddealtwithatboardlevel

Employees• Jobsecurity• Sustainability• Personalgrowth

anddevelopment• Skillsdevelopment• Remunerationand

incentives• Safety• Healthand

wellness

• Intranet• Trainingsessions• Newsupdates• Postercampaigns• Toolboxtalksatall

sites• Handbooks• Consultative

sessions• Employmentequity

forums• Policies/

procedures

• HRManager• Divisional

managers• SafetyManagers

• Increasedinvestmentintrainingandtalentmanagement

•Ongoingsafetyprogramme

Clients• Projectexecution

anddelivery•Quality/safety• Service• Valueformoney

• Tenderprocesses• Contractual

engagement• Keyclient

relationshipsmaintainedthrough:

σ Servicecontract(SLAs)

σ 1:1meetings σ Ad hocwrittenupdates

• DivisionalManagers

• Teamateachsubsidiary

• Exceptional,innovativededicatedservice

• External–regularclientmeetingstodiscusspotentialissues

• Internal–pre-contractassessmentofpotentialissues



Trade unions•Wagenegotiations• Conditionsof

employment• Engagement

onhealthandwellnessissues

• Regularmeetingsattherelevantlevels

• HRandIndustrialRelationsManager

• Sitemanager

•Ongoingfocusonlabourandemployeerelations

• Consistencyinindustrialrelations

•Maintainingindustrylevelrelationshipstoavoidsitenegotiations

• Recognitionagreementsatindustrylevel

Major contractors,suppliers andbusiness partners

• Projectexecution• Costs•Marketconditions

• Contractsandserviceagreements

•Meetings•Workshops• Presentations• Training• Industrybody

meetings• Events

• CEO&CFO• Divisional

Managers• SiteManagers

• Keyfocusareasmeasuredregularlythrough:

σ Negotiatingfaircreditterms

σ Ontimepayment

σ Assistingemergingcontractorswithcashadvance(enterprisedevelopment)

Government, local authorities and regulatory bodies

• Regulatorycompliance

• Environmentalcompliance

• Faircompetitivepractices

• Skillsdevelopment• Jobcreation

• Formalandinformalmeetings

• Consultationsandworkshops

• Conferencesandseminars

• Tendersubmissions• Presentations

• CEO&CFO• Divisional

Managers• SiteManagers

•Group-wideadoptionofISO9001,14001and18001

• ISO14001accreditationframework(safetyandenvironment)

• Continualfocusonartisantrainingandskillsdevelopment

• Enterprisedevelopment

• EmployeeawarenessofCodeofEthicsandConduct

GROUPOVERV

IEW



Communities inwhich the groupoperates

• SustainabilityofCSIinvestment

• ImprovedenterprisedevelopmentandCSIscores

• Usinglocalcontractorsforprojects

• Communityliaison

• Social&EthicsCommittee

• Siteteams

•OngoingCSIprojects

• Sponsorships• Programmesin

partnershipwiththeUniversitiesoftheWitwatersrandandKZN

• Partnershipswithlocalcommunities

Industry

• B-BBEEchallengesintheconstructionindustry

• Skillsshortages• Safety

• Representationonkeyindustrybodies

•Meetings• Correspondence• Newsletters• Sponsorship

•CEO • ImproveB-BBEEratingtomaintaincompetitiveness

• Improvescoresy-o-yforCSI,enterprisedevelopmentandpreferentialprocurement

• Currentfocusremains:

σ Ownership σ Boardcomposition

sTAkEhOLdEr ENGaGEMENT (COnTInuEd)

The group belongs to the following industry

associations:

•National Home Builders Registration

Council (‘NHBRC’)

• Regional Master Builders Associations

(‘MBAs’)

• SAFCEC

• South African Society of Trenchless

Technologies (‘SASTT’)


Our kEY RiSkS

Esor’sfullriskmanagementprocessesarediscussedinmoredetailonpages38to39.Themostsignificantrisksfacedbythegroup,andhowwemanagethese,areindicatedintheriskmatrixbelow:

MATERIAL RISKS Mitigation

Underperformingcontracts Clearlydefinedprojectandcontractrolesandresponsibilities;documentedprocessforcontractbidding,negotiation,approvalandfulfilmentofadministrativerequirements;clearandobjectivestandardsformanagingandreportingallprojectsandcontractsincludingcostreporting,paymentadministrationandchangemanagement;clearguidelinesforidentifying,trackingandreportingprojectissuesorrisks.

Immediateidentificationandresponse;follow-upwithpossibleinternaldisciplinaryaction;entrenchaccountability;appointtherightpeopletotherightjobs,minimisenon-conformingreports;compliancereviewsagainstpoliciesandprocedures

Workingcapitalmanagement

Weeklycashflowforecast;adequateworkingcapitalfacilities;tougherondebtcollection;KPAsofdivisionalmanagers

B-BBEE Promotionfromwithin;carefulmanagementoftransformationprocessatboardlevel

Dependencyongovernmentinfrastructurespend

Productandmarketdiversification;strategicB-BBEErating;andgeographicaldiversity

Creditriskandcostreporting Dailysitecostingandsiteaccountability;monthlyreviewatEXCOmeeting;monthlyreviewofcontractfinancials;creditpolicy

Briberyandcorruption Obtaincourtinterdictswherenecessary;exposureofcorruptionthroughwhistle-blowing;enforceCodeofEthicsandConduct;SocialandEthicsCommitteeestablished;Zerotolerance

Competition Buildonreputationthroughstrongbrand;becompetitiveintermsofpriceandquality;includealternativebidsandin-housedesign

GROUPOVERV

IEW


ChAIrMAn’s And CEo’S REpoRT

Esor remains firmly focused on driving growth, in a disciplined manner, in identified key markets in southern Africa.

FollowingthesaleofourfoundingGeotechnicaldivisioninNovember2013,thegrouphasemergedtighter,refocusedandoperatingalmostexclusivelyinSouthAfrica.WearefirmlyfocusedonhighermarginmarketsintheconstructionsectorandaregearedtoagainexpandintoidentifiedkeymarketsinsouthernAfrica.Wehavefoundourselvescomingupforair,buoyedbytwofundamentallystrongbusinesses:CivilsandPipelines,andthepromisingfledgingDevelopments.Inaddition,ourstrengthenedfinancialplatformwithconsiderablyreducedexternaldebtandincreasedworkingcapitalpositionsthegrouptogrowintheyearsaheadandrestoreourformerstature.

CivilsandPipelinesaresizable,well-establishedbusinessesonsoundfooting.Togethertheywereresponsibleforovertwothirdsofthegroup’srevenuestreampriortothesaleofGeotechnical.ThenewDevelopmentsdivision,whichfocusesondevelopinglandforsocialhousingprojects,hasshowngoodprogresstodateandindicatesdecentgrowthprospects.

Unfortunatelythevestigesofthreeloss-makingcontractscontinuetoweighonourmindsandourbalancesheet,andhamperedourintendedgrowthprogressintheyear.Despitenumerousinterventionproceduresandprocessestocontaintheselosses,limitfuturelossesoncurrentcontractsandpreventlossesonfuturecontracts,wemuststillcloseouttheproblemcontractscompletelybeforewecanputthembehindusonceandforall.Althoughouryear-endresultsreflectthedragoftheselegacyprojects,asfreshlossesflowed,wearepleasedtosaywearemovingforwardintothenewfinancialyearfreeofthisburden.

Shoring up strength for the swim ahead

DisposalofGeotechnicalThegeotechnicalmarketinSouthAfricahasbeenstagnantforanumberofyearsandthethenEsorfranki’sshareofthatmarketwasexperiencingheavypressure.GiventhefurtherthreatofKeller’saggressivesub-Saharanexpansionstrategytothegroup’spositionontherestofthecontinent,theboardconsideredittobeinthebestinterestsofshareholderstoselltheGeotechnicaldivisiontoKellerandsecurethegroup’slongtermsustainability.Theproceedsfromthedisposalwereusedtosettletheoutstandingdebtonthehighyieldbondprogramme,aswellastodistributeaspecialdividendtoshareholders.

EstablishingEsorDevelopmentsProjectsgeneratedthroughtheDevelopmentsdivisionhaveadirectandpositiveimpactonEsor’sgrowthandprofitabilitypotential.Inadditiontoassuminga“developers’margin”,weareabletopositionourother

Breakingtothesurface–theyearinreview.

BERNIE KRONE–CEO

DAVE THOMPSON –Chairman

BG3 tie-in valve lift.


divisionstosecureworkatreasonablemarginsandavoidtheirmargincontraction,whichtrendiscurrentlydepressingthecivilengineeringindustry.

Swimming in muddy waters

SouthAfrica’sconstructionindustryisstillrecoveringfromtheglobalrecessionandisnotyetoutofthewoods,despitearecoveryinconstructionactivityandmoderatingoftendercompetition.Inaddition,theconstructionsectortookthedominohitofthelabourtroublesintheminingsector,whichconstrainedproductivityingeneral.ProjectsattheN4inMarikanaandKusilePowerStationwereparticularlyimpactedduringtheyear.

Inshortthetradingenvironmentremainschallenging,withtoughconditionsprevailingandincreasedcompetitionputtingmarginsunderpressureacrossthebusiness,albeittovaryingdegrees.Civilsparticularlyoperatesinanintenselycompetitiveenvironment.

Performance

Group strategyAfrican expansionOurconcentrationwithinSouthAfricaisbasedonoursuccessingeneratingrepeatbusinesslocally,althoughEsorConstructionisalsocurrentlycompletingprojectsinSwazilandandoursightsaresetonfurthercross-borderexpansion.WearenotnaïvetotherisksofoperatinginAfrica.Althoughitisnewterritoryforthegroup’snowcoredivisions,theformerGeotechnicaldivisionhasalwaysbeenveryactiveinSADC.Consequentlyweintendtobeverycautiousinourapproachtothisdistinctoperatingenvironment,adoptinga“oneborderatatime”approachinanefforttocontainthedifficultiesofoperatingonthecontinent,whichbecomemultipliedbythenumberofentrypoints.Further,wewillalsoinvestigateoperatingasasub-contractororpartneracrossourborderstomitigaterisk.

B-BBEEForthepastfewyearswehavebeencommittedtoimprovingourBBBEEscorecardandactivelypursuedanewB-BBEEpartnertoboostblackownershiplevelsaswellasblackdirectorstoimproveourboardcomposition.Unfortunately,negotiationstobroadenourrepresentativeownershipdidnotcometofruition.Duringtheyear,weappointedtwonewblackdirectorsalthoughone

ORDER BOOK

r2,6 BILLIOn

hassubsequentlyresignedtofollowpersonalbusinessinterests.Inadditionlong-standingdirectorBrissMathabatheresignedon26February2014.However,weachieveda‘Level3’accreditationintermsoftheDepartmentofTradeandIndustry’sB-BBEECodesofGoodPracticeinFebruary2014.

Investor sentiment

ProspectsLookingaheadwehaveasecuredorderbookforCivilsofR1,2billion.Kusilewillstillfeatureasamajorpartofthebusinessforanotherthreeyears.InadditionthreelowcosthousingprojectshavecommencedinKwaZulu-NatalwithfurtheropportunitiesintheprovinceaswellasintheEasternCape.InGautengwearealsoseeingpotentialprojectsfromtheschoolsprojectwhichisexpectedtoroll-outshortlyandwillincludenewschoolsaswellasrefurbishmentsandmaintenance.

InPipelineswehaveasecuredorderbookofR655millionmainlyinKwaZulu-NatalandtheEasternCape.ThisdivisionincludesthepipejackingbusinesswhichrecentlysecuredaR68millioncontractforRandWater.FurtheropportunitiesareexpectedtocomefromsanitationprojectsthroughoutthecountryandthedivisionisalsopursuingopportunitiesinZimbabwe.

TheDevelopmentsdivisionhassecuredfourlong-termprojectswithapotentialorderbookinexcessofR4billion.TheseincludeDiepsloot,Orchards,UitvlugtandSoshanguve.

ThanksWewouldliketothankourmanagementandemployeesfortheirongoingcommitmentinthistumultuousyear.yourconsistenthardworkinthefaceofongoingchangeismuchappreciated.Wealsothankourbusinesspartners,suppliers,advisorsandourvaluedclientsandshareholdersfortheircontinuedconfidenceinthegroup.Ourfellowdirectors’contributionhasbeeninvaluableandwethankyou.

Dave Thompson Bernie KroneChairman CEO

Johannesburg22May2014

STRATEG

ICREV

IEW


dIVIsIOnAL REviEwS

Description Duration Value

Contracts underway/recently completed

BakwenaN4TollRoad.Phases2,3and4,North West

Constructionofasecond21kmeastboundcarriagewayalongasectionofN4

30months–inprogressanddueforcompletioninAugust2014

R330million

KusilePowerStation,Mpumalanga

Undergroundserviceductstocompletedterracesandgeneralservicepipelines

36months–inprogressanddueforcompletionin2016

>R850million

KusilePowerStation,Mpumalanga

Constructionofbulkearthworkstoterraces

36months–inprogressanddueforcompletioninJune2014

R120million

DiepslootEastHousingandInfrastructure,Gauteng

Constructionof8000residentialhousesandassociatedcivilsinfrastructurePhase1:ConstructionoftwopedestrianbridgesPhase2:Internalservices

Phase1–10months–inprogressanddueforcompletioninJune2014

Phase2:tostartinJune2014

R50million

R180millionKathu,Northern Cape Constructionofinfrastructureand

housingforBestwooddevelopment24months–civilscompletedandbuildingdueforcompletioninMay2014

R270million

KrielBoxholeandMainCivils,Mpumalanga

Mineinfrastructureanddevelopmentofboxhole

CompletioninApril2014andJuly2014,respectively

R117millionand

R41million,respectively

New contract awards

MthimudeHousing,KwaZulu-Natal

Lowcosthousing,500units40m²eachinruralKwaZulu-Natal

18monthsanddueforcompletioninMay2015

R32million

Umzumbe,KwaZulu-Natal Lowcosthousing,1000units40m²eachinruralKwaZulu-Natal

18monthsanddueforcompletioninMay2015

R67million

Bhobhoyilowcosthousing,KwaZulu-Natal

Lowcosthousing,1000units40m²eachinruralKwaZulu-Natal

18monthsanddueforcompletioninDecember2015

R115million

PlatinumPlace,Gauteng Upgradingexistingbuildingstructuretospec

15monthsanddueforcompletioninApril2014

R23million

ACSA,Gauteng Upgradingexistingbuildingstructuretospec

22monthsanddueforcompletioninOctober2014

R34million

UNISA,Gauteng Upgradingexistingbuildingstructuretospec

14monthsanddueforcompletioninAugust2014

R19million

Major challenges

•Containingthreeloss-makingcontracts

• Labouractioninsurroundingareasimpactingproductivity

Fy2014’s Achievements

• Strengthenedmanagement

• Plantrationalisationandconsolidationstrategy• Improvedsustainabilityoforderbookwithmore

longertermprojects

MARK RIPPON –ManagingDirector


STRATEG

ICREV

IEW

kuSilE powER STaTioN FRoM aBovE

REVENUEGROWTH

%

ORDERBOOK

R620m yearinreview

Thedivisionexperiencedsignificantdisruptionduetolabourunrestbothinternallyandstrikesinadjacentareasthatimpactedoncertainsites,includingtheBakwenaN4tollroad,KrielandKusile.Thedivisionwasfurtherimpactedbyloss-makingcontractsthathaveandarereachingcompletion.Theresultsofthesecontractshadnomaterialeffectontheresultofthegroupasawhole.

DuringtheyearCivilswasrestructuredandsuccessfullyright-sized.Ledbynewmanagement,thedivisionhasrevitalisedemployeemoraleandrevisedcontractingpracticesforimprovedcontrols.Thethreelossmakingcontractshavenowfinallybeenconcluded.

Thenewmanagementinstitutedacomprehensivereviewofthedivision’soperationsintheyear,resultinginanumberofoverhaulinitiatives:revisingcosttocompletionforecasts;adoptingadditionalcontingenciesagainstexposureoncertaincontracts;anoperationalrestructuringandright-sizing;andthesaleofredundantplant.AManagementDevelopmentProgrammehasbeenintroducedtoensurethe“rightpersonfortherightjob”.

ProspectsSignificantgrowthopportunityhasbeenidentifiedcross-borderinBotswana,Zimbabwe,ZambiaSwaziland,LesothoandMozambique.Thedivisionwillselectivelyentertheemarketsonthebackoffundingagenciesorthroughclientrelationships.Locallytheconstructionmarketremainedsubduedwithconstructionconfidenceremaininglow.Thereremainsanovercapacityintheindustrywithfewertendersandlowmargins.

Thedivisioniswellplacedinsecuringinternalcontractsthroughleveragingthesynergieswithinthegroup.Morethan15%ofdivisionalrevenuewillbegeneratedthroughthedevelopmentsthatweresecuredoverthepasttwoyears.

Inadditiontherehasbeenasignificantincreaseintenderactivityforprovincialandmunicipalauthoritiesaswellasthegovernment’sschoolprogramme.

REVENUEREDUCED

17,3%

ORDERBOOK

R1,2bnyearinreview

Thedivisionexperiencedsignificantdisruptionduetolabourunrestbothinternallyandstrikesinadjacentareasthatimpactedoncertainsites,includingtheBakwenaN4tollroad,KrielandKusile.Thedivisionwasfurtherimpactedbyloss-makingcontractsthathaveandarereachingcompletion.Theresultsofthesecontractshadamaterialeffectontheresultofthegroupasawhole.

DuringtheyearCivilswasrestructuredandsuccessfullyright-sized.Ledbynewmanagement,thedivisionhasrevitalisedemployeemoraleandrevisedcontractingpracticesforimprovedcontrols.

Thenewmanagementinstitutedacomprehensivereviewofthedivision’soperationsintheyear,resultinginanumberofoverhaulinitiatives:revisingcosttocompletionforecasts;adoptingadditionalcontingenciesagainstexposureoncertaincontracts;anoperationalrestructuringandright-sizing;andthesaleofredundantplant.AManagementDevelopmentProgrammehasbeenintroducedtoensurethe“rightpersonfortherightjob”.TheMDPcourseisdividedinto7modulescoveringaspectssuchasEmotionalIntelligence,Focus,Thinking,Action,InterpersonalandLeadershipskills.

ProspectsSignificantgrowthopportunityhasbeenidentifiedcross-borderinBotswana,Zimbabwe,Zambia,Swaziland,LesothoandMozambique.Thedivisionwillselectivelyenterthesemarketsonthebackoffundingagenciesorthroughclientrelationships.Locallytheconstructionmarketremainedsubduedwithconstructionconfidenceremaininglow.Thereremainsanovercapacityintheindustrywithfewertendersandlowmargins.

Thedivisioniswellplacedinsecuringinternalcontractsthroughleveragingthesynergieswithinthegroup.Morethan15%ofdivisionalrevenuewillbegeneratedthroughthedevelopmentsthatweresecuredoverthepasttwoyears.

Inadditiontherehasbeenasignificantincreaseintenderactivityforprovincialandmunicipalauthoritiesaswellasthegovernment’sschoolprogramme.


dIVIsIOnAL REviEwS (COnTInuEd)

DAVE GIBBONS–ManagingDirector


Contracts underway/recently completed

BulkWaterMain,

UmlaasRoad,KwaZulu-Natal Installationof13kmof1100mmpipe,fromRichmondofftaketoUmlaasRoad

21months–completed R133million

Canal–Siphon4,MhlumeSwaziland

Installationof1,5kmof1900mmsteelpipebetweentwoexistingcanalsintheMhlumearea


RawWaterPipeline,Hazelmere,KwaZulu-Natal

Installationof2,4kmof800mmpipelinefromHazelmereDamtoHazelmereWaterTreatmentWorks


BulkWaterSupply,Kwahlokohloko,KwaZulu-Natal

Constructionof5,8kmof900mmsteelpipelinefortheBulkWaterSupplytoKwahlokohloko


MainWaterSupply,Woodmead,KwaZulu-Natal

Supplyandinstall9kmof500mmpipelinetotheThulele/WoodmeadDevelopmentsandtheAvonPeakingPowerPlant

12months–nearingcompletion–however,furtherR22,5millionawarded

R38million

LowerThukelaPipelineStangerprojects,KwaZulu-Natal

Installationof29kmof900mmsteelpipelinebetweencommandreservoir(Tugelariver),andtheMvotiWTW,Stangerarea

18months–inprogress R185million

XonxaDamPipeline,Eastern Cape

Installationof23kmof600mmdiametersteelpipelinenearQueenstown


Water&Sanitation,eThekwini,KwaZulu-Natal

ProvisionofWaterandSanitationtoinformalsettlementsineThekwini


New contract awards

EthekwiniWater&Sanitation–NorthernAqueductPhase1,eThekwini,KwaZulu-Natal

Installationof14kmof800–1400mmpipe,fromPhoenixtoUmhlangaRocksandOttawa

18months–establishmentcommenced

R156million

EthekwiniWater&Sanitation–WesternAqueductPhase2and4,eThekwini,KwaZulu-Natal

Installationof25kmof1000mmand1400mmdiametersteelpipelinefromPinetowntoNtuzuma

24months–establishmentcommenced

R363million

Major challenges

• Newentrantstomarket

• ProjectexecutionatNorthernandWesternAqueduct–newprojects


•Operatingprofitup30,5%•CompletedBG3contracttosupplywaterto

Johannesburg

• EstablishedpresenceinZimbabwe

•CompletedfirstprojectinSwaziland


REVENUEGROWTH

79%

ORDERBOOK

R655m

yearinreview

Althoughthemarketisbuoyantintermsofdemandandactivity,thedivisionisbeingchallengedwithcompetitionlevelsincreasingasthemarketisrationalised.Largeconstructioncompanieshavesettheirsightsonthepipelinemarketandareacquiringsmallerbusinessestosecureentry.

Pipelineshasdeliveredanimpressiveperformanceforthe2014financialyearandiswellpositionedforcontinuedgrowth.Thedivisionhasastrongorderbookcomprisingofmainlygovernmentcontracts.

Thepipejackingbusiness,coretotheoldEsorbusiness,hasbeenincorporatedintothePipelinesdivisionwitheffectfrom1March2014.SynergieswithinthebusinesshavebeenimprovedbyconsolidatingthepipejackingbusinessintoPipelines.

ProspectsIntheyearahead,Pipelinesintendstofocusonexecutingthesecuredworkefficientlyandsuccessfully.FurtherexpansionintoAfricanmarketsisonthehorizon,withsignificantgrowthpotentialidentifiedinZambiaandZimbabwe(potentialprojectsincludetheZambiaMillenniumProjectaswellasanumberofwaterprojectsinZimbabwe).

valvE CHaMBER aT uMlaaS Road

STRATEG

ICREV

IEW


dIVIsIOnAL REviEwS (COnTInuEd)

KEVIN DUNCAN–ManagingDirector

Major challenges

• Longleadtimes

• Investmentcapitalconstraininggrowthopportunities


• EstablishmentofEsorDevelopments

• BreakinggroundonDiepslootdevelopment

• EngineeringservicesinstalledinTheOrchardshousingproject


Current projects

TheOrchards,Rosslyn,Gauteng

TheOrchardsisa100%Esor-ownedintegratedresidentialdevelopmentinTshwanecomprising:• 1373stands,ofwhich237areproclaimedandsold• twobusinesssitestotalling2,3ha• privateopenspaceof46ha• educationalsitestotalling7,3ha

5years–inprogress TotalprojectvalueexcludingtopstructureopportunitiesisestimatedatR240million

DiepslootEast,Gauteng

Esorownsthedevelopmentrightsasthe“turnkeydeveloper/contractor”fora9500unitintegratedhousingdevelopmenton237hacomprisingof:

6–8years–inprogress

TotalprojectvalueisestimatedtobeinexcessofR2billion

• 5192singleandrental• 3159walk-ups• 593bonded• 575mixeduse• 3schools• 5socialamenities

• 3shoppingfacilities• 5parks• 1hospital• 1magistratescourt• 86haconservationarea

Uitvlugt(ThreeRivers)Vereeniging,Gauteng

UitvlugtisanintegratedresidentialdevelopmentinThreeRiversEastnearVereenigingand100%ownedbyEsor.Comprisingmorethan4200unitsonthe370ha,ofwhichExt1(2242units)isproclaimedandreadytobedeveloped.Inaddition,thedevelopmentwillyield:• 11businesssites• privateopenspaceof68ha• educationalsites• garageof1ha• 7specialstandson5,7ha

6–8years–Feasibilitybeingfinalised

TotalprojectvalueexcludingtopstructureopportunitiesisestimatedatR600million

Soshanguve,Gauteng

SoshanguveExt8isaresidentialdevelopmentinTshwane.EsorhasacquiredtherightstodevelopthroughapartnershipwiththerightsholderofthelandavailabilityagreementwiththeCityofTshwaneMetropolitanMunicipality.Thiswillcomprise839Res1stands(1dwellingpererf)

3–4years–beingimplemented

TotalprojectvalueexcludingtopstructureopportunitiesisestimatedatR155million

KEVIN DUNCAN


POTENTIALINEXCESSOF

R4bn

year in review

Theentireaffordableandlow-incomehousingsector(comprisingthefullspectrumofbonded,socialrental,gap,FLISPandRDP/BNGmarkets)isintheenviablepositionwheredemandfaroutstripssupply.However,thegreatestthreattoprojectimplementationistheavailabilityof,andcosttothedeveloper,ofprovidingbulkservices,particularlyelectricity.Bulkservicesaregenerallythedomainofgovernmentagenciesorutilitycompanies,whereweareunfortunatelyexperiencinglowlevelsofeffectiveness.

TheDevelopmentsdivisionisalsomakingitsmark,targetinglargeintegratedhousingprojectsaimedattheprivate(bonded)andgovernment(subsidised)sectors.Thedivisionsignifiesafurtherdiversificationofthegroup’srevenuestream,balancingthecontractingrevenuederivedfromCivilsandPipelines,andanopportunitytocapturealargerpercentageofthevaluechain.Anumberofprojectshavealreadybeensecuredandarecurrentlyinvariousstagesofexecution.

Somenotablemilestonesandsuccesseswereachievedduringtheyear.TheR2billionintegratedhousingprojectatDiepslootinGauteng,whichincludestheconstructionoftwoiconicpedestrianbridgesacrossWilliamNicolDrive,brokeground.EngineeringserviceswereinstalledinTheOrchardshousingprojectnearRosslynandthefirststandsweretransferredtotop-structuredevelopers.Demandisstrongonthisprojectandsalesaregoingwell.ThedealwithInvestecontheUitvlugtintegratedhousingprojectnearThreeRiversinVereenigingwasconcludedandthelandtransferredintoanEsor-ownedspecialpurposevehicle.

ProspectsIntheyearaheadthedivisionisaimingtosecurethesecondWorksOrderatDiepslootandcommencewiththeinstallationofthelinkandinternalservices.TheOrchardsprojectisexpectedtogathermomentumwithanincreaseintheservicingandsalestempo.ThefirstphaseofUitvlugtshouldstartwiththeinstallationofservices.TheSoshanguweExt8projectisfurtherexpectedtobefinalisedandthemarketingandservicingofthefirstphasewillbegin.

CoMplETEd iNFRaSTRuCTuRE FoR dEvElopEd STaNdS aT oRCHaRdS

R725mSECUREDFORNEXT

TWOyEARS

STRATEG

ICREV

IEW


CFO’s REpoRT

IntroductionHighlightsfortheyearincludethesaleoftheGeotechnicalbusinesstoKellerforacashconsiderationofR525millionplusapotentialearn-outofanadditionalR150million,thesettlementoftheR202,5millionHighyieldBondaswellasthedeclarationofa38centspersharespecialdividend.WepostedgrowthinbothrevenueandprofitabilityinthePipelinesbusiness,successfullyestablishedtheDevelopmentsbusinesswithimprovedsalesatOrchardsandcommencedworkatDiepslootinJuly2013withtheconstructionoftwoiconicpedestrianbridges.

Theyear’slowsweretheimpactoflossesonthreecontractsresultinginanoperatinglossofR134millionintheCivilsbusiness.Twoofthethreecontractshavebeencompleted,namelyKrielandHwelereng,whilethemainworksattheN4isdueforcompletionatendMay2014,withonlyabridge,whichisthesubjectofavariationtothecontractoutstandinganddueforcompletioninAugust2014.

Attheendofthefinancialyearthebusinessisinastrongerfinancialposition.Gearinghasimprovedto27%,theCivilsdivisionhasbeenrestructuredstrategicallyandoperationallyandtheDevelopmentsbusinessisgearedforimplementationwiththeappointmentofaProjectManagertoleadtheroll-outoftheDiepslootandUitvlugtprojects.

Thegroupisconsolidatedinthreedivisions–Civils,PipelinesandDevelopments–whicharealllocatedatActiviaPark,andensuresflexibilityandagilitytorespondtomarketconditionsandclientrequirements.

Thegroup’scontinuingbusinessreportedanoperatinglossfromcontinuingoperationsfortheyearofR135millionwhichwasimpactedbytheoperatinglossofR134millionreportedintheCivilsdivision.Thisfollowsthreeperiodsofgrowthinearningsfrom2011to2013.

Substantiallosseshavebeenincurredonthefollowingcontracts:

• N4Marikana–mininglabourunrestinthearealedtolowproductionlevelsandalossofR94millionhasbeenrecordedfortheyearendedFebruary2014.Thiswasfurtherimpactedbystrikeactioninthetransportandfuelsectors.SubstantialcompletionisscheduledforMay2014,withonlyassociatedearthworksandabridgetobefinalised.Thisdelayresultedfromtheclientsuspendingworkdueto3rdpartydesignissues.Nopenaltieswereimposed.

• KrielCivilsandBoxhole–thescopeandapprovedconstructionmethodologyofthesetwocontracts,forthesameclient,waschanged

The2014financialyearwasayearofmanyhighsandlows.Tradingconditionsremaineddifficult,strikesandstaffrelatedissuesincreased,impactingonprofitability,particularlyattheN4roadprojectinMarikana,andthechallengeofbalancingcashresourceswithgrowth.

WESSEL VAN ZyL –CFO


duringtheconstructionphaseresultinginmajortimerelatedoverrunsandalossofR45millionfortheyearendedFebruary2014.Claimsandpenaltiesarebeingsubmittedanddiscussedbuthavenotbeenincludedinprofitorloss.

• HwelerengroadcontractwascompletedinApril2014andrecordedalossofR27millionmainlyduetolatecompletionandrework.Nopenaltieswereimposed.

Generally,theroadsandcivilssectorshavebeenaffectedbydifficultworkingconditions,includinglabourunrest,excessiverainfallandplannedproductiontargetsnotbeingachieved.

Thegrouphasfurtherfocusedon:

σ improvingriskmanagementprocessesintendering,executionandreportingofcontractsinacompetitiveconstructionenvironment;

σ successfullyimplementinganintegratedenterpriseresourceplanning(ERP)systemtobettersupportthegroup’soperations;

σ beddingdowntheintegratedfinancialreportingsystemacrossthegroup;

σ RestructuringtheCivilsdivision; σ acostcontroltrainingprogrammethatisbeingrolled-outtoensuremanagementinformationisconsistentandofthehigheststandard;and

σ reducingduplicatedcosts.

Theseprocesseswillbecontinuouslymanagedtoharnessfurtherefficiencyandeffectiveness.

ConsolidatedstatementofprofitandlossandothercomprehensiveincomeThegroup’scontinuingbusinessconsolidatedrevenuehasincreasedbyR55milliontoR1,6billiononimprovedactivitylevelsinthePipelinesdivision,whileconsolidatingtheoperationsintheCivilsdivisionaswellasaconsideredapproachtotheDevelopmentsdivision.Thegrouprecordedaheadlinelosspershareof11,3cents(2013:headlineearnings20,50centspershare).

Grossprofitmarginsdeterioratedto-1,2%(2013:15,0%)whileoverheadsincreasedtoR116,6million(7,3%ofrevenue)fromR67,8million(4,4%ofrevenue)onlastyear’scomparative.Improvedefficiencyresultingfromtherationalisationimpactedthemiddlelineoff-setbyretrenchmentcostsandtheonce-offcostsinsettlingtheHighyieldBond(HyB).

REVENUE CONTINUING OPERATIONS

r1,6bn

ThenetfinancecostofR37,4millionwasincurredasaresultoftheinterestonvehicleassetfinancefollowingthecapitalexpenditureprogrammeoverthelasttwofinancialyearsincludingtheinterestcostontheHyBtoDecember2013.ThetaxcreditofR102.9millionresultedinaneffectivetaxrateof34,8%substantiallyhigherthantheSouthAfricanstatutoryrateof28,0%.ThehigherrateislargelyattributabletoacapitalgainrealisedonthesaleofthegeotechnicalbusinessaswellasprioryearoverprovisiononcapitalallowancesintheGeotechnicaldivision,offsetbynon-deductibleexpenditureandotherpermanentdifferencesrelatedtothecancellationoftheHyB.

ThelossaftertaxincludingthediscontinuedbusinessamountedtoR166,1million(2013:profitR87,7million).

ConsolidatedstatementoffinancialpositionIntangible assets and goodwillThedirectorshavetestedtherecoverabilityofgoodwillasat28February2014basedonourprojectionsandestimatesasfurtherdisclosedinnote6tothefinancialstatements.

DuetothecurrentlossessufferedintheCivilsdivisionitwasdeemedappropriatetoimpairthegoodwillonthePatulaacquisitionbyR84,6milliontoR93,7million.

Thevaluationwasdonewiththeassistanceofexternalcorporateadvisersbasedonadiscountedcashflowmethodonacontinuingbasis.

Property, plant and equipmentCapitalexpenditureofR38million(2013:R151,1million)wasincurredforcontinuingoperationsinthecurrentfinancialyear.ThisexpenditureimprovedoperationalefficienciesmainlyinthePipelinesdivisiononthebackofsecuredlong-termcontracts.DuringtheyearthegroupdisposedofR78millionintheCivilsdivisionwhichrelatestoolderandnon-standardequipmentaswellastoalignthefleetbetterwiththecurrentandprojectedworkload.

Nosignificantimpairmentsofproperty,plantandequipmentoccurredduringtheyear.

TheboardhasapprovedR26millionforthe2015financialyear(2013:R92million)mainlyinthePipelinesdivision.

STRATEG

ICREV

IEW

CFO’s REpoRT (COnTInuEd)


CFO’s REpoRT (COnTInuEd)

Trade and other receivablesTradereceivablesdecreasedbyR152millionduetothedisposaloftheGeotechnicaldivisionandgoodcashcollectioninboththeCivilsandPipelinesdivisions.TheimpairmentprovisionforcontinuingoperationsincreasedbyR10milliontoR20,8million(2013:R10,8million).ThisprovisionrelatestoreceivablesintheCivilsdivision.Provisionhasbeenraisedonallcontractualdisputes,whereappropriate.

Thedaysoutstandinginthetradereceivablesdecreasedto45,4days(2013:73,9days).Thisratioiswithingrouprisktolerancelevels.TheSouthAfricancreditriskexposureisaroundmunicipal,provincialandquasigovernmententitiesasdetailedfurtherinnote37totheannualfinancialstatements.

Cash and cash equivalentsThegroup’snetcashoutflowfromoperatingactivitiesamountedtoR279,1million(2013:R32,9million),afterrealisinganoperatingprofitbeforeworkingcapitalchangesofR27,4million(2013:R263,4million)off-setbyanetR115,6millionincreaseinworkingcapital.ThegroupfurtherdeclaredandpaidadividendofR145,1millionresultinginthetotalcashoutflowfromoperatingactivitiesofR305,2million.

TheoutflowwasfundedthroughanetinflowfrominvestingactivitiesofR422,8millionbeingtherealisationofthecashproceedsofR437,4millionfollowingthesaleoftheGeotechnicalbusiness(seenote32).Proceedsonsaleofpropertyplantandequipment,mainlyasaresultofarestructureintheCivilsdivisionamountedtoR79,3millionthatisoff-setbyR52,5millionadditionstoproperty,plantandequipmentmainlyinthePipelinesbusinessaswellasR14,5millionadditionsintheGeotechnicalbusinesspriortothesale.ThegroupinvestedR40,6millionintheacquisitionofsharesinSafdevTanganani(Pty)Ltd,acompanythatownsthedevelopmentrightsfortheDiepslootintegratedhousingproject.

ThecashoutflowsfromfinancingactivitiesamountedtoR130,3million(2013:inflowofR183,8million)mainlyattributedtothesettlementofthehighyieldbondamountingtoR202,5millionandnetofraisingaR80millionbondovertheUitvlugtproject.

Securedshort-termoverdraftfacilitywasrenewedwithABSAatR30million.

SharecapitalandpremiumThesharecapitalandpremiumatgrouplevelincreasedbyR14,9millionafteraccountingforshareoptionsexercisedorlapsed(seenote35).

TheforeigncurrencytranslationreserveincreasedbyR19,8millioninthetranslationofourforeignoperationsintotheSouthAfricanreportingcurrency,followingthesaleoftheGeotechnicaldivisionandafurtherweakeningoftheRand.

Non-currentliabilitiesSecuredlong-termborrowingsdecreasedbyR205,5millionfollowingthesettlementoftheHyBprogrammeandrepayingR55,8millioninvehicleassetfinance.SecuredborrowingsincludeaR52,8millioninterestfreebondregisteredovertheUitvlugtproperty.

CurrentliabilitiesThecurrentportionofsecuredborrowingsremainedflatduetoamoreconstantandpredictablefinancialstructureinplaceforvehicleassetfinance.

TradeandotherpayablesTradeandotherpayablesincludeR18,8million(2013:R49,4million)duetocustomers.Thecostofsales’daysoutstandingintradeandotherpayablesdecreasedby1,3daysto64,0days(2013:65,3days).

FinancialcovenantsThecurrentgroupoverdraftfacilityofR30millionissecuredbytradereceivables.Otherguaranteefacilitiesareeithercoveredbytradereceivablesorthroughthegroupbalancesheet.

DividendTheboarddeclaredaspecialdividendof38centspersharefollowingthesaleoftheGeotechnicalbusiness,andhasresolvedthatnofinaldividendbedeclared.

TheyearaheadThegrouphasadequateasset-basedfinancingandguaranteefacilitiesthroughfinancialandinsuranceinstitutionstoprovidebothworkingcapitalandbondingfacilitiestosupporttheoperationsforthe2015financialyear.Itistheintent,subjecttotrusteeapproval,toincreasetheBBBEEownershipoftheEBBSOSTrustbyafurther3,5%throughutilisingavailablecashresourcesoftheTrust.ThiswillfurtherstrengthenthecurrentLevel3BBBEEstatusofthegroup.

GoingconcernTheboardissatisfiedthatthecompanywillcontinuetotradeasagoingconcerninthefollowing12monthsbasedoncurrentcashresourcesandfacilitiesavailable.ItremainsanareaofconcernthattheclaimsatKusilehavenotbeenresolvedandintheeventofanylengthylegalprocesswillhaveanegativeimpactonthecompany’sabilitytotrade.

Wessel van ZylCFO

Johannesburg22May2014


EThICAL lEadERSHSip

Theprinciplesofgoodcorporategovernancepermeatethegrouptofosteranenvironmentwhereineveryemployeeisexpectedtobehavewithhonestyandfairness.Thegroupriskofficercommunicatespoliciesoncorporategovernanceandethicstosubsidiaryboardspersonally,supportedbyposters,campaignsandsitepresentations,newslettersandinformationsupplementswithpayslips.

EthicalconductisanareawithwhichtheSocialandEthicsCommitteeistaskedbytheboard.Aspartofitsresponsibilitythecommitteeensuresthatthecompany’sethicsperformanceisassessed,monitored,reportedanddisclosed.Further,thecommitteereviewsthegroup’sCodeofEthicsandConductannuallyandrecommendsittotheboardforapproval.Italsoreviewscasesofconflictsofinterest,misconductorfraud,oranyotherunethicalactivitybyemployeesofthecompany.

TheCodeofEthicsandConduct(theCode)embodiesthegroup’scorevalues(seeIFC)andcommitsthegroup,employeesandcontractorstomaintainingthehighestlevelsofcompetency,ethicalconductandintegrityand,atalltimes,abidingbythelawtoensurethegroup’sreputationremainsbeyondreproach.TheCodeisreviewedannuallyandrefersspecificallytothegroup’sdealingsastheyrelatetocustomers,governmentandpoliticalactivities,employmentpractices,transformation,occupationalhealth,safetyandenvironment,thecommunity,theboardofdirectorsandmanagement.

Thegrouphasazerotoleranceapproachtotheftandfraud.TothisendEsorensuresthatacultureexistswhichencouragesemployeestonotonlybehaveethicallybutalsotoreportanyactualorperceivedunethicalbehaviour.Anumberofcaseswereinvestigatedduringtheyearwhichhaveledtothreedismissalsandanumberofdisciplinarycases.Allallegationsareinvestigatedwiththeassistanceofexternalconsultantstoensureproperandindependentspecialistoutcomes.InadditionallEsorvehiclescontaintrackingdeviceswhichprovidedailyreports.Thesereportsassistinverifyingandaddressinganyreportsofdangerousdrivingandininstanceswherethevehicleisfoundtobespeedingat130km/hourimmediateactionistaken.

TheCodeiscommunicatedtoemployeesacrossthegrouponcommencementofemployment,withaspectsregularlyreinforcedvianewslettersandpostersatthegroup’sofficesandsites.

Tosupportenforcementthegrouphasaconfidentialwhistle-blowingprocessinplace,intermsofwhichEsorprotectstheidentitiesofemployeeswhoreportnon-compliancewiththeCode.Informationregardingtheprocessappearsonposters,payslipsandinbookletsdistributedtoeachemployee,andwillalsoappearontheintranetinthefuture.

ACCOUNTABILITy

Theboardstrivestoensurethatthecompanyconductsitsbusinesswiththeutmostintegrityinalldealingswithallstakeholders.


dIrECTOrATE And EXECuTivE MaNaGEMENT

Executivedirectors

1. Bernie Krone (born 1953)CEOBSc Eng (Civil), Pr Eng FSAICEBerniehasover38years’experienceacrossallaspectsofgeotechnicalengineering.

BorninHalstead,EnglandhemovedtoSouthAfricaasachild.Afterattainingprofessionalengineerstatus,hegainedexperienceintheemployofmajorgeotechnicalengineeringcompaniesbeforejoiningEsor(Pty)Limited.

2. Wessel van Zyl (born 1967)CFOCA(SA)WesselqualifiedasaCharteredAccountantin1991afterservingarticleswithPWC.Helefttheauditingprofessiontoworkinthefinancialandtaxationfields,laterjoiningtheconstructionindustryin1997.Wesselpreviouslyworkedinthespecialistfieldsofauditing,taxation,treasuryandheadinguptheCorporateOfficeattheAvengGroupbeforehewasappointedatGrinaker-LTAasFinancialDirectorin2009.WesseljoinedEsorasCFOon8October2012.

Independentnon-executivedirectors

3. Dave Thompson (born 1936)ChairmanCA(SA), Advanced Management Programme (Harvard)DavequalifiedasaCharteredAccountantinSouthAfricaandisalsoamemberoftheAssociationofAccountantsandAuditorsintheUnitedKingdom.Hehasvastexperience,havingservedonamultitudeofboards.

4. Ethan Dube (born 1959)MSc (Statistics) Executive MBA (Sweden)Ethanhasgainedsignificantcorporatefinanceandassetmanagementexperienceovertheyears.HeworkedforSouthernLifeAssetManagersforthreeyearsasaSeniorAnalystandforStandardCharteredandMerchantBankfortwoyearsintheCorporateFinancedepartment.In1996EthanfoundedInfinityAssetManagementwiththreeotherpartnersandin1998hefoundedVunaniLimited,afinancialservicescompany,whereheisthecurrentCEO.HeisChairmanofSouthOceanHoldingsandanon-executivedirectorofHypropInvestmentsLimited.

5. Dr Franklin Sonn (born 1939)BA (Hons), STD FIACDemocraticSouthAfrica’sfirstambassadortotheUnitedStates(1995–1998),Franklinistherecipientof13honorarydoctoratesfromnationalandinternationaluniversitiesandhasheldmanydistinguishedpositionsineducationandbusinessinSouthAfrica.Hecurrentlyservesasanon-executivedirectoronthecorporateboardsofamongothers,MacsteelServiceCentresSA(Pty)Limited,JIAPiazza(Pty)Limited–Chairperson(holdingcompanyfortheIntercontinentalHotelJohannesburgORTamboAirport);EkapaMining(Pty)Limited(Chairperson);Imalivest(Pty)Limited(Chairperson)andXinergistixManagementServices(Pty)Limited(Chairperson).HeisformerChancelloroftheUniversityoftheFreeStateandformerPresidentoftheAfrikaanseHandelsinstituut.Hehasservedonthegroup’sboardsince2007.

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Executivemanagement

7. Mark Rippon (born 1971)Esor Civils Managing DirectorHND Civ Eng (Wits Tech)MarkstartedhiscareeratWBHOasaTechnicianandadvancedtothepositionofContractsManager.HesubsequentlyjoinedPatulaConstructionasContractsManagerandwaspromotedtoContractsDirectorin2003.OnEsor’sacquisitionofPatulaConstructionin2008,MarkbecameaDivisionalDirectorofEsorCivilsandwaslaterappointedasManagingDirectorin2012.Hehasabroadrangeofexperienceincludingcontractmanagement,contractlawandconstructionfinance.

8. Dave Gibbons (born 1966)Esor Pipelines Managing DirectorDip. Mining SurveyAfterqualifyingintheminingindustryin1988,DavejoinedWKConstructionwhereheservedfor18yearsgarneringexperienceinthepipelineindustry,beforeformingShearwaterKZN.DaveiscurrentlyManagingDirectorofEsorPipelines.

9. Kevin Duncan (born 1958)Esor Developments Managing DirectorHND (Civ Eng), BCom(Econ.), AEP, PGDKevinjoinedthecompanyin2012toestablishanin-housecapabilitytodrivethegroup’sownprojectsinthe‘affordablehousing’market.Kevinwaspreviouslymanagingdirectorofabusinessunitatoneofthemajorbanks,whichfocusedonacceleratingthedeliveryofaffordablehousingthroughprivatepartnershipsandrisksharingarrangements.PriortothishewasChiefExecutiveofaSOEthatwasmandatedtoprovidealternativeaccommodationtoclientswhosepropertieshadbeenrepossessed.

10. Patrick Africa (born 1966)Group SHEQ ManagerND (Safety Management)Patrickhasworkedintheshipping,gas,petrochemical,steel,roadsandearthworksandcivilsindustriesforthepast26years.Hecompletedhisentrylevelqualificationinsafetyin1996andin2001joinedFluorGlobalasaSafetySupervisor,travellingtodifferentpartsofSouthAfricaonmajorrevampcontracts.In2004hejoinedConcorCivilsasaSiteSafetyManager,andwaspromotedtoConcorRoadsandEarthworksDivisionalSHEQManagerin2007(hewaspartoftheteamheadingtheGautrainproject).PatrickjoinedEsorin2010astheGroupSHEQManager.

Independentnon-executivedirectors(continued)

6. Dr Oswald “Ossie” Franks (born 1953)PhD (Engineering Science), BSc Eng (Mechanical), Pr. Eng, M. Industrial Admin, Honours Business & Admin, Government Certificate of Competency: Mines and WorksOssieisaregisteredProfessionalEngineerwiththeEngineeringCouncilofSouthAfrica(ECSA)withmorethanthreedecadesofexperienceinindustryandacademia.HewasappointedDeanoftheFacultyofEngineering,theBuiltEnvironmentandInformationTechnologyattheNelsonMandelaMetropolitanUniversityinJuly2013.PriortothathewasCEOofECSAandDeanofEngineeringattheCapePeninsulaUniversityofTechnology.OssieisarecipientofbothaUSAID(administeredbytheAfricaAmericaInstitute)andaBritishCouncil(ODA)scholarship.HehasanextensivetrackrecordofserviceonvariousboardsorcouncilsincludingtheDepartmentofScienceandTechnology’sBoardoftheTechnologicalHumanResourceIndustryProgramme,theMasakh’iSizweCentreofExcellence,NationalAdvisoryCouncilonInnovation’sTaskTeamonInfrastructureforResearchandDevelopment,andtheCounciloftheVaalUniversityofTechnology.

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ACCOUNTABILITy

6


COrPOrATE GovERNaNCE

MEM

BERS

COMMITTEES

Board

ExcoDave Gibbons (Pipelines)Mark Rippon (Civils)Kevin Duncan (Developments)Partick Africa (SHEQ)

Executive directors

BernieKrone(CEO)WesselvanZyl(CFO)

Independent non-executive directors DaveThompson(Chairman)DrFranklinSonnEthanDubeDrOssieFranks

AUDITCOMMITTEE

HUMANRESOURCES

ANDNOMINATIONSCOMMITTEE

RISKCOMMITTEE

SOCIALANDETHICSCOMMITTEE

GovernancepracticesandreportingThecompany’sdisclosurestandardsareregulatedbytheSouthAfricanCompaniesAct,theJSEListingsRequirementsandKingIII,andarebenchmarkedagainstinternationalbestpracticeeg.GRI3.Esor’sboardappreciatesthateffectivecorporategovernanceisakeydriverofsustainabilityandacknowledgesitsresponsibilityinthisregard,includingtoreportopenlythereontostakeholders.

Esor’sgovernancestructure

Highlights

• Black independent non-executive director representation was maintained


ACCOUNTABILITy

GOVERNANCE STRUCTURE Roles and responsibilities Membership Attendance

Esor board Theboardisresponsibleandaccountablefortheperformanceandaffairsofthegroup,andhasfullcontroloverallsubsidiariesanddivisions.Thedirectorsexerciseleadershipwithintegrity,basedonprinciplesoffairness,accountability,responsibilityandtransparency.TheboardisthefocalpointforgoodcorporatecitizenshipandactsinaccordancewithitsownaswellasEsor’sCodeofEthicsandConduct,leadingbyexample.

Theboard’sprimaryfunction,inconjunctionwiththeCEO,istodeterminethegroup’sstrategy,purpose,valuesandstakeholdersrelevanttoitsbusiness.Italsocontinuallymonitorsthesolvencyandliquidityofthecompanyaswellasnon-financialaspects.Further,itisresponsiblefortheframeworksforthedelegationofauthorityandensuringcompliancewithallrelevantlaws,regulationsandcodesofbestbusinesspractice,aswellasappropriatestakeholdercommunicationtoprotectandenhancethecompany’sreputation.Theboardensurestheintegrityofthegroup’sintegratedreport.

Strategy,risk,performanceandsustainabilityarediscussedonanongoingbasis.Theseelementsofthebusinessarefullyintegrated.

TheresponsibilitiesoftheChairmanandCEO,andthoseofothernon-executiveandexecutivedirectors,areclearlyseparatedtoensureabalanceofpower.

TheChairmanisresponsiblefor:

• Providingeffectiveleadership•Maintainingethicalstandards

•Overseeingtheefficientoperationoftheboard.

TheCEOisresponsiblefor:

• Proposing,updating,implementingandmaintainingthestrategicdirectionofEsor

• Ensuringappropriatelysupervisedandcontrolleddailyoperations.(InthisregardtheCEOisassistedbytheCFOandEXCO.)

Theindependent non-executive directorsarehighmeritindividualswhoobjectivelycontributeawiderangeofindustryskills,knowledgeandexperiencetotheboard’sdecision-makingprocess.Thesedirectorsarenotinvolvedinthedailyoperationsofthecompany.

Executive directors (2):BernieKrone(CEO)WesselvanZyl(CFO)

Independent non-executive directors (4):DaveThompson(Chairman)EthanDubeOswaldFranks(appointed 23 May 2013)

MonhlaHlahla(appointed 23 May 2013, resigned 29 October 2013)

MBMathabathe(resigned 26 February

2014)

FranklinSonn

4(4)4(4)

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COrPOrATE GovERNaNCE (COnTInuEd)


Audit Committee AllmembersoftheAuditCommitteeareindependentnon-executivedirectorsasrequiredbytheCompaniesAct.

Thecommittee’skeyareaofresponsibilityistooverseefinancialreportingrisks,internalfinancialcontrols,fraudrisksandITrisks.Furtherdetailissetoutinitsfullreport.

(See Audit Committee Report on page 55.)

Independent non-executive directors (4):FranklinSonn(Chairmanto

February 2014)

EthanDubeDaveThompsonOswaldFranks(appointed 23 May 2013) (Chairman from March 2014)

Attending by invitation:BernieKrone(CEO)WesselvanZyl(CFO)

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Risk Committee Thecommittee’sprimaryfunctionistoprovideassistancetotheboardinensuringimplementationandmaintenanceofaneffectiveriskenvironment.Furtherdetailissetoutinthefullriskreport.

(See Risk Management Report on page 38.)

Independent non-executive directors (4):FranklinSonn(Chairman)EthanDubeDaveThompsonOswaldFranks(appointed 23 May 2013)

Attending by invitation:BernieKrone(CEO)WesselvanZyl(CFO)PatColman(Riskmanager)

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Human Resources and Nominations Committee

Thecommitteeisresponsiblefor:

• Consideringthecompositionoftheboard

• Ensuringthattheboardanditssub-committees: σ arereviewedregularly; σ comprisetherequisitemixofskills,experience,diversityandotherqualities;

σ alignwiththestrategicdirectionandrequirementsofEsor;and

σ meettherequirementsofsoundcorporategovernance

• SettingthecriteriaforboardnominationsincludingtheCEO

• Identifyingandrecommendingnomineestotheboard,includingfortheroleofCEO

• Successionplanning• Annuallyreviewingdirectors’credentials.

Thecommitteeisauthorisedbytheboardtoseekanyinformationrequiredfromanyemployeeandmayfurtherobtainexternallegalorotherindependentprofessionaladviceifdeemednecessary,attheexpenseofthegroup.Thecommitteeconductsthenominationprocessinaformalandtransparentmanner.

Independent non-executive directors (3):FranklinSonn(Chairman)DaveThompsonOswaldFranks(appointed 23 May 2013)

Attending by invitation:BernieKrone(CEO)WesselvanZyl(CFO)

WilliamNeuwenhuis(HRManager)(resigned 28 February 2014)

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ACCOUNTABILITy


Social and Ethics Committee

Thecommitteeischargedwith:

• Providingguidanceandaframeworkforethicalcompliance

• EstablishingCSIgoalsandmonitoringsocioeconomicdevelopmentintermsoftheUNGlobalCompactPrinciples,theOECDregardingcorruption,EmploymentEquitiesActandB-BBEE.

(See Social and Ethics Committee Report on page 51.)

BernieKrone(Chairman)WesselvanZyl(CFO)FranklinSonnEthanDubeDaveThompsonOswaldFranks(appointed 23 May 2013) (Chairman from March 2014)

WilliamNeuwenhuis(HRManager)(resigned 28 February 2014)

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GoingforwardtheAuditandRiskCommitteeswillbecombinedintoasingleAuditandRiskCommittee,astheAuditandRiskCommitteescompriseofthesamenon-executivedirectorsandthereisanoverlapintheinformationdiscussed.

Esor’sboardanditscommitteesareguidedbyindividualcharters,whichcanbeviewedonourwebsite.Thesearereviewedandupdatedregularlyinaccordancewithemergingguidelinesandlegislation.

Changes to the board in FY2014:

Date effective Change

23May2013 OswaldFranksappointed

MonhlaHlahlaappointed

29October2013 MonhlaHlahlaresigned

26February2014 BrissMathabatheresigned

BoardprocessesRotation of directorsIntermsofKingIIIandthegroup’sMemorandumofIncorporation,one-thirdoftheboard’snon-executivedirectorsmustretirefromofficeateachannualgeneralmeetingonarotationbasis.Retiringdirectorsmaymakethemselvesavailableforre-election,providedthattheyremaineligibleasrequiredbytheMemorandumofIncorporationandincompliancewiththeJSEListingsRequirements.

Accordingly,EthanDubeandFranklinSonnwillofferthemselvesforre-electionattheupcomingannualgeneralmeeting.Inaddition,theappointmentofOswaldFranksasanindependentnon-executivedirectorandchairmanoftheAuditandRiskCommitteewillbeapprovedandconfirmedbyshareholdersaspertheJSEListingsRequirements.

ReviewsTheboardissatisfiedthatallcommitteeshavefulfilledtheirresponsibilitiesduringtheyear.Toensuretransparency,committeechairmenprovidetheboardwithaverbalreportonrecentcommitteeactivitiesatallmeetingsandtheminutesofcommitteemeetingsareavailable.Inaddition,thecommitteechairmenora

WWW.ESOR.CO.ZA

nominatedcommitteememberattendsthecompany’sannualgeneralmeetingtoansweranyquestionsfromstakeholderspertainingtotheirrespectivematters.

Theindependenceofdirectorsisascertainedonaquarterlybasisthroughformalmandatorydeclarationsofpersonalinterest/s.Esor’sdefinitionof‘independent’isinlinewithKingIIIrecommendations.Non-executivedirectorsarenon-permanentemployeesofthegroup.

Eachindividualdirectoralsoperformedaself-evaluationexerciseduringtheyear.Theresultsofthesewerereviewedbytheboard,whichwassatisfiedthattheoverallassessmentdidnotdiminishinanymaterialrespectordegreefromthepreviousassessment.

Succession planningSuitablesuccessorshavebeenidentifiedinthecompanyforallseniormanagementpositions.Successionplanningremainsontheriskregisterofthegroupforfrequenttrackingandconsideration.Theboardisresponsibleforannuallyreviewingthestrategy.

Ongoing developmentThegroupriskofficerandCFOareresponsibleforensuringdirectorsreceiveongoingdevelopmentandtraining.Inthisregardthedirectorsarekeptabreastofallapplicablelegislationandregulations,changestorules,standardsandcodesaswellasrelevantsectordevelopmentswhichcouldpotentiallyimpactthegroupanditsoperations.

Inthecaseofnewappointments,theCEO(andCFO)informallypresentanoverviewofthegroup’sfinancialresults,marketpositionandoperationsaswellasinformationondirectors’fiduciarydutiesandresponsibilities.Inaddition,allnewappointeesareprovidedwiththegroup’slatestintegratedreport,interimandannualfinancialresultsannouncements,recentcircularstoshareholders,budgetdetails,companystructure,boardandsub-committeecomposition,minutesofthemostrecentboardmeetingandaboardpackfortheupcomingmeeting.

Restriction on share dealingsAtpresentnonon-executivedirectorholdsmorethan5%oftheissuedsharecapitalofthecompanyorhastheabilitytocontrolorinfluencetheboard.Thestakeholdingsofindependentnon-executivedirectorsaretherefore


notmaterialtotheirindividualpersonalwealth,andthereforedonotcompromisetheirindependence.Thesefindingshavebeendiscussedbytheboardandconfirmedwiththenon-executivedirectors.

Alldirectorsandseniorexecutiveswithaccesstofinancialandanyotherprice-sensitiveinformationareprohibitedfromdealinginEsorsharesduring‘closedperiods’,asdefinedbytheJSE,orwhilethecompanyistradingundercautionary.TheCFOinformsalldirectorsbyemailwhenthecompanyentersa‘closedperiod’.

Atallothertimesdirectorsarerequiredtodiscloseanysharedealingsinthecompany’ssecuritiestotheCFOandcompanysecretaryforapproval.TheCFO,togetherwiththesponsor,ensuresthatsharedealingsarepublishedonSENS.Duringtheyearadirectortradedinsharesduringaclosedperiod.Seepage37forfurtherdetails.

Independent adviceAllindependentnon-executivedirectorshaveunrestrictedaccesstomanagementatanytimeaswellastothegroup’sexternalauditors.Further,alldirectorsareentitledtoseekindependentprofessionaladviceonanymatterspertainingtothegroupastheydeemnecessaryandatthegroup’sexpense.

CompanysecretaryiThembaGovernanceandStatutorySolutions(Pty)LimitedistheappointedcompanysecretaryandtheboardissatisfiedthatthedirectorsofiThembaareappropriatelyqualified,competentandexperiencedtofulfilthisfunction.AsrequiredintermsoftheJSEListingsRequirements,theboardhassatisfieditselfbywayofaninformalreview.Aformalassessmentwasperformedinthecurrentfinancialyear.

iThembaisrepresentedbyEliseBeukes(B.Proc).Shehasbroadexperienceinallaspectsofcommerciallaw,havingspentthreeyearsinbothlitigationandcommercialpracticeasanadmittedattorneyandfouryearsascorporatelegalcounsel.InaccordancewiththerequirementsoftheCompaniesActandJSEListingsRequirements,asreadwithKingIII,sheisnotadirectorofthecompanyandthereforehasanarm’slengthrelationshipwiththeboard.

Itistheresponsibilityofthecompanysecretarytomonitorchangesanddevelopmentsincorporategovernanceand,togetherwiththeexecutivedirectors,tokeeptheboardupdatedinthisregard.Theboardreviewsanychangesandappropriatemeasuresareimplementedtocomplyinsuchawaytosupportsustainableperformance.ThecompanysecretaryinconjunctionwiththeCFOensuresthecompanycomplieswithallcurrentandapplicableregulationsandlegislation.Indoingsotheyliaisecloselywiththecompany’ssponsor.

Thecompanysecretaryfacilitatesanannualself-evaluationoftheboard’sperformance,mixofskillsandindividualcontributionsofdirectors,itsachievementsintermsofcorporategovernanceandtheeffectivenessofitssub-committees.Theexercisefurtherincludesareviewofcommunicationsbetweenmanagementandtheboardaswellasbetweentheboardandstakeholders.Intheyearunderreviewtheboardandcommitteesfunctionedasintended,accordingtothereviews.

Thecompanysecretaryisappointedandremovedbytheboard.Alldirectorshaveaccesstotheadviceandservicesofthecompanysecretaryandtocompanyrecords,information,documentsandpropertyinordertoparticipatemeaningfullyinboardmeetings.Thecertificaterequiredtobesignedintermsofsection88oftheCompaniesActappearsonpage54oftheannualfinancialstatements.

ITgovernanceEsorbelievesawell-governedITfunctioniscriticalinaddressingrisk,andthatthisfallswithintheresponsibilityoftheboardandexecutives.Thegrouphasasolidbusinesscontinuityanddisasterplaninplace.Duringtheyeartheintranetwaslaunched.

Thekeyaimsforthegroup’sITgovernanceframeworkaretostandardisebusinessprocessesacrossthegroup,reduceinternalcostsandensuresoundcorporategovernance.Overalltheframeworkaimstobecomprehensiveandpractical,customisedtotheenvironment,integratedintothekeybusinessobjectives,andmonitoredforcomplianceandperformance.

AnITgovernancecharter,whichcanbeviewedonourwebsite WWW.ESOR.CO.ZA

COrPOrATE GovERNaNCE (COnTInuEd)


formaliseslinesofdelegationfromtheboardandAuditCommitteethroughtotheCIO,aswellassetsoutpolicies,procedures,andperformancemetricswhichworktogetherintheITgovernanceframework.

Theformulationofthegroup’sITgovernancepolicyintermsofthecharterhastakenintoaccountthematerialissuesaffectingallrelevantstakeholdersincludingtheboard,employeesandspecificdepartments,forinstancefinance.

TheboardreceivesanannualupdateonITrisksfromtheCIO.Allriskspresentedintheyearweredeemedtobewithindefinedtolerancelevelsandnotconsideredmaterial.Theseincluded:

• Businesscontinuity• Prolongeddowntime

• Back-upandoff-sitestorage• Securityofnetworkanddesktops• Policieson:

σ ByOD(“Bringyourowndevicetowork”) σ Electroniccommunicationsandsocialmedia σ Corporategovernancecompliance σ Physicalaccesstoservers σ Levelofthirdpartyvendoraccesstothenetwork σ Copyrightinfringement.

LegalcomplianceThegroupriskofficer,alongwiththeexecutivemanagement(CFO),isresponsibleforensuringcompliancewithlawsandregulationsandthegrouphasinplacealegalcompliancechecklist.Thecontinuousevolutionoftheconstructionindustrylandscapeisprovingchallengingtoorganisationsincomplyingwithlawsandregulations.Duringtheyearthegroupconductedanumberofworkshopswithmanagementtoassistintheidentificationandprioritisationofitsregulatoryuniverse.KPMGInc.wasengagedtoassistwiththeprocessofreducing850potentiallyapplicablelegislationsto86Acts.ThiswasfurtherrefinedintoalistofActsmostapplicabletoEsorandwheretheconsequencesofnon-compliancecouldbemostdetrimentaltotheorganisationifnotmanaged.

Fortheyearaheadfocuswillbeon:

• AdoptionandimplementationoftheCompaniesAct;

• ImprovedcompliancewithKingIII;

• Continuedroll-outofcomplianceawarenessforumsandtraining;

•OngoingcompliancewithallotherActstowhichthecompanyissubject;and

• DevelopingactionplansandmeasurestoensurecompliancewithalllawsandapplicablelegislationandNationalActsthatmaypotentiallyapplytoEsor.

ApplicationofgovernanceprinciplesThecompleteKingIIIcompliancechecklistisavailableonourwebsite. WWW.ESOR.CO.ZA InsummarythegrouphasmateriallyappliedthemajorityofKingIIIprinciplesinitsinternalcontrols,policies,termsofreferenceandoverallprocedures,andwillcontinuetodoso.

Exceptions report• Adirectortradedinthecompany’ssecuritiesduring

aclosedperiod.TheJSEisintheprocessoffinalisingthematterafterrequestinginformationfromboththecompanyandthedirectorconcerned.

• Intermsofpara3.84(a),theNominationCommitteeshouldbechairedbytheChairmanoftheboard.However,thegroup’sNominationCommitteeiscombinedwiththeHumanResourcesCommittee.Thechairforeachapplicablesessionischangedtoalignwiththisrequirement.

Pleaseseepage125forthesummaryofapplicationofChapter2ofKingIII.

ACCOUNTABILITy


rIsk MAnAGEMEnT REpoRT

Theprinciplesofanintegratedenterprise-wideriskmanagementsystemisthatriskmanagementformspartofthedaytodaylifeofallemployeesinallstrategic,businessprocessesandoperationalactivities.

RiskCommitteeTheRiskCommitteeisresponsiblefordevelopingtheintegratedriskmanagementstrategyandpresentingthistotheboardforapprovalandfurtherinputontolerancelevels.Itisfurtherresponsibleforcommunicatingtherelevantaspects,guidelines,instructionsandrecommendationstothegroup’semployees.Theformalchartersetsoutthecommittee’scomposition,roleandresponsibilities.Specifically,thecommitteereviewsandrecommendsforboardapprovalthe:

• Integratedriskmanagementstrategy;

• CodeofEthicsandConductandanycorporatecitizenshippolicies;• Riskregisteraspreparedbymanagement,focusingonIT,fraudand

reputationalrisksinadditiontooperationalandotherbusinessrisks(seepage17);

• Internalauditreportsdetailingtheeffectivenessofriskmanagement;

• Compliancewithlegalandregulatoryprovisionsandthecompany’sMemorandumofIncorporation;and

•Casesofemployeeconflictsofinterest,misconductorfraud.

TheRiskCommitteefurtherassiststheboardinsettingthelevelsofrisktoleranceforthegroupinrespectofthecategoriesofriskwhicharedetailedintheriskregister.Thegrouphasapprovedtherevisedlimitsofauthorityaftertakingthesaleofthegeotechnicalbusinessintoaccountaswellasevaluatingtherisktoleranceandappetite.

Intermsofthecharter,thecommitteemeetsaminimumoffourtimesannuallywithadditionalmeetingsheldwhennecessary.TheCFO,headofinternalauditandthegroupriskofficerarerequiredtoattendallmeetings.TheCEOandotherboardmembersattendbyinvitation.Shouldanymemberofthecommittee,thegroupriskofficerortheinternalauditorrequestameeting,suchmeetingmaybearrangedinconsultationwiththecommittee’schairman.

Thegroupriskofficer,EddievanStaden,reportsquarterlytoboththeAuditandRiskCommitteesandattendsEXCOmeetingsbi-monthlyonthegroup’sriskregister,internalaudit,anyincidenceorriskoffraud,thewhistle-blowinghotline,insuranceexposureandanylegaldisputes.TheRiskCommitteefurther

Risk identification

and assessment

Risk tolerance levels set

Mitigation measures implemented

Group risk register

STRATEGIC

OBJEC

TIVESST

RATE

GIC

OBJ

ECTIV

ES

Effectiveriskmanagementiscentraltothegroup’sstrategyofmanagingriskonaholisticbasistomaintainacompetitiveadvantageandadaptingtochangesintheinternalandexternalenvironment.

Caption for image


receivesreportsandobtainsindependentassuranceonmaterialsustainabilityissues.

TheboardTheboardisresponsibleforthegroup’ssystemsofinternalcontrolandriskmanagement,andforsettingtolerancelevels,supportedasabove.Thelatterhasbeendonefortheyearaheadinaformalreport.Theboardhassetlimitsintermsofcashflow,revenue,debtors’days,profitbeforetax,contractprofitability,BEElevelandsafetymetrics.

Thesystemsofinternalcontrolaredesignedtomanageratherthaneliminaterisk.Absoluteassurancecannotbeprovided.Thesystemsaredesignedtoprovideonlyreasonableassuranceastotheintegrityandreliabilityoftheannualfinancialstatements,andfurthertosafeguardandmaintainaccountabilityofthegroup’sassets.Thesystemsshouldalsoidentifyandcurtailsignificantfraud,potentialliability,lossandmaterialmisstatementwhilecomplyingwithapplicablestatutorylawsandregulations.

InternalauditKPMGisappointedasco-sourcedconsultanttothegroup’sinternalauditfunction.TheinternalauditfunctionreportsdirectlytotheAuditCommitteeandmeetsregularlywiththecommitteechairmanandothermembers.TheAuditCommitteeconfirmedtheindependenceoftheinternalauditfunctionduringtheyear,followingabi-annualdeclarationofindependencebyKPMGandinlinewithgrouppolicyregardingtheuseofexternalauditorsonnon-auditservices.

Theinternalauditcharterdefinesthescopeofthefunctionasassistingtheboardinassessingthegroup’sriskmanagementandgovernanceprocesses.Thisincludestheassessmentofthereliabilityandintegrityoffinancialandoperatinginformation,newandexistingsystemsofinternalcontrol,meansforsafeguardingassetsandmethodsofconfirmingconsistencyofresultswithestablishedobjectives.

Practically,theinternalauditfunctionassiststhegroupby:

• Assistingmanagementinevaluatingtheirprocessformanagingkeyoperational,financialandcompliancerisks;

• Assistingmanagementinevaluatingtheeffectivenessofinternalcontrolsystems,includingcompliancewithinternalpolicies;

• Recommendingimprovementstotheinternalcontrolsystems;

• KeepingabreastofnewdevelopmentsaffectingEsor’sactivitiesandinternalauditwork;and

• BeingresponsivetoEsor’schangingneeds,strivingforcontinuousimprovementandmonitoringintegrity.

Duringtheyearunderreviewtheinternalauditreportedonthefollowingareas:

• Liquidityrisk• Projectperformance

• Stockandwagecontrols.

Allareasofconcernwereadequatelyandimmediatelyaddressedwithfollowupreviewsconductedtoensurecontrolsarebeingimplementedandfunctioningasintended.

ExternalauditKPMGInc.,theexternalauditors,reportonwhetherthefinancialstatementsarefairlypresentedincompliancewithIFRSandtheCompaniesAct.However,itremainstheresponsibilityofthedirectorstopreparetheannualfinancialstatements.

Theboard,assistedbytheAuditCommittee,evaluatestheindependenceandeffectivenessoftheexternalauditorsandconsiderswhetheranynon-auditservicesprovidedbysuchauditorsimpact/edontheirindependence(seeInternalauditabove).Appropriatecorrectiveactionistakenifthisisfoundtobethecase.

ACCOUNTABILITy


rEMunErATIOn REpoRT

The Human Resources and Nominations Committee comprises three non-executive directors with the majority being independent, including the chairman. Members are Dr Franklin Sonn (chairman), Dr Ossie Franks and Dave Thompson. The composition and scope of the committee are set out in written terms of reference which have been approved by the board.

Inaccordancewiththecommittee’scharteritisalsoresponsiblefortheoversightofallaspectsofhumanresourcesanddeterminingthegroup’sstrategyinthisregard.SeeOurPeopleonpage48forfurtherdetail.

RemunerationphilosophyandpolicyEsor’sphilosophyistoencouragesustainablelong-termperformanceacrossalldivisions.Thepurposeofourtotalrewardspackageistoattract,retain,motivateandrewardstaff,inaverycompetitiveenvironment,toachievethegroup’sobjectives.Thegroupisacutelyawareofitsdependenceonappropriatelyqualified,trainedandexperiencedspecialiststoachieveitsgoals.Asaresult,thegroup’sremunerationphilosophyneedstoensurethatwe“Buy”orattract,”Build”ordevelop,“Bind”orretaintherequiredskillsnecessarytoenablethebusinesstomeetitscurrentandfuturedemandsand“Bounce”orremoveunderperformingemployees.Weaimtoachievetheappropriatebalancebetweenshort-andlong-termrewardsfromaportionoftheshareholdervaluecreatedduringanyfinancialyear.

RemunerationEsorbalancesremunerationthatwillattract,incentiviseandretaintalentinahighly-competitivemarketwithoptimisingshareholderreturns.Ourpolicyistoremunerateallcompetentperformingemployeesbetweenthe50thand75thpercentilesensuringtheyareproperlybenchmarkedwithintheirrespectivedisciplines.

Thegroup’sexecutivesareremuneratedintermsofacosttocompanyorguaranteedpackageandarefurtherincentivisedforperformanceagainstadefined‘weightedaveragecostofcapital’parameteronanEVAmodifiedmodel.

Thefixedcostremunerationpackageismaintainedatcompetitivelevels,whilenoupperlimitonperformancebonusesisappliedgiventhebalancedscorecardexplainedbelow.Theperformanceoftheexecutiveanddivisionalcommitteeteamsaremeasuredagainstkeyperformanceareaswhichareweightedonascaleof1to5andbasedonprioritiesandimportancealignedto:

• Businessstrategy,objectivesandvalues• Soundandeffectiveriskmanagementandtolerableriskparametersand

entrepreneurship

• Performanceoftheoverallgroupandspecificbusinessunitandindividualperformanceagainsttargets

• Health,environment,qualityandsafetytargets.

ThepaymentofannualperformancebonusesundertheEsorshort-termincentiveschemeisstructuredtoensurethattheshareholdersreceivethetargetedreturnontheirinvestmentandiscontingentontheachievementof“superprofits”inexcessofreturnsbasedontheweightedaveragecostofcapital(WACC).

ThethresholdfordeterminingthemaximumexecutivebonuspooltobeallocatedisdeterminedonactualPBTagainstthebenchmarkedreturnsbasedonWACC.Inallcases,thepaymentofawardedbonusestoexecutivedirectorsandgroupexecutivemanagementisonlymadeif,andwhen,thereissufficientcashavailabletodoso.

TheHumanResourcesandNominationsCommitteeassiststheboardinensuringthatgroupremunerationandrecruitmentisalignedwithoverallbusinessstrategy,withtheaimofenablingEsortoattractandretainpersonnelwhowillcreatelong-termvalueforallstakeholders.

Remuneration packages are calculated on total cost of employment:

Remunerationpackages

Basicsalary

Travelallowances/company

car

Contributiontoretirementfundingandriskbenefits

Companycontribution

tohealthcare


Reviewof2014packagesAnnualincreasestoexecutiveremunerationpackagesareadjustedforchangesinthegeneralcostofliving.Insettingandapprovingthese,remunerationofpeersinthesameorasimilarindustryisreferenced,takingintoaccounttheindividuallevelsofresponsibility,performanceandjobcomplexity.IncreasesfortheCEOandCFOweredeferredforreviewduringAugust2014,pendingthefinalisationofagreedtargets.

Thegroupspentconsiderabletimeduringtheyearonensuringthatjobswereappropriatelygradedandjobtitleswereconsistent.

Theremunerationpackagesandannualincreasesarealsobenchmarkedagainstmarket-relatedsurveys,specificallyThe2014DeloitteExecutiveRewardSurvey.Thesurveyrecommendedincreasesinguaranteedpackagesfortheyearof7%,withCPIatthetimeofwritingthereportat5,9%.

Thegroupiscurrentlyformalisingalong-termincentiveschemewhichwillbefinalisedandrecommendedtotheHumanResourcesandNominationsCommitteeduringFy2015.

HumanResourcesandNominationsCommitteeresponsibilitiesFortheyearunderreview,theHumanResourcesandNominationsCommittee:

• Endorsedthecurrentshort-termincentivestructurefortheexecutives;

• Consideredalong-termincentivestructureforkeyemployeesandhigh

performers.Thisstructureisintheprocessofbeingfinalisedwiththeassistanceofexternalconsultantsandwillbeproposedonthebasisofacombinationofforfeitableshareallocationsaswellasfullvalueoptions;

• Reviewedandrecommendedexecutiveremunerationforboardapproval;

• Reviewedandrecommendednon-executivedirectors’feesforboardapproval;

• Consideredandrecommendedanannualincreaseinsalarybillforapprovalbytheboard;

•Monitoredtheorganisation’stransformationandemploymentequitytargets;

• Confirmedthegroupemployeeretirementfundingaswellashealthcarebenefits.

ExecutiveandemployeecontractsofemploymentAllpermanentappointmentsaresubjecttothesigningofastandardconditionsofemploymentcontract.Theretirementageiscurrentlysetat65forallemployees.Thenoticeperiodforemployeesisasfollows:

• Executives–3months• Salariedstaff–1month.

PrescribedofficersTheremunerationofprescribedofficers(excludingEsor’sexecutivedirectors)fortheyearended28February2014issetoutinsummarybelow:

28 February 2014 Position Salaries#

R’000Incentives

R’000 Total

R’000

RPMcLintock* MDGeotechnical 1851 437 2288AMField* DirectorGeotechnical 1605 290 1895DGibbons MDPipelines 2147 1152 3299WNeuwenhuis HRDirector 1506 382 1888MRippon MDCivils 2110 172 2282KDuncan MDDevelopments 1798 149 1947

* Resigned 21 November 2013. # Cost to company.

DirectorsTheremunerationpackagesforexecutivedirectorsandtheattendancefeestructurefornon-executivedirectorsissetoutindetailinnote36totheannualfinancialstatements.

GeneralremunerationpracticesThegroupsubscribestothegenericconditionsofemploymentandwageratesforhourly-paidemployeesasgazettedinaSectoralDeterminationandincollectivebargainingagreements.Mostconditionsofemploymentarethereforealreadystandardised.

Remunerationpractices,policiesandprocedureshavealsobeenstandardisedacrossthegroup,andarecommunicatedtoemployeesviaemploymentcontractsandpolicies.

WitheffectfromJanuary2011allpermanentsalariedemployeesbecamemembersofthegroup-nominatedretirementfundadministeredbyAlexanderForbes.Membersofthefundareallowedtheflexibilityofstructuringtheirretirementandriskbenefitsbasedonalifestagemodelandpersonalneeds.Hourly-paidemployeesaregenerallymembersoftheConstructionIndustryRetirementBenefitFund.

DiscoveryHealthisthegroup’shealthcareserviceproviderandemployeeshavefreedomofchoicewithrespecttothespecificplan.NMGConsultantsandActuarieshasbeenappointedastheintermediarybetweenthehealthcareproviderandmembers.

ACCOUNTABILITy


VALuE-AddEd STaTEMENT

Group

2014 2013 R’000 % R’000 %

Revenue 2 316 887 2325958 Incomefrominvestments – – Costofmaterialsandservices (1 470 773) (1365707)

Total value added 846 114 960251

Value distribution 960251 To employees Remunerationandbenefits 739 552 87,9 690882 72,0To providers of finance Financecosts 39 856 4,7 36890 3,8Forexgainonforeignbankaccounts 4 622 0,5 7425 0,8To providers of capital DividendstoEsorshareholders 145 149 17,3 – –To governments Currenttaxation (1 453) (0,4) 7461 0,8Foreigntaxation 25 561 5,5 1739 0,2To reinvest in business Retainedincome (166 161) (20,7) 87710 9,1Depreciationandamortisation 171 743 19,2 118271 12,3Deferredtaxation (112 755) (14,0) 9873 1,0

2014 2013 2013 2012

Averagenumberofemployees 4 906 4654Revenueperemployee(R’000) 472 500Valuecreatedperemployee(R’000) 173 293Corporatesocialinvestment(R’000) 600 600


HOWW

EADDVA

LUE


TrAnsFOrMATIOn

InFebruary2014Esorachieved,aLevel3B-BBEEaccreditation.ThegroupistargetingLevel2by2016.WehaveaB-BBEEpolicyandimprovementstrategyinplacetodrivetransformationincompliancewithB-BBEElegislation.

Esor’sprogresstowardsmeetingtheindustrytransformationcharterrequirementsandtheCodesofGoodPracticeonBEEissuedbytheDepartmentofTradeandIndustryissetoutinsummaryinthetablebelow:

BEE CODE

Scorecardrating

(points) 2012

Scorecardrating

(points) 2013

Scorecardrating

(points)2014

Esor2015target*

ConstructionCharter’s

target

Ownership 13,75 13,6 17,66 20 25

ManagementControl

3,04 3,04 6,76 6 10

EmploymentEquity

4,76 4,62 5,76 5 10

SkillsDevelopment

6,14 9,81 9,81 10 15

PreferentialProcurement

18,90 19,12 18,96 20 20

EnterpriseDevelopment

15 10,19 15 15 15

Socio-EconomicDevelopment

3,75 5 5 5 5

65,34 65,39 78,96 81 100

*Based on revised targets according to the Construction Charter for years 5 to 7, which are applicable for the first time in our next scorecard.

OwnershipInlinewiththeConstructionCharter’stargetedincreaseto30%ownership,thegroupisconsideringtheoutrightpurchaseofsharesthroughtheEsorBroadBasedShareOwnershipScheme(“EBBSOS”).Followingthesaleofthegeotechnicalbusinessandthesubsequentpaymentofa38centspersharedividend,theEBBSOSTrusthasR5millionavailableforre-investmentintosharesandcreatingfuturevalueforemployees.ThepotentialshareholdingoftheEBBSOSTrustcanincreaseto7%.

Management controlDuringtheyearEsorprioritisedtheappointmentofafurtherblackindependentnon-executivedirectors,particularlyfemales,toaddressthemanagementcontrolscorecardshortfall.MonhlaHlahlawasappointedeffective23May2013,butresignedeffective29October2013inordertopursuepersonalbusinessinterests.Inadditionablackindependentnon-executivedirectorDrOssieFrankswasappointedtotheboardeffective23ofMay2013.

Employment equity (EE)DuringtheyeartheDepartmentofLabourauditedEsor’sEEprocess.AlthoughtheEEpolicyhasremainedunchanged,theday-to-dayimplementationandcommunicationprocesseswereaddressedtoensureimprovedcompliance.Consultation(formativeemployment)sessionswereimplementedformostoftheemployeesincludingemployeesworkingonsite.DivisionalEmploymentEquityforumshavebeenestablishedandregularmeetingsheld.

Achievements

•Level3B-BBEEstatus

•Appointedblackindependentnon-executivedirector

Caption for image


ThebreakdownofemployeesintermsofEEissetoutbelow:

By EE Actual 2013/2014 Target 2014/2015CATEGORy/LEVEL Number %* Number %*

Topmanagement 6 17,6 6 17,6Seniormanagement 13 15,9 13 23,1Professionallyqualified 119 48,7 125 51,2Skilled 407 72,7 428 74,1Semi-skilled 1634 98,3 1700 98,3Unskilled 1218 99,3 1300 99,3

Total 3397 3572

*Percentage of workforce which is black.

By GENDER WomenCATEGORy/LEVEL Men Women target

Topmanagement 6 0 0Seniormanagement 13 0 1Professionallyqualified 101 18 20Skilled 399 8 15Semi-skilled 1493 141 160Unskilled 1009 209 250

Total 3021 376 446

Discriminationonanylevelisnottolerated.ShouldanysuchdiscriminationoccuritisimmediatelyandappropriatelydealtwithintermsoftheCodeofEthicsandConductandattendantdisciplinaryprocedures.(Thegrievanceanddisciplineproceduresarehandedtoemployeesinabookletaccompanyingpayslips.)Therewerenoincidentsofdiscriminationduringtheyear.

InawardingbursariesEsoractivelyseekstoawardbursariestoblackcandidates,specificallyfocusingonblackwomen.

Skills developmentThegroupiscommittedtointernaladvancementofstaff,particularlythosefrompreviouslydisadvantagedgroups.Thisisreflectedintheassistanceprovidedintermsofongoingskillsdevelopmentprogrammesandthefurtherstudylearnershipsscheme.Trainingobjectivesandtargetsaredeterminedatdivisionallevelandarebasedontheoperationalrequirementsofeachdivision.Emphasisisplacedontechnicalandoperatortraining.

Esorcontinuedtoinvestinthetraininganddevelopmentofitsemployeesduringtheyear,bothpermanentandlimiteddurationcontractors.TheGroupHRManagers,DivisionalDirectorsandtheGroupSHEQManagerareresponsibleforskillsdevelopmentandtrainingatthegroup.

ThetotaltrainingspendfortheyearwasR674397forpermanentemployeesencompassing:

Training course Number ofattendees

HealthandSafetytraining

890

Operatorre-certification 227

Furthereducation 167

OperatorcertificationInlinewithlegalrequirements,Esorcontinuestoinvestheavilyinensuringthatallourplantandequipmentoperatorsareproperlycertified.

Thetotalnumberofemployeeswhoattendedtrainingwas1284,with93,7%oftraineesfrompreviouslydisadvantagedgroups.Thisisreflectedbelowbynumberoftraininghours.

Population group Number of

hours

Black 10944

Coloured 80

Indian 96

White 776

Management developmentManagementdevelopmentatalllevelshasbeenidentifiedasacriticalfocusarea.Tothisendanin-housemanagementdevelopmentprogramme

HOWW

EADDVA

LUE


hasbeenintroduced,withtheprimaryobjectivesofboostingtechnicalmanagementskillsandlabourrelations,andwillalsoassistinsuccessionandcareerplanning.Seniorandmiddlemanagershavereceivedpsychometrictestingtodeterminepersonaldevelopmentareas.

Thedevelopmentprogrammehasbeenextendedtoseniorsitebasedemployees,mainlyfocusingonlabourrelations,commercialanddisciplinarymodules.

Further study learnershipsThegroupprovidesfinancialassistancetocurrentemployeestoobtainfurtherqualificationsintheirrespectivefields.Employeesarerequiredtoremainemployedforadeterminedperiodoftimerelativetothevalueofthefinancialassistancegranted.

Historicallythemainfocusoflearnershipswastoassistemployeesworkingtowardsmechanicalqualifications.Thegroupisnowintheprocessofregisteringsupervisorystaffonlearnerships,focusingonyoungcandidatesfrompreviouslydisadvantagedgroups.

Sponsored educationEsorremainscommittedtoitsstrategyofassistingnewentrantsintotheconstructionindustrybyprovidingthemwithfinancialsupportintheformofbursaries.Specificemphasisisplacedonassistingyoungblackfemalecandidateswishingtopursueacareerincivilengineering.Onqualificationthestudentisrequiredtoworkbacktimerelativetothevalueofthebursary.

Esorencouragesitsemployeestocapitaliseoncontinuousprofessionaldevelopmentopportunities.Duringthe

year,31studygrantswereprovidedtoemployees,23ofthesewereemployeesfromhistoricallydisadvantagedgroups.

Skills transfer for employees employed on limited duration contractsThedurationandnatureofprojectsinbothEsorCivilsandEsorPipelinesdictatethatalargecomponentofemployeesareemployedoncontractsoflimitedduration.Theseemployeesareusuallyunskilledlabour.Whentheprojectcomestoanend,theemployeeremainsunskilledwithlimitedchanceofre-employment.Toassistthesetemporaryemployeesanddeepenthewiderindustryskillspool,Esorhastwodedicatedtrainerstoprovideupskillsandcross-skillstrainingnotnecessarilyrelatedtotheindividual’sassignedtasks.1284employeesweretrainedthisyear.Trainingcoursesincludeshuttering,steelfixingandpipelaying.

AttheMooinooiandKusileconstructionsites,Esorisprovidingtraininginnewskillsforwhichtheemployeewillreceivecertification,furtherimprovingtheirfutureworkprospects.

Preferential procurementThegroupfocusedduringtheyearonprocurementpoliciesandsupplychainmanagement.Therewasanotableimprovementinspendwithblackfemaleandblack-ownedenterprises.TargetswillbemaintainedtoachieveConstructionCharterobjectiveswhilesustainingacompetitivesupplierbase.

Enterprise development (ED)ThekeyareaofattentionduringtheyearwasdrivingEDatoperationallevelbydevelopingrelationshipsthroughcontracts.Currentlythereare9companiescomprisingthegroup’sED

TrAnsFOrMATIOn (COnTInuEd)


programme.Supportrangesfromoperationalsupportandtrainingtomarketingandadministrativesupport.

EsorhasappointedanexternalconsultanttoassistwithED.Thegroupwillcontinuetofocusondevelopingsustainableenterprisesforgrowth,increasingcapacitythroughcontractpartnershipsandmentorship.Financialassistancewillbemonitoredtoensurethatthegroupisnotexposedtounduefinancialandcommercialriskwithintherealmsofthecharter.

CorporateSocialInvestment(CSI)Esorsupportssustainablesocialdevelopmentandupliftment,withaparticularfocusoneducationinthescienceandengineeringfields.

ThegroupcontinuestosupporttheWitsScienceStadiumbysponsoringtwolecturerooms.TheStadiumispartoftheUniversityoftheWitwatersrand’sflagshipproject,whichfacilitatesscientificteachingandresearchtoenhancetheUniversity’scapacitytoproducescience,engineeringandtechnologygraduatesandresearchers.Theprojectcanaccommodateupto3400students.(TheScienceStadiumcurrentlyincludes1500lectureseats,morethan1000laboratoryseatsand750tutorialroomseatsincorporatingaworld-classlaboratoryandteachingandtutoringfacilities.)

WehaveundertakentoprovidesanitationfacilitiestolocalcommunitiesintheareasinwhichweareworkinginKwaZulu-Natal.Theseincludetheprovisionofcleanrunningwaterandflushingtoilets.

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Our industry should continue to contribute significantly to creating employment and supporting the GDP growth of our country.

Achievements2014• Establishedanaccreditedin-housetrainingcentrethatprovidesonthejob

trainingtounskilledandskilledlabour

• Additionalskillstraininglaunchedforunskilledlabouronlimiteddurationcontracts

• Improvedemploymentequitycommunications

•Managementdevelopmentprogrammerolled-outintheCivilsdivision.

Key indicators* 2014 2013

Permanentemployeeheadcount 1 401 2059Contractemployeeheadcount 1 996 2595Femaleemployees 292 66Numberofpermanentemployeeshired 171 554

Employeesrepresentedbyunions(%) 30,5 35Totaltrainingspend(R’m) 674 397 754176

* We operate in an industry where work is project-driven and employment is subject to tenders awarded.

Ourpeoplearecoretothecontinuedsuccessofourbusinessandourhumanresourcesstrategyisthereforefullyalignedtothegroup’sbusinessstrategy.Weaimtoattractandretainkeytalentinordertobuildorganisationalcompetenciesandleadershipcapacityforlong-termgrowthandtocementourreputationasagoodcorporatecitizen.AtEsorthisisachievedthroughfourkeyactions:

HumanresourcesstrategyisaddressedatgrouplevelbytheHumanResourcesManager,withday-to-dayoperationalmattersdecentralisedandaddressedatdivisionallevel.

LabourrelationsThegroupsupportseveryemployee’srighttobelongtoaunionanddemonstratesthisthroughanopenandtransparentrelationshipwithallunionsandtheirrepresentatives.Esor’smanagementandunionsarecurrentlyindiscussionswithregardtoformalisingorganisationalrights.TherearepresentlytwounionsactiveintheEsorgroup–NUMandBCAWU.Allwageemployees,whichmakeupapproximately80%oftotalemployees,arecoveredbynationalcollectiveagreementsbetweenSAFCECandtheunionsBCAWUandNUM.

SkillsdevelopmentandtrainingSeeTransformationonpage45.

Our pEoplE

Constructionremainsaverypeople-intensiveindustryand,assuch,amajoremployerintheSouthAfricaneconomy.GovernmenthasconfirmedthebudgetallocationforinfrastructuredevelopmentforthenextthreeyearsatR847billion.

BUy Attractthebestcandidatesfromtheexternalskillspool

BUILD Developemployees

BIND Retainthebestperformers

BOUNCE Removepoorperformers


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SHEQInkeepingwithinternationalbestpractice,Esor’ssafety,health,environmental,riskandqualitypracticesareincorporatedintothegroupSHEQdepartment.Thisensuresarisk-drivenapproachtosafety,healthandenvironmentalpracticesonprojectsitesandincorporatesalltheseactivitiesintothequalitymanagementsystemtoconsistentlymaintainqualitystandards.

TheSHEQapproachsupportsthegovernancerequirementsofguidelinessuchasKingIIIandformsthebasisoftheintegratedcertificationoftheEsorgroupundertheinternationalISO9001,ISO14001andOHSAS18000standards.

EsoriscommittedtoasafeandhealthyworkingenvironmentandensuresstrictcompliancewiththeSouthAfricanOccupationalHealthandSafetyAct,85of1993.Tothisendinspectionandlegalcomplianceauditsareperformedregularly,safetypolicyisreviewedandexternalauditsareperformedasrequiredincompliancewithISO9001andotheraccreditations.Inadditionongoingscheduledauditsbydivisionalmanagementandclientauditstakeplacethroughoutthegroup.

LTIFR 2014 2013 2012 2011 2010

0,86 0,59 0,91 0,82 1,37

ThegroupSHEQmanagerissupportedbydivisionalmanagersandsitesafetyofficers.Thesafetyframeworkoperatesunderhisleadershipasfollows:

• Adetailedriskassessmentisundertakenforeachproducttypeandspecifictasks,andincorporatedinthesite-specifichealthandsafetyplan.

• Thesearethenratedaccordingtoamatrixandmitigatedaccordingly.

Itishisresponsibilitytostandardisehealthandsafetyproceduresandreportingbysiteandacrossthegroup.

TrainingthattookplaceduringtheyearincludedSHEManagementTrainingCourse(SAMTRAC)aimedatequippingthelearnerwiththeabilitytoplan,implementandmaintainaSHEManagementSystem;Firstaid;Legalliabilities;andTrafficmanagement.

Thefollowingmeasuresareinplacetopreventcasualtiesandinjuries:

• DivisionalSafetyCommittee;

• ToolboxTalks;• Safetyalerts;• HealthandSafetyinvestigations;and•Correctivedisciplinaryactioninthe

eventofprovennegligence.

Reportingof‘nearmisses’asimplementedinthepreviousyearhasprovedinvaluableinidentifyingtrendsandimplementingcorrectiveactionaheadofanincident.

TheimplementationoftheSHEQimprovementplaniscloselymonitoredthroughmonthlyfeedbacktotheCEOandseniorexecutives.Anyidentifiedshortcomingsareimmediatelyaddressedandincorporatedasgoalsandfocusareasforcontinualimprovement.Thegroupfocussesonalong-termstrategyofreducingincidentsaswellasashort-term,threemonthslookingaheadtomaintainmomentuminachievingourobjectives.

Key achievements

•Achieved ISO 14001:2004 accreditation



• Zero harm – no fatalities

• LTIFR of 0,86 significantly better than the industry norm of 1,33


ThE ENviRoNMENT

DuringtheyearEsorachievedtheinternationallyrecognisedISO14001*standard.Aspartofthisprocessanindependentevaluationoftheenvironmentalpolicyandgrouppracticeswasconducted.

Duringtheyearthegrouponceagainmetallitsenvironmentaltargetsasperthetablebelow:

Environmental objective Target Achieved

Reducetheuseofelectricityinallbuildingsbyreplacingexistinglightingwithenergysavinglighting

10%reductionofelectricity

50%achieved

Performatleasttwoenvironmentalcheckspercontractpermonth

Environmentcheckspercontractpermonth

✓

Reducefuelusageofcompany’sLDVs

11.5km/lconsumptionofallcompanyfleetLDVs

✓

Reducedieselspillsasaresultofdieseltransfersoncontractsto<1percontract

<1spillpercontract ✓

Reduceprintingpaperusageinentirecompanyby10%

10%reductioninpaper

✓

Thegroupiscommittedtotheongoingenvironmentaleducationofitsemployees.

EsorisalsoamemberofBirdlifeSouthAfrica.

QualityassuranceEsorhasanuncompromisingcommitmenttotheongoingimprovementofitsworkingproceduresandensuresthatproductsandservicesconformineveryrespecttotheclient’srequirements.Thegroup’sdedicationtoqualityisthefoundationofourreputationasamarketleader.

ArigorousqualityassuranceprogrammeisinplaceacrossallservicesandthegroupholdsaSABSISO9001certification,whichisconfirmedthroughbi-annualSABSauditsandinternalaudits.

Keyachievement

•AchievedISO14001*accreditation

* ISO 14000 is a family of standards related to environmental management that help organisations to:

• minimise the negative effect of operations and their processes on the environment such as adverse changes to air, water, or land; and

• comply with applicable laws, regulations, and other environmentally oriented requirements.


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sOCIAL And EThICs CoMMiTTEE REpoRT

TheSocialandEthicsCommittee’sresponsibilitiesencompassmonitoringandregulatingtheimpactofthegrouponitsstakeholders.Althoughmanagementistaskedwithoverseeingtheday-to-dayoperationalsustainabilityoftheirrespectiveareasofbusiness,andreportingthereontotheSocialandEthicsCommittee,theboardremainsultimatelyresponsibleforgroupsustainability.

ThecommitteeischairedbyDrOswaldFranks(appointed23May2013)andfurthercomprisesCEOBernieKrone,CFOWesselvanZyl,andindependentnon-executivedirectorsFranklinSonn,EthanDubeandDaveThompson.Detailsofmeetingattendanceareonpage35.

Thepurposeofthecommitteeistoregularlymonitorthegroup’sactivities,withregardtoanyrelevantlegislation,otherlegalrequirementsorprevailingcodesofbestpractice,inrespectofthefollowing:

• Socialandeconomicdevelopment,includingthegroup’sstandingintermsofthe:

σ 10principlessetoutintheUnitedNationsGlobalCompactPrinciples

σ OECDrecommendationsregardingcorruption

σ EmploymentEquityAct σ Broad-BasedBlackEconomicEmpowermentAct

•Goodcorporatecitizenship,includingthegroup’s:

σ promotionofequality,preventionofunfairdiscrimination,andreductionofcorruption

σ contributiontodevelopmentofthecommunitiesinwhichouractivitiesarepredominantlyconductedorwithinwhichourproductsorservicesarepredominantlymarketed

σ recordofsponsorship,donationsandcharitablegiving

• Environment,healthandpublicsafety,includingtheimpactofthegroup’sactivitiesanditsservices

• Consumerrelationships,includingthegroup’sadvertising,publicrelationsandcompliancewithconsumerprotectionlaws

• Labourandemployment,includingthegroup’s:

σ standingintermsoftheInternationalLabourOrganisationProtocolondecentworkandworkingconditions

σ employmentrelationships,andourcontributiontowardstheeducationaldevelopmentofouremployees.

Thecommitteedrawsthesematterstotheattentionoftheboardandreportsonthemtotheshareholdersattheannualgeneralmeeting.Employmentequity,B-BBEE,CSIandlabourrelatedissuesasreviewedbythecommitteearereportedonpages44to48.

Managementreportstothecommitteeonmattersrelevanttoitsdeliberationstoenablethememberstofulfiltheirresponsibilities.MechanismstoencourageethicalbehavioursuchastheCodeofEthics,corporatecitizenshippoliciesandwhistleblowersline,wereconfirmedasadequatebythecommitteeintheyear.

Nohumanrightsincidentswerereported.InSouthAfrica,aspectssuchasprohibitionofchildlabour,forcedcompulsorylabouranddiscriminatorypracticesaremonitoredbytheDepartmentofLabourinadditiontothecommittee.

Duringtheyearallseniormanagersandseniorcommercial/estimatingemployeescompletedtrainingonanti-corruptionandanti-competitivebehaviour.Thistrainingwillbecontinualforallemployeesexposedtopricingactivities.

Dr Oswald FranksSocial and Ethics Committee Chairman



FInAnCIAL STaTEMENTS

54 directors’ responsibility statement

54 declaration by company secretary

55 Audit Committee report

57 directors’ report

60 Independent auditor’s report

61 statements of financial position

62 statements of profit or loss and other comprehensive income

63 statements of changes in equity

65 statements of cash flow

66 notes to the financial statements

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TheseannualfinancialstatementshavebeenpreparedunderthesupervisionoftheCFO,WesselvanZylCA(SA).


Directors’ responsibility statement

The directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of Esor Limited, comprising the statements of financial position at 28 February 2014, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards, SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the manner required by the Companies Act of South Africa. The directors are also responsible for preparing the Directors’ Report.

The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management, as well as the preparation of the supplementary schedules included in these financial statements.

The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have no reason to believe the businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the consolidated and separate financial statements are fairly presented in accordance with the applicable financial reporting framework.

Approval of consolidated and separate annual financial statementsThe consolidated and separate annual financial statements of Esor Limited as identified in the first paragraph were approved by the board of directors on 22 May 2014 and signed on their behalf by:

B Krone W van ZylCEO CFO

Germiston22 May 2014

Declaration by Company seCretary

We declare that, to the best of our knowledge, the company has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of the Companies Act, and that all such returns are true, correct and up-to-date.

iThemba Governance and Statutory Solutions (Pty) Limited Company secretary



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auDit Committee reportfor the year ended 28 february 2014

The information below constitutes the report of the Audit Committee.

The Audit Committee is chaired by Dr O Franks and comprises a further three independent non-executive directors Dr FA Sonn, DM Thompson and EG Dube. A short CV for each of these directors has been set out on pages 30 to 31 of the integrated report demonstrating their suitable and relevant skills and experience. Although DM Thompson as Chairman of the board should not be a member of the Audit Committee in terms of the King III Report, the directors believe this is ameliorated by his qualification as a Chartered Accountant (SA) and the limited number of available non-executive directors to take his place.

The committee’s charter promotes the overall effectiveness of corporate governance in accordance with the King III Report. Further it provides for the monitoring of the company’s compliance with disclosure requirements, relevant laws and regulations and its own code of conduct. The Audit Committee charter is reviewed annually.

The committee approved the structure of and appointments to the internal audit function and its performance, as well as reviewed the internal audit report. With regards to the internal audit services provided by KPMG, the Audit Committee implements safeguards to eliminate or reduce independence threats by applying the independence rules-based approach. The principles to evaluate perceived independence issues are also important and in general terms, the aim is to ensure that external auditors do not:

•audit their own work;

•make management decisions for the company;

• create a mutuality of interest; or

• find themselves in an advocacy position.

The committee meets four times a year and attendance of directors is set out on page 34. Special meetings are convened as required. The external auditors and executive management are invited to attend every meeting.

The committee annually conducts a self-assessment and the board in addition evaluates the committee, based on several factors including:

• Expertise σ Inquiring attitude, objectivity, and independence σ Judgement σ Understanding of the business σ Understanding of and commitment to the committee’s duties and responsibilities σ Willingness to devote the time needed to prepare for and participate in committee deliberations σ Timely responses σ Attendance at meetings.

The committee members were all satisfied with the functioning of the committee. The board was also satisfied that the committee members collectively have sufficient academic qualifications or experience in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs and human resource management as required by section 94(5) of the Companies Act, read with Regulation 42.

Internal financial controlThe Audit Committee had oversight over a process by which internal audit performed an assessment of the effectiveness of the group’s system of internal control and risk management, including internal financial controls. This assessment conducted by internal audit and the annual external audit formed the basis for the Audit Committee’s recommendation to the board, that nothing has come to the attention of the committee that would suggest that the prevailing internal controls are not, in all material aspects, effective.

The assurance provided by the internal audit function serves to assist the board in fulfilling its disclosure obligations to report annually to shareholders on the effectiveness of the group’s system of internal financial control and risk management procedures.

Each internal audit conducted is concluded with a detailed report to management, which includes recommendations to address shortfalls and exposures.


In terms of the Companies Act and the JSE Listings Requirements the Audit Committee has considered and satisfied itself of the appropriateness of the expertise and experience of the CFO, Wessel van Zyl.

The Audit Committee has further satisfied itself that KPMG Inc. and Mr FHC von Eckardstein, the designated auditor, are independent of the company.

The Audit Committee requested a gap analysis to be performed to assist with the compilation of this integrated report and has reviewed the report for completeness and accuracy relative thereto. The Audit Committee recommended the annual financial statements for the year ended 28 February 2014, for approval to the board. The board has subsequently approved the annual financial statements which will be open for discussion at the forthcoming annual general meeting.

The Audit Committee is satisfied that appropriate risk management processes are in place and has obtained combined assurance given by internal auditors/external auditors and management.

Dr O FranksAudit Committee Chairman


auDit Committee report (continueD)for the year ended 28 february 2014


Directors’ report

The directors have pleasure in presenting the annual financial statements of the company and the group for the year ended 28 February 2014, and which have been audited in compliance with the Companies Act. The preparation of these annual financial statements was supervised by the group’s CFO, Wessel van Zyl.

Nature of businessThe nature of the group’s business is set out in the group profile on page 5 of the integrated report, of which this Directors’ Report forms part.

Financial resultsConsolidated revenue from continuing operations increased to R1,593 billion from R1,538 billion in the previous year. Earnings before interest, depreciation, impairments, amortisations and taxation (“EBITDA”) from continuing operations fell by 182,8% to a loss of R135,3 million from a profit R163,4 million. Headline earnings per share (“HEPS”) also decreased by 155,1% to a loss of 11,3 cents per share (2013: 20,5 cents). Net asset value (“NAV”) per share fell to 203,5 cents (2013: 280,3 cents) based on the number of shares in issue at year-end, net of treasury shares.

Use of estimates and judgementsContracts Senior management has spent considerable time and effort to ensure that the recognition of revenue and expenses relating to construction contracts is probable and reliable and expected losses are recognised immediately. Where the outcome of a contract cannot be measured reliably, profit is recognised to the extent of revenue recorded.

Claims and variations on contracts are only recognised if senior management is confident that it is probable that the claims and variations can be reliably measured and the customer will approve such items. In addition, negotiations for recognising such a claim have reached an advanced stage.

The group is involved in a number of contracts with Eskom at the Kusile Power Station, in particular Package 26 being the Terrace Underground Facilities contract. This contract has been subject to a number of delays, disruptions, delayed information, a change in sequence of access for construction, delayed access and scope changes since its commencement in May 2011. The original award was at a contract value of R311 million over a 30-month construction period, ending in December 2013. To date we have been unable to gain access to all areas and have only completed approximately 50% of the work in 110% of the time.

The results include all costs incurred on the contract as well as certified revenue to date and a claim of R130 million that was included in revenue. The total claim amounts to R230 million. It is currently being substantiated with reference to cause and effect events based on an MOU with the client in order to amicably settle the claim and to continue to execute the works. Numerous meetings and submissions have been made to the client. As a result the client has advanced R100 million subsequent to year-end to Esor with a repayment of 10% per month commencing in September 2014 on the outstanding amount after any additional certifications in terms of the claims submissions.

We have recognised the claim as management is confident that it can be measured reliably and such claims can be set-off against the advance of R100 million from Eskom before repayment becomes due.

Going concernSenior management has considered the group’s ability to continue as a going concern. Our process was thorough and based on management’s plan for future action in each division.

Although the group reported a significant loss for the year, these losses were largely funded through available cash resources.

The group is currently not leveraged, only certain assets are subject to financial leases, see note 4 to the annual financial statements. The group further has access to the R1 billion Domestic Medium-Term Note Programme, under this programme, Esor may from time to time issue secured or unsecured registered notes on the terms and conditions as contained in the Programme Memorandum.

Based on the outcome of management’s assessment of the future cash flows as well as the group’s ability to raise finance we are confident that the group remains a going concern despite the losses accounted for in the current financial year.

Further comment and detail is set out in the CFO’s report and in the financial statements and accompanying notes.

Property, plant and equipmentThe group acquired property, plant and equipment to the amount of R52,6 million (2013: R193,9 million) during the year and disposed of R83,1 million (2013: R12,2 million) mainly in the restructuring of the Civils division.

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Directors’ report (continueD)

Dividend declarationA special dividend relating to the sale of Esorfranki Geotechnical of 38 cents was paid on 9 December 2013.

In deciding on the dividend, the board has considered a number of factors which include the solvency and liquidity of the company following the payment of a dividend, future availability of credit and the sustainability of the construction market. Overall the board considers it prudent to conserve cash, which will in turn have a positive effect on future profits.

The board has therefore decided that no final dividend will be paid for the year (2013: Nil). It remains the policy of the group to review the dividend annually in light of the above factors.

Share capitalDetails of the authorised and issued shares of the company are set out in note 14 to the financial statements, and in the analysis of shareholders on page 111.

All authorised but unissued shares have been placed under the control of the directors until the upcoming annual general meeting, at which the directors propose that the authority granted to them to control the unissued shares be renewed (see Notice of Annual General Meeting).

Interest in subsidiariesDetails of the company’s subsidiaries are shown in notes 44 and 47 to the financial statements.

On 8 October 2013, the group entered into an agreement with Keller Holdings Plc (“Keller”) whereby it acquired 100% of the Geotechnical business for a cash consideration of R525 million in November 2013. The transaction excludes the Pipejacking business as well as certain geographical areas where the restraint of trade for five years will not apply.

Special resolutionsThe following special resolutions were passed by the shareholders at the annual general meeting held on 28 June 2013 and registered by the Companies and Intellectual Property Commission during the reporting period:

•Authority for the company or its subsidiaries to acquire shares in the company;

•Authority for the company to pay directors’ remuneration; and

•Authority to provide financial assistance to related and inter-related companies.

Special resolutions in subsidiariesDuring the year special resolutions were passed in subsidiary companies, which authorised these companies to provide direct or indirect financial assistance as contemplated in section 45 of the Companies Act, to any one or more related or inter-related companies.

Further special resolutions were passed for the adoption of the new Memorandum of Incorporation which brings the document in line with the Companies Act, 2008 as well as the Listings Requirements of the JSE.

Finally a special resolution was passed in Brookmay Properties Proprietary Limited for the disposal of an unused piece of land which comprised the greater part of the company’s assets.

DirectorsThe directors of the company at the date of this integrated report are set out below:

Executive directorsB Krone (CEO)WC van Zyl (CFO)

Independent non-executive directorsEG DubeDr FA SonnDM ThompsonDr O Franks (Appointed 23 May 2013)B Mathabathe (Resigned 26 February 2014)M Hlahla (Appointed 23 May 2013) (Resigned 29 October 2013)

Dr FA Sonn and Mr EG Dube retire at the upcoming annual general meeting and being eligible, will stand for re-election. In addition all new directors are subject to confirmation of election by shareholders at the first annual general meeting after their initial appointment. Accordingly, Dr O Franks will stand for confirmation of election at the upcoming annual general meeting.


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Company secretaryiThemba Governance and Statutory Solutions Proprietary Limited is the company secretary and its business and postal addresses are set out on the IBC of this integrated report.

Directors’ interestsThe directors of the company held the following direct and indirect interests in the company at year-end:

Direct shareholding Indirect shareholding Total

Directors’ shareholding 2014 2013 2014 2013 2014 2013

EG Dube – – 7 305 182 7 659 464 7 305 182 7 659 464Dr O Franks – – – – – –B Krone 14 873 328 13 509 394 – – 14 873 328 13 509 394MB Mathabathe* 136 395 2 705 404 – – 136 395 2 705 404Dr FA Sonn – – – – – –DM Thompson 50 000 50 000 50 000 50 000 100 000 100 000W van Zyl – – – – – –

* Resigned 26 February 2014.

There have been no changes in the directors’ interests since year-end up until the date of this report.

Directors’ emolumentsThe remuneration of directors is set out in note 36 to the financial statements.

AuditorsKPMG Inc. will continue in office in accordance with section 90(6) of the Companies Act. The audit partner is Mr FHC von Eckardstein.

Events after reporting dateThe board of directors is not aware of any material matters or circumstances arising since year-end and up until the date of this report.


inDepenDent auditor’s report

To the Shareholders of Esor LimitedWe have audited the consolidated and separate financial statements of Esor Limited, which comprise the statements of financial position at 28 February 2014, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 61 to 110.

Directors’ responsibility for the financial statements The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our 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 standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Esor Limited at 28 February 2014, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Other reports required by the Companies Act As part of our audit of the financial statements for the year ended 28 February 2014, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

KpmG inc.Registered Auditor

Per FHC von Eckardstein Chartered Accountant (SA) Registered AuditorDirector

22 May 2014

KPMG Crescent85 Empire Road Parktown Johannesburg2193


statements of finanCial positionat 28 february 2014

Group Company

2014 2013 2014 2013Note R’000 R’000 R’000 R’000

AssetsNon-current assets 613 660 1 237 461 679 073 678 466

Property, plant and equipment 4 320 135 822 678 – –Intangible assets 5 – 86 336 – –Goodwill 6 185 062 305 715 – –Financial assets at fair value through profit or loss 7 64 923 3 – –Deferred tax asset 8 11 457 22 729 – –Investments in subsidiaries 9 – – 679 073 678 466Loans and long-term receivables 10 32 083 – – –

Current assets 935 151 1 006 320 30 923 393 997

Loans and long-term receivables 10 – 27 726 – –Inventories 11 221 345 69 721 – –Unsecured loans 12 – – 30 895 388 777Taxation 13 455 14 513 – –Trade and other receivables 13 659 928 826 713 – 5 213Cash and cash equivalents 33 40 423 67 647 28 7

Total assets 1 548 811 2 243 781 709 996 1 072 463

Equity and liabilitiesShare capital and reserves 777 219 1 053 262 709 333 869 426

Share capital and premium 14 586 145 571 300 607 445 607 445Equity compensation reserve 19 213 18 606 19 213 18 606Foreign currency translation reserve 23 665 3 850 – –Retained earnings 148 196 459 506 82 675 243 375

Non-current liabilities 207 802 540 326 – 202 500

Secured borrowings 15 163 043 368 507 – 202 500Preference shares 16 23 424 21 000 – –Post-retirement benefits 17 – 1 913 – –Deferred tax liability 8 21 335 148 906 – –

Current liabilities 563 790 650 193 663 537

Current portion of secured borrowings 15 74 350 79 481 – –Bank overdraft 33 19 583 34 059 – –Taxation 19 131 4 508 – –Provisions 18 13 713 38 329 – –Trade and other payables 20 437 013 493 816 663 537

Total equity and liabilities 1 548 811 2 243 781 709 996 1 072 463

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statement of profit or loss anD other Comprehensive inComefor the year ended 28 february 2014

Group Company

2014 2013 2014 2013*restated

CONTINUING OPERATIONS Note R’000 R’000 R’000 R’000

Revenue 21 1 592 835 1 538 101 – 239 707Cost of sales (1 611 624) (1 306 865) – –

Gross profit (18 789) 231 236 – 239 707Other income 22 10 564 1 324 218 218Operating expenses (127 117) (69 106) (10 710) (4 300)

(Loss)/profit before interest, tax, amortisation, impairments and depreciation 23 (135 342) 163 454 (10 492) 235 625Amortisation, impairments and depreciation (146 419) (88 564) – (3 584)

Results from operating activities (281 761) 74 890 (10 492) 232 041Finance income 24 4 980 17 811 17 158 12 805Finance costs 25 (42 420) (49 463) (17 158) (12 805)

(Loss)/profit before income tax (319 201) 43 238 (10 492) 232 041Income tax income/(expense) 26 102 862 (18 136) – –

(Loss)/profit from continuing operations (216 339) 25 102 (10 492) 232 041Discontinued operationsProfitfromdiscontinuedoperations,netofincometax 27 50 178 62 608 – –

(Loss)/profit (166 161) 87 710 (10 492) 232 041

Other comprehensive income:Items that will never be reclassified to profit or lossActuarial loss on post retirement benefits – (97) – –Items that are or may be reclassified to profit or lossForeign currency translation differences for foreign operations 25 568 30 157 – –Related taxes (5 753) (4 912) – –

Other comprehensive income, net of tax 19 815 25 148 – –

(Loss)/profit attributable to:Owners of the company (166 161) 87 710 (10 492) 232 041

Total comprehensive income attributable to:Owners of the company (146 346) 112 858 (10 492) 232 041

Earnings per shareBasic (loss)/earnings per share (cents) 28 (43,5) 23,5 (2,7) 58,7Diluted (loss)/earnings per share (cents) 28 (43,5) 23,5 (2,7) 58,7

Earnings per share from continuing operationsBasic (loss)/earnings per share (cents) 28 (56,6) 6,8 (2,7) 58,7Diluted (loss)/earnings per share (cents) 28 (56,6) 6,8 (2,7) 58,7

Earnings per share from discontinued operationsBasic (loss)/earnings per share (cents) 13,1 16,7 – –Diluted (loss)/earnings per share (cents) 13,1 16,7 – –

* Restated due to application of IFRS 5 relating to discontinued operations.


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statements of ChanGes in equityfor the year ended 28 february 2014

Share capital

Share premium

Equity compen-

sation reserve

Foreign currency

translation reserve

Retained earnings

Total equity

Group R’000 R’000 R’000 R’000 R’000 R’000

Balance at 1 March 2012 388 591 657 16 188 (21 395) 350 594 937 432Profit for the year – – – – 87 710 87 710Other comprehensive income – – – 25 245 (97) 25 148

Total comprehensive income – – – 25 245 87 613 112 858

Transactions with owners, recorded directly in equityContributions by and distributions to ownersShare issue expenses – (787) – – – (787)Share-based payment transactions – – 2 418 – – 2 418Treasury shares – options exercised 1 1 340 – – – 1 341Treasury shares acquired (see note 31) (13) (21 286) – – 21 299 –

Total transactions with owners (12) (20 733) 2 418 – 21 299 2 972

Balance at 28 February 2013 376 570 924 18 606 3 850 459 506 1 053 262

Loss for the year – – – – (166 161) (166 161)Other comprehensive income – – – 19 815 – 19 815

Total comprehensive income for the year – – – 19 815 (166 161) (146 346)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends to equity holders – – – – (145 149) (145 149)Share-based payment transactions – – 607 – – 607Treasury shares – disposed 6 14 839 – – – 14 845

Total transactions with owners 6 14 839 607 – (145 149) (129 697)

Balance at 28 February 2014 382 585 763 19 213 23 665 148 196 777 219


statements of ChanGes in equity (continueD)for the year ended 28 february 2014

Share capital

Share premium

Equity compen-

sation reserve

Retained earnings

Total equity

Company R’000 R’000 R’000 R’000 R’000

Balance at 1 March 2012 395 607 837 16 188 11 334 635 754Profitfortheyear – – – 232 041 232 041

Total comprehensive income for the year – – – 232 041 232 041

Transactions with owners, recorded directly in equityContributions by and distributions to ownersShare issue expenses – (787) – – (787)Share-based payment transactions – – 2 418 – 2 418

Total transactions with owners – (787) 2 418 – 1 631

Balance at 28 February 2013 395 607 050 18 606 243 375 869 426

Loss for the year – – – (10 492) (10 492)

Total comprehensive income for the year – – – (10 492) (10 492)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends to equity holders – – – (150 208) (150 208)Share-based payment transactions – – 607 – 607

Total transactions with owners – – 607 (150 208) (149 601)

Balance at 28 February 2014 395 607 050 19 213 82 675 709 333


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statements of Cash flowfor the year ended 28 february 2014

Group Company

2014 2013 2014 2013Note R’000 R’000 R’000 R’000

Cash flows from operating activities (279 069) (32 853) (155 361) 230 196

Cash receipts from customers 1 487 579 1 995 185 – 239 707Cash paid to suppliers and employees (1 575 788) (1 960 683) (5 153) (9 511)

Cash (utilised in)/generated by operations 29 (88 209) 34 502 (5 153) 230 196Finance income 25 957 42 369 17 158 12 805Finance costs (71 213) (86 684) (17 158) (12 805)Dividends paid (145 149) – (150 208) –Taxation paid 30 (455) (23 040) – –

Cash flows from investing activities 422 816 (210 980) – –

Additions to property, plant and equipment (52 564) (193 930) – –Proceeds on disposal of property, plant and equipment 79 312 39 132 – –Acquisition of business, net of cash 31 (40 558) (28 456) – –Disposal of discontinued operations, net of cash 32 437 387 – – –Investments acquired (761) (27 726) – –

Cash flows from financing activities (156 495) 183 815 155 382 (230 211)

Increase/(decrease) in unsecured loans – – 357 882 (431 924)(Decrease)/increase in secured borrowings (171 340) 162 154 (202 500) 202 500Preference shares issued – 21 000 – –Proceeds from share issue, net of issue expenses 14 845 554 – (787)Post-retirement benefits paid – 107 – –

Net (decrease)/increase in cash and cash equivalents (12 748) (60 018) 21 (15)Net cash and cash equivalents at beginning of year 33 588 93 606 7 22

Cash and cash equivalents at end of year 33 20 840 33 588 28 7


notes to the finanCial statementsfor the year ended 28 february 2014

1. General information Esor Limited (the “company”) is a company incorporated and domiciled in the Republic of South Africa. The address

of the company’s registered office is 30 Activia Road, Activia Park, Germiston. The consolidated financial statements of the company as at and for the year ended 28 February 2014 comprise the company and its subsidiaries (together referred to as the “group” and individually as “group entities”) and the group’s interest in joint operations. The group is primarily involved in the civil engineering and speciality pipelines sector in South Africa and Southern Africa (Refer notes 2.23 and 46).

2. Presentation of financial statements The consolidated financial statements and financial statements have been prepared in accordance with

International Financial Reporting Standard (IFRS), SAICA Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, in the manner required by the Companies Act, 71 of 2008, of South Africa and the JSE Listings Requirements. The consolidated financial statements and financial statements have been prepared on the historical cost basis, except for certain financial instruments at fair value and incorporate the principal accounting policies set out below. Except for the changes below, the group has consistently applied the accounting policies to all periods presented.

During the year, the following accounting standards, interpretations and amendments to published accounting standards were adopted:

• IAS 1 (amendments) Presentation of items of other Comprehensive Income

• IFRS 10 Consolidated Financial Statements

• IFRS 11 Joint arrangements

• IFRS 12 Disclosure of interests in other entities

• IFRS 13 Fair value measure

• IAS 19 Employee benefits

The methods used to measure the fair value of these financial instruments are discussed further in note 42. The comparative statements of profit or loss and other comprehensive income and cash flows has been re-presented as if an operation discontinued during the current year had been discontinued from the start of the comparative year.

2.1 Functional and presentation currency These consolidated financial statements and financial statements are presented in Rands (“R”), which is the

company’s functional currency and the group’s presentation currency. All financial information presented in Rands has been rounded to the nearest thousand (“R’000”).

2.2 Use of estimates and judgements The preparation of financial statements in conformity with IFRS requires management to make judgements,

estimates and assumptions that may affect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The key assumptions and judgements made concerning the future and other sources of estimation uncertainty at the reporting date that could have a significant risk of causing material adjustment to the carrying amounts of the assets and liabilities within the next financial year are:

Revenue During the initial stages of a construction contract it is often the case that the contract outcome cannot be

estimated reliably. When contract revenue and the costs to complete the contract can be measured reliably, profit is recognised by reference to the stage of completion of the activity of the contract. However, the reliability of current estimates of future revenue and expenses is a critical factor when assessing the profit to be recognised on a yet uncompleted contract (Refer notes 13 and 21).

Options granted Management used the Black-Scholes model to determine the value of the share options at issue date.

Additional details regarding the estimates are included in note 35.

Impairment testing Management used the value-in-use method to determine the recoverable amount of goodwill. Additional

disclosure of these estimates is included in note 6.

Measurement of fair values The fair valuation of an asset or liability includes:

• The contingent purchase consideration on the sale of the geotechnical business (Note 7)

• Trade and other receivables (Note 13)

• Borrowings (Notes 15 and 42)


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notes to the finanCial statements (continueD)for the year ended 28 february 2014

2. Presentation of financial statements (continued) 2.2 Use of estimates and judgements (continued) Provisions Provisions raised were determined by management on estimates based on the information available.

Additional disclosures of these estimates of provisions are included in note 18.

Recognition of deferred tax asset Availability of future taxable profit against which carry forward tax losses can be used. Additional disclosure of

the estimate is included in note 8.

Property, plant and equipment Management has made certain estimations with regard to the determination of estimated useful lives and

residual values of items of property, plant and equipment, as discussed further in note 2.3.

2.3 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.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

Property, plant and equipment is carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable amount of items, other than land, to their residual values, over their estimated useful lives, using a method that reflects the pattern in which the assets’ future economic benefits are expected to be consumed.

Subsequent costs The group recognises in the carrying amount an item of property, plant and equipment the cost of replacing

part of such an item when the cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the group and the cost of such an item can be measured reliably. Any remaining carrying amount of the replaced part is written off to profit or loss as incurred.

When an item comprises major components with different useful lives or residual values, the components are accounted for as separate items (major components) of property, plant and equipment and depreciated over their estimated useful lives.

Methods of depreciation, useful lives and residual values are reviewed annually at each reporting date. The following methods and estimated useful lives were applied during the current and previous periods:

Item Method Useful life

Land Not depreciated IndefiniteBuildings Straight line 50 yearsPlant and equipment Straight line 5 – 15 yearsMotor vehicles Straight line 4 – 8 yearsFurniture and fittings Straight line 1 – 10 yearsComputers Straight line 1 – 3 years

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

Derecognition occurs when an item of property, plant and equipment is disposed of, or when it is no longer expected to generate any future economic benefits.

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 and the carrying amount of the item.



2. Presentation of financial statements (continued) 2.4 Non-current assets held-for-sale and discontinued operations Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered

primarily through sale rather than through continuing use are classified as held-for-sale. Immediately before classification as held-for-sale, the assets (or components of a disposal group) are re-measured in accordance with the group’s accounting policies. On initial classification as held-for-sale and subsequently, non-current assets or disposal groups are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses are included in profit or loss and are allocated first to goodwill and then to the remaining assets and liabilities on a pro rata basis (with the exception of inventories, financial assets, deferred taxation assets, and employee benefit assets, which continue to be measured in accordance with the group’s accounting policies). Gains are not recognised in excess of any cumulative impairment loss. Gains and losses on re-measurement are recognised in profit or loss.

Intangible assets and property, plant and equipment once classified as held-for-sale are not amortised or depreciated.

A discontinued operation is a clearly distinguishable component of the group’s business that is abandoned or disposed of or is classified as held for sale pursuant to a single plan and which represents a separate major line of business or geographical area of operation that can be distinguished physically, operationally and for financial reporting purposes.

Classification as a discontinued operation occurs upon the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit and loss and other comprehensive income and statement of cash flows are restated as if the operation has been discontinued from the start of the comparative period.

2.5 Intangible assets An intangible asset is recognised when:

• It is probable that the expected future economic benefits that are attributable to the asset will flow to the company; and

• The cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost unless acquired as part of a business combination, in which case the cost of the intangible assets is their fair value at the date of acquisition. Research costs are recognised as an expense when they are incurred. Development costs are capitalised when they meet the following criteria:

• It is feasible to complete the asset so that it will be available for use or sale;• Thereisanintentiontocompleteanduseorsellit;• Thereisanabilitytouseorsellit;• Itwillgenerateprobablefutureeconomicbenefits;• Thereareavailabletechnical,financialandotherresourcestocompletethedevelopmentandtouseorsell

the asset; and• Theexpenditureattributabletotheassetduringitsdevelopmentcanbemeasuredreliably.

Internally generated brands and items similar in substance are not recognised as intangible assets.

Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided on indefinite useful life intangible assets. These are tested annually for impairment and impaired if necessary.

Finite useful life intangible assets are amortised on a straight-line basis over their estimated useful life, from the date that they are available for use. They are only tested for impairment when an indication of impairment exists. Amortisation is recognised in profit or loss. Methods of amortisation and useful lives are reviewed annually at each reporting date.


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2. Presentation of financial statements (continued) 2.6 Goodwill The group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus• therecognisedamountofanynon-controllinginterestsintheacquiree;plus• ifthebusinesscombinationisachievedinstages,thefairvalueoftheexistingequityinterestinthe

acquiree; less• thenetrecognisedamount(generallyfairvalue)oftheidentifiableassetsacquiredandliabilitiesassumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Goodwill arising from business combinations is subsequently measured at cost less accumulated impairment losses (refer to impairment accounting policy 2.8). Goodwill is not amortised.

2.7 Investments in subsidiaries In the company’s financial statements, investments in subsidiaries are carried at cost less any accumulated

impairment.

The cost of an investment in a subsidiary is the aggregate of:

• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus

• anycostsdirectlyattributabletothepurchaseofthesubsidiary.

2.8 Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the group. The group controls an entity when it is exposed to, or has rights

to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, only substantive rights are considered. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the group.

Acquisitions from entities under common control At acquisition, business combinations arising from transfers of interest in entities that are under the control of

the shareholder that controls the group are accounted for in the period in which the transfer of interest occurs and comparatives are not restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the group controlling shareholder’s consolidated financial statements.

Joint operations Joint operations are those operations where the group has rights to the assets, and the obligations for the

liabilities, relating to the arrangement. The group will recognise its portion of the assets, liabilities, revenue and expenses.

Changes in interests without a loss in control When there is a change in the interest in a subsidiary after control is obtained, that does not result in a loss in

control, the difference between the fair value of the consideration transferred and the amount by which the non-controlling interest is adjusted is recognised directly in the statement of changes in equity (in the premium on non-controlling interest reserve). No goodwill is recognised on such transactions.

Loss of control Upon the loss of control, the group derecognises the assets and liabilities of the subsidiary, any non-controlling

interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity- accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.


2. Presentation of financial statements (continued) 2.9 Impairment of assets Financial assets A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine

whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss and reflected in an allowance account. Interest on impaired assets continues to be recognised.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss.

Non-financial assets The carrying amounts of the group’s non-financial assets, other than inventories and deferred tax assets,

are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets are grouped together in the smallest group of assets that generate cash flows from continuing use that are largely independent of cash inflows of other assets or groups of assets (the “cash-generating unit”). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.

2.10 Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other

receivables, including retention receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below:

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.



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2. Presentation of financial statements (continued) 2.10 Financial instruments (continued) Non-derivative financial assets The group initially recognises loans and receivables on the date that they are originated. All other financial

assets are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.

Non-derivative financial liabilities The group initially recognises debt securities and subordinated liabilities on the date that they are originated.

All other financial liabilities are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.

Financial assets at fair value through profit or loss An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon

initial recognition. Financial instruments are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the group’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Loans and receivables Loans and receivables are measured at amortised cost using the effective interest method, less any

impairment losses.

Financial liabilities Financial liabilities are measured at amortised cost using the effective interest method.

Derivative financial instruments The group holds derivative financial instruments to economically hedge its foreign currency and interest rate

risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value, attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below:

Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognised in profit or loss.

Other non-trading derivatives When a derivative financial instrument is not designated as a hedging instrument in a qualifying hedge

relationship, all changes in its fair value are recognised in profit or loss.

2.11 Share capital and reserves Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares

and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes

directly attributable costs is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

Equity compensation reserve The equity compensation reserve comprises equity settled share-based payments, which have been amortised

over the vesting period of share options granted to employees.

Foreign currency translation reserve The foreign currency translation reserve comprises all foreign currency differences arising from the translation

of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the company’s net investment in a foreign operation.



2. Presentation of financial statements (continued) 2.12 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases and are not recognised on the group’s statement of financial position.

The group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the group’s net

investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group’s net investment outstanding in respect of leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

The group as lessee Assets held under finance leases are recognised as assets of the group at their fair value at the inception of the

lease or, if lower, at the present value of the minimum lease payments discounted using the interest rate implicit in the lease contract. Any initial direct costs incurred are added to the amount recognised as an asset. Lease payments are apportioned between finance charges and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Finance charges are recognised in profit or loss in accordance with the group’s general policy on finance income and costs (note 2.18).

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Contingent rent is recognised as an expense in the period in which it is incurred.

2.13 Inventories Inventories are measured at the lower of cost or net realisable value. The cost of inventories comprises all costs

of purchase, costs of production or conversion and other costs incurred in bringing the inventories to their present location and condition. 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 all inventories is assigned using the first-in first-out method, as all inventories have a similar nature and use to the group.

When inventories are sold, the carrying amounts 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, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

2.14 Financial guarantees Financial guarantees are contracts that require the company to make specified payments to reimburse the

holder for a loss it incurs because a group company fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included within trade and other payables.

2.15 Revenue Construction contracts Contract revenue includes the initial amount agreed in the contract plus any variations in contract work,

claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be measured reliably, contract revenue and expenses are recognised in profit or loss in proportion to the stage of completion of the contract.



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2. Presentation of financial statements (continued) 2.15 Revenue (continued) The stage of completion is assessed by reference to surveys of work performed. When the outcome of a

construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss.

Property developments Revenue from construction of real estate is recognised on transfer of the property deeds when the risk and

reward of ownership transfer to the buyer in accordance with IFRIC 15.

2.16 Income tax Income tax expense comprises current and deferred tax. An income tax expense is recognised in profit or loss

except to the extent that it relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and joint operations to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but the intention is to settle current tax liabilities and assets on a net basis or their current tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

2.17 Provisions A provision is recognised if, as a result of a past event, the group has a present legal or constructive obligation

that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the group from

a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the group recognises any impairment loss on the assets associated with that contract.

Restructuring costs Provisions for restructuring are made if the group has a formal plan for restructuring identifying:

• the business or part thereof;

• the locations affected;

• the location, function, and approximate number of employees that will be compensated for terminating their services;

• the estimated expenditures;

• when the plan will be implemented; and

• has raised a valid expectation that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

2.18 Dividend received Dividend income is recognised in profit or loss on the date that the company’s right to receive payment is

established.



2. Presentation of financial statements (continued) 2.19 Finance income and costs Finance income comprises interest income on funds invested, changes in the fair value of financial assets at

fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial liabilities at fair value through profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

2.20 Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of group entities

at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

Foreign operations Foreign currency differences are recognised in other comprehensive income, and presented in the foreign

currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

All assets and liabilities of foreign operations, including fair value adjustments and goodwill arising on acquisition, are translated at the rate of exchange ruling at the reporting date.

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in other comprehensive income in the foreign currency translation reserve (“FCTR”).

2.21 Share-based payment transactions Goods acquired or services received in a share-based payment transaction are recognised when the goods

are obtained or as the services are received. A corresponding increase in the equity compensation reserve is recognised if the goods or services were acquired in an equity-settled share-based payment transaction.

When the goods received or acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses.

For equity-settled share-based payment transactions, the goods or services received are measured directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the fair value of the goods or services received cannot be estimated reliably, their value and the corresponding increase in equity, indirectly are measured by reference to fair value of the equity instruments granted.

Share-based payment arrangements in which the group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the group.

For cash-settled share-based payment transactions, the goods or services acquired and the liability incurred are measured at the fair value of the liability based on the fair value of the shares using a suitable valuation model. Until the liability is settled, the fair value of the liability is re-measured at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.



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2. Presentation of financial statements (continued) 2.21 Share-based payment transactions (continued) For share-based payment transactions in which the terms of the arrangement provide either the company or

the counterparty with the choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments, the components of that transaction are recorded as a cash-settled share-based payment transaction if, and to the extent that, a liability to settle in cash or other assets has been incurred, or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred.

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity (in the equity compensation reserve), over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

2.22 Employee benefits Short-term employee benefits The cost of short-term employee benefits are recognised in the period in which the service is rendered and are

not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past service provided by the employee and the obligation can be estimated reliably.

Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions

into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss when employees render service that entitle them to the contributions. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Payments made to industry-managed retirement benefit schemes (or State plans) are dealt with as defined contribution plans where the company’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.

Post-retirement medical aid benefits The group contributed 50% of post-retirement medical aid costs of certain retired employees of the

Geotechnical business unit.

The projected unit credit method is used to determine the present value of the defined benefit obligations and the related current service cost and, where applicable past service cost. Both are recognised in profit or loss.

The group had unfunded obligations to provide these post-retirement benefits. The estimated liability was recognised on an accrual basis as the present value of the defined benefit obligation over the periods of service of employees. Actuarial gains and losses were recognised in other comprehensive income in the period in which they occur.

2.23 Segment reporting The segment information has been prepared in accordance with IFRS 8 Operating Segments, which requires

disclosure of financial information of an entity’s operating segments.

Identification of reportable segments Segment information is prepared in conformity with the basis that is reported to the chief operating decision

maker in assessing segment performance and allocating resources to segments. These values have been reconciled to the consolidated financial statements.

The revenue and operating assets are further disclosed within the geographical areas in which the group operates. The basis on which the segments are reported by the group is in accordance with the accounting policies adopted for preparing and presenting the consolidated financial statements.



2. Presentation of financial statements (continued)

2.23 Segment reporting (continued) Segment revenue excludes value-added taxation and includes intersegment revenue. Net revenue represents

segment revenue from which intersegment revenue has been eliminated. Sales between segments are made on a commercial basis.

Segment expenses include direct and allocated expenses. Depreciation and amortisation have been allocated to the segments to which they relate.

The segment assets comprise all assets of the different segments that are employed by the segment and that either are directly attributable to the segment, or can be allocated to the segment on a reasonable basis.

Reportable segments Geotechnical operations Revenue in this segment is derived from the construction and provision of piling, pipejacking, lateral support

and ground improvement for the construction industry, primarily in South Africa. Operations are, however, diversely located throughout Africa.

Civils operations Revenue in this segment is derived from the construction of roads, township infrastructures, water and

sewerage reticulation and concrete projects. Civils operations are solely located in South Africa.

Pipeline operations Revenue in this segment is derived from the construction and rehabilitation of onshore pipelines. Pipeline

operations are primarily located in South Africa.

Development operations Revenue in this segment is derived from development of low-income housing projects in both bonded and

social rental, gap, FLISP and RDP/BNG markets.

Geographical information The group’s operations are principally located in South Africa and Zimbabwe.

3. New accounting pronouncements A number of new standards, amendments to standards and interpretations are effective for annual periods

beginning on or after 1 March 2014, and have not been applied in preparing these consolidated and separate financial statements. All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity).

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) The amendments clarify that a qualifying investment entity is required to account for investments in controlled

entities, as well as investments in associates and joint ventures, at fair value through profit or loss; the only exception would be subsidiaries that are considered an extension of the investment entity’s investment activities. The consolidation exemption is mandatory and not optional.

This amendment is effective for annual periods beginning on or after 1 January 2014 with early adoption permitted. This is not expected to have an impact on the financial statements of Esor Limited.

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) The amendments clarify when an entity can offset financial assets and financial liabilities. This amendment will result

in the group no longer offsetting two of its master netting arrangements. This amendment is effective for annual periods beginning on or after 1 January 2014 with early adoption permitted.

Recoverable Amount Disclosures for Non-Financial Assets (Amendment to IAS 36) The amendments reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the recoverable

amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, the recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2014 with early adoption permitted. The group will adopt the amendments for the year ending 28 February 2015.



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3. New accounting pronouncements (continued) IFRIC 21 Levies Levies have become more common in recent years, with governments in a number of jurisdictions introducing levies

to raise additional income. Current practice on how to account for these levies is mixed. IFRIC 21 provides guidance on accounting for levies in accordance with IAS 37 Provisions, Contingent Liabilities and Assets. This is not expected to have an impact on the financial statements of Esor Limited. The Interpretation is effective for annual periods commencing on or after 1 January 2014 with retrospective application.

IFRS 9 Financial Instruments IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9

(2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additions relating to financial liabilities.

On 19 November 2013, the IASB issued a new general hedge accounting standard, part of IFRS 9 Financial Instruments (2013). The new standard removed the 1 January 2015 effective date of IFRS 9. A new mandatory effective date will be determined once the classification and measurement and impairment phases of IFRS 9 are finalised.

The group will adopt the standard in the first annual period beginning on or after the mandatory effective date (once specified). The impact of the adoption of IFRS 9 has not yet been estimated as the standard is still being revised and impairment and macro-hedge accounting guidance is still outstanding.

The group will assess the impact once the standard has been finalised and the effective date is known.



4. Property, plant and equipment

Cost

Accumulated depreciation

and impairment

lossesCarrying

valueGroup R’000 R’000 R’000

2014Land and buildings 32 956 (2 216) 30 740Plant and equipment 434 490 (158 994) 275 496 Motor vehicles 30 143 (17 646) 12 497 Furniture and fittings 562 (327) 235 Computers 3 676 (2 509) 1 167

501 827 (181 692) 320 135

2013Land and buildings 70 399 (12 542) 57 857Plant and equipment 1 172 840 (434 990) 737 850Motor vehicles 54 270 (29 477) 24 793Furniture and fittings 1 541 (1 266) 275Computers 3 701 (1 798) 1 903

1 302 751 (480 073) 822 678

The carrying amount of property, plant and equipment can be reconciled as follows:

Carrying value at

beginning of year Additions Disposals

Disposal of discontinued

operationDepre-ciation

Translation adjust-ments

Carrying value at

end ofyear

R’000 R’000 R’000 R’000 R’000 R’000 R’000

2014

Land and buildings 57 857 7 079 (2 195) (33 670) (489) 2 158 30 740Plant and equipment 737 850 41 451 (79 816) (339 576) (79 443) (4 970) 275 496Motor vehicles 24 793 3 090 (629) (11 289) (4 071) 603 12 497Furnitureandfittings 275 31 (7) (24) (40) – 235Computers 1 903 913 (479) – (1 172) 2 1 167

822 678 52 564 (83 126) (384 559) (85 215) (2 207) 320 135



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4. Property, plant and equipment (continued)

Carrying value at

beginning of year Additions Disposals

Depre-ciation

Impair-ments

Trans-lation

adjust-ments

Carrying value at

end of year

R’000 R’000 R’000 R’000 R’000 R’000 R’000

2013Land and buildings 64 664 1 374 (4 289) (956) (8 757) 5 821 57 857Plant and equipment 649 185 182 237 (6 759) (100 240) – 13 427 737 850Motor vehicles 22 844 8 090 (1 196) (5 756) – 811 24 793Furnitureandfittings 398 92 – (217) – 2 275Computers 221 2 137 – (455) – – 1 903

737 312 193 930 (12 244) (107 624) (8 757) 20 061 822 678

Included in the carrying amounts above are items of plant and equipment which have been impaired. The accumulated impairment at year-end was NIL (2013: R8,8 million).

Certain plant and equipment with a carrying value of R194 million (2013: R293 million) is encumbered to secure the borrowings(instalmentsalefinancing)setoutinnotes15and19.

5. Intangible assets

CostAccumulated amortisation

Carrying value

Group R’000 R’000 R’000

2014“Franki” brand name – – –

– – –

2013“Franki” brand name 94 529 (8 193) 86 336

94 529 (8 193) 86 336

The carrying amount of intangible assets can be reconciled as follows:

Amortisation period

Carrying value at

beginning of year

R’000Amortisation

R’000

Disposal of discontinued

operationR’000

Carrying value

at end of year

R’000

2014“Franki” brand name 50 years 86 336 (1 890) (84 446) –

86 336 (1 890) (84 446) –

2013“Franki” brand name 50 years 88 226 (1 890) – 86 336

88 226 (1 890) – 86 336



6. Goodwill

CostAccumulated

impairmentCarrying

valueGroup R’000 R’000 R’000

2014Esor Construction – Geotechnical – – –Esor Construction – Civils 178 306 (84 638) 93 668Esor Construction – Pipelines 90 837 – 90 837Brookmay 557 – 557

269 700 (84 638) 185 062

2013Esor Construction – Geotechnical 36 015 – 36 015Esor Construction – Civils 178 306 – 178 306Esor Construction – Pipelines 90 837 – 90 837Brookmay 557 – 557

305 715 – 305 715

The carrying amount of goodwill can be reconciled as follows:

Carrying value at

beginning of year Impairment

Disposal ofdiscontinued

operation

Carrying value at

end ofyear

R’000 R’000 R’000 R’000

2014Esor Construction – Geotechnical 36 015 – (36 015) –Esor Construction – Civils 178 306 (84 638) – 93 668Esor Construction – Pipelines 90 837 – – 90 837Brookmay 557 – – 557

305 715 (84 638) (36 015) 185 062

2013Esor Construction – Geotechnical 36 015 – – 36 015Esor Construction – Civils 178 306 – – 178 306Esor Construction – Pipelines 90 837 – – 90 837Brookmay 557 – – 557

305 715 – – 305 715

Goodwill arising from business combinations has been allocated to individual reporting units or cash-generating units, namely Geotechnical, Civils, Pipelines and Brookmay.

The recoverable amount of each cash-generating unit was estimated based on its value in use and except for the Civils division the carrying amount was lower than its recoverable amount and no impairment loss was recognised. An impairment loss of R84,6 million was recognised on the goodwill attributable to the Civils division. The recoverable amounts which were determined with the assistance of independent valuers, are as follows:

2014 2013R’000 R’000

Geotechnical – 512 755Civils 569 065 601 328Pipelines 313 892 272 509

882 957 1 386 592

notes to the financial statements (continued)for the year ended 28 february 2014


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6. Goodwill (continued) Valueinusewasdeterminedbydiscountingthefuturecashflowsgeneratedfromthecontinuinguseofthe

individual entities and was based on the following key assumptions:

• Cash flows were projected based on actual operating results and a forecast period of five years;• Pipelines Revenue growth was projected 15% for 2015, 10% thereafter based on secured work load and past

experience. Civils revenue growth was projected at 6,5%;• Gross margins were maintained at margins expected in the industry over the forecast period based on past

experience;• Operating expenses were not expected to increase significantly but have been increased in line with revenue

growth; and• A weighted average cost of capital of between 16,8% to 17,4% (2013: 20,91% to 24,4%) was applied in

determining the recoverable amounts of the cash-generating units. The discount rate was estimated based on weighted average cost of capital and a debt-equity ratio of 30% (2013: 20%).

The values assigned to key assumptions represent management’s assessment of future trends in the construction industry and are based on both internal and external sources.

The above estimates are sensitive in the following areas:

• Discount rate applied; and• Forecasted revenues and margins; and• Working capital levels.

Based on a range of estimates in the above areas, management impaired the goodwill of R84,6 million attributable to the Civils division. No impairment was required for the Pipelines division.

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

7. Financial assets at fair value through profit or loss■■ The fair value of the contingent consideration

receivable for the disposal of the discontinued operation is based on EBITDA growth of the business of 8% and a discount factor of 9%.Projected amount 81 104 – – –Discount adjustment (16 172) – – –

Fair value receivable 64 932 – – –

■■ Level 3: The contingent consideration receivable arose from the disposal of the discontinued operation, which includes a clause that entitles the seller to an amount of R150 million if the discontinued operation’s cumulative EBITDA over the next three years exceeds a threshold. The fair value is determined considering the estimated receivable, discounted to present value. The fair value is based on key unobservable inputs of EBITDA growth of the business of 8% and a discount factor of 9%. The fair value was determined by the groupfinancedepartment.ScenariosonEBITDAgrowthwere developed by the management considering the economy generally and their knowledge of the geotechnical business. The estimated fair value increases the higher the annual EBITDA growth rate, the higher the EBITDA margin and the lower the discount rate. Management considers that changing the above mentionedunobservableinputstoreflectotherreasonably possible alternative assumptions would not resultinasignificantchangeintheestimatedfairvalue.Cost – 7 627 – –Amortisation – (4 700) – –Fair value adjustment – (2 912) – –

Carrying value of foreign exchange hedge – 15 – –

Disclosed as:Non-current assets 64 923 3 – –Trade and other receivables 9 12 – –

64 932 15 – –



Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

8. Deferred taxBalance at beginning of year 126 177 116 304 – –Movements during the year:Disposal of discontinued operation (1 383) – – –Translation adjustment 8 809 – –Movements in FCTR and other (2 169) 2 875 – –Temporary differences (112 755) 6 189 – –

Balance at end of year 9 878 126 177 – –

The balance comprises: Property, plant and equipment 26 775 115 417 – – Intangible assets – 24 174 – – Provisions and accruals (7 232) (17 199) – – Retentions receivable 32 338 47 915 – – Advance billings (8 858) (18 489) – – Allowance for future expenditure – 6 422 – – Assessed loss (23 671) (50 194) – – Other (9 474) 18 131 – –

9 878 126 177 – –

Non-current assets 11 457 22 729 –Non-current liabilities (21 335) (148 906) –

(9 878) (126 177) –

9. Investments in subsidiariesSharesatcost 679 073 678 466

Details of the investments in subsidiaries are shown in notes 44 and 47. The directors have not impaired the investment in Esor Construction (Pty) Ltd as the diminution is not considered to be permanent.

10. Loans and long-term receivables Loan – Kathu Property Developers Proprietary Limited 31 322 27 726 – –This loan was provided for a period of 42 months from April 2012 and earned interest at a rate of Prime plus 2%. ThisloanissecuredbyafirstmortgagebondoverErven 8434, 8435 and 8436 Kathu, Gamagara Municipality, Northern Cape Province. The recipient of this loan had previously intended to settle this loan early, but has subsequently reverted to the original terms of the loan agreement.

31 322 27 726 – –

Loans – English Breeze Investments Private Limited 761 – – –This loan is unsecured and interest free. It was provided to the fellow shareholders of our Zimbabwean subsidiary. ThisloanwillberepaidthroughprofitsearnedbytheZimbabwean operation.

761 – – –

Disclosed as follows:Non-current assets 32 083 – – –Current assets – 27 726 – –

32 083 27 726 – –



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Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

11. InventoriesConsumables 7 519 19 724 – –Housing property held for development and resale 203 355 49 997 – –Form work and scaffolding 10 471 – – –

221 345 69 721 – –

Housing property with a value of R84,7 million is encumbered by mortgage bonds referred to in note 15.

Group Company

Interest rate 2014 2013 2014 2013% R’000 R’000 R’000 R’000

12. Unsecured loansEsor Africa Proprietary Limited – – – 17 817 17 856Esor Construction Proprietary Limited 8,0 – – 13 078 368 543EsorShareIncentiveSchemeTrust – – – – 2 378

– – 30 895 388 777

Disclosed as follows: –Current assets – – 30 895 388 777Current liabilities – – – –

– – 30 895 388 777

These loans are repayable on demand.

A subordination agreement was entered into by Esor Limited and its subsidiaries, subordinating any intra-group debt claims the group companies may have against each other to the preferential debts owed toABSABankLimitedforthedurationofthefundingarrangementsenteredinto(Refernotes15and19).

The balance of impairments raised in previous periods was R282 million as at 28 February 2014 (2013: R282 million). This was against the unsecured loans receivable from Esor Africa (consequent to the group reorganisation).



Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

13. Trade and other receivablesTrade receivables 607 359 759 206 – –Financialassetsatfairvaluethroughprofitorloss 9 12 – –Sundrydebtorsandpre-payments 52 560 67 495 – 5 213

659 928 826 713 – 5 213

Trade receivables include amounts due from customers. This amount is calculated as follows:Costsincurredplusrecognisedprofits,lessrecognised losses on contracts in progress at year-end 6 282 416 5 410 319 – –Amountscertified (6 013 767) (5 285 159) – –Retentions receivable 115 492 171 125 – –

384 141 296 285 – –

Amounts due from contract customers 402 955 345 654 – –Amounts due to contract customers (refer note 20) (18 814) (49 369) – –

384 141 296 285 – –

The total carrying value of trade receivables have been pledged to secure the borrowing facilities mentioned in notes 15 and 19.

Claimsandvariationsoncontractsareonlyrecognisedifseniormanagementisconfidentthatitisprobablethattheclaims and variations can be reliably measured and the customer will approve such items, In addition, negotiations for recognising such a claim have reached an advanced stage.

TheresultsincludeallcostsincurredontheKusileTerraceUndergroundFacilitiescontractaswellascertifiedrevenueto date and a claim of R130 million that was included in revenue. The total claim amounts to R230 million. It is currently being substantiated with reference to cause and effect events based on an MOU with the client in order to amicably settle the claim and to continue to execute the works. Numerous meetings and submissions have been made to the client. As a result the client has advanced R100 million in March 2014 to Esor with a repayment of 10% permonthcommencinginSeptember2014ontheoutstandingamountafteranyadditionalcertificationsintermsofthe claims submissions.

Wehaverecognisedtheclaimasmanagementisconfidentthatitcanbemeasuredreliablyandsuchclaimscanbe set-off against the advance of R100 million from Eskom before repayment becomes due.



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Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

14. SharecapitalandpremiumAuthorised500 000 000 ordinary shares of R0,001 each 500 500 500 500

Issued395 185 430 (2013: 395 185 430) ordinary shares of R0,001 each 395 395 395 395Less: nil (2013: 6 267 096) treasury shares held

bytheEsorShareIncentiveScheme,and – (6) – –Less: 13 312 250 treasury shares held by the Esor Broad

BasedShareOwnershipScheme (13) (13) – –

382 376 395 395Sharepremium 585 763 570 924 607 050 607 050

Balance at beginning of year 570 924 591 657 607 050 607 837Premium on treasury shares acquired – (21 286) – –Premium on options exercised 14 839 1 340 – –or forfeited on share issues – (787) – (787)

586 145 571 300 607 445 607 445

Sharemovements There were no movements in the issued share capital during the year.



15. Securedborrowings

Monthlyinstalment Group Company

Group Company 2014 2013 2014 2013R’000 R’000 R’000 R’000 R’000 R’000

Instalment sale agreements 6 198 – 174 615 237 937 – –Mortgage bonds – – 62 778 – – –

Domestic medium-term note programmeOn 24 August 2012, the group raised R17,5 million under this programme. The note, EFC01, was listed ontheBondExchangeofSouthAfricaon24August2012 and bore interest at the three-month JIBAR rate plus 3,75%. Interest was payable quarterly. This bond was redeemed on 30 November 2013 – – – 17 500 – 17 500

On 24 August 2012, the group raised R125 million under this programme. The note, EFC02, was listed ontheBondExchangeofSouthAfricaon24August2012 and bore interest at the three-month JIBAR rate plus 4,5%. Interest was payable quarterly. This bond was redeemed on 30 November 2013 – – – 125 000 – 125 000

On 24 August 2012, the group raised R45 million under this programme. The note, EFC03, was listed ontheBondExchangeofSouthAfricaon24August2012 and bore interest at the three-month JIBAR rate plus 5%. Interest was payable quarterly. This bond was redeemed on 30 November 2013 – – – 45 000 – 45 000

On 24 August 2012, the group raised R15 million under this programme. The note, EFC04, was listed ontheBondExchangeofSouthAfricaon24August2017 and bore interest at the three-month JIBAR rate plus 5,5%. Interest was payable quarterly. This bond was redeemed on 30 November 2013 – – – 15 000 – 15 000

Securities Lending TransactionTheEsorShareIncentiveSchemeenteredintoasecuritieslendingtransactionwithStandardBankinterms of which the trust has loaned 5 209 342 shares inEsorLimitedand,inreturn,StandardBankadvanced an amount of R6,9 million to the trust. This instrument bears interest at an effective rate of 8,5% andisfixedforthedurationoftheagreement.Thefinaldateforrepaymentofthisinstrumentwas February 2014 – – – 7 551 – –

Total secured borrowings 237 393 447 988 – 202 500Current portion included under current liabilities (74 350) (79 481) – –

163 043 368 507 – 202 500

Instalment sale agreements are secured over plant and equipment referred to in note 4. Interest is levied at rates of between prime plus 3,5% and prime minus 2,0%. Instalment sale agreements are for periods not exceeding 60months.ThelastfinalrepaymentdateontheinstalmentagreementsisFebruary2019.

The mortgage bonds are secured over development land described as Portions 109 and 110 of the Farm Uitvlugt Number 434, Province of Gauteng and Portion 143 of the Farm Hartebeeshoek 303, Northern Province, with carrying values totalling R84,7 million. These loans are repaid on a pro rata basis as each developed stand is transferred. This is expected to result in repayment of R9 million in the 2014 year end and a minimum of R4 million per year thereafter. R52,8 million of these mortgage bonds are interest free. The abovementioned bond is stated at fair value at initial recognition.Thefairvaluewasbasedondiscountedcashflowsusingmarket-relatedinterestrates.

Development property referred to in note 11 is secured by the mortgage bonds referred to above.

At year-end, the prime interest rate was 9,0% (2013: 8,5%).



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Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

16. Preference shares1 000 preference shares 23 424 21 000 – –

On 1 July 2012, 1 000 cumulative compulsory redeemable preference shares were issued by Esor Property Developments (Pty) Ltd at an issue price of R21 000 per share. These shares bear interest at a rate of prime plus 3%. Interest is payable on the last day of February each year. These instruments will be redeemed in July 2015.

These preference shares are guaranteed as disclosed in note 48.

17. Post-retirement benefitsDefinedbenefits Prior to 1 July 2005, all medical aid members of Esor Geotechnical who reached the age of 65 years together with employees who were 55 years or older, who accepted early retirement as an alternative to retrenchment, received a subsidy of 50% towards post-retirement medical aid contributions. This obligation is unfunded.Balance at 1 March 1 913 1 806 – –Current contributions paid – (134) – – Actuarial loss charged to other comprehensive income – 97 – –Interest cost – 144 – –Disposal of discontinued operation (1 913) – – –

Balance at 28 February – 1 913 – –

The principal actuarial assumptions applied in the determination of the fair values include:Consumerpriceinflation (%) – 5,40 – –Discount rate (%) – 6,90 – –Medical cost trend rate (%) – 7,40 – –Number of employees in the fund – 6 – –Date of last actuarial valuation: 28 February 2013.

Any changes in the actuarial assumptions are not expectedtohaveasignificantimpactonthepost-retirement obligation.

SensitivityThe effect of a 1% movement in the healthcare cost inflationassumptiononthecontractualliabilityandtheannual expense after taxation is as follows:1% increase in healthcare cost – 171 – –1% decrease in healthcare cost – (151) – –1% increase in interest cost – (11) – –1% decrease in interest cost – 11 – –

DefinedcontributionsContributionstoretirementbenefitfunds 27 769 44 912 – –

Retirementbenefitsareprovidedforfull-timepermanentlyemployedstaffwhoareundernormalretirementagesbymeansofapensionandprovidentfund.Thecompany’scontributionsarechargedtoprofitorlossintheyearthattheybecomedue.ThefundsaregovernedbythePensionFundsAct,24of1956,andaredefinedcontributionfunds.No actuarial valuation was done as this was disposed to Keller as part of the geotechnical sale.



Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

18. ProvisionsStaffbonuses Opening balance 19 697 16 350 – – Utilised (22 428) (36 873) – – Created 12 524 40 220 – – Disposal of discontinued operation (5 215) – – –

Closing balance 4 578 19 697 – –

Contractual obligations Opening balance 18 632 – – Acquired through business combination – 11 128 – – (Reversed)/Created (9 497) 7 504 – –

Closing balance 9 135 18 632 – –

Total provisions 13 713 38 329 – –

The provision for staff bonuses relates mainly to discretionary bonuses payable to staff. This provision is based on historical data and management’s estimate of payments likely to be made. The group expects to incur the majority of the liability over the next year.

The contractual obligation relates to the group’s obligation to build a section of road and a bridge as part of the negotiated terms of the Orchards development near Pretoria. These need to be completed before the end of the projectwhichislikelytobeinthe2016financialyear.

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

19. Borrowing facilitiesAvailable facilities– assetfinance 251 403 314 771 – –– contract guarantees 1 607 304 1 604 580 – –– overdraft 30 000 30 000 – –– forward exchange contracts 5 000 5 000 – –– financialderivatives 16 000 16 000 – –– mortgage bond 62 778 – – –

1 972 485 1 970 351 – –

Other facilitiesDomestic medium-term note programme– Available programme amount 1 000 000 797 500 – –

Facilities utilised– assetfinance 174 615 229 281 – –– contract guarantees 621 194 635 459 – –– overdraft 19 583 29 938 – –– financialderivatives – 4 121 – –– mortgage bonds 62 778 – – –

878 170 898 799 – –

Companies within the group have provided securities to secure these facilities (refer note 13)



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Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

20. Trade and other payablesTrade payables 196 653 216 449 286 9Accruals 155 426 167 569 377 211Amounts due to customers (refer note 13) 18 814 49 369 – –Sundrypayables 66 120 60 429 – 317

437 013 493 816 663 537

Included in amounts due to customers are amounts in respect of future losses on contracts amounting to R11,6 million (2013: R9,9 million).

Group Company

2014 2013 2014 2013R’000 Restated* R’000 R’000 R’000

21. RevenueContract revenue 2 316 887 2 325 958 – –Dividends received – – – 239 707

2 316 887 2 325 958 – 239 707

Continuing operations 1 592 835 1 538 101 – 239 707Discontinued operations 724 052 787 857 – –

2 316 887 2 325 958 – 239 707

Contract revenue comprises the value of work done in respect of contracts, net of value-added taxation.

Dividends received comprises the gross amount of dividends received from subsidiaries and other investments.

Group Company

2014 2013 2014 2013R’000 Restated* R’000 R’000 R’000

22. Other incomeProfitondisposalofplantandequipment 4 100 25 915 – –Profitonacquisitionofsubsidiary – 1 115 – –Sundryincome 9 470 209 218 218

13 570 27 239 218 218

Continuing operations 10 564 1 324 218 218Discontinued operations 3 006 25 915 – –

13 570 27 239 218 218



Group Company

2014 2013 2014 2013R’000 Restated* R’000 R’000 R’000

23. Results from operating activities of continuing operations Results from operating activities are stated after taking into account the following items which require separate disclosure:

Expenditure

Auditor remuneration 2 124 4 877 316 338

– Audit fees 1 162 4 111 316 338

– Other services 962 766 – –

Depreciation of property, plant and equipment 53 024 88 564 – –Amortisation of intangible assets 1 890 1 890 – –Impairment of investments – – – 3 584Impairment of property, plant and equipment – 8 757 – –Loss on disposal of property, plant and equipment 7 914 1 649 –Staffcosts 521 600 431 664 – –

Operating lease charges (refer note 45) 135 327 58 094 – –

– Equipment hire 131 351 53 154 – –– Motor vehicles 3 945 4 862 – –

– Property rentals 31 78 – –

Number of employees at year-end 3 170 2 940 –Impairment of goodwill 84 638 – – –Loss on disposal of discontinued operations 31 973 – – –

24. Finance incomeInterest income on bank deposits 1 421 1 977 – –Exchange gain on amounts owing to/from subsidiaries and foreign branches 24 537 37 935 – –Other 3 595 2 457 17 158 12 805

29 553 42 369 17 158 12 805

Continuing operations 4 980 17 811 17 158 12 805Discontinued operations 24 573 24 558 – –

29 553 42 369 17 158 12 805



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2014 2013 2014 2013R’000 R’000 R’000 R’000

25. Finance costsInterestexpenseonfinancialliabilitiesmeasuredat amortised cost 42 054 33 493 17 158 12 805Preference dividends 2 424 1 607 – –Exchange loss on amounts owing to/from subsidiaries and foreign branches 29 159 45 360 – –Other – 6 224 – –

73 637 86 684 17 158 12 805

Continuing operations 42 420 49 463 17 158 12 805Discontinued operations 31 217 37 221 – –

73 637 86 684 17 158 12 805

Theabovefinancialincomeandexpenseincludesthefollowing in respect of assets/(liabilities) not at fair value throughprofitorloss: (40 633) (31 516) – –

Totalfinanceincomeonfinancialassets 1 421 1 977 17 158 12 805Totalfinanceexpenseonfinancialliabilities (42 054) (33 493) (17 158) (12 805)

26. Income tax expenseSouth AfricanNormal taxation (3 529) 7 461 – –

– current tax 1 858 3 203 – – – prior year (over)/underprovision (5 387) 4 258 – –

Deferred tax (106 863) 3 899 – –

– current (83 901) 3 919 – – – prior year overprovision (22 962) (20) – –

Capital gains tax 2 076 3 580 – –ForeignNormal tax 25 561 1 739 – –

– current 23 550 6 936 – – – prior year overprovision (1 659) (5 324) – –Withholding tax 3 670 127 – –

Deferred (5 892) 2 290 –

– current (5 496) 3 478 – – – prior year overprovision (396) (1 188) – –

(88 647) 18 969 – –

Continuing operations (102 862) 18 136 – –Discontinued operations 14 215 1 239 – –

(88 647) 18 969 – –

Reconciliation of tax rates: % % % %Normal rate of taxation 28,0 28,0 28,0 28,0Adjusted for 6,8 (10,2) (28,0) (28,0)

– foreign tax rates (1,0) (13,3) – –– exempt income 46,4 (0,3) – (28,95)– capital gains tax (0,8) 3,4 –– prior year under/(over) provision 11,9 (5,8) – –– permanent differences 2,8 2,1 – –– non-deductible expenditure (54,0) 3,3 (28,0) 0,95– other 1,5 0,4 – –

34,8 17,8 – –



28. Earnings per shareBasic (loss)/earnings per share (cents) (43,5) 23,5 (2,7) 58,7Diluted (loss)/earnings per share (cents) (43,5) 23,5 (2,7) 58,7Headline (loss)/earnings per share (cents) (11,3) 20,5 (2,7) 58,7Diluted headline (loss)/earnings per share (cents) (11,3) 20,5 (2,7) 58,7Dividend per share (cents) 38,0 – 38,0 –

The calculation of the headline earnings/(loss) per share attributable to the ordinary equity holders of the parent is based on the following information:Reconciliation of headline (loss)/earnings:(Loss)/profitaftertax (166 161) 87 710 (10 492) 232 041Netloss/(profit)ondisposalofproperty,plant and equipment 294 (16 988) – –Impairment of intangible assets, property, plant and equipment and investments 84 638 6 305 – 3 584Loss on disposal of discontinued operations 38 190 – – –

Headline (loss)/earnings (43 039) 77 027 (10 492) 235 625

Basic (loss)/earnings per share from continuing operations (56,6) 6,8 (2,7) 58,7Diluted (loss)/earnings per share from continuing operations (56,6) 6,8 (2,7) 58,7Headline (loss)/earnings per share from continuing operations (24,4) 8,3 (2,7) 58,7Dilutive (loss)/earnings per share from continuing operations (24,4) 8,3 (2,7) 58,7

Reconciliation of headline (loss)/earnings from continuing operations(Loss)/profitaftertax (216 339) 25 102 (10 492) 232 041Netprofitondisposalofproperty,plantandequipment 294 (195) – –Impairment of property, plant and equipment and goodwill 84 638 6 305 – –Loss on disposal of discontinued operations 38 190 – – –

(93 217) 31 212 (10 492) 232 041

27. Discontinued operationsEffective 21 November 2013, the group disposed of 100% of its Geotechnical business unit to Keller Holdings Limited. ThiscomprisedoperationsinSouthAfricanbranchesaswellasthesubsidiariesinBotswana,Ghana,Mauritius,Lesotho,Seychelles,Mozambique,NamibiaandSwaziland.

Theprofitorlossofthediscontinuedoperationsfortheyearwasasfollows:

Group Company

2014 2013 2014 2013Note R’000 Restated R’000 R’000 R’000

Revenue 21 724 052 787 857 – –Cost of sales (548 477) (637 325) – –

Gross profit 22 175 575 150 532 – –Other income 3 006 25 915 – –Operating expenses (82 220) (70 230) – –

Profit before interest, tax, amortisation, impairments and depreciation 23 96 361 106 217 – –Amortisations, impairments and depreciation (25 324) (29 707) – –

Results from operations 71 037 76 510 – –Finance income 24 24 573 24 558 – –Finance costs 25 (31 217) (37 221) – –

Profit before income tax 64 393 63 847 – –Income tax (expense)/income 26 (14 215) (1 239) – –

Profit after tax from discontinued operations 50 178 62 608 – –



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2014 2013 2014 2013R’000 R’000 R’000 R’000

28. Earnings per share (continued)Weighted average number of ordinary shares:Issued ordinary shares 395 185 430 395 185 430 395 185 430 395 185 430Effect of own shares held (13 215 250) (19 491 302) – –Effect of shares issued – (405 223) – –

Weighted average number of shares 381 970 180 375 288 905 395 185 430 395 185 430

Dilutive average number of ordinary shares: The calculation of the diluted earnings per share attributable to the ordinary equity holders of the parent is based on the following information:Weighted average number of ordinary shares 381 970 180 375 288 905 395 185 430 395 185 430Effect of share options issued – – – –

Diluted weighted average number of shares 381 970 180 375 288 905 395 185 430 395 185 430

The average market value of the company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices of options that were outstanding during the period.

29. Reconciliation of (loss)/profit before taxation to cash generated from operations(Loss)/profitbeforetaxation (254 808) 106 679 (10 492) 232 041Adjusted for:– financeincome (29 553) (42 369) (17 158) (12 805)– profitondisposalofproperty,plantandequipment (4 100) (25 915) _ –– loss on disposal of property, plant and equipment 7 914 2 320 _ –– profitonacquisitionofsubsidiary – (1 115) _ –– foreign currency adjustment 29 951 8 771 _ –– depreciation of property, plant and equipment 85 215 107 624 _ –– amortisation of intangible assets 1 890 1 890 _ –– impairment of goodwill 84 638 – _ –– Loss on disposal of discontinued operations 31 973 – _ –

– amortisation and fair value adjustments of financialassets 3 7 612 _ 3 584

– share-based payments 607 2 418 _ –– (revised)/impairment of property, plant and equipment – 8 757 _ –– financecosts 73 637 86 684 17 158 12 805

Operatingprofitbeforeworkingcapitalchanges 27 367 263 356 (10 492) 235 625Working capital changes (115 576) (228 854) 5 339 (5 429)

(Increase)/decrease in trade and other receivables (105 256) (303 483) 5 213 (5 213)Increase in inventories (131 788) (8 830) – –Decrease/(increase) in trade and other payables 140 869 72 608 126 (216)(Decrease)/increase in provisions (19 401) 10 851 – –

Cash generated from operations (88 209) 34 502 5 153 230 196



Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

30. Taxation paidAmounts receivable/(owing) at beginning of year 10 005 (255) – –Currenttaxchargedtoprofitorloss (24 108) (12 780) – –Disposed in discontinued operations 7 972 – – –Amount owing/(receivable) at end of year 5 676 (10 005) – –

(455) (23 040) – –

31. Acquisition of subsidiariesSafdevTangananiProprietaryLimitedThis company was purchased on 1 April 2013. The values recognised on acquisition were:Unsecured loans 171 – – –

Net assets value 171 – – –

Amount paid – Purchase price (78 689) – – – – Amount owing 38 131 – – –

Cashoutflow (40 558) – – –

During the comparative period, effective 1 March 2012, thegroupassumedcontroloftheEsorBroad-BasedShareOwnershipScheme.Thiswasasaresultoftherestructuringof the board of this trust. No amount was paid for this acquisition. The fair values of assets and liabilities of this trust were as follows on the date of acquisition: Trade and other receivables – 2 – – Cash – 1 113 – –

Net assets – 1 115 – –

Netcashinflow – (1 113) – –

SafdevLand1ProprietaryLimitedwasacquiredon1July2012.Thefinancialvaluesrecognisedonacquisition was as follows:Inventories – 40 269 – –Trade receivables – 449 – –Cash and cash equivalents – 1 431 – –Provisions – (11 128) – –Trade payables – (21) – –

Net assets – 31 000 – –Amount paid – Cash – (10 000) – – – Preference shares – (21 000) – –Less: Cash acquired – 1 431 – –

Netcashoutflow – 29 569 – –

Totalnetcashoutflow (40 558) (28 456) – –

TheShelfCompaniesacquiredarelistedinnote47.



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Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

32. Disposal of business unitThe cash free and debt free purchase consideration is based on the business achieving an EBITDA over 3 years in excess R240 million. The contingent consideration is capped at R150 million. The fair value of the contingent consideration recognised is R64,9 millionThe net assets of the business unit disposed: – – –Property, plant and equipment 384 559 – – –Intangible assets 84 446 – – –Goodwill 36 015 – – –Inventories 20 722 – – –Trade and other receivables 288 998 – – –Foreign currency translation reserve (10 090) – – –Securedborrowings (39 255) – – –Post-retirementbenefitobligation (1 913) – – –Deferred tax liability (1 383) – – –Taxation (7 972) – – –Provisions (5 215) – – –Trade and other payables (197 672) – – –

Net asset value 551 240 – – –Less: – – –

Loss and disposal (31 973) – – –Contingent consideration (64 932) – – –Amount in escrow pending property transfers (15 800) – – –Other amounts outstanding (1 148) – – –

Netcashinflow 437 387 – – –

33. Cash and cash equivalents Cash and cash equivalents included in the statementofcashflowsincludethefollowingamounts:Cash and cash equivalents 40 423 67 647 28 7Bank overdraft (19 583) (34 059) – –

Cash and cash equivalent at bank and on hand 20 840 33 588 28 7

34. Joint operations The group and company had interests in the following joint operations:StefanuttiStocksFranki (%) – 50 – –Esor Balekane JV (%) – 95 – –

The group’s interests in the joint operations have been incorporated into the results, assets and liabilities as follows:

Statement of financial positionCurrent assets – 18 215 – –

Current liabilities – 17 113 – –

Statement of comprehensive income Revenue – 24 154 – –Cost of sales – (10 871) – –

Grossprofit – 13 283 – –Interest received – 1 104 – –

Profitbeforetaxation – 14 387 – –



35. Share-basedpaymenttransactionsThe group operated three share-based payment arrangements, which are described below. All of the these plans terminated on 28 February 2014 after all unexercised options had lapsed.

General employee share options Plan A Plan B Plan C

Grant date 14 March 2006 30 November 2006 14 December 2009Number of options granted 3 000 000 3 000 000 8 250 000Option life Five years Five years Five years

Vesting conditions

Options vest in tranches of 20%

per annum


per annum


per annumMethod of settlement Equity Equity Equity

ThefairvaluesofoptionsgrantedwerecalculatedusingBlack-Scholesoptionpricingmodel.Thekeyinputsintothemodel were as follows:

General employee share options Plan A Plan B Plan C

Weighted average share price (cents) 237 237 692,5 Weighted average exercise price (cents) 136 136 362Weighted average volatility (%) 35 35 50Remaining option life (years) 1 1 3Pre-tax risk-free rate (%) 7,4 7,4 7,68

The dividend yield assumption was based on a 20 cents per share dividend.

2014 2013

Outstanding share options

Number of share

options

Number of share

options

Opening balance at beginning of year 6 267 096 7 086 498Granted during the year – –Lapsed/exercised during the year (6 267 096) (819 402)

Outstanding at end of year – 6 267 096

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

Expense arising from share-based payment transaction 607 2 418 – –

Weighted average share price for the year (cents) 122,8 137,4 122,8 137,4



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Basic salary BonusDirectors’ base fee

Directors’ attendance

fee TotalR’000 R’000 R’000 R’000 R’000

36. Directors’ emoluments2014Non-executive directorsEG Dube – – 80 75 155Dr O Franks – – 44 43 87B Mathabathe – – 55 33 88DrFASonn – – 107 80 187DM Thompson – – 135 135 270

Executive directorsB Krone – – – – –W van Zyl1 – – – – –

From the company – – 421 366 787

Executive directorsEsor ConstructionB Krone 3 247 814 – – 4 061W van Zyl1 1 950 739 – – 2 689

From subsidiaries 5 197 1 553 – – 6 750

Total emoluments 5 197 1 553 421 366 7 537

2013Non-executive directorsEG Dube – – 82 72 154B Mathabathe – – 55 23 78DrFASonn – – 125 123 248DM Thompson – – 133 133 266

Executive directorsA Brookstein3 – – – – –W van Houten2 – – – – –B Krone – – – – –W van Zyl1 – – – – –

From the company – – 395 351 746

Executive directorsEsor ConstructionA Brookstein3 2 102 187 – – 2 289W van Houten2 1 760 1 148 – – 2 908B Krone 3 063 1 296 – – 4 359W van Zyl1 796 42 – – 838

From subsidiaries 7 721 2 673 – – 10 394

Total emoluments 7 721 2 673 395 351 11 140

1 Appointed 8 October 20122 Resigned30September20123 Resigned 31 January 2013

No management, consulting, technical or other fees directly or indirectly, including payments to management companies,havebeenpaidtoanydirectorsofthecompany.Thereisnocommission,gainorprofit-sharingarrangement payable to any of the directors.

Prescribedofficers’remunerationisoutlinedonpage41.



37. Risk management Overview

• Credit risk;• Liquidity risk; and• Market risk.

The risk exposure is addressed below and has not changed from the previous reporting period.

This note presents information about the group’s and company’s exposure to each of the above risks, the group’s and company’s objectives, policies and processes for measuring and managing risk, and the group’s and company’s management of capital. Further quantitative disclosures are included throughout these consolidated and separate financial statements.

The board of directors has overall responsibility for the establishment and oversight of the group’s and company’s risk management framework. The risk management policies are established to identify and analyse the risks faced by the group and company, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and activities. The group and company aim to develop a disciplined and constructive control environment in which all employees understand their roles and responsibilities.

The Audit and Risk Committee oversees how management monitors compliance with the group’s risk management policies and procedures and reviews the adequacy of the risk management framework. The Audit and Risk Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit and Risk Committee.

Credit risk Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from trade and other receivables.

Trade and other receivables The exposure to credit risk is influenced mainly by the counterparties’ individual risk characteristics as an end-user

customer. The Tender Committee, established in terms of its risk policies and procedures, is mandated to review significant new customers and counterparties prior to submission of any bid or tender offers and proposals. This committee directs appropriate risk payment conditions and terms in its review of tender proposals and bids. Contract debtors, by geographical location, are grouped, as a concentration of credit risk, and monitored monthly by the Executive Management Committee. When trading in other African countries, the group addresses the credit risk by mainly trading with existing customers. In addition, large upfront payments and guarantees are requested in order to minimise exposure.

A significant number of the group’s customers have been transacting with the group for a number of years, and losses have occurred infrequently. In monitoring customer credit risk, customers are mainly grouped according to their geographical location, whilst other credit characteristics such as ageing profile, maturity and existence of previous financial difficulties are also considered. Customers classed as “high risk” are placed on a restrictive customer list and future contracts are entered into on an advance payment or payment guaranteed basis with the approval of the Tender Committee. Contracts entered into contain provisions for payment defaults and retention of title clauses so that in the event of non-payment the group and company may have secured claims. The group and company may require collateral in respect of trade and other receivables.

The group has various cash deposits, forward exchange contracts and financial guarantees which are held with or issued by reputable banking institutions which mitigate credit risk.

Liquidity risk Liquidity risk is the risk that the group and company will not be able to meet their financial obligations as they fall

due. The policy to manage liquidity is to ensure, as far as possible, that the group and company will always have sufficient liquidity to meet their liabilities when they are due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation.

The group and company use activity based costing to estimate the tendered cost of its products and services. Cash flow models, particularly on larger tender proposals, are reviewed by the Tender Committee. The objective is to ensure that projected cash flows remain positive throughout their estimated duration. Daily and monthly forecast cash flows are monitored to ensure that surplus cash is appropriately invested in optimal treasury call deposits and access finance facilities. Details of the borrowing facilities have been set out in note 19. There are no restrictive funding arrangements.

Going concern risk Seniormanagementhasconsideredthegroup’sabilitytocontinueasagoingconcern.Ourprocesswasthorough

and based on management’s plan for future action in each division.

Although the group reported a significant loss for the year, these losses were largely funded through available cash resources.



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37. Risk management (continued) Going concern risk (continued) The group is currently not leveraged, only certain assets are subject to financial leases (see note 4 to the

financial statements). The group has access to the R1 billion Domestic Medium-Term Note Programme. Under this programme, Esor may from time to time issue secured or unsecured registered notes on the terms and conditions as contained in the Program Memorandum.

The group’s total available facilities, including overdrafts, asset based finance, bonding and guarantee facilities, but excluding the R1 billiion domestic medium-term note programme, at year end amounts to R1,09 billion.

Based on the outcome of management’s assessment of the future cash flows as well as the group’s ability to raise finance we are confident that the group remains a going concern despite the losses accounted for in the current financial year.

Market risk Market risk is the risk that changes in market prices, such as diesel, foreign exchange rates and interest rates, will

affect the group’s and company’s income or the value of its holdings of financial instruments. The objective is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Currency risk The group and company are exposed to currency risk on intra-group transactions, capital asset acquisitions and

foreign cash resources that are denominated in a currency other than the respective functional currencies of the groupentities,primarilytheSouthAfricanRand.

The group economically hedges all foreign capital asset additions or imports against foreign currency exposures over the estimated delivery lead times. The company uses forward exchange contracts to hedge its currency risk, mostly with a maturity of less than one year from the reporting date. When necessary, forward exchange contracts are rolled over at maturity.

The principal amounts of the group’s and company’s foreign cash balances are managed to ensure that its net exposure is kept to acceptable exposure levels through multiple hard currencies, both on and offshore. Foreign treasury call deposits, denominated in currencies other than the underlying operational functional currency, provide an economic hedge.

Gross intra-group receivables are denominated in the functional currency of the entity funding the transaction. These investment levels are monitored to ensure that the net foreign exchange risk exposure is best economically hedged. Cash flows are monitored to minimise unnecessary foreign exchange risk associated with intra-group transactions.

The group’s and company’s investments in foreign operations are not hedged as those currency positions are considered to be long-term in nature.

Interest risk The group and company are exposed to variable linked interest rate risk on their purchases of capital assets financed

through instalment sale agreements. The group and company treasury operates an access finance facility against its exposure on its instalment sale borrowings, thereby economically off-setting its risk to interest rate changes.

Capital management The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence

and to sustain future developments of the business. The board of directors monitors the return on capital, which the group defines as total capital and reserves, and the level of dividends to ordinary shareholders. The board’s target isforemployees,throughtheEsorBroad-BasedShareOwnershipScheme,toholdatleast5%oftheEsorgroup’sordinary shares. Their holding is currently 3,37% (2013: 3,37%). This shareholding is part of the group’s Broad-based Black Economic Empowerment strategy.

The board seeks to maintain a balance between the higher returns with higher levels of borrowings and the security afforded by a sound and conservative capital position. The group’s target is to achieve a return on weighted average capital of more than 15% (2013: 15%).



Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

38. Credit risk The maximum exposure to credit risk at the reporting date was:Contract debtors 607 359 759 206 – –Sundrydebtors 52 560 48 138 – –Financialassetsatfairvaluethroughprofitorloss 9 15 – –Other investments 32 083 27 726 – –Unsecured intra-group loans – – 30 895 388 777Cash and cash equivalents 40 423 67 647 28 7

732 434 902 732 30 923 388 784

The maximum exposure to credit risk by geographical concentrationforfinancialassetsatthereporting date was:SouthAfrica 728 094 748 428 30 923 388 784Angola – 33 722 – –Ghana – 19 511 – –Mozambique – 23 665 – –Botswana – 9 409 – –Mauritius – 36 104 – –Tanzania – 31 106 – –Othersub-Saharancountries – 526 – –CommonMonetaryAreacountries(Swaziland,Namibia) 4 340 261 – –

732 434 902 732 30 923 388 784

The ageing of trade receivables at the reporting date was:Not past due 586 609 750 357 – –Past due not impaired 20 750 8 849 – –Past due and impaired 20 810 57 975 – –

628 169 817 181 – –

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:Balance beginning of year 57 975 49 723 – –Disposal of discontinued operation (47 165) – – –Impairment loss raised 10 000 8 252 – –

Balance at end February 20 810 57 975 – –

Based on historic default rates, the group believes that no further impairment allowance, as detailed above, is necessary in respect of trade receivables not past due or past due. The ageing of contract debtors is affected directlybythemeasurementquantitiesclaimedoninterimcertificateswhicharesubjecttore-measurementandinterim adjustments by the customer or the customer’s representative.



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38. Credit risk (continued) Themaximumexposuretocreditriskoftradereceivablestosignificantcustomersatthereportingdatewas

as follows:

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

CustomerEskomHoldingsSOCLimited 39 708 74 306 – –Ethekwini Municipality 26 952 12 074 – –Bakwena Platinum Corridor 17 416 – – –Kathu Property Developers Proprietary Limited 15 362 51 305 – –Umgeni Water 8 241 – – –Chris Hani Municipality 6 494 – – –Department of Transport – 26 857 – –Rand Water 16 057 35 550 – –

The group and company may request certain clients to provide independent reputable bank guarantees, or advance payments, as collateral against credit risk, in respect of contracts concluded. The objective of such collateral is to counter the risk of non-payment by the group’s and company’s contract debtors.

The processes described above are followed by the group and company to manage credit risk before credit is granted to the customers on projects.

39. Liquidity risk Thefollowingarethecontractualmaturitiesoffinancialliabilities,includingestimatedinterestpayments:

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

Non-derivative financial liabilities SecuredborrowingsCarrying amount 237 393 447 988 – 202 500Contractual cash flows 274 495 506 408 – 218 700

One year or less 84 303 79 481 – –Two to five years 126 192 426 927 – 218 700More than five years 64 000 – – –

Trade and other payablesCarrying amount 415 400 444 447 663 537Contractual cash flows 415 400 444 447 663 537

One year or less 415 400 444 447 663 537

Otherfinancialliabilities*(outsidescopeofIAS39)Carrying amount 18 814 49 369 – –Contractual cash flows 18 814 49 369 – –

One year or less 18 814 49 369 – –

Unsecured loans Carrying amount – – – –Contractual cash flows – – – –

One year or less – – – –

Total non-derivative financial liabilitiesCarrying amount 671 607 941 804 663 203 037Contractual cash flows 708 709 1 000 224 663 219 237

One year or less 518 517 573 297 663 537Two to five years 126 192 426 927 – 218 700More than five years 64 000 – – –

* Other financial liabilities include retention creditors, advance payments received and value-added tax.



There are no defaults/breaches in respect of long-term loans payable.

40. Currency risk Exposure to currency risk The group’s and company’s exposure to foreign exchange risk was as follows at the reporting date:

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

Grossexposureinthestatementoffinancialposition:Cash and cash equivalentsUSD – 49 474 – –GBP – 1 – –BWP – – – –GHS – 3 641 – –Other – 6 597 – –

– 59 713 – –

Amounts owing to subsidiaries and branches are eliminated on consolidation. However, these amounts do impact profitorlosswithinthegroupandcompany’sfinancialstatementsresultingfromchangesinforeignexchangerates.Exposure to currency risk occurs when entities in the group owe amounts to other group entities in currencies denominated in other than their functional currency.

Currency code Description

USD UnitedStatesDollarGBP Great British PoundBWP Botswana PulaMUR Mauritian RupeeGHS Ghanaian CediZAR SouthAfricanRandOther MozambicanMetical/TanzanianShilling/NigerianNaira/ZambianKwacha/AngolanKwanza/Euro

Thefollowingsignificantexchangeratesappliedduringtheyear:

2014 2014 2013 2013

Group and companyAverage

rateSpot rate

Average rate

Spotrate

DenominationTanzanianShilling 164,41 158,77 188,2744 178,6225UnitedStatesDollar 9,7586 10,1697 8,3728 8,8384Ghanaian Cedi 4,7137 4,4667 4,6512 4,6168Mauritian Rupee 3,1685 2,9975 3,6246 3,4702Mozambican Metica 3,0700 2,9700 3,4300 3,3600Botswana Pula 1,1560 1,1969 1,0839 1,1002



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40. Currency risk (continued) Exposure to currency risk Sensitivity analysis A10%strengtheningoftheZARagainstforeigncurrenciesatthereportingdatewouldhavedecreasedprofitorloss

(after tax) by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2013. The translation of the foreign operations is affected by movements in the exchange rate which directly impacts on the group’s and company’s statement of comprehensive income.

A 10% weakening of the ZAR against the above currencies at reporting date would have had an equal but opposite effectonprofitorloss(aftertax)bytheamountsshownbelow:

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

Effectonprofitforallcurrencies – 4 299 –

Effectonprofit/(loss)onsignificantcurrencies:USDollar – 3 562 – –Angolan Kwanza – 373 – –Ghanaian Cedis – 262 – –SeychelleRupee – 53 – –Nigerian Naira – 45 – –Euro – 4 – –

Effectonprofitonsignificantcurrencies – 4 299 – –

41. Interest rate riskAtthereportingdatetheinterestrateprofileofthe group’sandcompany’sinterest-bearingfinancial instruments was:Fixed rate instrumentsFinancial assets – – – –Financial liabilities – (7 551) – –

– (7 551) – –

Variable rate instrumentsFinancial assets 72 506 91 252 28 7Financial liabilities (307 549) (477 926) – (202 500)

235 043 (386 674) 28 (202 493)

Cash flow sensitivity analysis for fixed and variable rate instruments Anincreaseof100basispointsininterestratesatthereportingdatewouldhaveincreased/(decreased)profitorloss

(after tax) by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. This analysis was performed on the same basis for 2013. A decrease in interest rates would haveanequalbutoppositeeffectonprofitorloss.

Group Company

2014 2013 2014 2013R’000 R’000 R’000 R’000

ProfitorlossFixed rate instruments – 54 – –Variable rate instruments (1 692) (2 777) – –

(1 692) (2 723) – –



42. Classification of financial instruments Thetablebelowsetsoutthegroup’sandcompany’sclassificationofeachclassoffinancialassetsandliabilities,

and their fair values.

The fair value of all instruments is estimated at its carrying value as these instruments are generally short-term in nature and thus carrying amount approximates fair value.

Loans and receivables

Liabilities at amortised

cost

Financial assets and liabilities at

fair value through

profit or loss

Other financial

assets and liabilities*

Total carrying amount Fair value

R’000 R’000 R’000 R’000 R’000 R’000

Group 2014Financial assetsTrade and other receivables 544 427 – 9 115 492 659 928 659 928Cash and cash equivalents 40 423 – – – 40 423 40 423Other 32 083 – 64 923 – 97 006 97 006

616 933 – 64 932 115 492 797 357 797 357

Financial liabilities Non-current portion of secured borrowings – 163 043 – – 163 043 163 043Trade and other payables – 415 400 – 18 814 434 214 434 214Current portion of secured borrowings – 74 350 – – 74 350 74 350

– 652 793 – 18 814 671 607 671 607

* Outside the scope of IAS 39.



cost


fair value through

profitor loss

Other financial



R’000 R’000 R’000 R’000 R’000 R’000

Group 2013Financial assetsTrade and other receivables 636 161 – 15 190 537 826 713 826 713Cash and cash equivalents 63 526 – – – 63 526 63 526Other 27 726 – 3 – 27 729 27 729

727 413 – 18 190 537 917 968 917 968

Financial liabilities Non-current portion of secured borrowings – 368 507 – – 368 507 368 507Trade and other payables – 422 719 – 71 097 493 816 493 816Current portion of secured borrowings – 79 481 – – 79 481 79 481

– 870 707 – 71 097 941 804 941 804




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42. Classification of financial instruments (continued)



cost


fair value through

profit or loss

Other financial



R’000 R’000 R’000 R’000 R’000 R’000

Company 2014Financial assetsUnsecured loans 30 895 – – – 30 895 30 895Cash and cash equivalents 28 – – – 28 28

30 923 – – – 30 923 30 923

Financial liabilitiesTrade and other payables – 663 – – 663 663Securedborrowings – – – – – –

– 663 – – 663 663

Company 2013Financial assetsTrade and other receivables 5 213 – – – 5 213 5 213Unsecured loans 388 777 – – – 388 777 388 777Cash and cash equivalents 7 – – – 7 7

393 997 – – – 393 997 393 997

Financial liabilitiesTrade and other payables – 535 – – 535 535Securedborrowings – 202 500 – – 202 500 202 500

– 203 035 – – 203 035 203 035




42. Classification of financial instruments (continued) Basis for determining fair values Thefollowingsummarisesthesignificantmethodsandassumptionsusedinestimatingthefairvalueoffinancial

instrumentsreflectedinthetableabove:

Derivatives The fair values of derivative instruments are determined with reference to the quoted market prices of the relevant

instrument at year-end.

Fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

Non-derivativefinancialliabilities:Securedborrowingsandshareholderloans Fairvalueiscalculatedbasedonthepresentvalueoffutureprincipalandinterestcashflows,discountedatthe

marketrateofinterestatthereportingdate.Securedborrowingsareatvariablerateslinkedtotheprimerateof interest and thus the carrying value on such instruments would approximate the fair value.

Trade and other receivables The fair value of intra-group and third party trade and other receivables is estimated at its carrying value as these

instruments are short-term in nature and thus carrying amount approximates fair value.

Trade and other payables The fair value of intra-group and third party trade and other payables is estimated at its carrying value as these

instruments are short-term in nature and thus carrying amount approximates fair value.

Investments The fair value of third party investments is estimated at its carrying value as these instruments are short-term in nature

and thus carrying amount approximates fair value.

Unsecured loans The fair value of unsecured loans is estimated at its carrying value as these loans are short-term in nature and thus

carrying amount approximates fair value.

43. Related parties During the year the following transactions took place with subsidiaries and related parties. Loan balances with these

subsidiaries and related parties are shown in note 12.

Group Company

2014 2013 2014 2013Party Name of transaction R’000 R’000 R’000 R’000

Balekane Construction (Pty) Limited Trade receivables 15 344 25 118 – –Esor Pipelines (Pty) Limited Dividends received – – – 32 831Esor Civils (Pty) Limited Dividends received – – – 206 876Esor Plant (Pty) Limited Interest received – – – 1 158Esor Construction (Pty) Limited Interest received – – 17 158 11 647Turncard Trading 122 (Pty) Limited Brokerage fee 187 – – –

Transactions with jointly controlled operations have been disclosed in note 34. Directors’ emoluments are disclosed in note 36.



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44. Investments in subsidiaries

Share capital Holding Cost

2014 2013 2014 2013 2014 2013R R % % R’000 R’000

Brookmay Properties (Pty) Limited 100 ordinary shares of R1 each at cost 100 100 100 100 5 492 5 492

Esor Africa (Pty) Limited 102 ordinary shares of R1 each at cost 102 102 100 100 8 909 8 909

Esor Construction (Pty) Limited 30 000 ordinary shares of 1 cent each at cost 300 300 100 100 668 255 667 609

Esor Civils (Pty) Limited 100 ordinary shares of R1 each at cost 100 100 100 100 * *

Esor Pipelines (Pty) Limited 1 000 ordinary shares of R1 each at cost 1 000 1 000 100 100 1 1

Esor Property Developments (Pty) Limited 100 100 100 100 * *

Less impairments:Brookmay Properties (Pty) Limited – – – – (3 584) (3 584)

679 073 678 466

* Less than R1 000

For transactions under common control, an accounting policy choice in respect of consolidated and separate financial statements, is to be applied consistently to all common control transactions, either:

1. Book value (carry over basis), on the basis that the investment simply has been moved from one part of the group to another; or

2. IFRS3accountingonthebasisthattheacquiredisaseparateentityinitsownright,andshouldnotbeconfusedwith the economic group as a whole.

Esor has made the accounting policy choice of using the Book Value method and it is thus appropriate to transfer a portion of investments from Esor Civils (Pty) Limited, Esor Africa (Pty) Limited and Esor Pipelines (Pty) Limited into Esor Construction (Pty) Limited since the operations of these companies were sold into Esor Construction (Pty) Limited.

The shares of Esor Africa (Pty) Limited have been pledged to Credit Guarantee Insurance Corporation of Africa Limited (“CGIC”) to secure guarantee facilities mentioned in note 19.

Refer note 47 for further information on subsidiary companies.

45. Commitments Leases The group leases certain of its land and buildings, vehicles and office equipment for periods of up to a maximum of

10 years. At year-end, the minimum lease payments due on operating leases were as follows:

2014 2013

Within Within Within Withinone two to five one twotofive

year years year yearsGroup R’000 R’000 R’000 R’000

Land and buildings 252 – 1 296 570Plant and vehicles 1 859 3 035 3 114 4 798Officeequipment 278 278 273 762

2 389 3 313 4 683 6 130

Capital commitments Group At year-end, plant and equipment with a value of R6,7 million (2013: R6,4 million) had been authorised and

contracted for. Further capital expenditure to the value of R19,3 million (2013: R8,7 million) had been authorised but was not yet contracted for. These assets will be utilised to expand the operating capacity of the group. The purchase of these assets will be funded through the group’s borrowing facilities as well as future debt instruments.

Company The company has not authorised or contracted for any capital expenditure.



46. Segmentalanalysis Operating segments The group has three reportable segments, as described in the accounting policy note 2.23, which are the group’s

strategic business units.

Geotechnical Civils Pipelines

Deve-lop-ment

Corporate and eliminations Consolidated

2014 2013 2014 2013 2014 2013 2014 2014 2013 2014 2013R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

External revenue 712 646 787 857 961 599 1 214 549 579 285 323 552 63 356 – – 2 316 887 2 325 958Inter segment revenue 11 406 – 42 690 8 713 – – – (54 096) (8 713) – –

Segmentrevenue 724 052 787 857 1 004 289 1 223 262 579 285 323 552 63 356 (54 096) (8 713) 2 316 887 2 325 958

SegmentresultProfit/(loss)beforeinterest and taxation 71 037 76 105 (183 881) 76 525 39 892 30 583 1 404 (139 176) (32 219) (210 724) 150 994Netfinance(cost)/income (6 644) (12 663) (15 179) (22 286) 1 318 (157) (342) (23 237) (9 209) (44 084) (44 315)Taxation (14 215) (1 239) 56 514 (14 859) (11 891) (8 883) (100) 58 339 6 012 88 647 (18 969)

Segmentprofit/(loss) 50 178 62 203 (142 546) 39 380 29 319 21 543 962 (104 074) (35 416) (166 161) 87 710

Segmentassets – 734 464 788 590 963 994 254 857 191 552 264 454 313 449 353 771 1 621 350 2 243 781Segmentliabilities – 325 267 875 797 872 001 204 802 169 549 245 312 (481 780) (84 276) 844 131 1 190 519 Capital and non-cash items Additions to property, plant and equipment 14 538 42 814 26 313 132 407 9 596 17 083 – 2 117 1 626 52 564 193 930Depreciation 23 435 27 817 50 257 61 959 6 176 4 082 – 5 347 13 766 85 215 107 624Impairment loss – – – – – – – 84 446 8 757 84 446 8 757 Number of employees – 1 169 1 969 2 701 1 163 763 3 35 21 3 170 4 654

Revenue generated from significant customers includes:

Revenue

Customer Business unit2014

R’0002013

R’000

EskomHoldingsSOCLimited Civils 596 492 364 594Umgeni Water Pipelines 146 064 1 944Ethekwini Municipality Pipelines 98 824 57 877Bakwena Platinum Corridor Concessionaire (Pty) Limited Civils 69 213 119 385Anglo American Inyosi Coal Civils 47 672 –Rand Water Pipelines 23 484 117 250Katu Developers (Pty) Ltd Civils 59 990 117 248



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46. Segmentalanalysis(continued)South Africa Other regions Consolidated

2014 2013 2014 2013 2014 2013Geographical information R’000 R’000 R’000 R’000 R’000 R’000

Total revenue from external customers 2 015 474 1 961 439 301 413 364 519 2 316 887 2 325 958Property, plant and equipment 319 014 646 915 1 121 158 473 320 135 805 388

A separate segment report has not been prepared for the company as it had no trading operations.

47. Interest in subsidiaries The subsidiaries of Esorfranki Limited are involved in the following principal activities:

Country ofincorporation

Percentage held

Nature of business 2014 2013

Directly heldBrookmay Properties (Pty) Limited1 SouthAfrica Property investment 100 100Esor Africa (Pty) Limited1 SouthAfrica Property investment 100 100Esor Civils (Pty) Limited1 SouthAfrica Dormant 100 100Esor Construction (Pty) Limited1 SouthAfrica Civil Engineering 100 100Esor Pipelines (Pty) Limited1 SouthAfrica Dormant 100 100Esor Property Developments (Pty) Limited SouthAfrica Property development 100 100

Indirectly heldEsorBroadBasedShareOwnershipScheme SouthAfrica Employee share scheme 100 100EsorShareIncentiveScheme SouthAfrica Employee share scheme 100 100Esor Plant (Pty) Limited SouthAfrica Dormant 100 100EsorfrankiDRCSPRL DRC Geotechnical 100 100Frankipile Botswana (Pty) Limited2 Botswana Geotechnical – 100Frankipile Ghana Limited2 Ghana Geotechnical – 100Frankipile International Projects Limited2 Mauritius Geotechnical – 100Frankipile Lesotho (Pty) Limited2 Lesotho Geotechnical – 100Frankipile Mauritius International Limited Mauritius Geotechnical 100 100FrankipileMauritius(Seychelles)Limited2 Seychelles Geotechnical – 100Frankipile Mozambique Limitada2 Mozambique Geotechnical – 100Frankipile Namibia (Pty) Limited2 Namibia Geotechnical – 100FrankipileSwaziland(Pty)Limited2 Swaziland Geotechnical – 100GeoFranki (West Africa) Limited Nigeria Geotechnical 60 60Layered Brick Construction (PVT) Limited3 Zimbabwe Investment holding – –Esor Uitvlugt (Pty) Limited3 SouthAfrica Property development – –Nike Enterprises (PVT) Limited Zimbabwe Properties investment 49 100SafdevLand1(Pty)Limited SouthAfrica Property development 100 100SafdevTanganani(Pty)Limited4 SouthAfrica Property development 100 –Zimfranki Projects (PVT) Limited Zimbabwe Civil engineering 49 100

1 Further information on these subsidiaries can be found in note 44. 2 Disposed as part of the geotechnical sale (see note 27). 3 Shelf Companies acquired during the year. 4 Operating company acquired during the year (see note 31).



47. Interest in subsidiaries (continued)

Company

2014R’000

2013R’000

The profit/(loss) after taxation attributable to the subsidiariesBrookmay Properties (Pty) Limited (2 593) (5 513)Esor Africa (Pty) Limited 1 635 2 560EsorBroad-BasedShareOwnershipScheme 4 326 42EsorShareIncentiveScheme 5 806 (166)Esor Construction (Pty) Limited 217 611 80 751SubsidiariesofEsorConstruction(Pty)Limited (385 107) 42 688Esor Plant (Pty) Limited (2 064) (13 253)Esor Civils (Pty) Limited (3 003) –Esor Pipelines (Pty) Limited 153 – SafdevLand1(Pty)Limited 7 094 –SafdevTanganani(Pty)Limited 775 –Esor Property Developments (Pty) Limited (302) –

(155 669) 107 109

Aggregateprofits 237 400 126 041

Aggregate losses (393 069) (18 932)

Loans to/(from) subsidiariesEsor Africa (Pty) Limited 17 818 17 856EsorShareIncentiveTrust – 2 378Esorfranki Construction (Pty) Limited 13 078 368 543

30 896 388 777

48. Guarantees The company provided a parent company guarantee to Eskom for the performance by Esor Civils in terms of its

awardfortheconstructionofundergroundterracesattheKusilePowerStation.Themaximumexposureforthisguarantee is R52 million (2013: R52 million), being 10% of the award contract value. This guarantee is due to expire in May 2014.

The company further provided a financial guarantee for the obligations of Esorfranki Property Developments Proprietary Limited in relation to the redemption price outstanding on the preference shares issued. Refer note 16.



analysis of shareholdersfor the year ended 28 february 2014

Company: Esor LimitedRegister date: 28 February 2014Issued share capital: 395 185 430

Shareholder spreadNumber of

shareholdings %Number of

shares %

1 – 1 000 shares 458 14,12 255 648 0,061 001– 10 000 shares 1 297 39,98 6 329 757 1,6010 001– 100 000 shares 1 154 35,57 41 823 168 10,58100 001– 1 000 000 shares 275 8,48 79 262 745 20,061 000 001 shares and over 60 1,85 267 514 112 67,70

Total 3 244 100,00 395 185 430 100,00

Distribution of shareholdersNumber of


shares %

Banks/brokers 8 0,25 3 543 117 0,90Close corporations 56 1,73 6 714 639 1,70Empowerment 2 0,06 13 448 645 3,40Endowment funds 17 0,52 1 405 414 0,36Individuals 2 719 83,82 132 175 797 33,45Insurance companies 10 0,31 8 581 903 2,17Medical schemes 6 0,18 3 320 180 0,84Mutual funds 45 1,39 143 482 748 36,31Nominees and trusts 196 6,04 13 904 343 3,52Other corporations 37 1,14 1 205 697 0,30Private companies 83 2,56 24 462 372 6,19Public companies 3 0,09 259 800 0,07Retirement funds 60 1,85 41 677 836 10,54Sharetrust 2 0,06 1 002 939 0,25

Total 3 244 100,00 395 185 430 100,00

Public/non-public shareholdersNumber of


shares %

Non-public shareholders 7 0,22 16 112 662 4,08Directors and associates of the company holdings 5 0,15 15 109 723 3,82Sharetrust 2 0,06 1 002 939 0,25Public shareholders 3 237 99,78 379 072 768 95,92

Total 3 244 100,00 395 185 430 100,00

Beneficial shareholders holding 3% or moreNumber of

shares %

Coronation Fund Managers 41 340 763 10,46Investec 33 240 333 8,41MMI Holdings Ltd 18 093 343 4,58Krone, B 14 873 328 3,77Sanlam 13 965 993 3,53EsorBroadBasedShareOwnershipScheme 13 312 250 3,37Transnet Pension Fund 13 205 740 3,34InvestmentSolutions 12 187 919 3,08

Total 160 219 669 40,54

Institutional holding 3% or moreCoronation Fund Managers 97 156 965 24,59Investec Asset Management 39 062 655 9,88Kagiso Asset Management 23 607 855 5,97Momentum Investments 13 259 867 3,36

Total 173 087 342 43,80

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Financial year-end February

Preliminary annual results announcement 29 May 2014

Annual report posted 29 May 2014

Annual general meeting 27 June 2014

Interim results announcement October

shareholders’ diary


ESOR LIMITED(formerly Esorfranki Limited)(IncorporatedintheRepublicofSouthAfrica)(Registration number 1994/000732/06)JSEcode:ESRISIN:ZAE000184669(“Esor” or “the company”)

Notice is hereby given that the annual general meeting of the shareholders of Esor will be held in the boardroom of the companyat30ActiviaRoad,ActiviaPark,GermistononFriday,27June2014at10:00(SAtime),todealwiththebusinessas set out below and to consider and, if deemed appropriate, pass, with or without modification, the ordinary and special resolutions set out in this notice.

Kindly note that in terms of section 63(1) of the Companies Act, No. 71 of 2008, as amended (“Companies Act”), meeting participants (including proxies) will be required to provide reasonably satisfactory identification before being entitled to participate in or vote at the annual general meeting. Forms of identification that will be accepted include original and valid identity documents, driver’s licences and passports.

The board of directors of the company has determined the following dates applicable to the annual general meeting:

2014

Record date for the receipt of notice of the annual general meeting in terms of section 59(1) of the Companies Act Friday, 23 May

Last day to trade in order to be eligible to participate and vote at the annual general meeting Thursday, 12 June

Record date for determining which shareholders are entitled to participate and vote at the annual general meeting Friday, 20 June

Last day to lodge forms of proxy for the annual general meeting by 10:00 on

Wednesday, 25 June, or they may be handed to the

Chairman of the meeting at any time prior to thecommencement of voting on the resolutions tabled at

the annual general meeting

For the purpose of approving the ordinary resolutions, other than ordinary resolution number 5, the support of more than 50% (fifty per cent) of the voting rights exercised on the resolution by shareholders present in person, or represented by proxy, at the annual general meeting is required, unless otherwise indicated.

Shareholdersarereferredtotheexplanatorynotesasattachedtothenoticeoftheannualgeneralmeetingforadditional information, including abbreviated profiles of the directors standing for re-election.

Special resolution number 1General authority to the company to purchase its own shares“RESOLVEDasaspecialresolutionthatthecompany,orasubsidiary,beandherebyisauthorised,bywayofgeneralauthority as contemplated in section 48 of the Companies Act to acquire from time to time any of the issued ordinary shares of the company, upon such terms and conditions and in such amounts as the directors of the company may from time to time determine, but subject to the Memorandum of Incorporation (“MOI”) of the company, the provisions of the CompaniesActandtheListingsRequirementsoftheJSELimited(“JSE”).

ItisrecordedthattheListingsRequirementsoftheJSErequire,inter alia, that the company or a subsidiary may make a general acquisition of shares issued by the company only if:

• therepurchaseoftheordinarysharesiseffectedthroughtheorderbookoperatedbytheJSEtradingsystemanddone without any prior understanding or arrangement between the company and the counterparty;

• at any point in time the company may only appoint one agent to effect any repurchases on its behalf;• this general authority shall only be valid until the next annual general meeting of the company, provided that it shall

not extend beyond 15 (fifteen) months from the date of passing of the general authority to repurchase shares;• the maximum price at which the shares may be acquired will be 10% (ten per cent) above the weighted average

ofthemarketvalueatwhichsuchordinarysharestradedontheJSE,forthe5(five)businessdaysimmediatelypreceding the date on which the transaction is effected;

• any such acquisition shall not, in any one financial year, exceed 10% (ten percent) of the company’s issued ordinary shares or 39 518 543 million (thirty nine million five hundred and eighteen thousand and five hundred and forty three) shares as at the passing of the general authority;

notice of annual general meeting

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• shouldderivativesbeused,suchauthorityislimitedtoparagraphs5.72(c)and(d)and5.84(a)oftheJSEListingsRequirements;

• thecompanyand/oritssubsidiariesmaynotrepurchasesecuritiesduringaprohibitedperiodasdefinedintheJSEListings Requirements, unless it has in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been disclosed in an announcementpublishedonSENSpriortothecommencementoftheprohibitedperiod;

• the directors have passed a resolution authorising the repurchase, resolving that the company has satisfied the solvency and liquidity test as defined in the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the group;

• the company may not enter the market to proceed with the repurchase until Esor’s sponsor, Vunani Corporate Finance, has confirmed the adequacy of Esor’s working capital for the purposes of undertaking a repurchase of shares,inwritingtotheJSE;

• when the company has cumulatively repurchased 3% (three per cent) of the initial number of the relevant class of securities, and for each 3% (three per cent) in aggregate of the initial number of that class acquired thereafter, anannouncementmustbemade.Suchannouncementmustbemadeassoonaspossibleandinanyeventbynot later than 08:30 on the second business day following the day on which the relevant threshold is reached or exceeded; and

• this authority will only be utilised to the extent that the directors, after considering the maximum effect of such repurchase, for a period of at least 12 (twelve) months after the date of notice of the annual general meeting are of the opinion that:■■ the company and the Esor group will be able to repay its debts in the ordinary course of business;■■ theassetsofthecompanyandtheEsorgroupfairlyvaluedaccordingtoInternationalFinancialReportingStandardsandonabasisconsistentwiththelastfinancialyearofthecompanyended28February2013,exceeditsliabilities;

■■ the company and the Esor group have adequate share capital and reserves for ordinary business purposes;■■ thecompanyandtheEsorgrouphavesufficientworkingcapitalforordinarybusinesspurposes.”

Voting:

In order for this special resolution number 1 to be adopted, the support of at least 75% (seventy-five per cent) of the total number of votes, which the shareholders present or represented by proxy at this meeting are entitled to cast, is required.

AdditionaldisclosurerequirementsrequiredintermsoftheJSEListingsRequirementsMaterial changesNo material changes have occurred since the end of the last financial period, being 28 February 2014, and the date of this notice of annual general meeting.

Directors’ responsibility statementThe directors of Esor as set out on pages 30 to 31 of the integrated report:

• have considered all the statements of fact and opinion in the integrated report to which this notice is attached;• accept, individually and collectively, full responsibility for such statements; and• declare that, to the best of their knowledge and belief, such statements are correct and no material facts have been

omitted, the omission of which would make any such statements false or misleading and that they have made all reasonableenquiriestoascertainsuchfactsandthatthisnoticecontainsallinformationrequiredbylawandtheJSEListings Requirements.

Litigation statementEsor nor its subsidiaries is party to any legal or arbitration proceedings (including such proceedings which are pending or (threatened) which may have or have had in the previous 12 (twelve) months a material effect on the group’s financial position.

OtherdisclosureintermsoftheJSEListingsRequirementsTheJSEListingsRequirementsrequirethefollowingdisclosures,whicharecontainedintheintegratedreport:

Requirements ReferenceDirectors Pages 30 to 31Major shareholders Page 111Directors’ interests in securities Page 59Sharecapitalofthecompany Pages58and111 Note 14

notice of annual general meeting (continued)


Special resolution number 2Approval of non-executive directors’ fees“RESOLVED,asaspecialresolution:

• that the company be and is hereby authorised to pay remuneration to its directors for their services as directors, as contemplated in section 66(8) and 66(9) of the Companies Act of 2008; and

• that the remuneration structure and amounts as set out below, be and are hereby approved until such time as rescinded or amended by shareholders by way of a special resolution:

R’000

Type of fee (per annum)

Actual meeting fee2013/14

R

Proposed meeting fee2014/15

R

BoardChairman R43 300 R46 300Board member R21 650 R23 150Audit and Risk CommitteeChairman N/A R35 850Member N/A R18 700Audit CommitteeChairman R28 850 CombinedwithRiskCommitteefrom2014/15–SeeaboveMember R14 450 CombinedwithRiskCommitteefrom2014/15–SeeaboveRisk CommitteeChairman R9 025 CombinedwithAuditCommitteefrom2014/15–SeeaboveMember R6 000 CombinedwithAuditCommitteefrom2014/15–SeeaboveHR and Nomination CommitteeChairman R18 050 R9 700Member R12 000 R6 400Social and Ethics CommitteeChairman R9 025 R9 700Member R6 000 R6 400


Special resolution number 3Authority to provide financial assistance to any company or corporation which is related or inter-related to the company“RESOLVEDasaspecialresolutionthat,asageneralapproval,thecompanymay,intermsofsection45(3)(a)(ii)ofthe Companies Act, provide any direct or indirect financial assistance (“financial assistance” will herein have the meaning attributed to it in section 45(1) of the Companies Act) to any related or inter-related company or to any juristic person who is a member of or related to any such company/ies (“related” and “inter-related” will herein have the meaning attributed to it in section 2 of the Companies Act), subject to compliance with the remainder of section 45 of the Companies Act, as the board of directors of the company may deem fit and on the terms and conditions, to the recipient/s, in the form, nature and extent and for the amounts that the board of directors of the company may determine from time to time.”


Presentation of annual financial statements and reportsThe consolidated audited annual financial statements for the company and the group, including the external Independent Auditor’s Report, the Audit Committee Report and the Directors’ Report for the year ended 28 February 2014, have been distributed as required and will be presented to shareholders at the annual general meeting.

The consolidated audited annual financial statements, together with the abovementioned reports are set out on pages 55 to 110 of the integrated report.

Report from Social, Ethics and Transformation CommitteeInaccordancewithCompaniesRegulation43(5)(c),issuedintermsoftheCompaniesAct,thechairmanoftheSocial,Ethics and Transformation Committee, or in the absence of the chairman any member of the committee, will present the committee’s report to shareholders at the annual general meeting.


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Ordinary resolution number 1Appointment and re-appointment of directorsDrFASonnandMrEGDuberetirebyrotationand,beingeligible,offerthemselvesforre-electionasdirectorofthecompany and in addition, the appointment of Dr O Franks as a director by the board of directors, to be approved and confirmedbyshareholdersasprovidedforintheJSEListingsRequirements.

Accordingly, shareholders are requested to consider and, if deemed fit, approve the separate ordinary resolutions set out below.

Ordinary resolution number 1.1“RESOLVEDthatthere-appointmentofDrFASonnasanindependentnon-executivedirectorofthecompanybeandishereby approved.”

Ordinary resolution number 1.2“RESOLVEDthatthere-appointmentofMrEGDubeasanindependentnon-executivedirectorofthecompanybeandis hereby approved.”

Ordinary resolution number 1.3“RESOLVEDthattheappointmentofDrOFranksasanindependentnon-executivedirectorofthecompanybeandishereby ratified.”

Ordinary resolution number 2Re-appointment of auditors“RESOLVEDthatthere-appointmentofKPMGIncorporated,RegisteredAuditors,upontherecommendationofthecurrent Audit Committee, as independent auditors of the company be and is hereby approved.”

Ordinary resolution number 3Appointment of Audit Committee members for the year ending 28 February 2015It is proposed that the non-executive directors as indicated below be appointed as members of the Audit Committee.

Ordinary resolution number 3.1“RESOLVEDthattheappointmentofDrFASonnasamemberoftheAuditCommitteeuntiltheconclusionofthenextannual general meeting of the company in 2015, subject to his re-election as a director pursuant to ordinary resolution number 1.1, be and is hereby approved.”

Ordinary resolution number 3.2“RESOLVEDthattheappointmentofMrEGDubeasamemberoftheAuditCommitteeuntiltheconclusionofthenextannual general meeting of the company in 2015, subject to his re-election as a director pursuant to ordinary resolution number 1.2, be and is hereby approved.”

Ordinary resolution number 3.3“RESOLVEDthattheappointmentofMrDMThompsonasamemberoftheAuditCommitteeuntiltheconclusionofthenext annual general meeting of the company in 2015, be and is hereby approved.”

Ordinary resolution number 3.4“RESOLVEDthattheappointmentofDrOFranksasamemberoftheAuditCommitteeandchairmanuntiltheconclusionof the next annual general meeting of the company in 2015, subject to his appointment as a director pursuant to ordinary resolution number 1.3, be and is hereby approved.”

Ordinary resolution number 4Authority to issue shares“RESOLVEDthatthedirectorsbeandareherebyauthorisedtoallotandissueattheirdiscretiontheunissuedbutauthorised ordinary shares in the share capital of the company and/or grant options to subscribe for the unissued shares, for such purposes and on such terms and conditions as they may determine, provided that such transaction(s) has/havebeenapprovedbytheJSELimited,asandwhenrequired,andaresubjecttotheJSEListingsRequirementsandtheCompanies Act and shareholders hereby waive any pre-emptive rights in relation thereto.”

Ordinary resolution number 5Authority to issue shares for cash“RESOLVEDthattheboardofdirectorsofthecompanybeandtheyareherebyauthorisedbywayofageneralauthority, to issue all or any of the authorised but unissued shares in the capital of the company for cash, as and when theyintheirdiscretiondeemfit,subjecttotheCompaniesAct,theMOIofthecompany,theJSEListingsRequirements,when applicable, and subject to the following limitations:

• the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue;



• anysuchissuewillonlybemadeto“publicshareholders”asdefinedintheListingsRequirementsoftheJSEandnottorelated parties;

• this authority is valid until the company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date that this authority is given;

• in respect of securities which are the subject of the general issue of shares for cash may not exceed 5% (five per cent) of the number of listed equity securities as at the date of the notice of general/annual general meeting, provided that:■■ in the event of a sub-division or consolidation of issued equity securities during the period contemplated above, the

existing authority must be adjusted accordingly to represent the same allocation ratio;■■ any such general issues are subject to exchange control regulations and approval at that point in time;■■ a paid press announcement giving full details, including the impact on the net asset value, net tangible asset value,

earnings and headline earnings per share, will be published at the time of any issue representing, on a cumulative basiswithin1(one)financialyear,5%(fivepercent)ormoreofthenumberofsharesinissuepriortotheissue;and

■■ in determining the price at which an issue of shares may be made in terms of this authority, the maximum discount permittedwillbe10%(tenpercent)of theweightedaverage tradedpriceon theJSEof thosesharesover the30 (thirty) business days prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities.”

In order for this ordinary resolution number 5 to be passed, the support of at least 75% (seventy-five per cent) of the votingrightsexercisedontheresolutionbyallequitysecuritiesholders(asdefinedintheJSEListingsRequirements)present in person, or represented by proxy, at the annual general meeting is required.

Ordinary resolution number 6Advisory endorsement of the remuneration policy“RESOLVEDtoapprove,asanon-bindingadvisoryvote,thecompany’sremunerationpolicy(excludingtheremuneration of the non-executive directors for their services as directors and members of board committees), as set out in the Remuneration Report contained in the integrated report on pages 40 to 41.”

Ordinary resolution number 7Authority to implement the special and ordinary resolutions“RESOLVEDthat,anydirectorofthecompanyorthecompanysecretarybeandisherebyauthorisedtodoallsuchthings, sign all such documents and take all such actions as may be necessary for or incidental to the implementation of the special and ordinary resolutions as set out in this notice of the annual general meeting.”

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

Voting and proxiesThe shareholders of the company will be entitled to attend the annual general meeting and to vote on the ordinary and special resolutions set out above. On a show of hands, every Esor shareholder who is present in person, by proxy or represented at the annual general meeting shall have one vote (irrespective of the number of shares held in the company), and on a poll, which any shareholder can request, every Esor shareholder shall have for each share held by him/her that proportion of the total votes in the company which the aggregate amount of the nominal value of that share held by him bears to the aggregate of the nominal value of all the shares issued by the company.

ProxiesAn Esor shareholder entitled to attend and vote at the annual general meeting may appoint one or more persons as his/her proxy to attend, speak and vote in his/her stead. A proxy need not be a shareholder of the company.

A form of proxy is attached for the convenience of certificated shareholders and “own name” dematerialised shareholders of the company who are unable to attend the annual general meeting, but who wish to be represented thereat.Inordertobevalid,dulycompletedformsofproxymustbereceivedbythecompany’sTransferSecretaries,ComputershareInvestorServicesProprietaryLimited,GroundFloor,70MarshallStreet,Johannesburg,2001(POBox61051,Marshalltown, 2107), no later than 10:00 on Wednesday, 25 June 2014.

Shareholders’rightsregardingproxiesintermsofsection58oftheCompaniesActareasfollows:(1) At any time, a shareholder of a company may appoint any individual, including an individual who is not a

shareholder of that company, as a proxy to: (a) participate in, and speak and vote at, a shareholders’ meeting on behalf of the shareholder; or (b) give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.

(2) A proxy appointment: (a) must be in writing, dated and signed by the shareholder; and (b) remains valid for: (i) one year after the date on which it was signed; or (ii) any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner

contemplated in sub-section (4)(c), or expires earlier as contemplated in sub-section (8)(d).


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(3) Except to the extent that the MOI of a company provides otherwise: (a) a shareholder of that company may appoint two or more persons concurrently as proxies, and may appoint

more than one proxy to exercise voting rights attached to different securities held by the shareholder; (b) a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to

any restriction set out in the instrument appointing the proxy; and (c) a copy of the instrument appointing a proxy must be delivered to the company, or to any other person on

behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders meeting.

(4) Irrespective of the form of instrument used to appoint a proxy: (a) the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in

person in the exercise of any rights as a shareholder; (b) the appointment is revocable unless the proxy appointment expressly states otherwise; and (c) if the appointment is revocable, a shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to the company.

(5) The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of:

(a) the date stated in the revocation instrument, if any; or (b) the date on which the revocation instrument was delivered as required in sub-section (4)(c)(ii).

(6) A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the instrument appointing the proxy otherwise provides.

Any shareholder of the company who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the annual general meeting should he/she decide to do so.

Dematerialised shareholders of the company, other than “own name” dematerialised shareholders of the company, whohavenotbeencontactedbytheirCSDPorbrokerwithregardtohowtheywishtocasttheirvotes,shouldcontacttheirCSDPorbrokerandinstructtheirCSDPorbrokerastohowtheywishtocasttheirvotesatthecompany’sannualgeneralmeetinginorderfortheirCSDPorbrokertovoteinaccordancewithsuchinstructions.ThismustbedoneintermsoftheagreemententeredintobetweensuchdematerialisedshareholdersofthecompanyandtherelevantCSDPorbroker.IfyourCSDPorbrokerdoesnotobtaininstructionsfromyou,theywillbeobligedtoactintermsofyourmandatefurnished to them.

Electronic participationShouldanyshareholderwishtoparticipateintheannualgeneralmeetingbywayofelectronicparticipation,thatshareholder should make application in writing (including details as to how the shareholder or its representative can be contacted) to so participate to the transfer secretaries at the address below, to be received by the transfer secretaries at least five business days prior to the annual general meeting in order for the transfer secretaries to arrange for the shareholder (and its representative) to provide reasonably satisfactory identification to the transfer secretaries for the purposes of section 63(1) of the Companies Act and for the transfer secretaries to provide the shareholder (or its representative) with details as to how to access any electronic participation to be provided. The company reserves the right to elect not to provide for electronic participation at the annual general meeting in the event that it determines that it is not practical to do so. The costs of accessing any means of electronic participation provided by the company willbebornebytheshareholdersoaccessingtheelectronicparticipation.Shareholdersareadvisedthatparticipationintheannualgeneralmeetingbywayofelectronicparticipationwillnotentitleashareholdertovote.Shouldashareholder wish to vote at the annual general meeting, he/she may do so by attending and voting at the annual general meeting either in person or by proxy.

By order of the board

iThemba Governance and Statutory Solutions (Pty) LtdCompany Secretary

Johannesburg22 May 2014



Annual general meeting – explanatory notesSpecial resolution number 1 – General authority to repurchase sharesSection48oftheCompaniesActauthorisestheboardofdirectorsofacompanytoapprovetheacquisitionofitsownsharessubjecttotheprovisionsofsection48andsection46havingbeenmet.TheJSEListingsRequirementsrequirethe shareholders of the company to approve the authority to repurchase shares and the approval of a 75% majority of the votes cast by shareholders present or represented by proxy at the annual general meeting for special resolution number 1 to become effective. The directors of the company do not have any specific intentions for utilising this general authority at the date of this annual general meeting.

Special resolution number 2 – Directors’ remunerationIn terms of section 66(8) and section 66(9) of the Companies Act, a company may pay remuneration to directors for their services as directors unless otherwise provided by the Memorandum of Incorporation and on approval of shareholders by way of a special resolution. Executive directors are not specifically remunerated for their services as directors but as employees of the company and as such, the resolution as included in the notice requests approval of the remuneration paid to non-executive directors for their services as directors of the company.

Special resolution number 3 – Financial assistance to related and inter-related companiesSection45(2)oftheCompaniesActauthorisestheboardtoprovidedirectorindirectfinancialassistancetoarelatedor inter-related company, subject to sub-sections (3) and (4) of section 45 of the Companies Act and unless otherwise provided in the company’s Memorandum of Incorporation. In terms of section 45(3) of the Companies Act, a special resolution of shareholders is required in these instances. The main purpose of the special resolution as set out in the notice of the meeting is to approve the granting of inter-company loans, a recognised and well known practice, details of which are also set out in the notes to the annual financial statements.

This general authority is necessary for the company to continue making loans to subsidiaries as well as granting letters of support and guarantees in appropriate circumstances. A general authorisation from shareholders avoids the need to refer each instance to shareholders for approval with the resulting time delays and expense. If approved, this general authority will expire at the end of two years.

NotificationsShareholdersareherebynotifiedintermsofsection45(5)oftheCompaniesActthattheboardhaspassedthesameresolution to take effect on the passing of this special resolution by shareholders.

Shareholdersarealsoadvisedthattheboardissatisfiedthatafterprovidingthefinancialassistance,thecompanywillsatisfy the solvency and liquidity tests and that the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

Presentation of annual financial statementsAt the annual general meeting, the directors must present the annual financial statements for the year ended 28 February 2014 to shareholders, together with the reports of the directors, the audit committee and the auditors. These are contained within the integrated report.

Presentation of report from Social, Ethics and Transformation CommitteeRegulation43totheCompaniesActof2008requiresthattheSocialandEthicsCommitteereportstoshareholdersattheannual general meeting on matters within the committee’s mandate.

Ordinary resolution numbers 1.1 to 1.3 – Appointment and rotation of directorsIn accordance with the company’s Memorandum of Incorporation, one third of the directors are required to retire at each annual general meeting and may offer themselves for re-election. In addition, any person appointed to the board of directors following the previous annual general meeting is required to retire and is eligible for election at the next annual general meeting.

Brief biographical details of each of the directors standing for re-election are set out below:

Dr Franklin SonnBorn: 1939BA(Hons),STDFIAC

DemocraticSouthAfrica’sfirstambassadortotheUnitedStates(1995to1998),Franklinistherecipientof13honorarydoctorates from national and international universities and has held many distinguished positions in education andbusinessinSouthAfrica.Hecurrentlyservesasanon-executivedirectorontheboardsofanumberofbluechipcompaniesincludingMacsteelServiceCentresSA(Pty)Limited,SteinhoffInternationalHoldingsLimited,RGAReinsuranceCompanyofSouthAfrica,Imalivest(Pty)LimitedandXinergistixManagementServices(Pty)Limited.HeisformerChancelloroftheUniversityoftheFreeStateandformerPresidentoftheAfrikaanseHandelsinstituut.He has served on the board of Esor Limited since 2007.


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Ethan DubeBorn: 1959MSc(Statistics)ExecutiveMBA(Sweden)

Ethan has gained significant corporate finance and asset management experience over the years. He worked for SouthernLifeAssetManagersforthreeyearsasaSeniorAnalystandforStandardCharteredandMerchantBankfortwoyears in the Corporate Finance department. In 1996 Ethan founded Infinity Asset Management with three other partners and in 1998 he founded Vunani Limited, a financial services company, where he is the current CEO. He is Chairman of SouthOceanHoldingsandanon-executivedirectorofHypropInvestmentsLimited.

Dr Oswald FranksBorn: 1953PhD(EngineeringScience),BScEng(Mechanical),Pr.Eng,M.IndustrialAdmin,HonoursBusiness&Admin,GovernmentCertificate of Competency: Mines and Works

OssieisaregisteredProfessionalEngineerwithEngineeringCouncilofSouthAfrica(ECSA)withmorethanthreedecadesof experience in industry and academia. He was appointed Dean of the Faculty of Engineering, the Built Environment and Information Technology at the Nelson Mandela Metropolitan University in July 2013. Prior to that he was CEO of ECSAandDeanofEngineeringattheCapePeninsulaUniversityofTechnology.OssieisarecipientofbothaUSAID(administered by the Africa America Institute) and a British Council (ODA) scholarship. He has an extensive track recordofserviceonvariousboardsorcouncilsincludingtheDepartmentofScienceandTechnology’sBoardoftheTechnologicalHumanResourceIndustryProgramme,theMasakh’iSizweCentreofExcellence,NationalAdvisoryCouncilon Innovation’s Task Team on Infrastructure for Research and Development, and the Council of the Vaal University of Technology.

Ordinary resolution number 2 – Re-appointment of auditorsKPMG Incorporated (“KPMG”) has indicated its willingness to continue in office and ordinary resolution number 2 proposesthere-appointmentofthatfirmasthecompany’sauditorswitheffectfrom1March2014.Section90(3)ofthe Companies Act requires the designated auditor to meet the criteria as set out in section 90(2) of the Companies Act. The board of directors of the company is satisfied that both KPMG and the designated auditor meet all relevant requirements and, on recommendation of the audit committee, it is proposed that KPMG be re-appointed.

Ordinary resolution numbers 3.1 to 3.4 – Appointment of Audit CommitteeIn terms of section 94(2) of the Companies Act, a public company must at each annual general meeting elect an audit committee comprising at least three members who are non-executive directors and who meet the criteria of section 94(4) of the Companies Act. Regulation 42 to the Companies Act specifies that one third of the members of the audit committee must have appropriate academic qualifications or experience in the areas as listed in the regulation.

The board of directors of the company is satisfied that the proposed members of the Audit Committee meet all relevant statutoryrequirements.TheappointmentofDrSonnandMrDubeasmembersoftheAuditCommitteewillbesubjecttotheir re-election as directors of the company and the appointment of Dr Franks as a member of the Audit Committee will be subject to his appointment as director. As indicated in the Corporate Governance Report forming part of the integrated report, the chairman of the board is also proposed for appointment as a member of the Audit Committee. This is not in full compliance with the recommendations of the King III Report and an explanation for the non-application of this recommendation has been provided in the integrated report.



Brief biographical details of Mr D Thompson are as follows:

Dave ThompsonBorn: 1936ChairmanCA(SA)

DavequalifiedasCharteredAccountantinSAandisalsoamemberoftheAssociationofAccountantsandAuditorsintheUnitedKingdom.HehasfurtherstudiedfortheAdvancedManagementProgrammeatHarvardintheUSA.Davehasvast experience, having served on a multitude of boards.

Ordinary resolution numbers 4 and 5 – Placement and issue of shares for cashIn terms of the Companies Act, directors are authorised to allot and issue the unissued shares of the company, unless otherwiseprovidedinthecompany’sMOIorininstancesaslistedinsection41oftheAct.TheJSErequiresthattheMOI should provide that shareholders in a general meeting may authorise the directors to issue unissued securities and/or grant options to subscribe for unissued securities as the directors in their discretion think fit, provided that such transaction(s)has/havebeenapprovedbytheJSEandaresubjecttotheJSEListingsRequirements.Intheabsenceofthe MOI as contemplated in the Companies Act, ordinary resolution number 4 has been included to confirm directors’ authority to issue shares. Directors confirm that there is no specific intention to issue any shares, other than as part of and in terms of the rules of the company’s share incentive scheme, as at the date of this notice.

Also,intermsoftheJSEListingsRequirements,theauthoritytoissuesharesforcashassetoutinordinaryresolutionnumber 5 requires the approval of a 75% majority of the votes cast by shareholders present or represented by proxy at the annual general meeting for ordinary resolution number 5 to become effective.

Ordinary resolution number 6 – Remuneration philosophy and policyTheKingReportonCorporateGovernanceforSouthAfrica,2009(KingIII)recommendsthattheremunerationphilosophy of the company be submitted to shareholders for consideration and for an advisory, non-binding vote to provide shareholders with an opportunity to indicate should they not be in support of the material provisions of the remuneration philosophy and policy of the company.

Ordinary resolution number 7 – Signing authorityAuthority is required to do all such things and sign all documents and take all such action as necessary to implement the ordinary and special resolutions set out in the notice and approved at the annual general meeting. It is proposed that the company secretary and/or any director be authorised accordingly.

Summary of the rights established in terms of section 58 of the Companies Act as required by section 58(7)(b)For purposes of this summary, “shareholder” shall have the meaning ascribed thereto in the Act.1. At any time, a shareholder of a company is entitled to appoint any individual, including an individual who is not a

shareholder of that company, as a proxy, to participate in, speak and vote at a shareholders’ meeting on behalf of the shareholder or give or withhold written consent on behalf of such shareholder in relation to a decision contemplated in section 60 of the Companies Act.

2. A proxy appointment must be in writing, dated and signed by the relevant shareholder, and such proxy appointment remains valid for one year after the date upon which the proxy was signed or any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Companies Act or expires earlier as contemplated in section 58(8)(d) of the Companies Act.

3. Except to the extent that the MOI of a company provides otherwise: 3.1 a shareholder of the relevant company may appoint two or more persons concurrently as proxies, and may

appoint more than one proxy to exercise voting rights attached to different securities held by such shareholder; 3.2 a proxy may delegate his authority to act on behalf of a shareholder to another person, subject to any

restriction set out in the instrument appointing the proxy; and 3.3 a copy of the instrument appointing a proxy must be delivered to the company or to any other person on

behalf of the relevant company before the proxy exercises any rights of the shareholder at a shareholders’ meeting.

4. Irrespective of the form of instrument used to appoint a proxy, the appointment of the proxy is suspended at any time and to the extent that the shareholder who appointed that proxy chooses to act directly and in person in the exercise of any rights as a shareholder of the relevant company.

5. Unless the proxy appointment expressly states otherwise, the appointment of a proxy is revocable. If the appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and the company.


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6. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant shareholder as of the later of the date: (a) stated in the revocation instrument, if any; or (b) upon which the revocation instrument is delivered to the proxy and the relevant company as required in section 58(4)(c)(ii) of the Act.

7. If the instrument appointing a proxy or proxies has been delivered to the relevant company, as long as that appointment remains in effect, any notice that is required by the Companies Act or the relevant company’s MOI to be delivered by such company to the shareholder, must be delivered by such company to the shareholder or to the proxy or proxies, if the shareholder has directed the relevant company to do so in writing and paid any reasonable fee charged by the company for doing so.

8. A proxy is entitled to exercise or abstain from exercising any voting right of the relevant shareholder without direction, except to the extent that the MOI or the instrument appointing the proxy provides otherwise.

9. If a company issues an invitation to shareholders to appoint one or more persons named by such company as a proxy or supplies a form of instrument for appointing a proxy:

9.1 such invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;

9.2 the invitation or form of instrument supplied by the relevant company must: (a) bear a reasonably prominent summary of the rights established in section 58 of the Companies Act; (b) contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by such shareholder; and (c) provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour or against the applicable resolution/s to be put at the relevant meeting, or is to abstain from voting;

9.3 the company must not require that the proxy appointment be made irrevocable; and 9.4 the proxy appointment remains valid only until the end of the relevant meeting at which it was intended to be

used, unless revoked as contemplated in section 58(5) of the Companies Act.



Esor Limited(formerly Esorfranki Limited)IncorporatedintheRepublicofSouthAfricaRegistration number 1994/000732/06JSEcode:ESRISIN:ZAE000184669(“Esor” or “the company”)

Form of proxy for the annual general meeting of the company to be held on Friday, 27 June 2014 at the company’s office at 30 Activia Road, Activia Park, Germiston (“the annual general meeting”). Only for use by certificated shareholders,nomineecompaniesofCentralSecuritiesDepositoryParticipants(“CSDP”),brokers’nomineecompaniesand shareholders who have dematerialised their shares and who have elected own name registration and who wish to vote on the special and ordinary resolutions per the notice of the annual general meeting to which this form is attached.

ShareholderswhohavedematerialisedtheirsharesthroughaCSDPorbrokermustnotcompletethisformofproxyandmustprovidetheirCSDPorbrokerwiththeirvotinginstructions,exceptforshareholderswhoelectedownnameregistrationinthesub-registerthroughaCSDP,whichshareholdersmustcompletethisformofproxyandlodgeitwithComputershareInvestorServicesProprietaryLimited.

Holders of dematerialised shares, other than with own name registration, who wish to attend the annual general meeting,mustinformtheirCSDPorbrokerofsuchintentionandrequesttheirCSDPorbrokertoissuethemwiththenecessary letter of representation.

I/We (name in block letters)

of (address)

Telephone: Landline: Mobile:

being the holders of ordinary shares in the company, do hereby appoint:

1. or failing him/her

2. or failing him/her

3. the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the annual general meeting of the company, or any adjournment hereof, which will be held for the purpose of considering and, if deemed fit, of passing, with or without modification, the ordinary and special resolutions as detailed in the notice of annual general meeting, and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions:

Number of votes on a poll (one vote per ordinary share) In favour of Against AbstainSpecial resolution number 1Authority for the company to repurchase its own sharesSpecial resolution number 2Authorisation for the company to pay non-executive directors’ remunerationSpecial resolution number 3Authority to provide financial assistance to related and inter-related companiesOrdinary resolution number 1.1Re-electionofDrFASonnasanindependentnon-executivedirectorOrdinary resolution number 1.2Re-election of Mr EG Dube as an independent non-executive directorOrdinary resolution number 1.3Ratification of Dr O Franks’ appointment as an independent non-executive directorOrdinary resolution number 2Re-appointment of KPMG Inc as external auditorOrdinary resolution number 3.1Re-electionofDrFASonnasamemberoftheAuditCommitteeOrdinary resolution number 3.2Re-election of Mr EG Dube as a member of the Audit CommitteeOrdinary resolution number 3.3Re-election of Mr DM Thompson as a member of the Audit CommitteeOrdinary resolution number 3.4Appointment of Dr O Franks as a member and Chairman of the Audit CommitteeOrdinary resolution number 4Authority to issue unissued sharesOrdinary resolution number 5Authority to issue unissued shares for cashOrdinary resolution number 6SanctioningoftheremunerationphilosophyOrdinary resolution number 7Authority to effect the resolutions

Signature signedat on 2014.

Assisted by (if applicable)Please see notes on reverse.

form of proxy

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notes to the form of proxy

1. Each shareholder is entitled to appoint one or more proxies (none of whom need be a shareholder of the company) to attend, speak and vote in place of that shareholder at the annual general meeting.

2. Shareholder(s)thatarecertificatedorownnamedematerialisedshareholdersmayinsertthenameofaproxyorthe names of two alternative proxies of the member’s choice in the space(s) provided, with or without deleting “the Chairman of the meeting”, but any such deletion must be initialled by the shareholder(s). The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. If no proxy is named on a lodged form of proxy, the Chairman shall be deemed to be appointed as the proxy.

3. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy, in the case of any proxy other than the Chairman, to vote or abstain from voting as deemed fit and in the case of the Chairman to vote in favour of the resolution.

4. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholders, but the total of the votes cast or abstained from may not exceed the total of the votes exercisable in respect of the shares held by the shareholder.

5. FormsofproxymustbelodgedatorpostedtoComputershareInvestorServicesProprietaryLimited,GroundFloor,70MarshallStreet,Johannesburg,2001(POBox61051,Marshalltown,2107)tobereceivednolaterthan48 hours prior to the meeting or they may be handed to the Chairman of the meeting at any time prior to the commencement of voting on the resolutions tabled at the annual general meeting.

6. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Where there are joint holders of shares, the vote of the first joint holder who tenders a vote, as determined by the order in which the names stand in the register of members, will be accepted.

7. The Chairman of the annual general meeting may reject or accept any form of proxy which is completed and/or received otherwise than in accordance with these notes, provided that, in respect of acceptances, the chairman is satisfied as to the manner in which the shareholder concerned wishes to vote.

8. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the company or Computershare Investor ServicesProprietaryLimitedorwaivedbytheChairmanoftheannualgeneralmeeting.


annexure: King iii application

Chapter 2: Boards and directors Responsibility

2.1 The board should act as the focal point for and custodian of corporate governance

The board is the focal point and custodian of corporate governance at Esor. In accordance with the board charter the board is committed to the highest standards ofcorporategovernance.(Seeboardcharteronourwebsite.) WWW.ESOR.CO.zA

The board

2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable

The board, in accordance with the board charter, and all committee terms of reference reviewed in line with King III, is responsible for aligning the strategic objectives, vision and mission with performance and sustainability considerations.

The group’s formalised risk management process takes into account the full range of risks including strategic and operational risk, as well as performance and sustainability.

TheEXCOandtheboard evaluate the risk report quarterly

2.3 The board should provide effective leadership based on an ethical foundation

The board provides effective leadership and is committed to the highest levels of corporate governance as a key driver of sustainability.

Monitored by the SocialandEthicsCommittee

2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen

See2.3above. Monitored by the SocialandEthicsCommittee

2.5 The board should ensure that the company’s ethics are managed effectively

TheSocialandEthicsCommitteeistaskedwithensuringthat the company’s ethics are managed effectively. In addition to ensuring adherence to the Code of Ethics,theSocialandEthicsCommitteealignsitselfwith the goals of the United Nations Global Compact Principles, the OECD Guidelines on Corruption and the Employment Equities Act.

TheSocialandEthicsCommittee meets bi-annually to assess compliance and progress with goals

2.6 The board should ensure that the company has an effective and independent Audit Committee

The Audit Committee is chaired by an independent non-executive director. It further consists of two independent non-executive directors. The board is satisfied with their levels of independence in accordance with directors’ mandatory quarterly disclosures. The board is satisfied that the Audit Committee is effective. The Audit Committee met three times during the financial year as well as one special meeting to approve the working capital plan relating to the disposal of the Geotechnical business. The fourth scheduled meeting was in March 2014. The date has been moved from February to March to tie in with the board meetings. In future, the Audit Committee will meet four times a year.

Annual self-evaluation performed by Audit Committee in May

2.7 The board should be responsible for the governance of risk

The board’s Risk Committee has conducted an evaluation of the governance or risk and is satisfied with the effective management process. The board is in the process of continuous enhancement and a roll-out to operational levels.

Quarterly review of risk report and register

A comprehensive risk management plan was developed

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2.8 The board should be responsible for information technology (IT) governance

The board ensures that IT governance is an integral part of corporate governance and that it is assessed in line with the IT Governance Charter and framework.

IT has been added to the Risk Committee responsibilities and is assessed bi-annually

2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards

The board ensures that the company complies with applicable laws and considers adherence to non-bindingrules,codesandstandardswithinSouthAfrica.The applicable laws were prioritised and actions will be rolled out in FY2015.

The Risk Committee oversees compliance within SouthAfrica

2.10 The board should ensure that there is an effective risk-based internal audit

The board ensures that the internal audit function continues to report directly and effectively to the Audit Committee. The internal Audit Charter defines the scope of the internal audit function as assisting the board in assessing the group’s risk management and governance processes.

Co-sourced internal audit function reports quarterly to the Audit Committee

2.11 The board should appreciate that stakeholders’ perceptions affect the company’s reputation

The board of Esor recognises the importance of developing and nurturing positive and stable relationships with key stakeholders as a key driver of business success. The value we place on our stakeholders is articulated in our mission statement.

Board manages direct relationships with key stakeholders throughtheEXCOStakeholdersatisfaction surveys are conducted but irregularly

2.12 The board should ensure the integrity of the company’s integrated report

The board continues to ensure that the integrated report endeavours to provide a true view of the group’s commitment to ensuring that financial, social and environmental sustainability permeates the entire business.

Audit Committee and external assurance

2.13 The board should report on the effectiveness of the company’s system of internal controls

The board continuously ensures the soundness of the company’s system of internal controls through independent review by internal and external audit.

Audit Committee evaluates progress

2.14 The board and its directors should act in the best interests of the company

The board acknowledges its role as a trustee on behalf of the shareholders. In addition to the Code of Ethics, the members of the board are governed by a formal policy in respect of dealing in Esor shares as well as disclosure related to third party transactions.

Policy on insider trading is in place where senior managers are forbidden to trade in Esor shares in closed periods

2.15 The board should consider business rescue proceeding or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act

The board monitors the company’s solvency and liquidity. Business rescue has not been required.

The group’s ability to continue as a going concern is assessed annually by the Audit Committee

annexure: King iii application (continued)



2.16 The board should elect a chairman of the board who is an independent non-executive director. The CEO of the company should not also fulfil the role of chairman of the board

The Chairman, Dave Thompson, is an independent non-executive Chairman and the roles of CEO and Chairman are clearly defined.

The two roles operate under distinct mandates as approved by the board

2.17 The board should appoint the chief executive officer and establish a framework for the delegation of authority

The board has appointed Bernie Krone as CEO and a delegation of authority framework is reviewed regularly.

Delegation of authority is approved by the board and reviewed at least annually

2.18 The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent

The board comprises a majority independent non-executive directors, four independent non-executive directors and two executive directors. The composition of the board ensures the balance of power with no single member having the majority influence.

Monitored by the Human Resources and Nominations Committee

2.19 Directors should be appointed through a formal process

A formal and transparent appointment process is in place. One-third of directors retire on a rotational basis.

The Human Resources and Nominations Committee oversees the process and recommends new directors

2.20 The induction of and ongoing training and development of directors should be conducted through formal processes

New appointees to the board are appropriately familiarised with the company through an induction programme and ongoing training is provided and offered to the directors through membership of the Institute of Directors. Formal introduction and induction programmes are in place.

New directors are issued with the annual report

Members complete external CPD’s

The group risk officer and CFO are responsible for ensuring directors receive development and training

2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary

IthembaGovernanceandStatutorySolutions(Pty)Limited is an independent company secretarial practiceprovidingservicestonumerousJSE-listedcompanies and was appointed in compliance with the CompaniesAct,2008,theJSEListingsRequirementsandthe recommendations of King III. During the financial year, the board commenced with an annual evaluation of the competence, qualifications and experience of the group company secretary and report on these in the annual report.

Suitabilityofcompany secretary is assessed annually by the board


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2.22 The evaluation of the board, its committees and the individual directors should be performed every year

The Chairman of the company performs an internal board assessment annually.

Board and committees are assisted by the company secretary to complete self- assessments on an annual basis in May

The previous assessment was positive with no areas of concern identified

2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities

The board delegates certain functions without abdicating its own responsibilities to the following committees:

• Audit Committee• Risk Committee• Human Resources and Nominations Committee• SocialandEthicsCommittee• EXCO

Members are elected by the board and the committees act in accordance with the approved terms of reference of each committee

2.24 A governance framework should be agreed between the group and its subsidiary boards

A governance framework between the group and its subsidiary boards is agreed and is in effect.

The framework was approved and agreed by the board during the March 2013 board meeting

2.25 Companies should remunerate directors and executives fairly and responsibly

The remuneration philosophy reflects Esor’s commitment to best practice. The group’s Human Resources and Nominations Committee determines the remuneration policy on executive and senior remuneration in line with the group’s remuneration philosophy and strategy. The total remuneration packages of the executive directors and senior management are subject to annual review and benchmarked against external market data, taking into account the size of the company, its market sector and business complexity. A detailed remuneration report is contained in the integrated report on page 40.

Remuneration philosophy in line with previous years and is recommended by the Human Resources and Nominations Committee to the board for approval

2.26 Companies should disclose the remuneration of each individual director and certain senior executives

The remuneration of directors and prescribed officers is disclosed in the integrated report on pages 41 and 97.

Annual disclosure

2.27 Shareholdersshouldapprove the company’s remuneration policy

Shareholdersconsiderandendorse,bywayofanon-binding advisory vote, the company’s remuneration policy at the annual general meeting.

Policy tabled at annual general meeting

The full King III application is available on the website WWW.ESOR.CO.zA


corporate information

Esor Limited(formerly Esorfranki Limited)Registration number 1994/000732/06JSEcode:ESRISIN:ZAE000184669

Registered office30 Activia RoadActivia ParkGermiston1429

PO Box 6478, Dunswart, 1508Telephone: 011 776 8700Facsimile: 011 822 1158

Company secretaryiThembaGovernanceandStatutorySolutions(Pty)LimitedMonument Office ParkSuite5–10279SteenbokAvenueMonument Park

PO Box 25160, Monument Park, 0105Telephone: 086 111 1010Facsimile: 086 604 1315

Transfer secretariesComputershareInvestorServices(Pty)Limited(Registration number 2004/003647/07)Ground Floor70MarshallStreetJohannesburg2001

PO Box 61051, Marshalltown, 2107Telephone: 011 370 5000Facsimile: 011 688 5210

AuditorsFHC von EckardsteinKPMG Inc.KPMG Crescent85 Empire RoadParktown2193

PrivateBagX9,Parkview,2122Telephone: 011 647 7111Facsimile: 011 647 8000

SponsorVunani Corporate FinanceVunani HouseVunani Office Park151KatherineStreetSandton2196

PO Box 652419, Benmore, 2010Telephone: 011 263 9500Facsimile: 011 784 1989

AttorneysThompson Wilks Inc.23 Impala RoadChislehurstonSandton2196

PO Box 3242, Parklands, 2121Telephone: 011 784 8984Facsimile: 011 883 8660

Commercial bankerABSACapitalPodium floorNorton Rose Building15 Alice LaneSandton2196

PO Box 7735, Johannesburg, 2000Telephone: 011 226 8184

Enquires relating to the annual report and investor relationsEnvisageInvestor&CorporateRelations4thFloor,SouthWing,HydeParkCornerJanSmutsAvenueHyde Park

[email protected]

Telephone: 011 325 5944Facsimile: 011 325 5942

www.esor.co.za

Documents

· Our VIsIOn aNd valuES CORE VALUES How we live our values unITY • Cohesive group Wastevalues in place • Employee culture effectively revitalised • Improved employment equity