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DELIVERY ON GROUP STRATEGY
This section indicates how our strategy outlined on page 2 performed against market dynamics and what our expectations are going forward.
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CONSTRUCTION
Strategy:
Secure and execute large and/or multi-disciplinary contracts where the group has built capacity and can differentiate itself.F2011 F2012 Market dynamics Group’s market expectations 
Gross capital fixed investment delays in all private sector markets Severe slowdown in public infrastructure spend Reduced average size of contracts at lower margins post completion of 2010-related infrastructure spend Short term building and civil contracts will be smaller and tendered Medium/long term expected to favour packaged contracts Trends in contract size and complexity indicate that clients tend to align with contractors who will relieve them of non-core activities
How strategy performed against market dynamics Additional actions Strategic focus 
Strategy buffered some of the worst of the market challenges Emphasis on securing large, longer term, multi-disciplinary contracts provided some resilience to rapid decline in contract awards Focus on concessions offering provided early entry opportunity in future infrastructure contracts such as roads, PPPs and power Despite short term hiatus in large contracts, the group has a longer term view on contract flow The infrastructure backlog (in all our geographies) will require us to continue building large and multi-disciplinary contract capacity Competence is being established in multiple business units for participation in turnkey and large contracts through cross-group packaging and the growth of engineer, procure and construct (EPC) ability in Engineering and Construction (E+C)
– Strategy supports concessions business where bankable EPC package is a pre-requisite to contract closure – It will reduce reliance on single discipline tender market through contracts where more than one group business unit is involved
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MANUFACTURING AND CONSTRUCTION MATERIALS
Strategy:
Optimise the contribution of our Manufacturing and Construction Materials portfolio to the group.F2011 F2012 Market dynamics Group’s market expectations Volumes and prices declined in manufacturing markets across the board Construction Materials experienced the worst volumes and prices in decades in line with the construction downturn Manufacturing Retail market has stabilised, but expected to remain weak for at least another 12 months Steel demand starting to improve slowly Infrastructure spend delays continue; timing of low-cost housing still uncertain
Construction MaterialsMarket volume decline slowed, but outlook set to remain tough. Some pricing improvement seen, which will support 12- to 18-month profitability improvement
How strategy performed against market dynamics Additional actions Strategic focus Manufacturing
Product development into new growth niches: new export markets and product range extension Margin decline; plant process improvements insufficient to prevent margin erosion Competitive advantage: developed supply chain and distribution excellence New international technology partnerships in Asia, Australia and South America improved product and process performance Manufacturing
Refined fibre cement strategy to meet tough markets; expanded exports and grew modular housing system offering Investment in repositioning construction steel product range Steel fabrication work secured externally Manufacturing
Product development to support growth pockets Export expansion in Fibre Cement Greater market penetration with new products, particularly modular housing Improvement in plant process design Restructure and reposition Steel business Further technology injection Construction Materials
Severity of market decline superseded strategyConstruction Materials
Worst price and volume declines in decades led to impairment of carrying value of long term assets Reviewed carrying value of non-current assets in line with outlook Significant corrective action Construction Materials
Bed down new, refocused structure Rebuild team Develop further mining crushing services opportunities within South Africa and over-border
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INVESTMENTS AND CONCESSIONS
Strategy:
Build an infrastructure, concessions and property portfolio.F2011 F2012 Market dynamics Group’s market expectations Infrastructure Concessions
South Africa:
– Slowdown in broader public private partnership (PPP) concessions roll out post 2010 FIFA World Cup – Achieved preferred bidder status on two PPPs, but further delays in process – Second phase of CTROM* transport concessions tenders – Power concessions (independent power projects) proposed but framework uncertain Rest of Africa:
– Investigating PPPs Central and Eastern Europe:
– Weak due to economic pressures and political changes Concessions South Africa:
– Requests for proposals expected to be evaluated, with some awards – Traction expected in SA PPP, IPP renewables market and hospital PPPs Rest of Africa:
– Growing appetite for PPPs (roads, water, electricity, public buildings and other services); development over one to three years Central and Eastern Europe:
– No improvement in market conditions for full concessions until 2013 – Some electronic tolling contracts (ETCs) expected – More countries to adopt PPPs over next three years Construction Materials Investment in real estate developments not viable until tenant market demand recovers Property assets Conversion of land assets into developments still challenging Slow and protracted recovery
How strategy performed against market dynamics Additional actions Strategic focus Infrastructure Concessions Concessions portfolio provided some defence against construction downturn Concessions
Strategy unchanged:Investing time and resources for additional concessions markets Fair value profit of R33,1 million generated in current year Concessions Strategy directed towards:
– Broadening asset classes (PPPs, power, serviced accommodation, power and regional transport) – Expanding geographic spread to reduce concentration in Eastern Europe Property assets Continued positioning for better quality, core future property development investments Property assets
Developed affordable housing project with Group Five Motlekar Secured investment manager role for offshore listed property fund Fair value profit of R15,3 million generated in current year Property assets
Continue property portfolio transition strategy to preserve current asset values – with a diversified portfolio of fee-generating work plus longer term equity positioning * Comprehensive toll road operations and maintenance.
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EXPANSIONARY GEOGRAPHIC STRATEGY
Strategy:
Expand our geographic footprint to 40% of revenue outside South Africa.F2011 F2012 Market dynamics Group’s market expectations Global financial crisis reduced Group Five’s ability for over-border geographic expansion to 25% of revenue against the targeted 40% Africa: Steady growth in resources with infrastructure to follow over time Middle East: Investment in public infrastructure backed by oil price, industrialisation and economic diversification Eastern Europe: After two years of contract postponements/ cancellations, expect more countries to adopt PPPs over next three years
How strategy performed against market dynamics Additional actions Strategic focus Geographic diversity provided some relief to deep decline in South African construction sector. Delayed expansion in territories where the group has built capacity, specifically Middle East and Eastern Europe Revenue contribution from non-South African markets was:
2011: 25%
2010: 20%
2009: 37%
2008: 34%Strategy unchanged. Resources committed to expanding group operations in current regions and entering new territories which fit the group’s capabilities and risk criteria Africa: Development of a more permanent presence in three distinct regions of West, East and Central Africa
Middle East: Specific focus on Saudi Arabia, Qatar, UAE and Jordan
Eastern Europe:Recovery of debt due to the group, order book growth Longer term strategy to re-build a sustainable business of relevant size
Expect to participate in new pre-qualifications in new territories, with a potential beyond roads Secure Bulgaria IPP bankability and an additional transport concession 
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FOCUSED SECTORS: MINING, INDUSTRIAL, POWER, OIL AND GAS, WATER AND ENVIRONMENT, REAL ESTATE AND TRANSPORT
Strategy:
Diversify across sectors to spread risk and access growth areas.F2011 F2012 Market dynamics Group’s market expectations 36% of Construction revenue was generated from new sectors penetrated (power and oil and gas) (vs 24% in F2010) Public sector work in these sectors contributed 30% of Construction revenue compared to the group’s traditional private sector role of building/civils/mining contractor Increased competition and margin pressure Mining: African mining recovery to continue Industrial: Emerging activity in pulp and paper, minerals benefaction and petrochemical Power: Integrated Resource Plan 2011; REFIT* bid process now in progress; growth market in baseload, independent power projects, renewable, including nuclear – group well positioned Oil and gas: Increased revenue in sector expected Water and environment: Water master plan (Department of Water and Forestry and Trans Caledon Tunnel Authority)
– several large contracts in the marketReal estate: Slow and protracted recovery; project funding very challenging; increased competition; affordable housing contracts increasing slowly Transport: Steady revenue base with growth through road concessions, port and rail possible; very competitive tender market * The Renewable Energy Feed in Tariff.
How strategy performed against market dynamics Strategic focus Sector strategy unchanged – together with geographic expansion; it mitigated some impact of weak markets (although global economic weakness has delayed some sector development) Capacity built before the downturn; pre-qualified in the new sectors of power, oil and gas, PPP/EPC, as well as work secured in
re-emerging mining sectorIncreasing contribution to order book and pipeline shows future value in these sectors Diversify earnings between these seven sectors Timing of PPP roll out is unclear Demand for infrastructure contracts in our targeted sectors has now become critical Mining
F2010 vs F2011 contribution to:
Construction revenue: 9% vs 11% Target pipeline*: 12% vs 13% Expand Group Five offering to the mining industry by including more group products and services Growth from strong operational bases established in targeted countries Industrial
F2010 vs F2011 contribution to:
Construction revenue: 4% vs 4% Target pipeline*: 4% vs 1% Use of the group’s multi-disciplinary strengths, together with technology packaging capability, to present as a strategic partner Power
F2010 vs F2011 contribution to:
Construction revenue: 7% vs 7% Target pipeline*: 14% vs 28% Continue capacity building and diversification into alternative power sources; clear demand for power in South Africa and other markets Use Group Five’s track record and strong position in this market Secure power plant contracts in thermal, renewable and nuclear technologies Oil and gas
F2010 vs F2011 contribution to:
Construction revenue: 17% vs 29% Target pipeline*: 3% vs 2% Expansion of services business and packaging of technology within E
ngineering and Construction (E+C)Strategic positioning should result in growth as global economy improves and South Africa addresses domestic infrastructure backlog Secure N1-N2 and new port/rail work in SA Expand over-border order book Explore over-border business Water and environment
F2010 vs F2011 contribution to:
Construction revenue: 1% vs 2% Target pipeline*: 7% vs 8% Develop design/build competence in water and with technical partners Real estate
F2010 vs F2011 contribution to:
Construction revenue: 27% vs 32% Target pipeline*: 39% vs 32% Order book expansion in Building and Housing in Africa Development of affordable housing market in South Africa Design/build in support of concession PPPs Transport
F2010 vs F2011 contribution to:
Construction revenue: 35% vs 15% Target pipeline*: 21% vs 16% * Our Target Opportunity Pipeline is the group’s indicator of medium to long term opportunities and performance. It represents the group’s targeted contracts and includes only the value that could be traded by the group and not total contract values. In addition, it is not to be confused with the secured order book nor does the group expect to secure the full pipeline presented.