NOTES

The Group operates in the construction, engineering and mining environment and as a result the revenue is not seasonal in nature but is influenced by the nature of the contracts that are currently in progress. Refer to commentary for a more detailed report on the performance of the different operating platforms within the Group.

The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies Act, No. 71 of 2008. The accounting policies applied in the preparation of these interim financial statements are in terms of International Financial Reporting Standards and are consistent, with the exception of the adoption of amendments to IFRS 2: Share-based Payment, IFRS 3: Business Combinations, IFRS 8: Operating Segments, IFRS 13: Fair Value Measurement, IAS 16: Property, Plant and Equipment, IAS 19: Employee Benefits, IAS 24: Related Party Disclosures, IAS 32: Financial Instruments: Presentation, IAS 36: Impairment of Assets, IAS 38: Intangible Assets and IAS 40: Investment Property, with those applied in the previous consolidated annual financial statements. These statements were compiled under the supervision of Mr AJ Bester CA(SA), the Group Financial Director.

The review has been conducted in accordance with International Standards on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor, Deloitte & Touche and their unmodified review report is available for inspection at the Company’s registered office. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group’s external auditors.

The information presented in the notes below represent audited results for 30 June 2014 and reviewed results for 31 December 2014 and 31 December 2013.

The Group disposed of the majority of it’s Tolcon business, effective on 1 September 2014, for a gross consideration of R186 million (cash receivable of R136 million net of working capital, other adjustments and transaction costs). Of the total consideration, R116 million was received on the effective date, R5 million was received in November 2014 and the remaining R15 million is receivable 24 months after the closing date. Earlier payment of the deferred consideration is dependant on certain contractual conditions.

The sale excludes the investments in the Bombela Concession and Bombela Operating Companies and also Entilini Concessions and its operating companies – the Group’s Concessions businesses are not part of Tolcon.

The Group is close to reaching an agreement for the disposal of the remaining Tolcon businesses (comprising of Cape Point Partnership and Entilini operations).

3.1 Profit from discontinued operations

3.2 Profit before interest and taxation

3.3 Cash flows from discontinued operations include the following:

The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short term investments, derivatives, accounts receivable and payable and interest bearing borrowings.

6.1 Financial assets designated as fair value through profit or loss

In November 2013 an arbitration award was made in favour of the Gauteng Province, in the water ingress dispute between the Gauteng Province and the Bombela Civil Joint Venture (of which Murray & Roberts has a 45% shareholding).

The Tribunal ruled that in certain parts of the tunnel the non-compliance with specification could be settled through financial compensation and in other parts of the tunnel additional works by the Bombela Civil Joint Venture would be required to meet the specification. A panel of technical experts and design consultants were appointed to
perform a technical evaluation of the potential remedial work that may be required. Based on their reports and on an assessment of designs for potential remedial work, the Group recorded a R300 million provision during the second half of the 2014 financial year, for its share of potential costs to be incurred. The amount of any other potential financial compensation, if any, related to the matter cannot be determined.

The Group disposed of the majority of it’s Tolcon business effective on 1 September 2014 for a gross consideration of R186 million (R136 million net of working capital, other adjustments and transaction costs). Refer to note 3 for additional information.

Murray & Roberts completed the acquisition of 100% of the shares of CH-IV International (“CH-IV”) on 6 August 2014, a boutique engineering company based in the United States of America for a consideration of R57 million. The fair value of the net assets acquired at the date of acquisition was R35 million. The goodwill of R22 million is attributable mainly to the expertise of the CH-IV workforce and accessibility to the contracts in the United States of America engineering market. None of the goodwill is expected to be deductible for tax purposes.

Murray & Roberts completed the acquisition of 100% of the shares of Booth Welsh (“Booth Welsh”) on 5 September 2014, a privately owned engineering services company based in Ayrshire, Scotland for a consideration of R79 million. The fair value of the net liabilities acquired at the date of acquisition was R17 million. The goodwill of R96 million is attributable mainly to the expertise of the Booth Welsh workforce and accessibility to the contracts in the European engineering market. None of the goodwill is expected to be deductible for tax purposes.

Murray & Roberts completed the acquisition of the assets, liabilities and business of Aquamarine Water Treatment (“Aquamarine”) on 1 October 2014, a company that designs, manufactures and installs water treatment solutions, and offers a complete customised solution, including support for and maintenance of its installations for a consideration of R28 million. Of the total consideration, R26 million was paid on the effective date, R1 million is payable during October 2015 and the remaining R1 million is payable during October 2016. The fair value of the net liabilities acquired at the date of acquisition was R1 million. The goodwill of R29 million is attributable mainly to the expertise of Aquamarine’s key management personnel and the synergies expected to be achieved from integrating the company into the Group’s water business. None of the goodwill is expected to be deductible for tax purposes.

Impact of acquisitions on the results of the Group:

The profit for the period includes an amount of R5 million (CH-IV: R3 million, Booth Welsh: R1 million and Aquamarine: R1 million) that relates to the businesses acquired during the year. The revenue includes R148 million (CH-IV: R38 million, Booth Welsh: R95 million and Aquamarine: R15 million) in respect of the businesses acquired
during the year.

The effect on revenue of the Group from continuing operations would have been R230 million (CH-IV: R44 million, Booth Welsh: R166 million and Aquamarine: R20 million) if the businesses had been acquired on 1 July 2014, and the profit for the period from continuing operations would have been R11 million (CH-IV: R4 million, Booth Welsh: R5 million and Aquamarine: R2 million).

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. As at 31 December 2014 there were no impairment indicators.

A gross annual dividend, relating to the 30 June 2014 financial year, of 50 cents per share was declared on 27 August 2014 and paid during the period.

The Board has resolved not to declare an interim dividend.

There have been no significant changes to the nature of related party transactions since 30 June 2014.

The directors are not aware of any matter or circumstance arising after the period ended 31 December 2014, not otherwise dealt with in the Group’s interim results, which significantly affects the financial position at 31 December 2014 or the results of its operations or cash flows for the period then ended.