REPORT OF DIRECTORS

FOR THE YEAR ENDED 30 JUNE 2012

This report presented by the directors is a constituent of the consolidated annual financial statements at 30 June 2012, except where otherwise stated, all monetary amounts set out in tabular form are expressed in millions of Rands.

NATURE OF BUSINESS

Main business and operations

Murray & Roberts Holdings Limited is an investment holding company with interests in the construction & engineering, underground mining development, oil & gas, construction materials and related fabrication sectors.

The Company does not trade and all of its activities are undertaken through a number of subsidiaries, joint ventures and associates. Information regarding the Group’s major subsidiaries and associate companies appears in Annexure 1 of the consolidated annual financial statements.

Group financial results

At 30 June 2012 the Group recorded a loss of R592 million (2011: loss of R1 648 million), representing a diluted loss per share of 214 cents (2011: diluted loss per share of 528 cents). Diluted headline loss per share was 246 cents (2011: diluted headline loss per share of 454 cents). The comparatives have been restated retrospectively in terms of Circular 3/2009 issued by the South African Institute of Chartered Accountants (“SAICA”) and International Accounting Standards (“IAS”) 33: Earnings per share.

Full details of the financial position and results of the Group are set out in these consolidated annual financial statements. The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards. The accounting policies have been applied consistently compared to the prior year, except for the adoption of new or revised accounting standards as set out in note 1.

Going concern

The Board is satisfied that the consolidated annual financial statements comply with International Financial Reporting Standards on a going concern basis following an assessment of solvency and liquidity requirements.

Uncertified revenue

Included in amounts due from contract customers in the statement of financial position is the Group’s share of uncertified revenue that has been recognised through the statement of financial performance in current and prior periods in respect of claims and variation orders on projects (refer to note 9 of the consolidated annual financial statements), mainly related to Gautrain Rapid Rail Link (“Gautrain”), Dubai International Airport Concourse 2 (“Dubai Airport”) and Gorgon Pioneer Material Offloading Facility contract.

A cumulative total revenue of R2 billion, net of on-account payments of R50 million, being amounts due from contract customers, has been recognised in the statement of financial position at 30 June 2012 (2011: R2 billion) as the Group’s share of uncertified revenue in respect of claims and variation instructions on the Group’s projects. Recognition of these assets is supported by the Group’s independent experts and advisers, and is in accordance with IAS 11: Construction Contracts.

Resolution of these extremely complex legal and financial claims and variation instructions are yet to be finalised, and may be subject to arbitration and/or negotiation. This could result in a materially higher or lower amount being awarded finally, compared to that recognised in the statement of financial position at 30 June 2012.

Competition Commission

The Competition Commission (“Commission”) engaged the construction industry in April 2011 and the Group submitted applications through the April 2011 Fast-Track process. A provision was raised based on the potential violations that were identified as a result of this process. The Board is of the opinion that the provision raised for this liability is adequate to cover any penalties that may arise as a result of the investigation. However, there is no guarantee as to the size of the penalty or the sufficiency of the provision.

Gorgon Pioneer Material Offloading Facility (“GPMOF”)

The Group communicated to the market in October 2011 regarding the additional losses to be incurred on the GPMOF project amounting to R520 million relating to weather delays. A further R80 million was recognised at 31 December 2011 and communicated with the half year results. Subsequent to December 2011, the project experienced further weather incidents as well as unexpected safety stoppages which have delayed the final project completion date. The impact of all these and other events further amounted to approximately R600 million, which has been recognised in the second half of the financial year.

Segmental disclosure

The Group manages its operations through five operating platforms. An analysis of the Group’s results reflects the results and financial position of each platform (refer to Annexure 3 of the consolidated annual financial statements).

AUTHORISED AND ISSUED SHARE CAPITAL

Full details of the authorised and issued capital of the Company at 30 June 2012 are contained in note 12 of the consolidated annual financial statements.

During the year under review, the Board of directors announced that it had given due consideration to the continued implementation of the Group’s Recovery and Growth plan, the expected funding requirements of the order book, optimal statement of financial position structure, debt repayment tenure and the protracted nature of the claims settlement process. The Board was of the view that it was prudent to raise additional equity capital from shareholders and intended to propose a renounceable rights offer to raise R2 billion.

On 26 March 2012 a rights offer circular was posted to shareholders relating to a renounceable rights offer of 112 843 490 shares at an issue price of R18.00 per share, in the ratio of 34 rights offer shares for every 100 Murray & Roberts shares held at the close of business on Friday, 23 March 2012. The renounceable rights offer closed on Friday, 20 April 2012. On 23 April 2012 shareholders were advised of the results of the renounceable rights offer. Due to rounding principles as set out in the rights offer circular, 112 843 499 renounceable rights offer shares were issued and listed due to rounding up of fractional entitlements.

As a result of the renounceable rights issue, additional options were issued to all participants of the Murray & Roberts Holdings Limited Employee Share Incentive Scheme (“Scheme”). Details of the adjustments are disclosed in the remuneration report on Remuneration report . The intention of the Group is to settle any liability under this incentive scheme by purchasing shares in the open market, therefore no dilution of shareholding is anticipated.

Particulars relating to the Scheme are set out in note 13 of the consolidated annual financial statements. During the year, the Trust granted a total of 3 637 000 options over ordinary shares (2011: 1 738 000 options) to senior executives, including executive directors.

At 30 June 2012, the Trust held 5 378 382 (2011: 6 189 282) shares against the commitment of options granted by the Trust totalling 16 502 112 (2011: 11 173 125) ordinary shares. The shares held by the Trust have been purchased in the market and have not been issued by the Company.

The total number of ordinary shares that may be utilised for purposes of the Scheme is limited to 7,5% of the total issued ordinary shares of the Company, currently 33 189 262 (2011: 33 189 262) ordinary shares. As no shares have been issued to date in connection with the Scheme, this limit remains unutilised.

DIVIDEND

No interim or final dividends were declared or proposed for the years ended 30 June 2011 and 2012.

SUBSIDIARIES AND INVESTMENTS

Acquisitions

Acquisition of additional shares in Forge Group Limited (“Forge”)
During the financial year Clough Limited increased its interest in Forge by 3% to 36%, following a put option by previous executives.

Acquisition of remaining interest in PT Operational Services Proprietary Limited (“PT Operational Services”)
The Group acquired the remaining 33% equity interest in PT Operational Services increasing its interest to 100% during the current financial year.

Acquisition of 100% interest in Incycle Shotcrete (Proprietary) Limited (“Incycle Shotcrete”)
The Group acquired the full interest in Incycle Shotcrete for a consideration of R7,4 million, effective 30 September 2011.

Acquisition of remaining 50% in RSC Tshwane Joint Venture
The Group acquired the remaining 50% shareholding in RSC Tshwane Joint Venture for a consideration of R7,2 million on 1 July 2011.

Disposals

Disposal of non-core assets
The Group disposed of the following non-core assets during the current financial year:

	Johnson Arabia LLC for proceeds of R109 million on 31 October 2011
	The South African steel operations, comprising of RSC Ekusasa Mining with an effective date of 1 July 2011, Alert Steel Polokwane Proprietary Limited on 31 October 2011 and Freyssinet Posten Proprietary Limited on 31 December 2011. The combined proceeds totalled R120 million
	BRC Arabia LLC, 49% shareholding on 30 June 2012 for proceeds of R2 million
	Clough’s Marine construction operations on 22 December 2011 for net proceeds of R591 million
	The Group’s 47% shareholding in Murray & Roberts (Zimbabwe) Limited for proceeds of R10 million
	The Group’s equity interest in N3 Toll Concession Proprietary Limited was disposed of on 1 July 2011, however, the proceeds were received in advance of 30 June 2011
	The Group’s 30% shareholding in Gryphon Logistics Proprietary Limited for proceeds of R5 million

SPECIAL RESOLUTIONS

During the year under review four special resolutions were passed by shareholders. These related to:

1) The conversion of the Company’s entire authorised and issued share capital from par value shares to no par value shares;
2) An increase in the Company’s authorised but unissued share capital;
3) Authorisation for the ability to issue 30% or more of the Company’s issued share capital; and
4) Authorisation for the amendment of the Company’s memorandum of incorporation.

The special resolutions were filed with the Companies and Intellectual Property Commission.

Special resolutions relating to name changes were passed by subsidiary companies during the year under review.

EVENTS AFTER REPORTING DATE

The Steel Business, including CISCO, was disposed of at book value subsequent to the year-end in two separate transactions. The Steel Business transaction, excluding CISCO, is subject to Competition Commission approval.

The directors are not aware of any other matter or circumstance arising since the end of the financial year, not otherwise dealt with in the Group and Company annual financial statements, which significantly affects the financial position at 30 June 2012 or the results of its operations or cash flows for the year then ended.

INTEREST OF DIRECTORS

A total of 2 936 610 (2011: 2 065 750) share options are allocated to directors in terms of the Murray & Roberts Holdings Limited Employee Share Incentive Scheme, further details are set out in note 13.

The directors of the Company held direct beneficial interests in 65 351 of the Company’s issued ordinary shares (2011: 28 000 ordinary shares). Details of ordinary shares held per individual director are listed below.

* AJ Bester was appointed to the Board as Group financial director on 1 July 2011.
** BC Bruce and RW Rees retired on 30 June 2011.

At the date of this report, these interests remain unchanged.

DIRECTORS

At the date of this report, the directors of the Company were:

Independent non-executive

RC Andersen (Chairman); DD Barber; TCP Chikane; NM Magau; JM McMahon; WA Nairn; AA Routledge; M Sello; SP Sibisi and RT Vice.

Due to other business commitments, ADVC Knott-Craig resigned as a non-executive director on 17 January 2012.

TCP Chikane was appointed as a non-executive director on 15 June 2012.

Executive

HJ Laas (Group chief executive); AJ Bester (Group financial director) and O Fenn.

COMPANY SECRETARY

The company secretary’s business and postal addresses are:

AUDITORS

Deloitte & Touche continued in office as external auditors. At the Annual General Meeting of 31 October 2012, shareholders will be requested to appoint Deloitte & Touche as external auditors for the 2013 financial year. AJ Zoghby will be the individual registered auditor who will undertake the audit.

29 August 2012