PROTECH KHUTHELE HOLDINGS LIMITED - voluntary strategic and operational update

voluntary strategic and operational update

Protech Khuthele Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/024352/06)
JSE code: PKH & ISIN: ZAE000101986
(“Protech” or “the Company” or “the Group”)

VOLUNTARY STRATEGIC AND OPERATIONAL UPDATE


In the interests of transparent disclosure, Protech has provided a voluntary
strategic and operational update. The Group’s internal repositioning is on track
and has enabled Protech to gain a much clearer understanding of its internal
capabilities, systems and positioning. As such, it is ensuring that it is optimally
positioned to take full advantage of an upturn in the construction market and
infrastructure spending.

Market conditions
In line with expectations, market conditions in the construction and mining
infrastructure sectors remained challenging during the last six months. However,
tender activity, a leading indicator of future growth in the industry, has started
trending upwards. The uptick in public sector infrastructure spending has yet to
be evidenced, but is expected to start improving early in the 2013 calendar year
as government’s plans are cemented. Spending among mining companies has
remained low.

Strategy update
Protech continued to strengthen its internal support structures in line with its
strategic repositioning to ensure that its structures and processes are aligned
and optimised to deliver on its objectives, thereby ensuring its ability to benefit
from improved market conditions as expected.

The strategic highlights for the last six months are as follows:
* Good progress with a number of functional initiatives including Operations,
   Information and Finance management supported by work being done on
   People, Leadership and Culture is leading to improved internal processes and
   supports a strategic focus on the market and growth.
* The optimisation of the plant model to better align the model with the
   performance capabilities and potential of the plant and equipment owned.
   Previously, all units of plant and equipment were replaced based on a generic
   time based replacement policy which did not take into account the unique
   operating characteristics and optimal utilisation periods of different classes of
   plant and equipment. This in turn resulted in under utilisation of operating
   asset capacity and sub-optimal fixed capital investment returns. The revised
   plant operating model will result in improved plant and equipment utilisation
   over extended asset lives which still fall within the warranty periods of the
   plant and equipment. These changes will significantly improve the ratio of
    fixed capital investment to revenue and will, in turn, significantly improve the
    return on assets and the revenues generated through production, all of which
    will have a positive carry through to the bottom line.
*   The Group continues to strengthen its executive and operational leadership
    capability. During the last six months a number highly experienced industry
    experts have joined the Group at an operational level, bolstering its top level
    skills to drive the growth strategy.

Operational update
Although market conditions remained tight, the Group has secured over 90% of
its budgeted turnover for the financial year and its order book remains strong.
Cash flow generation from operations was strong during the first six months of
the 2013 financial year and the cash resources of the Group remain at
satisfactory levels. This position provides some additional tendering capacity to
selectively pursue opportunities that fall within its target markets and that match
its criteria and risk parameters.

Despite challenging domestic markets, the Group won a number of new
contracts in South Africa in the last six months including the following, amongst
others:
   * Vodacom Datapark, Midrand: R8.7 million earthmoving contract including
       the provision of services.
   * Sasol Shondoni Mine: Two contracts totalling R201.8 million, comprising
       bulk earthworks of around 2 million m3 and mine infrastructure early works
       over.
   * East Rand Water Care Company (ERWAT) Welgedacht Waste Water
       Works: R37.5 million contract for bulk earthworks, excavations,
       construction and compaction.

Within the newly established Civil and Earthworks business, the focus has been
on consolidating the existing portfolio of projects to ensure the proper processes
and procedures are in place to manage the current exposures. The objective is to
place the business on a solid footing to transition into a more active tendering
mode.

The above information has not been reviewed nor reported on by the Company’s
auditors.

Lanseria
21 August 2012

Sponsor
Deloitte & Touche Sponsor Services (Pty) Limited
(Registration number 1996/000034/07)

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