Annual Financial Results 20052006

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Annual Financial Results 2005/2006

• July 2006

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Contents of presentation

• Strategy confirmation and structure
• Strategy implementation
• Salient features 2006
• Financial results 2006
• Post-balance sheet events
• Summary
• Conclusion and questions

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Strategy confirmationand structure
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Strategy confirmation and structure
Enabling economicgrowth
Focused freight transport company
Strategy
TRANSNET COMPANY
Structure
Operational divisions(continued businesses)
PORTS
National Ports Authority
SA Port Operations
5
Strategy Four-point turnaround plan
Lower cost of doing business
Targetedsectors

• Redirect
• re-engineer
• the business
• Re-engineer core business
• Corporate HO restructure
• Operational synergies
• Customer focus
• Infrastructure development

• Corporate governance
• and risk management
• Shareholders compact
• Memo and Articles of Association
• IFRS
• Legal review
• EWRMF

4-Point turnaround plan

• Human capital
• development
• Skills audit and matching
• Recruitment and retention
• Skills and training
• Performance management
• Career management
• Succession
• planning

• Balance sheet restructuring
• Pension fund deficit
• Transfer SAA to Government
• Disposal of non-core businesses

Economic development
6
Strategy implementation Progress made
Corporate governance and risk management

• Progress summary
• Major re-engineering program
• Vulindlela underway
• Commenced with roll out of R64.5
  billioninvestment plan
• Disposal of non-core assets
• Established governance structures and risk
  programmes implemented
• Comprehensive HR strategy

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Strategy implementation (continued)
Restructuring the balance sheet

• Exit of non-core assets
• PFMA approval obtained for the disposal of
  non-core assets
• Businesses sold

• Sale process started
• Viamax, freightdynamics, V A Waterfront (26),
  Equity Aviation (49),
• VAE Perway (35), non-core property,
  Transtel
• Future plan
• Sale of Housing Assets, SA Express, Autopax, C
  class preference shares

8
Strategy Implementation Progress
Redirecting the business

• Investment plan of R64.5 bn approved and roll-out
  commenced

• Vulindlela (re-engineering) programme implemented
  with focus
• Addressing safety
• Efficiency improvements
• Costs reductions
• Service delivery
• Market-share increase
• Main focus is on Spoornet
• Port and Rail Master Plan for future growth
  completed
• Restructuring of corporate office completed

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Strategy implementation (continued)
Human capital strategy

• Completed redesign and staffing of corporate
  centre
• Introduced a talent management programme
• Began capacity-building exercise for operational
  requirements and skills demand study for medium
  term
• Introduced a new reward and performance
  management system and the roll-out has begun
• Introduced a leadership development programme
• Redefined partnership with labour for the
  transformation of Transnet

10
Strategy implementation
Corporate Governance and risk management

• Shareholder compact completed and approved by
  Board awaiting approval from Shareholder
• Revised articles of association approved by Board
  awaiting Shareholder approval
• Litigation and material contracts due diligence
  completed
• Enterprise Wide Risk Management Framework
  completed
• Key risks identified and monitored for each
  operating division
• Internal audit (outsourced) now fully functional
  focusing on
• Control environment /compliance reviews
• Transaction audit (a comprehensive payroll audit
  completed)
• Assessment of major projects and special
  investigations
• Developed and completed a fraud prevention plan,
  core values,
• ethics statements and contracts for all employees

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Capex spending five-year plan
Planned spending over next five years (core
businesses) R64.5 billion

• Petronet R4.9 billion
• Multi-product pipeline DJP (R4.2 billion)
• Gas line upgrading (R0.4 billion)

• Transwerk R2.6 billion
• Equipment

• SAPO R6.3 billion
• Mainly capacity increases
• Durban (R1.5 billion)
• Richards Bay (R1.0 billion)
• Ngqura (R1.2 billion)
• Cape Town (R0.9 billion)
• Saldanha (R0.6 billion)

• Spoornet R31.5 billion
• Coal line (R8 billion)
• Ore line (R2.7 billion)
• General freight (R10.8 billion)
• Maintenance capitalisation (R8.1 billion)

• NPA R18.6 billion
• Upgrade and expansion
• Durban (R8.7 billion)
• Cape Town (R3.9 billion)
• Ngqura (R2.5 billion)
• Richards Bay (R1.4 billion)

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Transnet core businesses five-year gross capital
investment budget
Financial years
Financial years
13
Salient features 2006

ACHIEVING PERFORMANCE OBJECTIVES
Excludes notional revenue on embedded
derivatives Excludes R1.7bn decrease in SAAs
operational cash flow
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Financial Results 2006
15
Financial results 2006
Consolidated income statement
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Transnet operating profit margin(after
impairment before fair value adjustment)
HIGHEST MARGIN IN LAST SEVEN YEARS
Transnet Group (Including discontinued operations)
Average previous6 years 5,8
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Spoornet performance 2006 versus 2005
Financial
Operating profit

• Turnover increased by 4 to R14.4 billion
• Capex spending R3 809 million in 2005/2006 and
  R31.5 billion over the next five years
• Total volumes transported increased by 0.5 to
  182mt
• Iron-ore line volumes achieved 29.6mt (increase
  of 5 over 2004/2005)
• Coal line volumes transported was68.7mt
  (increase of 2.7 over 2004/2005)
• General freight volumes decreased by 2.7 to
  83.8mt over the year

1014
681
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Operational
Includes a net amount of R681m for
capitalisation of maintenance under IFRS
18
NPA performance 2006 versus 2005

• Turnover increased by 11 to R5.5 billion
• Capex spending R783 million in 2005/2006 and
  R18.6 billion over the next five years
• Bulk volumes grew by 6 due to increased demand
  for coal, iron ore (China) and other commodities
• Full container imports grew 9 while exports did
  not reflect growth due to currency strength,
  competition and quality issues
• All ports were accredited as being ISPS code
  compliant

Financial
Operating profit
19
Operational
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SAPO performance 2006 versus 2005

• Turnover increased by 9 to R3.6 billion
• Capex spending R776 million in 2005/2006 and R6.3
  billion over the next five years
• Container volumes increased by 7 and is
  expected to further increase by 8 in 2005/2006
• Breakbulk volumes dropped 5 due to competition
  and the trend towards containerisation
• Volumes in automotive sector reflected
  exceptional growth of 43 compared to 2004/2005
  
• A record 28.8mt was exported through the Saldanha
  iron-ore terminal

Financial
Operating profit
4
Operational
20
Petronet performance 2006 versus 2005

• Turnover increased by 4 to R1.1 billion
• Capex spending R224 million in 2005/2006 and R4.9
  billion over the next five years
• Petronet successfully complied with the clean
  fuels requirements in January 2006
• De-bottlenecking project became operational in
  October 2005 resulting in an 18 improvement on
  existing constraints
• Existing refined products pipeline (DJP) is
  running at close to capacity while the crude line
  feeding Natref is operating at 75

Financial
Operating profit
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Operational
21
Transwerk performance 2006 versus 2005

• Turnover increased by 28 to R3.8 billion
• Capex spending R189 million in 2005/2006 and R2.6
  billion over the next five years
• Output achieved during the year which entails
  refurbishing, upgrading, building and modifying
• 7 213 wagons
• 316 locomotives
• 550 coaches
• 2 113 traction motors
• 62 830 wheel pairs

Financial
Operating profit
46
Operational
22
SAA Financial performance 2006 versus previous
two years three-year view
Turnover
Operating profit
Includes extra release from Air Traffic Liability
of R600m
12,5
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Financial results 2006
Consolidated balance sheet
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Financial results 2006 (continued)
Consolidated balance sheet (continued)
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IFRS Impact on 2004/2005
Financial statement prepared under IFRS with
effect from 1 April 2004
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IFRS 5 (Non-current assets held-for-sale and
discontinued operations)

• The following businesses met criteria at 31 March
  2006
• SAA V A Waterfront
• Autopax Equity Aviation
• Viamax VAE Perway
• freightdynamics
• Metrorail treated as discontinued 26 December
  2005
• Net income for the above shown as discontinued
• Gross assets and liabilities shown separately as
  held-for-sale

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Post-retirement benefit obligations
Consolidated balance sheet
Unfunded liabilities

• Restructuring and funding plan in progress
• Funding monthly including Transnet subsidy

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Financial results 2006 (continued)
Abridged consolidated cash flow statement
Effective 28 increase after adjustment for the
decrease in SAA operational cash flow of R1,7
billion
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Funding requirements Next three years
Projections Excluding non-core
Note Excludes proceeds from sale of non-core
portfolio Reduction because of discontinued
businesses
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Post-balance sheet events

• SAA sale agreement signed
• Metrorail sale agreement signed
• Sale process launched for V A, Viamax and
  freightdynamics
• Second Network Operator (SNO)
  Telecommunications assets sold

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Summary

• Sound financial performance for the year
• R64.5 billion investment program underway
• Vulindlela project implemented that will deliver
  significant improvement in efficiencies, cost
  reductions, safety and customer service
• Disposal of non-core entities has begun and will
  be complete by December 2006

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Conclusion

• Progress to date is pleasing but still
  significant challenges ahead
• The sustainability of the turnaround achieved to
  date and future improvements can only be achieved
  through relentlessly driving the implementation
  of the strategies
• Our optimism for the future is based on the
  commitment of management and staff to focus on
  priorities and work as a team to deliver

WE THEREFORE MOVE INTO THE FUTURE WITH CONFIDENCE
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Thank you