delivering on our commitments delivering on our commitments Contents T page 3 ransnet Annual Report 2005 Consolidated salient Strategic intent 1 features Group structure 2 Consolidated salient features 3 Consolidated performance indicators 4 page 8 Consolidated value added statement 5 Consolidated five-year review 6 Board of directors Glossary of terminology 7 Board of directors 8 Executive Committee 10 page 11 Chairman’s statement 11 Chairman’s statement Group Chief Executive’s statement 14 Sustainability report 21 Corporate governance 25 page 14 Operational report – Spoornet 30 Annual Report Operational report – National Ports Authority (NPA) 34 Group Chief Executive’s Operational report – South African Port Operations (SAPO) 38 statement Operational report – Petronet 42 Operational report – Transwerk 46 Operational report – South African Airways (SAA) 50 Chief Financial Officer’s report 54 Audit Committee approval 58 Contents to the annual financial statements 59 Photography courtesy of Peter Morey, www.transnet.co.za Geoff Brown, Spoornet, SAA, SAPO, Corporate information 142 05 NPA and Transwerk. GRAPHICOR 32855 delivering on our commitments delivering on our commitments Contents T page 3 ransnet Annual Report 2005 Consolidated salient Strategic intent 1 features Group structure 2 Consolidated salient features 3 Consolidated performance indicators 4 page 8 Consolidated value added statement 5 Consolidated five-year review 6 Board of directors Glossary of terminology 7 Board of directors 8 Executive Committee 10 page 11 Chairman’s statement 11 Chairman’s statement Group Chief Executive’s statement 14 Sustainability report 21 Corporate governance 25 page 14 Operational report – Spoornet 30 Annual Report Operational report – National Ports Authority (NPA) 34 Group Chief Executive’s Operational report – South African Port Operations (SAPO) 38 statement Operational report – Petronet 42 Operational report – Transwerk 46 Operational report – South African Airways (SAA) 50 Chief Financial Officer’s report 54 Audit Committee approval 58 Contents to the annual financial statements 59 Photography courtesy of Peter Morey, www.transnet.co.za Geoff Brown, Spoornet, SAA, SAPO, Corporate information 142 05 NPA and Transwerk. GRAPHICOR 32855 Strategic intent Transnet is committed to transparency, integrity, efficiency and competitiveness Transnet Limited is a public company, wholly owned by the South African government, which operates and controls South Africa’s major transport infrastructure. Even as it accelerates the pace of its transformation from a diversified conglomerate into a focused freight transport company, it will continue to be a significant player in the South African economy. The Group employs more than 70 000 people and has an asset base in excess of R70 billion. Our aim is to be a cost-effective and efficient transport service provider. Working with our clients, we are building on existing corridors and clusters and exploiting the synergy between port and rail to tailor our solutions according to our customers’ needs. www.transnet.co.za Transnet Annual Report 2005 1 Group structure Strategy To be a focused freight transport company Structure Holding company Core businesses Non-core businesses Other non-core businesses SA Airways (Pty) Ltd 98,2% Investment Portfolio Transport Portfolio Support businesses 2 Transnet Annual Report 2005 Consolidated salient features for the year ended 31 March 2005 2005 2004 % R million R million change Turnover 46 259 43 637 6,0 EBITDA 8 972 7 442 20,6 Operating profit 5 818 187 >100 Net profit/(loss) for the year after taxation 6 810 (6 332) >100 Number of ordinary shares issued (millions) 14 710 14 710 Profit/(loss) per share (cents) 46,3 (43,0) Total assets 72 633 72 700 (0,1) Total debt 55 674 62 783 (11,3) Capital and reserves 16 959 9 917 71,0 Cash flow from operating activities before cash effects of derivative transactions 7 536 4 952 52,2 Capital expenditure (excluding intangibles) 5 575 7 820 (28,7) EBITDA margin (%) 19,4 17,1 Operating profit margin (%) 12,6 0,4 Net profit margin (%) 14,7 (14,5) Refer glossary of terminology on page 7 Turnover EBITDA Operating profit 11 837 5 818 46 259 43 637 5 088 41 278 8 972 35 811 8 155 31 740 7 442 6 060 1 704 1 463 187 01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 Transnet Annual Report 2005 3 Consolidated performance indicators March March March March March 2005 2004 2003 2002 2001 R million R million R million R million R million PROFITABILITY MEASURES Operating profit margin (%) 13 0,4 12 4 5 Net profit margin (%) 15 (15) (1) 10 10 Return on average total assets (%) 9 (9) (1) 5 6 Return on equity (%) 40 (64) (2) 16 17 SOLVENCY RATIOS Gearing ratio (%) 67 83 65 52 53 Total debt to total capital (%) 77 88 74 71 68 Interest cover (times) 2,2 0,1 1,9 0,3 0,9 CASH FLOW MEASURES Operating cash flow to total debt (%) 18 12 17 11 12 EXCHANGE RATES – ZAR to US$ – closing rate 6,21 6,61 8,06 11,38 8,03 – ZAR to US$ – average 6,56 7,15 9,53 9,64 7,33 Operating margins Return on average (%) total assets (%) 13 12 9 6 5 5 4 (1) 0 (9) 01 02 03 04 05 01 02 03 04 05 Interest cover Gearing (%) 2,2 83 1,9 67 65 53 52 0,9 0,3 0,1 01 02 03 04 05 01 02 03 04 05 4 Transnet Annual Report 2005 Consolidated value added statement for the year ended 31 March 2005 2005 2004 R million % R million % Revenue 46 259 43 637 Cost of materials and services (22 848) (22 273) Net operating expenses excluding impairments (40 288) (39 229) Excluding: – Depreciation 2 390 2 536 – Amortisation 73 64 – Retirement benefit costs 1 469 1 681 – Salaries, wages and other benefits 13 508 12 675 Value added by operations 23 411 98 21 364 98 Income from investments 538 2 434 2 – Investment and other income 276 342 – Income from associates 262 92 – Fair value adjustments* – – Value added/created 23 949 100 21 798 100 Applied as follows: Employees 14 977 62 14 356 66 – Salaries, wages and other benefits 13 508 12 675 – Retirement benefit costs 1 469 1 681 Providers of capital 2 567 11 2 220 10 – Net finance costs 2 588 2 211 – Minority interests (21) 9 Government 1 620 7 190 1 – South African normal taxation 1 635 190 – Secondary taxation on companies (15) – Re-invested to maintain and expand operations 4 785 20 5 032 23 – Depreciation, amortisation and impairment 2 616 6 821 – Deferred taxation 9 14 – Net profit/(loss)* 2 160 (1 803) Value apportioned 23 949 100 21 798 100 * The above figures are disclosed net of the fair value adjustments. The comparative figures have been restated accordingly. 4 650 (4 529) Value distribution 2005 2004 Re-invested to maintain Re-invested to maintain and expand operations and expand operations 20% 23% Employees Employees 66% 62% Government 1% Government 7% Providers Providers of capital of capital 11% 10% Transnet Annual Report 2005 5 Consolidated five-year review March March March March March 2005 2004 2003 2002 2001 R million R million R million R million R million INCOME STATEMENT AND CASH FLOW Turnover 46 259 43 637 41 278 35 811 31 740 Operating profit 5 818 187 5 088 1 463 1 704 Net finance costs and fair value adjustments 2 062 6 740 9 711 (416) 2 125 Depreciation and amortisation 2 463 2 600 2 258 2 113 2 204 Impairment of assets 153 4 221 493 448 173 Profit/(loss) before taxation 8 156 (6 211) (625) 3 915 3 653 Taxation 1 629 204 16 466 260 Minority interest in income/(loss) (21) 9 (220) 12 106 Net profit/(loss) for the year 6 810 (6 332) (421) 3 437 3 287 EBITDA 8 972 7 442 11 837 6 060 8 155 Cash generated from operations 9 863 7 040 7 178 6 451 4 576 BALANCE SHEET Equity (including minority interests) 16 959 9 917 17 641 21 201 18 998 Non-current liabilities 30 710 32 217 32 669 29 695 19 571 Current liabilities 24 964 30 566 18 456 21 390 19 957 Total debt 55 674 62 783 51 125 51 085 39 528 EQUITY AND LIABILITIES 72 633 72 700 68 766 72 286 58 526 Non-current assets 55 282 57 156 54 883 43 702 42 018 Current assets 17 351 15 544 13 883 28 584 16 508 TOTAL ASSETS 72 633 72 700 68 766 72 286 58 526 Cash generated Net assets Capital from operations employed expenditure 9 863 10 601* 21 201 18 998 7 178 17 641 7 040 16 959 7 820* 6 451 5 575 4 576 9 917 4 122 2 677 01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 * Includes significant investment in renewal of SA Airways (Pty) Ltd aircraft fleet 6 Transnet Annual Report 2005 Glossary of terminology Current ratio Net assets Current assets divided by current liabilities. Total assets less total liabilities. Debt Net profit/(loss) Interest-bearing borrowings, retirement benefit obligations, Profit or loss after taxation and minority interests. derivative financial liabilities, less short-term investments and net cash and cash equivalents. Net profit margin Net profit of loss expressed as a percentage of turnover. EBITDA Earnings (profit from operations before net finance costs, other Operating profit income and income from associates) before taxation, depreciation, Profit or loss from operations before net finance costs. amortisation and impairment. Operating profit margin EBITDA margin Profit or loss from operations before net finance costs expressed EBITDA expressed as a percentage of turnover.