Sanyati Holdings Limited

Transcription

1 Previously Afriscan Holdings (Pty) Limited Sanyati Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 1988/002538/06) (JSE code: SAN ISIN: ZAE ) ( Sanyati or the company ) PROSPECTUS Prepared and issued in terms of the Listings Requirements ( the Listings Requirements ) of JSE Limited ( the JSE ) relating to a private placement of Sanyati ordinary shares by way of an offer for subscription of ordinary shares at an issue price of 100 cents per ordinary share in the share capital of Sanyati, thereby raising R before expenses ( the private placement ) and the subsequent listing of the ordinary shares of Sanyati on the Alternative Exchange ( ALT x ) of the JSE. Opening date of private placement at 09:00 on Monday, 29 May 2006 Closing date of private placement at 12:00 on* Tuesday, 30 May 2006 Anticipated listing date on ALT x at 09:00 on Friday, 2 June 2006 * Shareholders wishing to receive shares in dematerialised form must advise their Central Securities Depository Participant ( CSDP ) or broker of their acceptance of the offer to subscribe for shares in the manner and cut-off time stipulated by their CSDP or broker. This prospectus is not an invitation to the general public to subscribe for shares in Sanyati. This is an offer to selected members of the public to subscribe for shares in Sanyati and is issued in compliance with the Listings Requirements and the Companies Act, 1973 (Act 61 of 1973), as amended ( the Act ), for the purpose of providing information to the public and investors with regard to Sanyati. At commencement of business on the date of listing, the authorised share capital of Sanyati will comprise Sanyati ordinary shares with a par value of 0,001 cent each and after the private placement, there will be issued ordinary shares with a par value of 0,001 cent each and a premium of 99,999 cents each. The issue price was as per the directors valuation of the shares before the listing. The ordinary shares issued in terms of the private placement will rank pari passu with all other ordinary shares issued by Sanyati. Applications must be for a minimum of shares and in multiples of shares thereafter. There is a minimum subscription, sufficient to meet the Listings Requirements, for the listing to proceed. The ordinary shares issued will be issued either in dematerialised form or in certificated form, as requested by the applicant. Subject to the required spread of public shareholders in terms of the Listings Requirements being obtained pursuant the private placement, the JSE has granted Sanyati a listing in respect of ordinary shares on ALT x under the abbreviated name Sanyati, share code SAN and ISIN ZAE , with effect from the commencement of business on Friday, 2 June The directors of Sanyati, whose names are given in Annexure 1 to this prospectus, collectively and individually, accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any statement false or misleading, that they have made all reasonable enquiries to ascertain such facts and (if applicable) that this prospectus contains all information required by law and the Listings Requirements. PKF, Chartered Accountants (SA), whose reports are included in this prospectus, have given and have not, prior to publication, withdrawn their written consent to the inclusion of their reports in the form and context in which they appear. The Designated Adviser, attorneys, commercial banker and transfer secretaries, whose names are included in this prospectus, have given and have not, prior to registration, withdrawn their written consents to the inclusion of their names in the capacities stated and, where applicable, to their reports being included in this prospectus. An English copy of this prospectus, accompanied by the documents referred to under Documents available for inspection as set out in paragraph 33 of this prospectus, was registered by the Registrar of Companies on Thursday, 25 May 2006 in terms of section 155(1) of the Act. Warning: The listing of ordinary shares in the company is on ALT x. Investors are advised of the risks of investing in a company listed on ALT x. Investors are advised that the JSE does not guarantee the viability or the success of a company listed on ALT x. In terms of the Listings Requirements, the company is obliged to appoint and retain a Designated Adviser, which is required to, inter alia, attend all board meetings held by the company to ensure that all the Listings Requirements and applicable regulations are complied with, approve the Financial Director of the company and guide the company in a competent, professional and impartial manner. If the company fails to retain a Designated Adviser, it must make arrangements to appoint a new Designated Adviser within 10 business days, failing which the company faces suspension of trading of its securities. If a Designated Adviser is not appointed within 30 days of its suspension, the company faces the termination of its listing without the prospect of an appropriate offer to minority shareholders. The Registrar of Companies has scrutinised the information disclosed in this prospectus. The Registrar of Companies does not express a view on the risk for investors or the price of the shares. Designated adviser Auditors Attorneys e change s p o n s o r s worldwide Deneys Reitz Inc. 1984/003385/21 Date of issue: 25 May

2 CORPORATE INFORMATION Directors R D Jackson M I Krouse K Ramkissoon M J Sangweni H M Dlamini* N Khambule* (*Non-executive) Company secretary and registered office Marc Ivor Krouse, B.Comm c/o Nexia Levitt Kirson, CA(SA) 1st Floor, 215 North Ridge Road, Morningside, Durban, 4001 (PO Box , Overport, 4067) Telephone: (031) Facsimile: (031) Designated Adviser Exchange Sponsors (Pty) Limited (Registration number 1999/024433/07) 39 First Road Hyde Park, 2196 (PO Box , Craighall, 2024) Telephone: (011) Facsimile: (011) Transfer secretaries Computershare Investor Services 2004 (Pty) Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Telephone: (011) Facsimile: (011) Auditors and reporting accountants PKF Chartered Accountants (SA) Registered Accountants and Auditors (Practice number E) 19th Floor, 320 West Street Durban, 4001 (PO Box 1858, Durban,4000) Telephone: (031) Facsimile: (031) Attorneys Deneys Reitz Inc. (Registration number 1984/003385/21) 4th Floor, The Marine 22 Gardiner Street Durban 4001 (PO Box 2010, Durban, 4000) Telephone: (031) Facsimile: (031) Commercial banker First National Bank Limited (Registration number 1929/001225/06) 8 Rydall Vale Park, Douglas Saunders Drive La Lucia Ridge, 4051 (PO Box 4130, The Square, Umhlanga Rocks, 4320) Telephone: (031) Facsimile: (031)

3 TABLE OF CONTENTS The definitions commencing on page 10 of this prospectus apply mutatis mutandis to the following table of contents: CORPORATE INFORMATION 2 SALIENT FEATURES 5 IMPORTANT DATES AND TIMES 9 DEFINITIONS 10 Page PROSPECTUS 1. Introduction Incorporation and history Industry background Nature of business Prospects Major shareholders Directors and executive management Purpose of placement on Alt X Details of the private placement Material changes Profit history, forecasts, unaudited pro forma balance sheet and dividend policy Promoters interest Brokerages and commissions Preliminary expenses and issue expenses Capital commitments and contingent liabilities Loans receivable and borrowing powers Property and subsidiaries acquired Shares issued, other than for cash Property and subsidiaries disposed of Principal immovable property owned and leased Details of subsidiaries Share capital Adequacy of working capital Options and preferential rights in respect of shares Share incentive schemes Material contracts 36 3

4 Page 27. Material inter-company transactions Litigation statement Advisers interests Consents King Code Directors responsibility statement Documents available for inspection Paragraphs of Schedule 3 to the Act which are not applicable 38 Annexure 1 Directors, executive management, appointment, qualification, remuneration and borrowing powers of directors 39 Annexure 2 Audited reviewed historical financial information of Sanyati 56 Annexure 3 Independent reporting accountants report on the historical financial information of Sanyati 77 Annexure 4 Independent reporting accountants report on the profit forecast of Sanyati 79 Annexure 5 Independent reporting accountants report on the unaudited pro forma balance sheet 81 Annexure 6 Group structure and historical transactions 83 Annexure 7 Corporate Governance 87 Annexure 8 Salient features of the company s share schemes 89 Annexure 9 Vendors 96 Private placement application form Attached 4

5 SALIENT FEATURES The salient features are a summary only. For full appreciation, this prospectus should be read in its entirety. The definitions commencing on page 10 of this prospectus apply mutatis mutandis to the salient features. 1. INCORPORATION AND HISTORY 1.1 Afriscan was established in 1988 by founding shareholder Rick Jackson as a civil engineering contracting company. The company operated in KwaZulu-Natal and Eastern Cape, and soon expanded to include a plant hire company and a building company. Afriscan Holdings was formed in 1996 to control and administer this expanding group of companies. 1.2 Afriscan Construction was the first medium-sized company in KwaZulu-Natal to appoint black executive directors who owned shares in the company. By 1996, previously disadvantaged individuals owned 51,4% of the shares in Afriscan Construction through direct ownership by the Black directors and through an employees trust. Notable achievements of the company during its 18 year history included qualifying as finalists for the coveted South African non-listed company award in 1995, 1996, 1997, 1998 and 1999 and nomination as one of South Africa s top 300 empowerment companies for the company s contribution to Broad-Based Black Economic Empowerment and Transformation by the Department of Trade & Industry in In 2000, the management of Afriscan Construction, the civil engineering company, negotiated a buy-out. In terms of the agreement, Afriscan Holdings, changed its name to Sanyati Holdings (Pty) Limited on 23 January 2004 and continued to provide administration and financial services for Afriscan Construction. 1.4 Both companies grew rapidly, independently acquiring assets and other companies under their own banners. In 2002, Afriscan Construction acquired the majority shareholding in Ntuthuko and Brisk Asphalt whilst Sanyati Holdings established Sanprop as a property development company, Rusinga Building as a building company and various offshore companies offering cellular communication infrastructure in Uganda, Tanzania and Zambia. The group structure and history of Sanyati are set out in Annexure In December 2005, the shareholders of Sanyati Holdings proposed a listing of Sanyati and all its interests. The transaction was approved in February 2006, resulting in a 31,75% black economic empowered company, Sanyati Holdings, providing construction and civil engineering services. The company converted to a public company on 12 May NATURE OF THE COMPANY S BUSINESS AND INDUSTRY 2.1 Sanyati is one of the larger black empowered civil engineering and construction companies in KwaZulu-Natal. The company executes projects for a number of private clients, parastatals and Government departments. Large infrastructure projects are tendered for and undertaken by Sanyati as main contractor and/or in partnership with larger private or listed construction companies. 2.2 The company s directors are the major shareholders of Sanyati, with most of the directors having spent more than 10 years in the company s executive management team. The company operates from premises in Kloof, New Germany (Pinetown), Verulam, Botha s Hill and Richards Bay, executing projects in KwaZulu-Natal, the Eastern Cape as well as Zambia. More than 98% of the company s work force of people is previously disadvantaged individuals. 2.3 The Group s audited revenues of R260 million for the year that ended 28 February 2006 are derived equally from private and governmental projects. 5

6 2.4 The Group s business can be divided into the following areas: Afriscan Afriscan Construction was established as a construction and plant hire company and evolved into an organisation skilled in providing cost effective civil engineering solutions. Afriscan has undertaken diversified earthwork contracts such as earth wall dams, road construction earthworks, sports fields, housing platforms, canals, industrial and residential township earthworks. It also has experience in the construction and maintenance of national, provincial and township roads. Afriscan has vast experience in pipeline construction including water, sewer and storm water contracts for governmental, domestic and industrial usage. Other projects include dams, weirs, reservoirs, irrigation schemes, pump stations and flash flood retention dams. Afriscan also has significant experience in the construction of township services both greenfield and in situ upgrades. Afriscan has completed low-cost housing projects which includes infrastructure and top structure. Afriscan contributes 47% of Sanyati s revenues, with more than 30% of Afriscan s revenues earned from private clients Brisk Asphalt Brisk Asphalt, the leading Black empowered road surfacing company in the KwaZulu-Natal region, manufactures and lays asphalt and chip and spray products for Afriscan and other civil engineering companies. Brisk Asphalt s clients include local government, municipalities, roads departments and other companies. Brisk Asphalt contributes 16% of Sanyati s revenues, with 39% of its revenues earned from private clients Deroma Structures Deroma Structures specialises in heavy industrial concrete work, bridges and culverts, concrete dams, water retaining structures, industrial building works, concrete roads and telecommunications infrastructure projects. Established in Richards Bay to support ongoing projects in the area, Deroma Structures succeeded in building up an impressive client base in the region. Deroma Structure s clients include corporates, government departments, other contractors, roads departments and water boards. Deroma Structures contributes 16% of Sanyati s revenues, with more than 72% of its revenues earned from private clients Sanprop Sanprop is a wholly-owned subsidiary of Sanyati and focuses on the development of smaller customised residential developments, medium sized commercial offices and a range of industrial projects. With more than 53% of its revenues earned from private clients, Sanprop currently contributes 13% of Sanyati s revenues Rusinga Building Rusinga Building executes building projects for other subsidiaries within the Group and the private sector. The company contributes 8% of Sanyati s revenues, with 44% of its revenues earned from private clients. 3. PROSPECTS 3.1 The civil engineering industry is entering a promising period, boosted by National Government s announcement of a R372 billion capital expenditure budget over the next three to five years, as well as the demand for residential and non-residential property. Of Government s budgeted amount, R109 billion is allocated to the provinces, R82 billion to municipalities and R123 billion to public enterprises. 3.2 Market indicators have indicated that the growth in residential and non-residential construction projects has slowed down to 37% (year-on-year) and 78,1% (year-on-year), respectively, in January 2006, but is forecasted to remain at these high rates for the next two to three years. Based on current market activities and the implementation of Government s expenditure programme, the 6

7 South African Federation of Civil Engineering Contractors ( SAFCEC ) estimates the growth in the sector to increase to more than 13% per annum for the next three years. This growth figure could be higher, given local government s backlog on capital budget spending in recent years which needs to be addressed. 3.3 Sanyati s principal clients include parastatals, local government, municipalities and large corporates that are involved in the development of infrastructure, townships, retail developments and expansion projects. The company has experienced an average growth rate in revenue of more than 40% over the past three years. Its involvement in a number of projects, locally and internationally will ensure that it achieves a high revenue growth rate over the next three to five years. 4. SUMMARY OF HISTORICAL AND FORECAST INCOME STATEMENTS 4.1 The reviewed and audited historical financial information for Sanyati and its subsidiaries, the preparation of which is the responsibility of the directors, is presented in Annexure 2. Annexure 3 contains the independent reporting accountants report on the historical financial information of Sanyati. 4.2 The forecasted financial information of Sanyati and its subsidiaries for the financial periods ending 28 February 2007 to 29 February 2008, the preparation of which is the responsibility of the directors, are set out below (detailed forecasted financial information is set out in paragraph 11.2 of this Prospectus). The results must be read in conjunction with the independent reporting accountants report thereon reproduced in Annexure The table below sets out the reviewed income statements of Sanyati for the two periods ended 29 February 2004 and 28 February 2005, the audited income statement of Sanyati for the year ended 28 February 2006 and the forecast income statements for the period 28 February 2007 and 29 February Extracts from the historical, audited and forecast income statements Sanyati Sanyati Sanyati Sanyati Sanyati Reviewed Reviewed Audited Forecast Forecast Year ended 28 February (R 000) (R 000) (R 000) (R 000) (R 000) Revenue Gross profit Other income Operating expenses EBITDA Depreciation Profit before interest and taxation Net interest received/(paid) 288 (608) (1 041) (52) (603) Profit before taxation Taxation Earnings attributable to ordinary shareholders Minority Interest 120 (553) (360) Profit attributable to shareholders Pro forma weighted average shares in issue Pro forma earnings per share (cents) 2,00 2,32 8,58 11,09 14,09 Pro forma dividend per share (cents) 0,55 0,55 Note: (1) The unaudited pro forma weighted average number of shares in issue is used in order to reflect the effect of the share capital restructuring on the earnings per share calculations. 7

8 5. PURPOSE OF THE PRIVATE PLACEMENT AND THE LISTING 5.1 The purpose of the private placement is to: enhance investor and general public awareness of Sanyati s activities and specialised skills; attract and retain intellectual capital through the incentive of meaningful equity participation; raise capital and to have the flexibility of listed shares to allow the company to take advantage of potential acquisition opportunities; afford members of the investing public, clients and business associates of Sanyati the opportunity to participate directly in the income stream derived by Sanyati as well as in the future capital growth of its assets. 5.2 An amount of R , before share issue and listing expenses, will be raised by the issue of shares for cash to private individuals, corporations and institutions. The proceeds will be utilised for capital expenditure and strategic acquisitions. 5.3 Those private individuals, corporations and institutions that have been invited to apply should do so by completing the attached private placement application form in accordance with the provisions of this prospectus and the instructions contained in the private placement application form. 5.4 No offer will be made to the general public in terms of the private placement. The private placement will be made to selected applicants only. 5.5 Subject to the achievement of the required spread of 100 public shareholders and public shareholders holding 10% of the ordinary shares of Sanyati, the JSE has formally approved the listing of ordinary shares in the share capital of Sanyati on ALT x with effect from commencement of business on Friday, 2 June The shares will trade under the abbreviated name Sanyati, with the JSE code SAN and ISIN ZAE DETAILS OF THE PLACEMENT 6.1 Salient features The salient features of the private placement are as follows: Offer price per ordinary share (cents) 100 Par value per ordinary share (cents) 0,001 Premium per ordinary share (cents) 99,999 Number of ordinary shares offered in terms of the private placement Issue consideration before expenses R35 million The opening and closing dates of the private placement are as follows: Opening date of private placement at 09:00 on Monday, 29 May 2006 Closing date of private placement at 12:00 on Tuesday, 30 May 2006 Anticipated listing date on ALT x at 09:00 on Friday, 2 June The placement will not be underwritten and is subject to a minimum subscription, sufficient to meet the Listings Requirements, being achieved. 7. COPIES OF THE PROSPECTUS Copies of this prospectus, in English, may be obtained during business hours, from date of issue of the prospectus to the closing date of the private placement from the registered offices of Sanyati, Exchange Sponsors (Pty) Limited and the transfer secretaries, details of which are set out in the Corporate Information section of this prospectus. The prospectus will also be available in PDF format on the company s website ( 8

9 IMPORTANT DATES AND TIMES 2006 Abridged prospectus released on SENS on Opening date of private placement at 09:00 on Closing date of private placement at 12:00 on Listing of Sanyati on ALT x at 09:00 on Safe custody accounts at CSDP or broker updated in respect of dematerialised shareholders on or about (1) Posting of share certificates in respect of certificated shareholders on or about Refund of surplus private placement application monies received (where applicable) on Monday, 29 May Monday, 29 May Tuesday, 30 May Friday, 2 June Friday, 2 June Friday, 2 June Monday, 5 June Notes: (1) CSDP s effect payment on a delivery versus payment basis. (2) The above dates are subject to change. Any such change will be released on SENS. (3) Shareholders wishing to receive shares in dematerialised form must advise their CSDP or broker of their acceptance of the offer to subscribe for shares in the manner and cut-off time stipulated by their CSDP or broker. 9

10 DEFINITIONS In this prospectus, Annexures and the attachments hereto, unless the context indicates otherwise, references to the singular include the plural and vice versa, words denoting one gender include the others, expressions denoting natural persons include juristic persons and associations of persons and vice versa, and the words in the first column hereunder have the meanings stated opposite them in the second column, as follows: Act the Companies Act, 1973 (Act 61 of 1973), as amended; Afriscan or Afriscan Afriscan Construction (Pty) Limited (registration number Construction 1991/060155/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; Afriscan Property Trust the Afriscan Property Trust (registration number IT 1749/95), a trust duly incorporated in South Africa; Afriscan Plant Afriscan Plant (Pty) Limited (registration number 1992/005901/07), a private company incorporated in South Africa; ALT x the Alternative Exchange of the JSE; Apple Designs Nezar Trading (Pty) Limited (registration number 2004/015031/07), a private company incorporated in South Africa; applicants application form auditors or independent reporting accountants BEE selected private individuals, corporations and institutions that have been invited to subscribe for Sanyati shares in terms of the private placement; the application form in respect of the placement, attached to and forming part of this prospectus; PKF Chartered Accountants (SA) (Practice number E); as defined in the Broad-Based Black Economic Empowerment Act, 53 of 2003, and which means the economic empowerment of all black people, including women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socio-economic strategies; Brisk Asphalt Brisk Asphalt Surfacing (Pty) Limited (registration number 2000/018043/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; business day certificated shareholders certificated shares common monetary area any day other than a Saturday, Sunday or official public holiday in South Africa; Sanyati shareholders who elect to receive physical Sanyati share certificates; Sanyati shares for which physical Sanyati share certificates have been issued; South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho; 10

11 C&R Construction Emberton Investments (Pty) Limited (registration number 2004/026812/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Rusinga Building, which is a whollyowned subsidiary of Sanyati; CSDP dematerialised shareholder Deroma Structures Central Securities Depository Participant as defined in terms of the Securities Services Act, 36 of 2004, appointed by an individual shareholder for purposes of, and in regard to the dematerialisation of documents of title for purposes of incorporation into the STRATE system; a shareholder who holds ordinary shares which have been incorporated into the STRATE system and which are no longer evidenced by physical documents of title in terms of the Custody and Administration of Securities Act, 1992; Deroma Structures (Pty) Limited (registration number 2001/023079/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; Designated Adviser Exchange Sponsors (Pty) Limited (registration number 1999/024433/07), a company incorporated in accordance with the laws of South Africa, a Designated Adviser as contemplated in the Listings Requirements; directors or board of directors the directors of Sanyati, further details of whom appear in Annexure 1; documents of title EBITDA emigrant Exchange Control Regulations Government the Group IFRS share certificates, certified transfer deeds, balance receipts or any other documents of title acceptable to Sanyati in respect of shares; earnings before interest, taxation, depreciation and amortisation; an emigrant from South Africa whose address is outside the common monetary area; the Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of the Currency and Exchanges Act, 1933 (Act 9 of 1933), as amended; the Government of South Africa; includes the holding company Sanyati and the trading activities of the wholly-owned Sanyati subsidiaries, all companies incorporated in accordance with the laws of South Africa; International Financial Reporting Standards, which comprise standards and interpretations approved by the International Accounting Standards Board, International Financial Reporting Interpretations Committee and International Accounting Standards, and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee; incorporation the date of incorporation of Sanyati, being April InfraCell Zambia the JSE InfraCell Zambia Limited (registration number 60531), a private company incorporated in Zambia, a wholly-owned subsidiary of Deroma Structures, which is a wholly-owned subsidiary of Sanyati; JSE Limited (registration number 2005/022939/06), a company duly registered and incorporated with limited liability under the company laws of South Africa, and licensed as an Exchange under the Securities Act,

12 the last practicable date the listing Listings Requirements the last practicable date prior to the finalisation of this prospectus, being Tuesday, 23 May 2006; the proposed listing of the entire issued share capital of the company on ALT x,onfriday, 2 June 2006; the Listings Requirements of the JSE; Motheo East Motheo East (Pty) Limited (registration number 2001/009241/07), a private company incorporated in South Africa; National Air Cargo National Air Cargo (Pty) Limited (registration number 1983/009348/07), a private company incorporated in South Africa; non-resident a person whose registered address is outside the common monetary area and who is not an emigrant; Ntuthuko Ntuthuko Development (Pty) Limited (registration number 1984/006483/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; Nyanga Roads RZT Zelpy 4601 (Pty) Limited (registration number 2005/044452/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Brisk Asphalt; ordinary shares own-name registration ordinary shares of 0,001 cent each in the share capital of the company; shareholders who hold shares that have been dematerialised and are recorded by the CSDP on the sub-register kept by that CSDP in the name of such shareholder; private placement or placement the private placement of ordinary shares at 100 cents per ordinary share to selected institutions, corporations and individuals for cash; Properties One Sanyati Properties One (Pty) Limited (registration number 2004/027134/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; Properties Two Sanyati Properties Two (Pty) Limited (registration number 2004/015000/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; Properties Three Sanyati Properties Three (Pty) Limited (registration number 2003/027584/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; Properties Four Sanyati Properties Four (Pty) Limited (registration number 2004/027338/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; Properties Five Sanyati Properties Five (Pty) Limited (registration number 2004/029295/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; Properties Six Sanyati Properties Six (Pty) Limited (registration number 2004/029296/07), a private company incorporated in South Africa; Properties Seven Sanyati Properties Seven (Pty) Limited (registration number 2004/027476/07), a private company incorporated in South Africa; Properties Eight Sanyati Properties Eight (Pty) Limited (registration number 2004/032343/07), a private company incorporated in South Africa; Properties Nine Sanyati Properties Nine (Pty) Limited (registration number 2004/031953/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; 12

13 Properties Ten Sanyati Properties Ten (Pty) Limited (registration number 2004/032404/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanprop; this prospectus Rand or R or cents Rusinga Building SAFCEC Sanprop or Sanyati Properties Sanyati, the company, Sanyati Holdings, Afriscan Holdings or Sanyati Group Sanyati subsidiaries Secprop 223 Investments Secprop 230 Investments SENS share incentive schemes shareholders South Africa STRATE Surlink this bound document, dated 25 May 2006, including all Annexures and the attachments hereto; the official currency of South Africa; Rusinga Building (Pty) Limited (registration number 1995/006764/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; South African Federation of Civil Engineering Contractors, an employer elected body; Sanprop (Pty) Limited (registration number 2003/029018/07), a private company incorporated in South Africa, a wholly-owned subsidiary of Sanyati; Sanyati Holdings Limited (registration number 1988/002538/06), a public company incorporated in accordance with the laws of South Africa; collectively, Afriscan, Brisk Asphalt, Deroma Structures, Rusinga Building, Sanprop, Ntuthuko, Secprop 223, Nyanga Roads, InfraCell Zambia, Properties One, Properties Two, Properties Three, Properties Four, Properties Five, Properties Nine, Properties Ten and C&R Construction; Secprop 223 Investments (Pty) Limited (registration number 2000/020595/07), a private company incorporated in South Africa and trading as Afriscan Savuka; Secprop 230 Investments (Pty) Limited (registration number 2001/024847/07), a private company incorporated in South Africa; the Securities Exchange News Service of the JSE; the Sanyati Executive Share Incentive Scheme, comprising a deferred purchase and/or option scheme and the Sanyati Broad-Based Employee Share Trust, the salient features of which are set out in Annexure 8; holders of ordinary shares in Sanyati; the Republic of South Africa; the settlement and clearing system used by the JSE, managed by STRATE Limited (registration number 1998/022242/06), a public company incorporated in accordance with the laws of South Africa; Surlink (Pty) Limited (registration number 1999/019085/07), a private company incorporated in South Africa; and transfer secretaries Computershare Investor Services 2004 (Proprietary) Limited (registration number 2004/003647/07), a company incorporated in accordance with the laws of South Africa. 13

14 Previously Afriscan Holdings (Pty) Limited Sanyati Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 1988/002538/06) (JSE code: SAN ISIN: ZAE ) ( Sanyati or the company ) Directors R D Jackson M I Krouse K Ramkissoon M J Sangweni H M Dlamini* N Khambule* (*Non-executive) PROSPECTUS 1. INTRODUCTION 1.1 Sanyati intends to list on ALT X of the JSE as a strategic step that will allow the company to raise capital in support of its vision of becoming a medium to large size empowered construction company. A listing will provide the capital, which it requires for strategic acquisitions and capital expenditure for growth. 1.2 Sanyati is one of the larger black empowered civil engineering companies in KwaZulu-Natal and focuses on civil engineering and construction projects in the region as well as in selected African countries. The company provides its services to customers in the construction industry, executing projects for corporations, parastatals and local government either as partners in a consortium or as the primary contractor. 1.3 Sanyati can be regarded as one of the pioneers of empowerment in the construction industry, having secured 51,4% black shareholding in Its BEE status allows the company to be preferred to other contractors on public contracts. 1.4 A key part of the company s business strategy is its investment in its employees, with the emphasis on training and retaining personnel, in order to enhance and sustain its competitiveness. With 98% of its work force of people being black, management s focus is aimed at retaining personnel in an industry sector characterised by a shortage of skills. 1.5 A proven track record of delivery, along with the company s empowerment credentials have ensured that Sanyati is well positioned for construction projects, either as the primary contractor, or as part of a consortium bidding for the larger projects in the KwaZulu-Natal region. The company s customer-driven focus, reliability, competitive pricing and track record ensure that it remains a prominent player in the construction sector. 1.6 A listing on ALT X improves the company s ability to raise capital for strategic acquisitions. Sanyati will be favourably positioned for future tenders, which will ensure that the company maintains its revenue growth rate of more than 40% over the next three to five years. 14

15 2. INCORPORATION AND HISTORY 2.1 Afriscan was established in 1988 by founding shareholder Rick Jackson as a civil engineering contracting company. The company operated in KwaZulu-Natal and Eastern Cape, and soon expanded to include a plant hire company and a building company. Afriscan Holdings was formed in 1996 to control and administer this expanding group of companies. 2.2 Afriscan Construction was the first medium-sized company in KwaZulu-Natal to appoint black executive directors who owned shares in the company. By 1996, Previously Disadvantaged Individuals owned 51,4% of the shares in Afriscan Construction through direct ownership by the Black directors and through an employees trust. Notable achievements of the company during its 18 year history included qualifying as finalists for the coveted South African non-listed company award in 1995, 1996, 1997, 1998 and 1999 and nomination as one of South Africa s top 300 empowerment companies for the company s contribution to Broad-Based Black Economic Empowerment and Transformation by the Department of Trade & Industry in In 2000, the management of Afriscan Construction, the civil engineering company, negotiated a buy-out. In terms of the agreement, Afriscan Holdings changed its name to Sanyati Holdings (Pty) Limited on 23 January 2004 and continued to provide administration and financial services for Afriscan Construction. 2.4 Both companies grew rapidly, independently acquiring assets and other companies under their own banners. Afriscan Construction acquired the majority shareholding in Ntuthuko in 2000 and Brisk Asphalt in August Sanyati Holdings acquired Deroma Structures in September 2003, established Sanprop as a property development company in September 2003 and established Rusinga Building as a building company in October In December 2005, the shareholders of Sanyati Holdings proposed a listing of Sanyati and all its interests. The transaction was approved in February 2006, resulting in a 31,75% black economic empowered company, Sanyati Holdings, providing construction and civil engineering services. The company converted to a public company on 12 May The group structure and historical transactions of Sanyati are set out in Annexure INDUSTRY BACKGROUND 3.1 Introduction The Reserve Bank s Quarterly Bulletin of December 2005 has indicated that the buoyant conditions that the construction sector experienced in 2004 have continued into the first three-quarters of The level of the real value added by the construction sector in the first three quarters of 2005 was 10% higher than in the first three quarters of 2004, almost equal to the annual growth of 10,5% recorded for 2004 as a whole. The growth is expected to continue, as it is fuelled by the announcement of Government s capital expenditure projects and the continued demand for residential and non-residential properties. The urgency in government spending is fuelled by the demand on the country s capacity, which needs to be increased in order to meet Government s objective of sustaining an economic growth rate of 6%. To support the country s growth objectives, government recently announced its proposed government expenditure over the Medium Term Expenditure Framework. Specific budgeted amounts include the following: R47,0 billion by Transnet of which R40,0 billion will be for harbours, ports, railways and a petroleum pipeline; R5,2 billion by the Airports Company of South Africa including airport improvement and the Dube Trade Port; and R7,5 billion for stadiums and infrastructure for the 2010 World Cup. With its regional focus on the KwaZulu-Natal area, the implementation of the above projects will favour Sanyati as one of the larger civil engineering and construction companies in the region. 15

16 3.2 Civil Engineering Growth in the construction sector is linked to government policy and general economic conditions that determine the appetite for expansion. The various large scale projects will be awarded to industry players with the ability to execute these projects successfully. Major construction companies will utilise subcontractors to execute key elements of such projects, which will substantially benefit a company like Sanyati with its empowerment credentials and regional footprint. Based on certain assumptions on the size and starting date of some of the key government projects, SAFCEC has forecasted the growth in the Engineering Sector at 13,25% in 2006 and 25,35% in Construction The macro-economic environment and the relatively low level of consumer debt remain supportive of a firm residential market. Anecdotal evidence however shows that the anticipated consolidation in house prices is creeping in, as the average time for houses on the market has increased to 53 days, whilst properties on average are being sold for 4% less than the asking price by January The growing middle class is supporting the middle price segment of the housing market, whilst increasing property prices in the premium segment have been stimulating the demand for more affordable property, resulting in townhouses and flats gaining popularity relative to houses. According to Statistics South Africa, the number of houses completed in September 2005 was almost 3,1% lower than in the corresponding period the previous year, while the number of townhouses and flats completed grew by 170% over the same period. While this reflects a growing supply of townhouses and flats, the continuous price growth in this segment implies that the demand for this type of accommodation still exceeds supply. Growth in real gross fixed capital formation by the private sector accelerated from an annualised rate of 4% in the second quarter to 7,5% in the third quarter of Stronger rates of growth in real capital outlays were recorded in several sectors of the economy, including manufacturing, construction, commerce as well as the transport and communication sectors. Real investment in the manufacturing sector benefited from capital outlays for manufacturing plants, where the construction of new shopping malls and non-residential buildings contributed to gross fixed capital formation by the private sector. 4. NATURE OF BUSINESS 4.1 Sanyati is one of the larger black empowered civil engineering and construction companies in KwaZulu-Natal. The company executes projects for a number of private customers, parastatals and government. Large infrastructure projects are tendered for and undertaken by Sanyati as main contractor and in partnership with listed construction companies. Afriscan has vast experience in the construction of township services, both greenfield and in situ upgrade. The company has completed low-cost housing projects which included infrastructure and top-structure. 4.2 The company s directors are the major shareholders of Sanyati, with most of the directors having spent more than 10 years in the company s executive management team. The company operates from premises in Kloof, New Germany (Pinetown), Verulam and Richards Bay, executing projects in KwaZulu-Natal, the Eastern Cape as well as Zambia. 4.3 The company s audited revenues of R260 million for the year that ended 28 February 2006 are derived equally from private and governmental projects. 4.4 The company s business can be divided into the following areas: Afriscan Afriscan was established as a construction and plant hire company and evolved into an organisation skilled in providing cost effective Civil Engineering solutions. Afriscan has 16

17 undertaken diversified earthwork contracts such as earth wall dams, roadwork earthworks, sports fields, housing platforms, canals, industrial and residential township earthworks. It also has experience in the construction of national, provincial and township roads. Afriscan has vast experience in pipeline construction that includes water, sewer and storm water contracts for governmental, domestic and industrial usage. Other projects include dams, weirs, reservoirs, irrigation schemes, pump stations and flash flood retention dams. Afriscan contributes 47% of Sanyati s revenues, with more than 30% of its revenues earned from private clients Brisk Asphalt Brisk Asphalt Surfacing is the leading Black empowered road surfacing company in the region and manufactures and lays asphalt and chip and spray products for Afriscan and other civil engineering companies. Brisk Asphalt s clients include local government, municipalities, roads departments and other contractors. Brisk Asphalt contributes 16% of Sanyati Holdings revenues, with 39% of its revenues earned from private clients. Effective 17 March 2006, Brisk Asphalt acquired Nyanga Roads. This will add to the range of services now offered by the road surfacing division to include chip and spray, slurry seal, patch and repair and emulsion manufacture and sales. Nyanga Roads is forecast to contribute R60 million turnover to the Brisk Asphalt operations in the 2007 financial year Deroma Structures Deroma Structures specialises in heavy industrial concrete work, bridges and culverts, concrete dams, water retaining structures, industrial building works, concrete roads and telecommunications infrastructure projects. Established in Richards Bay to support ongoing projects in the area, the company succeeded in building up an impressive client base in the region. Deroma Structure s clients include corporates, government departments, other contractors, roads departments and water boards. Deroma Structures contributes 16% of Sanyati Holdings revenues, with more than 72% of its revenues earned from private clients Sanprop Sanprop is a wholly-owned subsidiary of Sanyati and focuses on the development of smaller customised residential developments (four to ten units), medium-sized commercial offices and a range of industrial projects. With more than 53% of its revenues earned from private clients, Sanprop currently contributes 13% of Sanyati s revenues, Rusinga Building Rusinga Building executes building projects for other subsidiaries within the Group and the private sector. Rusinga Building contributes 8% of Sanyati s revenues, with 44% of its revenues earned from private clients. 4.5 The group does not receive any Government protection and there is no investment encouragement law affecting the Group s businesses. 5. PROSPECTS 5.1 Government has announced its intention to invest in infrastructural projects of more than R372 billion over the next three to five years. Such projects form part of Gross Fixed Capital Formation ( GFCF ) and have lead to an increased GFCF to GDP ratio of 17%. It is Government s intent to increase this ratio to 25% by Of Government s budgeted amount, R109 billion is allocated to the provinces, R82 billion to municipalities and R123 billion to public enterprises. Sanyati s track record and diversity positions it well to tender for the various projects announced by government. 5.2 Sanyati has experienced an average growth rate of more than 40% over the past three years. The company is involved in a number of projects that include infrastructural expansion projects at Richards Bay, the erection of telecommunication towers for the mobile operators in Zambia and 17

18 the R80 million earthworks project at River Horse Industrial Development in Durban. Sanyati also forms part of the Group 5 (Ilembe) consortium that has submitted a proposal for the Dube Trade Port project in Durban. With the current level of its order book and the anticipated increase in government infrastructure spending, Sanyati should be able to sustain a high revenue growth rate for the next three to five years. 6. MAJOR SHAREHOLDERS 6.1 There are no shareholders other than directors of Sanyati or its subsidiary companies that are, directly or indirectly, beneficially interested in 5% or more of the issued ordinary share capital of Sanyati at the last practicable date. Refer to paragraph 5.1 in Annexure 1 for the directors shareholdings. The subsidiary directors holding in excess of 5% at the last applicable date are: Imtiaz Saib shares for a direct holding of 7,44%; and Dave Bruce shares for a direct holding of 6,11%. 6.2 No shareholder through direct and/or indirect holding will, insofar as the directors of Sanyati are aware, directly or indirectly, hold 35% (controlling interest) or more of the issued share capital of Sanyati following the private placement. The company will have a public shareholding of at least 100 shareholders that will hold a minimum of 10% of the ordinary shares on the day of listing. There will be no controlling shareholder in Sanyati after the listing. 6.3 There will be no change in the controlling shareholder as a result of the private placement. 6.4 There have been no changes in the controlling shareholder and trading objects of Sanyati and its subsidiaries during the preceding five years. 7. DIRECTORS AND EXECUTIVE MANAGEMENT 7.1 Details of directors and executive management, including the appointment, remuneration, borrowing powers of directors and directors interests and declarations are set out in Annexure The company has obtained confirmation from the directors that they are free of any conflict of interest between the directors duties to the company and their private interests. 8. PURPOSE OF PLACING AND LISTING ON ALT x 8.1 Subject to the achievement of the required spread of public shareholders, the JSE has formally approved the listing of ordinary shares in the share capital of Sanyati on ALT x with effect from commencement of business on Friday, 2 June The shares will trade under the abbreviated name Sanyati, with the JSE code SAN and ISIN ZAE Sanyati has reserves of at least R2 million in retained earnings. The company will have a public shareholding of at least 100 shareholders that will hold a minimum of 10% of the ordinary shares on the day of listing. 8.3 It is intended that an amount of R , before share issue and listing expenses, will be raised by the issue of shares for cash to private individuals, corporations and institutions. The proceeds will be utilised for capital expenditure and strategic acquisitions. 8.4 The purpose of the placement and the listing are to: enhance investor and general public awareness of Sanyati, its activities and specialised skills; attract and retain intellectual capital through the incentive of meaningful equity participation; raise capital and to have the flexibility of listed shares to allow the company to take advantage of potential acquisition opportunities; broaden Sanyati s shareholder base and to obtain the spread of shareholders required for the listing of Sanyati s ordinary shares on the JSE; 18