Directors’ report

for the year ended 28 February 2011

The directors present their report, which forms part of the annual financial statements of the company and the group for the year ended 28 February 2011.

Nature of business
Buildmax is a diversified supplier of opencast mining services, bulk earthworks and construction materials in South Africa and is listed on the JSE in the “Construction & Materials” sector.

The Buildmax group operates through three key strategic business units (“segments”), namely Mining services, Equipment sales and rental and Construction materials.

Financial results
Details of the group consolidated and company financial results, financial position and cash flows are set out in the accompanying audited annual financial statements.

Directors

Directors in office at the date of this report are:

Executive directors

TP Bantock (CEO)
CS Els (CFO) (appointed 1 April 2010)

Independent non-executive directors

MD Lamola
CB Brayshaw
CJM Wood (Chairman)

Non-executive directors

DJ Mack
MW McCulloch (appointed 12 January 2011)
G Montgomery (appointed with effect from 1 June 2011)
BT Ngcuka

In terms of the Memorandum of Incorporation, CB Brayshaw, DJ Mack, MW McCulloch, G Montgomery and BT Ngcuka will retire as directors at the upcoming Annual General Meeting, and being eligible, offer themselves for re-election.

The following directors resigned during the period under review:

PJ de Klerk	2 August 2010
HP Fourie	2 August 2010
A Maharaj	16 May 2011
M Matisonn	24 November 2010
R Munitz	24 November 2010

Share capital

On 30 August 2010 the ordinary shareholders of Buildmax Limited approved a special resolution to increase its authorised ordinary share capital from 2 000 000 000 (two billion) ordinary shares of 1 cent each to 6 000 000 000 (six billion) ordinary shares of 1 cent each and the company amended its Memorandum of Association accordingly.

During the period under review the company raised R300,5 million by way of a rights issue to Buildmax shareholders of 2 404 016 261 new Buildmax shares at an issue price of 12,5 cents each in the ratio of 2,31 new Buildmax shares for every Buildmax share held.

Details of the authorised and issued ordinary share capital are included in note 12 to the annual financial statements and in the statement of changes in equity. A detailed reconciliation of the movement in ordinary share capital and share premium is provided.

The company’s unissued ordinary shares have been placed under the control of the directors until the forthcoming Annual General Meeting.

Going concern

After making the necessary enquiries, the Board of directors believes that the Buildmax group has adequate cash resources to continue in operational existence for the foreseeable future. The group’s forecasts and projections, taking account of reasonable possible changes in trading performance, show that the group will be able to meet its short and medium-term debt repayments and that it will have adequate working capital facilities available to continue to operate within the level of its current financing structure.

Goodwill and other intangible assets

Based on the continued weak outlook for the industries the group operates in, management reviewed the carrying amounts of its goodwill and intangible assets to determine whether there is any indication that those assets have suffered an impairment. These reviews have been consistently applied at the end of each reporting period.

The recoverable amount for each separate cash-generating unit was calculated by management and verified by independent experts. An impairment of R255,8 million (2010: R647,3 million) was recognised in the statement of comprehensive income.

The impairment is disclosed in notes 3, 4 and 25 to the financial statements.

Property, plant and equipment

The group acquired property, plant and equipment amounting to R89,9 million (2010: R197,1 million) during the year under review

(refer note 2).

Impairment

Details of indications of impairment existed at the reporting date including increased repairs and maintenance, increased down time and the status of the impairment secondhand mining equipment market. Based on these impairment indicators the recoverable amount (as defined in the group’s accounting policies on page 55) of property, plant and equipment had to be reassessed at the reporting date. Utilising the services of internal industry experts, management completed a detailed item-by-item estimate of the recoverable amounts of all property, plant and equipment. The impairment amount was calculated as the difference between the recoverable amount and the carrying amount at the end of the reporting period.

An impairment of R39,9 million (2010: R421,9 million) was recognised in the statement of comprehensive income against property, plant and equipment. Refer to disclosure in notes 3.1 and 25 to the financial statements.

Change in accounting estimates

Management carried out a detailed review of the carrying values of all items of property, plant and equipment having regard to the current utilisation, maintenance programmes, the depressed secondhand mining equipment market and the scarcity of bank funding. Management concluded that an hourly rate of depreciation would be more appropriate than a straight-line basis, as this method is better aligned with usage.

During the same review, utilising the services of internal industry experts, management revised the residual values and useful lives of all items of property, plant and equipment and adjusted them accordingly.

The new basis of depreciation was applied from March 2010.

Subsidiaries

Details of the company’s interest in subsidiaries at year-end are set out in note 5 to these annual financial statements.

The assets and liabilities related to Watertite Guttering (Pty) Limited (part of the Construction Materials business unit) have been presented as held for sale following the approval of the sale of the business by the Board of Directors. The completion date of the transaction is expected by the end of July 2011.

Discontinued operations

As stated in the previous year’s annual report, management reassessed the business risks relating to Vukuza Earth Works (Pty) Limited (“Vukuza” and now renamed Buildmax Equipment (Pty) Limited) – a subsidiary in the Mining Services business unit – as a result of anticipated operating losses. Accordingly the Vukuza operations have been systematically wound down, all loss-making opencast mining contracts were terminated and the unit’s business model was changed to one of short-term plant and equipment rental for preferred customers as well as sales. Consequently operating losses were incurred and a retrenchment programme was necessary. Management expects that the wind-down of Vukuza, including the sale of assets, will be completed by the end of the next financial year. The financial results of Vukuza have been disclosed as discontinued operations for the year under review.

Business combinations

All conditions precedent to the acquisition of a further company in Buildco, Mystic Blue Trading 135 (Pty) Limited, have not been fulfilled at the date of this report and accordingly the results of this company have not been included in the results of the group. This company holds a number of prospecting rights which would not have had a material effect on the trading results or financial position of the group had these been included in the results.

Estimates and contingencies

Management makes estimates and judgments concerning the future with regards to opencast mining contracts, provisions, claims and other fair value accounting policies. The resulting estimates and judgments can only approximate the actual results. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Dividends

It is the group’s policy to consider the declaration of a dividend annually. Given the need to protect the group’s financial position, the Board of directors has decided not to declare a dividend for the year ended 28 February 2011. No dividend was declared or proposed during the prior year.

Directors’ emoluments

Directors’ remuneration, including direct and indirect benefits, for the year ended 28 February 2011 was as follows:

	Board and committee fees R'000	Salary R'000	Bonus R'000	Contributions to medical aid and retirement funds R'000	Expense allowance R'000	Total R'000

Executive Directors
TP Bantock	–	2 468	1 000	32	38	3 538
PJ de Klerk*	–	749	94	26	21	890
CS Els	–	1 494	1 000	–	29	2 523
HP Fourie*	–	639	167	94	22	922
Non-executive Directors
CB Brayshaw	301	–	–	–	–	301
MD Lamola**	238	–	–	–	–	238
DJ Mack	140	–	–	–	–	140
A Maharaj	140	–	–	–	–	140
M Matisonn	105	–	–	–	–	105
MW McCulloch	23	–	–	–	–	23
R Munitz	105	–	–	–	–	105
BT Ngcuka	140	–	–	–	–	140
CJM Wood	331	–	–	–	–	331

	1 523	5 350	2 261	152	110	9 396

* This represents their proportionate remuneration for the period 1 March 2010 to 31 July 2010.
** In addition to the director’s fees paid to Mr Lamola he receives a monthly retainer to assist with the group’s transformation strategy. This payment has been disclosed in note 41 to the annual financial statements.

Directors’ remuneration, including direct and indirect benefits, for the year ended 28 February 2010 was as follows:

	Board and committee fees R'000	Salary R'000	Bonus R'000	Company Benefits R'000	Expense allowance R'000	Total R'000

Executive Directors
TP Bantock	–	208	–	–	–	208
PJ de Klerk	–	1 720	–	63	48	1 831
HP Fourie	–	1 363	320	206	35	1 924
Non-executive Directors
CB Brayshaw	275	–	–	–	–	275
MD Lamola	220	–	–	–	–	220
DJ Mack	132	–	–	–	–	132
A Maharaj	132	–	–	–	–	132
M Matisonn	132	–	–	–	–	132
MW McCulloch	132	–	–	–	–	132
R Munitz	132	–	–	–	–	132
BT Ngcuka	132	–	–	–	–	132
CJM Wood	253	–	–	–	–	253

	1 408	3 291	320	269	83	5 371

Directors’ shareholding

At 28 February 2011, directors in office held 41 736 681 (2010: 94 241 397) shares or 1,21% (2010: 9,06%) of the issued ordinary share capital of the company.

No significant changes in directors’ shareholding were reported between 28 February 2011 and the date of this report.

	Total 2011	Direct beneficial 2011	Indirect beneficial 2011	Total 2010	Direct beneficial 2010	Indirect beneficial 2010

Executive Directors
TP Bantock*	1 530 000	–	1 530 000	–	–	–
PJ de Klerk**	N/A	N/A	N/A	15 609 005	–	15 609 005
CS Els	–	–	–	–	–	–
HP Fourie**	N/A	N/A	N/A	6 000 000	–	6 000 000
Non-executive Directors
CB Brayshaw	331 000	331 000	–	100 000	100 000	–
MD Lamola	331 000	331 000	–	100 000	100 000	–
DJ Mack*	–	–	–	–	–	–
A Maharaj* **	–	–	–	–	–	–
M Matisonn**	N/A	N/A	N/A	34 796 292	–	34 796 292
MW McCulloch*	–	–	–	–	–	–
R Munitz**	N/A	N/A	N/A	17 366 728	–	17 366 728
BT Ngcuka	39 544 681	99 300	39 544 681	20 269 372	30 000	20 239 372
CJM Wood	–	–	–	–	–	–

Total number of shares	41 736 681	761 300	40 975 381	94 241 397	230 000	94 011 397

* Has an indirect beneficial, but not material, interest in Brait.
**These directors resigned during the period under review

Borrowing powers

The company has unlimited borrowing powers in terms of its Memorandum of Incorporation.

Buildmax share incentive scheme

A share incentive scheme was approved and adopted by the company at the general meeting of shareholders held on 28 March 2008. At the date of this report, no allocations have been made in terms of this scheme.

Audit and Risk Committee

The Audit and Risk Committee fulfilled its responsibilities for the year under review. The committee satisfied itself as to the independence of the external auditors and their suitability for reappointment for the ensuing year as well as to the competency, experience and qualifications of the chief financial officer of the company.

Company Secretary

The Company Secretary is Probity Business Services (Pty) Limited.

Special resolutions

The following special resolutions were passed and registered during the year under review.

30 August 2010	- To approve an increase in authorised share capital of the company
24 November 2010	- To approve general authority to effect share repurchases

Events after reporting date

The directors are not aware of any matter or circumstance arising since the end of the financial year not otherwise dealt with in the annual financial statements (refer to note 38), which significantly affect the financial position of the group or company or the results of their operations for the year under review.