Executive Review
of Performance

The RPE segment includes, inter alia, the businesses of Equipment Spare Parts Africa (Proprietary) Limited (“ESP”) and KMP Holdings Limited (“KMP”).

• RPE has delivered strong performance during the trading year, achieving above average results in revenue and operating profit:
• revenue increased by 10.6%;
  the sustainable operating profit before interest on financing transactions and foreign exchange movements (“operating profit”) increased by 32.8%;
• the net operating assets in this segment were R481 million and the return on net operating assets was 29.8%;

Further efficiencies and synergies are envisaged through the sales of KMP into our KAG, where further focus will be put on improving product pricing and increasing our product offering and cross selling to our customers.

The KAG Group is equity accounted as a joint venture.
The US market provided tempered demand throughout the year for undercarriage components with the other companies in KAG managing to provide satisfactory results, against the backdrop of the increasing geopolitical tensions between China and the West.

In respect of the year under review:

• the sustainable operating profit before interest on financing transactions and foreign exchange movements (“operating profit”) decreased by 27% to SGD26 million;
• the net operating assets in this segment were SGD203 million and the return on net operating assets was 12.8%.

RPI focuses on the import and local manufacture of industrial consumable products, services, and solutions for all industries
in Southern Africa. RPI offers world-class solutions and products with the aim to improve the efficiency of our customers and ensure that they remain globally competitive.

RPI continues to limit the impact of loadshedding and water disruptions with the use of generators, solar, where viable, and water storage solutions, but the impact of areas outside our control, like that of connectivity and, the impacts of these factors on our customers, has affected the business performance. The significant increase in freight charges and the continued local increase in fuel prices resulted in the higher cost of products. Due to contract pricing with several of our major customers, the effect of these higher product costs cannot always be passed on immediately, which has put pressure on our gross margins in some areas of the business. The business continues to focus on inventory, ensuring the correct fill rates for customers, while also focusing on strategies to move inventory that will move out of the current age cycle.

In respect of the year under review:

• revenue increased by 1.9% from R4.8 billion to R4.9 billion;
  the sustainable operating profit increased by 2.2% from R317 million to R324 million;
• the net operating assets increased marginally by 3% from R1.84 billion to R1.90 billion;
• the return on net operating assets for the financial year was 17.1%, a decrease of 0.1% from 17.2%.

RPA, which operates in South Africa and certain European countries, consists of automotive and agricultural replacement parts businesses. RPA focuses on the importation and distribution of automotive aftermarket parts and Original Equipment Manufacturer (“OEM”) kits, as well as driveshaft parts and other replacement parts for the agricultural industry. The Polish operations and warehouse have been part of the robust performance, validating these acquisitions with further growth into Europe expected in the years ahead. Operations out of Spain will be the first new operation started in the year ahead.

New product lines will be introduced into the Imex business which was acquired in July. Located in Castleford in the UK, Imex supplies aftermarket automotive components mainly into the UK market. As part of the growth of the RPA segment, management are evaluating the potential of expanding the product range into passenger car products as well as opening further branches across the European continent to continue the expansion of the offshore portion of the business and to broaden
the customer and product base.

In respect of the year under review

• revenue increased by 34% from R551 million to R738 million, primarily driven by the Imexpart acquisition;
• sustainable operating profit for the segment decreased by 18.7% from R111 million to R91 million;
• net operating assets increased by 47% from R339 million to R499 million;
• the return on net operating assets for the financial year
  decreased from 32.8% to 18.2%.

CE sells capital equipment, spare parts and provides the related services to the earth-moving, construction, mining, and logistics industries.

Mining and material handling showed strong demand for some of the bigger machines supplied by CE due to high commodity prices and the weakening Rand. However, the problems being experienced in the South African harbours and transport thereto are hindering sales and impacting revenue for the mining community for export product. The construction industry woes continue, as they also faced a very tough year, with very little in both infrastructure and commercial build.

Through the year our capital equipment competitors, who represent Japanese brands in the market, have had the upper hand as the Rand strengthened against the Yen, making their products more competitive against those which were either Euro or US dollar priced. CE therefore had to reduce its gross profit margins to compete. The demand for the Tonly rigid off-road dump truck out of China continues to grow and is contributing meaningfully to both revenue and gross profit.

After-market spare parts sales in the OEM market continue to do well. Spare parts contribute a significant part of the annual gross profit of this segment