Condensed segmental analysis

Corporate informationTransnet SOC LtdIncorporated in the Republic of South Africa.Registration number 1990/000900/30.

Waterfall Business Estate9 Country Estate DriveMidrand, 1662

Short-form announcementThis short-form announcement is the responsibility of the Transnet Board of Directors. It is only a summary of the reported information and any investment decision should be based on the full announcement available on the Transnet website at www.transnet.net. The full announcement is also available for inspection at the registered office of Transnet.

OverviewRevenue for the period increased by 2,9% to R38,7 billion (2018: R37,6 billion), despite operational challenges in the rail and port businesses. Revenue growth was supported by a 3,0% increase in export iron ore volumes and a 1,6% increase in petroleum volumes.

Transnet has hosted numerous integrated customer and industry engagements to better understand customer requirements and to discern where the Company is not measuring up. The engagements included customer breakfasts and steering committees, and engagement at specific forums, such as the NAAMSA Automotive Industry Supply Chain Forum and the Container Liner Operators Forum.

Constructive outcomes of the engagements include the conclusion of long-term take-or-pay contracts with the manganese industry, as well as the signing of an internal Transnet Customer Charter to drive a customer-centric culture in the Company.

Net operating expenses increased by 1,2% to R21,2 billion (2018: R20,9 billion) despite an increase of 5,8% in personnel costs and a 5,1% increase in electricity costs. Numerous cost-optimisation initiatives were implemented throughout the Company, which aided cost containment. These initiatives included rationalising overtime, reducing professional and consulting fees; rolling out programmes to measure the execution of condition-assessment versus time-based maintenance; and limiting discretionary costs relating to travel, printing, stationery and telecommunications.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 5,1% to R17,5 billion (2018: R16,6 billion) with a resultant increase in the EBITDA margin to 45,2% (2018: 44,3%).

Profit for the period increased by 3,5% to R2,9 billion.

ProspectsThe Board of Directors is confident that the Company will continue to generate strong cash flows and report year-on-year improvement in financial performance while maintaining affordable levels of debt without any Government support. The Company’s efforts are expected to contribute to the overall efficiency and growth of the South African logistics environment and ultimately, to have a positive impact on the economic growth of the country.

* Compound annual growth rate.

Reviewed condensed consolidated financial results for the six months ended 30 September 2019

FreightRail

22 8

16

Engineering National PortsAuthority

Port Terminals

30 000

25 000

20 000

15 000

10 000

5 000

0

(R m

illio

n)

Pipelines

22 0

36

5 44

44

245

6 18

76

384

7 13

66

736

3 00

22

710

20192018

Segment revenue

FreightRail

9 68

2

Engineering National PortsAuthority

Port Terminals

12 000

10 000

8 000

6 000

4 000

2 000

0

(2 000)

(R m

illio

n)

Pipelines

9 99

1

319

(672

)

4 00

94

391

2 59

02

499

2 59

62

100

20192018

Segment EBITDA

Highlights

0

40 000

35 000

30 000

20 000

5 000

32 228 32 604 37 096 37 573 38 667

2015 2016 2017 2018 2019

25 000

15 000

10 000

Revenue 4,7%*

R m

illio

n

0

20 000

5 000

18 325 18 739 20 778 20 936 21 186

2015 2016 2017 2018 2019

25 000

15 000

10 000

Net operating expenses 3,7%*

R m

illio

n

0

20 000

5 000

13 903 13 865 16 318 16 637 17 481

2015 2016 2017 2018 2019

15 000

10 000

EBITDA 5,9%*

R m

illio

n

Condensed statement of financial positionReviewed Audited

30 September 30 September 31 March(in R million) 2019 2018 2019

Non-current assets 348 117 345 079 339 422

Current assets 14 498 20 019 16 078

Total assets 362 615 365 098 355 500

Capital and reserves 155 328 153 588 148 631

Non-current liabilities 167 184 159 142 173 782

Current liabilities 40 103 52 368 33 087

Total equity and liabilities 362 615 365 098 355 500

Condensed statement of cash flowsReviewed Audited

30 September 30 September 31 March(in R million) 2019 2018 2019

Cash flows from operating activities 10 022 9 801 21 930Cash flows utilised in investing activities (8 618) (9 027) (20 124)Cash flows (utilised in)/from financing activities (4 698) 472 (2 030)Net (decrease)/increase in cash and cash equivalents (3 294) 1 246 (224)Cash and cash equivalents at the beginning of the period 4 156 4 380 4 380Total cash and cash equivalents at the end of the period 862 5 626 4 156

Revenue increased by 2,9% to R38,7 billion for the year, supported by a 3,0% increase in export iron ore volumes and a 1,6% increase in petroleum volumes.

Net operating expenses increased by 1,2% to R21,2 billion.

EBITDA increased by 5,1% to R17,5 billion, with the EBITDA margin Increasing from 44,3% to 45,2%.

Profit for the period increased by 3,5% to R2,9 billion.

Cash generated from operations after working capital changes increased by 5,3% to R16,2 billion.

Capital investment of R7,9 billion for the period.

B-BBEE spend amounted to R14,7 billion or 102,48% of total measured procurement spend.

2,5% of labour costs was spent on training, focusing on artisans, engineers and technicians.

DIFR performance was 0,72 against a tolerance of 0,75, below the global benchmark of 1,0.

Gearing of 43,2% and cash interest cover at 3,0 times were both comfortably within loan covenant requirements.

DirectorsExecutive directorsMr MS Mahomedy (Acting Group Chief Executive)Mr MD Gregg-Macdonald (Acting Group Chief Financial Officer)

Non-executive directorsDr PS Molefe (Chairperson), Ms UN Fikelepi, Ms RJ Ganda, Ms DC Matshoga, Mr LL von Zeuner, Ms ME Letlape, Adv OM Motaung, Ms GT Ramphaka, Mr AP Ramabulana, Dr FS Mufamadi.

Acting Group Company SecretaryMs K NaickerWaterfall Business Estate, 9 Country Estate Drive,Midrand, 1662. PO Box 72501, Parkview, 2122, South Africa.

Independent auditorsSizweNtsalubaGobodo Grant Thornton Inc.20 Morris Street East, Woodmead, Johannesburg, 2191

www.transnet.net

Koedoespoort

Beit Bridge

Germiston

Johannesburg

Transnet Corporate Centre

Bloemfontein

Durban

Uitenhage

Sishen

Salt River

Richards Bay

East London

Port Elizabeth

Ngqura

Saldanha

Mossel BayCape Town

Saldahna

Engineering National Ports Authority

Port Terminals

Freight Rail Pipelines

Export iron ore volumes railed.

Export coal volumes railed.

31,0mt

General freight volumes railed.42,4mt

35,9mtContainer volumes at ports.

Pipelines petroleum volumes.

2 325 329 TEUs

9 187 Mℓ

Automotive volumes at ports.435 236 units