ShareData · 1 Contents Chairman’s statement 2 Corporate governance 5 Board of directors 9 Eight year review 10 Financial highlights 11 Annual financial statements Directors’

A N N U A L R E P O R T 2 0 0 6

E L B G R O U P

1

C o n t e n t s

Chairman’s statement 2

Corporate governance 5

Board of directors 9

Eight year review 10

Financial highlights 11

Annual financial statements

Directors’ responsibility for financial reporting 12

Certificate of the company secretary 12

Report of the independent auditors 13

Directors’ report 14

Accounting policies 16

Income statements 23

Balance sheets 24

Statements of changes in equity 25

Cash flow statements 27

Notes to the annual financial statements 29

Subsidiaries and joint venture 65

Analysis of ordinary shareholders 66

Directors’ interests in ordinary shares 66

Analysis of transactions in ordinary shares 67

Shareholders’ diary 67

Administration 68

Notice of annual general meeting 70

Proxy form 71

Notes to the proxy form 72

2

ELB ENGINEERING GROUP

ELB Equipment has a number of locally designed and

manufactured products and represents internationally

renowned manufacturers whose products are designed to

meet industrialised first-world standards. Operating in

three specialised divisions, each with responsibility for

specific products, it provides a streamlined and

professional service, that can offer the industry a wide

selection of products.

Construction Equipment

• Ditch Witch Trenching & Directional Drilling Equipment

• Terex/Fermec (formerly MF Industrial) Backhoe

Loaders

• Mitsubishi Motor Graders

• Simesa Compaction Equipment **

Earthmoving Equipment

• Furukawa Wheel Loaders

• Kawasaki Wheel Loaders

• Sumitomo Tracked Excavators

• Terex Rigid & Articulated Dump Trucks

Mining/Quarrying Equipment

• Allu-SM Screener-Crusher Buckets

• Furukawa Drill Rigs

• Furukawa Hydraulic Breakers

• Taurus Heavy Duty Rotary Barrel Screens **

• ELB Static & Mobile Conveyors **

• Terex / Pegson Mobile & Static Crushing Plants

• Oresizer Vertical Shaft Impact Crushers **

• Terex / Powerscreen Mobile & Static Screens

• Simesa Underground Equipment **

**Designed and manufactured by ELB Equipment

In order to service its customer base effectively, ELB

Equipment based in Boksburg has branches in Cape

Town, Durban, Kimberley and Wolmaransstad as well as a

well-established dealer network throughout South Africa

and other Southern African states. In addition to offering

parts and field service round-the-clock, a large centralised

and fully equipped refurbishing facility is available for

rebuilding and refurbishing of ELB Equipment products.

Ditch Witch Australia

Ditch Witch Australia is an importer and distributor of

Underground and Utility Construction Equipment.

Product Lines include

• Ditch Witch Trenching and Directional Drilling

Equipment

• Stanley Hydraulic Packs and Tools

• Trenchmaster Mini Trencher

• Bedmaster Bed Defining Machine

• McLaughlin Case Boring Equipment, Augers and

Cutter Heads

• Vacuum Excavation Equipment

• Belle Concrete and Mortar Mixers and Compaction

Equipment

C h a i r m a n ’ s s t a t e m e n t

Following the recent restructure ELB is an investment holding company owning 85 per centof ELB Engineering Limited ("ELB Engineering") and 100 per cent of ELB Timber Holdings

Limited ("ELB Timbers").

3


• Soltau Microtunnelling Systems

• Wirth Horizontal Directional Drilling Equipment

Markets served in Australia are gas, water, sewage,

electricity, communications, the Defence Force and

airports and dock authorities.

Ditch Witch Australia distributes direct through sales and

service offices in Sydney, Melbourne, Adelaide, Perth and

Brisbane.

ELB Engineering Services has, over the past year,

made solid advances since its inception early in 2005.

The business focuses on the supply of a total engineered

solution to the mining, industrial and power sectors based

on its own in house capability as well as technology

agreements with world class product and know how

companies.

Bulk Materials Handling

Augmenting the in house expertise base, ELB Engineering

Services has an exclusive license with KOCH Materials

Handling, from Germany. The capability encompasses the

supply of turn key packages from run of mine tip to ship

loading including all conveyor options, stockyard

equipment and simulation modelling.

KONECRANES, a world leader in the supply of port

handling equipment is serviced via a technology

agreement with ELB Engineering Services for the large

part of Africa.

KONECRANES not only provides the engineering of its

equipment to ELB Engineering Services but further

provides an on going service and maintenance ability, with

over 250 000 cranes under its control, globally.

Pneumatic Conveying

ELB Engineering Service’s capability for the supply of most

types of pneumatic conveying is supported by the world

class technology from Claudius Peters. Claudius Peters

provide the vast majority of equipment required for the

grinding, handling, cooling, mixing, storing and out loading

in the Cement, Lime, Ash and Gypsum industry.

Coal Beneficiation

ELB Engineering Services provides the materials handling

inputs into the Sedgman coal beneficiation plants.

Sedgman is a world renowned provider of total solutions

from project assessment to operations, in the field of coal

handling and process plants.

ELB TIMBER GROUP

ELB Timbers comprises three operating divisions. These

are:

ELB Timber Manufacturing which is based in

Lydenburg and manufactures a range of timber products

from rotary peeled veneer including plywood board, block

board and sugar board.

The Clipbox range of reusable packaging that uses spring

steel clips as connectors is produced out of a facility

based in Krugersdorp.

Veneercraft which is based in White River in

Mpumalanga and produces both rotary peeled and sliced

veneer as well as plywood. A veneer upgrading facility also

allows it to manufacture full skin veneer layons for the

furniture and door markets.

Plycraft which is based in Krugersdorp and manufactures

moulded furniture components (interior shells, arms, toe

(continued)

4


caps, etc) out of laminated pine timber, primarily for the

South African office chair market.

FINANCIAL RESULTS

The ELB Group saw sales increase from R575 million in

2005 to R 694 million in 2006 and headline earnings from

R7,6 million in 2005 to R12,1 million in 2006.

The ELB Engineering Group had another good year with

sales increasing from R464 million in 2005 to R591

million in 2006 and headline earnings increasing from

R15,7 million in 2005 to R26,7 million in 2006.

The ELB Timber Group on the other hand was not

profitable. Sales, including discontinued operations,

increased from R87 million in 2005 to R103 million in

2006. The loss from continuing operations in 2006,

including a R3 million impairment of plant and equipment,

was R12,9 million compared to R2,9 million loss in 2005.

The losses for discontinued operations, after closing the

board plant in Malelane, were R9,6 million in 2006

compared to R5,8 million in 2005. The losses from

continuing operations were attributable largely to costs

associated with commissioning a new dryer, rationalising

business units, as well as a significant increase in raw

material costs, the strong Rand and cheap imports making

it difficult to achieve the gross margins necessary to be

profitable. The losses of R9,6 million for discontinued

operations include shut down costs and asset

impairments of R7,6 million.

PROSPECTS

The ELB Engineering Group is well positioned to benefit

from both the ongoing infrastructure spend in Southern

Africa and Australia as well as the increase in capacities

and efficiencies being implemented by the global

resources and power industry sectors. Turnover is

expected to grow substantially in real terms. Though the

recent restructure and introduction of a BEE Trust which

now owns 15 per cent of the ELB Engineering Group will

dilute earnings for the coming year ELB Engineering

Services is expected to start to make a meaningful

contribution for the first time.

The prospects for the ELB Timber Group becoming

profitable in the near future are not encouraging due to

further significant increases expected in timber input costs

while at the same time cheaper imports are expected to

further reduce the selling price of plywood products to

even less profitable levels. A decision has therefore been

made by the ELB Board to support and to further

rationalise the business such that timber losses will have

ceased by no later than June 2007.

DIVIDENDS

The final dividend has been increased from 5 cents in

2005 to 10 cents in 2006 reflecting the Board’s

confidence in the prospects for the ELB Engineering Group

going forward.

The total dividend for the year is therefore 15 cents per

share versus 10 cents per share for the 2005 financial

year.

CONCLUSION

I would like to thank all those who have contributed to ELB

over the past year.

Each year offers its own challenges which will need

dedication and commitment from all those involved.

A G FLETCHER

23 October 2006

(continued)

5

C o r p o r a t e g o v e r n a n c e

The Group is committed to the highest standards of

business integrity, ethical values and professionalism in all

its activities. As an essential part of this commitment the

board endorses the principles embodied in the King II

Report on Corporate Governance and has materially

complied with the King Code throughout the accounting

period under review. The key principles underpinning the

governance of the Group are set out in this statement.

BOARD OF DIRECTORS

The Group has a unitary board structure. In line with best

practice and to meet the Listings Requirements of the

JSE, the roles of the chairman and the senior executive

directors have been separated. The board is chaired by Mr

Anthony Fletcher, who succeeded Mr Bill Bateman on his

retirement from the board, whilst the executive

management of the operations conducted by the Group is

the responsibility of the chief executive officers of the

operating subsidiaries. This ensures a balance of authority

and precludes any one director from exercising unfettered

powers of decision-making.

At the date of this report, the board of directors comprised

eight members of whom three are independent non-

executive directors and one is a non-executive director.

Meetings are held at least five times a year, appropriately

timed to review quarterly results and the budget for the

forthcoming year. The agenda includes, as necessary,

strategic considerations; identification, measurement and

management of risk; acquisitions of significance;

investment policy and areas of concern. Additional board

meetings may be convened as and when necessary.

The board has established a number of committees in

which the non-executive directors play an active role and

which operate within the defined terms of reference laid

down by the board. All committees are chaired by an

independent non-executive director save for the

remuneration and nominations committee which is

chaired by Mr AG Fletcher (formerly by Mr WGL Bateman).

All committees have met their responsibilities during the

year in compliance with their terms of reference.

THE AUDIT COMMITTEE

The audit committee operates in terms of a mandate from

the board to review the financial statements, the

appropriateness of the Group's accounting and disclosure

policies, compliance with International Financial Reporting

Standards and the effectiveness of internal controls.

In keeping with this policy, KPMG Inc (KPMG) has been

appointed as external auditor whilst BDO Spencer Steward

(Johannesburg) Inc (BDO) has been appointed to fulfil the

role of internal auditor. Expert advice on non-audit issues

is normally obtained from other third party professionals

save where the use of either KPMG or BDO is deemed

more appropriate and no conflict with the respective

external and internal audit roles is evident.

The members of the audit committee are two of the

independent directors, Messrs RGH Smith (chairman) and

JC Hall and the chairman of the board, Mr AG Fletcher.

Both the external auditors and the internal auditors have

6


unrestricted access to this committee and attend

meetings whenever necessary to report on their findings

and to discuss accounting; auditing; risk identification,

measurement and mitigation; internal control and financial

reporting matters. Executive directors responsible for the

sub-groups and members of the management teams are

invited to attend such meetings whenever their presence

is considered necessary.

THE REMUNERATION AND NOMINATIONS

COMMITTEE

The members of this committee are Messrs AG Fletcher,

JC Hall and RGH Smith. It determines the remuneration

strategy of the Group and, more specifically, the

remuneration of the non-executive and executive directors

and of those executives and managers who report directly

to the chief executive officers of the operating

subsidiaries. The committee also approves proposals in

respect of certain incentive arrangements.

The remuneration and nominations committee is also

responsible for the assessment and nomination of

potential new directors. The committee does not have

full authority to appoint such directors as such authority

vests in the board of directors. Following the

appointment of new directors to the board, an induction

programme, which includes visits to the Group’s

businesses and meetings with senior management, is

arranged. All directors are subject to retirement and re-

election by shareholders every three years. In addition,

all directors are subject to election by shareholders at

the first opportunity after their initial appointment.

RISK MANAGEMENT

Operational and financial risk management is the

responsibility of the boards of directors of the Company

and of its subsidiaries. Where appropriate, risk

management procedures and related controls have been

implemented and are reported on regularly at board and

management meetings. Further explanation regarding the

identification and management of risk is reflected below

under the heading ‘The internal audit function’.

INTERNAL CONTROL

Internal control systems for financial reporting and the

safeguarding of assets have been implemented. These

systems are designed to provide reasonable assurance to

management and the board of directors that Group assets

are safeguarded and reliable information is provided in the

financial statements.

THE INTERNAL AUDIT FUNCTION

The internal audit function is outsourced to BDO. During

the course of the June 2006 financial year, the Group

continued its internal audit programme which integrates

the identification and ranking of risks inherent in the

different operations with an evaluation of the systems and

internal controls employed in the operations. This process

assists in the mitigation of major risks within the Group,

wherever possible. These integrated risk identification

(continued)

7


and internal control audits are conducted on a systematic

basis to ensure adequate coverage of business units and

the reports are submitted to management and the audit

committee.

The Initial exercise has been completed in the equipment

sub-group, ELB Equipment Limited, and follow up

exercises are conducted on a regular basis. An initial

exercise has also been completed in respect of the Group

Treasury and Salary Payroll services and the follow up

exercise planned for 2006 has been deferred to the new

financial year.

As an alternative to the introduction of the integrated

approach to the timber sub-group, ELB Timber Holdings

(Proprietary) Limited ("Timbers"), the internal auditors

investigated specific areas of risk identified by Timbers

management during the course of the year under review.

The introduction of the integrated approach has been

postponed to the new financial year.

Consideration will be given to applying this methodology

within ELB Engineering Services (Proprietary) Limited

during the new financial year as the activities of this

relatively new Company have gained sufficient momentum

to warrant the introduction of the integrated approach by

the internal auditors.

Notwithstanding the implementation of this internal audit

methodology, all Group operations continue to identify,

assess and monitor the risks to which their businesses are

exposed.

The results of reports received and tabled to date are

considered to be satisfactory. Where deficiencies have

been identified, corrective action has been taken and

follow up reviews are performed.

HEALTH AND SAFETY

The board of directors and management at all levels

regularly assess and address health and safety in

accordance with Group procedures.

CODE OF ETHICS

A Code of Ethics, requiring all employees of the Group to

maintain the highest ethical standards in their dealings

with each other and other stakeholders, in line with the

relevant recommendations of the King ll Report, has

been published and distributed throughout the Group.

COMPANY SECRETARY

All directors have access to the advice and services of

the Company secretary, who is responsible to the board

for ensuring compliance with procedures and applicable

statutes and regulations. All the directors have full and

timely access to all information that may be relevant to

the proper discharge of their duties and obligations, thus

enabling the board to function effectively.

INSIDER TRADING

The Company has closed periods prohibiting trade in ELB

shares by directors and staff before the announcement of

interim and year-end results and during any period where

(continued)

NAME BOARD AUDIT REMUNERATION& NOMINATIONS

2005 2006 2005 2006

July 8 Sept 22 Sept 10 Nov 21 Nov Mar May July Sept Nov 10 Mar 30 Mar 9 May Nov 05

WGL Bateman* √ √ √ √ √ √ x x √ √ x √ x √

AG Fletcher √ √ √ √ √ √ √ √ √ √ √ √ √ N/A

PJ Blunden √ √ √ √ √ √ √ √ N/A N/A N/A N/A N/A N/A

T de Bruyn √ √ √ √ √ √ √ x N/A N/A N/A N/A N/A N/A

JC Hall √ √ √ √ √ √ √ √ x √ √ x √ √

JP Herselman √ √ √ √ √ √ √ x N/A N/A N/A N/A N/A N/A

SJ Meijers N/A N/A N/A N/A N/A N/A N/A √ N/A N/A N/A N/A N/A N/A

MV Ramollo √ √ x √ √ √ √ √ N/A N/A N/A N/A N/A N/A

RGH Smith √ √ x √ √ √ √ √ √ √ √ √ √ √

8


the Company is trading under cautionary announcements

or where they have knowledge of price sensitive

information.

All share dealings of directors require the prior approval of

the chairman, and the Company secretary retains a record

of all such share dealings and approvals.

COMMUNICATION TO STAKEHOLDERS

ELB is proactive in the distribution of information to

relevant parties through the JSE SENS communications

system, printed and electronic media releases and the

statutory publication of its financial results.

The board encourages all stakeholders to attend the

shareholders’ meetings as this is the ideal opportunity to

voice their opinions.

DISCLOSURE

The annual report deals fully with disclosures pertaining to

the annual financial statements, auditors’ responsibilities,

accounting records, internal control, risk management,

accounting policies, adherence to accounting standards,

going concern issues and adherence to codes of

governance and the JSE Listings Requirements.

(continued)

9

B o a r d o f d i r e c t o r s

EXECUTIVE

Anthony Garth Fletcher (54) †‡

BCom, CA(SA)

Appointed Chairman of the board in May 2006.

Appointed to the board in 1996.

Served as Chairman from 1998 to 2003.

Peter John Blunden (51)

BCom

Chief executive – ELB Equipment


Joined the Group in 1978.

Appointed a Director of ELB Engineering

Limited in April 2006.

Dr Stephen John Meijers (45)

PhD (Mech Eng), BSc (Mech Eng), MAP (Wits),

SEP (Wits)/Harvard)

Chief executive – ELB Engineering Services

Appointed to the board in May 2006.

Appointed a Director of ELB Engineering

Limited in April 2006.

Mollo Victor Ramollo (51)

BSc (Elect Eng)


Appointed an Executive Director of Equipment

Industrial Supplies (Pty) Limited in 2004.

NON-EXECUTIVE

Theunis de Bruyn (38)

BCom, CA(SA)


John Christopher Hall (71)†‡*

D Soc Sc (hc) UCT, CBE


Dr John Paul Herselman (63)*

Dr Ing, Dipl Ing, BSc (Chem Eng)


Richard Guy Hickman Smith (75) †‡*

BCom, CA(SA)


† Member of Audit Committee

‡ Member of Remuneration and Nominations Committee

*Independent

DIRECTORATE 1 JULY 2005 - 31 JULY 2006 : ATTENDANCE OF MEETINGS

* Mr WGL Bateman retired on 16 May 2006

x Submitted apologies and was granted a leave of absence in terms of the Company’ Articles of Association

11

F i n a n c i a l h i g h l i g h t s

10

E i g h t y e a r r e v i e w

FINANCIAL INFORMATION2006 2005 2004 2003 2002 2001 2000 1999

R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000

Sales revenue 693 681 574 627 580 332 554 685 2 382 126 2 937 537 1 779 575 2 258 659 Net operating costs including cost of sales

but excluding depreciation and amortisation (663 333) (556 770) (548 841) (526 128) (2 345 845) (2 845 959) (1 747 564) (2 243 561)

Operating profit before depreciation,amortisation and abnormal items 30 348 17 857 31 491 28 557 36 281 91 578 32 011 15 098

Depreciation and amortisation (6 495) (7 051) (8 112) (14 684) (35 486) (36 568) (32 804) (22 255)

Operating profit/(loss) before abnormal items 23 853 10 806 23 379 13 873 795 55 010 (793) (7 157)

Abnormal items (note 3) (12 961) 3 631 – 3 159 64 448 (2 143) (24 206) 58 396

Operating profit/(loss) 10 892 14 437 23 379 17 032 65 243 52 867 (24 999) 51 239 Interest received and other financial income 6 571 8 163 9 465 15 717 29 022 20 200 27 806 32 419 Interest paid (4 808) (3 487) (5 352) (7 071) (9 179) (9 192) (14 571) (15 641)Translation adjustments of foreign treasury cash – – – (26 248) 27 553 14 539 6 546 2 202 Income/(loss) from associates – – – – 1 039 (6 960) 1 028 2 422

Profit/(loss) before tax 12 655 19 113 27 492 (570) 113 678 71 454 (4 190) 72 641 Income tax (expense)/credit (10 776) (3 983) (13 480) (3 451) (50 811) (14 438) 13 871 (17 583)

Profit/(loss) for the year 1 879 15 130 14 012 (4 021) 62 867 57 016 9 681 55 058

Attributable to:Ordinary shareholders 1 871 14 486 11 855 4 400 72 023 40 978 3 880 30 331Preference shareholders – – – – – 1 1 1Minority interest 8 644 2 157 ( 8 421) (9 156) 16 037 5 800 24 726

1 879 15 130 14 012 (4 021) 62 867 57 016 9 681 55 058

Headline earnings/(loss) 12 079 7 558 11 782 (1 494) 11 029 40 806 3 552 22 847 Dividends paid 2 725 6 829 8 507 7 220 19 058 9 959 16 795 13 912 Special dividend – – – – 184 560 – – –

OTHER STATISTICS2006 2005 2004 2003 2002 2001 2000 1 999

Shares in issue at the year end 27 151 554 27 354 649 27 300 534 28 889 889 30 760 000 30 256 984 29 868 884 27 659 920

Net asset value per share (cents) 597 589 546 509 536 970 881 1 152

Headline earnings/(loss) per share (cents) 44.2 27.6 42.1 (5.2) 36.4 135.9 12.3 82.7

Interim and final dividends for the year per share (cents) 15 10 30 30 45 50 25 60

Special dividend per share (cents) – – – – 600 – – –

Dividend cover (times) (excluding specialdividend) (based on headline earnings) 2.9 2.8 1.4 (0.2) 0.8 2.7 0.5 1.4

NOTES

1 The financial information in this review includes both continuing and discontinued operations.

2 Amounts and numbers for the years 2004 to 2006 are in accordance with IFRS. The 2003 and earlier years are in accordance with South African GAAP.

3 ELB McWade was sold with effect from 30 September 2004 (2005 financial year) and Bataman Project Holdings Limited (Batepro) with effect from31 December 2001 (2002 financial year). The results of those operations are included to their dates of disposal. Profits on disposal are included in abnormal items.

4 2003 and later years include the effect of consolidating the share trusts.

5 Translation adjustments have been taken directly to the foreign currency translation reserve from the 2004 financial year onwards. Previously they were takenthrough the income statement.

6 The amounts for dividends paid are the dividends declared and paid during the year.

1999 2000 2001 2002 2003 2004 2005 2006

0

500

1000

1500

2000

2500

3000

1999 2000 2001 2002 2003 2004 2005 2006

-5

0

5

10

15

20

25

30

35

40

45

1999 2000 2001 2002 2003 2004 2005 2006

-20

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004 2005 2006

0

200

400

600

800

1000

1200

Sales Revenue (R millions)

Headline Earnings (R millions)

Headline Earnings and Dividends per Share (cents)

Net Asset Value per Share (cents)

Headline earnings per share

Dividends per share (cents)

I, the undersigned, DG Jones, hereby certify that to the best of my knowledge and belief, arrived at after due and carefulenquiry, for the year ended 30 June 2006, the Company has lodged with the Registrar of Companies all returns as arerequired of a public company in terms of the South African Companies Act of 1973, as amended, and that all such returnsare true, correct and up to date, and that all legal requirements have been fulfilled.

DG JonesCompany Secretary

Boksburg23 October 2006

12

D i r e c t o r s ’ r e s p o n s i b i l i t y f o r f i n a n c i a l r e p o r t i n g

The directors of ELB Group Limited are responsible formonitoring the preparation of and the integrity of theannual financial statements and the related information ofthe Company and the Group included in the annual report.

In order for the board to discharge its responsibilities,management has developed and continues to maintain asystem of internal control. The board has ultimateresponsibility for the system of internal control andreviews its operations, primarily through the auditcommittee and various other risk monitoring committees.

The internal controls include a risk based system ofinternal accounting and administrative controls designedto provide reasonable but not absolute assurance thatassets are safeguarded and that transactions areexecuted and recorded in accordance with generallyaccepted accounting practices and the Group’s policiesand procedures. These controls are implemented bytrained, skilled personnel with an appropriate segregationof duties, and are monitored by management. The controlsinclude a comprehensive budgeting and reporting systemoperating within strict deadlines and an appropriatecontrol framework.

As part of the system of internal control, the Group internalaudit function conducts operational, financial and specificaudits and coordinates audit coverage with the external

auditors. The external auditors are responsible forreporting on the annual financial statements.

The annual financial statements are prepared inaccordance with International Financial ReportingStandards (IFRS) and in the manner required by theCompanies Act of South Africa. The annual financialstatements are based on appropriate accounting policiesconsistently applied and supported by reasonable andprudent judgements, assumptions and estimates.

The directors believe that the Group will be a goingconcern in the year ahead. For this reason they continueto adopt the going concern basis in preparing the Groupannual financial statements.

The annual financial statements for the year ended 30June 2006 set out on pages 14 to 65 have been approvedand signed on behalf of the board of directors by

AG Fletcher PJ BlundenChairman Director

Boksburg23 October 2006

C e r t i f i c a t e o f t h e c o m p a n y s e c r e t a r y

13

R e p o r t o f t h e i n d e p e n d e n t a u d i t o r s

To the members of ELB Group Limited

We have audited the annual financial statements and

Group annual financial statements of ELB Group Limited

set out on pages 14 to 65 for the year ended 30 June

2006. These financial statements are the responsibility

of the Company’s directors. Our responsibility is to

express an opinion on these financial statements based

on our audit.

We conducted our audit in accordance with

International Standards on Auditing. Those standards

require that we plan and perform the audit to obtain

reasonable assurance about whether the financial

statements are free of material misstatement. An audit

includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the

accounting principles used and significant estimates

made by management as well as evaluating the overall

financial statement presentation. We believe that our

audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in

all material respects, the financial position of the

Company and of the Group at 30 June 2006 and the

results of their operations and cash flows for the year

then ended in accordance with International Financial

Reporting Standards, and in the manner required by the

Companies Act of South Africa.

KPMG Inc.Registered Auditor

Per AD Roberts

Chartered Accountant (SA)

Registered Auditor

Director

23 October 2006

14

D i r e c t o r s ’ r e p o r t

To the shareholders

Your directors submit the financial statements for the

Company and the Group for the year ended 30 June 2006

with their report on the results and operations.

NATURE OF THE BUSINESS

The Company operates as an investment holding

company deriving most of its distributable income from

dividends. The major investments at the end of June

2006 are grouped into two segments namely

• ELB Engineering Limited (ELB Engineering) which

supplies equipment and technical solutions through

two sub-groups, ELB Equipment Holdings Limited

(ELB Equipment Holdings) and ELB Engineering

Services (Proprietary) Limited (ELB Engineering

Services). ELB Equipment Holdings continues to

administer the Group treasury.

• ELB Timber Holdings (Proprietary) Limited (ELB Timber

Holdings) which supplies peeled and sliced veneers,

plywood products, furniture components and

specialised packaging solutions.

RESTRUCTURING AND INCLUSION OF ANEMPOWERMENT PARTNER

Shareholder approval was given on 16 May 2006

regarding the disposal of the Company’s 100%

shareholding in ELB Equipment Holdings to a wholly-

owned subsidiary ELB Engineering and the creation of the

ELB Educational Trust for Historically Disadvantaged South

Africans (the ELB Educational Trust). Approval was also

given to a donation of R3 million by the Company to the

ELB Educational Trust to facilitate the acquisition of a 15%

stake by the ELB Educational Trust in the ordinary share

capital of ELB Engineering. Further approval was given for

the disposal of the 79% shareholding In ELB Engineering

Services held by ELB Equipment Holdings to ELB

Engineering to complete the restructuring.

TRUSTEES

The Master of the Supreme Court has confirmed theappointment of the initial trustees of the ELB EducationalTrust as nominated by the Company, namely Messrs AGFletcher, TJ Matsau and MV Ramollo.

DISCONTINUED OPERATIONS

The company announced on 18 May 2006 that, withregard to certain operations in the ELB Timber Holdingsfold, it had decided to rationalise production at thefurniture components plant in White River and discontinueproduction at the Ultrabord board plant at Malelane. ELBTimber Holdings would continues to produce veneer andplywood at its plants in Lydenburg and White River as wellas certain furniture components and packaging solutionsat its plant in Krugersdorp.

ELB ENGINEERING

ELB owns 85% of the ordinary share capital as well as100% of the cumulative convertible redeemablepreference shares issued by ELB Engineering. The SouthAfrican equipment operations housed in the division ELBEquipment Limited had another particularly successfulyear and reported profits in excess of those budgeted.The DitchWitch Australia joint venture operations, in whichELB Equipment Holdings has an 84.2% interest, producedexcellent results in the light of favourable tradingconditions, considerably ahead of budget. The recentlyformed ELB Engineering Services company in which ELBEngineering has a 79% interest made great strides inbuilding its team and securing a healthy order book duringthe financial year under review.

Headline earnings attributable to ELB Engineeringamounted to R 26,7 million (2005 - R15,7 million).

ELB TIMBER HOLDINGS

ELB Timber Holdings owns 100% of the shares in bothELB Timber Products (Proprietary) Limited and ELBUltrabord (Proprietary) Limited. Further details regarding

15

D i r e c t o r s ’ r e p o r t

the activities are contained in the paragraph coveringDiscontinued Operations.

Headline loss attributable to the continuing operations ofELB Timber Holdings amounted to R9,9 million (2005 –R2,8 million), and to the discontinued operations R2,9million (2005 – R5,8 million).

ACCOUNTING POLICIES

The annual report has been prepared in accordance withthe South African Companies Act and complies withInternational Financial Reporting Standards (IFRS). Thesame accounting policies outlined in the 2005 AnnualReport apply to this Report.

GENERAL

The Group continues to support the principles of goodcorporate governance contained in the first King Reportand the subsequent King II Report. Further details areprovided in the Corporate Governance statement on page5 of this report.

The operating entities within the Group have compliedwith the requirements of the Employment Equity Act andthe Skills Development Act.

DIVIDENDS

An interim dividend of 5 cents (2005 – 5 cents) perordinary share was paid on 24 April 2006 and a finaldividend in respect of the year of 10 cents (2005 – 5cents) per ordinary share was declared on 21 September2006 and is payable on 23 October 2006.Dividends in respect of the 6 per cent fixed cumulativepreference shares were declared simultaneously with theinterim and final ordinary dividends referred to above.

SHARE CAPITAL

Details of the authorised and issued share capital at 30June 2006 are set out in notes 32 and 33 to the financialstatements. There was no change in either the authorisedordinary share capital or the authorised preference share

capital during the year. The issued preference share capitalremained at the level of 3800 6% fixed cumulativepreference shares at the end of June 2005, as noredemption of such shares by the Company occurred on theopen market during the year under review. Similarly, theissued ordinary share capital of 33 860 000 shares at 30June 2005 remained unchanged at the end of June 2006.

ELB shares held by the Group’s share trusts and incentiveshares not as yet paid for by participants, are regarded asshares under the control of the trusts and are eliminatedon consolidation as treasury shares.

DIRECTORATE

The names as well as a brief history of the directors of theCompany appear on page 9 whilst the name of theCompany secretary in office at the date of this report, andthe Company’s business and postal addresses appear onpage 68.

The following appointments and resignations occurredduring the financial period under review and until the dateof this report.

Appointments EffectiveSJ Meijers 16 May 2006

RetirementWGL Bateman 16 May 2006

In terms of the Company’s Articles of Association, thefollowing directors retire at the forthcoming AnnualGeneral Meeting and, being eligible, are available for re-election: Messrs JP Herselman and SJ Meijers. Havingattained the mandatory retirement age, Messrs JC Halland RGH Smith retire from the board at the forthcomingAnnual General Meeting.

Details of directors’ remuneration and options in respectof ordinary shares in the Company are contained in note 7to the annual financial statements. Details of directors’interests in the ordinary shares of the Company areprovided on page 66.

(continued)

17

A c c o u n t i n g p o l i c i e s

16


ELB Group Limited (the Company) is a companydomiciled in South Africa. The consolidated annualfinancial statements of the Company for the year ended30 June 2006 comprise the Company and itssubsidiaries and joint venture, together referred to as theGroup.

The annual financial statements were authorised forissue by the directors on 23 October 2006.

Compliance

The annual financial statements have been prepared inaccordance with International Financial ReportingStandards (IFRS) and the requirements of the SouthAfrican Companies Act

Preparation

The annual financial statements are presented in Rands,rounded to the nearest thousand. They are prepared onthe historical cost basis, modified by restatement ofcertain financial instruments to fair value. Theaccounting policies set out below have been appliedconsistently to all periods presented in these annualfinancial statements and have also been consistentlyapplied by all Group entities. Where an accounting policychanges, comparative figures are restated in accordancewith the new policy, where applicable.

The preparation of the annual financial statements inaccordance with IFRS requires management to makejudgements, estimates and assumptions that affect theapplication of accounting policies and reported amountsof assets and liabilities and income and expense. Theestimates and underlying assumptions are based onhistorical experience and various other factors that arebelieved to be reasonable under the circumstances.Actual results may differ ultimately from theseestimates. The estimates and assumptions are reviewedon an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate isrevised if the revision affects only that period, or in theperiod of the revision and future periods if the revisionaffects both current and future periods.

The accounting policies involving a higher degree ofcomplexity and where assumptions and estimates aresignificant to the financial statements are useful life,residual value and impairment of property, plant andequipment, the recognition of deferred tax assets andconstruction contracts. Further information is given inthe accounting policies relating to these areas.

There are no key assumptions concerning the future andother key sources of estimation uncertainty at thebalance sheet date that management have assessed ashaving a significant risk of causing material adjustmentto the carrying amounts of assets and liabilities in thenext financial year.

Prior year errors

Where an error relating to a prior year is sufficientlymaterial so as to distort the presentation of the results orthe financial position, then such error will be reflected asa prior year adjustment in the statement of changes inequity, and the comparatives will be restated.

An error in the computation of the tax charge for theprevious year in a subsidiary was considered to besufficiently material so as to misrepresent results forboth the current year and the previous year, and thefinancial position of the previous year, and has beendisclosed as a prior year adjustment in the statement ofchanges in equity in these annual financial statements.The comparatives have been restated accordingly.Details of the error are contained in note 42 to theannual financial statements.

Consolidation

Basis

The annual financial statements show the financialposition and results of the Company and theconsolidated financial position and results of the Group.Intra group balances and unrealised profits and lossesand income and expenses arising from intra grouptransactions are eliminated in preparing the Groupconsolidated financial statements. Unrealised gainsarising from transactions with joint ventures areeliminated to the extent of the Group’s interest against

the investment in these entities. Unrealised losses ontransactions with joint ventures are eliminated in thesame way as unrealised gains, but only to the extent thatthere is no evidence of impairment.

Subsidiaries

Subsidiaries are entities controlled by the company.Control exists when the company has the power, directlyor indirectly, to govern the financial and operatingpolicies of an entity so as to obtain benefits from itsactivities. In assessing control, potential voting rightsthat presently are exercisable or convertible are takeninto account. The financial statements of subsidiaries areincluded in the consolidated financial statements fromthe date that control commences until the date thatcontrol ceases.

Joint ventures

Joint ventures are entities over which the groupexercises joint control in terms of a contractualagreement. Joint ventures are proportionatelyconsolidated, whereby the group’s share of the jointventure’s assets, liabilities, income, expenses and cashflows are combined with similar items on a line-by-linebasis, in the group’s financial statements from the datethe joint control commences until the date that jointcontrol ceases.

Share trusts

For purposes of the Group financial statements shares inthe company under the control of the Group’s sharetrusts are classified as treasury shares and reduce thenumber of shares in issue. The dividends on the treasuryshares reduce the amounts of the ordinary dividendspaid and increase the operating expenses. Loans to thetrusts are included as a deduction from issued sharecapital in the Group’s financial statements.

Foreign currency translation

Transactions in foreign currencies are translated at therates of exchange ruling at the dates of the transactions.Gains and losses on settlement, arising from fluctuationsin exchange rates, are recognised in profit or loss.

Monetary assets and liabilities denominated in foreigncurrencies at the end of the financial year are translatedto Rands at the rates ruling at that date. Gains or losseson translation are recognised in profit or loss. Nonmonetary assets and liabilities that are measured interms of historical cost in foreign currency are translatedusing the exchange rate at the date of the transaction.

All foreign operations have different functionalcurrencies to the presentation currency. The results andfinancial position of the foreign operations have beenincluded after translating the income statements at theweighted average rates of exchange for the appropriateperiod, and the balance sheets at the rates of exchangeruling at the year end. The gains and losses ontranslation are taken directly to the foreign currencytranslation reserve through the Group statement ofchanges in equity.

Revenue

Sales revenue

Sales revenue comprises sales, less discounts, ofmerchandise and manufactured goods, and revenuerecognised on construction contracts and for otherservices rendered, and excludes intra group sales andvalue added tax. Revenue from the sale of goods isrecognised when the significant risks and rewards ofownership have transferred to the buyer. Revenue forservices rendered is recognised as services arerendered. Revenue is not recognised when it cannot bemeasured reliably or where there are significantuncertainties regarding the recovery of the considerationdue, associated costs or the possible return of goods, orcontinuing management involvement with the goodsdelivered or services rendered.

The recognition of revenue on construction contracts isdetailed in the accounting policy note regarding thatactivity.

Interest received

Interest received is recognised on a time proportionbasis using the effective interest rate method.

(continued)

19


18


Dividends received

Dividends are recognised when the right to receivepayment is established, with the exception of dividendson preference share investments which are recognisedon a time proportion basis, using the effective interestrate method, in the period to which they relate.

Employee benefits

Employee benefits expense

All short term employee benefit expenses such assalaries, bonuses, allowances, leave pay entitlement andmedical aid and other contributions are recognised inprofit or loss during the period in which the employeesrender the related services. Termination costs arerecognised in full when the commitment to thetermination plan is made. Shares under the control of theshare trusts in the Group are classified as treasuryshares and the dividends thereon are included inemployee benefits expense.

Retirement benefits

The Group provides a defined benefit (now closed to newentrants) and defined contribution retirement funds forthe benefit of employees, the assets of which are held inseparate funds. The Group’s contributions to the fundsare recognised as an expense in the year in which theyarise. Actuarial gains and losses in respect of definedbenefit obligations are recognised in profit or loss in theyear in which they arise.

Share based payment transactions

The fair value of share options granted to Groupemployees is recognised as an employee benefitsexpense with a corresponding increase in equity. Thefair value is measured at grant date and expensed overthe period during which the employee becomesunconditionally entitled to the equity instruments. Thefair value of the instruments granted is measured usinggenerally accepted valuation techniques, taking intoaccount the terms and conditions upon which theinstruments are granted. The amount recognised as anexpense is adjusted to reflect the actual number of shareoptions that vest. This accounting policy has been

applied to all equity instruments granted after 7November 2002 that had not yet vested at 1 July 2003.

Operating lease expenses

Expenses under operating leases are recognised in theincome statement on a straight line basis over the termof the lease.

Interest paid

Interest paid comprises interest paid on borrowingscalculated on the principal outstanding and using theeffective interest rate method.

Abnormal items

Abnormal items are items of income and expense whosesize, nature or incidence is relevant to explain theperformance of the Group.

Capital items included in abnormal items are items ofincome and expense relating to transactions of a capitalnature. Such items would include disposal of property,impairments of property, plant and equipment,impairments of intangible assets and long terminvestments as well as restructure and closureexpenses.

Non current assets held for sale anddiscontinued operations

Immediately before classification as held for sale, themeasurement of the assets, and all assets and liabilitiesin a disposal group, is brought up to date in accordancewith the applicable IFRSs. Then, on initial classificationas held for sale, non current assets and disposal groupsare recognised at the lower of carrying amount and fairvalue less costs to sell. Impairment losses on initialclassification as held for sale are included in profit orloss, even when there is a revaluation. The same appliesto gains and losses on subsequent remeasurement.

A discontinued operation is a component of the Group’sbusiness that represents a separate major line ofbusiness or geographical area of operations.Classification as a discontinued operation occurs uponthe earlier of disposal or when the operation meets the

(continued) (continued)

criteria to be classified as held for sale. Discontinuedoperations are separately recognised in the annualfinancial statements once management has made acommitment to discontinue the operation without arealistic possibility of withdrawal.

Headline earnings

Headline earnings comprise the net profit attributable toordinary shareholders after adjusting for material incomeand expense items of a capital nature, which areincluded in abnormal items; and also after adjusting forprofits and losses on the discontinuance or disposal ofdiscontinued operations and on the disposal of plant andequipment.

Taxation

Tax on the profit or loss for the year comprises currentand deferred tax. Tax is recognised in the incomestatement except to the extent that it relates to itemsrecognised directly in equity. Current tax comprises taxpayable calculated on the basis of the expected taxableincome for the year, using the tax rates applicable forthat year, and any adjustments of tax payable forprevious years. When an adjustment in respect of aprevious year arises from an error and is sufficientlymaterial so as to misrepresent the results for the year,then such error will be treated in accordance with theaccounting policy on prior year errors, described above.

Deferred tax is recognised at current tax rates on taxableand deductible temporary differences, unutilisedsecondary tax on companies (STC) credits and tax lossescarried forward. Temporary differences are differencesbetween the carrying amounts of assets and liabilities forfinancial reporting purposes and their tax bases. Theeffect on deferred tax of any changes in tax rates isrecognised in profit or loss, except where it relates toitems previously charged or credited directly to equity. Adeferred tax asset is recognised to the extent that it isprobable that future taxable income will be availableagainst which the unused tax losses carried forward anddeductible temporary differences can be utilised.Deferred tax assets are reduced to the extent that it is no

longer probable that the related tax benefit will berealised.

Dividends

Dividends declared to equity holders are included in thestatement of changes in equity in the year in which theyare declared. STC expenses and STC credits arerecognised in profit or loss in the year in which thedividends are declared.

Property, plant and equipment

Property, plant and equipment are stated at cost lessaccumulated depreciation and impairment losses.Leases that transfer substantially all the risks andrewards of ownership of the underlying asset to theGroup are classified as finance leases. Assets subject tofinance lease agreements are capitalised, wherematerial, at the cash cost equivalent and thecorresponding liability to the lessor is raised.

Property, plant and equipment, including capitalisedleased assets, are depreciated at rates intended to writethem off in equal instalments over their useful lives totheir residual values, which is usually twenty years forproperty, five years for plant and equipment and threeyears for computer equipment. Land has an indefiniteuseful life and is not depreciated.

Goodwill

All business combinations are accounted for by applyingthe purchase method. Goodwill represents amountsarising on acquisition of subsidiaries. The excess of thecost of subsidiary companies and the fair value of the netidentifiable assets (their fair net asset value) atacquisition is capitalised as goodwill in the consolidatedannual financial statements and is stated at cost lessaccumulated impairment losses. Goodwill is allocated tocash generating units and is not amortised but is testedannually for impairment.

The Group carried no goodwill at the dates of the currentand previous year ends.

20


Intangible assets

Research costs are written off as incurred.

Intangible assets are stated at cost less accumulatedamortisation and impairment losses. Capitalisedintangible assets are amortised to their residual values inequal instalments over their useful lives which arerelatively short and usually five years.

The carrying amount of each intangible asset is reviewedat each reporting date and impairment losses arerecognised where necessary.

The Group carried no intangible assets at the dates ofthe current and previous year ends.

Borrowing costs

Borrowing costs that are directly attributable toqualifying assets are capitalised up to the date that theassets are substantially ready for their intended use.Qualifying assets are those that necessarily take anextended period of time to prepare for their intendeduse.

All other borrowing costs are recognised as interest paidin profit or loss in the period in which they are incurred.

Impairment of assets

The carrying amounts of the Group’s assets, other thaninventories, trade and other receivables and deferred taxassets, which are separately assessed and providedagainst where necessary, are reviewed at each balancesheet date to determine whether there is any indicationof impairment. If any such indication exists, therecoverable amount of the asset is estimated in order todetermine the extent of any impairment loss. Therecoverable amount is the higher of the asset’s fair valueless expenses to sell the asset, or the asset’s value inuse. Value in use is estimated taking into account futurecash flows, forecast market conditions and the expectedlife of the asset. Such cash flows are discounted usingpre tax discount rates that reflect current marketassessments of the time value of money and the risksassociated with the specific asset. For an asset that does

not generate largely independent cash flows, therecoverable amount is determined for the cashgenerating unit to which the asset belongs.

Impairment losses are recognised whenever the carryingamount of an asset or its cash generating unit exceedsits recoverable amount. Impairment losses arerecognised in profit or loss.

An impairment loss in respect of goodwill is notreversed. For other assets, an impairment loss isreversed if there has been a change in the estimatesused to determine the recoverable amount and there isan indication that the impairment loss may no longerexist. An impairment loss is reversed only to the extentthat the asset’s carrying amount does not exceed theinitial carrying amount.

Interest in subsidiaries

The Company’s interest in subsidiaries comprises equityinvestments in the subsidiaries and loans to thesubsidiaries. These are carried at cost less impairments.Impairments are assessed with reference to the netequity and projected profitability of subsidiaries.

Construction contracts

Revenue from fixed price construction contracts isrecognised for each contract on the stage of completionmethod, based generally on the ratio of costs incurred todate to total estimated costs, or on completed manhoursto date to estimated total manhours, or on the proportionof physical progress to date to the completed contract.Contracts which are not yet 30% complete are consideredto be contracts where the outcome cannot be estimatedwith reasonable assurance, and revenue on thesecontracts is recognised only to the extent of contract costsincurred to date that are considered to be recoverable.

Revenue from cost plus construction contracts isrecognised for the services rendered to date in terms ofthe contracts.

Terms and conditions negotiated with clients vary from

one construction contract to another. These terms and

21


conditions influence contract pricing and are inextricably

interwoven with contract profitability.

When it is probable that total contract costs will exceed

total contract revenue the expected loss is recognised

immediately for all such contracts.

Construction contracts in progress represent costs that

have not yet been billed to clients.

Construction contract liabilities comprise billings to

clients in advance of the stage of completion and

provisions for estimated possible costs relevant to the

stage of completion. Charges from suppliers for goods

delivered or services rendered to date on contracts,

where these are not yet settled, and any additional

accruals related thereto, are carried separately as trade

payables.

Inventories

Inventories are valued at the lower of cost, determined

on the first-in-first-out (fifo) method or weighted average

cost basis, and net realisable value. Production

overheads are included in the cost of work in progress

and manufactured finished goods.

Financial instruments

Financial instruments are recognised initially at fair

value. Subsequent to initial recognition these

instruments are measured as stated below.

Financial assets

Financial assets are recognised when the entity

becomes a party to the contractual provisions of the

financial asset. Such assets consist of cash and cash

equivalents, a contractual right to receive cash or

another financial asset, or a contractual right to

exchange financial instruments with another entity on

potentially favourable terms.

Other investments

Investments held for trading are classified as currentassets and are stated at fair value, with any resultantgain or loss recognised in profit or loss.

Other investments held by the Group are stated at fairvalue, with any resultant gain or loss being recognised inprofit or loss. When these investments are disposed ofthe difference between the amount realised and the lastfair value carrying amount is recognised as a gain or lossin profit or loss. Where these investments are interestbearing, interest calculated using the effective interestrate method is recognised in profit or loss.

Trade and other receivables

Trade and other receivables are stated at initial carryingamounts less impairments. Impairments are equal to thedifference between initial carrying amounts and estimatedrecoverable amounts. Impairments are established whenthere is evidence that amounts will not be realised inaccordance with the original terms of the receivables.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances andterm and call deposits, and are recognised at fair value.Fair value adjustments are recognised in profit or loss.

Short term borrowings and bank overdrafts form anintegral part of the Group’s cash management and areincluded as a component of net cash and cashequivalents for the purpose of the statement of cashflows.

Financial liabilities

Financial liabilities are recognised when the entitybecomes a party to the contractual provisions of theinstrument. Financial liabilities consist of the obligationsto deliver cash or another financial asset or to exchangefinancial instruments with another entity on potentiallyunfavourable terms. Financial liabilities, other thanderivative instruments, are measured at amortised cost.

(continued) (continued)

22


Offset

Financial assets and financial liabilities are offset and thenet amount reported in the balance sheet only when theGroup has a legally enforceable right to set off therecognised amounts, and intends to settle on a netbasis, or to realise the asset and settle the liabilitysimultaneously.

Derivative instruments

The Group uses derivative financial instruments tomanage its exposure to foreign exchange price risksarising from operating activities. The Group does not holdor issue derivative instruments for dealing purposes.

Derivative instruments used during the year compriseforward exchange contracts (FECs) and are measured atfair value. Fair value adjustments are recognised in profitor loss. Fair value is determined by comparing thecontractual forward rate to the current forward rate of anequivalent FEC with the same maturity date.

Provisions

A provision is recognised in the balance sheet when theGroup has a present legal or constructive obligation as aresult of past events, and it is probable that an outflowof economic benefits will be required to settle theobligation, and a reliable estimate can be made of theobligation. If the effect is material, a provision isdetermined by discounting the expected future cashflows at a pre tax rate that reflects current marketassessments of the time value of money and the risksspecific to the obligation.

Restructuring

A provision for restructuring is recognised when theGroup has approved a detailed and formal restructuringplan, and the restructuring has either commenced or hasbeen announced publicly. Future operating expenses arenot provided for.

Onerous contracts

A provision for onerous contacts is recognised when theexpected benefits to be derived by the Group from acontract are lower than the unavoidable cost of meetingthe obligations under the contract.

Segment reporting

A segment is a distinguishable component of the Groupthat is engaged in providing products or services whichare subject to risks and returns that are different fromthose of other segments. The basis of segment reportingis representative of the internal structure used formanagement reporting.

Segment results include revenue and expenses directlyattributable to a segment whether from externaltransactions or from transactions with other Groupsegments.

Segment assets and liabilities comprise those operatingassets and liabilities that are directly attributable to thesegment or that can be allocated to the segment on areasonable basis.

23

I n c o m e s t a t e m e n t s

Group Company2006 2005 2006 2005

Note R 000 R 000 R 000 R 000

Continuing operations

Sales revenue 1 664 970 527 024 – – Operating (costs)/income excluding depreciation

and abnormal items 2 (632 976) (509 862) 117 (476)

Operating profit/(loss) before depreciationand abnormal items 31 994 17 162 117 (476)

Depreciation 17 (5 187) (5 035) – –

Operating profit/(loss) before abnormal items 26 807 12 127 117 (476)Abnormal items 8 (5 313) (2 829) 49 146 (414)

Operating profit/(loss) 21 494 9 298 49 263 (890)Interest received and other financial income 9 6 525 8 155 – 364 Interest paid (4 632) (3 474) – –

Profit/(loss) before tax 23 387 13 979 49 263 (526)Income tax expense 10 (11 896) (2 787) (423) (979)

Profit/(loss) from continuing operations 11 491 11 192 48 840 (1 505)

Discontinued operations(Loss)/profit from discontinued operations 11 (9 612) 3 938 – 2 333

Profit for the year 1 879 15 130 48 840 828

Attributable to:Ordinary shareholders of ELB Group Limited

Continuing operations 45.1 11 483 11 195 48 840 (1 505)Discontinued operations 11 (9 612) 3 291 – 2 333

1 871 14 486 48 840 828

Minority interest

Continuing operations 8 (3)Discontinued operations – 647

8 644

1 879 15 130 48 840 828

Earnings per ordinary share (cents)Basic earnings per share 14 6.8 53.0 Diluted earnings per share 14 6.8 52.9 Basic earnings per share from continuing operations 14 42.0 41.0 Diluted earnings per share from continuing operations 14 42.0 40.9

Details of headline earnings and headline earnings per shareare included in notes 13 and 14

Details of dividends declared and paid on the ordinary sharesare included in note 15

for the year ended 30 June 2006(continued)

24

B a l a n c e s h e e t s

Group Company 2006 2005 2006 2005

Note R 000 R 000 R 000 R 000 ASSETSNon current assetsProperty, plant and equipment 17 29 687 36 632 – – Interest in subsidiaries 19 160 113 116 422 Long term receivables 21 – – 23 858 22 174 Prepaid rent expense 24 – 3 659 – – Deferred tax assets 25 7 431 7 721 – –

37 118 48 012 183 971 138 596

Current assetsConstruction contracts in progress 26 923 113 – – Inventories 27 230 459 194 287 – – Trade and other receivables 28 77 650 39 092 240 178 Other current financial assets 29 16 269 – – – Income tax prepaid 382 991 278 209 Other current assets 30 4 208 9 187 113 103 Non current assets of discontinued operation 17

held for disposal & 31 5 337 – – – Cash and cash equivalents 151 538 124 445 101 95

486 766 368 115 732 585 Total assets 523 884 416 127 184 703 139 181

EQUITY AND LIABILITIESAttributable to ordinary shareholders of the CompanyIssued capital 32.3 25 192 25 192 25 192 25 192 Treasury shares 32.3 (24 098) (23 366)Reserves 34 (11 315) (13 721) 250 250 Retained earnings 172 282 173 136 158 187 112 733

162 061 161 241 183 629 138 175 Preference shares 33 8 8 8 8 Minority interest 665 207 Total equity 162 734 161 456 183 637 138 183 Non current liabilitiesInterest bearing borrowings 35 9 613 9 025 – – Deferred tax liabilities 25 – 1 120 – –

9 613 10 145 – – Current liabilitiesConstruction contract liabilities 26 30 017 1 049 – – Non interest bearing current payables 36 187 750 153 010 532 512 Interest bearing current payables 37 94 954 40 903 – – Other current financial liabilities 38 – 922 – – Income tax payable 7 904 2 963 – – Other current liabilities 39 29 084 24 700 534 486 Liabilities associated with non current assets

of discontinued operation held for disposal 31 1 828 – – – Short term borrowings and bank overdrafts – 20 979 – –

351 537 244 526 1 066 998 Total equity and liabilities 523 884 416 127 184 703 139 181

at 30 June 2006

25

S t a t e m e n t s o f c h a n g e s i n e q u i t y

Attributable to ordinary shareholders of the CompanyPref-

Issued Treasury Retained erence Minority TotalNote capital shares Reserves profit Total shares interest equity

R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 GROUP

Balance at 30 June 2004 25 192 (23 563) (17 918) 165 479 149 190 8 3 478 152 676

Foreign currency translation adjustments for foreign operations 4 197 4 197 4 197

Profit for the year 14 486 14 486 644 15 130

Total recognised income and expense for the year – – 4 197 14 486 18 683 – 644 19 327

Ordinary dividends paid 15 (6 829) (6 829) (6 829)

Shares released by the ELB Share Incentive Trust 32 108 108 108

Shares released by the Batecor Share Incentive Trust 32 89 89 89

Disposal by the ELB Group of portion of interest insubsidiary 41.7 48 48

Disposal by the ELB Group of interest in subsidiary 41.6 (3 963) (3 963)

Total changes for the year – 197 4 197 7 657 12 051 – (3 271) 8 780

Balance at 30 June 2005 as restated 25 192 (23 366) (13 721) 173 136 161 241 8 207 161 456

Balance at 30 June 2005 as previously reported 25 192 (23 366) (13 721) 175 265 163 370 8 207 163 585 Adjustment arising from the recalculation of income

tax expense in the previous financial year 42 (2 129) (2 129) (2 129)

Balance at 30 June 2005 as restated above 25 192 (23 366) (13 721) 173 136 161 241 8 207 161 456

Foreign currency translation adjustments for foreign operations 2 406 2 406 2 406

Profit for the year 1 871 1 871 8 1 879Total recognised income and expense for the year – – 2 406 1 871 4 277 – 8 4 285 Ordinary dividends paid 15 (2 725) (2 725) (2 725)

Shares acquired by the ELB Participants Share Trust 32 (1 006) (1 006) (1 006)Shares acquired by the ELB Share Incentive Trust 32 (172) (172) (172)Shares released by the Batecor Share Incentive Trust 32 446 446 446Acquisition of 15% interest in ELB Engineering Limited

by the ELB Educational Trust for HistoricallyDisadvantaged South Africans 450 450

Total changes for the year – (732) 2 406 (854) 820 – 458 1 278

Balance at 30 June 2006 25 192 (24 098) (11 315) 172 282 162 061 8 665 162 734

for the year ended 30 June 2006

26

S t a t e m e n t s o f c h a n g e s i n e q u i t y

Pref-

Issued Retained erence TotalNotes capital Reserves earnings Total shares equity

R 000 R 000 R 000 R 000 R 000 R 000

COMPANY

Balance at 30 June 2004 25 192 250 120 370 145 812 8 145 820

Profit for the year 828 828 828 Ordinary dividends paid 15 (8 465) (8 465) (8 465)

Balance at 30 June 2005 25 192 250 112 733 138 175 8 138 183

Profit for the year 48 840 48 840 48 840 Ordinary dividends paid 15 (3 386) (3 386) (3 386)

Balance at 30 June 2006 25 192 250 158 187 183 629 8 183 637

for the year ended 30 June 2006 (continued)

27

C a s h f l o w s t a t e m e n t s

Group Company2006 2005 2006 2005

Note R 000 R 000 R 000 R 000

Continuing operationsCash flows from operating activitiesOperating profit/(loss) before depreciation and abnormal items 31 994 17 162 117 (476)Non cash adjustments 41.1 (386) (1 109) – – Changes in working capital 41.2 30 887 (14 807) (4) 426

Cash inflow/(outflow) before abnormal items,interest and income tax 62 495 1 246 113 (50)

Abnormal items:Relocation of operations 8 (1 331) (1 781) – – Interest on revised tax assessments of subsidiary 8 (92) (697) – – Value added tax (VAT) dispute on public company expenses 8 – (305) – (305)Interest on VAT dispute 8 (40) (109) (40) (109)Establishment of the ELB Educational Trust for Historically

Disadvantaged South Africans:Donation to the Trust 41.10 (3 000) – (3 000) – Expenses 41.10 (400) – (400) –

Interest received and other financial income 6 525 8 155 – 364 Interest paid (4 632) (3 474) – – Income tax paid 41.3 (6 086) (8 642) (492) (1 058)

Cash inflow/(outflow) from operating activities beforedividends paid 53 439 (5 607) (3 819) (1 158)

Dividends paid:Ordinary shareholders 41.4 (2 725) (6 829) (3 386) (8 465)

Cash inflow/(outflow) from operating activities 50 714 (12 436) (7 205) (9 623)

Cash flows from investment activitiesDisposal of interest in subsidiary:

Proceeds 41.6 – 30 000 – 30 000 Expenses incurred 41.6 – (491) – (491)Amount owing by subsidiary included in proceeds 41.6 – (7 402)

Disposal of portion of interest in subsidiary 41.7 – 111 – – Additions to property 17 (5 674) (11 916) – – Replacement of equipment and vehicles 41.5 (4 844) (5 836) – – Transfer of ELB Equipment Holdings Limited to

ELB Engineering Limited:Surplus on transfer of equity investment 41.10 108 691 –

Investment in equity of ELB Engineering Limited 41.11 (90 002) –Increase in amounts owing by subsidiaries (9 794) (12 544)

Cash (outflow)/inflow from investment activities (10 518) 11 868 8 895 9 563


Attributable to ordinary shareholders

28

C a s h f l o w s t a t e m e n t s


Group Company2006 2005 2006 2005

Note R 000 R 000 R 000 R 000

Cash flows from financing activities(Increase)/decrease in non current receivables – – (1 684) 14 Increase in non current borrowings 2 250 7 092 – – (Decrease)/increase in funding by ordinary shareholders 41.8 (732) 197 – – Translation adjustments 2 406 4 197 Increase in funding by minority interest 41.9 3 000 –

Cash inflow/(outflow) from financing activities 6 924 11 486 (1 684) 14

Net cash inflow/(outflow) from continuing operations 47 120 10 918 6 (46)

Discontinued operationNet cash inflow from discontinued operation 41.12 952 3 370 – –

Increase/(decrease) in net cash and cash equivalents 48 072 14 288 6 (46)Net cash and cash equivalents at the beginning of the year 103 466 97 368 95 141 Cash and cash equivalents of subsidiary on disposal 41.6 – (8 190)

Net cash and cash equivalents at the end of the year 151 538 103 466 101 95

Reconciliation to balance sheetCurrent assets: cash and cash equivalents 151 538 124 445 101 95 Current liabilities: short term borrowings and bank overdrafts – (20 979) – –

Net cash and cash equivalents 151 538 103 466 101 95

29

N o t e s t o t h e a n n u a l f i n a n c i a l s t a t e m e n t s

Group Company2006 2005 2006 2005

R 000 R 000 R 000 R 000

1 Sales revenueContinuing operationsSale of goods 610 999 521 838 – –Revenue recognised on construction contracts 52 919 4 586 – – Services rendered 1 052 600 – –

664 970 527 024 – –

2 Operating costs/(income)Continuing operationsOperating costs/(income) comprise:Cost of sales 557 442 438 282 – – Other operating costs/(income) 75 534 71 580 (117) 476

632 976 509 862 (117) 476

2006 2005Dis- Dis-

Continuing continued Continuing continuedTotal operations operations Total operations operations

Note R 000 R 000 R 000 R 000 R 000 R 000

GroupOperating costs include the following

items of (income)/expense:Profit on disposal of plant and equipment (416) (416) – (629) (592) (37)Research and development expenditure 3 3 – 33 33 – Auditors remuneration– annual audit 874 794 80 2 508 2 284 224

– other services 170 170 – 162 162 –Administration and technical services 3 915 3 819 96 2 034 1 989 45 Deferred rent expense for the year 24 400 – 400 400 – 400

Operating lease expenses – premises 4 786 4 786 – 6 213 5 957 256 – equipment and vehicles 116 102 14 102 63 39

There are no contingent rents payable under any operatingleases.

Future minimum lease expenses at 30 June 2006 undernon cancellable operating leases comprise:

Not later than one year 5 447 5 433 14 3 034 3 015 19 Later than one year and not later than five years 4 516 4 495 21 3 397 3 361 36 Later than five years – – – 1 300 1 300 – Minimum future sub lease receipts (4 146) (4 146) – (28) (28) –

There are no significant leasing arrangements.

Trade and other receivables adjustments 3 2 020 1 846 174 2 628 2 546 82 Currency exchange adjustments (excluding translation

of foreign operations) 4 1 864 1 864 – 879 911 (32)

JSE listed securities market value adjustment (28) (28) – – – –

Employee benefits expense (including retirement fundcontributions) 5 91 407 84 750 6 657 79 896 71 598 8 298

Number of employees at the end of the financial year 1 068 916 152 941 803 138


30


2006 2005 R 000 R 000

2 Operating costs (continued)

Company

Operating costs include the followingitems of (income)/expense:

Income from group companies:Management and administration fees (734) (554)

Auditors remuneration – annual audit 17 15 – other services 19 –

Administration and technical services – external 381 108– inter company 110 158

Decrease in impairment of loan to the ELB Share IncentiveTrust (this item is eliminated in the Group consolidation) (568) (35)

Employee benefits expense – short term benefits 338 350 Number of employees at the end of the financial year 4 4


31


2006 2005Dis- Dis-

Continuing continued Continuing continuedTotal operations operations Total operations operations

R 000 R 000 R 000 R 000 R 000 R 000

3 Trade and other receivables adjustments – expenses

Group

Net amount written off 926 861 65 1 960 1 960 –Net increase in impairments 1 094 985 109 668 586 82

Net expense 2 020 1 846 174 2 628 2 546 82

4 Currency exchange adjustments – loss/(gain)

Group

Settlement of accounts receivable – – – ( 45) – (45)Settlement of accounts payable 525 525 – (257) (270) 13 Forward exchange contracts (FECs) maturing (962) (962) – (282) (282) – Payables adjusted to spot rates:

Current year end adjustment 17 219 17 219 – (2 245) (2 245) –Previous year end reversal 2 245 2 245 – 7 933 7 933 –

FECs marked to market:Current year end adjustment (16 241) (16 241) – 922 922 –Previous year end reversal (922) (922) – (5 147) (5 147) –

Net loss/(gain) 1 864 1 864 – 879 911 (32)

Currency exchange adjustments on bank deposits is reported in note 9.

5 Employee benefits expense

Group

Short term benefits 84 098 78 371 5 727 74 064 66 198 7 866 Post employment benefits

Retirement fund contributions (refer also to note 6) 5 212 5 058 154 4 656 4 272 384 Other 3 3 – 4 4 –

Termination benefits 785 85 700 145 145 –

Total direct benefits 90 098 83 517 6 581 78 869 70 619 8 250 Indirect benefits 1 309 1 233 76 1 027 979 48

Total employee benefits expense 91 407 84 750 6 657 79 896 71 598 8 298


32


6 Post employment benefits

Retirement

The Group provides retirement benefits for all its permanent employees. Local group companies contribute to a defined benefit pension fund,a defined contribution pension fund and a defined contribution provident fund, all of which are are subject to the South African Pensions FundAct of 1956 as amended. Certain local employees are required by legislation to contribute to industrial schemes, to which group companiesalso contribute. Foreign group companies contribute to retirement funds registered in their countries of operation.

The funds are administered independently of the Group. The local defined benefit pension fund is actuarially valued every three years. Thelast actuarial valuation was performed in January 2004. In the intervening years the actuaries perform a valuation at each year end in termsof the requirements of IAS 19. At the last valuation in June 2006 the fund was in a sound financial position.

Group2006 2005

Employee benefit obligations of the defined benefit pension fundR 000 R 000

Fair value of plan assets 111 489 95 602Present value of funded obligations (88 527) (84 858)

Surplus 22 962 10 744

The South African Pension Funds Act of 1956 as amended precludes the Group fromaccessing the surplus and accordingly it has not been recognised in the Group balance sheet.

The defined benefit pension fund consists of pensioner members and a small number ofemployee members. This fund is closed to new entrants.

Since the defined benefit pension fund is in surplus there has been no need to recognise anycosts other than contributions.

Principal actuarial assumptions used in the valuations

Discount rate 8% 8%Expected return on plan assets 8,5% 8,5%Future salary increases 6% 6%Future pension increases 3,75% 3,75%

Employer contributions recognised in the income statement R 000 R 000

Contributions by group companies on behalf of members:Defined benefit funds 177 173Defined contribution funds 5 035 4 483

5 212 4 656

The contributions are the Group contributions on behalf of employees to all the funds described above of which the employees are members.These contributions are included in employee benefits expense disclosed in note 5.

Medical

The Group pays a subsidy of R25 000 per annum in respect of three retired members of the ELB Group Limited Pension Fund. The subsidy,over the life expectancy of the three members, has been fully accrued in the balance sheet. Apart from this subsidy, the Group carries noobligations in respect of post employment medical expenses.


33


7 Directors remunerationSalaries and Retirement Medical Dividends Imputed

directors fund aid on treasury interest Total Total fees (a) Allowances contributions contributions shares (b) (c) 2006 2005 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000

Executive directors

PJ Blunden (a) 1 151 192 171 51 83 37 1 685 1 441 AG Fletcher 1 674 141 – 49 45 – 1 909 1 917 MA Hindle (d) – – – – – – – 158Dr SJ Meijers (e) 131 22 15 4 – – 172 –D Naidoo (d) – – – – – – – 150 MV Ramollo 238 48 30 – – – 316 227

3 194 403 216 104 128 37 4 082 3 893

Non executive directors

WGL Bateman (f) 246 – – 26 – – 272 251T de Bruyn (g) 35 – – – – – 35 – JC Hall 114 – – – – – 114 104Dr JP Herselman 70 – – – – – 70 65 RGH Smith 121 – – – – – 121 111

586 – – 26 – – 612 531

Total 3 780 403 216 130 128 37 4 694 4 424

Paid by the Company 340 345 Paid by subsidiaries 4 354 4 079

4 694 4 424

(a) The salary of Mr PJ Blunden includes a performance bonus of R300 000 awarded to him during the year.

(b) Dividends on treasury shares comprise participation in the ELB dividends through the ELB Participants Share Trust, and dividends onshares allocated but not yet paid for in the share incentive trusts

(c) Imputed interest is on the unpaid balances of interest free loans granted by the share incentive trusts in respect of incentive sharesallocated to participants. These amounts are not recorded as expenses of the Company or the Group.

(d) Mr MA Hindle and Mr D Naidoo resigned on 29 September 2004 following the sale of ELB McWade.

(e) Dr SJ Meijers, the chief executive of ELB Engineering Services, was appointed to the board on 16 May 2006.

(f) Mr WGL Bateman, after 46 years of service to the Group, retired on 16 May 2006.

(g) Mr T de Bruyn was appointed to the board on 15 July 2005.

Directors do not have service contracts. All executive directors have employment contracts and receive monthly remuneration. In casesof resignation or retirement a period of notice would be agreed between the director and management, which, in normal circum-stances, could be expected to be between six and twelve months.

Directors share options

No share options were held by directors at 30 June 2006 and 30 June 2005.


34


Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

8 Abnormal items


Operating items

Relocation of operations (1 331) (1 781) – –Interest on revised tax assessments of subsidiary (92) (697) – –Value added tax (VAT) dispute on public company expenses – (305) – (305)Interest on VAT dispute (40) (109) (40) (109)

(1 463) (2 892) (40) (414)

Capital items

Restructure of ELB operations incorporating the introductionof black economic empowerment (BEE) partners (850) – 80 504 –

Impairment of plant and equipment (3 000) – – –Increase in impairment of loan to ELB Timber Holdings (Pty)

Limited (31 318) –Profit on disposal of portion of interest in subsidiary – 63 – –

(3 850) 63 49 186 –

Total abnormal items: net (expense)/income (5 313) (2 829) 49 146 (414)

9 Interest received and other financial income


Interest received 6 484 7 917 – 364 Net currency exchange gains on bank deposits 41 238 – –

6 525 8 155 – 364


35


Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

10 Income tax (expense)/credit


South African income tax:Current year:

Normal tax payable (10 505) (5 134) – (69)

Secondary tax on companies (STC) (423) (1 058) (423) (1 058)Capital gains tax (CGT) (1) (74) – – Deferred tax – rate change adjustment – (195) – –

– current year 1 538 377 – – Previous years:

Payable tax (102) 796 – 148 Deferred tax – 3 191 – –

Foreign income tax:Current year:

Payable tax (874) – – – Deferred tax (1 798) (690) – –

Previous years:Payable tax 269 – – –

(11 896) (2 787) (423) (979)

Total payable tax (11 636) (5 470) (423) (979)Total deferred tax (260) 2 683 – –

(11 896) (2 787) (423) (979)

The total deferred tax for the year as above is accountedfor as follows:

(Decrease)/increase in deferred tax asset (260) 2 683 – –

Refer also to note 25

Reconciliation of the rate of taxation % % % %

Income tax as a percentage of net profit or loss before tax 50.9 19.9 0.9 (186.1)(Increase)/decrease in tax rate arising from:

Secondary tax on companies (STC) (1.8) (7.6) (0.9) 201.1 Capital gains tax (CGT) – (0.5) – –Deferred tax rate change adjustment – (1.4) – – Prior year adjustments – SA payable tax (0.4) 5.7 – (28.1)

– SA deferred tax – 22.8 – – – foreign payable tax 1.2 – – –

Other permanent differences (8.6) (4.5) 29.0 42.1 Net tax losses, not raised as deferred tax assets, created

or utilised (12.3) (5.4) – –

Standard tax rate 29.0 29.0 29.0 29.0

At 30 June 2006 subsidiaries in continuing operations had estimated tax losses to be carried forward amounting to R28 990 000(2005 - R20 412 000), of which R28 979 000 (2005 - R14 283 000) had not been recognised in deferred tax assets.

The company had no dividend credit for secondary tax on companies (STC) at the year end available for set off against future net dividendspayable (2005 - nil).


36


2006 2005ELB Timbers ELB Timbers

Malelane Malelane ELBboard plant Total board plant McWade

Note R 000 R 000 R 000 R 000

11 (Loss)/profit from discontinued operations

GROUP

Sales revenueSale of goods 28 711 47 603 24 237 23 366

Operating costs excluding depreciation, amortisation and abnormal items:Cost of sales (18 743) (36 130) (19 921) (16 209)Other operating costs (11 614) (10 778) (8 709) (2 069)

(30 357) (46 908) (28 630) (18 278)

Operating (loss)/profit before depreciation,amortisation and abnormal items (1 646) 695 (4 393) 5 088

Depreciation of plant and equipment 17 (1 308) (1 815) (1 449) (366)Amortisation of intangible assets 18 – (201) – (201)

(1 308) (2 016) (1 449) (567)

Operating (loss)/profit before abnormal items (2 954) (1 321) (5 842) 4 521 Abnormal items:

Impairment of plant and equipment (3 389) – – – Impairment of deferred rent expense (3 259) – – – Retrenchment expenses (700) – – – Other costs of discontinuance (300) – – –

(7 648) – – –

Operating (loss)/profit (10 602) (1 321) (5 842) 4 521

Interest received 46 105 – 105 Interest paid (176) (110) (108) (2)

(130) ( 5) (108) 103

(Loss)/profit before tax (10 732) (1 326) (5 950) 4 624 South African income tax:

Current yearPayable tax expense – (1 377) – (1 377)Deferred tax liability reduction 1 120 181 181 –

1 120 (1 196) 181 (1 377)

(Loss)/profit for the year (9 612) (2 522) (5 769) 3 247 Profit on disposal of discontinued operation attributable

to ordinary shareholders of ELB Group Limited 41.6 – 6 460 – 6 460

(Loss)/profit from discontinued operations (9 612) 3 938 (5 769) 9 707

Attributable to:Ordinary shareholders of ELB Group Limited (9 612) 3 291 (5 769) 9 060 Minority interest – 647 – 647

(9 612) 3 938 (5 769) 9 707


37


11 (Loss)/profit from discontinued operations (continued)

GROUP 2006 2005ELB Timbers ELB Timbers

Malelane Malelane ELBboard plant Total board plant McWade

R 000 R 000 R 000 R 000

Reconciliation of headline (loss)/earnings ofdiscontinued operations(Loss) / profit of discontinued operations attributable to

ordinary shareholders of ELB Group Limited as above (9 612) 3 291 (5 769) 9 060

Deduct: Capital items:

Disposal of plant and equipment:

Profit – 37 – 37

Income tax effect – (11) – (11)

Minority interest – (5) – (5)

Impairments and costs of discontinuance:

Impairment of plant and equipment (3 389) – – –

Impairment of deferred rent expense (3 259) – – –

Retrenchment expenses (700) – – –

Other costs of discontinuance (300) – – –

Reduction in deferred tax liability relating to the

impairment of plant and equipment 983 – – –

Profit on disposal of discontinued operation as above – 6 460 – 6 460

(6 665) 6 481 – 6 481

Headline (loss)/earnings of discontinued operationsattributable to ordinary shareholders ofELB Group Limited (2 947) (3 190) (5 769) 2 579

At 30 June 2006 the discontinued operation had an estimated tax loss of R30 846 000 (2005 - R26 742 000). The tax loss has not been

recognised in deferred tax assets.


38


2006 2005 R 000 R 000

11 (Loss)/profit from discontinued operations (continued)

COMPANY

ELB McWade

Profit on disposal – 2 333


12 Taxed profits and losses of subsidiaries

The interest of the Company for the year ended 30 June 2006 in the aggregate after taxprofits of subsidiaries amounted to R24 724 000 (2005 - R24 124 000) and in theaggregate losses to R22 488 000 (2005 - R11 846 000). Included in the losses arelosses of discontinued operations amounting to R9 612 000 (2005 - R5 769 000).

13 Headline earnings

Reconciliation of headline earnings

Net profit attributable to ordinary shareholders of ELB Group Limited per the income statement 1 871 14 486 Deduct: Capital items included therein:

Net abnormal capital items of continuing operations per note 8:Restructure of ELB operations incorporating the introduction of BEE partners (850) –Impairment of plant and equipment (3 000) –Profit on disposal of portion of interest in subsidiary – 63

Profit on disposal of ELB McWade as detailed in note 41.6 – 6 460 Profit on disposal of plant and equipment included in operating profit:

Continuing operations 416 592 Discontinued operations – 37 Income tax effect (109) (207)Minority interest – (17)

Discontinued operations impairments and costs of discontinuance per note 11:Impairment of plant and equipment (3 389) –Impairment of deferred rent expense (3 259) –Retrenchment expenses (700) –Other costs of discontinuance (300) –Reduction in deferred tax liability relating to the impairment of plant and equipment 983 –

(10 208) 6 928

Headline earnings 12 079 7 558 Deduct: Headline (loss)/earnings of discontinued operations per note 11 (2 947) (3 190)

Headline earnings of continuing operations 15 026 10 748

Refer also to note 45.1

39


Group 2006 2005

14 Earnings per ordinary share

The weighted average number of ordinary shares in issueduring the year, excluding treasury shares, and used incalculating the earnings per ordinary share was 27 315 085(2005 - 27 336 561).

The weighted average, including the number attributable to unexercised share options of nil (2005: 35 967),used in calculating diluted earnings per ordinary share was27 315 085 (2005 - 27 372 528).

Cents Cents

Profit attributable to ordinary shareholders

Earnings per share calculated on the net profit for the yearattributable to ordinary shareholders of ELB Group Limitedof R1 871 000 (2005 - R14 486 000).Refer to the income statement.

Basic 6.8 53.0

Diluted 6.8 52.9

Profit from continuing operations, attributable toordinary shareholders

Earnings per share from continuing operations, calculated onthe net profit of continuing operations attributable to ordinaryshareholders of ELB Group Limited, of R11 483 000 (2005 - R11 195 000).Refer to the income statement and to note 45.1

Basic 42.0 41.0

Diluted 42.0 40.9

Headline earnings

Headline earnings per share calculated on the headline earningsof R12 079 000 (2005 - R7 558 000).Refer to note 13

Basic 44.2 27.6

Diluted 44.2 27.6

Headline earnings from continuing operations

Headline earnings per share from continuing operations,calculated on earnings of R15 026 000 (2005 - R10 748 000)Refer to note 13

Basic 55.0 39.3

Diluted 55.0 39.3


40


15 Dividends on ordinary shares Previous Current year year final interim

Cents per Number of Number of dividend dividend Totalshare shares shares R000 R000 R000

Year ended 30 June 2006Final dividend in respect of the

previous year's earnings paid 24 October 2005 5 33 860 000 1 693 1 693

Interim dividend in respect of the current year's earningspaid 24 April 2006 5 33 860 000 1 693 1 693

Gross dividends disclosed by the company 10 33 860 000 33 860 000 1 693 1 693 3 386

Dividends on treasury shares included in net operating costs as employeebenefits expense (6 506 351) (6 708 426) (325) (336) (661)

Amounts disclosed by the group 27 353 649 27 151 574 1 368 1 357 2 725

Year ended 30 June 2005Previous year final dividend 20 33 860 000 6 772 6 772Current year interim dividend 5 33 860 000 1 693 1 693

Gross dividends disclosed by the company 25 33 860 000 33 860 000 6 772 1 693 8 465

Dividends on treasury shares included in net operating costs as employee benefits expense (6 559 466) (6 505 351) (1 311) (325) (1 636)

Amounts disclosed by the group 27 300 534 27 354 649 5 461 1 368 6 829

A final dividend of 10 cents per share, amounting to R3 386 000 on the total 33 860 000 shares in issue at the date of declaration, inrespect of the current year's earnings, was declared on 21 September 2006 and is payable on 23 October 2006 (2005 - 5 cents per shareon 33 860 000 shares amounting to R1 693 000). Secondary tax on companies (STC) of R423 250 (2005 - R211 625) will be payableon the dividend. Neither the final dividend nor the tax thereon has been accrued in these annual financial statements.

Together with the interim dividend of 5 (2005 - 5) cents per share the total dividends in respect of the current financial year amount to 15(2005 - 10) cents per share.

16 Dividends on 6% preference shares

The dividends for the year on the 6% preference shares of R2 each amounted to R456 (2005 - R456).


41


17 Property, plant and equipment

GROUP Capitalised Plant, leased -

equipment equipment Property and vehicles and vehicles Total

R 000 R 000 R 000 R 000

30 June 2006Cost 19 771 38 871 863 59 505Accumulated depreciation (1 437) (25 189) (192) (26 818)Accumulated impairment – (3 000) – (3 000)

Carrying amount 18 334 10 682 671 29 687

30 June 2005Cost 14 922 52 319 683 67 924Accumulated depreciation (961) (30 257) (74) (31 292)

Carrying amount 13 961 22 062 609 36 632

Total Total 2006 2004

Movement for the year R 000 R 000

Carrying amount at the beginning of the year 13 961 22 062 609 36 632 26 876 Reallocations (46) 61 (15) – –Additions 5 674 5 160 473 11 307 20 673 Depreciation – continuing operations (590) (4 452) (145) (5 187) (5 035)

– discontinued operations – (1 222) (86) (1 308) (1 815)Impairments – continuing operations – (3 000) – (3 000) –

– discontinued operations – (3 389) – (3 389) –Disposals – (161) – (161) (378)Disposal of business – – – – (3 952) Assets of discontinued operation

reclassified for seperate disclosure (665) (4 507) (165) (5 337) –Foreign currency translation adjustments – 130 – 130 263

Carrying amount at the end of the year 18 334 10 682 671 29 687 36 632

Details of properties owned by the group are recorded in a register which is available for inspection at the registered address of the Company.The cost of land included in the carrying amount of property at 30 June 2006 was R2 671 000 (2005 - R2 878 000).

Capital commitmentsAuthorised but not yet

Contracted contracted Total Total or ordered or ordered 2006 2005

R 000 R 000 R 000 R 000

Additions and improvements to buildings – – – 4 309 Vehicles 612 – 612 69Office furniture 25 – 25 –Computers 12 – 12 10

649 – 649 4 388

The capital commitments will be financed from existing cash resources.


42


18 Intangible assetsGROUP

Total Total 2006 2005

R 000 R 000

Movement for the year

Carrying amount at the beginning of the year – 2 584Additions – 104Amortisation – (201)Disposal of business – (2 487)

Carrying amount at the end of the year – –

19 Interest in subsidiaries

COMPANY

Shares at costOrdinary shares 2 24 787Preference shares 90 000 –

90 002 24 787

Amounts owing by subsidiaries 127 429 117 635 Less impairment (57 318) (26 000)

Carrying amount 70 111 91 635

Total carrying amount 160 113 116 422

Further details are given page 65.

Long term inter company loans among the local Group operations were interest free until 30 June 2006, the date of the balance sheet.Group operations have been restructured substantially at 30 June 2006, and the effects of the restructure are incorporated in theseannual financial statements. The restructure included rationalising and consolidating the long term inter company loans among the localoperations at that date. Impairments have been taken into account fully.


43


Group 2006 2005

R 000 R 000

20 Joint venture

The Group has an 84,21053% (2005 - 80%) interest in the Ditch Witch Australia Pty Limited joint venture.

Group's proportionate share of aggregate joint ventureoperations

Sales revenue 85 234 49 623 Net profit 8 910 2 264

Property, plant and equipment 2 601 2 010 Current assets 46 403 31 478

Total assets 49 004 33 488

Long term liabilities 929 778 Current liabilities 20 702 10 245

Total liabilities 21 631 11 023

Cash inflow/(outflow):Operations 8 916 2 301 Distributions paid (6 171) (254)Investment activities (966) (1 134)Financing activities 524 1 209

2 303 2 122

Company 2006 2005

R 000 R 000

21 Long term receivables

ELB Participants Share Trust (refer to note 22) 20 748 19 742 ELB Share Incentive Trust (refer to note 23) 3 350 3 178

Gross amounts 24 098 22 920Impairment of the ELB Share Incentive Trust (3) (568)

24 095 22 352Current portion of the ELB Share Incentive Trust included in current receivables (237) (178)

23 858 22 174

The loans to the two Trusts above are regarded as being loans in respect of treasury shares in the Group annual financial statements,and are disclosed as deductions from the issued ordinary share capital for Group purposes in note 32.

There are no other long term receivables in the Company or the Group.


44


22 ELB Participants Share Trust

The Trust was established to enable employees and salaried directors (the participants) to acquire a beneficial interest in the dividendsof the Group, thereby ensuring that the Group continues to have the benefit of an identity of interest between its shareholders and itsmanagement.

An interest free loan of R20 747 963 has been made to the Trust to enable the Trust to acquire 5 870 650 ordinary shares in the Companyto achieve the purpose outlined above.

23 ELB Share Incentive Trust

The Trust was established to enable certain executive directors and staff to acquire shares in the Company. The loan to the Trust is interestfree, and the loans granted by the Trust to executive directors and staff are correspondingly also interest free. The trustees of the shareincentive scheme may not release shares until they are paid for in full.

Number of shares

2006 2005

23.1 ELB Share Incentive TrustScheme share participations

Shares held at the beginning of the year 805 684 837 199 Shares paid for in full during the year (71 200) (31 515)Shares transferred from the Batecor Share Incentive Trust 103 312 –

Shares held at the end of the year 837 796 805 684

Scheme option participations

Options held by participants at the beginning of the year at an exercise price of 300 cents per share 12 500 212 500

Options exercised – (20 000) Options forfeited – (180 000)

Options held by participants at the end of the year 12 500 12 500

23.2 Batecor Share Incentive Trust

The assets and liabilities of this Trust were transferred at book value to the ELB Share Incentive Trust at 30 June 2006.The loan to the Trust, previously carried by the wholly owned subsidiary, ELB Equipment Holdings Limited, was acquired by ELB Group Limited at its impaired value.

Scheme share participations

Shares held at the beginning of the year 113 312 135 912 Shares paid for in full during the year (10 000) (22 600)Shares transferred from the ELB Share Incentive Trust (103 312) –

Shares held at the end of the year – 113 312


45


24 Prepaid rent expense

The prepaid rent expense represents the balance of a prepayment incurred at the commencement of an operating lease over premisesoccupied by a subsidiary, now classified as a discontinued operation. Until the time of discontinuance the expense was being written offon a straight line basis over the ten year period of the lease. The balance of the expense was fully impaired at 30 June 2006. Details ofthe movement during the year are:

Group 2006 2005

Note R 000 R 000

Balance at the beginning of the year 3 659 3 901 Additional expenses incurred – 158 Written off as an operating cost in discontinued operations during the year (400) (400)Impairment recognised in discontinued operations (3 259) –

Balance at the end of the year – 3 659

The write off of the prepaid rent expense is not included in the amounts separately disclosed for operating lease expenses, and thecarrying amount is not included in future commitments under operating leases. Refer to note 2.

25 Deferred tax

25.1 Deferred tax assets

Temporary differences:Property, plant and equipment (30) 27 Inventories 1 452 1 191Receivables and other current assets 191 795 Construction contract liabilities 1 787 27Leave pay accrued 1 174 1 378Warranties and other current liabilities 2 845 2 465

Tax losses carried forward 12 1 838

7 431 7 721

Movement for the yearBalance at the beginning of the year 7 721 5 093(Expense)/credit in the income statement in respect of continuing operations 10 (260) 2 683Disposal of subsidiary – (596) Foreign currency translation adjustments (30) 541

Balance at the end of the year 7 431 7 721

25.2 Deferred tax liabilities

Temporary differences:Property, plant and equipment – 1 120

Movement for the yearBalance at the beginning of year 1 120 1 301Income statement credit in respect of discontinued operations 11 (1 120) (181)

Balance at the end of the year – 1 120


46



Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

26 Construction contracts

Construction contract liabilitiesThe amount shown separately under current liabilities in the

balance sheet comprises:Provisions relevant to completion to date 1 763 1 –– –Billings to clients in advance of completion to date 28 254 1 048 –– –

30 017 1 049 –– –

Additional information regarding construction contracts

Revenue recognised for the year on construction contracts,as disclosed in note 1 52 919 4 586 – – –

At 30 June 2006, for construction contracts not yet complete,the aggregate amount of costs incurred and recognisedprofits, less recognised losses, amounted to 57 646 4 790 –– –

Costs incurred on construction contracts plus profitsrecognised and not yet included in billings to clients at theyear end, recorded separately under current assets in thebalance sheet as construction contracts in progress, totalled 923 113 –– –

Amount receivable from construction contract clients at theat the year end, as disclosed in note 28 39 612 1 033 –– –

Retentions held by clients at the year end and included in theamount receivable from construction contract clients 2 641 – ––

27 Inventories

Merchandise and components 48 290 26 786 –– –Work in progress 3 733 3 832 –– –Finished goods 178 436 163 669 –– –

230 459 194 287 –– –

28 Trade and other receivables

Amounts receivable from construction contract clients 39 612 1 033 –– –Other trade receivables 40 679 40 537 –– –Impairment of other trade receivables (3 889) (3 736) –– – Other current receivables 2 505 2 280 240 178 Impairment of other current receivables (1 257) (1 022) –– –

77 650 39 092 240 178

29 Other current financial assetsForward exchange contracts (FECs) marked to market 16 241 – –– – JSE listed securities at market value 28 – –– –

16 269 – –– –

47


Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

30 Other current assets

Taxes recoverable (excluding income tax) 3 292 7 917 29 19 Interest receivable on income tax and other tax overpayments 91 293 84 84 Prepaid expenses 755 490 – – Insurance claims – 439 – – Other 70 48 – –

4 208 9 187 113 103

31 Discontinued operation held for disposal

ELB Timbers - Malelane board plant

Non current assets held for disposal

Property 665 – Plant and equipment 4 507 – Capitalised leased vehicles 165 –

5 337 –

Liabilities associated with non current assets held for disposal

Mortgage bond over property 1 582 – Finance lease and instalment sale agreements over vehicles 246 –

1 828 –

The operations of the ELB Timbers Malelane board planthave been closed, and the property, plant and equipment, andvehicles are held for disposal. At the date of this report therewas no binding contract for the disposal. Further details arecontained in the directors' report and the chairman's statement.


Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

32 Ordinary share capital and premium

32.1 Authorised ordinary share capital

50 000 000 ordinary shares of 4 cents each 2 000 2 000 2 000 2 000

32.2 Number of ordinary shares in issueGroup Company

2006 2005 2006 2005 Number Number Number Number

Number of shares in issue at the beginning of the year 27 354 649 27 300 534 33 860 000 33 860 000 Shares acquired bt the ELB Participants Share Trust (284 295) – – –Incentive scheme shares paid by the participants 81 200 54 115 – –

Number of shares in issue at the end of the year 27 151 554 27 354 649 33 860 000 33 860 000

32.3 Issued ordinary shares and premium

33 860 000 (2005 - 33 860 000) shares of 4 cents each 1 354 1 354 1 354 1 354 Share premium account 23 838 23 838 23 838 23 838

25 192 25 192 25 192 25 192

Treasury sharesShares under the control of:ELB Participants Share Trust (20 748) (19 742)ELB Share Incentive Trust (3 350) (3 178)Batecor Share Incentive Trust – (446)

(24 098) (23 366)

Net issued ordinary shares and premium 1 094 1 826 25 192 25 192

In terms of the ELB Share Incentive Trust scheme, the directorsmay direct the trustees to offer shares or grant options in respectof shares to specified employees. The maximum number ofshares which may be issued or transferred or options that maybe granted is limited to 3 500 000 shares. At 30 June 20061 243 535 (2005 - 1 242 235) shares were available for issue.The increase during the year of 1 300 shares available comprisedthe net of 10 000 shares issued, which reduced the numberavailable, and 11 300 shares surrendered, which increased thenumber available. Shares surrendered by participants are takeninto stock by the Trust, and issues to participants are firstly madefrom the stock account before additional shares are issued by theCompany.

Refer also to note 23 .

48



49


Group Company 2006 2005 2006 2005

R 000 R 000 R 000 R 000

33 Preference shares

Authorised

150 000 6% fixed cumulative redeemablepreference shares of 200 cents each 300 300 300 300

Issued

3 800 (2005 - 3 800) 6% fixed cumulative redeemablepreference shares of 200 cents each 8 8 8 8

The preference shares are redeemable by purchase onthe open market out of a redemption reserve set asideby the appropriation of profits of the Company whichwould otherwise have been available for distributionas dividends to the ordinary shareholders. Refer to note 34

34 Reserves

Capital redemption reserves 742 742 242 242 Reserve for redemption of preference shares (refer to note 33) 8 8 8 8 Foreign currency translation reserve (12 065) (14 471) – –

(11 315) (13 721) 250 250

35 Interest bearing borrowings

Rate of interest

Mortgage bonds secured over properties with

carrying amounts totalling R16 543 000(2005 - R12 555 000) 10%pa 8 660 8 160

Finance lease and credit instalment agreementssecured over vehicles with carrying amounts 6,99% pa tototalling R2 356 000 (2005 - R1 873 000) 11,28% pa 2 162 1 909

10 822 10 069Current portion included in interest

bearing current payables (1 209) (1 044)

Non current portion 9 613 9 025


50


Group Company2006 2005 2006 2005

R 000 R 000 R 000 R 000

36 Non interest bearing current payables

Trade payables 146 238 120 993 – – Other payables and accruals 41 512 32 017 532 512

187 750 153 010 532 512

37 Interest bearing current payables

Interest bearing trade payables 93 745 39 859 – – Current portion of interest bearing non current borrowings

per note 35 1 209 1 044 – –

94 954 40 903 – –

38 Other current financial liabilities

Forward exchange contracts (FECs) marked to market – 922 – –

39 Other current liabilities

Taxes payable (excluding income tax) 4 411 3 509 534 486 Amounts payable under employee benefit plans 11 376 9 261 – – Insurance premiums and claims excess accrued 935 570 – – Other accruals 12 362 11 360

29 084 24 700 534 486

40 Contingent liabilities

All claims raised against the group are reviewed by the audit committee and the board and where necessary appropriate accruals aremade. The directors were not aware of any other contingent liabilities requiring disclosure.


51


Group Company 2006 2005 2006 2005

Note R 000 R 000 R 000 R 000

41 Notes to the cash flow statements41.1 Non cash adjustments

Continuing operationsProfit on disposal of plant and equipment 2 (416) (592)Foreign currency translation adjustments to

deferred tax assets 25.1 30 (541) Retained loss of indirect subsidiary, ELB

McWade Engineering (Pty) Limited, on disposal 41.6 – 24

(386) (1 109)

41.2 Changes in working capitalIncrease in construction contracts in progress (810) (113) – – Increase in inventories (36 172) (43 488) – – (Increase)/decrease in current receivables (38 558) (7 397) (62) 59 Increase in financial and other current assets (11 290) (3 494) (10) (101)Increase in construction contract liabilities 28 968 1 049 – – Increase/(decrease) in non interest bearing payables 34 740 69 211 20 (18)Increase/(decrease) in interest bearing payables 54 051 (6 991) – – Increase/(decrease) in financial and other current liabilities 3 462 (20 221) 48 486 Increase in liabilities associated with non current

assets of discontinued operation held for disposal 1 828 – – –

36 219 (11 444) (4) 426

Attributable to – continuing operations 30 887 (14 807) (4) 426– discontinued operations 5 332 3 363 – –

41.3 Income tax paidBalances at the beginning of the year:

Income tax prepaid 991 167 209 130 Income tax payable (2 963) (9 734) – –

Payable:Continuing operations 10 (11 636) (5 470) (423) (979)Discontinued operations 11 – (1 377)

Income tax payable in subsidiary on disposal – 5 645 Balances at the end of the year:

Income tax prepaid (382) (991) (278) (209)Income tax payable 7 904 2 963 – –

(6 086) (8 797) (492) (1 058)

Attributable to – continuing operations (6 086) (8 642) (492) (1 058)– discontinued operations – (155) – –

41.4 Dividends paid to ordinary shareholdersDividends declared and paid in the year:

Final for the previous year (1 368) (5 461) (1 693) (6 772)Interim for the current year (1 357) (1 368) (1 693) (1 693)

(2 725) (6 829) (3 386) (8 465)


52


Group Company2006 2005 2006 2005

R 000 R 000 R 000 R 000

41 Notes to the cash flow statements (continued)

41.5 Replacement of plant and equipment

Purchases at cost 17 (5 633) (8 757)Proceeds on disposals 577 1 007 Foreign currency translation adjustments 17 (130) (263)

(5 186) (8 013)

Attributable to – continuing operations (4 844) (5 836)– discontinued operations (342) (2 177)

41.6 Disposal of interest in subsidiary

ELB McWade

Property, plant and equipment – 3 952 Intangible assets – 2 487 Deferred tax asset – 596 Inventories – 13 410 Trade receivables – 12 294 Other current assets – 800 Cash and cash equivalents – 8 190 Minority interest – (3 963) Non interest bearing non current loan from ELB Group

Limited (holding company) – (7 402) Trade payables – (4 467) Income tax payable – (5 645) Other current liabilities – (4 581)

Net assets of subsidiary on disposal – 15 671 Eliminate ELB Group Limited loan as above – 7 402

Net assets disposed – 23 073 Retained loss in indirect subsidiary, ELB McWade

Engineering (Pty) Limited, on disposal – (24) Expenses in connection with the disposal – 491 Profit on disposal – 6 460

Proceeds on disposal – 30 000

Cost of investment in ELB McWade – 19 774Non interest bearing non current loan to ELB McWade – 7 402Expenses in connection with the disposal – 491Profit on disposal – 2 333

Proceeds on disposal – 30 000


53

Group Company2006 2005 2006 2005

R 000 R 000 R 000 R 000


41.7 Disposal of portion of interest in subsidiaryProfit on sale of portion of interest per note 8 – 63Carrying amount of interest sold per the statement

of changes in equity – 48

Proceeds on disposal – 111

41.8 Funding by ordinary shareholders

Per the statement of changes in equity:Increase in loan to the ELB Participants Share Trust (1 006) –

(Increase)/decrease in loan to the ELB Share Incentive Trust (172) 108

Decrease in loan to the Batecor Share Incentive Trust 446 89

(732) 197

41.9 Funding by minority interest

Subscription by the ELB Educational Trust for HistoricallyDisadvantaged South Africans for 15% of the issuedordinary shares in ELB Engineering Limited, being300 shares of R1 each at a premium of R9 999 pershare; equal to 300 shares at R10 000 per share 3 000 –

41.10 Transfer of ELB Equipment Holdings Limited to

ELB Engineering Limited as part of the restructureCost of equity investment (refer to page 65) 24 787 – Surplus on transfer (see below) 83 904 –

Proceeds on transfer 108 691 – Surplus on restructure of ELB operations incorporating

the introduction of BEE partners(refer to note 8) 80 504 –

Expenses included in the surplus above:Donation to the ELB Educational Trust for HDSA 3 000 – Expenses in establishing the Trust 400 –

Surplus on transfer of ELB Equipment Holdings Limited 83 904 –

41.11 Investment in ELB Engineering Limited

Ordinary shares (2) – Preference shares (90 000) –

(90 002) –



54


Group

2006 2005

Note R 000 R 000


41.12 Cash flow of discontinued operations

Cash flow from operating activities

Operating profit before depreciation, amortisationand abnormal items 11 (1 646) 695

Non cash adjustments:Prepaid rent expense for the year 24 400 400 Profit on sale of plant and equipment 2 – (37)

Changes in working capital 41.2 5 332 3 363

Cash inflow before abnormal items,interest and income tax 4 086 4 421

Retrenchment costs 11 (700) –Other discontinuance costs 11 (300) –Interest received and other financial income 11 46 105 Interest paid 11 (176) (110)Income tax paid 41.3 – (155)

Cash inflow from operating activities 2 956 4 261

Cash flow from investment activitiesReplacement of plant and equipment 41.5 (342) (2 177)Acquisition of intangible assets 18 – (104)Deferred rent expenditure 24 – (158)

Cash outflow from investment activities (342) (2 439)

Cash flow from financing activities(Decrease)/increase in long term borrowings (1 662) 1 548

Net cash inflow 952 3 370

Net cash and cash equivalents at the beginning of the year 355 5 175 Cash and cash equivalents of subsidiary on disposal – (8 190)

Cash and cash equivalents at the end of the year 1 307 355


55


42 Prior year error

GROUP

A recalculation of the income tax expense of a subsidiary for the 2005 financial year resulted in an additional expense of R2 129 000for that year. In the balance sheet at 30 June 2005the income tax payable was overstated by R718 000 and the deferred tax assetswere overstated by R2 847 000. There was no effect on the Group cash flow.

The recalculation removes from the deferred tax asset carried at 30 June 2005 an amount of R2 802 000 in respect of the temporaryallowance relating to inventories, and R45 000 relating to current receivables. The overstatement of the payable tax at 30 June 2005of R718 000 resulting from the inclusion of the movement for the year of the two items, is corrected.

The error had the effect of reducing the previously reported basic earnings per share for 2005, by 7,8 cents from 60,8 to 53,0 cents.Previously reported diluted earnings per share for 2005 are reduced by 7,8 centws from 60,7 cents to 52,9 cents.

43 Related party transactions

Related party relationships exist between group companies. All buying and selling transactions are concluded at arm's length and areeliminated upon consolidation.

Inter company current accounts do not bear interest. Short term inter company loans bear interest at market rates. Until 30 June 2005long term inter company loans generally did not bear interest. From 1 July 2005 market related rates have been agreed on the long terminter company loans among the foreign subsidiaries. Group operations were substantially restructured on 30 June 2006, which includedthe rationalisation and consolidation of the local long term inter company loans.

ELB Group Limited transferred its equity investment in ELB Equipment Holdings Limited and its subsidiaries to ELB Engineering Limitedat 30 June 2006. The transfer was effected at the net asset value of the ELB Equipment Holdings Limited Group at that date. The transferwas part of the Group restructuring which incorporated the introduction of BEE partners. Full details of the restructure are contained inthe Directors Report and the Chairman's Statement. Prior to the restructure, ELB Engineering Limited was a dormant indirect subsidiaryof ELB Group Limited, with issued ordinary shares of R2 and an amount owing by ELB Group Limited of R2.

Directors remuneration is reported in note 7.Material transactions of ELB Group Limited with subsidiaries are:Management and administration fees charged – reported in note 2.Loans to subsidiaries – reported on page 65.


56


44 Financial risk management

44.1 Foreign currency management

Unless the customer has accepted the currency risk, all imports into South Africa of equipment relating to specific customer

orders are covered by forward exchange contracts (FECs). Equipment imports, not yet paid for, are covered by FECs as soon

as customer orders are obtained except, as before, where the customer is carrying the currency risk. When exchange rates

are considered to be particularly favourable, management may cover by FEC certain equipment imports not yet paid for and

not yet subject to customer orders.

Significant other trading transactions are usually covered by FECs.

At 30 June 2006 the Group had the following uncovered foreign currency denominated amounts in the balance sheets of its South

African operations.

2006 2005

R 000 R 000

Current assets

Trade receivables

United States Dollars 866 –

Current liabilities

Trade payables non interest bearing

United States Dollars 493 66

Euros 3 852 1 056

Japanese Yen 15 562 18 368

British Pounds 27 143 16 069

Australian Dollars 514 –

Singapore Dollars 55 –

Trade payables interest bearing

Japanese Yen 6 772 12 014

British Pounds 16 457 6 675

70 848 54 248


57


44 Financial risk management (continued)

44.1 Foreign currency management (continued)

FECs of South African operations at 30 June 2006 are summarised below.

FEC FEC foreign amounts Rand amounts

2006 2005 2006 2005

000 000 R 000 R 000

Trade imports - specific

United States Dollars – – – –

Euros – 18 – 149

Japanese Yen 750 746 477 343 42 466 29 329

British Pounds 5 208 5 128 59 975 62 862

102 441 92 340

Trade imports - general

Euros 67 – 647 –

Japanese Yen 116 049 – 6 509 –

British Pounds 305 – 3 610 –

10 766 –

Total trade imports 113 207 92 340

Trade exports - specific

Japanese Yen – 670 – 40

Total trade exports – 40

The differences between FEC contract values and fair values at 30 June 2006 have been accrued as FEC assets in current assets

or FEC liabilities in current liabilities in respect of net gain adjustments or net loss adjustments respectively in the operating units.

The net gains and losses are taken through net other operating costs in the income statement.

Approximate currency exchange rates at 30 June 2006 were: 2006 2005

Number of South African Rands to one:

United States Dollar 7.13760 6.65475

Euro 9.15836 8.05392

British Pound 13.10661 11.92330

Australian Dollar 5.29397 5.06592

Singapore Dollar 4.49842 3.94847

Number of Japanese Yen to one South African Rand 16.075 16.667


58


44 Financial risk management (continued)

44.2 Interest rate management

The Group is exposed to interest rate risk as funds are borrowed at floating rates.This risk is moderate and is mitigated by the

substantial surplus of funds within the Group, and by arrangement with financial institutions for borrowing facilities to be available

at market rates in the cases of short term cash shortages.

Surplus funds are placed with 'A' grade financial institutions and in money market securities.

The Group makes use of the cash management system provided by its major local banker, whereby most of the Group bank

balances and overdrafts are pooled each day, with the bank charging or crediting interest on the net balance. This facility affords

a considerable advantage in controlling interest charged and received.

The Company's articles of association restrict the amount that the Group may borrow on the authority of the directors. At 30 June

2006 the maximum permissible Group borrowings amounted to R162,7 million (2005 - R161,5 million).

44.3 Credit risk

The Group has a large and diverse number of clients and customers comprising its customer base, dispersed across different

industries, including customers in Africa and Australia. There is no significant exposure to any individual customer or client.

Accordingly the Group has no significant concentration of credit risk.

44.4 Fair values

The carrying amounts of all financial assets and financial liabilities in the balance sheets approximate to their fair value.


59


45 Segment information

45.1 Primary segments


The Group is structured into two operating segments.ELB Engineering supplies equipment and technical solutions and administers the Group treasury.

ELB Timbers manufactures and supplies peeled and sliced veneers, plywood products, furniture components and specialised packagingsolutions.

Certain Group overheads are retained as Group overheads and not charged or allocated to the segments.

ELB ELB EliminateEngin- ELB Group inter

Total eering Timbers overheads companyR 000 R 000 R 000 R 000 R 000

SEGMENT REVENUE AND SEGMENT RESULTSfor the year ended 30 June 2006

Segment revenue – external 664 970 590 717 74 253 – –Operating costs excluding depreciation

and abnormal items:Cost of sales (557 442) (492 596) (64 846) – _Other operating costs (75 534) (58 158) (16 053) (1 323) _

(632 976) (550 754) (80 899) (1 323) _

Operating profit/(loss) before depreciationand abnormal items 31 994 39 963 (6 646) (1 323) –

Depreciation (5 187) (2 433) (2 754) – –

Operating profit/(loss) before abnormal items 26 807 37 530 (9 400) (1 323) –Abnormal items as detailed below (5 313) (1 023) (3 400) (890) –

Operating profit/(loss) 21 494 36 507 (12 800) (2 213) –Interest received and other financial income 6 525 6 525 19 – (19)Interest paid (4 632) (4 557) (94) – 19

Segment results 23 387 38 475 (12 875) (2 213) –Income tax expense (11 896) (11 473) – (423) –

Profit/(loss) for the year 11 491 27 002 (12 875) (2 636) –

Attributable to:Ordinary shareholders of ELB Group Limited 11 483 26 994 (12 875) (2 636) –Minority interest 8 8 – – –

11 491 27 002 (12 875) (2 636) –


60


45 Segment information (continued)

45.1 Primary segments (continued)


ELB ELB EliminateEngin- ELB Group inter


HEADLINE EARNINGS

Net profit/(loss) attributable to ordinaryshareholders of ELB Group Limited as above 11 483 26 994 (12 875) (2 636) –

Deduct: Capital items included in attributable netprofit as detaiked below (3 543) 266 (2 959) (850) –

Headline earnings/(loss) 15 026 26 728 (9 916) (1 786) –

Abnormal itemsRelocation of operations (1 331) (931) (400) – –Interest on revised tax assessments of subsidiary (92) (92) – – –Interest on VAT dispute (40) – – (40) –Impairment of plant and equipment (3 000) – (3 000) – –Restructure of ELB operations (850) – – (850) –

(5 313) (1 023) (3 400) (890) –

Capital items included in attributable net profitImpairment of plant and equipment (3 000) – (3 000) – –Restructure of ELB operations (850) – – (850) –Profit on disposal of plant and equipment 416 375 41 – –Income tax effect of capital items (109) (109) – – –

(3 543) 266 (2 959) (850) –

61


45 Segment information (continued)45.1 Primary segments (continued)

Continuing operations ELB ELB EliminateEngin- ELB Group inter


SEGMENT REVENUE AND SEGMENT RESULTSfor the year ended 30 June 2005Segment revenue - external 527 024 464 338 62 686 – –Operating costs excluding depreciation

and abnormal items:Cost of sales (438 282) (391 859) (46 423) – _Other operating costs (71 580) (55 934) (14 552) (1 094) _

(509 862) (447 793) (60 975) (1 094) _Operating profit/(loss) before depreciation

and abnormal items 17 162 16 545 1 711 (1 094) –Depreciation (5 035) (2 260) (2 775) – – Operating profit/loss) before abnormal items 12 127 14 285 (1 064) (1 094) –Abnormal items as detailed below (2 829) (634) (1 781) (414) – Operating profit/(loss) 9 298 13 651 (2 845) (1 508) –Interest received and other financial income 8 155 7 738 86 364 (33)Interest paid (3 474) (3 349) (158) – 33 Segment results 13 979 18 040 (2 917) (1,144) –Income tax expense (2 787) (1 808) – (979) – Profit/(loss) for the year 11 192 16 232 (2 917) (2 123) –

Attributable to:Ordinary shareholders of ELB Group Limited 11 195 16 235 (2 917) (2 123) –Minority interest (3) (3) – – –

11 192 16 232 (2 917) (2 123) – HEADLINE EARNINGSNet profit/(loss) attributable to ordinaryshareholders of ELB Group Limited as above 11 195 16 235 (2 917) (2 123) –Deduct: Capital items included in attributable net

profit as detailed below 447 528 (81) – – Headline earnings/(loss) 10 748 15 707 (2 836) (2 123) – Abnormal itemsRelocation of operation (1 781) – (1 781) – –Interest on revised tax assessments of subsidiary (697) (697) – – –VAT dispute (305) – – (305) –Interest on VAT dispute (109) – – (109) –Profit on sale of portion of interest in subsidiary 63 63 – – –

(2 829) (634) (1 781) (414) – Capital items included in attributable net profitProfit on sale of portion of interest in subsidiary 63 63 – – –Profit/(loss) on disposal of plant and equipment 592 673 (81) – –Income tax effect of capital items (196) (196) – – –Minority interest in capital items (12) (12) – – –

447 528 (81) – –

for the year ended 30 June 2006 (continued) for the year ended 30 June 2006 (continued)

62


45 Segment information (continued)45.1 Primary segments (continued)SUMMARY OF CONTINUING OPERATIONS

Year ended 30 June2006 2005

R 000 R 000

Segment revenue – external 664 970 527 024

Net profit attributable to ordinary shareholders 11 483 11 195Headline earnings

Headline earnings as reported above 15 026 10 748 Deduct: Particular operating items detailed below (no tax or

minority interest adjustments are applicable) (1 463) (2 892)

Headline earnings before particular operating items below 16 489 13 640

Relocation of operations (1 331) (1 781)Interest on revised tax assessments of subsidiary (92) (697)VAT dispute – (305)Interest on VAT dispute (40) (109)

(1 463) (2 892)

Segment assets and liabilitiesELB Eliminate

Engin- ELB ELB interTotal eering Timbers Group company

30 June 2006 R 000 R 000 R 000 R 000 R 000

Non current assets 37 118 23 311 6 376 7 431 –Current assets:

Non current assets of discontinued operationheld for disposal 5 337 – 5 337 – –

Other current assets 481 429 439 641 41 189 836 (237)

Total assets 523 884 462 952 52 902 8 267 (237)

Minority interest 665 665 – – –

Non current liabilities 9 613 43 785 93 257 – (127 429)Current liabilities:

Non current liabilities associated with non current assets of discontinued operation held for disposal 1 734 – 1 734 – –

Other current liabilities 349 803 325 581 15 229 8 993 –

Total liabilities 361 150 369 366 110 220 8 993 (127 429)

30 June 2005Non current assets 48 012 16 144 24 147 7 721 Current assets 368 115 377 293 36 843 1 367 (47 388)

Total assets 416 127 393 437 60 990 9 088 (47 388)

Minority interest 207 207 – – –

Non current liabilities 10 145 94 775 66 460 1 120 (152 210)Current liabilities 244 526 224 704 28 241 3 976 (12 395)

Total liabilities 254 671 319 479 94 701 5 096 (164 605)

63


45 Segment information (continued)45.2 Geographic segments

2006 2005 R 000 R 000

Segment revenue – continuing operations – externalSouth Africa 579 736 477 401 International 85 234 49 623

664 970 527 024

Non current assetsSouth Africa 27 086 38 280 International 2 601 2 011

29 687 40 291

Non current assets of discontinued operation held for disposalSouth Africa 5 337 – International – –

5 337 –

Current assetsSouth Africa 418 145 323 995International 62 902 43 129

481 047 367 124

Segment assets 516 071 407 415Deferred tax assets 7 431 7 721Income tax prepaid 382 991

Total Group assets 523 884 416 127

Capital expenditure during the yearSouth Africa 10 415 20 061International 445 130

10 860 20 191

Non current liabilitiesSouth Africa 8 683 8 250International 930 775

9 613 9 025

Non current liabilities associated with non current assets of discontinued operation held for disposalSouth Africa 1 828 – International – –

1 828 –

Current liabilitiesSouth Africa 319 973 230 321International 21 832 11 242

341 805 241 563

Segment liabilities 353 246 250 588Deferred tax liabilities – 1 120Income tax payable 7 904 2 963

Total Group liabilities 361 150 254 671

for the year ended 30 June 2006 (continued)for the year ended 30 June 2006 (continued)

64



46 Accounting standards and interpretations in issue but not yet effective

At the date of authorisation of the annual financial statements for the year ended 30 June 2006 the following relevant standards andinterpretations were in issue but not yet effective.

46.1 IFRS 7 - Financial instruments: disclosures, including amendments to IAS 1,Presentation of financial statements: capital disclosures

Effective for periods commencing on or after 1 January 2007. The disclosures provided in respect of financial instruments in theannual financial statements for the year ending 30 June 2008, as well as comparative information, will be required to be compliantwith IFRS 7.

The disclosure requirements of IFRS 7 require additional disclosure compared to that required in terms of existing IFRS. The adoptionof IFRS 7 will not have any effect on the accounting policies adopted for financial instruments.

46.2 IAS 19 - Employee benefits

Effective for periods commencing on or after 1 January 2007. The revisions to IAS 19 will be adopted by the Group for the first time inits financial reporting for the year ending 30 June 2008. The adoption of IAS 19 will result in additional disclosure of the Group’s definedbenefit plans, including:

• a summary of defined benefit obligations and actuarial gains or losses for the current reporting period and the previous four annualperiods; and

• an estimation of contributions payable in the following reporting period.

46.3 IAS 39 - Financial instruments: recognition and measurement, and IFRS 4 - Insurance contracts: financial guarantee contracts

The amendments to IAS 39 and the requirements of IFRS 4 will be adopted by the Group for the first time for the year ending 30 June2007. The adoption will not affect the results or position of the Group but will affect the results and position of Group entities whichissue guarantees in favour of other Group entities, and to the results and position of the beneficiary Group entities.

47 Special resolutions

ELB Engineering Limited

Name changed from ELB Systems LimitedIssue of ordinary sharesAuthorisation and issue of preference sharesChange to objects clause in memorandum of association

65

S u b s i d i a r i e s a n d j o i n t v e n t u r e

Issued Effective interest Equity investment Indebtedness ordinary

Currency capital 2006 2005 2006 2005 2006 2005 NAME 000's % % R 000 R 000 R 000 R 000

Local direct interest (subsidiaries)

ELB Engineering Limited(refer note below) ZAR 2 85 100 90 002 – 34 828 –

ELB Timber Holdings (Pty) Limited ZAR – 100 100 – – 92 601 29 749 Local indirect interest(principal operating subsidiaries only)

Batmon Nominees (Pty) Limited ZAR 1 85 100 BEP (Pty) Limited ZAR – 85 100 BRI Pipelines (Pty) Limited ZAR – 85 100 ELB Capital Investments (Pty) Limited ZAR – 85 100 ELB Engineering Services (Pty) Limited ZAR – 67 100ELB Equipment Holdings Limited – 85 100

(refer note below) ZAR 30 000 85 100 – 24 787 – 58 783ELB Equipment Limited ZAR –Elbex (Pty) Limited ZAR – 85 100 ELB Investments (Pty) Limited ZAR – 85 100 – 29 103 ELB Timber Products (Pty) Limited ZAR 13 070 100 100 ELB Ultrabord (Pty) Limited ZAR 2 500 100 100 Equipment Industrial Supplies (Pty) Limited ZAR – 63 74 Plycraft (Pty) Limited ZAR – 100 100 Veneercraft (Pty) Limited ZAR – 100 100

Foreign indirect interest(only principal operating subsidiaries and the joint venture)

Incorporated in the Cayman Islands:Bel Finance Limited USD 4 85 100Incorporated in Australia:Ditch Witch Australia Pty Limited

(joint venture) AUD – 72 80Elbquip Holdings Pty Limited AUD 3 000 85 100 Metquip Pty Limited AUD 2 650 85 100

Carrying amounts before impairment 90 002 24 787 127 429 117 635 Impairment of loan to ELB Timber Holdings (Pty) Limited – – (57 318) (26 000)

Carrying amounts after impairment 90 002 24 787 70 111 91 635

The Group restructure, incorporating the introduction of BEE partners with a 15% interest in ELB Engineering Limited, was effected on 30 June 2006.

The equity investment of ELB Group Limited in ELB Engineering Limited comprises R1 700 in the issued ordinary shares of ELB Engineering Limited, being85% thereof, and R 90 000 000 in the issued preference shares, being 100% thereof. Before the Group restructure, ELB Engineering Limited was adormant indirect wholly owned subsidiary with issued ordinary share capital of R2, and an amount owing by the holding company of R2.

The long term loan of R92 601 000 owing by ELB Timber Holdings (Pty) Limited (ELB Timbers) to ELB Group Limited (ELB) has been subordinated by ELBfor the benefit of the other creditors of ELB Timbers.

ELB Equipment Holdings Limited was previously held directly, but is now indirectly held through ELB Engineering Limited following the Group restructure.

The currencies listed above are:AUD - Australian Dollars, USD - United States Dollars, ZAR - South African Rands

Details of holding company's interest

at 30 June 2006

Beneficial holdings at 30 June 2006 Beneficial holdings at 30 June 2005 Name Total Direct Indirect Total Direct Indirect

WGL Bateman * * * 6 129 900 964 788 5 165 112 PJ Blunden 180 118 30 118 150 000 180 118 30 118 150 000 T de Bruyn 100 100 – – – – AG Fletcher 4 294 712 100 4 294 612 129 600 100 129 500 JC Hall 20 000 – 20 000 20 000 – 20 000 Dr JP Herselman 158 600 – 158 600 158 600 – 158 600 Dr SJ Meijers 100 100 – – – –MV Ramollo 100 100 – 100 100 –RGH Smith 100 100 – 100 100 –

4 653 830 30 618 4 623 212 6 618 418 995 206 5 623 212

* Mr Bateman retired from the board on 16 May 2006.

No non beneficial shares were held by any director in the current or the previous financial year.

No change occurred in directors' interests between 30 June 2006 and 30 September 2006.

66

D i r e c t o r s ’ i n t e r e s t s i n o r d i n a r y s h a r e s

A n a l y s i s o f o r d i n a r y s h a r e h o l d e r s

Number of Number of % ofshareholders shares shares issued

Public shareholders 706 14 623 127 43,2Non public shareholders 9 12 528 427 37,0Treasury shares 2 6 708 446 19,8

717 33 860 000 100,00

Directors (direct and indirect holdings) 8 4 653 830 13,7ELB share trusts 2 6 708 446 19,8

MAJOR SHAREHOLDERS

ELB Participants Share Trust 5 870 650 17,3Rand Merchant Bank (a division of FirstRand Bank Limited) 5 253 468 15,5Blandford Estates (Pty) Limited 4 294 612 12,7Golden Hind Partnership 2 905 879 8,6BlueBay Visioaction Portfolio 1 011 593 3,0

67

A n a l y s i s o f t r a n s a c t i o n s i n o r d i n a r y s h a r e s

Listed on the JSE in 1951

Closing price at 30 June 2006 720 cents

Highest closing price in the year 750 cents

Lowest closing price in the year 370 cents

Total number of shares traded 5 991 700

Total value of shares traded R31 873 643

Number of shares traded as a percentage of total shares issued 17,7%

S h a r e h o l d e r s d i a r y

Financial year end 30 June

Annual general meeting November

Financial reports

Interim report for the half year March

Provisional report for the year September

Annual report October

Dividends Declared Paid

Ordinary dividends

Interim March April

Final September October

6% fixed cumulative redeemable preference shares

Six months ending 31 December March April

Six months ending 30 June September October


68

A d m i n i s t r a t i o n

ELB GROUP LIMITED

Incorporated in the Republic of South Africa

Registration Number: 1930/002553/06

Ordinary Shares

Share Code: ELR

ISIN Code: ZAE000035101

Preference Shares

Share Code: ELRP

ISIN Code: ZAE000035333

COMPANY SECRETARYDG Jones

H Dip Tax, MBA, CA(SA), FCIS

REGISTERED OFFICE

ELB Equipment

14 Atlas Road

Anderbolt

Boksburg

1459

POSTAL ADDRESS

PO Box 565

Boksburg

1460

TELEPHONE

011 772 1400

FAX

011 772 1401

SHARE TRANSFER SECRETARIES

Computershare Investor Services 2004(Pty) LimitedRegistration Number 004/003647/07

70 Marshall Street

Johannesburg 2001

PO Box 61051

Marshalltown 2107

INDEPENDENT AUDITORS

KPMG Inc

KPMG Crescent

85 Empire Road

Parktown 2193

Johannesburg

Private Bag 9

Parkview 2122

BANKER

First National Bank

(a division of FirstRand Bank Limited)

4 First Place

Bank City

Corner Simmonds & Pritchard Streets

Johannesburg

SPONSORS

Rand Merchant Bank

(a division of FirstRand Bank Limited)

1 Merchant Place

Corner Fredman Drive & Rivonia Road

Sandton 2196

PO Box 786273

Sandton 2146

69

N o t i c e o f a n n u a l g e n e r a l m e e t i n g

Notice is hereby given that the seventy sixth Annual

General Meeting of shareholders of ELB Group Limited

(the Company) will be held in the Board Room, ELB Group

Limited, 1st Floor, 55 Sixth Road, Hyde Park, Sandton, on

Monday 20 November 2006 at 11:30 for the following

purposes:

1. ORDINARY BUSINESS

1.1 To consider the annual financial statements of

the Company for the year ended 30 June 2006

together with the reports of the directors and

auditors contained therein.

1.2 To elect a director in place of Dr SJ Meijers who

retires in accordance with the Company’s

Articles of Association, but, being eligible, offers

himself for re-election.

1.3 To elect a director in place of Dr JP Herselman

who retires in accordance with the Company’s

Articles of Association, but, being eligible, offers

himself for re-election.

Biographical details of all directors of the

Company are set out on page 9.

1.4 To ratify the directors’ fees and bonuses.

1.5 To transact any other business that may be

transacted at an annual general meeting.

2. SPECIAL BUSINESS

Shareholders will be asked to consider and, if

deemed fit, pass the following resolution with or

without amendments:

2.1 Ordinary Resolution:

Authority to place unissued shares under

control of the directors

"Resolved that all the authorised but unissued

shares in the capital of the Company be hereby

placed under the control of the directors as a

general authority in terms of section 221(2) of

the South African Companies Act number 61 of

1973, as amended ("the Companies Act"), who

are hereby authorised to allot and issue shares

in the Company upon such terms and

conditions as the directors in their sole

discretion deem fit, including the shares which

are at the disposal of the directors for the

purposes of the Company’s Share Incentive

Scheme, subject to the provisions of the

Companies Act, the Articles of Association of the

Company and the Listings Requirements of the

JSE Limited ("JSE").

Voting and proxies

Shareholders of the Company who have not

dematerialised their shares in the Company (shares), or

who have dematerialised their shares with "own name"

registration, are entitled to attend and vote at the meeting

and are entitled to appoint a proxy or proxies to attend,

speak and vote in their stead at the meeting. The person

so appointed need not be a shareholder. Proxy forms must

be forwarded, to reach the registered office of the

Company, or the transfer secretaries, Computershare

Investor Services 2004 (Proprietary) Limited, at the

70

N o t i c e o f a n n u a l g e n e r a l m e e t i n g

address given below no later than 11:30 on Thursday, 16

November 2006.

On a show of hands, every shareholder of the Company

present in person or represented by proxy shall have one

vote only. On a poll, every shareholder of the Company

shall have one vote for every share held in the Company

by such shareholder.

Shareholders who have dematerialised their shares, other

than those shareholders who have dematerialised their

shares with "own name" registration, should contact their

CSDP or broker in the manner and time stipulated in their

agreements in order to furnish them with their voting

instructions and to obtain the necessary authority to attend

the meeting should such shareholders wish to do so.

By order of the Board

DG Jones

Company Secretary

Boksburg 1459

Computershare Investor Services

2004 (Proprietary) Limited

70 Marshall Street

Johannesburg 2001

PO Box 61051

Marshalltown 2107

Johannesburg

23 October 2006

(continued)

71

P r o x y f o r m

For completion by shareholders who have not dematerialised their shares or who have dematerialised their shares but with own name registration.

For use by certificated shareholders and “own name registered” dematerialised shareholders, at the general meeting of thecompany to be held at 11:30 on Monday 20 November 2006, at 1st Floor, 55 Sixth Street, Hyde Park, Sandton.

Dematerialised shareholders (other than “own name registered” dematerialised shareholders) who wish to attend the annualgeneral meeting should obtain from their CSDP or broker the necessary authorisation to attend the annual general meeting oradvise their CSDP or broker as to what action they wish to take in respect of voting at the annual general meeting.

FORM OF PROXY FOR THE SEVENTY SIXTH ANNUAL GENERAL MEETING OF ELB GROUP LIMITED

I/We (please print) .............................................................................................................................................................

of address (please print) ....................................................................................................................................................

being the holder/s of ......................................................................................... shares in the Company, do hereby appoint

1 ............................................................................................................................................................or failing him/her

2 ............................................................................................................................................................or failing him/her

3 the chairman of the meeting

as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purposes ofconsidering and, if deemed fit, for the passing, with or without modification, the resolutions to be proposed thereat and at anyadjournment thereof, and to vote for and/or against such resolutions and/or abstain from voting in respect of the sharesregistered in my/our name(s), in accordance with the following (see note 3):

In favour Against Abstain

1. Approval of annual financial statements

2. Election of director Dr SJ Meijers

3. Election of director Dr JP Herselman

4. Approval of director's emoluments

Ordinary resolution

Authority to place unissued shares underthe control of the directors

Signed at .................................................................................................. on . ....................................................... 2006

Signature (see note 5).......................................................................................................................................................

Assisted by me where applicable (see note 8) ....................................................................................................................

Please read the notes on the reverse side hereof.

ELB GROUP LIMITEDRegistration No. 1930/002553/06

(Incorporated in the Republic of South Africa)

ISIN Code ZAE000035101 Share Code ELR

(“the Company”)

72

N o t e s t o t h e f o r m o f p r o x y

1. A form of proxy is only to be completed by those

shareholders who hold shares in certificated form or

are recorded on sub-register electronic form in "own

name". All other beneficial owners who have

dematerialised their shares through a Central

Securities Depository Participant ("CSDP") or broker

and wish to attend the meeting must provide the

CSDP or broker with their voting instructions in terms

of the relevant custody agreement entered into

between them and the CSDP or broker.

2. A shareholder may insert the name of a proxy or the

names of two alternative proxies of his/her choice in

the spaces provided, with or without deleting "the

chairman of the meeting", but any such deletion

must be initialed by the shareholder. The person

whose name is first on this form of proxy and who is

present at the meeting will be entitled to act as proxy

to the exclusion of those whose names follow.

3. Please insert an "X" in the relevant spaces

indicating how you wish your votes to be cast.

However, if you wish to cast your votes in respect of

a lesser number of shares than you own in the

Company, insert the number of shares held in

respect of which you wish to vote. Failure to comply

with the above will be deemed to authorise the proxy

to vote or abstain from voting at the meeting as

he/she deems fit in respect of all the shareholders’

votes exercisable thereat. A shareholder or his/her

proxy is not obliged to use all the votes exercisable

by the shareholder or by his/her proxy, but the total

of the votes cast in respect of which abstention is

recorded may not exceed the total of the votes

exercisable by the shareholder or by his/her proxy.

4. The form of proxy appointing a proxy must reach the

registered office of the Company or the transfer

secretaries, Computershare Investor Services 2004

(Proprietary) Limited, 70 Marshall Street

Johannesburg, 2001 (PO Box 61051, Marshalltown,

2107 Johannesburg) by not later than 11:30 on

Thursday 16 November 2006.

5. The completion and lodging of this form of proxy will

not preclude the relevant shareholder from attending

the meeting and speaking and voting in person

thereat to the exclusion of any proxy appointed in

terms hereof.

6. Documentary evidence establishing the authority of a

person signing this form of proxy in a representative

capacity must be attached to this form of proxy,

unless recorded by the Company or waived by the

chairman of the meeting.

7. Any alteration or correction made to this form of

proxy must be initialed by the signatory/ies.

8. A minor must be assisted by his/her parents or

guardian unless the relevant documents establishing

his/her capacity are produced or have been

registered by the Company.

9. The chairman of the meeting may accept any form of

proxy which is completed, other than in accordance

with these notes, if the chairman is satisfied as to the

manner in which the shareholder wishes to vote.

E L B G R O U P

First floor, 55 Sixth Road, Hyde Park, JohannesburgPO Box 413149, Craighall, 2024

Tel +27 11 772 1400Fax +27 11 772 1401

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