Commitment to South African Engineering Intellectual Capital

IST celebrated its 25th anniversary in 2005 – a remarkable achievement for a company with humble beginnings. Looking forward to its next quarter century the company remains committed to strengthening its position as one of South Africa’s leading intellectual capital organizations and one of very few that are focused on diversified engineering technology solutions for capital-intensive industries.

Our core business is engineering and this will not change. However as different engineering challenges arise in the economy, whatever they may be, IST will continue to source a balance of local and global intellectual property to provide economically viable solutions for its selected markets. We will therefore enter new markets with new products utilizing our key asset – our engineering skills.

The products, services, markets and customers may change over time but we will remain fi rst and foremost an engineering company, led by engineers and with the majority of our staff being engineers.

New Business – Expanding the Sandbox
The past year has been an exciting journey – new products in new markets continue to drive our strategic thinking. There are clear indications that two major emerging trends will provide fertile ground for IST’s engineers to develop their business.

The first of these is the need to extend and upgrade the electrical energy supply and the network associated therewith. For many years IST has been a supplier of technology in this area to Eskom and the local authorities which distribute electrical power. 2005 has seen IST enter the generation space for the fi rst time with its technology partner General Electric. It is also aggressively entering the turnkey substation market with GE products and has a corporate number of additional products from GE whose planned launch is well advanced.

In addition the standby power source for emergency situations is expected to grow and provide good opportunities for the emerging fuel cell technology which is now offered by IST. Locally the continued increase in demand for power will also provide good opportunities for the demand side management know-how which resides in IST and experts predict a strong global revival of interest in nuclear power which bodes well for our nuclear engineers working on the PBMR project.

The second is the increasing awareness of the need to take care of environmental issues. This awareness will need to increase demand for cleaning and recycling technologies for not only air and water but also for waste. The bag-house to be built by IST at Highveld Steel is an important fi rst project of its kind for IST – also with the backing of GE through its European BHA subsidiary. Other world class technologies are being studied and readied for introduction into this market.

We continue to do new and unusual things. We have handed over the fi rst optical sorting plant for diamond recovery at Cullinan’s diamond mine. As is often the case the application of these new technologies in robust environments requires patience and this new plant has provided a strong productivity boost at one of South Africa’s oldest diamond mines. We also received a major export order for our homegrown shooting training systems technology.

Doing What We Know Well
In the ICT area we have had a solid year in spite of vigorous competition. This is in line with IST’s strong emphasis on organic growth. The product offerings across all of the IST divisions have gained further momentum over the past year both locally and at selected international sites. The continuous drive to achieve even more effi cient project execution, coupled with tried and tested business systems and processes continues unabated. The company remains deeply committed to its Quality Management System, which supports the drive to improve our CSI (Customer Satisfaction Index).

Skills Acquisition and Development – Underpinning Sustainability
IST’s future is underpinned by continued commitment to the engineering learning and application. We have chosen mechanical, electrical, electronic and metallurgical/ chemical engineering as our core disciplines – others such as civil engineering disciplines are used on a subcontracted basis.

This raw intellectual capacity IST possesses will continue to be complemented by substantial domain knowledge of industries ranging from telecommunications, electricity distribution, energy management, nuclear power, defence, mining, metals and minerals to paper, pulp and petrochemical.

Our drive on a cultural level is to engender engineering excellence driven by Innovation, Speed and Tenacity – without these attributes IST would not be the special company it is.

Black Economic Empowerment
Empowerment and employment equity continue to remain critical issues for IST. The shifting emphasis focus from shareholding to employment equity and preferential procurement will be the challenges IST focuses on in 2006.

Corporate Governance
In spite of not being listed IST aspires to the highest standards of corporate governance. We continue to strive to achieve full compliance with the King II code on corporate governance and for the fi rst time will address the IFRS requirements in our fi nancial reporting.

The main board is complemented by an Audit Committee, Human Resources and Remuneration Committee and a Risk Committee. We retain the services of Messrs PriceWaterHouseCoopers as our auditor.

Looking Ahead
This 2006 yearbook reviews the year which ended 28 February, 2005. It is our second since our de-listing and we hope that readers will fi nd the content useful and of interest. We enter this year with great confi dence and a strong order book. We are well placed to execute our plans to build a world-class engineering technology business.

I would once again like to record my sincere appreciation to the customers, suppliers and principals, without whose patronage and partnership there would be no future for IST - you are all greatly valued.

Harry Coetzee Group Chief Executive May, 2006