| Thu 21 Feb 2008, 9:53 | | Glenrand M I B - Reviewed Interim Results For The Six Months |
|
GMB - Glenrand M I B - Reviewed Interim Results For The Six Months
Ended 31 December 2007
Glenrand M I B Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008001/06)
("Glenrand M I B" or "the group")
JSE share code: GMB
ISIN: ZAE000078010
Reviewed Interim Results for the six months ended 31 December 2007
Highlights
Restructuring as a focused risk advisory business almost complete
Finrite acquired - new revenue channels within core competence
HEPS from continuing operations of 3,0 cents
Overall earnings impacted by large losses in Benefit Services (which
business has been sold), and software impairment.
Andrew Chislett, CEO, said:
We have continued to make progress in refocusing our energies as a risk
advisory business. We successfully concluded the sale of the Benefits
Services pension fund administration division with an effective date of 1
February. This division suffered significant losses during the period under
review which resulted in the disappointing overall performance.
The business is now moving forward in a positive way as we continue to win
new mandates, capitalise on our strong market position and deal with the
high cost structure of the group. We remain confident about returning the
group to sustained profit growth in 2009.
Overview
Significant strides have been made during the period under review towards
restructuring the group as a risk advisory business, with core interests in
short-term insurance broking, risk advisory services and claims and policy
administration capabilities. The group's growth strategy has gained positive
momentum following the acquisition of the business of Finrite, which allows
the group to diversify revenues and gain access to distribution channels
that were previously inaccessible. The exclusive trading relationship with
our international partner, Jardine Lloyd Thompson plc, provides access to
global expertise and the ability to provide services to multinational
clients.
STRATEGIC INITIATIVES
An agreement to dispose of the pension fund administration business of
Glenrand M I B Benefit Services (Pty) Ltd ("Benefit Services") to Absa
Consultants and Actuaries (Pty) Limited ("Absa") was concluded on 20
December 2007 with an effective date of 5 February 2008. A binding offer has
been received from Absa for the Healthcare division, which was accepted,
subject to successful conclusion of definitive agreements. With the imminent
transfer of assets from Ten50Six Life Limited, the disposal of non-core
assets is materially complete.
DISCONTINUING OPERATIONS
The group returned a disappointing overall headline loss of 15,4 cents per
share (2006: profit of 1,7 cents) arising primarily from increased losses in
the discontinuing Benefit Services business as a result of significant
client losses, increased administration backlogs and the delay in the
disposal of the business. The Benefit Services business suffered a trading
loss of R43,5 million (2006: R12,9 million), which included increased
estimates of R6,2 million to address processing backlogs, bringing the total
provision for resolving terminated mandates to R16,5 million. The full
extent of the provision required still remains uncertain and will only
crystallise as processing arrears are brought up to date. It is estimated
that this process will require a further fifteen months.
CONTINUING OPERATIONS
Continuing operations comprise the Risk Services business, which continues
to trade positively despite ongoing soft market conditions in the commercial
and corporate segments. The personal lines segment experienced positive
revenue growth from hardening rates driven by insurers' motor losses. All
segments of the Risk Services operation continue to enjoy excellent client
and staff retention.
Risk Services' broking revenues were up marginally to R215,6 million. Good
new business flows were partially offset by the impact of soft market
conditions on the commission components of the commercial and corporate
units. Investment income increased significantly to about R22 million.
Headline earnings per share for the continuing business were 3,0 cents
(2006: 2,9 cents) excluding the impairment of software intangible assets of
R16,9 million, which resulted in a continuing loss per share of 5,0 cents.
Events that occurred in the half year caused management to assess the
carrying value of software intangible assets and an impairment was required.
Contributing to the headline loss was a charge of R2,8 million (2006: R0,7
million) in terms of IFRS 2 Share based payments, mainly as a result of the
granting of an additional 4 050 000 share options to employees on 28
September 2007 at a strike price of 130 cents per share. Post-retirement
medical obligations increased significantly since the previous annual
valuation and accounted for an amount of R2 million included in finance
costs. The last six months also required an increase of R5,8 million in the
provision for the company's share of the Professional Indemnity claims.
Good progress has been made towards restructuring the group's cost base and,
in particular, the cost structures and overheads that will remain with the
group subsequent to the disposal of non-core businesses. Actuarial
adjustments of R5,4 million before taxation relating to post-retirement
medical aid obligations were recognised directly against equity. The tax
charge is distorted due to the policy not to raise a deferred taxation asset
in Benefit Services.
PROSPECTS
Management believes that the disposal of Benefit Services, cessation of
projects that do not promise the required return on investment,
organisational redesign initiatives focused on key business enablers and
profitable acquisitions will provide the platform for a return to
sustainable profits from the 2009 financial year onwards. It is unlikely
that a profit for the year to 30 June 2008 will be achieved due to the large
losses sustained in Benefit Services. The earnings generated by the Finrite
acquisition will be consolidated from 1 February 2008. We are continuing
with a selective acquisition strategy in terms of the growth agenda for our
continuing operations.
DIRECTORATE
Mr A J Chislett was appointed CEO to the group on 1 November 2007 and Dr M F
Kunene reverted to his previous role as non-executive Chairman of the Board.
Mr N G Payne was appointed as a member and Chairman of the Remuneration and
Nominations Committee and Mr R G Cottrell as lead independent non-executive
Director.
DIVIDEND
No interim dividend was declared. It remains the group's intention to resume
dividend payments when prudent to do so.
On behalf of the Board of Directors
Dr M F Kunene A J Chislett
(Chairman) (Chief Executive Officer)
20 February 2008
Consolidated Income Statement
for the six months ended 31 December 2007
Reviewed* Audited
Reviewed restated summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Note R'000 R'000 R'000
Continuing operations
Revenue 215 634 208 272 421 616
Employment expenses (125 587) (122 174) (248 544)
Rent and IT expenses (24 245) (27 787) (43 794)
Amortisation and (6 856) (8 023) (15 250)
depreciation
Other expenses (58 061) (47 392) (96 832)
Finance costs (5 546) (2 760) (7 412)
Disposals and impairments (18 106) 1 226 2 593
Investment income 21 973 12 609 31 169
Share of profit of equity 467 421 788
accounted investees
(Loss) profit before (327) 14 392 44 334
taxation
Taxation (9 881) (4 168) (3 604)
(Loss) profit from (10 208) 10 224 40 730
continuing operations
Discontinuing operations
(Loss) profit from 3 (35 673) 48 848 43 486
discontinuing operations
(net of taxation)
including the profit on
disposal of discontinued
operations
(Loss) profit for the (45 881) 59 072 84 216
period
Profit attributable to:
Minority interest 1 084 2 335 3 674
Shareholders of Glenrand (46 965) 56 737 80 542
M?I?B
(45 881) 59 072 84 216
Earnings per share
Basic (loss) earnings per (20,7) 25,0 35,6
share (cents)
Diluted (loss) earnings (20,7) 25,0 35,6
per share (cents)
Continuing operations
Basic (loss) earnings per (5,0) 4,1 17,0
share (cents)
Diluted (loss) earnings (5,0) 4,1 17,0
per share (cents)
Headline (loss) earnings 4 (15,4) 1,7 6,7
per share (cents)
Diluted headline (loss) 4 (15,4) 1,7 6,7
earnings per share
(cents)
Number of shares (net of
treasury shares)
- Weighted average 226 526 226 526 226 526
(000's)
- Diluted weighted 226 526 226 526 226 526
average (000's)
* Restated refer to note 2
Statement of Recognised Income and Expenses
for the six months ended 31 December 2007
Reviewed* Audited
Reviewed restated summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
R'000 R'000 R'000
Actuarial (loss) gain on post- (5 368) 312 (1 156)
retirement medical aid
obligations
Deferred taxation on defined 1 557 (90) 335
benefit actuarial (loss) gain
Translation of foreign (1 167) 1 416 1 976
subsidiaries
Income and expenses recognised (4 978) 1 638 1 155
directly in equity
(Loss) profit for the period (45 881) 59 072 84 216
Total recognised income and (50 859) 60 710 85 371
expenses for the period
Attributable to:
Minority interest 1 084 2 335 3 674
Shareholders of Glenrand M?I?B (51 943) 58 375 81 697
Total recognised income and (50 859) 60 710 85 371
expenses for the period
Balance Sheet
as at 31 December 2007
Assets
Non-current assets
Property, plant and equipment 22 327 29 925 23 378
Investment properties 6 464 6 464 6 464
Goodwill 32 524 42 442 31 457
Intangible assets 34 136 50 225 52 971
Deferred taxation asset 35 905 40 401 40 642
Investments 2 215 4 236 3 783
Long-term accounts receivable 1 871 10 332 6 615
Linked investments backing - 5 278 491 -
policyholder contracts
Non-current assets 135 442 5 462 516 165 310
Other current assets 381 538 324 664 427 724
Accounts receivable policyholders - 76 280 -
Current assets 381 538 400 944 427 724
Assets classified as held for sale 3 609 076 8 206 5 576 409
Total assets 4 126 056 5 871 666 6 169 443
Equity and liabilities
Equity
Shareholders' equity 143 307 165 846 192 405
Minority interest 3 069 3 460 4 037
Total equity 146 376 169 306 196 442
Liabilities
Non-current liabilities
Long-term liabilities 42 524 38 108 34 643
Deferred taxation 117 112 117
Policyholder liabilities - 5 327 063 -
Non-current liabilities 42 641 5 365 283 34 760
Other current liabilities 347 452 309 370 352 411
Accounts payable policyholders - 27 707 -
Current liabilities 347 452 337 077 352 411
Liabilities classified as held for 3 589 587 - 5 585 830
sale
Total liabilities 3 979 680 5 702 360 5 973 001
Total equity and liabilities 4 126 056 5 871 666 6 169 443
Cash Flow Statement
for the six months ended 31 December 2007
Cash generated by operations (31 739) 8 204 17 502
- Continuing 10 731 11 832 53 741
- Discontinuing (42 470) (3 628) (36 239)
Working capital changes (6 821) (64 259) (3 794)
Investment income received 24 700 15 339 39 721
Interest paid (5 824) (2 995) (8 842)
Taxation paid (5 281) (14 267) (18 045)
Dividends paid (1 767) (2 212) (2 587)
Cash (outflow) inflow from (26 732) (60 190) 23 955
operating activities
Cash inflow from investing 2 003 31 754 62 310
activities
Cash (outflow) inflow from (870) (200) 4 452
financing activities
Net (decrease) increase in cash (25 599) (28 636) 90 717
and cash equivalents
Cash and cash equivalents at 256 653 164 135 164 135
beginning of period
Effect of exchange rate 887 1 033 1 801
fluctuations on cash held
Cash and cash equivalents at end 231 941 136 532 256 653
of period
Segmental Analysis
for the six months ended 31 December 2007
Segmental revenues
Risk Advisory Services# 215 634 217 875 431 219
- Continuing 215 634 208 272 421 616
- Discontinuing - 9 603 9 603
Benefit Services 26 065 43 761 85 329
Total segmental revenues 241 699 261 636 516 548
Segmental results
Risk Advisory Services# 885 7 773 22 705
- Continuing 885 3 263 18 197
- Discontinuing - 4 510 4 508
Benefit Services (43 514) (12 943) (35 842)
Total segmental losses 5 (42 629) (5 170) (13 137)
# Risk Advisory Services includes Risk Services South Africa, Africa and
group costs.
Notes to the Financial Statements
1. Basis of accounting
These reviewed interim results are prepared in accordance with the
recognition and measurement requirements of International Financial
Reporting Standards (IFRS), the disclosure requirements of IAS 34 Interim
Financial Reporting and the South African Companies Act of 1973, as amended.
The accounting policies are consistent with those applied for the year ended
30 June 2007, except as stated below.
During the year, the group adopted IFRS 7 Financial Instruments: Disclosures
(including amendments to IAS 1 Presentation of Financial Statements: Capital
Disclosures) and amendments to IFRS 4 Insurance Contracts.
The group elected to recognise actuarial gains and losses in equity and not
in the income statement from June 2007. This change in accounting policy was
due to the adoption of the Amendment to IAS 19 Employee Benefits - Actuarial
Gains and Losses, Group Plans and Disclosures. The December 2006
comparatives have been restated as detailed in note 2.
2. Adjustments
Reconciliation of financial information previously reported
Reconciliation of income statement
Restated period ended 31 December 2006
R'000 R'000 R'000
Profit before Profit after
taxation Taxation taxation
As previously reported 14 080 (4 078) 10 002
Adjusted for
- Actuarial gain 312 (90) 222
Adjusted results 14 392 (4 168) 10 224
3. Discontinuing operations
The group announced the disposal of the administration business of Glenrand
M I B Benefit Services (Pty) Limited on 20 December 2007, subject to the
fulfilment of certain conditions. Simultaneously, the decision was made to
dispose of its interest in its Healthcare division and to transfer the
assets of Ten-50-Six Life Limited to Advantage Asset Managers (Pty) Limited.
Accordingly the profits and losses of Glenrand M I B Benefit Services (Pty)
Limited and Ten-50-Six Life Limited are disclosed as discontinuing.
Liabilities classified as held for sale excludes any obligations that remain
with the group in terms of the disposal, such as provisions.
During the previous financial year the group disposed of its investments in
Holmwoods and Back and Manson (South Africa) (Pty) Limited and Admiral
Professional Underwriting Agency (Pty) Limited.
Reviewed Audited
Reviewed restated summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
R'000 R'000 R'000
4. Calculation of headline
(loss) earnings
(Loss) earnings attributable (46 965) 56 737 80 542
to ordinary shareholders
Adjusted for
Impairment and disposals of 16 895 368 307
assets
Profit (loss) on disposal 1 211 (58 415) (84 513)
of investments and subsidiary
companies
Fair value adjustment for (6 133) - 9 824
subsidiary company held for
sale
Taxation effect - 5 125 8 999
Minority interest - 1 4
Headline (loss) earnings (34 992) 3 816 15 163
5. Segmental analysis
5.1 Reconciliation of
statutory to segmental (loss)
profit
Statutory (loss) profit (36 175) 70 330 99 799
before tax
Continuing (327) 14 392 44 334
Discontinuing (35 848) 55 938 55 465
Adjusted for
Investment income (25 146) (15 339) (39 721)
Finance costs 7 186 2 995 8 842
Share of profits of equity (467) (5 109) (7 675)
accounted investees
Headline adjusting items 11 973 (58 047) (74 382)
Total segmental losses (42 629) (5 170) (13 137)
5.2 Segmental analysis of
group costs
Risk Advisory Services
Risk Services South Africa 30 008 27 141 54 283
Africa and Underwriting 166 241 482
Unallocated group costs 11 570 18 346 31 139
Benefit Services 9 071 8 021 16 043
Total group costs included in 50 815 53 749 101 947
segmental losses
Group costs entail the following:
IT, Marketing, Operating Leases, Payroll, Compliance, Risk and Legal, Group
Finance, Secretarial and the Executive Office.
6. Independent review
These reviewed interim results have been prepared in accordance with IAS 34
Interim Financial Reporting and have been reviewed by KPMG Inc., whose
unqualified report is available for inspection at the company's registered
office.
7. Reconciliation of movement in capital and reserves
for the six months ended 31 December 2007
Share
capital Share Non-
and share option distributable
Treasury
R'000 premium shares reserve reserves
Balance as at 30 52 425 (39 212) 22 889 39 341
June 2006
Total recognised - - - 1 976
income and
expenses for the
year
Share-based - - 3 537 -
payment reserve
Issue of shares - - - -
by subsidiary
company
Sale of shares in - - - -
subsidiary
company
Trade mark - - - (6 653)
amortisation
reserve transfer
Share of profits - - - (4 715)
of equity
accounted
investees
Dividends paid - - - -
Balance as at 30 52 425 (39 212) 26 426 29 949
June 2007
Total recognised
income and
expenses for - - - (1 167)
the period
Share-based - - 2 845 -
payment reserve
Acquisition of - - - -
shares in
subsidiary
Trade mark - - - (2 217)
amortisation
reserve transfer
Share of profits - - - (533)
of equity
accounted
investees
Dividends paid - - - -
Balance as at 31 52 425 (39 212) 29 271 26 032
December 2007
Retained Shareholders' Minority Total
R'000 earnings equity interest equity
Balance as at 30 31 728 107 171 17 070 124 241
June 2006
Total recognised 79 721 81 697 3 674 85 371
income and
expenses for the
year
Share-based - 3 537 - 3 537
payment reserve
Issue of shares - - 367 367
by subsidiary
company
Sale of shares - - (14 487) (14 487)
in subsidiary
company
Trade mark 6 653 - - -
amortisation
reserve transfer
Share of profits 4 715 - - -
of equity
accounted
investees
Dividends paid - - (2 587) (2 587)
Balance as at 30 122 817 192 405 4 037 196 442
June 2007
Total recognised
income and
expenses for (50 776) (51 943) 1 084 (50 859)
the period
Share-based - 2 845 - 2 845
payment reserve
Acquisition of - - (284) (284)
shares in
subsidiary
Trade mark 2 217 - - -
amortisation
reserve transfer
Share of profits 533 - - -
of equity
accounted
investees
Dividends paid - - (1 768) (1 768)
Balance as at 31 74 791 143 307 3 069 146 376
December 2007
Directorate: Dr M F Kunene (Chairman), *A J Chislett (Chief Executive
Officer), P Cooper (Alt), R G Cottrell, G T Ferreira, D J Harpur, A W
Mansfield, M R Mashishi, T N Mgoduso (Alt), T H Nyasulu, N Payne, *G
Whitcher. Group Secretary: E Price *Executive
Registered Office: 288 Kent Avenue * PO Box 2544 * Randburg 2125 * Tel (011)
329 1111 * Fax (011) 329 1333 * email info@glenrandmib.co.za * website
www.glenrandmib.co.za
* Licensed Financial Services Provider Number: 11228
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited *
70 Marshall Street * Johannesburg 2001 * PO Box 61051 * Marshalltown 2107 *
South Africa * Tel (011) 370 5000 * Fax (011) 688 7715
Investment Bank and Sponsor: Nedbank Capital
Date: 21/02/2008 07:00:18 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
