| Thu 11 Sep 2008, 7:05 | | GMB - Glenrand MIB Limited - Audited Summarised Results for the year ended 30 |
|
GMB
GMB
GMB - Glenrand MIB Limited - Audited Summarised Results for the year ended 30
June 2008
Glenrand MIB Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008001/06)
("Glenrand MIB" or "the group")
JSE share code: GMB ISIN: ZAE 000078010
Audited Summarised Results
for the year ended 30 June 2008
- Exit from loss making Benefit Services substantially complete
- Renewed focus on profitable operations providing platform for growth
We are making steady progress to return Glenrand MIB to sustained profitability.
Our core Risk Services business performed well with total income up 14% to R515
million. Following the disposal of our loss-making Benefit Services business we
have re-organised the company so that our broking, risk advisory, claims and
policy administration services are more closely aligned to our customer`s needs.
We are now focused on profitable continuing operations and have created a
platform for sustained profits from next year onwards. Andrew Chislett, Chief
Executive Officer
OVERVIEW
The period under review marked the restructuring of the group as a risk advisory
business, with core interests in short-term insurance broking, risk advisory,
claims and policy administration capabilities.
The continuing business produced 14% growth in income (excluding the return on
plan assets) in difficult market conditions, yet the group returned a
disappointing overall loss of 36,2 cents per share (2007: profit of 35,6 cents)
arising primarily from increased losses in the discontinuing Benefit Services
business and impairments to assets that are considered of limited value in use.
This result is very disappointing and although placing a significant burden on
the continuing business, the group has sufficient cash facilities to settle
these obligations.
The disposal of the pension fund administration business of Glenrand MIB Benefit
Services (Pty) Limited ("Benefit Services") to Absa Consultants and Actuaries
(Pty) Limited ("Absa") was effective 5 February 2008. Similarly, the Healthcare
division of Benefit Services was sold to Absa effective 1 March 2008. We are
still in the process of planning the transfer of policyholders` assets from Ten-
50-Six Life Limited ("TFS"). We are also in an advanced stage of disposing of
the pension backed home loan book of business of Benefit Services, which is the
last remaining asset in Benefit Services, other than its holding in TFS.
We are continuing to address the cost base of the continuing business and a
number of projects to reduce variable costs associated with technology,
telephony and printing have been completed. Improved treasury management added
significantly to investment income. The targeted R10 million cost savings have
been exceeded which were, however, offset by once off restructuring costs to
exit pre-existing contractual arrangements.
DISCONTINUING OPERATIONS
The Benefit Services business incurred a trading loss of R102,3 million (2007:
R35,8 million), which included increased estimates of R85,2 million to close
down the Benefit Services unit. This was due to a change in the basis of the
disposal and consequential delays in concluding the final disposal arrangements.
This changed the assumptions on which the provisions were previously based.
With the appointment of Absa as our agent to finalise these accounts, a fuller
understanding of the extent of the processing backlogs on funds that terminated
their mandates and therefore not transferring to Absa became apparent. It is
estimated that this process will require a further 24 months to conclude and the
provision includes interventions to accelerate the effort where possible. There
are 201 terminated funds, almost all with long outstanding annual financial
statements and valuation reports. It is targeted that 65% of these funds will be
resolved by 30 June 2009 and 85% by 31 December 2009. The project plan will
require constant vigilance and a concerted effort to conclude the project within
the estimated provisions.
The costs of exiting the discontinued operations have been adequately provided
for.
CONTINUING OPERATIONS
The continuing business produced revenue growth across all of its operating
units despite ongoing soft market conditions in the commercial and corporate
segments. Broking revenues increased by 10,5% to R466 million. Investment income
(excluding the return on plan assets) increased significantly to approximately
R48,8 million, as a result of increased premium flow and higher interest rates,
resulting in total income of R515 million. Glenrand MIB had own cash resources
of R102 million at 30 June 2008.
All business units of the Risk Services operation continue to enjoy excellent
client and staff retention. New business targets were met, offset by the impact
of soft market conditions on the commission components of the commercial and
corporate units. The personal lines book experienced positive revenue growth
from hardening rates driven by insurers` motor losses and achievement of sales
targets.
Earnings per share from the continuing business was 0,3 cents (2007: 17,0
cents), however excluding once off impairments of software amounting to R17,7
million, headline earnings per share of 8,8 cents was achieved. Although good
progress has been made towards restructuring the group`s cost base, the share of
group costs previously absorbed by Benefit Services was carried by Risk Services
subsequent to 5 February 2008.
Contributing further to the overall headline loss was a charge for post-
retirement benefits which increased significantly since the previous annual
valuations and accounted for R17,6 million included in finance costs. Actuarial
adjustments of R6,8 million before taxation relating to post-retirement benefits
were recognised directly against equity. The expected return on the defined
benefit plan assets amounted to R18,2 million which was included in investment
income. The net income statement effect before tax from post-retirement benefits
is R4,6 million. An additional R4,3 million (2007: R3,5 million) was recognised
in terms of IFRS 2 share-based payments, mainly as a result of the granting of
additional share options. The provision for doubtful debts increased to R8
million.
PROSPECTS
Management believes that the disposal of Benefit Services and organisational
redesign initiatives sets the platform for a return to sustainable profits from
the 2009 financial year onwards. We are continuing with a selective acquisition
strategy in terms of the growth agenda for our continuing operations. Management
has set a target of achieving a 20% profit before tax margin on gross revenue
from our continuing operations by 2010.
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. Ms T Mgoduso was appointed as alternate director to Mrs H Nyasulu on 3
July 2007.
DIVIDEND
No dividend was declared. We are committed to resuming dividend payments as soon
as it is prudent to do so, taking into account retentions for growth.
On behalf of the Board of Directors
Dr M F Kunene A J Chislett
(Chairman) (Chief Executive Officer) 10 September 2008
Income Statement
for the year ended 30 June
2008 2007
R`000 R`000
Continuing operations
Revenue 466 049 421 616
Employment expenses (268 734) (248 544)
Rent and IT expenses (49 042) (43 794)
Amortisation and depreciation (18 522) (15 250)
Other expenses (117 196) (96 832)
Finance costs (26 219) (7 412)
Disposals and impairments (27 953) 2 593
Investment income 66 987 31 169
Share of profit of equity accounted 1 374 788
investees
Profit before taxation 26 744 44 334
Taxation (23 997) (3 604)
Profit from continuing operations 2 747 40 730
Discontinuing operations
(Loss) profit from discontinuing operations (82 740) 43 486
(net of taxation) including the profit on
disposal of discontinued operations
(Loss) profit for the year (79 993) 84 216
(Loss) profit attributable to:
Minority interest 2 057 3 674
Shareholders of Glenrand MIB (82 050) 80 542
(79 993) 84 216
Earnings per share
Basic (loss) earnings per share (cents) (36,2) 35,6
Diluted (loss) earnings per share (cents) (36,2) 35,6
Continuing operations
Basic earnings per share (cents) 0,3 17,0
Diluted earnings per share (cents) 0,3 17,0
Headline (loss) earnings per share (cents) (38,9) 6,7
Diluted headline (loss) earnings per share (38,9) 6,7
(cents)
Number of shares (net of treasury shares)
- Weighted average (000`s) 226 526 226 526
- Diluted weighted average (000`s) 226 612 226 526
Statement of Recognised Income and Expenses
for the year ended 30 June
2008 2007
R`000 R`000
Actuarial loss on post-retirement benefits (6 767) (1 156)
Deferred taxation on post-retirement 1 767 335
benefits actuarial loss
Translation of foreign subsidiaries 2 404 1 976
Income and expenses recognised directly in (2 596) 1 155
equity
(Loss) profit for the year (79 993) 84 216
Total recognised income and expenses for (82 589) 85 371
the year
Attributable to:
Minority interest 2 057 3 674
Shareholders of Glenrand MIB (84 646) 81 697
Total recognised income and expenses for (82 589) 85 371
the year
Balance Sheet
as at 30 June
2008 2007
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 20 335 23 378
Investment properties - 6 464
Goodwill 44 530 31 457
Intangible assets 74 772 52 971
Deferred taxation asset 36 697 40 642
Investments 3 123 3 783
Long-term accounts receivable 1 260 6 615
Non-current assets 180 717 165 310
Current assets 511 537 427 724
Assets classified as held for sale 2 918 219 5 576 409
Total assets 3 610 473 6 169 443
Equity and liabilities
Equity
Shareholders` equity 112 674 192 405
Minority interest 4 042 4 037
Total equity 116 716 196 442
Liabilities
Non-current liabilities
Long-term liabilities 48 064 34 643
Deferred taxation 8 579 117
Non-current liabilities 56 643 34 760
Current liabilities 534 347 352 411
Liabilities classified as held for sale 2 902 767 5 585 830
Total liabilities 3 493 757 5 973 001
Total equity and liabilities 3 610 473 6 169 443
Cash Flow Statement
for the year ended 30 June
2008 2007
R`000 R`000
Cash (utilised) generated by operations (48 819) 17 502
- Continuing 42 111 53 741
- Discontinuing (90 930) (36 239)
Working capital changes 56 181 (3 794)
Investment income received 55 851 39 721
Interest paid (20 009) (8 842)
Taxation paid (13 318) (18 045)
Dividends paid (1 768) (2 587)
Cash inflow from operating activities 28 118 23 955
Cash (outflow) inflow from investing (19 673) 62 310
activities
Cash inflow from financing activities 3 262 4 452
Net increase in cash and cash equivalents 11 707 90 717
Cash and cash equivalents at beginning of 256 653 164 135
year
Effect of exchange rate fluctuations on 459 1 801
cash held
Cash and cash equivalents at end of year 268 819 256 653
Business Segment Analysis
for the year ended 30 June
2008 2007
R`000 R`000
Segmental revenues
Risk Advisory Services 466 049 431 219
- Continuing 466 049 421 616
- Discontinuing - 9 603
Benefit Services 39 800 85 329
Total segmental revenues 505 849 516 548
Segmental results
Risk Advisory Services 3 944 22 705
- Continuing 3 944 18 197
- Discontinuing - 4 508
Benefit Services (102 321) (35 842)
Total segmental losses (98 377) (13 137)
Notes to the Financial Statements
1. Basis of accounting
These consolidated preliminary 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.
IFRS 7 Financial Instruments: Disclosures, and a complementary amendment to IAS
1, Presentation of Financial Statements - Capital Disclosures: was adopted as at
1 July 2007, and introduces new disclosures relating to financial instruments.
These disclosure requirements have been included in the annual financial
statements.
2. Discontinuing operations
The group announced the disposal of the retirement fund administration business
of Glenrand MIB Benefit Services (Pty) Limited effective 5 February 2008. In
addition the group announced on 1 March 2008 that it had disposed of the
Healthcare business of Glenrand MIB Benefit Services (Pty) Limited. The decision
was made to transfer the assets of Ten-50-Six Life Limited to another life
company.
Accordingly the profits and losses of Glenrand MIB 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.
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.
3. Business combination
On 1 February 2008, the group acquired the business of Finrite Insurance
Administrators (Pty) Limited for R54 174 109, of which R30 000 000 was paid
immediately in cash. The balance is subject to achieving the agreed profit
threshold. The business is involved in end to end administration and claims
fulfilment of high volume insurance products for underwriters.
In the five months to 30 June 2008, the company achieved a profit of R1 060 990.
If the acquisition had occurred on 1 July 2007, management estimates that
revenue would have been R35 555 678 and profit R2 835 306. In determining these
amounts, management has assumed that the fair value adjustments that arose on
the date of acquisition would have been the same if the acquisition occurred on
1 July 2007.
Assets in the business at date of acquisition consisted of property, plant and
equipment of R1 476 000 and software of R16 324 000. The balance of the assets
have arisen due to the fair value adjustment as a result of the purchase price
allocation. The goodwill recognised on the acquisition is attributable mainly to
the assembled workforce, blue sky income, as well as synergy benefits and future
benefit growth.
The acquisition had the following effect:
2008 2007
R`000 R`000
Property, plant and equipment 1 476 -
Intangible assets
- software 11 730 -
- favourable lease 308 -
- customer relationship 35 625 -
Deferred tax assets 1 286 -
Deferred tax liabilities (10 062) -
Net identifiable assets and liabilities 40 363 -
Goodwill on acquisition 13 811 -
Total consideration 54 174 -
4. Calculation of headline (loss) earnings
(Loss) earnings attributable to ordinary (82 050) 80 542
shareholders
Adjusted for
Impairment and disposals of assets 22 276 307
Loss on disposal of investments and (18 497) (84 513)
subsidiary companies
Fair value adjustment for subsidiary company (9 824) 9 824
held for sale
Taxation effect - 8 999
Minority interest (69) 4
Headline (loss) earnings (88 164) 15 163
5. Business segment analysis
5.1 Reconciliation of statutory to segmental
loss
Statutory (loss) profit before tax (55 833) 99 799
Continuing 26 744 44 334
Discontinuing (82 577) 55 465
Adjusted for
Investment income (74 011) (39 721)
Finance costs 38 886 8 842
Share of profits of equity accounted (1 374) (7 675)
investees
Headline adjusting items (6 045) (74 382)
Total segmental losses (98 377) (13 137)
6. Analysis of Benefit Services provisions
included in current liabilities
Professional indemnity - internal deductible 7 992 6 996
Terminated funds 44 100 10 258
Pension fund PAYE late payments 2 015 2 278
FSB penalties 17 246 1 486
Irregular income 6 857 7 492
Onerous contracts 4 858 -
Employee retrenchment benefits 2 167 -
85 235 28 510
7. Taxation
The tax charge is distorted due to the policy of not raising a deferred taxation
asset in Benefit Services and the capital nature of impairments.
8. Audit report
KPMG Inc.`s unmodified auditors` report on the condensed financial statements
contained in this preliminary report is available for inspection at the
company`s registered office.
9. Reconciliation of movement in capital and reserves
for the year ended 30 June
Treasury
Share shares
and share-
capital based Non-
and share payment distributable Retained
R`000 premium reserve reserves earnings
Balance at 30 June 52 425 (16 323) 39 341 31 728
2006
Changes in equity
for 2007
Total recognised - - 1 976 79 721
income and expense
for the year
Share-based payment - 3 537 - -
reserve
Issue of shares by - - - -
subsidiary company
Sale of shares in - - - -
subsidiary company
Trade mark - - (6 653) 6 653
amortisation reserve
transfer
Share of losses of - - (4 715) 4 715
equity accounted
investees
Dividends paid - - - -
Balance at 30 June 52 425 (12 786) 29 949 122 817
2007
Changes in equity
for 2008
Total recognised - - 2 404 (87 050)
income and expense
for the year
Share-based payment - 4 915 - -
reserve
Acquisition of - - - -
shares in subsidiary
Trade mark - - (4 435) 4 435
amortisation reserve
transfer
Share of profits of - - 374 (374)
equity accounted
investees
Dividends paid - - - -
Balance at 30 June 52 425 (7 871) 28 292 39 828
2008
Share-
holders` Minority Total
R`000 equity interest equity
Balance at 30 June 107 171 17 070 124 241
2006
Changes in equity
for 2007
Total recognised 81 697 3 674 85 371
income and expense
for the year
Share-based payment 3 537 - 3 537
reserve
Issue of shares by - 367 367
subsidiary company
Sale of shares in - (14 487) (14 487)
subsidiary company
Trade mark - - -
amortisation reserve
transfer
Share of losses of - - -
equity accounted
investees
Dividends paid - (2 587) (2 587)
Balance at 30 June 192 405 4 037 196 442
2007
Changes in equity
for 2008
Total recognised (84 646) 2 057 (82 589)
income and expense
for the year
Share-based payment 4 915 - 4 915
reserve
Acquisition of - (284) (284)
shares in subsidiary
Trade mark - - -
amortisation reserve
transfer
Share of profits of - - -
equity accounted
investees
Dividends paid - (1 768) (1 768)
Balance at 30 June 112 674 4 042 116 716
2008
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 G Payne, *G Whitcher. Company 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
Licenced Financial Services Provider Number: 11228
Transfer Secretaries:
Computershare Investor Services (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: 11/09/2008 07:05:01 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.
