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GMB
GMB
GMB - Glenrand M?I?B Limited - Reviewed interim results for the six months ended
31 December 2008
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 2008
* Broking revenue up 16,8%
* Earnings per share 9,1 cents (2007: (loss) 20,7 cents)
* Headline earnings per share 9,6 cents (2007: (loss) 15,4 cents)
* Benefit Services subsidiary to be liquidated
OVERVIEW
The group increased broking revenue by 16,8% to R252 million during the period
under review, which included R13,9 million attributable to the acquisition of
Finrite. Investment income increased by 29% to R28,4 million following improved
treasury management activities. The group posted a profit of 9,1 cents per share
(2007: loss of 20,7 cents). Losses attributable to the discontinuing Benefit
Services subsidiary detracted from the profitability of the continuing
operations, which achieved a profit per share of 10,4 cents (2007: loss of 5,0
cents). The Benefit Services subsidiary is to be liquidated as set out below.
CONTINUING OPERATIONS
All business units of the Risk Services operation continue to enjoy excellent
client and staff retention. This business remains a market leader in most of its
areas of operation. The business caters for the man in the street right up to
the most complex and specialist covers required for national and multinational
corporate clients. The diversified nature of this business has stood up well to
the current market conditions and we are currently analysing our exposure to the
global financial crisis as it relates to our growth targets.
The restructuring exercise is materially complete although the anticipated cost
reduction benefits have not yet fully materialised. We continue to address the
fixed cost base of the company. This relates mainly to premises lease
arrangements, which have some time to run to renewal. Further reductions in
variable costs are highly dependent on the implementation of productivity
improvement initiatives. During March 2009 we implemented a new contact centre
to reduce the cost to serve clients. Management has previously set a target of
achieving a 20% profit before tax margin by the financial year ending 30 June
2010, which target remains in place.
DISCONTINUING OPERATIONS
Benefit Services
We appointed an additional team of independent actuaries and consultants to
assist both Benefit Services and Absa Consultants and Actuaries (Pty) Limited
("Absa"), the latter acting as our agent, to finalise the processing backlogs on
terminated mandates. Progress on the project was significantly slower than
expected and we, together with our business partners, noted with mounting
concern that further increases in provisions will be required. Despite
continuous activity and efforts to fast track the project, we now believe that
the conclusion of the project within the twenty four months communicated at 30
June 2008 is impossible. Continued support of this insolvent subsidiary in the
face of escalating provisions and uncertainty relative to the completion date
could place the financial health of the holding company at risk. As a
consequence, continued support for the Benefit Services subsidiary has been
withdrawn and the subsidiary will be placed into liquidation.
Ten-50-Six Life
It was previously announced that as part of the disposal and wind down of the
employee benefits business, Glenrand M?I?B intended transferring the policies
currently held by Ten-50-Six Life Limited ("Ten-50-Six") (a wholly-owned
subsidiary of Glenrand M?I?B Benefit Services (Pty) Limited ("Benefit
Services")) to another FSB approved life company. Accordingly, the annual
financial statements for the year ended 30 June 2008 reflected the business
assets and liabilities as held for sale, as required by accounting standards.
In February 2009 Ten-50-Six policyholders were advised that the policies would
no longer be transferred but would instead be terminated in accordance with the
terms of the policy agreements. Subject to any time restrictions inherent in
realising the underlying assets, Ten-50-Six will transfer for the benefit of
each policyholder the amount to which the policyholder is entitled under each
policy. What remains of this entity will be disposed of as part of the
liquidation of Benefit Services.
POST BALANCE SHEET EVENTS
Until the effective date of the liquidation we continue to consolidate the
subsidiary. This requires that its provisions were reassessed in light of the
changed circumstances arising from the withdrawal of support by the holding
company.
We continue to use the same methodology in estimating provisions required to
finalise the terminated funds book as we did at 30 June 2008, and these
estimates are based on the information available as at 31 December 2008.
Deconsolidation will take place when the subsidiary is placed into liquidation,
which is expected to take place during the fourth quarter of the current
financial year.
Had we deconsolidated Benefit Services and its subsidiary companies at 31
December 2008, the net asset value of the group would have increased by R17,3
million. Had Benefit Services been liquidated on 1 July 2008, our earnings per
share and headline earnings per share would have been 32,3 and 11,2 cents per
share respectively. We will release comprehensive financial effects on SENS on
the effective date of liquidation.
PROSPECTS
In addition to the effect of the post balance sheet events outlined above we can
report that the continuing Risk Services business has several opportunities for
organic growth and there is a continued focus on sustainable growth at the
correct margin of profit. The business continues to selectively pursue
acquisitive opportunities.
DIRECTORATE
Dr I Abedian was appointed an independent non-executive director on 3 November
2008 and Mr P Cooper and Mr A P du Preez were appointed as non-executive
directors on 19 November 2008 and 25 February 2009 respectively. Mr G T
Ferreira, Mr A W Mansfield and Mr D J Harpur retired from the Board at the
company`s annual general meeting on 19 November 2008. Mr P Cooper resigned as a
director on 25 February 2009.
DIVIDEND
No dividend has been declared. It remains the 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
23 March 2009
Consolidated Income Statement
for the six months ended 31 December 2008
Audited
Reviewed Reviewed summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
Note R`000 R`000 R`000
Continuing
operations
Revenue 251 854 215 634 466 049
Employment expenses (145 793) (125 587) (268 734)
Rent and IT (24 002) (24 245) (49 042)
expenses
Amortisation and (11 377) (6 856) (18 522)
depreciation
Other expenses (57 277) (58 061) (117 196)
Finance costs (8 170) (5 546) (26 219)
Disposals and (1 035) (18 106) (27 953)
impairments
Investment income 28 364 21 973 66 987
Share of profit of 332 467 1 374
equity accounted
investees
Profit (loss) 32 896 (327) 26 744
before taxation
Taxation (8 238) (9 881) (23 997)
Profit (loss) from 24 658 (10 208) 2 747
continuing
operations
Discontinuing
operations
Loss from 2 (2 956) (35 673) (82 740)
discontinuing
operations (net of
taxation) including
the profit on
disposal of
discontinued
operations
Profit (loss) for 21 702 (45 881) (79 993)
the period
Profit (loss)
attributable to:
Minority interest 1 094 1 084 2 057
Shareholders of 20 608 (46 965) (82 050)
Glenrand M?I?B
21 702 (45 881) (79 993)
Earnings per share
Basic earnings 9,1 (20,7) (36,2)
(loss) per share
(cents)
Diluted earnings 9,1 (20,7) (36,2)
(loss) per share
(cents)
Continuing
operations
Basic earnings 10,4 (5,0) 0,3
(loss) per share
(cents)
Diluted earnings 10,4 (5,0) 0,3
(loss) per share
(cents)
Headline earnings 4 9,6 (15,4) (38,9)
(loss) per share
(cents)
Diluted headline 4 9,6 (15,4) (38,9)
earnings (loss) per
share (cents)
Number of shares
(net of treasury
shares)
- Weighted average 226 526 226 526 226 526
(000`s)
- Diluted weighted 226 526 226 526 226 612
average (000`s)
Statement of Recognised Income and Expenses
for the six months ended 31 December 2008
Audited
Reviewed Reviewed summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Actuarial loss on post- (1 975) (5 368) (6 767)
retirement benefits
Deferred taxation on post- 553 1 557 1 767
retirement benefits
actuarial loss
Translation of foreign (2 854) (1 167) 2 404
subsidiaries
Income and expenses (4 276) (4 978) (2 596)
recognised directly in
equity
Profit (loss) for the 21 702 (45 881) (79 993)
period
Total recognised income 17 426 (50 859) (82 589)
and expenses for the
period
Attributable to:
Minority interest 1 094 1 084 2 057
Shareholders of Glenrand 16 332 (51 943) (84 646)
M?I?B
Total recognised income 17 426 (50 859) (82 589)
and expenses for the
period
Balance Sheet
as at 31 December 2008
Assets
Non-current assets
Property, plant and 19 576 22 327 20 335
equipment
Investment properties - 6 464 -
Goodwill 38 696 32 524 44 530
Intangible assets 68 526 34 136 74 772
Deferred taxation asset 33 197 35 905 36 697
Investments 1 708 2 215 3 123
Long-term accounts 869 1 871 1 260
receivable
Non-current assets 162 572 135 442 180 717
Current assets 500 505 381 538 511 537
Assets classified as held 2 287 078 3 609 076 2 918 219
for sale
Total assets 2 950 155 4 126 056 3 610 473
Equity and liabilities
Equity
Shareholders` equity 131 772 143 307 112 674
Minority interest 2 740 3 069 4 042
Total equity 134 512 146 376 116 716
Liabilities
Non-current liabilities
Long-term liabilities 47 724 42 524 48 064
Deferred taxation 8 307 117 8 579
Non-current liabilities 56 031 42 641 56 643
Current liabilities 491 269 347 452 534 347
Liabilities classified as 2 268 343 3 589 587 2 902 767
held for sale
Total liabilities 2 815 643 3 979 680 3 493 757
Total equity and 2 950 155 4 126 056 3 610 473
liabilities
Cash Flow Statement
for the six months ended 31 December 2008
Cash generated (utilised) 16 945 (31 739) (48 819)
by operations
- Continuing 23 677 10 731 42 111
- Discontinuing (6 732) (42 470) (90 930)
Working capital changes (80 170) (6 821) 56 181
Investment income received 34 568 24 700 55 851
Interest paid (4 709) (5 824) (20 009)
Taxation paid (10 947) (5 281) (13 318)
Dividends paid (1 740) (1 767) (1 768)
Cash (outflow) inflow from (46 053) (26 732) 28 118
operating activities
Cash (outflow) inflow from (7 897) 2 003 (19 673)
investing activities
Cash inflow (outflow) from 1 302 (870) 3 262
financing activities
Net (decrease) increase in (52 648) (25 599) 11 707
cash and cash equivalents
Cash and cash equivalents 268 819 256 653 256 653
at beginning of period
Effect of exchange rate (833) 887 459
fluctuations on cash held
Cash and cash equivalents 215 338 231 941 268 819
at end of period
Business Segment Analysis
for the six months ended 31 December 2008
Note
Segmental revenues
Risk Advisory 251 854 215 634 466 049
Services
Benefit Services 12 595 26 065 39 800
Total segmental 264 449 241 699 505 849
revenues
Segmental results
Risk Advisory 13 405 885 3 944
Services
Benefit Services (7 512) (43 514) (102 321)
Total segmental 5 5 893 (42 629) (98 377)
profits (losses)
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 2008.
2. Discontinuing operations
The group announced the disposal of the retirement fund administration
subsidiary, of Glenrand M?I?B Benefit Services (Pty) Limited, during the
previous financial year and to transfer the assets of Ten-50-Six Life Limited to
another life company.
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.
3. Business combination
On 13 November 2008 the group acquired 10% of the ordinary shares in Glenrand
M?I?B Credit and Political Risk Consultants (Pty) Limited for a consideration of
R2 547 188. Previously the group owned 70% of the share capital and acquired the
additional shareholding in terms of a shareholders` agreement when the previous
shareholder passed away.
The acquisition had the following effect:
December
2008
Decrease in minority interest 656
Increase in goodwill 638
Pre-acquisition dividend 660
Imputed interest 593
Total consideration 2 547
Audited
Reviewed Reviewed summarised
6 months 6 months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
4. Calculation of headline
earnings (loss)
Earnings (loss) 20 608 (46 965) (82 050)
attributable to ordinary
shareholders
Adjusted for
Impairment and disposals 1 035 16 895 22 276
of assets
Profit (loss) on
disposal of investments
and
subsidiary companies - 1 211 (18 497)
Fair value adjustment - (6 133) (9 824)
for subsidiary company
held for sale
Taxation effect - - -
Minority interest - - (69)
Headline earnings (loss) 21 643 (34 992) (88 164)
5. Business segment
analysis
Reconciliation of
statutory to segmental
profit (loss)
Statutory profit (loss) 30 425 (36 175) (55 833)
before tax
Continuing 32 896 (327) 26 744
Discontinuing (2 471) (35 848) (82 577)
Adjusted for
Investment income (33 405) (25 146) (74 011)
Finance costs 8 170 7 186 38 886
Share of profits of (332) (467) (1 374)
equity accounted investees
Headline adjusting items 1 035 11 973 (6 045)
Total segmental profits 5 893 (42 629) (98 377)
(losses)
6. Analysis of Benefit
Services` provisions
included in current
liabilities
Professional indemnity - 8 793 6 707 7 992
internal deductible
Terminated funds 49 607 16 486 44 100
Pension fund PAYE late - 2 228 2 015
payments
FSB penalties - 1 039 17 246
Irregular income 519 8 349 6 857
Onerous contracts 3 851 1 492 4 858
Employee retrenchment 511 - 2 167
benefits
63 281 36 301 85 235
The Benefit Services subsidiary no longer receives support from the holding
company. Only those claims for which the Benefit Services subsidiary is itself
liable have been recognised and therefore ex gratia payments are no longer
provided for.
7. 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.
8. Reconciliation of movement in capital and reserves for the six months ended
31 December 2008
Treasury
Share shares and
capital share-based Non-
and share payment distributable Retained
R`000 premium reserve reserves earnings
Balance as at 52 425 (12 786) 29 949 122 817
30 June 2007
Total - - 2 404 (87 050)
recognised
income and
expenses for
the year
Share-based - 4 915 - -
payment
reserve
Acquisition of - - - -
shares in
subsidiary
Trade mark - - (4 435) 4 435
amortisation
reserve
transfer
Share of - - 374 (374)
profits of
equity
accounted
investees
Dividends paid - - - -
Balance as at 52 425 (7 871) 28 292 39 828
30 June 2008
Total - - (2 854) 19 186
recognised
income and
expenses for
the period
Share-based - 2 766 - -
payment
reserve
Acquisition of - - - -
shares in
subsidiary
Trade mark - - (1 478) 1 478
amortisation
reserve
transfer
Share of - - (1 168) 1 168
profits of
equity
accounted
investees
Dividends paid - - - -
Balance as at 52 425 (5 105) 22 792 61 660
31 December
2008
Shareholders` Minority Total
R`000 equity interest equity
Balance as at 192 405 4 037 196 442
30 June 2007
Total (84 646) 2 057 (82 589)
recognised
income and
expenses for
the year
Share-based 4 915 - 4 915
payment
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 as at 112 674 4 042 116 716
30 June 2008
Total 16 332 1 094 17 426
recognised
income and
expenses for
the period
Share-based 2 766 - 2 766
payment
reserve
Acquisition of - (656) (656)
shares in
subsidiary
Trade mark - - -
amortisation
reserve
transfer
Share of - - -
profits of
equity
accounted
investees
Dividends paid - (1 740) (1 740)
Balance as at 131 772 2 740 134 512
31 December
2008
Directorate: Dr M F Kunene (Chairman), *A J Chislett
(Chief Executive Officer), +Dr I Abedian, +R G Cottrell,
A P du Preez, M R Mashishi, T N Mgoduso (Alt),
T H Nyasulu, +N G Payne, *G Whitcher. Company Secretary: E Price *Executive
+Independent Non-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
Sponsor: Nedbank Capital
Date: 23/03/2009 16:30:05 Produced by the JSE SENS Department.
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