| Tue 23 Sep 2003, 17:27 | | REVIEWED INTERIM FINANCIAL STATEMENTS FOR |
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ENTERPRISE RISK MANAGEMENT LIMITED - REVIEWED INTERIM FINANCIAL STATEMENTS FOR
THE SIX MONTHS TO 31 AUGUST 2003
ENTERPRISE RISK MANAGEMENT LIMITED
Registration number 1995/001603/06
Share code: ERM
ISIN: ZAE000037701
(the "Company" or "ERM")
REVIEWED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 31 AUGUST 2003
INCOME STATEMENT
Group & Group & Group &
Company Company Company
six months eight months 14 months
to Aug 2003 to Aug 2002 to Feb 2003
R000"s R000"s R000"s
Turnover 9 951 10 078 15 818
Operating loss from
operations (987) (6 888) (13 217)
After charging
- Depreciation 121 842 1 411
- Interest paid - 395 -
Profit from disposal
of businesses 10 818 - -
Investment Income 1 607 3 488 8 818
Profit/(Loss) before
taxation 11 438 (3 400) (4 399)
South African normal
taxation (2 283) (1 493) (1 493)
Secondary Tax on
Companies - (8 371) (8 371)
Profit/(Loss) after taxation 9 155 (13 264) (14 263)
Reconciliation of
headline earnings
Profit/(Loss) after
taxation adjusted for:
Profit on sale of business
undertaking (Note 2) (7 818) - -
Profit on sale of
foreign exchange
business (Note 2) (3 000) - -
Headline loss for period (1 216) (13 264) (14 263)
Weighted average number
of shares (000"s) 53 569 53 568 53 569
Earnings/(Loss) per
share (cents) 17,09 (24,76) (26,63)
Headline loss per
share (cents) (2,27) (24,76) (26,63)
CASH FLOW STATEMENT
Group & Group & Group &
Company Company Company
six months eight months 14 months
to Aug 2003 to Aug 2002 to Feb 2003
R000"s R000"s R000"s
Cash generated
from operations (866) (5 651) (11 852)
Net profit/(loss)
before taxation 11 438 (3 400) (4 399)
Adjusted for:
Depreciation 121 842 1 411
Profit on sale
of businesses (10 818) - -
Investment income (1 607) (3 093) (8 818)
Share options
not exercised - - (46)
Cash generated from
movements in
working capital 27 186 6 811 (1 448)
Decrease in accounts
receivable 26 618 12 791 2 793
Increase/(Decrease) in
account payable 568 (5 980) (4 241)
Dividends paid - (66 902) (66 870)
Taxation paid (1 375) (13 980) (10 751)
Interest received 1 607 3 488 8 818
Net cash flow from
operating activities 26 552 (76 234) (82 103)
Net cash flow from
investing activities 3 000 (53) (135)
Net cash flow from
financing activities (9 700) 8 8
Increase/(Decrease)
in cash and cash
equivalents 19 852 (76 279) (82 230)
Cash and cash
equivalents
at beginning of period 10 136 92 366 92 366
Cash and cash
equivalents
at end of period 29 988 16 087 10 136
BALANCE SHEET
Group & Group & Group &
Company Company Company
six months eight months 14 months
to Aug 2003 to Aug 2002 to Feb 2003
R000"s R000"s R000"s
Assets
Non-current assets 9 701 1 489 1 002
Property, plant and
equipment 1 1 489 1 002
Loans receivable 9 700 - -
Current assets 70 396 67 251 68 464
Accounts receivable
(Note 3) 40 408 48 330 58 328
Taxation - 2 834 -
Cash and cash
equivalents 29 988 16 087 10 136
Total assets 80 097 68 740 69 466
Equity and Liabilities
Capital and reserves 74 901 66 791 65 746
Stated capital 59 001 59 047 59 001
Distributable
reserves 15 900 7 744 6 745
Current liabilities 5 196 1 949 3 720
Accounts payable 4 129 1 822 3 561
Taxation 908 - -
Shareholders for
dividend 159 127 159
Total capital and
liabilities 80 097 68 740 69 466
Number of shares in
issue (000`s) 53 575 53 576 53 575
Net asset value
per share (cents) 139,81 124,68 122,72
STATEMENT OF CHANGES IN EQUITY
Group & Group & Group &
Company Company Company
six months eight months 14 months
to Aug 2003 to Aug 2002 to Feb 2003
R000"s R000"s R000"s
Stated capital
Opening balance 59 001 59 039 59 039
Share options exercised - - 8
Share options issued
but not exercised - - (46)
Closing balance 59 001 59 047 59 001
Distributable reserves
Opening balance 6 745 87 977 87 977
Net profit/(loss) for period 9 155 (13 264) (14 263)
Dividends paid - (66 969) (66 969)
Closing balance 15 900 7 744 6 745
Notes to the Interim Financial Statements
1. Accounting policies
These interim annual financial statements have been prepared with reference
to and in compliance with Generally Accepted Accounting Practice Statement
AC 127: Interim Financial Reporting.
With the exception of Accounting Statement AC 133: Financial Instruments:
Recognition and Measurement, which has been applied for the first time
during the current financial year, the same accounting policies and methods
of computation used in the audited annual financial statements at 28
February 2003 have been used in these interim financial statements.
2. Disposal of businesses
During the period ended 31 August 2003, and as fully set out in a circular
to shareholders dated 8 August 2003, the Company disposed of:
* its main business enterprise, as a going concern, in terms of section
228 of the Companies Act, 1973 (Act 61 of 1973), as amended ("the
Act"), to Newshelf 716 (Proprietary) Limited ("Newshelf"), a company
registered in South Africa and a subsidiary of J&J Financial Services
(Proprietary) Limited with effect from 15 August 2003. The disposal
consideration is R13 million payable over three years (refer
commentary below), less an adjustment in an amount of R483 293 in
respect of a waiver of compliance with a suspensive condition; and
* its foreign exchange business to PSG Treasury Outsourcing
(Proprietary) Limited for a disposal consideration of R3,5 million
with effect from 28 May 2003, of which an amount of R1,5 million is
subject to certain adjustments in terms of the sale agreement.
On the date of the disposal of the businesses, the carrying value of
the assets was R2,399 million.
3. Accounts receivable
Trade receivables, which generally have 30- to 90-day terms, are recognised
and carried at original invoice values less an allowance for any doubtful
amounts. An estimate for doubtful debts is made when an indication of
impairment has occurred and collection of the full amount is no longer
probable. The amount of the loss is the difference between the assets"
carrying amount and the present value of expected cash flows, discounted at
the financial instruments original effective interest rate.
Notwithstanding the fact that the Company, in concurrence with its legal
advisors, remains confident that there is a high probability that the
entire amount owing by the City of Johannesburg, will be recovered, the
risks inherent in any legal proceeding were taken into account in
determining the future cash flows and accordingly, an estimate for doubtful
debts in the amount of R12,421 million is reflected in these results.
Similarly in order to record the timing impairment resulting for the amount
of R12 million due from Newshelf, an amount of R2,3 million, being the
amount of the probable loss resulting from the difference between the
assets" carrying amount and the present value of expected cash flows,
discounted at the financial instruments original effective interest rate,
is reflected in these interim results.
4. Auditors" review report
Ernst & Young have issued an unmodified review report on the condensed
financial statements contained in this interim report, which is available
for inspection at the Company"s registered office.
5. Commentary on the results and prospects
The Company reported earnings of 17,09 cents (2002: loss of 24,76 cents)
per share, a headline loss of 2,27 cents (2002: loss of 24,76 cents) per
share and a net asset value of 139,81 cents per share.
Following the disposals (refer note 2), the Company will have no operating
business. The Company will derive income from interest received on its cash
balances, the collection of certain work in progress, outstanding accounts
receivable and its litigation claims, the rights in respect of which were
retained by the Company and accordingly are excluded from the transaction
with Newshelf. In terms of the transaction with Newshelf, an amount of
R1 million has been paid and the balance, in an amount of R12 million will
be payable over the next three years.
In addition, the Company will pursue its claim against the City of
Johannesburg in an amount of R45 619 million, which claim is a part-heard
arbitration that is scheduled to recommence on 1 October 2003.
The Company is using its best endeavours to collect this major asset from
the City of Johannesburg so that it is in a position to evaluate the best
means in which to utilise all the Company"s cash and working capital
resources.
The Company points out that in terms of the agreement with the City of
Johannesburg, there is an express provision to the effect that interest is
payable by the City of Johannesburg on overdue amounts at the rate of
18% per annum. The Company confirms that although interest, which at
31 August 2003 amounted to R12,899 million, has not been accrued, the
Company has indeed claimed payment thereof from the City of Johannesburg,
which interest is believed to be recoverable on the same basis as the
capital amount claimed.
The Company, in concurrence with its legal advisors, remains confident that
there is a high probability that the entire amount owing by the City of
Johannesburg will be recovered.
The Board has resolved not to consider any termination of the listing of
the Company or to suspend its trading on the JSE Securities Exchange South
Africa ("JSE") at this time. The main reason for this is that the Board
believes that shareholders may benefit from the collection of the Company"s
accounts receivable, the most material of which relates to the ongoing
arbitration between the Company and the City of Johannesburg, which is not
expected to be finalised before December 2003. Furthermore, the Board will
be considering and exploring various alternatives to the Company"s future
direction and will inform shareholders as soon as possible when a decision
has been taken. These alternatives may include the acquisition of new
assets.
6. Listing on the JSE
Following the disposal, the Company has become a cash shell with a listing
in the "Financial - Speciality & Other Finance - Other Financial" sector of
the JSE lists. The Company will not meet all of the listing criteria as set
out in the Listings Requirements of the JSE since it will have no
operational assets or operating business following the disposal.
In terms of the provision of the Listings Requirements of the JSE, the
Company will have six months during which to acquire new assets, failing
which, its listing may be suspended and, subject to any ruling which the
JSE may make, its listing may be terminated if no circular relating to an
acquisition is approved by the JSE within three months from the date of
suspension.
7. Dividend
The Board has resolved not to declare any dividend to shareholders for the
period under review.
8. Department of Trade and Industry investigation
As has been previously announced, the Minister of Trade and Industry has
appointed an inspector in terms of sections 257 and 258 of the Act into the
affairs of the Company. The Company has no specific information regarding
this investigation.
9. Further cautionary announcement
As advised, the Company has received a firm intention to make an offer from
Catwalk Investments (Proprietary) Limited ("Catwalk"), a wholly-owned
subsidiary of Hosken Consolidated Investments (Proprietary) Limited,
subject to the completion of a due diligence investigation. The Board has
considered the terms of the offer and are unanimously of the view that the
price of 95 cents per ordinary share ("offer price") offered by Catwalk to
shareholders is inadequate.
Further to the cautionary announcement dated 27 August 2003, the Company
has agreed to give Catwalk access to information in relation to the
Company"s business in order for Catwalk to conduct a due diligence
investigation into the business affairs of the Company ("due diligence"),
subject to Catwalk"s execution of an appropriate confidentiality and non-
disclosure undertaking. The Board is prepared to give Catwalk an
opportunity to conduct the due diligence on the understanding that Catwalk
will, following the successful completion of the due diligence, consider
increasing the offer price.
Shareholders are advised to continue exercising caution when dealing in the
Company"s securities.
By order of the Board:
C de Beer, CA(SA)
Company secretary
Randburg
23 September 2003
Directors:
J B Zwart (Chairman)(ne), H Joffe (ne)(Acting CEO), Dr D E Baloyi (ne)(Alt I J
Pascal (British)), B H L Macdonald (ne), G M Magomola (ne),C D Stein (ne).
Sponsor:
Exchange Sponsors (Proprietary) Limited
Transfer secretaries:
Computershare Limited
Registered office:
25 St. John Road
Houghton Estate
Houghton, 2198
Email: enquiries.erm@mweb.co.za
Date: 23/09/2003 05:15:09 PM Produced by the JSE SENS Department
