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Enterprise Risk Management Limited - Audited Financial
Release Date: 29/03/2004 17:15:01 Code(s): ERM
ENTERPRISE RISK MANAGEMENT LIMITED - AUDITED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2004
ENTERPRISE RISK MANAGEMENT LIMITED
Registration number 1995/001603/06
(The "Company" or "ERM")
ISIN: ZAE000037701
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY
2004
Group & Group &
Company Company
Twelve Fourteen
months months
To Feb 2004 To Feb 2003
R 000"s R 000"s
Income Statement
Turnover 12,020 15,818
Operating Loss from (3,793) (13,217)
operations
After charging
- Depreciation 120 1,410
Profit from disposal of
businesses 9,972 -
Investment Income 4,822 8,818
Profit/(Loss) before 11,001 (4,399)
taxation
SA Normal taxation (2,499) (1,493)
Secondary tax on - (8,371)
companies
Profit/(Loss) after tax 8,502 (13,263)
Reconciliation of
headline earnings
Profit/(Loss) after (7,372) -
taxation adjusted for:
Profit on sale of
business undertaking (2,600) -
(Note 2)
Profit on sale of
foreign exchange
business (Note 2)
Headline loss for the (1,470) (14,263)
period
Weighted Average number
of 53,569 53,569
Shares (000"s)
Earnings/(Loss) Per 15,87 (26,63)
Share (cents)
Headline Loss per Share (2,74) (26,63)
(cents)
Group & Group &
Company Company
Twelve Fourteen
months months
To Feb 2004 To Feb 2003
R 000"s R 000"s
Balance Sheet
Assets
Non-Current Assets 32,845 1,002
Investments 22,543 -
Property, Plant & 1,002
Equipment -
Loans (Note 3) 10,302 -
Current Assets 43,406 68,464
Accounts receivable 39,524 58,328
(Note 3)
Cash & Cash Equivalents 3,882 10,136
Total Assets 76,251 69,466
Equity & Liabilities
Capital and Reserves 74,248 65,746
Stated Capital 59,001 59,001
Distributable Reserves 15,247 6,745
Current Liabilities 2,003 3,720
Accounts Payable 1,763 3,561
Taxation 81 -
Shareholders for 159 159
Dividend
Total Capital & 76,251 69,466
Liabilities
Number of shares in 53,575 53,575
issue (`000) 138,59 122,72
NAV per Share (cents)
Group & Group &
Company Company
Twelve Fourteen
months months
To Feb 2004 To Feb 2003
R 000"s R 000"s
Cash Flow
Statement
Cash generated
from operations (3,327) (11,852)
Net profit/(loss)
before tax 11,001 (4,399)
Adjusted for:
Depreciation
Investment income 120 1,411
Fair value (4,822) (8,818)
adjustments on
trade receivables 346 -
Share options not - (46)
exercised
Profit on (7,372) -
disposal of
undertaking (2,600) -
Profit on
disposal of
foreign exchange
business
Cash generated
from movements in
working capital 14,842 (1,448)
Decrease in
Accounts 18,458 2,793
Receivable
Decrease in (3,616) (4,241)
account payable
Dividends Paid - (66,870)
Taxation Paid (2,418) (10,750)
Investment income 2,953 8,818
Net Cash flow
from operating 12,050 (82,102)
activities
Net Cash Flow
from Investing (18,304) (136)
activities
Net Cash Flow
from Financing - 8
Activities
Decrease in Cash
and Cash (6,254) (82,230)
Equivalents
Cash and Cash
Equivalents at 10,136 92,366
the beginning of
Period
Cash and Cash
Equivalents at
end of Period 3,882 10,136
Group & Group &
Company Company
Fourteen Fourteen
months months
To Feb 2004 To Feb 2003
R 000"s R 000"s
Statement of
Changes in Equity
Stated Capital
Opening Balance 59,001 59,039
Share Options - 8
exercised
Share Options - (46)
issued but not
exercised
Closing Balance 59,001 59,001
Distributable
reserves
Opening Balance 6,745 87,977
Net Profit/(Loss)
for the Period 8,502 (14,263)
Dividends paid - (66,969)
Closing Balance 15,247 6,745
Notes to the Financial Statements
1. Accounting policies
These annual financial statements have been prepared with reference to and in
accordance with South African Statements of Generally Accepted Accounting
Practice.
With the exception of Accounting Statement AC133: 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 results.
2. Disposal of businesses
In the announcement published in the press on 23 June 2003, the Company advised
shareholders that the Company had concluded an agreement with Newshelf 716
(Proprietary) Limited ("Newshelf") a subsidiary of the J&J Financial Services
Group, in terms of which the Company had, subject to certain conditions,
disposed of the entire business undertaking conducted by it as a going concern
to Newshelf with effect from the effective date (25 August 2003), for a disposal
consideration of R13 million. This disposal required the approval of
shareholders in terms of Section 228 of the Companies Act, 1973, which approval
was obtained at a general meeting of shareholders held on 25 August 2003. In
the interim results announcement published in the press on 23 September 2003,
shareholders were also advised that ERM had also, prior to the disposal referred
to above, sold the Foreign Exchange business conducted by it as a going concern,
with effect from 1 June 2003, to PSG Treasury Outsourcing (Proprietary) Limited
on the terms and conditions recorded in the PSG Treasury Outsourcing agreement.
The sale of the Foreign Exchange business did not require shareholder approval.
3. Accounts receivable
Trade receivables, which generally have 30 to 90 day terms, are recognised and
carried at original invoice values less a provision for any impairment. The
Company recognised an impairment loss equal to the best estimate in the range of
possible outcomes, taking into account all relevant information available before
the financial statements are issued about conditions that existed at the balance
sheet date.
AC 133 also requires that financial assets be initially measured at the fair
value of the consideration given. The Company estimates that the fair value of
the consideration, relating to the deferred payment of R12 million due from
Newshelf, on a discounted present value basis is R10,3 million. The difference
between the present value and future value will be recognised on the effective
interest rate basis over the life of the financial asset.
4. ontingent liabilities and outstanding claims
4.1 Contingent liability
4.1.1 The Company has received service of a claim totalling approximately
R1million from certain former employees. This matter is being defended to the
fullest.
4.2 Outstanding claims
4.2.1 Included in accounts receivable are amounts in respect of the City of
Johannesburg of R45, 6 million (2003: R45, 6 million). As reported previously,
the debtor is the subject of pending arbitration proceedings against the City of
Johannesburg. The Company"s claim is R45, 6 million plus interest at 18,0% in
terms of the agreement, which forms the basis of the claim. The presentation of
evidence in respect of the major claims and counterclaims of both parties
has almost terminated. It is anticipated that summations will be given towards
the end of May 2004, where after the award of the arbitrator is awaited. The
Company remains confident of achieving success in this matter.
4.2.2 The Company has issued arbitration proceedings against the South African
Post Office for payment of amounts outstanding of some R1, 8 million in respect
of unpaid fees and damages, of which some R1, 3 million is included in accounts
receivable. The legal advice received by the Company in respect of this claim is
such that the Company is confident that this claim will be successful.
4.2.3 A portion of the amount due to the Company by PSG Treasury Outsourcing
(Proprietary) Limited, in terms of the sale agreement is subject to dispute,
which is in the process of arbitration. The potential loss to the Company should
the negotiations lead to an unfavourable ruling is R0, 6 million (which amount
is included in accounts receivable) plus costs.
5. Auditors review report
Ernst & Young have issued a modified audit report on the condensed Financial
Statements contained in this interim report, which is available for inspection
at the
Company"s registered office.
Commentary on the Results and Prospects
The Company reported earnings of 15,87 cents per share (2003: loss of 26,63
cents), a headline loss of 2,74 cents per share (2003: loss of 26,63 cents) and
a net asset value of 138,59 cents per share. If all debts (including the capital
of R45, 6 million, interest at 18% per annum owing by the City of Johannesburg
and including a recovery of legal costs) are collected in full, the Company
should end up with liquid reserves equivalent to a net asset value of between
180 and 190 cents per share.
Following the disposal, the Company has no operating business, and its only
income is from capital gains, interest and/or dividends received on its cash
reserves. The net loss for the latter six months of the period under review
however includes residual revenue in an amount of some R2 million pursuant to
the sale of the business undertaking and legal and associated fees in respect of
the ongoing arbitration against the City of Johannesburg, in an amount of some
R4 million. Additional residual revenue may be earned in the next twelve months.
The Company currently runs a tight budget with only one fulltime employee. It is
managing its cash resources in a manner to maximise returns to shareholders.
Over the next thirty months, the Company will be entitled to receive payment
from Newshelf and/or J&J Financial Services (Proprietary) Limited in respect of
the outstanding balance of the disposal consideration payable pursuant to the
sale of the business in an amount of approximately R12 million.
The City of Johannesburg arbitration proceedings are - at the date of this
review - entering its final sessions, nearly two years since the arbitration was
precipitated by the Company and more than two and a half years since the work
and services rendered to the City of Johannesburg were completed.
The Company remains committed to pursuing to the fullest, the four remaining
litigation claims (refer note 4) in the best interests of the Company and of its
shareholders.
Listing on the JSE
The Company has been informed that the JSE will review the listing of the
Company"s shares on the JSE on 31st May 2004. The Company has made the JSE aware
of the fact that until the outcome of the Johannesburg arbitration is known, and
in view of the material impact it will have on the Company"s Net Asset Value,
the Board of Directors is not in a position to set out a comprehensive business
strategy at present. The Johannesburg debt could well, in a best case
scenario (inclusive of recovery of legal costs and full interest) realise up to
R58 million, which is well above 50% of the Company"s Net Asset Value.
Dividend
The Board has resolved not to declare any dividend to Shareholders for the
period under review.
Notice of Annual General Meeting
Notice is hereby given that the seventh annual general meeting of members of
Enterprise Risk Management Limited will be held at 25 St. John Road, Houghton,
Johannesburg at 10:00 on Tuesday 8 June 2004.
By order of the Board
C de Beer, CA(SA)
Company secretary
Randburg
29 March 2004
Directors JB Zwart (Chairman), H Joffe (Acting CEO), Dr DE
Baloyi (Alt IJ Pascal (British)), BHL Macdonald,
CD Stein.
Sponsor Exchange Sponsors (Proprietary) Limited
Transfer secretaries Computershare Services (Proprietary) Limited
Registered office 25 St. John Road, Houghton Estate, Houghton, 2198
Email inquiries.erm@mweb.co.za
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