| Fri 18 Mar 2005, 17:20 | | RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2005 |
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Enterprise Risk Management Limited - Qualified Audited Results For The Year
Ended 28 February 2005
Enterprise Risk Management Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/001603/06)
Share code: ERM ISIN: ZAE000037701
(the `Company`)
QUALIFIED AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2005
INCOME STATEMENT
Audited Audited
Company Company
Twelve Twelve
months months
To Feb 2005 To Feb 2004
R 000`s R 000`s
Turnover - 12 020
Loss from operations (23 852) (3 793)
Profit from disposal of businesses - 9 972
Investment income 16 643 4 822
(Loss)/Profit before taxation (7 209) 11 001
Deferred taxation 8 533 -
South African normal taxation 81 (2 499)
Profit after taxation 1 405 8 502
Reconciliation of headline earnings
Profit/(Loss) after taxation adjusted for:
Profit on sale of business undertaking - (7 372)
Profit on sale of foreign exchange business - (2 600)
Headline earnings/(loss) for the year 1 405 (1 470)
Weighted average number of shares (000`s) 53 569 53 569
Earnings per share (cents) 2,62 15,87
Headline earnings/(loss) per share (cents) 2,62 (2,74)
CASH FLOW STATEMENT
Company Company
Twelve Twelve
months months
To Feb 2005 To Feb 2004
R 000`s R 000`s
Cash generated from operations (23 852) (3 327)
Cash generated from movements in working capital 37 088 14 842
Decrease in accounts receivable 38 596 18 458
Increase in accounts payable (1 508) (3 616)
Cash generated from operating activities 13 236 11 515
Taxation paid - (2 418)
Investment income 16 040 2 672
Dividend income 603 281
Net cash flow from operating activities 29 879 12 050
Net cash flow from financing activities - -
Net cash flow from investing activities (32 280) (18 304)
Decrease in cash and cash equivalents (2 401) (6 254)
Cash and cash equivalents at the beginning of year 3 882 10 136
Cash and cash equivalents at end of year 1 481 3 882
BALANCE SHEET
Company Company
Twelve Twelve
months months
To Feb 2005 To Feb 2004
R 000`s R 000`s
Assets
Non-current assets 73 585 32 845
Investments 54 857 22 543
Deferred taxation 8 533 -
Loans receivable 10 195 10 302
Current assets 2 516 43 406
Accounts receivable 1 035 39 524
Cash and cash equivalents 1 481 3 882
Total assets 76 101 76 251
Equity and liabilities
Capital and reserves 75 687 74 248
Stated capital 59 001 59 001
Retained earnings 16 686 15 247
Current liabilities 414 2 003
Accounts payable 255 1 763
Taxation - 81
Shareholders for dividend 159 159
Total capital and liabilities 76 101 76 251
Number of shares in issue (`000) 53 576 53 576
Net asset value per share (cents) 141,27 138,59
STATEMENT OF CHANGES IN EQUITY
Audited Audited
Company Company
Twelve Twelve
months months
To Feb 2005 To Feb 2004
R 000`s R 000`s
Stated capital
Balance at beginning of year 59 001 59 001
Balance at end of year 59 001 59 001
Retained earnings
Balance at beginning of year 15 247 6 745
Net profit for the period 1 405 8 502
Dividends 34 -
Balance at end of year 16 686 15 247
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The audited annual financial results for the year ended 28 February 2005 have
been prepared with reference to and in compliance with South African Statements
of Generally Accepted Accounting Practice and the Companies Act, 1973.
The accounting policies, which have been applied in these financial
statements, are consistent with those of the previous year.
Loans receivable 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 probable loss is the difference between
the carrying amount of the assets and the present value of expected cash flows,
discounted at the financial instruments original effective interest rate.
2. Audit opinion
The results for the year ended 28 February 2005 have been audited. Ernst &
Young`s qualified audit report on these annual financial statements is available
at the registered office of the Company.
Qualification
The Company is owed an amount relating to the disposal of a business in the
previous year. The amount receivable is disclosed as loans receivable and is
reflected on the Balance Sheet at R10,20 million. At present the auditors have
not obtained sufficient audit evidence to support the recoverability of this
amount.
Qualified audit opinion
In the auditors opinion, except for the effect on the financial statements
of the matter referred to in the preceding paragraph, the financial statements
fairly present, in all material respects, the financial position of the Company
at 28 February 2005 and the results of its operations and cash flows for the
year then ended in accordance with South African Statements of Generally
Accepted Accounting Practice, and in the manner required by the Companies Act in
South Africa.
3. Loans receivable
Loans receivable are carried on an amortised cost basis using the effective
interest rate method. At 28 February 2005 the carrying amount of the loan due
from Newshelf 716 (Proprietary) Limited amounted to R10,20 million (2004: R10,30
million).
4. Change in accounting estimates
The dispute with the City of Johannesburg (`COJ`) has been resolved. Revenue
in an amount of R31 million was recognised in the 2001 financial year. This was
subsequently disputed by the COJ and culminated in an arbitration hearing in
accordance with the original agreement. In terms of the arbitration award the
arbitrator dismissed the claim by the Company for liquidity risk management in
the amount of R19 million (excluding VAT). The Company was ordered to repay to
the COJ in respect of its counterclaim in relation to services rendered by the
Company pertaining to the general insurance fund of the COJ, in the amount of
R11,90 million (excluding VAT). The Company provided against these amounts in
prior periods an amount of R12,40 million. The effect of the aforesaid is a
reduction in net profit from operations of R18,50 million.
5. Investment income and profit from operations
Included in investment income is an amount of R4,20 million being the net
interest received from the COJ in terms of the arbitration award.
As previously advised, the remaining dispute with the COJ, which was not
resolved by the arbitration proceeding, has now also been resolved. An amount of
R0,90 million was received from the COJ in the latter half of the year.
Furthermore the outstanding disputes with the South African Post Office (`SAPO`)
and PSG Treasury Outsourcing (Pty) Ltd (`PSG`) have now also been settled. As a
result of these settlements an amount of R1,90 million was received from the
SAPO (including interest of R0,23 million) and an amount R0,55 million was
released from the escrow account relating to the sale of the foreign exchange
business to PSG. Included in profit from operations for the year ended 28
February 2005 is a net charge in an amount of R0,74 million pursuant to these
settlements.
6. Income tax
As a consequence of the COJ arbitration (refer note 4) and the subsequent
reduction in net profit, the Company recognised a deferred tax asset in an
amount of R8,53 million for the year ended 28 February 2005. If not succesful
with the refund, the directors are of the opinion that the deferred tax asset
will be utilised against future profit in the foreseeable future.
Commentary on the results and future business
Earnings of 2,62 cents per share (2004: 15,87 cents), headline earnings of 2,62
cents per share (2004: loss of 2,74 cents) and a net asset value of 141,27 cents
per share (2004: 138,59 cents) were reported.
As previously reported, the Company is pursuing the possible recovery of taxes
paid by it to the South African Revenue Services in an amount of approximately
R8,53 million in relation to the COJ Arbitration which amount is currently
disclosed as a deferred tax asset. Refer to notes 4 and 6 to the financial
statements.
The Company continues to vigorously defend claims of approximately R1 million
from three former executive employees relating to their service agreements with
the Company.
Listing on the JSE Securities Exchange South Africa (`JSE`)
Shareholders are referred to previous announcements made by the Company in this
regard.
Subsequent to the finalisation of the arbitration proceedings against the COJ on
28 July 2004, the Company submitted a Business Plan, modelled on the hugely
successful Berkshire Hathaway Incorporated approach, to the JSE for the purpose
of assessing the suitability of the Company`s continued listing on the JSE.
Having considered the Company`s business plan, the JSE and FTSE are of the view
that the Company should be reclassified as an Investment Trust Company. The JSE
advised that it will make a final determination as to the Company`s
classification on the JSE once it has reviewed the Company`s financial
statements for the year ended 28 February 2005.
Further details in this regard will be made available to shareholders in the
Company`s Annual Report for 2005.
Dividend
The Board has resolved not to declare any dividend to shareholders for the year
under review.
By order of the Board
C de Beer CA(SA)
Company secretary
Randburg
18 March 2005
Directors: J B Zwart (Chairman) (NE), H Joffe (Acting CEO), Dr D E Baloyi (NE),
B H L Macdonald (NE), C D Stein (NE)
Sponsor: Exchange Sponsors (Proprietary) Limited
Transfer secretaries: Computershare Investor Services 2004 (Proprietary) Limited
Registered office: 25 St. John Road, Houghton Estate, Houghton, 2198
Email: enquiries.erm@mweb.co.za
Date: 18/03/2005 05:15:13 PM
Produced by the JSE SENS Department
