| Wed 7 Sep 2005, 15:51 | | Glenrand M.I.B - Audited results for the year |
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Glenrand M.I.B - Audited results for the year ended 30 June 2005 and further
cautionary announcement
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 ZAE000018529
AUDITED YEAR-END RESULTS FOR THE YEAR ENDED 30 JUNE 2005 AND FURTHER CAUTIONARY
ANNOUNCEMENT
Financial review
Overview
The past financial year has been a challenging one with the group reporting a
decrease in headline earnings per share of 61% to 11,8 cents, and a decrease in
earnings per share of 68% to 4,3 cents. A lack of revenue growth in certain
areas of the business as a result of the decrease in investment income earnings
following the reduction in interest rates over the prior year and the softer
market environment, and increased costs in other components have driven the 34%
decrease in continuing trading profit to R80,2 million for the current year. A
decisive and conservative look at the carrying values of all assets has been
undertaken and the resultant impairment and write-offs of R20,8 million have
significantly decreased the current year`s performance.
Income statement
The continuing revenues have increased by 5% over the prior year. This has been
driven by the increase in income in Benefit Services of 32% over the prior year
and the constant Risk Services revenue (before investment income). A dampener on
the revenue growth in the current year has been as a result of the Reinsurance
Consultants division, which reported a 21% decline in revenue for the year, and
the decrease in investment income earnings for the group in the current year by
R10 million (18%).
Although Risk Services expenses have been well controlled, the Benefit Services
expenses spiralled for the year, reflecting a R47 million (55%) increase over
the prior year as a result of the additional expenses required to rectify the
short comings in the performance and management of the retirement fund
administration business. Approximately R16 million of the Benefit Services
expenses are one-off and are not expected to be repeated in 2006.
Additional once-off interest paid in the current period of R5 million mainly
comprises interest incurred by Benefit Services on fund withdrawals and interest
incurred by Glenrand M.I.B on the adjustments to tax assessments going back to
1999 that have only been finalised in the current year.
The significant headline adjusting items in the current year relate to the
impairment of the goodwill relating to investments totalling R21 million and the
write-off of unutilised software of R6,3 million, offset by the profit on
disposal of an investment totalling R6,5 million.
The current year effective tax rate of 46,7% after adjustment for headline
items, has increased as a result of the deferred tax asset on Benefit Services`
current year losses not being raised.
Balance sheet and cash flow
The group`s gearing has remained constant at 3% for the year.
During the year the group purchased Ten-50-Six Life Limited. This company
provides policy-linked investments for retirement funds through the use of a
life licence. The licence is not risk taking, but is used for the pooling of
funds to be invested. The company records both the assets invested with the
asset managers, as well as the liabilities owing to the policyholders. The group
balance sheet therefore reflects these significant assets and liabilities of
R3,3 billion, in the current year. There is no impact on the income statement.
The group continues to generate cash from its operations. The outflow of cash
from investing activities has been as a result of acquisition by Risk Services
of the Insight system, the accounting and policy management software. Benefit
Services has purchased the minority shareholders of Glenrand M.I.B Capital and
acquired Omniplus, the new software platform for pension fund administration.
STRATEGIC DEVELOPMENTS
BEE
Final stages of negotiations are occurring in line with our stated ambitions of
exceeding 25%. Internal transformation in terms of staff, procurement and social
responsibility continue unabated.
Risk Advisory Services
Business efficiency has been substantially improved and will be further enhanced
through a commitment to a single integrated administration platform. Particular
attention is being given to skills retention. Focus on new business and
acquisition opportunities has been upgraded and, in the case of new business, is
achieving positive results.
Benefit Services
This business has dramatically impacted on group results, in the main due to
considerable unexpected costs following the recognition of a number of issues
that required attention. These have been addressed. Forward positive momentum
is being gained in client service levels, new business and the migration of
funds to our new administration platform. A new management team headed by Greg
Morris, who was appointed on 1 June 2005, is now fully functional with the
expectation to return to profit in the year to June 2006.
Underwriting
The group, as per previous strategic statements, has now established a separate
unit with a focus on our underwriting management activity. In the year ahead it
is the intention to enhance our position and engage appropriate partners for
support and growth.
PROSPECTS
Barring unforeseen events, the group is expected to achieve significant growth
in headline earnings per share for the year ending June 2006.
APPOINTMENT OF CHIEF EXECUTIVE OFFICER
As advised in our SENS announcement dated 14 April 2005, we confirm that Mr E S
G von Roretz has been appointed CEO with effect from 7 September 2005. Mr D J
Harpur will continue to be involved with the group as a non-executive Director
with various other responsibilities until October 2006.
Declaration of FINAL dividend
Notice is hereby given that a final dividend (No. 12) of 4 cents per share
(2004: 14 cents) has been declared. The following are the salient dates:
Last day to trade in order to
participate in the final dividend Friday, 30 September 2005
Trading on or after this date will
be ex the final dividend Monday, 3 October 2005
Record date Friday, 7 October 2005
Payment date Monday, 10 October 2005
On payment date, if so mandated, dividends due to holders of certificated
securities will either be transferred electronically to bank accounts or,
alternatively, cheques will be posted to their registered addresses.
Dividends in respect of dematerialised shareholdings will be credited to
shareholders` accounts with their Central Securities Depository Participant
(`CSDP`) or broker.
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 3 October 2005 and Friday, 7 October 2005, both dates
inclusive.
On behalf of the board of directors
A W Mansfield
(Chairman - Non-executive)
E S G von Roretz
Chief Executive Officer)
7 September 2005
Further cautionary announcement
Further to the cautionary announcement dated 26 July 2005, shareholders are
advised that Glenrand M.I.B is still engaged in negotiations which, if
successfully concluded, may have an effect on the price of the company`s shares.
Accordingly, shareholders are advised to continue to exercise caution when
dealing in the company`s shares until a further announcement is made.
Income Statement
for the year ended 30 June 2005
Audited Audited
Year Year
ended ended
30 June 30 June
2005 % 2004
Note R`000 change R`000
Operating revenue 3 617 476 671 150
- continuing 617 476 5 585 847
- discontinued - 85 303
Operating expenses (537 254) (547 397)
- continuing (537 254) 16 (464 503)
- discontinued - (82 894)
Trading profit 80 222 123 753
- continuing 80 222 (34) 121 344
- discontinued - 2 409
Interest paid (8 865) (8 832)
Operating profit 71 357 114 921
Income from associates 8 372 6 770
Profit before non-trading items 79 729 121 691
Non-operating income 2 772 5 361
Headline adjusting items 4 (20 771) (41 037)
Profit before taxation 61 730 86 015
- continued 61 730 (27) 84 955
- discontinued - 1 060
Taxation 5 (38 546) (43 033)
Profit after taxation 23 184 42 982
Minority interest (12 832) (10 739)
- continued (12 832) (9 756)
- discontinued - (983)
Profit attributable to
shareholders 10 352 32 243
Headline earnings per share,
fully diluted (cents) 11,8 (61) 30,3
Earnings per share, fully
diluted (cents) 4,3 (68) 13,4
Number of shares
- issued (000`s) 243 270 242 046
- weighted average, fully
diluted (000`s) 242 656 240 237
Balance Sheet
as at 30 June 2005
Audited Audited
Year Year
ended ended
30 June 30 June
2005 2004
Note R`000 R`000
Assets
Fixed assets 60 351 46 143
Goodwill and intangible assets 38 597 33 813
Deferred taxation asset 43 407 30 669
Investments 22 879 51 184
Linked investments backing
policyholder funds 3 325 219 -
Current assets 605 613 570 574
Total assets 4 096 066 732 383
Equity and liabilities
Ordinary shareholders` interest 163 920 190 806
Cost of shares held by subsidiary company (2 084) (2 084)
Minority interest 21 564 21 817
Deferred taxation Liability 222 260
Long-term liabilities 6 36 753 34 792
Policyholder funds 3 318 668 -
Current liabilities 557 023 486 792
Total equity and liabilities 4 096 066 732 383
Cash Flow Statement
for the year ended 30 June 2005
Audited Audited
Year Year
ended ended
30 June 30 June
2005 2004
R`000 R`000
Cash generated by operations 96 457 146 791
- continuing 96 457 143 400
- discontinued - 3 391
Movement in working capital 103 207 (13 865)
Taxation paid (71 603) (36 773)
Dividends paid (69 786) (57 288)
Cash available from
operating activities 58 275 38 865
Cash (utilised) generated by
investing activities (23 449) 25 225
Cash generated from financing
activities 587 15 726
Net increase in cash
and cash equivalents 35 413 79 816
Cash and cash equivalents
at beginning of year 378 714 298 898
Cash and cash equivalents
at end of year 414 127 378 714
Statement of Changes in Equity
for the year ended 30 June 2005
Non-
distribut-
Share Share able Retained
R`000 capital premium reserves earnings Total
Balance as at
30 June 2003 4 771 35 554 51 284 134 961 226 570
Adjustment in terms
of AC105:
Operating leases - - (155) (10 253) (10 408)
Balance as at
1 July 2003 4 771 35 554 51 129 124 708 216 162
Ordinary shares
issued 70 6 157 - - 6 227
Consolidation of
share option trust (16) (1 513) - 296 (1 233)
Cash flow hedge - - - (640) (640)
Translation of
foreign subsidiaries - - (4 665) - (4 665)
Shared earnings of
associates - - (6 172) 6 172 -
Profit attributable
to shareholders - - - 32 243 32 243
Dividends paid - - - (57 288) (57 288)
Balance as at
30 June 2004 4 825 40 198 40 292 105 491 190 806
Adoption of AC140 - - - 5 706 5 706
Balance as at
1 July 2004 4 825 40 198 40 292 111 197 196 512
Ordinary shares
issued 24 2 169 - - 2 193
Consolidation of
share option trust 11 1 015 - - 1 026
Cash flow hedge - - - 640 640
Deferred taxation asset
impairment reversed - - 8 000 - 8 000
Translation of
foreign subsidiaries - - 5 367 - 5 367
Shared earnings
of associates - - 2 304 (2 304) -
Profit attributable
to shareholders - - - 10 352 10 352
Dividends paid - - - (60 170) (60 170)
Balance as
at 30 June 2005 4 860 43 382 55 963 59 715 163 920
Segmental Analysis
for the year ended 30 June 2005
Audited Audited
Year Year
ended ended
30 June 30 June
2005 2004
R`000 R`000
Segmental revenues
Risk advisory services 517 075 520 445
Benefit services, healthcare
and medical services 100 401 150 705
- continuing 100 401 150 705
- discontinued - 74 403
Total segmental revenues 617 476 671 150
Segmental profits
Risk advisory services 111 757 131 501
Benefit services, healthcare
and medical services (31 535) (7 748)
- continuing (31 535) (8648)
- discontinued - 900
Total segmental profits 80 222 123 753
Notes
1. Basis of accounting
The group results as at 30 June 2005 have been prepared in terms of South
African Statements of Generally Accepted Accounting Practice. With effect from 1
July 2005, the group will adopt International Financial Reporting Standards, and
the impact of this change is currently being quantified. The effect of this
transition will be disclosed in the interim results for the six months to 31
December 2005, and the next annual report.
Compliance with AC140: Business Combinations
During the year the group changed its accounting policy to comply with AC140:
Business Combinations. In respect of acquisitions prior to 31 March 2004, the
group has ceased amortisation of goodwill from 1 July 2004. Goodwill at this
date is now included on the basis of its deemed cost, which represents the cost
of goodwill less accumulated amortisation at 30 June 2004.
In respect of acquisitions after 31 March 2004, goodwill is stated at cost less
any accumulated impairment losses. Goodwill is allocated to cash-generating
units and is no longer amortised but is tested annually for impairment. In
respect of associates, the carrying amount of goodwill is included in the
carrying amount of the investment in the associate.
Negative goodwill arising on acquisition is recognised directly in profit or
loss. Previously recognised negative goodwill has been derecognised resulting in
an increase of R5,7 million in retained earnings as at 1 July 2004.
Straight-lining of operating lease payments
The change in the manner of recognising lease payments arises as a result of a
change in interpretation of AC105: Operating leases by South African entities in
order to align the South African practice with that applied internationally. The
effect of the revised interpretation is that operating lease payments will be
recognised on a straight-line basis over the lease term, and not as cash paid.
The required adjustments have been made and have resulted in a decrease of R10,3
million in retained earnings as at 1 July 2003, and a decrease in prior year
earnings of R4 million.
Recognition of debtors and creditors
The treatment for claims and premiums in debtors and creditors has been adjusted
in the current year.
The group now recognises a debtor only to the extent of the commission/fees
receivable. Previously a debtor was also recognised for the premium receivable.
The group now raises a creditor for the premium payable to the insurer, only on
receipt of the premium from the client, whereas previously this was raised when
the client was invoiced.
The group`s reinsurance business also previously recognised a creditor and
debtor in respect of amounts owing by the reinsurer to the client in respect of
claims. With effect from the current year these are no longer recognised in the
group accounts.
Comparative figures have been restated to reflect the above changes. This has
resulted in a decrease of R135,6 million in accounts receivable and accounts
payable in the prior year. There is no impact on the retained earnings at 1 July
2004.
2. Audit report
The consolidated results for the year have been audited by KPMG Inc. and their
unqualified audit report is available for inspection at the company`s registered
office.
3. Operating revenue Audited Audited
Year ended Year ended
30 June 2005 30 June 2004
R`000 R`000
Includes: Investment income 45 044 55 100
4. Calculation of headline earnings
Profit attributable to shareholders 10 352 32 243
Add: (Profit)/loss on disposal of
investments (6 506) 9 478
Add: Goodwill amortisation - 10 884
Add: Provision for impairment of
assets 27 277 20 675
Add: Taxation effect - 145
Less: Minority shareholders` effect (2 388) (689)
Headline earnings 28 735 72 736
5. Taxation
The group`s tax charge comprises
the following:
SA normal taxation 31 659 43 468
SA deferred taxation (4 776) (11 898)
STC 7 499 6 552
Foreign taxation 1 001 1 362
Discontinued - 93
Associates` taxation 3 163 3 456
38 546 43 033
6. Long-term liabilities
Interest bearing 4 804 5 896
Non-interest bearing 31 949 28 896
36 753 34 792
DIRECTORATE
A W Mansfield (Chairman), E S G von Roretz*+ (Chief Executive Officer), T
Boesch*, R G Cottrell, G T Ferreira, D J Harpur, Dr M F Kunene*, M J Leeming, Y
Z Simelane
Group Secretary: E Price *Executive +British
Registered office
288 Kent Avenue
PO Box 2544
Randburg 2125
Tel (011) 329-1111
Fax (011) 329-1333
e-mail info@glenrandmib.co.za
website www.glenrandmib.co.za
Transfer secretaries
Computershare Investor Services 2004 (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
Licensed Financial Services Provider Number: 11228
Date: 07/09/2005 03:29:56 PM
Produced by the JSE SENS Department
