| Fri 16 Sep 2005, 11:46 | | RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005 |
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Enterprise Risk Management Limited - Reviewed results for the six months ended
31 August 2005
ENTERPRISE RISK MANAGEMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/001603/06)
Share code: ERM & ISIN: ZAE000037701
(the `Company`)
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005
Income Statement
Reviewed Audited
Reviewed restated restated
six months to six months to 12 months to
31 Aug 2005 31 Aug 2004 28 Feb 2005
R000`s R000`s R000`s
Turnover - - -
Operating loss from
operations (1 090) (22 847) (24 861)
Realised capital gains on
sale
of investments 2 784 896 896
Investment income 1 886 6 034 16 643
Profit/(loss) before
taxation 3 580 (15 918) (7 322)
Deferred taxation (752) 9 298 7 378
SA nor mal taxation - (53) 81
Profit/(loss) after tax 2 829 (6 673) 137
Weighted average number
of shares (000`s) 53 576 53 576 53 576
Earnings/(loss) and diluted
earnings/(loss)
per share (cents) 5,3 (12,5) 0,3
Headline earnings/(loss)
and
diluted headline
earnings/(loss)
per share (cents) 5,3 (12,5) 0,3
Balance Sheet
31 Aug 2005 31 Aug 2004 28 Feb 2005
R000`s R000`s R000`s
Assets
Non-current assets 82 200 59 266 72 331
Investments 66 119 39 228 54 857
Deferred taxation 5 313 9 199 7 279
Loans receivable 10 767 10 839 10 195
Current assets 2 547 12 942 2 516
Accounts receivable 807 10 234 1 035
Cash and cash equivalents 1 740 2 708 1 481
Total assets 84 747 72 208 74 847
EQUITY AND LIABILITIES
Capital and reserves 84 497 67 555 74 433
Stated capital 59 001 59 001 59 001
Distributable reserves 9 164 8 464 15 274
Fair value and other reserves 16 332 90 158
Current liabilities 250 4 652 414
Accounts payable 91 4 359 255
Taxation - 134 -
Shareholders for dividend 159 159 159
Total capital and liabilities 84 747 72 208 74 847
Number of shares in issue (`000) 53 576 53 576 53 576
Net asset value per share
(cents) 157,7 126,1 138,9
Cash Flow Statement
Six months to Six months to 12 months to
31 Aug 2005 31 Aug 2004 28 Feb 2005
R000`s R 000`s R 000`s
Cash generated from
operations 1 197 (22 444) (23 852)
Cash generated from
movements
in working capital 64 31 887 37 089
Decrease in accounts
receivable 228 29 291 38 597
(Decrease)/increase in
accounts
payable (164) 2 596 (1 508)
Cash generated from
operating
activities 1 261 9 443 13 237
Taxation paid - - -
Investment income 1 030 5 867 8 340
Dividend income 856 167 603
Net cash flow from
operating
activities 3 147 15 478 22 180
Net cash flow from
financing
activities - - -
Net cash flow from
investing
activities (2 888) (16 652) (24 581)
Increase/(decrease) in
cash and cash equivalents 259 (1 174) (2 401)
Cash and cash equivalents
at the
beginning of the period 1 481 3 882 3 882
Cash and Cash Equivalents
at the end of the period 1 740 2 708 1 481
Statement of Changes in Equity
Six months to Six months to 12 months to
31 Aug 2005 31 Aug 2004 28 Feb 2005
R000`s R 000`s R 000`s
Stated capital
Opening balance 59 001 59 001 59 001
Movement - - -
Closing balance 59 001 59 001 59 001
Distributable reserves
Opening retained earnings
as previously reported 15 274 15 247 15 247
Prior year adjustment
- Deferred tax - (99) (99)
- change in accounting
policy
as a result of IFRS (8 939) (45) (45)
Net profit/(loss) for the
period 2 829 (6 673) 137
Dividends written back - 34 34
Closing balance 9 164 8 464 15 274
Fair value and other
reserves
Opening balance 158 - -
- value of services
provided 75 45 113
- Change in accounting
policy
as a result of IFRS 8 939 45 45
- Fair value gains net of
tax 7 160 - -
Closing balance 16 332 90 158
Notes to the Interim Financial Statements
1. ACCOUNTING POLICIES
1.1 Basis of preparation
These Interim financial statements have been prepared in accordance with
International Accounting Standard (`IAS`) 34, Interim Financial Reporting, and
are covered by International Financial Reporting Standard (`IFRS`) 1 - First
time adoption of International Financial Reporting Standards.
The Company has made use of the exemption available under IFRS 1 to only apply
IAS 32 and IAS 39 from 1 March 2005.
1.2 Share based payments
The Company has changed its accounting policy with regard to share-based
payments to comply with IFRS 2. Costs associated with share based awards to
employees and non-executive directors under the share option scheme are now
charged to the income statement over the vesting periods. The cost is determined
by using independent valuations of the share options.
1.3 Investments
Share and loan investments are classified as available-for-sale financial assets
and are subsequently measured at fair value. The fair values of quoted
investments are based on current bid prices, or in the case of listed securities
whose trading has been suspended on the JSE, on the last traded price prior to
such suspension. These investments are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance
sheet date. In terms of IAS 39, fair value adjustments for the period on
available-for-sale assets are recognised directly in equity, through the
statement of changes in equity.
A deferred tax asset and/or liability is recognised through equity on the
potential unrealised capital gains and/or losses from available-for-sale
financial assets.
2. INVESTMENTS
As at 31 August 2005 the Company`s investment portfolio comprised the
following:
Market price Market value
at 31 August at 31 August
2005 2005
Name of Quantity Cost in cents
investment R`000 R`000 R`000 R`000
JCI Convertible
Debentures 3 000 3 437 89* 2 670
Apex Hi Properties -
`A` shares 1 000 8 384 1 185 11 850
Anglo American PLC
ordinary
shares 20 2 945 16 200 3 240
Bidvest Limited
ordinary shares 380 24 708 8 740 33 212
Sasol Limited
ordinary shares 67 8 280 21 500 14 405
Highveld Steel and
Vanadium Limited
ordinary shares 15 1 053 4 949 742
Total 48 807 66 119
*Last traded price prior to suspension of trading on 1 August 2005.
3. ACCOUNTS RECEIVABLE
IAS 39 requires that financial assets be initially measured at the fair value of
the consideration receivable. The Company estimates that the fair value of the
consideration relating to the deferred payment of R12 million due from Newshelf
716 (Proprietary) Limited in November 2006, on a discounted present value basis,
is R10,8 million (2004: R10,8 million). The difference between the present value
and future value is recognised on the effective interest rate basis over the
life of the financial asset. The amount so recognised in this period is R0,6
million (2004: R0,5 million)
4. TRANSITION TO IFRS
The Company`s financial statements for the year ending 28 February 2006 will be
the first annual financial statements that comply with IFRS. The Company`s
transition date is 1 March 2004. In preparing these interim financial statements
the Company has applied certain of the optional exemptions from full
retrospective application of IFRS.
Exemptions from full retrospective application:
* Exemption from restatement of comparatives for IAS 32 and IAS 39
* Share-based payment transaction exemption
The Company has elected not to apply IFRS 2 to share options granted prior to 7
November 2002 that had not yet vested by 1 March 2005. The Company has elected
to apply the share-based payment exemption. It applied IFRS 2 from 1 March 2004
to those options that were issued after 7 November 2002 but that had not vested
by 1 March 2005.
5. RECONCILIATION BETWEEN IFRS AND GAAP INCLUDING OTHER PRIOR YEAR ADJUSTMENTS
The following reconciliation provides a quantification of the effect of the
transition to IFRS on equity and net income in terms of the items referred to in
4 above as well as the effect of other prior year adjustments:
1 March 31 August 28 February
2004 2004 2005
Reconciliation of equity:
Equity as previously reported 74 248 67 625 75 687
IFRS reconciling items
- Fair value reserves - - -
- Share based payment reserves 45 90 158
- Distributable reserves - (45) (158)
Other prior year adjustments not
related to IFRS
- Change in accounting policy
in respect of share based payments (45) (45) -
- Deferred tax - (70) (1 254)
Equity as reported in terms of IFRS 74 248 67 555 74 433
Reconciliation of net income:
Net income as previously reported
in terms of GAAP - (6 657) 1 405
IFRS reconciling items
- Fair value reserves - - -
- Share based payments - (45) (113)
Other prior year adjustments not
related to IFRS
- Deferred tax - 29 (1 155)
Net income as reported in terms of
IFRS - (6 673) 137
6. AUDITORS REVIEW REPORT
Grant Thornton have been appointed auditors of the Company with effect from 1
August 2005. The annual financial statements of the Company at 28 February 2005
were qualified on the basis of lack of evidence to support the recoverability of
an amount of R10,8 million owing to the Company and receivable in November 2006.
Grant Thornton`s review report, which is available for inspection at the
Company`s registered office, has been modified to highlight the same matter.
Commentary on the results
Earnings and diluted earnings of 5,3 cents per share (2004: loss of 12,5 cents),
headline earnings and diluted headline earnings of 5,3 cents per share (2004:
loss of 12,5cents) and a net asset value of 157,7 cents (2004: 126,1 cents) per
share were reported. The increase in the net asset value of the Company results
mainly from an increase in the value of the Company`s investment portfolio
during the period.
The Company has lodged a formal objection against its tax assessment for the tax
year ended 31 December 2001, in order to recover taxes overpaid by it to the
South African Revenue Services (`SARS`) in an amount of approximately R9,3
million in relation to the City of Johannesburg Arbitration which was finalized
in July 2004. The amount was recognised as a deferred tax asset in August 2004.
The SARS has disallowed the objection, however the Company is appealing to the
Income Tax Court to decide on the matter. Should this second appeal not be
successful, the Company will have a tax loss in the 2005 tax year which will
then be utilised against future profits.
The Company provided for deferred tax on the unrealised and realised capital
gains on its investment portfolio for the six months ended 31 August 2005 in the
amount of R1,2 million. The Company did not provide for deferred tax on the
realised and unrealised capital gains on its investment portfolio for the year
ended 28 February 2005 in the amount R1,3 million. As a result of this the
comparative figures have been restated accordingly. The effect of this
adjustment is a reduction in the net asset value of the Company as at 28
February 2005 of 2,3 cents.
The Company currently holds an investment in JCI Convertible Debentures which
represents 4% of its total investment portfolio. The directors are of the
opinion that the value as reflected in Note 2 to the interim financial
statements represents a fair value for this investment.
Contingent liability
As previously reported the Company is still defending claims of approximately R1
million from three former executive employees relating to their service
agreements with the Company. A trial date has been set down for May 2006. No
provision has been made for these claims.
Dividend
The Board has resolved not to declare any dividend to shareholders for the
period under review.
By order of the Board
C de Beer CA(SA) Randburg
Company secretary 16 September 2005
Directors: J B Zwart (Chairman)*, H Joffe (Acting CEO)*, Dr D E Baloyi*,
B H L Macdonald*, C D Stein* *non-executive
Sponsor: Grant Thornton Corporate Finance (Pty) Ltd
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: 16/09/2005 11:45:12 AM
Produced by the JSE SENS Department
