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GMB
GMB
Glenrand M I B - Reviewed Year-end Results and Renewal of Cautionary
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: ZAE000078010
Reviewed Year-end Results for the year ended 30 June 2006
and Renewal of Cautionary Announcement
Condensed Income Statement
for the year ended 30 June Reviewed #Audited
2006 2005
Notes R"000 R"000
Continuing operations
Revenue 494 541 494 638
Employment benefit expenses (301 986) (290 343)
Rent and IT expenses (61 620) (60 288)
Amortisation and depreciation (19 041) (26 291)
Other expenses (158 147) (131 721)
Finance costs (8 391) (8 485)
Disposal and impairment
of investments (3 034) (20 677)
Investment income 31 947 37 275
Share of profits of associates 774 835
Loss before taxation (24 957) (5 057)
Taxation (20 120) (27 136)
Loss from continuing operations (45 077) (32 193)
Discontinued operations
Profit from discontinued
operations (net of taxation)
including the profit on disposal
of investments 3 107 931 22 397
Profit (loss) for the year 62 854 (9 796)
Profit (loss) attributable to:
Minority shareholders 12 899 12 981
Shareholders of Glenrand M I B 49 955 (22 777)
62 854 (9 796)
Earnings per share
Basic earnings
per share (cents) 22,1 (9,4)
Diluted earnings
per share (cents) 19,5 (9,4)
Continuing operations
Earnings per share (cents) (22,7) (16,0)
Diluted earnings
per share (cents) (20,2) (15,9)
Headline earnings per share
Headline earnings
per share (cents) 5 (12,8) (1,8)
Diluted headline earnings
per share (cents) 5 (11,3) (1,8)
Number of shares
(net of treasury shares)
- Issued (000"s) 226 526 241 830
- Diluted weighted
average (000"s) 255 594 242 656
Condensed Segmental Analysis
for the year ended 30 June Reviewed #Audited
2006 2005
R"000 R"000
Segmental revenues
Risk advisory services 452 018 478 058
- continuing 7 393 857 405 480
- discontinued 58 161 72 578
Benefit services 100 684 89 158
Total segmental revenues 552 702 567 216
Segmental results
Risk advisory services 18 447 50 789
- continuing 7 (7 082) 23 506
- discontinued 25 529 27 283
Benefit services (37 533) (42 481)
Total segmental results (19 086) 8 308
Condensed Balance Sheet
at 30 June Reviewed #Audited
2006 2005
Notes R`000 R"000
Assets
Property, plant and equipment 30 362 32 184
Investment properties 6 464 8 458
Goodwill 35 449 35 798
Intangible assets 48 699 52 445
Deferred taxation asset 41 872 46 909
Investments 4 810 21 625
Long-term accounts receivable 11 883 -
Linked investments backing
policyholder contracts 5 129 803 3 325 219
Current assets 544 123 597 919
Assets classified as
held for sale 60 049 -
Total assets 913 514 4 120 557
Equity and liabilities
Equity
Shareholders" equity 111 415 130 109
Minority interest 17 070 18 160
Total equity 128 485 148 269
Liabilities
Long-term liabilities 6 37 738 40 902
Deferred taxation 117 222
Policyholder liabilities 5 244 552 3 318 668
Current liabilities 486 752 612 496
Liabilities classified
as held for sale 15 870 -
Total liabilities 5 785 029 3 972 288
Total equity and liabilities 5 913 514 4 120 557
Condensed Cash Flow Statement
for the year ended 30 June Reviewed #Audited
2006 2005
R"000 R"000
Cash generated from operations 54 898 82 756
- continuing 24 475 46 546
- discontinued 30 423 36 210
Movement in working capital (131 625) 116 908
Taxation paid (27 286) (71 603)
Dividends paid (71 157) (69 786)
Cash (utilised by) generated
from operating activities (175 170) 58 275
Cash utilised by investing
activities (40 230) (23 449)
Cash (utilised by) generated
from financing activities (34 592) 587
Net (decrease) increase in
cash and cash equivalents (249 992) 35 413
Cash and cash equivalents
at beginning of period 414 127 378 714
Cash and cash equivalents
at end of period 164 135 414 127
Condensed Statement of Changes in Equity
for the year ended 30 June
Share Treasury
capital and share Non-
and option distri-
share reserve butable Retained
premium reserve reserves earnings
Audited balance
at 30 June 2004
As previously
reported in terms
of SA GAAP 46 552 (3 613) 40 292 111 197
Adjustments
for IFRS - 838 16 905 29 433
Other
adjustments - - (1 075) (37 671)
Restated balance
at 30 June 2004 46 552 (2 775) 56 122 102 959
Shares issued 2 193 - - -
Movement in
treasury shares - 1 026 - -
Cash flow hedge - - - 640
Trade mark
amortisation - - (14 968) 14 968
Share option
costs - 973 - -
Movement in
minority interest - - - -
Translation of
foreign
subsidiaries - - 5 366 -
Shared earnings
of associates - - 2 126 (2 126)
Profit (loss)
attributable
to shareholders - - - (22 777)
Dividends paid - - - (60 170)
Balance at
30 June 2005 48 745 (776) 48 646 33 494
Shares issued 3 680 - - -
Movement in
treasury shares - (36 625) - -
Trade mark
amortisation - - (9 979) 9 979
Share option
costs - 21 078 - -
Translation of
foreign
subsidiaries - - 1 448 -
Shared earnings
of associates - - 3 469 (3 469)
Acquisition of
shares in
subsidiary - - - -
Profit
attributable
to shareholders - - - 49 955
Dividends paid - - - (58 230)
Balance at
30 June 2006 52 425 (16 323) 43 584 31 729
Condensed Statement of Changes in Equity (continued)
for the year ended 30 June
Share-
holders" Minority Total
equity interest equity
Audited balance
at 30 June 2004
As previously
reported in terms
of SA GAAP 194 428 21 817 216 245
Adjustments
for IFRS 47 176 - 47 176
Other adjustments (38 746) (3 553) (42 299)
Restated balance
at 30 June 2004 202 858 18 264 221 122
Shares issued 2 193 - 2 193
Movement in
treasury shares 1 026 - 1 026
Cash flow hedge 640 - 640
Trade mark
amortisation - - -
Share option
costs 973 - 973
Movement in
minority interest - (3 469) (3 469)
Translation of
foreign
subsidiaries 5 366 - 5 366
Shared earnings
of associates - - -
Profit (loss)
attributable
to shareholders (22 777) 12 981 (9 796)
Dividends paid (60 170) (9 616) (69 786)
Balance at
30 June 2005 130 109 18 160 148 269
Shares issued 3 680 - 3 680
Movement in
treasury shares (36 625) - (36 625)
Trade mark
amortisation - - -
Share option
costs 21 078 - 21 078
Translation of
foreign
subsidiaries 1 448 - 1 448
Shared earnings
of associates - - -
Acquisition of
shares in
subsidiary - (1 062) (1 062)
Profit attributable
to shareholders 49 955 12 899 62 854
Dividends paid (58 230) (12 927) (71 157)
Balance at
30 June 2006 111 415 17 070 128 485
Notes to the Condensed Financial Statements
1. Implementation of IFRS
From 2006 onwards the Glenrand M I B Group ("the Group") is required to
prepare its consolidated financial statements in accordance with IFRS and
JSE Limited"s ("JSE") Listing Requirements. This change applies to all
financial reporting for accounting periods beginning on or after 1
January 2005 and consequently the Group`s first published IFRS results
were its interim results for the six months ended 31 December 2005. The
Group"s first published full set of financial statements under IFRS are
for the year ended 30 June 2006. As the Group publishes comparative
information for one year in its financial statements, the date for the
transition to IFRS is 1 July 2004, which represents the start of the
earliest period of comparative information.
In order to explain how the Group"s reported performance and financial
position are impacted by IFRS, the Group has restated information
previously published under SA GAAP to the equivalent basis under IFRS.
This restatement follows the guidelines set out in IFRS 1 First-time
Adoption of International Financial Reporting Standards.
Basis of accounting
The Group has prepared the consolidated balance sheet as at 30 June 2005 and
the consolidated income statement for the year then ended, in accordance
with IFRS, to establish the financial position and results of operations
of the Group necessary to provide the comparative information to be
included in the Group"s first set of IFRS financial statements for the
year ended 30 June 2006.
Transitional arrangements
The date of transition to IFRS for the Group is 1 July 2004. The Group"s
opening balance sheet at 1 July 2004 has been restated to reflect all
existing IFRS"s applicable at 30 June 2006. At the date of transition,
IFRS 1 allows a number of exemptions to the principle of retrospective
application. The Group made the following elections relating to the
transitional arrangements:
Business combinations
The Group has elected not to retrospectively apply the requirements to IFRS 3
Business combinations for business combinations that occurred prior to
the date of transition and consequently no adjustment has been made for
business combinations prior to 31 March 2004.
Share-based payments
The Group has elected not to apply the provisions of IFRS 2 Share-based
payments to employee share option scheme awards granted on or before 7
November 2002.
Presentation of the financial statements
Changes have been made to the format of the Group"s income statement, balance
sheet and statement of changes in equity arising from the adoption of IAS
1 Presentation of financial statements and IAS 27 Consolidated and
separate financial statements. These changes only affect the presentation
of the information, and do not impact the amounts as previously reported.
Amendments to accounting policies and other adjustments
Share-based payments
The Group grants share options to employees under an employee share incentive
scheme. Previously under SA GAAP no costs were recognised in the income
statement. In accordance with the requirements of IFRS 2 Share-based
payments, the Group now recognises an expense in the Income Statement,
with a corresponding increase in the share option reserve. The options
are measured at fair value at grant date. The fair value is expensed over
the vesting period.
Revenue recognition
In line with industry practice, the Group"s accounting policy has previously
been to recognise insurance broking income in full at inception of the
policy. In accordance with industry developments and guidance provided in
IAS 18 Revenue, the Group now defers a portion of broking income to cover
the cost of services provided over the contract period. The amount
deferred is recognised as revenue over the contract period on a
consistent basis, reflecting the level of servicing activities incurred
during the period.
Intangible assets
The Group has reinstated the intangible assets relating to Trade Marks ("TM")
with a corresponding increase in non-distributable reserves in accordance
with IFRS 3 Business Combinations. The related deferred tax asset has
been adjusted. The Group now recognises an expense in the income
statement relating to the amortisation of the Trade Marks over their
useful lives. Computer software, previously reflected in property, plant
and equipment as computer and office equipment, has now been reclassified
as an intangible asset.
Property, plant and equipment
The Group has reassessed the useful lives of all its property, plant and
equipment in accordance with IAS 16 Property, plant and equipment. In
instances where items of property, plant and equipment were fully
depreciated and are still in use, the applicable assets have now been
reinstated to reflect their appropriate carrying values.
Non-current assets held for sale and discontinued operations
In accordance with IFRS 5 Non-current assets held for sale and discontinued
operations, a discontinued operation is a component of the Group"s
business that represents a separate major line of business or
geographical area of operation, that meets the criteria as held for sale.
On initial classification as held for sale, non-current assets are
recognised at the lower of the carrying amount and fair value less costs
to sell.
Straight-lining of operating lease payments
The change in the manner of recognising lease payments, on a straight-line
basis, arises as a result of a change in interpretation of IAS 17 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 and when the cash is
paid.
Leave pay accrual
The group has historically only accrued for a maximum of 30 days leave per
employee as this represented the maximum cash obligation. This approach
has now changed to accrue for the total leave days due to the employee,
to bring the total cost of employment recognised in line with services
rendered.
Disability obligation
The group has an obligation to contribute in part towards employee benefits
on disability. The liability arose on the shortfall between the benefit
paid to former employees and the amount recovered from insurers. The
liability was actuarially valued and accounted for as a long-term
liability.
Fraud loss
During the current year fraud perpetrated by a member of middle management
was identified. Part of this related to prior years. The fraud involved
theft of funds which was concealed by means of falsified accounting
entries. Prior year financial results have been restated to remove the
falsified entries and to write-off the amounts misappropriated. The
anticipated insurance recovery has been accounted for in the current year
in terms of IFRS.
Reconciliation of financial information previously reported
Reconciliation of income statements
#Audited
Year
ended
30 June
2005
R"000
Net profit after tax
As previously reported under SA GAAP 23 184
Adjustments for IFRS
Share-based payments (973)
Amortisation of intangible assets (17 923)
Other adjustments
Revenue recognition (5 293)
As previously reported (1 005)
Other adjustments
Operating lease adjustments 270
Fraud loss (8 688)
Leave pay accrual 84
Disability obligation (457)
Net loss after tax as reported under IFRS (9 796)
Reconciliation of equity
Share Treasury
capital shares and Non-dis-
and share share tributable
R"000 premium options reserves
1 July 2004
As previously reported under
SA GAAP 46 552 (3 613) 40 292
Adjustments for IFRS
Share-based payments - 838 -
TM reinstatement,
net of amortisation - - 44 905
Deferred taxation on TM - - (28 000)
Other adjustments
Revenue recognition - - (1 075)
As previously reported 46 552 (2 775) 56 122
Other adjustments
Operating lease
adjustments - - -
Fraud loss - - -
Leave pay accrual - - -
Disability obligation - - -
As reported under IFRS 46 552 (2 775) 56 122
30 June 2005
As previously reported under
SA GAAP 48 745 (2 587) 55 963
Adjustments for IFRS
Share-based payments - 1 811 -
TM reinstatement,
net of amortisation - - 29 937
Deferred taxation on TM - - (36 000)
Other adjustments
Revenue recognition - - (1 254)
As previously reported 48 745 (776) 48 646
Other adjustments
Operating lease adjustments - - -
Fraud loss - - -
Leave pay accrual - - -
Disability obligation - - -
As reported under IFRS 48 745 (776) 48 646
Reconciliation of equity (continued)
Retained Minority Total
R"000 earnings interest equity
1 July 2004
As previously reported under
SA GAAP 111 197 21 817 216 245
Adjustments for IFRS
Share-based payments (838) - -
TM reinstatement,
net of amortisation - - 44 905
Deferred taxation
on TM 30 271 - 2 271
Other adjustments
Revenue recognition (24 911) (3 553) (29 539)
As previously reported 115 719 18 264 233 882
Other adjustments
Operating lease
adjustments (985) - (985)
Fraud loss (7 872) - (7 872)
Leave pay accrual (1 414) - (1 414)
Disability obligation (2 489) - (2 489)
As reported under IFRS 102 959 18 264 221 122
30 June 2005
As previously reported under
SA GAAP 59 715 21 564 183 400
Adjustments for IFRS
Share-based payments (1 811) - -
TM reinstatement,
net of amortisation - - 29 937
Deferred taxation
on TM 27 318 - (8 682)
Other adjustments
Revenue recognition (30 177) (3 404) (34 835)
As previously reported 55 045 18 160 169 820
Other adjustments
Operating lease
adjustments (715) - (715)
Fraud loss (16 560) - (16 560)
Leave pay accrual (1 330) - (1 330)
Disability obligation (2 946) - (2 946)
As reported under IFRS 33 494 18 160 148 269
2. Review opinion
The group results have been reviewed by KPMG Inc. who have issued an
unqualified review report, which is available at the company"s registered
office.
3. Discontinued operations
As announced on 7 October 2005, the Group disposed of its Reinsurance
Consultants division with effect 31 January 2006. Effective 1 July 2005,
the Group disposed of its investment in Websoft (Pty) Limited.
Underwriting businesses were also classified as discontinued operations.
4. Taxation
Reviewed #Audited
Year ended year ended
30 June 30 June
2006 2005
R"000 R"000
The Group"s taxation charge
comprises the following:
SA normal taxation 11 942 21 479
SA deferred taxation (512) (1 453)
STC 7 714 6 109
Foreign taxation 976 1 001
20 120 27 136
5. Calculation of headline earnings
Profits (losses) attributable
to ordinary shareholders 49 955 (22 777)
Add back
Impairment of assets 5 038 27 277
Profit on disposal of investments (84 033) (6 506)
Add (less) taxation effect 80 -
Less minority shareholders" effect 9 (2 388)
Headline earnings (28 951) (4 394)
Refer to note under Financial Review - Headline Earnings.
6. Long-term liabilities
Interest-bearing 3 969 4 804
Non-interest-bearing 33 769 36 098
37 738 40 902
7. Risk Adivsory Services
Risk Adivsory Services includes Risk Services South Africa, Africa and
unallocated Group costs.
# Compiled from published annual financial statements, updated with the
audited IFRS adjustments.
Operational review
Financial review
Overview
The reviewed annual results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). Details and
explanations relating to the effect of the implementation of IFRS in the
current and prior periods are contained in notes to this announcement.
Prior year results have been restated in terms of IFRS and other
adjustments.
Headline earnings
In terms of IFRS the value of trade marks was reinstated on the balance sheet
and amortisation commenced in the current financial year. The headline
loss on which the trading statement was based was calculated on the basis
that the Group"s trademark amortisation of R10,3 million (after tax) was
added back when calculating headline earnings. In finalising the year
end results the Group established that trademark amortisation should in
fact be included in headline earnings resulting in the actual headline
loss per share being 11,3 cents for 2006.
The interim results published on 1 March 2006 excluded the Group"s trademark
amortisation from headline earnings and hence the restatement of 2005
headline earnings.
The adjustment did not impact on earnings per share.
Income statement
For the continuing operations, revenues remained static at
R494,5 million (2005: R494,6 million). Earnings per share for continuing
operations deteriorated from a loss of 15,9 cents in the prior year to
20,2 cents loss in the current year. Basic earnings per share improved
from a loss of 9,4 cents in the prior year to a profit of 19,5 cents.
Expenses were impacted by a once-off BEE share-based cost of
R20 million as well as associated professional fees of R4,1 million.
Provisions raised in Benefit Services for "bulking and undisclosed profits"
amounted to R14,1 million.
The net effect on the results of an internal fraud was a R19,5 million
recovery in the current financial year.
The recovery arose as the losses under the adjusted IFRS statements were
expensed as incurred over five years whilst the recovery could only be
recognised in the current year.
Included in the profit from the discontinued operations was a profit on the
sale of the Reinsurance Consultants division of R81,7 million. The
balance comprises the results of the Reinsurance Consultants division for
the seven months to 31 January 2006, as well as the full year results for
our underwriting operations, which are expected to be sold, as referred
to in this announcement under "Renewal of Cautionary Announcement".
The current year taxation was distorted by not raising the deferred tax asset
on Benefit Services" current year loss, and the reversal of the deferred
tax asset previously raised. It was further impacted by secondary tax on
companies, as well as permanent differences relating to professional
fees, BEE share-based costs and the fraud insurance recovery.
The soft market conditions and competitive environment continue to impact the
Risk Advisory Services business. This was partially offset by strong new
business gains. Client retention was generally very good, underscoring
client satisfaction.
Although Benefit Services" revenue increased, overall results were
disappointing. Results were negatively impacted by the increase in
provisions, write-off of deferred tax assets, as well as higher
continuing costs of rectifying administration.
The main difference between headline earnings and earnings is the disposal of
the Reinsurance Consultants division (refer to note 5).
Balance sheet and cash flow
The Group"s gearing remains at 3% with the Group continuing to generate cash
from its operations.
A strategic review of our underwriting investments has resulted in assets
being classified as assets held for sale.
Dividends totalling R71,2 million (R69,8 million) were paid during the year
under review.
Investing activities included R23 million spent on the purchase of 49,9% in
Glenrand M I B Makgulong as part of the BEE transaction. Cash used for
financing activities included the R36 million share buyback in terms of
the scheme of arrangement.
STRATEGIC DEVELOPMENTS
BEE transaction
The final elements of the BEE transaction have been completed with the share
issue and buybacks occurring on 18 April 2006. The benefits of being an
empowered company are beginning to materialize.
Risk Advisory Services
As a result of the disposal of the Reinsurance Consultants division and the
expected sale of our underwriting investments, the strategic focus is now
on short-term insurance broking and risk consultancy at which we are a
market leader. It is anticipated that the implementation of the
integrated administration platform will be fully functional at the end of
the next financial year building on the successful Phase I implementation
during the course of the year under review. Back office functions are
accordingly being realigned to provide cost-effective and efficient
service to clients and rectify control weaknesses in legacy systems.
Acquisitions remain a key strategic focus, aligning with our intent to
equalise the profit contributions from reporting business units and
reduce the dependency on our Corporate account.
The discussions with potential international partners continue.
Benefit Services
Considerable progress has been made in dealing with the legacy issues, the
benefits of which are not reflected in the current year"s results.
Dormant and terminated funds have been ring-fenced. The costs of this
exercise make up a considerable proportion of current and prior year
provisions. A strategic focus of increasing the number of funds under
administration is being pursued in order to create the critical mass
required for our administration business.
PROSPECTS
The outlook for 2007 is positive and the Group is being restructured to
ensure that it is focused on its core business which we believe will
produce results which are reflective of its ability and standing in the
market.
DIRECTORATE
The Group CEO, Mr Steve von Roretz, resigned as a director on 16 August 2006.
Dr Dudu Kunene has been appointed acting CEO.
Mrs T Boesch, Mr M J Leeming and Mrs Y Z Simelane resigned as directors and
Mrs T H Nyasulu and Mr M R Mashishi have been appointed to the Board of
Directors.
Mr P Cooper has been appointed as alternate director to Mr G T Ferreira.
DIVIDEND
The Board has resolved not to declare a final dividend. It is the intention
to resume dividend payments once the Group returns to profitability.
On behalf of the Board of Directors
Dr M F Kunene A W Mansfield
(Chairman and acting CEO) (Non-executive director)
19 September 2006
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 23 August 2006
and are advised that the company is still in discussions which, if
successfully concluded, could have an impact on the price at which the
company`s ordinary shares trade on the JSE Limited. These discussions are
in respect of the sale of our interest in an underwriting management
company.
Accordingly, shareholders are advised to continue to exercise caution when
dealing in the company"s securities until a further announcement is made.
Investment bank and sponsor
Nedbank Capital
Directorate:
*Dr M F Kunene (Chairman and Acting Chief Executive Officer), P Cooper (Alt),
R G Cottrell, G T Ferreira, D J Harpur, A W Mansfield, M R Mashishi, T H
Nyasulu
Group Secretary: E Price *Executive
Registered Office:
288 Kent Avenue, PO Box 2544, Randburg 2125
Tel (011) 329 1111, Fax (011) 329 1333
email info@glenrandmib.co.za, website www.glenrandmib.co.za
Licensed Financial Services Provider Number: 11228
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
Date: 19/09/2006 03:08:22 PM Produced by the JSE SENS Department
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