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ERM
ERM
ERM - Consolidated Reviewed Results For The Six Months
Ended 31 August 2006
Enterprise Risk Management Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/001603/06)
Share code: ERM
ISIN: ZAE000037701
("the company" or "the group")
Consolidated reviewed results for the six months ended 31 August 2006
Group income statement
Reviewed Reviewed Audited
Restated
Six months Six Twelve
months months
to to to
31 August 31 August 28 February
2006 2005 2006
(R"000) (R"000) (R"000)
Turnover - - -
Operating loss (3 150) (1 090) (2 518)
Realised capital gains on sale of 5 353 2 784 16 031
investments
Investment income 3 990 1 886 4 836
Profit before taxation 6 193 3 580 18 349
Taxation (1 101) (533) (1 874)
Profit for the period 5 092 3 047 16 475
Weighted average number of shares 54 568 53 576 53 576
("000)
Earnings per share (cents) 9,3 5,7 30,8
Diluted earnings per share 9,3 5,7 30,3
(cents)
Reconciliation of headline
earnings:
Earnings attributable to 5 092 3 047 16 475
shareholders
Realised capital gains on sale of (4 577) (2 380) (13 709)
investments (net of tax)
Headline earnings 515 667 2 766
Headline earnings per share 0,9 1,2 5,2
(cents)
Diluted headline earnings per 0,9 1,2 5,1
share (cents)
Group balance sheet
Reviewed Reviewed Audited
Restated
31 August 31 August 28
February
2006 2005 2006
(R"000) (R"000) (R"000)
Assets
Non-current assets 40 180 82 509 54 165
Financial assets 36 534 66 119 50 217
Deferred taxation 3 646 5 623 3 948
Loan receivable - 10 767 -
Current assets 60 679 2 547 44 638
Accounts receivable 122 807 666
Loan receivable 2 000 - 11 287
Cash and cash equivalents 58 557 1 740 32 685
Total assets 100 859 85 056 98 803
Equity and liabilities
Equity attributable to equity 99 342 84 806 98 394
holders
Stated capital 59 537 59 001 59 001
Retained earnings 29 289 10 769 24 197
Fair value and other reserves 10 516 15 036 15 196
Current liabilities 1 517 250 409
Accounts payable 158 91 225
Financial liabilities 1 200 - 25
Shareholders for dividend 159 159 159
Total equity and liabilities 100 859 85 056 98 803
Number of shares in issue (`000) 54 633 53 576 53 576
Net asset value per share (cents) 181,8 158,3 183,7
Group cash flow statement
Reviewed Reviewed Audited
Restated
Six Six Twelve
months months months
to to to
31 August 31 August 28
February
2006 2005 2006
(R"000) (R"000) (R"000)
Cash generated from operations 6 649 1 197 (3 086)
Cash generated from movements in 477 64 339
working capital
Decrease in accounts receivable 544 228 369
(Decrease) in accounts payable (67) (164) (30)
Cash generated from/(utilised in) 7 126 1 261 (2 747)
operating activities
Investment income 2 371 1 030 1 540
Dividend income 980 856 2 205
Taxation refunded - - 380
Net cash flows from operating 10 477 3 147 1 378
activities
Net cash flows from investing 13 532 (2 888) 29 826
activities
Net cash flows from financing 1 863 - -
activities
Net increase in cash and cash 25 872 259 31 204
equivalents
Cash and cash equivalents at the 32 685 1 481 1 481
beginning of the period
Cash and cash equivalents at the 58 557 1 740 32 685
end of the period
Group statement of changes in equity
Reviewed Reviewed Audited
Restated
Six Six Twelve
months months months
to to to
31 August 31 August 28 February
2006 2005 2006
(R"000) (R"000) (R"000)
Stated capital
Opening balance 59 001 59 001 59 001
- Share options exercised 1 722 - -
- Treasury shares bought back (at (1 186) - -
cost)
Closing balance 59 537 59 001 59 001
Retained earnings
Opening retained earnings as 24 197 16 686 16 686
previously reported
Prior year adjustment
- Deferred tax - (1 163) (1 163)
- Change in accounting policy as - (158) (158)
a result of IFRS
Restated balance 24 197 15 365 15 365
Transfer to fair value reserves - (7 643) (7 643)
as a result of IFRS conversion
Net profit for the period 5 092 3 047 16 475
Closing balance 29 289 10 769 24 197
Fair value reserves
Opening balance 14 522 - -
Transfer from distributable - 7 643 7 643
reserves as a result of IFRS
conversion
Fair value (losses)/gains net of (130) 9 540 20 547
tax
Transfer to income statement on (4 577) (2 380) (13 668)
disposal net of tax
Closing balance 9 815 14 803 14 522
Other reserves
Opening balance as previously 674 - -
reported
Change in accounting policy as a - 158 158
result of IFRS
Restated balance 674 158 158
Value of services provided 27 75 516
Closing balance 701 233 674
Fair value and other reserves 10 516 15 036 15 196
Notes to the interim financial statements
1. Accounting policies
The reviewed results of the group for the six months ended 31 August 2006
have been prepared in accordance with the group"s accounting policies,
which comply with International Financial Reporting Standards and are
consistent with those of the previous year. This interim report complies
with International Accounting Standards 34 - Interim Financial Reporting.
2. Investments
At 31 August 2006 the company"s investment portfolio comprised the
following:
At 31 August 2006
Name of Market Market
investment Quantity price value
("000) (cents) (R"000)
JCI Convertible Debentures - - -
Apex Hi Properties "A" units 800 1 330 10 640
Anglo American PLC ordinary shares 30 31 075 9 323
Bidvest Limited ordinary shares 60 10 910 6 546
Sasol Limited ordinary shares 15,5 25 000 3 875
Highveld Steel & Vanadium Limited 100 6 150 6 150
ordinary shares
TOTAL 36 534
At 31 August 2005
Name of Market Market
investment Quantity price value
("000) (cents) (R"000)
JCI Convertible Debentures 3 000 89 2 670
Apex Hi Properties "A" units 1 000 1 185 11 850
Anglo American PLC ordinary shares 20 16 200 3 240
Bidvest Limited ordinary shares 380 8 740 33 212
Sasol Limited ordinary shares 67 21 500 14 405
Highveld Steel & Vanadium Limited 15 4 949 742
ordinary shares
TOTAL 66 119
3. Accounts receivable
IAS 39 requires that financial assets be initially measured at the fair
value of the consideration receivable. On 10 August 2006, the company
received payment in an amount of R8,0 million relating to the deferred
payment of R12 million due from First South Risk Solutions (Proprietary)
Limited ("FSRS"). On a discounted present value basis, the balance of the
loan is R2,0 million payable by 31 December 2006 (2005: 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 (2005:
R0,6 million).
4. Auditors" review report
Grant Thornton has issued an unmodified review report, which is available
for inspection at the company"s registered office. The company"s previous
results were qualified on the basis of a lack of evidence to support the
recoverability of an amount that was owed to the company. In view of the
fact that the company has reached a settlement on the loan, and payments
in terms thereof have been met, the qualification is no longer required.
Shareholders are referred to the commentary on the results for details of
the settlement and its effect on the income statement. The company will
be applying to the JSE Limited for the removal of the annotation to its
share.
Commentary on the results
Earnings and diluted earnings of 9,3 cents (2005: 5,7 cents) per share,
headline and diluted headline earnings of 0,9 cents (2005: 1,2 cents) per
share and a net asset value of 181,8 cents (2005: 158,3 cents) per share
were achieved. 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. Earnings for the six months to 31 August
2005 have been restated to take into account an adjustment to deferred
tax relating to realised capital gains on sale of investments for the
year ending 28 February 2004. Headline earnings for the six months to 31
August 2005 have been restated to exclude realised capital gains on sale
of investments from earnings.
During the period under review the share traded between a high of 190,0
cents (2005: 130,0 cents) per share and a low of 140,0 cents (2005: 89,0
cents) per share. The volume of shares traded during the period was
50,816 million (2005: 12,468 million) shares at an average price of 154,4
cents (2005: 99,8 cents) per share. This represents 91,8% of the
company"s total issued shares (2005: 23,4%).
In August 2006 the company and FSRS entered into discussions regarding
the loan owed to it by FSRS, relating to the sale of a business in August
2003. Settlement was reached on 11 August 2006. The amount so settled was
R10 million of which R8 million was received on 17 August 2006. The
balance of R2 million is payable by 31 December 2006. As a result of the
settlement an impairment loss of R1,9 million was recognised in profit
and loss for the period.
As previously reported, arising from the arbitrated reduction in income
of the prior years, the company believes an amount of R9,27 million plus
interest is refundable by SARS. SARS is of the opinion that the amount
gives rise to an assessed loss, not a refund. The company has lodged its
grounds of appeal and awaits a pre-trial conference. The amount has been
included in the deferred tax asset.
Contingent liability
The company is still defending claims of approximately R1,0 million from
three former executive employees relating to their service agreements
with the company. No provision has been made for these claims as the
directors believe it is unlikely that the claims will be successful.
Stated capital
During the period under review, two former directors exercised their
share options, resulting in the issue of 1,8 million shares by the
company, bringing the total number of shares in issue to 54,633 million
shares, net of 0,7 million treasury shares.
Share buy-back
At the last annual general meeting held on 18 May 2006, shareholders
voted to renew the general authority granted to the company to purchase
its own shares. To date the company has bought back 742 620 shares at an
average price of 159,7 cents per share. These shares are housed as
treasury shares in a wholly-owned subsidiary of the company, Risk
Outsourcing (Proprietary) Limited.
Dividend
The board has resolved not to declare any dividend to shareholders for
the period under review.
Future direction
By virtue of a number of changes to the board since May 2006 and a change
in one of its major shareholders in July 2006, the company is in the
process of embarking on a new strategic direction mainly in the area of
commercial, industrial, retail and storage properties. The company will
however also be seeking out a number of small to medium sized private
equity investments which will further enhance shareholder value. In
addition to this the company continues to actively invest in listed
shares. This portfolio of shares is of a long-term nature and is included
in non-current assets. The company has also engaged in a short-term
trading portfolio to maximise shareholder funds. This portfolio is
included in current assets and/or liabilities and is managed separately
from the long-term portfolio.
By order of the board
C de Beer CA (SA)
Company secretary
Randburg
6 October 2006
Directors
BL Gruzd (Chairman)*, MA Stein (CEO),
Dr DE Baloyi*, E Gerber*
*non-executive
Sponsor
Merchant 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: 06/10/2006 05:00:10 PM Produced by the JSE SENS Department
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