| Wed 20 Dec 2006, 11:00 | | ERP - ERP.com - Disposal of Iserve |
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ERP
ERP
ERP - ERP.com - Disposal of Iserve, Change to the board and Trading statement
ERP.COM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/010017/06)
Share code: ERP & ISIN code: ZAE000043493
("ERP.com" or "the company")
DISPOSAL OF iSERVE (PROPRIETARY) LIMITED ("iSERVE"), CHANGE TO THE BOARD AND
TRADING STATEMENT
1. Introduction
ERP.com shareholders are advised that ERP.com has entered into an agreement with
Gateway Technologies (Proprietary) Limited ("Gateway") dated 15 December 2006
("the agreement"). The agreement sets out the terms of the disposal of the
business of ERP.com`s wholly-owned subsidiary, iServe (a company providing SAP
implementation and consulting services) ("the disposal"), which is effective
from 30 November 2006. The agreement includes the disposal of accounts
receivable, accounts payable, fixed assets and interests in contracts.
2. Rationale for the disposal
iServe has been engaged in a long term fixed price contract for the
implementation of SAP at a major customer. The contract is milestone payment
based and iServe has been significantly underperforming resulting in non
achievement of the specific milestones. Losses to date in the business as a
result of this underperformance are approximately R20 million. The company has
entered into an agreement with the customer that in return for a `break fee`
cash payment of R10,5 million to the customer, the company will be released from
all its obligations under the terms of the implementation contract and that all
the company`s obligations will be assumed by Gateway. The consideration for the
disposal as detailed below will be utilised to fund the `break fee` payment.
ERP.com`s board is of the opinion that to remain engaged in the implementation
contract and to attempt to complete the contract (as opposed to providing the
`break fee`) would result in the company incurring significant additional losses
and expose the group to an unacceptable level of risk.
The disposal is, additionally, in line with ERP.com`s strategy, as communicated
to shareholders, to dispose of those operations that do not support its core
business of Information Risk Management.
3. Consideration for the disposal
The consideration for the disposal is R10 702 252, to be settled in cash. As
indicated above, the sale proceeds will be used to fund the `break fee` cash
payment to the customer
4. Financial effects of the disposal
The unaudited pro forma financial effects of the disposal on ERP.com`s earnings
per share ("EPS"), headline earnings per share ("HEPS"), net asset value ("NAV")
and tangible net asset value ("NTAV") per share are set out below. This
unaudited pro forma financial information has been prepared for illustrative
purposes only and because of its nature may not give a fair reflection of
ERP.com`s financial position and results of operations, nor the effect and
impact of the disposal going forward, and is the responsibility of ERP.com`s
directors.
Before the After the Change
disposal(1) disposal(2) (%)
EPS 12.6 14.5(3) 15
HEPS 12.6 14.5(3) 15
NAV 33.0 35.0(4) 6
NTAV 31.2 33.2(4) 6
Number of shares for EPS and HEPS
purposes 159 123 977 159 123 977
Number of shares for NAV and NTAV 156 259 298 156 259 298
Notes:
1. Based on the audited results for the year ended 31 July 2006.
2. Based on the assumption that the disposal took place on 1 August 2005
for income statement purposes and 31 July 2006 for balance sheet
purposes.
3. EPS and HEPS have been adjusted to exclude the consolidated loss
attributable to ERP.com from iServe for the year ended 31 July 2006 of
R3 075 977.
4. Based on the assumption that the disposal was effected on 31 July
2006.
5. Conditions precedent
All conditions precedent relating to the disposal have been fulfilled.
6. Related party transaction
Mr Casper Lessing, a director of ERP.com, is the shareholder of Gateway. The
disposal is, therefore, a "small related party transaction" in terms of the JSE
Limited ("JSE") Listings Requirements.
ERP.com has therefore appointed KPMG Services (Proprietary) Limited ("KPMG")
(subject to approval by the JSE Issuer Services Division) as an independent
professional expert to review the terms and conditions of the disposal.
Shareholders will be informed in due course of the outcome of this review.
7. Change to the Board of directors
Further to the disposal, Mr Casper Lessing has resigned as a director of ERP.com
with effect from 18 December 2006.
8. Trading statement
In terms of the JSE Listings Requirements, companies are required to publish a
trading statement as soon as they are reasonably certain that the financial
results for the current reporting period will be more than 20% different than
that of the prior comparative period.
Further to the disposal referred to above, it is expected that the business
disposed of (taking into account losses from operations and the loss on the sale
of the business), will contribute a loss of between 8.5 cents and 9.5 cents to
earnings per share and headline earnings per share for the six month period
ending 31 January 2007. This estimate relates only to the effect of the
disposal. The results of ERP.com`s remaining operations for the 6 months ending
31 January 2007 are not yet known with reasonable certainty and a further
trading update will be made as soon as there is reasonable certainty regarding
this.
Shareholders are advised that the above information regarding the results for
the six months ending 31 January 2007 has not been reviewed or reported on by
ERP.com`s auditors.
Johannesburg
20 December 2006
Sponsor
Nedbank Capital
Date: 20/12/2006 11:00:01 Produced by the JSE SENS Department.
