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GMB
GMB
GMB - Glenrand M I B - Reviewed interim condensed results for the six months
ended 31 December 2006
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 Interim Condensed Results for the six months ended 31 December 2006
Operational Review
Financial review
Overview
The interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS). The past six months have been
challenging with the group reporting a decrease in headline earnings per share
from a restated 3,8 cents per share (see note 2) to 1,6 cents per share.
However, earnings per share grew from 3,8 cents to 24,9 cents per share,
mainly due to the recognition of profits on the disposal of non-core assets.
Income statement
Continuing revenues remained relatively flat compared to the prior period.
Within Risk Advisory Services, revenues were up despite the highly competitive
soft market conditions. The flow of new business was ahead of expectations and
client retention remained high. Revenues were down in Benefit Services due to
the sale of the Financial Planning book and slow new business.
Profit before taxation from continuing operations was down due to an increase
in expenses arising from the implementation of integrated administration
platforms, the retention of specialist skills and non-recurring costs. The
effective taxation rate applied to earnings has been distorted as a result of
not recognising any deferred tax assets in Benefit Services.
The high overall running costs, including group costs, are receiving urgent
attention and this initiative is expected to have a positive impact during the
next financial year.
The profit on disposal of assets almost exclusively accounts for headline
earnings adjusted items.
Balance sheet and cash flow
Gearing remains low at 2,3%.The group continues to generate cash from its Risk
Advisory operations, which was offset by the Benefit Services funding
requirement. Working capital movements are represented by insurance debtors
and creditors and are in line with the comparative period in respect of
continuing operations.
STRATEGIC DEVELOPMENTS
We are currently assessing the most appropriate manner to restructure the
group to improve profitability. The group continued its strategy of returning
to core advisory services and disposed of its investment in Holmwoods and Back
and Manson (SA) (Pty) Limited during the period.
Risk Advisory Services
High priorities remain the retention of clients and specialist skills and
aggressive new business activity.
The implementation of a fully integrated administration platform positions
this division for future growth. A number of further projects to improve
business efficiency are underway. An ongoing focus on identifying acquisition
opportunities led to the purchase of Bymac Insurance Brokers (Pty) Limited.
This acquisition positions Glenrand M I B as the largest independent broker in
the Eastern Cape region. The Board is considering other acquisition
opportunities.
Benefit Services
Considerable progress was made in migrating clients to the new generation
administration platform and winding up of the discontinued funds. 75% of
existing clients are now on this new platform, 85% is targeted by June 2007
and the balance will be migrated by the end of the calendar year. The winding
up of discontinued funds is progressing well, with 60% complete to date. Over
90% of discontinued funds will be wound up by the end of the calendar year.
There remains a continued focus on creating critical mass for the
administration business. We do not envisage Benefit Services returning to
profitability by 30 June 2007.
PROSPECTS
We are confident that the group will produce overall improved results from
continuing operations at
30 June 2007 compared with the previous financial year.
DIRECTORATE
The process to appoint a CEO will be concluded soon. Dr Dudu Kunene continues
in his role as acting CEO to the group. Mr G Whitcher was appointed as Group
Financial Director on 29 November 2006 and Mr N Payne was appointed as a non
executive director on 6 December 2006.
DIVIDEND
The Board of Directors has resolved not to declare an interim dividend. It is
the intention to resume dividend payments once the group returns to higher
levels of profitability.
On behalf of the board of directors
Dr M F Kunene G Whitcher
(Chairman and acting CEO) (Group Financial Director)
26 February 2007
REMINDER OF CAUTIONARY ANNOUNCEMENT
Shareholders are reminded that the company is still trading under a
cautionary, as published on 11 January 2007 and 21 February 2007.
Investment bank and sponsor
Nedbank Capital
Consolidated Income Statement
for the six months ended 31 December 2006
Reviewed
Reviewed restated Restated
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Note R`000 R`000 R`000
Continuing operations
Revenue 252 033 251 397 494 541
Employment benefits (157 479) (144 232) (301 986)
expenses
Rent and IT expenses (34 929) (31 791) (61 620)
Amortisation and (8 458) (10 231) (19 041)
depreciation
Other expenses (61 526) (67 238) (158 147)
Finance costs (2 994) (2 479) (8 391)
Disposal and 3 141 - (3 034)
impairment of
investments
Investment income 15 083 17 378 31 947
Share of profits of 421 410 774
associates
Profit (loss) before 5 292 13 214 (24 957)
taxation
Taxation 3 (4 165) (12 774) (20 120)
Profit (loss) from 1 127 440 (45 077)
continuing operations
Discontinuing
operations
Profit from
discontinuing
operations (net of
taxation)
including the profit 4 57 723 16 282 107 654
on disposal of
investments
Profit for the year 58 850 16 722 62 577
Profit attributable
to:
Minority shareholders 2 335 7 460 12 899
Shareholders of 56 515 9 262 49 678
Glenrand M I B
58 850 16 722 62 577
Earnings per share
Basic earnings per 24,9 3,8 20,8
share (cents)
Diluted earnings per 24,9 3,8 19,4
share (cents)
Continuing operations
Profit/(loss) per 0,1 (1,3) (21,6)
share (cents)
Diluted profit/(loss) 0,1 (1,3) (20,2)
per share (cents)
Headline 5 1,6 3,8 (12,2)
earnings/(loss) per
share (cents)
Diluted headline 5 1,6 3,8 (11,4)
earnings/(loss) per
share (cents)
Number of shares (net
of treasury shares)
- Issued (000`s) 226 526 241 863 238 682
- Diluted weighted 226 526 242 296 255 594
average (000`s)
Consolidated Balance
Sheet
as at 31 December 2006
Reviewed
Reviewed restated Restated
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Assets
Property, plant and 29 925 31 663 30 362
equipment
Investment properties 6 464 8 458 6 464
Goodwill 42 442 36 249 35 449
Intangible assets 50 225 49 705 48 699
Deferred taxation asset 40 401 40 637 41 872
Investments 4 236 11 459 4 810
Long term accounts 10 332 - 14 921
receivable
Linked investments 5 278 491 4 604 124 5 129 803
backing policyholder
contracts
Current assets 324 664 283 874 330 364
Accounts receivable 76 280 51 539 210 721
policyholders
Assets classified as held 8 206 89 052 55 806
for sale
Total assets 5 871 666 5 206 760 5 909 271
Equity and liabilities
Equity
Shareholders` equity 165 846 124 906 107 171
Minority interest 3 460 17 103 17 070
Total equity 169 306 142 009 124 241
Liabilities
Long-term liabilities 38 108 37 181 37 738
Deferred taxation 112 146 117
Policyholder liabilities 5 327 063 4 593 217 5 244 552
Current liabilities 309 370 295 553 390 781
Accounts payable 27 707 62 446 95 972
policyholders
Liabilities classified as - 76 208 15 870
held for sale
Total liabilities 5 702 360 5 064 751 5 785 030
Total equity and 5 871 666 5 206 760 5 909 271
liabilities
Consolidated Cash Flow
Statement
for the six months
ended 31 December 2006
Reviewed
Reviewed restated Restated
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Cash generated from 20 548 41 355 54 898
operations
- Continuing 11 663 22 459 24 475
- Discontinuing 8 885 18 896 30 423
Movement in working (63 226) (223 458) (131 628)
capital
Taxation paid (14 267) (5 920) (27 283)
Dividends paid (2 212) (18 190) (71 157)
Cash utilised by (59 157) (206 213) (175 170)
operating activities
Cash generated from 31 754 (2 523) (28 347)
(utilised by) investing
activities
Cash utilised by (200) (635) (46 475)
financing activities
Net decrease in cash (27 603) (209 371) (249 992)
and cash equivalents
Cash and cash 164 135 414 127 414 127
equivalents at
beginning of period
Cash and cash 136 532 204 756 164 135
equivalents at end of
period
Consolidated Segmental Analysis
for the six months ended 31 December 2006
Reviewed
Reviewed restated Restated
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Note R`000 R`000 R`000
Segmental revenues
Risk Advisory 217 875 234 818 452 018
Services#
- Continuing 208 272 201 745 393 857
- Discontinuing 9 603 33 073 58 161
Benefit Services 43 761 49 652 100 684
Total segmental 261 636 284 470 552 702
revenues
Segmental results
Risk Advisory 7 461 22 842 18 447
Services#
- Continuing 2 951 8 624 (7 082)
- Discontinuing 4 510 14 218 25 529
Benefit Services (12 943) (10 753) (37 533)
Total segmental 7 (5 482) 12 089 (19 086)
(losses) profit
#Risk Advisory Services includes Risk Services South Africa,
Africa and Group costs.
Consolidated Statement of Changes in Equity
for the six months ended 31 December 2006
Share capital Treasury Non-
and and share distributable
R`000 share premium option reserves Retained
reserve earnings
Balance at 30 48 745 (776) 44 679 33 494
June 2005
restated
(Refer
note 2)
Changes in
equity for the
six months
1 December
2005
Translation of - - (1 978) -
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the - - - 9 262
six months to
31 December
2005
Total - - (1 978) 9 262
recognised
income and
expenses
Issue of - (1 192) - -
treasury
shares
Ordinary 1 608 - - -
shares issued
Share option - 737 - -
reserve
Trade mark - - (4 989) 4 989
amortisation
Share of - - 3 594 (3 594)
profits of
equity
accounted
investees
Dividends paid - - - (9 673)
Balance at 31 50 353 (1 231) 41 306 34 478
December 2005
carried
forward
Changes in
equity for the
six months to
30 June 2006
Translation of - - 3 426 -
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the - - - 40 416
six months to
30 June 2006
Total - - 3 426 40 416
recognised
income and
expenses
Issue of - (35 433) - -
treasury
shares
Ordinary 2 072 - - -
shares issued
Share options - 20 341 - -
reserve
Trade mark - - (4 990) 4 990
amortisation
Movement in - - - -
minority
interest
Share of - - (401) 401
profits of
equity
accounted
investees
Dividends paid - - - (48 557)
Balance at 30 52 425 (16 323) 39 341 31 728
June 2006
carried
forward
Changes in
equity for the
six months to
31 December
2006
Translation of - - 1 416 -
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the - - - 56 515
six months to
31 December
2006
Total - - 1 416 56 515
recognised
income and
expenses
Share option - 744 - -
reserve
Trade mark - - (3 326) 3 326
amortisation
Movement in - - - -
minority
interest
Share of - - 443 (443)
profits of
equity
accounted
investees
Dividends paid - - - -
Balance at 31 52 425 (15 579) 37 874 91 126
December 2006
Consolidated Statement of Changes in Equity - continued
Shareholders`
R000 equity Minority Total equity
interest
Balance at 30 126 142 18 160 144 302
June 2005
restated
(Refer note 2)
Changes in
equity for the
six months to
31 December
2005
Translation of (1 978) - (1 978)
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the 9 262 7 460 16 722
six months to
31 December
2005
Total 7 284 7 460 14 744
recognised
income and
expenses
Issue of (1 192) - (1 192)
treasury
shares
Ordinary 1 608 - 1 608
shares issued
Share option 737 - 737
reserve
Trade mark - - -
amortisation
Share of - - -
profits of
equity
accounted
investees
Dividends paid (9 673) (8 517) (18 190)
Balance at 31 124 906 17 103 142 009
December 2005
carried
forward
Changes in
equity for the
six months to
30 June 2006
Translation of 3 426 - 3 426
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the 40 416 5 439 45 855
six months to
30 June 2006
Total 43 842 5 439 49 281
recognised
income and
expenses
Issue of (35 433) - (35 433)
treasury
shares
Ordinary 2 072 - 2 072
shares issued
Share options 20 341 - 20 341
reserve
Trade mark - - -
amortisation
Movement in - (1 062) (1 062)
minority
interest
Share of - - -
profits of
equity
accounted
investees
Dividends paid (48 557) (4 410) (52 967)
Balance at 30 107 171 17 070 124 241
June 2006
carried
forward
Changes in
equity for the
six months to
31 December
2006
Translation of 1 416 - 1 416
foreign
subsidiaries
Net income
recognised
directly in
equity
Profit for the 56 515 2 335 58 850
six months to
31 December
2006
Total 57 931 2 335 60 266
recognised
income and
expenses
Share option 744 - 744
reserve
Trade mark - - -
amortisation
Movement in - (13 733) (13 733)
minority
interest
Share of - - -
profits of
equity
accounted
investees
Dividends paid - (2 212) (2 212)
Balance at 31 165 846 3 460 169 306
December 2006
Notes to the Consolidated Financial Statements
1. Basis of accounting
These interim results are prepared in accordance with, and comply with,
International Financial Reporting Standards ("IFRS") and the South African
Companies Act of 1973, as amended. The accounting policies are consistent with
those applied for the year ended 30 June 2006, and comply with the recognition
and measurement requirements of IFRS and disclosure requirements of IAS 34
Interim Financial Reporting.
The December 2005 and June 2006 comparatives have been restated as detailed in
note 2.
2. Adjustments
The adjustments 2.1 to 2.4 were already reported in the 30 June 2006 annual
financial statements.
2.1 Straight-lining of operating lease payments
The group adopted the change in interpretation of IAS 17 Leases in 2005. A
calculation error identified at
30 June 2006 has resulted in the adjustments to the income statement and
balance sheet at 31 December 2005 as reflected below.
2.2 Leave pay accrual
The group has historically only provided for a maximum of 30 days leave per
employee as this represented the maximum cash obligation. This approach has
now changed to provide for the total leave days due to the employee, to bring
the total cost of employment recognised in line with services rendered. The
effect on the income statement and balance sheet at 31 December 2005 is
reflected below.
2.3 Disability obligation
The group has an obligation to contribute in part towards employee benefits on
disability. This amount was previously not recognised. 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 is accounted
for as a long-term liability. The effect on the income statement and balance
sheet at 31 December 2005 is reflected below.
2.4 Fraud loss
During the previous year a fraud 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 insurance recovery was accounted for in the prior year. The effect on the
income statement and balance sheet at 31 December 2005 is reflected below.
2.5 Share-based payments of equity accounted investees
The group has previously not accounted for the Admiral Executive share scheme
in terms of IFRS 2 Share based payments. The scheme is classified as a cash
settled share based transaction according to this statement. The effect on the
income statements and balance sheets at 31 December 2005 and 30 June 2006 are
reflected below.
Reconciliation of financial information previously reported
Reconciliation of income statements
Reviewed restated Restated
6 months ended year ended
31 December 2005 30 June 2006
R`000 R`000 R`000 R`000 R`000 R`000
Profit Net Profit Net
before profit before profit
taxation Taxation after taxation Taxation after
taxation taxation
As previously 39 904 (18 050) 21 854 93 819 (30 965) 62 854
reported
Adjustments
- Share-based - - - (277) - (277)
payments
- Operating 108 (31) 77 - - -
lease
adjustments
- Leave pay 146 (42) 104 - - -
accrual
- Disability 33 (10) 23 - - -
obligation
- Fraud loss (5 304) (32) (5 336) - - -
Adjusted 34 887 (18 165) 16 722 93 542 (30 965) 62 577
results
Reconciliation of balance sheet
Defer- Current Long- Current Share-
red term holders
tax Invest- assets Liabi- Liabi- equity
asset ments lities lities
31 December
2005 as
previously 39 825 15 426 422 535 33 065 400 440 172 659
reported
- Disclosed - - (97 510) - (76 208) -
as held for
sale
- Disclosed
as
Policyholder
information - - (51 539) - (62 446) -
- Share- - (3 967) - - - (3 967)
based
payments
- Operating 260 - - - 899 (638)
lease
adjustments
- Leave pay 501 - - - 1 729 (1 226)
accrual
- Disability 1 193 - - 4 116 - (2 923)
obligation
- Fraud loss (1 142) - 10 388 - 31 139 (21 896)
Restated 31 40 637 459 283 874 37 181 295 553 142 009
December
2005
30 June 2006
as
previously 1 872 4 810 541 085 37 738 486 753 128 485
reported
- Disclosed
as
Policyholder
information - - (210 721) - (95 972) -
- Share- - - - - - (4 244)
based
payments
Restated 41 872 4 810 330 364 37 738 390 781 124 241
30 June 2006
3. Taxation
Reviewed
Reviewed Restated Restated
6 months ended 6 months ended Year ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
The Group`s
taxation charge
comprises the
following:
SA normal taxation 1 448 6 212 11 942
SA deferred 1 476 2 591 (512)
taxation
STC 569 3 564 7 714
Foreign taxation 672 407 976
4 165 12 774 20 120
4. Discontinuing operations
As announced on 15 October 2006, the Group disposed of its investment in
Holmwoods and Back and Manson (SA) (Pty) Limited with effect from 30 September
2006. As a result of this, comparative income statements have been accordingly
reclassified as discontinued.
The remaining underwriting businesses are also classified as discontinued
operations.
During the previous financial year the Group disposed of its Reinsurance
Consultants division, as well as its investment in Websoft (Pty) Limited.
Reviewed
Reviewed Restated Restated
6 months 6 months Year
ended ended ended
31 31 30 June
December December
2006 2005 2006
R`000 R`000 R`000
5. Calculation of headline
earnings (loss)
Profit attributable to 56 515 9 262 49 678
ordinary shareholders
Add back
Impairment of assets 368 - 5 038
Profit on disposal of (58 415) - (84 033)
investments
Taxation effect 5 125 - 80
Minority shareholders` 1 - 9
effect
Headline earnings/(loss) 3 594 9 262 (29 228)
6. Acquisition of subsidiary
Goodwill arose on the
transactions during the
period as follows:
Net assets acquired (1)
Consideration paid 9 672
Goodwill arising 9 671
7. Segmental analysis
7.1 Reconcilliation of
statutory to segmental
profit
Statutory profit before 70 018 34 886 93 542
tax
Continuing 5 292 13 214 (24 957)
Discontinuing 64 726 21 672 118 499
Add back
Investment income (15 339) (21 691) (37 363)
Finance charges 2 995 2 489 8 724
Share of profits of (5 109) (3 595) (4 994)
associates
Headline adjusting items (58 047) - (78 995)
Headline adjusted (5 482) 12 089 (19 086)
segmental (loss) profit
7.2 Segmental analysis of
group costs
Risk Advisory Services
Risk Services South 27 141 24 416 48 831
Africa
Africa and Underwriting 241 655 1 311
Unallocated group costs 18 346 29 412 63 343
Benefit Services 8 021 3 772 7 544
Total group costs 53 749 58 255 121 029
included in segmental
profit
Group costs entails the following:
IT, Marketing, Operating Leases, Payroll, Compliance, Risk and Legal,
Group Finance, Secretarial and the Executive Office.
8. Independent review
These interim condensed results have been prepared in accordance with IAS 34
Interim Financial Reporting and have been reviewed by KPMG Inc., whose
unqualified report is available for inspection at the company`s registered
office.
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, N Payne, *G Whitcher. 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 200
PO Box 61051 Marshalltown 2107 South Africa
Tel (011) 370 5000 Fax (011) 688 7715
Investment Bank and Sponsor: Nedbank Capital
Date: 26/02/2007 13:01:02 Produced by the JSE SENS Department.
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