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BFS
BFS
BFS - Blue - Abridged Audited Results For The Year Ended 28 February 2007
And Renewal Of Cautionary
Blue Financial Services Limited
(Registration number 1996/006595/06)
("Blue" or "the Group")
Share code: BFS & ISIN: ZAE0000083655
Abridged audited results for the year ended 28 February 2007 and renewal
of cautionary
Highlights
Headline earnings per share up 472% to 13.62 cents
Group income statement
Audited
year ended
28 February
2007
R`000
Revenue 202 520
Other income 4 657
Operating expenses (118 125)
Operating profit 89 052
Investment revenue 128
Finance costs (31 752)
Profit before taxation 57 428
Taxation (16 526)
Profit for the year 40 902
Attributable to:
Equity holders of the parent 40 589
Minority interest 313
Share capital 352 000 000
Treasury shares (6 368 241)
Issued shares 345 631 759
Weighted average number of 330 530 389
shares in issue
Diluted weighted average 419 080 997
number of shares in issue
Earnings per share (cents) 12.28
Headline earnings per share 13.62
(cents)
Adjusted headline earnings per 17.35
share (cents)
Fully diluted earnings per 9.69
share (cents)
Fully diluted headline 10.74
earnings per share (cents)
Audited
year ended
28 February
2007
Reconciliation of weighted
average issued shares to
diluted weighted average
issued shares:
Weighted average number of 330 530 389
shares in issue
Shares to be converted 88 550 608
Diluted weighted average 419 080 997
number of shares in issue
Audited
year ended
28 February
2007
R`000
Reconciliation of earnings to
headline earnings
Earnings 40 589
Impairment of loan in Blue 4 439
Cell (Pty) Ltd
Headline earnings 45 028
Imputed interest charge1 5 008
Amortisation of intangible 7 305
assets
Adjusted headline earnings 57 341
The Group was dormant as at 28 February 2006 and the consolidation of all
the operating companies in the various countries only took place on 1
March 2006, therefore no prior year comparitves are reflected.
Imputed interest charge
Imputed interest charge resulted from the acquisition of Micro Access
Financial Services (Pty) Ltd (trading as Future Finance) ("Future
Finance"). Paragraph 24 of IFRS 3: Business Combinations requires that
assets given and liabilities incurred or assumed by the acquirer, in
exchange for control of the acquiree, be measured at their fair values at
the date of exchange. Therefore, when settlement of all or any part of
the cost of a business combination is deferred, the fair value of the
deferred component shall be determined by discounting the amounts payable
to their fair value of the deferred payment at the date of exchange.
This discounting results in an amount of interest incurred (and paid) on
settlement of the purchase price of the business combination.
Group balance sheet
Audited
as at
28 February
2007
R`000
Assets
Non-current assets
Investment property 1 976
Property, plant and equipment 20 306
Goodwill 269 495
Intangible assets 64 967
Related party loans 2 670
Deferred tax 1 303
360 717
Current assets
Available for sale financial 1 109
assets
Inventory -
Loan advances 207 331
Trade and other receivables 2 423
Cash and cash equivalents 11 832
222 695
Total assets 583 412
Equity and liabilities
Equity
Share capital 399 894
Reserves (16)
Retained income 40 589
Minority interest 539
441 006
Liabilities
Non-current liabilities
Loans from shareholders 328
Borrowings 34 602
Finance lease obligation 10 191
Deferred tax 18 846
63 967
Current liabilities
Borrowings 10 421
Current tax payable 17 464
Finance lease obligation 1 801
Operating lease liability 153
Trade and other payables 14 163
Provisions 2 131
Bank overdraft 32 306
78 439
Total liabilities 142 406
Total equity and liabilities 583 412
Net asset value per share (cents) 127.59
Tangible net asset value per 30.83
share (cents)
Group statement of changes in equity for the year ended 28 February 2007
Share Share Total Foreign
capital premium share currency
R`000 R`000 capital translation
R`000 R`000
Balance at 1 March 2006 - - - -
Currency translation - - - (16)
differences
Net expenses recognised - - - (16)
directly in equity
Profit for the year - - - -
Total recognised income - - - (16)
and expenses for the year
Issue of shares 0.4 393 600 393 600 -
Treasury shares 0.01 (6 368) (6 368) -
Issue of preference shares 35 200 - 35 200 -
Share issue costs - (22 538) (22 538) -
Minority interest at - - - -
acquisition date
Balance at 28 February 35 200 364 694 399 894 (16)
2007
Group statement of changes in equity for the year ended 28 February 2007
(Contd)
Total
attributable
to equity
Retained holders of Minority Total
income the Group interest Equity
R`000 R`000 R`000 R`000
Balance at 1 March - - - -
2006
Currency translation - (16) - (16)
differences
Net expenses - (16) - (16)
recognised directly in
equity
Profit for the year 40 589 40 589 313 40 902
Total recognised 40 589 40 573 313 40 886
income and expenses
for the year
Issue of shares - 393 600 - 393 600
Treasury shares - (6 368) - (6 368)
Issue of preference - 35 200 - 35 200
shares
Share issue costs - (22 538) - (22 538)
Minority interest at - - 226 226
acquisition date
Balance at 28 February 40 589 440 467 539 441 006
2007
Group cash flow statement
Audited
year ended
28 February
2007
R`000
Cash flows from operating activities (12 659)
Cash receipts from customers 122 123
Cash paid to suppliers and employees (93 982)
Cash generated by operating activities 28 141
Interest paid (31 624)
Taxation paid (9 176)
Cash flows from investing activities (96 903)
Expenditure to maintain operating capacity (17 795)
Property, plant and equipment acquired (17 582)
Impairment of loans (4 486)
Loans granted (2 370)
Movement in financial assets (597)
Proceeds on disposal of assets 7 240
Subsidiaries acquired (79 108)
Cash flows from financing activities 89 088
Capital raised 114 486
Repayment of shareholders and related party (11 516)
loans
Loans repaid (13 882)
Decrease in cash and cash equivalents (20 474)
Cash and cash equivalents at beginning of year -
Cash and cash equivalents at end of year (20 474)
Group Segmental Analysis
South Botswana
Africa
Year ended Year ended
28 Feb 28 Feb
2007 2007
R`000 R`000
Revenue 182 596 32 094
External revenue 156 348 32 094
Inter segment 26 248 -
transactions
Finance Costs (22 365) (7 011)
Expenses (105 373) (17 828)
Segment result 54 858 7 254
Income taxes
Profit for the year
Other disclosures
Segment assets 633 901 32 201
Segment liabilities (129 572) (20 522)
Depreciation and 9 740 1 207
amortisation
Capital expenditure 13 168 777
Group Segmental Analysis (contd)
Zambia Other
Year ended Year ended
28 Feb 28 Feb 2007
2007
R`000 R`000
Revenue 22 642 155
External revenue 21 297 155
Inter segment 1 345 -
transactions
Finance Costs (5 184) (63)
Expenses (10 670) (5 318)
Segment result 38 496 5 536
Income taxes - -
Profit for the - -
year
Other disclosures
Segment assets 28 588 4 764
Segment (27 306) 9 215
liabilities
Depreciation and 628 162
amortisation
Capital 1 175 2 379
expenditure
Group Segmental Analysis (contd)
Elimination Consolidated
Year ended Year ended
28 Feb 2007 28 Feb 2007
R`000 R`000
Revenue (30 309) 207 177
External revenue - 209 893
Inter segment (30 309) (2 716)
transactions
Finance Costs 3 000 (31 624)
Expenses (21 064) (118 125)
Segment result (54 373) 57 428
Income taxes - (16 526)
Profit for the - 40 902
year
Other disclosures
Segment assets (450 503) 248 951
Segment 68 425 (99 761)
liabilities
Depreciation and - 11 575
amortisation
Capital - 17 498
expenditure
Reconciliation of segment assets and assets per balance sheet
Year ended
28 Feb 2007
R`000
Assets per segments 248 951
Goodwill on acquisition of 269 495
subsidiaries
Intangible assets acquired 72 271
Amortisation of intangible (7 305)
assets
Assets per balance sheet 583 412
Non-consolidation of Blue Cell (Pty) Ltd IAS 27, paragraph 21 states that
a parent loses control of a subsidiary when it loses the power to govern
the financial and operating policies of an investee so as to obtain
benefit from its activities. The loss of control can occur with or
without and change in absolute or relative ownership levels. It could
occur, for example, when a subsidiary becomes subject to the control of a
government, court, administrator or regulator.
The directors are of the opinion that control of Blue Cell (Pty) Ltd was
lost when application for liquidation was lodged with the High Court of
South Africa and the regulator intervened in the process.
In terms of Section 291 of the Companies Act, group annual financial
statements need not deal with a subsidiary if the directors of the
company are of the opinion that it is impracticable or would be of no
real value to members of the company, in view of the insignificant
amounts involved, or would entail expense or delay out of proportion to
the value to members of the company. The directors of Blue decided that
the amounts involved were insignificant in relation to the Group
Financial Results and did not include the financial statements for Blue
Cell (Pty) Ltd in the Group`s financial statements. Refer to the notes on
post-balance sheet events for further details.
Comments on resultsNature of businessBlue is a pan-African financial
services supplier, providing ethical, innovative and affordable credit
solutions to people within Africa. Blue currently operates in South
Africa, Botswana, Uganda, Zambia and Tanzania (including Zanzibar) and
partners with employers (governments, parastatals and businesses) to
provide their employees with a range of financial services. These
partnerships enable Blue to offer the above solutions to its client base
at affordable rates while limiting its risk in doing so.The Group
currently employs more than 600 staff and has more than 100 branches in 5
countries in Africa.
Blue targets creditworthy formally employed individuals below LSM 7
(households with an average income of R7 500 per month or less), a sector
that remains largely excluded from main stream credit markets.
Financial overviewThese are Blue`s maiden annual financial results since
listing on the JSE Limited`s AltX on 12 October 2006.
Robust trading in the second half of the year, coupled with the effects
of the AIG investment, the JSE listing and the acquisition of Future
Finance resulted in a 15.5% increase in turnover compared to the pre-
listing statement forecast. Taxed profits exceeded the pre-listing
statement forecast by some R15.1 million. The acquisition of Future
Finance was effective as from 1 April 2006, hence eleven months` trading
results of Future Finance are included in the Group results.
Earnings per share (EPS) and headline earnings per share (HEPS) of 12.28
cps (EPS) and 13.62 cps (HEPS) respectively for the year under review
considerably exceeded the pre-listing statement forecast of 8.28 cps for
both EPS and HEPS.
Goodwill of R269.5 million is as a result of the Future Finance
acquisition and consolidation of Blue`s subsidiaries. Goodwill is tested
annually for impairment in accordance with IFRS 3. The trading results of
the companies have during the last year exceeded forecasts and therefore
no impairment was necessary.
Loans and advances amounted to R207.3 million in 2007.
Diluted EPS and HEPS are included as a result of the potential conversion
of the preference shares held by AIG into ordinary shares, based on Blue
achieving its profit forecasts.
Provision for bad debtThe Group has, for the year ended 28 February 2007,
provided for doubtful debts equal to 3% of the loan book. This is higher
than normal for the group due to the inclusion of Micro Access Financial
Services (Pty) Ltd.
Share issue cost
The R22.5 million share issue expenses can be contributed to two separate
share issues during the year. All costs directly associated with the
issue of shares relating to the business acquisitions were capitalized
against the share premium account. This has been handled in accordance
with section 76(3) of the Companies Act and is in accordance with IFRS
requirements.
Cash Flow Statement
Blue financed part of the acquisition of Future Finance utilising an
overdraft of R20 million, which contributed significantly to the negative
cash flow. It must be noted that the company turns large amounts of cash
and it is more prudent to lend out all available funds. The majority of
the collections effected on the debtors` books are done in the first few
days of a month. The company is expecting further funding from various
sources, including AIG.
Basis of preparation and unqualified audit opinionThe consolidated
financial statements for the year ended 28 February 2007 has been
prepared, and comply with IFRS. The consolidated financial statements and
this set of summarised financial information has been audited by PKF
(Pta) Inc. Their unqualified audit reports together with Blue`s
consolidated financial statements are available for inspection at the
Blue`s registered office.
Subsidiaries and % held as at 28 February 2007
Blue Employee Benefits (Pty) Ltd South Africa - 100%Blue Incremental
Housing Finance (Pty) Ltd South Africa - 88%Blue Cell (Pty) Ltd -
66.6%Blue Employee Benefits (Pty) Ltd Botswana - 100%Blue Financial
Services (Pty) Ltd Zambia - 100%Blue Financial Services Ltd (Tanzania) -
100%
Blue Employee Benefits Ltd (Uganda)- 100%
Micro Access Financial Services (Pty) Ltd (trading as Future Finance) -
100%
Blue Financial Services Ltd (Cameroon) - 100%
Blue Ltd (Kenya) - 100%
Products and Services offered by Blue
Blue specialises in:
* Salary advancesBlue, in partnership with various employers provide
salary advances to employees. The approach allows the employer to retain
control of salary advances without damaging its cash flow, and avoids a
negative image among employees. Blue currently provides a salary advance
service to over 100 employers, which include the Zambian, Botswana,
Ugandan and Tanzanian governments.
* Bonded housing financeBlue has subsequent to 28 February 2007 purchased
100% of a company called Greenstart Home Loans, which provides home loans
from R20 000 to R300 000. These are structured over 15 to 20 year periods
at a prime-linked interest rate. This company has access via Greenstart
to a substantial government funding line through the National Housing
Finance Corporation ("NHFC"), enabling it to offer finance in instances
where banks decline applications due to area or credit history.
* Pension backed home loansPension fund-backed lending is one of Blue`s
most recent housing products which allows an individual to access the
home loan market, using the individual`s pension or provident fund as
security. This enables individuals with no other form of security to
finance their own property.
* Air Time sales and servicesThis product is currently being phased out
due to the liquidation of the particular subsidiary, Blue Cell (Pty) Ltd.
* Incremental housing financeBlue offers finance for the purchasing of
land, the connection of utilities, and home improvements. These loans are
for housing purposes only and are only disbursed to suppliers and vendors
to ensure delivery of housing products. Repayments can be structured over
36 months and range from R1 000 to R10 000.
* Insurance
Blue has an intensive drive to roll out an insurance offering in all its
operating companies. Currently Blue has insurance offerings in South
Africa, Botswana and is currently rolling out that product in Zambia,
Tanzania and Uganda.
* Term loans.Structured loans over a fixed term with fixed repayments and
interest charges. The average term is around 12 to 18 months.
Certain products are first being tested and fine tuned before they are
rolled out to operations in Africa. Products currently being evaluated
are:
* Asset based finance* Small and Medium Enterprise funding
Impact of the National Credit Act ("NCA")Blue welcomes the implementation
of the NCA, anticipated in June 2007. The provisions of the NCA impact on
only two of Blue`s products: term loans and salary advances. This impact
should be minimised through the uptake of other Blue products in Future
Finance branches and the larger sales volumes expected due to the Future
Finance acquisition, which increased Blue`s footprint from 12 to 78
branches across South Africa.
With other geographical areas such as Tanzania and Uganda starting to
contribute more significantly to revenue, any potential negative impact
by the NCA should be minimised.
Declaration of dividendIn line with the Group policy, no dividend has
been declared for the year.
Post balance sheet events
Conversion of AIG`s preference shares to equity.In terms of the agreement
signed 29 July 2006 , which was submitted to the JSE and the South
African Reserve Bank, AIG has the option to convert preference shares to
equity in three tranches, based on Blue achieving pre-agreed financial
targets. The first conversion option is due one month after the release
of the financial results. However, as permitted in the agreement AIG
opted to convert a portion of the first tranch before the release of the
results, and accordingly 12 000 000 preference shares were converted on
18 April 2007. AIG is in terms of the agreement obliged to elect to
convert the balance of their preferred shares within 30 days of the
publishing of the annual financial results. AIG have indicated that they
will be converting its preference shares to ordinary shares.
Equity investment by Millennium PartnersAs per the SENS announcement
dated 4 May 2007, Blue has signed an agreement with Millennium Partners
which would enable its wholly owned subsidiary in Botswana, Blue Employee
Benefits (Pty) Limited Botswana ("Blue Botswana"), to issue 300, 14.5%,
unsecured guaranteed debentures due 2010 with a par value of R100 000
each (totalling R30 million) to Millennium European Holdings II S.A.R.L.
("MEH"). Blue has simultaneously granted MEH 5 million options to acquire
Blue shares at R3.00 per share. The issue of debentures and options are
subject to shareholder and/or regulatory approval.
Liquidation of Blue Cell (Pty) LtdAs announced on SENS on 12 March 2007,
Blue Cell (Pty) Ltd, a cellular solutions provider that markets cell-
phone contract packages and related technology solutions to Blue clients,
will be liquidated due to irreconcilable differences with the other
shareholder. The High Court of South Africa on 9 May 2007 granted the
liquidation order.
Further cautionary announcementFurther to the cautionary announcements
dated 22 December 2006, 15 February 2007 and 30 March 2007 shareholders
are advised that negotiations are still in progress, which if
successfully concluded, may have a material effect on the price of Blue`s
securities. Accordingly, shareholders are advised to continue exercising
caution when dealing in Blue`s securities until a full announcement is
made.
ProspectsBlue is continuously investigating expansion opportunities,
through either organic growth or acquisitions. Countries targeted for
expansion in 2007 are Lesotho, Kenya, Malawi, Rwanda and Cameroon.
The directors wishes to reiterate that Blue remains on a steep growth
curve with access to capital and new markets. The Blue board and
management will continue to strive to make Blue the market leader in
Africa in providing financial services to previously underserved credit
markets.
Interim results published on 23 November 2006
The interim results published on SENS for the six months ended 31 August
2006, are currently under review with respect to their compliance with
IFRS. The final outcome is still to be resolved and revised interim
financial statements will be published on SENS as soon a possible.
On behalf of the BoardD van Niekerk - Chairman and CEOR Swart - COO
10 May 2007
Directors: D van Niekerk (Chairman and CEO); R Swart (COO); JS Coetzee
(Financial Director); WJ Smit (Legal Director);MJ Sondiyazi*, CW Siwale*
(Zambian),A Steyn* and NP Kanabar* (Tanzanian) *non-executive
Registered Office:
Blue Building 34 Bouvardia Avenue, Lynnwood RidgePretoria, South Africa,
0001 (PO Box 72041, Lynnwood Ridge, 0040)
Transfer Secretaries:
Link Market Services (Pty) Ltd11 Diagonal Street, Johannesburg, 2001(PO
Box 4844, Johannesburg, 2000)
Company Secretary:
Ms. Retha StoltzBlue Building 34 Bouvardia Avenue, Lynnwood
RidgePretoria, South Africa rethas@blue.co.zaTel: (012) 348 8088
Designated Advisor:
Ernst & Young Sponsors (Pty) Ltd
PO Box 2322, Johannesburg, 2000
Investor Relations:
Morne Reinders or Eune EngelbrechtBlue Building 34 Bouvardia Avenue,
Lynnwood RidgePretoria, South Africa,0001 morner@blue.co.za or
eune@blue.co.zaTel: (012) 348 8088 or 082 480 4541 or 082 322
1173www.blue.co.za
Date: 10/05/2007 16:10:01 Produced by the JSE SENS Department.
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