| Thu 16 Aug 2007, 17:43 | | BFS - Blue - Re-Statement of 2007 Annual Financial |
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BFS
BFS
BFS - Blue - Re-Statement of 2007 Annual Financial Statements
Blue Financial Services Limited
(Registration number 1996/006595/06)
("Blue" or "the Group")
Share code BFS & ISIN ZAE000083655
RE-STATEMENT OF 2007 ANNUAL FINANCIAL STATEMENTS
The Company`s results for the year ended 28 February 2007, which were published
on SENS on 10 May 2007, are hereby withdrawn and re-published. This withdrawal
is at the request of the JSE Limited after consultation with the GAAP Monitoring
Panel ("GMP") regarding an accounting interpretation. This re-statement relates
to the effective date of the acquisition of Micro Access Financial Services
(Proprietary) Limited (trading as Future Finance). The Company initially
accounted for this acquisition effective from the legal date of the transaction,
being 1 April 2006, whereas the Company took effective control of that entity on
1 December 2006 and will now account therefor as at that date.
Resulting from the consolidation from 1 December 2006 the first eight month`s
profits contributed by Micro Access Financial Services (Proprietary) Limited
(trading as Future Finance) now form part of the retained earnings at
acquisition of Future Finance and will be reflected in the Goodwill of the Group
for the year ended 28 February 2007. In addition net cash flows and the
projections of the group will remain unchanged.
Restated
Audited Reviewed
year ended year ended
28 February 28 February
2007 2007
R`000 R`000
Revenue 202 520 147 075
Other income 4 657 4 373
Operating expenses (118 125) (84 262)
Operating profit 89 052 67 186
Investment revenue 128
Finance costs (31 752) (25 167)
Profit before taxation 57 428 42 019
Taxation (16 526) (9 648)
Profit for the year 40 902 32 371
Attributable to:
Equity holders of the parent 40 589 32 058
Minority interest 313 313
Share capital 352 000 000 352 000 000
Treasury shares (6 368 241) (6 368 241)
Issued shares 345 631 759 345 631 759
Weighted average number of shares in 330 530 389 309 138 608
issue
Diluted weighted average number of 419 080 997 397 689 216
shares in issue
Earnings per share (cents) 12.28 10.37
Headline earnings per share (cents) 13.62 11.81
Adjusted headline earnings per share 17.35 13.55
(cents)
Fully diluted earnings per share 9.69 8.77
(cents)
Fully diluted headline earnings per 10.74 9.89
share (cents)
Group income statement
Restated
Audited Reviewed
year ended year ended
28 February 28 February
2007 2007
Reconciliation of weighted average
issued shares to diluted weighted
average issued shares:
Weighted average number of shares in 330 530 389 309 138 608
issue
Shares to be converted 88 550 608 88 550 608
Diluted weighted average number of 419 080 997 397 689 216
shares in issue
Restated
Audited Reviewed
year ended year ended
28 February 28 February
2007 2007
R`000 R`000
Reconciliation of earnings to headline
earnings
Earnings 40 589 32 058
Impairment of loan in Blue Cell (Pty) 4 439 4 439
Ltd
Headline earnings 45 028 36 497
Imputed interest charge1 5 008 861
Amortisation of intangible assets 7 305 4 516
Adjusted headline earnings 57 341 41 874
1 Imputed interest charge
Imputed interest charge resulted from the acquisition of Micro Access
Financial Services (Pty) Ltd. 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.
Imputed interest charge was reduced from R5 million to R861 000 due to the
change in consolidation period from 11 months to 3 months.
This discounting results in an amount of interest incurred (and paid) on
settlement of the purchase price of the business combination.
Group balance sheet
Restated
Audited Reviewed
as at as at
28 February 28 February
2007 2007
R`000 R`000
Assets
Non-current assets
Investment property 1 976 1 976
Property, plant and equipment 20 306 20 306
Goodwill 269 495 265 022
Intangible assets 64 967 59 058
Related party loans 2 670 2 670
Deferred tax 1 303 1 303
360 717 350 335
Current assets
Available for sale financial assets 1 109 1 109
Loan advances 207 331 207 331
Trade and other receivables 2 423 2 423
Cash and cash equivalents 11 832 11 832
222 695 222 695
Total assets 583 412 573 030
Equity and liabilities
Equity
Share capital 399 894 399 894
Reserves (16) (16)
Retained income 40 589 32 058
Minority interest 539 538
441 006 432 474
Liabilities
Non-current liabilities
Loans from shareholders 328 328
Borrowings 34 602 34 602
Finance lease obligation 10 191 10 191
Deferred tax 18 846 17 132
63 967 62 253
Current liabilities
Borrowings 10 421 10 285
Current tax payable 17 464 17 464
Finance lease obligation 1 801 1 801
Operating lease liability 153 153
Trade and other payables 14 163 14 163
Provisions 2 131 2 131
Bank overdraft 32 306 32 306
78 439 78 303
Total liabilities 142 406 140 556
Total equity and liabilities 583 412 573 030
Net asset value per share (cents) 127.59 125.13
Tangible net asset value per share 30.83 31.36
(cents)
Audited
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 and - - - (16)
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 2007 35 200 364 694 399 894 (16)
Restated Reviewed
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 and - - - (16)
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 2007 35 200 364 694 399 894 (16)
Audited
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 recognised - (16) - (16)
directly in equity
Profit for the year 40 589 40 589 313 40 902
Total recognised income and 40 589 40 573 313 40 886
expenses for the year
Issue of shares - 393 600 - 393 600
Treasury shares - (6 368) - (6 368)
Issue of preference shares - 35 200 - 35 200
Share issue costs - (22 538) - (22 538)
Minority interest at - - 226 226
acquisition date
Balance at 28 February 2007 40 589 440 467 539 441 006
Restated Reviewed
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 recognised - (16) - (16)
directly in equity
Profit for the year 32 058 32 058 313 32 371
Total recognised income and 32 058 32 042 313 32 355
expenses for the year
Issue of shares - 393 600 - 393 600
Treasury shares - (6 368) - (6 368)
Issue of preference shares - 35 200 - 35 200
Share issue costs - (22 538) - (22 538)
Minority interest at - - 225 225
acquisition date
Balance at 28 February 2007 32 058 431 936 538 432 474
Group cash flow statement
Audited Restated Reviewed
year ended year ended
28 February 28 February
2007 2007
R`000 R`000
Cash flows from operating activities (12 659) (27 115)
Cash generated by operating activities 28 141 5 164
Interest paid (31 624) (25 167)
Taxation paid (9 176) (7 973)
Non cash imputed interest - 861
Cash flows from investing activities (96 903) (96 486)
Expenditure to maintain operating (17 795) (17 322)
capacity
Property, plant and equipment acquired (17 582) (17 246)
Impairment of loans (4 486) (4 439)
Loans granted (2 370) -
Movement in financial assets (597) (2 868)
Proceeds on disposal of assets 7 240 7 231
Subsidiaries acquired (79 108) (79 164)
Cash flows from financing activities 89 088 103 127
Capital raised 114 486 117 802
Repayment of shareholders and related (11 516) (18 617)
party loans
Loans (repaid)/raised (13 882) 3 942
Decrease in cash and cash equivalents (20 474) (20 474)
Cash and cash equivalents at beginning - -
of year
Cash and cash equivalents at end of (20 474) (20 474)
year
Group Segmental Analysis
South Africa Botswana
Year ended Year ended Year ended Year ended
Restated Restated
28 Feb 2007 28 Feb 2007 28 Feb 2007 28 Feb 2007
R`000 R`000 R`000 R`000
Revenue 182 596 96 573 32 094 31 820
External revenue 156 348 94 091 32 094 31 586
Inter-segment 26 248 2 482 - 234
transactions
Other Income 4 045 274
Finance Costs (22 365) (12 908) (7 011) (7 011)
Operating Expenses (52 777) (18 807)
External Operating (105 373) (49 990) (17 828) (15 273)
Expenses
Amortisation (2 787) (978)
Intersegment operating - (2 555)
expenses
Segment result 54 858 34 933 7 254 6 276
Income taxes
Profit for the year
Other disclosures
Segment assets 633 901 215 769 32 201 32 189
Segment liabilities (129 572) (75 119) (20 522) (22 205)
Depreciation and 9 740 6 538 1 207 1 207
amortisation
Capital expenditure 13 168 12 915 777 777
Group Segmental Analysis (contd)
Zambia Other
Year ended Year ended Year ended Year ended
Restated Restated
28 Feb 2007 28 Feb 2007 28 Feb 2007 28 Feb 2007
R`000 R`000 R`000 R`000
Revenue 22 642 22 588 155 155
External revenue 21 297 21 243 155 155
Intersegment transactions 1 345 1 345 - -
Other Income 54
Finance Costs (5 184) (5 184) (63) (63)
Operating Expenses (10 670) (11 421) (5 318)
External Operating (9 164) (5 318)
Expenses
Amortisation (751)
Intersegment operating (1 506)
expenses
Segment result 6 788 6 037 (5 226) (5 226)
Income taxes - -
Profit for the year - -
Other disclosures
Segment assets 28 588 28 588 4 764 4 764
Segment liabilities (27 306) (26 920) 9 215 (15 379)
Depreciation and 628 628 162 162
amortisation
Capital expenditure 1 175 1 175 2 379 2 379
Group Segmental Analysis (contd)
Elimination Consolidated
Year ended Year ended Year ended Year ended
Restated Restated
28 Feb 2007 28 Feb 2007 28 Feb 2007 28 Feb 2007
R`000 R`000 R`000 R`000
Revenue (30 309) (4 061) 207 177 147 075
External revenue - - 209 893 147 075
Inter segment (30 309) (4 061) (2 716) -
transactions
Other Income - 4 373
Finance Costs 3 000 - (31 624) (25 167)
Operating Expenses 4 061 (84 261)
External Operating - (79 745)
Expenses
Amortisation - (4 516)
Intersegment operating 4 061 -
expenses
Segment result (54 373) - 57 428 42 019
Income taxes - - (16 526) (9 648)
Profit for the year - - 40 902 32 371
Other disclosures
Segment assets (450 503) (33 663) 248 951 247 648
Segment liabilities 68 425 33 663 (99 761) (105 960)
Depreciation and - - 11 575 8 534
amortisation
Capital expenditure - - 17 498 17 246
Reconciliation of segment assets and assets per balance sheet
Restated
Year ended Year ended
28 Feb 2007 28 Feb 2007
R`000 R`000
Assets per segments 248 951 281 311
Intercompany loans eliminated (33 663)
Goodwill on acquisition of 269 495 265 022
subsidiaries
Intangible assets acquired 72 271 63 574
Amortisation of intangible assets (7 305) (4 516)
Deferred tax assets 1 303
Assets per balance sheet 583 412 573 031
Reconciliation of segment liabilities and liabilities per balance sheet
Restated
Year ended Year ended
28 Feb 2007 28 Feb 2007
R`000 R`000
Liabilities per segments (140 623)
Intercompany loans eliminated 33 663
Deferred tax liabilities (17 132)
Income Tax (17 464)
Liabilities per balance sheet (140 556)
Non-consolidation of Blue Cell (Pty) Ltd
IAS 27, paragraph 21: 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 become subject to the control of a government, court,
administrator or regulator.
The directors are of the opinion that control 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 results
Nature of business
Blue 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 overview
These 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 Micro Access Financial
Services (Pty) Ltd (trading as Future Finance) ("Future Finance") resulted in
turnover of R147 million for the year under review. Taxed profits in the
comparative periods were R32.5 million, exceeding the pre-listing statement
forecast by some R6.7 million. The acquisition of Future Finance was effective
as from 1 December 2006, hence three months` trading results of Future Finance
are included in the Group results.
Earnings per share (EPS) of 10.37 and headline earnings per share (HEPS) of
11.81 cps for the year under review considerably exceeded the pre-listing
statement forecast of 8.28 cps for both EPS and HEPS.
Goodwill of R265 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 debt
The 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 review opinion
The 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 reviewed by PKF (Pta) Inc.
Their unqualified review report is available for inspection at the Company`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 advances
Blue, 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 finance
Blue 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 loans
Pension 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 services
This product is currently being phased out due to the liquidation of the
particular subsidiary, Blue Cell (Pty) Ltd.
*Incremental housing finance
Blue 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 dividend
In 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 had 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 permited 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 obliged in
terms of the agreement 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 preference to ordinary shares.
Equity investment by Millennium Partners
As 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) Ltd
As 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.
Prospects
Blue 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.
On behalf of the Board
D van Niekerk - Chairman and CEO
R Swart - COO
16 August 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) T Couloubis* *non-executive
Registered Office:
Blue Building
34 Bouvardia Avenue, Lynnwood Ridge
Pretoria, South Africa, 0001
(PO Box 72041, Lynnwood Ridge, 0040)
Transfer Secretaries:
Link Market Services (Pty) Ltd
11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Company Secretary:
Mr. R vd Westhuizen
Blue Building
34 Bouvardia Avenue, Lynnwood Ridge
Pretoria, South Africa
rethas@blue.co.za
Tel: (012) 348 8088
Designated Advisor:
Ernst & Young Sponsors (Pty) Ltd
PO Box 2322, Johannesburg, 2000
Investor Relations:
Morne Reinders or Eune Engelbrecht
Blue Building
34 Bouvardia Avenue, Lynnwood Ridge
Pretoria, South Africa,0001
morner@blue.co.za or eune@blue.co.za
Tel: (012) 348 8088 or 082 480 4541 or 082 322 1173
www.blue.co.za
Date: 16/08/2007 17:43:01 Produced by the JSE SENS Department.
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JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
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