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BLU
BLU
BLU - Blue Label Telecoms - Reviewed Interim Results For The Half Year
Ended 30 November 2007
Blue Label Telecoms Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
JSE Share code: BLU & ISIN: ZAE000109088
("BLT" or "the Company")
Reviewed interim results for the half year ended 30 November 2007
- Successful listing and capital raising of R1.3 billion
- Microsoft Corporation`s acquisition of a 12% equity stake in the Group
and conclusion of strategic collaboration agreement
- Microsoft Corporation`s acquisition of a 38.85% equity stake in Oxigen
Services India
- Revenue of R5.8 billion
- Pro forma core net income after tax of R180 million
Condensed Group Balance Sheet
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Assets
Non-current assets 455 504 199 870
Property, plant and equipment 53 594 37 840
Intangible assets 189 291 58 591
Goodwill 177 804 44 774
Investment in associates and joint ventures 34 815 58 665
Current assets 2 676 510 1 714 175
Financial assets at fair value through profit
and loss 16 399 12 862
Inventories 229 847 225 286
Loans receivable 10 034 81 698
Intangible assets 112 953 51 073
Trade and other receivables 578 934 348 940
Cash and cash equivalents 1 728 343 994 316
Total assets 3 132 014 1 914 045
Equity and liabilities
Capital and reserves 1 763 022 382 976
Share capital and share premium 4 404 616 2 079 533
Restructuring reserve (1 843 913) (1 843 400)
Foreign currency translation reserve 3 626 2 589
Retained earnings/(accumulated loss) (820 230) 31 837
1 744 099 270 559
Minorities interest 18 923 112 417
Non-current liabilities 68 447 247 557
Deferred taxation 54 087 17 034
Interest bearing borrowings 14 360 230 523
Current liabilities 1 300 545 1 283 512
Trade and other payables 1 253 271 973 194
Non-interest bearing borrowings 16 525 30 308
Current tax liabilities 26 436 41 004
Current portion of interest bearing borrowings 4 313 239 006
Total equity and liabilities 3 132 014 1 914 045
Condensed Group Income Statement
Six months ended
30 November 30 November 30 November
2007 2007 2006
Pro forma Actual Restated
Unaudited Reviewed Unaudited
R`000 R`000 R`000
Revenue 6 174 559 5 797 260 4 104 239
Other income 22 268 15 451 26 611
Cost of inventories sold (5 807 484) (5 471 583) (3 904 104)
Employee compensation and
benefit expense (164 693) (166 420) (58 494)
Depreciation, amortisation and
impairment charges (33 934) (18 928) (14 044)
Other expenses (83 109) (64 281) (37 503)
Operating profit 107 607 91 499 116 705
Finance income 104 623 72 576 39 175
Finance expense (52 142) (92 451) (51 384)
Share of profit/(loss)
of associates (6 573) (4 353) 962
Profit for the period
before taxation 153 515 67 271 105 458
Taxation (53 261) (26 568) (30 818)
Net profit for the period 100 254 40 703 74 640
Reconciliation between net
profit for the period
and core net profit for the period
Once off employee compensation
and benefit expense net of tax 56 800 56 800 -
Amortisation on intangibles raised
through business combinations
net of tax 16 800 6 887 5 170
Cancellation of commission contract 9 000 9 000 -
Core net profit for the period 182 854 113 390 79 810
Net profit for the period
attributable to: 100 254 40 703 74 640
Equity holders of parent 99 072 14 379 46 730
Minority interest 1 182 26 324 27 910
Core net profit for the period
attributable to: 182 854 113 390 79 810
Equity holders of parent 180 707 85 095 49 477
Minority interest 2 147 28 295 30 333
Earnings per share for profit
attributable to equity holders
(cents)
- Basic 12.93 3.47 12.36
- Headline 13.10 3.79 9.35
- Core 23.58 20.55 13.09
Weighted average
number of shares 766 360 894 414 166 131 378 097 993
Number of shares in issue 766 360 894 766 360 894 378 097 993
Condensed Group Statement of Changes in Equity
Share capital Retained earnings/
and share (accumulated Restructuring
premium loss) reserve
R`000 R`000 R`000
Balance as at
1 June 2006 2 079 533 - (1 998 328)
Net profit for the period - 46 730 -
Transactions with minorities - (14 893) 151 511
Associates acquired
during the period - - 3 417
Exchange gains on
translation of
foreign operations - - -
Balance as at 30
November 2006 2 079 533 31 837 (1 843 400)
Balance as at
1 June 2007 2 079 533 50 792 (1 843 913)
Shares issued during
the period 2 364 929 - -
Net profit for the period - 14 379 -
Listing costs (39 846) - -
Dividends declared - (999) -
Transactions with minorities - (884 402) -
Exchange losses on
translation of
foreign operations - - -
Balance as at 30
November 2007 4 404 616 (820 230) (1 843 913)
Foreign currency
translation Minorities Total
reserve interest equity
R`000 R`000 R`000
Balance as at 1 June 2006 - - 81 205
Net profit for the period - 27 910 74 640
Minorities acquired during the period - 84 507 221 125
Associates acquired during the period - - 3 417
Exchange gains on translation of
foreign operations 2 589 - 2 589
Balance as at 30 November 2006 2 589 112 417 382 976
Balance as at 1 June 2007 4 187 129 440 420 039
Shares issued during the period - - 2 364 929
Net profit for the period - 26 324 40 703
Listing costs - - (39 846)
Dividends declared - - (999)
Minorities disposed of
during the period - (136 748) (1 021 150)
Exchange losses on translation
of foreign operations (561) (93) (654)
Balance as at 30 November 2007 3 626 18 923 1 763 022
Segmental Summary
Revenue
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Telecommunication Distribution 5 623 868 4 088 292
International Telecommunication Distribution 103 364 10 066
Technology Platforms 14 542 190
Related Services 55 486 5 691
Corporate - -
Total 5 797 260 4 104 239
Operating profit/(loss)
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Telecommunication Distribution 103 027 122 688
International Telecommunication Distribution 6 822 3 495
Technology Platforms (5 883) (1 388)
Related Services 10 997 (340)
Corporate (23 464) (7 750)
Total 91 499 116 705
EBITDA
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Telecommunication Distribution 115 376 134 400
International Telecommunication Distribution 8 752 4 203
Technology Platforms (3 961) (141)
Related Services 13 301 (337)
Corporate (23 041) (7 376)
Total 110 427 130 749
Net operating assets/(liabilities)
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Telecommunication Distribution 1 397 335 438 624
International Telecommunication Distribution 3 947 (4 972)
Technology Platforms 2 514 (132)
Related Services 3 326 (453)
Corporate (31 157) (2 404)
Total 1 375 965 430 663
Condensed Group Cash Flow Statement Six months ended
30 November 30 November
2007 2006
Actual Restated
Reviewed Unaudited
R`000 R`000
Cash flows from operating activities 141 867 151 601
Cash received from customers 5 500 141 3 755 299
Cash paid to suppliers and employees (5 346 851) (3 592 756)
Cash generated from operations 153 290 162 543
Interest received 66 534 36 404
Interest paid (43 858) (23 356)
Taxation paid (34 099) (23 990)
Cash flows from investing activities (186 451) (16 760)
Net proceeds on disposal of intangible assets - 263
Net purchase of intangible assets (8 382) -
Purchase of financial assets at fair value
through profit and loss (780) (693)
Proceeds on disposal of available for
sale financial assets 1 157 -
Acquisition of subsidiaries (183 993) (3 900)
Net loans repaid by/(advanced to) associates 12 283 (1 210)
Dividends received 120 135
Net purchase of fixed assets (6 856) (11 355)
Cash flows from financing activities 677 672 141 712
Proceeds from/(repayment of) interest
bearing borrowings (562 749) 111 404
Purchase of minority loan claims (25 234) -
Proceeds from/(repayment of) non- interest
bearing borrowings (16 070) 30 308
Proceeds from issue of shares 1 321 571 -
Listing costs paid (39 846) -
Increase in cash and cash equivalents 633 088 276 553
Cash and cash equivalents at the
beginning of the period 1 090 044 -
Cash and cash equivalents acquired in
subsidiaries 5 211 717 763
Cash and cash equivalents at the end of the
period 1 728 343 994 316
Commentary
INTRODUCTION
The directors of Blue Label Telecoms Limited (BLT) are proud to present the
maiden reviewed interim results for the six months ended 30 November 2007. The
results have exceeded expectations resulting in excellent growth and are above
the financial forecasts for the period under review.
On 14 November 2007, two weeks before the half year end, BLT successfully
debuted in the telecommunications sector on the Main Board of the JSE Limited,
which took place subsequent to its corporate restructure.
NATURE OF BUSINESS
BLT is a leading distributor of prepaid secure electronic tokens of value and
transactional services within emerging markets and has in excess of 150 000
global mobile and physical points of presence covering South Africa, India,
Mozambique and the Democratic Republic of Congo.
BASIS OF PREPARATION
The condensed interim financial statements have been prepared in accordance
with International Accounting Standards (IAS) 34 Interim Financial Reporting.
The accounting policies and methods of computation are consistent with those
used in the comparative financial information for the six months ended 30
November 2006, (which were prepared in accordance with International Financial
Reporting Standards (IFRS) and the South African Companies Act).
As a result of the Group`s restructuring, its comparatives have been restated
using predecessor accounting principles, a complex accounting treatment. The
accounting principles applied result in extensive restatement of comparatives.
Shareholders are therefore advised to exercise caution and should read the
interim results as reported, in conjunction with BLT`s pre -listing statement,
when attempting to make year on year comparisons.
FINANCIAL REVIEW
Overview
The Group`s reported results for the six month period ended 30 November 2007
show actual Group revenue of R5.8 billion, EBITDA of R110.4 million, profit
from core operations of R85 million and a net profit of R40.7 million
(R14.4 million of which is attributable to equity holders).
The Group incurred once off expenses, net of tax, of R65.8 million relating to
the management bonus settlement and the termination of a commission agreement,
as expounded upon in the pre-listing statement. In addition, amortisation of
intangible assets of R6.9 million arose as a consequence of the purchase price
allocations calculated in terms of IFRS 3: Business Combinations.
The BLT Board believe that core earnings is a more appropriate measure of
Group operating performance since it adjusts for non-recurring and non-
operational items. Headline earnings per share for the half year
were 3.79 cents and core headline earnings per share were 20.55 cents.
The pro forma results have been prepared to show the impact of the restructuring
and listing on the BLT actual results for the half year ended 30 November 2007.
It is important to note that these results assume that the listing,
restructuring and minority acquisitions took place on 1 June 2007. As a result,
most associates are now consolidated as subsidiaries for the full six months.
Similarly most subsidiaries are consolidated as wholly owned for the full six
months. The pro forma results assume cash raised on listing was received on 1
June 2007, impacting positively on finance income and similarly finance
expenses.
Income statement
The net profit before tax and interest is after the deduction of the non-
recurring management bonus settlement of R80 million, and the cancellation of
the commission contract of R9 million both mentioned above.
Net interest paid of R17 million originally budgeted for did not materialise
due to predecessor accounting principles. In terms of these principles the
shareholders` loans and non-core receivables assets are assumed to be settled
on 1 June 2006.
The Group`s overall effective tax rate for the period is 37%. This is as a
result of certain non-deductible expenses.
Dividends
One of the subsidiary companies declared a dividend, of which R1 million has
accrued to the minority shareholder (49.9%).
As per the Group`s dividend policy, disclosed in its pre-listing statement, BLT
will only consider paying a dividend from the financial year commencing 1 June
2010.
Balance sheet
The Group`s successful listing resulted in the raising of cash totalling R1.3
billion. Of this R570 million was utilised to repay the majority of the Group`s
borrowings and R184 million was paid for the acquisition of minority interests
in key subsidiaries.
The Group has a strong balance sheet which is attributable to good trading
results, proactive attention to working capital management and significant cash
balances. R450 million of this cash relates to the net funds remaining from the
listing proceeds, which funds have been earmarked for future strategic
acquisitions.
The restructuring reserve arose as a result of the restatement of comparatives,
as required in terms of the principles of predecessor accounting. This reserve
represents the difference between the fair value of the entities under the
Group`s control and their respective net asset values, as at the assumed
restructure date of 1 June 2006.
As a result of the restructuring, additional intangible assets amounting to
R120.8 million have been recognised. The useful life of the majority of these
assets is five years and consequently will be amortised accordingly.
Change in accounting policy
BLT has changed its accounting policy with regard to accounting for
transactions with minorities. This differs to the Group`s disclosure in its
pre-listing statement. BLT has adopted the Economic Entity method, which is
consistent with the requirements of IFRS 3 Revised (Business Combinations), and
IAS 27 Revised (Consolidated and Separate Financial Statements). Under this
policy, goodwill arising on transactions with minorities is recognised against
reserves on the balance sheet, as minority shareholders are treated as equity
participants. The remaining goodwill on the balance sheet relates to
acquisitions of subsidiaries where the Group was not transacting with
minorities.
STRATEGIC RELATIONSHIP WITH MICROSOFT AND ADDITIONAL INVESTMENT IN OXIGEN INDIA
On 7 November 2007, BLT and the Microsoft Corporation signed a strategic
collaboration agreement to provide each other with mutual assistance in
exploring new business opportunities and preferred partnership initiatives
across the world`s emerging markets. Both BLT and Microsoft are pleased with
the significant momentum and progress made to date and are optimistic about
extending their relationship going forward to jointly bring technology and
value to emerging markets globally. BLT is focused on becoming Microsoft`s
global touch point and secure electronic tokens partner.
BLT currently holds 35% of the equity in Oxigen Services India (OSI). On 29
December 2007 it concluded a share sale and subscription agreement, to increase
its stake in OSI to 38.85%, subject to Reserve Bank approval, which is still
pending.
This was pursuant to an agreement entered into between BLT, Microsoft
Corporation and the existing operational partners in terms of which Microsoft
simultaneously took up a 38.85% stake in OSI on a sale and subscription basis.
OSI is currently incurring losses as it continues to develop its infrastructure,
asset base and points of presence across India. The Group`s share of the loss
for the period under review was R6.5 million.
Microsoft has signed a collaboration agreement with OSI which shall enable the
business to increase its product and technology offerings and pursue additional
advertising revenue opportunities.
PROSPECTS
The directors of BLT are pleased with the Group`s half year performance, which
exceeded management expectations and internal budgets.
BLT plans to focus on growing its mobile offering and further enhancing its
bouquet of proprietary and third party value added products and services. These
initiatives are expected to enhance BLT`s annuity based income stream in the
medium term, compounding over the longer term.
BLT will focus on organically enhancing the growth of its global secure
electronic token and transactional services footprint and will concentrate on
looking for strategic and complementary acquisition opportunities.
BLT`s strategic partnership with Microsoft positions it well to become
Microsoft Corporation`s preferred emerging market touch point, secure
electronic token and mobile partner.
CORPORATE GOVERNANCE
The directors and senior management of BLT endorse the Code of Corporate
Practices and Conduct as set out in the King II Report on Corporate Governance.
To date, the directors of BLT have formed Remuneration and Nomination,
Investment, Audit and Risk Management and Transformation Committees of the
Board.
REVIEW OPINION
The results for the period ended 30 November 2007 have been reviewed by the
Company`s auditors, PricewaterhouseCoopers Incorporated, and the unqualified
review report is available for inspection at the Company`s registered office.
APPRECIATION
The Board of BLT would like to thank BLT`s staff for their commitment and hard
work over the period under review, which included the significant effort
required to list BLT on the Main Board of the JSE Limited. The Board would also
like to thank BLT`s many suppliers, customers, business partners, advisors and
shareholders for their ongoing support.
By order of the Board
LM Nestadt BM Levy and MS Levy DB Rivkind
Chairman Joint Chief Executive Officers Chief Financial Officer
Directors:
LM Nestadt (Chairman)* BM Levy MS Levy S Ellerine* GD Harlow* RJ Huntley*
NN Lazarus* JS Mthimunye* MV Pamensky DB Rivkind HC Theledi* LM Tyalimpi*
(*Non-Executive)
Company Secretary: E Viljoen
Blue Label Telecoms Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
JSE Share cod e: BLU ISIN: ZAE000109088
("BLT" or "the Company")
The Prepaid Company Ventury Group Matragon Kwikpay Virtual Voucher Gold Label
Oxigen Services India Africa Prepaid Services SharedPhone International Activi
Technology Services Blue Label One Datacel CellFind e-Voucha
Date: 19/02/2008 08:00:26 Produced by the JSE SENS Department.
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