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BLU
BLU
BLU - Blue Label Telecoms Limited - Reviewed interim results for the half year
ended 30 November 2009
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 2009
11% increase in revenue to R8,4 billion
24% increase in EBITDA to R368 million
18,6% increase in gross profit to R621 million
9% decrease in core earnings per share to 25,59 cents
R316 million cash flows from operating activities
Positive growth in both South African and International Distribution
Summarised Group Statement of Financial Position
as at 30 November 2009
30 November 2009 31 May 2009
Reviewed Audited
R`000 R`000
ASSETS
Non-current assets 645 479 736 634
Property, plant and equipment 129 387 105 011
Intangible assets 398 338 460 325
Investment in associates and joint 95 221 109 837
ventures
Financial assets at amortised cost 18 321 54 096
Deferred taxation assets 4 212 7 365
Current assets 3 599 713 3 139 218
Financial assets at fair value through 10 10
profit and loss
Available for sale financial asset 861 -
Inventories 376 422 384 361
Loans receivable 33 618 29 920
Financial assets at amortised cost 88 955 67 449
Trade and other receivables 1 137 461 898 571
Current tax assets 2 637 2 101
Cash and cash equivalents 1 959 749 1 756 806
Total assets 4 245 192 3 875 852
EQUITY AND LIABILITIES
Capital and reserves 2 422 762 2 244 120
Share capital, share premium and treasury 4 352 767 4 379 175
shares
Restructuring reserve (1 843 912) (1 843 912)
Foreign currency translation reserve (17 116) (13 399)
Share-based payment reserve 19 511 10 602
Transaction with minority reserve (914 782) (914 399)
Retained earnings 812 220 635 305
2 408 688 2 253 372
Minorities interest 14 074 (9 252)
Non-current liabilities 57 211 69 664
Deferred taxation 42 333 49 544
Interest bearing borrowings 14 878 20 120
Current liabilities 1 765 219 1 562 068
Trade and other payables 1 701 605 1 518 853
Current tax liabilities 61 203 28 039
Current portion of Interest bearing 2 411 15 176
borrowings
Total equity and liabilities 4 245 192 3 875 852
Summarised Group Statement of Comprehensive Income
six months ended 30 November 2009
30 November 30 November
2009 2008
Reviewed Reviewed
R`000 R`000
Revenue 8 401 960 7 573 458
Other income 36 460 25 226
Cost of inventories sold (7 780 524) (7 049 489)
Employee compensation and benefit expense (151 326) (125 639)
Depreciation, amortisation and impairment (68 499) (45 377)
charges
Other expenses (138 741) (127 960)
Operating profit 299 330 250 219
Finance income 63 499 103 858
Finance expense (63 105) (50 119)
Share of loss in associates (11 897) (14 082)
Profit for the period before taxation 287 827 289 876
Taxation (100 874) (90 186)
Net profit for the period 186 953 199 690
Other comprehensive income:
Exchange losses on translation of equity (3 308) -
loans
Exchange (losses)/gains on translation of (37) 1 299
foreign operations
Foreign currency translation reserve (506) -
reclassified to profit or loss
Other comprehensive (loss)/income for the (3 851) 1 299
year, net of tax
Total comprehensive income for the year 183 102 200 989
Net profit for the period attributable to: 186 953 199 690
Equity holders of parent 176 915 198 158
Minorities interest 10 038 1 532
Total comprehensive income for the period 183 102 200 989
attributable to:
Equity holders of parent 173 198 200 011
Minorities interest 9 904 978
Earnings per share for profit attributable
to equity holders (cents)
- Basic 23,31 25,86
- Headline 23,38 26,06
- Diluted basic** 23,09 25,86
- Diluted headline** 23,15 26,05
Weighted average number of shares 758 921 476 766 231 733
Number of shares in issue 766 360 894 766 360 894
**Dilutive earnings per share and dilutive headline earnings per share are
calculated by adjusting the weighted average number of ordinary shares
outstanding for the number of shares that would be issued on vesting under
the employee forfeitable share plan.
Unaudited reconciliation between net
profit and core
net profit for the period:
Net profit for the period 186 953 199 690
Amortisation on intangibles raised through
business combinations
net of tax 18 357 18 857
Core net profit for the period 205 310 218 547
Core net profit for the period 205 310 218 547
attributable to:
Equity holders of parent 194 208 215 926
Minorities interest 11 102 2 621
- Core earnings per share (cents)* 25,59 28,18
*Core earnings per share is calculated after adding back the amortisation
of intangible assets as a consequence of the purchase price allocations
exercised in terms of IFRS 3: Business Combinations.
Summarised Group Statement of Changes in Equity
six months ended 30 November 2009
Share Foreign
capital,
share premium currency
and treasury Retained Restructuring translation
shares earnings reserve reserve
Reviewed Reviewed Reviewed Reviewed
R`000 R`000 R`000 R`000
Balance as at 4 404 737 244 758 (1 843 912) 2 552
1 June 2008
Net profit for the - 198 158 - -
period
Comprehensive - - - 1 853
income/(loss)
Total - 198 158 - 1 853
comprehensive
income
Treasury shares (24 131) - - -
Minorities - - - -
acquired during
the period
Balance as at 4 380 606 442 916 (1 843 912) 4 405
30 November 2008
Balance as at 4 379 175 635 305 (1 843 912) (13 399)
1 June 2009
Net profit for the - 176 915 - -
period
Comprehensive loss - - - (3 717)
Total - 176 915 - (3 717)
comprehensive
income/(loss)
Treasury shares (26 408) - - -
purchased
Share based - - - -
payment
Equity based - - - -
compensation
movements
Minorities
acquired and
disposed of during
the period - - - -
Contribution from - - - -
minorities
Balance as at 4 352 767 812 220 (1 843 912) (17 116)
30 November 2009
Summarised Group Statement of Changes in Equity (continued)
six months ended 30 November 2009
Transaction Share-based
with minority payment Minority Total
reserve reserve interest equity
Reviewed Reviewed Reviewed Reviewed
R`000 R`000 R`000 R`000
Balance as at (898 564) - 8 373 1 917 944
1 June 2008
Net profit for the - - 1 532 199 690
period
Comprehensive - - (554) 1 299
income/(loss)
Total - - 978 200 989
comprehensive
income
Treasury shares - - - (24 131)
Minorities - - 9 063 9 063
acquired during
the period
Balance as at (898 564) - 18 414 2 103 865
30 November 2008
Balance as at (914 399) 10 602 (9 252) 2 244 120
1 June 2009
Net profit for the - - 10 038 186 953
period
Comprehensive loss - - (134) (3 851)
Total - - 9 904 183 102
comprehensive
income/(loss)
Treasury shares - - - (26 408)
purchased
Shared based - 295 - 295
payment
Equity based - 8 614 151 8 765
compensation
movements
Minorities
acquired and
disposed of during
the period (383) - 12 650 12 267
Contribution from - - 621 621
minorities
Balance as at 30 (914 782) 19 511 14 074 2 422 762
November 2009
Segmental Summary
six months ended 30 November 2009
30 November Core 30 November
2008 2008
Actual Adjustments1 Core
Reviewed Unaudited Unaudited
R`000 R`000 R`000
Revenue
South African 7 088 140 - 7 088 140
distribution
International 282 944 - 282 944
distribution
Technology 10 300 - 10 300
Value added services 192 074 - 192 074
Corporate - - -
Total 7 573 458 - 7 573 458
EBITDA
South African 296 965 - 296 965
distribution
International 18 823 - 18 823
distribution
Technology (22 114) - (22 114)
Value added services 47 176 - 47 176
Corporate (45 254) - (45 254)
Total 295 596 - 295 596
Net profit for the
period
South African 255 856 5 002 260 858
distribution
International (8 341) 2 575 (5 766)
distribution
Technology (24 407) 371 (24 036)
Value added services 21 967 9 820 31 787
Corporate (46 917) - (46 917)
Total 198 158 17 768 215 926
Segmental Summary (continued)
six months ended 30 November 2009
30 November Core 30 November
2009 2009
Actual Adjust- Core
ments1
Reviewed Unaudited Unaudited
R`000 R`000 R`000
Revenue
South African 7 591 164 - 7 591 164
distribution
International 674 866 - 674 866
distribution
Technology 13 440 - 13 440
Value added services 122 490 - 122 490
Corporate - - -
Total 8 401 960 - 8 401 960
EBITDA
South African 361 746 - 361 746
distribution
International 63 349 - 63 349
distribution
Technology (35 561) - (35 561)
Value added services 18 641 - 18 641
Corporate (40 346) - (40 346)
Total 367 829 - 367 829
Net profit for the
period
South African 283 928 4 303 288 231
distribution
International (1 561) 2 932 1 371
distribution
Technology (47 617) 371 (47 246)
Value added services (12 325) 9 687 (2 638)
Corporate (45 510) - (45 510)
Total 176 915 17 293 194 208
30 November 31 May 2009
2009
Actual Actual
Reviewed Audited
R`000 R`000
Net operating assets/(liabilities)
South African distribution 1 706 967 1 552 917
International distribution 138 654 82 860
Technology (6 970) (20 503)
Value added services 28 531 18 984
Corporate (32 688) (57 108)
Total 1 834 494 1 577 150
Notes
1) Represents the adding back of the amortisation of intangible assets as a
consequence of the purchase price allocations exercised in terms of IFRS 3:
Business Combinations.
Summarised Group Statement of Cash Flows
six months ended 30 November 2009
30 November 30 November
2009 2008
Reviewed Reviewed
R`000 R`000
Cash flows from operating activities 316 434 421 142
Cash flows from investing activities (34 958) (110 577)
Cash flows from financing activities (23 730) 7 554
Increase in cash and cash equivalents 257 746 318 119
Cash and cash equivalents at the beginning of 1 756 806 1 328 294
the period
Cash and cash equivalents disposed of/acquired (46 209) 29 733
in subsidiaries
Translation difference (8 594) 103
Cash and cash equivalents at the end of the 1 959 749 1 676 249
period
Headline Earnings
30 November 30 November
2009 2008
Reviewed Reviewed
R`000 R`000
Profit attributable to equity holders of 176 915 198 158
parent
Loss on disposal of property plant and 1 376 -
equipment
Intangible asset impairment 4 884 -
(Profit)/loss on sale of group companies (17 345) 255
Loan impairment - 1 261
Foreign currency translation reserve (364) -
reclassified to profit or loss
Goodwill impairment 11 961 -
Headline earnings 177 428 199 674
Headline earnings per share (cents) 23,38 26,06
Disposal of Subsidiaries
The group`s entire shareholding in the Effective date % disposed
following subsidiaries were of disposal
disposed of in the six months ended
30 November 2009
Blue Label USA LLC 31 July 2009 50,1
Africa Prepaid Services (Mozambique) 30 November 2009 90
Limitada
Details of the total net assets disposed
and the resulting profit on disposal are
as follows:
Total
R`000`s
Total proceeds 66 241
Fair value of net assets disposed of 36 472
Profit on disposal 29 769
The assets and liabilities disposed of
are as follows:
Fair value
at disposal
date
000`s
Cash and cash equivalents 46 209
Property, plant and equipment 2 132
Intangible assets 13 629
Inventories 3 634
Financial assets at amortised cost 1 738
Receivables 68 859
Deferred tax 49
Borrowings (22 775)
Current tax liabilities (495)
Payables (88 182)
Fair value of subsidiaries disposed of 24 798
Minorities interest 11 571
Transaction with minority reserve 103
Fair value of net assets disposed of 36 472
Proceeds on disposal of subsidiaries 66 241
Still to be settled (25 671)
Cash and cash equivalents in subsidiaries (46 209)
disposed of
Cash outflow on disposal (5 639)
Commentary
INTRODUCTION
Against the background of the global economic crisis, the group achieved EBITDA
of R368 million, equating to 24% growth year on year. This again endorses the
group`s ability to achieve compounded growth in spite of volatile economic
conditions.
Revenue enhancement, margin improvement and the containment of overheads were
the contributors to this growth.
A decline in interest rates had a negative impact on interest received on the
substantial cash resources that the group has accumulated.
This together with impairments on goodwill and intangibles and the reversal of
an element of deferred tax assets resulted in a decline in core earnings per
share of 9%.
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), IAS 34 - Interim Financial
Reporting, the listing requirements of the JSE Limited and the South African
Companies Act 61 of 1973, as amended.
The condensed consolidated financial statements are prepared in accordance with
the going concern principle, under the historical cost basis, as modified by the
revaluation of certain assets and liabilities where required or elected in terms
of IFRS. The accounting policies and methods of computation are consistent with
those used in the comparative financial information for the six months ended 30
November 2008.
Financial overview
- Revenues of R8,4 billion equated to an increase of R828 million (11%)
- Gross profit margin improved from 6,92% to 7,40%
- EBITDA increased to R368 million up 24% from R295 million
- EBITDA margin improved from 3,90% to 4,38%
- Losses in Associate Company, Oxigen Services India, declined by 68%
- Decrease in core earnings per share from 28,18 cents to 25,59 cents.
Core earnings
In spite of accumulating an additional R203 million cash off an opening base of
R1,7 billion, the gradual decline in interest rates to August 2009 impacted
negatively on net finance income, which declined by R53 million. This, together
with the impairment of software and goodwill and the reversal of certain
deferred tax assets, resulted in a decline in core earnings per share from 28,18
cents to 25,59 cents.
The underlying report has been prepared on a segmental basis in order to provide
shareholders with an enhanced insight into the contributions to profitability by
the various operational divisions of the group.
Revenue
R`000 % of Total
Contribution
2009 2008
Segments Reviewed Reviewed % Growth 2009 2008
South African 7 591 164 7 088 140 7 90,3 93,6
distribution
International 674 866 282 944 139 8,0 3,7
distribution
Value added services 122 490 192 074 (36) 1,5 2,6
Technology 13 440 10 300 31 0,2 0,1
Total 8 401 960 7 573 458 11 100 100
South African distribution
This segment is the major contributor to group revenue, covering mainly the
distribution of prepaid airtime and electricity on a national basis. Significant
growth in commission earned on the distribution of prepaid electricity (360%),
was achieved through the establishment of additional distribution contracts with
a wider spectrum of municipalities.
International distribution
International distribution encompasses the group`s operations in Mozambique,
Democratic Republic of Congo, Nigeria, Australia, Mexico, India, United Kingdom
and Europe.
Revenue, which increased by 139%, was entirely attributable to Africa Prepaid
Services Nigeria (APSN) and does not include the turnover of associated
companies, namely, Oxigen Services India and Ukash (UK and Europe).
The group`s interests in Mozambique were disposed of in November 2009.
The comparative revenue does not include any contribution by APSN in that
operations only commenced in May 2009.
Value added services
The telemarketing of cellular and financial services products and inbound
customer care and technical support, are provided by various call centres
operated by the group. Contribution to group revenue declined by R23 million as
a result of material adverse market conditions. This in turn necessitated the
impairment of goodwill of R11,1 million pertaining to CNS Call Centre.
The comparative revenue includes R47 million pertaining to e-Voucha, a
subsidiary company that was sold prior to the commencement of the financial
period under review.
Growth in revenue generated by location based services and aggregation of mobile
content was neutral.
Technology
The technology division is an in house technical support and product development
enhancement operation. Its revenue relates to services and sales to third
parties.
EBITDA
EBITDA of R368 million represented growth of R72 million (24%) on the
comparative period.
The underlying segmental analysis separates contributions from trading
operations and technical and corporate support.
R`000
2009 2008
Segments Reviewed Reviewed % growth
South African distribution 361 746 296 965 22
International distribution 63 349 18 823 237
Value added services 18 641 47 176 (61)
Total trading operations 443 736 362 964 22
EBITDA Margin (%) 5,29 4,80 0,49
Technology (35 561) (22 114)
Corporate (40 346) (45 254)
Total support (75 907) (67 368) 13
Net Total 367 829 295 596 24
EBITDA Margin (%) 4,38 3,90 0,48
South African distribution
The growth in EBITDA of R65 million (22%) was achieved through revenue growth of
7%, an increase in gross profit margins by 0,55% and the containment of
overheads.
International distribution
The growth of R45 million included a profit of R29 million on the sale of APS
Mozambique. On elimination of this extraneous profit, the growth in EBITDA
equated to 82%.
Value added services
The decline in revenue of the call centres, reduced margins and costs of
rationalisation, were the major contributing factors to the negative growth in
value added services of R29 million (61%).
Technology and Corporate
The growth in EBITDA of R81 million (22%) generated by trading operations, was
underpinned by skilled technological, administrative and managerial support.
These services were provided at increased costs of R8 million.
NET FINANCE INCOME
Finance income of R64 million was attributable to interest earned by the South
African distribution segment of the group. Of this amount,
R20 million related to imputed interest receivable on debtor balances in terms
of IFRS requirements and R44 million earned on liquid working capital.
Finance income earned in the comparative period was R104 million, of which R14
million applied to imputed interest receivable on debtor balances in terms of
IFRS requirements.
The effective decline in finance income, net of the above IFRS adjustments, was
therefore R46 million from the comparative period. This decline was primarily
due to the reduction in interest rates, totalling 500 basis points.
This resulted in a net negative growth of R40 million (39%).
Of the finance expense of R63 million, R60 million related to imputed interest
payable on creditor balances in terms of IFRS requirements.
In comparison with the relative period, the increase in finance expense of R13
million (26%) was predominantly due to a positive movement in IFRS adjustments
of R12,2 million.
SHARE OF LOSSES FROM ASSOCIATES AND JOINT VENTURES
R`000
% 2009 2008
Associate Company Holding Reviewed Reviewed
Oxigen Services India Pvt Ltd 37,22 (4 595) (14 285)
Smart Voucher Limited (Ukash) 17,25 (7 542) (195)
Other 50 240 398
Total (11 897) (14 082)
Oxigen Services India
Oxigen Services India Pvt Ltd continues to incur losses albeit at a lesser rate,
when comparing the group`s share of historical losses of R14,2 million to
current losses of R4,6 million. This reduction in losses of 68% was derived
through growth in revenue by R130 million (21%) coupled with a reduction in
overhead of 46%.
Smart Voucher Limited t/a Ukash
The group`s share of associated company losses of R7,5 million included its
share of the amortisation of the intangible assets. Comparatives related to two
months only as Ukash was acquired in October 2008.
In addition, the reversal of a deferred tax asset of R3,7 million, impacted
further on Ukash`s negative contribution to core earnings.
CORE NET PROFIT
R`000
2009 2008 %
Segments Unaudited Unaudited Growth
South African distribution 288 231 260 858 11
International distribution 1 371 (5 766) 124
Value added services (2 638) 31 787 (108)
Total operations 286 964 286 879 -
Technology (47 246) (24 036) (97)
Corporate (45 510) (46 917) 3,0
Total support (92 756) (70 953) (31)
Core earnings 194 208 215 926 (10)
Core earnings per share (cents) 25,59 28,18 (9)
Headline earnings per share (cents) 23,38 26,06 (10)
After deducting the profit on the sale of APS Mozambique (R19 million net of
taxation and minorities interest) and accounting for the adjustment of
impairments of R18 million, headline earnings per share equated to 23,38 cents.
DIVIDENDS
In line with the group`s stated dividend policy, no dividend has been declared.
BALANCE SHEET
Assets
Total assets increased to R4,2 billion up R369 million (10%).
Non-current assets
The net decrease in non current assets by R91 million was attributable to:
- Capital expenditure net of disposals and depreciation on property, plant and
equipment of R24 million. This was mainly applied to the acquisition of point of
sale devices in both the South African and International distribution segments;
- The reversal of deferred tax assets of R4 million;
- A decrease in intangible assets, comprising goodwill and intangibles of R62
million, net of acquisitions, disposals, impairments and amortisation;
- A net decrease in financial assets at amortised cost of R35 million. This
relates to starter packs which have been sold but not yet activated; and
- A decrease in Investments in associates of R14 million.
Current assets
Current assets increased by R460 million. This was mainly attributable to the
increase in cash and cash equivalents by R203 million, trade and other
receivables by R239 million and the current portion of unactivated starter packs
by R21 million.
The stock turn averaged 3,44 times per month and debtors collections were 24
days.
CAPITAL AND RESERVES
Capital and reserves increased by R179 million, of which net profit for the
period accounted for R177 million.
The purchase of treasury shares in terms of the group`s staff share incentive
scheme, increase in share based payment reserve, positive movements in minority
interests and foreign exchange translation movements, accounted for the balance
of the net increase in capital and reserves.
LIABILITIES
The net increase in total liabilities of R191 million, related to an increase in
accounts payable by R183 million and taxation owing by R33 million less the
reduction of interest bearing debt of R18 million and deferred taxation of R7
million.
The trade creditor payment terms equated to 40 days.
CASH FLOW
Operating profit and continuing focus on working capital management generated
cash of R337 million. This was enhanced by a further R41 million from net
interest received on liquid working capital offset by taxation paid of R62
million, equating to cash flows from operating activities of R316 million.
Funds applied to investing and financing activities as well as negative
translation differences on foreign exchange transactions resulted in net cash
flow generated by the group for the period under review totalling R203 million.
Total cash on hand as at the 30 November 2009 accumulated to R1,96 billion.
PROSPECTS
Revenue from the South African distribution segment is expected to continue to
increase organically in line with the growth in the customer base and the
introduction of additional e-tokens of value.
Africa Prepaid Services Nigeria, which commenced operations in May 2009, is
expected to grow organically in line with the widening of the distribution
network that has been established.
Blue Label Mexico continues to expand its footprint by growing the roll out of
point of sale devices to new customers.
The improvement in the performance of Oxigen Services India is expected to
continue.
The group will continue to consider any strategic acquisitions to complement the
group`s business model. Vertical integration and critical mass will be key
criteria in order to ensure value creation to shareholders.
POST BALANCE SHEET EVENTS
Subsequent to the period under review, Africa Prepaid Services, a subsidiary of
BLT, concluded an agreement to dispose of its 80% interest in Africa Prepaid
Services DRC. In addition The Prepaid Company concluded an agreement with The
Starter Pack Company to acquire a starter pack base for the amount for an amount
of R59 million (VAT exclusive).
Review opinion
The results for the period ended 30 November 2009 have been reviewed by the
company`s auditors, PricewaterhouseCoopers Inc. and the unmodified review report
is available for inspection at the company`s registered office.
APPRECIATION
The board of Blue Label Telecoms would like to thank its suppliers, customers,
business partners and staff for their ongoing support and loyalty.
For and on behalf of the Board
LM Nestadt BM Levy and MS Levy DB Rivkind
Chairman Joint Chief Executive Officers Chief Financial Officer
23 February 2010
DIRECTORS:
LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine*, GD Harlow*,
NN Lazarus SC*, JS Mthimunye*, MV Pamensky, DB Rivkind, LM Tyalimpi*,
P Mansour*#
(*Non-Executive) (#American)
COMPANY SECRETARY: E Viljoen
www.bluelabeltelecoms.co.za
Date: 24/02/2010 07:30:02 Produced by the JSE SENS Department.
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