| Mon 21 Jun 2010, 7:05 | | BFS - Blue - Reviewed provisional condensed results for the year ended 28 |
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BFS
BFS
BFS - Blue - Reviewed provisional condensed results for the year ended 28
February 2010
BLUE FINANCIAL SERVICES LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1996/006595/06)
JSE Code: BFS ISIN: ZAE000083655
("Blue" or "the Company" or "the Group")
REVIEWED PROVISIONAL CONDENSED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010
Condensed Consolidated Statement of Financial Performance
for the year ended 28 February 2010
Reviewed
year ended
28 Feb 2010
R`000
Notes
Interest income 454,090
Interest expense (173,241)
Net interest income 280,849
Administration and commission income 164,790
Other operating income 1 117,616
Operating income 563,255
Net impairment of loan advances and receivables (548,811)
Operating expenses 6 (733,609)
Goodwill impairment (210,054)
(Loss)/profit before taxation (929,219)
Taxation (101,409)
(Loss)/profit for the period (1,030,628)
Attributable to:
Equity holders of the parent (1,019,871)
Non-controlling interests (10,757)
Earnings ratios 5
(Loss)/Earnings per share (170.25)
Headline (loss)/earnings per share (134.96)
Diluted (loss)/earnings per share (170.25)
Diluted headline (loss)/earnings per share (134.96)
Net asset value per share (3.24)
Restated Restated
year ended year ended
28 Feb 2009 28 Feb 2008
R`000 R`000
Interest income 500,604 195,283
Interest expense (128,345) (65,985)
Net interest income 372,259 129,298
Administration and commission income 218,217 139,461
Other operating income 121,285 19,222
Operating income 711,761 287,981
Net impairment of loan advances and receivables (59,256) (3,858)
Operating expenses (552,404) (205,684)
Goodwill impairment (43,933) -
(Loss)/profit before taxation 56,168 78,439
Taxation (29,212) (21,048)
(Loss)/profit for the period 26,956 57,391
Attributable to:
Equity holders of the parent 35,049 57,391
Non-controlling interests (8,093) -
Earnings ratios
(Loss)/Earnings per share 6.86 13.55
Headline (loss)/earnings per share 3.67 11.25
Diluted (loss)/earnings per share 6.86 12.95
Diluted headline (loss)/earnings per share 3.67 10.88
Net asset value per share 212.97 148.54
Condensed Consolidated Statement of Comprehensive Income
for the year ended 28 February 2010
Reviewed Restated Restated
year year year
ended ended ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R`000 R`000
(Loss)/profit for the year (1,030,628) 26,956 57,391
Other comprehensive income:
Exchange differences on
translation of foreign operations (137,708) 7,960 25,979
Revaluation of land and buildings 1,660 5,552 -
Income tax relating to components
of other comprehensive income (415) (1,388) -
Other comprehensive income for
the year, net of tax (136,463) 12,124 25,979
Total comprehensive
(loss)/income for the year (1,167,091) 39,080 83,370
Total comprehensive
(loss)/income attributable to:
Equity holders of the parent (1,145,854) 47,173 83,370
Non-controlling interests (21,237) (8,093) -
(1,167,091) 39,080 83,370
Condensed Consolidated Statement of Financial Position
as at 28 February 2010
Reviewed
year
ended
28 Feb 2010
R`000
Notes
Assets
Cash and cash equivalents 88,492
Loans and advances to customers 2 783,017
Trade and other receivables 41,887
Inventories -
Taxation receivables 948
Other financial assets 1,241
Property, plant and equipment 93,845
Deferred taxation 34,310
Intangible assets 40,892
Goodwill 3 448,881
Total Assets 1,533,513
Equity and Liabilities
Equity
Share capital 928,250
Other reserves 445
(Accumulated loss)/retained earnings (948,107)
(Losses)/reserves attributable to equity holders of parent (19,412)
Non-controlling interest 16,529
Shareholder (loss)/funds (2,883)
Liabilities
Bank overdraft 110,659
Trade and other payables 149,251
Taxation payable 96,195
Finance lease obligation 27,433
Derivative financial liabilities 13,280
Other financial liabilities 4 1,127,592
Operating lease liability 3,350
Deferred taxation 8,636
1,536,396
Total Equity and Liabilities 1,533,513
Restated Restated
year year
ended ended
28 Feb 2009 28 Feb 2008
R`000 R`000
Assets
Cash and cash equivalents 183,476 66,976
Loans and advances to customers 1,341,018 481,941
Trade and other receivables 55,105 8,362
Inventories 3,632 -
Taxation receivables 3,594 1,496
Other financial assets 50,705 122,842
Property, plant and equipment 108,099 44,101
Deferred taxation 127,419 19,786
Intangible assets 57,285 70,367
Goodwill 703,274 337,328
Total Assets 2,633,607 1,153,199
Equity and Liabilities
Equity
Share capital 888,566 491,905
Other reserves 67,738 48,346
(Accumulated loss)/retained earnings 131,244 88,867
(Losses)/reserves attributable to equity
holders of parent 1,087,548 629,118
Non-controlling interest 36,227 (198)
Shareholder (loss)/funds 1,123,775 628,920
Liabilities
Bank overdraft 89,083 12,835
Trade and other payables 113,326 24,988
Taxation payable 121,472 35,748
Finance lease obligation 18,181 9,055
Derivative financial liabilities - -
Other financial liabilities 1,138,010 422,611
Operating lease liability 1,823 832
Deferred taxation 27,937 18,210
1,509,832 524,279
Total Equity and Liabilities 2,633,607 1,153,199
Condensed Consolidated Statement of Changes in Equity
for the year ended 28 February 2010
Attributable to equity shareholders
Share capital
Note
R`000
Balance at 28 February 2007 - as previously reported 399,894
Change in accounting policies, restatements and
reclassifications 7 (35,200)
Balance at 28 February 2007 - restated 364,694
Total comprehensive income for the year -
Issue of ordinary shares 123,657
Purchase of own/treasury shares 1,748
Employee share option scheme - proceeds 3,373
Share issue costs (1,567)
Business combinations and other acquisitions -
Balance at 28 February 2008 - restated 491,905
Total comprehensive income for the year -
Sharebased payment to employees 2,362
Issue of ordinary shares 394,299
Business combinations and other acquisitions -
Contingency reserve -
Balance at 28 February 2009 - restated 888,566
Total comprehensive loss for the year -
Functional currency change -
Issue of ordinary shares 37,426
Sharebased payment to employees 2,258
Contingency reserve -
Business combinations and other acquisitions -
Balance at 28 February 2010 - reviewed 928,250
Attributable to equity shareholders
(Accumulated loss)/ Other
retained income reserves
R`000 R`000
Balance at 28 February 2007 - as
previously reported 31,966 23,095
Change in accounting policies,
restatements and reclassifications (490) -
Balance at 28 February 2007 - restated 31,476 23,095
Total comprehensive income for the year 57,391 25,979
Issue of ordinary shares - (728)
Purchase of own/treasury shares - -
Employee share option scheme - proceeds - -
Share issue costs - -
Business combinations and other acquisitions - -
Balance at 28 February 2008 - restated 88,867 48,346
Total comprehensive income for the year 35,049 12,124
Sharebased payment to employees 8,425 -
Issue of ordinary shares - 6,171
Business combinations and other acquisitions - -
Contingency reserve (1,097) 1,097
Balance at 28 February 2009 - restated 131,244 67,738
Total comprehensive loss for the year (1,019,871) (125,983)
Functional currency change (59,527) 59,527
Issue of ordinary shares - (621)
Sharebased payment to employees (169) -
Contingency reserve 216 (216)
Business combinations and other acquisitions - -
Balance at 28 February 2010 - reviewed (948,107) 445
Non-controlling
Total interest Total equity
R`000 R`000 R`000
Balance at 28 February 2007 - as
previously reported 454,955 540 455,495
Change in accounting policies,
restatements and reclassifications (35,690) - (35,690)
Balance at 28 February 2007 -
restated 419,265 540 419,805
Total comprehensive income for
the year 83,370 - 83,370
Issue of ordinary shares 122,929 - 122,929
Purchase of own/treasury shares 1,748 - 1,748
Employee share option scheme -
proceeds 3,373 - 3,373
Share issue costs (1,567) - (1,567)
Business combinations and other
acquisitions - (738) (738)
Balance at 28 February 2008 -
restated 629,118 (198) 628,920
Total comprehensive income for
the year 47,173 (8,093) 39,080
Sharebased payment to employees 10,787 - 10,787
Issue of ordinary shares 400,470 - 400,470
Business combinations and other
acquisitions - 44,518 44,518
Contingency reserve - - -
Balance at 28 February 2009 -
restated 1,087,548 36,227 1,123,775
Total comprehensive loss for
the year (1,145,854) (21,237) (1,167,091)
Functional currency change - - -
Issue of ordinary shares 36,805 - 36,805
Sharebased payment to employees 2,089 - 2,089
Contingency reserve - - -
Business combinations and other
acquisitions - 1,539 1,539
Balance at 28 February 2010 -
reviewed (19,412) 16,529 (2,883)
Condensed Consolidated Statement of Cash Flows
for the year ended 28 February 2010
Reviewed Restated Restated
year year year
ended ended ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R`000
Net cash used by operating
activities (212,513) (592,432) (261,868)
Net cash (used by)/from
investing activities (27,848) 97,505 (113,043)
Net cash from financing
activities 123,801 535,180 449,525
Total net cash movement
for the period (116,560) 40,253 74,614
Net cash at the beginning of
the period 94,393 54,140 (20,474)
Total net cash at end of the year (22,167) 94,393 54,140
Segment Report
Reviewed year ended 28 Feb 2010
South Africa Botswana Zambia Uganda
R`000 R `000 R `000 R`000
Interest income 260,396 59,063 44,721 14,319
Interest expense (105,646) (22,923) (21,394) (15,206)
Net interest income 154,750 36,140 23,327 (887)
Administration and
insurance income 172,649 8,605 10,623 5,461
Other operating income 85,928 25,110 8,482 -
Operating income 413,327 69,855 42,432 4,574
Net impairment of
loan advances and
receivables (357,828) (43,501) (15,002) (17,626)
Operating expenses (482,758) (49,820) (66,926) (50,724)
Goodwill impairment (137,455) - (50,488) -
Management operating
(loss)/profit (564,714) (23,466) (89,984) (63,776)
Segment result:
(Loss)/profit before
taxation (564,714) (23,466) (89,984) (63,776)
Taxation (102,129) (1,144) 6,456 (4,534)
(Loss)/profit after
taxation (666,843) (24,610) (83,528) (68,310)
Net investment in
foreign operation adjustment - - 1,721 (20,984)
Management (loss)/profit
after taxation (666,843) (24,610) (81,807) (89,294)
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property,
plant and equipment 27,877 572 1,926 421
Amortisation of
intangible assets 11,138 920 1,033 70
Segment assets 1,093,674 377,777 183,597 39,979
Segment liabilities (1,025,046) (329,757) (268,738) (112,285)
Reviewed year ended 28 Feb 2010
Tanzania Malawi Nigeria Mauritius
R`000 R`000 R`000 R`000
Interest income 40,076 16,554 34,181 13,492
Interest expense (16,478) (11,780) (4,134) (24,451)
Net interest income 23,598 4,774 30,047 (10,959)
Administration and
insurance income 4,725 5,343 6,752 -
Other operating income 26 236 - 464
Operating income 28,349 10,353 36,799 (10,495)
Net impairment of loan
advances and receivables (14,107) (26,837) (26,620) -
Operating expenses (53,711) (49,108) (31,748) (7,420)
Goodwill impairment - - - -
Management operating
(loss)/profit (39,469) (65,592) (21,569) (17,915)
Segment result:
(Loss)/profit before
taxation (39,469) (65,592) (21,569) (17,915)
Taxation (5,897) (445) (1,522) (1,402)
(Loss)/profit after
taxation (45,366) (66,037) (23,091) (19,317)
Net investment in foreign
operation adjustment (23,357) (23,143) (5,139) -
Management (loss)/profit
after taxation (68,723) (89,180) (28,230) (19,317)
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property,
plant and equipment 858 911 1,756 -
Amortisation of
intangible assets 70 - - -
Segment assets 76,806 65,433 80,494 335,508
Segment liabilities (123,209) (93,003) (47,418) (333,808)
Reviewed year ended 28 Feb 2010
CMA Other Eliminations Consolidated
R`000 R`000 R`000 R`000
Interest income 43,139 13,115 (84,966) 454,090
Interest expense (25,490) (10,139) 84,400 (173,241)
Net interest income 17,649 2,976 (566) 280,849
Administration and
insurance income 42,415 1,626 (93,409) 164,790
Other operating income - - (2,630) 117,616
Operating income 60,064 4,602 (96,605) 563,255
Net impairment of
loan advances and
receivables (33,882) (13,408) - (548,811)
Operating expenses (54,669) (49,299) 162,574 (733,609)
Goodwill impairment - (22,111) - (210,054)
Management
operating
(loss)/profit (28,487) (80,216) 65,969 (929,219)
Segment result:
(Loss)/profit
before taxation (28,487) (80,216) 65,969 (929,219)
Taxation 7,154 (2,698) 4,752 (101,409)
(Loss)/profit
after taxation (21,333) (82,914) 70,721 (1,030,628)
Net investment in
foreign operation
adjustment - (12,474) 83,376 -
Management
(loss)/profit
after taxation (21,333) (95,388) 154,097 (1,030,628)
Other material
non-cash items
included in segment
profit/(loss):
Depreciation on
property, plant
and equipment 1,414 1,231 - 36,975
Amortisation of
intangible assets 239 149 - 13,619
Segment assets 180,930 34,000 (934,685) 1,533,513
Segment liabilities (164,213) (93,659) 1,054,740 (1,536,396)
Restated year ended 28 Feb 2009
South Africa Botswana Zambia Uganda
R`000 R`000 R`000 R`000
Interest income 250,528 79,891 86,025 12,298
Interest expense (100,094) (16,546) (32,103) (8,500)
Net interest income 150,434 63,345 53,922 3,798
Administration and
insurance income 99,212 34,243 43,916 13,758
Other operating income 18,045 8,565 291 17
Operating income 267,691 106,153 98,129 17,573
Net impairment of
loan advances and
receivables (37,068) 2,958 (6,098) (1,009)
Operating expenses (293,380) (38,794) (105,433) (19,809)
Goodwill impairment (7,039) - - -
Management operating
profit/(loss) (69,796) 70,317 (13,402) (3,245)
Segment result:
Profit/(loss) before
taxation (69,796) 70,317 (13,402) (3,245)
Taxation 13,149 (17,096) (327) 1,734
Profit/(loss) after
taxation (56,647) 53,221 (13,729) (1,511)
Net investment in
foreign operation adjustment - - (9,831) (2,290)
Management profit/(loss)
after taxation (56,647) 53,221 (23,560) (3,801)
Other material non-cash
items included in
segment profit/(loss):
Depreciation on
property, plant
and equipment 14,666 564 1,258 637
Amortisation of
intangible assets 14,615 992 1,951 88
Segment assets 1,625,046 389,534 184,413 70,725
Segment liabilities (1,050,985) (313,696) (168,011) (81,708)
Restated year ended 28 Feb 2009
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 36,426 31,173 - 6,384
Interest expense (11,648) (7,322) - (1,956)
Net interest income 24,778 23,851 - 4,428
Administration and
insurance income 4,422 25,749 - 885
Other operating income - 2 93,604 278
Operating income 29,200 49,602 93,604 5,591
Net impairment of loan
advances and receivables (4,974) (1,598) - -
Operating expenses (28,015) (15,389) - (26,982)
Goodwill impairment - - - -
Management operating
profit/(loss) (3,789) 32,615 93,604 (21,391)
Segment result:
Profit/(loss) before
taxation (3,789) 32,615 93,604 (21,391)
Taxation 2,932 (9,990) (13,105) 2,145
Profit/(loss) after
taxation (857) 22,625 80,499 (19,246)
Net investment in foreign
operation adjustment (322) - - 182
Management profit/(loss)
after taxation (1,179) 22,625 80,499 (19,064)
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property,
plant and equipment 1,187 621 - 477
Amortisation of
intangible assets 83 - - -
Segment assets 87,284 148,525 317,701 114,542
Segment liabilities (93,011) (101,906) (238,446) (38,766)
Restated year ended 28 Feb 2009
CMA Other Eliminations Consolidated
R`000 R`000 R`000 R`000
Interest income 66,914 4,171 (73,206) 500,604
Interest expense (16,791) (6,591) 73,206 (128,345)
Net interest income 50,123 (2,420) - 372,259
Administration and
insurance income 25,018 7,619 (36,605) 218,217
Other operating income 80 1,103 (700) 121,285
Operating income 75,221 6,302 (37,305) 711,761
Net impairment of
loan advances and
receivables (6,787) (4,680) - (59,256)
Operating expenses (32,070) (39,071) 46,539 (552,404)
Goodwill impairment - (36,894) - (43,933)
Management operating
profit/(loss) 36,364 (74,343) 9,234 56,168
Segment result:
Profit/(loss)
before taxation 36,364 (74,343) 9,234 56,168
Taxation (10,797) 4,844 (2,701) (29,212)
Profit/(loss)
after taxation 25,567 (69,499) 6,533 26,956
Net investment in
foreign operation
adjustment - 441 11,820 -
Management
profit/(loss)
after taxation 25,567 (69,058) 18,353 26,956
Other material
non-cash items
included in segment
profit/(loss):
Depreciation on
property, plant
and equipment 1,288 1,314 - 22,012
Amortisation of
intangible assets 101 1,062 - 18,892
Segment assets 206,035 35,796 (545,994) 2,633,607
Segment
liabilities (167,987) (58,595) 803,279 (1,509,832)
Restated year ended 28 Feb 2008
South Africa Botswana Zambia Uganda
R`000 R`000 R`000 R`000
Interest income 122,182 30,332 20,598 2,166
Interest expense (35,621) (15,499) (7,291) (1,188)
Net interest income 86,561 14,833 13,307 978
Administration and
insurance income 46,155 21,153 43,855 4,205
Other operating income 26,319 2,819 948 -
Operating income 159,035 38,805 58,110 5,183
Net impairment of loan
advances and receivables 2,311 (2,684) (2,340) (543)
Operating expenses (139,646) (23,878) (22,840) (13,067)
Goodwill impairment - - - -
Management operating
profit/(loss) 21,700 12,243 32,930 (8,427)
Segment result:
Profit/(loss) before
taxation 21,700 12,243 32,930 (8,427)
Taxation (2,935) (3,187) (11,644) 2,875
Profit/(loss) after taxation 18,765 9,056 21,286 (5,552)
Net investment in foreign
operation adjustment - - - (393)
Management profit after
taxation 18,765 9,056 21,286 (5,945)
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property,
plant and equipment 4,710 1,133 659 390
Amortisation of
intangible assets 5,112 949 404 74
Segment assets 872,889 92,868 91,617 21,881
Segment liabilities (371,045) (71,924) (66,784) (32,476)
Restated year ended 28 Feb 2008
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 6,965 3,750 - -
Interest expense (2,821) (1,677) - -
Net interest income 4,144 2,073 - -
Administration and insurance
income 6,000 21,714 - -
Other operating income 30 62 - -
Operating income 10,174 23,849 - -
Net impairment of loan
advances and receivables (105) (328) - -
Operating expenses (13,840) (4,303) - -
Goodwill impairment - - - -
Management operating
profit/(loss) (3,771) 19,218 - -
Segment result:
Profit/(loss) before
taxation (3,771) 19,218 - -
Taxation 1,326 (5,868) - -
Profit/(loss) after taxation (2,445) 13,350 - -
Net investment in foreign
operation adjustment 402 823 - -
Management profit after
taxation (2,043) 14,173 - -
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property,
plant and equipment 616 92 - -
Amortisation of
intangible assets 68 - - -
Segment assets 51,349 44,681 - -
Segment liabilities (55,615) (29,797) - -
Restated year ended 28 Feb 2008
CMA Other Eliminations Consolidated
R`000 R`000 R`000 R`000
Interest income 6,755 2,535 - 195,283
Interest expense (1,867) (21) - (65,985)
Net interest income 4,888 2,514 - 129,298
Administration and
insurance income 13,057 38 (16,716) 139,461
Other operating income 132 (467) (10,621) 19,222
Operating income 18,077 2,085 (27,337) 287,981
Net impairment of
loan advances and
receivables (733) 564 - (3,858)
Operating expenses (5,572) (3,128) 20,590 (205,684)
Goodwill impairment - - - -
Management operating
profit/(loss) 11,772 (479) (6,747) 78,439
Segment result:
Profit/(loss) before
taxation 11,772 (479) (6,747) 78,439
Taxation (3,255) (370) 2,010 (21,048)
Profit/(loss) after
taxation 8,517 (849) (4,737) 57,391
Net investment in
foreign operation
adjustment - 2,580 (3,412) -
Management profit
after taxation 8,517 1,731 (8,149) 57,391
Other material
non-cash items
included in
segment profit/(loss):
Depreciation on
property, plant and
equipment 290 323 - 8,213
Amortisation of
intangible assets 89 496 - 7,192
Segment assets 70,757 21,268 (114,111) 1,153,199
Segment liabilities (58,276) (14,555) 176,193 (524,279)
The Group`s reportable segments are geographical business units that offer
comparable business products and solutions, which are managed and measured
regionally.
Blue has nine reportable segments: South Africa, Botswana, Zambia, Uganda,
Tanzania, Malawi, Mauritius, Nigeria and CMA. The segments offer a variety of
products and services as well as equipment sales.
"CMA" comprise the aggregated segment results and financial position of the
`Common Monetary Area` countries outside South Africa, namely Lesotho,
Namibia and Swaziland.
"Other" comprises the aggregated segment information for the remainder of
operations based in Kenya, Cameroon and Rwanda.
Notes
BASIS OF PREPARATION
The condensed consolidated provisional financial results of the Group for the
year ended 28 February 2010, comprise the company and its subsidiaries.
These reviewed financial results have been prepared in accordance with the
recognition and measurement criteria of IFRS, the AC 500 standards as issued by
the Accounting Practices Board or its successor, interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC), and
the presentation and disclosure requirements of International Accounting
Standard: Interim Financial Reporting (IAS 34) and the JSE Listings
Requirements and South African Companies Act (as amended). In the preparation
of these financial results the Group has applied key assumptions concerning
the future and other indeterminate sources in recording various assets and
liabilities.
The Group`s principal accounting policies and assumptions have been applied
consistently over the current and prior financial period, except for:
- IAS 1 Presentation of Financial Statements
- IAS 18 Revenue Recognition (Revised)
- IAS 21 Effects of Changes in Foreign Exchange Rates
- IAS 39 Financial Instruments - Presentation (Revised)
- IFRS 8 Operating Segments
- Circular 3/2009 Headline Earnings Per Share
Refer Note 7 for detail disclosure and impact of the changes in accounting
policies, restatements and reclassifications.
DISCLOSURE NOTES
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
1. Other operating income
Profit on sale of shares and
business combination - 93,604 -
Net mobile revenue 26,790 23,891 2,271
Profit on disposal of
non-current assets 195 470 6,702
Profit on exchange differences 81,941 37 2,374
Other income 8,690 3,283 7,875
117,616 121,285 19,222
Net mobile revenue comprise: 26,790 23,891 2,271
Gross mobile and related revenue 70,140 39,890 2,271
Subcriptions and cost of sales (43,350) (15,999) -
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
2. Loans and advances to customers
Gross loans and advances 1,122,920 1,490,179 513,508
Less: Deferred initiation fees (58,667) (2,127) -
Less: Allowance for impairment
of loans and advances (281,236) (147,034) (31,567)
783,017 1,341,018 481,941
Movement on allowance for impairment:
Opening balance (147,034) (31,567) (6,640)
Change for the period (142,924) (93,186) (26,626)
Subsidiaries acquired - (29,944) (151)
Foreign exchange movement 8,722 7,663 1,850
(281,236) (147,034) (31,567)
Analysis of gross loans and
advances by territory:
South Africa 435,340 658,041 179,736
Rest of Africa 687,580 832,138 333,772
1,122,920 1,490,179 513,508
Analysis of impairment on loans
and advances by territory:
South Africa (146,224) (106,569) (16,640)
Rest of Africa (135,012) (40,465) (14,927)
(281,236) (147,034) (31,567)
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
3. Goodwill
Cost/ valuation 702,868 747,207 337,328
Accumulated impairment (253,987) (43,933) 0
Carrying value 448,881 703,274 337,328
Reconciliation of goodwill:
Opening balance 703,274 337,328 287,319
Business combinations - 410,554 30,692
Foreign exchange movements (44,339) (675) 19,317
Impairment loss (210,054) (43,933) -
Total 448,881 703,274 337,328
The Group has elected to use the fair value option in the determination of
goodwill impairment at year-end, in contrast to value-in-use, based on the
various uncertainties with respect to funding and the restructuring of the
Group. Fair value was determined with reference to the 30 day volume
Weighted average share price leading up to year-end, of which the basis of
allocation was determined on expected cashflows from net loan advances per
cash generating unit. Subsequent to year-end, the Group`s share price has
deteriorated along with its increased volatility. The impact of the change
in fair value against a reduced share price at 15c per ordinary share
translates into an additional R54 million impairment of goodwill.
4. Other financial liabilities
Repayment of interest
bearing debt < 1 Year 2-5 Years 5+ Years Total
R`000 R`000 R`000 R`000
28 February 2010 (682,763) (298,497) (146,332) (1,127,592)
28 February 2009 (638,777) (419,723) (79,510) (1,138,010)
28 February 2008 (145,004) (252,742) (24,865) (422,611)
The Group is in breach of a number of loan covenants and terms. These
funding liabilities are classified as part of the less than one year
category in the table above.
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
Included as part of other
financial liabilities -
owing to related parties:
Funding facility from
International Finance Corporation 63,587 65,459 62,987
Short-term loan from D. Van
Niekerk (director) 3,289 36,785 -
Funding loan from Credit U
shareholders 2,520 234,000 -
Overdraft funding from ABSA Limited 37,425 32,236 -
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
5. Reconciliation of headline
(loss)/earnings
(Loss)/profit attributable to
ordinary equity holders of
the parent entity (1,019,871) 35,049 57,391
Adjusted for:
Net loss/(gains) on the
disposal of plant and equipment 562 (470) (3,162)
Gain on revaluation of other
financial assets - - (6,162)
Negative goodwill - - (418)
Goodwill impairment 210,054 43,933 -
Intangible asset impairment 1,160 23,306 -
Profit on sale of shares - (93,604) -
Total tax effects of adjustment (348) 10,518 -
Headline (loss)/earnings (808,443) 18,732 47,649
Number of share in issue (net
of treasury shares) in million 624.37 582.33 465.66
Weighted number of shares in
issue in million 599.04 510.65 423.52
Diluted number of shares in
issue in million 626.89 561.73 472.69
6. (Loss)/profit before taxation
Reported (loss)/profit before taxation includes the following significant
items as part of operating expenses:
Reviewed Restated Restated
year ended year ended year ended
28 Feb 2010 28 Feb 2009 28 Feb 2008
R`000 R `000 R `000
Employee cost 210,109 156,067 74,867
Operating lease cost 63,098 37,003 19,049
Impairment of financial assets 48,116 3,581 -
Depreciation on property, plant
and equipment 36,975 22,012 8,213
Loss on exchange differences 18,180 70,032 3,806
Amortisation of intangible
assets 13,619 18,892 7,192
Fair value adjustment on
derivative instruments 13,280 - -
Impairment of intangible assets 1,160 23,306 -
7. Changes in accounting policies, restatement and reclassifications of
comparative results
Reclassifications
Previously
reported 7.1
R` 000 R` 000
Reconciliation - 28 February 2008
Income Statement
Other operating income (16,898) (5,548)
Net impairment of loan advances and
receivables 4,472 (614)
Operating expenses 203,831 -
Fair value adjustment (6,162) 6,162
Taxation expense 21,518 -
Net profit (profit after taxation) (61,998) -
Retained earnings - opening balance (31,966) -
Statement of Financial Position
Share capital and premium (526,905) -
Other reserves (45,661) -
Retained earnings (93,964) -
Other financial liabilities (385,199) -
Reconciliation - 28 February 2009
Income Statement
Interest income (540,914) -
Interest expense 137,372 -
Other operating income (171,914) 49,929
Net impairment of loan advances and
receivables 93,186 (33,930)
Operating expenses 545,613 (59,932)
Goodwill impairment - 43,933
Taxation 44,009 -
Net profit (profit after taxation) (110,865) -
Retained earnings - opening balance (93,964) -
Statement of Financial Position
Trade and other receivables 29,110 28,144
Loans and advances to customers 1,448,149 (28,144)
Other financial assets 51,751 -
Goodwill 685,907 -
Intangible assets 59,077 -
Deferred tax (net) 90,502 -
Share capital and premium (925,992) -
Other reserves (41,631) (1,097)
Retained earnings (221,347) 1,097
Trade and other payables (102,506) -
Taxation payable (129,316) -
Other financial liabilities (1,097,191) -
Business Investment
combinations recognition
7.2 7.3
R` 000 R` 000
Reconciliation - 28 February 2008
Income Statement
Other operating income - -
Net impairment of loan advances and receivables - -
Operating expenses - -
Fair value adjustment - -
Taxation expense - -
Net profit (profit after taxation) - -
Retained earnings - opening balance - -
Statement of Financial Position
Share capital and premium - -
Other reserves - -
Retained earnings - -
Other financial liabilities - -
Reconciliation - 28 February 2009
Income Statement
Interest income - -
Interest expense - -
Other operating income - -
Net impairment of loan advances and receivables - -
Operating expenses 1,496 29,218
Goodwill impairment - -
Taxation - (11,692)
Net profit (profit after taxation) 1,496 17,526
Retained earnings - opening balance - -
Statement of Financial Position
Trade and other receivables (2,149) -
Loans and advances to customers (41,742) -
Other financial assets (1,046) -
Goodwill 54,261 -
Intangible assets - -
Deferred tax (net) - 8,068
Share capital and premium - -
Other reserves - (26,059)
Retained earnings 1,496 17,526
Trade and other payables (10,820) -
Taxation payable - 465
Other financial liabilities - -
Preference
share
Impairment classification
7.4 7.5
R` 000 R` 000
Reconciliation - 28 February 2008
Income Statement
Other operating income - (1,220)
Net impairment of loan advances and
receivables - -
Operating expenses - 2,414
Fair value adjustment - -
Taxation expense - -
Net profit (profit after taxation) - 1,194
Retained earnings - opening balance - 490
Statement of Financial Position
Share capital and premium - 35,000
Other reserves - 728
Retained earnings - 1,684
Other financial liabilities - (37,412)
Reconciliation - 28 February 2009
Income Statement
Interest income - -
Interest expense - -
Other operating income - -
Net impairment of loan advances and
receivables - -
Operating expenses 38,686 16,179
Goodwill impairment -
Taxation (537) -
Net profit (profit after taxation) 38,149 16,179
Retained earnings - opening balance - 1,684
Statement of Financial Position
Trade and other receivables - -
Loans and advances to customers - -
Other financial assets - -
Goodwill (36,894) -
Intangible assets (1,792) -
Deferred tax (net) 537 -
Share capital and premium - 37,426
Other reserves - (5,443)
Retained earnings 38,149 17,863
Trade and other payables - -
Taxation payable - -
Other financial liabilities - (49,846)
Effective
Loan book interest
conversion accrual
7.6 7.7
R` 000 R` 000
Reconciliation - 28 February 2008
Income Statement
Other operating income - -
Net impairment of loan advances and receivables - -
Operating expenses - -
Fair value adjustment - -
Taxation expense - -
Net profit (profit after taxation) - -
Retained earnings - opening balance - -
Statement of Financial Position
Share capital and premium - -
Other reserves - -
Retained earnings - -
Other financial liabilities - -
Reconciliation - 28 February 2009
Income Statement
Interest income 40,310 -
Interest expense - (9,027)
Other operating income - -
Net impairment of loan advances and receivables - -
Operating expenses - -
Goodwill impairment - -
Taxation (11,431) 2,528
Net profit (profit after taxation) 28,879 (6,499)
Retained earnings - opening balance - -
Statement of Financial Position
Trade and other receivables - -
Loans and advances to customers (37,245) -
Other financial assets - -
Goodwill - -
Intangible assets - -
Deferred tax (net) 375 -
Share capital and premium - -
Other reserves (1,916) -
Retained earnings 28,879 (6,499)
Trade and other payables - -
Taxation payable 9,907 (2,528)
Other financial liabilities - 9,027
Net investment
in foreign
operation Balance as
7.8 restated
R` 000 R` 000
Reconciliation - 28 February 2008
Income Statement
Other operating income 4,444 (19,222)
Net impairment of loan advances and
receivables - 3,858
Operating expenses (561) 205,684
Fair value adjustment - -
Taxation expense (470) 21,048
Net profit (profit after taxation) 3,413 (57,391)
Retained earnings - opening balance - (31,476)
Statement of Financial Position
Share capital and premium - (491,905)
Other reserves (3,413) (48,346)
Retained earnings 3,413 (88,867)
Other financial liabilities - (422,611)
Reconciliation - 28 February 2009
Income Statement
Interest income - (500,604)
Interest expense - 128,345
Other operating income 700 (121,285)
Net impairment of loan advances and
receivables - 59,256
Operating expenses (18,856) 552,404
Goodwill impairment - 43,933
Taxation 6,335 29,212
Net profit (profit after taxation) (11,821) (26,956)
Retained earnings - opening balance 3,413 (88,867)
Statement of Financial Position
Trade and other receivables - 55,105
Loans and advances to customers - 1,341,018
Other financial assets - 50,705
Goodwill - 703,274
Intangible assets - 57,285
Deferred tax (net) - 99,482
Share capital and premium - (888,566)
Other reserves 8,408 (67,738)
Retained earnings (8,408) (131,244)
Trade and other payables - (113,326)
Taxation payable - (121,472)
Other financial liabilities - (1,138,010)
Impact of restatement and changes in accounting policies on earnings per
share and diluted earnings per share:
Reported IAS 21 Restatement
2008
(Loss)/Earnings per share 14.64 (0.81) (0.28)
Headline (loss)/earnings per share 12.34 (0.81) (0.28)
Diluted (loss)/earnings per share 13.98 (0.78) (0.25)
Diluted headline (loss)/earnings per share 11.91 (0.78) (0.25)
Anti-dilutive Updated
2008
(Loss)/Earnings per share - 13.55
Headline (loss)/earnings per share - 11.25
Diluted (loss)/earnings per share - 12.95
Diluted headline (loss)/earnings per share - 10.88
Reported IAS 21 Restatement
2009
(Loss)/Earnings per share 23.30 2.31 (18.75)
Headline (loss)/earnings per share 12.63 2.31 (11.27)
Diluted (loss)/earnings per share 21.91 2.10 (17.13)
Diluted headline (loss)/earnings per share 12.17 2.10 (10.29)
Anti-dilutive Updated
2009
(Loss)/Earnings per share - 6.86
Headline (loss)/earnings per share - 3.67
Diluted (loss)/earnings per share (0.02) 6.86
Diluted headline (loss)/earnings per share (0.31) 3.67
7.1 Income statement reclassifications
Reclassifications have not resulted in any changes in the prior year`s earnings,
earnings per share or related cashflow, and are detailed as follows:
Other operating income
Fair value adjustment of R6.2 million on financial assets have been
reclassified to form part of other operating income. Recoveries of written
off loans and advances of R33.9 million have been reclassified to form part
of net impairment of loan advances and receivables.
Mobile revenue and cost of sales
The Group has reviewed its interpretation of IAS 18 "Revenue" and available
guidance under EITF 99-19 "Reporting revenue gross as a principal versus net as
an agent". Mobile activities undertaken by the Group is in an agent
relationship whereby the network provider remains the primary obligor as
service provider. Mobile revenue and related cost, previously reflected on a
gross basis, have been reclassified and reflected on a net basis under other
income.
Goodwill impairment
Impairment of goodwill of R43.9m, previously included as part of operating
expenses, has been reclassified to a separately disclosable on the income
statement.
Statement of financial position reclassifications
Contingency reserve
Contingency reserve on insurance activities, previously included as part of
distributable reserves of R1.1m, have been reclassified to form part of
non-distributable reserves.
Loans and advances to customers
Gross receivables of R72.4m and related R44.3m impairment for cellular and
mobile customers, previously included as part of loans and advances to
customers, have been reclassified to form part of trade and other receivables.
These changes did not impact on the Group`s results or cashflow information for
the comparative periods.
7.2 Restatements arising from Business Combinations
In line with IFRS 3 "Business Combinations" (updated to January 2008), the
Group has amended provisional accounting of business combinations to reflect
new information obtained about facts and circumstances that existed as at the
acquisition date. Retrospective adjustment of the provisional amounts
recognised at the acquisition date is required and included in the table above.
This resulted in the recognition of R54.3m additional at-acquisition goodwill
and R1.5m in operating expenses.
Restatements impacting Net (Loss)/Profit
7.3 Investment recognition
The Group has amended its recognition of its investment in the Zambia based
operation, Nedfin Limited, previously accounted for as a subsidiary under its
Botswana based operations Blue Employee Benefits (Proprietary) Limited. The
investment is to reside as a subsidiary of Blue Financial Services (Zambia)
Limited, based on the initial purchase agreement and share certificate
registration. The resultant change requires a restatement of foreign exchange
losses of R29.2m, on the intergroup funding flow on purchase of the company,
which was previously recorded as part of the foreign currency translation
reserve on translation and consolidation of the subsidiary results.
7.4 Impairment
The Group has reviewed its goodwill impairment assessment on its investments in
Blue Financial Services Cameroon SA and identified that impairment indicators
existed at 28 February 2009.
Consequently, the recorded goodwill and intangible assets` carrying values,
which exceeded the fair value of the reported cash generating unit were
impaired. A restatement and additional impairment of R36.8m and R1.8m related
to goodwill and intangible assets respectively, was recorded.
7.5 Preference share classification
The Group has revised its accounting classification of preference shares, in
accordance with the guidance under IAS 32 "Financial Instruments Presentation",
which requires the issuer to classify the instrument as a financial liability
or equity instrument. These redeemable convertible preference shares,
previously reflected as part of equity, have been restated to form part of
other financial liabilities, as the ability of the holder of the instrument to
redeem or convert at their discretion gives rise to the existence of a
contractual obligation of one party to deliver cash or another financial asset
to another party, or to exchange financial assets or liabilities under
conditions that are potentially unfavourable. The impact on net profit of R16.2
million (2008: R1.2 million 2007: R0.5 million) for the year ended 28 February
2009 relates to the foreign exchange on remeasurement of the year-end foreign
denominated liability up to the relevant conversion into equity.
7.6 Loan book conversion
The Group has restated the outstanding balances on certain subsidiary loan
books, based on take-on balance discrepancies and conversion differences
related to the transfer of the existing loan database onto an improved
operating platform and loan management software. The restatement resulted in
a decrease in the gross loan book and interest income of R37.2 million and R40.3
million respectively.
7.7 Effective interest rate
The Group has restated the accrual of interest on other financial liabilities,
based on the effective interest rate applicable to the individual financial
instruments in terms of IAS 32 "Financial instruments presentation". As a
result, an amendment was required to adjust the interest expense on financial
liabilities of R9.0m for the year ended 28 February 2009.
Changes in accounting policies - retrospectively applied
7.8 Net investment in foreign operation
The Group elected the option to apply the provisions of IAS 21 "The effects of
changes in foreign exchange rates" related to `net investment in foreign
operation`, and as result have amended the treatment of unrealised foreign
exchange gains and losses arising on intergroup monetary investments for which
settlement is neither planned nor likely to occur in the foreseeable future,
in substance, forming a part of the entity`s net investment in that foreign
operation (deemed equity). The retrospective application and resultant
restatement disclosed at 31 August 2009 have been amended based on the
additional impact of the change in recognition of the investment in Nedfin
Limited. The table above reflects the comparative changes for the adoption.
Interim financial reporting and presentation
The Group has adopted the revised IAS 34 "Interim financial reporting" based on
consequential amendments and adoption of IAS 1 "Presentation of financial
statements", resulting in changes in terminology, layout and inclusion of
certain financial information. The Group has adopted the accounting policy to
reflect the Statement of Comprehensive Income separately from the Income
Statement. Comparative information has been adjusted where necessary.
Segment reporting
The Group adopted IFRS 8 "Operating Segments" in the current financial year.
Operating segments are defined as components of an entity for which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in the allocation of resources and in performance
assessment. The operating segments currently reported under IFRS 8 are not
comparable to the previously reported primary segments under IAS 14: Segment
Reporting, resultantly segmental information for comparative periods have been
restated.
Changes in accounting policies - prospective application
Functional currency change
The Group has reviewed the functional currency of its intermediate holding
company incorporated in Mauritius, based on the primary economic environment in
which the entity operates as well as the activities of the foreign operation
which are carried out as an extension of the reporting entity. Resultantly the
functional currency has been amended from Rupees to Rand effective 1 June 2009,
applied prospectively under guidance of IAS 21 "The Effects of Changes in
Foreign Exchange Rates" related to `changes in functional currency`.
Revenue recognition
The clarification under IAS 18 "Revenue recognition" and IAS 39 "Financial
instruments presentation", which now requires the cost deferral element on
initiation fees to be based on incremental cost, whereas previously direct cost
was allowed, was adopted prospectively by the Group and consequently did not
impact the prior year results.
8. Capital commitments
The Group has the following capital commitments at 28 February 2010:
1. Nigeria. In terms of the original shareholders agreement on the
establishment of Blue Intercontinental Micro Finance Bank in Nigeria, Blue had
an obligation to subscribe US$7.0 million in equity capital. To date Blue has
subscribed US$2.3 million in cash and other assets. Accordingly, Blue has a
capital commitment to fund its 55% held subsidiary, with a further US$4.7
million.
2. Zambia. The Group is required to capitalise the business with an amount of
R71 million at 28 February 2010. Discussions with the Zambian regulatory
authorities subsequent to the reporting date have permitted a capitalisation of
a portion of the Group loan account to the value of R35 million. It is
envisaged that the remaining capital commitment of R36 million will be provided
through further cash contributions into these operations pursuant to the
Group`s recapitalisation plans.
9. Contingent liabilities
The Group has the following contingent liabilities:
1. There are certain potential legal claims against the Group, the outcome of
which cannot at present be foreseen. The claims estimated below R5.0 million
(2009: None) are not regarded as substantial either on an individual or Group
basis. Provision is made for all liabilities which are expected to materialise.
2. The Group has made third party payments through a subsidiary company on
behalf of the South African operations of approximately R28 million without
following the required exchange control (Excon) approval and reporting process.
The Group has informed the South African Reserve Bank (SARB) of this matter.
The SARB may due to the contravention of the applicable Excon regulation,
impose a penalty on the Group which is currently not quantifiable.
10. Going concern assumption
In the commentary on the Group`s 2010 reviewed provisional results, a number of
key strategic actions aimed at addressing the deterioration in the financial
position of the Group were identified. The most significant of these actions
was a proposed recapitalisation of the Group through the introduction of a new
strategic shareholder.
The Group has incurred a loss of R1 030.6 million for the year ended 28 February
2010. The extent of this loss is so severe that total Group consolidated
liabilities now exceed the consolidated assets by R2.9 million. The Group is in
breach of a number of loan covenants as a result of the deterioration of its
financial condition. The reviewed provisional results have been prepared on a
going concern basis, except to the extent that long-term debt funding has been
disclosed as a current liability, where the covenants or terms on these
facilities have been breached. The Group`s ability to continue as a going
concern is dependent on the successful implementation of the proposed
recapitalisation of the Group through a combination of equity and debt, the
ongoing support of existing key funders and the implementation of an effective
turnaround plan, which includes further cost reductions, improvements in
operational efficiencies and business sophistication, along with the ability to
obtain future funding.
On the 10 June 2010, the Group announced that it had entered into a
Subscription Agreement with the Mayibuye Group (Proprietary) Limited
("Mayibuye"), in terms of which Mayibuye will subscribe for ordinary shares in
the Group, by way of a specific issue of shares for cash at an issue price of
13 cents per Blue ordinary share, for an aggregate subscription consideration
of R163 million. In addition, Mayibuye will provide loan financing on an arm`s
length basis to Blue in the amount of R300 million on commercial terms.
The recapitalisation is subject to a number of conditions precedent, which
include inter alia:
1. Securing irrevocable undertakings from 70% of the shareholders to support
the proposals;
2. Concluding restructuring agreements with debt funders involving the
rescheduling or otherwise of debt facilities including addressing current
covenant breaches; and
3. Obtaining shareholder, as well as all necessary regulatory approvals (as
required).
Following the recapitalisation, Mayibuye will drive the turnaround plan as
detailed in the Forward Looking Statement below. The ability of the Group to
continue as a going concern is dependent on the successful outcome of this
recapitalisation and turnaround plan.
COMMENTARY ON THE RESULTS
Nature of business:
Blue is a pan-African financial services supplier, providing ethical,
innovative and affordable credit solutions to people within Africa. Blue
operates in Botswana, Cameroon, Kenya, Lesotho, Malawi, Namibia, Nigeria,
Rwanda, South Africa, Swaziland, Tanzania, Uganda and Zambia. Blue has been
granted an operating licence in Ghana but operations have not yet commenced.
Since the year-end Blue has suspended operations in Cameroon and Rwanda out of
concern for lower than expected performance, and in the case of Rwanda,
has been compounded by regulatory compliance challenges.
The Group currently employs 1 401 permanent staff over 241 branches across its
operations.
Financial overview:
Blue generated a loss of R1,030.6 million for the year ended 28 February 2010
compared to a profit of R26.9 million in the 2009 financial year. This
translates into a decline in earnings per share from 6.86 cents for 2009 to a
loss of 170.25 cents per share for 2010. Headline earnings per share are
similarly affected declining from 3.67 cents per share to a headline loss of
134.96 cents per share. The following changes to ordinary share capital and
premium during the financial year are reflected as follows:
- Conversion of class C preference shares into 39,779,850 ordinary shares
- Issue of the remaining 2,258,868 treasury shares on the final tranche of the
staff share scheme
The Group`s decline in financial performance during the year is primarily as a
result of:
1. Rapid expansion of the business over the past few years without committed
wholesale funding lines to provide loans to customers across its branch
network. The global shortage of available funding emanating from the impact of
the world economic crisis, which commenced in 2008, together with insufficient
operational cash flows to meet the overall commitments of the business, reduced
the Group`s ability to drive loan book growth.
Overall organisational capacity to cope with the rapid expansion
has proven to be insufficient, highlighting weaknesses in a number of key
business areas.
2. An overall decline in the quantum, quality and performance of the loan
portfolio.
Due to low levels of available liquidity, the overall loan portfolio declined
as cash flows from collections were required to sustain the business instead of
being re-invested into the loan book. New sales for the Group amounted to R690
million for the year compared to R942 million for the 2009 financial year. New
sales are lower than the performing loans maturing, and therefore non-
performing loans comprise a larger percentage of the remaining book. The
performance of the loan portfolio has also not met expectations showing an
increase in non-performing loans from the prior year and a consequent
deterioration in the ageing of the Group`s overall loan advances.
As a result the Group experienced a decline in the overall loan advances
portfolio on a net basis from R1,341.0 million in 2009 to R783.0 million for
2010. The Group has also for the first time introduced a policy of writing off
non-performing loans, resulting in a write off of R360.2 million. In addition a
further provision for credit impairment on loan advances of R142.9 million)
compared to R93.2 million in 2009 was made. This translates to an overall
credit impairment provision of 25.1% on gross loans and advances compared to
10.0% in 2009. The Group continues to enhance its credit provisioning
methodologies as more data and client history becomes available.
The split of credit impairments on loan advances to customers is as follows:
Group
28 Feb 2010 28 Feb 2009 28 Feb 2008
Gross loans and advances
to customers (R`000) 1,122,920 1,490,179 513,508
Allowance for impairment (R`000) (281,236) (147,034) (31,567)
Allowance (%) 25.0% 9.9% 6.1%
South Africa
28 Feb 2010 28 Feb 2009 28 Feb 2008
Gross loans and advances
to customers (R`000) 435,340 658,041 179,736
Allowance for impairment (R`000) (146,224) (106,569) (16,640)
Allowance (%) 33.6% 16.2% 9.3%
Rest of Africa
28 Feb 2010 28 Feb 2009 28 Feb 2008
Gross loans and advances
to customers (R`000) 687,580 832,138 333,772
Allowance for impairment (R`000) (135,012) (40,465) (14,927)
Allowance (%) 19.6% 4.9% 4.5%
3. Key acquisitions (specifically Credit U) were ill timed and expected
business prospects have not materialised. The Group has therefore impaired its
goodwill and intangible assets by R211.5 million. Deferred tax assets have also
been de-recognised to the value of R130 million due to the losses recorded.
Further impairments may be required at the next interim period should the
recapitalisation of the Group, as discussed under the Going Concern and Forward
Looking Statement, not be concluded.
4. Costs have increased disproportionately throughout the Group compared to
revenues from current trading activities. Despite a reduction of approximately
R53 million in cash operating expenses in the second half of the financial
year, this has been insufficient to arrest the overall increase in costs that
have exceeded income growth for the full financial year. The Group has further
impaired the financial asset related to a loan book previously sold by R48.1
million based on a decline in collections on this asset. The overall cost :
income ratio for the Group is now at 119% compared to 77% for the 2009
financial year.
5. The significant weakening in most of the African currencies to the Rand
during the period resulted in a dilution of the Rand based results in the
African countries in which we trade. The Group has changed its accounting
policy regarding the fair value of intra Group balances during the period.
Forex gains and losses on intra Group balances in certain subsidiary companies
are now recorded as part of the net investment by the holding Company and not
directly through the income statement of the subsidiaries. This change resulted
in forex gains and losses, net of taxation of R83.4 million being recorded in
equity during the period. The impact in the comparative period was immaterial
as forex movements were significantly more stable.
6. The strengthening of the Rand and Zambian Kwacha to the USD during the
period resulted in a gain of R60.0 million (2009 comparative period R40 million
loss) on all related un-hedged USD external exposures and was recorded as part
of other operating income. The Group remains committed to hedging all third
party hard currency funding but a decline in available credit lines from
financial institutions to the Group has resulted in the Group being unable
to hedge the remaining exposures during the period.
Forward looking statement:
The Group has impaired goodwill and intangible assets by R211.5m, and
de-recognised deferred tax assets by an amount of R130m. Non-performing loans
and advances of R360.2 million have been written-off in addition to the write-
off of financial assets and trade receivables to the value of R48.1 million
and R42.1 million, respectively, and the Group has further increased its credit
impairment to 25.1% of gross advances. Although these actions together with the
significant trading losses have eroded the net asset position such that the
liabilities now exceed its assets, the Group`s recapitalisation and turnaround
plan provide a solid platform from which to rebuild.
As noted in the Going Concern section, the future of the Group is dependent on
the successful conclusion of the recapitalisation and turnaround plan for the
business.
Mayibuye plans to recapitalise the business and to drive the execution of a
turnaround plan aimed at restoring the Group to profitability in the medium
term through addressing important areas of business and product improvement.
Key actions to be implemented in conjunction with Mayibuye:
1. The cash proceeds of R150 million equity, post the Pinebridge settlement of
R13 million discussed in the post balance sheet events, along with R300 million
loan finance will be used to stabilise the financial position and provide the
funding required to facilitate growth in the business;
2. Mayibuye has significant experience in turnaround strategies for financial
services companies, most notably with its acquisition of Integer. With this
turnaround experience, Mayibuye is expected to assist Blue in right sizing its
operations to sustainable levels such that Blue will be able to return to
profitability. This will inter alia entail further cost reductions. The Group
has delivered approximately R53m of sustainable cost savings during the second
half of the financial year and is on track to exceed the R100m targeted
sustainable costs savings by February 2011;
3. Enhance overall operational performance specifically in collections, risk
management and finance. Mayibuye has significant experience in collecting
debtors` books. This credit collection experience will be of significance when
assisting Blue to realise the maximum value from its impaired loans and
advances. Mayibuye also has relevant experience in credit granting and will be
able to assist Blue in improving its credit granting processes to improve the
performance of its future loan advances;
4. Reconstitute the Group board and management;
5. Restructure current debt facilities with key funders;
6. Assess business segments, product mix and products lines as well as the
introduction of new products in line with overall business optimisation and
capital deployment;
7. Suspend the execution of any further expansion opportunities for the interim
period. The business will focus on organic growth and scalability of its
existing operations;
The Board believes that these strategic actions can restore Group profitability
and ensure that the Group benefits in the future from its market position,
distribution, brand and products on the continent.
CHANGES TO THE BOARD OF DIRECTORS
Mr S Strydom has been appointed as an executive director effective 1 June 2009
and to the position of chief financial office in August 2009. Mr G Chittenden
resigned as an executive director with effect from 31 July 2009. Ms GL Sangudi
has retired as a non-executive director with effect from 1 September 2009,
whilst Ms AR Aime has been appointed as a non-executive director effective 1
September 2009. Mr J French has been appointed as an independent non-executive
director with effect from 10 November 2009. Mr S Twala has been appointed as
independent non-executive chairman of the Group with effect from 1 March 2010.
DIVIDENDS
No dividend has been declared for the year.
POST BALANCE SHEET EVENTS
As outlined in the Going Concern section, the Group announced that it has
entered into a Subscription Agreement with the Mayibuye Group (Proprietary)
Limited ("Mayibuye"). At the time of Blue`s listing on the Alternative Exchange
of the JSE, Pinebridge Global Emerging Markets Partners II, L.P. and Pinebridge
Capital Partners LLC ("Pinebridge") (previously AIG Global Emerging Markets
Partners II, L.P. and AIG Capital Partners LLC, respectively) had agreed to
invest US$15 million in cash in three equal tranches by subscribing for various
classes of redeemable convertible preference shares ("Preference Shares"). As
holder of these Preference Shares, Pinebridge had certain special rights
including special voting rights and rights to anti-dilution relief. The
majority of these special rights persist even after the conversion of the
Preference Shares into Ordinary Shares. In addition, certain of these special
rights are contained in the Articles of Association of the company.
Subject to the agreement with Mayibuye becoming unconditional, the Group and
Pinebridge have agreed a settlement in terms of which Pinebridge will waive all
of its special rights and any claims and obligations of any nature whatsoever
(the "Pinebridge Settlement") against Blue. The settlement amount in respect of
the Pinebridge Settlement has been quantified at R13 million.
Other than the matters noted above, no post balance sheet events were
identified.
DISCLAIMER OF OPINION
The accompanying financial information of the Group has been reviewed by the
Group`s independent auditors, Deloitte & Touche. Their review was conducted in
Accordance with International Standard on Review Engagements 2410, Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the Company`s auditors.
A disclaimer of conclusion has been issued, on the accompanying financial
information as follows:
"Basis for Disclaimer of Conclusion
We draw attention to the provisional financial information which indicates that
the Group incurred a net loss for the year ended 28 February 2010 of R1 030.6
million and that, as at that date, its total liabilities exceeded its total
assets, net of non-controlling interests, by R2.9 million and the Group is in
breach of a number of loan covenants and terms. As indicated in Note 10 to the
provisional financial information, the Group`s ability to return to
profitability is contingent on:
the successful conclusion of a subscription agreement entered into subsequent
to year end which will give rise to the introduction of a new majority
shareholder, the injection of share capital, additional loan funding and the
restructure of current funding arrangements. The agreement is subject to the
fulfilment of a number of conditions precedent, the fulfilment of which is
uncertain at this stage;
the successful implementation of rationalisation plans; and
the ability to raise further funding in the future.
These conditions indicate the existence of material uncertainties which may cast
significant doubt on the Group`s ability to continue as a going concern and
therefore it may be unable to realise its assets and discharge its liabilities
in the normal course of business. In these circumstances, we were unable to
carry out the procedures we considered necessary for our review to conclude
that the going concern assumption is appropriate.
Disclaimer of Conclusion
Based on our review, because of the significance of the matters described in the
Basis for Disclaimer of Conclusion paragraph above, we have not been able to
obtain sufficient appropriate evidence to provide a basis for a conclusion.
Accordingly, we do not express a conclusion on the preliminary financial
information."
A copy of their report is available for inspection at the Company`s registered
office.
For and on behalf of the Board
D van Niekerk S Strydom
Chief Executive Officer Chief Financial Officer
18 June 2009
Directors:
D van Niekerk (CEO); S Strydom (CFO); CB Klopper (COO); WJ Smit
(Legal Director); S Twala*(Chairman); MG Meehan*; MJ Sondiyazi*;
A Steyn*; A Couloubis*; AR Aime*# and J French*#
* non-executive
independent
# United States of America
Registered Office:
Blue Building, 10 Boardwalk Office Park, 107 Haymeadow Street, Faerie Glen,
Pretoria, 0081
PO Box 72041, Lynnwood Ridge, 0040
Auditors:
Deloitte & Touche
Designated Advisor:
Grindrod Bank Limited
Transfer Secretaries:
Link Market Services (Pty) Ltd 11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Company Secretary:
Mrs. Elize Waldeck
Group head office:
Tel: +27 12 990 8400 Fax: +27 86 637 6033
E-mail: blue@blue.co.za
www.blue.co.za
Date: 21/06/2010 07:05:04 Produced by the JSE SENS Department.
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