| Thu 18 Nov 2010, 16:55 | | BFS - Blue Financial Services Limited - Reviewed condensed consolidated interim |
|
BFS
BFS
BFS - Blue Financial Services Limited - Reviewed condensed consolidated interim
financial results for the six months ended 31 August 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 CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS
ENDED 31 AUGUST 2010
Condensed Consolidated Income Statement for the period ended 31 August 2010
Reviewed Restated % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2010
Aug 2010 Aug 2009#
R`000 R`000 R`000
Interest income 150,585 280,295 (46) 454,090
Interest expense (71,743) (98,720) (27) (173,241)
Net interest income 78,842 181,575 (57) 280,849
Administration and 55,809 101,832 (45) 164,790
commission income
Other operating 56,443 101,499 (44) 117,616
income
Operating income 191,094 384,906 (50) 563,255
Net impairment of (77,087) (235,055) (67) (548,811)
loan advances and
receivables
Operating expenses (274,585) (354,731) (23) (733,609)
Goodwill impairments (3,187) - - (210,054)
Loss before taxation (163,765) (204,880) (20) (929,219)
Taxation (4,399) 48,208 >(100) (101,409)
Loss for the period (168,164) (156,672) 7 (1,030,628)
Attributable to:
Equity holders of the (157,882) (152,481) 4 (1,019,871)
parent
Minority interest (10,282) (4,191) >100 (10,757)
(168,164) (156,672) 7 (1,030,628)
Earnings ratios
Loss per share (25.29) (26.11) (3) (170.25)
Headline loss per share (24.87) (26.15) (5) (134.96)
Diluted loss per share (25.29) (26.11) (3) (170.25)
Diluted headline loss (24.87) (26.15) (5) (134.96)
per share
Net asset value per (32.95) 141.08 >(100) (3.11)
share
# Details of changes in accounting policies, restatement and
reclassifications of comparative results are contained in Note 6.
Condensed Consolidated Statement of Comprehensive Income for the period ended 31
August 2010
Reviewed Restated % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2010
Aug 2010 Aug 2009#
R`000 R`000 R`000
Loss for the period (168,164) (156,672) 7 (1,030,628)
Other comprehensive
(loss)/income:
Exchange differences on (30,392) (102,356) (70) (138,635)
translation of foreign
operations
Revaluation of land and - - - 1,660
buildings
Income tax relating to - (20,954) - 512
components of other
comprehensive income
Other comprehensive (30,392) (123,310) (75) (136,463)
income for the period,
net of tax
Total comprehensive loss (198,556) (279,982) (29) (1,167,091)
for the period
Total comprehensive loss
attributable to:
Equity holders of the (188,126) (265,505) (29) (1,145,854)
parent
Minority interest (10,430) (14,477) (28) (21,237)
(198,556) (279,982) (29) (1,167,091)
Condensed Consolidated Statement of Financial Position as at 31 August 2010
Reviewed Audited %
six months year ended change
ended 31 28 Feb
Aug 2010 2010
R`000 R`000
Assets
Cash and cash equivalents 107,007 88,492 21
Loan advances to customers 532,474 783,017 (32)
Trade and other receivables 29,540 35,361 (16)
Inventories 542 - -
Taxation receivable 720 948 (24)
Other financial assets 5,260 7,767 (32)
Property, plant and equipment 75,755 93,845 (19)
Deferred taxation 37,747 34,310 10
Intangible assets 32,275 40,892 (21)
Goodwill 429,993 448,881 (4)
Total Assets 1,251,313 1,533,513 (18)
Equity and Liabilities
Equity
Share capital 928,250 928,250 -
Other reserves (30,019) 445 >(100)
Accumulated loss (1,103,986) (948,107) 16
Deficit attributable to equity (205,755) (19,412) >100
holders of parent
Non-controlling interest 6,099 16,529 (63)
Total Equity (199,656) (2,883) >100
Liabilities
Bank overdraft 73,784 110,659 (33)
Derivative financial liabilities 16,903 13,280 27
Trade and other payables 153,315 149,251 3
Taxation payable 103,857 96,195 8
Finance lease obligations 22,937 19,048 20
Long-term liabilities 1,070,793 1,135,977 (6)
Operating lease liabilities 3,138 3,350 (6)
Deferred taxation 6,242 8,636 (28)
Total Liabilities 1,450,969 1,536,396 (6)
Total Equity and Liabilities 1,251,313 1,533,513 (18)
Condensed Consolidated Statement of Changes in Equity for the period ended 31
August 2010
Share (Accumulate Other
capital d loss)/ reserves
retained
income
R`000 R`000 R`000
Balance at 1 March 2009 - audited 888,566 131,244 67,738
Total comprehensive loss for the - (152,481) (113,024)
period
Functional currency change - (59,527) 59,527
Share-based payment to employees 1,022 1,144 -
Contingency reserve - (944) 944
Balance at 31 August 2009 - restated 889,588 (80,564) 15,185
Balance at 1 March 2009 - audited 888,566 131,244 67,738
Total comprehensive loss for the year - (1,019,871) (125,983)
Functional currency change - (59,527) 59,527
Share-based payment to employees 2,258 (169) -
Redemption of convertible 37,426 - (621)
redeemable preference shares
Contingency reserve - 216 (216)
Business combinations - - -
Balance at 28 February 2010 - audited 928,250 (948,107) 445
Balance at 1 March 2010 - audited 928,250 (948,107) 445
Total comprehensive loss for the - (157,882) (30,244)
period
Share-based payment to employees - 1,783 -
Contingency reserve - 220 (220)
Balance at 31 August 2010 - reviewed 928,250 (1,103,986) (30,019)
Total Non- Total equity
controllin
g interest
R`000 R`000 R`000
Balance at 1 March 2009 - 1,087,548 36,227 1,123,775
audited
Total comprehensive loss for (265,505) (14,477) (279,982)
the period
Functional currency change - - -
Share-based payment to 2,166 - 2,166
employees
Contingency reserve - - -
Balance at 31 August 2009 - 824,209 21,750 845,959
restated
Balance at 1 March 2009 - 1,087,548 36,227 1,123,775
audited
Total comprehensive loss for (1,145,854) (21,237) (1,167,091)
the year
Functional currency change - - -
Share-based payment to 2,089 - 2,089
employees
Redemption of convertible 36,805 - 36,805
redeemable preference shares
Contingency reserve - - -
Business combinations - 1,539 1,539
Balance at 28 February 2010 - (19,412) 16,529 (2,883)
audited
Balance at 1 March 2010 - (19,412) 16,529 (2,883)
audited
Total comprehensive loss for (188,126) (10,430) (198,556)
the period
Share-based payment to 1,783 - 1,783
employees
Contingency reserve - - -
Balance at 31 August 2010 - (205,755) 6,099 (199,656)
reviewed
Condensed Consolidated Statement of Cash Flows for the period ended 31 August
2010
Reviewed Restated % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2010
Aug 2010 Aug 2009#
R`000 R`000 R`000
Cash flows from
operating activities
Cash generated from/ 150,500 (24,850) >(100) 25,222
(used in) operations
Interest expense (71,743) (98,720) (27) (173,241)
Tax paid (984) (24,466) (96) (42,805)
Net cash from/(used in) 77,773 (148,036) >(100) (190,824)
operating activities
Cash flows from
investing activities
Purchase of property, (1,494) (20,618) (93) (30,524)
plant and equipment
Sale of property, 3,063 226 >100 3,416
plant and equipment
Other investing 2,507 (3,657) >(100) (5,355)
activities*
Net cash from 4,076 (24,049) >(100) (32,463)
investing activities
Cash flows from
financing activities
Net proceeds from long- (29,534) 105,926 >(100) 122,678
term liabilities
Net finance lease (1,133) (2,348) (52) 1,182
receipts/(payments)
Net cash from (30,667) 103,578 >(100) 123,860
financing activities
Total net cash movement 51,182 (68,507) >100 (99,427)
for the period
Net cash at the (22,167) 94,393 >(100) 94,393
beginning of the period
Effect of exchange 4,208 (9,020) >100 (17,133)
rates+
Total net cash at end of 33,223 16,866 97 (22,167)
the period
Segment report
Reviewed six months 31 Aug 2010
South Africa Botswana Zambia Uganda
R`000 R`000 R`000 R`000
Interest income 70,464 35,675 15,923 8,630
- External customers 43,691 20,260 15,656 8,630
- Inter - segment interest 26,773 15,415 267 -
Interest expense (34,866) (5,944) (11,019) (10,363)
Net interest income 35,598 29,731 4,904 (1,733)
Administration and commission 51,221 5,735 9,694 3,140
income
- External customers 9,194 5,735 9,694 3,140
- Inter - segment interest 42,027 - - -
Other operating income 50,229 10,861 4,303 519
Operating income 137,048 46,327 18,901 1,926
Net impairment of loan advances (37,425) (14,967) 1,448 (4,037)
and receivables
Operating expenses (146,812) (15,480) (25,404) (21,618)
Goodwill impairments - - (3,187) -
Management operating (47,189) 15,880 (8,242) (23,729)
(loss)/profit
Segment result: (Loss)/profit (47,189) 15,880 (8,242) (23,729)
before taxation
Taxation (2,967) (1,770) 3,871 -
(Loss)/profit after taxation (50,156) 14,110 (4,371) (23,729)
Net investment in foreign - - (120) (14,094)
operation adjustment
Management (loss)/profit after (50,156) 14,110 (4,491) (37,823)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 10,456 415 568 200
and equipment
Amortisation of intangible 6,413 432 175 30
assets
Segment assets 216,088 148,280 114,164 57,360
Segment liabilities (316,691) (206,367 (135,276) (115,830
) )
Non-current assets other than
financial instruments and
deferred taxation 344,725 71,738 42,489 30,824
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 10,964 9,438 8 5,455
- External customers 10,964 9,438 - 5,455
- Inter - segment interest - - 8 -
Interest expense (9,234) (8,428) (14,379) (3,065)
Net interest income 1,730 1,010 (14,371) 2,390
Administration and commission 6,508 2,227 - 2,275
income
- External customers 6,508 2,227 - 2,275
- Inter - segment interest - - - -
Other operating income 5,753 4,763 11,516 1,009
Operating income 13,991 8,000 (2,855) 5,674
Net impairment of loan advances (1,618) 2,020 - (13,830)
and receivables
Operating expenses (29,435) (15,282) (7,259) (13,160)
Goodwill impairments - - - -
Management operating (17,062) (5,262) (10,114) (21,316)
(loss)/profit
Segment result: (Loss)/profit (17,062) (5,262) (10,114) (21,316)
before taxation
Taxation (3) 3 (1,957) (5)
(Loss)/profit after taxation (17,065) (5,259) (12,071) (21,321)
Net investment in foreign (15,972) (5,096) - (1,910)
operation adjustment
Management (loss)/profit after (33,037) (10,355) (12,071) (23,231)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 359 514 - 1,129
and equipment
Amortisation of intangible 30 - - -
assets
Segment assets 63,329 68,305 344,559 59,741
Segment liabilities (105,858) (103,703) (756,595) (48,178)
Non-current assets other than
financial instruments and
deferred taxation 14,682 2,424 103,874 5,460
CMA Other Elimination Consolidated
R`000 R`000 R`000 R`000
Interest income 31,498 4,993 (42,463) 150,585
- External customers 31,498 4,993 - 150,585
- Inter - segment interest - - (42,463) -
Interest expense (8,578) (8,330) 42,463 (71,743)
Net interest income 22,920 (3,337) - 78,842
Administration and commission 15,707 1,329 (42,027) 55,809
income
- External customers 15,707 1,329 - 55,809
- Inter - segment interest - - (42,027) -
Other operating income 802 636 (33,948) 56,443
Operating income 39,429 (1,372) (75,975) 191,094
Net impairment of loan (5,961) (2,717) - (77,087)
advances and receivables
Operating expenses (12,596) (20,570) 33,031 (274,585)
Goodwill impairments - - - (3,187)
Management operating 20,872 (24,659) (42,944) (163,765)
(loss)/profit
Segment result: (Loss)/profit 20,872 (24,659) (42,944) (163,765)
before taxation
Taxation (3,573) (7) 2,009 (4,399)
(Loss)/profit after taxation 17,299 (24,666) (40,935) (168,164)
Net investment in foreign - (8,899) 46,091 -
operation adjustment
Management (loss)/profit 17,299 (33,565) 5,156 (168,164)
after taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, 640 624 - 14,905
plant and equipment
Amortisation of intangible 89 105 - 7,274
assets
Segment assets 125,424 37,374 16,689 1,251,313
Segment liabilities (87,772) (107,964) 533,265 (1,450,969)
Non-current assets other than
financial instruments and
deferred taxation 19,415 13,081 (110,689) 538,023
Audited 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
- External customers 194,604 45,768 38,841 14,319
- Inter - segment interest 65,792 13,295 5,880 -
Interest expense (105,646) (22,923) (21,394) (15,206)
Net interest income 154,750 36,140 23,327 (887)
Administration and commission 172,649 8,605 10,623 5,461
income
- External customers 79,240 8,605 10,623 5,461
- Inter - segment interest 93,409 - - -
Other operating income 85,928 25,110 8,482 -
Operating income 413,327 69,855 42,432 4,574
Net impairment of loan advances (357,828) (43,501) (15,002) (17,626)
and receivables
Operating expenses (482,758) (49,820) (66,926) (50,724)
Goodwill impairments (138,816) - (50,488) -
Management operating (566,075) (23,466) (89,984) (63,776)
(loss)/profit
Segment result: (Loss)/profit (566,075) (23,466) (89,984) (63,776)
before taxation
Taxation (102,129) (1,144) 6,456 (4,534)
(Loss)/profit after taxation (668,204) (24,610) (83,528) (68,310)
Net investment in foreign - - 1,721 (20,984)
operation adjustment
Management (loss)/profit after (668,204) (24,610) (81,807) (89,294)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 27,877 572 1,926 421
and equipment
Amortisation of intangible 11,138 920 1,033 70
assets
Segment assets 591,502 121,907 183,597 39,979
Segment liabilities (773,916) (241,045) (270,830) (112,606)
Non-current assets other than
financial instruments and
deferred taxation 382,626 75,863 68,683 36,198
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 40,076 16,554 13,492 34,181
- External customers 40,076 16,554 13,492 34,181
- Inter - segment interest - - - -
Interest expense (16,478) (11,780) (24,451) (4,134)
Net interest income 23,598 4,774 (10,959) 30,047
Administration and commission 4,725 5,343 - 6,752
income
- External customers 4,725 5,343 - 6,752
- Inter - segment interest - - - -
Other operating income 26 236 464 -
Operating income 28,349 10,353 (10,495) 36,799
Net impairment of loan advances (14,107) (26,837) - (26,620)
and receivables
Operating expenses (53,711) (49,108) (7,420) (31,748)
Goodwill impairments - - - -
Management operating (39,469) (65,592) (17,915) (21,569)
(loss)/profit
Segment result: (Loss)/profit (39,469) (65,592) (17,915) (21,569)
before taxation
Taxation (5,897) (445) (1,402) (1,522)
(Loss)/profit after taxation (45,366) (66,037) (19,317) (23,091)
Net investment in foreign (23,357) (23,143) - (5,139)
operation adjustment
Management (loss)/profit after (68,723) (89,180) (19,317) (28,230)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 858 911 - 1,765
and equipment
Amortisation of intangible assets 70 - - -
Segment assets 76,806 65,433 342,140 80,494
Segment liabilities (123,524) (93,003) (724,726) (47,418)
Non-current assets other than
financial instruments and
deferred taxation 17,961 2,919 67,322 6,832
CMA Other Eliminati Consolidated
on
R`000 R`000 R`000 R`000
Interest income 43,139 13,116 (84,967) 454,090
- External customers 43,139 13,116 - 454,090
- Inter - segment interest - - (84,967) -
Interest expense (25,490) (10,139) 84,400 (173,241)
Net interest income 17,649 2,977 (567) 280,849
Administration and commission 42,415 1,626 (93,409) 164,790
income
- External customers 42,415 1,626 - 164,790
- Inter - segment interest - - (93,409) -
Other operating income - - (2,630) 117,616
Operating income 60,064 4,603 (96,606) 563,255
Net impairment of loan advances (33,882) (13,408) - (548,811)
and receivables
Operating expenses (54,669) (49,299) 162,574 (733,609)
Goodwill impairments - (20,750) - (210,054)
Management operating (28,487) (78,854) 65,968 (929,219)
(loss)/profit
Segment result: (Loss)/profit (28,487) (78,854) 65,968 (929,219)
before taxation
Taxation 7,154 (2,698) 4,752 (101,409)
(Loss)/profit after taxation (21,333) (81,552) 70,720 (1,030,628)
Net investment in foreign - (12,474) 83,376 -
operation adjustment
Management (loss)/profit after (21,333) (94,026) 154,096 (1,030,628)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 1,414 1,231 - 36,975
and equipment
Amortisation of intangible 239 149 - 13,619
assets
Segment assets 180,930 33,333 (182,608) 1,533,513
Segment liabilities (164,647) (94,000) 1,109,319 (1,536,396)
Non-current assets other than
financial instruments and
deferred taxation 20,143 15,337 (110,266) 583,618
Restated six months 31 Aug 2009
South Africa Botswana Zambia Uganda
R`000 R`000 R`000 R`000
Interest income 167,178 36,412 28,690 8,199
- External customers 110,040 36,412 28,690 8,199
- Inter - segment interest 57,138 - - -
Interest expense (69,276) (14,323) (16,977) (5,728)
Net interest income 97,902 22,089 11,713 2,471
Administration and commission 67,330 19,554 5,828 3,443
income
- External customers 49,050 19,554 5,828 3,443
- Inter - segment interest 18,280 - - -
Other operating income 73,024 1,510 20,672 4
Operating income 238,256 43,153 38,213 5,918
Net impairment of loan advances (211,094) (5,921) (309) (6,105)
and receivables
Operating expenses (242,174) (9,812) (33,671) (32,562)
Goodwill impairments - - - -
Management operating (215,012) 27,420 4,233 (32,749)
(loss)/profit
Segment result: (Loss)/profit (215,012) 27,420 4,233 (32,749)
before taxation
Taxation 58,651 100 26 6,176
(Loss)/profit after taxation (156,361) 27,520 4,259 (26,573)
Net investment in foreign - - 2,308 15,432
operation adjustment
Management (loss)/profit after (156,361) 27,520 6,567 (11,141)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 14,762 438 598 256
and equipment
Amortisation of intangible 5,569 467 334 35
assets
Segment assets 1,806,385 345,635 207,867 63,921
Segment liabilities (1,011,074) (261,914) (155,176) (92,588)
Non-current assets other than
financial instruments and
deferred taxation 494,565 75,448 118,618 36,251
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 22,143 15,771 - 6,581
- External customers 22,143 15,771 - 6,581
- Inter - segment interest - - - -
Interest expense (6,594) (5,042) (20,093) (1,944)
Net interest income 15,549 10,729 (20,093) 4,637
Administration and commission 3,954 3,233 - 1,089
income
- External customers 3,954 3,233 - 1,089
- Inter - segment interest - - - -
Other operating income - - 6,284 -
Operating income 19,503 13,962 (13,809) 5,726
Net impairment of loan advances (6,766) 1,128 - (864)
and receivables
Operating expenses (40,496) (29,724) (61) (17,220)
Goodwill impairments - - - -
Management operating (27,759) (14,634) (13,870) (12,358)
(loss)/profit
Segment result: (Loss)/profit (27,759) (14,634) (13,870) (12,358)
before taxation
Taxation 1,385 4,803 4,463 4,018
(Loss)/profit after taxation (26,374) (9,831) (9,407) (8,340)
Net investment in foreign 14,750 14,172 - 2,373
operation adjustment
Management (loss)/profit after (11,624) 4,341 (9,407) (5,967)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 484 440 - 684
and equipment
Amortisation of intangible 37 - - -
assets
Segment assets 85,397 116,151 397,123 84,677
Segment liabilities (113,463) (90,269) (385,548) (37,245)
Non-current assets other than
financial instruments and
deferred taxation 18,677 2,722 - 5,208
CMA Other Elimination Consolidat
ed
R`000 R`000 R`000 R`000
Interest income 45,695 6,764 (57,138) 280,295
- External customers 45,695 6,764 - 280,295
- Inter - segment interest - - (57,138) -
Interest expense (12,317) (3,564) 57,138 (98,720)
Net interest income 33,378 3,200 - 181,575
Administration and 14,269 1,412 (18,280) 101,832
commission income
- External customers 14,269 1,412 - 101,832
- Inter - segment interest - - (18,280) -
Other operating income - 822 (817) 101,499
Operating income 47,647 5,434 (19,097) 384,906
Net impairment of loan (2,317) (2,807) - (235,055)
advances and receivables
Operating expenses (18,070) (26,972) 96,031 (354,731)
Goodwill impairments - - - -
Management operating 27,260 (24,345) 76,934 (204,880)
(loss)/profit
Segment result: 27,260 (24,345) 76,934 (204,880)
(Loss)/profit before
taxation
Taxation (10,545) (1,767) (19,102) 48,208
(Loss)/profit after taxation 16,715 (26,112) 57,832 (156,672)
Net investment in foreign - 13,516 (62,551) -
operation adjustment
Management (loss)/profit 16,715 (12,596) (4,719) (156,672)
after taxation
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property, 773 637 - 19,072
plant and equipment
Amortisation of intangible 51 124 - 6,617
assets
Segment assets 237,303 37,821 (954,613) 2,427,667
Segment liabilities (181,566) (72,421) 819,556 (1,581,708
)
Non-current assets other
than financial instruments
and deferred taxation 21,549 36,068 - 809,106
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" comprises 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.
BASIS OF PREPARATION
The condensed consolidated interim financial results of the Group for the six
month period ended 31 August 2010, comprise the company and its subsidiaries.
These reviewed interim financial results have been prepared in accordance with
the recognition and measurement criteria of IFRS, interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC), the AC 500
standards as issued by the Accounting Practices Board, International Accounting
Standard: Interim Financial Reporting (IAS 34), the JSE listing requirements and
the South African Companies Act. In the preparation of these interim 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 34 Interim Financial Reporting (Improvements effective for annual periods
beginning on or after 1 January 2011, early adopted), refer Note 7.
Refer Note 6 for detail disclosure and impact of restatements and
reclassifications.
1. Other operating income
Reviewed Restated Audited
six months six months year
ended 31 ended 31 ended 28
Aug 2010 Aug 2009 Feb 2010
R`000 R`000 R`000
Net mobile revenue 5,261 21,031 26,790
Profit on disposal of non-current 582 226 195
assets
Profit on exchange differences 39,812 78,612 81,941
Other 10,788 1,630 8,690
56,443 101,499 117,616
Net mobile revenue comprise: 5,261 21,031 26,790
Gross mobile and related revenue 24,143 47,691 70,140
Subscriptions and cost of sales (18,882) (26,660) (43,350)
`Recoveries` on written-off loans, previously disclosed as part of `other
operating income` was reclassified as part of `net impairment of loan advances
and receivables`.
2. Loan advances to customers
Reviewed six Audited
months ended year ended
31 Aug 2010 28 Feb 2010
R`000 R`000
Gross loan advances to customers 897,394 1,122,920
Less: Deferred initiation fees (38,349) (58,667)
Less: Allowance for impairment of loan (326,571) (281,236)
advances
532,474 783,017
Movement on allowance for impairment
Opening balance (281,236) (147,034)
Net charge for the period (62,885) (142,924)
Foreign exchange movement 17,550 8,722
(326,571) (281,236)
Analysis of gross loan advances by
territory:
South Africa 389,939 435,340
Rest of Africa 507,455 687,580
897,394 1,122,920
Analysis of impairment on loan
advances by territory:
South Africa (176,899) (146,224)
Rest of Africa (149,672) (135,012)
(326,571) (281,236)
3. Goodwill
Reviewed six months 31 August 2010
Cost/ Accumulated Carrying
valuation impairment value
R`000 R`000 R`000
Goodwill 687,167 (257,174) 429,993
Audited year ended 28 February 2010
Cost/ Accumulated Carrying
valuation impairment value
Goodwill 702,868 (253,987) 448,881
Reconciliation of goodwill
Reviewed six months ended 31 Aug 2010
Opening Impairment Foreign Total
balance loss exchange
movements
R`000 R`000 R`000 R`000
Goodwill 448,881 (3,187) (15,701) 429,993
Audited year ended 28 Feb 2010
Opening Impairment Foreign Total
balance loss exchange
movements
R`000 R`000 R`000 R`000
Goodwill 703,274 (210,054) (44,339) 448,881
4. Long-term liabilities
Contractual repayment profile of interest bearing debt:
Less than 1 2-5 Years +5 Years Total
Year
R`000 R`000 R`000 R`000
31 Aug 2010* (1,047,817) (5,467) (17,509) (1,070,793)
28 Feb 2010 (691,148) (298,497) (146,332) (1,135,977)
*Refer Note 8
Included as part of Long-term liabilities - owing to related parties:
Reviewed six Audited
months ended year ended
31 Aug 2010 28 Feb 2010
R`000 R`000
Short-term loan from D Van Niekerk 3,421 3,289
Funding loan from Credit U shareholders 1,184 2,520
Overdraft funding from ABSA Limited 37,348 37,425
Funding loan from International Finance 64,341 63,587
Corporation
5. Reconciliation of headline loss
Reviewed Restated Audited
six months six months year ended
ended 31 ended 31 28 Feb 2010
Aug 2010 Aug 2009
R`000 R`000 R`000
Loss attributable to ordinary (157,882) (152,481) (1,019,871)
equity holders of the parent
entity
Non headline items:
Net (profit)/loss on disposal (582) (226) 758
of non-current assets
Goodwill impairment 3,187 - 210,054
Intangible asset impairment - - 1,160
Total tax effects of - - (544)
adjustments
Headline loss (155,277) (152,707) (808,443)
Number of shares in issue (net 624.37 584.23 624.37
of treasury shares) in millions
Weighted number of shares in 624.37 584.00 599.04
issue in millions
Diluted weighted number of 627.37 627.90 626.89
shares in issue in millions
6. Restatement and reclassifications of comparative results
The restatement and reclassification of 31 August 2009 comparative results stems
directly from the adjustments to the 28 February 2009 financial results. No
additional restatements or reclassifications occurred during the period under
review.
As a result of the above restatements, loss per share previously reported of
27.07 cents per share was amended to 26.11 per share.
Previously Investment Preference Loan book
reported recognition share conversion
classifica
tion
R`000 R`000 R`000 R`000
6.1 6.2 6.3
Reconciliation - 31 August 2009
Income Statement
Interest income (293,301) - - 13,006
Interest expense 100,902 - - -
Other operating (103,167) - (10,828) -
income
Operating 360,352 (2,070) - -
expenses
Taxation (35,743) (7,790) - (3,030)
Net loss for the 162,266 (9,860) (10,828) 9,976
period (loss
after taxation)
Retained (179,181) 17,525 17,864 28,879
earnings -
opening balance
Statement of Financial Position
Loan advances to 1,216,573 - - (49,864)
customers
Deferred tax 191,782 14,018 - 3,164
(net)
Share capital (927,014) - 37,426 -
Other reserves 3,567 (23,241) (5,444) (2,206)
Accumulated loss 38,221 7,665 7,036 38,855
Taxation payable (131,781) 1,558 - 10,051
Long-term (1,185,931) - (39,018) -
liabilities
Effective Net Balance as
interest investment restated
accrual in foreign
operation
R`000 R`000 R`000
6.4 6.5
Reconciliation - 31 August 2009
Income Statement
Interest income - - (280,295)
Interest expense (2,182) - 98,720
Other operating income 12,496 - (101,499)
Operating expenses - (3,551) 354,731
Taxation (2,888) 1,243 (48,208)
Net loss for the period (loss 7,426 (2,308) 156,672
after taxation)
Retained earnings - opening (6,500) (9,831) (131,244)
balance
Statement of Financial Position
Loan advances to customers - - 1,166,709
Deferred tax (net) 971 - 209,935
Share capital - - (889,588)
Other reserves - 12,139 (15,185)
Accumulated loss 926 (12,139) 80,564
Taxation payable (611) - (120,783)
Long-term liabilities (1,286) - (1,226,235)
Restatements impacting Net Loss/Profit
6.1 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 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 the foreign currency translation reserve of
R23.2 million on intergroup flow of funds, related to the purchase of the
company, which was previously recorded as part of profit and loss with related
deferred taxation recognition.
6.2 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 long-term
liabilities, as the ability of the holder of the instrument to redeem or convert
at its 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 R10.8 million for the period ended 31
August 2009 relates to the foreign exchange gain on remeasurement of the foreign
denominated liabilities up to the relevant conversion into equity at the end of
the interim reporting period.
6.3 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 R49.9 million and R13.0 million
respectively for the period ended 31 August 2009.
6.4 Effective interest accrual
The Group has restated the accrual of interest on long-term 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 long term
liabilities and unrealised foreign exchange on remeasurment of R2.2 million and
R12.5 million respectively for the period ended 31 August 2009.
6.5 Net investment in foreign operation
The Group adopted IAS 21 "The Effects of Changes in Foreign Exchange Rates"
related to `net investment in a foreign operation` for the interim period ended
31 August 2009. As a direct result of the restatement related to the Nedfin
Limited investment classification, (refer 6.1) an amendment was made to the
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).
7. Changes in accounting policies - early adoption of improvements to IFRS
Interim financial reporting and presentation
The Group has elected to early adopt the improvements effective for annual
periods beginning on or after 1 January 2011, related to the disclosure about
significant events and transactions in interim periods that provide an update of
the relevant information presented in the most recent annual financial report.
8. Long-term liability covenants
A debt rescheduling agreement, which is conditional on the conclusion of the
recapitalisation of the Group, was concluded with major funders during September
2010. The debt rescheduling agreement, which plays a significant part of the
process of restructuring and recapitalisation of the Group, has the effect of
ring fencing debt facilities and establishing a 36 month moratorium on principal
payments to these funders. As the contractual terms of these loans were not
remedied before the reporting date, the outstanding facilities were classified
as current and payable.
9. Commitments and contingencies
Commitments
Blue Intercontinental Microfinance Bank Limited
In terms of the original shareholders agreement concluded on the formation of
Blue Intercontinental Micro Finance Bank Limited in Nigeria, the Group had an
obligation to subscribe for US$7.0 million in equity capital. To date the Group
has subscribed for US$1.0 million in cash and a further US$1.3 million
capitalisation via the intergroup loan. Accordingly, the Group has a capital
commitment to fund its 55% held subsidiary, with a further US$4.7 million.
The Group is currently in discussions with its fellow shareholders in Nigeria,
aimed at addressing certain shareholding and operational matters that have been
raised by the Central Bank of Nigeria following its review of the entity and
industry during 2009. These discussions could result in a change in shareholding
in the operation and could affect the ability of the Group to recover costs
incurred on behalf of the Nigerian subsidiary, as well as its commitment to
contribute capital to this subsidiary.
Blue Financial Services Zambia Limited
The Group was required to capitalise its Zambian subsidiary with an amount of
R71 million at 28 February 2010. The Zambian regulatory authorities have
permitted a capitalisation of a portion of the Group loan account to the value
of R35 million, which was concluded during the interim period. It is envisaged
that the remaining capital commitment will be provided through a cash
contribution of R15 million and a further capitalisation of the Group loan
account.
Contingencies
South African Reserve Bank
As reported at 28th February 2010, during previous financial years the Group
made third party payments of approximately R28 million through a subsidiary
company, on behalf of the South African operations, without following the
required exchange control (Excon) reporting process. The Group has made full
disclosure to 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
The Group`s liabilities exceed its assets by R205.8 million. The Group is in
breach of a number of loan covenants at the reporting date. The results have
been prepared on a going concern basis.
During the period, the Group focused on the following key strategic actions
aimed at sustaining the Group by arresting the decline in financial performance
and providing a sound platform from which the business can be positioned for
growth in the future:
- Aggressive cost reduction initiatives aimed at right-sizing the organisation
and establishing a fit for purpose structure;
- Conclusion of a debt rescheduling agreement with the majority of funders to
address covenant breaches and improve liquidity. The agreement ring fences debt
facilities and establishes a 36 months moratorium on principal payments to these
funders. At term, any shortfall between the outstanding obligations and loan
advances to customers designated as security for these liabilities will be
settled through an equity issue;
- Recapitalisation of the Group and the introduction of a new strategic
shareholder;
- Enhancements in credit granting and collection processes; and
- Improvement of financial reporting and corporate governance throughout the
Group.
On the 29 October 2010, shareholders approved the transaction which will result
in Mayibuye Group (Proprietary) Limited ("Mayibuye"), becoming the controlling
shareholder through a specific issue of shares for cash of R163 million. In
addition, Mayibuye (or its nominees) will make further capital of up to R300
million available to the Group to develop a new loan advances book.
This recapitalisation is subject to the fulfilment or waiver (as the case may
be) of the remaining key conditions precedent, namely:
- Final approval by the Zambian competition authority following the
unconditional interim authorisation already received; and
- Approval by the other lenders, who are party to the debt rescheduling
agreement, of the Renaissance Africa Master Fund convertible loan agreement
entered into.
The Group`s ability to continue as a going concern is dependent on:
- The successful implementation of the recapitalisation of the Group through a
combination of equity and debt capital;
- The implementation of an effective turnaround plan, which includes further
cost reductions, increases in operational efficiencies and business
sophistication;
- The continued support of funders not party to the debt rescheduling agreement;
and
- The ability to access future funding.
11. Subsequent events
On 22 October 2010, the Lesotho Court of Appeal passed a judgement in accordance
with which all fees and charges that relate to money lending agreements that
have been concluded in terms of the Money Lender Act 6 of 1993 are limited to a
rate of 25% per annum. The Group is currently reviewing the judgement and its
impact.
Pinebridge agreement
On 27 October 2010, an agreement was entered into between Mayibuye, Pinebridge
Global Emerging Markets Partners II, L.P. ("Pinebridge"), the Group and certain
Group Companies. The agreement deals with the following key matters:
- As a result of a directive issued by the Central Bank of Nigeria, Pinebridge
is required to transfer all of the shares, which it acquired in the share
capital of Blue Intercontinental Microfinance Bank Nigeria from the Group in
2008, back to the Group. The Group will therefore obtain a further 10% stake
in the Nigerian operations for a purchase consideration equal to the price
originally paid by Pinebridge being USD5 million, plus interest thereon at 8.5%
per annum from the date of the original sale agreement; and
- As a result of the restatement of the 2009 annual financial statements, the
number of shares in the Company allotted and issued to Pinebridge pursuant to
the conversion of the Class C Preference Shares was incorrect. As a result an
additional 22,731,279 Blue ordinary shares are required to be issued to
Pinebridge. Assuming a share price of 13c per share, the value of this claim is
R2.95 million.
The matters above may be settled through the issue of shares to Pinebridge. This
would be subject to the Company obtaining all necessary shareholder and
regulatory approvals, failing which they will be settled in cash in accordance
with the principles contained in the debt rescheduling agreement.
Any obligations arising from the above may result in Mayibuye receiving warranty
shares in terms of the subscription agreement. The extent of the warranty
shares to be issued will be determined as follows:
- With regard to the 10% stake in the Nigerian operations, a warranty obligation
can only occur to the extent that the fair value of the 10% acquired is less
than the price paid; and
- In respect of the Class C conversion, the obligation will be number of shares
multiplied by the applicable share price.
General Meeting of Shareholders on 29 October 2010
The results of the ordinary and special resolutions accepted were published on
SENS on 29 October 2010. All resolutions were passed by shareholders.
Other than the matters noted above, no subsequent events were identified.
12. COMMENTARY ON THE RESULTS
Nature of business:
The Group is a pan-African financial services provider of ethical, innovative
and affordable credit solutions to people within Africa. Blue operated in
Botswana, Cameroon, Kenya, Lesotho, Malawi, Namibia, Nigeria, Rwanda, South
Africa, Swaziland, Tanzania, Uganda and Zambia.
Financial overview:
The Group has decreased its loss before taxation by 20.1% from R204.9 million in
the comparative period to R163.8 million for the six months ended 31 August
2010. Net cash flows from operating activities increased by 152.5% from an
outflow of R148.0 million in the comparative period to an inflow of R77.8
million. These improvements in financial performance were achieved despite a
significant decline in new loan advances to customers due to the Group`s current
liquidity constraints. The Group was unable to raise any new funding during the
period compared to the R431 million raised in the comparative period.
Interest income and administration and commission income declined by 46.3% and
45.2% respectively with operating costs reflecting a decrease of 22.6% when
compared to the comparative period. The full impact of operating cost reductions
already achieved will only become fully evident on the release of the full year
and August 2011 interim period financial results. The Group has reduced its
monthly cash costs from R53 million in the comparative period to below R30
million at the interim date and these are now below R25 million at the date of
this report. The Group will exceed its target of achieving R100 million
sustainable cash cost savings by February 2011. Weakening in most of the African
currencies to the Rand during the period continues to provide challenging
trading conditions, whilst the Group benefits from the Rands strength against
the currencies of its foreign funding lines. The Group has not brought to
account the majority of deferred taxation assets that it should be able to
realise as it returns to profitability.
Net loan advances to customers declined by R250.5 million or 32.0% from the
prior year-end. This decline has a negative impact when comparing the credit
impairments as a percentage of gross loan advances to customers, which increased
to 36.39% from 24.04% for the comparative interim period and 25.05% as at 28
February 2010. Credit impairments have declined in absolute terms by 67.2% when
compared to the corresponding previous period. The credit impairments on loan
advances to customers are summarised as follows:
South Africa
31 Aug 28 Feb 31 Aug
2010 2010 2009
R`000 R`000 R`000
Gross loan advances to customers 389,939 435,340 721,140
Credit impairment (176,899) (146,224) (319,258)
Credit impairment (%) 45.37% 33.59% 44.27%
Rest of Africa
31 Aug 28 Feb 31 Aug
2010 2010 2009
R`000 R`000 R`000
Gross loan advances to customers 507,455 687,580 835,911
Credit impairment (149,672) (135,012) (55,105)
Credit impairment (%) 29.49% 19.64% 6.59%
Total
31 Aug 28 Feb 31 Aug
2010 2010 2009
R`000 R`000 R`000
Gross loan advances to customers 897,394 1,122,920 1,557,051
Credit impairment (326,571) (281,236) (374,363)
Credit impairment (%) 36.39% 25.05% 24.04%
The Group is confident that the impact of the skills and expertise that the
Mayibuye transaction brings to the Group in the form of improved credit granting
and collection processes will further enhance the quality of the loan portfolio
in future periods.
The changes in trading activity, cost reductions and operational enhancements
described above, translate into a decrease in loss per share from 26.11 cents
for 2009 to a loss of 25.29 cents per share for 2010. The headline loss per
share decreased from 26.15 cents per share to 24.87 cents per share.
FORWARD LOOKING STATEMENT
The envisaged recapitalisation of the Group on an improved operational platform
now provides the impetus to grow the business and return to profitability. On
the conclusion of the recapitalisation transaction, Mayibuye will drive the
turnaround plan for the Group with the objective of achieving profitability
within 18 months of the transaction. Key components of the turnaround plan
include:
- Further cost reductions aimed at reducing the Group`s cash operating
expenditure to below R 20 million per month by the first quarter of the 2011
calendar year;
- Enhancements in the credit granting and collections processes utilising the
expertise of Mayibuye group companies;
- Controlled growth in loan advances to customers through the utilisation of the
equity and debt capital provided as part of the Mayibuye transaction;
- A specific focus on improvements in customer service;
- Introduction of new complementary service offerings to customers;
- Improvements in governance and compliance structures including the
reconstitution of the board of directors and key management; and
- An increase in overall operational efficiencies and business sophistication.
The board is confident that these actions will restore the Group to
profitability and ensure that the Group remains well positioned to benefit from
its market position, distribution, brand and products on the continent.
CHANGES TO THE BOARD OF DIRECTORS
Mr D van Niekerk resigned as executive director and CEO on 30 July 2010. Mr. S
Twala (Chairman of the board) assumed the role of acting CEO from 2 August 2010.
DIVIDENDS
No dividend has been declared for the period under review.
REVIEW CONCLUSION
The accompanying financial information of the Group up to and including note 11
has been reviewed by the Group`s independent auditors, Deloitte & Touche. An
unqualified review conclusion has been issued, however an emphasis of matter was
added to the review conclusion expressed on the accompanying financial
information as follows:
"Without qualifying our review conclusion, we draw attention to the interim
financial information which indicates that the Group incurred a net loss of
R168.2 million for the period ended 31 August 2010 and, as at that date, the
Group`s total liabilities exceeded its total assets, by R205.8 million and the
Group is in breach of a number of loan covenants and terms.
As indicated in Note 10 to the interim financial information, the Group`s
ability to continue as a going concern is contingent on:
- The successful conclusion of the share subscription agreement entered into
subsequent to period end which will bring effect to the implementation of the
proposed recapitalisation of the Group through a combination of equity and debt
capital and the rescheduling of the majority of debt facilities;
- The successful implementation of an effective turnaround plan, which includes
further cost reductions and increases in operational efficiencies; and
- The continued support of funders not forming part of the debt rescheduling
agreement and the ability to access future funding.
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 it liabilities in
the normal course of business."
Forward-looking statement
This announcement contains certain forward-looking statements with respect to
the financial condition and results of operations of Blue Financial Services
Limited and its group companies, which by their nature involve risk and
uncertainty because they relate to events and depend on circumstances that may
or may not occur in the future. Any forward-looking statement included in this
announcement has not been reviewed or reported on by the Group`s independent
auditors.
The full review report is available for inspection at Blue`s registered office.
For and on behalf of the Board
S Twala S Strydom
Chairman Chief Financial Officer
18 November 2010
Directors:
S Twala *(Chairman and acting CEO); S Strydom (CFO); CB Klopper (COO); WJ Smit
(Legal); A Steyn*; A Couloubis*; AR Aime*; MG Meehan*; and J French*+
On the fulfillment of the remaining conditions precedent, the composition of the
board of directors, will be as follows:
J Meiring (CEO); S Strydom (CFO); S Twala *(Chairman);
R Emslie *(Deputy Chairman); A Ber*; A Couloubis*; RM Mashishi*;
L Fine*; T Till* and J French*+
*non-executive + United States of America independent
Registered Office:
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
Registration number 1994/007994/06
Transfer Secretaries:
Link Market Services (Pty) Ltd 11 Diagonal Street,
Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000)
Company Secretary:
E Waldeck, Building 10, Boardwalk Office Park,
107 Haymeadow Street, Faerie Glen, Pretoria, 0081
elisew@blue.co.za Tel: (012) 990 4300
Group head office:
Tel: +27 12 990 8400 Fax: +27 86 637 6033
E-mail: blue@blue.co.za
www.blue.co.za
Date: 18/11/2010 16:55:11 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
