| Wed 24 Aug 2011, 7:30 | | BLU - Blue Label Telecoms Limited - Audited results for the year ended 31 May |
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BLU
BLU
BLU - Blue Label Telecoms Limited - Audited results for the year ended 31 May
2011
Blue Label Telecoms Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
JSE Share code: BLU
ISIN: ZAE000109088
("BLT" or "the company" or "the group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MAY 2011
13% increase in revenue to R18 billion
18% increase in NPAT to R431 million
15% increase in core earnings to R456 million
15% increase in headline earnings per share from continuing operations
4% decline in headline earnings per share to 46,20 cents
R566 million cash generated by operations
Dividend of 14 cents per share
Summarised Group Statement of Financial Position
as at 31 May
2011 2010
R`000 R`000
ASSETS
Non-current assets 851 665 717 581
Property, plant and equipment 139 747 156 888
Intangible assets and goodwill 433 513 436 824
Investment in associates and joint 239 997 96 888
ventures
Starter pack assets 20 361 16 826
Deferred taxation assets 18 047 10 155
Current assets 4 216 942 3 730 721
Financial assets at fair value 10 150
through profit and loss
Starter pack assets 16 777 77 467
Inventories 1 012 594 560 846
Loans receivable 32 370 43 617
Trade and other receivables 914 164 987 279
Current tax assets 14 330 4 285
Cash and cash equivalents 2 226 697 2 057 077
Assets of disposal group classified 20 481 -
as held-for-sale
Total assets 5 089 088 4 448 302
EQUITY AND LIABILITIES
Capital and reserves 2 955 363 2 655 436
Share capital, share premium and 4 348 231 4 352 617
treasury shares
Restructuring reserve (1 843 912) (1 843 912)
Other reserves (13 601) (12 691)
Transaction with non-controlling (909 006) (914 867)
interest reserve
Share-based payment reserve 19 099 12 037
Retained earnings 1 340 318 1 000 327
2 941 129 2 593 511
Non-controlling interest 14 234 61 925
Non-current liabilities 38 093 47 696
Deferred taxation liabilities 22 196 31 616
Interest-bearing borrowings 15 897 16 080
Current liabilities 2 081 760 1 745 170
Trade and other payables 2 046 773 1 718 907
Provision 8 676 -
Current tax liabilities 22 326 21 320
Bank overdraft 527 2 175
Current portion of interest-bearing 3 458 2 768
borrowings
Liabilities of disposal group 13 872 -
classified as held-for-sale
Total equity and liabilities 5 089 088 4 448 302
Summarised Group Statement of Comprehensive Income
for the year ended 31 May
2011 2010
R`000 R`000
Continuing operations
Revenue 18 064 572 15 939 764
Other income 7 197 41 969
Changes in inventories of finished (16 996 939) (14 923 221)
goods
Employee compensation and benefit (263 360) (272 134)
expense
Depreciation, amortisation and (145 985) (115 113)
impairment charges
Other expenses (213 738) (216 721)
Operating profit 451 747 454 544
Finance costs (115 845) (107 127)
Finance income 146 429 161 018
Share of losses from associates and (2 757) (14 982)
joint ventures
Net profit before taxation 479 574 493 453
Taxation (152 176) (165 536)
Net profit from continuing operations 327 398 327 917
Discontinued operations
Net profit for the year from 57 573 97 264
discontinued operations
Net profit for the year 384 971 425 181
Other comprehensive income:
Exchange losses on translation of (4 926) (2 063)
equity loans
Exchange losses on translation of (6 550) (5 659)
foreign operations
Foreign currency translation reserve 4 219 (1 328)
reclassified to profit or loss
Other comprehensive loss for the (7 257) (9 050)
year, net of tax
Total comprehensive income for the 377 714 416 131
year
Net profit for the year attributable
to:
Equity holders of the parent 431 448 365 022
- From continuing operations 337 547 328 570
- From discontinued operations 93 901 36 452
Non-controlling interest (46 477) 60 159
- From continuing operations (10 149) (653)
- From discontinued operations (36 328) 60 812
Total comprehensive income for the 377 714 416 131
year attributable to:
Equity holders of the parent 430 538 355 580
Non-controlling interest (52 824) 60 551
Earnings per share for profit
attributable to equity holders
(cents)
Basic earnings per share 57,04 48,17
- From continuing operations 44,63 43,36
- From discontinued operations 12,41 4,81
Diluted earnings per share 56,49 47,96
- From continuing operations 44,08 43,15
- From discontinued operations 12,41 4,81
Headline earnings per share 46,20 48,27
- From continuing operations 50,12 43,46
- From discontinued operations (3,92) 4,81
Diluted headline earnings per share 45,75 48,06
Weighted average number of shares 756 359 399 757 793 428
Number of shares in issue 756 269 004 756 659 181
Diluted weighted average number of 763 742 466 761 159 181
shares*
*Diluted earnings per share and diluted headline earnings per
share is calculated by adjusting the number of shares in issue by
the number of shares that would be issued on vesting under the
forfeitable share plan.
Reconciliation between net profit and
core net profit for the year
Net profit for the year attributable 431 448 365 022
to equity holders of the parent
Amortisation of intangible assets 24 975 31 623
raised through business combinations
net of tax and non-controlling
interest
Core net profit attributable to 456 423 396 645
equity holders of the parent
- Core earnings per share (cents)** 60,34 52,34
**Core earnings per share is calculated after adding back the
amortisation of intangible assets as a consequence of the purchase
price allocations completed in terms of IFRS 3 (R): Business
Combinations.
Summarised Group Statement of Changes in Equity
for the year ended 31 May
Share
capital,
share
premium
and Restruc-
treasury Retained turing Other
shares earnings reserve reserves
R`000 R`000 R`000 R`000
Balance as at 31 4 379 175 635 305 (1 843 912) (13 399)
May 2009
Net profit for the - 365 022 - -
year
Comprehensive - - - (9 442)
income/(loss)
Total - 365 022 - (9 442)
comprehensive
income/(loss)
Treasury shares (26 558) - - -
purchased
Asset acquired for - - - -
shares
Equity - - - -
compensation
benefit movement
Share of equity - - - 10 150
movements in
associates
Dividends - - - -
Capital - - - -
contribution by
non-controlling
interest
Non-controlling - - - -
interest disposed
of during the year
Balance as at 31 4 352 617 1 000 327 (1 843 912) (12 691)
May 2010
Net profit/(loss) - 431 448 - -
for the year
Comprehensive loss - - - (910)
Total - 431 448 - (910)
comprehensive
income/(loss)
Treasury shares (8 935) - - -
purchased
Equity 4 549 - - -
compensation
benefit scheme
shares vested
Equity - - - -
compensation
benefit movement
Share of equity - - - -
movements in
associates
Dividends - (91 457) - -
Share based - - - -
payment movement
Non-controlling - - - -
interest disposed
of during the year
Balance as at 4 348 231 1 340 318 (1 843 912) (13 601)
31 May 2011
Summarised Group Statement of Changes in Equity (continued)
for the year ended 31 May
Transaction
with non- Share-
controlling based Non-
interest payment controlling Total
reserve reserve interest equity
R`000 R`000 R`000 R`000
Balance as at (914 399) 10 602 (9 252) 2 244 120
31 May 2009
Net profit for - - 60 159 425 181
the year
Comprehensive - - 392 (9 050)
income/(loss)
Total - - 60 551 416 131
comprehensive
income/(loss)
Treasury shares - - - (26 558)
purchased
Asset acquired - 295 - 295
for shares
Equity - 1 140 (30) 1 110
compensation
benefit movement
Share of equity - - - 10 150
movements in
associates
Dividends - - (2 912) (2 912)
Capital - - 558 558
contribution by
non-controlling
interest
Non-controlling (468) - 13 010 12 542
interest disposed
of during the
year
Balance as at 31 (914 867) 12 037 61 925 2 655 436
May 2010
Net profit/(loss) - - (46 477) 384 971
for the year
Comprehensive - - (6 347) (7 257)
loss
Total - - (52 824) 377 714
comprehensive
income/(loss)
Treasury shares - - - (8 935)
purchased
Equity - (4 549) - -
compensation
benefit scheme
shares vested
Equity - 10 903 229 11 132
compensation
benefit movement
Share of equity - 942 - 942
movements in
associates
Dividends - - (950) (92 407)
Share based - (234) 234 -
payment movement
Non-controlling 5 861 - 5 620 11 481
interest disposed
of during the
year
Balance as at 31 (909 006) 19 099 14 234 2 955 363
May 2011
Summarised Group Statement of Cash Flows
for the year ended 31 May
2011 2010
R`000 R`000
Cash flows from operating activities 427 663 515 910
Cash flows from investing activities (147 438) (185 000)
Cash flows from financing activities (100 004) (26 195)
Increase in cash and cash equivalents 180 221 304 715
Cash and cash equivalents at the 2 054 902 1 756 806
beginning of the year
Translation difference (8 953) (6 619)
Cash and cash equivalents at the end 2 226 170 2 054 902
of the year
Headline Earnings
2011 2010
R`000 R`000
Net profit attributable to equity 431 448 365 022
holders of the parent
Net profit on disposal of property, (109) (420)
plant and equipment
Net profit on disposal of (6 759) (18 566)
subsidiaries
Gain on remeasuring retained interest (143 365) -
in Blue Label Mexico due to loss of
control
Impairment of intangible assets and 20 972 6 900
property, plant and equipment
Impairment of goodwill 27 985 13 829
Impairment of available-for-sale 15 056 -
financial asset
Foreign currency translation reserve 4 219 (956)
reclassified to profit or loss
Headline earnings 349 447 365 809
Headline earnings per share (cents) 46,20 48,27
Disposal of Subsidiaries
Shares in the following subsidiaries were disposed of during the year ended 31
May 2011
Effective date % held and
of disposal disposed of
POS Control Services 1 June 2010 52
(Proprietary) Limited
Blue Label Australasia 29 December 2010 50,5
(Proprietary) Limited
Blue Label Mexico S.A de C.V * 23 February 2011 70
*Loss of control, diluted by
30%. Retained equity interest
of 40%.
Details of the total net
assets disposed and the
resulting profit on disposal
are as follows:
Total
R`000
Total proceeds -
Fair value of net assets (6 759)
disposed of
Profit on disposal 6 759
Gain on remeasuring retained 143 365
interest in Blue Label Mexico
due to loss of control
Foreign currency reserve (4 219)
reclassified
Total gain on transaction 145 905
The assets and liabilities
disposed of are as follows:
Carrying value/
fair value at
disposal date
R`000
Cash and cash equivalents 1 658
Property, plant and equipment 10 565
Intangible assets 550
Inventories 452
Receivables 17 273
Bank overdraft (384)
Borrowings (36 329)
Current tax assets 340
Payables (12 365)
Fair value of subsidiaries (18 240)
disposed of
Non-controlling interest 5 620
Transaction with non- 5 861
controlling interest reserve
Fair value of net assets (6 759)
disposed of
Cash and cash equivalents of (1 274)
subsidiaries disposed of
Cash outflows on disposals (1 274)
Segmental Summary
for the year ended 31 May 2011
South Inter-
Africa
Total national Technology
R`000 R`000 R`000 R`000
2011
Total segment 30 224 202 29 954 525 30 252 22 902
revenue
Inter-segment (12 159 (12 132 (998) (6 082)
revenue 630) 920)
Revenue 18 064 572 17 821 605 29 254 16 820
EBITDA 597 732 711 767 (8 683) (61 766)
Net profit/(loss) 431 448 562 538 60 133 (85 312)
for the year
attributable to
equity holders of
the parent
- From continuing 337 547 562 538 (33 (85 312)
operations 768)
- From discontinued 93 901 - 93 901 -
operations
Amortisation of
intangibles raised
through business
combinations net of
tax
and non-controlling 24 975 8 933 1 763 380
interest -
continuing
operations
Core net profit/ 456 423 571 471 61 896 (84 932)
(loss) for the year
attributable to
equity holders of
the parent
- From continuing 362 522 571 471 (32 (84 932)
operations 005)
- From discontinued 93 901 - 93 901 -
operations
At 31 May 2011
Total assets 5 068 607 4 362 116 386 561 89 876
Net operating 2 135 182 2 004 900 125 291 12 535
assets/(liabilities)
2010
Total segment 27 182 511 26 661 350 159 530 121 439
revenue
Inter-segment (11 242 (11 118 270 (103 110)
revenue 747) 013)
Revenue 15 939 764 15 543 337 159 800 18 329
EBITDA 569 657 685 686 17 448 (58 382)
Net profit/(loss) 365 022 546 552 16 464 (71 516)
for the year
attributable to
equity holders of
the parent
- From continuing 328 570 546 552 (19 (71 516)
operations 989)
- From discontinued 36 452 - 36 452 -
operations
Amortisation of
intangibles raised
through business
combinations net of
tax
and non-controlling 31 623 8 609 3 633 742
interest -
continuing
operations
Core net 396 645 555 161 20 097 (70 774)
profit/(loss) for
the year
attributable to
equity holders of
the parent
- From continuing 360 193 555 161 (16 (70 774)
operations 355)
- From discontinued 36 452 - 36 452 -
operations
At 31 May 2010
Total assets 4 448 302 3 612 970 517 400 67 930
Net operating 1 985 551 1 807 991 208 322 (2 730)
assets/(liabilities)
Segmental Summary (continued)
for the year ended 31 May 2011
Mobile Solutions Corporate
R`000 R`000 R`000
2011
Total segment revenue 94 121 122 402 -
Inter-segment revenue (15 505) (4 125) -
Revenue 78 616 118 277 -
EBITDA 19 347 18 731 (81 664)
Net profit/(loss) for the year (12 627) 5 033 (98 317)
attributable to equity holders
of the parent
- From continuing operations (12 627) 5 033 (98 317)
- From discontinued operations - - -
Amortisation of intangibles
raised through business
combinations net of tax
and non-controlling interest - 11 871 2 028 -
continuing operations
Core net profit/(loss) for the (756) 7 061 (98 317)
year attributable to equity
holders of the parent
- From continuing operations (756) 7 061 (98 317)
- From discontinued operations - - -
At 31 May 2011
Total assets 80 899 138 403 10 752
Net operating 10 901 21 674 (40 119)
assets/(liabilities)
2010
Total segment revenue 105 196 134 996 -
Inter-segment revenue (10 183) (11 711) -
Revenue 95 013 123 285 -
EBITDA 11 637 (4 255) (82 477)
Net profit/(loss) for the year (14 426) (28 271) (83 781)
attributable to equity holders
of the parent
- From continuing operations (14 426) (28 271) (83 781)
- From discontinued operations - - -
Amortisation of intangibles
raised through business
combinations net of tax
and non-controlling interest - 11 932 6 707 -
continuing operations
Core net profit/(loss) for the (2 494) (21 564) (83 781)
year attributable to equity
holders of the parent
- From continuing operations (2 494) (21 564) (83 781)
- From discontinued operations - - -
At 31 May 2010
Total assets 104 223 139 429 6 350
Net operating 4 512 9 363 (41 907)
assets/(liabilities)
Commentary
INTRODUCTION
Organic growth in revenues, a return to profitability in the call centre
operations and a net reduction in the share of losses from associates and joint
ventures were all positive contributing factors to the growth in group core
earnings.
This growth was augmented by an extraneous profit resulting from the dilution of
the group`s equity holding in Blue Label Mexico. In February 2011, 40% of the
share capital of Blue Label Mexico was issued to Grupo Bimbo for a capital
injection of US$20 million.
Grupo Bimbo is a manufacturer and distributor of bread and allied edible foods.
As the market leader in the Americas, Grupo Bimbo owns 103 manufacturing plants
and more than 1 000 distribution centres strategically located in 17 countries
throughout the Americas and Asia. It has one of the most extensive direct
distribution networks in the world.
The sale of equity has created a strategic alliance between the two groups, with
the objective of utilising Bimbo`s logistic capabilities and footprint to
accelerate the roll out of point of sale devices.
The synergy between the two companies was the driving force behind the above
transaction.
Trading losses in Africa Prepaid Services Nigeria ("APSN") and the necessity for
impairments of APSN following a commitment to dispose of the majority of assets
and liabilities in May 2011, adversely impacted on profits. The decline in the
financial performance of APSN was attributable to the failure by Multi-links to
perform its obligations in terms of the distribution agreement and the
consequent cancellation of that agreement arising from Multi-links` repudiation
of its obligations.
Further impairments to goodwill and related intangibles in Sharedphone
International and Content Connect Africa, as well as the write-off of internally
generated intangible assets in Blue Label One and Blue Label Distribution, also
inhibited the growth in core earnings.
The net positive growth in core earnings equated to 15%. Headline earnings
however, declined by 4% after the net deduction relating to the extraneous
profit in Blue Label Mexico and impairments described above. After extraction of
the total negative contribution of APSN as a discontinued operation, the balance
of the group increased headline earnings by 13%.
The group continued to generate positive cash flow, with cash generated from
operations of R566 million. Cash resources accumulated to R2,2 billion at year
end.
Financial overview
- Revenues increased by 13% to R18 billion.
- Gross profit increased by R51 million to R1,07 billion.
- Overheads decreased by 2%.
- EBITDA increased by 5% to R598 million.
- Net finance income declined by R23 million.
- Share of losses from associates and joint ventures declined from R15 million
to R2,8 million.
- Net profit after tax and non-controlling interests increased by 18% from R365
million to R431 million.
- Basic earnings per share increased by 18% from 48,17 cents to 57,04 cents.
- Core earnings increased by 15% to R456 million.
- Core earnings per share increased by 15% from 52,34 cents to 60,34 cents per
share.
- Headline earnings per share declined by 4% from 48,27 cents to 46,20 cents.
- Headline earnings per share from continuing operations increased by 15% from
43,46 cents to 50,12 cents.
- NAV per share increased from 342,76 cents per share to 388,90 cents per share.
BASIS OF PREPARATION
The summarised group annual financial statements have been derived from the
group annual financial statements and were prepared in accordance with the
requirements of Section 8.57 of the JSE Limited Listings Requirements and the
presentation and disclosure requirements of IAS 34 - Interim Financial
Reporting. The group annual financial statements have been prepared in
accordance with International Financial Reporting Standards and the requirements
of the Companies Act of South Africa. A copy of the group annual financial
statements can be obtained from the company`s registered office.
This financial information has been prepared in accordance with the going
concern principle, under the historical cost convention, as modified by the
revaluation of certain assets and liabilities where required or elected in terms
of IFRS. The accounting policies and methods of computation are consistent with
those used in the comparative financial information for the year ended 31 May
2010, with the exception of the standards that are effective for the first time
in the current period. These have been disclosed in note 1 to the annual
financial statements for the year ended 31 May 2011. These standards have not
had a significant impact on the financial information.
In addition, the group uses core net profit as a non-IFRS measure in evaluating
its performance. This supplements the IFRS measures disclosed. Core net profit
is calculated by adjusting net profit for the year with the amortisation of
intangible assets that arise as a consequence of the purchase price allocations
completed in terms of IFRS 3(R): Business Combinations.
SEGMENTAL REPORT
SOUTH AFRICAN DISTRIBUTION SEGMENT
2011 2010 Growth
R`000 R`000 R`000 Growth
Revenue 17 821 605 15 543 337 2 278 268 15%
Gross profit 925 398 867 230 58 168 7%
EBITDA 711 767 685 686 26 081 4%
Core net profit 571 471 555 161 16 310 3%
Gross profit margin 5,19% 5,58%
EBITDA margin 4,00% 4,41%
Revenue
Revenue comprised sales of physical and virtual prepaid airtime, commissions on
the distribution of prepaid electricity and compounded annuity revenue generated
from starter packs.
Whilst there were piecemeal price increases from the networks during the
financial year, the bulk of the growth in revenue was volume related and
entirely organic. Commissions on the sale of prepaid electricity increased by
79% from R34 million to R61 million, equating to turnover generated on behalf of
the utilities of R3,4 billion.
The growth in airtime revenue exceeded industry norms, with gains mainly
attributable to an increase in market share from competitors.
Gross profit
Although gross profit margins declined from 5,58% to 5,19%, the current melded
margins have been consistent for the past 18 months, albeit that electricity
commissions do not attract a cost of sale and in turn account for 0,22% for the
comparative period and 0,34% of the current year`s gross profit margins.
Margins on prepaid airtime declined due to the negative impact on the
implementation of RICA from the second half of the comparative period, the
passing on of network price increases at cost price to the client base as well
as the forfeiture of margins in return for higher revenue volumes.
The distribution mix of prepaid airtime per network was:
- Vodacom 52%
- MTN 35%
- Cell C 10%
- Telkom 3%
EBITDA
The growth in EBITDA of 4% was achieved in spite of a decline in EBITDA margin
from 4,41% to 4,00%. The decline in margin was due to the reduction in gross
profit margins and an increase in certain group overheads.
INTERNATIONAL DISTRIBUTION SEGMENT
2011 2010 Growth
R`000 R`000 R`000 Growth
Revenue 29 254 159 800 (130 546) (82%)
Gross profit 8 052 30 339 (22 287) (73%)
EBITDA (8 683) 17 448 (26 131) (150%)
Discontinued 93 901 36 452 57 449 158%
operations*
Africa Prepaid (40 813) 49 105 (89 918) (183%)
Services Nigeria
Blue Label Mexico 134 714 (12 653) 147 367 1 165%
Share of (2 884) (15 177) 12 293 81%
(losses)/profits from
associates and joint
ventures
Ukash 8 782 (8 079) 16 861 209%
Oxigen Services India (5 163) (7 098) 1 935 27%
Blue Label Mexico (6 503) - (6 503) -
Core net profit 61 896 20 097 41 799 208%
*Represents net profit after taxation and non-controlling interests.
In line with the commitment to dispose of the majority of assets and liabilities
of Africa Prepaid Services Nigeria, IFRS requires its financial performance to
be reflected as a discontinued operation. Consequently, revenue, gross profit
and EBITDA exclude the Nigerian trading activities for both the current and
comparative year.
The dilution from a 70% holding to a minority stake of 40% in Blue Label Mexico
requires its trading performance for the period June 2010 to February 2011 to be
reflected as a discontinued operation. Similarly, the results of Mexico are not
reflected in revenue, gross profit and EBITDA, both in the current and
comparative year.
As a result of the above, trading activities at EBITDA level only pertained to
Sharedphone International, Africa Prepaid Services SA, Gold Label Investments,
BLT USA and Blue Label Australasia.
Revenue
Current revenue related only to Sharedphone International. Its revenue declined
from R39 million to R29 million due to a fall in the competitive edge which
payphones traditionally had over mobile phones. This has emanated from the
mobile networks offering cheaper entry-level handsets and lower denomination
airtime vouchers to consumers. The decline in revenue has warranted an
impairment to goodwill and intangible assets relating to Sharedphone to the
extent of R8,4 million.
The balance of the decline in revenue of R120 million related to the cessation
of trading activities in the DRC, Mozambique and USA that existed in the
comparative period.
Gross profit
Gross profit generated by Sharedphone declined from R10 million to R8 million,
albeit at an increase in margin from 25,18% to 27,52%. The balance of the
decline in gross profit of R20 million related to the above entities that ceased
trading during the course of the prior year.
EBITDA
Sharedphone EBITDA declined from R3,9 million to R1,8 million. The balance of
negative EBITDA of R10,4 million pertained to expenditure incurred by Africa
Prepaid Services SA.
Discontinued operations
Discontinued operations include the financial results of APS Nigeria and Blue
Label Mexico. Although the latter has not discontinued its operations per se, it
is an IFRS requirement to categorise its results as a discontinued operation in
line with the dilution to a minority stake.
- APS Nigeria
The cancellation of the distribution agreement with Multi-links impacted
negatively on earnings culminating in a loss for the year of R41 million
equating to a R90 million adverse movement on a comparative basis.
Impairments of assets and goodwill accounted for R23 million with the balance of
R18 million attributable to trading losses. Arbitration proceedings have been
instituted to claim compensation for losses suffered consequent upon
cancellation of the distribution agreement.
- Blue Label Mexico
The comparative share of losses represented 70% ownership for the full year
ended 31 May 2010. The current share of profits represents the gain of R150
million relating to the dilution of equity from 70% to 40%, less a non-
distributable reserve release of R4 million and the group`s share of trading
losses of R11 million to the date of dilution.
Share of (losses)/profits from associates and joint ventures
- Ukash (15,75% holding)
Of the R17 million turnaround from a share of losses of R8 million to a share of
profits of R9 million, a recognition of a deferred tax asset accounted for R6,5
million. The balance was directly attributable to volume growth, increased
values in voucher redemption and the expansion of its footprint.
An increase in voucher redemption volumes by 84% resulted in a revenue increase
of 71%. Gross profit margins remained static at 49% and overhead growth was
limited to 1%, all reported in their local currency.
- Oxigen Services India (37,22% holding)
Revenue increased by 24% at static gross margins of 2,25%. A decline in
overheads of 8% resulted in a positive EBITDA growth of 198%, all reported in
their local currency.
- Blue Label Mexico (40% holding)
The share of losses of R6,5 million were from 23 February 2011 to 31 May 2011,
the period in which Blue Label Mexico became a joint venture as a result of the
dilution.
Revenues for the year ended 31 May 2011 increased by 232% reported in their
local currency. In spite of this revenue increase, the company continued to
incur losses due to an increase in overheads commensurate with the gearing up of
infrastructure to accommodate the roll out of point of sale devices to the Grupo
Bimbo channel of distribution as well as catering for organic growth.
Core net profit
The increase in core net profit of R42 million was inclusive of the gain
attributable to the dilution of equity in Blue Label Mexico. On eliminating this
gain, core net profit would have declined by a net R104 million of which R90
million pertained to an adverse movement in APS Nigeria and R15 million to the
impairment of an available-for-sale financial asset in APS SA.
MOBILE SEGMENT
In order to enhance the availability of management information on the group`s
performance from the distribution of mobile applications, Blue Label established
the mobile segment on 1 June 2010. These mobile applications were previously
housed in Value Added Services and Technology. A separate management and
reporting structure has been established for Mobile, and the segmental analysis
restated accordingly. The companies embodying this segment are Cellfind, Content
Connect Africa and Blue Label One.
2011 2010 Growth
R`000 R`000 R`000 Growth
Revenue 78 616 95 013 (16 397) (17%)
Gross profit 62 444 66 119 (3 675) (6%)
EBITDA 19 347 11 637 7 710 66%
Core net loss (756) (2 494) 1 738 70%
The bulk of the decline in revenue was due to a cut back in marketing spend by
the networks on mobile content downloads being the main source of revenue
generated by Content Connect Africa.
The decline in gross profit was limited to 6% due to melded margins increasing
from 69,59% to 79,43%. The margin increase was attributable to growth in revenue
from media sales and location based services generated by Blue Label One and
Cellfind respectively. A decline in overheads, however, resulted in a growth in
EBITDA.
The consistent under performance of Content Connect Africa, has necessitated the
impairment of goodwill and intangibles by R11,2 million. A further impairment of
R5,7 million was applied to Blue Label One`s internally generated intangible
assets, as its current revenues do not support the value of these assets.
Core net profit of R18 million contributed by Cellfind was largely offset by the
above impairments.
SOLUTIONS SEGMENT
The Value Added Services segment has been renamed Solutions, which houses the
Datacel group. The only change to the reporting of this segment is the
extraction of financial information relating to the newly formed Mobile segment.
The comparatives have been adjusted to reflect the change in segmental reporting
accordingly.
2011 2010 Growth
R`000 R`000 R`000 Growth
Revenue 118 277 123 285 (5 008) (4%)
Gross profit 58 582 50 348 8 234 16%
EBITDA 18 731 (4 255) 22 986 540%
Core net 7 061 (21 564) 28 625 133%
profit/(loss)
The decline in revenue was due to the closure of the CNS call centre activities
which was operational for part of the comparative period. The restructured
Datacel group contributed a positive turnaround of R29 million to core net
profit through a combination of call centre rationalisation and sustainable
outbound sales of mobile services and applications.
TECHNOLOGY SEGMENT
2011 2010 Growth
R`000 R`000 R`000 Growth
Revenue 16 820 18 329 (1 509) (8%)
Gross profit 13 157 2 507 10 650 425%
EBITDA (61 766) (58 382) (3 384) (6%)
Core net loss (84 932) (70 774) (14 158) (20%)
Technology losses and the growth thereon represented the costs of development
and support of the group`s Information Technology infrastructure. Income
generation was limited to services to third parties.
CORPORATE SEGMENT
2011 2010 Growth
R`000 R`000 R`000 Growth
EBITDA (81 664) (82 477) 813 1%
Core net loss (98 317) (83 781) (14 536) (17%)
Corporate expenditure was contained to neutral growth. STC of R9 million on the
maiden dividend declared in August 2010 and additional depreciation on leasehold
improvements, accounted for the increase in core net losses.
NET FINANCE INCOME
Finance costs
Finance costs totaled R116 million, of which R8 million related to interest paid
on borrowed funds and R108 million to imputed IFRS interest adjustments relating
to credit received from suppliers. On a comparative basis the imputed IFRS
interest adjustment was R102 million. The increase of R6 million was directly
IFRS related.
Finance income
Interest received on cash resources declined by R33 million from R83 million to
R50 million due to a continued reduction in interest rates and the preference of
settlement discounts and bulk inventory procurements when the opportunities
availed themselves.
The imputed IFRS interest adjustments increased by R19 million as a result of
extended credit afforded to selected customers.
DEPRECIATION, AMORTISATION AND IMPAIRMENT
The increase of R31 million related to the increase in impairments with
depreciation on property, plant and equipment remaining static.
CORE HEADLINE EARNINGS
The table, which has been prepared on a core headline earnings basis, excludes
the impairments to intangible assets and goodwill as well as the extraneous
profit on the Mexico dilution.
2011 2010
Segments R`000 R`000 Growth
South African distribution 571 317 554 172 3%
International distribution (excluding (21 827) (46 882) 53%
Nigeria)
Mobile 15 640 (1 962) 897%
Solutions 7 021 (6 828) 203%
Total trading operations 572 151 498 500 15%
APS Nigeria (18 341) 49 117 (137%)
Technology (81 281) (66 458) (22%)
Corporate (98 107) (83 728) (17%)
Core headline earnings 374 422 397 431 (6%)
Core headline earnings excluding 392 763 348 314 13%
Nigeria
The decline in core headline earnings of 6% would have equated to an increase of
13%, on elimination of the discontinued Nigerian operation.
STATEMENT OF FINANCIAL POSITION
Total assets increased by R641 million to R5,1 billion.
Material increases related to the investment in joint ventures of R143 million,
inventory by R452 million and cash resources by R171 million. The increase in
investment in joint venture pertains to the fair value gain on the retained 40%
shareholding in Blue Label Mexico.
The increase in inventory was mainly attributable to stockpiling shortly prior
to year end in anticipation of price increases.
The group remained highly liquid, maintaining its current asset ratio at 2:1.
The stock turn averaged 12 days net of the advanced purchases of approximately
R470 million in May 2011.
Debtors collection period averaged 17 days and creditors payment terms averaged
41 days.
STATEMENT OF CASH FLOWS
The increase of cash on hand by R170 million accumulated cash resources to R2,2
billion at year end.
The cash flow generated by operations of R566 million represented a decline of
R57 million on the comparative year, congruent with the decline in operating
profit.
The purchase of a starter pack base for R83 million accounted for the majority
of the acquisition of intangible assets of R113 million, with the balance being
attributable to development costs and software.
Capital expenditure was confined to R74 million, representing a decline of R31
million.
The dividend payment of R91 million related to the maiden dividend declared in
August 2010.
FORFEITABLE SHARE SCHEME
Forfeitable shares totaling 6 829 416 (2010: 4 567 247) were issued to
qualifying employees, 1 316 366 (2010: 5 644 309) shares were forfeited during
the period and a total of 909 823 (2010: nil) shares vested.
DIVIDEND NUMBER 2
On 23 August 2011, the board approved a dividend of 14 cents per ordinary share,
equating to a cover of 3,3 times on headline earnings per share. The dividend in
respect of ordinary shares for the year ended 31 May 2011 of R107 092 578, (STC:
R10 709 258) has not been recognised in the financial statements, as it was
declared after this date. The salient dates are as follows:
Last date to trade cum dividend Friday, 9 September 2011
Shares commence trading ex dividend Monday, 12 September 2011
Record date Friday, 16 September 2011
Payment of dividend Monday, 19 September 2011
Share certificates may not be dematerialised or rematerialised between Monday,
12 September and Friday, 16 September 2011, both days inclusive.
PROSPECTS
Airtime sales are expected to continue to exceed industry growth norms.
Commissions generated from prepaid electricity sales on behalf of utilities are
expected to increase both organically and through contracts with additional
electricity providers.
The mobile segment is expected to generate advertising revenue on bulk printed
prepaid vouchers and point of sale receipt vouchers.
The refocused international segment remains core to achieving footprint growth.
The vast distribution network of Grupo Bimbo and the accelerating roll-out of
point of sale devices will result in increased volumes of sales of electronic
tokens of value in Mexico.
Oxigen Services India is evolving to fulfilling its vision of supplementing its
traditional business of a prepaid recharge platform, by providing versatile
payment solutions, that will include Mobile Wallet, international remittances
and cash cards.
The group will continue to focus on expanding its product range offering and
distribution network, organically and through acquisition, both locally and
internationally.
SUBSEQUENT EVENT
In June 2011, Microsoft sold its 37,22% shareholding in Oxigen Services India to
2D Fine Investments Mauritius, a wholly owned subsidiary of 2D Fine Holdings
Mauritius. The shareholding in the latter is held through a joint venture
between Gold Label Investments, a wholly owned subsidiary of Blue Label Telecoms
Limited, and 2D Fine Holdings Limited. The latter is a company controlled by the
management of Oxigen Services India.
The effect of the above is that Blue Label has increased its effective
shareholding in Oxigen Services India above 50% however the group does not
exercise control.
AUDIT OPINION
PricewaterhouseCoopers Inc.`s unmodified audit reports on the 2011 group annual
financial statements and the summarised group annual financial statements
contained herein are available for inspection at the company`s registered
office. Any reference to future financial performance in this announcement has
not been audited or reported on by PricewaterhouseCoopers Inc.
APPRECIATION
The board of Blue Label Telecoms would once again like to thank its suppliers,
customers, business partners and staff for their ongoing support and loyalty.
For and on behalf of the board
LM Nestadt BM Levy and MS Levy DB Rivkind*
Chairman Joint Chief Executive Officers Financial Director
23 August 2011
*Supervised preparation of the group financial statements.
Directors:
LM Nestadt (Chairman)**, BM Levy, MS Levy, K Ellerine*,
GD Harlow**, NN Lazarus sc*, JS Mthimunye**, M Nyati*,
MV Pamensky, DB Rivkind, LM Tyalimpi**
(*Non-executive) (**Independent Non-executive)
Company Secretary: E Viljoen
Sponsor: Investec Bank Limited
24 August 2011
www.bluelabeltelecoms.co.za
Date: 24/08/2011 07:30:04 Produced by the JSE SENS Department.
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