| Tue 1 Nov 2011, 8:00 | | BFS - Blue Financial Services Limited - Reviewed Condensed Consolidated Interim |
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BFS
BFS
BFS - Blue Financial Services Limited - Reviewed Condensed Consolidated Interim
Financial Results for the six months ended 31 August 2011
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 2011
Condensed Consolidated Income Statement for the period ended 31 August 2011
Reviewed Reviewed % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2011
Aug 2011 Aug 2010
R`000 R`000 R`000
Interest income 227,599 150,585 51 309,034
Interest expense (50,529) (71,743) (30) (145,609)
Net interest income 177,070 78,842 >100 163,425
Administration and 29,352 55,809 (47) 87,092
commission income
Other operating income 9,231 35,727 (74) 52,990
Operating income 215,653 170,378 27 303,507
Net impairment of loan (26,093) (77,087) (66) (27,440)
advances and
receivables
Operating expenses (177,065) (257,056) (31) (525,271)
Profit/(loss)before 12,495 (163,765) >100 (249,204)
taxation
Taxation 9,320 (4,399) >100 (35,700)
Profit/(loss) for the 21,815 (168,164) (284,904)
period >100
Attributable to:
Equity holders of the 21,669 (157,882) >100 (275,559)
parent
Minority interest 146 (10,282) >100 (9,345)
21,815 (168,164) >100 (284,904)
Per share
ratios(cents)
Earnings/(loss) per 0.38 (25.29) >100 (29.59)
share
Headline earnings/(loss) 0.40 (24.87) >100 (27.77)
per share
Diluted earnings/(loss) 0.38 (25.29) >100 (29.59)
per share
Diluted headline 0.40 (24.87) >100 (27.77)
earnings/(loss) per
share
Net asset value per 1.13 (32.95) >100 1.00
share
Condensed Consolidated Statement of Comprehensive Income for the period ended 31
August 2011
Reviewed Reviewed % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2011
Aug 2011 Aug 2010
R`000 R`000 R`000
Profit/(loss) for the 21,815 (168,164) >100 (284,904)
period
Other comprehensive
loss:
Exchange differences on (14,061) (30,392) (54) (49,888)
translation of foreign
operations
Other comprehensive loss (14,061) (30,392) (54) (49,888)
for the period, net of
tax
Total comprehensive 7,754 (198,556) >100 (334,792)
profit/(loss) for the
period
Total comprehensive
profit/(loss)
attributable to:
Equity holders of the 17,877 (188,126) >100 (332,803)
parent
Minority interest (10,123) (10,430) 3 (1,989)
7,754 (198,556) >100 (334,792)
Condensed Consolidated Statement of Financial Position as at 31 August 2011
Reviewed Audited %
six months year ended change
ended 31 28 Feb 2011
Aug 2011
R`000 R`000
Assets
Cash and cash equivalents 138,969 232,299 (40)
Loan advances to customers 683,673 544,578 26
Trade and other receivables 3,581 19,697 (82)
Inventories 54 90 (40)
Taxation receivable - 504 (100)
Other financial assets 441 441 -
Property, plant and equipment 57,516 66,540 (14)
Deferred taxation 17,448 19,570 (11)
Intangible assets 19,952 25,190 (21)
Goodwill 418,552 422,093 (1)
Total Assets 1,340,186 1,331,002 1
Equity and Liabilities
Equity
Share capital 1,366,034 1,366,034 -
Other deficit (66,179) (62,011) 7
Accumulated loss (1,235,415) (1,257,460) (2)
Equity attributable to equity 64,440 46,563 38
holders of parent
Non-controlling interest 1,440 11,563 (88)
Total Equity 65,880 58,126 13
Liabilities
Bank overdraft 13,974 23,254 (40)
Derivative financial liabilities 18,685 19,807 (6)
Trade and other payables 196,294 230,767 (15)
Taxation payable 108,852 116,621 (7)
Finance lease obligations 10,908 14,002 (22)
Long-term liabilities 921,197 862,571 7
Operating lease liabilities 1,822 1,836 (1)
Deferred taxation 2,574 4,018 (36)
Total Liabilities 1,274,306 1,272,876 -
Total Equity and Liabilities 1,340,186 1,331,002 1
Condensed Consolidated Statement of Changes in Equity for the period ended 31
August 2011
Share Accumulated Other
capital loss reserves
R`000 R`000 R`000
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)
Balance at 1 March 2010 - audited 928,250 (948,107) 445
Total comprehensive loss for the - (275,559) (57,244)
period
Share-based payment to employees - 2,732 -
Issue of ordinary shares due to 163,000 - -
recapitalisation
Issue of ordinary shares on debt 271,828 - -
to equity conversion
Shortfall on convertible 2,956 (2,956) -
redeemable preference shares
conversion
Convertible instrument reserve - 4,822 (4,822)
Contingency reserve - 390 (390)
Business combinations - (38,782) -
Balance at 28 February 2011 - audited 1,366,034 (1,257,460) (62,011)
Balance at 1 March 2011 - audited 1,366,034 (1,257,460) (62,011)
Total comprehensive profit for the - 21,669 (3,792)
period
Contingency reserve - 376 (376)
Balance at 31 August 2011 - reviewed 1,366,034 (1,235,415) (66,179)
Total Non- Total
controllin equity
g interest
R`000 R`000 R`000
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
Balance at 1 March 2010 - (19,412) 16,529 (2,883)
audited
Total comprehensive loss for (332,803) (1,989) (334,792)
the year
Share-based payment to 2,732 - 2,732
employees
Issue of ordinary shares due to 163,000 - 163,000
recapitalisation
Issue of ordinary shares on 271,828 - 271,828
debt to equity conversion
Shortfall on convertible - - -
redeemable preference shares
conversion
Convertible instrument reserve - - -
Contingency reserve - - -
Business combinations (38,782) (2,977) (41,759)
Balance at 28 February 2011 - 46,563 11,563 58,126
audited
Balance at 1 March 2011 - 46,563 11,563 58,126
audited
Total comprehensive profit for 17,877 (10,123) 7,754
the period
Contingency reserve - - -
Balance at 31 August 2011 - 64,440 1,440 65,880
reviewed
Condensed Consolidated Statement of Cash Flows for the period ended 31 August
2011
Reviewed Reviewed % Audited
six months six months change year ended
ended 31 ended 31 28 Feb 2011
Aug 2011 Aug 2010
R`000 R`000 R`000
Cash flows from
operating activities
Cash (used in)/generated (73,355) 150,500 >(100) 225,577
from operations
Interest expense (50,529) (71,743) (30) (145,609)
Tax paid (1,254) (984) 27 (3,642)
Net cash (used in)/ from (125,138) 77,773 >(100) 76,326
operating activities
Cash flows from
investing activities
Purchase of non- (3,802) (1,494) >100 (7,789)
current assets
Sale of non-current 58 3,063 (98) 3,937
assets
Other investing - 2,507 (100) 7,326
activities
Net cash (used in)/ (3,744) 4,076 >(100) 3,474
from investing
activities
Cash flows from
financing activities
Proceeds from issue of - - - 150,000
ordinary shares
Net proceeds 52,417 (29,534) >(100) 9,708
from/(repayment of) long-
term liabilities
Net finance lease (3,092) (1,133) >100 (4,122)
payments
Net cash from/(used 49,325 (30,667) >(100) 155,586
in) financing
activities
Total net cash movement (79,557) 51,182 >100 (235,386)
for the period
Net cash at the 209,045 (22,167) >(100) (22,167)
beginning of the period
Effect of exchange rates 4,208 >100 (4,174)
(4,493)
Total net cash at end of 124,995 33,223 >100 (209,045)
the period
Segment report
Reviewed six months 31 Aug 2011
South Botswana Zambia Uganda
Africa
R`000 R`000 R`000 R`000
Interest income 120,524 27,304 24,007 7,557
- External customers 119,824 15,922 23,990 7,557
- Inter - segment interest 700 11,382 17 -
Interest expense (21,158) (12,226) (1,688) -
Net interest income 99,366 15,078 22,319 7,557
Administration and commission 21,802 2,373 6,282 1,197
income
- External customers 3,536 2,373 6,282 1,197
- Inter - segment interest 18,266 - - -
Other operating income 9,248 1,141 (673) (6,996)
Operating income 130,416 18,592 27,928 1,758
Net impairment of loan advances (44,950) (5,244) 433 2,237
and receivables
Operating expenses (86,460) (13,203) (23,357) (7,152)
Management operating 994 145 5,004 (3,157)
profit/(loss)
Segment result: 994 145 5,004 (3,157)
profit/(loss)before taxation
Taxation (3,553) (1,240) 573 (8)
Profit/(loss) after taxation (4,547) (1,095) 5,577 (3,165)
Net investment in foreign - - - (6,669)
operation adjustment
Management profit/(loss) after (4,547) (1,095) 5,577 (9,834)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 9,110 409 492 172
and equipment
Amortisation of intangible - - - -
assets
Segment assets 710,218 307,687 157,190 51,585
Segment liabilities (709,216) (215,213) (73,472) (110,947)
Non-current assets other than
financial instruments and
deferred taxation 390,748 69,588 62,089 25,278
Tanzania Malawi Mauritius Nigeria
R`000 R`000 R`000 R`000
Interest income 13,470 11,492 (225) 5,390
- External customers 13,470 11,492 - 5,390
- Inter - segment interest - - (225) -
Interest expense - (30) (26,947) (207)
Net interest income 13,470 11,462 (27,172) 5,183
Administration and 1,176 785 - 588
commission income
- External customers 1,176 785 - 588
- Inter - segment interest - - - -
Other operating income (7,877) (8,349) (2,108) 258
Operating income 6,769 3,898 (29,280) 6,029
Net impairment of loan 530 (76) - 3,391
advances and receivables
Operating expenses (7,036) (15,240) (142) (9,604)
Management operating 263 (11,418) (29,422) (184)
(loss)/profit
Segment result: 263 (11,418) (29,422) (184)
(loss)/profit before
taxation
Taxation (7) - 12,068 -
(Loss)/profit after 256 (11,418) (17,354) (184)
taxation
Net investment in foreign (7,680) (7,939) - 188
operation adjustment
Management (loss)/profit (7,424) (19,357) (17,354) 4
after taxation
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property, 214 408 - 1,074
plant and equipment
Amortisation of intangible - - - -
assets
Segment assets 57,346 80,355 293,439 32,236
Segment liabilities (91,310) (123,066) (733,223) (51,732)
Non-current assets other
than financial instruments
and deferred taxation 12,830 1,780 226,430 3,888
CMA Other Eliminatio Consolidated
n
R`000 R`000 R`000 R`000
Interest income 25,316 3,950 (11,186) 227,599
- External customers 25,316 3,950 688 227,599
- Inter - segment interest - - (11,874) -
Interest expense (65) - 11,792 (50,529)
Net interest income 25,251 3,950 606 177,070
Administration and commission 6,817 1,730 (13,398) 29,352
income
- External customers 6,817 1,730 4,868 29,352
- Inter - segment interest - - (18,266) -
Other operating income 1,398 (8,472) 31,661 9,231
Operating income 33,466 (2,792) 18,869 215,653
Net impairment of loan advances 14,678 2,908 - (26,093)
and receivables
Operating expenses (18,770) (9,799) 13,698 (177,065)
Management operating 29,374 (9,683) 32,567 12,495
(loss)/profit
Segment result: (Loss)/profit 29,374 (9,683) 32,567 12,495
before taxation
Taxation 3,170 (18) (1,665) 9,320
(Loss)/profit after taxation 32,544 (9,701) 30,902 21,815
Net investment in foreign - (8,043) 30,143 -
operation adjustment
Management (loss)/profit after 32,554 (17,744 61,045 21,815
taxation )
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 418 275 - 12,572
and equipment
Amortisation of intangible 38 111 4,892 5,041
assets
Segment assets 178,372 76,402 (604,644) 1,340,186
Segment liabilities (99,927) (140,98 1,074,785 (1,274,306)
5)
Non-current assets other than
financial instruments and
deferred taxation 17,797 10,876 (325,284) 496,020
Audited year ended 28 Feb 2011
South Botswan Zambia Uganda
Africa a
R`000 R`000 R`000 R`000
Interest income 150,751 70,124 35,700 14,475
- External customers 90,812 39,139 35,617 14,475
- Inter - segment interest 59,939 30,985 83 -
Interest expense (108,629) (27,437 (18,240) (17,072)
)
Net interest income 42,122 42,687 17,460 (2,597)
Administration and commission 57,976 5,945 17,161 7,283
income
- External customers 23,065 5,945 17,161 7,283
- Inter - segment interest 34,911 - - -
Other operating income 74,284 15,897 (5,493) (32,681)
Operating income 174,382 64,529 29,128 (27,995)
Net impairment of loan advances (21,835) (6,788) 9,154 2,020
and receivables
Operating expenses (354,025) (38,209 (45,765) (14,713)
)
Management operating (loss)/profit (201,478) 19,532 (7,483) (40,688)
Segment result: (Loss)/profit (201,478) 19,532 (7,483) (40,688)
before taxation
Taxation (8,653) (6,605) (5,176) (19)
(Loss)/profit after taxation (210,131) 12,927 (12,659) (40,707)
Net investment in foreign - - 378 (28,840)
operation adjustment
Management (loss)/profit after (210,131) 12,927 (12,281) (69,547)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 20,990 812 1,166 387
and equipment
Amortisation of intangible assets 12,833 853 333 60
Segment assets 1,171,018 321,384 130,245 52,450
Segment liabilities (967,077) (209,39 (68,366) (112,344)
1)
Non-current assets other than
financial instruments and deferred
taxation 718,135 69,899 118,362 27,232
Tanzania Malawi Mauritiu Nigeria
s
R`000 R`000 R`000 R`000
Interest income 32,898 18,681 53,519 15,368
- External customers 32,898 18,681 - 15,368
- Inter - segment interest - - 53,519 -
Interest expense (14,754) (15,038) (62,819) (4,834)
Net interest income 18,144 3,643 (9,300) 10,534
Administration and commission 1,685 3,592 - 2,374
income
- External customers 1,685 3,592 - 2,374
- Inter - segment interest - - - -
Other operating income (22,727) (8,201) 8,522 (4,214)
Operating income (2,898) (966) (778) 8,694
Net impairment of loan advances 3,152 12,781 - (21,226)
and receivables
Operating expenses (15,819) (21,121) 3,735 (21,164)
Management operating (loss)/profit (15,565) (9,306) 2,957 (33,696)
Segment result: (Loss)/profit (15,565) (9,306) 2,957 (33,696)
before taxation
Taxation (20) (305) (9,900) (91)
(Loss)/profit after taxation (15,585) (9,611) (6,943) (33,787)
Net investment in foreign (20,660) (9,580) - (3,824)
operation adjustment
Management (loss)/profit after (36,245) (19,191) (6,943) (37,611)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 625 963 - 2,127
and equipment
Amortisation of intangible assets 57 - - -
Segment assets 63,051 81,641 459,439 39,996
Segment liabilities (102,440) (116,005 (866,347 (51,530)
) )
Non-current assets other than
financial instruments and deferred
taxation 14,222 2,336 361,189 4,407
CMA Other Eliminati Consolidate
on d
R`000 R`000 R`000 R`000
Interest income 53,154 8,890 (144,526) 309,034
- External customers 53,154 8,890 - 309,034
- Inter - segment interest - - (144,526) -
Interest expense (9,348) (10,699) 143,261 (145,609)
Net interest income 43,806 (1,809) (1,265) 163,425
Administration and commission 22,490 3,497 (34,911) 87,092
income
- External customers 22,490 3,497 - 87,092
- Inter - segment interest - - (34,911) -
Other operating income 2,642 (15,363) 40,324 52,990
Operating income 68,938 (13,675) 4,148 303,507
Net impairment of loan advances (6,118) 1,420 - (27,440)
and receivables
Operating expenses (28,906) (17,361) 28,077 (525,271)
Management operating 33,914 (29,616) 32,225 (249,204)
(loss)/profit
Segment result: (Loss)/profit 33,914 (29,616) 32,225 (249,204)
before taxation
Taxation (13,016) 9 8,076 (35,700)
(Loss)/profit after taxation 20,898 (29,607) 40,301 (284,904)
Net investment in foreign - (13,684) 76,210 -
operation adjustment
Management (loss)/profit after 20,898 (43,291) 116,511 (284,904)
taxation
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 1,664 1,027 - 29,761
and equipment
Amortisation of intangible 176 214 - 14,526
assets
Segment assets 118,525 43,671 (1,150,41 1,331,002
8)
Segment liabilities (77,722) (104,043 1,402,389 (1,272,876)
)
Non-current assets other than 18,303 12,472 (832,734) 513,823
financial instruments and
deferred taxation
Reviewed six months 31 Aug 2010
South Botswana Zambia Uganda
Africa
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 50,313 10,485 (4,524) (1,076)
Operating income 137,132 45,951 10,074 331
Net impairment of loan advances (37,425) (14,967) 1,448 (4,037)
and receivables
Operating expenses (146,896) (15,104) (19,764) (20,023)
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 Mauritiu Nigeria
s
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 3,341 3,866 6,295 682
Operating income 11,579 7,103 (8,076) 5,347
Net impairment of loan advances (1,618) 2,020 - (13,830)
and receivables
Operating expenses (27,023) (14,385) (2,038) (12,833)
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 assets 30 - - -
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 Eliminatio Consolidated
n
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 (509) (33,948) 35,727
Operating income 39,429 (2,517) (75,975) 170,378
Net impairment of loan advances (5,961) (2,717) - (77,087)
and receivables
Operating expenses (12,596) (19,425 33,031 (257,056)
)
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 after 17,299 (33,565 5,156 (168,164)
taxation )
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant 640 624 - 14,905
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) (107,96 533,265 (1,450,969)
4)
Non-current assets other than
financial instruments and
deferred taxation 19,415 13,081 (110,689) 538,023
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 2011, 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 Requirements of the Companies Act of South Africa.
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 periods.
The Group has, however, where applicable adopted the following new and modified
standards and interpretations, in response to changes to IFRS:
IAS 24 (revised) - Related Party Disclosure, IFRS 3 - Business Combinations/IAS
27 - Consolidated and Separate Financial Statements, IAS 1 - Presentation of
Financial Statements, IFRS 7 - Financial Instruments: Disclosures, IAS 34 -
Interim Financial Reporting, IFRIC 13 - Customer Royalty Programmes, IFRIC 14 -
The Limit on a Defined Benefit Asset, Minimum Funding requirements and their
Interaction, IFRIC 19 - Extinguishing Financial Liabilities with Equity
Instruments and IFRIC 20 - IFRIC 20 Stripping Costs in the Production Phase of a
Surface Mine.
The adoption of the new and modified standards and interpretations has had no
impact on the Group`s results
1. Other operating income
Reviewed Reviewed Audited
six months six months year
ended 31 ended 31 ended 28
Aug 2011 Aug 2010 Feb 2011
R`000 R`000 R`000
Net mobile revenue 1,730 5,261 11,053
Net (loss)/profit on exchange (5,719) 18,996 32,457
differences
Profit on disposal of loan - 682 4,500
advances
Other 13,220 10,788 4,980
9,231 35,727 52,990
Net mobile revenue comprises: 1,730 5,261 11,053
Gross mobile and related 14,910 24,143 46,120
revenue
Subscriptions and cost of sales (13,180) (18,882) (35,067)
Net (loss)/profit on exchange (5,719) 18,996 32,457
differences comprises:
Profit on foreign exchange 20,175 39,812 81,951
differences
Loss on foreign exchange (25,894) (20,816) (49,494)
differences*
*`Loss on foreign exchange differences` was reclassified from `Operating
expenses` and offset on a net disclosure basis against `Profit on foreign
exchange differences` as a component of `Other operating income`.
2. Loan advances to customers
Reviewed six Audited
months ended year ended
31 Aug 2011 28 Feb 2011
R`000 R`000
Gross loan advances to customers 1,426,918 1,167,122
Less: Deferred initiation fees (43,010) (21,038)
Less: Allowance for impairment of loan (700,235) (601,506)
advances
683,673 544,578
Movement on allowance for impairment:
Opening balance (601,506) (281,236)
Net charge for the period (31,340) (49,280)
Reinstatement of written-off (69,635) (292,187)
loan advances
Foreign exchange movement 2,246 21,197
(700,235) (601,506)
Analysis of gross loan advances by
territory:
South Africa 825,913 681,759
Rest of Africa 601,005 485,363
1,426,918 1,167,122
Analysis of impairment on loan
advances by territory:
South Africa (557,845) (452,590)
Rest of Africa (142,390) (148,916)
(700,235) (601,506)
3. 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 2011 (140,963) (762,304) (17,931) (921,197)
28 Feb 2011 (97,038) (748,237) (17,296) (862,571)
The following related party balances were outstanding at the end of the
reporting period:
Reviewed six Audited
months ended year ended
31 Aug 2011 28 Feb 2011
R`000 R`000
ABSA Bank Limited - cross currency swap 18,685 19,807
Nederlandse Financierings Maatschappij voor 174,614 169,818
Ontwikkenlingslanden N.V
Hlano Financial Services (Pty) Ltd 50,639 -
4. Reconciliation of headline earnings/(loss)
Reviewed Reviewed Audited
six months six months year ended
ended 31 ended 31 28 Feb 2011
Aug 2011 Aug 2010
R`000 R`000 R`000
Earnings/(loss) attributable to 21,669 (157,882) (275,559)
ordinary equity holders of the
parent entity
Non headline items:
Net profit on disposal of non- (77) (226) (647)
current assets
Impairment of non-current asset 1,500 - -
Goodwill impairment - - 3,187
Intangible asset impairment - - 2,007
Settlement expense - - 13,000
Profit on disposal of - - (621)
subsidiary
Headline earnings/(loss) 23,092 (158,108) (258,633)
Number of ordinary shares in 5,791.99 584.23 5,791.99
issue in millions
Weighted number of ordinary 5,791.99 584.00 931.35
shares in issue in millions
Diluted weighted number of 5,803.82 627.90 943.18
shares in issue in millions
5. Commitments and contingencies
Commitments
Blue Intercontinental Microfinance Bank Limited
In terms of the original shareholders agreement on the establishment of Blue
Intercontinental Micro Finance Bank Limited in Nigeria, the Group had, subject
to regulatory approval, an obligation to subscribe for US$7.0 million in equity
capital. In accordance with this commitment the Group had to date subscribed for
US$1.0 million in cash. Although the Group reached agreement with its fellow
shareholder to reduce the remaining capital requirement for the Group to US$1
million, a majority stake in the Group`s fellow shareholder was however acquired
by another financial institution subsequent to these discussions. This has
caused the Group to enter into further discussions with the new effective fellow
shareholder which discussions have not as yet been concluded.
Contingent liabilities
Various legal matters
There are certain potential claims against the Group, the outcome of which
cannot at present be foreseen. The claims are not regarded as substantial either
on an individual or Group basis considering their estimated probability of
success and should not exceed R3.5 million (28 February 2011: R3.5 million) in
aggregate.
Taxation
The Group has considered all matters in dispute with the taxation authorities.
Deferred taxation assets have only been recognised where it is probable that the
Group will succeed in its position with the taxation authorities.
Warranty Claims
In terms of the Subscription Agreement concluded on 10 December 2010, the Group
provided a number of warranties in favour of Mayibuye. Should the Group have
breached any of these warranties during a period of up to 3 months in certain
instances or up to 12 months in other instances after the Subscription Date and
upon a final determination of the quantum of Mayibuye`s claims by a committee of
its Board consisting only of directors who are independent of Mayibuye, or an
order of court or arbitration award (Claim Amount), Mayibuye will be entitled to
the issue of such number of Ordinary Shares which in aggregate would be equal to
the value of the final assessed Claim Amount.
The minimum Claim Amount must exceed R5 million in aggregate and the maximum
amount is capped at an amount equivalent to the Aggregate Subscription
Consideration being R163 million. The foregoing maximum limitation does not
apply in respect of a breach by the Group of the warranty contained in the
Subscription Agreement pertaining to regulatory offences.
The Warranty Shares will be allotted and issued to Mayibuye at an issue price
per Warranty Share equal to the 30-day VWAP per Ordinary Share as at 12:00 on
the business day immediately preceding the date on which Mayibuye first notified
the Company of the applicable claim in writing. Upon the allotment and issue of
the Warranty Shares to Mayibuye, the obligation of the company to pay the Claim
Amount shall be deemed to have been set off against Mayibuye`s obligation to pay
the subscription consideration for the Warranty Shares.
The event(s) that may give rise to a risk of warranty claims have been recorded
in the prior year Group`s financial statements and interim results. To the
extent that the warranty claims are settled they will not have any impact on the
Company`s Income Statement or Net Asset Value.
A notification of warranty claims was received from Mayibuye on 9 and 10 March
2011. The following items, raised in the claim letters and subject to
confirmation as described above, are based on the underlying amount of the claim
event recorded in the financial statements at the reporting date:
- Pinebridge Global Emerging Markets Partners II, L.P. (Pinebridge) Agreement
dated 27 October 2010 R44 million
As result of a directive issued by the Central Bank of Nigeria, Pinebridge was
required to transfer all of the shares acquired by it in the share capital of
Blue Intercontinental Micro Finance Bank in Nigeria from the Group, back to the
Group at the purchase price originally paid being US$ 5 million plus interest
thereon accruing at a rate of 8.5% per annum from the date the original sale
agreement was concluded until the date of recapitalisation on 10 December 2010.
As a result of the restatement of the annual financial statements of the Group
in respect of the financial year ended 28 February 2009, the number of shares
allotted and issued to Pinebridge pursuant to the conversion of the Class C
Preference Shares held by it was incorrect and consequently required the
allotment and issue of an additional 22,731,279 Blue ordinary shares at 0.13c.
Pinebridge converted both these amounts into ordinary shares as part of the
Groups early debt to equity conversion concluded on 25 February 2011.
- Taxation
The Group identified and recorded additional potential taxation obligations in
the finalisation of its 2011 financial statements relating to charges levied on
Group subsidiaries for shared services costs. R20 million
The Group further continued to accrue for interest and penalties on all overdue
taxes in its financial results. R17.5 million
The Group is currently in discussions with various taxation authorities
regarding the settlement of the Group taxation obligations.
- Lesotho Revenues
Following a High Court ruling in Lesotho, the Group was required to
retrospectively reduce the interest rate charged to customers on loan advances.
3 million
- Other R23.3 million
6. Going concern:
The Group generated a net profit of R21.8 million for the period ended 31 August
2011, compared to a loss of R284.9 million for the full year ended 28 February
2011 and a loss of R168.2 million for the comparative period ended 31 August
2010.
The Group`s return to profitability confirms the positive impact of the Group`s
turnaround strategy to date.
The Group`s recapitalisation and Debt Rescheduling Agreement concluded in
December 2010, the debt to equity conversion implemented in February 2011, and
the turnaround strategy have laid the foundation for the Group to grow its net
asset value of R65.9 million (2011: R58.1 million). The Debt Rescheduling
Agreement together with the R300 million claim purchase agreement secured by the
Group as part of the recapitalisation, provides access to liquidity to meet the
current requirements of the Group.
As part of its turnaround plan, the Group has assessed the solvency and capital
requirements of all its subsidiaries. The Group is in process of addressing any
shortfalls in this regard by inter alia capitalising portions of the inter-group
loan accounts between the various Group companies as well as injecting capital
where required with a view to ensuring that all affected entities are suitably
capitalised.
Loan advances have increased steadily from the R544.6 million at February 2011
to R683.7 million at 31 August 2011. The Group`s continues to adopt a
conservative approach to lending ensuring that impairment levels remain within
the set targets by the Group. Included in the R125.1 million cash utilised in
operations is R267.3 million that was employed in increasing loan advances, a
positive step from which the group intends to keep extending loan advances in a
controlled manner.
As described in the Note 8, the turnaround strategy has reached the halfway
stage and the platform has been set to enable the Group to achieve sustainable
profitability for the long term. Key to this is the ongoing management of
operating costs, controlled growth in loan advances, sourcing of new funding for
loan advances and settlement of pre-existing liabilities including dealing with
funders not part of the debt rescheduling agreement.
The Group will continue to enhance all its business processes, internal controls
and operational efficiencies.
The consolidated results have been prepared on a going concern basis.
7. Subsequent events:
No subsequent events were identified.
8. COMMENTARY ON THE RESULTS
Nature of business:
The Group is an innovative pan-African financial services provider and the
enabler of progress, upliftment and improvement in peoples` lives. The Group
operates in the various jurisdictions as a registered bank, insurance company or
micro finance provider. The main product lines are micro finance, business
finance, housing finance, savings products, insurance and mobile.
During the period under review, the Group operated in 12 countries namely,
Botswana, Ghana, Kenya, Lesotho, Malawi, Namibia, Nigeria, South Africa,
Swaziland, Tanzania, Uganda and Zambia. The Group commenced operations in Ghana
during February 2011. It has 219 branches and employed 1669 permanent staff and
contract staff members at the reporting date.
As noted below, the Mayibuye Group acquired a majority stake in the Group on 10
December 2010, and is currently implementing a turnaround strategy. The
turnaround strategy encompasses key improvements in business processes, systems,
internal controls and governance that are required. These interim results and
related commentary should therefore be read in context of this turnaround plan
that is currently being implemented.
Financial overview:
The Group generated a profit of R21.8 million for the period ended 31 August
2011 compared to a loss of R168.2 million for the comparable interim period.
This translates into earnings per share of 0.38c and headline earnings per share
of 0.40c compared to losses of 25.29c and 24.87c; respectively.
The 2012 interim financial results represent a significant improvement from
those reported in 2011 and 2010.
The recapitalisation of the Group by Mayibuye and the commencement of the key
phases to its turnaround strategy for the Group, have yielded positive and
sustainable improvements in financial results and overall business fundamentals
which provide the platform to return the Group to sustained profitability.
Pursuant to this turnaround strategy, the Group has inter alia:
- Increased its net asset value to R65.9 million from the R58.1 million at
February 2011 and negative R205.8 million at 31 August 2010;
- Concluded a Debt Rescheduling Agreement with lenders to the Group comprising
R746.3 million (86.5%) of the Group`s total external funding obligations at the
agreement date. This agreement allows for a three year stay on principal
payments to lenders and remedies all related covenant breaches that existed;
- Successfully converted R274.0 million of debt to equity with shareholder
approval to convert a further R50.0 million. The Group has benefitted from a
reduced interest expense;
- Received a R300 million facility through a claims purchase agreement for loan
advances as part of the Group`s recapitalisation;
- Reduced operating expenses by R79.9 million (31.09%) from that reported in the
comparable period.
- Achieved a reduction in impairment charges on non-performing loan advances
from that reported in the previous period due to focused collection efforts and
improved credit scoring;
- Commenced active new lending totalling R267.3 million since March 2011. This
represents a significant improvement against the full year production for the
2011 financial year which amounted to R280.7 million (90.45% improvement on an
annualised basis);
- Reduced its taxation exposure emanating from past transactions by R12.1
million through a review of the underlying transactions giving rise to these
exposures. This has positively impacted the taxation credit in the income
statement reflected as R9.3 million (2011: R4.4 million charge).
- Reduced the extent of credit impairments on new lending due to improved credit
policies; and
- Reduced the cash flow shortfall between the income from collections and that
required to meet the Group`s normal operating expenses and interest obligations.
The elimination of this shortfall is key to ensuring that capital collected from
customers is applied to advancing new loans.
In addition to the above there has been an overall improvement in the Group`s
operational process, governance, internal controls and business sophistication.
Loan advances have increased by 25.6% from R544.6 million in 2011 to R683.7
million at 31 August 2011. The sustained focus in reduction of operating costs,
along with the cashflow made available through the Debt Rescheduling Agreement,
Group recapitalisation and other funding facilities allowed for an increase in
loan production and resultant loan book growth. The impact of a prudent approach
to new lending is expected to be more evident in subsequent financial periods.
The net impairment charge on loan advances and receivables has reduced following
the focused collection efforts on the non-performing loans. The recovery of
historically non-performing loans will remain a key component of the turnaround
strategy until such time as the business growth and level of loan advances has
reached the targeted levels. Credit impairments on gross loans and advances is
49.1% (2011: 51.5%). The Group is currently retaining its focus on government
payroll deduction loans in all territories outside of South Africa where the
historic credit impairments trends have been below 5%.
The Group has entered into a distribution relationship with an institution in
Kenya which will see Blue increasing its distribution points in this market by a
minimum of 400. The implementation is currently underway and the Group expects
that these additional distribution points will be operational in November 2011.
The impact of this expansion is expected to positively contribute to the Group`s
results in the 2013 financial year.
The Group continues to explore ways to minimise its exposure to fluctuations to
foreign currencies which resulted in losses of R14.1 million on the translation
of the financial results of the foreign subsidiaries during the reporting
period. The Group is engaged with taxation authorities across all affected
entities to address the outstanding tax obligations of the Group.
As reported in the Group`s 2011 financial results, the board has launched an
investigation which includes a review of the underlying reasons and causes of
the restatements to its financial results in prior years. Although the
investigation has already provided certain conclusions, the investigation is
ongoing. The Group remains committed to providing its full co-operation to all
relevant authorities regarding the findings.
FORWARD LOOKING STATEMENT
The successful recapitalisation of the Group and turnaround strategy provides
the impetus to grow the business and return it to sustainable profitability for
the long term. The execution of the turnaround strategy was formulated over an
18 month period with these interim results reflecting the impact thereof after
only the first 9 months. The turnaround strategy is on track and the board is
confident that these actions will sustain the Group`s return to profitability.
The Group remains well positioned to benefit from its market position,
distribution, brand and products on the continent.
CHANGE TO THE BOARD OF DIRECTORS
There were no changes to the board of directors for the period under review.
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 8
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:
"We draw attention to the condensed consolidated financial statements which
indicate that the Group realised a net profit of R21.8 million (28 February
2010: R284.9 million loss) for the period ended 31 August 2011, and to note 6 of
the notes to the condensed financial information which detail the progress made
on the Group`s turnaround strategy and the actions taken, and still required, in
maintaining sustainable profitability and to ensure its ongoing liquidity and
solvency. Our opinion is not qualified in respect of this matter."
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 opinion report is available for inspection at Blue`s registered
office.
Preparer of financial statements
These condensed consolidated financial statements have been prepared under the
supervision of GP Oosthuizen CA(SA).
For and on behalf of the Board
J Meiring S Strydom
Chief Executive Officer Chief Financial Officer
31 October 2011
Directors:
J Meiring (CEO); S Strydom (CFO); S Twala *(Chairman); R Emslie *(Deputy
Chairman); A Ber*; A Couloubis*; RM Mashishi*; L Fine*; T Till*; MG Meehan*;
and J French*#
*non-executive # United States of America independent
Registered Office:
Mayibuye Place
355 Kent Avenue
Randburg
PO Box 2731, Randburg, 2125
Auditors:
Deloitte & Touche
Designated Advisor:
Grindrod Bank Limited
Transfer Secretaries:
Link Market Services South Africa (Pty) Ltd, 13th floor Rennie House, 19
Ameshoff Street Braamfontein.
(PO Box 4844, Johannesburg, 2000)
Company Secretary:
E Waldeck, Mayibuye Place
355 Kent Avenue, Randburg
elisew@blue.co.za Tel: (012) 990 4300
Date: 01/11/2011 08:00:09 Produced by the JSE SENS Department.
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