| Thu 21 Jun 2012, 10:00 | | BFS - Blue Financial Services Limited - Reviewed provisional consolidated |
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BFS
BFS
BFS - Blue Financial Services Limited - Reviewed provisional consolidated
financial results for the year ended 29 February 2012
BLUE FINANCIAL SERVICES LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1996/006595/06)
JSE Code: BFS ISIN: ZAE000083655
("Blue" or "the Company" or "the Group")
REVIEWED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 29
FEBRUARY 2012
1. Condensed Consolidated Income Statement for the year ended 29 February
2012
Reviewed Audited %
year year change
ended 29 ended 28
Feb 2012 Feb 2011
R`000 R`000
Interest income 39
430,394 309,034
Interest expense (94,896) (145,609) (35)
Net interest income 335,498 163,425 105
Administration and commission income 94,621 87,092 9
Other operating income 28,067 20,533 37
Operating income 458,186 271,050 69
Net impairment of loan advances and (87,336) (27,440) 218
receivables
Operating expenses (357,967) (522,084) (31)
Goodwill impairments - (3,187) -100
Operating profit / (loss) 12,883 (281,661) >100
Net (loss) / profit on foreign (20,303) 32,457 (163)
exchange differences
Loss before taxation (7,420) (249,204) (97)
Taxation 49,696 (35,700) >100
Net profit/(loss) for the year 42,276 (284,904) >100
Attributable to:
Equity holders of the parent 49,534 (275,559) >100
Non-controlling interest (7,258) (9,345) 22
42,276 (284,904) >100
Per share ratios (in cents)
Earnings/(loss) per share 0.73 (29.59) >100
Headline earnings/(loss) per share 0.76 (27.77) >100
Diluted earnings/(loss) per share 0.73 (29.59) >100
Diluted headline earnings/(loss) per 0.75 (27.77) >100
share
Net asset value per share 0.01 0.01 -
Condensed Consolidated Statement of Comprehensive Income for the year ended
29 February 2012
Reviewed Audited %
year ended year ended change
29 Feb 2012 28 Feb 2011
R`000 R`000
Net profit / (loss) for 42,276 (284,904) >100
the year
Other comprehensive income (14,448) (49,888) (71)
for the year, net of
taxation
Total comprehensive profit 27,829 (334,792) >100
/ (loss)
Total comprehensive profit
/ (loss) attributable to:
Equity holders of the 45,363 (332,803) >100
parent
Non-controlling interest (17,534) (1,989) >100
27,829 (334,792) >100
2. Condensed Consolidated Statement of Financial Position as at 29 February
2012
Reviewed Audited %
year ended year ended change
29 Feb 2012 28 Feb 2011
R`000 R`000
Assets
Cash and cash equivalents 90,492 232,299 (61)
Loan advances to customers 770,501 544,578 41
Trade and other receivables 19,688 19,697 -
Inventories 74 90 (18)
Taxation receivable 22,520 504 >100
Other financial assets - 441 (100)
Property, plant and equipment 52,584 66,540 (21)
Deferred taxation 24,201 19,570 24
Intangible assets 19,963 25,190 (21)
Goodwill 426,620 422,093 1
Total Assets 1,426,643 1,331,002 7
Equity and Liabilities
Equity
Share capital and premium 1,366,034 1,366,034 -
Share based payment reserve 5,512 2,732 102
Other (deficit)/reserves (76,459) (64,743) (40)
Accumulated loss (1,210,658) (1,257,460) (4)
Equity attributable to equity 84,429 46,563 63
holders of parent
Non-controlling interest (5,971) 11,563 (152)
Total Equity 78,458 58,126 35
Liabilities
Bank overdraft 15,600 23,254 (33)
Derivative financial 13,148 19,807 (34)
liabilities
Trade and other payables 253,725 230,767 10
Taxation payable 96,565 116,621 (17)
Finance lease obligations 4,752 14,002 (66)
Long-term liabilities 958,038 862,571 11
Operating lease liabilities 2,434 1,836 32
Deferred taxation 3,922 4,018 (2)
Total Liabilities 1,348,184 1,272,876 6
Total Equity and Liabilities 1,426,643 1,331,002 6
3. Condensed Consolidated Statement of Changes in Equity for the year ended
29 February 2012
Share Share Other (Accumulated
Capital based Reserves Loss)/
and payment / Retained
Premium reserve (Deficit) Earnings
R`000 R`000 R`000 R`000
Balance at 28 February
2010 928,250 - 445 (948,107)
Total comprehensive
loss for the 2011 year - (57,244) (275,559)
Share-based payment to
employees - 2,732 - -
Issue of ordinary
shares due to 163,000 - - -
recapitalisation
Issue of ordinary shares
on first debt conversion 271,828 - - -
Shortfall on
convertible redeemable 2,956 - - (2,956)
preference shares
conversion
Convertible instrument
reserve - - (4,822) 4,822
Contingency reserve - - (390) 390
Business combinations - - - (38,782)
Balance at 28 February
2011 1,366,034 2,732 (62,011) (1,260,192)
Total comprehensive
income for the 2012 - - (14,448) 49,534
year
Share-based payment to
employees - 2,780 - -
Balance at 29 February
2012 1,366,034 5,512 (76,459) (1,210,658)
Total
attributable
to equity Non-
holders of controlling
the parent interest Total Equity
R`000 R`000 R`000
(19,412)
Balance at 28 February 16,529 (2,883)
2010
Total comprehensive loss
for the 2011 year (332,803) (1,989) (334,792)
Share-based payment to
employees 2,732 - 2,732
Issue of ordinary shares
due to recapitalisation 163,000 - 163,000
Issue of ordinary shares
on first debt conversion 271,828 - 271,828
Business Combinations (38,782) (2,977) (41,759)
46,563
Balance at 28 February 11,563 58,126
2011
Total comprehensive
income for the 2012 year 35,086 (17,534) 17,553
Share-based payment to
employees 2,780 - 2,780
Balance at 29 February 84,430 (5,971) 78,459
2012
4. Condensed Consolidated Statement of Cash Flows for the year ended 29
February 2012
Reviewed year Audited % change
end 2012 year end
2011
R`000 R`000
Cash flows from operating
activities
Cash generated from operations 196,829 225,577 (13)
Interest expense (95,344) (145,609) (35)
Net loan (advances (248,167) 157,986 <100
to)/collections from customers
Taxation paid 6,027 (3,642) <100
Net cash (utilised in) /
generated from operating (140,655) 76,326 <100
activities
Cash flows from investing
activities
Purchase of property, plant (5,477) (7,789) (30)
and equipment
Proceeds from disposal of 1,591 3,937 (60)
property, plant and equipment
Other investing activities 935 7,326 <100)
Net cash (utilised in) / (2,952)
generated from investing 161,460 <100
activities
Cash flows from financing
activities
Proceeds on share issue - 150,000 (100)
Net proceeds from long-term 50,000 9,708 >100
liabilities
Net capital repayment on long- (36,446) - >100
term liabilities
Net finance lease repayments (9,178) (4,122) (95)
Net cash generated from
financing activities 4,376 155,586 <100
Total cash movement for the (139,231) 235,386 <100%
year
Cash at the beginning of the 209,045 (22,167) >100
year
Effect of exchange rates (5,078) (4,174) <100
Total cash at the end of the 74,892 209,045 (64)
year
Segment report
Reviewed year ended 29 Feb 2012
South Botswana Zambia Uganda
Africa
R`000 R`000 R`000 R`000
Interest income 252,527 47,617 60,330 13,456
- External customers 172,061 36,036 59,669 13,456
- Inter-segment 80,466 11,581 660 -
Interest expense (88,947) (25,365) (4,371) 894
Net interest income 163,580 22,253 55,959 14,350
Administration and 45,358 18,897 21,866 4,322
commission income
- External customers 7,185 18,897 21,866 4,322
- Inter-segment 38,173 - - -
Other operating 26,499 1,645 62 73
income
Operating income 235,438 42,795 77,886 18,745
Net impairment of (31,087) (25,848) (11,880) (7,723)
loan advances
Operating expenses (173,165) (24,121) (44,800) (10,730)
Forex gain / (loss) (14,604) (543) (2,465) 3,823
Management operating 16,582 (7,717) 18,741 4,114
(loss)/profit
Segment result : 16,582 (7,717) 18,741 4,114
(Loss) / profit
before taxation
Taxation 26,760 7,792 (9,468) 266
(Loss) / profit after 43,342 75 9,272 4,381
taxation
Net investment in - (5,304) (5,885) (3,654)
foreign operation
adjustment
Management (loss) / 43,342 (5,229) 3,387 727
profit after taxation
Other material non-
cash items included
in segment profit /
(loss):
Depreciation on 16,132 1,116 982 329
property, plant and
equipment
Amortisation of - - - -
intangible assets
Interest income
- External customers 1,537,667 77,314 152,909 25,243
- Inter-segment
(599,741) (195,319) (93,256) (10,572)
Malawi Mauritius Nigeria
Tanzania
R`000 R`000 R`000 R`000
Interest income 28,260 24,958 6,643 9,686
- External customers 28,260 24,958 - 9,686
- Inter-segment - - 6,643 -
Interest expense (736) (4,391) (61,329) (2,944)
Net interest income 27,524 20,567 (54,686) 6,742
Administration and 1,708 7,198 - 1,578
commission income
- External customers 1,708 7,198 - 1,578
- Inter-segment - - - -
Other operating income 119 215 - 134
Operating income 29,352 27,980 (54,686) 8,454
Net impairment of loan (13,853) (10,954) - (7,292)
advances
Operating expenses (13,857) (16,449) (529) (20,956)
Forex gain / (loss) (1,404) 261 (5,424) 1,996
Management operating 237 837 (60,638) (17,798)
(loss) / profit
Segment result :(Loss) 237 837 (60,638) (17,798)
/ profit before
taxation
Taxation 1,133 4,791 12,068 (208)
(Loss) / profit after 1,370 5,629 (48,571) (18,006)
taxation
Net investment in (2,974) (3,765) - -
foreign operation
adjustment
Management (loss) / (1,605) 1,864 (48,571) (18,006)
profit after taxation
Other material non-cash
items included in
segment profit / (loss)
Depreciation on 410 877 - 2,172
property, plant and
equipment
Amortisation of - - - -
intangible assets
Segment assets 36,834 86,867 671,069 27,206
Segment liabilities (9,085) (9,004) (320,281) (17,663)
CMA Other Elimination Consolidated
R`000 R`000 R`000 R`000
Interest income 54,975 14,247 (82,305) 430,394
- External 54,975 14,247 17,045 430,394
customers
- Inter-segment - - (99,350) -
Interest expense (4,160) (2,804) 99,256 (94,896)
Net interest 50,815 11,443 16,951 335,498
income
Administration and 24,051 7,698 (38,056) 94,621
commission income
- External 24,051 7,698 117 94,621
customers
- Inter-segment - - (38,173) -
Other operating 1,573 98 (2,351) 28,067
income
Operating income 76,439 19,239 (23,456) 458,186
Net impairment of 14,720 (6,243) 12,825 (87,336)
loan advances
Operating expenses (30,242) (17,906) (5,211) (357,967)
Forex gain / - (6,248) 4,306 (20,303)
(loss)
Management 60,916 (11,158) (11,536) (7,420)
operating (loss) /
profit
Segment result 60,916 (11,158) (11,536) (7,420)
:(Loss) / profit
before taxation
Taxation 3,373 1,133 2,056 49,696
(Loss) / profit 64,289 (10,025) (9,480) 42,276
after taxation
Net investment in (9,506) (4,820) 35,909 -
foreign operation
adjustment
Management (loss) 54,783 (14,845) 26,429 42,276
/ profit after
taxation
Other material non-cash items included in segment
profit / (loss)
Depreciation on 705 852 - 23,575
property, plant
and equipment
Amortisation of 75 163 5,208 5,446
intangible
assets
Segment assets 193,326 84,222 (1,468,538) 1,426,620
Segment (56,965) (11,725) (23,154) (1,348,184)
liabilities
Audited year ended 28 Feb 2011
South Botswana Zambia Uganda
Africa
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 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 57,976 5,945 17,161 7,283
commission income
- External customers 23,065 5,945 17,161 7,283
- Inter - segment 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 (21,835) (6,788) 9,154 2,020
advances
Operating expenses (354,025) (38,209) (42,578) (14,713)
Goodwill impairment - - (3,187) -
Management operating (201,478) 19,532 (7,483) (40,688)
(loss)/profit
Segment result: (201,478) (7,483) (40,688)
(Loss)/profit before 19,532
taxation
Taxation (8,653) (6,605) (5,176) (19)
(Loss)/profit after taxation (210,131) (12,659) (40,707)
12,927
Net investment in foreign 378 (28,840)
operation adjustment - -
Management (loss)/profit (210,131) (12,281) (69,547)
after taxation 12,927
Other material non-cash
items included in
segment profit/(loss):
Depreciation on property, 20,990 812 1,166 387
plant and equipment
Amortisation of intangible 12,833 853 333 60
assets
Segment assets 1,171,018 321,384 130,245 52,450
Segment liabilities (967,078) (209,391) (68,366) (112,344)
Non-current assets other 718,135 69,899 118,362 27,232
than financial instruments
and deferred taxation
Tanzani Malawi Mauriti Nigeri
a us a
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 - - 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 income 1,685 3,592 - 2,374
- External customers 1,685 3,592 - 2,374
- Inter - segment - - - -
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 - (21,22
6)
Operating expenses (15,819 (21,121 3,735 (21,16
) ) 4)
Goodwill impairment - - - -
Management operating (loss)/profit (15,565 (9,306) 2,957 (33,69
) 6)
Segment result: (Loss)/profit before (15,565 (9,306) 2,957 (33,69
taxation ) 6)
Taxation (20) (305) (9,900) (91)
(Loss)/profit after taxation (15,585 (9,611) (6,943) (33,78
) 7)
Net investment in foreign operation (20,660 (9,580) - (3,824
adjustment ) )
Management (loss)/profit after (36,245 (19,191 (6,943) (37,61
taxation ) ) 1)
Other material non-cash items
included in
segment profit/(loss):
Depreciation on property, plant and 625 963 - 2,127
equipment
Amortisation of intangible assets 57 - - -
Segment assets 63,051 81,641 459,439 39,996
Segment liabilities (102,44 (116,00 (866,34 (51,53
0) 5) 7) 0)
Non-current assets other than 14,222 2,336 361,189 4,407
financial instruments and deferred
taxation
CMA Other Eliminatio Consolidat
n ed
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 - - (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 - - (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 0 (27,440)
)
Operating expenses (28,90 (17,361) 28,077 (522,084)
6)
Goodwill impairment - - - (3,187)
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 (13,01 9 8,076 (35,700)
6)
(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 118,52 43,671 (1,150,418 1,331,002
5 )
Segment liabilities (77,72 (104,043) 1,402,390 (1,272,876
2) )
Non-current assets other than 18,303 12,472 (832,734) 513,823
financial instruments and
deferred taxation
The Group`s reportable segments are geographical business units that offer
comparable business products and solutions, which are managed and measured
regionally.
The Group 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, Rwanda and Ghana.
5. BASIS OF PREPARATION
The reviewed provisional condensed consolidated financial results for the
year ended 29 February 2012, comprise the reviewed provisional condensed
consolidated results of the company and its subsidiaries as prepared by DA
Bekker CA(SA).
These reviewed provisional condensed consolidated results have been prepared
in accordance with the recognition and measurement criteria of IFRS, the AC
500 standards as issued by the Accounting Practices Board or its successor,
interpretations issued by the IFRS Interpretations Committee (IFRIC), and the
information requirements of International Accounting Standard: Interim
Financial Reporting (IAS34) and the JSE Listings Requirements and South
African Companies Act. In the preparation of these financial results the
Group has applied key assumptions concerning the future and other
indeterminate sources in recording various assets and liabilities. The
Group`s principal accounting policies and assumptions have been applied
consistently over the current and prior financial year.
6. Debt rescheduling agreement
The Group concluded a debt rescheduling agreement ("DRA") with its existing
lenders as part of the recapitalisation of the Group during December 2010.
Group lenders comprising circa R974 million of Group debt became party to the
DRA at that date. The DRA further remedied all covenants that had previously
been breached by the Group to these lenders.
It was originally anticipated that the turnaround process will take up to 3
(three) years to complete. As such the key objective of the DRA was to allow
the Group a period of 3(three) years, during which the participating lenders
have granted the Group a stay on principal payments on their facilities, and
pursuant to its turnaround objectives, to work on closing the gap between the
DRA assets and liabilities that existed on that date. If a gap still remains
at the end date of the DRA, being 1 January 2014, this will be converted into
equity in the Group.
The Group had always anticipated that a gap may remain at the end date of the
DRA and that a conversion of some of these liabilities into equity would in
all probability take place.
The effect of such an issuance of shares created uncertainty with a quantum
of the potential issue of shares in the Group to funders, and the further
issue of Anti-dilution shares to the Mayibuye Group in order to maintain
their shareholding at 51%. In terms of IFRS the Group`s balance sheet could
not reflect the positive impact of the expected future conversion of debt
into equity until this conversion takes place.
During February 2011, the Group concluded a conversion of debt into equity
comprising circa R274 million of Group debt as an initial step in moving the
Groups balance sheet to a solvent position and recording a portion of the
anticipated gap between the DRA assets and liabilities as equity.
The Group is now seeking to convert the projected possible remaining portion
of the expected gap between the DRA assets and liabilities through a further
conversion of debt into equity under the DRA of up to a maximum of R452
million. This proposed conversion will be tabled for approval at the upcoming
shareholders` meeting to be held on 29 June 2012.
7. Commitments and contingencies
Contingencies
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 therefore not exceed R3 million (2011:
R3.5 million) in aggregate.
Taxation
As part of its ongoing restructure, the Group has identified various
amendments required to its historic tax returns submitted to the South
African Revenue Services ("SARS") as a result of the initial findings of the
forensic investigation, coupled with its review of historic tax calculations
and submissions made. It should be noted that SARS has not yet completed its
assessment in this regard.
The revised tax returns have the impact of reducing the Group`s overall tax
obligations by R32.28 million.
The Group is seeking to engage the various taxation authorities across all
affected entities to address the outstanding tax obligations of the Group.
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
breach 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, from the
Group`s perspective, by its Board consisting of only directors of the Group
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 aforegoing 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 Group`s financial statements. 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 has been 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.
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 Interest Rates (R15.2 million)
Following a High Court ruling in Lesotho, the Group may be required to
retrospectively reduce the interest rate charged to customers on loan
advances.
- Other (R23.3 million)
The assessment of the veracity of these claims is expected to commence
following the release of the Group`s results for 29 February 2012.
8. Going concern
The Group earned a net profit after taxation of R42.27 million (2011: net
loss after taxation of R284.9 million) for the year ended 29 February 2012,
representing a key milestone in returning the Group to profitability from the
losses recorded in the prior year.
The recapitalisation of the Group by Mayibuye in December 2010, the impact of
the DRA, coupled with the debt: equity conversion in February 2011, and the
commencement of the key phases to the turnaround strategy, have to date
yielded positive and sustainable improvements in financial results and
overall business fundamentals.
The Group`s assets now exceed its liabilities by R78.5 million (2011: R58.1
million) and has, at the reporting date, access to the remaining R200 million
of the original R300 million facility through the claims purchase agreement
with Leonox (Proprietary) Limited for loan advances.
As described in note 6 above, the Group has received irrevocable undertakings
from shareholders representing 76% of the Group`s issued share capital to
conclude a further debt: equity conversion of DRA debt of up to a maximum of
R452 million. The shareholders meeting where this conversion will be
considered is set for 29 June 2012.
Following this conversion, the Group will improve its net equity position by
up to a maximum of R452 million and realise further savings in funder
interest costs, whilst representing another important step in moving the
Group closer to meeting all of its turnaround objectives. The conversion will
also ensure that the Group has a positive tangible net asset value.
As described in note 10 below, the turnaround strategy is well underway and
the business is now on a solid platform to enable it to change its focus to
driving growth in all its operations. Key to this is the planned debt: equity
conversion and further initiatives being explored to drive the on-going
strengthening of the Group`s balance sheet which will form the basis for
further debt raising to enable growth.
The Group in this regard has been re-engaged by financial institutions to
explore the extension of new funding lines to support the growth objectives
of the Group. These discussions are seen as a further positive indication of
the increase in investor and funder confidence in the Group.
The Group is maintaining its focus on managing operating cost levels, growing
loan advances, while managing short term cash requirements to settle pre-
existing liabilities. The Group will further strive to enhance all its
business processes, internal controls and operational efficiencies on an
ongoing basis.
Included in the results above are non-recurring charges and gains and the
Group furthermore remains exposed to foreign currency movements on its non-
Rand denominated external funding as well as its non-Rand denominated results
of its subsidiary companies.
The consolidated results have therefore been prepared on a going concern
basis.
9. Subsequent events
Blue Intercontinental Microfinance Bank Limited in Nigeria
In terms of the original shareholders agreement on the establishment of Blue
Intercontinental Micro Finance Bank Limited in Nigeria, the Group had an
obligation to subscribe for US$7 million in equity capital. In accordance
with this commitment the Group had to date subscribed for US$1 million in
cash.
The Group reported in the prior year that it had reached agreement with its
fellow shareholder subsequent to the financial year-end, which subject to
Regulatory approval, would inter alia have resulted in the remaining capital
requirement for the Group being reduced to US$1 million. This fellow
shareholder was however acquired by another Nigerian financial institution
during the 2012 financial year resulting in this agreement not being
consummated.
The Group, in collaboration with its holding company (Mayibuye Group (Pty)
Ltd ("Mayibuye")), is advanced in negotiations with the new fellow
shareholder regarding the future shareholding of the Nigerian Micro Finance
bank.
Debt: Equity Conversion
As described in note 6 and 8 above, the Group has received irrevocable
undertakings from shareholders representing 76% of the Group`s issued share
capital to conclude a further debt: equity conversion of DRA debt of up to
R452 million. The shareholders meeting where this conversion will be
considered is set for 29 June 2012.
Zimbabwe and the Congo
The Group, further to its turnaround initiatives and investigations,
identified the existence of entities previously established in Zimbabwe and
the Congo. The entities have not actively traded and the Group is in process
of finalising revised shareholders agreements, which are still subject to
inter alia regulatory approvals, prior to the finalising its plans for
operations in these countries.
Other than the matters noted above, no subsequent events were identified.
10. Commentary on the results
The Group generated a net profit after taxation of R42.27 million for the
year ended 29 February 2012 compared to a net loss after taxation of R284.9
million in the 2011 financial year. This translates into the conversion of a
loss per share of 29.6 cents for 2011, to earnings per share of 0.7 cents for
2012. Headline loss per share improved in a similar manner with headline
earnings per share for 2012 of 0.7 cents (2011: headline loss per share of
27.8 cents). The Group reported a net profit of R21.6 million for the 6
months ended 31 August 2011. The net profit for the full financial year is an
improvement over that reported for the first 6 months.
The 2012 financial results represent a significant improvement from those
reported in 2010, a year which signalled severe financial difficulties in the
Group and which brought into question its ability to continue operating as a
going concern.
Loan advances have increased by 40% from R544.6 million in 2011 to R770.5
million at 29 February 2012. The Group focused on enhancing the control
environment and driving its turnaround strategy together with the increase in
lending activities to customers. The impact of a prudent approach to new
lending has already realised benefits, and 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. Overall credit impairment on gross loans and advances is
49% (2011: 51.5%) after taking into account the reinstatement of loans
previously written-off. The Group is currently focusing on government payroll
deduction loans in all countries outside of South Africa where the current
credit impairments history is below 5%.
The Group is engaging 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 had launched a
forensic investigation, which includes a review of the underlying reasons and
causes of the restatements to its financial results in prior years. The
initial forensic report has been provided to the relevant regulatory
authorities, and the Group remains committed to providing its full co-
operation to all relevant authorities regarding the findings contained
therein.
Recapitalisation of Group Subsidiaries
As part of its turnaround plan, the Group has completed its assessment of the
solvency and capital requirements of all its subsidiaries. Where required
Group companies were recapitalised through inter alia the capitalisation of
portions of the inter-group loan accounts between the various Group companies
as well as injection of capital where so required.
FORWARD LOOKING STATEMENT
The recapitalisation of the Group by Mayibuye in December 2010, coupled with
the first debt: equity conversion in February 2011, and the commencement of
the key phases to its turnaround strategy, have to date yielded positive and
sustainable improvements in financial results and overall business
fundamental.
The turnaround strategy was formulated in a structured manner with an initial
focus on restoring the Group to solvency, implementing much needed and on-
going improvements in operational, governance and controls, and returning the
Group to profitability.
With the Group`s turnaround strategy now well advanced and a solid foundation
in place, focus has shifted to further strengthening the Group`s balance
sheet. A strong and well-capitalised balance sheet is paramount in securing
new funding and investors, which is a key catalyst in driving future growth
in loan advances and with that sustainable profitability of the Group going
forward.
The Group is also focusing on leveraging its extensive distribution network
and technology by introducing further innovation and convenience into its
customer proposition and distribution network. This is aimed at significantly
increasing customer access to the Group and its products but with minimal
investment required. Core focus areas for financial products will be growth
in the provision of financing for housing and education.
The board is confident that these actions will 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
The following changes to the Blue board took place during the year ended 29
February 2012:
Resigned - M G Meehan on 31 December 2011
Resigned - A Couloubis on 15 December 2011
Resigned - T L Till on 15 December 2011
Appointed - G Whitcher on 9 January 2012
Resigned - G Whitcher on 6 February 2012
Appointed - D Bekker on 6 February 2012
DIVIDENDS
No dividend has been declared for the period under review.
AUDITORS REVIEW CONCLUSION
The Group`s independent auditors, Deloitte & Touche, have reviewed the
accompanying financial information and a copy of their unmodified review
conclusion on this condensed consolidated financial information is available
for inspection at the Group`s registered office. The Group`s independent
auditors, Deloitte & Touche conducted their review in accordance with
International Standard on Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity.
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 subsidiary 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.
NO CHANGE STATEMENT, POSTING OF ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL
MEETING
Respective announcements will be made in due course advising shareholders of
inter alia, the following:
the date of when the consolidated annual financial statements are approved by
the Board, accompanied by a "No Change Statement"; and
to be followed by the date of the posting of the annual report and the
details of the notice of the annual general meeting.
For and on behalf of the Board
J Meiring D Bekker
Chief Executive Officer Chief Financial Officer
21 June 2012
S Twala *(Chairman); R Emslie *(Deputy Chairman); J Meiring (CEO); D
Bekker(CFO); A Ber*; RM Mashishi*; L Fine*; J French*# and S Strydom
*non-executive independent # United States of America
Registered Office:
Mayibuye Place
355 Kent Avenue
Randburg
PO Box 2731, Randburg, 2125
Auditors:
Deloitte & Touche
Designated Advisor:
Grindrod Bank Limited
Registration number 1994/007994/06
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: +27 (0) 11 504 6200
Group head office:
Tel: +27 (0) 11 504 6200 Fax: +27 (0) 504 6207
E-mail: blue@blue.co.za
www.blue.co.za
Date: 21/06/2012 10:00:03 Produced by the JSE SENS Department.
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