| Fri 13 Jul 2012, 16:22 | | Blue Financial Services - Audited Condensed Consolidated Financial Results for the year ended 29 February 2012 |
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BFS
Audited Condensed 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)
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2012
INTRODUCTION
Shareholders are referred to the reviewed provisional consolidated financial results of the Group for the year ended 29 February 2012, published on the Securities Exchange News Service of the JSE Limited on 21 June 2012 (Reviewed Results). Subsequent to the publication of the Reviewed Results, shareholders are advised that the Company has signed-off the group consolidated financial statements and deems it prudent to publish the audited condensed consolidated results on SENS earlier rather than to wait for the audited consolidated results to accompany the Annual Report and Notice of the Annual General Meeting to be sent to shareholders at a later date. Shareholders are further referred to the note in this announcement highlighting the modifications made to the Reviewed Results.
1. Condensed Consolidated Income Statement for the year ended 29 February 2012
Audited year ended 29 Feb 2012 Audited year ended 28 Feb 2011 % change
R000 R000
Interest income 416,773 309,034 35
Interest expense (94,896) (145,609) (35)
Net interest income 321,877 163,425 97
Administration and commission income 94,621 87,092 9
Other operating income 28,067 20,533 37
Operating income 444,565 271,050 64
Net impairment of loan advances and receivables (73,715) (27,440) >100
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 exchange differences (20,303) 32,457 <100
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 0.86 (29.59) >100
Headline earnings/(loss) per share 0.88 (27.77) >100
Diluted earnings/(loss) per share 0.86 (29.59) >100
Diluted headline earnings/(loss) per share 0.88 (27.77) >100
Net asset value per share 0.01 0.01 -
Condensed Consolidated Statement of Comprehensive Income for the year ended 29 February 2012
Audited year ended 29 Feb 2012 Audited year ended 28 Feb 2011 % change
R000 R000
Net profit / (loss) for the year 42,276 (284,904) >100
Other comprehensive loss for the year, net of taxation (24,724) (49,888) 50
Total comprehensive profit / (loss) 17,552 (334,792) >100
Total comprehensive profit / (loss) attributable to:
Equity holders of the parent 35,086 (332,803) >100
Non-controlling interest (17,534) (1,989) >100
17,552 (334,792) >100
Reconciliation of Headline earnings / (loss) per share (cents)
2012 2011
Gross Net Gross Net
R000 R000 R000 R000
Profit / (loss) for the year attributable to the owners of the Company - 49,534 - (275,559)
Non headline items:
Net loss / (profit) on sale of property , plant and equipment 13 13 (647) (647)
Goodwill impairments - - 3,187 3,187
Impairment charge - aircraft 1,500 1,500 2,007 2,007
Profit on disposal of subsidiary - - (621) (621)
Settlement expense - - 13,000 13,000
Earnings used in the calculation of headline earnings / (loss) per share 51,047 (258,633)
Weighted average number of ordinary shares for the purposes of basic earnings / (loss) per share ( in thousands) 5,791,989 931,353
Headline earnings / (loss )per share (cents) 0.88 (27,77)
2. Condensed Consolidated Statement of Financial Position as at 29 February 2012
Audited year ended 29 Feb 2012 Audited year ended 28 Feb 2011 % change
R000 R000
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 >100
Other deficits (76,459) (62,011) (23)
Accumulated loss (1,210,658) (1,260,192) (4)
Equity attributable to equity holders of parent 84,429 46,563 81
Non-controlling interest (5,971) 11,563 (100)
Total Equity 78,458 58,126 35
Liabilities
Bank overdraft 15,600 23,254 (33)
Derivative financial liabilities 13,148 19,807 (34)
Trade and other payables 253,726 230,767 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 33
Deferred taxation 3,922 4,018 (2)
Total Liabilities 1,348,185 1,272,876 6
Total Equity and Liabilities 1,426,643 1,331,002 7
3. Condensed Consolidated Statement of Changes in Equity for the year ended 29 February 2012
Share Capital and Premium Share based payment reserve Other Reserves / (Deficit) (Accumulated Loss)/Retained 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 recapitalisation 163,000 - - -
Issue of ordinary shares on first debt conversion 271,828 - - -
Shortfall on convertible redeemable preference shares conversion 2,956 - - (2,956)
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 year - - (14,448) 49,534
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 holders of the parent Non-controlling interest Total Equity
R'000 R'000 R'000
Balance at 28 February 2010 (19,412) 16,529 (2,883)
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
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
Total comprehensive income for the 2012 year 35,086 (17,534) 17,552
Share-based payment to employees 2,780 - 2,780
Balance at 29 February 2012 84,429 (5,971) 78,458
4. Condensed Consolidated Statement of Cash Flows for the year ended 29 February 2012
Audited year end 2012 Audited year end 2011 % change
R'000 R'000
Cash flows from operating activities
Cash generated from operations 185,814 70,546 >100
Interest expense (94,896) (145,609) (35)
Net loan (advances to)/collections from customers (225,841) 155,031 >100
Taxation paid 6,028 (3,642) >100
Net cash (utilised in) / generated from operating activities (128,895) 76,326 >100
Cash flows from investing activities
Purchase of property, plant and equipment (5,479) (7,789) (30)
Proceeds from disposal of property, plant and equipment 1,591 3,937 (60)
Other investing activities 935 7,326 (87)
Net cash (utilised in) / generated from investing activities (2,953) 3,474 >100
Cash flows from financing activities
Proceeds on share issue - 150,000 (100)
Net proceeds from long-term liabilities 50,000 9,708 >100
Net capital repayment on long-term liabilities (36,446) - >100
Net finance lease repayments (9,178) (4,122) >100
Net cash generated from financing activities 4,376 155,586 (97)
Total cash movement for the year (127,472) 235,386 >100
Cash at the beginning of the year 209,045 (22,167) >100
Effect of exchange rates (6,681) (4,174) >100
Total cash at the end of the year 74,892 209,045 (64)
5. Segment report
Audited year ended 29 Feb 2012
South Africa Botswana Zambia Uganda
R'000 R'000 R'000 R'000
Interest income 252,527 41,726 46,709 13,456
- External customers 172,061 30,145 46,049 13,456
- Inter-segment 80,466 11,581 660 -
Interest expense (88,947) (25,365) (4,371) 894
Net interest income 163,580 16,361 42,338 14,350
Administration and commission income 45,358 18,897 21,866 4,322
- External customers 7,185 18,897 21,866 4,322
- Inter-segment 38,173 - - -
Other operating income 26,499 1,645 62 73
Operating income 235,437 36,903 64,266 18,745
Net impairment of loan advances (26,793) (14,958) 1,740 (7,723)
Operating expenses (173,165) (24,121) (44,800) (10,730)
Forex (loss) / gain (14,604) (543) (2,465) 3,823
Management operating profit /(loss) 20,875 (2,719) 18,741 4,115
Segment result : Profit /(loss)before taxation 20,875 (2,719) 18,741 4,115
Taxation 26,760 7,792 (9,468) 266
Profit /(loss) after taxation 47,635 5,073 9,273 4,381
Net investment in foreign operation adjustment - (5,304) (5,885) (3,654)
Management profit /(loss) after taxation 47,635 (231) 3,388 727
Other material non-cash items included in segment profit / (loss):
Depreciation on property, plant and equipment 16,132 1,116 982 329
Amortisation of intangible assets - - - -
Interest income
Segment assets 1,541,961 82,314 152,909 25,243
Segment liabilities (599,741) (195,319) (93,256) (10,572)
Tanzania Malawi Mauritius Nigeria
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 commission income 1,708 7,198 - 1,578
- External customers 1,708 7,198 - 1,578
- Inter-segment - - - -
Other operating income 119 215 - 134
Operating income 29,351 27,980 (54,686) 8,454
Net impairment of loan advances (15,237) (10,954) - (7,292)
Operating expenses (13,857) (16,449) (529) (20,956)
Forex (loss)/ gain (1,404) 261 (5,424) 1,996
Management operating profit / (loss) (1,147) 838 (60,639) (17,798)
Segment result : Profit / (loss) before taxation (1,147) 838 (60,639) (17,798)
Taxation 1,133 4,791 12,068 (208)
(Loss) / profit after taxation (14) 5,629 (48,571) (18,006)
Net investment in foreign operation adjustment (2,974) (3,765) - -
Management profit /(loss) after taxation (2,988) 1,864 (48,571) (18,006)
Other material non-cash items included in segment profit / (loss)
Depreciation on property, plant and equipment 410 877 - 2,172
Amortisation of intangible assets - - - -
Segment assets 35,451 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 64,419 14,247 (85,858) 416,773
- External customers 64,419 14,247 13,492 416,773
- Inter-segment - - (99,350) -
Interest expense (4,160) (2,804) 99,257 (94,896)
Net interest income 60,259 11,443 13,399 321,877
Administration and commission income 24,167 7,698 (38,173) 94,621
- External customers 24,167 7,698 - 94,621
- Inter-segment - - (38,173) -
Other operating income 1,573 98 (2,351) 28,067
Operating income 85,999 19,239 (27,123) 444,566
Net impairment of loan advances 9,159 (6,243) 4,586 (73,716)
Operating expenses (30,242) (17,906) (5,212) (357,967)
Forex (loss)/ gain - (6,248) 4,306 (20,303)
Management operating profit / (loss) 64,916 (11,158) (23,444) (7,420)
Segment result :Profit / (loss) taxation 64,916 (11,158) (23,444) (7,420)
Taxation 3,373 1,133 2,056 49,696
(Loss) / profit after taxation 68,289 (10,025) (21,391) 42,276
Net investment in foreign operation adjustment (9,506) (4,820) 35,909 -
Management profit / (loss) after taxation 58,782 (14,845) 14,520 42,276
Other material non-cash items included in segment profit / (loss)
Depreciation on property, plant and equipment 705 852 - 23,575
Amortisation of intangible assets 75 163 5,208 5,446
Segment assets 199,850 84,222 (1,480,446) 1,426,646
Segment liabilities (58,383) (11,725) (23,156) (1,348,185)
Audited year ended 28 Feb 2011
South Africa Botswana Zambia Uganda
R000 R000 R000 R000
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 commission income 57,976 5,945 17,161 7,283
- External customers 23,065 5,945 17,161 7,283
- Inter segment 34,911 - - -
Other operating income 53,552 13,507 (2,949) (31,999)
Operating income 153,650 62,139 31,672 (27,313)
Net impairment of loan advances (21,835) (6,788) 9,154 2,020
Operating expenses (354,025) (38,209) (42,578) (14,713)
Forex gain / (loss) 20,732 2,390 (2,544) (682)
Goodwill impairment - - (3,187) -
Management operating (loss)/profit (201,478) 19,532 (7,483) (40,688)
Segment result: (Loss)/profit before taxation (201,478) 19,532 (7,483) (40,688)
Taxation (8,653) (6,605) (5,176) (19)
(Loss)/profit after taxation (210,131) 12,927 (12,659) (40,707)
Net investment in foreign operation adjustment - - 378 (28,840)
Management (loss)/profit after taxation (210,131) 12,927 (12,281) (69,547)
Other material non-cash items included in
segment profit/(loss):
Depreciation on property, plant and equipment 20,990 812 1,166 387
Amortisation of intangible assets 12,833 853 333 60
Segment assets 1,171,018 321,384 130,245 52,450
Segment liabilities (967,078) (209,391) (68,366) (112,344)
Tanzania Malawi Mauritius Nigeria
R000 R000 R000 R000
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 (22,949) (8,202) (3,646) (4,220)
Operating income (3,120) (966) (12,946) 8,688
Net impairment of loan advances 3,152 12,781 - (21,226)
Operating expenses (15,819) (21,121) 3,735 (21,164)
Forex gain / (loss) 222 1 12,168 6
Goodwill impairments - - - -
Management operating (loss)/profit (15,565) (9,306) 2,957 (33,696)
Segment result: (Loss)/profit before taxation (15,565) (9,306) 2,957 (33,696)
Taxation (20) (305) (9,900) (91)
(Loss)/profit after taxation (15,585) (9,611) (6,943) (33,787)
Net investment in foreign operation adjustment (20,660) (9,580) - (3,824)
Management (loss)/profit after taxation (36,245) (19,191) (6,943) (37,611)
Other material non-cash items included in
segment profit/(loss):
Depreciation on property, plant and equipment 625 963 - 2,127
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)
CMA Other Elimination Consolidated
R000 R000 R000 R000
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 income 22,490 3,497 (34,911) 87,092
- External customers 22,490 3,497 - 87,092
- Inter segment - - (34,911) -
Other operating income 2,642 (13,577) 38,374 20,533
Operating income 68,938 (11,889) 2,198 271,050
Net impairment of loan advances (6,118) 1,420 - (27,440)
Operating expenses (28,906) (17,361) 28,077 (522,084)
Forex gain / (loss) - (1,786) 1,950 32,457
Goodwill impairments - - - (3,187)
Management operating (loss)/profit 33,914 (29,616) 32,225 (249,204)
Segment result: (Loss)/profit before taxation 33,914 (29,616) 32,225 (249,204)
Taxation (13,016) 9 8,076 (35,700)
(Loss)/profit after taxation 20,898 (29,607) 40,301 (284,904)
Net investment in foreign operation adjustment - (13,684) 76,210 -
Management (loss)/profit after taxation 20,898 (43,291) 116,511 (284,904)
Other material non-cash items included in
segment profit/(loss):
Depreciation on property, plant and equipment 1,664 1,027 - 29,761
Amortisation of intangible assets 176 214 - 14,526
Segment assets 118,525 43,671 (1,150,418) 1,331,002
Segment liabilities (77,722) (104,043) 1,402,390 (1,272,876)
The Groups 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.
7. Basis of preparation
The audited condensed consolidated financial results for the year ended 29 February 2012, comprise a summary of the Groups audited financial statements for the company and its subsidiaries as prepared by DA Bekker CA(SA).
These audited 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.
8. 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 Groups 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 R274.7 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 also finalised the 2nd Debt to equity conversion, which was approved by the shareholders on 29 June 2012. Following this conversion, the Group improved its net equity position by R406.8m and realise savings in funder interest costs going forward, while representing another important step in moving the Group closer to meeting all of its turnaround objectives. After this Second Early Conversion, the Group intends to continue to explore opportunities to raise additional capital to further strengthen its balance sheet.
9. 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 fully completed its assessment in this regard.
The revised tax returns have the impact of reducing the Groups 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 Mayibuyes 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 Mayibuyes 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 Groups financial statements. To the extent that the warranty claims are settled they will not have any impact on the Companys 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 Groups results for 29 February 2012.
10. 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 Groups assets exceed its liabilities by R78.5 million (2011: R58.1 million) and has further, at the reporting date, access to the remaining R180 million of the original R300 million facility through the claims purchase agreement with Leonox (Proprietary) Limited for loan advances.
As described in note 8 above, the Group converted another R406.8m and realise savings in funder interest costs going forward, while representing another important step in moving the Group closer to meeting all of its turnaround objectives. The conversion ensured that the Group has a positive tangible net asset value.
As described in note 12 below, the turnaround strategy is well underway and the business is now on a more solid platform to enable it to change its focus to driving growth in all its operations. Key to this is the debt: equity conversion and further initiatives being explored to drive the on-going strengthening of the Groups 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.
11. 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, is advanced in negotiations with the new fellow shareholder regarding the future shareholding of the Blue Intercontinental Microfinance Bank which may see the Group having to pay an amount to retains it's controlling shareholding which will be accounted for as a common control transaction through reserves, under IAS27 - Consolidated and Separate Financial Statements.
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.
12. Commentary on the results
The Group generated a net profit after taxation of R42.28 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 0.86 cents for 2012. Headline loss per share improved in a similar manner with headline earnings per share for 2012 of 0.88 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. Impairments as a percentage of loan advances and receivables have reduced following the focused collection efforts on the non-performing loans. Overall credit impairment on gross loans and advances is 49.4% (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 Groups 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 Groups turnaround strategy now well advanced and a solid foundation in place, focus has shifted to further strengthening the Groups 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 15 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 OPINION
Deloitte & Touche, Blue Financial Services Limiteds independent auditors, have audited the consolidated annual financial statements of Blue Financial Services Limited from which the condensed consolidated financial results have been derived. The auditors have expressed an unqualified audit opinion on the consolidated annual financial statements. The condensed consolidated financial results comprise the condensed consolidated statement of financial position at 29 February 2012, condensed consolidated income statement, the condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the year then ended, and selected explanatory notes. The audit report of the consolidated annual financial statements is available for inspection at Blue Financial Services Limiteds registered office.
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.
MODIFICATIONS TO THE REVIEWED RESULTS
Set out below are the modifications made to the Reviewed Results which arose primarily as a result of a reclassification between individual line items in the respective statements. There was no modification to the net profit for the year or Total Equity of the Group.
Condensed Consolidated Income Statement
Audited year ended 29 Feb 2012 Reviewed year ended 29 Feb 2012 Variance
R000 R000 R000
Interest income 416,773 430,394 (13,621)
Net impairment of loan advances and receivables (73,715) (87,336) 13,621
Earnings/(loss) per share 0.86 0.73 # 0.13
Headline earnings/(loss) per share 0.88 0.76 # 0.12
Diluted earnings/(loss) per share 0.86 0.73 # 0.13
Diluted headline earnings/(loss) per share 0.88 0.75 # 0.13
# - variance arose as a result of the correction of a calculation error in the Reviewed Results
Condensed Consolidated Statement of Comprehensive Income
Audited year ended 29 Feb 2012 Reviewed year ended 29 Feb 2012 Variance
R000 R000 R000
Other comprehensive loss for the year, net of taxation (24,724) (14,448) 10,276
Total comprehensive profit / (loss) attributable to:
Equity holders of the parent 35,086 45,363 (10,276)
Non-controlling interest (17,534) (17,534) -
Condensed Consolidated Statement of Cash Flows
Audited year ended 29 Feb 2012 Reviewed year ended 29 Feb 2012 Variance
R000 R000 R000
Cash generated from operations 185,814 196,829 (11,015)
Interest expense (94,896) (95,344) 448
Net loan (advances to)/collections from customers (225,841) (248,167) 22,326
Effect of exchange rates (6,681) 5,078* (11,759)
* Incorrectly reflected as (5,078) in Reviewed Results
Audited year ended 28 Feb 2011 Previous reported 28 Feb 2011 Variance
R000 R000 R000
Net loan (advances to)/collections from customers 155,031 157,986 (2,955)
Segment report - 2012
Interest income
Segment Audited year ended 29 Feb 2012 Reviewed year ended 29 Feb 2012 Variance
R000 R000 R000
Botswana 36,036 30,145 5,891
Zambia 59,669 46,049 13,620
CMA 64,419 54,975 (9,444)
Elimination 13,492 17,045 3,553
Consolidated 416,773 430,394 13,620
Net impairment of loan advances
Segment Audited year ended 29 Feb 2012 Reviewed year ended 29 Feb 2012 Variance
R000 R000 R000
South Africa (26,793) (31,087) (4,294)
Botswana (14,958) (25,848) (10,890)
Zambia 1,740 (11,880) (13,620)
Tanzania (15,237) (13,853) 1,384
CMA 9,159 14,720 5,561
Elimination 4,586 12,825 8,239
Consolidated (73,716) (87,336) (13,620)
Segment report - 2011
Audited Reviewed
Segment Other operating income Forex gain / (loss) Other operating income
R000 R000 R000
South Africa 53,552 20,732 74,284
Botswana 13,507 2,390 15,897
Zambia (2,949) (2,544) (5,493)
Uganda (31,999) (682) (32,681)
Tanzania (22,949) 222 (22,727)
Malawi (8,202) 1 (8,201)
Mauritius (3,646) 12,168 8,522
Nigeria (4,220) 6 (4,214)
CMA 2,642 - 2,642
Other (13,577) (1,786) (15,363)
Elimination 38,374 1,950 40,324
Consolidated 20,533 32,457 52,990
ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING
An announcement will be made in due course advising shareholders of the publication of the Annual Report and posting of 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
13 July 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: 13/07/2012 04:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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