Wrap Text
BLU - Blue Label Telecoms Limited - Reviewed interim results for the half year
ended 30 November 2010
BLUE LABEL TELECOMS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
JSE Share code: BLU ISIN: ZAE000109088
("Blue Label" or "BLT" or "the company" or "the Group")
REVIEWED INTERIM RESULTS FOR THE HALF YEAR ENDED 30 NOVEMBER 2010
8% increase in revenue to R9,07 billion
14% increase in NPAT*
11% increase in core earnings*
114% growth in prepaid electricity
*Excluding STC
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
as at
30 November 31 May
2010 2010
Reviewed Audited
R`000 R`000
ASSETS
Non-current assets 720 932 717 581
Property, plant and equipment 163 111 156 888
Intangible assets and goodwill 424 130 436 824
Investment in associates and joint 100 423 96 888
ventures
Starter pack assets 19 642 16 826
Deferred taxation assets 13 626 10 155
Current assets 4 709 810 3 730 721
Financial assets at fair value 10 150
through profit and loss
Inventories 1 259 446 560 846
Loans receivable 32 493 43 617
Starter pack assets 46 727 77 467
Trade and other receivables 1 603 558 987 279
Current tax assets 5 516 4 285
Cash and cash equivalents 1 762 060 2 057 077
Total assets 5 430 742 4 448 302
EQUITY AND LIABILITIES
Capital and reserves 2 745 762 2 655 436
Share capital, share premium and 4 346 361 4 352 617
treasury shares
Restructuring reserve (1 843 912) (1 843 912)
Non-distributable reserve (18 978) (12 691)
Share-based payment reserve 18 302 12 037
Transaction with non-controlling (914 867) (914 867)
interests reserve
Retained earnings 1 101 506 1 000 327
2 688 412 2 593 511
Non-controlling interests 57 350 61 925
Non-current liabilities 48 546 47 696
Deferred taxation 30 809 31 616
Interest bearing borrowings 17 737 16 080
Current liabilities 2 636 434 1 745 170
Trade and other payables 2 303 394 1 718 907
Current tax liabilities 29 247 21 320
Bank overdraft - 2 175
Current portion of interest bearing 303 793 2 768
borrowings
Total equity and liabilities 5 430 742 4 448 302
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
six months ended
30 November 30 November
2010 2009
Reviewed Reviewed
R`000 R`000
Revenue 9 069 984 8 401 960
Other income 6 769 36 460
Change in inventories of finished (8 496 645) (7 780 524)
goods
Employee compensation and benefit (148 305) (151 326)
expense
Depreciation, amortisation and (51 013) (68 499)
impairment charges
Other expenses (121 541) (138 741)
Operating profit 259 249 299 330
Finance income 68 809 63 499
Finance expense (43 431) (63 105)
Share of profit/(loss) in 1 968 (11 897)
associates
Profit for the period before 286 595 287 827
taxation
Taxation (94 698) (100 874)
Net profit for the period 191 897 186 953
Other comprehensive loss:
Exchange losses on translation of (6 737) (3 308)
equity loans
Exchange losses on translation of (4 779) (37)
foreign operations
Foreign currency translation - (506)
reserve reclassified to profit or
loss
Other comprehensive loss for the (11 516) (3 851)
year, net of tax
Total comprehensive income for the 180 381 183 102
year
Net profit for the period 191 897 186 953
attributable to:
Equity holders of parent 192 637 176 915
Non-controlling interests (740) 10 038
Total comprehensive income for the 180 381 183 102
period attributable to:
Equity holders of parent 185 511 173 198
Non-controlling interests (5 130) 9 904
Earnings per share for profit
attributable to equity holders
(cents)
- Basic 25,45 23,31
- Headline 25,45 23,38
- Diluted basic** 25,22 23,09
- Diluted headline** 25,22 23,15
Dividend per share 12,00 -
Weighted average number of shares 756 814 806 758 921 476
Diluted weighted average number of 763 874 243 766 360 894
shares
Number of shares in issue 766 360 894 766 360 894
**Dilutive earnings per share and dilutive headline earnings per
share are calculated by adjusting the weighted average number of
ordinary shares outstanding for the number of shares that would be
issued on vesting under the employee forfeitable share plan.
Reconciliation between net profit
and core net profit for the period:
Net profit for the period 191 897 186 953
Amortisation on intangibles raised 14 007 18 357
through business combinations net
of tax
Core net profit for the period 205 904 205 310
Core net profit for the period 205 904 205,310
attributable to:
Equity holders of parent 206 381 194,208
Non-controlling interests (477) 11,102
- Core earnings per share (cents)* 27,27 25,59
*Core earnings per share is calculated after adding back the
amortisation of intangible assets as a consequence of the purchase
price allocations exercised in terms of IFRS 3(R): Business
Combinations.
SUMMARISED GROUP STATEMENT OF CASH FLOWS
six months ended
30 November 30 November
2010 2009
Reviewed Reviewed
R`000 R`000
Cash flows from operating activities (447 079) 316 434
Cash flows from investing activities (42 924) (34 958)
Cash flows from financing activities 203 363 (23 730)
(Decrease)/increase in cash and cash (286 640) 257 746
equivalents
Cash and cash equivalents at the 2 054 902 1 756 806
beginning of the period
Cash and cash equivalents disposed 384 (46 209)
of/acquired in subsidiaries
Translation difference (6 586) (8 594)
Cash and cash equivalents at the end of 1 762 060 1 959 749
the period
HEADLINE EARNINGS
six months ended 30 November 30 November
2010 2009
Reviewed Reviewed
R`000 R`000
Profit attributable to equity holders 192 637 176 915
of parent
Loss on disposal of property, plant and - 1 377
equipment
Intangible asset impairment - 4 884
Profit on sale of group companies - (17 345)
Foreign currency translation reserve - (364)
reclassified to profit or loss
Goodwill impairment - 11 961
Headline earnings 192 637 177 428
Headline earnings per share (cents) 25,45 23,38
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
six months ended
Share capital, Re-
share premium structu-
and treasury Retained ring
shares earnings reserve
Reviewed Reviewed Reviewed
R`000 R`000 R`000
Balance as at 1 June 4 379 175 635 305 (1 843 912)
2009
Net profit for the - 176 915 -
period
Other comprehensive - - -
loss
Total comprehensive - 176 915 -
income/(loss)
Treasury shares (26 408) - -
purchased
Share based payment - - -
Equity based - - -
compensation movements
Non-controlling - - -
interests disposed of
during the period
Contribution from non- - - -
controlling interests
Balance as at 30 4 352 767 812 220 (1 843 912)
November 2009
Balance as at 1 June 4 352 617 1 000 327 (1 843 912)
2010
Net profit for the - 192 637 -
period
Other comprehensive - - -
loss
Total comprehensive - 192 637 -
income/(loss)
Dividends paid - (91 458) -
Treasury shares (8 790) - -
purchased
Share based payment - - -
Forfeitable shares 2 534 - -
vested
Equity based - - -
compensation movements
Non-controlling - - -
interests disposed of
during the period
Share of equity - - -
movement in associates
Balance as at 30 4 346 361 1 101 506 (1 843 912)
November 2010
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (continued)
six months ended
Transaction
With non-
Non- controlling Share-based
distributable interests payment
reserve reserve reserve
Reviewed Reviewed Reviewed
R`000 R`000 R`000
Balance as at 1 June (13 399) (914 399) 10 602
2009
Net profit for the - - -
period
Other comprehensive (3 717) - -
loss
Total comprehensive (3 717) - -
income/(loss)
Treasury shares - - -
purchased
Share based payment - - 295
Equity based - - 8 614
compensation movements
Non-controlling - (383) -
interests disposed of
during the period
Contribution from non- - - -
controlling interests
Balance as at 30 (17 116) (914 782) 19 511
November 2009
Balance as at 1 June (12 691) (914 867) 12 037
2010
Net profit for the - - -
period
Other comprehensive (7 126) - -
loss
Total comprehensive (7 126) - -
income/(loss)
Dividends paid - - -
Treasury shares - - -
purchased
Share based payment - - (234)
Forfeitable shares - - (2 323)
vested
Equity based - - 8 822
compensation movements
Non-controlling - - -
interests disposed of
during the period
Share of equity 839 - -
movement in associates
Balance as at 30 (18 978) (914 867) 18 302
November 2010
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (continued)
six months ended
Non- Total
controlling
interests equity
Reviewed Reviewed
R`000 R`000
Balance as at 1 June 2009 (9 252) 2 244 120
Net profit for the period 10 038 186 953
Other comprehensive loss (134) (3 851)
Total comprehensive income/(loss) 9 904 183 102
Treasury shares purchased - (26 408)
Share based payment - 295
Equity based compensation movements 151 8 765
Non-controlling interests disposed of 12 650 12 267
during the period
Contribution from non-controlling 621 621
interests
Balance as at 30 November 2009 14 074 2 422 762
Balance as at 1 June 2010 61 925 2 655 436
Net profit for the period (740) 191 897
Other comprehensive loss (4 390) (11 516)
Total comprehensive income/(loss) (5 130) 180 381
Dividends paid - (91 458)
Treasury shares purchased - (8 790)
Share based payment 234 -
Forfeitable shares vested - 211
Equity based compensation movements 288 9 110
Non-controlling interests disposed of 33 33
during the period
Share of equity movement in associates - 839
Balance as at 30 November 2010 57 350 2 745 762
SEGMENTAL SUMMARY
six months ended South African International
Total distribution distribution
Reviewed Reviewed Reviewed
R`000 R`000 R`000
30 November 2010
Total segment revenue 15 477 677 14 914 687 440 674
Internal revenue (6 407 693) (6 395 391) (767)
External revenue 9 069 984 8 519 296 439 907
EBITDA 310 262 346 171 7 344
Net profit for the 192 637 282 159 (2 747)
period
Amortisation on
intangibles raised
through business
combinations net of
tax and
non-controlling 13 744 4 491 732
interests
Core net profit for 206 381 286 650 (2 015)
the period
At 30 November 2010
Total assets 5 430 742 4 650 633 430 961
Net operating 2 073 376 1 873 317 188 449
assets/(liabilities)
30 November 2009
Total segment revenue 13 839 037 12 971 347 674 596
Internal revenue (5 437 077) (5 380 183) 270
External revenue 8 401 960 7 591 164 674 866
EBITDA 367 829 361 746 63 349
Net profit for the 176 915 283 928 (1 561)
period
Amortisation on 17 293 4 484 2 932
intangibles raised
through business
combinations net of
tax and non-
controlling interests
Core net profit for 194 208 288 412 1 371
the period
At 31 May 2010
Total assets 4 448 302 3 612 970 517 400
Net operating 1 985 551 1 807 991 208 322
assets/(liabilities)
SEGMENTAL SUMMARY (continued)
six months ended
Technology Mobile
Reviewed Reviewed
R`000 R`000
30 November 2010
Total segment revenue 10 360 48 598
Internal revenue (2 683) (6 722)
External revenue 7 677 41 876
EBITDA (27 939) 13 070
Net profit for the period (37 927) (692)
Amortisation on intangibles raised through 190 5 966
business combinations net of tax and non-
controlling interests
Core net profit for the period (37 737) 5 274
At 30 November 2010
Total assets 88 979 98 182
Net operating assets/(liabilities) 16 114 11 684
30 November 2009
Total segment revenue 59 018 58 897
Internal revenue (49 300) (1 905)
External revenue 9 718 56 992
EBITDA (25 735) 9 083
Net profit for the period (35 917) (4 271)
Amortisation on intangibles raised through 190 5 966
business combinations net of tax and non-
controlling interests
Core net profit for the period (35 727) 1 695
At 31 May 2010
Total assets 67 930 104 223
Net operating assets/(liabilities) (2 730) 4 512
SEGMENTAL SUMMARY (continued)
six months ended
Solutions Corporate
Reviewed Reviewed
R`000 R`000
30 November 2010
Total segment revenue 63 358 -
Internal revenue (2 130) -
External revenue 61 228 -
EBITDA 12 388 (40 772)
Net profit for the period 5 084 (53 240)
Amortisation on intangibles raised 2 365 -
through business combinations net of tax
and non-controlling interests
Core net profit for the period 7 449 (53 240)
At 30 November 2010
Total assets 138 734 23 253
Net operating assets/(liabilities) 22 151 (38 339)
30 November 2009
Total segment revenue 75 179 -
Internal revenue (5 959) -
External revenue 69 220 -
EBITDA (268) (40 346)
Net profit for the period (19 754) (45 510)
Amortisation on intangibles raised 3 721 -
through business combinations net of tax
and non-controlling interests
Core net profit for the period (16 033) (45 510)
At 31 May 2010
Total assets 139 429 6 350
Net operating assets/(liabilities) 9 363 (41 907)
COMMENTARY
INTRODUCTION
In a period in which Blue Label rationalised businesses within its operating
segments, contained expenditure and maximised on the benefits of healthy cash
reserves, the net profit after tax increased by 9% and core profitability by
7%. A maiden dividend was declared in August 2010 and Secondary Tax on
Companies ("STC") was paid during the period under review. On a comparative
basis, growth in net profit after tax and core earnings pre the STC payment
was 14% and 11% respectively.
Off a strong balance sheet, working capital was managed efficiently. The
procurement of inventory was maximised, additional credit was extended to
selected long standing channels of distribution and the Group capitalised on
bulk purchasing and settlement discounts.
Although on a comparative basis overall gross profit margins declined, margins
in fact exceeded those achieved in the second half of the 2010 financial year
in the South African distribution segment, the major contributor to Group
profitability.
With cash reserves averaging R1,9 billion, the deployment of cash to achieve
additional discounts was a natural substitution for declining income earned
from monies held on deposit due to lower interest rates.
Turnarounds in the Datacel group, Oxigen India and Ukash were other
contributing factors to the growth in profitability.
Blue Label has an effective ownership of 36,72% in Africa Prepaid Services
Nigeria ("APSN") through its 72% shareholding in Africa Prepaid Services (Pty)
Ltd. The performance of APSN was adversely impacted by negative consumer
sentiment in respect of the Multi-Links product, given the statements made by
Multi-Links regarding the uncertainty of the network`s future and the strained
relationship between them and our Group. As the exclusive distributor on
behalf of Multi-Links, APSN was negatively affected by a decline in market
demand for their services. This weighed heavily on both its revenue and
profitability. APSN`s contribution to Group net profit was R2.6 million for
the period under review compared to R8,4 million for the relative comparative
period and R38,7 million for the full year ended May 2010. The latter equated
to 5,1 cents of Group headline earnings per share of 48,27 cents. On 26th
November 2010 Blue Label announced the cancellation of APSN`s contract with
Multi-Links arising from Multi-Link`s repudiation of its obligations under the
contract.
APSN continues to distribute on behalf of other network operators and is
proceeding with the roll out of a multi-tiered point of sale vending system in
support of the sales of airtime on behalf of these networks. In conjunction
with the largest dealers in Nigeria, APSN aims to have national representation
of its products and services. The strategy of APSN continues to be one of
replicating the South African distribution model by being a distributor for
all major networks and to offer value added services and products to its voice
offering.
APSN is in the process of instituting arbitration proceedings against Multi-
Links to recover the losses it has suffered consequent upon the cancellation
of the contract.
BASIS OF PREPARATION
The condensed consolidated interim financial information for the half year
ended 30 November 2010 is prepared in accordance with IAS 34 - Interim
Financial Reporting, the Listing Requirements of the JSE Limited and the South
African Companies Act 61 of 1973, as amended. The condensed consolidated
interim financial information should be read in conjunction with the reviewed
interim financial information for the six months ended 30 November 2009 and
the audited annual financial statements for the year ended 31 May 2010, which
have been prepared in accordance with International Financial Reporting
Standards ("IFRS").
The condensed consolidated interim financial information is prepared in
accordance with the going concern principle, under the historical cost basis,
as modified by the revaluation of certain assets and liabilities where
required or elected in terms of IFRS. The accounting policies and methods of
computation are consistent with those used in the comparative financial
information for the six months ended 30 November 2009, with the exception of
the standards that are effective for the first time in the current period.
These have been disclosed in note 1 to the annual financial statements for the
year ended 31 May 2010. These standards have not had a significant impact on
the interim financial information.
In addition, the Group uses core net profit as a non-IFRS measure in
evaluating the Group performance. This supplements the IFRS measures. Core net
profit is calculated by adjusting net profit for the year with the
amortisation of intangible assets that arise as a consequence of the purchase
price allocations completed in terms of IFRS 3(R): Business Combinations.
FINANCIAL OVERVIEW
- Revenues increased by 8% to R9,07 billion.
- Gross profit declined from R621 million to R573 million.
- Overheads declined by R20 million (7%).
- EBITDA declined from R368 million to R310 million.
- Net finance income increased by R25 million.
- Turnaround of R14 million in contribution by associates from a share of
losses of R12 million to a share of profits of R2 million.
- Net profit after tax and non-controlling interests increased from R177
million to R193 million (9%).
- Basic earnings per share increased from 23,31 cents to 25,45 cents (9%).
- Core earnings increased from R194 million to R206 million.
- Core earnings per share increased by 7% to 27,27 cents per share.
- NAV per share has increased from 346,50 cents per share to 358,29 cents per
share.
SEGMENTAL REPORT
In order to enhance the availability of management information on the Group`s
performance from the distribution of mobile applications, Blue Label has
established a new segment, namely Mobile. These mobile applications were
previously housed in Value Added Services and Technology. A separate
management and reporting structure has been established for Mobile, and the
segmental analysis has been amended and restated accordingly.
The Value Added Services segment has been renamed Solutions. The only change
to the reporting of this segment is the extraction of financial information
that relates to the newly formed Mobile segment. The comparatives have been
adjusted to reflect the change in segment reporting.
REVENUE
R`000 % of total contribution
Segments Nov 2010 Nov 2009 % Growth Nov 2010 Nov
2009
South African 8 519 296 7 591 164 12,2 93,8 90,4
distribution
International 439 907 674 866 (34,8) 4,9 8,0
distribution
Mobile 41 876 56 992 (26,5) 0,5 0,7
Technology 7 677 9 718 (21,0) 0,1 0,1
Solutions 61 228 69 220 (11,5) 0,7 0,8
Total 9 069 984 8 401 960 8,0 100 100
South African distribution
Revenues, which increased by R928 million to R8,5 billion, were generated from
the distribution of physical and virtual electronic tokens of value. This
growth of 12% was predominantly volume related, achieved through a hybrid of
industry and market share growth. Whilst prepaid airtime remains the primary
source of revenue, commissions earned on the distribution of prepaid
electricity amounted to R30 million for the period, equating to revenue of
R1,5 billion on behalf of the utilities. This commission compares to R14
million for the relative comparative period.
The above products as well as Ukash, lotto, bus tickets and starter packs are
distributed through the major retailers, independent stores, petroleum
forecourts and informal communities.
The distribution mix of prepaid airtime was as follows:
- Vodacom 51%
- MTN 35%
- Cell C 10%
- Telkom 4%
International distribution
International distribution encompasses the Group`s operations in Nigeria,
Mexico, India and the United Kingdom. APSN and Blue Label Mexico are
subsidiary companies whilst Oxigen India and Ukash are associates.
Revenue generated by APSN declined by R137 million to R388 million, directly
related to the decline in customer interest in the Multi-Links product in
Nigeria.
Revenue in Blue Label Mexico increased by R32 million through the expansion of
its roll out of additional point of sale devices.
As the Group`s interests in Mozambique, Democratic Republic of Congo and VPN
USA were disposed of towards the end of the comparative period, these closures
had a negative impact on comparative revenue to the extent of R121 million.
Mobile
Cellfind, Content Connect Africa and Blue Label One make up this newly formed
segment. Although revenue declined by R15 million, cost cutting and margin
improvement ensured a growth in profitability.
Technology
The Technology segment is an in-house technical support, maintenance and
product development and enhancement operation. Revenue generated from sales to
third parties was consequently limited.
Blue Label Solutions
Solutions encompasses the business of Datacel, a data base aggregator and
vendor and an inbound and outbound call centre operation, focusing on
telecommunication offerings. The call centre operations were rationalised in
2009 resulting in a decline in revenue but an increase in profitability.
GROSS PROFIT
R`000 Margin
Six months ended Six months ended
Nov 2010 May 2010 Nov 2009 Nov May Nov
2010 2010 2009
Segments % % %
South 442 619 406 186 461 044 5,20 5,11 6,07
African
distribution
Internationa 58 397 95 502 92 518 13,27 16,67 13,71
l
distribution
Mobile 35 178 25 737 40 382 84,01 67,69 70,86
Technology 6 108 8 2 499 79,56 0,10 25,72
Solutions 31 037 25 355 24 993 50,69 46,90 36,11
Total 573 339 552 788 621 436 6,32 6,41 7,40
The above table summarises the segmental results after adjusting for the
impact of discounting of receivables and payables as required by IFRS.
Movements in the mix of debtors and creditors have a direct impact on sales
and cost of sales with regard to the interest element pertaining thereto.
The table below has been prepared after eliminating such imputed interest in
order to show the underlying growth excluding the impact of accounting
reclassifications in terms of IFRS reporting.
The material differences relate to the South African and International
distribution segments only. Mobile, Technology and Solutions are not affected
by imputed interest adjustments.
Gross profit excluding imputed interest adjustments
R`000 Margin
Six months ended Six months ended
Nov May Nov Nov May Nov
2010 2010 2009 2010 2010 2009
Segments % % %
South African 454 043 409 336 444 5,30 5,11 5,84
distribution 440
International 53 440 89 981 74 625 12,15 15,72 11,05
distribution
Mobile 35 178 25 737 40 382 84,01 67,69 70,86
Technology 6 108 8 2 499 79,56 0,10 25,72
Solutions 31 036 25 355 24 993 50,69 46,90 36,11
Total 579 805 550 417 586 939 6,36 6,34 6,97
South African distribution
The implementation of RICA in August 2009 initially had a negative impact on
margins due to the delay in activations of starter packs across the industry.
The gradual streamlining of RICA registrations between implementation and
November 2010 is evidenced by the steady improvement in margins. This together
with the growth in commissions earned on prepaid electricity sales resulted in
margin growth from the second half of the financial year ended May 2010 of
0,19% from 5,11% to 5,30%. Gross profit increased by R9,6 million on the
comparable period in spite of a decline in margins in line with the revenue
increase in this segment.
International distribution
Of the R21 million decline, R7 million related to APSN. The impact of the
cessation of interests in Mozambique, DRC and VPN USA accounted for R14
million.
EBITDA
EBITDA declined by R57 million of which the imputed interest adjustments
accounted for R40 million. The latter had a converse positive affect on net
finance income.
Total EBITDA
R`000
Nov Nov
Segments 2010 2009 % Growth
South African distribution 346 171 361 746
International distribution 7 344 63 349
Mobile 13 070 9 083
Solutions 12 388 (268)
Total trading operations 378 973 433 910 (12,7)
EBITDA margin (%) 4,2 5,2
Technology (27 939) (25 735)
Corporate (40 772) (40 346)
Total support (68 711) (66 081) (4,0)
Net total 310 262 367 829 (15,7)
EBITDA margin (%) 3,4 4,4
EBITDA excluding imputed interest adjustments
R`000 Margin
Nov Nov Nov Nov
2010 2009 2010 2009
Segments % %
South African distribution 357 593 345 140 4,2 4,5
International distribution 2 388 45 456 0,5 6,7
Mobile 13 070 9 083 31,2 15,9
Solutions 12 388 (268) 20,2 (0,4)
Total trading operations 385 439 399 411 4,2 4,7
Technology (27 939) (25 735)
Corporate (40 772) (40 346)
Total support (68 711) (66 081)
Net total 316 728 333 330 3,5 4,0
On exclusion of the impact of imputed interest adjustments, South African
distribution contributed a growth in EBITDA of R12 million, International
distribution a decline of R43 million, Mobile a growth of R4 million and
Solutions a growth of R13 million, with a resultant net decline of R14 million
at trading operations level as opposed to R55 million when including imputed
interest adjustments.
Of the R43 million International distribution decline, R30 million was
attributable to a capital profit on the sale of Mozambique in the comparative
period.
The Mobile segment, by reducing overheads, grew by R4 million and Solutions by
R13 million, benefiting from its rationalisation programme.
Technology declined by R2 million whilst Corporate, through an expenditure
containment drive, remained static in its EBITDA charge.
As the profit on sale of Mozambique was of a capital nature, comparative
EBITDA on a pure trading basis effectively increased by R16 million.
NET FINANCE INCOME
Finance costs
Of the costs of R43 million, R4 million related to interest paid on borrowed
funds and R39 million to imputed IFRS interest adjustments relating to credit
received from suppliers.
On a comparative basis the imputed IFRS interest adjustment was R60 million.
The decline amounting to R21 million in these present value adjustments
resulted from the utilisation of funds for early settlement discounts.
Finance income
Interest received on cash resources declined by R16 million from R44 million
to R28 million due to a reduction in interest rates and the preference of
settlement discounts to interest when the opportunities availed themselves.
The imputed IFRS interest adjustments increased by R20 million as a result of
extended credit afforded to selected customers.
DEPRECIATION, AMORTISATION AND IMPAIRMENT
Goodwill impairments of R12 million in the Datacel group and a software
impairment in the Technology segment of R5 million, occurred in the
comparative period. There were no impairments in the current period, thus the
decline.
SHARE OF PROFITS/(LOSSES) FROM ASSOCIATES AND JOINT VENTURES
R`000
Associate company % Holding Nov 2010 Nov 2009
Oxigen Services India Pvt Ltd 37,22 (1 972) (4 595)
(Oxigen)
Smart Voucher Limited (Ukash) 15,75 3 308 (7 542)
Other - 632 240
Total 1 968 (11 897)
Associates and joint ventures` net contribution to Group profit is now
positive.
Oxigen continued to reduce losses with a decline of 57%. This was achieved as
a result of revenue increases of 7% and reduction in overheads by 18%,
reported in local currency.
Although Ukash has accounted for a turnaround of R11 million, the inclusion of
an historical unrecognised deferred tax asset accounted for R3,7 million of
this amount. The increase of R7 million in trading profit was as a result of
higher volumes in redemption of vouchers by 101%.
CORE NET PROFIT
R`000
Segments Nov 2010 Nov 2009 % Growth
South African distribution 286 650 288 412 (0,6)
International distribution (2 015) 1 371 (246,9)
Mobile 5 274 1 695 211,2
Solutions 7 449 (16 033) 146,5
Total trading operations 297 358 275 445 8,0
Technology (37 737) (35 727) (5,6)
Corporate (53 240) (45 510) (17,0)
Total support (90 977) (81 237) (12,0)
Core earnings 206 381 194 208 6,3
Basic earnings per share (cents) 25,45 23,31 9,2
Core earnings per share (cents) 27,27 25,59 6,6
Headline earnings per share 25,45 23,38 8,9
(cents)
Diluted earnings per share 25,22 23,09 9,2
(cents)
Core earnings for the period increased by R12 million (6%) after the deduction
of STC of R9 million applicable to the dividend paid in September 2010. Real
growth therefore equated R21 million (11%).
In computing core earnings per share, basic earnings were increased by the
amortisation of intangible assets amounting to R14 million equating to 1,82
cents per share.
DIVIDEND
The dividend policy is to consider paying a dividend after taking into account
cash flow needs for working capital, capital expenditure, share buy backs and
acquisitions. The Group intends maintaining a dividend cover of three to four
times earnings.
BALANCE SHEET
- Assets
Total assets increased by R982 million to R5,43 billion.
There were no material movements in total non-current assets. Included in non-
current assets is loan to Oxigen of R17 million.
- Net current assets
Current assets increased by R979 million and current liabilities increased by
R891 million resulting in an increase in net current assets of R88 million.
The Group took advantage of additional discounts from suppliers by increasing
inventories prior to the traditionally busy December season. This was funded
through a combination of the utilisation of cash resources, short-term loans
and additional supplier facilities afforded to the Group.
The application of the above was as follows:
- Inventory increased by R699 million.
- Cash resources declined by R295 million.
- A short-term loan of R301 million was procured for a tenure of 10 days.
- Accounts payable increased by R584 million equating to average creditors
terms of 50 days.
Accounts receivable, which included a prepayment of R329 million for a bulk
purchase transaction, increased by R616 million in line with increased
revenues and the provision of additional credit to selected customers.
Loans receivable include a related party loan of R32 million to ZOK Cellular
(Pty) Ltd.
- Capital and reserves
Capital and reserves increased by the net profit for the period of R192
million less dividends of R91 million. Non-controlling interests decreased by
R5 million. Treasury shares were purchased for R9 million and R3 million of
shares previously awarded under the forfeitable share scheme vested, resulting
in a net decline of R6 million in share capital. There was a net increase in
the share-based payment reserve of R6 million to account for the future
vesting of shares in terms of the forfeitable staff share scheme. The decrease
of R6 million in the non-distributable reserve was mainly due to foreign
exchange movements in the translation of foreign subsidiaries.
The above equated to an increase in capital and reserves of R90 million.
FORFEITABLE SHARE SCHEME
Forfeitable shares totalling 5 532 192 were issued to qualifying employees,
219 616 shares were forfeited during the period and a total of 466 875 shares
vested.
CASH FLOW
The temporary growth in inventories to the extent of R699 million, the
prepayment of R329 million and additional credit afforded to customers were
funded by free cash flow resources, additional funding from trade creditors
and a short term loan. This resulted in a negative generation of cash from
trading operations and positive cash flows from financing activities net of a
dividend payment of R91 million. The investing activities of R43 million
mainly related to capital expenditure.
PROSPECTS
Driving revenue growth and increasing gross profit margins are the short and
medium term objectives.
The Group will continue to focus on expanding its product range offering and
distribution network, organically and through acquisition, both locally and
internationally.
In August 2010 Vodacom and Nedbank launched M-PESA, an initiative that
facilitates the conversion of real money into electronic money at any
authorised M-PESA outlet. Blue Label is in the process of providing its vast
client base with M-PESA authorisation and capabilities to deliver this
service. The impact of this will not be limited to money transfers but will
enable the consumer to pay for all of the value added services that the Group
offers to the end user through the M-PESA mechanism.
Although the Multi-Links contract has been cancelled, APSN will be
distributing airtime and starter packs on behalf of other networks in Nigeria
as well as introducing value added services and products to its distribution
network. This will be supported by an aggressive roll out of intelligent point
of sale devices throughout Nigeria.
The growth in prepaid electricity commissions is expected to continue as more
municipalities offer prepaid electricity options to their customers and
additional distribution contracts are concluded with municipalities across
South Africa.
The strategic partnership launched with Ubank will combine their banking
capabilities and the Group`s technology platforms, products and services as a
unique value proposition to Ubank`s customers.
The Group will continue to capitalise on its vast "real estate" of printed
vouchers through the generation of advertising revenue thereon.
SUBSEQUENT EVENTS
No events occurred subsequent to period end that required disclosure.
REVIEW REPORT
The results for the period ended 30 November 2010 have been reviewed by the
company`s auditors, PricewaterhouseCoopers Inc. and the unmodified review
report is available for inspection at the company`s registered office.
APPRECIATION
The board of Blue Label Telecoms would once again like to thank its suppliers,
customers, business partners and staff for their ongoing support and loyalty.
For and on behalf of the Board
LM Nestadt BM Levy and MS Levy DB Rivkind
Chairman Joint Chief Executive Officers Financial Director
21 February 2011
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine*,
GD Harlow*, NN Lazarus sc*, JS Mthimunye*, M Nyati*, MV Pamensky, DB Rivkind,
LM Tyalimpi* (*Non-Executive)
Company Secretary: E Viljoen
Sponsor: Investec Bank Limited
www.bluelabeltelecoms.co.za
Date: 22/02/2011 07:05:02 Supplied by www.sharenet.co.za
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