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BLU - Blue Label Telecoms Limited - Unaudited interim results for the half year

Release Date: 22/02/2012 07:30
Code(s): BLU
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BLU - Blue Label Telecoms Limited - Unaudited interim results for the half year ended 30 November 2011 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") UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED 30 NOVEMBER 2011 - 7% increase in revenue to R9,2 billion - 14% increase in gross profit to R590 million - 47% increase in EBITDA to R438 million* - 41% increase in NPAT to R272 million* - 44% increase in headline earnings per share to 36,74 cents* - R795 million cash flows from operating activities * includes once off income receipt of R79.4 million. SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION 30 November 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited As at R`000 R`000 R`000 ASSETS Non-current assets 998 127 720 932 851 665 Property, plant and equipment 130 741 163 111 139 747 Intangible assets and 528 074 424 130 433 513 goodwill Investment in associates and 322 854 100 423 239 997 joint ventures Starter pack assets 9 715 19 642 20 361 Deferred taxation assets 6 743 13 626 18 047 Current assets 4 725 338 4 709 810 4 216 942 Financial assets at fair 10 10 10 value through profit and loss Inventories 667 099 1 259 446 1 012 594 Loans receivable 31 607 32 493 32 370 Starter pack assets 8 286 46 727 16 777 Trade and other receivables 1 316 823 1 603 558 914 164 Prepayments 391 402 - - Current tax assets 4 210 5 516 14 330 Cash and cash equivalents 2 305 901 1 762 060 2 226 697 Assets of disposal group - - 20 481 classified as held-for-sale Total assets 5 723 465 5 430 742 5 089 088 EQUITY AND LIABILITIES Capital and reserves 3 119 701 2 745 762 2 955 363 Share capital, share premium 4 332 137 4 346 361 4 348 231 and treasury shares Restructuring reserve (1 843 912) (1 843 912) (1 843 912) Non-distributable reserve 7 819 (18 979) (13 601) Share-based payment reserve 23 612 18 302 19 099 Transaction with non- (909 572) (914 867) (909 006) controlling interests reserve Retained earnings 1 505 177 1 101 507 1 340 318 Non-controlling interests 4 440 57 350 14 234 Non-current liabilities 109 048 48 546 38 093 Deferred taxation liabilities 25 977 30 809 22 196 Interest-bearing borrowings 12 018 17 737 15 897 Trade and other payables 71 053 - - Current liabilities 2 494 716 2 636 434 2 081 760 Trade and other payables 2 484 878 2 303 394 2 046 773 Provisions 4 012 - 8 676 Current tax liabilities 1 577 29 247 22 326 Bank overdraft - - 527 Current portion of interest- 4 249 303 793 3 458 bearing borrowings Liabilities of disposal group - - 13 872 classified as held-for-sale Total equity and liabilities 5 723 465 5 430 742 5 089 088 SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME Six months Six months Year ended ended ended 30 November 30 November 31 May 2011 2010 2011
Unaudited Unaudited Audited R`000 R`000 R`000 Continuing operations Revenue 9 249 177 8 643 554 18 064 572 Other income 89 787 6 769 7 197 Change in inventories of (8 659 445) (8 124 648) (16 996 939) finished goods Employee compensation and (146 339) (133 146) (263 360) benefit expense Depreciation, amortisation (45 953) (47 037) (145 985) and impairment charges Other expenses (94 910) (93 679) (213 738) Operating profit 392 317 251 813 451 747 Finance expense (74 959) (36 806) (115 845) Finance income 85 611 68 680 146 429 Share of (loss)/profit in (11 308) 1 968 (2 757) associates and joint ventures Profit for the period 391 661 285 655 479 574 before taxation Taxation (117 862) (95 197) (152 176) Net profit from continuing 273 799 190 458 327 398 operations Discontinued operations Net (loss)/profit for the (12 064) 1 439 57 573 period from discontinued operations Net profit for the period 261 735 191 897 384 971 Other comprehensive income/(loss): Exchange profits/(losses) 9 038 (6 737) (4 926) on translation of equity loans Exchange profits/(losses) 14 588 (4 779) (6 550) on translation of foreign operations Foreign currency - - 4 219 translation reserve reclassified to profit or loss Other comprehensive income/(loss) for the period, net of tax 23 626 (11 516) (7 257) Total comprehensive income 285 361 180 381 377 714 for the period Net profit for the period attributable to: Equity holders of the 271 903 192 637 431 448 parent - From continuing 275 005 192 100 337 547 operations - From discontinued (3 102) 537 93 901 operations Non-controlling interests (10 168) (740) (46 477) - From continuing (1 206) (1 642) (10 149) operations - From discontinued (8 962) 902 (36 328) operations Total comprehensive income 285 361 180 381 377 714 for the period attributable to: Equity holders of the 293 323 185 511 430 538 parent Non-controlling interests (7 962) (5 130) (52 824) Earnings per share for profit attributable to equity holders (cents) Basic earnings per share 36,02 25,45 57,04 - From continuing 36,43 25,38 44,63 operations - From discontinued (0,41) 0,07 12,41 operations Diluted earnings per 35,58 25,22 56,49 share** - From continuing 35,99 25,15 44,08 operations - From discontinued (0,41) 0,07 12,41 operations Headline earnings per 36,74 25,45 46,20 share - From continuing 37,15 25,38 50,12 operations - From discontinued (0,41) 0,07 (3,92) operations Diluted headline earnings 36,29 25,22 45,75 per share** Dividend per share 14,00 12,00 12,00 Weighted average number of 754 875 983 756 814 806 756 359 399 shares Diluted weighted average 764 256 072 763 874 243 763 742 466 number of shares Number of shares in issue 753 042 132 766 360 894 756 269 004 Reconciliation between net profit and core net profit for the period: Net profit for the year 271 903 192 637 431 448 attributable to equity holders of the parent Amortisation on intangible 10 237 13 744 24 975 assets raised through business combinations net of tax and net of non- controlling interest Core net profit for the 282 140 206 381 456 423 period Core net profit attributable to: Equity holders of the 282 140 206 381 456 423 parent Non-controlling interests (10 294) (1 003) (47 000) - Core earnings per share 37,38 27,27 60,34 (cents)* *Core earnings per share is calculated after adding back the amortisation of intangible assets as a consequence of the purchase price allocations completed in terms of IFRS 3(R): Business Combinations. **Diluted earnings per share and diluted 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. SUMMARISED GROUP STATEMENT OF CASH FLOWS Six months Six months Year ended ended ended 30 November 30 November 31 May
2011 2010 2011 Unaudited Unaudited Audited R`000 R`000 R`000 Cash flows from operating 794 644 (447 079) 427 663 activities Cash flows from investing (204 684) (42 540) (147 438) activities Cash flows from financing (517 629) 203 363 (100 004) activities Increase/(decrease) in cash and 72 331 (286 256) 180 221 cash equivalents Cash and cash equivalents at the 2 226 170 2 054 902 2 054 902 beginning of the year Translation difference 7 400 (6 586) (8 953) Cash and cash equivalents at the 2 305 901 1 762 060 2 226 170 end of the period SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY Share capital, share premium and treasury Retained Restructuring
shares earnings reserve Unaudited Unaudited Unaudited Six months ended R`000 R`000 R`000 Balance as at 1 June 2010 4 352 617 1 000 327 (1 843 912) Net profit for the period - 192 637 - Other comprehensive loss - - - Total comprehensive - 192 637 - income/(loss) Dividends paid - (91 457) - Treasury shares purchased (8 790) - - Share-based payment - - - movement Forfeitable shares vested 2 534 - - Equity-based compensation - - - movements Non-controlling interests - - - disposed of during the period Share of equity movement in - - - associates Balance as at 30 November 4 346 361 1 101 507 (1 843 912) 2010 Balance as at 1 June 2011 4 348 231 1 340 318 (1 843 912) Net profit for the period - 271 903 - Other comprehensive income - - - Total comprehensive - 271 903 - income/(loss) Dividends paid - (107 044) - Treasury shares purchased (16 094) - - Equity-based compensation - - - movements Transaction with non- - - - controlling interest movements Balance as at 30 November 4 332 137 1 505 177 (1 843 912) 2011 Audited Audited Audited Year ended R`000 R`000 R`000 Balance as at 1 June 2010 4 352 617 1 000 327 (1 843 912) Net profit for the year - 431 448 - Other comprehensive loss - - - Total comprehensive - 431 448 - income/(loss) Dividends paid - (91 457) - Treasury shares purchased (8 935) - - Share-based payment - - - movement Forfeitable shares vested 4 549 - - Equity-based compensation - - - movements Non-controlling interests - - - disposed of during the year Share of equity movement in - - - associates Balance as at 31 May 2011 4 348 231 1 340 318 (1 843 912) SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (continued) Transaction with Non- non-controlling Share-based distributable interests payment
reserve reserve reserve Unaudited Unaudited Unaudited Six months ended R`000 R`000 R`000 Balance as at 1 June 2010 (12 691) (914 867) 12 037 Net profit for the period - - - Other comprehensive loss (7 126) - - Total comprehensive (7 126) - - income/(loss) Dividends paid - - - Treasury shares purchased - - - Share-based payment - - (234) movement Forfeitable shares vested - - (2 323) Equity-based compensation - - 8 822 movements Non-controlling interests - - - disposed of during the period Share of equity movement 838 - - in associates Balance as at 30 November (18 979) (914 867) 18 302 2010 Balance as at 1 June 2011 (13 601) (909 006) 19 099 Net profit for the period - - - Other comprehensive 21 420 - - income Total comprehensive 21 420 - - income/(loss) Dividends paid - - - Treasury shares purchased - - - Equity-based compensation - - 4 513 movements Transaction with non- - (566) - controlling interest movements Balance as at 30 November 7 819 (909 572) 23 612 2011 Audited Audited Audited Year ended R`000 R`000 R`000 Balance as at 1 June 2010 (12 691) (914 867) 12 037 Net profit for the year - - - Other comprehensive loss (910) - - Total comprehensive (910) - - income/(loss) Dividends paid - - - Treasury shares purchased - - - Share-based payment - - (234) movement Forfeitable shares vested - - (4 549) Equity-based compensation - - 10 903 movements Non-controlling interests - 5 861 - disposed of during the year Share of equity movement - - 942 in associates Balance as at 31 May 2011 (13 601) (909 006) 19 099 SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (continued) Non-controlling Total
interests equity Unaudited Unaudited Six months ended R`000 R`000 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 - (91 457) Treasury shares purchased - (8 790) Share-based payment movement 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 - 838 Balance as at 30 November 2010 57 350 2 745 762 Balance as at 1 June 2011 14 234 2 955 363 Net profit for the period (10 168) 261 735 Other comprehensive income 2 206 23 626 Total comprehensive income/(loss) (7 962) 285 361 Dividends paid (1 900) (108 944) Treasury shares purchased - (16 094) Equity-based compensation movements 68 4 581 Transaction with non-controlling interest - (566) movements Balance as at 30 November 2011 4 440 3 119 701 Audited Audited
Year ended R`000 R`000 Balance as at 1 June 2010 61 925 2 655 436 Net profit for the year (46 477) 384 971 Other comprehensive loss (6 347) (7 257) Total comprehensive income/(loss) (52 824) 377 714 Dividends paid (950) (92 407) Treasury shares purchased - (8 935) Share-based payment movement 234 - Forfeitable shares vested - - Equity-based compensation movements 229 11 132 Non-controlling interests disposed of 5 620 11 481 during the year Share of equity movement in associates - 942 Balance as at 31 May 2011 14 234 2 955 363 SEGMENTAL SUMMARY South African International
Total distribution distribution Unaudited Unaudited Unaudited Six months ended R`000 R`000 R`000 30 November 2011 Total segment revenue 14 703 706 14 533 390 14 331 Internal revenue (5 454 529) (5 444 571) - External revenue 9 249 177 9 088 819 14 331 Operating profit before 438 270 394 357 2 918 depreciation, amortisation and impairment charges Net profit for the period 273 799 301 534 (12 511) Amortisation on 10 363 4 223 1 215 intangibles raised through business combinations net of tax Core net profit for the 284 162 305 757 (11 296) period Core net profit for the period attributable to: Equity holders of the 285 242 304 362 (6 510) parent Non-controlling interests (1 080) 1 395 (4 786) At 30 November 2011 Total assets 5 723 465 4 618 252 329 763 Net operating assets 2 230 622 1 771 651 27 939 Six months ended 30 November 2010 Total segment revenue 15 051 247 14 914 687 14 244 Internal revenue (6 407 693) (6 395 391) (767) External revenue 8 643 554 8 519 296 13 477 Operating profit before 298 850 346 171 (4 069) depreciation, amortisation and impairment charges Net profit for the period 190 458 281 990 (5 641) Amortisation on 14 007 4 491 869 intangibles raised through business combinations net of tax Core net profit for the 204 465 286 481 (4 772) period Core net profit for the period attributable to: Equity holders of the 205 843 286 650 (2 553) parent Non-controlling interests (1 378) (169) (2 219) 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) Audited Audited Audited Year ended R`000 R`000 R`000 31 May 2011 Total segment revenue 30 224 202 29 954 525 30 252 Internal revenue (12 159 630) (12 132 920) (998) External revenue 18 064 572 17 821 605 29 254 Operating profit before 597 732 711 767 (8 683) depreciation, amortisation and impairment charges Net profit for the year 327 398 562 048 (43 643) Amortisation on 25 498 8 933 2 034 intangibles raised through business combinations net of tax Core net profit for the 352 896 570 981 (41 609) year Core net profit for the year attributable to: Equity holders of the 362 522 571 471 (32 005) parent Non-controlling interests (9 626) (490) (9 604) At 31 May 2011 Total assets 5 068 607 4 362 116 386 561 Net operating 2 135 182 2 004 900 125 291 assets/(liabilities) SEGMENTAL SUMMARY (continued) Technology Mobile Solutions Corporate Unaudited Unaudited Unaudited Unaudited Six months ended R`000 R`000 R`000 R`000 30 November 2011 Total segment revenue 13 292 46 978 95 715 - Internal revenue (5 037) (2 253) (2 668) - External revenue 8 255 44 725 93 047 - Operating profit before (34 564) 89 946 24 186 (38 573) depreciation, amortisation and impairment charges Net profit for the period (45 204) 70 204 16 218 (56 442) Amortisation on 316 4 577 32 - intangibles raised through business combinations net of tax Core net profit for the (44 888) 74 781 16 250 (56 442) period Core net profit for the period attributable to: Equity holders of the (44 645) 74 781 13 696 (56 442) parent Non-controlling interests (243) - 2 554 - At 30 November 2011 Total assets 87 478 67 901 181 928 438 143 Net operating assets 2 733 15 951 52 258 360 090 Six months ended 30 November 2010 Total segment revenue 10 360 48 598 63 358 - Internal revenue (2 683) (6 722) (2 130) - External revenue 7 677 41 876 61 228 - Operating profit before (27 939) 13 070 12 388 (40 771) depreciation, amortisation and impairment charges Net profit for the period (38 012) (692) 6 053 (53 240) Amortisation on 316 5 966 2 365 - intangibles raised through business combinations net of tax Core net profit for the (37 696) 5 274 8 418 (53 240) period Core net profit for the period attributable to: Equity holders of the (37 737) 5 274 7 449 (53 240) parent Non-controlling interests 41 - 969 - At 30 November 2010 Total assets 88 979 98 182 138 734 23 253 Net operating 16 114 11 684 22 151 (38 339) assets/(liabilities)
Audited Audited Audited Audited Year ended R`000 R`000 R`000 R`000 31 May 2011 Total segment revenue 22 902 94 121 122 402 - Internal revenue (6 082) (15 505) (4 125) - External revenue 16 820 78 616 118 277 - Operating profit before (61 766) 19 347 18 731 (81 664) depreciation, amortisation and impairment charges Net profit for the year (85 944) (12 627) 5 881 (98 317) Amortisation on 632 11 871 2 028 - intangibles raised through business combinations net of tax Core net profit for the (85 312) (756) 7 909 (98 317) year Core net profit for the year attributable to: Equity holders of the (84 932) (756) 7 061 (98 317) parent Non-controlling interests (380) - 848 - At 31 May 2011 Total assets 89 876 80 899 138 403 10 752 Net operating 12 535 10 901 21 674 (40 119) assets/(liabilities) HEADLINE EARNINGS Six months Six months Year
ended ended ended 30 November 30 November 31 May 2011 2010 2011 Unaudited Unaudited Audited
R`000 R`000 R`000 Profit attributable to equity 271 903 192 637 431 448 holders of the parent Net loss/(profit) on disposal of 41 - (109) property, plant and equipment Net profit on disposal of - - (6 759) subsidiaries Gain on remeasuring retained - - (143 interest in Mexico due to loss of 365) control Impairment of intangible assets and 5 431 - 20 972 property, plant and equipment Impairment of goodwill - - 27 985 Impairment of available-for-sale - - 15 056 financial asset Foreign currency translation reserve - - 4 219 reclassified to profit or loss Headline earnings 277 375 192 637 349 447 Headline earnings per share (cents) 36,74 25,45 46,20 - From continuing operations 37,15 25,38 50,12 - From discontinued operations (0,41) 0,07 (3,92) COMMENTARY FINANCIAL REVIEW The financial results for the interim period ended 30 November 2011 reflected growth in revenue of 7%, an increase in gross profit margins from 6,00% to 6,38% and overhead growth limited to 6%. Profitability was enhanced by a once off other income receipt of R79.4 million. The disclosure of the source and circumstance of the payment are prohibited by a confidentiality agreement. EBITDA increased by 47% and net profit for the period increased by 41% to R272 million. On the International front, the negative impact caused by the closure of the Africa Prepaid Services Nigeria operation manifested itself in a turnaround of a comparative profit contribution of R6,9 million to a negative contribution of R3,1 million in the current period. Ukash contributed an effective increase in profitability whilst Oxigen Services India ("Oxigen") and Blue Label Mexico continued to incur losses. A strong foundation in Mexico has been developed for an accelerated roll-out of point of sale devices through Grupo Bimbo`s distribution capabilities. Financial inclusion services in India, are gaining momentum as an additional offering to the vast footprint that has been established by Oxigen. Cash generated from operations amounted to R795 million. After the buy-back of Microsoft`s 12% interest in the group for R391 million, a dividend payment of R107 million and other finance and capital expenditure activities, cash resources increased to R2,3 billion. The statement of financial position reflecting accumulated equity of R3,1 billion, remains robust and liquid. FINANCIAL OVERVIEW - Revenues increased by 7% to R9,2 billion. - Gross profit increased by R71 million to R590 million. - Overheads were contained at 6% growth. - EBITDA increased by 47% to R438 million which includes a once off income receipt of R79.4 million. - Net finance income declined by R21 million. - Net profit after tax and non-controlling interests from continuing operations increased by 43% to R275 million. Excluding the once off income receipt of R79.4 million, the increase was 7%. - Headline earnings per share increased by 44% from 25,45 cents to 36,74 cents per share. Excluding the once off income receipt of R79.4 million, the growth was 8%. - NAV per share increased from 388,90 cents per share to 413,69 cents per share. BASIS OF PREPARATION The condensed consolidated interim financial information has been prepared in accordance with the requirements of Section 8.57 of the JSE Limited Listings Requirements and the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting. The condensed consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") and the requirements of the Companies Act of South Africa. 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 applied in the annual financial statements for the year ended 31 May 2011, 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. 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`s 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. The results have not been reviewed or audited for the period ended 30 November 2011. SEGMENTAL REPORT SOUTH AFRICAN DISTRIBUTION SEGMENT Unaudited Unaudited
2011 2010 Growth R`000 R`000 R`000 Growth Revenue 9 088 819 8 519 296 569 523 7% Gross profit 503 402 442 619 60 783 14% EBITDA 394 357 346 171 48 186 14% Core net profit 304 362 286 650 17 712 6% Gross profit margin 5,54% 5,20% EBITDA margin 4,34% 4,06% Revenue Revenue comprised sales of physical and virtual prepaid airtime, commissions on the distribution of prepaid electricity and compounded annuity revenue generated from starter packs. The increase in revenue was predominantly volume driven in all of these components. Commissions earned on the distribution of prepaid electricity amounted to R41 million (2010: R30 million) for the period, equating to revenue of R2,7 billion (2010: R1,5 billion) on behalf of the utilities. Gross profit Gross profit increased by R61 million (14%). The margin increase from 5,20% to 5,54% was after IFRS adjustment requirements. Excluding the effect of this adjustment, margins decreased from 5,30% to 5,24% compared to 5,09% for the year ended 31 May 2011. The percentage margin contributions relating to prepaid electricity commissions, included in revenue net of costs, were 0,34% and 0,43% for November 2010 and November 2011 respectively and 0,34% for the year ended 31 May 2011. EBITDA The growth in EBITDA of 14% was inclusive of the effects of IFRS adjustments. On exclusion of these adjustments in both the comparative and current period, a more representative growth of R13 million is achieved, which would equate to a 3% growth. INTERNATIONAL DISTRIBUTION SEGMENT Unaudited Unaudited 2011 2010 Growth
R`000 R`000 R`000 Growth Revenue 14 331 13 477 854 6% Gross profit 3 488 3 964 (476) (12%) EBITDA 2 918 (4 069) 6 987 172% Discontinued operations* (3 102) 537 (3 639) (678%) Africa Prepaid Services (3 102) 6 877 (9 979) (145%) Nigeria Blue Label Mexico - (6 340) 6 340 - Share of (losses)/profits (11 008) 1 336 (12 344) (924%) from associates and joint ventures Ukash 2 274 3 308 (1 034) (31%) Oxigen Services India (4 399) (1 972) (2 427) (123%) Blue Label Mexico (8 464) - (8 464) - Other (419) - (419) - Core net loss from (11 296) (4 772) (6 524) (137%) continuing operations - Equity holders of the (6 510) (2 553) (3 957) (155%) parent - Non-controlling interests (4 786) (2 219) (2 567) 116% Core net loss from (12 064) 1 439 (13 503) (938%) discontinued operations - Equity holders of the (3 102) 537 (3 639) (678%) parent - Non-controlling interests (8 962) 902 (9 864) 1 094% *Represents net profit after taxation and non-controlling interests. Revenue, gross profit and EBITDA pertain mainly to Sharedphone International, Africa Prepaid Services SA and Gold Label Investments. The positive turnaround of R7 million at EBITDA level was mainly representative of foreign exchange gains in Gold Label Investments. Discontinued operations The assets and liabilities of Africa Prepaid Services Nigeria were disposed of in the current interim financial period, in line with the group`s commitment at 31 May 2011. IFRS requires treatment of its financial performance to be reflected as a discontinued operation, with comparatives restated. The Multi- links contract was cancelled in November 2010 with the result that the share of losses incurred in the current period, were confined to expenditure relating to the winding down of the operation. The dilution from a 70% shareholding in Blue Label Mexico to a minority stake of 40% required the group`s share of losses of R6,3 million to be reflected as a discontinued operation in the comparative period. The current share of losses of R8,5 million is reflected as a joint venture which is equity accounted for. The increased losses were attributable to expansionary expenditure in support of a concerted drive in the roll-out of point of sale devices in conjunction with Grupo Bimbo. Share of (losses)/profits from associates and joint ventures Oxigen Services India BLT`s share of losses increased from R2 million to R4.4 million which were exacerbated by its increase in shareholding from 37,22% to 55,83%. Although revenue increased by 52% at consistent margins, increased overheads relating to the implementation of a financial services offering onto the existing footprint eroded its performance in the short term. Ukash Ukash continues to increase profitability exponentially, both through volume growth and increases in average revenue per users. The prior period included the recognition of a deferred tax asset, of which the group`s share amounted to R3,7 million. On a comparative basis, the current share of earnings of R2,3 million, whilst reflecting a decline of R1 million, collates to a growth in share of profit of R2,7 million on elimination of the extraneous credit pertaining to the deferred tax asset. MOBILE SEGMENT Unaudited Unaudited 2011 2010 Growth R`000 R`000 R`000 Growth
Revenue 44 725 41 876 2 849 7% Gross profit 33 345 35 178 (1 833) (5%) EBITDA 89 946 13 070 76 876 588% Core net profit 74 781 5 274 69 507 1 318% This segment comprises Cellfind, Blue Label One and Content Connect Africa. Positive contributions by Cellfind`s location-based services and media revenue generated by Blue Label One, were suppressed at gross profit level due to a decline in Content Connect Africa. EBITDA and core net profit was inclusive of the once off income receipt. SOLUTIONS SEGMENT Unaudited Unaudited 2011 2010 Growth
R`000 R`000 R`000 Growth Revenue 93 047 61 228 31 819 52% Gross profit 44 503 31 037 13 466 43% EBITDA 24 186 12 388 11 798 95% Core net profit 13 696 7 449 6 247 84% The Solutions segment houses the Datacel group which operates call centres and provides data and lead generation services. The improvements in the call centre operations and the constant growth in data accumulation have clearly manifested themselves in growth at all levels. TECHNOLOGY SEGMENT Unaudited Unaudited 2011 2010 Growth
R`000 R`000 R`000 Growth Revenue 8 255 7 677 578 8% Gross profit 4 994 6 108 (1 114) (18%) EBITDA (34 564) (27 939) (6 625) (24%) Core net loss (44 645) (37 737) (6 908) (18%) Technology losses and the growth thereon represented the costs of development and support of the group`s Information Technology infrastructure. Income generation was limited to services to third parties. CORPORATE SEGMENT Unaudited Unaudited 2011 2010 Growth R`000 R`000 R`000 Growth
EBITDA (38 573) (40 771) 2 198 5% Core net loss (56 442) (53 240) (3 202) (6%) Core net losses increased in spite of a decline in corporate expenditure by R2 million. DEPRECIATION, AMORTISATION AND IMPAIRMENT A hybrid of the expiration of the useful life and the non-amortisation on historically impaired intangible assets, offset by impairments of R7,5 million on point of sale devices. NET FINANCE INCOME Finance costs Finance costs totalled R75 million, of which R3 million related to interest paid on borrowed funds and R72 million to imputed IFRS interest adjustments on credit received from suppliers. On a comparative basis the imputed IFRS interest adjustment was R33 million and interest on borrowed funds R4 million. Finance income Finance income totalled R86 million of which R32 million was interest received on cash resources and R54 million IFRS adjustments. These adjustments increased by R13 million due to the affordance of additional credit to customers. STATEMENT OF FINANCIAL POSITION Total assets increased by R634 million to R5,7 billion during the six months ended 30 November 2011. Material increases included the purchase of starter pack bases for R121 million, additional funding of R74 million relating to the increase in shareholding in Oxigen and a prepayment of R391 million for the purchase of Microsoft`s 12% shareholding in the group. During the current period, stock levels were reduced by R345 million equating to an average inventory holding of 14 days. This stock turn was still in excess of historical averages of 12 days, due to inventory being bolstered in November in order to cater for the festive season. Debtors collection period averaged 24 days and creditors payment terms averaged 49 days. STATEMENT OF CASH FLOWS Cash flow of R795 million generated from operating activities was applied to the funding for the additional shareholding in Oxigen, the acquisition of starter pack bases, the prepayment for Microsoft`s 12% shareholding in the group and a dividend payment of R107 million. The net increase in cash on hand of R72 million accumulated cash resources to R2,3 billion at 30 November 2011. FORFEITABLE SHARE SCHEME Forfeitable shares totalling 4 836 611 (2010: 5 532 192) were issued to qualifying employees. 910,093 (2010: 219,616) shares were forfeited during the period and no shares vested during the current period (2010: 466 875). PROSPECTS Continued focus on the marketing and distribution of prepaid starter packs is expected to compound existing annuity revenues. Commissions generated from prepaid electricity sales on behalf of utilities are expected to continue to increase both organically and through contracts with additional electricity providers. Consumer awareness of this payment mechanism is becoming more prevalent in this arena. The mobile segment is expected to compound its advertising revenue on bulk printed prepaid vouchers and point of sale receipt vouchers, following its sound entry into this space during the reporting period. The distribution capabilities of Grupo Bimbo, the largest bakery in the world and a 40% shareholder in Blue Label Mexico, is expected to filter down to a significant gain in the momentum of the roll-out of point of sale devices. Since the commencement of this strategic alliance with them in March 2011, the roll- out of point of sale devices has increased at an exponential rate. Oxigen has developed a robust foundation and is poised to embark on an aggressive foot print expansion which will incorporate banking services that will service the vast unbanked population in India. This initiative will be implemented through associations with several banks in India, including State Bank of India, the largest bank in that country. The strategic alliance established with Mobilitrix, is expected to accelerate growth in loyalty and mobile couponing services in order to strengthen customer retention and incentive capabilities. This will be supported by the best of breed technology, providing an end-to-end mobile reward service to retailers, manufactures and media companies. SUBSEQUENT EVENTS In January 2012, 100% of Multiserve (Pty) Ltd was purchased with the objective of utilising their 169 stores located nationally as a platform for Blue Label`s strategy of marketing its products and services on a retail basis. Blue Label`s 50,1% shareholding in Sharedphone International (Pty) Ltd was disposed of in January 2012. The decision to dispose of this interest was in line with its decline in revenue as a result the demise of its competitive edge that it historically had over community pay phones. APPRECIATION The board of Blue Label Telecoms would like to express its appreciation to its suppliers, customers, business partners and staff for their ongoing support and loyalty. For and on behalf of the board LM Nestadt Chairman BM Levy and MS Levy Joint Chief Executive Officers DB Rivkind* Financial Director 21 February 2012 *Supervised preparation of the group financial statements. Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine*, GD Harlow*, NN Lazarus SC*, JS Mthimunye*, MV Pamensky, DB Rivkind, J Vilakazi* (*Non-executive) Company Secretary: E Viljoen Sponsor: Investec Bank Limited www.bluelabeltelecoms.co.za Date: 22/02/2012 07:30:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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