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BLUE LABEL TELECOMS LIMITED - Audited Results for the year ending 31 May 2012

Release Date: 21/08/2012 08:00
Code(s): BLU     PDF:  
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Audited Results for the year ending 31 May 2012

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")

AUDITED RESULTS FOR THE YEAR ENDED 31 MAY 2012



+4%

increase in revenue to R18,7 billion



+13%

increase in gross profit to R1,2 billion



+26%

increase in EBITDA to R750 million*



+40%

increase in headline earnings per share to 64,65 cents*



R458 million*

headline earnings



R528 million

cash flows from operating activities



R392 million

12% share buy-back



+64%

increase in dividend to 23 cents per share



*Includes a once off income receipt of R79,4 million.



SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION

as at 31 May                                                                      2012           2011

                                                                                 R'000          R'000

ASSETS

Non-current assets                                                             993 076        851 665

Property, plant and equipment                                                  112 188        139 747

Intangible assets and goodwill                                                 505 698        433 513

Investment in associates and joint ventures                                    357 471        239 997

Loans receivable                                                                 1 435              -

Starter pack assets                                                              4 501         20 361

Deferred taxation                                                               11 783         18 047

Current assets                                                               3 942 456      4 216 942

Financial assets at fair value through profit and loss                               -             10

Starter pack assets                                                              3 191         16 777

Inventories                                                                    539 221      1 012 594

Loans receivable                                                                30 049         32 370

Trade and other receivables                                                  1 387 650        914 164

Current tax assets                                                               7 103         14 330

Cash and cash equivalents                                                    1 975 242      2 226 697

Assets of disposal group classified as held-for-sale                                 -         20 481

Total assets                                                                 4 935 532      5 089 088

EQUITY AND LIABILITIES

Capital and reserves                                                         2 914 386      2 955 363

Share capital, share premium and treasury shares                             3 941 316      4 348 231

Restructuring reserve                                                      (1 843 912)     (1 843 912)

Other reserves                                                                  25 539       (13 601)

Transaction with non-controlling interest reserve                            (909 572)      (909 006)

Share-based payment reserve                                                     38 915         19 099

Retained earnings                                                            1 671 378      1 340 318

                                                                             2 923 664      2 941 129

Non-controlling interest                                                       (9 278)         14 234

Non-current liabilities                                                         50 624         38 093

Deferred taxation                                                               21 598         22 196

Interest-bearing borrowings                                                          -         15 897

Trade and other payables                                                        29 026              -

Current liabilities                                                          1 970 522      2 081 760

Trade and other payables                                                     1 931 204      2 046 773

Provision                                                                        6 260          8 676

Current tax liabilities                                                         21 041         22 326

Bank overdraft                                                                       -            527

Non-interest-bearing borrowings                                                12 017               -

Current portion of interest-bearing borrowings                                       -          3 458

Liabilities of disposal group classified as held-for-sale                            -         13 872

Total equity and liabilities                                                 4 935 532      5 089 088



SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 May                                                         2012           2011

                                                                                 R'000          R'000

Continuing operations

Revenue                                                                     18 715 390     18 064 572

Other income                                                                    97 412          7 197

Change in inventories of finished goods                                   (17 507 468)     (16 996 939)

Employee compensation and benefit expense                                    (327 830)      (263 360)

Depreciation, amortisation and impairment charges                             (91 557)      (145 985)

Other expenses                                                               (227 022)      (213 738)

Operating profit                                                               658 925        451 747

Finance expense                                                              (181 081)      (115 845)

Finance income                                                                 170 995        146 429

Share of losses from associates and joint ventures                            (19 835)        (2 757)

Net profit before taxation                                                     629 004        479 574

Taxation                                                                     (194 075)      (152 176)

Net profit from continuing operations                                          434 929        327 398

Discontinued operations

Net (loss)/profit for the year from discontinued operations                   (15 455)         57 573

Net profit for the year                                                        419 474        384 971

Other comprehensive income:

Exchange profit/(loss) on translation of equity loans                            5 395        (4 926)

Exchange profit/(loss) on translation of foreign operations                     36 058        (6 550)

Foreign currency translation reserve recycled to profit or loss                      -          4 219

Other comprehensive profit/(loss) for the year, net of tax                      41 453        (7 257)

Total comprehensive income for the year                                        460 927        377 714

Net profit for the year attributable to:

Equity holders of the parent                                                   438 104        431 448

- From continuing operations                                                   443 597        337 547

- From discontinued operations                                                 (5 493)         93 901

Non-controlling interest                                                      (18 630)       (46 477)

- From continuing operations                                                   (8 668)       (10 149)

- From discontinued operations                                                 (9 962)       (36 328)

Total comprehensive income for the year attributable to:                       460 927        377 714

Equity holders of the parent                                                   477 244        430 538

Non-controlling interest                                                      (16 317)       (52 824)

Earnings per share for profit attributable to equity holders (cents)

Basic earnings per share                                                         61,87          57,04

- From continuing operations                                                     62,65          44,63

- From discontinued operations                                                  (0,78)          12,41

Diluted earnings per share                                                       60,97          56,49

- From continuing operations                                                     61,74          44,08

- From discontinued operations                                                  (0,78)          12,41

Headline earnings per share                                                      64,65          46,20

- From continuing operations                                                     65,43          50,12

- From discontinued operations                                                  (0,78)         (3,92)

Diluted headline earnings per share                                              63,70          45,75

Number of shares in issue                                                  674 509 042     766 360 89

Number of shares excluding treasury and forfeitable share scheme shares    661 501 917     756 269 00

Weighted average number of shares                                          708 059 527     756 359 39

Diluted weighted average number of shares*                                 718 577 060     763 742 46



*Diluted earnings per share and diluted headline earnings per share is calculated by 

adjusting the number of shares in issue by the number of shares that would be issued on 

vesting under the forfeitable share plan.



Reconciliation between net profit and core net profit for the year:



Net profit for the year attributable to equity holders of the parent           438 104       431 448

Amortisation on intangible assets raised through business combinations

net of tax and non-controlling interest					        17 693        24 975

Core net profit attributable to equity holders of the parent                   455 797       456 423

- Core earnings per share (cents)**                                              64,37         60,34



**Core earnings per share is calculated after adding back the amortisation on intangible 

assets as a consequence of the purchase price allocations completed in terms of IFRS 3(R): 

Business Combinations.



SUMMARISED GROUP STATEMENT OF CASH FLOWS

for the year ended 31 May                                                         2012           2011

                                                                                 R'000          R'000

Cash flows from operating activities                                           528 109        427 663

Cash flows from investing activities                                         (276 991)      (147 438)

Cash flows from financing activities                                         (519 984)      (100 004)

(Decrease)/increase in cash and cash equivalents                             (268 866)        180 221

Cash and cash equivalents at the beginning of the year                       2 226 170      2 054 902

Translation difference                                                          17 938        (8 953)

Cash and cash equivalents at the end of the year                             1 975 242      2 226 170





SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY

for the year ended 31 May                         Share capital,                                         Transaction with

                                                  share premium                                           non-controlling   Share-based

                                                   and treasury      Retained Restructuring         Other       interests       payment     Non-controlling     Total

                                                         shares      earnings       reserve      reserves         reserve       reserve        interest        equity

                                                          R'000         R'000         R'000         R'000           R'000         R'000           R'000         R'000

Balance as at 31 May 2010                             4 352 617     1 000 327    (1 843 912)     (12 691)       (914 867)        12 037          61 925     2 655 436



Net profit/(loss) for the year                                -       431 448             -             -               -             -        (46 477)       384 971

Comprehensive loss                                            -             -             -          (910)              -             -         (6 347)       (7 257)

Total comprehensive income/(loss)                             -       431 448             -          (910)              -             -        (52 824)       377 714

Treasury shares purchased                               (8 935)             -             -             -               -             -               -       (8 935)

Equity compensation benefit scheme shares vested          4 549             -             -             -               -       (4 549)               -             -

Equity compensation benefit movement                          -             -             -             -               -        10 903              229       11 132

Share of equity movements in associates                       -             -             -             -               -            942              -           942

Dividends                                                     -      (91 457)             -             -               -             -            (950)     (92 407)

Share based payment movement                                  -             -             -             -               -          (234)             234            -

Non-controlling interest disposed of during the year          -             -             -             -           5 861             -           5 620        11 481

Balance as at 31 May 2011                             4 348 231     1 340 318    (1 843 912)     (13 601)       (909 006)        19 099          14 234     2 955 363



Net profit/(loss) for the year                                -       438 104             -             -               -             -        (18 630)       419 474

Comprehensive profit                                          -             -             -        39 140               -             -           2 313        41 453

Total comprehensive income/(loss)                             -       438 104             -        39 140               -             -        (16 317)       460 927

Treasury shares purchased                              (16 095)             -             -             -               -             -               -      (16 095)

Shares acquired                                       (392 378)             -             -             -               -             -               -     (392 378)

Equity compensation benefit scheme shares vested          1 558             -             -             -               -       (1 517)             (41)            -

Equity compensation benefit movement                          -             -             -             -               -        21 929              197       22 126

Share of equity movements in associates                       -             -             -             -               -          (596)              -         (596)

Dividends                                                     -     (107 044)             -             -               -             -         (2 945)     (109 989)

Transaction with non-controlling interest reserve move        -             -             -             -            (566)            -               -         (566)

Non-controlling interest disposed of during the year          -             -             -             -               -             -         (4 406)       (4 406)

Balance as at 31 May 2012                             3 941 316     1 671 378     (1 843 912)      25 539       (909 572)        38 915         (9 278)     2 914 386





SEGMENTAL SUMMARY

for the year ended 31 May							     South 	  Inter        Tech-

 			                                                Total       Africa     national       nology       Mobile    Solutions    Corporate

                                                                        R'000        R'000        R'000        R'000        R'000        R'000        R'000

2012

Total segment revenue                                              30 173 943   29 855 365       17 429       28 405       96 084      176 660            -

Inter-segmental revenue                                          (11 458 553) (11 432 351)            -     (11 731)      (8 840)      (5 631)            -

Revenue                                                            18 715 390   18 423 014       17 429       16 674       87 244      171 029            -

EBITDA                                                                750 482      801 746     (15 901)     (64 258)       97 359       38 927    (107 391)

Net profit/(loss) for the year attributable to equity 

holders of the of the parent  					      438 104      587 179     (30 277)     (83 144)       69 270       21 259    (126 183)

- From continuing operations                                          443 597      587 179     (24 784)     (83 144)       69 270       21 259    (126 183)

- From discontinued operations                                        (5 493)            -      (5 493)            -            -            -            -

Amortisation on intangibles raised through business 

combinations net of tax and non-controlling			       17 693        8 716        3 841          379        4 692           65            -

interest - continuing operations

Core net profit/(loss) for the year attributable to equity holders

of the parent							      455 797      595 895     (26 436)     (82 765)       73 962       21 324    (126 183)

- From continuing operations                                          461 290      595 895     (20 943)     (82 765)       73 962       21 324    (126 183)

- From discontinued operations                                        (5 493)            -      (5 493)            -            -            -            -

At 31 May 2012

Total assets                                                        4 935 532    4 279 757      337 494       84 304       62 278      137 997       33 702

Net operating assets/(liabilities)                                  1 971 934    2 032 934     (10 126)      (3 703)        5 247        7 385     (59 804)



2011

Total segment revenue                                              30 224 202   29 954 525       30 252       22 902       94 121      122 402            -

Inter-segmental revenue                                          (12 159 630) (12 132 920)        (998)      (6 082)     (15 505)      (4 125)            -

Revenue                                                            18 064 572   17 821 605       29 254       16 820       78 616      118 277            -

EBITDA                                                                597 732      711 767      (8 683)     (61 766)       19 347       18 731     (81 664)

Net profit/(loss) for the year attributable to 

equity holders of the parent					      431 448      562 538       60 133     (85 312)     (12 627)        5 033     (98 317)

- From continuing operations                                          337 547      562 538     (33 768)     (85 312)     (12 627)        5 033     (98 317)

- From discontinued operations                                         93 901            -       93 901            -            -            -            -

Amortisation on intangibles raised through business 

combinations net of tax and non-controlling			       24 975        8 933        1 763           380      11 871        2 028            -

interest - continuing operations

Core net profit/(loss) for the year attributable 

to equity holders of the parent:				      456 423      571 471       61 896     (84 932)         (756)       7 061     (98 317)

- From continuing operations                                          362 522      571 471     (32 005)     (84 932)         (756)       7 061     (98 317)

- From discontinued operations                                         93 901            -       93 901            -            -            -            -

At 31 May 2011

Total assets                                                        5 068 607    4 362 116      386 561       89 876       80 899      138 403       10 752

Net operating assets/(liabilities)                                  2 135 182    2 004 900      125 291       12 535       10 901       21 674     (40 119)





DISPOSAL OF SUBSIDIARY

Shares in the following subsidiary were disposed of during the year ended 31 May 2012

							    Effective date of   % held and

                                                                     disposal  disposed of

SharedPhone International Proprietary Limited                       31-Jan-12        50,1



Details of the total net assets disposed and the resulting loss on disposal is as follows:



										     Total

                                                                                     2 012

                                                                                     R'000

Total proceeds                                                                       3 907

Fair value of net assets disposed of                                                 6 921

Loss on disposal                                                                   (3 014)

                                                                            Carrying value/

                                                                                 fair value

                                                                              disposal date

                                                                                      R'000

Cash and cash equivalents                                                             1 406

Property, plant and equipment                                                           278

Intangible assets                                                                        25

Inventories                                                                           9 422

Receivables                                                                           3 978

Deferred tax asset                                                                      476

Current tax assets                                                                       69

Borrowings                                                                          (5 958)

Payables                                                                              (868)

Fair value of subsidiary disposed of                                                  8 828

Non-controlling interest                                                            (4 406)

Goodwill                                                                              2 499

Fair value of net assets disposed of                                                  6 921

Cash and cash equivalents of subsidiary disposed of                                   1 406

Cash inflow on disposal                                                               2 501





ACQUISITION OF SUBSIDIARY

Shares in the following subsidiary were acquired during the year ended 31 May 2012



							     Effective date of

                                                                   acquisition  % acquired

Multiserv Proprietary Limited                                   1 January 2012         100



Details of the total net assets acquired and the resulting goodwill and reserves     Total

acquisition are as follows:

                                                                                     R'000

Total purchase consideration                                                         8 933

Fair value of net assets acquired                                                    3 086

Goodwill                                                                             5 847



The assets and liabilites acquired through acquisition are as follows:          Fair value

                                                                               acquisition

                                                                                      date

                                                                                     R'000

Cash and cash equivalents                                                              739

Property, plant and equipment                                                          370

Intangible assets*                                                                   5 481

Loans receivable                                                                     2 091

Inventories                                                                          1 552

Receivables                                                                          1 212

Current tax assets                                                                     143

Deferred tax liability*                                                            (1 512)

Borrowings                                                                         (5 210)

Payables                                                                           (1 780)

Fair value of net assets acquired                                                    3 086

Cash and cash equivalents in subsidiary acquired                                       739

Total purchase consideration                                                       (8 933)

Less loans acquired                                                                (5 068)

Cash outflow on acquisition                                                       (13 262)



*Intangible assets include R5,4 million of franchise fees which relates to the purchase price 

allocation performed in terms of IFRS3(R) - Business Combinations. Deferred tax to the value 

of R1,5 million was raised on recognition of this intangible asset.



Multiserv Proprietary Limited was purchased with the objective of utilising their national 

footprint as a platform for the group's strategy of marketing its products and services on 

a retail basis.





HEADLINE EARNINGS

for the year ended 31 May                                                             2012             2011

                                                                                     R'000            R'000

Net profit attributable to equity holders of the parent                            438 104          431 448

Net profit on disposal of property, plant and equipment                               (65)            (109)

Net loss/(profit) on disposal of subsidiaries                                        3 014          (6 759)

Loss on disposal of associate                                                        3 025                -

Gain on remeasuring retained interest in Blue Label Mexico due to loss of control        -        (143 365)

Impairment of intangible assets and property, plant and equipment                    9 354           20 972

Impairment of goodwill                                                               4 684           27 985

Impairment of available-for-sale financial asset                                         -           15 056

Profit on disposal of investment                                                     (361)                -

Foreign currency translation reserve reclassified to profit or loss                      -            4 219

Headline earnings                                                                  457 755          349 447

Headline earnings per share (cents)                                                  64,65            46,20







COMMENTARY

FINANCIAL REVIEW

Revenue increased by 4%. Gross profit margins increased from 5,91% to 6,45%. EBITDA 

increased by 26%. EBITDA included the once off other income receipt of R79,4 million. The 

disclosure of information regarding this receipt is restricted by a confidentiality agreement.

Headline earnings per share increased by 40% from 46,20 cents to 64,65 cents. On exclusion of

the above once off receipt, growth in headline earnings per share would have equated to 19%.



The SA Distribution segment remains the predominant contributor to group profitability. 

Prepaid airtime volumes continued to increase and commissions on the sale of prepaid 

electricity escalated by 39%. Compounded annuity revenue from starter pack bases added 

momentum to profitability. 



On the international front, Oxigen Services India has become a profitable entity as a result

of the addition of financial service offerings to its bouquet of products. Ukash has continued

to make positive contributions to group profitability. Whilst Blue Label Mexico's ("BLM") 

footprint expansion initiatives have accelerated at a vast rate through the Grupo Bimbo 

distribution network, the costs of gearing up infrastructure in support of the roll out of 

point of sale devices resulted in BLM incurring additional losses in the past year. 



Cash flows generated from operating activities amounted to R528 million. Following the 

repurchase of Microsoft's 12% interest in the group for R392 million, as well as a dividend 

payment of R107 million and investing activities of R277 million, cash on hand at year end 

amounted to R1,98 billion.



The statement of financial position remains robust and liquid, reflecting accumulated equity

of R2,91 billion. 



FINANCIAL OVERVIEW

- Revenues increased by 4% to R18,7 billion.

- Gross profit increased by R140 million to R1,2 billion supported by margin increases from 

5,91% to 6,45%.

- Overheads increased by 16%.

- EBITDA increased by 26% to R750 million, inclusive of the once off income receipt of 

R79,4 million. 

- Net profit after tax and non-controlling interests from continuing operations increased by 

31% to R444 million. Growth would have equated to 11% on exclusion of the once off income receipt.

- Headline earnings per share increased by 40% from 46,20 cents to 64,65 cents per share. 



BASIS OF PREPARATION



The summarised group annual financial statements have been derived from the group annual 

financial statements and were prepared in accordance with the requirements of Section 8.57 

of the JSE Limited Listings Requirements, the presentation and disclosure requirements of 

IAS 34 - Interim Financial Reporting and the AC500 standards as issued by the Accounting 

Practices Board. The group annual financial statements have been prepared in accordance with 

International Financial Reporting Standards and the requirements of the Companies Act of 

South Africa. A copy of the group annual financial statements can be obtained from the 

company's registered office.



This financial information has been prepared in accordance with the going concern principle,

under the historical cost convention, except for certain financial and equity investments 

which have been measured at fair value. The accounting policies and methods of computation 

are consistent with those used in the comparative financial information 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 

for the year ended 31 May 2012. These standards have not had a significant impact on the 

financial information.



In addition, the group uses core net profit as a non-IFRS measure in evaluating its 

performance. This supplements the IFRS measures disclosed. 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 summarised group annual financial statements should be read in conjunction with the 

group annual financial statements which include details of all related party transactions. 



SEGMENTAL REPORT

South African distribution



                                            2012         2011       Growth

                                           R'000        R'000        R'000    Growth

Revenue                               18 423 014   17 821 605      601 409        3%

Gross profit                           1 048 893      925 398      123 495       13%

EBITDA                                   801 746      711 767       89 979       13%

Core net profit                          595 895      571 471       24 424        4%

Gross profit margin                        5,69%        5,19%

EBITDA margin                              4,35%        4,00%





Prepaid airtime and annuity revenue generated from starter packs continued to be the major 

contributors to the increase in revenue of 3%. Commissions earned on the distribution of 

prepaid electricity amounted to R85 million (2011: R61 million) equating to revenue generated

 on behalf of utilities of R5,5 billion (2011: R3,4 billion). The group acts as an agent in 

the distribution of prepaid electricity. 								

								

Gross profit inclusive of IFRS adjustments increased by R123 million (13%), supported by 

margin increases from 5,19% to 5,69%. Commissions on prepaid electricity accounted for 0,11% 

of this margin increase. On exclusion of IFRS adjustments, margins increased from 5,09% to 

5,28%.								

								

The growth in EBITDA of 13% was inclusive of the effects of IFRS adjustments. On exclusion of

these adjustments in both the comparative and current years, a more representative growth of

R33 million was achieved, equating to a 5% increase.



International distribution



                                                               2012     2011   Growth

                                                              R'000    R'000    R'000  Growth

Revenue                                                      17 429   29 254 (11 825)   (40%)

Gross profit                                                  2 574    8 052  (5 478)   (68%)

EBITDA                                                     (15 901)  (8 683)  (7 218)   (83%)

Discontinued operations*                                    (5 493)   93 901 (99 394)  (106%)

Africa Prepaid Services Nigeria                             (5 493) (40 813)   35 320     87%

Blue Label Mexico                                                -   134 714 (134 714  (100%)

Share of losses from associates and joint ventures         (19 182)  (2 884) (16 298)  (565%)

Ukash                                                         2 228    8 782  (6 554)   (75%)

Oxigen Services India                                         4 616  (5 163)    9 779    189%

Blue Label Mexico                                          (24 873)  (6 503) (18 370)  (282%)

Other                                                       (1 153)       -   (1 153)       -

Core net loss from continuing operations                   (36 563) (41 609)    5 046     12%

- Equity holders of the parent                             (20 943) (32 005)   11 062     35%

- Non-controlling interests                                (15 620)  (9 604)  (6 016)   (63%)

Core net (loss)/profit from discontinued operations        (15 454)   57 573 (73 027)  (127%)

- Equity holders of the parent                              (5 493)   93 901 (99 394)  (106%)

- Non-controlling interests                                 (9 962) (36 328)   26 366     73%







*Represents net (loss)/profit after taxation and non-controlling interests.								

								

The decrease in revenue in the international segment was due to the disposal of SharedPhone 

International ("SPI"). The decline in EBITDA was due to this disposal of SPI as well as an 

increase in legal fees expended on the ongoing litigation relating to Africa Prepaid Services

Nigeria. Forex gains of R7,6 million, limited this decline to R7,2 million. 								

								

The Group's objective in the international segment is to partner with local management in 

the countries in which it operates. These partnerships result in its international operations

being equity accounted for. The group's current active international operations, namely, 

Ukash, Oxigen Services India and Blue Label Mexico are disclosed accordingly under share of 

losses from associates and joint ventures.								

								

Discontinued operations								

								

Africa Prepaid Services Nigeria								

								

In line with a commitment made in May 2011 for the disposal of the assets and liabilities of

Africa Prepaid Services Nigeria ("APSN"), the financial performance thereof for both the years

ended 31 May 2011 and 31 May 2012 are required to be reflected as a discontinued operation. 

The Multi-links contract was cancelled in November 2010. The share of losses of R5,5 million 

incurred in the current year was attributable to the expenditure relating to the winding down

of the operation. The comparative year's losses of R41 million comprised impairments of 

assets and goodwill amounting to R23 million, and the balance of R18 million being 

attributable to trading losses. 								

								

Blue Label Mexico								

								

In February 2011, Grupo Bimbo acquired 40% of BLM by subscribing for new shares. Blue Label's

70% shareholding was diluted to 40% as a result of this transaction, with BLM's management 

retaining 20%. Accordingly, the group's share of trading losses of R11,3 million for the 

period June 2010 to February 2011 was reflected as a discontinued operation. Thereafter, the 

group's share of losses is reflected as "share of losses from associates and joint ventures". 								

								

The group's remaining 40% shareholding was required to be revalued based on the equity value

payable by Grupo Bimbo for its 40% shareholding. This resulted in a net fair value gain of 

R146 million in the comparative year.								

								

Share of losses from associates and joint ventures								

								

Ukash 								

								

The comparative share of profits of R8,8 million included a deferred tax credit adjustment 

of R6,5 million, with trading profits net of amortisation of intangible assets amounting to 

R2,3 million. In the current year, prior to a deferred tax debit adjustment of R2,8 million, 

the share of profits earned on a pure trading basis, net of the amortisation of intangible 

assets, amounted to R5 million. This represented an increase of R2,7 million (117%). This 

was achieved through growth in revenue of 57% with a gross profit margin increase from 49% to

53%, all reported in their local currency.





Oxigen Services India								

								

Blue Label's share of profits equated to R4,6 million, compared to prior year share of losses

of R5,2 million. This was mainly due to the addition of banking services to its prepaid 

airtime platform. These results were achieved through a 52% increase in revenue at gross 

profit margins of 2,95% (2011: 2,25%). EBITDA increased by 778%, all reported in their local 

currency.								

								

Blue Label Mexico								

								

The comparative share of losses of R6,5 million was for the period March 2011 to May 2011, 

during which period Blue Label's equity holding in BLM was reduced from 70% to 40%. The 

current year's share of losses of R25 million was for the full 12-month period. BLM's total 

losses increased from R32 million to R60 million. The increase in losses was largely due to 

costs incurred in the process of gearing up for an extensive roll out of point of sale 

devices through the Grupo Bimbo distribution network. 



MOBILE



                                   2012     2011   Growth

                                  R'000    R'000    R'000   Growth

Revenue                          87 244   78 616    8 628      11%

Gross profit                     66 059   62 444    3 615       6%

EBITDA                           97 359   19 347   78 012     403%

Core net profit/(loss)           73 962    (756)   74 718    9883%







This segment comprises Cellfind, Blue Label One and Content Connect Africa. 								

								

The growth in EBITDA of R78 million was inclusive of the once off income receipt of R79,4 million. 								

								

A net decline at depreciation level and the movement in taxation relating to the once off 

income receipt accounted for the growth in its contribution to core net profit.



SOLUTIONS



                                            2012       2011       Growth

                                           R'000      R'000        R'000    Growth

Revenue                                  171 029    118 277       52 752       45%

Gross profit                              79 505     58 582       20 923       36%

EBITDA                                    38 927     18 731       20 196      108%

Core net profit                           21 324      7 061       14 263      202%





The Solutions segment houses the Datacel group which operates call centres and provides data 

and lead generation services. Improvements in the call centre operations and the constant 

growth in data accumulation continued to manifest themselves in growth at all levels.	



TECHNOLOGY



                           2012       2011       Growth

                          R'000      R'000        R'000    Growth

Revenue                  16 674     16 820        (146)      (1%)

Gross profit             10 891     13 157      (2 266)     (17%)

EBITDA                 (64 258)   (61 766)      (2 492)      (4%)

Core net loss          (82 765)   (84 932)        2 167        3%





Technology losses are representative of the costs of development and support of the group's 

Information Technology infrastructure. Income generation was limited to services to third 

parties. 



CORPORATE



                          2012       2011       Growth

                         R'000      R'000        R'000    Growth

EBITDA               (107 391)   (81 664)     (25 727)     (32%)

Core net loss        (126 183)   (98 317)     (27 866)     (28%)



The increase in core net losses of the corporate segment was mainly attributable to the cost 

of executive bonuses. No executive bonuses were paid in the prior year.



DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES								

								

Depreciation declined by R4 million and amortisation of intangible assets in terms of purchase

 price allocations declined by R14 million. Impairments of goodwill, intangible assets and 

property, plant and equipment declined by R36 million. 								

								

NET FINANCE INCOME								

								

Finance costs								

								

Finance costs totalled R181 million, of which R3 million related to interest paid on borrowed 

funds and R178 million to imputed IFRS interest adjustments on credit received from suppliers. 

On a comparative basis, interest paid on borrowed funds was R8 million and the imputed IFRS 

interest adjustment was R108 million.								

								

Finance income								

								

Finance income totalled R171 million, of which R60 million was interest received on cash 

resources and R111 million pertained to IFRS adjustments. On a comparative basis interest 

received on cash resources amounted to R50 million and the imputed IFRS interest adjustment 

R96 million.								

								

STATEMENT OF FINANCIAL POSITION								

								

The decline in current assets was mainly attributable to the application of funds for an 

increase in investment in Oxigen Services India of R74 million, additional working capital 

provided to BLM of R26 million and the acquisition of starter pack bases for R121 million 

(included in intangible assets).								

								

The acquisition of Microsoft's 12% shareholding in the group for R392 million and the purchase

 of treasury shares for R16 million accounted for the decline in share capital, share premium 

and treasury shares. 								

								

Inventory declined by R473 million, returning to its optimal level of 11 days.								

								

The affording of additional credit to selected clients resulted in debtors collections 

increasing from 17 to 26 days. Creditor payment terms averaged 37 days.								

								

STATEMENT OF CASH FLOWS								

								

Cash flow of R528 million generated from operating activities was applied to investing 

activities to the extent of R277 million. This comprised the funding of an additional 

investment of R74 million in Oxigen Services India, the provision of working capital of 

R26 million to Blue Label Mexico and the acquisition of starter pack bases for R121 million.								

								

A further R520 million was applied to financing activities to facilitate the purchase of 

Microsoft's 12% shareholding in the group for R392 million, Treasury shares R16 million and 

a dividend payment of R107 million.								

								

The resultant accumulated cash resources of the group declined by R251 million to 

R1,98 billion.								

								

FORFEITABLE SHARE SCHEME								

								

Forfeitable shares totalling 4 828 644 (2011: 6 829 416) were issued to qualifying employees. 

During the year 1 067 905 (2011: 1 316 366) shares were forfeited and 311 637 (2011: 909 823) 

shares vested during the current period.								

								

DIVIDEND NO 3								

								

The group's current dividend policy is to declare an annual dividend. Accordingly, notice is 

hereby given that on Monday, 20 August 2012, the board approved a gross ordinary dividend 

(number 3) of 23 cents per ordinary share (19,55 cents per ordinary share net of dividend 

withholding tax) for the year ended 31 May 2012. The dividend, inclusive of withholding tax, 

equates to a 2,95 cover on headline earnings. The total declaration of R155 137 080 for the 

year ended 31 May 2012 has not been recognised in the financial statements as it was made 

after this date. 								

								

The dividend has been declared from income reserves. The company has no secondary tax on 

companies credits available. The dividend withholding tax rate is 15%. The issued share 

capital at the declaration date is 674 509 042 ordinary shares. The company's income tax 

reference number is 9062246179.





The salient dates are as follows:



Last date to trade cum dividend                    Friday, 7 September 2012.



Shares commence trading ex dividend                Monday, 10 September 2012.



Record date                                        Friday, 14 September 2012.



Payment of dividend                                Monday, 17 September 2012.



Share certificates may not be dematerialised or rematerialised between Monday, 10 September 

and Friday, 14 September 2012, both days inclusive.								





PROSPECTS								

								

The group is actively building its SMS aggregation capabilities through its own development 

and strategic acquisitions. The objective is to create economies of scale through mass 

aggregation, as well as enhancing the range of SMS services available to customers. Increasing

customer awareness of the benefits of prepaid electricity and contracts with additional utility

providers is likely to enhance commissions generated from prepaid electricity sales.								

								

Annuity revenue from an expanding starter pack base is expected to compound accordingly. 								

								

The distribution capabilities of Grupo Bimbo, the largest bakery in the world, are expected 

to add significant momentum to the roll-out of point of sale devices in Mexico. 								

								

Oxigen Services India is expected to continue its drive into banking services initiatives in 

partnership with leading banks and financial institutions in India.								

								

The group will continue to focus on expanding its product range offerings and distribution 

network, organically and through acquisition.								

								

The statement of financial position remains robust and liquid, which augurs well for future 

growth, acquisitions and distributions to shareholders.								

								

SUBSEQUENT EVENTS								

								

Subsequent to year end, dividend number 3 was declared and approved by the board.								

								

CONTINGENCIES								

								

Multi-Links Telecommunications Limited, a previously wholly owned subsidiary of Telkom Limited

in Nigeria, concluded a Super Dealer agreement with Africa Pre-Paid Services (APS), in December

2008 in terms of which APS was appointed for an initial period of 10 years to sell, market and

procure customers for Multi-links' range of products and services in Nigeria (the agreement).

On 29 May 2009, APS ceded and assigned all of its rights and obligations in terms of the 

agreement to APSN. On 26 November 2010 APSN cancelled the agreement arising from Multi-Links' 

repudiation of its obligations under the contract. On 13 June 2011 APSN launched arbitration 

proceedings in South Africa (as per contract) against Multi-Links claiming damages (9 claims) 

in the total sum of USD481 million. Multi-Links is defending the matter and has filed a 

counterclaim in the amount of USD123 million. Telkom sold its shareholding in Multi-Links to 

Hip Oils Topco Limited during September 2011. In addition, in terms of an indemnity contained 

in the Sale and Purchase agreement between Telkom and Hip Oils Topco Limited concluded in 

August 2011, Telkom has issued an indemnity in relation to the APSN claim for amounts in 

excess of $10 million.								

								

The arbitration has been set down for hearing from 4 November until 15 December 2012.								

								

INDEPENDENT AUDIT								

								

PricewaterhouseCoopers Inc.'s unmodified audit reports on the group annual financial statements

and the summarised group annual financial statements for the year ended 31 May 2012 are 

available for inspection at the company's registered office. Any reference to future financial

performance in this announcement has not been audited or reported on by PricewaterhouseCoopers Inc.								

								

APPRECIATION 								

								

The board of Blue Label Telecoms would once again 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                         BM Levy and MS Levy               DB Rivkind CA(SA)*

Chairman                           Joint Chief Executive Officers    Financial Directors   20 August 2012



*Supervised the preparation and review 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 

Auditors: PricewaterhouseCoopers Inc.





								



									

								

 								








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