Wrap Text
Unaudited results for the half year ended 30 November 2014
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 results for the half year ended 30 November 2014
HIGHLIGHTS
- Increase in revenue of 14% to R10.3 billion
- Increase in gross profit of 11% to R788 million
- Increase in gross profit margins from 7.48% to 7.62%*
- Increase in EBITDA of 20% to R516 million
- Increase in headline earnings per share of 15% to 42.73 cents
- Increase in core earnings per share of 17% to 44.47 cents
*Excluding imputed IFRS interest adjustments.
COMMENTARY
Headline earnings per share increased by 15% to 42.73 cents. This growth was achieved in spite of the Group’s share of
losses in Blue Label Mexico increasing by R14.5 million, negatively impacting on growth in headline earnings per share
by 2.17 cents.
The growth in earnings was primarily attributable to increases in revenue of 14%, gross profit of 11% and EBITDA of
20%. Gross profit margins increased from 7.48% to 7.62% on exclusion of imputed IFRS interest adjustments. The growth in
margins was achieved through the efficient application of cash resources to bulk inventory purchases at favourable
discounts, early settlement supplier discounts, an increase in commissions earned on the distribution of prepaid electricity
and compounding annuity income.
The South African distribution segment continues to be the predominant contributor to Group profitability through the
expansion of its offerings into its multitude of distribution channels. It is a reliable aggregator for several
suppliers, supported by a responsive service. Its reputation continues to be one of trust and reliability.
The recently acquired Retail Mobile Credit Specialists (RMCS) and Viamedia, both performed according to expectations
in enhancing Group profitability.
The secure and safe banking and financial services provided by Oxigen Services India, continue to gain momentum with
deposits reaching USD2.7 million per day at the interim stage. It has become the largest provider in India of domestic
money remittances on the Interbank Mobile Payment Service network, a platform provided by the National Payments
Corporation of India.
BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared in accordance with the JSE Limited Listings
Requirements, the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued
by the Financial Reporting Standards Council. The condensed consolidated interim financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act of South
Africa.
These condensed consolidated interim financial statements have 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 applied in the annual
financial statements for the year ended 31 May 2014 and with those applied in the previous condensed consolidated interim
financial statements, 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 consolidated annual financial statements for the year ended 31 May 2014. These
standards have not had a significant impact on the interim financial statements.
We aim to provide stakeholders with the same additional information that management uses to evaluate the performance
of the Group’s operations.
Accordingly, we make reference to gross profit, as well as operating profit before depreciation, amortisation and impairment
charges (EBITDA) excluding imputed IFRS interest adjustments.
In addition, the Group applies 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 2014.
SEGMENTAL REPORT
South African distribution
Unaudited Unaudited
30 November 30 November
2014 2013 Growth
R’000 R’000 R’000 Growth
Revenue 10 157 038 8 923 465 1 233 573 14%
Gross profit 696 195 621 463 74 732 12%
EBITDA 507 718 448 264 59 454 13%
Core net profit 347 668 307 835 39 833 13%
Gross profit margin 6.85% 6.96%
EBITDA margin 5.00% 5.02%
The increase in revenue by 14% was predominantly achieved through access to additional channels of distribution.
Revenue generated on “PINless top-ups” increased by R468 million from R721 million to R1.189 billion. As only the
commission earned thereon is accounted for, the effective growth in Group revenue equated to 18%.
Net commissions earned on the distribution of prepaid electricity increased by R12 million to R79 million (18%) on
revenue of R5.3 billion generated on behalf of the utilities.
The gross profit increase of 12% was achieved after inclusion of imputed IFRS interest adjustments. On exclusion of
these adjustments for the current period and the comparative period, gross profit increased by R107 million, equating to
an effective growth of 18%. Similarly the impact on gross profit margins on exclusion of imputed IFRS interest
adjustments equated to a growth from 6.62% to 6.85%.
The growth in EBITDA of 13% was inclusive of the effects of imputed IFRS interest adjustments. On exclusion of these
adjustments, a more representative growth of R92 million was achieved, equating to a 22% growth, with EBITDA margins
increasing from 4.69% to 5.01%.
Core net profit increased by 13% after an increase in finance costs and non-controlling interests. The increase in
finance costs was congruent with the application of cash resources to acquisitions, dividends paid, bulk purchasing
transactions and early settlement discounts.
International distribution
Unaudited Unaudited
30 November 30 November
2014 2013 Growth
R’000 R’000 R’000 Growth
EBITDA (4 511) (9 790) 5 279 54%
Share of (losses)/profits from
associates and joint ventures (42 128) (30 285) (11 843) (39%)
- Ukash 7 379 6 937 442 6%
- Oxigen Services India (666) (3 537) 2 871 81%
- Blue Label Mexico (45 194) (30 709) (14 485) (47%)
- Other (3 647) (2 976) (671) (23%)
Core net loss (45 881) (37 809) (8 072) (21%)
- Equity holders of the parent (39 666) (30 132) (9 534) (32%)
- Non-controlling interests (6 215) (7 677) 1 462 19%
The positive movement in EBITDA of R5.3 million was mainly attributable to a decline in expenditure on legal fees from
R10.5 million to R7.3 million incurred by Africa Prepaid Services Nigeria (APSN) and a decline in employee costs by
R1.4 million. These costs will not perpetuate as the litigation has been settled.
The share of net losses from associates and joint ventures comprised the following:
Ukash
The Group’s share of profits in Ukash, after the amortisation of intangible assets, increased by 6% from R6.9 million
to R7.4 million. During November 2014, an agreement was signed whereby Blue Label Telecoms will dispose of its interests
in Ukash. Completion of the transaction will take place after receipt of the necessary regulatory approvals.
Oxigen Services India
The Group’s share of losses declined from R3.5 million to R0.7 million, after the amortisation of intangible assets of
R0.7 million. This positive turnaround was attributable to increases in revenue by 16% and gross profit by 36%,
reported in their local currency.
The benefits of Oxigen Services India’s defined strategy of becoming India’s first non banked mobile wallet that
empowers the unbanked masses to instantly transfer and receive cash across the entire country are clearly evident in its
turnaround into profitability. This has been primarily due to its shift in strategy to a focus on money transfer services
without detracting from its airtime sales.
Daily money transfer deposits have increased from USD1.2 million per day in the comparative period to USD2.7 million
per day in this reporting period, increasing exponentially through its connectivity with the National Payment Corporation
of India.
Blue Label Mexico
In the comparative period, Blue Label Mexico incurred losses of R67 million, inclusive of a subsidy receipt of R32
million from trade partners. The Group’s share of losses in the comparative period equated to R31 million after the
amortisation of intangible assets. In the current period, Blue Label Mexico’s losses increased to an equivalent of R95 million,
of which R5 million was attributable to negative foreign exchange movements. The Group’s share of losses equated to R45
million of which R2 million pertained to these foreign exchange movements.
In spite of revenue increasing by 20%, the main reasons for further losses were attributable to continued margin
compression and an increase in overhead costs. The increase in overheads was necessitated by a continued roll out of point of
sale devices as well as ancillary support services.
Although Blue Label Mexico has made significant progress in establishing points of presence, as well as strategic
alliances with all Telco networks, VISA, Banamex and various FMCG suppliers, the benefits of these initiatives are only
expected to manifest themselves in the future.
Mobile
Unaudited Unaudited
30 November 30 November
2014 2013 Growth
R’000 R’000 R’000 Growth
Revenue 95 248 80 749 14 499 18%
Gross profit 61 138 56 436 4 702 8%
EBITDA 20 241 18 927 1 314 7%
Core net profit 11 951 14 172 (2 221) (16%)
This segment comprises Cellfind, Panacea Mobile, Blue Label Engage, Blue Label One, Simigenix and the recently
acquired Viamedia.
Viamedia, which was acquired with effect from 1 September 2014, together with Blue Label One made positive
contributions to growth in revenue, EBITDA and core net profit.
Their contributions to EBITDA growth were R15.6 million and R6 million respectively. Their combined contributions were
offset by negative growth in EBITDA of R20 million in the balance of the companies comprising this segment. Margin
compression on bulk SMS distribution by Cellfind and Panacea was the main factor causing their negative contributions to
growth.
At core net profit level, positive contributions to growth by Viamedia of R8.5 million and Blue Label One by R4.4
million were negated by net negative growth contributions of R15.1 million by the balance of the companies comprising this
segment.
Solutions
Unaudited Unaudited
30 November 30 November
2014 2013 Growth
R’000 R’000 R’000 Growth
Revenue 75 106 74 808 298 0%
Gross profit 30 451 32 166 (1 715) (5%)
EBITDA 18 122 17 264 858 5%
Core net profit 7 770 9 257 (1 487) (16%)
The Solutions segment houses Blue Label Data Solutions (BLDS), Forensic Intelligence Data Solutions, Datacision, Blue
Label Call Centre, Velociti and CNS Call Centres. BLDS contributed R14.5 million to EBITDA and R7 million to core net
profit.
Corporate
Unaudited Unaudited
30 November 30 November
2014 2013 Growth
R’000 R’000 R’000 Growth
EBITDA (25 607) (43 201) 17 594 41%
Core net loss (32 200) (50 054) 17 854 36%
The decline in negative EBITDA and core net loss was primarily attributable to a once-off income receipt.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges increased by R12.1 million of which R10 million pertained to the
amortisation of intangible assets emanating from the acquisitions of RMCS and Viamedia.
Net finance costs
Finance costs
Finance costs totalled R100 million, of which R29 million related to interest paid on borrowed funds and R71 million
to imputed IFRS interest adjustments on credit received from suppliers. On a comparative basis, interest paid on borrowed
funds was R7 million and the imputed IFRS interest adjustment equated to R74 million. Interest paid on borrowed funds
was attributable to the cost of financing bulk inventory purchase transactions and early settlement payments attracting
discounts, for which facilities were utilised and repaid during the current period.
Finance income
Finance income totalled R91 million, of which R15 million was attributable to interest received on cash resources and
R76 million to imputed IFRS interest adjustments. On a comparative basis, interest received on cash resources amounted
to R16 million and the imputed IFRS interest adjustment to R54 million. The decline in interest received was attributable
to the utilisation of funds on hand for the payment of dividends, acquisitions, bulk inventory purchase transactions
and early settlement discounts.
Statement of financial position
Total assets increased by R384 million to R6.9 billion, of which growth in non-current assets accounted for R332
million and current assets for R53 million.
The increase in non-current assets was mainly attributable to a net growth in intangible assets and goodwill totalling
R324 million, to capital expenditure net of depreciation of R13 million and to investment in associates and joint
ventures of R21 million.
The increase in intangible assets and goodwill mainly related to the acquisition of Viamedia, of which goodwill
equated to R193 million and intangibles R135 million. A further R58 million was incurred for the purchase of software, starter
pack bases and a distribution channel. Amortisation of intangibles amounted to R63 million.
The increase in investment in associates and joint ventures was predominantly due to an additional R50 million capital
contribution to Blue Label Mexico, movement in loans of R15 million, comprising of interest capitalised of R6 million
and unrealised foreign exchange gains of R9 million. These increases were off-set by a share of net losses incurred of
R43 million and a negative impact of R1 million in foreign currency translation reserves.
The net increase in current assets mainly comprised an increase in accounts receivable of R312 million and an increase
in inventories of R529 million congruent with bulk inventory purchases. Cash resources declined by R796 million in line
with the application of cash to fund the increase in assets and payment of dividends.
Although the stock turn increased from 26 days at year end to 35 days in the short term, the discount afforded thereon
justified this additional inventory holding.
The debtors collection period, equating to 40 days at year end, increased to 44 days at the interim stage.
The net profit attributable to equity holders of R284 million, less a dividend of R182 million, resulted in retained
earnings accumulating to R2.3 billion.
Trade and other payables increased by R220 million with credit terms averaging 59 days.
Statement of cash flows
Investment in excess inventory resulted in a negative cash generation of R304 million from operating activities. The
nature of inventory is one of a highly liquid commodity.
R287 million was applied to investing activities, of which R50 million related to the additional investment in Blue
Label Mexico, R144 million to the acquisition of Viamedia, R59 million to the purchase of intangible assets, R32 million
to capital expenditure and R5 million to loans granted.
After applying R19 million to the acquisition of treasury shares and a dividend payment of R185 million to
shareholders and non-controlling interests, the balance of cash on hand amounted to R388 million.
Forfeitable share scheme
Forfeitable shares totalling 3 124 234 (2013: 3 014 847) were issued to qualifying employees. During the period 6 084
(2013: 462 283) shares were forfeited and 3 819 408 (2013: 3 629 922) shares vested.
Litigation update
The arbitration proceedings between APSN and the former subsidiary of Telkom SA SOC Limited (Telkom), Multi-Links
Telecommunications Limited (Multi-Links) have been settled.
The litigation action in the High Court of South Africa between Telkom and Multi-Links, on the one hand, and Blue
Label, Africa Prepaid Services, APSN and certain individuals, on the other, has been settled.
In terms of the settlement agreement all claims and counterclaims have been withdrawn and all of the parties have
agreed that they will have no further claims against one another arising out of the disputes forming the subject of both the
arbitration proceedings and the action, including any claims for costs.
Prospects
Oxigen Services India is poised to address the next stage of its growth cycle by increasing its share of domestic and
international remittances. It is able to facilitate banking, money transfer transactions and instant payments within the
convenient reach of people via secure proprietary technologies. As the considered pioneer in the establishment of a
retail payment eco system based on GPRS point-of-sale devices, PCs and mobile phones, OSI is well placed to provide
remittance capabilities to 450 000 unbanked villages in India.
TicketPros, a ticketing provider and proud partner of premium sporting events in South Africa, has expanded on its
existing service channels of ticketing to concerts, music festivals, hospitality and transport. Proprietary technology
facilitates the provision of a myriad of added benefits to ticket purchasers, which afford it a competitive edge in the market
place.
Acquiring, which is the ability to process credit and debit card payments for products and services on behalf of
merchants, is set to gain momentum as a result of the establishment of successful alliances with various financial
institutions. This will enable consumers to transact at store level through the multitude of points of presence that Blue Label
has deployed both locally and internationally.
The prevalence of prepaid water meters is following in the footsteps of the prepaid electricity model. Installation of
meters by third parties, supported by state-of-the-art software, has enabled Blue Label to enter into the prepaid water
arena. Vouchers can now be purchased by consumers at the multitude of points of presence that it has
established. Existing relationships with several municipalities will enable it to replicate its prepaid electricity
model, given the quality of service that it has provided them with on the prepaid electricity side to date.
Blue Label Mexico will continue to grow its points of presence network in pursuit of its strategy of enhancing its
products and service offerings, including transactional revenue. As opposed to being confined to one network, it has taken
the initiative of becoming a multi-carrier which should enhance earnings.
Post balance sheet events
Subsequent to the period under review, The Prepaid Company concluded an agreement to acquire a starter pack base for
an amount of R31 million.
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 DA Suntup* CA(SA)
Chairman Joint Chief Executive Officers Financial Director
17 February 2015
* Supervised the preparation of the Group’s interim results.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
30 November 30 November 31 May
2014 2013 2014
Unaudited Unaudited Audited
As at R’000 R’000 R’000
ASSETS
Non-current assets 2 129 839 1 442 960 1 798 307
Property, plant and equipment 109 943 98 212 97 200
Intangible assets and goodwill 1 329 638 741 587 1 005 934
Investment in and loans to associates
and joint ventures 619 505 584 547 598 109
Loans receivable 15 700 1 000 18 501
Starter pack assets 3 068 2 601 2 307
Trade and other receivables 31 993 - 51 604
Deferred taxation assets 19 992 15 013 24 652
Current assets 4 757 180 4 745 750 4 704 580
Inventories 1 835 020 1 522 557 1 306 206
Loans receivable 33 938 29 837 27 850
Starter pack assets 1 364 1 127 1 010
Trade and other receivables 2 494 016 1 890 102 2 181 973
Current tax assets 4 496 1 564 3 410
Cash and cash equivalents 388 346 1 300 563 1 184 131
Total assets 6 887 019 6 188 710 6 502 887
EQUITY AND LIABILITIES
Capital and reserves 3 648 620 3 307 542 3 523 989
Share capital, share premium and
treasury shares 3 943 889 3 945 833 3 945 832
Restructuring reserve (1 843 912) (1 843 912) (1 843 912)
Other reserves 139 834 121 245 138 798
Share-based payment reserve 31 976 31 865 33 660
Transaction with non-controlling
interest reserve (957 230) (939 314) (957 230)
Retained earnings 2 324 960 2 018 815 2 222 685
Non-controlling interest 9 103 (26 990) (15 844)
Non-current liabilities 113 746 19 912 92 400
Deferred taxation liabilities 83 912 19 912 41 510
Trade and other payables 29 649 - 50 178
Provisions 185 - 712
Current liabilities 3 124 653 2 861 256 2 886 498
Trade and other payables 3 059 540 2 824 554 2 818 898
Provisions 25 362 16 181 23 777
Current tax liabilities 13 944 5 662 28 733
Current portion of interest-bearing
borrowings 2 805 2 842 2 653
Current portion of non-interest-bearing
borrowings 23 002 12 017 12 437
Total equity and liabilities 6 887 019 6 188 710 6 502 887
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2014 2013 2014
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue 10 327 392 9 079 022 19 401 666
Other income 36 821 5 398 26 692
Change in inventories of finished goods (9 539 608) (8 368 957) (18 052 132)
Employee compensation and benefit expense (187 677) (163 178) (332 542)
Depreciation, amortisation and impairment
charges (46 479) (34 357) (65 137)
Other expenses (120 965) (120 821) (255 691)
Operating profit 469 484 397 107 722 856
Finance costs (99 666) (80 683) (166 876)
Finance income 90 732 70 088 156 250
Share of loss from associates and joint ventures (42 629) (29 779) (56 873)
Profit for the period before taxation 417 921 356 733 655 357
Taxation (133 457) (113 404) (206 442)
Net profit for the period 284 464 243 329 448 915
Other comprehensive income:
Exchange profits on translation of foreign operations 1 317 8 105 25 637
Other comprehensive income for the period, net of tax 1 317 8 105 25 637
Total comprehensive income for the period 285 781 251 434 474 552
Net profit for the period attributable to: 284 464 243 329 448 915
Equity holders of the parent 284 392 246 360 450 230
Non-controlling interest 72 (3 031) (1 315)
Total comprehensive income for the period
attributable to: 285 781 251 434 474 552
Equity holders of the parent 285 428 254 466 475 889
Non-controlling interest 353 (3 032) (1 337)
Earnings per share for profit attributable to
equity holders (cents)
Basic earnings per share 42.79 37.17 67.88
Diluted earnings per share** 41.87 36.66 66.86
Headline earnings per share 42.73 37.15 67.98
Diluted headline earnings per share** 41.82 36.63 66.96
Dividend per share 27.00 25.00 25.00
Weighted average number of shares 664 598 720 662 703 861 663 298 476
Diluted weighted average number of shares 670 493 760 672 014 932 672 311 571
Number of shares in issue 674 509 042 674 509 042 674 509 042
Reconciliation between net profit and core net
profit for the period:
Net profit for the period attributable to
equity holders of the parent 284 392 246 360 450 230
Amortisation on intangible assets raised through
business combinations net of tax and net of
non-controlling interest 11 131 4 718 10 372
Core net profit for the period 295 523 251 078 460 602
- Core earnings per share (cents)* 44.47 37.89 69.44
* 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.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share capital,
share premium
and treasury Retained Restructuring Other
shares earnings reserve reserves*
Unaudited Unaudited Unaudited Unaudited
Six months ended R’000 R’000 R’000 R’000
Balance as at 1 June 2013 3 939 891 1 941 082 (1 843 912) 113 139
Net profit for the period - 246 360 - -
Other comprehensive income - - - 8 106
Total comprehensive income/(loss) - 246 360 - 8 106
Dividends paid - (168 627) - -
Treasury shares purchased (11 120) - - -
Equity compensation benefit scheme shares vested 17 062 - - -
Equity-based compensation movements - - - -
Transaction with non-controlling interest reserve movement - - - -
Non-controlling interests acquired during the period - - - -
Balance as at 30 November 2013 3 945 833 2 018 815 (1 843 912) 121 245
Balance as at 1 June 2014 3 945 832 2 222 685 (1 843 912) 138 798
Net profit for the period - 284 392 - -
Other comprehensive income - - - 1 036
Total comprehensive income - 284 392 - 1 036
Dividends paid - (182 117) - -
Treasury shares purchased (19 130) - - -
Equity compensation benefit scheme shares vested 17 187 - - -
Equity-based compensation movements - - - -
Non-controlling interests acquired during the period - - - -
Balance as at 30 November 2014 3 943 889 2 324 960 (1 843 912) 139 834
Year ended Audited Audited Audited Audited
R’000 R’000 R’000 R’000
Balance as at 1 June 2013 3 939 891 1 941 082 (1 843 912) 113 139
Net profit for the year - 450 230 - -
Other comprehensive profit - - - 25 659
Total comprehensive income - 450 230 - 25 659
Dividends paid - (168 627) - -
Treasury shares purchased (11 120) - - -
Equity compensation benefit scheme shares vested 17 061 - - -
Equity-based compensation movements - - - -
Share of equity movement in associates - - - -
Transaction with non-controlling interest reserve movement - - - -
Non-controlling interest movement - - - -
Balance as at 31 May 2014 3 945 832 2 222 685 (1 843 912) 138 798
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
** Includes employee compensation benefit reserve.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (continued)
Transaction
with
non-controlling Share-based Non-
interest payment controlling
reserve reserve** interest Total equity
Unaudited Unaudited Unaudited Unaudited
Six months ended R’000 R’000 R’000 R’000
Balance as at 1 June 2013 (931 125) 39 496 (15 718) 3 242 853
Net profit for the period - - (3 031) 243 329
Other comprehensive income - - (1) 8 105
Total comprehensive income/(loss) - - (3 032) 251 434
Dividends paid - - - (168 627)
Treasury shares purchased - - - (11 120)
Equity compensation benefit scheme shares vested - (16 715) (347) -
Equity-based compensation movements - 9 084 108 9 192
Transaction with non-controlling interest reserve movement (8 189) - - (8 189)
Non-controlling interests acquired during the period - - (8 001) (8 001)
Balance as at 30 November 2013 (939 314) 31 865 (26 990) 3 307 542
Balance as at 1 June 2014 (957 230) 33 660 (15 844) 3 523 989
Net profit for the period - - 72 284 464
Other comprehensive income - - 281 1 317
Total comprehensive income - - 353 285 781
Dividends paid - - (2 850) (184 967)
Treasury shares purchased - - - (19 130)
Equity compensation benefit scheme shares vested - (16 947) (240) -
Equity-based compensation movements - 15 263 273 15 536
Non-controlling interests acquired during the period - - 27 411 27 411
Balance as at 30 November 2014 (957 230) 31 976 9 103 3 648 620
Year ended Audited Audited Audited Audited
R’000 R’000 R’000 R’000
Balance as at 1 June 2013 (931 125) 39 496 (15 718) 3 242 853
Net profit for the year - - (1 315) 448 915
Other comprehensive profit - - (22) 25 637
Total comprehensive income - - (1 337) 474 552
Dividends paid - - (1 805) (170 432)
Treasury shares purchased - - - (11 120)
Equity compensation benefit scheme shares vested - (16 792) (269) -
Equity-based compensation movements - 10 792 277 11 069
Share of equity movement in associates - 164 - 164
Transaction with non-controlling interest reserve movement (26 105) - 3 760 (22 345)
Non-controlling interest movement - - (752) (752)
Balance as at 31 May 2014 (957 230) 33 660 (15 844) 3 523 989
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
** Includes employee compensation benefit reserve.
CONDENSED GROUP STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2014 2013 2014
Unaudited Unaudited Audited
R’000 R’000 R’000
Cash flows from operating activities (304 387) 742 291 907 332
Cash flows from investing activities (286 892) (203 956) (467 220)
Cash flows from financing activities (204 547) (178 989) (196 892)
(Decrease)/increase in cash and cash equivalents (795 826) 359 346 243 220
Cash and cash equivalents at the beginning of the period 1 184 131 941 282 941 282
Translation difference 41 (65) (371)
Cash and cash equivalents at the end of the period 388 346 1 300 563 1 184 131
HEADLINE EARNINGS
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2014 2013 2014
Unaudited Unaudited Audited
R’000 R’000 R’000
Profit attributable to equity holders of the parent 284 392 246 360 450 230
Net profit on disposal of property, plant and equipment (383) (185) (207)
Impairment of intangible assets and property, plant and
equipment - - 866
Headline earnings 284 009 246 175 450 889
Headline earnings per share (cents) 42.73 37.15 67.98
ACQUISITION OF SUBSIDIARY
Effective date
Shares in the following subsidiary were acquired during the period: of acquisition % acquired
Subsidiary
Viamedia Proprietary Limited 1 September 2014 75
Details of the provisional total net assets acquired and the resulting Total
goodwill as at the date of acquisition are as follows: R’000
Total purchase consideration 253 374
Fair value of net assets acquired 60 204
Goodwill 193 170
The assets and liabilities acquired through acquisition are as follows: Acquirer’s
carrying
Fair value at amount on
acquisition date acquisition date
R’000 R’000
Cash and cash equivalents (21 420) (21 420)
Property, plant and equipment 1 577 1 577
Intangible assets* 134 814 17
Goodwill 193 170 -
Loans receivable 13 026 13 026
Inventories 619 619
Receivables 29 970 29 970
Deferred tax* (37 604) 139
Borrowings (11 014) (11 014)
Current tax liability (10 274) (10 274)
Payables (12 080) (12 080)
280 784 (9 440)
Total purchase consideration 253 374
Contingent consideration (131 027)
Cash and cash equivalents in subsidiary acquired 21 420
Cash outflow on acquisition 143 767
* Included in intangibles is R9.5 million of customer relationships and R125 million of customer listing which relate
to the provisional purchase price allocations performed for Viamedia in terms of IFRS 3(R): Business Combinations.
Deferred tax to the value of R37.7 million was raised on recognition of these intangible assets.
Viamedia was purchased with the objective of affording the Group access to new channels for the distribution of both
Viamedia and Group products and services.
In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting terms
to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the acquisition
of Viamedia, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most
significant among these is the opportunity that the distribution network affords the Group.
The contingent consideration arrangement requires BLT to pay in cash the former owners of Viamedia an additional four
amounts of R24.1 million, R24.1 million, R55 million and R112.5 million if certain profit warranties are achieved.
The potential undiscounted amount of all future payments that the Group could be required to make under this arrangement
is between R0 and R215.6 million.
The fair value of the contingent consideration arrangement of R131 million was estimated by applying the income approach.
The fair value estimates are based on a discount rate of 9%. For the first, second and third profit targets management
has assumed a probability of 100%.
For the fourth profit target management has assumed a probability of 50%. This differs to the probability of 0% disclosed
in the post-balance sheet acquisition of subsidiary note in the consolidated annual financial statements as at 31 May 2014.
SEGMENTAL SUMMARY
Six months ended 30 November 2014 South African International
Total distribution distribution
Unaudited Unaudited Unaudited
R’000 R’000 R’000
Total segment revenue 13 294 271 12 999 702 -
Inter-segment revenue (2 966 879) (2 842 664) -
External revenue 10 327 392 10 157 038 -
EBITDA 515 963 507 718 (4 511)
Net profit/(loss) for the period net of
non-controlling interests 284 392 341 029 (41 534)
Amortisation on intangibles raised through
business combinations net tax and non-controlling interest 11 131 6 639 1 868
Core net profit/(loss) for the period 295 523 347 668 (39 666)
At 30 November 2014
Total assets 6 887 019 5 633 582 581 852
Net operating assets/(liabilities) 1 632 527 1 838 537 (10 648)
Six months ended 30 November 2013
Total segment revenue 12 003 041 11 739 894 -
Inter-segment revenue (2 924 019) (2 816 429) -
External revenue 9 079 022 8 923 465 -
EBITDA 431 464 448 264 (9 790)
Net profit/(loss) for the period net of
non-controlling interests 246 360 305 541 (32 062)
Amortisation on intangibles raised through business combinations
net of tax and non-controlling interest 4 718 2 294 1 930
Core net profit/(loss) for the period 251 078 307 835 (30 132)
At 30 November 2013
Total assets 6 188 710 5 333 125 541 500
Net operating assets/(liabilities) 1 884 494 1 896 364 (14 870)
Year ended 31 May 2014 Audited Audited Audited
R’000 R’000 R’000
Total segment revenue 25 354 475 24 837 763 -
Inter-segment revenue (5 952 809) (5 734 111) -
External revenue 19 401 666 19 103 652 -
EBITDA 787 993 821 310 (13 961)
Net profit/(loss) for the year net of non-controlling interests 450 230 552 926 (51 176)
Amortisation on intangibles raised through business combinations
net of tax and non-controlling interest 10 372 6 070 3 314
Core net profit/(loss) for the year 460 602 558 996 (47 862)
At 31 May 2014
Total assets 6 502 887 5 651 680 556 376
Net operating assets/(liabilities) 1 818 082 1 871 469 (16 065)
SEGMENTAL SUMMARY (continued)
Six months ended 30 November 2014
Mobile Solutions Corporate
Unaudited Unaudited Unaudited
R’000 R’000 R’000
Total segment revenue 208 304 86 265 -
Inter-segment revenue (113 056) (11 159) -
External revenue 95 248 75 106 -
EBITDA 20 241 18 122 (25 607)
Net profit/(loss) for the period net of
non-controlling interests 9 327 7 770 (32 200)
Amortisation on intangibles raised through
business combinations net tax and non-controlling interest 2 624 - -
Core net profit/(loss) for the period 11 951 7 770 (32 200)
At 30 November 2014
Total assets 474 967 135 126 61 492
Net operating assets/(liabilities) (43 137) 26 528 (178 753)
Six months ended 30 November 2013
Total segment revenue 177 941 85 206 -
Inter-segment revenue (97 192) (10 398) -
External revenue 80 749 74 808 -
EBITDA 18 927 17 264 (43 201)
Net profit/(loss) for the period net of
non-controlling interests 13 678 9 257 (50 054)
Amortisation on intangibles raised through business combinations
net of tax and non-controlling interest 494 - -
Core net profit/(loss) for the period 14 172 9 257 (50 054)
At 30 November 2013
Total assets 106 838 149 901 57 346
Net operating assets/(liabilities) 11 022 35 178 (43 200)
Year ended 31 May 2014 Audited Audited Audited
R’000 R’000 R’000
Total segment revenue 350 783 165 929 -
Inter-segment revenue (198 165) (20 533) -
External revenue 152 618 145 396 -
EBITDA 34 273 29 257 (82 886)
Net profit/(loss) for the year net of non-controlling interests 23 916 12 547 (87 983)
Amortisation on intangibles raised through business combinations
net of tax and non-controlling interest 988 - -
Core net profit/(loss) for the year 24 904 12 547 (87 983)
At 31 May 2014
Total assets 96 420 136 090 62 321
Net operating assets/(liabilities) (20 543) 23 840 (40 619)
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine*, GD Harlow*, NN Lazarus SC*^, JS Mthimunye*, MV Pamensky,
DA Suntup, J Vilakazi* (*Non-executive) (^Resigned effective 27 January 2015)
Company Secretary: J van Eden
Sponsor: Investec Bank Limited
Auditors: PricewaterhouseCoopers Inc.
American Depository Receipt (ADR) Programme:
Cusip No.: 095648101 Ticker name: BULBY ADR to ordinary share: 1:10
Depository: The Bank of New York, 101 Barclay Street, New York, NY, 10286, USA
www.bluelabeltelecoms.co.za
Date: 18/02/2015 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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