Wrap Text
Audited results for the year ended 31 May 2015
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 2015
HIGHLIGHTS
- Increase in revenue of 14% to R22 billion
- Increase in gross profit of 22% to R1.64 billion
- Increase in gross profit margins from 6.96% to 7.46%
- Increase in EBITDA of 37% to R1.08 billion
- Increase in headline earnings per share of 21% to 82.26 cents
- Increase in core earnings per share of 29% to 89.71 cents
- Increase in dividend declared of 15% to 31 cents per share
COMMENTARY
Headline earnings per share increased by 21% to 82.26 cents, net of the Group’s share of losses of R85 million in Blue
Label Mexico which equated to 12.82 cents per share. The remaining businesses within the Group contributed 95.08 cents
to headline earnings per share.
The increase in headline earnings was achieved through organic growth in the South African distribution segment,
assisted by the acquisitions of Retail Mobile Credit Specialists Proprietary Limited (RMCS) and Viamedia Proprietary Limited
(Viamedia).
The growth in earnings was primarily attributable to increases in revenue of 14%, gross profit of 22% and EBITDA of
37%. Gross profit margins increased from 6.96% to 7.46%. Organic growth was achieved through the expansion of the Group’s
bouquet of offerings to its escalating multitude of distribution channels.
Core earnings, which increased by 30% to R597 million, represent the earnings of the Group after adjusting for the
amortisation of intangible assets net of taxation and non-controlling interests as a consequence of purchase price
allocations in terms of IFRS 3(R): Business Combinations. Core earnings reflect the underlying financial performance of the
Group.
The statement of financial position remains robust and liquid, with accumulated equity increasing to R3.9 billion, net
of accumulated dividends paid to date totalling R704 million. Net asset value equated to R5.79 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 SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council. The Group annual financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the requirements of the Companies Act, No 71 of 2008. A copy of the Group annual financial
statements can be obtained from the Company’s registered office at no charge.
This financial information has been prepared in accordance with the going concern principle, under the historical cost
convention, except for certain financial and equity instruments 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 2014, with the exception of the standards that are effective for the first time in the current year. These
have been disclosed in note 1 to the Group annual financial statements for the year ended 31 May 2015. 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 arises 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
2015 2014 Growth %
R’000 R’000 R’000 Growth
Revenue 21 657 891 19 103 652 2 554 239 13
Gross profit 1 444 730 1 180 376 264 354 22
EBITDA 1 038 252 821 310 216 942 26
Core net profit 684 756 558 996 125 760 22
Gross profit margin 6.67% 6.18%
EBITDA margin 4.79% 4.30%
The increase in revenue by 13% was predominantly achieved through access to additional channels of distribution.
Revenue generated on “PINless top-ups” increased by R966 million from R1.7 billion to R2.7 billion. As only the commission
earned thereon is accounted for, the effective growth in Group revenue equated to 17%.
Net commissions earned on the distribution of prepaid electricity increased by R31 million to R165 million (23%) on
revenue of R10.4 billion generated on behalf of an escalating base of utilities.
The gross profit increase of 22% was achieved after inclusion of imputed IFRS interest adjustments. On exclusion of
these adjustments for both the current and the comparative year, gross profit increased by R279 million, equating to an
effective growth of 24%. Similarly the impact on gross profit margins on exclusion of imputed IFRS interest adjustments
equated to a growth from 5.97% to 6.54%.
The growth in EBITDA of 26% was inclusive of the effects of imputed IFRS interest adjustments. On exclusion of these
adjustments, growth of R231 million was achieved, equating to a 29% growth, with EBITDA margins increasing from 4.10% to
4.67%.
Core net profit increased by R126 million to R685 million (22%).
International distribution
2015 2014 Growth %
R’000 R’000 R’000 Growth
EBITDA 35 379 (13 961) 49 340 353
Share of (losses)/profits from associates
and joint ventures (81 269) (56 249) (25 020) (44)
- Ukash 12 004 14 089 (2 085) (15)
- Oxigen Services India 2 619 (3 259) 5 878 180
- Blue Label Mexico (88 508) (60 844) (27 664) (45)
- Other (7 384) (6 235) (1 149) (18)
Core net loss (54 646) (59 987) 5 341 9
- Equity holders of the parent (46 958) (47 862) 904 2
- Non-controlling interests (7 688) (12 125) 4 437 37
The group disposed of its interest in Ukash at the end of March 2015. This profit on disposal increased EBITDA by R37
million. The balance of the growth was attributable to a decline in expenditure incurred by Africa Prepaid Services
Nigeria (APSN). Legal fees declined from R20.9 million to R9.4 million. These costs will not perpetuate as litigation
matters have 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, declined by 15% from R14 million
to R12 million. This decline was attributable to the Group having sold its interest in Ukash after 10 months of trading
in the current financial year.
Oxigen Services India
There was a turnaround of the Group’s share of losses of R3.3 million in the comparative year to a share of profits
equating to R2.6 million in the current year, after the amortisation of intangible assets. This positive turnaround was
attributable to increases in revenue by 15% and gross profit by 21%, 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 continues to gain momentum.
This has been primarily due to its focus on money transfer services without detracting from its traditional airtime sales.
Daily money transfer deposits have increased from USD2.3 million per day as at 31 May 2014 to USD3.3 million per day
as at 31 May 2015, this increased exponentially through its connectivity with the National Payment Corporation of India.
Blue Label Mexico
In the comparative year, Blue Label Mexico incurred losses of R131 million. The Group’s share thereof equated to R61
million after the amortisation of intangible assets. In the current year, Blue Label Mexico’s losses increased to an
equivalent of R186 million, of which the Group’s share equated to R89 million.
In spite of revenue increasing by 23%, 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 the need for enhanced post-sale
customer support as well as systems fortification.
Mobile
2015 2014 Growth %
R’000 R’000 R’000 Growth
Revenue 240 168 152 618 87 550 57
Gross profit 136 773 109 756 27 017 25
EBITDA 51 359 34 273 17 086 50
Core net profit 28 559 24 904 3 655 15
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 EBITDA and core net profit.
Their contributions to EBITDA growth were R46 million and R8 million respectively. Their combined contributions were
offset by negative growth in EBITDA of R37 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 R26 million and Blue Label One by R5.5
million were negated by net negative growth contributions of R27.8 million by the balance of the companies comprising this
segment.
Blue Label Engage was disposed of in December 2014 and Blue Label One has been restructured into a more efficient
operation through the closure of loss-making divisions.
Solutions
2015 2014 Growth %
R’000 R’000 R’000 Growth
Revenue 146 163 145 396 767 1
Gross profit 62 837 59 402 3 435 6
EBITDA 40 831 29 257 11 574 40
Core net profit 23 975 12 547 11 428 91
The Solutions segment houses Blue Label Data Solutions (BLDS), Forensic Intelligence Data Solutions (FIDS),
Datacision, Blue Label Call Centre, Datacel Direct, Velociti and CNS Call Centres.
BLDS contributed R32.8 million to EBITDA and the call centre operations R8 million. The latter contributed R3.4
million in the prior year.
Contributions of R19.2 million and R5.5 million to core net profit were generated by BLDS and the call centre
operations respectively. In the comparative year, BLDS made a positive contribution of R13 million while the call centre
operations contributed a nominal R0.3 million to core net profit.
The remaining companies contributed a negative R0.7 million to core net profit.
Corporate
2015 2014 Growth %
R’000 R’000 R’000 Growth
EBITDA (85 656) (82 886) (2 770) (3)
Core net loss (93 754) (87 983) (5 771) (7)
The increases in negative EBITDA and core net loss were primarily attributable to bonuses granted to senior executives
who did not receive bonuses in the prior year, partially offset by a once-off income receipt.
DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
Depreciation, amortisation and impairment charges increased by R29 million of which R16 million emanated from the
acquisitions of RMCS and Viamedia. Of this amount, R13 million pertained to the purchase price allocation amortisation of intangibles.
NET FINANCE COSTS
Finance costs
Finance costs totalled R233 million, of which R68 million related to interest paid on borrowed funds and R165 million
to imputed IFRS interest adjustments on credit received from suppliers. On a comparative basis, interest paid on
borrowed funds amounted to R23 million and the imputed IFRS interest adjustment equated to R144 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 year.
Finance income
Finance income totalled R173 million, of which R31 million was attributable to interest received on cash resources and
R142 million to imputed IFRS interest adjustments. On a comparative basis, interest received on cash resources amounted
to R39 million and the imputed IFRS interest adjustment to R117 million. The decline in interest received on cash
resources 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 R524 million to R7 billion, of which growth in non-current assets accounted for R242 million
and current assets for R282 million.
The net increase in non-current assets was mainly attributable to a net growth in intangible assets and goodwill
totalling R249 million, to capital expenditure net of depreciation of R9 million and to loans receivable of R11 million.
These increases were offset by a net decline in investment in associates and joint ventures of R50 million.
The net increase in intangible assets and goodwill mainly pertained to the acquisition of Viamedia, in which goodwill
equated to R186 million and intangibles R63 million. A further R125 million was incurred for the purchase of software,
development costs, starter pack bases and distribution channels. Amortisation of intangibles amounted to R122 million.
The net decline in investment in associates and joint ventures was predominantly due to the disposal of the Group’s
interest in Ukash amounting to R94 million, a share of net losses of R79 million and a negative impact of R10 million in
foreign currency translation reserves. These declines were offset by an additional R50 million capital contribution to
Blue Label Mexico and a contingent purchase consideration of R30 million for the acquisition of an effective 37.5%
shareholding in the Supa Pesa group. Movements in loans equated to a further R53 million, comprising loans granted of R13
million, interest capitalised of R14 million and unrealised foreign exchange gains of R26 million.
The net increase in current assets mainly comprised an increase in accounts receivable of R530 million and an increase
in inventories of R127 million in line with bulk inventory purchases. Cash resources declined by R396 million congruent
with the application of cash to fund the increase in assets and payment of dividends.
In spite of an increase in inventory of R127 million, the stock turn improved from 35 days reported at the interim
reporting date to 26 days at year end. The discount afforded on bulk inventory purchases justified the quantum of inventory
held.
The debtor’s collection period increased from 44 days reported at the interim reporting date to 46 days at year end.
The net profit attributable to equity holders of R578 million, less a dividend of R182 million, resulted in retained
earnings accumulating to R2.6 billion.
Trade and other payables increased by R105 million with credit terms averaging 53 days.
STATEMENT OF CASH FLOWS
Cash flows from operating activities amounted to R132 million net of the funding of additional working capital
requirements of R657 million.
Cash flows applied to investing activities amounted to R329 million. Of this amount R50 million related to the
additional investment in Blue Label Mexico, R13 million to loans to associates, R157 million to the acquisition of Viamedia,
R125 million to the purchase of intangible assets, R10 million to net loans granted, R53 million to capital expenditure
and R20 million to the settlement of contingent purchase considerations for RMCS and Panacea Mobile. The above funds
applied to investing activities were partially offset by proceeds received of R95 million on the disposal of Ukash.
After applying R19 million to the acquisition of treasury shares and a dividend payment of R187 million to
shareholders and non-controlling interests, the balance of cash on hand amounted to R788 million.
Although cash on hand declined by R402 million, inventory of R1.4 billion is a highly liquid commodity.
FORFEITABLE SHARE SCHEME
Forfeitable shares totalling 2 937 836 (2014: 2 782 541) were issued to qualifying employees. During the period 419
998 (2014: 1 074 880) shares were forfeited and 3 819 409 (2014: 3 629 922) shares vested.
DIVIDEND NUMBER 6
The Group’s current dividend policy is to declare an annual dividend. On 18 August 2015, the board approved a gross
ordinary dividend (number 6) of 31 cents per ordinary share (26.35 cents per ordinary share net of dividend withholding
tax) for the year ended 31 May 2015. This dividend of R209 097 803, inclusive of withholding tax, equates to a 2.62 cover
on headline earnings. The dividend for the year ended 31 May 2015 has not been recognised in the financial statements as
it was declared after this date.
The dividend has been declared from income reserves. The Company has no secondary tax on companies credits available.
The issued share capital at the declaration date was 674 509 042 ordinary shares. The Company’s income tax reference
number is 9062246179.
Last date to trade cum dividend Friday, 4 September 2015
Shares commence trading ex dividend Monday, 7 September 2015
Record date Friday, 11 September 2015
Payment of dividend Monday, 14 September 2015
Share certificates may not be dematerialised or rematerialised between Monday, 7 September 2015 and Friday, 11 September 2015,
both days inclusive.
Before declaring the final dividend the board applied the solvency and liquidity test on the Company and reasonably
concluded that the Company will satisfy the solvency and liquidity test immediately after payment of the final divided.
The final dividend will be paid 26 days after the directors have performed the solvency and liquidity testing.
Dividends tax is provided for at 15% of the amount of any dividend paid by Blue Label Telecoms, subject to certain
exemptions. The dividends tax is a tax borne by the beneficial owner of the dividend and will be withheld by either the
issuer of the dividend or by regulated intermediaries.
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 applied for a payments bank licence to the Reserve Bank of India (RBI) in February 2015. This
application was submitted after extensive prior piloting of processes in conjunction with RBI. The latter is expected to
announce the names of successful applicants by the end of August 2015. This will supplement its current domestic
remittance offering with cash-out and international remittance capabilities without having to utilise third-party licence
holders. Transaction fees will be enhanced by the above capabilities.
Oxigen has been appointed the sole successful bidder in the global bid of Indian Banks’ Association, for its
proprietary “super” point-of-sale terminals. These micro ATM terminals will be deployed in conjunction with the banks, resulting
in an accelerated footprint expansion in the rural areas. Oxigen’s recharge, bill payment and wallet services, will be
available through these terminals.
Blue Label Mexico has commenced the distribution of prepaid starter packs. Given its vast distribution capabilities,
it is well placed to generate monthly compounded annuity revenue thereon.
Towards the end of the financial year, BLT and the Edcon group entered into an initiative whereby a company was formed
to establish stand-alone retail outlets under the brand “Edgars Connect”. This will create an ideal platform for BLT to
implement its strategy of marketing its products and services on a retail basis.
The prevalence of prepaid water meters continues to emulate 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 are purchased by consumers at the multitude of points of presence that it has established. Existing relationships
with several municipalities is expected to result in increased growth in this initiative.
South African distribution has enhanced its bouquet of products to include mobile handsets and tablets. This
initiative is expected to gain significant momentum going forward.
TicketPro continues to increase its range of ticketing and access control services and solutions. Its technology
offering and distribution reach provide it with a competitive edge, as it steadily grows market share.
The Group’s distribution footprint is perfectly positioned to offer a money transfer solution that will provide reach
across all sectors of the South African economic landscape.
SUBSEQUENT EVENTS
Subsequent to year end, dividend number 6 was declared and approved by the board.
Shareholders are advised that Mr Y Mahomed has been appointed as an independent non-executive director to the board
with effect from 18 August 2015. Mr Y Mahomed was previously a founding member of 3C Telecommunications Proprietary
Limited, the holding company of Cell C Proprietary Limited (Cell C). He was a director of Cell C until June 2015.
INDEPENDENT AUDIT
PricewaterhouseCoopers Inc.’s unqualified audit reports on the Group annual financial statements and the summarised
Group annual financial statements for the year ended 31 May 2015 are available for inspection at the Company’s registered
office. This announcement which sets out the annual results for Blue Label Telecoms Limited for the year ended 31 May 2015
contains “forward-looking statements”, which have not been audited or reported on by the Group’s auditors, with
respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and
objectives.
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
Chairman
BM Levy and MS Levy
Join Chief Executive Officers
DA Suntup* CA(SA)
Financial Director
19 August 2015
* Supervised the preparation and review of the Group’s audited year-end results.
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May
2015 2014
R’000 R’000
Assets
Non-current assets 2 040 214 1 798 307
Property, plant and equipment 106 684 97 200
Intangible assets and goodwill 1 254 893 1 005 934
Investment in and loans to associates and joint ventures 548 572 598 109
Loans receivable 29 733 18 501
Starter pack assets 4 449 2 307
Trade and other receivables 65 085 51 604
Deferred taxation assets 30 798 24 652
Current assets 4 986 606 4 704 580
Inventories 1 433 104 1 306 206
Loans receivable 44 569 27 850
Starter pack assets 1 938 1 010
Trade and other receivables 2 712 165 2 181 973
Current tax assets 6 419 3 410
Cash and cash equivalents 788 411 1 184 131
Total assets 7 026 820 6 502 887
Equity and liabilities
Capital and reserves 3 917 981 3 523 989
Share capital, share premium and treasury shares 3 943 888 3 945 832
Restructuring reserve (1 843 912) (1 843 912)
Other reserves 108 543 138 798
Share-based payment reserve 39 297 33 660
Transaction with non-controlling interest reserve (965 861) (957 230)
Retained earnings 2 622 558 2 222 685
Non-controlling interest 13 468 (15 844)
Non-current liabilities 197 673 92 400
Deferred taxation liabilities 54 451 41 510
Trade and other payables 143 222 50 178
Provisions - 712
Current liabilities 2 911 166 2 886 498
Trade and other payables 2 831 000 2 818 898
Provisions 21 491 23 777
Current tax liabilities 42 588 28 733
Borrowings 16 087 15 090
Total equity and liabilities 7 026 820 6 502 887
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May
2015 2014
R’000 R’000
Revenue 22 044 222 19 401 666
Other income 99 972 26 692
Change in inventories of finished goods (20 399 882) (18 052 132)
Employee compensation and benefit expense (407 448) (332 542)
Depreciation, amortisation and impairment charges (94 019) (65 137)
Other expenses (256 699) (255 691)
Operating profit 986 146 722 856
Finance costs (233 165) (166 876)
Finance income 173 047 156 250
Share of loss from associates and joint ventures (79 338) (56 873)
Net profit before taxation 846 690 655 357
Taxation (265 497) (206 442)
Net profit for the year 581 193 448 915
Other comprehensive income:
Items reclassified to profit or loss
Foreign currency translation reserve reclassified to profit or loss (18 467) -
Items that may be subsequently reclassified to profit or loss
Share of other comprehensive income of associates and joint ventures (10 497) 26 099
Foreign exchange profits on translation of foreign operations 5 863 (462)
Other comprehensive (loss)/profit for the year, net of tax (23 101) 25 637
Total comprehensive income for the year 558 092 474 552
Net profit for the year attributable to: 581 193 448 915
Equity holders of the parent 577 617 450 230
Non-controlling interest 3 576 (1 315)
Total comprehensive income for the year attributable to: 558 092 474 552
Equity holders of the parent 549 691 475 889
Non-controlling interest 8 401 (1 337)
2015 2014
R’000 R’000
Earnings per share for profit attributable to equity holders (cents)
Basic earnings per share (cents) 86.86 67.88
Diluted earnings per share** (cents) 85.03 66.86
Dividend per share (cents) 27.00 25.00
Weighted average number of shares 665 029 849 663 298 476
Diluted weighted average number of shares 672 702 231 672 311 571
Number of shares in issue 674 509 042 674 509 042
Headline earnings per share (cents) 82.26 67.98
Diluted headline earnings per share** (cents) 80.49 66.96
Reconciliation between net profit and core net profit for the year:
Net profit for the year attributable to equity holders of the parent 577 617 450 230
Amortisation on intangible assets raised through business combinations
net of tax and net of non-controlling interest 18 961 10 372
Core net profit for the year 596 578 460 602
Core earnings per share (cents)* 89.71 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.
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Share capital, Transactions with
share premium non-controlling Share-based
and treasury Retained Restructuring Other interest payment Non-controlling
shares earnings reserve reserves* reserve reserve** interest Total equity
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance as at 31 May 2013 3 939 891 1 941 082 (1 843 912) 113 139 (931 125) 39 496 (15 718) 3 242 853
Net profit for the year - 450 230 - - - - (1 315) 448 915
Other comprehensive income - - - 25 659 - - (22) 25 637
Total comprehensive income - 450 230 - 25 659 - - (1 337) 474 552
Dividends paid - (168 627) - - - - (1 805) (170 432)
Treasury shares purchased (11 120) - - - - - - (11 120)
Equity compensation benefit
scheme shares vested 17 061 - - - - (16 792) (269) -
Equity compensation benefit movement - - - - - 10 792 277 11 069
Share of equity movement in associates - - - - - 77 - 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 3 945 832 2 222 685 (1 843 912) 138 798 (957 230) 33 660 (15 844) 3 523 989
Net profit for the year - 577 617 - - - - 3 576 581 193
Other comprehensive income - - - (27 926) - - 4 825 (23 101)
Total comprehensive income - 577 617 - (27 926) - - 8 401 558 092
Dividends paid - (182 117) - - - - (4 874) (186 991)
Treasury shares purchased (19 131) - - - - - - (19 131)
Equity compensation benefit scheme
shares vested 17 187 - - - - (16 949) (238) -
Equity compensation benefit movement - - - - - 24 082 208 24 290
Share of equity movement in associates - - - - - 548 - 548
Associate disposed - 3 081 - (2 329) - (752) - -
Non-controlling interest movement - 1 292 - - (8 631) (1 292) 25 815 17 184
Balance as at 31 May 2015 3 943 888 2 622 558 (1 843 912) 108 543 (965 861) 39 297 13 468 3 917 981
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
**Includes employee compensation benefit reserve.
SUMMARISED GROUP STATEMENT OF CASH FLOWS
For the year ended 31 May
2015 2014
R’000 R’000
Cash flows from operating activities 132 495 907 332
Cash flows from investing activities (328 751) (467 220)
Cash flows from financing activities (205 276) (196 892)
(Decrease)/increase in cash and cash equivalents (401 532) 243 220
Cash and cash equivalents at the beginning of the year 1 184 131 941 282
Translation difference 5 812 (371)
Cash and cash equivalents at the end of the year 788 411 1 184 131
HEADLINE EARNINGS
For the year ended 31 May
2015 2014
R’000 R’000
Net profit attributable to equity holders of the parent 577 617 450 230
Net profit on disposal of property, plant and equipment (1 225) (207)
Profit on disposal of subsidiary (3 962) -
Profit on disposal of associate (28 643) -
Impairment of intangible assets and property, plant and equipment 3 264 866
Headline earnings 547 051 450 889
Headline earnings per share (cents) 82.26 67.98
RELATED PARTY TRANSACTIONS
For the year ended 31 May
2015 2014
Significant transactions and balances with related parties R’000 R’000
Transactions with related parties
Sales 14 220 12 768
Purchases 98 830 96 524
Interest received 14 486 12 812
Rent paid 18 616 16 583
Balances with related parties
Loans receivable 225 854 177 891
Amounts in trade receivables 9 178 6 880
Amounts in trade payables 7 828 5 816
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 total net assets acquired and the resulting goodwill Total
as at the date of acquisition are as follows: R’000
Total purchase consideration 229 157
Fair value of net assets acquired 43 190
Goodwill 185 967
Acquirer’s
carrying
Fair value at amount on
acquisition date acquisition date
The assets and liabilities acquired through acquisition are as follows: R’000 R’000
Bank overdraft (13 086) (13 086)
Property, plant and equipment 1 579 1 579
Intangible assets 62 762 1 314
Goodwill 185 967 -
Inventories 619 619
Receivables 15 800 15 800
Deferred tax (17 066) 139
Tax receivable 19 403 19 403
Payables (12 424) (12 424)
Carrying/fair value of subsidiary acquired 243 554 13 344
Non-controlling interest (14 397)
Fair value of net assets acquired 229 157
Total purchase consideration 229 157
Contingent consideration (84 783)
Plus: Bank overdraft of subsidiary 13 086
Cash flow on acquisition 157 460
Viamedia Proprietary Limited (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 Blue Label Telecoms Limited to pay in cash the former owner of
Viamedia, an additional amount of R215.6 million if certain profit warranties are achieved. The first three amounts of
R24.1 million are based on the profits of Viamedia for the year ended 31 May 2015 and years ending 31 May 2016 and
31 May 2017. The fourth and fifth amounts of R30.9 million and R112.5 million are based on the profits of Viamedia for the
three years ending 31 May 2017.
The potential undiscounted amount of all future payments that the Group could be required to make under this
arrangement is between Rnil and R215.6 million.
The fair value of the contingent consideration arrangement of R84.8 million was estimated by applying the income
approach. The fair value estimates are based on a discount rate of 9%. For the first, second, third and fourth profit targets
management has assumed a probability of 100%. For the fifth profit target management has assumed a probability of 0%.
In determining these probabilities management has assessed the cash flow projections based on financial budgets approved
by the board of directors for the forthcoming three years which are based on assumptions of the business, industry and
economic growth.
SEGMENTAL SUMMARY
South
African International
Year ended Total distribution distribution Mobile Solutions Corporate
31 May 2015 R’000 R’000 R’000 R’000 R’000 R’000
Total segment revenue 27 780 173 27 364 493 - 251 085 164 595 -
Internal revenue (5 735 951) (5 706 602) - (10 917) (18 432) -
Revenue 22 044 222 21 657 891 - 240 168 146 163 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 1 080 165 1 038 252 35 379 51 359 40 831 (85 656)
Net profit/(loss) for the year attributable
to equity holders of the parent 577 617 671 619 (50 551) 26 328 23 975 (93 754)
Amortisation on intangibles raised through
business combinations net of tax and non-controlling interest 18 961 13 137 3 593 2 231 - -
Core net profit for the year attributable to
equity holders of the parent 596 578 684 756 (46 958) 28 559 23 975 (93 754)
At 31 May 2015
Total assets 7 026 820 5 890 188 477 953 449 306 151 541 57 832
Net operating assets/(liabilities) 2 075 440 2 135 980 (8 946) (19 583) 37 488 (69 499)
31 May 2014
Total segment revenue 25 354 475 24 837 763 - 350 783 165 929 -
Internal revenue (5 952 809) (5 734 111) - (198 165) (20 533) -
Revenue 19 401 666 19 103 652 - 152 618 145 396 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 787 993 821 310 (13 961) 34 273 29 257 (82 886)
Net profit/(loss) for the year attributable to
equity holders of the parent 450 230 552 926 (51 176) 23 916 12 547 (87 983)
Amortisation on intangibles raised through
business combinations net of tax and non-controlling interest 10 372 6 070 3 314 988 - -
Core net profit for the year attributable to
equity holders of the parent 460 602 558 996 (47 862) 24 904 12 547 (87 983)
At 31 May 2014
Total assets 6 502 887 5 651 680 556 376 96 420 136 090 62 321
Net operating assets/(liabilities) 1 818 082 1 871 469 (16 065) (20 543) 23 840 (40 619)
DISPOSAL OF SUBSIDIARY
Effective date % held and
Shares in the following subsidiary were disposed of during the year of disposal disposed of
Subsidiary
Blue Label Engage Proprietary Limited 14 December 2014 50.1
Details of the total net assets disposed and the resulting profit Total
on disposal are as follows: R’000
Total proceeds 2 400
Carrying/fair value of net assets disposed of (1 562)
Profit on disposal of subsidiary 3 962
Fair value at
disposal date
The assets and liabilities disposed of are as follows: R’000
Cash and cash equivalents 66
Property, plant and equipment 64
Intangible assets 267
Financial assets at fair value through profit and loss 1 389
Receivables 8 484
Loan receivable 1 328
Borrowings (12 934)
Payables (7 254)
Carrying/fair value of subsidiary disposed of (8 590)
Non-controlling interest 4 286
Goodwill 2 742
Carrying/fair value of net assets disposed of (1 562)
Total proceeds on disposal received in cash 2 400
Less: Cash and cash equivalents of subsidiary disposed of (66)
Cash inflow on disposal 2 334
NON-IFRS INFORMATION
The auditor’s report does not necessarily cover all of the information contained in this announcement. Shareholders
are therefore advised that in order to obtain a full understanding of the nature of the auditor’s work they should obtain
a copy of that report together with the accompanying financial information from the registered office of the company.
This announcement contains certain non-IFRS financial information which has not been audited or reported on by the Group’s
auditors.
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine*, GD Harlow*, Y Mahomed*,
JS Mthimunye*, MV Pamensky, DA Suntup, J Vilakazi*
(*Non-executive)
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: BNY Mellon, 101 Barclay Street, New York NY, 10286, USA
www.bluelabeltelecoms.co.za
Date: 19/08/2015 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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