Wrap Text
Unaudited results for the half year ended 30 November 2016
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 2016
Highlights
- Increase in revenue
of 3% to R13.2 billion*
- Increase in gross profit
of 25% to R1.1 billion
- Increase in EBITDA
of 15% to R715 million
- Increase in earnings per share
of 56% to 81.78 cents
- Increase in headline earnings per share
of 54% to 81.78 cents
- Increase in core headline earnings per share
of 52% to 82.86 cents
* On inclusion of the gross revenue generated on “PINless top-ups”, revenue effectively
increased by 9%.
Commentary
OVERVIEW
Group earnings continued to escalate, comprising a hybrid of organic growth in local operations augmented by
the impact of a fair value gain resulting from Oxigen Services India (Oxigen) being viewed as a venture capital
investment.
South African distribution perpetuated its dominance in contribution to Group earnings, with its core headline
earnings equating to a growth of 26%.
Although Blue Label Mexico (BLM) continued to incur losses, the Group’s share thereof declined by 32%, from
R32.5 million to R22.1 million.
Continued growth in market share contributed to the increase in Group revenue. This growth was confined to
3% in line with the continuous shift in consumer buying patterns from traditional purchasing of airtime to that
of “PINless top-ups”. Only the gross profit earned on the latter is accounted for in Group revenue as opposed
to the gross amount generated from transactions of this nature. On imputing such revenue, the effective growth
would have equated to 9%.
An improvement in gross profit margins from 7.13% to 8.64% resulted in gross profit escalating by R226 million
(25%) to R1.14 billion.
After accounting for a negative turnaround in foreign exchange movements of R78 million and an increase in other
overheads of R53 million, the resultant EBITDA increased by R95 million (15%) to R715 million.
The Group, through its wholly owned subsidiary, Gold Label Investments, holds an effective 58.18% interest in Oxigen.
This investment has historically been accounted for as an investment in an associate, applying the equity method up to
30 November 2016.
The investment in Oxigen was initially of a long-term nature as it was expected to emulate the business model of the
South African distribution operations. However, its profile has changed from that of the traditional Group business model
to one of generating growth in the market value of the investment with a view to unlocking the Group’s share thereof.
With the advent of its change in focus to financial services through wallet subscription, it is no longer strategically
aligned with the other business units of the Group and is unlikely to generate profitability in the short to medium term.
However, the market value of the company is expected to increase in conjunction with its growth in wallet subscribers.
This in turn creates the potential to unlock the investment value in the future and the Group is pursuing this new
strategy with respect to its investment in Oxigen.
Accordingly, Oxigen is now viewed as a venture capital investment, which, in accordance with IAS 28 - Investment in
Associates and Joint Ventures has been accounted for at fair value as at 30 November 2016. The differential between
the carrying value of the investment and its fair value is reflected as a gain on associate measured at fair value.
The fair value gain of R264 million, less deferred taxation thereon of R9 million and the Group’s share of losses for
the period under review of R120 million, equated to a net increase of R135 million to Group earnings. On exclusion of
this net increase, headline earnings would have amounted to R410 million and core headline earnings to R417 million,
equating to 61.48 cents and 62.53 cents per share respectively. In both instances, effective growth per share would
have equated to 15%.
Capital and reserves accumulated to R4.76 billion, net of accumulated dividends paid to date totalling R1.16 billion,
further strengthening the Group’s balance sheet. The net asset value increased by 15% to R6.96 per share.
SEGMENTAL REPORT
South African distribution
November November May
2016 2015 2016
Unaudited Unaudited Growth % Audited
R’000 R’000 R’000 Growth R’000
Revenue 12 996 799 12 634 322 362 477 3% 25 722 540
Gross profit 1 018 359 795 245 223 114 28% 1 582 743
EBITDA 746 126 577 586 168 540 29% 1 133 433
Core net profit 491 334 391 138 100 196 26% 750 951
Core headline earnings 491 336 391 013 100 323 26% 751 086
Gross profit margin 7.84% 6.29% 6.15%
EBITDA margin 5.74% 4.57% 4.41%
Growth in revenue of 3% was organically achieved through the expansion of its distribution channels.
Revenue generated on “PINless top-ups” increased by R935 million from R1.8 billion to R2.8 billion, equating
to effective growth in South African distribution revenue of 9%, in that only the commission earned thereon
is recognised.
Net commissions earned on the distribution of prepaid electricity continued to increase, escalating by R8 million
to R103 million on turnover of R6.9 billion generated on behalf of the utilities.
Gross profit margins improved from 6.29% to 7.84%, resulting in an increase in gross profit of R223 million (28%)
from R795 million to R1.0 billion. The improvement in margins was attributable to a hybrid of additional discounts
received on early settlement payments and compounded annuity revenue. The increase in gross profit was partially
negated by additional net finance costs, congruent with applying excess funds and facilities on a piecemeal basis
to early settlement discounts.
The resultant growth in EBITDA of 29% to R746 million equated to an EBITDA margin of 5.74%.
Contribution to Group core headline earnings increased by R100 million (26%) to R491 million.
International
November November May
2016 2015 2016
Unaudited Unaudited Growth % Audited
R’000 R’000 R’000 Growth R’000
EBITDA (22 175) 23 595 (45 770) (194%) 44 152
Gain on associate measured at fair value 264 204 - 264 204 -
Share of (losses)/profits from associates
and joint ventures (146 422) (33 659) (112 763) (335%) (70 283)
- Oxigen Services India (119 831) 2 813 (122 644) (4 360%) (27 672)
- Blue Label Mexico (22 122) (32 499) 10 377 32% (63 293)
- 2DFine Holdings Mauritius (5 832) (4 605) (1 227) (27%) 19 734
- Mpower 1 363 632 731 116% 948
Core net profit/(loss) 97 060 (11 825) 108 885 921% (29 352)
Core headline earnings 97 060 (11 825) 108 885 921% (59 327)
The decline in EBITDA of R46 million related to a negative turnaround in foreign exchange movements.
The share of net losses from associates and joint ventures comprised the following:
Oxigen Services India
The financial performance of Oxigen for the six months ended November 2016 was equity accounted for, of which the
Group’s share of losses amounted to R120 million. The major portion of these losses was attributable to substantial
expenditure incurred on the marketing of the brand and the acquisition of wallets.
Total wallet subscribers accumulated to 25.6 million as at 30 November 2016. This quantum is expected to increase
in perpetuity and in turn increase the value of Oxigen. The expenditure incurred on the creation of additional
wallets was congruent with the decision that has been made to focus on the value creation of a compounding wallet
subscriber base as opposed to the revenue generated thereon.
Oxigen has consequently been accounted for as a venture capital investment with effect from the 30 November 2016.
The differential between the carrying value of the investment and its fair value amounted to R264 million and has
been accounted for in the condensed Group statement of comprehensive income as a gain on associate measured at fair
value. The fair value gain of R264 million, less deferred taxation thereon of R9 million and the Group’s share of
losses for the period under review of R120 million, equated to a net increase of R135 million to headline earnings.
Going forward, losses incurred by Oxigen will have no impact on Group earnings. The investment therein will be
measured at fair value.
Blue Label Mexico
BLM’s losses declined from R67.4 million to R44.7 million, of which the Group’s share was R22.1 million after
the amortisation of intangible assets. In the comparative period, the Group’s share of losses amounted to
R32.5 million.
The decline in losses was achieved in spite of a reduction in revenue by 28%. This decline was caused by intense
competition among carriers, resulting in lower tariffs payable by the end user. It is anticipated that pricing
will stabilise and increase in the near future.
The decline in revenue was compensated for by an increase in gross profit of R15.1 million (46%), underpinned by
higher gross profit margins.
The increase in gross profit was primarily attributable to BLM becoming a multicarrier distributor as opposed
to historically being confined to one network. This has created a more competitive environment among the networks
to the benefit of the company.
Focus on cost efficiencies resulted in decreases in operational expenditure by 14%. While the resultant EBITDA
remained negative, it declined by R20.4 million (50%).
The distribution of starter packs now generates monthly compounded annuity income. Bill payments, credit and
debit card acquiring, food vouchers and compounding annuity revenue emanating from starter pack distribution,
are perpetually increasing, which, together with improved margins and expense containment should result in a
further decline in losses for the balance of the financial year.
Mobile
November November May
2016 2015 2016
Unaudited Unaudited Growth % Audited
R’000 R’000 R’000 Growth R’000
Revenue 148 651 137 730 10 921 8% 291 856
Gross profit 97 409 85 520 11 889 14% 182 533
EBITDA 46 765 39 441 7 324 19% 111 142
Core net profit 25 468 20 916 4 552 22% 64 273
Core headline earnings 25 438 20 915 4 523 22% 65 333
The mobile segment comprises Viamedia, Supa Pesa, Blue Label One, Cellfind, Panacea and Simigenix.
The growth in revenue at improved margins and containment of overheads resulted in this segment achieving
a growth in EBITDA of 19%. Its contribution to core headline earnings increased by 22% to R25 million.
Solutions
November November May
2016 2015 2016
Unaudited Unaudited Growth % Audited
R’000 R’000 R’000 Growth R’000
Revenue 100 063 103 222 (3 159) (3%) 190 326
Gross profit 28 931 37 872 (8 941) (24%) 64 418
EBITDA 19 366 18 975 391 2% 35 889
Core net profit 11 345 6 808 4 537 67% 16 116
Core headline earnings 11 345 12 262 (917) (7%) 21 564
In October 2015 Velociti was disposed of at a loss of R5.4 million. On exclusion of this capital loss from core
net profit in the prior period, core headline earnings in the remaining entities declined by R0.9 million.
On exclusion of Velociti’s historical contribution, revenue generated by the remaining entities, dominated
by Blue Label Data Solutions, increased by 36%. However, margin compression resulted in static growth in
gross profit, which, together with an increase in overheads, resulted in the decline in core headline earnings.
Corporate
November November May
2016 2015 2016
Unaudited Unaudited Growth % Audited
R’000 R’000 R’000 Growth R’000
EBITDA (74 873) (39 360) (35 513) (90%) (84 057)
Core net loss (72 799) (48 899) (23 900) (49%) (93 748)
Core headline loss (72 754) (48 899) (23 855) (49%) (93 745)
Of the decline in EBITDA of R36 million, R30 million pertained to a negative turnaround in foreign exchange
movements and R6 million to professional fees incurred relating to potential acquisitions.
Its negative contribution to Group core headline earnings increased by R24 million to R73 million.
DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
Depreciation, amortisation and impairment charges increased by R8 million to R55 million. Of this amount,
R9.1 million pertained to the amortisation of intangible assets resulting from purchase price allocations
from historical acquisitions compared to R10.4 million in the comparative period.
NET FINANCE COSTS
Finance costs
Finance costs totalled R142 million, of which R66 million related to interest paid on borrowed funds and R76 million
to imputed IFRS interest adjustments on credit received from suppliers. On a comparative basis, interest paid on
borrowed funds amounted to R12 million and the imputed IFRS interest adjustment equated to R87 million.
The increase of R54 million on interest paid on borrowed funds was mainly due to the perpetuation of applying excess
funds to bulk inventory purchase transactions and early settlement payments attracting favourable discounts. Finance
facilities were utilised on a piecemeal basis for this purpose, and repaid during the current period. The additional
finance costs were more than compensated for by the growth in gross profit and gross profit margins.
Finance income
Finance income totalled R118 million, of which R38 million was attributable to interest received on cash resources
and R80 million to imputed IFRS interest adjustments on credit afforded to customers. On a comparative basis,
interest received on cash resources amounted to R28 million and the imputed IFRS interest adjustment to R68 million.
The increase in interest received from cash resources was mainly attributable to growth in revenue, partially offset
by the utilisation of funds for financing and investing activities.
STATEMENT OF FINANCIAL POSITION
Total assets increased by R968 million to R8.3 billion. Non-current assets increased by R106 million, and current
assets by R862 million.
The movement in non-current assets included increases in investments in associate and joint venture companies of
R33 million, in capital expenditure net of depreciation of R14 million, in loans receivable of R77 million and
R8 million in trade receivables relating to postpaid contracts in excess of 12 months. These increases were
partially offset by a decrease in intangible assets of R26 million.
The net increase of R33 million in investment in associate and joint venture companies comprised the R264 million
gain on Oxigen measured at fair value, the acquisition of Utilities World for R12 million, interest capitalised on
loans of R13 million and loans granted of R5 million. These increases were partially offset by the Group’s share
of losses therein, totalling R148 million inclusive of the amortisation of applicable intangible assets, a negative
impact on foreign currency translation reserves of R82 million, and unrealised foreign exchange losses on loans of
R31 million.
The net decline of R26 million in intangible assets mainly pertained to the amortisation of intangibles by
R72 million, offset by R46 million expended on the purchase of computer software, internally generated software
development costs and starter pack bases.
Of the increase in current assets, material movements related to increases in inventories of R383 million, loans
receivable of R5 million, cash resources of R243 million and trade receivables of R220 million.
The stock turn equated to 31 days compared to 25 days for the financial year ended 31 May 2016. Bulk inventory
purchase opportunities at favourable discount rates validated the consequent increase in inventory. The nature
of the business enables it to reduce its inventory holdings within the above number of days at any given time.
The debtor’s collection period increased to 40 days compared to 38 days for the financial year ended 31 May 2016.
Net profit attributable to equity holders of R545 million, less a dividend of R243 million, resulted in retained
earnings accumulating to R3.4 billion.
Trade and other payables increased by R722 million, with average credit terms increasing to 51 days compared to
40 days for the financial year ended 31 May 2016.
STATEMENT OF CASH FLOWS
Cash flows generated from operating activities amounted to R709 million, predominately attributable to increased
trading activity, net of working capital requirements.
Cash flows applied to investing activities amounted to R207 million. Of this amount, R46 million related to the
purchase of intangible assets, R79 million to net loans granted, R37 million to capital expenditure, R49 million
to earn outs relating to prior acquisitions and R7.5 million to the acquisition of Utilities World. These outflows
were partially offset by R1.5 million from the sale of fixed assets and R10 million from a contingent consideration
received emanating from the sale of Ukash.
After applying R7 million to the acquisition of treasury shares and a dividend payment of R249 million to
shareholders and non-controlling interests, cash on hand at year-end amounted to R832 million.
FORFEITABLE SHARE SCHEME
Forfeitable shares totalling 1 386 327 (2015: 2 583 819) were issued to qualifying employees. During the period
nil (2015: 530 375) shares were forfeited and 2 141 673 (2015: 2 915 266) shares vested.
SUBSEQUENT EVENTS
A binding umbrella restructure agreement has been entered into between Blue Label, Cell C, debt providers of
Cell C, a third-party investor and other relevant parties, in terms of which the maximum net borrowings of
Cell C will be reduced to approximately R6.0 billion. The third-party investor is to subscribe for 15% of the
share capital of Cell C and Blue Label’s subscription for 45% of the share capital of Cell C remains unchanged.
The binding restructure agreement is subject to the conclusion of the relevant transaction agreements by no later
than 30 June 2017.
PROSPECTS
The board remains positive with regard to the investment in Cell C and other commercial benefits that will
follow therefrom.
The demand for low-cost smart phones and tablets is expected to accelerate and in turn enhance revenue and
profitability.
The financing of the mobile device element of postpaid contracts as well as that of providing short-term finance
for emergency top-ups are initiatives that are currently under consideration.
Losses in BLM are expected to continue to decline with the advent of sustainable improved gross profit margins
and increased annuity revenue generated from starter packs.
A “big Data” programme has consolidated and aggregated transactions across various divisions within the Group
which will create the opportunity to upsell and cross-sell the bouquet of various products and services that
Blue Label has to offer through their distribution channels.
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
27 February 2017
*Supervised the preparation of the Group’s interim results.
Condensed Group statement of financial position
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
As at R’000 R’000 R’000
ASSETS
Non-current assets 2 380 693 2 105 946 2 275 161
Property, plant and equipment 114 296 115 077 100 434
Intangible assets 572 268 636 157 598 333
Goodwill 604 590 603 440 603 440
Investments in and loans to associates and joint ventures 943 475 668 754 910 567
Loans receivable 83 396 2 300 5 910
Starter pack assets 6 746 7 488 6 099
Trade and other receivables 36 845 52 324 29 166
Deferred taxation assets 19 077 20 406 21 212
Current assets 5 892 908 5 511 932 5 030 790
Inventories 2 042 354 1 268 300 1 658 860
Loans receivable 103 699 69 529 98 217
Starter pack assets 1 722 1 872 1 576
Trade and other receivables 2 899 293 2 684 170 2 679 023
Current tax assets 13 975 5 320 4 087
Cash and cash equivalents 831 865 1 482 741 589 027
Total assets 8 273 601 7 617 878 7 305 951
EQUITY AND LIABILITIES
Capital and reserves 4 756 212 4 095 105 4 519 567
Share capital, share premium and treasury shares 3 953 872 3 942 513 3 942 512
Restructuring reserve (1 843 912) (1 843 912) (1 843 912)
Other reserves 106 998 140 476 187 605
Equity compensation benefit reserve 34 613 30 736 42 039
Transactions with non-controlling interest reserve (965 861) (965 861) (965 861)
Retained earnings 3 407 395 2 762 632 3 105 050
4 693 105 4 066 584 4 467 433
Non-controlling interest 63 107 28 521 52 134
Non-current liabilities 100 022 147 070 102 954
Deferred taxation liabilities 77 000 68 221 62 141
Trade and other payables 23 022 78 849 40 813
Current liabilities 3 417 367 3 375 703 2 683 430
Trade and other payables 3 341 114 3 309 049 2 601 807
Provisions 32 459 15 826 24 928
Current tax liabilities 25 769 33 112 40 608
Borrowings 18 025 17 716 16 087
Total equity and liabilities 8 273 601 7 617 878 7 305 951
Condensed Group statement of comprehensive income
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue 13 245 513 12 875 274 26 204 722
Other income 2 861 42 960 126 294
Changes in inventories of finished goods (12 100 814) (11 956 637) (24 375 028)
Employee compensation and benefit expense (210 487) (202 553) (427 116)
Depreciation, amortisation and impairment charges (55 435) (47 083) (98 183)
Other expenses (221 864) (138 807) (288 313)
Operating profit 659 774 573 154 1 142 376
Finance costs (141 680) (98 834) (214 110)
Finance income 118 307 95 824 193 899
Gain on associate measured at fair value 264 204 - -
Share of losses from associates and joint ventures (147 577) (33 713) (71 770)
Net profit for the period before taxation 753 028 536 431 1 050 395
Taxation (189 064) (169 694) (318 783)
Net profit for the period 563 964 366 737 731 612
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Share of other comprehensive (loss)/income of
associates and joint ventures (81 844) 33 513 81 544
Foreign exchange loss on translation of foreign operations (35) (54) (15)
Other comprehensive income/(loss) for the period, net of tax (81 879) 33 459 81 529
Total comprehensive income for the period 482 085 400 196 813 141
Net profit for the period attributable to: 563 964 366 737 731 612
Equity holders of the parent 545 168 349 172 691 590
Non-controlling interest 18 796 17 565 40 022
Total comprehensive income for the period attributable to: 482 085 400 196 813 141
Equity holders of the parent 464 561 381 105 770 652
Non-controlling interest 17 524 19 091 42 489
Share performance
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
Earnings per share for profit attributable to
equity holders
Basic earnings per share (cents) 81.78 52.46 103.85
Diluted earnings per share (cents)* 81.12 51.92 102.84
Weighted average number of shares 666 664 546 665 657 319 665 950 277
Diluted weighted average number of shares 672 076 754 672 569 839 672 520 023
Number of shares in issue 674 509 042 674 509 042 674 509 042
Share performance
Headline earnings per share (cents) 81.78 53.26 100.35
Diluted headline earnings per share (cents)* 81.12 52.71 99.37
Dividend per share (cents) 36.00 31.00 31.00
Reconciliation between net profit and core
headline earnings for the period
Net profit for the period attributable to
equity holders of the parent 545 168 349 172 691 590
Amortisation on intangible assets raised through
business combinations net of tax and net
of non-controlling interest 7 240 8 966 16 650
Core net profit for the period 552 408 358 138 708 240
Headline earnings adjustments 17 5 328 (23 329)
Core headline earnings 552 425 363 466 684 911
Core headline earnings per share (cents)** 82.86 54.60 102.85
* 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.
** Core headline earnings per share are calculated after adding back to headline earnings, the amortisation of
intangible assets as a consequence of the purchase price allocations completed in terms of IFRS 3(R) -
Business Combinations.
Condensed Group statement of cash flows
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Cash generated by operations 945 583 1 241 467 744 185
Interest received 25 693 17 460 42 082
Interest paid (65 819) (11 716) (48 207)
Taxation paid (196 074) (157 779) (305 118)
Net cash generated from operating activities 709 383 1 089 432 432 942
Cash flows from investing activities
Acquisition of intangible assets
and property, plant and equipment (83 530) (84 782) (127 131)
Acquisition of subsidiaries net of cash acquired 771 - -
Acquisition of associate (7 530) - -
Disposal of subsidiary net of cash disposed - 13 219 13 219
Capital contribution to Blue Label Mexico - (42 654) (42 654)
Capital contribution to Oxigen Services India - - (159 425)
Loan granted to Lornanox (1 758) (32 000) (58 883)
Loans granted (73 889) (11 390) (27 306)
Loans granted to associates (3 401) - (1 620)
Settlement of contingent consideration (49 109) (1 631) (1 931)
Other investing activities 11 544 2 774 9 398
Net cash utilised in investing activities (206 902) (156 464) (396 333)
Cash flows from financing activities
Acquisition of treasury shares (7 381) (23 052) (23 052)
Dividends paid to non-controlling interest (6 600) (4 000) (4 000)
Dividends paid to equity holders of the parent (242 823) (209 098) (209 098)
Other financing activities (2 803) - -
Net cash utilised in financing activities (259 607) (236 150) (236 150)
Net increase/(decrease) in cash and cash equivalents 242 874 696 818 (199 541)
Cash and cash equivalents at the beginning of the year 589 027 788 411 788 411
Exchange gains on cash and cash equivalents (36) (2 488) 157
Cash and cash equivalents at the end of the period 831 865 1 482 741 589 027
Condensed Group statement of changes in equity
Transactions
Share capital, with non-
share premium controlling Equity Non-
and treasury Retained Restructuring Other interest compensation controlling Total
shares earnings reserve reserves* reserve benefit reserve interest equity
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Six months ended R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance as at 1 June 2016 3 942 512 3 105 050 (1 843 912) 187 605 (965 861) 42 039 52 134 4 519 567
Net profit for the period - 545 168 - - - - 18 796 563 964
Other comprehensive income - - - (80 607) - - (1 272) (81 879)
Total comprehensive income - 545 168 - (80 607) - - 17 524 482 085
Dividends paid - (242 823) - - - - (6 600) (249 423)
Treasury shares purchased (7 381) - - - - - - (7 381)
Non-controlling interest acquired - - - - - - 65 65
Equity compensation benefit
scheme shares vested 18 741 - - - - (18 486) (255) -
Equity compensation benefit
movement - - - - - 11 060 239 11 299
Balance as at 30 November 2016 3 953 872 3 407 395 (1 843 912) 106 998 (965 861) 34 613 63 107 4 756 212
Balance as at 1 June 2015 3 943 888 2 622 558 (1 843 912) 108 543 (965 861) 39 297 13 468 3 917 981
Net profit for the period - 349 172 - - - - 17 565 366 737
Other comprehensive income - - - 31 933 - - 1 526 33 459
Total comprehensive income - 349 172 - 31 933 - - 19 091 400 196
Dividends paid - (209 098) - - - - (4 000) (213 098)
Treasury shares purchased (23 052) - - - - - - (23 052)
Equity compensation benefit
scheme shares vested 21 677 - - - - (21 639) (38) -
Equity compensation benefit
movement - - - - - 13 078 - 13 078
Balance as at 30 November 2015 3 942 513 2 762 632 (1 843 912) 140 476 (965 861) 30 736 28 521 4 095 105
Audited Audited Audited Audited Audited Audited Audited Audited
Year ended R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance as at 1 June 2015 3 943 888 2 622 558 (1 843 912) 108 543 (965 861) 39 297 13 468 3 917 981
Net profit for the year - 691 590 - - - - 40 022 731 612
Other comprehensive income - - - 79 062 - - 2 467 81 529
Total comprehensive income - 691 590 - 79 062 - - 42 489 813 141
Dividends paid - (209 098) - - - - (4 000) (213 098)
Treasury shares purchased (23 052) - - - - - - (23 052)
Equity compensation benefit
scheme shares vested 21 676 - - - - (21 429) (247) -
Equity compensation benefit
movement - - - - - 23 421 424 23 845
Share of equity movement
in associates - - - - - 750 - 750
Balance as at 31 May 2016 3 942 512 3 105 050 (1 843 912) 187 605 (965 861) 42 039 52 134 4 519 567
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
Segmental summary
South African
Total distribution International Mobile Solutions Corporate
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Six months ended 30 November 2016 R’000 R’000 R’000 R’000 R’000 R’000
Total segment revenue 16 415 810 16 159 238 - 156 433 100 139 -
Internal revenue (3 170 297) (3 162 439) - (7 782) (76) -
Revenue 13 245 513 12 996 799 - 148 651 100 063 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 715 209 746 126 (22 175) 46 765 19 366 (74 873)
Net profit/(loss) for the period attributable to
equity holders of the parent 545 168 486 520 95 957 24 145 11 345 (72 799)
Amortisation on intangibles raised through
business combinations net of tax and
non-controlling interest 7 240 4 814 1 103 1 323 - -
Headline earnings adjustments net of
non-controlling interest 17 2 - (30) - 45
Core headline earnings for the period
attributable to equity holders of the parent 552 425 491 336 97 060 25 438 11 345 (72 754)
At 30 November 2016
Total assets 8 273 601 6 662 879 818 199 612 650 127 587 52 286
Net operating assets/(liabilities) 2 475 541 2 388 351 (10 968) 102 357 32 989 (37 188)
Six months ended 30 November 2015
Total segment revenue 16 004 672 15 749 428 - 146 220 109 024 -
Internal revenue (3 129 398) (3 115 106) - (8 490) (5 802) -
Revenue 12 875 274 12 634 322 - 137 730 103 222 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 620 237 577 586 23 595 39 441 18 975 (39 360)
Net profit/(loss) for the period attributable
to equity holders of the parent 349 172 385 355 (13 685) 19 593 6 808 (48 899)
Amortisation on intangibles raised through
business combinations net of tax and
non-controlling interest 8 966 5 783 1 860 1 323 - -
Headline earnings adjustments net of
non-controlling interest 5 328 (125) - (1) 5 454 -
Core headline earnings for the period attributable
to equity holders of the parent 363 466 391 013 (11 825) 20 915 12 262 (48 899)
At 30 November 2015
Total assets 7 617 878 6 306 524 561 975 504 004 154 861 90 514
Net operating assets/(liabilities) 2 136 229 2 188 937 (9 234) 38 803 53 426 (135 703)
Audited Audited Audited Audited Audited Audited
Year ended 31 May 2016 R’000 R’000 R’000 R’000 R’000 R’000
Total segment revenue 32 439 100 31 934 736 - 307 661 196 703 -
Internal revenue (6 234 378) (6 212 196) - (15 805) (6 377) -
Revenue 26 204 722 25 722 540 - 291 856 190 326 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 1 240 559 1 133 433 44 152 111 142 35 889 (84 057)
Net profit/(loss) for the year attributable
to equity holders of the parent 691 590 739 588 (31 993) 61 627 16 116 (93 748)
Amortisation on intangibles raised through
business combinations net of tax and
non-controlling interest 16 650 11 363 2 641 2 646 - -
Headline earnings adjustments net of
non-controlling interest (23 329) 135 (29 975) 1 060 5 448 3
Core headline earnings for the year attributable
to equity holders of the parent 684 911 751 086 (59 327) 65 333 21 564 (93 745)
At 31 May 2016
Total assets 7 305 951 5 787 731 809 096 543 561 137 061 28 502
Net operating assets/(liabilities) 2 347 360 2 341 780 1 872 40 423 37 376 (74 091)
Headline earnings
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Profit attributable to equity holders of the parent 545 168 349 172 691 590
Net loss/(profit) on disposal of property,
plant and equipment 17 (136) (360)
Loss on disposal of intangible assets - - 3
Loss on disposal of subsidiary - 5 454 5 454
Profit on dilution of joint venture - - (29 975)
Impairment of intangible assets and property,
plant and equipment - 10 1 549
Headline earnings 545 185 354 500 668 261
Headline earnings per share (cents) 81.78 53.26 100.35
Financial instruments
Contingent considerations, included in trade and other payables, are level 3 financial liabilities.
Changes in level 3 instruments are as follows:
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Contingent consideration
Opening balance 83 563 123 902 123 902
Acquisition of Reware Proprietary Limited 1 150 - -
Acquisition of Utilities World Proprietary Limited 4 516 - -
Settlements (49 109) (1 631) (1 931)
Gains and losses recognised in profit or loss 2 271 3 931 (38 408)
Closing balance 42 391 126 202 83 563
Total gains or losses for the period included
in profit or loss for
liabilities held at the end of the reporting period, under:
Other income - - (48 120)
Finance costs 2 271 3 931 9 712
Change in unrealised gains or losses for the period
included in profit or loss for liabilities held
at the end of the reporting period 2 003 655 9 127
The fair value of the contingent consideration is estimated by applying the income approach. The fair value is based on
the discount rates applicable to the Group and management’s probability assumptions on certain warranties being achieved.
There have been no changes in management’s probability assumptions. The discount rate has been increased in line with the
increase in the prime lending rate. The resulting changes in the fair values are accounted for in finance costs in the
statement of comprehensive income.
The investment in Oxigen Services India Private Limited, viewed as a venture capital investment and accounted for at fair
value, is a level 3 instrument. Refer to “Investments in and loans to associates and joint ventures”.
The Group has not disclosed the fair values of all financial instruments measured at amortised cost, as their carrying
amounts closely approximate their fair values.
Investments in and loans to associates and joint ventures
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Equity-accounted associates and joint ventures 196 449 383 940 628 371
Venture capital associate 412 800 - -
Loans to associates and joint ventures 334 226 284 814 282 196
943 475 668 754 910 567
The Group, through its wholly-owned subsidiary, Gold Label Investments, holds an effective 58.18% interest in Oxigen.
This investment has historically been accounted for as an investment in an associate applying the equity method up
to 30 November 2016.
The investment in Oxigen was initially of a long-term nature as it was expected to emulate the business model of the
South African distribution operations. However, its profile has changed from that of the traditional Group business
to one of generating growth in the market value of the investment with a view to unlocking the Group’s share thereof.
With the advent of its change in focus to financial services through wallet subscription, it is no longer strategically
aligned with the other business units of the Group and is unlikely to generate profitability in the short to medium term.
However, the market value of the company is expected to increase exponentially in conjunction with its growth in wallet
subscribers. This in turn creates the potential to unlock the investment value in the future and the Group is pursuing
this new strategy with respect to its investment in Oxigen.
Accordingly, Oxigen is now viewed as a venture capital investment, which in accordance with IAS 28 - Investment in
Associates and Joint Ventures has been accounted for at fair value as at 30 November 2016. The differential between the
carrying value of the investment and its fair value is reflected as a gain on associate measured at fair value in the
condensed Group statement of comprehensive income.
The fair value is determined by an independent third party using the discounted cash flow model which takes into account
the current and projected performance of Oxigen. These calculations use cash flow projections based on financial budgets
approved by the board of directors for the forthcoming year and forecasts for ten years which are based on assumptions
of the business, industry and economic growth. Cash flows beyond this period are extrapolated using terminal growth rates,
which do not exceed the expected long-term economic growth rate. The discount rate and terminal growth rate used in
calculating the fair value are 23% and 5% respectively.
The following table illustrates the sensitivity analysis to the fair value of the investment in Oxigen should there be
any movements to the material unobservable inputs.
Movement
Change in fair value
Unobservable inputs to inputs R’000
Discount rate +0.5% (50 812)
-0.5% 53 906
Terminal growth rate +1% 38 674
-1% (34 509)
Customer acquisition and engagement spend +1% 40 745
-1% (39 459)
Capital expenditure +1% 48 717
-1% (47 408)
Significant related party transactions
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Purchases from related parties
ZOK Cellular Proprietary Limited - 34 941 26 001
Loans to related parties
2DFine Holdings Mauritius 218 890 203 865 234 892
Lornanox Proprietary Limited trading as Edgars Connect 69 418 38 000 65 949
Oxigen Services India Private Limited 36 025 35 049 38 359
Stylco Proprietary Limited 20 000 - 26 000
ZOK Cellular Proprietary Limited 28 934 3 260 20 881
Basis of preparation
The condensed unaudited consolidated interim financial statements have been 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 condensed
unaudited consolidated interim financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the requirements of the Companies Act, No 71 of 2008.
These condensed unaudited consolidated interim financial statements have been prepared in accordance with the going
concern principle, under the historical cost convention. The condensed unaudited consolidated interim report does not
include all the disclosures required for complete annual financial statements prepared in accordance with IFRS as
issued by the International Accounting Standards Board (IASB). The accounting policies used in preparing the condensed
unaudited consolidated interim report are consistent with those applied in the previous annual 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 operating profit before depreciation, amortisation and
impairment charges (EBITDA). In addition, the Group applies core net profit and core headline earnings as a non-IFRS
measures in evaluating theGroup’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. Core headline earnings are calculated by
adjusting core net profit with the headline earnings adjustments required by SAICA circular 2/2015.
The results have not been reviewed or audited for the period ended 30 November 2016.
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine**, GD Harlow*, P Mahanyele* (appointed 1 September 2016),
Y Mahomed* (resigned 11 January 2017), JS Mthimunye*, DA Suntup, J Vilakazi*
(*Independent non-executive) (**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
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