Wrap Text
Unaudited Results for the half year ended 30 November 2017
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 2017
Highlights
- Increase in revenue to R13.5 billion*
- Increase in ebitda of 9% to R778 million
- Increase in earnings per share of 110% to 167.43 cents
- Increase in headline earnings per share of 109% to 166.68 cents
- Increase in core headline earnings per share of 108% to 168.42 cents
- Increase in cash generated from operating activities to R3.1 billion
* On inclusion of the gross amount generated on "PINless top-ups", the effective increase equated to 10%.
Commentary
Overview
On 2 August 2017, Blue Label, through its wholly owned subsidiary The Prepaid Company ("TPC"), acquired 45% of
Cell C Proprietary Limited ("Cell C") and 47.37% of 3G Mobile Proprietary Limited ("3G Mobile"). The purchase
consideration for these acquisitions was R5.5 billion and R0.9 billion respectively.
Core headline earnings for the six months ended November 2017 amounted to R1.36 billion, resulting in an increase
of R804 million (146%). Post-dilution resulting from the issue of 200 million shares at R15 per share, core headline
earnings per share increased by 108% to 168.42 cents per share.
These earnings comprised the Group's share of profits in Cell C of R928 million, which included the recognition of
an increase in a deferred tax asset of R1.92 billion, of which the Group's 45% share amounted to R865 million and its
share of profits in 3G Mobile of R36 million. The balance pertained to the remaining companies within the Group,
inclusive of once-off costs of an imputed IFRS interest adjustment of R21 million attributable to the deferred
payment of R650 million relating to the acquisition of 3G Mobile.
The core headline earnings in the current period were negatively impacted by R91 million as a result of the cessation
of early settlement discounts and interest forfeiture in lieu of the utilisation of working capital resources to fund
the cash element of the Cell C acquisition.
The investments in Oxigen Services India, Oxigen Online Services India (collectively, "Oxigen Services India") and
2DFine Holdings Mauritius ("2DFine") were accounted for as investments in associates and joint venture, applying the
equity method up until 30 November 2016. Thereafter, these entities have been accounted for as venture capital
investments at fair value. The net effect thereof, resulted in a positive contribution to Group earnings of
R135 million in the comparative period and in turn a negative impact on earnings growth in the current period
in this regard.
The underlying table demonstrates the impact on core headline earnings growth, on exclusion of the acquisitions
of Cell C and 3G Mobile, non-recurring costs, the forfeiture of income as well as the accounting treatment of
Oxigen Services India and 2DFine in the comparative period. Adjusted core headline earnings per share would have
equated to a growth of 21% to 75.59 cents per share, congruent with not having to have issued any further shares
to fund the above acquisitions.
Nov 2017 Nov 2016 Growth Growth
R'000 R'000 R'000 %
Core headline earnings 1 356 780 552 425 804 355 146%
Core HEPS (cents) 168.42 80.78 87.64 108%
Core headline earnings adjusted for:
Share of losses from India and fair value gain (556) (135 577)
Share of profits from Cell C excluding
amortisation of intangible assets (927 643) -
Share of profits from 3G Mobile excluding
amortisation of intangible assets (35 824) -
IFRS interest expense relating to 3G Mobile acquisition 21 194 -
Cessation of settlement discounts and interest forfeiture 91 414 -
Adjusted core headline earnings 505 365 416 848 88 517 21%
Adjusted core HEPS (cents) 75.59 62.53 13.06 21%
Group revenue increased by 2% to R13.5 billion. On imputing gross amounts generated on the continued growth in sales
of "PINless top-ups", of which only the gross profit earned thereon is accounted for, the effective growth equated
to 10%.
EBITDA increased by 9% from R715 million to R778 million.
The Group's share of losses in Blue Label Mexico continued to decline from R22.1 million to R10.5 million (52%).
As a result of the restructuring of working capital, cash generated from trading operations amounted to R3.3 billion,
which facilitated the payment of the cash element of the acquisitive cost of the shares in Cell C.
The net asset value per share increased by 48% to R10.29.
Segmental report
South African Distribution
Unaudited Unaudited Audited
Nov 2017 Nov 2016 Growth Growth May 2017
R'000 R'000 R'000 % R'000
Revenue 13 274 086 12 996 799 277 287 2% 25 786 396
Gross profit 1 019 527 1 018 359 1 168 0% 1 917 023
EBITDA 741 874 746 126 (4 252) (1%) 1 388 296
Share of profits/(losses) from associates
and joint ventures 949 534 (3 360) 952 894 (5 404)
- Cell C 924 194 - 924 194 - -
- 3G Mobile 31 381 - 31 381 - -
- Other (6 041) (3 360) (2 681) (80%) (5 404)
Core net profit 1 394 257 491 334 902 923 184% 893 106
Core headline earnings 1 393 443 491 336 902 107 184% 893 128
Gross profit margin 7.68% 7.84% 7.43%
EBITDA margin 5.59% 5.74% 5.38%
Growth in revenue of 2% was organically achieved through continued expansion of its distribution channels. Amounts
generated on "PINless top-ups" increased by R1.2 billion from R2.8 billion to R4 billion, equating to an effective
increase in South African Distribution of 10%, in that only the gross profit earned thereon is recognised.
Net commissions earned on the distribution of prepaid electricity continued to increase, escalating by R21 million
to R124 million (21%) on an increase in revenue generated on behalf of the utilities from R6.9 billion to
R8.4 billion (20%).
Gross profit margins declined from 7.84% to 7.68%, primarily attributable to the forfeiture of R50 million of early
settlement discounts in lieu of the utilisation of working capital resources to fund the cash element of the Cell C
acquisition. The forfeiture of early settlement discounts was partially replaced by marketing rebates which only
came into effect from August.
The above decline in gross profit margins as well an increase in overheads, which included an expense of R12 million
directly attributable to escalating the quantum of distribution channels, had a direct impact on negative growth in
EBITDA.
Interest forfeiture attributable to the utilisation of cash resources towards the payment for the investment in
Cell C amounted to R77 million. A further cost of R21 million, attributable to the deferred payment of R650 million
relating to the acquisition of 3G Mobile, was imputed in terms of IFRS requirements.
The negative growth in EBITDA and the above net impact on finance costs were augmented by positive contributions
of R924 million from Cell C, inclusive of the Group's share of the recognition of the deferred tax asset amounting
to R865 million and R31 million from 3G Mobile. This resulted in an increase in contribution to Group core headline
earnings from R491 million to R1.39 billion (184%).
International
Unaudited Unaudited Audited
Nov 2017 Nov 2016 Growth Growth May 2017
R'000 R'000 R'000 % R'000
EBITDA 22 203 (22 175) 44 378 200% (31 792)
Gain on associate measured at fair value 716 264 204 (263 488) (100%) 160 200
Share of (losses)/profits from associates
and joint ventures (10 246) (146 422) 136 176 93% (162 218)
- Oxigen Services India - (119 831) 119 831 100% (119 831)
- Blue Label Mexico (10 511) (22 122) 11 611 52% (36 978)
- 2DFine - (5 832) 5 832 100% (5 409)
- Mpower 265 1 363 (1 098) (81%) -
Non-controlling interest (32 460) 183 (32 643) 7
Core net (loss)/profit (16 714) 97 060 (113 774) (117%) (17 213)
Core headline (loss)/profit (21 878) 97 060 (118 938) (123%) (16 874)
The increase in EBITDA of R44 million was attributable to a positive turnaround in foreign exchange movements of
R28 million. The balance of R16 million related to the winding up process of the Africa Prepaid Services group.
As a consequence of the winding up process, non-controlling interest in the Africa Prepaid Services group were
allocated R32 million, being their share of net loan releases.
The share of net losses from associates and joint ventures comprised the following:
Oxigen Services India and 2DFine Holdings Mauritius
In the comparative period, the investments in Oxigen Services India and 2DFine were accounted for as investments
in associates and joint venture, applying the equity method up until 30 November 2016. From that date these entities
have been accounted for as venture capital investments at fair value. The fair value gain of R264 million, less deferred
taxation thereon of R9 million and the Group's share of losses of R120 million, resulted in a positive contribution
to Group earnings of R135 million in the comparative period.
The fair value of venture capital investments is required to be assessed at each reporting period. The change
in fair value between 31 May 2017 and 30 November 2017 increased by R0.7 million.
Blue Label Mexico
Blue Label Mexico's losses declined from R44.7 million to R20.4 million, of which the Group's share amounted to
R10.5 million after the amortisation of intangible assets. In the comparative period the Group's share of losses
amounted to R22.1 million.
The decline in losses was attributable to an increase in revenue from R1.5 billion to R1.9 billion (27%). This was
achieved in the pursuance of its strategy by increasing the number of transactional terminals, customer penetration
through incremental products and services provided as well as extending its reach to merchants through the
distribution channels of Grupo Bimbo.
The distribution of starter packs generates monthly compounded annuity income. This has gained momentum, placing
Blue Label Mexico as the leader in the SIM distribution business throughout Mexico. Bill payments, credit and
debit card acquiring and food vouchers have increased perpetually.
The resultant gross profit increased by R35 million (73%), underpinned by an increase in gross profit margins.
The growth in margins was congruent with the increase in the distribution of starter packs, higher margins afforded
by the smaller networks and the expansion of the bouquet of products.
Operational expenditure increased by 17%, of which payroll costs accounted for the majority of the increase in line
with the necessity to employ additional staff in support of the growth in business operations.
The resultant EBITDA equated to a turnaround of R23 million (111%) from a negative R21 million to a positive
R2 million.
Mobile
Unaudited Unaudited Audited
Nov 2017 Nov 2016 Growth Growth May 2017
R'000 R'000 R'000 % R'000
Revenue 172 988 148 651 24 337 16% 347 858
Gross profit 97 873 97 409 464 0% 200 079
EBITDA 47 283 46 765 518 1% 99 101
Core net profit 27 548 25 468 2 080 8% 56 327
Core headline earnings 27 512 25 438 2 074 8% 56 289
This segment comprises Viamedia, Supa Pesa, Blue Label One, Cellfind, Panacea and Simigenix.
Although revenue increased by 16%, gross profit remained static due to a decline in margins from 65.5% to 56.6%.
This decline was attributable to a change in accounting treatment by recognising revenue as a principal as opposed to
an agent in the comparative period.
Contribution to core headline earnings increased by 8% to R27.5 million, primarily due to an increase in interest
received on positive cash resources generated.
Solutions
Unaudited Unaudited Audited
Nov 2017 Nov 2016 Growth Growth May 2017
R'000 R'000 R'000 % R'000
Revenue 102 623 100 063 2 560 3% 177 621
Gross profit 33 673 28 931 4 742 16% 55 480
EBITDA 24 442 19 366 5 076 26% 34 020
Core net profit 13 715 11 345 2 370 21% 18 956
Core headline earnings 13 710 11 345 2 365 21% 18 956
Although revenue growth was marginal at 3%, gross profit thereon increased by R4.7 million (16%) in line with margin
increases from 28.9% to 32.8%.
Blue Label Data Solutions was the predominant contributor to the growth in core headline earnings from R11.3 million
to R13.7 million (21%).
Corporate
Unaudited Unaudited Audited
Nov 2017 Nov 2016 Growth Growth May 2017
R'000 R'000 R'000 % R'000
EBITDA (57 501) (74 873) 17 372 23% (158 302)
Core net loss (56 007) (72 799) 16 792 23% (150 142)
Core headline loss (56 007) (72 754) 16 747 23% (150 103)
Of the decline in negative EBITDA of R17 million, R18 million pertained to a positive turnaround in foreign exchange
movements.
Accordingly, the negative contribution to Group core headline earnings declined by R17 million to R56 million.
DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
Depreciation, amortisation and impairment charges increased by R5 million to R60 million. Of this increase, R6 million
pertained to depreciation on additional capital expenditure incurred during the period less a reduction of R1 million
relating to the amortisation of intangible assets emanating from purchase price allocations on historical acquisitions,
which declined from R9.1 million to R8.1 million.
NET FINANCE COSTS
Finance costs
Finance costs totalled R218 million, of which R41 million related to interest paid on borrowed funds and R177 million
to imputed IFRS interest adjustments on credit received from suppliers. On a comparative basis, interest paid on
borrowed funds amounted to R66 million and the imputed IFRS interest adjustment equated to R76 million.
The decline of R25 million on interest paid on borrowed funds was due to both the underutilisation of the Group's
facilities as well as the application of surplus funds on hand to debt for the months of June and July 2017.
The decline in finance costs was, however, limited to R25 million due to interest costs increasing on a piecemeal
basis from August to November 2017, congruent with the payment for the cash element of R2.75 billion for the
acquisition of 45% of Cell C, which was effected on 2 August 2017. This payment was facilitated through a change
in the working capital structure of the Group. In addition, a further R740 million was advanced to Cell C on a
piecemeal basis for the purpose of applying such funds towards capital expenditure.
Finance income
Finance income totalled R148 million, of which R67 million was attributable to interest received on cash resources
and R81 million to imputed IFRS interest adjustments on credit afforded to customers. In the prior period, interest
received on cash resources amounted to R38 million and the imputed IFRS interest adjustment to R80 million.
The increase of R29 million in interest received from cash resources included interest of R15 million from
Cell C for the advance of R740 million to them for capital expenditure.
The limited growth in finance income was congruent with the utilisation of an element of cash resources for the
funding of the Cell C transaction.
STATEMENT OF FINANCIAL POSITION
Total assets increased by R6.6 billion to R15.3 billion of which non-current assets increased by R7.4 billion and
current assets decreased by R0.8 billion.
Non-current assets included increases in capital expenditure net of depreciation of R0.9 million, in investment in
and loans to associates and joint ventures of R7.4 billion, in loans receivable of R5.5 million and in a financial
asset at fair value through profit and loss of R79 million. These increases were offset by decreases of R35 million
in intangible assets and goodwill, trade and other receivable of R24.6 million and deferred tax assets of
R9.4 million.
The net increase of R7.4 billion in investment in associate and joint venture companies comprised the acquisition
of Cell C and 3G Mobile for R5.5 billion and R0.9 billion respectively, the Group's net share of profits totalling
R940 million inclusive of the amortisation of applicable intangible assets, R0.7 million gain on Oxigen measured
at fair value, loans granted of R4.1 million, interest of R13.2 million capitalised on loans, unrealised foreign
exchange profits on loans of R10.8 million and a positive impact on foreign currency translation reserves of
R11.1 million. These increases were partially offset by dividends received of R1.8 million.
The net decline of R35 million in intangible assets and goodwill mainly pertained to the amortisation of
intangibles by R54.7 million, offset by R19.7 million expended on the purchase of software and development
costs.
The increase of R79 million in a financial asset at fair value through profit and loss, emanating from the
Cell C transaction, related to a USD6 million part payment for the acquisition of bond notes issued by Cedar
Cellular Investments 1 Proprietary Limited.
Of the decrease in current assets, material movements included decreases in inventories of R913 million, in
loans
granted to Cell C of R749 million, in other loans receivable of R75 million, in cash resources of R879 million
and increases in trade receivables of R279 million.
The stock turn equated to 19 days compared to 33 days for the financial year ended 31 May 2017.
The debtor's collection period increased to 41 days compared to 39 days for the financial year ended 31 May 2017.
Net profit attributable to equity holders of R1.3 billion, less a dividend of R350 million, resulted in retained
earnings accumulating to R4.6 billion.
Share capital and share premium increased by R3 billion congruent with the issue of 200 million shares at an issue
price of R15 per share, which were applied for part payment for the equity of Cell C and 3G Mobile.
Trade and other payables increased by R2.5 billion, inclusive of the deferred payment of R0.6 billion relating
to the acquisition of 3G Mobile, with average credit terms increasing to 80 days compared to 53 days for the
financial year ended 31 May 2017.
STATEMENT OF CASH FLOWS
Cash flows generated from operating activities amounted to R3.1 billion, predominately attributable to a change
in the working capital structure.
Cash flows applied to investing activities amounted to R6.3 billion. Of this amount, R5.5 billion was applied to the
acquisition of Cell C, R740 million to the capital expenditure loan granted to Cell C, R79 million for the purchase
of the bond notes, R22.2 million for professional fees, R20 million for the purchase of intangible assets, R27.9 million
to settlement of contingent considerations and R26.4 million for capital expenditure. These outflows were offset by
R66.6 million from loans receivable.
Cash flows from financing activities amounted to R2.35 billion, of which R2.75 billion related to proceeds received
on shares issued. After applying R28.8 million to the acquisition of treasury shares and a dividend payment of
R370 million to shareholders and non-controlling interests, cash on hand at period end amounted to R471 million.
FORFEITABLE SHARE SCHEME
Forfeitable shares totalling 1 888 961 (2016: 1 386 327) were issued to qualifying employees. During the period
174 418 (2016: nil) shares were forfeited and 2 432 743 (2016: 2 141 673) shares vested.
SUBSEQUENT EVENTS
The Prepaid Company Proprietary Limited acquired the remaining 52.63% of the issued share capital of 3G Mobile with
effect from 6 December 2017, the date on which the Competition Tribunal approval was granted.
On 2 January 2018 BLT acquired 60% of the issued share capital of Airvantage Proprietary Limited for a purchase
consideration of R151 million. An agreement has been concluded to acquire 60% of the issued share capital of
AV Technology Limited, an affiliate company of Airvantage incorporated in Mauritius, for a purchase
consideration of USD6.4 million. The transaction will be completed once approval from the South African
Reserve Bank is obtained.
On 9 February 2018, Gold Label Investments Proprietary Limited and 2DFine Investments Mauritius exercised
their rights to acquire additional shares in Oxigen Services India and Oxigen Online Services India in
proportion to their shareholdings. The total purchase consideration amounted to USD2.9 million.
PROSPECTS
In line with the Group's strategy to continue expanding its distribution footprint and product offerings, focus will
be on further penetration into the informal market through the provision of point of sale devices to the multitude of
independent traders who do not have the tools to market and sell the Blue Label offering of product and services at
present.
Blue Label is one of the primary distribution channels for Cell C products and services. Our investment in Cell C
provides a compelling value proposition to the Group, to Cell C and its customers, through vertical integration
that will afford both companies the opportunity to realise synergies in product distribution. Cell C now has a
sustainable capital structure to deliver on their strategic objectives.
3G Mobile is one of Africa's largest distributors and financiers of mobile devices and handsets to major retailers
and cellular network providers. It has distribution rights for all major tier one and tier two mobile devices and
allied products from the manufacturers thereof. Through its wholly owned subsidiary, Comm Equipment Company
Proprietary Limited, it provides the financing of the mobile handset component of postpaid and hybrid contracts
to Cell C, with the capability of extending such services to other networks and channels. These functions
supplement Blue Label's strategic objectives to provide value-added services to both Cell C and its own
customer base. 3G Mobile provides the ideal platform to combine Blue Label's low cost and certified pre-owned
mobile handset divisions into a consolidated group. The acquisition thereof is both earnings accretive and
provides a solid foundation for distribution into the burgeoning low-cost smartphone market.
The proprietary software developed by Airvantage will afford Blue Label the opportunity to apply such intellectual
property within the Group, thereby enabling it to broaden its offerings to its customer base. It is the intention
of Airvantage to emulate its robust business model internationally in the near future.
Through Blue Label's entrenched relationship with numerous municipalities on whose behalf prepaid electricity is
sold and the proceeds thereof collected, it is the intention to supplement these services with a full turn-key
revenue management system, credit control services, audits, meter replacements and new installations.
Following Blue Label Mexico's continuous improvement in operations, it is expected to provide a positive contribution
to Group profitability, given their consistent growth in revenue generation at sustainable improved gross profit margins
and compounding annuity revenue generated from starter packs.
"Big Data" creates the opportunity to upsell and cross sell the various bouquets of products and services that
Blue Label has to offer, through its distribution channels, by intelligently understanding consumer behaviour.
APPRECIATION
The Board of Blue Label 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
Joint Chief Executive Officers
DA Suntup* CA(SA)
Financial Director
21 February 2018
* Supervised the preparation of the unaudited condensed Group interim results.
Unaudited condensed Group statement of financial position
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
As at R'000 R'000 R'000
ASSETS
Non-current assets 9 589 037 2 380 693 2 198 757
Property, plant and equipment 112 501 114 296 111 599
Intangible assets 476 123 572 268 511 164
Goodwill 604 590 604 590 604 590
Investments in and loans to associates and joint ventures 7 666 388 314 804 315 833
Investments in and loans to venture capital associates
and joint venture 567 487 628 671 544 165
Loans receivable 42 367 83 396 36 851
Financial assets at fair value through profit and loss 79 050 - -
Starter pack assets 5 302 6 746 5 346
Trade and other receivables 17 936 36 845 42 512
Deferred taxation assets 17 293 19 077 26 697
Current assets 5 661 587 5 892 908 6 491 513
Inventories 1 267 436 2 042 354 2 180 121
Loan to associate 749 279 - -
Loans receivable 112 941 103 699 188 229
Starter pack assets 1 353 1 722 1 365
Trade and other receivables 3 037 600 2 899 293 2 758 997
Current tax assets 21 775 13 975 12 135
Cash and cash equivalents 471 203 831 865 1 350 666
Total assets 15 250 624 8 273 601 8 690 270
EQUITY AND LIABILITIES
Capital and reserves 9 034 499 4 756 212 5 004 442
Share capital, share premium and treasury shares 6 957 271 3 953 872 3 953 871
Restructuring reserve (1 843 912) (1 843 912) (1 843 912)
Other reserves 115 795 106 998 107 036
Equity compensation benefit reserve 38 026 34 613 46 420
Transactions with non-controlling interest reserve (975 302) (965 861) (975 302)
Retained earnings 4 648 200 3 407 395 3 649 192
8 940 078 4 693 105 4 937 305
Non-controlling interest 94 421 63 107 67 137
Non-current liabilities 74 215 100 022 59 226
Deferred taxation liabilities 69 461 77 000 52 952
Trade and other payables 4 754 23 022 6 274
Current liabilities 6 141 910 3 417 367 3 626 602
Trade and other payables 6 051 380 3 341 114 3 517 673
Provisions 43 679 32 459 35 071
Current tax liabilities 44 913 25 769 55 832
Borrowings 1 938 18 025 18 026
Total equity and liabilities 15 250 624 8 273 601 8 690 270
Unaudited condensed Group statement of comprehensive income
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 13 549 697 13 245 513 26 311 875
Other income 29 245 2 861 16 814
Changes in inventories of finished goods (12 398 624) (12 100 814) (24 139 293)
Employee compensation and benefit expense (225 883) (210 487) (452 985)
Depreciation, amortisation and impairment charges (60 462) (55 435) (112 851)
Other expenses (176 134) (221 864) (405 088)
Operating profit 717 839 659 774 1 218 472
Finance costs (217 622) (141 680) (303 027)
Finance income 148 426 118 307 242 194
Gain on associates and joint venture
measured at fair value 716 264 204 160 200
Share of profits/(losses) from associates
and joint ventures 940 425 (147 577) (164 941)
Net profit for the period before taxation 1 589 784 753 028 1 152 898
Taxation (189 874) (189 064) (332 037)
Net profit for the period 1 399 910 563 964 820 861
Other comprehensive income:
Items reclassified to profit or loss
Foreign currency translation reserve
reclassified to profit or loss (2 340) - -
Items that may be subsequently reclassified to
profit or loss
Share of other comprehensive income/(loss) of associates
and joint ventures 11 138 (81 844) (82 424)
Foreign exchange loss on translation of foreign operations (3) (35) (52)
Other comprehensive income/(loss) for the
period, net of tax 8 795 (81 879) (82 476)
Total comprehensive income for the period attributable to: 1 408 705 482 085 738 385
Net profit for the period attributable to: 1 399 910 563 964 820 861
Equity holders of the parent 1 348 812 545 168 786 965
Non-controlling interest 51 098 18 796 33 896
Total comprehensive income for the period attributable to: 1 408 705 482 085 738 385
Equity holders of the parent 1 357 571 464 561 706 396
Non-controlling interest 51 134 17 524 31 989
Share performance
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Earnings per share for profit
attributable to equity holders
Basic earnings per share (cents) 167.43 79.72 114.97
Diluted earnings per share (cents)* 166.04 79.10 114.00
Weighted average number of shares 805 590 826 683 824 520 684 508 497
Diluted weighted average number of shares 812 327 853 689 236 729 690 322 107
Number of shares in issue 868 892 834 674 509 042 674 509 042
Share performance
Headline earnings per share (cents) 166.68 79.73 115.02
Diluted headline earnings per share (cents)* 165.30 79.10 114.05
Dividend per share (cents) 40 36 36
Reconciliation between net profit and
core headline earnings for the period:
Net profit for the period attributable
to equity holders of the parent 1 348 812 545 168 786 965
Amortisation on intangible assets raised through
business combinations net of tax and net of
non-controlling interest 13 987 7 240 14 069
Core net profit for the period 1 362 799 552 408 801 034
Headline earnings adjustments (6 019) 17 362
Core headline earnings 1 356 780 552 425 801 396
Core headline earnings per share (cents)** 168.42 80.78 117.08
* 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.
Unaudited condensed Group statement of cash flows
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash generated by operations 3 297 462 945 583 1 753 991
Interest received 43 702 25 693 52 300
Interest paid (40 642) (65 819) (105 518)
Taxation paid (184 522) (196 074) (338 814)
Net cash generated from operating activities 3 116 000 709 383 1 361 959
Cash flows from investing activities
Acquisition of intangible assets and
property, plant and equipment (46 119) (83 530) (113 280)
Acquisition of subsidiaries net of cash acquired - 771 -
Acquisition of associate (5 500 000) (7 530) -
Acquisition of bond notes (79 050) - -
Loans advanced to Cell C (740 000) - -
Capital contribution to Oxigen Services India - - (25 534)
Equity loans advanced to Lornanox (883) (1 758) (5 875)
Loans repaid/(granted) 66 567 (73 889) (117 268)
Loans granted to associates and joint ventures (1 841) (3 401) (15 756)
Settlement of contingent consideration (27 868) (49 109) (50 666)
Contingent proceeds received - - 12 839
Other investing activities (16 519) 11 544 (4 936)
Net cash utilised in investing activities (6 345 713) (206 902) (320 476)
Cash flows from financing activities
Acquisition of treasury shares (28 846) (7 381) (7 381)
Proceeds on share issue 2 750 000* - -
Dividends paid to non-controlling interest (21 100) (6 600) (26 788)
Dividends paid to equity holders of the parent (349 804) (242 823) (242 823)
Other financing activities - (2 803) (2 803)
Net cash generated from/(utilised in) financing activities 2 350 250 (259 607) (279 795)
Net (decrease)/increase in cash and cash equivalents (879 463) 242 874 761 688
Cash and cash equivalents at the beginning of the period 1 350 666 589 027 589 027
Exchange gains on cash and cash equivalents - (36) (49)
Cash and cash equivalents at the end of the period 471 203 831 865 1 350 666
* Shares to the value of R3.03 billion were issued by Blue Label in the current period. Of this amount
R2.75 billion was received in cash. The balance of R283 million was issued in exchange for shares in 3G Mobile.
Unaudited 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 2017 3 953 871 3 649 192 (1 843 912) 107 036
Net profit for the period - 1 348 812 - -
Other comprehensive income - - - 8 759
Total comprehensive income - 1 348 812 - 8 759
Dividends paid - (349 804) - -
Treasury shares purchased (28 846) - - -
Equity compensation benefit scheme
shares vested 21 653 - - -
Equity compensation benefit movement - - - -
Disposal of non-controlling interests - - - -
Issue of shares 3 010 593 - - -
Balance as at 30 November 2017 6 957 271 4 648 200 (1 843 912) 115 795
Balance as at 1 June 2016 3 942 512 3 105 050 (1 843 912) 187 605
Net profit for the period - 545 168 - -
Other comprehensive income - - - (80 607)
Total comprehensive income - 545 168 - (80 607)
Dividends paid - (242 823) - -
Treasury shares purchased (7 381) - - -
Non-controlling interest acquired - - - -
Equity compensation benefit scheme
shares vested 18 741 - - -
Equity compensation benefit movement - - - -
Balance as at 30 November 2016 3 953 872 3 407 395 (1 843 912) 106 998
Audited Audited Audited Audited
Year ended 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
Net profit for the year - 786 965 - -
Other comprehensive income - - - (80 569)
Total comprehensive income - 786 965 - (80 569)
Dividends paid - (242 823) - -
Treasury shares purchased (7 381) - - -
Equity compensation benefit scheme
shares vested 18 740 - - -
Equity compensation benefit movement - - - -
Non-controlling interest acquired - - - -
Transaction with non-controlling
interest reserve movement - - - -
Balance as at 31 May 2017 3 953 871 3 649 192 (1 843 912) 107 036
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
** Includes employee compensation benefit reserve
Unaudited condensed Group statement of changes in equity continued
Transactions
with non-
controlling Share-based Non-
interest payment controlling Total
reserve reserve** interest equity
Unaudited Unaudited Unaudited Unaudited
Six months ended R'000 R'000 R'000 R'000
Balance as at 1 June 2017 (975 302) 46 420 67 137 5 004 442
Net profit for the period - - 51 098 1 399 910
Other comprehensive income - - 36 8 795
Total comprehensive income - - 51 134 1 408 705
Dividends paid - - (21 100) (370 904)
Treasury shares purchased - - - (28 846)
Equity compensation benefit scheme
shares vested - (21 363) (290) -
Equity compensation benefit movement - 12 969 364 13 333
Disposal of non-controlling interests - - (2 824) (2 824)
Issue of shares - - - 3 010 593
Balance as at 30 November 2017 (975 302) 38 026 94 421 9 034 499
Balance as at 1 June 2016 (965 861) 42 039 52 134 4 519 567
Net profit for the period - - 18 796 563 964
Other comprehensive income - - (1 272) (81 879)
Total comprehensive income - - 17 524 482 085
Dividends paid - - (6 600) (249 423)
Treasury shares purchased - - - (7 381)
Non-controlling interest acquired - - 65 65
Equity compensation benefit scheme
shares vested - (18 486) (255) -
Equity compensation benefit movement - 11 060 239 11 299
Balance as at 30 November 2016 (965 861) 34 613 63 107 4 756 212
Audited Audited Audited Audited
Year ended R'000 R'000 R'000 R'000
Balance as at 1 June 2016 (965 861) 42 039 52 134 4 519 567
Net profit for the year - - 33 896 820 861
Other comprehensive income - - (1 907) (82 476)
Total comprehensive income - - 31 989 738 385
Dividends paid - - (26 788) (269 611)
Treasury shares purchased - - - (7 381)
Equity compensation benefit scheme
shares vested - (18 486) (254) -
Equity compensation benefit movement - 22 867 550 23 417
Non-controlling interest acquired - - 65 65
Transaction with non-controlling
interest reserve movement (9 441) - 9 441 -
Balance as at 31 May 2017 (975 302) 46 420 67 137 5 004 442
* Included in other reserves is the foreign currency translation reserve and the non-distributable reserve.
** Includes employee compensation benefit reserve
Segmental summary
South African
Total Distribution International Mobile Solutions Corporate
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Six months ended 30 November 2017 R'000 R'000 R'000 R'000 R'000 R'000
Total segment revenue 17 066 351 16 671 393 - 178 848 103 577 112 533
Internal revenue (3 516 654) (3 397 307) - (5 860) (954) (112 533)
Revenue 13 549 697 13 274 086 - 172 988 102 623 -
Operating profit/(loss) before
depreciation, amortisation and
impairment charges 778 301 741 874 22 203 47 283 24 442 (57 501)
Net profit/(loss) for the period attributable
to equity holders of the parent 1 348 812 1 382 210 (17 539) 26 433 13 715 (56 007)
Amortisation on intangibles raised through
business combinations net of tax and
non-controlling interest 13 987 12 047 825 1 115 - -
Headline earnings adjustments net
of non-controlling interest (6 019) (814) (5 164) (36) (5) -
Core headline earnings for the period
attributable to equity holders of the parent 1 356 780 1 393 443 (21 878) 27 512 13 710 (56 007)
At 30 November 2017
Total assets 15 250 624 13 779 350 792 031 564 755 126 566 (12 078)
Net operating (liabilities)/assets (480 323) (620 431) 51 074 62 418 35 600 (8 984)
Six months ended 30 November 2016
Total segment revenue 16 415 810 16 159 238 - 156 433 100 139 61 425
Internal revenue (3 170 297) (3 162 439) - (7 782) (76) (61 425)
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)
Audited Audited Audited Audited Audited Audited
Year ended 31 May 2017 R'000 R'000 R'000 R'000 R'000 R'000
Total segment revenue 32 724 069 32 058 672 - 361 754 178 286 125 357
Internal revenue (6 412 194) (6 272 276) - (13 896) (665) (125 357)
Revenue 26 311 875 25 786 396 - 347 858 177 621 -
Operating profit/(loss) before depreciation,
amortisation and impairment charges 1 331 323 1 388 296 (31 792) 99 101 34 020 (158 302)
Net profit/(loss) for the year attributable
to equity holders of the parent 786 965 883 542 (19 072) 53 681 18 956 (150 142)
Amortisation on intangibles raised through
business combinations net of tax and
non-controlling interest 14 069 9 564 1 859 2 646 - -
Headline earnings adjustments net of
non-controlling interest 362 22 339 (38) - 39
Core headline earnings for the year attributable
to equity holders of the parent 801 396 893 128 (16 874) 56 289 18 956 (150 103)
At 31 May 2017
Total assets 8 690 270 7 201 527 743 530 593 595 141 100 10 518
Net operating assets/(liabilities) 2 864 911 2 762 751 10 424 103 458 45 517 (57 239)
Headline earnings
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Profit attributable to equity holders of the parent 1 348 812 545 168 786 965
Net (profit)/loss on disposal of property, plant and equipment (855) 17 23
Foreign currency translation reserve recycled to profit or loss (2 340) - -
Profit on liquidation of Africa Prepaid Services Nigeria (2 824) - -
Impairment of intangible assets and property, plant and equipment - - 339
Headline earnings 1 342 793 545 185 787 327
Headline earnings per share (cents) 166.68 79.73 115.02
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
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Contingent consideration
Opening balance 32 974 83 563 83 563
Acquisition of Reware Proprietary Limited - 1 150 1 150
Acquisition of Utilities World Proprietary Limited - 4 516 4 516
Settlements (27 867) (49 109) (50 666)
Gains and losses recognised in profit or loss 540 2 271 (5 589)
Closing balance 5 647 42 391 32 974
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 (252) - (10 210)
Finance costs 288 2 271 4 621
Unrealised gains or losses recognised in profit or
loss for liabilities held at the end of the reporting period (288) 2 003 5 304
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 changes in management's probability assumptions in respect of certain of the companies. The resulting changes
in the fair values are accounted for in other income in the statement of comprehensive income. 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, Oxigen Online and 2DFine Mauritius are viewed as venture capital investments and
accounted for at fair value, and are level 3 instruments. Refer to "Investment and loans to venture capital associates
and joint venture".
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.
Financial assets at fair value through profit and loss are level 3 financial assets.
Changes in level 3 instruments are as follows:
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Financial asset at fair value through profit and loss
Opening balance - - -
Bond notes issued by SPV1 79 050 - -
Gains and losses recognised in profit or loss - - -
Closing balance 79 050 - -
In terms of the Cell C acquisition, special purpose vehicles (SPVs) have been established by Cell C to facilitate
the debt restructuring arrangements. The only assets within the SPVs are shareholdings in Cell C and their
corresponding external debt is to the original Cell C lenders. TPC, a wholly owned subsidiary of BLT, has
engaged with the SPVs as follows:
Cedar Cellular Investments 1 Proprietary Limited ("SPV1"): TPC has agreed to acquire 7.625% of the USD275 million
in bond notes issued by SPV1, with a face value of USD21 million and accruing interest at 8.625% per annum, from
Saudi Oger for a purchase consideration of USD9 million. TPC advanced USD6 million (R79 million) on 21 August 2017.
The balance of USD3 million will be advanced once the South African Exchange Control Authorities have approved
the cash outflow.
Magnolia Cellular Investment 2 (RF) Proprietary Limited ("SPV2"): TPC has agreed to provide liquidity support of
up to USD80 million to SPV2. Of this amount, USD20 million has been provided by Oger Telecoms, thus reducing TPC's
obligations to a maximum of USD60 million. The obligation was reduced by a further USD16.5 million which was paid
by Saudi Oger into SPV2 from the proceeds of the sale of a specific asset. TPC's remaining funding obligations may
be reduced if certain further assets of Oger Telecoms are realised and the proceeds thereof contributed to SPV2.
Irrespective of the amounts received from Oger Telecoms, TPC will be entitled to receive the entire balance of
the funding provided to SPV2 (USD80 million plus accrued interest). The balance of the liquidity support of
USD43.5 million will be provided as to USD3.5 million in August 2018 followed by two tranches of USD20 million
each every six months thereafter, and will bear interest at a Libor linked rate. These payments may be reduced
in the event of any further contributions being forthcoming from Oger Telecoms during the period. As at
30 November 2017, no funds had been provided by TPC.
Based on the structure of the SPVs, TPC will only recover the funding it provides if the realised value of
Cell C shares held by the respective SPVs exceeds the external debt owed by the SPVs. To the extent that
the amount realised by the SPVs on the Cell C shares is less than the external debt, TPC will receive no
repayment. The nature of this arrangement exposes TPC to the performance risk of the Cell C share price
and not the credit risk of the SPVs.
As a result of the structure and associated risks, the funding arrangement has been accounted for as a financial
asset at fair value through profit and loss. Any funding amounts advanced to the SPVs are accounted for as an
adjustment to this balance.
Investments and loans to venture capital
associates and joint venture
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Venture capital associates and joint venture 292 266 412 800 291 550
Loan to venture capital associates and joint venture 275 221 215 871 252 615
567 487 628 671 544 165
The exemption available in IAS 28 - Investments in Associate and Joint Ventures has been applied to the investment
in Oxigen Services India, Oxigen Online and 2DFine Holdings Mauritius from 30 November 2016 and the investment is
now accounted for in accordance with IAS 39 - Financial Instruments: Recognition and Measurement at fair value with
changes in fair value recognised in profit or loss. The differential between the carrying amount of the investment
(previously equity accounted for) and the fair value at this date is reflected as a gain on associate measured at
fair value in the reviewed condensed Group statement of comprehensive income. In the prior year, any additional
changes in the fair value between 30 November 2016 and year-end were recognised in the Group statement of
comprehensive income. Likewise, in the current period, any changes in the fair value between 31 May 2017 and
30 November 2017 have been recognised in the Group statement of comprehensive income. The fair value adjustment
recognised in the Group statement of comprehensive income for the period ended was R0.7 million (2016: R264 million).
Prior to 30 November 2016, the investment in Oxigen Services India was of a strategic nature, as it was it was
expected to emulate the business model of the South African distribution operations. The original decision to
invest in this business was because it was strategically aligned with other Blue Label distribution businesses
in South Africa. 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 in value in the future and the
Group is pursuing this new strategy with respect to its investment in Oxigen Services India. In line with the
Group's exit strategy Oxigen Services India was demerged into two separate entities with effect from 1 June 2016.
This was implemented to improve the marketability of these entities to potential investors.
2DFine Holdings Mauritius is an investment holding company that holds an interest in Oxigen Services India and
Oxigen Online. Consequently, management reviews the results and operations of Oxigen Services India, Oxigen Online
and 2DFine Holdings Mauritius on a fair value basis as opposed to the profits/losses that they generate. In addition,
management has established an exit strategy with a view to realising this fair value in the foreseeable future.
Accordingly Oxigen Services India, Oxigen Online and 2DFine Holdings Mauritius are viewed as a venture capital
investment which, in accordance with IAS 28 - Investments in Associates and Joint Ventures has been accounted
for at fair value through profit and loss from 30 November 2016 at which date equity accounting ceased.
Fair value estimate
The finance department of the Group includes a team that outsources the valuations to qualified independent third
party valuation specialists required for financial reporting purposes, including level 3 fair values. This team
reports directly to the Financial Director (FD) and the Audit, Risk and Compliance Committee (ARCC). Discussions
of valuation processes and results are held between the FD, ARCC and the valuation team at least once every
six months, in line with the Group's reporting periods.
The investments in venture capital associates and joint venture are level 3 valuations in the fair value hierarchy.
In terms of IFRS 13 - Fair Value Measurement: the market approach has been utilised in determining the fair value
of the Indian entities. This approach utilises relevant information generated by similar market transactions that
have been concluded by comparable businesses. The valuation is based on a multiple applied to gross revenue, based
on the same principles adopted by similar business to that of the Oxigen Services group, that was recently disposed
of. This differs from the discounted cash flow approach applied previously, as the market approach provided the
Group with more reliable evidence to support the valuation. The revenue multiple of 5.1 was applied in determining
the fair value.
The following table summarises the quantitative information of the significant unobservable input used in the
level 3 fair value measurement for this investment.
Movement in
Change to fair value
Unobservable inputs inputs R'000
Revenue multiple 0.2 10 141
0.1 5 071
(0.1) (5 071)
(0.2) (10 141)
(0.3) (15 220)
Significant related party transactions and balances
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Sales to related parties
Cell C Proprietary Limited 146 789 - -
Purchases from related parties
Cell C Proprietary Limited 2 858 002 - -
ZOK Cellular Proprietary Limited 2 - 17 552
Interest received from related parties
2DFine Holdings Mauritius 11 092 10 664 21 159
Cell C Proprietary Limited 17 854 - -
Loans to related parties
2DFine Holdings Mauritius 239 028 218 890 218 305
Cell C Proprietary Limited 749 279 - -
Lornanox Proprietary Limited trading as Edgars Connect 77 764 69 418 75 209
Oxigen Services India Private Limited 36 193 36 025 34 310
ZOK Cellular Proprietary Limited 20 950 28 934 26 364
Amounts due from related parties included in trade receivables
Cell C Proprietary Limited 135 148 - -
Amounts due to related parties included in trade payables
Cell C Proprietary Limited 2 055 178 - -
Subsequent events
The Prepaid Company Proprietary Limited acquired the remaining 52.63% of the issued share capital of 3G Mobile
Proprietary Limited (3G Mobile) for a purchase consideration of R1 billion. The effective date of the transaction
was 6 December 2017, on which date the Competition Tribunal approval was granted.
On 2 January 2018 BLT acquired 60% of the issued share capital of Airvantage Proprietary Limited (Airvantage) for
a purchase consideration of R151 million. An agreement has been concluded to acquire 60% of the issued share capital
of AV Technology Limited, an associate company of Airvantage incorporated in Mauritius, for a purchase consideration
of USD6.4 million. The transaction will be completed once approval from the South African Reserve Bank is obtained.
On 9 February 2018, Gold Label Investments Proprietary Limited and 2DFine Investments Mauritius exercised their
rights to acquire additional shares in Oxigen Services India and Oxigen Online Services India in proportion to
their shareholdings. The total purchase consideration amounted to USD2.9 million.
Acquisition of subsidiaries
Shares in the following subsidiaries were acquired subsequent to period end:
Effective date %
of acquisition acquired
Subsidiaries
3G Mobile Proprietary Limited 6 December 100%
2017
Supplier and distributor of mobile phones and tablets to major retailers across South Africa and sub-Saharan Africa,
and financier of the mobile handset component of post-paid and hybrid contracts
Airvantage Proprietary Limited 2 January 60%
2018
Owner of a system that offers Mobile Network Operators the ability to
advance airtime, data and mobile money to subscribers
Details of the provisional net assets acquired and the resulting goodwill as
at the date of acquisition are as follows:
3G Mobile Airvantage
Proprietary Proprietary
Limited Limited
R'000 R'000
Total purchase consideration 1 902 208 150 732
Provisional fair value of net assets acquired 1 657 469 116 198
Goodwill 244 739 34 534
The provisional assets and liabilities acquired through acquisition are as follows:
3G Mobile Proprietary Limited Airvantage Proprietary Limited
Acquirer's Provisional fair Acquirer's
provisional value at provisional
Provisional fair carrying acquisition carrying
value at amount on date amount on
acquisition acquisition R'000 acquisition
date date date
R'000 R'000 R'000
Cash and cash equivalents 98 121 98 121 14 570 14 570
Property, plant and equipment 16 114 16 114 2 939 2 939
Intangible assets 353 342 - 219 209 7 862
Investments 106 106 15 944 15 944
Loans receivable - - 7 323 7 323
Goodwill 479 352 234 613 37 534 3 000
Inventories 163 233 163 233 - -
Receivables 2 557 780 2 557 780 31 336 31 336
Deferred tax (73 199) 25 737 (60 138) (961)
Borrowings (1 269 882) (1 269 882) - -
Payables (421 859) (421 859) (40 519) (40 519)
Provisional fair value of
subsidiaries acquired 1 903 108 1 403 963 228 198 41 494
Non-controlling interest (902) (16 598)
Provisional fair value of net
assets acquired 1 403 061 24 896
Total purchase consideration 1 902 208 150 732
Fair value of previously held interest (927 402) -
Purchase price relating to the
initial 47.37%
investment in 3G Mobile 895 263 -
Notional interest on consideration payable 62 764 -
Purchase price settled (282 833) (150 732)
To be settled 1 650 000 -
3G Mobile was acquired with the objective of affording the Group access to new channels for the supply and
distribution of tier 1 to tier 4 mobile phones and tablets, as well as the ability to finance the mobile handset
component of post-paid and hybrid contracts.
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 3G Mobile, 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 and ability to finance
assets affords the Group.
Airvantage was acquired with the objective of expanding the Group's service offerings to offer mobile network
operators the capability to provide their subscribers with airtime, data and mobile money services through an
advance mechanism.
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 Airvantage, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most
significant among these is the opportunity that the Prepaid Airtime Advance System affords the Group.
Material transactions
On 2 August 2017, Blue Label, through its wholly owned subsidiary, TPC, acquired 45% of the issued share capital of
Cell C for a purchase consideration of R5.5 billion. Of this amount, 183 333 333 ordinary shares were subscribed
for by third parties at an issue price of R15.00 per share, equating to R2.75 billion.
On the same date, TPC concluded an agreement to purchase 100% of the issued share capital in 3G Mobile from its
shareholders for a purchase consideration of R1.9 billion. The acquisition has been structured in two stages, whereby
47.37% of the issued share capital was initially acquired for a purchase consideration of R900 million. The remaining
52.63% of the issued share capital will be acquired for a further R1.0 billion, subject to the fulfilment of conditions
precedent. Refer to the subsequent events note. Of the initial purchase of 47.37%, 16 666 666 ordinary shares were
issued to the vendors at R15.00 per share, equating to R250 million. The balance of R650 million remains payable.
On 2 August 2017 TPC concluded an agreement with Cell C in terms of which it has undertaken to advance R1.34 billion
on a piecemeal basis for the purpose of applying such funds towards capital expenditure. This advance, which is
interest bearing, will be repayable in full by the end of July 2018. To date R740 million has been advanced.
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, adjusted for financial instruments measured at fair value
through profit and loss. 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 non-IFRS
measures 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. 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 2017.
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine**, GD Harlow*, P Mahanyele*, 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
Date: 22/02/2018 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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