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When you keep looking forward, youll leave a lasting legacy behind
BLU
ZAE000109088
75 Grayston Drive
Cnr Benmore Road
Morningside Ext 5
Sandton
2196
(PO Box 652261, Benmore, 2010)
www.bluelabeltelecoms.com
GROWTH
REPORT CONTENTS
Our group in brief
01
01
02
03
10
11
12
14
19
20
24
28
Nature of business
Corporate thumbnail
Vision, mission and values
Our markets and brands
Strategic and operational highlights
Financial highlights
Group structure
Board of directors
Segment heads
Chairmans report
Joint chief executive officers report
Segmental reviews
Financial statements
86
95
95
96
97
100
101
102
103
104
148
149
150
151
152
164
168
169
170
page 1
CORPORATE PROFILE
Nature of business
Blue Label Telecoms and its subsidiaries and associate
companies core business is the virtual distribution of prepaid
secure electronic tokens of value and transactional services
across its global footprint of touch points.
Its prepaid product offerings include airtime, electricity and
bus ticketing. Other solutions provided include location-based
services, cell phone content and mobile applications.
Transactions are processed through points-of-presence ranging
from single entity retail outlets to national chain stores and
petroleum forecourts in South Africa and in several countries
beyond its borders.
The focus is on distribution in emerging markets where the
products and services are of significant value to the unbanked
and badly banked.
In-house proprietary technology to support the groups initiatives
plays an integral role in supporting the rollout of its bouquet of
products and services.
The groups stated strategy is to extend its global footprint of
touch points, both organically and acquisitively and to fulfil the
significant demand for the delivery of multiple prepaid products
and services through a single distribution base via various
delivery mechanisms.
CORPORATE THUMBNAIL
Why do consumers use prepaid products and services?
Prepaid products and services are the ultimate budgeting
tool, as consumers have absolute choice and control over
what they spend.
The majority of prepaid transactions are cash based and
using prepaid removes the requirement for credit checks.
Prepaid products and services can be conveniently topped
up, either virtually or physically, as and when required by
consumers.
Prepaid products and services are sold across a broad
footprint of traditional and non-traditional outlets.
Prepaid products and services enable the worlds unbanked
consumers to transact efficiently.
ITS OUR
page 2
CORPORATE THUMBNAIL
continued
Mission statement
We exist to provide world-class prepaid product and service
offerings to consumers within the middle and lower tiers
of the worlds economic pyramid. We aim to achieve this
through the development and acquisition of cutting-edge
technologies, the expansion of our global footprint of touch
points and adherence to our core values of enduring
relationships, entrepreneurship, innovation and respect.
ENDURING RELATIONSHIPS
ENTREPRENEURSHIP
Embracing
opportunities
Walking the talk
INNOVATION
RESPECT
Moving forward
with lessons learnt
Forward thinking
A member of the
Blue Label family
Interacting with
mutual respect
page 3
PRIME
page 4
page 5
START-UP
page 6
Our proven business model and bouquet of product and technology offerings, enables
customers to purchase prepaid airtime via multiple devices.
page 7
AIR
page 8
mibli powered by Microsoft OneApp is the groups most advanced on-phone service,
aimed at the mobile generation. It marks the entry into the direct-to-consumer market.
page 9
PLAY
page 10
Accolades:
The Prepaid Company was awarded
Vodacom Best Channel Partner for the
fourth year in succession
Number one prepaid distribution channel
partner of Telkom for the past five years.
page 11
FINANCIAL HIGHLIGHTS
Revenue
R billion
15,3
12,5
12,9
Actual
2008
Pro
forma
2008
18%
Revenues*
16%
Net profit after tax*
Actual
2009
R15,3 billion
Core net profit
19%
R million
427
371
270
31%
Operating profit*
Actual
2008
16%
Core earnings per share*
Pro
forma
2008
Actual
2009
R427 million
Core earnings per share
cents
55,93
48,40
R667 million
45,81
Pro
forma
2008
Actual
2009
55,93 cents
GROWTH TIME
page 12
GROUP STRUCTURE
See page 28
See page 34
International distribution
Gold Label
Oxigen Services India 37,22%
Ukash 16,9%
Africa Prepaid Services 72%
Africa Prepaid Services DRC 80%
Africa Prepaid Services Mozambique 90%
Africa Prepaid Services Nigeria 51%
Blue Label Mexico 70%
Sharedphone 50,1%
Blue Label Australasia 50,5%
See page 40
Technology
Activi Technology Services
Transaction Junction 60%
Activi Development Services
Blue Label One Trading as Mobile Services Company (MSC)
See page 46
Value-added services
Datacel
Velociti
CNS
Cellfind
Content Connect Africa
page 13
Global presence
page 14
BOARD OF DIRECTORS
page 15
page 16
Mark Levy
(Born: 1950)
(Born: 1971)
Brett Levy
Joint chief executive officer
BCompt (UNISA)
Mark graduated with a BCompt degree from UNISA in 1993.
After initially taking up a position as a commodity trader, Mark
decided to pursue his goal of becoming an entrepreneur in
earnest and has spent the past several years spearheading
Blue Label Telecoms impressive growth and international
expansion. Together with his brother Brett Levy, Mark won
the ABSA Jewish Business Achiever Non-Listed Company
Award (2007). Mark was nominated as an Ernst & Young
World Entrepreneur SA Finalist for 2007.
Mark Pamensky
Chief operating officer
(Born: 1972)
(Born: 1975)
David Rivkind
Chief financial officer
(Born: 1972)
page 17
Gary Harlow
Joe Mthimunye
(Born: 1957)
(Born: 1965)
page 18
Neil Lazarus SC
Sidney Ellerine**
Non-executive director
Non-executive director
(Born: 1958)
(Born: 1936)
BA LLB (WITS)
Neil graduated from the University of the Witwatersrand in
1981 with a BA LLB degree. After completing his articles, he
was admitted as an attorney in 1983. He was admitted as
an advocate in 1984 and practised at the Johannesburg bar.
He was appointed as senior counsel by President Mandela
in 1998. He also served as an acting judge. As an advocate,
Neil specialised in corporate restructures, mergers and
acquisitions and was involved in significant corporate
reorganisations both locally and internationally. Upon leaving
the profession in 2000 he became a director of Corpcapital
Limited where he established and participated in its
corporate finance business. Neil discharged both corporate
finance and legal mandates in respect of a number of local
and international transactions.
In 2004 Neil became a legal and corporate finance adviser
to Netcare Limited. He advised Netcare on its acquisition of
the General Hospital group in the UK in 2006. Neil advised
Blue Label Investments on its restructure in 2007 and
played an important role in helping the group to achieve its
listing in November 2007. Neil continues to render legal and
corporate advisory services to the group.
He advises the board of directors of a number of listed
and non-listed companies on strategic, legal and corporate
finance matters. Neil has served on the boards of directors
of a number of public and significant non-listed companies.
Peter Mansour
Non-executive director
(Born: 1970)
** Deceased.
page 19
SEGMENT HEADS
Bradley Turkington
Chief operating officer: International distribution
BSoc Sci (Finance Hons) (Natal)
After completing his postgraduate degree in finance, Bradley
became the financial director of a London-based wholesaler.
Bradley returned to South Africa after four years abroad
and with the international relationships he had established
became involved in the South African cellular telephony
industry from inception. Bradley served on the local board
of a NASDAQ listed company, which was involved in bringing
prepaid to South Africa and many other markets. He joined
a subsidiary of Matragon as a consultant in March 2006, to
expand their international business. Bradley was responsible
for formulating Blue Label Investments international strategy
prior to listing. In November 2007 he was appointed COO of
the international distribution segment and is responsible for
all the international business operations and initiatives.
Dr David Fraser
Group chief technology officer
BSc(Eng), MSc(Eng), PhD (Natal), CEng(UK), MIET(UK),
MIEEE(USA), MSAIEE(SA), MSPE
David is a professional engineer who has considerable
international and local business experience in
telecommunications, IT and associated technologies. After
qualifying, David lectured and researched communications at
university after which he established a number of successful
companies, including a telecoms and broadcasting services
company and a scientific consultancy firm. Davids knowhow in the broadband wireless and related businesses
has assisted in the establishment and growth of several
European and USA-based companies. David became involved
at Sentech in South Africa with the development of the
countrys first public broadband 3G wireless data network,
and joined Blue Label Investments in 2005. Together with
Dr Angelo Roussos, David is responsible for the development
Dr Angelo Roussos
Group chief information officer
BSc (Lab. Med.), MBBCh (Wits)
Angelo became interested in high-speed networking and
supercomputing while pursuing a postgraduate medical
degree, collaborating on the NSFNet, a precursor to the
modern internet. In 1990, he established one of the first
companies in South Africa to provide e-mail services, and
later the second SA business to provide commercial internet
services. With his partners, he created one of the largest
ISPs in SA in 1994. In 1998, Angelo left medicine to focus
full-time on IP-networking, and he formed InfoSat which was
the second company in the world to offer DVB/IP services
via satellite. Sentech, the largest signal distributor in Africa,
acquired a majority stake in InfoSat. From July 2002 until
October 2003, Angelo guided Sentech as group executive:
Multimedia Services and was responsible for the technology
selection, business strategy and business management of
the new multimedia business. Apart from his extensive IPbased telecoms experience, Angelo has engaged in strategic,
policy and regulatory representations to the SA government
and regulator. Together with Dr David Fraser, Angelo is
responsible for ensuring that the group remains ahead of
the trend through the development of new and innovative
technology solutions, with a focus on the transactional side of
the business.
Craig Ireland
Chief executive officer: Value-added services
(Datacel)
BCom (Natal)
Craig has been in the telecommunication and technology
industry for over 16 years, having spent 12 years with
Dimension Data, one of South Africas largest ITC companies.
While at Dimension Data Craig headed up a number of
strategic divisions including their call centre division. He spent
four years developing the local call centre technology market
in South Africa. In 2006 he assisted the Business Trust and
the Department of Trade and Industry in the development
of a business plan for South Africas outsourcing and BPO
market. At the same time he established Velociti, a call
centre outsourcing business, based in Durban South Africa.
Craig is responsible for the groups national call centre
businesses.
page 20
CHAIRMANS REPORT
Larry Nestadt
Larry Nestadt
Chairman
Larry Nestadt
Chairman
page 21
DEAR STAKEHOLDERS
31 May 2009.
achieved.
page 22
management bands.
CORPORATE CITIZENSHIP
on a monthly basis.
PROSPECTS
The group is poised for further growth and is in
page 23
APPRECIATION
I would like to thank my fellow directors for the
contributions they have made over the past year.
The board expresses its appreciation to Mark
and Brett Levy and their executive team for their
entrepreneurial vision, energy and determination.
The group also expresses its gratitude to the
companys employees for their hard work and
achievements.
Larry Nestadt
Chairman
page 24
page 25
MICROSOFT
Our relationship with Microsoft is an ongoing
strategic imperative. We share the common goal
of engaging consumers and profiling them more
effectively. Access to cutting-edge technology and
products enable efficient delivery to the market.
LiveID will facilitate inter-operability between
cellphones and personal computers, providing
substantial flexibility as products and solutions
become device agnostic.
Over the past 18 months, we have worked with
Microsoft to deliver the next generation of mobile
services to the mass markets of the developing
world. mibli powered by Microsoft OneApp, a
completely integrated mobile eco-system was
launched in August 2009. This world first embodies
three solutions, namely:
Transactional capability
The mobile services functionality of our subsidiary,
the Mobile Services Company (MSC)
Microsofts OneApp on-phone software.
mibli powered by Microsoft OneApp is free
to download and incorporates a wide range of
interactive features, such as Facebook, Twitter,
miLocate and a mobile wallet. An Apps store is
scheduled to be released shortly, which will add to
the revenue streams of white labelling, advertising
and content downloads.
Accessed through a single window in the installations
menu of mobile phones, mibli powered by
Microsoft OneApp works on nearly every brand
and model of phone. GPRS and Java are the only
prerequisites from a functionality perspective.
Previously, this level of interactivity was only available
on top-of-the-range smartphones.
The majority of mobile phones used in South Africa
are capable of running mibli powered by Microsoft
OneApp. Given the vast number of mobile phones
in use, the scale of opportunity to generate additional
revenue is substantial in that every user has the
ability to access and vend our prepaid products and
services through the mobile wallet feature.
page 26
The company is growing the number of points-ofpresence and transactions per site.
page 27
PROSPECTS
We are well positioned to grow our footprint
organically and through strategic acquisitions. Our
global reach provides access to a wide range of
prepaid products and value-added services that
are viable additions to our existing offering in South
Africa and other emerging markets.
It is anticipated that revenue will continue to grow
organically, not only through the existing product
offering, but also through the additional product
offerings that have been developed in-house and
which are expected to be rolled out across the
groups points-of-presence during the forthcoming
year.
APPRECIATION
Blue Label Mexico is steadily increasing its pointsof-presence and turnover in accordance with its
business plan.
page 28
SEGMENTAL REVIEWS
page 29
page 30
continued
Pedro Christofides
Chief operating officer:
South African distribution
This segment distributes prepaid secure electronic tokens of value (e-tokens) to the South African
wholesale and retail consumer markets.
The subsidiaries encompassing this segment all fulfil specific roles while simultaneously benefiting
from the purchasing power and vertical integration of the group.
page 31
Cigicell
Cigicell is a distributor of virtual prepaid airtime and electricity through a broad network of distribution
channels including the forecourts of the major oil companies.
Virtual Voucher
Distributor of prepaid airtime through an integrated prepaid voucher management system to in excess
of 500 Engen petroleum sites nationwide.
Kwikpay
Distributes virtual prepaid airtime, electricity vouchers and bill payments through multi-application and
managed terminal vending solutions and integrated point-of-sale devices.
2008
Revenue*
2009
Revenue
2008
EBITDA*
2009
EBITDA
94,3%
92,9%
97,8%
109,9%
page 32
continued
Prepaid electricity
The introduction of prepaid electricity vouchers into the channels serviced by the
South African distribution segment, has demonstrated the ability to quickly grow the
distribution of additional products to access the segments vast footprint.
Accolades
For the fourth year in succession, Blue Label Telecoms has been awarded the Vodacom
Best Channel Partner. This award is measured on volume, growth, average revenue
per user (ARPU) and churn.
The group has also been recognised as the number one prepaid distribution channel
partner of Telkom for the past five years.
page 33
PROSPECTS
It is anticipated that revenue will continue to grow organically, not only through the
existing product offering, but also through the additional product offerings that have been
developed in-house and which are expected to be rolled out across the groups points-ofpresence during the forthcoming year. These initiatives include:
A technical arrangement with Gidani, the licensed operators of Lotto in South Africa to
integrate their products into till points and other distribution channels
Prepaid electricity distribution contracts with additional municipalities
The introduction of off- line prepaid top-up electricity that will complement the current
on-line top-up facility that is currently being offered
Prepaid bus ticketing
Money remittances throughout the groups touch points.
page 34
International distribution
page 35
page 36
International distribution
continued
Bradley Turkington
Chief operating officer:
International distribution
During the period under review Blue Label Telecoms considered several international opportunities and
potential investments. This culminated in the launching of Blue Label Mexico, Africa Prepaid Services
Nigeria and investments into the United States of America and the United Kingdom, augmenting the
groups presence in India, Australia, Mozambique and the Democratic Republic of Congo.
The overall strategy is to ensure growth in the groups global presence through a combination
of establishing bricks and mortar operations in selected markets, entering into strategic
partnerships and providing technology licences to third parties.
page 37
2008
Revenue*
2009
Revenue
2008
EBITDA*
2009
EBITDA
3,9%
4,8%
5,2%
1,1%
page 38
The Ukash initiative has given the group the ability to provide its products and services to a
footprint established by Ukash, covering several countries in Europe.
The Ukash issuing, redemption and settlement platform facilitates integration with third
party devices and technology, ensuring rapid deployment and broad-based coverage.
Ukash has concluded a technology deal with MasterCard RePower to be the recharge
provider for the launch of the prepaid debit cash loading platform in Europe.
Oxigen India
Although Oxigen India has not as yet turned to profitability, a combination of continued
growth in outlets supplied and new initiatives resulted in an improvement towards the end
of the financial year under review.
These initiatives include the following:
Reduction in monthly expenditure
Consolidation of technology competencies
Improvement of connectivity and reliability of the communications interface
Introduction of prepaid E-Toll recharge vouchers
Piloting of prepaid railway ticketing
Agreement with The State Bank of India to pilot the PIN-less top-up of airtime and
Oxicash via mobile phones to its consumer base (the integration is complete and testing
is underway):
An agreement with Nokias Ovi stores to utilise Oxicash as a payment mechanism for all
Nokia N-Gage products during the extended warranty period
The appointment of Oxigen as a service provider of airtime sales in all Nokia branches.
Content Connect Australia
This company was established as an aggregator of localised content to mobile operators
and third-party clients. It is the intention to enhance the range of products distributed by
the company in order to encompass all the e-tokens of value that comprise the bouquet of
products and services that Blue Label Telecoms affords to customers globally.
Democratic Republic of Congo
The negative economic climate in the DRC has necessitated a restructure of the business
model. Operating costs have been reduced in line with the elimination of an element of the
product offering.
page 39
Mozambique
APS Mozambique established five additional branches. This initiative together with an
escalation in starter pack activations resulted in improved margins emanating from
additional volume discounts from the networks.
SharedPhone International
SharedPhone operates a SIM-card mobile payphone solution that allows vendors in rural
areas including other African countries to offer consumers access to a public payphone
and the means to vend prepaid airtime and prepaid electricity.
The company has penetrated several international markets over the past year (with
particular success in Africa) by:
becoming the leading connector of CST payphones in South Africa;
concluding an exclusive rollout in Rwanda with the leading GSM network;
pioneering in Liberia as the first GSM PayPhone supplier; and
making notable inroads in Mozambique.
The company has successfully implemented pilot operations with Blue Label Mexico,
positioning itself for expansion into Latin America in 2010.
PROSPECTS
Africa Prepaid Services is expected to contribute significant growth to the international
segment primarily through its strategic 51% shareholding in Africa Prepaid Services
Nigeria. The current mobile penetration level of 45% in Nigeria augurs well for potential
future growth, considering that most established markets have penetrations in excess of
100%.
Blue Label Mexico is steadily increasing its points-of-presence and turnover in accordance
with its business plan.
There has been an improvement in the financial performance of Oxigen India which is
expected to continue.
Ukash will provide consumers with the means to cash-in, utilise cash, and cash-out at their
own convenience. The current economic climate has seen an increased acceptance of the
prepaid model, even in developed markets. Ukash is well positioned to exploit this trend.
Technology partnerships will be pursued in line with the model established in the USA.
page 40
Technology
page 41
page 42
Technology
continued
Angelo Roussos
Chief information officer
The technology platforms segment houses all group companies which focus on the development,
integration and management of the groups IT systems, infrastructure and technology solutions.
The groups technology includes business-to-business and direct-to-consumer solutions.
BUSINESS-TO-BUSINESS TECHNOLOGY SOLUTIONS
Activi Technology Services (Activi)
Activi develops, operates and maintains all core transactional and service platforms for the group. As such,
focus is on providing:
Secure financial transactions
Secure e-tokens
Support and field support
Hosting/management of IT infrastructure
Manufacturing and maintenance.
page 43
During the past year, significant progress has been made in the following key areas:
Consolidation, management and enhancement of the technology platforms throughout the group
Integration of Lottery dispensers, on behalf of Gidani, into till points, allowing consumers to purchase
Quick Picks when paying for other goods
Development and implementation of a mobile application facilitating the purchase of lottery numbers via
cell phones
Integration of live bill payments into point-of-sale devices
Development of mobile services technologies, in association with Microsoft.
DIRECT-TO-CONSUMER TECHNOLOGY SOLUTIONS
Blue Label One, trading as the Mobile Services Company (MSC)
MSC consists of divisions that offer business-to-business and direct-to-consumer products and services:
The direct-to-consumer division consolidates all products and services associated with mibli powered
by Microsoft OneApp
An m-Commerce division provides a mobile wallet, which is a feature of mibli powered by Microsoft
OneApp
MSC Media is the mobile advertising division. The groups physical and virtual prepaid airtime inventory
and distribution channels constitute valuable marketing space for certain brands and provide an
innovative revenue stream for the group.
2008
Revenue*
2009
Revenue
2008
EBITDA*
2009
EBITDA
0,2%
0,1%
(2,28%)
(8,5%)
page 44
Technology
continued
Dr David Fraser
Chief technology officer
mibli powered by Microsoft OneApp which was launched post year end, is the groups most advanced
on-phone service, aimed at the mobile generation. The group is uniquely positioned to leverage its global
transactional experience and footprint to enable mibli powered by Microsoft OneApp to become a
revenue-based, transaction-centric mobile services eco-system, in which many different products/
services are combined in one mobile interface, supported by a single, integrated back-end.
MSCs systems and technology platforms have the capacity and capability to support the mobile service
requirements of Blue Label Telecoms, as well as any third-party client.
The MSC eco-system and Activis transaction system are integrated and supply the groups products and
transactional services through the mobile channel.
PROSPECTS
Activi remains focused on the development and support of commercially viable and functionally rich
transaction engines that provide robust and stable platforms. It strives to optimise the groups technology
investments, while standardising deployment processes, templates and methodologies.
page 45
The aim is to provide one central hosting facility for the South African business and a blueprint for
international hosting, with a local, decentralised field support team. This model drives the group objective of
increasing points-of-presence and footprint globally.
Once the mibli powered by Microsoft OneApp App store is operational, significant interest from
developers and advertisers is anticipated.
South Africa is the first emerging market to launch mibli powered by Microsoft OneApp. The group
anticipates partnering with Microsoft in launching the application in other emerging markets in due course.
page 46
Value-added services
page 47
page 48
Craig Ireland
Chief operating officer:
Value-added services (Datacel)
The value-added services segment houses all group companies that are broadly aligned with the South
African information and communication technologies (ICT) industry.
Datacel
Datacel is a national business process outsourcing company, operating both inbound and outbound call centre
services. During the year under review these functions are delivered through its subsidiaries Velociti, CNS and
Blue Label Call Centre.
It specialises in telemarketing of cellular products and various financial services instruments and provides
inbound customer care and technical support.
Services are provided for third parties and several companies within the Blue Label group.
The outbound call centre insurance business underperformed, resulting in the consolidation of three call
centres into two. Blue Label Call Centre was consequently closed post year-end.
The Velociti Call Centre has expanded its cellular contract telemarketing area and inbound capabilities. This
division has performed well.
The outbound direct selling model continues to have good growth prospects as companies develop more
products and services for the emerging income groups which are sold through the call centres.
Cellfind
Cellfind remains focused on delivering annuity income-driven location-based services via Vodacom and MTN,
as well as providing WASP services.
page 49
Cellfind remains focused on delivering annuity incomedriven location-based services via Vodacom and MTN,
as well as providing WASP services.
PROSPECTS
The predominantly outbound call centres are constantly procuring additional product offerings to the databases that they
communicate with, utilising the existing infrastructure of call centre seats to achieve additional revenue.
Additional location based services that were introduced in the latter part of the financial year-end 2009 are expected
to gain momentum over a full year cycle. The company is exploring the introduction of value-added services in territories
outside South Africa.
2008
Revenue*
2009
Revenue
2008
EBITDA*
2009
EBITDA
1,6%
2,2%
10,75%
13,2%
page 50
CORPORATE GOVERNANCE
INTRODUCTION
The group continues to develop its governance
policies and procedures in line with an integrated
governance, risk and compliance framework.
The board regards corporate governance as
fundamentally important to the success of the
companys business and is unreservedly committed
to applying the principles of good corporate
governance in the management of the company.
The board is the focal point of the governance
system and is ultimately accountable and
responsible for the performance and affairs of the
company. The board exercises leadership, integrity
and sound judgement in directing the company to
enable it to achieve its objectives and goals.
page 51
page 52
The number of meetings held during the year under review and the attendance of the directors are detailed below:
Attendance at meetings
Director
Aug
Oct
Oct
Nov
Jan
Feb
LM Nestadt (Chairman)
BM Levy
MS Levy
S Ellerine
GD Harlow
RJ Huntley
NN Lazarus SC
P Mansour
JS Mthimunye
MV Pamensky
DB Rivkind
HC Theledi
LM Tyalimpi
Legend: (P) Attendance (A) Apologies submitted and leave of absence granted
Special board meetings held on the 13th and 28th of October
Alternate director to Peter Mansour attended in person
Peter Mansour is based in United States of America and attended board meetings via teleconference
page 53
page 54
page 55
July
Aug
Nov
Feb
JS Mthimunye
(Chairman)
GD Harlow
LM Tyalimpi
BM Levy^
MS Levy^
DB Rivkind^
DA Suntup^
page 56
Attendance at meetings
Attendance at meetings
Members
(and invitees)
Jun
Aug
Sept
NN Lazarus SC (Chairman)
S Ellerine
GD Harlow
Members
(and invitees)
Nov
GD Harlow
(Chairman)
S Ellerine
RJ Huntley
D Hilewitz
BM Levy^
NN Lazarus SC
MS Levy^
BM Levy
DB Rivkind^
MS Levy
JS Mthimunye
MV Pamensky
DB Rivkind
DA Suntup
HC Theledi
page 57
Aug
Nov
Feb
RJ Huntley (Chairman)
S Ellerine
BM Levy
LM Tyalimpi
I Hindley^
COMPANY SECRETARY
All directors have access to the advice of the
group company secretary and may liaise with the
group company secretary on agenda items for
board meetings. The company secretary provides
guidance to the board as a whole and to individual
directors with regard to their responsibilities and
plays a pivotal role in ensuring compliance with
procedures and applicable statutes and regulations.
Responsibilities of the group company secretary,
include inter alia:
induction of new or inexperienced directors;
assisting the chairman and joint chief executive
officers in determining the annual board plan;
assisting with other strategic issues of an
administrative nature;
facilitating full and timely access by directors to all
information such as corporate announcements,
investor communications and other developments
which may affect Blue Label Telecoms or its
operations;
acting as a central source of guidance on matters
of ethics and governance.
The group company secretary is furthermore
responsible for the functions specified in section
268(G) of the Companies Act No 61 of 1973, as
amended (the Act). All meetings of shareholders,
directors, and board subcommittees are properly
page 58
RISK MANAGEMENT
The board has committed Blue Label Telecoms to a
process of risk management that is aligned to the
principles of King II. The features of this process
are outlined in the Blue Label Telecoms Enterprise
Wide Risk Management Policy Framework (risk
framework). The risk framework is applicable to the
entire Blue Label Telecoms group. This enterprise
wide approach adopted by the company, means that
every risk in the group will be identified, assessed
and monitored in a structured and systematic
process of risk review and management.
Management is accountable to the board for
designing, implementing and monitoring the process
of risk management and integrating it into the
day-to-day activities of Blue Label Telecoms. In this
regard, management established an Internal Risk
and Compliance Committee (IRC) to identify, evaluate
and measure group-wide risks and compliance in
all functional areas and to implement and maintain
adequate internal controls. The IRC is chaired by
the chief financial officer of Blue Label Telecoms
and reports directly to the ARCC at the quarterly
meetings. The members of the IRC comprise the
senior managers of the group responsible for
the four organisational segments as well as the
heads of product development and commercial
product offerings, the group legal adviser, group
company secretary and group human resource
and transformation manager. The head of external
audit and the head of the outsourced internal audit
function also attend the IRC meetings.
The IRC has conducted group-wide risk assessments
to identify and prioritise major risks in accordance
with the impact and likelihood of these risks. In line
with the groups risk framework the potential impact
of the risks are quantified on a five point scale
comprising catastrophic, critical, serious, significant
and minor/insignificant. Risks are then further
quantified in terms of the probability of occurrence in
accordance with probability factors, namely; almost
certain, likely, possible, unlikely and rare. Internal
controls to mitigate the identified risks are evaluated
page 59
SHARE DEALINGS
Blue Label Telecoms and TPC, its major subsidiary,
have adopted an Insider Trading and Dealings in
Securities policy. This policy requires all relevant
directors who wish to deal in Blue Label Telecoms
shares to obtain prior written clearance from the
chairman of the Remuneration and Nomination
Committee and either the chief financial officer or
group company secretary. The same restriction
applies to the group company secretary. In his
own case, the chairman of the Remuneration and
Nomination Committee must obtain clearance
to deal in Blue Label Telecoms shares from the
chairman of the board and the chief financial officer
of Blue Label Telecoms.
GOING CONCERN
The board has considered and recorded the facts
and assumptions on which it relies to conclude that
the business will continue as a going concern in
the ensuing financial year. The directors are of the
opinion that the business will be a going concern in
the year ahead and their statement in this regard is
also contained in the statement on the responsibility
of the directors for the consolidated financial
statements on page 95 of this report.
RESPECT
We value peoples differences.
We value diverse opinions.
We treat stakeholders fairly with respect and
dignity.
We do not discriminate on the basis of race,
religion, gender or sexual orientation.
ACCOUNTABILITY
We admit mistakes, learn from them and ask
for help.
We take ownership and responsibility for our
actions and performance.
We take initiative to make a difference and to
help.
We focus on results.
We recognise and celebrate our successes.
CODE OF
BUSINESS
CONDUCT
COMPETITIVENESS
We are determined in our pursuit of success.
We strive to be leaders in the markets we
serve.
We are committed to ensuring that we have
the best people, technology, quality, service, and
market knowledge.
We act with a sense of urgency, and we strive
for excellence in everything we do.
INNOVATION
We work creatively to develop new ways to provide value to our
customers.
We drive our innovation by understanding our markets needs,
and we are the first to deliver against those needs.
We create new markets with unique technologies and solutions.
page 60
REMUNERATION REPORT
INTRODUCTION
ADVISORS
In determining the remuneration of executive and nonexecutive directors and certain senior executives the
RNC obtains information on remuneration trends and
seeks advice from external independent remuneration
consultants.
REMUNERATION PHILOSOPHY
REMUNERATION POLICY
GOVERNANCE
The board remains ultimately responsible for the
remuneration policy and the RNC operates under
approved terms of reference. The focus of its activities
is on the groups remuneration framework, the
determination of levels of remuneration for executive
and non-executive directors, annual salary adjustments
and bonuses and the determination of awards to
be made in terms of the companys Forfeitable
Share Plan (share plan). The chairman of the RNC
reports to the board at quarterly board meetings
and submits recommendations made by the RNC to
the board for consideration. The board accepted the
recommendations made by the RNC during the year.
SERVICE CONTRACTS
The company concluded three-year employment
contracts with the executive directors in November
2007. The contracts provide for an option to renew (by
mutual agreement) upon the expiry of the initial term.
page 61
Current
fee per
meeting
Proposed
fee per
meeting *
Services as directors
chairman of the board
board members
R30 000
R32 550
R700 000
R162 750
R41 666
R25 000
R45 208
R27 125
R180 832
R108 500
Remuneration committee
chairman
member
R33 333
R20 000
R36 166
R21 700
R144 664
R86 800
Investment committee
chairman
member
R25 000
R15 000
R27 125
R16 275
R217 000
R130 200
Transformation committee
chairman
member
R25 000
R15 000
R27 125
R16 275
R108 500
R65 100
Ad hoc committee
chairman
member
R25 000
R15 000
R27 125
R16 275
R108 500
R65 100
* In the event that there are fewer meetings than envisaged, the member shall receive the fee in respect of the number of meetings attended.
** In the event that there are more meetings per year than initially planned, directors fees will be paid only up to the cap.
The annual fee paid to the chairman in respect of the year ended 31 May 2009 amounted to R600 000.
BM Levy
MS Levy
MV Pamensky
DB Rivkind
Balance
1 June 2008
0
0
0
0
Issue date
Forfeitable
shares
awarded
Balance
31 May 2009
Vesting date
26/02/2009
26/02/2009
26/02/2009
26/02/2009
369 936
369 936
269 745
138 726
369 936
369 936
269 745
138 726
01/09/2010
01/09/2010
01/09/2010
01/09/2010
page 62
SUSTAINABILITY REPORT
Our responsibility
page 63
page 64
page 65
VALUE-ADDED STATEMENT
Value added is the measure of wealth the group has created in its operations by adding value to the cost of
products and services. The statement below summarises the total wealth created and shows how it was
shared by employees and other parties who contributed to its creation. Also set out below is the amount
retained and re-invested in the group for the replacement of assets and the further development of operations
VALUE-ADDED
Value-added by operating activities
Revenue
Net operating expenses
Value added by investing activities
Fair value movement on financial assets at
fair value through profit or loss
Interest income
2009
R000
2009
%
847 005
15 281 449
(14 434 444)
158 539
84,2
278 970
278 970
4 891
4 891
190 144
190 144
166 574
93 220
61 269
27 445
(15 360)
364 965
390 547
(25 582)
1 005 544
2008
%
594 545
12 545 471
(11 950 926)
176 002
32
158 507
1 005 544
VALUE DISTRIBUTED
Distributed to employees
Salaries, wages, medical and other benefits
Distributed to providers of finance
Finance costs
Distributed to the state
Income tax
STC
Value reinvested
Depreciation, amortisation and impairment
Net discounting finance cost
Share of losses of associates
Deferred taxation
Value retained
Retained profit
Minority shareholders interest
15,8
2008
R000
77,2
22,8
(1 375)
177 377
100
770 547
100
27,7
265 003
265 003
46 575
46 575
102 009
101 759
250
149 168
58 670
85 225
17 441
(12 168)
207 792
180 891
26 901
34,4
770 547
100
0,5
18.9
16,6
36,3
100
2009
6,0
13,2
19,4
27,0
2008
27,0%
27,7%
34,4%
Distributed to employees
36,3%
19,4%
6,0%
Value retained
13,2%
page 66
STAKEHOLDER RELATIONS
The building of long-term and transparent relationships with our stakeholders is a business imperative. The
group has a deliberate and measured approach to its interaction with stakeholders, developed over the course
of a number of years. These interactions take account of the impact that the stakeholders may have on the
business. The frequency and form of that engagement is commensurate with such estimated impact.
Initiatives such as media roundtables, bi-annual analyst perception audits and feedback from employees result
in stakeholder concerns being identified and presented to the executive committee for consideration and/or
further action.
Blue Label Telecoms has identified the following as the stakeholders that contribute to its sustainability, either
directly or indirectly:
Stakeholder group
Stakeholder engagement
Employees
Shareholders, investors,
analysts and the media
Customers
page 67
Stakeholder group
Stakeholder engagement
Business partners
The relationships that Blue Label Telecoms has with its business partners such
as Microsoft, Vodacom, MTN, Cell C, Telkom, municipalities and parastatals,
among others, are managed in terms of distributor and/or dealer agreements
and collaboration agreements. Relationship managers are appointed to each
partner to provide a single and dedicated point of contact. In most instances
engagement with these business partners occurs regularly and at least once a
month in the form of informal and formal meetings.
Communities
Government, regulatory
bodies and the public sector
The group regularly engages government (at a national and local level),
parastatals and other public organisations through various tender processes.
From a compliance point of view, the completion and rendition of statutory
returns is undertaken diligently. Blue Label Telecoms is not a member of any
industry association and/or national/international advocacy organisation in
which the company has positions in governance bodies, participates in projects
or committees or provides substantive funding.
Suppliers
page 68
SHAREHOLDER ANALYSIS
Below is a synopsis of Blue Labels shareholder spread, distribution of shareholders and beneficial shareholders
holding 3% or more of the issued share capital of the company.
No of
shareholdings
No of shares
Shareholder spread
1 1 000 shares
1 001 10 000 shares
10 001 100 000 shares
100 001 1 000 000 shares
1 000 001 shares and over
626
1 251
479
107
56
24,85
49,66
19,02
4,25
2,22
361 248
4 669 913
14 680 162
33 434 847
713 214 724
0,05
0,61
1,92
4,36
93,06
Total
2 519
100,00
Distribution of shareholders
Banks
Close corporations
Empowerment
Endowment funds
Individuals
Insurance companies
Investment companies
Medical schemes
Mutual funds
Nominees and trusts
Other corporations
Retirement funds
Private companies
Public companies
Treasury stock
24
61
1
13
1 982
11
18
2
41
216
28
28
85
8
1
Totals
Public/non-public shareholders
Non-public shareholders
Directors and associates
Strategic holdings (more than 10%)
Treasury stock
Public shareholders
Total
0,95
2,42
0,04
0,52
78,68
0,44
0,71
0,08
1,63
8,58
1,11
1,11
3,37
0,32
0,04
77 433 972
1 380 644
76 441 268
536 704
202 910 208
7 973 414
31 397 804
19 000
36 289 943
57 454 925
197 226
16 300 887
157 553 936
95 269 250
5 201 713
10,10
0,18
9,97
0,07
26,48
1,04
4,09
0,00
4,74
7,50
0,03
2,13
20,56
12,43
0,68
2 519
100,00
20
18
1
1
2 499
45,16
32,49
11,99
0,68
54,84
2 519
100,00
No of shares
15,23
11,99
10,78
9,97
9,81
5,70
Total
63,48
page 69
ETHICAL PRACTICES
Blue Label Telecoms strives to become the leading global distributor of secure electronic tokens of value and
transactional services, including non-banking value-added transactional services, within emerging and
developing markets. In pursuing this vision we are committed to behaving and interacting with all stakeholders
in a professional and ethical manner.
The values that underpin our interaction with stakeholders include:
Integrity
Respect
Accountability
Innovation
Competitiveness.
Blue Label Telecoms is a proud supporter of Business Against Crime South Africa.
Key impacts and risks
The group has identified the following key impacts and risks to the group.
Impact/Risk
Comment
Response
General economic
conditions
Regulation of Interception
of Communications and
Provision of
Communication-Related
Information Act (RICA)
Registration is administratively
complex and leads to a delay in the
ultimate activation of starter packs.
page 70
Comment
Response
Reduction of inter-connect
fees
Non-exclusivity of various
supply, distribution and
WASP agreements
page 71
Comment
Response
SOCIAL PRACTICES
Transformation and broad-based black economic
empowerment
The group decided that BBBEE verification at
subsidiary level, as opposed to group verification, was
more effective in terms of mitigating commercial risk
and developing priority skills for the specific subsidiary
companies. The board-appointed transformation
committee has developed transformation targets for
the South African subsidiaries of the group. Subsidiary
companies that have completed the formal verification
process include:
Subsidiary
Demtrade 11 (Proprietary)
Limited trading as Blue Label
Procurement
Cigicell (Proprietary) Limited
Activi Technology Services
(Proprietary) Limited
Comm Express Services SA
(Proprietary) Limited
Velociti (Proprietary) Limited
BBBEE status
Level 2 contributor
Level 4 contributor
Level 5 contributor
Level 6 contributor
Level 6 contributor
page 72
LEGACY PARKS
The South African Rugby Legends Association has
been running a number of projects designed
primarily to uplift disadvantaged youth. One of these
projects is Legacy Parks which involves the
development of sporting facilities in previously
disadvantaged areas. Blue Label Telecoms joined
forces with South African Rugby Legends
Association, the Gauteng government, Lucas
Radebe and the Protea Glen Community Forum by
sponsoring the Lucas Radebe Sustainable Legacy
Park in Protea Glen, Soweto.
The sporting facilities are used during the day to
host school-run sports clinics free of charge for the
youth in the community. These clinics also help
identify talent and occupy the youth in constructive
and sociable activities. In the early evenings the
park is used by corporate leagues, that pay a fee, in
order to ensure the sustainability and maintenance
of the park. At night, the Police Services assist at
the park to hand out meals and provide positive role
models to homeless children who use the park as a
place of security.
MALAMULELE ONWARD
Malamulele Onward is a non-profit organisation
that has taken on the substantial task of identifying
and helping caregivers of children with cerebral
palsy (CP) in some of the most deprived areas
of southern Africa. The project started in the
Malamulele area of Limpopo Province and rapidly
expanded to the Eastern Cape. Children severely
disabled by CP survive, often into adulthood, but
they and their families are neglected by the health
and education systems.
Malamulele Onwards programmes aim to address
the rehabilitation needs of children with CP through
the provision of hands-on therapy and equipment
to children living in the most disadvantaged areas
page 73
Enterprise development
Blue Label Telecoms, through its major subsidiary
The Prepaid Company continued to provide financial
assistance on an interest-free basis to ZOK Cellular
(Proprietary) Limited (ZOK). In addition Blue Label
Telecoms provides management and strategic
support and other resources to ZOK. ZOK aims
to empower budding entrepreneurs from South
Africas previously disadvantaged communities by
equipping them with a ready-made FMCG retailing
solution in the form of a ZOK container. This
container is a licensed business unit designed as a
self contained turn-key business with start-up stock
for the retail section, starter packs and airtime,
public phones, fax facilities, internet services and
ATM facilities. The placement of ZOK containers
in previously disadvantaged areas is intended to
bridge the gap in telecommunications, ICT and
banking services in such areas, as well as to
uplift the communities in the areas served by the
containers.
page 74
page 75
Gifts were handed out to the invited guests, students and community at the launch event:
page 76
Preferential procurement
The group has initiated a move to procure on a
centralised basis via Blue Label Procurement. The
centralisation of group procurement will ensure
greater efficiencies and coordination of the groups
transformation procurement initiatives. Blue
Label Procurement completed its formal BBBEE
verification and achieved a Level 2 contributor
status.
As part of the centralisation process a database has
been set up to continually keep track of the groups
suppliers and their BEE status. The group strives to
procure all goods and services from BEE certified
suppliers, where possible.
HUMAN CAPITAL
The group recognises that its employees are its
most important asset. Executive management
ensures that the groups value and belief system is
inculcated throughout the group by the adherence
to the groups Code of Conduct including ethics,
environment, health and safety. All new employees
undergo an induction session during which they
receive their staff manual comprising of the
groups visions, mission, values, conditions of
employment, standard group practices, procedures
and policies, as well as a health and safety booklet.
Blue Label Telecoms human resource department
oversees the groups skills development and
training initiatives. Senior management in each
of the subsidiaries are responsible for ensuring
that group strategy and culture are implemented
consistently.
All permanent employees are automatically included
in various group-wide schemes, namely group
life as well as group benefits such as miTRAFFIC,
Look4help, Look4me, MTN WhereRU and
MTN 2MyAid.
page 77
The table below depicts the demographics of the employee base in the group:
Male
Female
African Coloured Indian White African Coloured Indian White
Top management
Senior management
Professionally qualified,
experienced specialists
and mid-management
Skilled technical and
academically qualified
workers, junior
management,
supervisors, foremen,
and superintendents
Semi-skilled and
discretionary
decision-making
Unskilled and defined
decision-making
Total permanent
Non-permanent
employees
Grand total
Foreign
nationals
Male Female
2009
Total
2008
Total
2
1
0
2
0
6
44
26
0
1
1
0
0
2
6
10
0
0
0
0
53
48
45
50
10
15
71
45
162
75
68
22
39
96
11
11
24
43
317
146
206
39
22
14
293
85
38
80
786
654
15
67
88
86 256
325
104
68
185
14
35
322
69
76
398
25 109
4 1 433 1 058
13
133
36 148
94 195 269
458
140 216
191
14
546
558
1 979 1 616
The increase in the total number of employees compared to the previous reporting period is attributable to the
groups expansion and its consequent support requirement.
page 78
LIVING LEADERSHIP
The group is currently reviewing a number of
competency-based performance assessment
systems to be implemented as a group-wide initiative,
which will enable Blue Label Telecoms to assess
the performance of employees and hence identify
individual training needs, career development
objectives, succession planning, remuneration benchmarking and the like. It is anticipated that this will only
be in place in the early part of the next financial year.
LEARNERSHIP INITIATIVES
Cigicell (Proprietary) Limited, a subsidiary of Blue
Label Telecoms, is participating in the contact
centre support learnership programme offered
by the Services Sector Education and Training
Authorities (SSETA). The initiative is proving to be
successful, providing skills training and development
as well as the possibility of employment to those
who would not ordinarily have the opportunity to
obtain a qualification. The qualification aims to
enhance the provision of entry-level service within
the contact centre industry. Contact centres have
become key business tools that form an integral
part of the way in which organisations are run. The
group runs a few contact centre operations, both
inbound and outbound and hopes to implement the
programmes on a regular basis in the future, across
its subsidiaries.
page 79
90%
80%
70%
60%
50%
40%
30%
20%
10%
Long-term
cost
Water
saving
Process
ENVIRONMENTAL PRACTICES
Given the nature of Blue Label Telecoms business,
the groups environmental impact could be classified
as low.
The groups participation in the JSE SRI Index as a
newly listed company highlighted a number of areas
requiring improvement including environmental
management reporting. Blue Label Telecoms is
therefore evaluating the respective reporting areas
to ensure a more detailed report going forward. In
this regard processes and procedures are being
established to improve the measurement and
monitoring of the groups environmental impact
including carbon emissions.
We do not currently measure the following
environmental impacts:
Direct and indirect water use
Environmental supplier standards
Transportation/logistical impacts
Overall environmental expenditures.
Sensor taps
Normal taps
Energy
saving
page 80
Land use
The group occupies leased properties comprising
mainly office buildings, none of which is situated
in biodiversity-rich or ecologically significant
habitats as determined by the Global Reporting
Initiative. The company reached agreement with
its landlord to expand its main office building
situated at 75 Grayston Drive, Sandton, in support
of managements objective to retain as many
subsidiaries and employees as possible in one
environment to enhance communication and
to ensure alignment in culture and objectives.
The impact of the centralisation of the groups
business location has been considered and
management has agreed to overcome this potential
challenge by instituting three different work shifts
which employees may elect, dependent on their
circumstances. The landlord and its architects gave
due consideration to the environmental impact of
the building expansion and to this end incorporated
a wide spectrum of solutions and best practices
to ensure an eco-friendly building. On completion,
the entire building will be operated to reduce the
overall impact on human health and the natural
environment by more efficient use of energy, water
and other resources, as well as protecting occupant
health and improving employee productivity.
Energy efficiency
The energy consumption of Blue Label and its
subsidiaries located at the office building on
75 Grayston Drive, Sandton for the 12-month
period ended 31 May 2009 amounted to a total
to 1 648 186,64kWh. Energy saving initiatives
have been identified and will be implemented in the
existing building as well as the new building currently
being erected.
Recycling
Blue Label continues to recycle its office waste
such as paper and printer cartridges in an
environmentally friendly manner. Waste paper and
scrap, including printer cartridges, associated with
an office environment are collected by scrap dealers
for disposal in an environmentally friendly manner.
page 81
INDEPENDENCE
SA was not responsible for the preparation of
any part of this report and has not undertaken
any commissions for BLT in the reporting period
concerning reporting or data collection. SAs
responsibility in performing its assurance activities is
to the management of BLT alone and in accordance
with the terms of reference agreed with them.
ASSURANCE OBJECTIVES
The objectives of the assurance process were
to provide stakeholders of BLT with a low level
independent assurance opinion on whether the
report meets standard reporting principles of
completeness, accuracy, consistency and neutrality,
as well as to assess the degree to which the report
is consistent with the Global Reporting Initiative
(GRI) G3 guidelines, with the objective of establishing
whether or not the report has met the Global
Reporting Initiative (GRI) G3 Application Level C
reporting requirements.
FINDINGS
In general, the companys sustainability reporting
processes are adequate, and this report reflects a
significant improvement over BLTs 2008 report.
However, it was found that:
Although BLT actively engages an array of key
stakeholders, as defined within this report, the
assurance process did not allow for additional
engagement to confirm or refute BLTs
assertion that the report adequately reflects
the information requirements of their key
stakeholders.
Although additional performance data would
be required to enhance the overall quality of
BLTs sustainability reports, this report appears
to reflect an accurate accounting of BLTs
sustainability performance for the period ending
31 May 2009.
page 82
RECOMMENDATIONS
While we are satisfied that this report is a fair
demonstration of BLTs ability to collect, collate
and report on its sustainability performance, the
following recommendations have been identified:
BLT should ensure that stakeholder engagement
procedures include an assessment of whether or
not this report, and all future reports, adequately
reflect the reporting requirements of key
stakeholders.
BLT should continue to improve its reporting
according to international best practice, including
the principles of inclusiveness, materiality,
and responsiveness, as guided by AA 1000AS
(2008), ultimately seeking an AA1000AS form of
assurance in future reports.
Having addressed the requirements of GRI G3
Application Level C, it is our recommendation that
BLT review the process followed in compiling the
report and, while making further improvements
on the quality of data required for Application
Level C, begin addressing the requirements of
Application Level B.
CONCLUSIONS
Based on the information reviewed, and citing BLTs
status as a recently listed company (second year of
JSE Limited listing), SustainabilityAssurance.co.za
is satisfied that this report provides a reasonably
comprehensive and balanced account of the
environmental, safety and social performance
of BLT during the period under review. The data
presented is based on policies and procedures that
are, in many cases, still in the process of further
development and/or implementation, and we are
satisfied that the reported performance data
reasonably represents the current environmental,
safety and social performance of BLT. Moreover,
and although the quality or quantity of data of
many GRI G3 indicators can yet be improved, this
report appears to meet the GRI G3s requirements
for Application Level C (C+ with this assurance
engagement).
SustainabilityAssurance.co.za
22 October 2009
page 83
This is BLTs first attempt at ensuring compliance to the Global Reporting Initiative (GRI) G3 sustainability
reporting requirements, as recommended by King II. As such, we have opted to seek C+ Level of GRI G3
compliance. The following tables provide a summary of the GRIs requirements, as well as a quick reference
to our self-assessment of compliance.
Standard Disclosures
Not Required
G3 Management
Approach Disclosures
G3 Performance
Indicators & Sector
Supplement
Performance
Indicators
Report on a minimum
of 10 Performance
Indicators, including at
least one from each of:
social, economic, and
environment
B+
Same as requirement
for Level B
Management
Approach Disclosures
for each Indicator
Category
Management
Approach Disclosures
for each Indicator
Category
Report on a minimum
of 20 Performance
Indicators, at least
one from each of:
economic, environment, human rights,
labour, society, product
responsibility
Respond on each
core G3 and Sector
Supplement* indicator
with due regard to the
Materiality Principal
by either: a) reporting
on the
indicator or b) explaining the reason for its
omission
A+
Report on:
1.1
2.1 2.10
3.1 3.8, 3.10 3.12
4.1 4.4, 4.14 4.15
C+
G3 Profile Disclosures
page 84
Core
SOCIAL
Additional
Economic performance
EC1
65
EC3
7678, 113114
Market presence
EC6
7376
EC7
7177
7879
LA8
7879
LA13
SO1
EN2
80
7778
SO3
LA12
7778
SO7
67
PR5
67
7176
59, 76
Public policy
80
EN5
7980
EN7
7980
Anti-competitive behaviour
Products and services
EN11
80
EN13
7980
EN12
80
EN14
80
7980
7980
Compliance
EN28
7778
1418, 5059,
7778
SO5
67
Biodiversity
EN26
LA11
Corruption
Energy
EN22
N/A
Community
Materials
7980
LA9
ENVIRONMENTAL
EN3
LA7
LA10
7176
EN1
Additional
Core
Health and safety
80
SOCIAL
Core
Additional
Employment
LA1
7677
LA2
7677
Labour/management relations
LA4
N/A
LA5
N/A
Key
Included
Included, but requires future improvement
page 85
Awards
page 86
David Rivkind
Chief Financial Officer
page 87
The financial results of the group for the year ended 31 May 2009 demonstrated the resilience of its
product offerings to negative changes in economic conditions. An increase in demand for prepaid
electronic tokens of value has resulted in a sound performance by the group. Organic growth contributed
significantly to the increase in core earnings of 15%.
The above growth, together with the companys continued focus on stringent asset management, resulted
in a substantial increase in cash generation.
OVERVIEW
Group income statement
2009
Actual
R000
Revenue
Cost of inventories sold
Gross profit
Other income
Employee compensation and benefit expense
Other expenses
2008
Core
pro forma
R000
2008
Actual
R000
719 102
68 142
(195 629)
(155 686)
669 865
69 545
(265 003)
(146 240)
EBITDA
Depreciation, amortisation and impairment charges
568 067
(93 220)
435 929
(73 675)
328 167
(58 670)
Operating profit
Finance expense
Finance income
Share of losses from associates
474 847
(112 699)
205 046
(27 445)
362 254
(106 604)
239 470
(19 661)
269 497
(147 704)
193 281
(17 441)
539 749
(174 784)
475 459
(138 929)
297 633
(89 841)
364 965
25 582
336 530
(507)
207 792
(26 901)
Basic earnings
Once-off employee compensation and benefit expense net of tax
390 547
336 023
180 891
57 600
36 653
34 919
22 937
9 000
427 200
370 942
270 428
51,13
51,63
55,93
43,85
43,55
48,40
30,65
30,26
45,81
Although net attributable earnings of R391 million exceeded the earnings for the 2008 relative period by
R210 million, equating to a growth in basic earnings per share from 30,65c to 51,13c (66,82%), the board of
directors believes it is more prudent to compare actual earnings to historical core pro forma earnings in order
to evaluate the real growth of the group.
page 88
Core pro forma earnings are adjusted for nonrecurring and non-operational items that applied
during the comparative period and assume that the
listing and restructuring of the group took place on
1 June 2007.
The salient comparisons of the performance for the
year against historical core pro forma results were
as follows:
Revenue
Revenues increased by R2,4 billion to R15,3 billion
(18%) which was predominantly volume related.
Gross profit
Gross profit increased from R719 million to
R1,065 billion (48%).
This growth was attributable to a combination of the
above turnover growth and an increase in margin
from 5,56% to 6,97%.
The groups trading environment is characterised
by high volumes and relatively low margins. The
increase in GP margins by 1,41% resulted from the
increased purchasing power of the South African
distribution division and the growth in value added
services.
Employee costs
The increase in employee costs from R195 million to
R278 million (42,60%) was attributable to the
following:
Acquisitions and start-ups during the year 11,6%
Additional headcount and salary increases 28%
Forfeitable share plan expense 3%
Other expenses
Other expenses increased from R156 million to
R241 million (54,48%).
page 89
2009
R000
2008
R000
% growth
37,22
(25 940)
(19 661)
(31,9)
16,90
(2 286)
781
Other
Total
(27 445)
(19 661)
(39,6)
Segmental report
The following are the divisional segments that
constitute the group profile:
South African distribution
Distribution of secure electronic tokens of value
encompassing prepaid airtime and starter packs,
bill payments, prepaid electricity, prepaid
insurance and redeemable prepaid vouchers for
online products and services.
International distribution
Replication of the South African distribution model
internationally, currently in operation in Mexico,
Australia, Mozambique, Democratic Republic of
the Congo, Nigeria, Europe, United Kingdom and
India.
Value-added services
Telemarketing of cellular and financial services
products, inbound customer care and technical
support via the groups call centres.
Marketing of the location-based products of
Look4Me and Look4Help (Vodacom) Where
are U and 2MyAid (MTN), miTraffic and
Look4Music.
Aggregation of localised content for mobile
operators and third-party clients.
Technology
Development, integration and management of the
groups IT systems and technologies.
page 90
Revenue
Segments
South African distribution
2009
2008
% of total
R000
R000
2009
2008
% growth
14 199 031
12 194 815
92,9
94,3
16,4
International distribution
724 163
500 268
4,8
3,9
44,8
Value-added services
335 743
207 676
2,2
1,6
61,7
22 512
27 850
0,1
0,2
(19,2)
100
100
18,2
Technology
Total
Value-added services
Total growth in this segment was R128 million
(61,7%) of which R48 million (23,2%) was acquisitive
and R80 million (38,5%) organic.
International distribution
The revenue reflected is in respect of subsidiaries
only and does not include turnover from associate
companies, namely, Ukash (United Kingdom and
Europe) and Oxigen Services India.
Technology
The focus on in-house technological support and
product development and enhancement has resulted
in a conscious decision to reduce service and
support to third parties. This has resulted in a
decline in revenue from third parties by R5 million.
2009
R000
2008
R000
% growth
624 346
426 245
46,5
6 144
21 873
(71,9)
75 239
46 866
60,5
705 729
494 984
42,6
Technology
(48 502)
(9 929)
Corporate
(89 160)
(49 126)
Total support
(137 662)
(59 055)
Net total
568 067
435 929
30,3
International distribution
There was a decline in EBITDA of R19 million
comprising R4 million from Polsa Holdings trading
operations, which was disposed of in March 2009,
the loss on disposal thereof of R4 million and
R11 million from start-up operations in the USA,
Mexico and Australia.
page 91
Value-added services
Acquisitive contributions of R9 million (19,2%) and
organic growth of R19 million (41,3%) equated to a
growth of R28 million (60,5%) in EBITDA.
The marginal decline in EBITDA percentage to
revenue from 22,6% to 22,4% was in line with the
decision to incur additional expenditure on
infrastructure costs in order to enhance the
platform for growth in the future.
2008
R000
Growth
R000
537 815
407 320
130 495
International distribution
(10 947)
(9 060)
(1 887)
Value-added services
49 497
33 450
16 047
576 365
431 710
144 655
Segments
(55 250)
(11 339)
(43 911)
Corporate
(93 915)
(49 429)
(44 486)
Total support
(149 165)
(60 768)
(88 397)
Net total
427 200
370 942
56 258
The growth in core earnings of operational companies was 34% and net growth after technology and
corporate expenses of 15%.
Balance sheet
Assets
Total assets increased by R658 million (20,4%) to
R3,9 billion primarily as a result of an increase in
current assets, of which R432 million related to a
growth in cash resources.
Non-current assets
The net increase in non-current assets was R24 million.
page 92
Current assets
Current assets increased by R634 million. The increase
was mainly due to the growth in cash and cash
equivalents of R432 million, trade and other receivables
of R268 million less a reduction in inventories of
R100 million. The stock turn averaged three times per
month and debtors collections were 21 days.
Cash flow
Growth in profitability and the benefits of stringent
working capital management have resulted in the
positive cash generated from trading operations of
R746 million.
Nature of change
No of shares
Nature of interest
NN Lazarus SC
Shares disposed
3 401 249
Direct beneficial
GD Harlow
Shares disposed
277 871
Indirect beneficial
APPRECIATION
I wish to acknowledge and express my appreciation
to the staff of the group, in particular the finance
team for their concerted efforts and high-quality
performance.
David Rivkind
Chief financial officer
page 93
page 94
FINANCIAL STATEMENTS
Directors responsibility
Declaration by company secretary
Independent auditors report
Directors report
Group balance sheet
Group income statement
Group statement of changes in equity
Group cash flow statement
Notes to the group annual financial
statements
Company balance sheet
Company income statement
Company statement of changes in equity
Company cash flow statement
Notes to the company annual financial
statements
page 95
DIRECTORS RESPONSIBILITY
The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the financial statements
and the related information including pro forma information. The auditors are responsible for reporting on the fair presentation of the financial
statements. The financial statements have been prepared in accordance with International Financial Reporting Standards and in the manner
required by the Companies Act, 1973.
The directors are also responsible for the companys system of internal financial control. These are designed to provide reasonable, but not
absolute, assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain accountability of the assets,
and to prevent and detect misstatement and loss. Nothing has come to the attention of the directors to indicate that any material breakdown in
the functioning of these controls, procedures and systems has occurred during the year under review.
The financial statements have been prepared on the going-concern basis, since the directors have every reason to believe that the company has
adequate resources in place to continue in operation for the foreseeable future.
The financial statements have been audited by the independent auditors, PricewaterhouseCoopers Incorporated, which was given unrestricted
access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the
board. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate.
Approval of the financial statements
The financial statements which appear on pages 97 to 163 were approved by the directors on 25 August 2009 and are signed on its behalf.
LM Nestadt
Non-executive chairman
DB Rivkind
Chief financial officer
BM Levy
Joint chief executive officer
MS Levy
Joint chief executive officer
In terms of section 268G(d) of the South African Companies Act, 1973, as amended (Act), I certify that Blue Label Telecoms Limited has
lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Act. Further, that such returns
are true, correct and up to date.
E Viljoen
Company secretary
Sandton
25 August 2009
page 96
PricewaterhouseCoopers Inc
Director: EJ Gerryts
Registered Auditor
Johannesburg
25 August 2009
National executive:
SP Kana (Chief Executive Officer), TP Blandin de Chalain, DJ Flscher, GM Khumalo, IS Sehoole, S Subramoney, F Tonelli.
Resident director in charge: ER Mackeown
The Companys principal place of business is at 2 Eglin Road, Sunninghill where a list of directors names is available for inspection.
PricewaterhouseCoopers Inc is an authorised financial services provider.
VAT reg.no. 4950174682
page 97
DIRECTORS REPORT
page 98
Directorate
The following were directors of the company for the year under review:
Name
Office
Appointment date
Larry M Nestadt
5 October 2007
Brett M Levy
1 February 2007
Mark S Levy
1 February 2007
Sidney Ellerine*
Non-executive director
5 October 2007
Gary D Harlow
5 October 2007
Reitumetse J Huntley
5 October 2007
Neil N Lazarus SC
Non-executive director
5 October 2007
Peter Mansour
Non-executive director
21 May 2008
Joe S Mthimunye
5 October 2007
Mark V Pamensky
5 October 2007
David B Rivkind
5 October 2007
Herbert C Theledi
Non-executive director
5 October 2007
5 October 2007
Directors interests
The individual interests declared by directors and officers in the companys share capital as at 31 May 2009, held directly or indirectly were
as follows:
Nature of
interest
Direct beneficial
Indirect beneficial
Direct non-beneficial
Indirect non-beneficial
Director
2009
2008
2009
2008
2009
2008
2009
2008
BM Levy
74 340 553
73 290 553
8 272 778
7 272 778
MS Levy
66 933 145
65 883 145
8 272 777
7 272 777
S Ellerine*
15 409 152
15 409 152
2 222 222
2 222 222
HC Theledi
42 959 992
44 992 807
MV Pamensky
7 565 738
6 565 738
LM Nestadt
8 204 674
8 204 674
GD Harlow
3 277 871
3 277 871
14 815
14 815
8 204 673
8 204 673
177 779
177 779
RJ Huntley
2 140 355
2 241 634
DB Rivkind
3 431 669
NN Lazarus
*Mr Ellerine passed away on 17 July 2009. His shares are owned by several trusts.
page 99
The aggregate interest of the current directors in the capital of the company was as follows:
Number of shares
Beneficial
Non-beneficial
2009
2008
2 414 816
2 414 816
page 100
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Investment in associates and joint ventures
Financial asset at amortised cost
Deferred taxation assets
Current assets
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Inventories
Loans receivable
Trade and other receivables
Current tax assets
Cash and cash equivalents
Note
2009
R000
2008
R000
4
5
5
6
7
8
736 634
105 011
202 830
257 495
109 837
54 096
7 365
712 759
69 484
223 544
266 242
81 356
72 133
3 143 109
10
67 449
384 361
29 920
898 571
2 101
1 760 697
2 509 470
5 672
53 163
484 501
7 103
630 687
1 328 344
3 879 743
3 222 229
2 244 120
*
4 404 737
(25 562)
(1 843 912)
(13 399)
(914 399)
9 371
1 231
635 305
2 253 372
(9 252)
1 917 944
*
4 404 737
(1 843 912)
2 552
(898 564)
244 758
1 909 571
8 373
9
7
10
11
12
13
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Treasury shares
Restructuring reserve
Foreign currency translation reserve
Transaction with minority reserve
Equity compensation benefit reserve
Share-based payment reserve
Retained earnings
14
Minorities interest
Non-current liabilities
Deferred taxation
Interest bearing borrowings
Current liabilities
Trade and other payables
Non-interest bearing borrowings
Current tax liabilities
Bank overdraft
Current portion of interest bearing borrowings
Total equity and liabilities
*Less than R1 000.
8
15
16
17
13
15
69 664
49 544
20 120
58 056
55 111
2 945
1 565 959
1 518 853
28 039
3 891
15 176
1 246 229
1 152 969
9 041
71 146
50
13 023
3 879 743
3 222 229
page 101
Note
Revenue
Other income
Changes in inventories of finished goods
Employee compensation and benefit expense
Depreciation, amortisation and impairment charges
Other expenses
2009
R000
2008
R000
15 281 449
22 368
(14 215 840)
(278 970)
(93 220)
(240 940)
12 545 471
69 545
(11 875 606)
(265 003)
(58 670)
(146 240)
Operating profit
Finance costs
Finance income
Share of losses from associates
18
19
19
6
474 847
(112 699)
205 046
(27 445)
269 497
(147 704)
193 281
(17 441)
20
539 749
(174 784)
297 633
(89 841)
364 965
207 792
390 547
(25 582)
180 891
26 901
21
51,13
30,65
page 102
Restructuring
reserve1
R000
Transaction
with
minority
reserve2
R000
Employee
compensation
benefit
reserve
R000
180 891
4 188
(14 893)
288 783
2 364 928
(39 724)
180 891
(39 724)
26 901 207 792
(998)
(998)
(883 671)
(883 671)
(1 636)
Share
premium
R000
Treasury
shares
R000
* 2 079 533
* 2 364 928
(39 724)
* 4 404 737
390 547
(25 562)
Minorities acquired/(disposed
of) during the year
Note
Balance as at 1 June 2007
Shares issued during the year
Share issue costs
Net profit for the year
Dividends
Minorities disposed of during
the year
13
Share
capital
R000
Foreign
currency
translation
reserve
R000
Retained
earnings
R000
Sharebased
payment
reserve
R000
Total
ordinary
shareholders
equity
R000
Minority
interest
R000
Total
equity
R000
(1 636)
2 552
(898 564)
1 909 571
390 547
(25 582)
364 965
(25 562)
(25 562)
1 231
1 231
1 231
9 371
9 371
195
9 566
(15 835)
(15 835)
3 458
(12 377)
(15 107)
(15 107)
(15 107)
(844)
(844)
4 304
3 460
* 4 404 737
(25 562)
9 371
(474)
(2 110)
The restructuring reserve arose as a result of the restatement of group comparatives, as required in terms of the principles of predecessor accounting. This reserve represents the
difference between the fair value of the entities under the groups control and their respective net asset values, as at the assumed restructure date of 1 June 2006.
The transaction with minority reserve relates to the excess payments over the carrying amounts arising on transactions with minority shareholders as these are treated as equity
participants. (Refer to note 6 and 24)
page 103
Note
Cash flows from operating activities
Cash received from customers
Cash paid to suppliers and employees
2009
R000
2008
R000
15 013 566
(14 267 551)
12 193 526
(12 272 774)
746 015
158 507
(4 891)
(232 637)
(79 248)
177 377
(46 575)
(71 350)
666 994
(19 796)
(28 716)
(10)
5 428
(52 264)
(50 098)
(9 523)
(2 321)
5 553
(74 780)
889
(22 898)
(1 391)
11 722
(7 021)
(313 364)
(38 618)
120
12 642
(47 238)
(206 731)
(405 157)
6 583
8 355
(25 562)
(590 076)
(28 031)
1 319 613
(39 724)
(10 624)
661 782
449 639
1 328 294
(21 127)
236 829
1 090 044
1 421
1 756 806
1 328 294
22
19
19
23.1
23.2
6
24
25
13
page 104
1.
page 105
page 106
1.
page 107
Joint ventures
A joint venture is a contractual arrangement whereby two or
more parties undertake an economic activity that is subject to
joint control. Joint control is the contractually agreed sharing
of control over an economic activity, and exists only when the
strategic financial operating decisions relating to the activity
require the unanimous consent of the parties sharing control
(venturers).
The groups interest in its joint venture is accounted for under
the equity method of accounting whereby an interest in jointly
controlled entities is initially recorded at cost and adjusted
thereafter for post-acquisition changes in the groups share of
net assets of the joint venture. The income statement reflects
the groups share of the results of operations of the joint
venture.
Associates
Associates are all entities over which the group has
significant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted for by the
equity method of accounting and are initially recognised at
cost. The groups investment in associates includes goodwill
(net of any accumulated impairment loss) identified on
acquisition.
The groups share of its associates post-acquisition profits
or losses is recognised in the income statement, and
its share of post-acquisition movements in reserves is
recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment. When the groups share of losses in an
associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the group
does not recognise further losses, unless it has incurred
obligations or made payment on behalf of the associate.
Unrealised gains on transactions between the group
and its associates are eliminated to the extent of the
groups interest in the associate. Unrealised losses are
also eliminated to the extent of the groups interest in the
associate unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure
consistency with the policies adopted by the group.
The company financial statements account for associates
at cost less any accumulated impairment.
Dilution gains and losses arising in investments in
associates are recognised in the income statement.
(a)
(b)
Foreign currencies
Functional and presentation currency
Items included in the financial statements of each of the
groups entities are measured using the currency of the
primary economic environment in which the entity operates
(the functional currency). The consolidated financial
statements are presented in rand, which is the companys
functional and presentation currency.
page 108
1.
(b)
(c)
Group companies
The results and financial position of associates (none of
which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
assets and liabilities are translated at the closing rate at
the date of that balance sheet; and
income and expenses are translated at average
exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and
all resulting exchange differences are recognised as a
separate component of equity.
(a)
(b)
page 109
Starter pack assets that have been sold and not yet activated
are accounted for as financial assets as they represent a
contractual right for the group to receive cash.
(c)
(a)
(b)
page 110
1.
(a)
20% 25%
16,67% 25%
25%
25% 33,33%
16,67%
20% 33,33%
16,67%
33,33%
2%
8,33%
Intangible assets
Computer software development
Acquired computer software licences are capitalised on
the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised over their
estimated useful lives (three years).
(b)
page 111
(c)
(d)
(e)
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the groups share of the net
identifiable assets of the acquired subsidiary, associate or
jointly controlled entity at the date of acquisition. If the cost
of acquisition is less than the net assets of the subsidiary
acquired, the difference is recognised directly in the income
statement. Goodwill on the acquisition of subsidiaries is
included in goodwill in the balance sheet. Goodwill on
acquisitions of associates and joint ventures is included
in investments in associates, and investments in joint
ventures respectively.
page 112
1.
Operating leases
Leases in which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating
leases. Payments under operating leases, net of incentives,
are charged to the income statement on a straight-line
basis over the period of the lease. When an operating
lease is terminated before the lease period has expired,
any payment required to be made to the lessor by way of
penalty is recognised as an expense in the period in which
termination takes place.
Inventories
Inventories are stated at the lower of cost or estimated net
realisable value. Cost comprises direct materials and, where
applicable, overheads that have been incurred in bringing the
inventories to their present location and condition, excluding
borrowing costs. The cost of the inventory is determined by
means of the weighted average cost basis. Net realisable
value is the estimate of the selling price in the ordinary course
of business, less selling expenses. Provisions are made for
obsolete, unusable and unsaleable inventory and for latent
damage first revealed when inventory items are taken into use
or offered for sale.
Trade receivables
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A
provision for impairment of trade receivables is established
when there is objective evidence that the group will not be
able to collect all amounts due according to the original
terms of receivables. The amount of the provision is the
difference between the assets carrying amount and the
present value of estimated future cash flows, discounted
at the original effective interest rate. The amount of the
provision is recognised in the income statement.
page 113
Deferred taxation
Deferred taxation is provided using the liability method for all
temporary differences arising between the tax bases of assets
and liabilities and their carrying values for financial reporting
purposes. However, if the deferred income tax arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that
it is probable that future taxable profit will be available against
which the temporary differences can be utilised. Deferred
income tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled
by the group and it is probable that the temporary difference
will not reverse in the foreseeable future.
(a)
(b)
(c)
Sales of services
Sales of services are recognised in the accounting period
in which the services are rendered, by reference to
completion of the specific transaction assessed on the
basis of the actual service provided as a proportion of the
total services to be provided.
(d)
Interest income
Interest income is recognised on a time-proportion basis
using the effective interest method. When a receivable
is impaired, the group reduces the carrying amount to
its recoverable amount, being the estimated future cash
flow discounted at original effective interest rate of the
instrument, and continues unwinding the discount as
interest income. Interest income on impaired loans is
recognised using the original effective interest rate.
(e)
Dividend income
Dividend income is recognised when the right to receive
payment is established.
(a)
Employee benefits
Equity compensation benefit
The group operates an equity settled forfeitable share
incentive plan, under which the entity receives services from
employees as consideration for equity instruments of the
group. The fair value of the services received in exchange for
the grant of forfeitable shares is recognised as an expense.
The total amount to be expensed is determined by the fair
value of the forfeitable shares granted. The total amount
expensed is recognised over the vesting period, which is
the period over which all of the vesting conditions are to be
satisfied. At each balance sheet date, the entity recognises
the impact of any shares that have been forfeited prior to
the end of the vesting period, if any, in the income statement
with a corresponding adjustment to equity.
page 114
1.
(a)
2.
(a)
(b)
(c)
(d)
(b)
(c)
page 115
(d)
(e)
(f)
(g)
3.
Financial risks
In the course of its business, the group is exposed to
a number of financial risks: credit risk, liquidity risk and
market risk (including foreign currency, interest rate
and other price risks). This note presents the groups
objectives, policies and processes for managing its financial
risk and capital.
Credit risk
Credit risk arises because a counterparty may fail to
meet its obligations to the group. The group is exposed
to credit risk on financial assets mainly in respect of
trade receivables, loans receivable and cash and cash
equivalents.
Trade receivables consist primarily of invoiced amounts
from normal trading activities. The group has a diversified
customer base and policies are in place to ensure sales
are made to customers with an appropriate credit history.
Individual credit limits are set for each customer and the
utilisation of these credit limits is monitored regularly.
Where necessary, a provision for impairment is made. A
significant portion of the groups customer base is made up
of major retailers, with the balance of the customer base
being widely dispersed.
page 116
3.
Less than
1 month or on
demand
R000
More than
1 month but
not exceeding
1 year
R000
Payable in:
More than
1 year but not
exceeding
2 years
R000
More than
2 years but
not exceeding
5 years
R000
More than
5 years
R000
10 434
596 783
3 891
611 108
4 742
871 029
875 771
4 631
4 631
16 755
16 755
2008
Interest bearing borrowings
11 285
Non-interest bearing borrowings
8 539
Trade and other payables*
171 637
Bank overdraft
50
Total
191 511
*Trade and other payables exclude non-financial instruments.
1 738
502
925 978
928 218
1 608
1 608
1 337
1 337
2009
Interest bearing borrowings
Non-interest bearing borrowings
Trade and other payables*
Bank overdraft
Total
Market risk
The group is exposed to risks from movements in foreign exchange rates and interest rates that affect its assets, liabilities and
anticipated future transactions.
page 117
3.
Financial liabilities
Interest bearing borrowings
Trade and other payables*
Bank overdraft
Net financial position
2008
Financial assets
Cash and cash equivalents
Trade and other receivables*
Loans receivable (including
loans to associates)
Financial assets at fair value
through profit or loss
Financial assets at amortised
cost
Financial liabilities
Interest bearing borrowings
Non-interest bearing
borrowings
Trade and other payables*
Bank overdraft
Net financial position
ZAR
R000
USD
R000
AUD
R000
MxM
R000
NgN
R000
MZN
R000
Total
R000
1 625 586
725 645
57 959
68 835
95
18
650
1
71 932
23 022
4 475
3 231
1 760 697
820 752
34 421
19 710
54 131
10
10
117 546
2 503 208
2 419
148 923
113
651
94 954
1 580
9 286
121 545
2 757 135
18 364
1 128 684
3 891
1 150 939
1 352 269
18 198
84 323
102 521
46 402
128
128
(15)
160
160
491
232 752
232 752
(137 798)
36 562
21 765 1 467 812
3 891
21 765 1 508 265
(12 479) 1 248 870
ZAR
R000
USD
R000
EUR
R000
CDF
R000
MZN
R000
Total
R000
1 313 550
553 859
5 933
20 550
8 456
2 686
404
9 525
1 328 344
586 620
5 788
20 149
830
26 777
5 320
352
5 672
119 134
1 997 661
3 227
49 859
12 324
2 935
12 864
125 296
2 072 709
15 968
15 968
544
1 052 172
50
1 068 734
928 927
16 886
16 886
32 973
8 497
10 020
18 517
(6 193)
18 538
18 538
(5 674)
9 041
1 097 616
50
1 122 675
950 034
*Trade and other receivables, and trade and other payables exclude non-financial instruments.
With a 10% strengthening or weakening in the rand against all other currencies, profit before tax would have decreased or increased
by R10,3 million respectively (2008: R2,1 million).
Capital risk
The companys objectives when managing capital are to safeguard the companys ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust this capital structure, the company may issue new shares, adjust the amount of dividends paid to
shareholders, return capital to shareholders or sell assets to reduce debt.
The group defines capital as capital and reserves and non-current borrowings.
The company is not subject to externally imposed capital requirements.
There were no changes to the groups approach to capital management during the year.
Fair value measurement
For all short-term financial assets and liabilities, the carrying amount is regarded as an approximation of the fair value.
The fair value of all non-current loans receivable and borrowings are calculated using a discounted cash flow model based on
prevailing market interest rates.
page 118
Computer
equipment
R000
4.
Furniture
and fittings
R000
Motor
vehicles
R000
Office
equipment
R000
Terminals
R000
12 088
13 855
(6 094)
(6 471)
129
7 377
4 373
(748)
(2 081)
131
9 658
10 580
(2 574)
(3 941)
(277)
2 622
2 436
(283)
(1 113)
35
7 896
6 313
(438)
(2 603)
13 507
9 052
13 446
3 697
11 168
At 31 May 2009
Cost
Accumulated depreciation
Carrying amount
29 544
(16 037)
13 507
12 590
(3 538)
9 052
19 389
(5 943)
13 446
5 584
(1 887)
3 697
21 870
(10 702)
11 168
5 748
12 189
(762)
(5 494)
407
12 088
3 150
6 148
(583)
(1 393)
55
7 377
6 918
7 251
(1 862)
(2 899)
250
9 658
1 339
2 027
(172)
(605)
33
2 622
5 879
3 048
(306)
(1 067)
342
7 896
At 31 May 2008
Cost
Accumulated depreciation
20 744
(8 656)
10 365
(2 988)
14 309
(4 651)
3 919
(1 297)
9 940
(2 044)
Carrying amount
12 088
7 377
9 658
2 622
7 896
Property, plant and equipment include the following amounts where the company is a lessee under a finance lease:
2009
R000
2008
R000
2 579
1 601
Motor vehicles
Cost
Accumulated depreciation
Carrying value at 31 May
These assets have been pledged as surety against the liability.
(696)
1 883
(657)
944
page 119
Leasehold
improvements
R000
Vending
machines
R000
Media
equipment
R000
Plant and
machinery
R000
Land
R000
Buildings
R000
Total
R000
2 893
8 831
(137)
(1 964)
(349)
20 300
26 545
(2 475)
(6 138)
5 207
798
(202)
(1 710)
587
234
(111)
856
976
69 484
74 941
(12 951)
(26 132)
(331)
9 274
38 232
4 093
710
1 832
105 011
11 253
(1 979)
9 274
50 872
(12 640)
38 232
9 083
(4 990)
4 093
812
(102)
710
1 832
1 832
162 829
(57 818)
105 011
358
3 055
(248)
(277)
5
2 893
13 283
13 594
(2 882)
(3 695)
20 300
1 846
4 800
(1 439)
5 207
25
2 654
(1 996)
(96)
587
1 176
(1 176)
3 794
(2 937)
856
43 516
54 766
(12 924)
(16 965)
1 091
69 484
3 239
(346)
25 995
(5 695)
7 787
(2 580)
716
(129)
856
97 870
(28 386)
2 893
20 300
5 207
587
856
69 484
page 120
5.
Customer Distribution
listing agreement
R000
R000
Computer
software
R000
Internally
generated
software
R000
Franchise
fees
R000
Customer
relationships
R000
Supplier
relationships
R000
Total
R000
Goodwill
R000
Trademarks
R000
266 242
2 489
(8 235)
(279)
(2 722)
5 966
3 278
(4 142)
(281)
7 721
21 087
(6 264)
(3 565)
11 336
(1 642)
(2 174)
(80)
49 961
14 817
(1 345)
(9 497)
(364)
11 996
14 174
(929)
(3 128)
(37)
1 901
(121)
133 607
(39 755)
1 056
(746)
489 786
55 845
(12 151)
(65 827)
(4 606)
(2 722)
257 495
4 821
18 979
7 440
53 572
22 076
1 780
93 852
310
460 325
257 495
257 495
11 598
(6 777)
4 821
47 765
(28 786)
18 979
11 806
(4 366)
7 440
75 808
(22 236)
53 572
25 812
(3 736)
22 076
2 418
(638)
1 780
154 907
(61 055)
93 852
46 907
225 828
(6 493)
266 242
6 004
1 493
(1 531)
5 966
17 601
924
(10 804)
7 721
3 973
8 375
(1 223)
211
11 336
43 278
13 259
(372)
(6 208)
4
49 961
1 257
11 640
(901)
11 996
2 022
(121)
1 901
154 907
(21 300)
133 607
1 491
(435)
1 056
119 020
419 939
(372)
(42 523)
215
(6 493)
489 786
266 242
266 242
8 206
(2 240)
5 966
29 225
(21 504)
7 721
13 102
(1 766)
11 336
59 989
(10 028)
49 961
12 960
(964)
11 996
2 022
(121)
1 901
154 907
(21 300)
133 607
1 491
(435)
1 056
548 144
(58 358)
489 786
Intangible assets
At 31 May 2009
Cost
Accumulated amortisation
Carrying amount
Year ended 31 May 2008
Opening carrying amount
Additions
Disposals
Amortisation charge
Translation differences
Adjustment*
Closing carrying amount
At 31 May 2008
Cost
Accumulated amortisation
Carrying amount
* This adjustment arose due to a reversal of the present value of a contingent purchase price liability that is no longer applicable due to the
restructuring of the group.
** Goodwill in respect of Content Connect Africa has been reduced as a result of warranty claims that have materialised.
page 121
2009
R000
2008
R000
81 356
61 804
122 357
(27 445)
(26 105)
(1 882)
527
15
(7 297)
3 544
(8 949)
(17 441)
(17 426)
(21)
6
(120)
(336)
7 021
(9 043)
82 210
(19 919)
Movement in loans
Loans granted to associates and joint ventures
Loans repaid by associates
Loans received from associates and joint ventures
Prepayment in prior period for additional interest purchased
Unrealised foreign exchange gains on loans to associates
4 501
(914)
(1 266)
(57 000)
950
50 724
(12 106)
853
(53 729)
39 471
109 837
81 356
Note
6.
24
The directors believe that the carrying value of the shares approximates their fair value.
The loans are neither past due nor impaired with a low risk of default.
* Less than R1 000.
Associates
2009
Shares in associates acquired during the year:
Date
acquired
1 June 2008
1 October 2008
1 October 2008
17 December 2008
Effective
percentage
acquired
3,85
17,25
50
25
page 122
6.
Name
India
United
Smart Voucher Limited
Kingdom
Dual Data (Proprietary) Limited South Africa
BLK Risk Services
(Proprietary) Limited
South Africa
2008
Oxigen Services India
(Private) Limited
India
Net book
value
R000
Assets
R000
Liabilities
R000
Revenues
R000
167 511
92 610
1 434 602
(64 078)
37,22
61 920
122 343
1 341
110 888
1 340
45 112
3 954
(12 009)
16,9
50
40 851
1 324
429
1 247
893
25
220
208 093
128 070
1 057 732
(56 175)
35
81 356
Country of
incorporation
2009
Oxigen Services India
(Private) Limited
Effective
percentage
interest
held
Profit/
(loss)
R000
There are no contingent liabilities relating to the groups interest in associates. For details on related party transactions refer to note 29.
On 14 November 2007, the group increased its shareholding in the following associates to obtain a controlling interest:
House of Business Solutions (Proprietary) Limited
Cellfind (Proprietary) Limited
Africa Prepaid Services (Proprietary) Limited
Virtual Voucher (Proprietary) Limited
Datacel Direct (Proprietary) Limited
Refer to note 24 for details of these acquisitions.
Joint ventures
Shares in joint ventures acquired during the year:
Date
acquired
1 June 2008
Effective
percentage
acquired
50
Effective
percentage
disposed
40
Effective
percentage
interest
held
Net book
value
R000
Country of
incorporation
Assets
R000
Liabilities
R000
Revenues
R000
2009
Premet Cellular
(Proprietary) Limited
SA
1 026
6 998
14 731
(1 061)
40
Demtrade 11
(Proprietary) Limited
SA
7 554
6 382
9 086
1 121
50
6 846
SA
2 585
5 523
19 651
(1 774)
40
SA
2 303
7 214
297 945
(2 602)
40
2008
The Hub Pretalk
(Proprietary) Limited
Premet Cellular
(Proprietary) Limited
There are no contingent liabilities relating to the groups interest in joint ventures.
* Less than R1 000.
page 123
2009
R000
7.
2008
R000
125 296
45 266
(49 399)
382
121 545
(67 449)
84 383
114 855
(74 412)
470
125 296
(53 163)
54 096
72 133
The credit risk in respect of the balance at the end of the year is considered low.
This is based on the historical trends of connections of starter packs in the market.
Capital
allowances
R000
8.
Fair
value
gains
R000
Provisions
R000
Tax
losses
R000
Prepayments
R000
Other
R000
Total
R000
Deferred taxation
At 31 May 2007
Charge/(credited) to income statement
Tax rate change
Acquisition of subsidiary (note 24)
At 31 May 2008
Charge/(credited) to income statement
Disposal of subsidiary (note 25)
Foreign currency translations
(93)
951
(9)
337
1 186
1 677
18 442
(9 915)
(467)
46 951
55 011
(14 544)
(1 435)
(1 128)
(244)
(541)
(3 348)
(427)
68
(99)
(18)
(1 162)
1
(553)
(1 732)
(9 334)
77
86
27
38
151
1 238
4 103
234
(494)
3 843
6 030
384
1 998
At 31 May 2009
2 863
40 467
(3 806)
(10 989)
1 389
12 255
2009
R000
21 085
(10 993)
(1 175)
46 194
55 111
(15 360)
452
1 976
42 179
2008
R000
1 080
1 996
(2 164)
(10 488)
(328)
2 539
(7 365)
1 784
38 472
(1 642)
(502)
1 716
9 716
1 186
55 011
(3 348)
(1 732)
151
3 843
49 544
55 111
42 179
55 111
Deferred tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit through
future taxable profits is probable. The group did not recognise deferred income tax assets of R17,1 million (2008: R5,9 million) in
respect of losses amounting to R55 million (2008: R20,5 million) that can be carried forward against future taxable income.
Deferred income tax liabilities of R2,1 million (2008: R2,3 million) have not been recognised.
page 124
Note
9.
2008
R000
5 672
10
(5 427)
32
28
(305)
16 183
1 391
(10 527)
(1 375)
25
10
5 672
384 361
484 501
384 361
484 501
29 120
800
3 593
3 510
29 920
7 103
10.
2009
R000
Inventories
Airtime and related products
A general notarial bond is held by Investec Bank Limited over airtime up to
R550 million (2008: R250 million).
11.
Loans receivable
Interest free
Bearing interest at the prime linked interest rates
Loans are unsecured and have no fixed terms of repayment. Included in interest-free
loans is an amount of R28 million to ZOK Cellular (Proprietary) Limited (ZOK). The loan
to ZOK in the prior year of R27 million was included in trade receivables.
12.
726 862
(3 192)
723 670
169 456
5 445
556 974
(5 299)
551 675
55 703
23 309
898 571
630 687
Gross
R000
Impairment
R000
682 922
15 101
8 479
2 679
18 650
727 831
3
17
1 717
12
1 443
3 192
527 010
10 123
12 668
4 498
11 413
25
53
622
4 599
565 712
5 299
Receivables in respect of starter packs are included in fully performing debtors above. Ongoing activation revenue due to these
debtors is set off against the receivable balance as and when it is earned by them.
The effect of discounting of the trade receivables balance is not taken into account in the above table.
The trade receivables that are neither past due nor impaired are considered to have a low risk of default.
page 125
12.
2009
R000
2008
R000
5 299
2 876
(4 983)
1 071
613
3 815
(200)
3 192
5 299
Cash at bank
Cash on hand
1 751 775
8 922
1 317 963
10 381
Favourable balances
Bank overdraft
1 760 697
(3 891)
1 328 344
(50)
1 756 806
1 328 294
13.
The PACS facility granted by First National Bank is secured by a cession of cash to the value of R1,2 million.
Cash and cash equivalents of R1 282 million (2008: R1 055 million) are restricted.
14.
2009
Number
of shares
2008
Number
of shares
2009
R000
2008
R000
(5 201 713)
*
*
Share capital
Authorised
Total authorised share capital of ordinary shares
(par value of R0,000001 each)
Issued
Balance at the beginning of the year
Shares issued during the year
Shares acquired during the year
Balance at the end of the year
The company acquired 5 201 713 shares on the Johannesburg stock exchange in order to grant forfeitable shares to employees
and directors.
The amount paid to acquire these shares was R25 710 333. An amount of R25 561 982 has been deducted from shareholders
equity. These shares are held as treasury shares. (The difference of R148 351 relates to shares held by equity accounted group
companies.) See note 30 for details on the forfeitable shares.
The directors of the company have unrestricted authority until the following annual general meeting to allot up to 3% of the
number of ordinary shares issued in the company as at 31 May 2008, subject to the provisions of section 221 of the Companies
Act, 1973, and the JSE Listings Requirements.
page 126
14.
Number
Issue
price
per share
R
Share
capital
R000
Share
premium
R000
5,50
1 045 724
14 545 455
5,50
80 000
6,75
6,75
*
*
1 000 000
239 204
2 364 928
15.
2009
R000
2008
R000
206
608
2 221
32 261
35 296
(15 176)
794
3 918
11 256
15 968
(13 023)
20 120
2 945
101
134
427
514
235
(29)
941
(147)
206
794
380
306
1 855
2 918
686
(78)
4 773
(855)
608
3 918
The group did not default on any loans or finance lease liabilities, or breach any terms of the underlying agreements during the period.
Liabilities under non-cancellable finance leases
Liabilities under capitalised finance leases are payable over periods of one to five years at effective interest rates linked to the prime
interest rate per annum. They are secured by the motor vehicles to which they relate.
Instalment sale liabilities
All instalment sale liabilities are secured over the plant and equipment to which they relate, are repayable in monthly instalments and
are subject to interest at prime linked rates.
Bank borrowings
The bank borrowings are repayable in 24 fixed monthly instalments. The loan bears interest at 12% per annum.
Other borrowings
Other borrowings are unsecured and have no fixed terms of repayment. These borrowings bear interest at prime linked rates.
page 127
16.
2008
R000
1 362 803
1 072 565
17.
2009
R000
Accruals
58 655
45 670
Sundry creditors
67 628
23 694
VAT
29 767
11 040
1 518 853
1 152 969
Bank borrowings
The loan is unsecured. The bank has the right to request full payment in cash unless
otherwise negotiated.
300
Other borrowings
8 741
9 041
11 951
7 590
4 434
18.
Operating profit
The following items have been charged/(credited) in arriving at operating profit:
Audit fees services as auditors
Audit fees other
Consulting fees
Courier and postage
Excess of acquirers interest in the net fair value over cost
Fair value movements on financial assets at fair value through profit or loss
14 008
2 383
7 027
4 599
(2 585)
(32)
1 375
(7 851)
(520)
(1 970)
(1 969)
6 432
9 312
(43 000)
Impairment of loans
1 261
6 090
3 244
Insurance
12 833
5 189
Legal fees
6 261
1 978
(2 335)
Loan release
Loss on disposal of intangible asset
967
640
422
4 933
4 614
1 468
(4 089)
(8 157)
6 146
2 356
24 831
12 140
Overseas travel
15 761
7 861
(352)
(244)
3 883
711
3 996
1 927
page 128
2009
R000
19.
Finance (income)/costs
Interest received
Bank
Loans
Other
Discounting of receivables
Interest paid
Bank
Loans
Finance leases
Other
Discounting of payables
20.
(157 759)
(333)
(415)
(46 539)
(175 496)
(959)
(922)
(15 904)
(205 046)
(193 281)
1 477
2 231
576
607
107 808
34 194
9 596
645
2 140
101 129
112 699
147 704
(92 347)
(45 577)
190 144
101 759
190 406
(262)
101 759
(15 360)
(12 168)
(15 360)
(12 168)
Taxation
Current tax
current year
prior year adjustment
Deferred tax
current year
250
174 784
89 841
539 749
297 633
Tax at 28%
Income not subject to tax
Expenses not deductable for tax purposes
Secondary tax on companies
Capital gains
Effect of tax rate changes
Utilisation of previously unrecognised tax losses
Tax effect of assessed losses not recognised
Share of losses from associates
Prior year adjustment
Effect of different tax dispensations
151 130
(1 457)
7 293
(174)
(1 468)
12 944
7 685
(262)
(907)
83 337
(3 504)
8 187
250
(1 453)
(1 175)
(3 532)
3 391
4 883
(543)
Tax charge
174 784
89 841
390 547
763 834
51,13
180 891
590 264
30,65
STC
21.
2008
R000
b) Headline
Headline earnings are calculated applying the principles contained in SAICA circular 8/2007. The weighted average number of shares
used is as for the basic earnings per share figure discussed above.
page 129
21.
539 749
640
4 933
(352)
Tax
R000
(174 784)
(179)
(1 237)
Minorities
R000
25 582
(5)
Headline
earnings
R000
390 547
456
3 696
(352)
394 347
763 834
51,63
2008
audited
Profit before
tax and
minorities
R000
297 633
422
Tax
R000
(89 841)
(118)
Minorities
R000
(26 901)
(2 585)
Headline
earnings
R000
180 891
304
(2 585)
178 610
590 264
30,26
390 547
761 159
5 152
766 361
50,96
394 347
766 361
51,46
page 130
21.
2009
unaudited
R000
2008
unaudited
R000
d) Core (unaudited)
Core earnings per share is calculated after adding back the amortisation of intangible assets
as a consequence of the purchase price allocations exercised in terms of IFRS 3: Business
Combinations, the costs incurred in terms of the Management Bonus Settlement Agreement
and the termination of the Otter Mist Trading cc consulting agreement, as explained in the
pre-listing statement.
Reconciliation between net profit for the period and core net profit for the period:
Net profit for the period
Management bonus settlement net of tax
Amortisation on intangibles raised through business combinations net of tax
Cancellation of onerous contract
390 547
36 653
180 891
57 600
22 937
9 000
427 200
270 428
22.
403 782
427 200
(23 418)
763 833 909
55,93
301 409
270 428
30 981
590 263 513
45,81
2009
R000
2008
R000
474 847
269 497
26 132
65 827
46 539
(107 808)
1 261
640
967
4 581
(32)
6 022
7 342
16 965
42 523
53
(43 000)
15 904
(101 129)
422
(2 585)
1 375
65 851
(307 977)
454 907
3 844
3 072
(194 417)
(252 084)
205 078
5 032
(40 913)
746 015
(1 969)
(79 248)
page 131
2009
R000
23.
23.1
Taxation paid
Balance outstanding at beginning of year
Translation differences
Taxation charge
Acquisition of subsidiaries
Disposal of subsidiaries
Net payable outstanding at end of year
23.2
71 146
(2 096)
190 144
(619)
(25 938)
31 617
50
102 009
8 820
(71 146)
232 637
71 350
Acquisition of associates
Acquisition of associates and joint ventures
Cash advanced in the prior year
Cash paid in current year
24.
24.1
2008
R000
122 357
(70 093)
52 264
Business combinations
Acquisition of subsidiaries and start-up operations
31 May 2009
Initial acquisition
Date acquired
Blue Label**
Data
Solutions
Celebia**
Holdings
Blue Label**
Telecoms
Blue Label**
USA Inc
USA, LLC
Answers
Direct
Distributor of
Company
prepaid
distributes
cellular
Blue Label
airtime in
products
Mexico and services
in the
Australasian
markets
Call centre
operation
Provider of
data for
use in call
centres
Investment
holding
company
situated in
Cyprus
Investment
holding
company
situated in
the USA
Africa
Prepaid
Services
Nigeria**
Limited
Distributor of Distributor of
prepaid
prepaid
calling cards
cellular
in the USA airtime and
starter
packs in
Nigeria
% acquired
18 July
2008
70
19 August
2008
50,5
1 August
2008
80
1 August
2008
81
1 July
2008
100
2 December
2008
100
2 December
2008
50,01
1 December
2008
51
Assets
Liabilities
R000
20 534
1 358
R000
119
3 209
R000
2 120
1 478
R000
3 595
709
R000
35
1 386
R000
39 947
50 948
R000
119 481
90 679
R000
224 401
233 430
Revenue
Profit/(loss) after tax since acquisition
292
(6 098)
(3 637)
7 037
460
3 004
1 625
(101)
(1 559)
134 263
(12 022)
110 713
(15 972)
Had these acquisitions of subsidiaries been made at the beginning of the financial year they would have contributed R7,037 million to revenue and (R5,036) million loss to
net profit after tax. The actual contribution to revenue and net profit after tax for the year was R7,037 million and (R3,177) million loss. (This excludes the effect of start-up
operations).
** These represent start-up operations.
page 132
Answers
Direct
R000
Blue Label**
Data
Solutions
R000
Celebia**
Holdings
R000
Blue Label**
Telecoms
Blue Label**
USA Inc
USA, LLC
R000
R000
Africa
Prepaid
Services
Nigeria**
Limited
R000
Total
R000
30 404
1 109
149
31 663
30 404
(9 121)
21 283
11
1 964
24
(2 511)
(68)
529
(261)
268
1 659
150
800
(800)
150
(30)
120
30
*
*
*
19 856
54
910
(19 856)
(1 234)
(121)
(121)
814
814
(399)
415
161
21 820
800
54
1 748
(23 167)
(1 302)
31 777
(9 811)
21 966
1 689
5 861
27 144
27 144
1 927
1 927
150
150
130
9
49 630
49 639
415
(415)
5 991
29 646
49 630
(415)
78 861
(30 404)
(3 260)
(1 109)
818
150
(1)
(149)
49 490
(31 663)
47 198
page 133
Virtual
Voucher
Africa
Prepaid
Services
House of
Business
Solutions
Group
Provider of a
Distributor of Holding company
fully integrated prepaid cellular
of Datacel
prepaid voucher
airtime and
Direct group.
management Vodacom starter
The group is
system packs in Africa,
a provider of
operating in
excluding direct marketing
over 500 Engen
South Africa
of short-term
petroleum
insurance
forecourts
products to
various
databases
Cellfind
Provider of
location-based
services
CNS
Call Centre
Call centre
operations
specialising in
insurance policy
sales
Content
Connect
Africa
Provider of
content for
mobile
devices
Little River
Trading 181
The procurement, selling
and distribution
of prepaid
products for
inter alia fixed
and mobile
networks and all
business
ancillary thereto
POS
Control
Services
Assembles and
sells point-ofsale devices
Initial acquisition
Date acquired
% acquired
1 June
2006
15%
1 June
2006
28%
1 June
2006
33,3%
1 June
2006
42,7%
14 November
2007
85%
R000
32 538
15 556
365 015
14 November
2007
44%
R000
49 243
61 374
212 471
14 November
2007
66,7%
R000
303
42
14 November
2007
57,3%
R000
25 131
5 122
45 039
1 January
2008
80%
23 January
2008
100%
1 March
2008
100%
1 March
2008
52%
Further
acquisition
Date acquired
% acquired
Assets
Liabilities
Revenue
Profit/(loss)
after tax since
acquisition
4 327
220
8 231
18 453
R000
10 523
2 341
11 044
R000
7 595
3 685
4 500
R000
56 254
54 165
342 271
R000
651
719
609
1 062
(32)
2 089
(68)
page 134
CNS
Call Centre
R000
Content
Connect
Africa
R000
Little River
Trading 181
R000
POS
Control
R000
Total
R000
(5 296)
2 973
2 920
4 614
6 145
11 356
183
35
2 774
1 366
3 069
669
117
2 002
718
248
667
7 528
4 320
13 043
15 069
(1 644)
(8 735)
29 875
1 127
10 265
20 741
553
(8 365)
(17 924)
(31 904)
28 289
3 319
1 209
4 428
5 313
(134)
(7 921)
(16 344)
(5 332)
62 686
9 664
128
(17 564)
(14 967)
924
5 488
(259)
6 387
2 983
(1 788)
(37)
(5 817)
38 732
(10 845)
166 893
9 934
1 209
23 308
52 885
5 313
547
(46 742)
(35 949)
(66 755)
12 655
11 481
(2 365)
19 485
46 680
7 119
(1 424)
8 540
27 887
133 847
(3 789)
(2 703)
2 478
(5 651)
(3 167)
(9 043)
9 952
11 594
13 834
43 513
5 695
8 540
27 887
121 015
16 354
11 728
12 705
13 296
44 876
79 897
101 251
21 406
5 660
21 460
62 113
175 186
215 560
38 034
(19 125)
18 909
37 595
(23 925)
13 670
138 607
(68 821)
69 786
166 170
(137 170)
29 000
11 355
11 355
30 000
30 000
90 000
90 000
511 761
(249 041)
262 720
5 296
(2 973)
(2 920)
(4 614)
(6 145)
(11 356)
24 205
10 697
66 866
24 386
11 355
23 855
90 000
251 364
Initial acquisition
Date acquired
% acquired
Assets
Liabilities
Revenue
Profit/(loss) after tax since acquisition
1 October 2008
20
R000
13 615
2 019
26 916
1 507
page 135
Minority interests
Fair value of net assets acquired
Amounts transferred to transactions with minority reserve
Total purchase consideration
Settled in cash
Cash outflow on acquisition
CNS
Call Centre
R000
2 005
2 005
895
2 900
2 900
2 900
Total
R000
2 005
2 005
895
2 900
2 900
2 900
Budding
Trade
1170
Ventury
Group
31 May 2008
The Prepaid
Company
Initial acquisition
Date acquired
% acquired
Further acquisition
Date acquired
% acquired
Date acquired
% acquired
Date acquired
% acquired
Assets
Liabilities
Revenue
Profit/(loss) after tax
since acquisition
Matragon
Kwikpay SA
The Matragon is
procurement,
the holding
selling, company of
distribution
Comm
of prepaid
Express
products for Services SA
inter alia fixed
which is a
and mobile
distributor
networks and
of prepaid
all business airtime and
ancillary other prepaid
thereto products and
starter packs.
Distribution
channels
include
terminals,
vending
machines
and software
embedded on
POS devices
Supply of
electronic
vouchers
and related
services
1 June
2006
69,6%
1 June
2006
50%
1 June
2006
60%
Velociti
Blue Label
One
Call centre
Focus on
Company
Group
operations
technology holds Telkom
company
specialising strategy and
licence consisting of:
in insurance new product
1. Ventury
policy sales development
Group
and cellular
2. Cigicell
contract
3. iVeri
sales
Distributor
of prepaid
airtime
through own
terminals.
Multi-channel
payment and
transaction
processing
group
1 June
2006
51%
1 June
2006
75%
1 June
2006
50%
1 June
2006
90%
22 April
2008
10%
R000
R000
R000
R000
R000
R000
R000
2 311 711
1 973 312
10 342 528
100 264
378 312
331 916
4 132 280
23 579
107 615
88 048
630 302
7 121
13 086
14 058
32 569
2 736
9 685
17 611
(3 596)
137 184
41 454
1 638 497
5 476
page 136
Velociti
R000
Blue Label
One
R000
Budding
Trade
1170
R000
Ventury
Group
R000
Total
R000
791
791
(1 556)
(1 556)
*
*
10 992
10 992
150 083
150 083
71 265
7 185
11 556
3 000
708 485
97 000
(48 500)
48 500
48 500
334
1 125
(1 125)
7 185
(3 592)
3 593
3 593
10 000
(10 000)
3 000
(1 500)
1 500
1 500
(2 585)
8 407
8 407
8 407
(2 251)
856 317
(794 317)
62 000
62 000
E-Voucha
30 November
2008
51
E-Voucha
R000
iVeri
31 October
2008
51
iVeri
R000
Polsa
31 March
2009
50
Polsa
R000
Total
R000
4
535
1 140
2 500
83
13 145
384
(205)
(1 923)
(16 352)
(689)
338
2 499
2 148
352
2 500
1 777
635
50
132
68
(300)
(42)
(861)
1 459
(687)
2 835
3 607
(607)
3 000
12 376
4 611
1 759
305
12 035
11 886
(20 228)
(577)
(14 161)
8 006
(3 999)
400
4 407
(4 326)
81
14 157
5 781
2 949
2 500
305
12 118
25 163
452
(205)
(22 451)
(619)
(31 374)
8 776
(4 348)
5 734
10 162
(4 581)
5 581
To be settled
Received in cash
Less: Cash and cash equivalents in subsidiary
(1 071)
1 429
201
3 000
(1 777)
(81)
(12 376)
(1 152)
4 429
(13 952)
1 630
1 223
(12 376)
(9 523)
Minority interests
Fair value of net assets acquired
Amounts transferred to transactions
with minority reserve
Goodwill/(excess of acquirers interest
in the net fair value over cost)
Total purchase consideration
Settled in shares
Settled in cash
Cash flow on acquisition
The Prepaid
Company
R000
Matragon
R000
Kwikpay SA
R000
114 121
114 121
25 735
25 735
615 479
729 600
(729 600)
25.
Disposal of subsidiaries
31 May 2009
Date disposed
% disposed
page 137
26.
2009
R000
2008
R000
23 859
61 399
11 175
16 589
57 555
7 818
10 670
13 158
15
120 276
6 321
10 586
46
98 915
Commitments
Future operating lease commitments:
The group leases various offices and warehouses under non-cancellable operating
lease agreements. The lease terms are between 1 and 5 years, and the majority of lease
agreements are renewable at the end of the lease period at market rate.
The group also leases various plant and machinery under cancellable operating lease
agreements. The group is required to give a six-month notice for the termination of the
majority of these agreements. The lease expenditure charged to the income statement
during the year is disclosed in note 18.
The future aggregate minimum lease payments under non-cancellable operating leases are
as follows:
Premises
Payable within one year
Payable in two to five years
Payable in greater than five years
Equipment
Payable within one year
Payable in two to five years
Payable in greater than five years
27.
page 138
27.
2009
R000
2008
R000
2 475
6 601
965
6
493
280 386
15 594
1 650
74 875
1 104
91
105
3 356
18
2 796
204
103
19 911
4 996
1 519
2 550
54
3 002
41
180
160
414
146
249
401
469
3 210
1 954
119
108
4 449
1 200
101
page 139
27.
2009
R000
2008
R000
56
69
3 664
1 810
194
1 947
1 880
828
240
1 767
19 710
4 353
27 866
19 673
27 271
1 266
118
282
159
1 105
4 147
3 476
44
64
310
1 272
2 850
188
16
113
page 140
28.
Services as
directors of
Blue Label
Telecoms
Limited
R000
Salary and
allowances
R000
Bonuses and
performance
related
payments
R000
Other
benefits
R000
Subtotal
R000
5 210
5 215
3 824
1 953
16 202
1 387
1 387
75
69
29
29
202
5 285
5 284
3 853
3 369
17 791
600
300
465
315
340
362
195
230
2 807
2 807
16 202
1 387
202
600
300
465
315
340
362
195
230
2 807
20 598
2 763
2 763
2 026
1 034
8 586
3 360
3 360
1 429
735
8 884
37
37
16
16
106
6 160
6 160
3 471
1 785
17 576
325
230
330
205
228
233
150
115
1 816
1 816
8 586
8 884
106
325
230
330
205
228
233
150
115
1 816
19 392
Directors emoluments
For the year ended 31 May 2009
Executive directors
Levy, BM
Levy, MS
Pamensky, MV
Rivkind, DB
Non-executive directors
Nestadt, LM
Ellerine, S
Harlow, GD
Huntley, RJ
Lazarus, NN
Mansour, P
Mthimunye, J
Theledi, HC
Tyalimpi, LM
Non-executive directors
Nestadt, LM
Ellerine, S
Harlow, GD
Huntley, RJ
Lazarus, NN
Mansour, P
Mthimunye, J
Theledi, HC
Tyalimpi, LM
*The sum of R80 million was paid to Brett and Mark Levy in lieu of their pre-listing contractual bonus entitlements. The R80 million was used to acquire BLT shares.
page 141
Cancellation
of pre-listing
management
bonus
participation
agreement*
R000
Other
benefits
from
subsidiaries
R000
Corporate
finance and
legal fees
for services
rendered to
Blue Label
Telecoms
Limited
subsidiaries
R000
5 285
5 284
3 853
3 369
17 791
1 330
1 330
1 330
600
300
465
315
1 670
362
195
230
4 137
21 928
40 000
40 000
80 000
23
25
10
8
66
200
201
200
101
702
50 384
49 484
6 454
2 822
109 144
80 000
66
600
1 219
1 819
1 819
702
325
230
930
235
1 447
278
150
140
3 735
112 879
Bonuses and
performancerelated
payments
from
subsidiaries
R000
Services as
directors of
subsidiaries
of Blue Label
Telecoms
Limited
R000
Salary and
allowances
from
subsidiaries
R000
4 001
3 098
1 752
403
9 254
1 021
525
1 546
30
45
25
100
100
9 254
1 546
Retirement
and related
benefits
from
subsidiaries
R000
Total
R000
page 142
29.
Segmental summary
The groups segment reporting follows the organisational structure as reflected in its internal management reporting systems, which
are the basis for assessing the financial performance of the business segments and for allocating resources to the business segments.
Managements assessment of the groups organisational structure takes the geographical location of the segments into account. All
reporting segments located outside of South Africa are included in the International distribution segment. Operations included in all other
segments are located within South Africa.
At 31 May 2009, the group is managed on the basis of five main business segments:
South African distribution, which includes the distribution of physical and virtual prepaid airtime of the South African mobile network
operators and Telkom, and the distribution of starter packs in South Africa.
International distribution, which includes international distribution of physical and virtual prepaid airtime in India and Africa, and the
distribution of starter packs in Africa.
Technology, which includes technological innovation, development and support for the operations of the group.
Value-added services, which includes other value-added services of the group, leveraging off its existing products and distribution
network as well as the development of new mobile services to take to market.
Corporate, which includes head office administration.
Transactions between reportable segments are conducted at arms length.
Total
2009
R000
2009
R000
2008
R000
The segment results for the year ended 31 May are as follows:
Total segment revenue
Inter-segment revenue
25 198 131
(9 916 682)
18 044 759
(5 499 288)
24 038 712
(9 839 681)
17 451 794
(5 490 224)
Revenue
15 281 449
12 545 471
14 199 031
11 961 570
Segment result
Operating profit before depreciation, amortisation and impairment
charges
Depreciation and amortisation and impairment charges
Finance costs
Finance income
Share of (losses)/profits from associates
Taxation
568 067
(93 220)
(112 699)
205 046
(27 445)
(174 784)
328 167
(58 670)
(147 704)
193 281
(17 441)
(89 841)
624 346
(31 897)
(98 916)
195 779
(163 379)
339 352
(28 376)
(144 769)
188 797
545
(84 431)
364 965
207 792
525 933
271 118
Non-cash items
Excess of acquirers interest in the net fair value over cost
Net (loss)/profit on sale of subsidiaries
Fair value adjustment
The segment assets and liabilities at 31 May are as follows:
Assets excluding investments in associates and joint ventures
Investment in associates and joint ventures
3 769 906
109 837
3 140 873
81 356
2 227 849
1
2 687 522
1
Total assets
3 879 743
3 222 229
2 227 850
2 687 523
74 941
55 845
119 327
3 030
54 766
419 939
40 936
4 331
31 046
119 630
1 635 623
1 304 285
1 159 605
1 125 116
1 689
(4 581)
32
2 585
(1 375)
(607)
32
2 585
(1 375)
page 143
International distribution**
2009
R000
2008
R000
Technology**
Value-added services**
2009
R000
2008
R000
2009
R000
Corporate
2008
R000
2009
R000
2008
R000
725 288
(1 125)
383 749
(344)
94 793
(72 281)
35 594
(7 713)
339 338
(3 595)
173 622
(1 007)
724 163
383 405
22 512
27 881
335 743
172 615
6 144
(16 915)
(12 569)
7 486
(28 226)
3 789
17 968
(7 891)
(888)
51
(19 176)
(2 093)
(48 502)
(8 452)
(658)
147
(657)
(9 796)
(4 079)
(528)
93
1 428
75 239
(33 601)
(349)
1 371
781
(12 081)
42 247
(17 473)
(1 030)
976
1 190
(3 369)
(89 160)
(2 355)
(207)
263
(2 456)
(61 604)
(851)
(489)
3 364
_
(1 376)
(40 291)
(12 029)
(58 122)
(12 882)
31 360
22 541
(93 915)
(60 956)
1 659
(4 326)
30
352
507 285
102 770
157 451
81 355
60 630
40 543
254 522
7 066
282 567
719 620
(27 210)
610 055
238 806
60 630
40 543
261 588
282 567
719 620
(27 210)
14 049
24 557
119 327
5 038
46 523
9 340
14 112
7 883
9 231
6 652
8 554
3 030
9 966
242 904
3 964
4 291
832
1 651
373 191
80 654
22 692
9 737
41 861
63 547
38 274
25 230
page 144
30.
Vesting date
Number of shares
2 882 000
2 269 814
14 409 999
11 349 073
5 151 814
25 759 072
At end of year
The fair value of the shares is based on the value paid for the shares on the open market at grant date.
The total number of forfeitable shares issued to executive directors during the period is 1 148 343.
page 145
Number of
issued ordinary
Country
shares
31.
Percentage
held
RSA
RSA
Australia
RSA
RSA
Mexico
USA
RSA
Cyprus
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
300
150
201
300
1 200 000
1 100
100
100
100
1 000
100
100
1 000
100
100
100
500 000
10 000
200
100
2 000
200
100
72
50,5
100
100
70
100
100
100
100
100
100
100
100
100
100
50,1
100
51
100
100
100
RSA
1 000
100
RSA
100
100
RSA
100
100
RSA
RSA
RSA
200
100
100
100
100
52
RSA
RSA
RSA
100
300
120
100
100
60
Mozambique
DRC
Nigeria
300
10 000 000
90
80
51
USA
50,01
RSA
RSA
RSA
RSA
RSA
300
1 000
1 000
1 000
100
India
United Kingdom
14 244 294
46 353 933
37,22
16,9*
RSA
RSA
100
100
50*
25
RSA
200
39
RSA
160
50
RSA
100
40
*Significant influence is demonstrated by the company as a result of representation on the board of directors.
100
100
100
80
81
page 146
Number of
issued ordinary
shares
Country
31.
Percentage
held
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
RSA
300
150
300
100
100
1 000
100
100
1 000
1 000
100
100
100
500 000
10 000
200
2 000
200
100
72
100
100
100
100
100
100
51
100
100
100
100
50,1
100
51**
100
100
RSA
Cyprus
1 000
17 600
100
50*
RSA
100
100
RSA
RSA
100
1 000
100
51
RSA
RSA
RSA
200
100
100
100
100
52
RSA
RSA
RSA
100
300
120
100
100
60
Mozambique
DRC
300
90
80
RSA
RSA
RSA
300
1 000
1 000
100
80
100
India
12 502 110
35
RSA
RSA
300
100
40
40
**49% was disposed of on 1 April 2008 for a nominal amount. No further disclosure has been made as the effect of this transaction is below R1 000.
32.
page 147
page 148
Note
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred taxation asset
Investment in subsidiaries
Investment in joint venture
Current assets
Loans receivable
Loans to subsidiaries
Receivables
Current tax assets
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Treasury shares
Equity compensation benefit
Accumulated loss
Non-current liabilities
Deferred taxation liability
Current liabilities
Trade and other payables
Loans from subsidiaries
Current tax liabilities
Bank overdraft
Total equity and liabilities
*Less than R1 000.
3
4
5
6.1
6.2
7
6.1
8
9
10
10
5
12
6.1
9
2009
R000
2008
R000
3 298 627
3 064
5 222
3 287 162
3 179
1 160 702
875
1 151 391
6 927
800
709
4 459 329
3 267 104
1 212
1 671
136
3 264 085
1 210 276
476
1 174 310
34 878
612
4 477 380
4 393 111
*
4 404 737
(9 567)
4 395 170
1 939
(3 998)
2 826
2 826
63 392
14 388
48 000
1 004
4 403 436
*
4 404 737
4 404 737
(1 301)
4 459 329
4 447 380
73 944
23 815
48 866
1 214
49
page 149
Note
Other income
Employee compensation and benefit expense
Depreciation, amortisation and impairment charges
Other expenses
2009
R000
2008
R000
89 035
(51 049)
(2 355)
(40 805)
43 516
(29 478)
(3 444)
(14 513)
Operating loss
Finance costs
Finance income
13
14
14
(5 174)
(120)
5 559
(3 919)
(11)
3 706
15
265
(2 962)
(224)
(1 077)
(2 697)
(1 301)
page 150
Note
Balance as at 31 May 2007
Shares issued during the year
Share issue costs
Net loss for the year
Balance as at 31 May 2008
Shares purchased during
the year
Equity based compensation
movements
10
Share
capital
R000
Share
premium
R000
Treasury
shares
R000
Equity
based
compensation
reserve
R000
*
*
4 444 461
(39 724)
4 404 737
(9 567)
Accumulated
loss
R000
(1 301)
(1 301)
1 939
(2 697)
4 404 737
1 939
(3 998)
11
(9 567)
Total
equity
R000
4 444 461
(39 724)
(1 301)
4 403 436
(9 567)
1 939
(2 697)
4 393 111
page 151
Note
Cash flows from operating activities
Finance income
Finance costs
Taxation paid
16
14
14
17
2009
R000
2008
R000
20 796
5 559
(120)
(2 014)
(12 015)
3 706
(11)
24 221
(8 320)
(2 988)
40
(4 290)
(28 577)
1 429
22 053
(3 030)
(149)
(1 244)
(1 719)
(180 203)
(1 128 806)
(15 512)
(1 311 972)
(9 567)
1 360 579
(39 724)
(9 567)
1 320 855
(858)
563
563
*
(295)
563
page 152
1.
Accounting policies
The accounting policies applied to the company annual
financial statements are consistent with the group
accounting policies as detailed on pages 104 to 114.
2.
Financial risks
In the course of its business, the company is exposed to
a number of financial risks: credit risk, liquidity risk and
market risk (including foreign currency and other price
risk). This note presents the companys objectives, policies
and processes for managing its financial risk and capital.
Credit risk
Credit risk arises because a counterparty may fail to meet
its obligations to the company. The company is exposed to
credit risks on financial instruments such as receivables,
loans receivable and cash.
Receivables consist primarily of invoiced amounts from
normal trading activities. The company has a diversified
customer base and policies are in place to ensure sales
are made to customers with an appropriate credit history.
Individual credit limits are set for each customer and the
utilisation of these credit limits is regularly monitored.
Where necessary, a provision for impairment is made.
Less than
1 month or
on demand
(R000)
More than
1 month
but not
exceeding
1 year
(R000)
More than
1 year
but not
exceeding
2 years
(R000)
More than
2 years
but not
exceeding
5 years
(R000)
More than
5 years
(R000)
48 000
3 145
1 004
Total
52 149
2008
Loans from subsidiaries
Trade and other payables*
Bank overdraft
48 866
13 640
49
4 515
-
Total
62 555
4 515
2009
Market risk
The company is exposed to risks from movements in
foreign exchange rates and interest rates that affect its
assets, liabilities and anticipated future transactions.
page 153
Financial assets
Cash
Receivables*
Loans receivable
Financial liabilities
Non-interest bearing borrowings
Trade and other payables*
Bank overdraft
ZAR
R000
2009
Euro
R000
Total
R000
ZAR
R000
2008
USD
R000
Total
R000
709
5 233
1 149 959
2 456
709
5 233
1 152 415
612
32 084
1 174 310
476
612
32 084
1 174 786
1 155 901
2 456
1 158 357
1 207 006
476
1 207 482
48 000
3 145
1 004
48 000
3 145
1 004
48 866
18 155
49
48 866
18 155
49
52 149
52 149
67 070
67 070
1 103 752
2 456
1 106 208
1 139 936
476
1 140 412
With a 10% strengthening or weakening in the rand against all other currencies, profit before tax would have decreased or increased
by R245 594 (2008: R47 525) respectively.
Capital risk
The companys objectives when managing capital are to safeguard the companys ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust this capital structure, the company may issue new shares, adjust the amount of dividends paid to
shareholders, return capital to shareholders or sell assets to reduce debt.
The company defines capital as capital and reserves and non-current borrowings.
The company is not subject to externally imposed capital requirements.
There were no changes to the companys approach to capital management during the year.
Fair value measurement
For all short-term financial assets and liabilities, the carrying amount is regarded as an approximation of the fair value.
The fair value of all non-current loans receivable and borrowings are calculated using a discounted cash flow model based on
prevailing market interest rates.
page 154
Computer
equipment
R000
3.
Office
equipment
R000
Leasehold
improvements
R000
Total
R000
270
223
(33)
(136)
324
484
564
(265)
783
329
610
(136)
803
129
360
(104)
385
1 231
(462)
769
1 212
2 988
(33)
(1 103)
3 064
462
(138)
324
1 049
(266)
783
959
(156)
803
491
(106)
385
1 231
(462)
769
4 192
(1 128)
3 064
279
(9)
270
485
(1)
484
349
(20)
329
131
(2)
129
1 244
(32)
1 212
279
(9)
270
485
(1)
484
349
(20)
329
131
(2)
129
1 244
(32)
1 212
Computer
software
R000
Internally
developed
software
R000
Total
R000
Intangible assets
Year ended 31 May 2009
Opening carrying amount
Additions
Amortisation charge
Closing carrying amount
At 31 May 2009
Cost
Accumulated amortisation
Carrying amount
Year ended 31 May 2008
Opening carrying amount
Additions
Amortisation charge
Closing carrying amount
At 31 May 2008
Cost
Accumulated amortisation
Carrying amount
5.
Motor
vehicles
R000
4.
Furniture
and fittings
R000
1 671
711
(739)
1 643
3 579
3 579
1 671
4 290
(739)
5 222
2 430
(787)
1 643
3 579
3 579
6 009
(787)
5 222
1 719
(48)
1 671
1 719
(48)
1 671
1 719
(48)
1 671
1 719
(48)
1 671
2009
R000
2008
R000
136
Deferred taxation
At 31 May
Credited to income statement:
Provisions
Capital allowances
Tax losses
Prepayments
Other
At 31 May
Deferred taxation comprises:
Provisions
Capital allowances
Tax losses
Prepayments
Other
153
(1 015)
493
(474)
(2 119)
(2 826)
117
19
136
270
(1 015)
493
(474)
(2 100)
(2 826)
117
19
136
page 155
2009
R000
6.
6.1
2008
R000
Shares at
cost less
amounts
written off
R000
Details are reflected below:
2009
Africa Prepaid Services (Proprietary) Limited1
Activi Technology Services (Proprietary) Limited
Blue Label Telecoms USA Incorporated
Blue Label Investments (Proprietary) Limited
Blue Label Mexico S.A. de C.V.
Blue Label One (Proprietary) Limited
Budding Trade (Proprietary) Limited
Celebia Holdings Limited
Cellfind SA (Proprietary) Limited
Content Connect Africa (Proprietary) Limited1
Content Connect Australia (Proprietary) Limited2
Datacel Direct (Proprietary) Limited1
Gold Label Investments (Proprietary) Limited
Kwikpay SA (Proprietary) Limited
Matragon (Proprietary) Limited
Matrix Investments No 4 (Proprietary) Limited
The Postpaid Company (Proprietary) Limited1
SharedPhone International (Proprietary) Limited1
The Prepaid Company (Proprietary) Limited
Uninex (Proprietary) Limited
Velociti (Proprietary) Limited
Ventury Group (Proprietary) Limited
Virtual Voucher (Proprietary) Limited
2008
Africa Prepaid Services (Proprietary) Limited1
Activi Technology Services (Proprietary) Limited
Blue Label Investments (Proprietary) Limited
Blue Label One (Proprietary) Limited
Budding Trade (Proprietary) Limited
Cellfind SA (Proprietary) Limited
Content Connect Africa (Proprietary) Limited
Datacel Direct (Proprietary) Limited1
E-Voucha (Proprietary) Limited
Gold Label Investments (Proprietary) Limited
Kwikpay SA (Proprietary) Limited
Matragon (Proprietary) Limited
Matrix Investments No 4 (Proprietary) Limited
The Postpaid Company (Proprietary) Limited
SharedPhone International (Proprietary) Limited1
The Prepaid Company (Proprietary) Limited
Velociti (Proprietary) Limited
Ventury Group (Proprietary) Limited
Virtual Voucher (Proprietary) Limited
61 520
5 000
*
108 416
26 650
40 000
6 000
1
290 000
27 000
1 926
150 000
29 400
22 500
194 000
4 160
*
20 000
2 150 214
*
7 185
98 406
44 784
3 287 162
1 151 391
(48 000)
3 264 085
1 174 310
(48 866)
4 390 553
4 389 529
Loans
owing by
subsidiaries
R000
Loans
owing to
subsidiaries
R000
35 112
1 962
50 540
595
713
38
739
719
2 713
6 293
149 315
735
32 996
942
2 745
861 277**
976
1 806
1 055
120
(48 000)
3 287 162
1 151 391
(48 000)
61 520
5 000
108 416
40 000
6 000
290 000
30 000
150 000
2 500
29 400
22 500
194 000
4 160
*
20 000
2 150 214
7 185
98 406
44 784
3 264 085
13 539
7 120
100 340
30 377
3 216
1 018 903**
815
1 174 310
(866)
(48 000)
(48 866)
page 156
2009
R000
6.
6.2
Date
Country of
acquired incorporation
2009
Demtrade 11
(Proprietary) Limited
7.
8.
2008
R000
1 June 2008
South Africa
3 030
149
3 179
Assets
R000
Liabilities
R000
Revenues
R000
Profit
R000
Percentage
interest held
7 554
6 382
9 086
1 121
50
2009
R000
2008
R000
859
16
476
875
476
1 149
5 778
32 104
2 774
6 927
34 878
Gross
R000
Impairment
R000
925
103
71
50
1 149
31 963
67
74
32 104
Loans receivable
31 May 2008
Fully performing
Past due by 1 to 30 days
Past due by 31 to 60 days
Past due by 61 to 90 days
Past due by more than 90 days
Based on the credit history of the relevant debtors, management does not consider there to be
any indications of potential default in respect of the fully performing book.
page 157
2009
R000
9.
2008
R000
697
12
709
(1 004)
611
1
612
(49)
(295)
563
10.
2009
Number
of shares
2008
Number
of shares
2009
R000
2008
R000
Share capital
Authorised
Total authorised share capital of ordinary shares
(par value of R0,000001 each)
Issued
Balance at the beginning of the year
Shares issued during the period
Shares acquired during the period
(5 201 713)
1
766 630 893
The company acquired 5 201 713 shares on the Johannesburg stock exchange in order to grant forfeitable shares to employees and
directors of the group.
The cost to the company to acquire these shares of R9 566 822 has been deducted from shareholders equity. These shares are
held as treasury shares. See note 11 for details on the forfeitable shares.
Number
Issue
price
per share
R
Share
capital
R000
Share
premium
R000
5,50
1 045 724
14 545 455
5,50
80 000
5,50
2 079 533
6,75
6,75
*
*
*
1 000 000
239 204
4 444 461
page 158
11.
Grant date
Vesting date
28 November 2008
26 February 2009
1 September 2010
1 September 2010
Number of
shares
518 630
1 404 407
2 593
7 022
1 923 037
9 615
The fair value of the shares is based on the value paid for the shares on the open market at grant date.
The total number of forfeitable shares issued to executive directors during the period is 1 148 343.
12.
2009
R000
2008
R000
159
11 666
1 572
991
2 753
15 630
1 542
3 890
14 388
23 815
page 159
2009
R000
13.
Operating loss
The following items have been charged/(credited), in arriving at operating loss:
Management fees received
Consulting fees
Foreign exchange loss
Impairment of loans
Profit on disposal of property, plant and equipment
Insurance
Legal fees
Operating lease rentals premises
Overseas travel
Security
Share incentive scheme expense
Repairs and maintenance
Audit fees
14.
(88 871)
9 718
393
513
(7)
1 716
2 644
1 625
7 435
541
1 939
47
3 403
(43 268)
114
730
3 365
988
282
717
3 724
156
16
2 267
(130)
(5 429)
(2 631)
(1 075)
(5 559)
(3 706)
Finance (income)/costs
Interest received
Bank
Loans
Interest paid
Bank
120
120
15.
2008
R000
11
11
(5 439)
(3 695)
2 962
2 962
1 214
1 214
(137)
(137)
2 962
1 077
265
74
(224)
(62)
2 888
(118)
1 257
2 962
1 077
Taxation
Current tax
current year
Deferred tax
current year
page 160
16.
(5 174)
(3 919)
1 103
739
513
(7)
1 939
32
48
3 363
32 022
(9 427)
(912)
(34 878)
23 815
(476)
20 796
(12 015)
1 214
800
1 214
(1 214)
2 014
1 392
666
1 265
2 057
2 058
3 322
Taxation paid
Balance outstanding at beginning of year
Taxation charge
Balance due/(outstanding) at end of year
18.
2008
R000
17.
2009
R000
Commitments
Future operating lease charges for:
Premises
Payable within one year
Payable in two to five years
page 161
19.
2009
R000
2008
R000
27
28
351
2 987
253
392
1 261
469
68
1 060
16
60
324
814
436
2 160
1 395
1 540
338
600
90
60
1 536
580
1 954
150
75 560
60
465
540
210
20
174
720
330
160
350
20
195
210
39 597
370
99
1 200
1 566
717
1 245
page 162
19.
2009
R000
2008
R000
1 962
35 112
120
318
108
595
713
50 540
38
739
228
719
2 713
6 293
149
149 315
735
28
32 996
2 745
861 277
942
57
976
1 806
1 055
120
13 539
7 120
100 340
30 377
3 216
1 018 903
815
48 000
866
48 000
436
21
338
108
159
6
11
31 920
113
42
2
108
400
866
page 163
ANNEXURE 1
Reconciliation between group net profit and group pro forma net profit:
The table below sets out the unaudited pro forma information of BLT. The unaudited group pro forma income statement has been prepared
for illustrative purposes only.
Revenue
Other income
Changes in inventories of finished goods
Employee compensation and benefit expense
Depreciation, amortisation and impairment charges
Other expenses
Operating profit
Finance income
Finance expense
Share loss of associates
Profit for the period before taxation
Taxation
Net profit
Reconciliation between net profit and core net profit attributable to
equity holders:
Net profit
Management bonus settlement net of tax
Amortisation on intangibles raised through business combinations
net of tax
Cancellation of onerous contract
Core net profit
Net profit attributable to:
Equity holders of parent
Minority interest
Core net profit attributable to:
Equity holders of parent
Minority interest
Earnings per share on profit attributable to equity holders (cents)*
Basic
Headline
Core
Number of ordinary shares in issue
Weighted average number of ordinary shares in issue
31 May 2008
Actual(1)
Audited
R000
Restructuring
and
acquisitions(2)
R000
Cash
effects(3)
R000
31 May 2008
Pro forma(4)
Unaudited
R000
12 545 471
69 545
(11 875 606)
(265 003)
(58 670)
(146 240)
269 497
193 281
(147 704)
(17 441)
297 633
(89 841)
207 792
385 138
(1 403)
(335 901)
(10 626)
(15 005)
(18 446)
3 757
(215)
(1 433)
(2 220)
(111)
(1 785)
(1 896)
46 404
42 533
88 937
(24 903)
64 034
12 930 609
68 142
(12 211 507)
(275 629)
(73 675)
(164 686)
273 254
239 470
(106 604)
(19 661)
386 459
(116 529)
269 930
180 891
57 600
24 498
64 034
269 423
57 600
22 937
9 000
270 428
207 792
180 891
26 901
301 409
270 428
30 981
11 982
36 480
(1 896)
24 498
(26 394)
7 650
36 480
(28 830)
64 034
64 034
64 034
64 034
64 034
34 919
9 000
370 942
269 930
269 423
507
373 093
370 942
2 151
30,65
30,26
45,81
766 360 894
590 263 513
35,16
34,86
48,40
766 360 894
766 360 894
Notes
1. Extracted from the audited group income statement of BLT for the year ended 31 May 2008.
2. Represents the effects of the group restructure based on the assumption that minority acquisitions occurred on 1 June 2007.
The following subsidiaries are therefore consolidated as wholly owned for the full year:
The Prepaid Company
Kwikpay
Matragon
Blue Label One
Similarly, the following associates are consolidated as subsidiaries for the full year:
72% Africa Prepaid Services
100% Virtual Voucher
100% Cellfind SA
100% Datacel
100% House of Business Solutions
3. Represents the positive impact on finance income and expense assuming cash raised on listing was received 1 June 2007.
4. Represents the pro forma unaudited group income statement of BLT on the assumption that the restructuring, listing and minority acquisitions were effective
1 June 2007.
5. All adjustments are expected to have a continuing effect on BLT.
page 164
Notice is hereby given that the second annual general meeting of the shareholders of Blue Label Telecoms will be held in the Boardroom,
Blue Label Telecoms Corporate Offices, 75 Grayston Drive, Sandton, on Wednesday, 25 November 2009 at 10:00 to conduct the following
business:
1. To receive, consider and adopt the annual financial statements of the company and of the Blue Label Telecoms group for the year ended
31 May 2009, including the directors report and auditors report thereon.
2. To re-elect (by separate and stand-alone resolutions) the following directors who retire by rotation, but being eligible for re-election, have
offered themselves for re-election: Mr GD Harlow, Ms RJ Huntley and Mr NN Lazarus SC.
Resolved that Mr GD Harlow who is required to retire by rotation as a director of the company at this annual general meeting and who
is eligible for re-election and who has offered himself for re-election, be and is hereby reappointed as a director of the company with
immediate effect.
Resolved that Ms RJ Huntley who is required to retire by rotation as a director of the company at this annual general meeting and who
is eligible for re-election and who has offered herself for re-election, be and is hereby reappointed as a director of the company with
immediate effect.
Resolved that Mr NN Lazarus SC who is required to retire by rotation as a director of the company at this annual general meeting and
who is eligible for re-election and who has offered himself for re-election, be and is hereby reappointed as a director of the company
with immediate effect.
Abbreviated curriculum vitae in respect of each director offering himself/herself for re-election are contained on pages 17 and 18 of this
annual report.
3. To reappoint PricewaterhouseCoopers Inc as independent registered auditors of the company for the ensuing year and to authorise
the directors to determine the remuneration of the auditors for the past years audit as reflected in note 18 of the annual financial
statements. The individual registered auditor who will undertake the audit during the financial year ending 31 May 2010 is Mr EJ Gerryts.
To consider and, if deemed fit, pass with or without modification the following special resolution and ordinary resolutions.
4. Special resolution number 1 General Authority to Repurchase Shares
Resolved that the company and any of its subsidiaries be and they are hereby authorised, by way of a general approval, to acquire
ordinary shares issued by the company, in terms of section 85 and 89 of the Companies Act, No 61 of 1973, as amended (the
Companies Act), and in terms of the JSE Limited (the JSE) Listings Requirements, being that:
any such acquisition of ordinary shares shall be effected through the order book operated by the JSE trading system and done without
any prior understanding or arrangement with the counterparty;
this general authority shall be valid until the companys next annual general meeting, provided that it shall not extend beyond
15 (fifteen) months from the date of passing of this special resolution number 1;
an announcement will be published as soon as the company or any of its subsidiaries have acquired ordinary shares constituting, on a
cumulative basis, 3% of the number of ordinary shares in issue and for each 3% in aggregate of the initial number acquired thereafter,
in compliance with paragraph 11.27 of the JSE Listings Requirements;
acquisition of shares in aggregate in any one financial year may not exceed 20% of the companys ordinary issued share capital as at
the date of passing of this special resolution number 1;
ordinary shares may not be acquired at a price greater than 10% above the weighted average of the market value at which such
ordinary shares are traded on the JSE as determined over the five business days immediately preceding the date of repurchase of
such ordinary shares;
the company has been given authority by its articles of association;
at any point in time, the company and/or its subsidiaries may only appoint one agent to effect any repurchase;
the company and/or its subsidiaries undertake that they will not enter the market to repurchase the companys shares until the
companys sponsor has provided written confirmation to the JSE regarding the adequacy of the companys working capital in
accordance with Schedule 25 of the JSE Listings Requirements;
the company remains in compliance with the shareholder spread requirements of the JSE Listings Requirements; and
the company and/or its subsidiaries not repurchasing any shares during a prohibited period, as defined in the JSE Listings
Requirements unless a repurchase programme is in place, where dates and quantities of shares to be traded during the prohibited
period are fixed and full details of the programme have been disclosed in an announcement over the Securities Exchange News Service
(SENS) prior to the commencement of the prohibited period.
page 165
Before entering the market to effect the general repurchase, the directors, having considered the effects of the repurchase of the
maximum number of ordinary shares in terms of the aforegoing general authority, will ensure that for a period of 12 (twelve) months
after the date of the notice of annual general meeting:
the company and the Blue Label Telecoms group will be able, in the ordinary course of business, to pay its debts;
the consolidated assets of the company and the Blue Label Telecoms group, fairly valued in accordance with International Financial
Reporting Standards, will exceed the liabilities of the company and the Blue Label Telecoms group;
the company and the Blue Label Telecoms groups ordinary share capital, reserves and working capital will be adequate for ordinary
business purposes; and
the working capital of the company and the Blue Label Telecoms group will be adequate for the purposes of the business of the
company and the Blue Label Telecoms group.
The following additional information, some of which may appear elsewhere in the annual report of which this notice forms part, is provided
in terms of the JSE Listings Requirements for purposes of the general authority:
directors and management pages 16 to 19
major beneficial shareholders page 68
directors interests in shares pages 61, 92 and 98
share capital of the company page 157
Litigation statement
In terms of paragraph 11.26 of the JSE Listings Requirements, the directors, whose names appear on pages 16 to 19 of this annual
report of which this notice forms part, are not aware of any legal or arbitration proceedings that are pending or threatened, that may
have or had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Blue Label Telecoms groups
financial position.
Directors responsibility statement
The directors, whose names appear on page 14 of this annual report confirm that to the best of their knowledge and belief:
the statements made in the annual report are true and correct;
there are no facts which have been omitted which would make any statements false or misleading, and that all reasonable enquiries to
ascertain such facts have been made;
the annual report contains all information required by law and the JSE Listings Requirements.
Material change
Other than the facts and developments reported on in this annual report, there have been no material changes in the affairs or financial
position of the company and its subsidiaries since the date of signature of the audit report and up to the date of this notice.
The reason for and effect of this special resolution is to grant the directors of the company or its subsidiaries a general authority in terms
of the Companies Act and the JSE Listings Requirements for the repurchase by the company or a subsidiary company of the company, of
the companys shares.
The directors have no specific intention, at present, for the company or its subsidiaries to repurchase any of the companys shares but
consider that such a general authority should be put in place should an opportunity present itself to do so during the year.
page 166
continued
Current fee
per meeting
Proposed
fee per
meeting*
Proposed
capped fee
per annum**
R700 000
R30 000
R32 550
R162 750
chairman
R41 666
R45 208
R180 832
member
R25 000
R27 125
R108 500
chairman
R33 333
R36 166
R144 664
member
R20 000
R21 700
R86 800
chairman
R25 000
R27 125
R217 000
member
R15 000
R16 275
R130 200
chairman
R25 000
R27 125
R108 500
member
R15 000
R16 275
R65 100
chairman
R25 000
R27 125
R108 500
member
R15 000
R16 275
R65 100
Services as directors
chairman of the board
board members
Audit, risk and compliance committee
Remuneration committee
Investment committee
Transformation committee
Ad hoc committee
* In the event that there are fewer meetings as envisaged, the member shall receive the fee in respect of the number of meetings attended.
** In the event that there are more meetings per year than initially planned, directors fees will be paid only up to the cap.
The annual fee paid to the chairman in respect of the year ended 31 May 2009 amounted to R600 000.
page 167
that issues in the aggregate in any one financial year shall not exceed 3% of the ordinary shares in the issued share capital of the
company from time to time.
in determining the price at which an allotment and issue of shares will be made in terms of this authority, the maximum discount
permitted will be 10% of the weighted average traded price of the ordinary shares over the 30 days prior to the date that the price of
issue is determined or agreed by the directors of the company.
In terms of the JSE Listings Requirements, the approval of 75% majority of the votes cast by shareholders present or represented by
proxy at this annual general meeting will be required for ordinary resolution number 3 to become effective.
8. Ordinary resolution number 4 Signature of documents
Resolved that any one director or the secretary of the company be and is hereby authorised to do all such things and sign all documents
and take all such action as they consider necessary to implement the resolutions set out in the notice convening this annual general
meeting at which this ordinary resolution will be considered.
By order of the board
E Viljoen
Group company secretary
26 October 2009
Transfer secretaries
Registered office
75 Grayston Drive
Cnr Benmore Road
Morningside Ext 5
Sandton
2196
(PO Box 652261, Benmore, 2010)
page 168
page 169
PROXY FORM
TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY.
For completion by registered members of Blue Label Telecoms unable to attend the second annual general meeting of the company to be
held at 10:00 on Wednesday, 25 November 2009 at the Blue Label Telecoms Corporate Offices, 75 Grayston Drive, Sandton or at any
adjournment thereof,
I/We
(Please print)
of address
Being the registered holder(s) of
1.
2.
the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the second annual general meeting
of the company which will be held on Wednesday, 25 November 2009 at 10:00 for the purpose of considering and, if deemed fit, passing,
with or without modification, the resolutions to be proposed thereat and at any adjournment thereof, and to vote for and/or against the
resolutions and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions:
For
Against
Abstain
Please indicate with an X in the appropriate spaces provided above how you wish your vote to be cast. If no indication is given, the proxy will
be entitled to vote or abstain as he/she deems fit.
Signed at
Signature
Assisted by me (where applicable)
on
2009
page 170
BASTION GRAPHICS