Blue Financial Services, which bills itself as an innovative pan-African financial services provider and enabler of progress, upliftment and improvement in people's lives, managed to drastically reduce its losses in the year ended 28 February 2011.The group incurred a loss of R284.9 million for the 12 months compared to a loss of R1.0 billion in the 2010 financial year - a 72% improvement.
This translates into a decline in loss per share from 170.25c for 2010 to a loss of 29.59c per share for 2011. Headline loss per share improved in a similar manner declining from 134.96c per share to a headline loss of 27.77c per share - a 79% improvement.
The group reported a loss of R168.2 million for the 6 months ended 31 August 2010. The loss for the second half of the financial year of R116.7 million, without removing once-off costs and loan advance write-off's in excess of R100 million, is an improvement of 30.6% over that for the first 6 months.
"The 2011 financial results represent a significant improvement from those reported in 2010, a year which signalled severe financial difficulties in the group and which brought into question its ability to continue operating as a going concern.
"The recapitalisation of the group by Mayibuye and the commencement of the key phases to its turnaround strategy for the Group from September 2010, has yielded positive and sustainable improvements in financial results and overall business fundamentals which provide the platform to return the group to profitability," Blue said.
The Group has pursuant to this turnaround strategy inter alia:
- Restored the net asset value to R46.6 million from the negative R19.4 million at February 2010 and negative R205.8 million at 31 August 2010;
- Concluded a Debt Rescheduling Agreement with lenders to the Group comprising R746.3 million (86.5%) of the Group's total external funding obligations at the reporting date. This agreement allows for a three year stay on principal payments to lenders and remedies all related covenant breaches that existed;
- Successfully converted R274.0 million of debt to equity with shareholder approval to convert a further R50.0 million. The Group will further benefit from a reduced interest expense in future years;
- Received a R300 million facility through a claims purchase agreement for capital funding line for loan advances as part of the Group's recapitalisation;
-Reduced operating expenses by R193.2 million (27%) or to R22 million per month by February 2011 from that reported in the 2010 financial year. Operating expenses for the year include once-off costs in excess of R75 million relating mainly to costs associated with the recapitalisation of the Group and turnaround strategy;
- Achieved a reduction in the overall impairment charges on non-performing loan advances of R49.6 million from that reported for the 6 months ended 31 August 2010 due to focused collection efforts. This reduction was achieved despite interest written-off amounting to R36.4 million during this period;
- Commenced active new lending totalling R150 million since September 2010. Total new loans for the year amounted to R280.7 million (2010: R690.0 million);
-Reduced the extent of credit impairments on new lending due to improved credit scoring; and
- Reduced the cash flow shortfall between the income from collections and that required to meet the Group's normal operating expenses and interest obligations. The elimination of this shortfall is key to ensuring that capital collected from customers is applied to new loans.
"In addition to the above there has been an overall improvement in the Group's operational process, governance, internal controls and business sophistication. Loan advances have decreased by 30.4% from R783.0 million in 2010 to R544.6 million at 28 February 2011," Blue stated.
The group operates in the various jurisdictions inter alia as a registered bank, Insurance company or micro finance provider. In all the jurisdictions the main product lines are micro finance, business finance, housing finance, savings products, insurance and mobile.
On 10 December 2010, the Mayibuye Group (Proprietary) Ltd acquired a majority stake in the Group and is currently implementing a turnaround strategy under the leadership of the Group's new Chief Executive Officer with support from Mayibuye. The Group, through an arms-length outsourced arrangement, is further leveraging off the key competencies of the Mayibuye Group specifically in credit, collections and information technology, which were identified as key areas of improvement required throughout the Group.
"As a cornerstone of the turnaround strategy, the Group has adopted, a new set of core values being Respect, Reliability and Returns."
During the year under review, the group operated in 12 countries namely, Botswana, Ghana, Kenya, Lesotho, Malawi, Namibia, Nigeria, South Africa, Swaziland, Tanzania, Uganda and Zambia. The Group commenced operations in Ghana during February 2011. The Group has 213 branches and employed 1800 permanent staff and contract staff members at the date of this report.