Directors' report

The directors have pleasure in presenting the group annual financial statements of Blue Label Telecoms Limited (Blue Label Telecoms or the company) and its subsidiary, associate and joint venture companies (the group) for the year ended 31 May 2012.

Principal activities and strategy

Blue Label Telecoms is a leading distributor of prepaid secure electronic tokens of value and transactional services within emerging and developing economies across its global footprint of touch points. The group’s stated strategy is to extend its local and international footprint of touch points, both organically and acquisitively, to meet the significant demand for the delivery of multiple prepaid products and services through a single distributor, across various delivery mechanisms and via numerous merchants or vendors.

Financial results

The group recorded a profit after tax from continued operations attributable to equity holders for the year ended 31 May 2012 of R444 million (2011: R338 million). Full details of the financial position and results of the company, the group and its segments are set out in the annual financial statements, and group annual financial statements. The group and company annual financial statements for the year ended 31 May 2012 were approved by the board and signed on its behalf on 20 August 2012.

Going concern

The financial statements have been prepared on the going-concern basis, since the directors have every reason to believe that Blue Label Telecoms company and the group have adequate resources in place to continue in operation for the foreseeable future.

Subsidiaries, associates and joint ventures

Particulars of the principal subsidiaries, joint ventures and associates of the Blue Label Telecoms group are provided in note 34 to the annual financial statements.

Disposals

On 31 January 2012 Blue Label Telecoms Limited sold its 50.1% shareholding in SharedPhone International Proprietary Limited to the minority shareholder for an amount of R3.9 million. For further details of the disposal during the year, refer to note 27 to the group annual financial statements.

Acquisitions

On 1 January 2012, 100% of Multiserv Proprietary Limited was purchased for R14 million with the objective of utilising their 165 stores located nationally as a platform for Blue Label’s strategy of marketing its products and services on a retail basis. For further details on the acquisition during the year, refer to note 28 to the group annual financial statements.

Share capital

Full details of the authorised, issued and unissued capital of the company at 31 May 2012 are contained in note 16 to the group annual financial statements. There were no shares issued during the financial year ended 31 May 2012 (2011: nil).

The directors of the company have unrestricted authority until the following annual general meeting to allot and issue, as they in their discretion deem fit, the unissued ordinary shares of the company as at 31 May 2011, subject to the provisions of the memorandum of incorporation of the company, the Companies Act and the Listings Requirements.

On 1 December 2011 the company acquired 91 851 852 shares from Microsoft Corporation representing 11.99% of the Blue Label ordinary shares in issue prior to the specific repurchase. The amount paid for these shares including transaction costs was R392 377 518. These shares have been cancelled.

Subsequent events

Subsequent to year end a dividend was declared.

Dividends

On 20 August 2012, the board approved a dividend of 23 cents per ordinary share. The dividend in respect of ordinary shares for the year ended 31 May 2012 of R155 137 050 has not been recognised in the financial statements as it was declared after this date. The salient dates are as

Share certificates may not be dematerialised or rematerialised between Monday, 10 September and Friday, 14 September 2012, both days inclusive.

Before declaring the final dividend the board applied the solvency and liquidity test on the company and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after payment of the final dividend. The final dividend will be paid 28 days after the directors have performed the solvency and liquidity testing.

With effect from 1 April 2012, Dividends Tax replaces Secondary Tax on Companies (STC). Dividends Tax is provided for at 15% of the amount of any dividend paid by Blue Label Telecoms Limited, subject to certain exemptions. The Dividends Tax is a tax borne by the beneficial owner of the dividend and will be withheld by either the issuer of the dividend or by regulated intermediaries.

Directorate

The following were directors of the company for the year under review:

Directors’ interests

The individual interests declared by directors and officers in the company’s share capital as at 31 May 2012, held directly or indirectly were as follows:

The aggregate interest of the current directors in the capital of the company was as follows:

The beneficial interest held by directors and officers of the company constitutes 27.58% (2011: 24.12%) of the issued share capital of the company.

Details of directors’ emoluments and equity compensation benefit are set out in note 31 of the group annual financial statements and details of the forfeitable share plan are set out in note 33.

Resolutions

On 22 November 2011 the Company passed and filed with the Companies and Intellectual Property Commission the following special resolutions:

• Approving the specific repurchase by the company of the Blue Label shares held by Microsoft Corporation.
• Approving the remuneration of non-executive directors.
• Granting of a general authority to repurchase the company’s shares.
• Renewal of the authority that unissued shares be placed under the control of the directors.
• Approving financial assistance to directors, prescribed officers and related or inter-related companies.

Except for the aforementioned, no other special resolutions, the nature of which might be significant to shareholders in their appreciation of the state of affairs of the group, were passed by the company or its subsidiaries during the period covered by this annual report.

Secretary

The company secretary is E Viljoen. The business and postal address of the company secretary appear on the inside back cover.

Auditors

PricewaterhouseCoopers Incorporated will continue in office in accordance with section 90 (6) of the Companies Act.

Larry Nestadt
Chairman