Directors' report

The directors have pleasure in presenting the Group and Company 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 2013.

Principal activities and strategy

Blue Label Telecoms’ core business is the virtual distribution of secure electronic tokens of value and transactional services across its global footprint of touch points. The Group’s stated strategy is to extend its global 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 net profit after tax from continuing operations attributable to equity holders for the year ended 31 May 2013 of R425 million (2012: R444 million). The comparative year results included a once-off income receipt of R79.4 million. On exclusion of this receipt the net profit after tax from continued operations attributable to equity holders for that year would have equated to R375 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 2013 were approved by the board and signed on its behalf on 18 August 2013.

Going concern

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

Disposals

On 1 August 2013 Blue Label Data Solutions Proprietary Limited sold its 26% shareholding in the issued share capital of Betterquote Proprietary Limited to Bettersure Proprietary Limited.

On 11 September 2012 Blue Label Telecoms Limited disposed of 100% of Content Connect Africa Proprietary Limited to Metastar Trading Proprietary Limited for R2 million. For further details on the disposal during the year, refer to note 27 to the Group annual financial statements.

On 1 January 2013 The Prepaid Company Proprietary Limited sold 100% of the issued share capital of Multiserv Proprietary Limited to Guinea Fowl Mews 8 Proprietary Limited for a purchase consideration of R10.3 million. For further details on the disposal during the year, refer to note 27 of the Group annual financial statements.

On 1 May 2013 The Prepaid Company Proprietary Limited sold its 51% in the issued share capital of Bela Phone Company Proprietary Limited to Universal Phone Company Proprietary Limited for a purchase consideration of R51.

Acquisitions

On 13 July 2012 Blue Label Telecoms Limited acquired the remaining 25% of The Post Paid Company Proprietary Limited for a purchase consideration of R25, bringing its holding to 100%. Refer to note 28.2 of the Group annual financial statements for further details.

On 1 September 2012 Blue Label Telecoms Limited acquired a further 5% of Blue Label Mexico S.A. de C.V. for a purchase consideration of R21.1 million, bringing its holding to 45%. Refer to note 6 of the Group annual financial statements for further details.

On 1 September 2012 Blue Label Telecoms Limited acquired 51% of Blue Label Engage Proprietary Limited for a purchase consideration of R2.4 million plus an amount arrived at by multiplying the amount by which the headline earnings of Blue Label Engage Proprietary Limited in its 2013 financial year exceeds R600 000 by four capped at a further R2.6 million. Refer to note 28.1 of the Group annual financial statements.

On 1 September 2012 Blue Label Telecoms acquired 51% of the issued share capital of Panacea Mobile Proprietary Limited for a purchase consideration of R7.5 million plus an additional amount of R1.5 million if the net profit after tax for Panacea Mobile Proprietary Limited’s 2013 financial year is no less than R4.2 million. To the extent that the net profit after tax for the 2013 financial year is less, the R1.5 million will be pro-rated accordingly. An additional amount of up to R1.5 million (payable over 10 equal periods, capped at R150 000 per period), based on the achievement of certain criteria in respect of a customer contract being achieved by Panacea Mobile Proprietary Limited. Refer to note 28.1 of the Group annual financial statements.

On 1 January 2013 The Prepaid Company Proprietary Limited acquired the right to receive all revenue accruing to a post paid cellular base from 1 January 2013 onwards for a purchase consideration of R108 million. Refer to note 5 of the Group annual financial statements.

On 15 January 2013 The Prepaid Company Proprietary Limited acquired the right to receive all revenue accruing to a prepaid cellular base from 1 December 2012 for a purchase consideration of R40 million. Refer to note 5 of the Group annual financial statements.

On 15 March 2013 The Prepaid Company Proprietary Limited acquired the right to receive all revenue accruing to a prepaid cellular base from 1 February 2013 onwards for a purchase consideration of R35 million. Refer to note 5 of the Group annual financial statements.

On 20 March 2013 The Prepaid Company Proprietary Limited acquired the right to receive all revenue accruing to a prepaid cellular base from 1 January 2013 onwards for a purchase consideration of R81 million. Refer to note 5 of the Group annual financial statements.

On 28 January 2013 Blue Label Telecoms Limited acquired 24.01% of the issued share capital of Africa Prepaid Services Nigeria Limited from Citadella Holdings Corp for a purchase consideration of R14 million.

On 5 April 2013 Blue Label Telecoms acquired 60% of the shares in the ticketing company TicketPros Proprietary Limited for a purchase consideration of R10 million. Refer to note 28.1 of the Group annual financial statements.

Share capital

Full details of the authorised, issued and unissued capital of the Company at 31 May 2013 are contained in note 15 of the Group annual financial statements. There were no shares issued during the financial year ended 31 May 2013 (2012: 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 2012, subject to the provisions of the memorandum of incorporation of the Company, the Companies Act and the Listings Requirements.

Subsequent events

Subsequent to year end a dividend was declared.

On 1 June 2013 Blue Label Telecoms acquired the remaining 49% of the issued share capital of Panacea Mobile Proprietary Limited and the remaining 40% of the issued share capital of TicketPros Proprietary Limited for a purchase consideration of R11.5 million and R4.7 million respectively.

In June 2013, the Group secured a distribution agreement with a leading reseller at a purchase price of R84 million. This is expected to further enhance the Group’s prominence in the distribution of prepaid services.

Dividend

On 18 August 2013, the board approved a dividend of 25 cents per ordinary share. The dividend in respect of ordinary shares for the year ended 31 May 2013 of
R168 627 261 has not been recognised in the financial statements as it was declared after this date. The salient dates are as follows:

Last date to trade cum dividend	Friday, 6 September 2013
Shares commence trading ex dividend	Monday, 9 September 2013
Record date	Friday, 13 September 2013
Payment of dividend	Monday, 16 September 2013

Share certificates may be dematerialised or rematerialised between Monday, 9 September 2013 and Friday, 13 September 2013, 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 divided. The final dividend will be paid 28 days after the directors have performed the solvency and liquidity testing.

Dividends tax is provided for at 15% of the amount of any dividend paid by Blue Label Telecoms, 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:

Name	Office	Appointment date	Date and nature of change
Larry M Nestadt	Independent non-executive director	5 October 2007	—
Brett M Levy	Joint chief executive officer	1 February 2007	—
Mark S Levy	Joint chief executive officer	1 February 2007	—
Kevin M Ellerine	Non-executive director	8 December 2009	—
Gary D Harlow	Independent non-executive director	5 October 2007	—
Neil N Lazarus SC	Non-executive director	5 October 2007	—
Joe S Mthimunye	Independent non-executive director	5 October 2007	—
Mark V Pamensky	Chief operating officer	5 October 2007	—
David B Rivkind	Financial director	5 October 2007	—
Jeremiah S Vilakazi	Independent non-executive director	19 October 2011	—

Prescribed officer

DA Suntup is a prescribed officer of the Company.

Directors’ and prescribed officer’s interests

The individual interests declared by directors and officers in the Company’s share capital as at 31 May 2013, held directly or indirectly were as follows:

	Nature of interest
	Direct beneficial		Indirect beneficial
Director/officer	2013	2012	2013	2012
BM Levy	74 644 607	74 340 553	8 272 778	8 272 778
MS Levy	67 237 199	66 933 145	8 272 777	8 272 777
KM Ellerine	—	—	296 297	296 297
JS Mthimunye	30 000	20 000	—	—
MV Pamensky	—	—	5 565 738	5 565 738
LM Nestadt	—	—	8 204 674	8 204 674
GD Harlow	—	—	2 400 000	2 000 000
NN Lazarus	4 803 424	4 803 424	—	—
DB Rivkind	—	—	3 700 000	3 700 000
DA Suntup	—	—	3 700 000	3 700 000
JS Vilakazi	—	—	—	—

The aggregate interest of the current directors and officers in the capital of the Company was as follows:

	Number of shares
	2013	2012
Beneficial	187 127 494	186 109 386

The beneficial interest held by directors and officers of the Company constitutes 28.28% (2012: 28.13%) of the issued share capital of the Company.

Details of directors’ and prescribed officer emoluments and equity compensation benefits 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 29 November 2012 the Company passed and filed with the Companies and Intellectual Property Commission the following special resolutions:

•	Approving the remuneration of non-executive directors.
•	Granting a general authority to repurchase the Company’s shares
•	Renewal of the authority that unissued shares be placed under the control of the director.
•	Approval for the Company to grant financial assistance in terms of sections 44 and 45 of the Companies Act.
•	Adoption of a new memorandum of incorporation.

Special resolutions passed by subsidiary companies comprised of approval to grant financial assistance in terms of section 44 and 45 of the Companies Act and the adoption of a new memorandum of incorporation.

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 at the date of signing these Group and Company annual financial statements.

Company secretary

Ms E Viljoen resigned as Company secretary with effect from 30 April 2013. Ms J van Eden was appointed Company secretary with effect from 1 June 2013.

The board is satisfied that Ms van Eden has the requisite knowledge and experience to carry out the duties of a Company secretary of a public company in accordance with section 88 of the Act and is not disqualified to act as such. She is not a director of the board and maintains an arms-length relationship with the board.

The business and postal address of the Company secretary appear on the Company’s website.

American depository receipt facility

A sponsored American depository receipt facility has been established. The facility is sponsored by the Bank of New York and details of the administrators are reflected on the Company’s website.

Auditors

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

Larry Nestadt
Chairman