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33
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
Financial Director’s report
continued
The share of net losses from
associates and joint ventures
comprised the following:
Ukash
Share of profits in Ukash ceased in
March 2015 as the Group disposed of
its interest therein.
Oxigen Services India
Since inception of the Group’s
investment in OSI in 2004, focus has
been on expanding its offline network
of retail outlets. In this regard
approximately 200 000 points of
presence are operative. This element
of the business generated profitability
of R45 million of which the Group’s
share equated to R25 million, in
comparison to R2.6 million in the
previous financial year.
In line with the dynamics of a shift in
demand for online wallets, a strategic
decision was made to enter this field.
Although offline retail-based wallets
continue to increase, penetration into
the creation of wallets through online
channels has the potential of
compounding transactional growth
through consumers being afforded
the ability to transact on web-based
and/or mobile applications.
The creation of these additional
wallets will not only increase
transactional revenue, but the wallets
in themselves have an intrinsic value
based on worldwide trends in this
regard. In order to escalate
penetration in both online and offline
wallet acquisition, brand awareness is
key to achieving this objective.
Accordingly, during the second half of
the financial year significant
expenditure was incurred on the
marketing of the brand and the
acquisition of wallets. This resulted in
the online company incurring losses
of R92 million of which the Group’s
share equated to R53 million. The
Group’s net share of losses amounted
to R28 million, equating to a negative
turnaround of R30.3 million, after the
amortisation of intangibles.
At the end of the previous financial
year the total wallet subscribers
amounted to 5.4 million. At the end
of the current year this subscriber
base has increased to 22.6 million, the
bulk of which was congruent with the
expenditure incurred in the second
half of the financial year.
Daily money transfer deposits have
grown from USD3.3 million per day as
at 31 May 2015 to USD4.0 million per
day as at 31 July 2016, increasing
exponentially through its connectivity
with the National Payment
Corporation of India.
Blue Label Mexico
BLM’s losses declined from
R186 million to R130 million, of which
the Group’s share was R63.3 million
after the amortisation of intangible
assets.
The decline in losses was attributable
to increases in revenue by 14%, gross
profit by R67 million, underpinned by
higher gross profit margins. Focus on
cost efficiencies confined an increase
in operational expenditure to 3%.
The resultant EBITDA increased by
R54 million (44%).
The increase in gross profit was
primarily attributable to BLM
becoming a multi-carrier distributor as
opposed to historically being confined
to one network. This has created a
more competitive environment among
the networks to the benefit of the
Company.
The introduction of the distribution of
starter packs that generate monthly
compounded annuity income is
expected to gain momentum which
will result in further declines in losses
going forward.
2DFine Holdings Mauritius
The Group’s effective shareholding in
OSI prior to March 2016 was 55.83%.
Of this shareholding, 37.22% was
held by Gold Label Investments (GLI),
a wholly owned subsidiary of the
Group and 18.61% indirectly through
the Group’s 50% shareholding in
2DFine Holdings Mauritius. In March
2016, a rights issue was offered by
OSI for USD10.5 million. The Group
exercised its rights for the entire
amount through GLI congruent with
2DFine Holdings Mauritius waiving its
rights. The effect of this is that GLI’s
shareholding has increased from
37.22% to 40.97% and its indirect
shareholding of 18.61% has been
diluted to 17.21%. The latter has in
turn resulted in a gain of R30 million
on dilution, being the Group’s share
of the increased net asset value
emanating from the rights issue.
This gain was offset by the Group’s
share of losses of R10.2 million
attributable to interest paid on
historical loans from GLI and BLT. The
Group’s share of interest paid in the
comparative year amounted to
R7.6 million.
After deducting the gain on dilution of R30 million, the negative contribution by
the international segment to core headline earnings amounted to R59.3 million.
2016
R’000
2015
R’000
Growth
R’000
%
growth
Mobile
Revenue
291 856
240 168
51 688
22
Gross profit
182 533
136 773
45 760
33
EBITDA
111 142
51 359
59 783
116
Core net profit
64 273
28 559
35 714
125
Core headline earnings
65 333
28 346
36 987
130