Blue Financial Services was still confident that it would return to profitability by next June, chief executive Johan Meiring said yesterday. Meiring’s confidence was boosted by improved results that showed losses incurred in the year to February declined to R284.9 million, from R1 billion in the previous year.
The AltX-listed microfinancier said this translated into a loss a share to 29.59c, from 170.25c. The headline loss a share fell to 27.77c from 134.96c.
Blue’s turnaround strategy began in December when a R450m recapitalisation transaction by Mayibuye, a black economic empowerment (BEE) investment firm, became effective. Meiring said he was very happy with the results.
“I think we are on track. We said it would take 18 months to turn Blue around and we are three months into the process. I do believe that we can return to sustainable profitability in 18 months,” Meiring said.
Also assisting the turnaround plan was a debt rescheduling agreement with lenders comprising R746.3m, which was 86.5 percent of the group’s total external funding obligations at the reporting date. This allows for a three-year stay on principal payments to lenders and remedies all related covenant breaches that existed.
The firm onverted R274m of debt to equity, with shareholder approval to convert a further R50m. Blue was able to restore net asset value to R46.6m from the negative R19.4m and it reduced operating expenses by 27 percent to R22m a month.
“We have been correcting some of the structures and we introduced tighter controls.”
Blue has begun active lending, which he said was slow in the first six months. Since September, new lending totalled R150m and new loans for the year amounted to R280.7m.
Mayibuye came to the rescue last July and it became a majority shareholder. The company reported a R1bn loss last year as it battled with credit impairment and collections.
“My assessment is they grew too fast, they went into 14 countries but did not take the approach of making them profitable, they just added country after country. The company became too complex because they did not take into account the work, cost, culture, regulation. They underestimated the complexities,” Meiring said.
As part of revamping, the company downsized its operations by retrenching 15 percent of its 800 staff compliment. Meiring said the retrenched workers would be given first preference in any recruitment opportunity.
Stephen Meintjes, an analyst at Imara SP Reid, said: “They still have a way to go to the recovery.” The shares rose 4c to 32c yesterday. - Business Report