Blue Financial Services planned a prudent lending approach to eliminate impairments and bad quality loans even if this meant slow growth to its loan book, the pan-African financial services provider said yesterday.
Reporting its interim results for the six months ended August 31, the chief executive, Johan Meiring, said quality lending was at the forefront of improved bad debt impairment charges and increased earnings and the group would therefore retain this strategy.
Blue generated a net profit of R21.8 million in the six months to August, compared to a loss of R168.2m in the comparative period last year and a loss of R284.9m in the full year to February 2011. This translated into earnings per share of 0.38 cents and headline earnings per share of 0.40 cents compared to losses of 25.29 and 24.87 cents respectively.
Loan advances in South Africa totalled R825.9m while advances in the rest of Africa stood at R601m.
“Credit appetite is different with countries. In South Africa, even though credit demand has grown lightly, there aren’t a lot of quality loans,” said Meiring.
Blue Financial Services operates in the various jurisdictions as a registered bank, insurance company or micro finance provider. Its main product lines are micro, business and housing finance, savings products, insurance and mobile.
He said although the group had seen growth in its loan book, it was mainly the decline in expense, which was also helped by the group’s turnaround strategy, that backed its financials.
“We’d like to keep our bad debt impairments at these types of levels and to do that we won’t sacrifice quality over quantity. We will not be chasing rapid loans, we are happy with the steady growth,” he said.
Blue’s gross loan advances to customers totalled R1.42bn during the period under review while net impairment of loan advances and receivables decreased to R26m from R77.08m in the comparable 2010 period.
Meiring said the growth of its interest-bearing book and the group’s recapitalisation by Mayibuye and the commencement of the key phases to its turnaround strategy had also yielded positive and sustainable improvements which helped to return it to sustained profitability.
The group’s interest income grew by 51 percent to R227.5m, from R150.6m.
Blue concluded recapitalisation and a Debt Rescheduling Agreement in December 2010. In February it implemented the debt to equity conversion and adopted a turnaround strategy which laid the foundation to grow its net asset value to R65.9m compared to R58.1m in February. The group’s net asset value per share rose to 1.13 cents from a loss of 32.95 cents last year.
Meiring said after Mayibuye had acquired Blue the group had benefited vastly from skills in credit and collections. The net impairment charge was reduced as a result of focused collection efforts on the non-performing loans, among other things.
Blue said the recovery of historically non-performing loans would remain a key component of its turnaround strategy until the business growth and level of loan advances had reached the targeted levels.
Meiring said although the group continued to explore ways to minimise its exposure to the fluctuations of foreign currencies if good opportunities came its way it would explore them.
Blue has entered into a distribution relationship with an institution in Kenya which would see it increase its distribution points by a minimum of 400. It expects these to be operational this month.
Exposure to foreign currencies had resulted in losses of R14.1 million on the translation of the financial results of the foreign subsidiaries during the period under review. - Londiwe Buthelezi