Blue Financial Services (Blue) would report a loss in the six months to September as the global financial crisis limited its ability to grow its loan book, the AltX-listed pan African micro financier said on Tuesday.
Blue said the financial downturn had restricted levels of available funding and operating costs have been disproportionately high compared to revenue. This was because of lower than expected levels of available funding.
It said there had also been a surge in the impairment of loan advances, particularly in the South African portion of the loan book. There was also a weakening in many of the African market currencies against the rand.
Blue has operations in 14 African countries, including Ghana, Tanzania, Swaziland, Kenya, Cameroon and Nigeria.
During yesterday's late trade, Blue was at some point down about 6 percent or six cents on the JSE. But the counter rerated, gaining 1.16 percent or 1 cents to close at 87 cents.
Steve Meintjes, a senior analyst at Imara SP Reid, told Business Report that they had put a sell recommendation on the stock.
This trading update supports our recommendation. These guys changed the auditors recently and the new ones make absolutely sure that the loan book is rock solid, Meintjes said.
But Morne Reinders, the corporate affairs executive at Blue, said the trading update did no signal the end of the world for the business.
This is the symptom of the first six months. We believe the matter is fixable. The business is still sound, Reinders said, adding the involvement of the International Finance Corporation (IFC) bore testimony to this. The IFC is one of the shareholders in Blue.
Blue recently appointed James French to the board as an independent non-executive director after the IFC nominated him.
Dave Van Niekerk, Blue's executive chairman, said the appointment of French was indicative of the IFC's involvement and support of Blue's work on the continent.
French has extensive experience in capital markets development, treasury and corporate finance, financial engineering and advanced risk management of major international bank portfolios.
Meintjes said: This case is similar to the African Dawn Capital (AfDawn) where management got so messed up that outsiders were brought into play.