Blue in share free-fall

Johannesburg - Shares in Blue Financial Services tumbled on Tuesday as it conceded it had overspent funding its ambitious expansion strategy, plans it would now delay.

The company blamed the global financial crisis for its inability to raise affordable funding saying that operating costs were "disproportionately high when compared to revenue owing to the lower than expected levels of available funding".

The Alt-X listed had fallen 18.6% during the final hour of trade and was last trading at 70 cents a share. About 700 000 shares had changed hands in 59 deals.

Keith McLachlan an analyst for share-tipping site Smallcaps.co.za, told Fin24.com the company's reference to enhancing the groups provisioning policy was a central feature of the trading statement. It was a sign that Blue Financial had failed to manage its loan book appropriately, he said.

"You can really see how well a company has been managing their credit control policy when their funding dries up," said McLachlan.

Funding was an issue highlighted by Blue in their trading update and caps an disastrous year for investors since Blue was trading at above 600c/share a year ago. It was at 250c in September.

Concerns have been raised after the group has seen a string of financial directors and auditors come through the business over the last few three years.

Stockbroker Imara SP Reid recently issued a "sell" recommendation on Blue.

Head of research at Imara, Stephen Meintjes, advised clients: "We still believe all Blue's problems are fixable but have come to the conclusion that, with new financial management, new auditors and, in due course, the new independent chairman promised by management, this could take some time."

- Fin24.com