Blue Label Telecoms took a R40 million knock in its interim results for the six months ended 30 November 2009, from a hefty drop in interest rates near the end of last year.
However, joint-CEO Mark Levy says the company's planned 4% budgeting for a possible shortfall in the interest rate mitigated the losses. Blue Label announced the 4% at last year's interim presentation, when it appeared SA's interest rates would take a nosedive.
The company's business model relies heavily on earning bank interest on cash from prepaid vouchers and has traditionally made low margins off the product. Levy says margins are increasing.
However, even with the R40 million knock and another R20 million write off for software or products that didn't go anywhere, Levy says the company is still pleased with the 11% revenue increase.
“Our core business remains strong and robust. And as long as the core remains intact, it gives us the opportunity to venture out and complement it with other products,” he says.
While the company has a healthy balance sheet, Levy says it was not pleased with the performance of its call centres. “We really felt the product of the global crisis in that part of the business,” he explains.
The contact centre business was focused on onward-selling insurance products, which took a turn for the worse during the crisis. Blue Label closed some of the call centres and started to refocus products in the others.
Despite the troubles, the company has seen an incredible boom in several other sectors. Its international services grew by over 300%, thanks to an exclusive partnership with Telkom's MultiLinks in Nigeria.
Levy says the company will expand its prepaid sales in the country through other operators and possibly utilities.
Locally, it has seen a dramatic increase in prepaid electricity, which Levy believes could be off the back of uncertainty around Eskom's tariff hikes. These tariff increases have subsequently been confirmed and Blue Label is likely to see another spike in prepaid customers.
The company says it is still on track to review possible dividends from June this year, the company's financial year-end.
Share