Blue Label Telecoms expects to improve its profitability as it has broadened its distribution channels, and is also on the hunt for new acquisitions. However, its investments have weighed on margins.
The company, which grew revenue 2% to R19.4 million - from R19 billion - in the year to May, is also investing in its local distribution channels, which crimped its margin growth in SA, it notes.
Blue Label recently bought Retail Mobile Credit Specialists, which provides telecommunication products and services, content, data and allied activities.
It has also expanded through its purchase of a 75% stake in Via Media, a mobile content and value-added services provider. Both these deals will enhance its profitability, and give it access to new distribution channels.
"The group's distribution footprint is perfectly positioned to offer a money transfer solution that provides reach across all sectors of the South African economic landscape," it says.
Cash positive
Blue Label adds its ability to "generate positive cash flows from operating activities will facilitate opportunities both on an acquisitive and trading basis, as well as the distribution of dividends to shareholders". It ended the period with R1.2 billion in cash resources.
At the end of the year, the listed company reported a 10% increase in earnings before interest, tax, depreciation and amortisation - to R788 million - while its gross profit margin moved up 0.26 percentage points.
It notes the improvement in margins was thanks to it putting cash into bulking up inventory at favourable rates. However, growth at its local distribution segment - in terms of earnings before interest, tax, depreciation and amortisation - was held back to 3% because of "costs incurred for future growth in its distribution channel as well as margin compression caused by competitive forces".
Internationally, Blue Label recorded a net loss of R57 million, mostly due to its stake in Blue Label Mexico, which is investing to expand its points of presence. This cost headline earnings per share 9c, which came in at 67.98c, a gain on last year's 64.17c.
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