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Organic growth pushes Blue Label forward

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 24 Aug 2016
CEOs Mark and Brett Levy say Blue Label's performance was underpinned by expanding distribution channels and growing market share.
CEOs Mark and Brett Levy say Blue Label's performance was underpinned by expanding distribution channels and growing market share.

Blue Label Telecoms says a strong full year earnings performance was primarily attributable to organic growth, as headline earnings, for the year ended 31 May, grew by 22% to R668 million.

Joint-CEOs Brett Levy and Mark Levy say the organic growth was underpinned by an expanding multitude of distribution channels, and in turn a growth in market share.

Blue Label Telecoms saw a 22% increase in headline earnings per share (HEPS), from 82.26c in 2015 to 100.35c. Growth in earnings was predominantly achieved through increases in revenue of 19%, to R26.2 billion, and gross profit rising 11% to R1.8 billion. The final dividend of 36c per share was a 16% increase on the previous year as EBITDA grew 15% to R1.2 billion.

Blue Label says its participation in the recapitalisation of Cell C is "progressing positively".

In December last year, Blue Label revealed it planned to buy a 35% stake in Cell C for R4 billion, as part of the mobile operator's recapitalisation plan. At the time, the companies said they expected the transaction to come into effect in June this year, but so far this has not happened.

"Management are of the opinion that the transaction is compelling both from an investment and commercial perspective," Blue Label said today.

The group says it is well positioned to meet the increased demand for low-cost smartphones and tablets, through its extensive distribution network in SA and beyond its borders. Meanwhile, it expects the distribution of prepaid electricity to continue to grow, "through enhanced government initiatives to roll out additional prepaid electricity meters throughout SA".

Blue Label says the 19% growth in revenue was organically achieved through increased sales by expanding distribution channels. Revenue generated on "PINless top-ups" increased by R1.4 billion from R2.7 billion to R4.1 billion, equating to effective growth in South African distribution revenue of 23%, in that only the commission earned thereon is recognised.

Net commissions earned on the distribution of prepaid electricity continued to increase, escalating by R33 million to R197 million on turnover of R12.1 billion generated on behalf of the utilities.

International losses

On the international front, the group's share of losses in Blue Label Mexico declined by 28%, from R89 million to R63 million. A negative contribution of R27.7 million from Oxigen Services India (OSI) was congruent with significant expenditure incurred on the expansion of its mobile wallet subscriber base. These losses impacted negatively on group HEPS by 9.50c and 4.16c respectively.

"New initiatives at Blue Label Mexico, including the escalation of starter pack distribution, will contribute to a reduction in losses that have arisen from its aggressive rollout strategy," it says.

In terms of OSI, the group says it will focus on enhancing its mobile wallet subscriber base, with increased marketing to the vast unbanked population in India.

"This will result in growth in transactional revenue and the intrinsic value of the wallet subscriber base which has accumulated to 22.6 million active wallets at present."

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