Blue Label Telecoms saw little growth in revenue over the past financial year, impacted by changing consumer buying patterns. The group's revenue grew by just 0.4% for the year ended 31 May, to R26.3 billion.
"The continuous shift in consumer buying patterns from traditional purchasing of airtime to that of 'PINless top-ups', resulted in limited growth in group revenue," the group says in its results statement.
It says only the gross profit earned on these top-ups is accounted for in group revenue, as opposed to the gross amount generated from transactions of this nature. If those amounts had been imputed, then effective growth would have been 7%.
Meanwhile, gross profit grew by 19% to R2.2 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) rose 7% to R1.3 billion. Headline earnings per share (HEPS) grew 18% to 117.98cps and earnings per share (EPS) increased by 14% year-on-year to 117.92cps.
The group declared a full year dividend of 40cps, an increase of 11% from a year ago.
The South African business's revenue ticked up only 0.2% to R25.8 billion, still making up the bulk of group revenue. However, revenue generated on 'PINless top-ups' increased by R2 billion ? from R4.1 billion to R6.1 billion ? equating to effective growth in South African distribution revenue of 7%.
The international businesses continued to be loss-making. The group says although Blue Label Mexico incurred losses in the year, its losses continued to decline, with the group's share thereof reducing by 42%, from R63 million to R37 million.
The group's share of losses in Oxigen Services India amounted to R120 million for the six months ending November 2016 and its share of losses in 2DFine Holdings Mauritius amounted to R5.4 million for the same period.
With effect from 30 November 2016, Oxigen Services India and 2DFine have been accounted for as venture capital investments, and as a result, are now measured at fair value investments. This means any further losses incurred by the businesses from that date had no impact on group earnings.
Acquisitions
The long-awaited Cell C recapitalisation was finalised at the beginning of this month, with Blue Label Telecoms coming on board as an investor. Through its subsidiary The Prepaid Company, it bought a 45% stake in the mobile operator for R5.5 billion.
Net1 UEPS Technologies also bought a 15% stake for R2 billion. The recapitalisation will bring Cell C's debt down to below R6 billion, after previously sitting at over R20 billion.
Blue Label is one of the primary distribution channels for Cell C products and services, and says the acquisition "provides a compelling value proposition to the group, to Cell C and its customers through vertical integration that will afford both companies the opportunity to realise synergies in product distribution".
"Cell C now has a sustainable capital structure to deliver on their strategic objectives," Blue Label says.
However, minority shareholder and broad-based black economic empowerment consortium, CellSAf, yesterday said the recapitalisation is "far from a done deal" and plans to challenge it. CellSAf claims "the proposed restructuring is non-compliant and faces a number of legal and regulatory hurdles".
This month, The Prepaid Company concluded an agreement to purchase 100% of the issued share capital in 3G Mobile for R1.9 billion. 3G Mobile supplies and distributes mobile phones and tablets to major retailers across SA and Sub-Saharan Africa.
"3G Mobile provides the ideal platform to combine Blue Label's low-cost and certified pre-owned mobile handset divisions into a consolidated group. The acquisition thereof is earnings accretive and provides a solid foundation for distribution into the burgeoning low-cost smartphone market," Blue Label says.
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