Blue Label Telecoms is adding more products to its point-of-sale network, including a ticketing solution that, while in the works, aims to take the hassle out of queuing to get tickets for concerts and other events.
Joint-CEO Mark Levy says TicketPros still needs some technical work, such as resolving the issue of whether to install printing solutions at its vending machines and sign up service providers, but will allow people to buy tickets at their leisure, instead of queuing.
The ticketing engine will provide ticketing to transport, as well as sporting and entertainment events, while the platform for innovative financial services products, including debit and credit card processing, has been laid.
Moving forward
Blue Label is also aggressively rolling out its Mexican infrastructure, although the operation weighed on its results in the year to May. During the year, revenue gained marginally to R19 billion, and gross profit moved to R1.3 billion.
Earnings growth was mostly due to the contribution from the South African distribution segment, while commissions earned on the distribution of prepaid electricity increased 33%, to R113 million.
Levy points out that while revenue seems to have only grown a percent, this is the result of its shift to more PIN-less vouchers. Because the company acts as a middle man in vending these, the total sale value is not added to the top line, although it still earns lower down the income statement from the service.
If Blue Label was able to include all the revenue, its turnover would have gained 6%, says Levy.
In addition, last year's numbers included a once-off gain of R79.4 million, which has to be stripped out of this year's figures to see the group's actual growth, says Levy. On this basis, Blue Label's bottom line grew, he adds. Total reported net profit was R408 million, compared with R419 million a year ago.
The company also contained overheads, which gained about 3%, says Levy. This rate is below current inflation levels.
Blue Label also decided to invest its cash into its debtors' book and in growing stock instead of leaving the cash in the bank, as it earns more by investing the cash outside the bank, says Levy. Adding back the investment in the debtors' book and the R1.3 billion spent on stock, cash in hand would be at R2.5 billion, he says.
"It's simple math... We're sweating the money."
As a result of the cash management, Blue Label's gross margin gained about 0.5%, says Levy. He adds that the company is not geared.
Additional costs
Its Mexican operation continued to make losses, as expected, as it is still in the rollout stage. The ongoing legal dispute with Telkom and its former subsidiary, Multi-Links, has cost it in legal fees, says Levy. While confident of the outcome of both matters, they jointly weighed on the bottom line to the tune of R82 million.
Telkom and Multi-Links are suing three entities and three people for around R7 billion in damages, arguing breaches of fiduciary duty by a former executive and misrepresentations by Blue Label. It alleges the misrepresentations were designed to cause Telkom to continue pumping money into the bleeding Nigerian company after December 2008.
The suit, filed on 17 May in the North Gauteng High Court, cites six defendants, including Blue Label Telecoms, Africa Prepaid Services, Africa Prepaid Services Nigeria (APSN), Blue Label COO Mark Pamensky, ICT veteran Mthunzi Mdwaba, and former executive Thami Msimango. The case has been set down for next February.
In March 2007, Telkom bought 75% of the CDMA operator, for $280 million, and almost two years later, bought out the balance for another $130 million. The company says in its filing that Multi-Links performed poorly between when it initially invested and November 2008, to the point where its performance was below the business plan.
Telkom sold the unit in October 2011, making a large loss, after having written the unit down for more than its initial investments. Under the deal, Multi-Links outsourced its entire sales, marketing and distribution function to APSN. The deal was seen as vital to fixing the flagging Multi-Links operation, which was a precondition of Telkom investing more into it.
Blue Label, which has also instituted arbitration against Multi-Links after its 10-year deal was cancelled early, is confident the claims made against it, its subsidiaries and representatives will be successfully defended. "As the arbitration and legal proceedings are sub judice, no further statements may be made about the merits at this stage."
Levy says the drain from its Mexican operations is expected to continue for another year as it is rolling out "aggressively". He adds that the group has inked a deal with a global credit card company, details of which will be announced soon, as will an agreement in SA.
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