JSE-listed prepaid services company Blue Label is looking to buy companies to supplement its core offerings.
The company this morning reported its results for the year to May and said revenue grew 13%, to a record R18 billion, while net profit grew 18%, to R431 million.
Joint-CEO Mark Levy says the company has a cash balance of R2.2 billion and net cash of about R500 million, after working capital investments. Mark Levy says the company is looking at acquisitions to grow its core business.
Blue Label operates in SA, India, Mexico and Nigeria, and also has a small operation in the UK. The company provides prepaid vouchers for airtime and other products such as electricity.
Mark Levy says the company wants to add new offerings to its distribution channel such as coupons, loyalty vouchers, broadband vouchers and financial services. He explains the company may use its cash on hand to develop these products, or buy out a company that already offers them.
In addition, the company paid out a 14c dividend, a 17% increase on last year's maiden payment to shareholders. Mark Levy is comfortable with the amount of cash the company has available. “We don't know what tomorrow brings.”
Bigger footprint
Joint-CEO Brett Levy says the South African operation gained 15% revenue, to R7.8 billion, as the company doubled its network, increasing its distribution footprint. The local operation now has 140 000 points of presence in SA, he says.
Electricity sales have grown from R3 million three years ago to R3.5 billion this year. Blue Label does not include this revenue in its income as it acts as an agent. Commissions from the sale of power improved 79%, to R61 million, says Brett Levy.
For the next financial year, Brett Levy expects electricity to continue growing at the same level. He points out that the government will roll out another seven million prepaid meters in the next year, taking the market to 14 million meters.
In addition, says Brett Levy, city councils are converting post paid accounts to prepaid. Blue Label has also signed four new tenders, which were not reflected in this year's figures, he adds.
Revenue from prepaid airtime sales is now R1.5 billion and the company increased SIM connections 47% during the year. Brett Levy expects to add another 450 000 connections a month during the new financial year.
Not all good
However, Blue Label's decision to exit the Nigerian operation weighed on results. Mark Levy says the company closed down its operation after year-end after trying unsuccessfully to sell the unit.
Mark Levy says the company incurred a R18 million loss during the year, compared to a R49 million gain last year. It also impaired the unit by R23 million, writing it off completely, says Mark Levy.
Blue Label said last month it would pull out of Nigeria, after losing a contract with Telkom's former Multi-Links unit, which was cancelled last November.
The company said the cancellation of the Multi-Links deal has impacted the “viability of the business in Nigeria”. Blue Label decided to focus its efforts on other emerging markets, such as its operations in India and Nigeria.
Blue Label's Nigerian unit last year threatened legal action over lost profit, because the 10-year “super dealer agreement” was cancelled early after Telkom decided to exit the struggling Multi-Links CDMA business.
Mark Levy says the company is now waiting for an arbitration date to be set, which should be some time next year. He will not disclose the amount of the company's claim.
Blue Label has a 36.72% stake in Africa Prepaid Services (APS) Nigeria through its 72% ownership of APS, which owned 51% of the Nigerian company. APS, which distributes bulk printed physical prepaid products and starter packs, has also pulled out of Nigeria.
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