South Africa’s power crisis severely interrupted the prepaid operations of Blue Label Telecoms (BLT) in the last 12 months, leaving a large hole in the group’s earnings.
Announcing its full-year results today for the year ended 31 May, the JSE-listed technology group says load-shedding had a significant impact on the group, knocking R30 million off its earnings.
Inconsistent power supply negatively impacted the sale of prepaid electricity, prepaid airtime, starter packs and its call centre operations, all of which are significant revenue streams for the group.
“We lost 32 full days, which is an estimate of 10% production time. The frequent power outages imposed by external factors have adversely affected our operational efficiency, resulting in disruptions, delays and additional costs,” said Brett Levy, BLT co-CEO, during a virtual call this morning.
“While the management team has worked diligently to mitigate the effects of load-shedding, it has disrupted the availability and accessibility of these essential services to our customers and has negatively affected our overall financial performance.”
He noted it also had a negative impact on international money transfer volumes.
BLT subsidiary Blue Label Distribution is the largest distributor of prepaid e-tokens of value, with over 150 000 distribution points of representation across SA.
The company is the predominant contributor to the group’s revenue and profitability – providing airtime, prepaid electricity and bill payments. Its other principal operating companies include: The Prepaid Company, Cell C, Blue Label Connect, TicketPro, 3G Mobile, Cigicell, Prepaid24, Utilities World, Reware, Edgars Connect and Transaction Junction.
Despite its load-shedding troubles, the group reported revenue of R18.9 billion and an increase in gross profit of 19%, to R3.48 billion (R2.93 billion in 2022).
EBITDA increased by R91 million (7%), from R1.372 billion to R1.463 billion, excluding the extraneous contributions of R146 million in the current year and non-recurring income of R326 million in the prior year.
“The core businesses of the Blue Label Group have consistently demonstrated growth in revenue, gross profit and core headline earnings per share for the year ended 31 May 2023. Excluding the extraneous contributions of R523 million in the current year and the non-recurring income of R214 million in the prior year, core headline earnings increased by R78 million (9%), from R847 million to R925 million,” says the group.
However, as only the gross profit earned on PIN-less top-ups, prepaid electricity, ticketing and gaming is recognised as revenue, on imputing the gross revenue generated from these sources, the effective growth in revenue equated to R4.5 billion (6%), resulting in a total revenue of R76.8 billion, compared to R72.3 billion in the prior year, it says.
The group says the results exclude the extraneous contributions of R523 million in the current year, primarily resulting from the recapitalisation transaction of Cell C, and R214 million in the prior year – core headline earnings per share increased by 9% to 104.83c per share compared to 96.56c per share in the prior year.
Full Cell C results will be made available within the next two weeks, according to the company.
In September 2022, Cell C completed a lengthy cash-raising exercise led by Blue Label Telecoms, in an effort to recapitalise the business.
The transaction included restructuring of Cell C’s debt owed to certain secured lenders totalling R7.3 billion (fixed as at November 2019). As part of the agreement, Blue Label would provide liquidity via a secured loan of R1.46 billion.
A portion of R1.03 billion of this debt funding would be used to pay out the secured lenders, as per the accepted compromise offer of 20c for every R1 of debt, it said at the time.
Discussing the recap in the results, BLT says: “The predominant extraneous contributions to the May 2023 basic, headline and core headline earnings per share, resulting from the recapitalisation transaction of Cell C, were attributable to expected credit losses and fair value movements of R88 million; loss on modification of a financial instrument of R57 million, primarily due to the renegotiation and reclassification of the CEC deferral amount of R1.1 billion, owed by Cell C, from ‘trade and other receivables’ to ‘loans to associates and joint ventures’.”