Blue Label Telecoms’ share price soared 15% on Thursday after reporting a strong set of interim results for the six months ended 30 November 2017.
Adjusted core headline earnings per share — stripping out the effects of the Cell C and 3G Mobile acquisitions to provide a “like-for-like” comparison — shot up by 21% year on year to 75.59c.
With the two acquisitions factored into the numbers, core Heps rose by 108% to 168.42c on revenue of R13.5bn.
Core headline earnings were R1.4bn. Earnings included the group’s share of profits in Cell C of R928m, of which R865m was from the recognition of a deferred tax asset. Cell C has as much as another R3bn it can recognise, which the mobile operator intends to apply in the coming years. Blue Label’s share of profits from 3G Mobile amounted to R36m.
Blue Label co-CEO Brett Levy said the company’s acquisition of a 45% stake in Cell C in a deal worth R5.5bn will soon begin to bear significant fruit for the group. “It will be a very strong third network that has a lot to offer consumers. Results for 2017 were exceptional, but a lot of it was to do with the recapitalisation.”
Levy hinted that he expects Cell C’s 2018 financial performance to be robust.
“Our investment in Cell C 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,” Blue Label said in a statement. “Cell C now has a sustainable capital structure to deliver on its strategic objectives.”
Levy’s co-CEO (and brother), Mark Levy, said the Cell C and 3G Mobile deals have created a platform for further strong growth in the years to come.
A big focus for 2018 is on expanding Blue Label’s distribution footprint and product offerings, particularly in the informal market, the group said. This will be done by providing many more point-of-sale devices to independent traders.
Financing
3G Mobile is expected to benefit from growing demand for low-cost and refurbished smartphones. Through subsidiary Comm Equipment Company, it plans to offer financing to consumers on a range of products beyond cellphones, including satellite decoders.
In prepaid electricity, where growth continues to be robust — albeit on thin margins — Blue Label intends to work with key municipalities to offer a “full turnkey revenue management system, credit control services, audits, meter replacements and new installations”.
Its Mexican operation, meanwhile, is soon expected to contribute to group profits for the first time thanks to an improvement in revenue and sustained improved gross profit margins and compounding annuity revenue generated from starter packs, it said.
Blue Label generated R3.1bn in cash from operating activities in the interim period. It does not, however, declare an interim dividend.
The Levy brothers together directly hold 13.7% of Blue Label’s equity. Its biggest shareholder is Allan Gray, which holds a 15.9% stake on behalf of its clients. — © 2018 NewsCentral Media
