Blue Label Telecoms, the JSE-listed group led by brothers Mark and Brett Levy, has turned in a strong set of financial results for the year to May 2017, the last numbers it will report that don’t include contributions from its recent significant investments in Cell C and 3G Mobile.
Headline earnings per share rose by 18% to 117.98c, driven by solid organic growth in its distribution business. Gross profit increased by R343m, 19%, to R2.2bn, with an increase in margins from 6.98% to 8.26%.
Earnings before interest, tax, depreciation and amortisation rose by a slower 7% due to currency fluctuations, an increase in overheads and other factors.
Although Blue Label Mexico incurred losses, these losses continued to decline, with the group’s share thereof declining by 42%, to R37m.
The ongoing shift in consumer buying patterns from the traditional purchase of airtime to that of Pin-less top-ups resulted in limited growth in group revenue, which came in at R26.3bn. This is because only the gross profit earned on such top-ups is accounted for in group revenue.
Revenue generated on Pin-less top-ups increased by R2bn to R6.1bn, equating to effective growth in South African distribution revenue of 7%, in that only the commission earned thereon is recognised, Blue Label said.
South African distribution contributed R25.8bn in revenue — flat year on year — while gross core headline earnings from this segment rose by 19% to R893.1m.
Net commissions earned on the distribution of prepaid electricity continued to increase, escalating by R18m to R215m on a value of R14bn generated on behalf of the utilities.
Mexico
In Mexico, losses declined from R130m to R74m, of which the group’s share amounted to R37m. The decline in losses was achieved despite a reduction in revenue by 23%, caused by intense competition between carriers, resulting in lower tariffs for end users. However, in the latter half of the financial year, pricing stabilised. Gross profit margins improved.
In India, Blue Label’s investments are now accounted for as venture capital investments at fair value. A fair value gain of R160m and the group’s share of losses of R125m equated to a net positive contribution of R35m to group earnings.
Group cash flows generated from operating activities were almost R1.4bn, mainly due to increased trading activity, net of working capital requirements. Cash on hand at year end amounted to more than R1.3bn. The group has declared a dividend of 40c/share (32c net of dividend withholding tax). — © 2017 NewsCentral Media
