JSE-listed Blue Label Telecoms has hiked headline earnings per share by 17% in the year ended 31 May 2013 if the effect of a once-off income receipt of R79,4m in the prior year is excluded.
The strong performance came despite relatively flat revenue growth from continuing operations. Revenue was R19bn, from R18,7bn in 2012.
The earnings lift was achieved through an improvement in gross profit margins from 6,45% to 6,7% and a reduction in the number of issued shares resulting from the company’s repurchase of Microsoft’s 12% shareholding in December 2011.
Excluding the once-off receipt in the previous financial year, headline earnings increased by 9% to R425m.
“The growth in earnings, with the South African distribution segment being the main contributor thereto, was achieved in spite of compounding losses in Mexico and a decline in the performance in the call centre operation,” the company says.
Prepaid airtime, annuity revenue generated from starter packs and commissions earned on the distribution of prepaid electricity accounted for a 1% increase in revenue.
Commissions earned on the distribution of prepaid electricity increased by R28m, or by 33%, to R113m, on revenue generated on behalf of utility suppliers of R7,2bn (2012: R5,5bn).
Losses mounted at Blue Label’s joint venture in Mexico. The company’s share of losses grew from R24,9m in 2012 to R51,1m in 2013, in spite of revenue growth of 103%.
“The increase in losses was attributable to margin compression and a significant increase in overheads,” Blue Label says. “Furthermore, the group increased its shareholding from 40% to 45% during the course of the financial year and in turn the group assumed an additional 5% share of these losses.”
Gross profit margins tumbled as the result of a reduction in discounts offered by Mexico’s dominant mobile operator, Telcel, which said it would reinstate the previous margins, plus additional discounts, but only if Blue Label Mexico agreed to become an exclusive distributor. Blue Label agreed and signed a deal with Telcel in April.
The purchase of additional point-of-sale devices, needed so it could operate nationally, also hurt margins, it says.
In India, Oxigen Services improved revenue by 18% to R3bn, but operating expenses increased by 16%, resulting in a decline in operating profit. Its share of losses was R565 000, from a profit of R4,6m in 2012.
Blue Label, whose share price has risen by a third in the past year, declared a dividend of 25c/share. — (c) 2013 NewsCentral Media