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Blue Label Telecoms earnings boosted by acquisitions

22 February 2018

Highlights for the interim period to 30 November 2017:

  • Increase in Revenue to R13.5 billion
  • Increase in EBITDA of 9% to R778 million
  • Increase in earnings per share of 110% to 167.43 cents
  • Increase in headline earnings per share of 109% to 166.68 cents
  • Increase in core headline earnings per share of 108% to 168.42 cents
  • Increase in cash generated from operating activities to R3.1 billion

Core headline earnings amounted to R1.36 billion. Earnings included the Group’s share of profits in Cell C of R928 million, of which R865 million pertained to the recognition in a deferred tax asset, and its share of profits of R36 million in 3G Mobile. The balance of earnings pertained to the remaining companies within the Group.

Prospects:
In line with the Group’s strategy to continue expanding its distribution footprint and product offerings, focus will be on further penetration into the informal market through the provision of point of sale devices to the multitude of independent traders who do not have the tools to market and sell the Blue Label offering of product and services at present. The demand for low cost smart phones and tablets is expected to accelerate and, in turn, enhance revenue and profitability.

Blue Label is one of the primary distribution channels for Cell C products and services. 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. Cell C now has a sustainable capital structure to deliver on their strategic objectives.

3G Mobile is one of Africa’s largest distributors and financiers of mobile devices and handsets to major retailers and cellular network providers. It has distribution rights for all major tier one and tier two mobile devices and allied products from the manufacturers thereof. These functions supplement Blue Label’s strategic objectives to provide value added services to both Cell C and its own customer base. 3G Mobile provides the ideal platform to combine Blue Label’s low cost and certified pre-owned mobile handset divisions into a consolidated group. The acquisition thereof is both earnings accretive and provides a solid foundation for distribution into the burgeoning low cost smartphone market.

The proprietary software developed by Airvantage will afford Blue Label the opportunity to apply such intellectual property within the Group, thereby enabling it to broaden its offering to its customer base. It is the intention of Airvantage to emulate its robust business model internationally in the near future.

Through Blue Label’s entrenched relationship with numerous municipalities on whose behalf prepaid electricity is sold and the proceeds thereof collected, it is the intention to supplement these services with a full turn-key revenue management system, credit control services, audits, meter replacements and new installations.

Following Blue Label Mexico’s continuous improvement in operations, it is expected to provide a positive contribution to Group profitability, given their consistent growth in revenue generation at sustainable improved gross profit margins and compounding annuity revenue generated from starter packs.

“Big Data” creates the opportunity to upsell and cross sell the various bouquets of products and services that Blue Label has to offer, through its distribution channels, by intelligently understanding consumer behaviour.