Blue Label Telecoms Integrated Annual Report 2019

30 Blue Label integrated annual report 2019 Joint CEOs’ report The mobile industry in South Africa is under pressure as a result of high subscriber penetration and intense price competition. However, mobile technology is clearly a fundamental requirement of human life in the 21st century and is becoming the tool through which multitudes of products and services ranging from communications, entertainment, financial and administrative services to education and healthcare services will be delivered. Cell C is driving to be in a position where it provides these services rather than focusing on network rollout and management thereof. The 2019 financial year ending 31 May 2019 was focused on refining operating structures and processes to improve our ability to service customers and maximise benefits for existing and new operations, taking into account changing market conditions. Improving the agility and security of our IT system, which are the bedrock of our business, has been a key priority this financial year. Blue Label has again demonstrated its resilience and continuing ability to innovate during tough economic trading conditions, evidenced by the increase in core headline earnings by 26% to R904 million on exclusion of the negative impacts as detailed below*. Our underlying ethos of driving financial inclusion for the mass market is delivering the social and financial benefits we strive for. As South Africans, this is our responsibility. Blue Label’s further growth into the formal retail, banking and informal markets has been achieved by delivering technology and payment agnostic products and services that South Africans need and want. Our products and services make life more convenient, reduce the cost of transport in particular for the man on the street and grow the businesses that we distribute to. We are proud of what we do. GOING FOR GROWTH AND EFFICIENCY Our focus during the 2019 financial year, apart from progressing the Cell C transactions, has been on deep diving into Blue Label’s technology stacks and operations. We have spent many years growing both organically and acquisitively. Consolidating and rationalising what we have to greatly improve our service to customers and create agile technology platforms and people processes to rapidly deliver new and existing products and services to market has been our focus. We have reviewed every aspect of our business and created a new operating structure which maximises and leverages our current skills base for the benefit of a broader number of our subsidiaries. We are also investing in new skills that will assist us to develop and rapidly deploy the new products in our pipeline. Key to all of these undertakings is customer service and efficient and effective scalability. We both recognise that Blue Label’s share price has been under enormous pressure as a result of the market’s concern regarding Cell C’s ability to restructure its balance sheet and secure access to sufficient, reasonably priced funding to propel earnings growth into the future. Blue Label writing its investment in Cell C down to zero has compounded these fears. We are confident that the conclusion of the extended national roaming agreement and recapitalisation transactions in progress will place Cell C on a path to sustainable growth into the future. * On exclusion of the negative impact attributable to: u u Cell C’s trading losses, impairment of certain of its property, plant and equipment, the impact of the derecognition of its deferred tax asset and the impairment of Blue Label’s total investment in Cell C; u u Fair value downward adjustments of the exposure relating to SPV1 and SPV2 pertaining to the initial recapitalisation of Cell C and the Glocell loan; u u An impairment of Blue Label’s total investment in the Oxigen India group, including 2Dfine Holdings Mauritius, as well as providing for loan impairments and guarantees payable therein; and u u Partial impairments of goodwill and an investment in a joint venture.