ABOUT US
Blue Label's preparations for a potential COVID‑19 lockdown level 5 began in earnest in late February/early March 2020. Enormous effort went into preparing how to efficiently respond and facilitate staff working from home without interrupting any of our core services.
Not only did this entail the speedy procurement of hardware and software where needed, the training of those staff needing to take large PCs and desktops home and re-assemble them there, the provision of data access to those without service at home but also constant communication with staff, suppliers and customers to seamlessly manage the transition period. Our preparation allowed us to have all staff working remotely and a fully functioning remote Customer Interaction Centre available by 27 March 2020.
Blue Label's technical prowess came to the fore and we showed our resilience by continuing to deliver essential services, including electricity, airtime, data and other digital services, as well as providing financial transactional services. The COVID-19 lockdown has not impacted negatively on airtime, data and electricity sales volumes. The Group's digital expertise has enabled uninterrupted access to all our products and services through banks, formal retailers, independent retailers, petroleum forecourts and spaza shops across South Africa. Buying patterns continue to evolve and were accelerated by the lockdown. Our data clearly points to consumers increasingly moving to digital channels at the expense of petroleum forecourts and traditional retailers. Blue Label is channel agnostic and was easily able to divert digital stock to meet demand wherever needed.
We have noted an increase in the productivity of our people as they strive to continue delivering innovatively and we are proud to have launched new digital products and services despite the COVID-19 chaos.
The majority of our companies have evolved to meet the changing market dynamics and used COVID-19 to spur innovation in order to continue delivering uninterrupted services and develop new services. Cigicell, our provider of pre-paid electricity tokens and revenue assurance services launched a zero-rated unstructured supplementary service data (USSD) service to provide indigent customers with their free basic electricity (FBE) token without the need to leave their places of residences. Apart from the phenomenal work done by our Information Technology division to cater for remote working conditions and the need to seriously up our data protection and prevention of cybercrime initiatives, the division also launched a WhatsApp bot providing customers with the ability to purchase many of our products without the need to establish an independent electronic wallet. All that is needed is WhatsApp and a bank or South African Social Security Agency (SASSA) card.
Despite these relatively upbeat stories, Blue Label has experienced significant pressure in some of our operating divisions.
Ticketpro was on track to have its most profitable year – then COVID-19 struck, crippling the industry. Despite this major setback, Ticketpro has used the time to rebuild and technically develop new and improved systems and infrastructure. We continue to expand the ticketing footprint in SA – 3 929 independent venues to access Ticketpro's event, sporting and transporting ticketing services.
Ticketpro also launched an online streaming events platform – COVID Zero – to maintain relevance and provide artists and fans a platform to share and enjoy content safely. COVID Zero empowers entertainers and raises funds for charities to provide less fortunate South Africans with face masks, hand sanitisers and food parcels.
Funds raised were managed by Blue Label's corporate social investment (CSI) arm, the Trust Blu Foundation who worked with Uconomy and Uconomy Youth, social enterprises that aim to create and maintain an integrated network of self-sustainable economic ecosystems that address unemployment from grassroots level. With the COVID-19 enforced shutdown, Uconomy was faced with the challenge of continued support to their small, medium and micro-enterprises (SMME) and youth. With the mentorship and support from Blue Label Telecoms and Trust Blu Foundation, Uconomy was able to mobilise over 3 000 unemployed and previously disadvantaged youth and their small and microenterprise network and repurpose them to address the COVID-19 crisis. This entailed repositioning them as a final stage in the production of reusable face masks, disposable gowns and shoe covers and packaging of hand sanitiser which were distributed to communities in need.
Our starter pack business was severely hampered by the hard lockdown, losing R38 million in the months of March and April. Our gaming business, in which we provide digital tokens for use at gaming outlets, also had nothing to bet on given that no sporting events took place. The starter pack business has now recovered to pre-COVID-19 levels and gaming appears to be picking up as punters bet on European football which has restarted. COVID-19 severely interrupted operations some of our call centre operation with 800+ call centre agents furloughed during the hard lockdown. Our large clients restricted operations while they were assessing the COVID-19 impacts. There were no new sales in April and May 2020. Business has slowly started to pick up again and we currently have 526 agents working remotely, 400 agents are now back in the office with temperature screening, hand sanitising stations, attendance records and they are appropriately socially distanced. We are planning scenarios where between 50% and 65% of our agents will be able to work offsite within 12 months.
COVID-19, however, had a significant negative impact on the retail operations of WiConnect. WiConnect's financial feasibility was impacted by the losses directly attributable to the lockdown and by the uncertainty of the duration of the pandemic. A decision was made to cease the operations of the WiConnect retail stores. This resulted in a negative impact of R184 million on the Group's core headline earnings for the year ended 31 May 2020. The actual cash outflow required for the closure of the stores will, however, be confined to approximately R30 million.
In addition, challenging economic conditions, an unfavourable trading environment, margin compression as a result of reduced incentives from the networks and an increase in product costs, exacerbated by COVID-19, necessitated an impairment of goodwill in Blue Label Connect of R157 million, a partial impairment in Glocell Distribution of R57 million and a fair value downward adjustment of the Glocell loan, net of taxation, of R47 million.
Our budgeting and planning process for the 2021 financial year has been complex given the need to cater for multiple scenarios, given the possibility of further waves of the virus and potential returns to harder lockdown level. We have also had to plan for possible further changes in the different markets within which we operate. This has necessitated the creation of an inherent flexibility to all our strategic and operational plans.
We are proud of the technical prowess of the Company and its people and we look forward to emerging from the COVID-19 crisis with reduced cost of acquisition, and further improved innovation and flexibility.
THE RITE STRATEGY 
