During the year ended 31 May 2023, Blue Label continued its digital business transformation journey, shifting from being a purely distribution and value-added services company that runs technology to that of being a digital business that orchestrates distribution and X-tech ecosystems.
Fuelling business innovation, this journey intends to promote the following key outcomes:
With technology, digitalisation, innovation, automation, artificial intelligence and big data playing bigger roles in what we do, we continue to expand our digital ecosystem which will enable us to improve our market share in fintech and solidify our role as a market leader therein.
While various socio-economic factors influenced our operations and some consumer habits and major shifts in the telecommunication and fintech industries have impacted how we operate, Blue Label was nevertheless able to introduce new products, acquire new clients and business partners, impact the lives of those we work with and for and deliver on our business strategy.
Core headline earnings for the year ended 31 May 2023 amounted to R402 million, equating to core headline earnings of 45.55 cents per share.
The core businesses of the Blue Label Group have shown consistent growth in revenue, gross profit, and core headline earnings per share for the year ended 31 May 2023. The predominant extraneous contributions to the May 2023 basic, headline, and core headline earnings per share are primarily associated with the recapitalisation transaction of Cell C.
In the comparative year, core headline earnings amounted to R1.061 billion, equating to core headline earnings of 121.01 cents per share.
Excluding the extraneous contributions of R523 million in the current year and the non-recurring income of R214 million in the prior year, core headline earnings increased by R78 million (9%) from R847 million to R925 million. Core headline earnings per share increased by 9% from 96.56 cents per share in the prior year to 104.83 cents per share.
Earnings per share for the current and prior years amounted to 30.48 cents and 117.13 cents respectively. On exclusion of the extraneous contributions and non-recurring income from both the current and prior years, earnings per share and headline earnings per share increased by 8% to 100.35 cents per share and 9% to 101.24 cents per share, respectively.
The review that follows provides more detail on the operating performance of the core businesses in Blue Label.
TPC is a leader in the distribution of prepaid airtime, sim cards as well as all mobile hardware that they distribute on behalf of the mobile network operators in South Africa. Their long-standing relationships with the mobile network operators are a key strength, hence it is vitally important for TPC to nurture and build these long-standing relationships.
TPC has three key core contributors towards revenue generation, namely the wholesaling of prepaid airtime, prepaid SIM cards and store-in-store offerings within the retail environment.
There is a marked decline in the traditional wholesaling of prepaid airtime, as consumers now have more choice as to where they can purchase their products from and pinless top-ups continuously drive the convenience factor as well as the availability of more touch points for consumers to purchase their products. TPC is pursuing a complete digital transformation of their wholesale model which encompasses a wallet solution that assists merchants in managing their cash. The platform is in its build stage and will significantly assist in the merchant stickiness. There is an emphasis on a direct-to-consumer business model, to capitalise on the pinless offering.
The prepaid sim-market is a saturated landscape, but still presents multiple opportunities for growth from an acquisition and retention perspective. TPC's strategic intent is to focus on two learnership programmes through which they employ young people who would otherwise be unemployed. In the process thereof, they equip them with valuable skills and an opportunity to generate income for themselves.
The store-in-store offerings ensure that there is collaboration across the Blue Label Telecoms Group by offering TPC's core products as well as those of multiple other subsidiary companies. The overarching benefit for a retailer partnering with TPC on the store-in-store offering is that all products and services across multiple mobile network operators are delivered through one single relationship and offering.
BLD is a leading distributor of prepaid airtime, data, electricity, gaming, money transfers, bill payments, ticketing, and other virtual products. A key focus for the period under review was the diversification of their revenue streams, the highlight of which was the significant double-digit month-on-month growth of their BluVoucher offering.
BluVoucher is a generic prepaid voucher that consumers can purchase across the Group's extensive distribution network. Consumers are able to redeem their BluVoucher on a growing number of third-party platforms, across categories such as connectivity, gaming, healthcare and insurance, thereby enabling a typical cash consumer to transact in an online digital world.
The growth of BLD's distribution network across banks and financial institutions, formal retailers, petroleum forecourts, independent retailers, and informal traders remained a key focus for it, but alongside an elevated drive on product penetration of their existing offerings through their existing distribution network.
For the forthcoming financial year, the key strategic focus remains on further expanding the distribution network in key, high-growth segments while, at the same time, developing and enhancing its home-grown product offerings.
CEC continues to manage, in partnership with Cell C, most aspects of the Cell C postpaid base including supply chain, commercial, marketing, billing, credit and collections. It achieves this function through a hybrid of in-house and outsourced services.
CEC anchors its operational activities on four key drivers; profitable customer acquisition; subscriber retention; reduced churn; and customer satisfaction, to ensure the growth and profitability of this business. Over the past year, it has consistently exceeded monthly acquisitions targets and achieved significant improvements across the other metrics.
CEC has executed on several improvement initiatives with strong results. It has shortened marketing and deal cycle processes and routines, improved supply chain efficiencies to significantly reduce stock holding without negatively impacting product availability and a more focused approach to sales channel optimisation.
It recently launched a new range of simplified, competitive and relevant postpaid price plans. These plans, repositioned from "pinnacle" to "elevate", will offer enhanced value in the form of anytime data, anytime social and anytime all-net minutes. These new plans reflect CEC's core value of providing transparent, simplified value to its customers.
The focus for the coming year will be to build on the momentum built over the previous 12 months and in turn, this will enhance the Cell C postpaid base and deliver an industry-leading customer service.
The most significant event for Cell C in this period was the finalisation of the recapitalisation process which significantly reduced its debt and in turn deleveraged its balance sheet to a significant degree. This has created the foundation for a sustainable business and ensured the successful implementation of a new capex light operating model. While the delay in the conclusion of the recapitalisation stretched liquidity and delayed investment in some key initiatives, prudent management of costs and expenditure was maintained.
The other critical achievement was the completion of the full transition to their partner network infrastructure in June 2023. Cell C now has full access to over 14 000 towers on MTN for our Prepaid Customers in addition to Vodacom's network, which our Postpaid Customers are currently roaming on Vodacom.
Cell C has continued to invest in compelling prepaid offers aimed at positioning the brand as the prepaid solution for value and simplicity. The telco will continue to offer competitive pricing and value rich offerings on top of its much-improved network coverage, including rural coverage as part of our commitment to addressing specific customer pain points, providing customers with value, choice, and transparency.
It continues to expand their MVNO business and has completed an important partnership with Capitec Bank as well as concluded multi-year extensions with certain MVNO partners. Cell C continues to be the country's leading MVNO enabler.
In an effort to propel sustainable growth, an extensive and intense systems overhaul programme to replace its out-of-date billing platform with modern next generation systems was launched in December 2022. This transformation will positively impact the entire enterprise and improve customer experience.
Part of the investment into growth includes commencement of the process to upgrade Cell C's Core network, with focus on virtualisation and implementing 5G and Voice over LTE services. This capability will in time place Cell C in a strong position to obtain the benefit of the 5G deployment by their network partner.
Cigicell is a leading distributor of prepaid electricity and water tokens and together with its subsidiaries and joint ventures, it also provides revenue assurance for municipalities.
Cigicell's customer base depends on the expert advice that it provides and it continues to build strong, trust-based relationships which are reinforced by it delivering on its promise to collect, protect and enhance their customers' revenues.
It is impacting on communities in various ways, particularly through the employment of local skilled and semi-skilled labour in the municipality areas in which they operate, and it continues to focus on efficiency, sustainability, and scalability.
Cigicell's commission earned on electricity vending was negatively impacted during the 2023 financial year, mainly attributable to load shedding that caused lower electricity consumption and in turn, lower commission earned. It however continues to focus on growing the revenue assurance side of the business while building on its dominant electricity vending position.
Cigicell offers its own online payment platform, Unipay, which allows payment of municipal rates and taxes conveniently, safely and reliably. Significant growth has been achieved on the value of transactions settled through the Unipay website during the 2023 financial year and this is expected to perpetuate going forward.
Token Identifier-rollovers for prepaid meters must be completed before 24 November 2024. This will be a significant focus area for the business in FY24 and they are well-positioned to roll out this service to their customers.
It also expects to continue growing its service offerings which oversee the strategic planning, implementation and evaluation of municipal services, including data integrity, verifications, credit control, stock collections, indigent registrations and the monitoring of electricity infrastructures. This will assist municipalities to improve their electricity network stability and revenue enhancement.
Ticketpro offers unique and specialised services in the concert, sport, travel and transport sectors in South Africa. This enhances Blue Label's revenue through the ability to secure distribution contracts, by offering customers access to exclusive transport services, sporting events and entertainment, as a way of boosting foot traffic to Blu Approved merchants.
Ticketpro has launched several new products to enhance the customer experience on their platform, thereby delivering in its quest to create an exciting world of experiences. It has also diversified their product range by launching several new prepaid products such as airtime and data, betting vouchers and lifestyle vouchers available for physical purchase and online, on various of their platforms.
Ticketpro has launched a division called Ticketpro Travel Solutions. This offers corporates and leisure customers a simpler and more cost-effective travel booking portal that saves them money, time, and provides more options for both local and international travel.
This exciting new division offers flights, trains, car rentals, accommodation, and travel packages from more than 160 different APIs across the globe.
Ticketpro has also acquired some exciting new partners that they work closely with to enhance the event experience by installing state-of-the-art access control and ticket readers using 3D scanners and NFC-tap technology.
Ticketpro has also launched South Africa's first truly South African Smartap NFC bus ticket solution which has been rolled out to the largest commuter carrier in Gauteng - Putco. This has catapulted the ticket purchase process, making it more accessible to commuters by allowing commuters to buy tickets 24 hours a day.
GloCell Retail Solutions (GCRS) is a distributor of prepaid airtime, data, electricity, virtual products, gaming and ticketing.
With new solutions, they continue to grow their distribution network, which spans across formal retailers and petroleum forecourts. GCRS continues to focus on customer service, investing significantly in technology platforms to ensure maximum uptime and the availability of the widest array of products and services.
While it continues to focus on solidifying its distribution network and product and service penetration across formal channels, driving additional growth in the informal segment with new business development will remain a top priority.
Over the past year, GCRS has continued to drive significant growth across gaming, money transfers and transportation product categories and achieved growth from products that they have developed and launched in-house as part of its diversification strategy.
Looking forward, the key strategic focus remains the development of new technology, expansion and roll out of new and existing products and executing on merchants' needs to make it seamless and effortless to trade with GloCell Retail Solutions.
BluNova is in the business of building businesses, leveraging experience in innovation and strategy to pull together people, processes, and technology to enable client-facing use-cases from the Group's aggregated data sources.
Some of these use-cases derive value for internal clients directly, and at other times new digital business opportunities are identified that are reliant on Blue Label's rich data. These digital start-ups are nurtured to commercial viability thereby monetising the Group's data.
To date BluAdvance and AltBureau have been established with this innovation mindset. In the pipeline, MarTech, with AdTech capabilities are under assessment for possible externalisation.
BluNova is advancing the development of capabilities in credit scoring, customer value management campaigning, lead generation and digital marketing.
Transaction Junction grew its presence across Southern Africa and into Africa.
Repositioning the technology platform and strategic alliances has helped generate significant interest in the TJ platform among multiple retail merchant tiers and across industry verticals, including FMCG, hospitality, food and beverage and fuel.
Growth continues to be fuelled by banking partnerships, allowing merchants to benefit from a fully integrated payment solution and enhanced VAS products. Strategic projects have positioned TJ well to continue an upward trajectory in customer deployments, particularly in the large retail sector.
Taking advantage of the accessibility and widespread use of the TJ platform, multinational corporations have begun using the TJ services, mostly to broaden and standardise their offerings across multiple regions. The growth of TJ's eCommerce platform has made it possible for their clients to obtain substantial value from their omnichannel approach, which works to provide a consistent customer and merchant experience regardless of the channel through which a transaction is conducted.
Growth in the franchise sector has seen substantial benefits derived from TJ's ability to provide mobility into a rapidly evolving customer segment that improves how merchants can service their customer base.
Strategically, TJ has invested in its SoftPOS solution to maximise efficiencies and deliver a scalable merchant POS offering, fully integrated and optimised for use within cloud deployments and complementing the digital merchant experience. These advancements allow TJ to rapidly scale into multiple geographies and across retail segments, increasing service diversification through an expanded transaction offering.
TJ has extended its proprietary technology into the Tier 1 retail space, in order to take advantage of their purpose-built multichannel offering that enables retailers to expand their payment offerings and value-added services. Moreover, TJ continues to enhance their capabilities to ensure a consistent and fully secured payment ecosystem that swiftly meets both standard and bespoke requirements without compromising on the highest levels of security in the industry today.
BLC's technology and systems have enabled it to go to market with new products and services in a noticeably short period and they are also extremely agile in their processes and operations.
There has been significant focus on the BLC Call Centre channel over the last several months and while they had a phenomenal growth phase last year, they slowed down the increasing monthly sales to realign their collections and scorecard.
BLC is currently developing a new system for CEC which will function as a front-end platform as well as back-end management system. The multiverse system will allow CEC to have more control over their sales process within their channels.
Although primarily focused on its current strategy, BLC simultaneously explores further acquisitive opportunities as in the case of the purchase of 50% of APS.
Blue Label Data Solutions (BLDS) is a premier provider of data, lead generation supply, validation, verification and cleansing of data.
It offers a wide range of innovative products and services designed to support marketing efforts and streamline business processes. It is accredited by the Direct Marketing Association of South Africa, of which it is a founding member and an affiliate member of the Wireless Application Service Providers' Association.
With years of experience in the industry, BLDS has built a strong reputation for delivering high-quality campaigns and exceptional customer service.
It outsources to various analytical companies and a team of data scientists to enhance their data, using advanced machine learning data algorithms and perform quarterly updates on their entire database, using their partner network.
BLDS prides itself with the quality, contactability, reliability and compliance of their data as each and every one of their systems and solutions are designed with the legislative requirements of Promotion of Access to Information Act, Protection of Personal Information Act and the Consumer Protection Act in mind.
Blue Label Telecoms Integrated Annual Report 2023
