Core headline earnings for the year ended 31 May 2022 amounted to R1.06 billion, equating to core headline earnings of 121.01 cents per share.
In the comparative year, core headline earnings amounted to R788 million, of which R763 million related to continuing operations and R25 million to discontinued operations. Core headline earnings amounted to 89.65 cents per share.
On exclusion of the non-recurring income of R214 million in the current year and R47 million in the prior year, as illustrated in the underlying tables, core headline earnings from continuing operations increased by R131 million from R716 million to R847 million (18%) and core headline earnings from continuing operations increased by 18% from 81.50 cents per share in the prior year to 96.56 cents per share. This growth was indicative of a robust trading performance by the Group during the year.
The non-recurring income of R214 million emanated from:
On exclusion of the non-recurring income in the current and prior year, earnings per share and headline earnings per share from continuing operations increased by 20% to 92.68 cents per share and by 19% to 92.89 cents per share respectively.
The financial results of WiConnect in the prior year of R25 million, are disclosed in core headline earnings from discontinued operations and is not included in the continuing operations’ revenue, gross profit, earnings before interest, taxation, depreciation and amortisation (EBITDA), and net profit after taxation.
Revenue generated by the continuing operations within the Group declined by 5% to R17.8 billion. As only the gross profit earned on PINless top-ups, prepaid electricity, ticketing and gaming are recognised as revenue, on imputing the gross revenue generated thereon, the effective growth in revenue equated to 10% from R66.0 billion to R72.3 billion.
Gross profit increased by R548 million (23%) to R2.93 billion, congruent with an increase in margins from 12.66% to 16.46%.
| Group May 2022 R'000 |
Extraneous income* May 2022 R'000 |
Remaining May 2022 R'000 |
Group May 2021 R'000 |
Extraneous costs** May 2021 R'000 |
Remaining May 2021 R'000 |
Growth remaining R'000 |
Growth remaining % |
||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 17 806 262 | – | 17 806 262 | 18 821 290 | – | 18 821 290 | (1 015 028) | (5) | |||
| Gross profit | 2 930 973 | – | 2 930 973 | 2 383 254 | – | 2 383 254 | 547 719 | 23 | |||
| Other income | 390 851 | 360 955 | 29 896 | 103 684 | 88 093 | 15 591 | 14 305 | 92 | |||
| EBITDA | 1 698 494 | 326 301 | 1 372 193 | 1 360 273 | 131 777 | 1 228 496 | 143 697 | 12 | |||
| Non-controlling interest | (64 918) | (43 203) | (21 715) | (47 409) | – | (47 409) | 25 694 | 54 | |||
| Net profit from continuing operations | 1 027 079 | 214 410 | 812 669 | 805 286 | 126 175 | 679 111 | 133 558 | 20 | |||
| Core headline earnings | 1 061 080 | 214 410 | 846 670 | 787 580 | 71 663 | 715 917 | 130 753 | 18 | |||
| – From continuing operations | 1 061 080 | 214 410 | 846 670 | 762 599 | 46 682 | 715 917 | 130 753 | 18 | |||
| – From discontinued operations | – | – | – | 24 981 | 24 981 | – | – | ||||
| Gross profit margin (%) | 16.46 | 16.46 | 12.66 | 12.66 | |||||||
| EBITDA margin (%) | 9.54 | 7.71 | 7.23 | 6.23 | |||||||
| Weighted average shares ('000) | 876 857 | 876 857 | 878 463 | 878 463 | |||||||
| Share performance from continuing operations | |||||||||||
| EPS (cents) | 117.13 | 92.68 | 91.67 | 77.31 | 15.37 | 20 | |||||
| HEPS (cents) | 117.34 | 92.89 | 83.32 | 78.01 | 14.88 | 19 | |||||
| Core HEPS (cents) | 121.01 | 96.56 | 86.81 | 81.50 | 15.06 | 18 | |||||
| * | The extraneous contributions to Group earnings in the current year were attributable to once-off income (1), including: |
| ** | The extraneous contributions to Group earnings in the prior year were attributable to: |
|
|
| Extraneous income* May 2022 R'000 |
Once-offs(1) May 2022 R'000 |
||
|---|---|---|---|
| Other income | 360 955 | 360 955 | |
| EBITDA | 326 301 | 326 301 | |
| Non-controlling interest | (43 203) | (43 203) | |
| Net profit from continuing operations | 214 410 | 214 410 | |
| Core headline earnings from continuing operations | 214 410 | 214 410 | |
| Extraneous income** May 2021 R'000 |
Fair value movements(2) May 2021 R'000 |
Once-offs(3) May 2021 R'000 |
WiConnect(4) May 2021 R'000 |
|
| Other income | 88 093 | – | 88 093 | – |
| EBITDA | 131 777 | 16 009 | 115 768 | – |
| Net profit from continuing operations | 126 175 | 16 961 | 109 214 | – |
| Core headline earnings | 71 663 | 16 961 | 29 721 | 24 981 |
| – From continuing operations | 46 382 | 16 961 | 29 721 | – |
| – From discontinued operations | 24 981 | – | – | 24 981 |
On exclusion of the R326 million relating to the non-recurring income in the current year and R132 million in the prior year, EBITDA increased by R144 million (12%) from R1.23 billion to R1.37 billion.
The anticipated increase in overheads, included costs of R65 million attributable to new learnership initiatives in the current year and R10 million in the prior year. The benefit thereof is realised by way of income tax savings as a result of the section 12H allowances being claimed for such learnerships. On exclusion thereof in both the current and prior year, EBITDA increased by R199 million (16%).
| May 2022 R'000 |
Extraneous income(1) May 2022 R'000 |
Remaining May 2022 R'000 |
May 2021 R'000 |
Extraneous costs(2, 4) May 2021 R'000 |
Remaining May 2021 R'000 |
Growth remaining R'000 |
Growth remaining % |
|||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 17 552 603 | – | 17 552 603 | 18 641 531 | – | 18 641 531 | (1 088 928) | (6) | ||
| Gross profit | 2 866 324 | – | 2 866 324 | 2 333 768 | – | 2 333 768 | 532 556 | 23 | ||
| Other income | 337 153 | 315 132 | 22 021 | 10 708 | – | 10 708 | 11 313 | 106 | ||
| EBITDA | 1 700 844 | 234 852 | 1 465 992 | 1 374 735 | 16 009 | 1 358 726 | 107 266 | 8 | ||
| Non-controlling interest | (59 002) | (43 203) | (15 799) | (42 004) | – | (42 004) | 26 205 | 62 | ||
| Net profit from continuing operations | 1 058 951 | 122 961 | 935 990 | 820 819 | 16 961 | 803 858 | 132 132 | 16 | ||
| Core headline earnings | 1 092 828 | 122 961 | 969 867 | 880 662 | 41 942 | 838 720 | 131 147 | 16 | ||
| – From continuing operations | 1 092 828 | 122 961 | 969 867 | 855 681 | 16 961 | 838 720 | 131 147 | 16 | ||
| – From discontinued operations | – | – | – | 24 981 | 24 981 | – | – | |||
| Gross profit margin (%) | 16.33 | 16.33 | 12.52 | 12.52 | ||||||
| EBITDA margin (%) | 9.69 | 8.35 | 7.37 | 7.29 |
Refer to page 2 for footnote (1) and page 3 for footnotes (2) and (4).
Revenue generated by the continuing operations within this segment declined by 6% from R18.6 billion to R17.6 billion. As only the gross profit earned on “PINless top-ups”, prepaid electricity, ticketing and gaming are recognised as revenue, on imputing the gross revenue generated thereon, the effective growth in revenue equated to 9% from R65.8 billion to R72.1 billion.
The Group continues to increase market share and bolster its product and services mix to defend and grow its
positions in the market. Gross revenue generated on“PINless
top-ups” increased by R1.7 billion (9%) from
R19.3 billion to R21.0 billion.
Net commissions earned on the distribution of prepaid electricity increased by R18 million (7%) to R298 million. Revenue generated on behalf of the utilities increased by 18% from R26.7 billion to R31.5 billion.
Gross profit increased by R533 million (23%) to R2.87 billion, congruent with an increase in margins from 12.52% to 16.33%.
EBITDA in the current year included the non-recurring recoupment income, net of professional fees and other costs incurred, of R235 million attributable to the fraudulent scheme. Non-recurring income in the prior year of R16 million pertained to foreign exchange gains on the USD20 million liquidity support provided to SPV2.
On exclusion of the non-recurring income in both the current and prior year, and despite an anticipated increase in overheads, EBITDA increased by R107 million (8%) from R1.36 billion to R1.47 billion.
The anticipated increase in overheads, included costs of R53 million attributable to new learnership initiatives in the current year, whereby the benefit thereof is realised by way of income tax savings as a result of the section 12H allowances being claimed for such learnerships. On exclusion thereof, EBITDA increased by R160 million (12%).
Core headline earnings from continuing operations reflected non-recurring income of R123 million in the current year relating to the net recoupment as a result of the fraudulent scheme and R16 million in the prior year pertaining to the foreign exchange gains on the USD20 million SPV2 liquidity support.
On exclusion of the above non-recurring income in the current and prior year, core headline earnings from continuing operations increased by R131 million (16%) from R839 million to R970 million.
This segment comprises Datacel, Blue Label Data Solutions (BLDS), the data aggregation and lead generation entity in which the Group owns 81%, and a 50% joint venture shareholding owned by BLDS in I Talk Holdings and an effective 37.5% in I Talk Financial Services (joint venture), both of which are outbound call centre operations.
As at 1 June 2021, the Group incorporated the following additional companies, namely, Blue Train, Blue Label Communications, One World Telecoms and I Talk2U.
| May 2022 R’000 |
May 2021 R’000 |
Growth remaining R’000 |
Growth remaining % |
||
|---|---|---|---|---|---|
| Revenue | 253 659 | 179 759 | 73 900 | 41 | |
| Gross profit | 64 649 | 49 486 | 15 163 | 31 | |
| EBITDA | 27 503 | 16 746 | 10 757 | 64 | |
| Share of profits from associates and joint ventures | 6 364 | 5 722 | 642 | 11 | |
| Core headline earnings | 29 487 | 21.411 | 8 076 | 38 | |
| Gross profit margin (%) | 25.49 | 27.53 | |||
| EBITDA margin (%) | 10.84 | 9.32 |
Escalating demand for aggregated data and lead generations resulted in an increase in revenue of 41% from R180 million to R254 million.
Gross profit increased by R15 million (31%) from R49 million to R65 million, congruent with the increase in revenue albeit at lower margins from 27.53% to 25.49%.
EBITDA increased by R11 million (64%) from R17 million to R28 million, of which BLDS contributed R26 million, and the call centre operations R2 million. BLDS contributed R16 million, and the call centre operations R1 million in the prior year.
Contribution to Group core headline earnings increased by R8 million (38%) from R21 million to R29 million. Of the latter amount, BLDS accounted for R23 million. I Talk Holdings and I Talk Financial Services generated earnings of R12.1 million, of which the Group’s share thereof amounted to R5.1 million. Of the core headline earnings of R21 million in the prior year, BLDS accounted for R16 million. I Talk Holdings and I Talk Financial Services generated earnings of R11.5 million, of which the Group’s share thereof amounted to R4.6 million.
| May 2022 R’000 |
Extraneous income May 2022 R’000 |
Remaining May 2022 R’000 |
May 2021 R’000 |
Extraneous costs May 2021 R’000 |
Remaining May 2021 R’000 |
Growth remaining R’000 |
Growth remaining % |
||
|---|---|---|---|---|---|---|---|---|---|
| Other income | 51 565 | 45 823 | 5 742 | 11 436 | 8 600 | 2 836 | (2 906) | 102 | |
| EBITDA | (41 624) | 92 002 | (133 623) | (82 033) | 43 151 | (125 184) | (8 439) | (7) | |
| Net loss from continuing operations | (70 580) | 92 002 | (162 582) | (104 965) | 43 151 | (148 116) | (14 466) | (10) | |
| Core headline earnings | (70 884) | 92 002 | (162 886) | (103 021) | 43 151 | (146 172) | (16 714) | (11) |
On exclusion of the extraneous income in the current and prior year, the negative contribution to Group core headline earnings increased by R17 million (11%) to R163 million.
The extraneous income of R92 million in the current year related to the accounting effects of the settlement of the contingent consideration relating to the disposal of the VAS operations in April 2020 and the accounting implications of the put option obligation for the acquisition of up to 40% of the shares in Airvantage.
Depreciation, amortisation and impairment charges decreased by R15 million to R174 million. Of the latter amount, R65 million (2021: R65 million) pertained to depreciation on capital expenditure, R29 million (2021: R29 million) to depreciation raised in terms of IFRS 16 – Leases, R4 million (2021: R6 million) to impairments and R76 million (2021: R88 million) to the amortisation of intangible assets of which R43 million (2021: R43 million) emanated from purchase price allocations on historical acquisitions.
Finance costs totalled R201 million, of which interest paid on borrowed funds amounted to R187 million and R6 million to the unwinding on the lease liability in terms of IFRS 16. On a comparative basis, finance costs amounted to R132 million, comprising interest paid on borrowed funds of R117 million and R9 million on the unwinding on the lease liability.
Comm Equipment Company Proprietary Limited concluded a working capital financing facility with African Bank of R1.9 billion during the current financial year, of which R1.6 billion was utilised at year end. This resulted in an increase in finance costs of R80 million, offset by a reduction in finance costs attributable to a decline in the Investec Bank facility.
Finance income totalled R81 million, of which R70 million was for interest received on cash resources and R6 million on loans granted. In the prior year, interest received on cash resources amounted to R51 million and interest on loans granted amounted to R4 million.
Total assets increased by R1.9 billion to R13.3 billion, of which non-current assets accounted for R0.7 billion and current assets for R1.2 billion.
Non-current assets included increases in intangible assets and goodwill of R614 million, investments in and loans to associates and joint ventures of R36 million, financial assets at fair value through profit or loss of R58 million, deferred tax assets of R8 million, loans receivable of R5 million, capital expenditure net of depreciation of R1 million and financial assets at fair value through other comprehensive income of R2 million. These increases were offset by decreases in advances to customers of R23 million and right-of-use assets of R22 million.
Of the net increase in intangible assets and goodwill of R614 million, additions to intangible assets amounted to R952 million offset by amortisation of R338 million. Of the total additions to intangible assets, R693 million relates to costs borne by the Group in terms of a subscription income sharing arrangement and R212 million to subscriber acquisition costs.
The net increase of R46.4 million in investments and loans to associates and joint ventures comprised the Group’s net share of profits totalling R8 million, acquisition of further shares in an associate of R17.7 million, net loan increases of R25.8 million and its share of the movements in the foreign currency translation reserve amounting to R1.3 million, offset by a dilution of its holding in a joint venture of R0.5 million and dividends received of R5.8 million.
The material net increase in current assets included increases in trade and other receivables of R991 million, cash and cash equivalents of R306 million and inventory of R177 million, offset by decreases in advances to customers of R122 million and financial assets at fair value through profit and loss of R130 million.
The stock turn equated to 28 days compared to 22 days for the financial year ended May 2021.
The debtor’s collection period increased to 79 days compared to 59 days for the financial year ended May 2021. On exclusion of the trade debtors relating to CEC, the debtor’s collection period remained unchanged at 28 days. CEC’s trade debtors predominantly related to amounts due from Cell C, which will be settled down to an amount of R1.1 billion on the recapitalisation of Cell C.
Net profit attributable to equity holders amounted to R1.03 billion, contributing to accumulated capital and reserves of R4.2 billion.
Non-current liabilities increased by R546 million, comprising an increase in borrowings of R472 million, deferred taxation liabilities of R105 million offset by a decrease in lease liabilities of R31 million.
Current liabilities increased by R378 million, including increases in trade and other payables of R94 million, deferred revenue of R36 million, and borrowings of R390 million. This increase was offset by a decrease in financial guarantee contracts of R106 million and financial liabilities at fair value through profit and loss of R47 million. Average credit terms from continuing operations equating to 124 days (2021: 116 days).
The decrease in financial guarantee contracts of R106 million was due to the settlement of an amount owing by Glocell Proprietary Limited to Investec Bank Limited that was guaranteed by Glocell Distribution Proprietary Limited, congruent with the buyout of the latter’s non-controlling interest in the current year.
Cash generated from trading operations totalled R935 million. Working capital movements comprised an increase in trade payables of R45 million and a decrease in advances to customers of R145 million, offset by an increase in trade receivables of R847 million and an increase in inventory of R181 million. After incurring net finance costs and taxation, net cash generated from operating activities amounted to R649 million.
Net cash flows utilised in investing activities amounted to R1.0 billion, primarily attributable to the purchase of intangible assets of R1.0 billion, capital expenditure of R78 million, the acquisition of further shares in an associate of R15 million and net loans granted of R38 million, offset by the receipt of R117 million contingent consideration relating to the disposal of the VAS operations in April 2020. Of the R1.0 billion invested in intangible assets, R928 million related to costs borne by the Group in terms of the subscription income sharing arrangement.
Cash flows generated from financing activities amounted to R668 million, of which R756 million related to the net increase in borrowings, offset by R38 million to lease payments, R30 million to dividend payments to non-controlling interests, R11 million to the acquisition of non-controlling interest and R9 million to the purchase of treasury shares.
Cash and cash equivalents accumulated to R2.7 billion at 31 May 2022.
Forfeitable shares totalling 8 717 136 (2021: 14 611 406) were issued to qualifying employees. During the year, 5 245 249 (2021: 2 517 085) shares were forfeited and 1 452 062 (2021: 1 174 045) shares vested.
Certain of the Secured Lenders of Cell C, are holders of formerly publicly listed notes issued by Cell C described as USD184 002 000 8.625% First Priority Senior Secured Notes. Shareholders were notified of the convening of a meeting of the holders of the Notes (Noteholders) for Noteholders to approve an extraordinary resolution which, among other things, will give effect to the compromising of the Noteholders’ claims (Compromise Offer). In terms of the Compromise Offer Cell C shall, inter alia, restructure its debt owing to certain secured lenders totalling c.R7.3 billion, with such amount being fixed as at November 2019, by compromising the secured lenders’ claims by an offer of 20c to the Rand. The Noteholder meeting was held on 5 July 2022 and Noteholders with the requisite majority voted resolutions in favour of, among other things, the compromise offer as set out in Cell C’s consent solicitation memorandum.
The binding long-form agreements are expected to be completed in their entirety shortly. It is anticipated that the recapitalisation process, the completion of which has endured for longer than initially anticipated, is expected to close by mid-September 2022.
In August 2022, The Prepaid Company renegotiated a further extension of its Investec facility to 30 September 2023. The Investec facility available to The Prepaid Company at year end is required to reduce by R120 million to R1.005 billion as at 30 September 2022. At 31 May 2022, the Investec facility is disclosed as current borrowings, as the extension to 30 September 2023, was only granted in August 2022.
These summary consolidated financial statements for the year ended 31 May 2022 have been audited by PricewaterhouseCoopers Inc., who expressed a modified opinion thereon. The auditor also expressed a modified opinion on the consolidated annual financial statements from which these summary consolidated financial statements were derived.
A copy of the auditor’s report on the summary consolidated financial statements and of the auditor’s report on the annual consolidated financial statements are available for inspection at the Company’s registered office, together with the financial statements identified in the respective auditor’s reports.
The auditor’s report does not necessarily report on all of the information contained in this announcement/financial results. Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor’s engagement, they should obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office.
The Board of Blue Label wishes to express its appreciation to its staff, suppliers, customers and business partners for their continued support and commitment to the Group.
For and on behalf of the Board
LM Nestadt
Chairman
BM Levy
Joint Chief Executive Officer
MS Levy
Joint Chief Executive Officer
DA Suntup* CA(SA)
Financial Director
25 August 2022
| * | Supervised the preparation and review of the Group’s audited year-end results. |
