Blue Label growth curbed by shift in consumer buying patterns

JSE-listed Blue Label Telecoms said on Thursday that group earnings increased organically for the year ended May 2017, primarily due to its South Africa distribution increasing its contribution to group core headline earnings by 19% to R2.2 billion.

However, the continuous shift in consumer buying patterns from traditional purchasing of airtime to that of “PIN-less top-ups”, resulted in limited growth in group revenue, to R26.3 billion.

Blue Label reported a 7% increase in ebitda to R1.3 billion, and an 18% rise in headline earnings per share to 117.98 cents.

Operating profit increased to R1.2 billion, from R1.14 billion in 2016, while the group increase its dividend per share by 11% to 40 cents.

In South Africa, revenue generated on “PIN-less top-ups” increased by R2 billion to R6.1 billion, equating to effective growth in South African distribution revenue of 7%, in that only the commission earned thereon is recognised.

Net commissions earned on the distribution of prepaid electricity continued to increase, escalating by R18 million to R215 million on a value of R14 billion generated on behalf of the utilities.

Blue Label Mexico’s losses declined from R130 million to R74 million, of which the group’s share amounted to R37 million after the amortisation of intangible assets.

In the comparative period, the group’s share of losses amounted to R63 million.

The decline in losses was achieved in spite of a reduction in revenue by 23%, Blue Label said. This decline was caused by intense competition amongst carriers, resulting in lower tariffs payable by the end user.

However, in the latter half of the financial year pricing stabilised, resulting in an increase in revenue during that period.

The overall decline in revenue was compensated for by an increase in gross profit of R26.6 million (32%), underpinned by higher gross profit margins, the group said.

Blue Label said that its acquisition of 3G Mobile provides the ideal platform to combine its 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.”

Read: Blue Label completes Cell C recapitalisation

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Blue Label growth curbed by shift in consumer buying patterns