Blue Label talks up Cell C potential amid flagging revenue

Blue Label Telecoms on Wednesday reported a 1% rise in revenue to R26.8 billion for the year ended May 2018.

“On imputing gross revenue generated on the continued growth in sales of ‘PINless top-ups’, of which only the gross profit earned thereon is accounted for, the effective growth in revenue equated to 9%,” the group stated.

However, operating profit declined to R1,097,549, from R1,174,890 before, as did diluted headline earnings per share, from 113.22 cents per share, to 107.41 cents per share.

Blue Label said that EBITDA increased by 4% to R1.34 billion, underpinned by an increase in gross profit margins from 8.04% to 8.52%.

Cash generated from operating activities amounted to R3.2 billion, partly facilitating the payment of the cash element of the acquisitive transactions.

The telecoms group said that core headline earnings for the year amounted to R1.03 billion, an increase of R236 million (30%).

Core headline earnings per share increased from 116.24 cents per share to 120.61 cents per share (4%), post a dilution resulting from the issue of an additional 272 million shares to fund an element of acquisitions made during the financial year, it said.

Core headline earnings are calculated after adding back the amortisation of intangible assets as a consequence of the purchase price allocations to headline earnings.

Blue Label acquired 45% of Cell C in August 2017, for R5.5 billion, and 47.37% of 3G Mobile for R0.9 billion. It then acquired the remaining 52.63% of 3G Mobile for R1 billion in December.

The core headline earnings comprised the group’s share of profits of R569 million in Cell C which included the recognition of an increase in a deferred tax asset of R1.92 billion, of which the group’s 45% share amounted to R865 million, its profit contributions from 3G Mobile of R157 million and from Airvantage of R2.6 million.

These contributions were from the effective dates of each acquisition and not for a full year, it said.

Looking ahead, Blue Label said it is accelerating its programme of providing point of sale devices to traders within the informal market.

“Blue Label is one of the primary distribution channels for Cell C products and services. The investment in Cell C provides opportunities to realise synergies and enhance product distribution initiatives,” it said.

3G Mobile continues to expand its handset financing model to include other products, the group said.

Outside of South Africa, “Blue Label Mexico is seeing consistent growth in revenue, improved gross profit margins and compounding annuity revenue generated from starter pack sales.

“This is expected to result in a positive contribution to group earnings within the year ahead,” it said.

Shares in Blue Label Telecoms dropped to their lowest level since 2013 on Tuesday, down as much as 8% to R7.70, following disappointing interim numbers by Cell C.

Read: Cell C adds 600,000 subscribers to climb to 16.3 million

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Blue Label talks up Cell C potential amid flagging revenue