Cell C owner takes a hit
Blue Label Telecoms has seen its earnings drop, even looking beyond the recapitalisation of Cell C.
In its results for the financial year ended 31 May 2024, group revenue declined by R4.3 billion (-23%) to R14.6 billion.
“However, as only the gross profit earned on ‘PINless top-ups’, prepaid electricity, ticketing and universal vouchers is recognised as revenue, on imputing the gross revenue generated from these sources, the effective growth in revenue equated to R12.5 billion (+16%), resulting in a total revenue of R89.3 billion compared to the prior year of R76.8 billion,” said the group.
Gross profit dropped by R188 million (-5%) from R4.483 billion to R3.295 billion.
The decline was somewhat mitigated by an increase in the gross profit margin from 18.41% to 22.57%, which was attributed to the growth in ‘PINless top-ups’, prepaid electricity, ticketing, and universal vouchers, where only the gross profit earned is seen as revenue.
The group said that it remains vigilant in managing its total overhead costs, but its EBITDA declined by R258 million (-18%) from R1.463 billion to R1.205 billion, excluding the positive contributions of R20 million in FY24 and negative contributions of R146 million in FY23.
Of the decline, Comm Equipment Company Proprietary Limited (CEC) showed a negative impact of R368 million, while the other group operations added R110 million.
Notably, core headline earnings for the year increased from R402 million in FY23 to R679 million in FY24. Earnings in FY23 were negatively affected by Cell C’s recapitalisation transaction.
However, when excluding the positive contributions of R66 million in FY24 and negative contributions of R523 million in FY23, core headline earnings declined by R312 million (-34%) from R925 million to
R613 million.
“This decline in core headline earnings was attributable to a decrease of R188 million in CEC, while the remaining entities within the Group declined by R124 million compared to the prior year.”
“The decline in CEC’s core headline earnings was primarily attributable to a decline in gross profit stemming from a decrease in earnings resulting from the expiry, in November 2022, of certain elements of the revenue-sharing agreement, increased expenditure related to the distribution agreement and an increase in the amortisation of handset subsidies.”
“The declines were offset by a reduction in the expected credit loss following a comprehensive base reconciliation at the end of the previous financial year as well as the derecognition of the expected credit loss on the sale of a portion of its handset receivable books.”
As per Cell C’s recapitalisation and working capital requirements, The Prepaid Company Proprietary Limited (TPC) is required to buy R1.2 billion of additional prepaid airtime through four quarterly payments of R300 million each.
To fund Cell C’s working capital requirements, CEC sold a part of its handset receivable book to financial institutions. The funds generated from this transaction were transferred from CEC to TPC and ultimately to Cell C through the acquisition of airtime.
The other entities within the group, particularly TPC, saw a reduction in core headline earnings due to the cessation of certain rebates and a reduction in discounts from Cell C following its recapitalisation.
Earnings per share increased from 30.48 cents in FY23 to 72.49 cents in FY24.
However, when excluding the contributions resulting primarily from the recapitalisation transaction of Cell C from FY23 and FY24, earnings per share and headline earnings per share declined by 35% to 65.07 cents per share and 66.22 cents per share, respectively
The Board of Directors thus did not declare a dividend for the year.
The group’s financial results can be found below:
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