Blue Label reports strong margin growth

JSE-listed Blue Label Telecoms, whose share price has been advancing strongly this year, on Thursday reported robust full-year results, with a big expansion in gross profit margin.

GP margin jumped to 16.5%, from 12.7% a year ago, the company said in its results for the 12 months ended 31 May 2022. Gross profit rose 23% on the back of a 10% improvement in gross revenue to R72.3-billion – a figure that includes the gross amount generated on so-called “Pin-less” airtime top-ups, prepaid electricity, ticking and mobile gaming.

Reportable revenue was R17.8-billion, from R18.8-billion previously, a decline of R1-billion, though this fall was expected in line with the growth in Pin-less transactions, where revenue isn’t recognised, co-CEO Brett Levy told a news conference on Thursday.

Headline earnings per share jumped from 86c a year ago to R1.17, Blue Label said. Earnings before interest, tax, depreciation and amortisation, or Ebitda – a measure of operational profitability – jumped by 25%, pushing up Ebitda margin to 9.5% from 7.7% before.

“The next few years look really good for Blue Label. We’ve come out of Covid strong after two great years,” Levy said.

He said the group learned painful lessons from its disastrous R5.5-billion acquisition of a 45% stake in Cell C in 2017, which hammered its share price, which is still far from recovering its losses. This has led to a new “maturity” by management, with a focus on growing what works and cutting loose what doesn’t, Levy said.

“In the past, we’d just keep going, hamster on the treadmill, but we have matured in our way of doing business: let’s understand what we are doing well and do it better. That is making a massive difference to the success of what we are doing.”

Cell C

Although Blue Label’s traditional cellular airtime business is no longer growing – reporting basically flat gross revenue growth of 1% in the 2022 financial year – the prepaid electricity and gaming segments are seeing “tremendous growth”, Levy said. The only weak area has been ticketing, because of Covid, though that business is now ticking up again.

Meanwhile, Blue Label disclosed that Cell C reported a net loss of R2.4-billion in the 12 months ended 31 May 2022, from a net profit the year before of R2.4-billion. But Levy downplayed this huge swing into the red, saying the numbers will look substantially better following the completion of the long-delayed recapitalisation plan, which should be done by mid-September.

Read: Investors lost trust in us, Blue Label’s co-founders admit

“About R800-million [of the net loss figure] is forex related,” Levy said. “On the date of the racap, the forex reverses. R1.5-billion [of the net loss] is on international debt and interest on that debt. That’s also written off at the recap. That’s R2.3-billion of the R2.4-billion. In the current financial year, there were also once-off costs of R1.3-billion for lawyers, financiers and once-off fees that relate to the recap.”

Cell C will unpack its financials in detail when it presents its results for both the year ended 31 December 2021 and the six months ended 30 June 2022 next month, Levy said.

Cell C will also soon align its financial year-end with Blue Label’s. The mobile operator will report financials for the five months from January to May 2023, and then six-monthly thereafter in line with Blue Label’s interim and year-end reporting periods of November and May.

Blue Label’s share price was trading up about 1% on Thursday following publication of its annual results. Over the past year, the share has added 23%. Year to date, it’s up 41%.  – © 2022 NewsCentral Media

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