Blue Label Earnings Tick Up, Shares Does Not

"The investment in Cell C provides opportunities to realise synergies and enhance product distribution initiatives.," the company said on Wednesday.

Blue Label Telecoms
Blue Label Telecoms

Blue Label Telecoms, a JSE-listed parent company of Cell C, on Wednesday posted a 4% rise in core headline earnings per share (HEPS) to R120.61 in the year to end-May 2018.

HEPS is South Africa’s main profit gauge.

The company said the major impacts on its HEPS in the year were R217 million as a result of the cessation of early settlement discounts and interest forfeiture. This was in lieu of the utilisation of working capital resources to fund the cash element of the acquisitions, the company said.

During the year, Blue Label Telecoms acquired 45% of Cell C for R5.5 billion and 47.37% of 3G Mobile for R9 million. On 6 December 2017, TPC acquired the remaining 52.63% of 3G Mobile for R1 billion. On 2 January 2018, Blue Label acquired 60% of Airvantage for R151 million. The total of R7.55 billion was partly funded through the issue of 272 million shares amounting to R3.9 billion.

The company also reported that revenue rose by 1% to R26.8 billion. EBITDA increased by 4% from R1.29 billion to R1.34 billion,
underpinned by an increase in gross profi t margins from
8.04% to 8.52%.

Blue Label Telecoms added that cash generated from operating activities amounted to R3.2 billion, partly facilitating the payment of the cash
element of the acquisitive transactions.

Blue Label Telecoms is a reseller of prepaid mobile and electricity vouchers with operations in South Africa, India and Mexico.

On the international front, Blue Label Mexico’s losses declined from R74.4 million to R42.8 million, of which the group’s share amounted to
R21.9 million after the amortisation of intangible assets.

The decline in loss was attributable to an increase in revenue
from R3.1 billion to R4 billion. The company said this was achieved in
the pursuance of its strategy by increasing the number of transactional terminals at higher Average Revenue Per Users, in line with customer penetration through incremental products and services provided as well as extending its reach to merchants through the distribution channels of Grupo Bimbo.

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.,” the company said on Wednesday.

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.”

However, during the reporting period shares in Blue Label Telecoms under-performed. The stock has tanked 48.5% in the year to date


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