Blue Label Telecoms has experienced a downturn in its financial performance, with a notable decline in earnings that persists even when the recapitalisation of Cell C is not taken into account. For the fiscal year that concluded on May 31, 2024, the company reported a significant drop in group revenue, which fell by R4.3 billion, a 23% decrease, bringing the total to R14.6 billion.
The company pointed out that if the gross revenue from ‘PINless top-ups’, prepaid electricity, ticketing, and universal vouchers were considered, there would be an apparent revenue increase of R12.5 billion, or 16%. This adjustment would result in a total revenue of R89.3 billion, up from the previous year’s R76.8 billion.
Despite this, gross profit saw a reduction of R188 million, a 5% decrease, falling from R4.483 billion to R3.295 billion. However, the gross profit margin improved from 18.41% to 22.57%, thanks to the growth in ‘PINless top-ups’, prepaid electricity, ticketing, and universal vouchers, which are recognized as revenue based on gross profit earned.
Blue Label Telecoms emphasized its commitment to controlling overhead costs, yet EBITDA saw a decrease of R258 million, an 18% decline, from R1.463 billion to R1.205 billion. This figure excludes the positive impact of R20 million in FY24 and the negative impact of R146 million in FY23.
The Comm Equipment Company Proprietary Limited (CEC) had a negative impact of R368 million on the decline, while other operations within the group contributed an additional R110 million. Core headline earnings, however, rose from R402 million in FY23 to R679 million in FY24, with the previous year’s earnings being adversely affected by the recapitalisation of Cell C.
When the positive impact of R66 million in FY24 and the negative impact of R523 million in FY23 are excluded, core headline earnings saw a decrease of R312 million, or 34%, from R925 million to R613 million. This downturn in core headline earnings was primarily due to a R188 million decrease in CEC, with the rest of the group entities experiencing a R124 million drop compared to the previous year.
CEC’s core headline earnings suffered mainly due to a decrease in gross profit following the expiration of certain revenue-sharing agreement components in November 2022, increased costs related to the distribution agreement, and higher amortization of handset subsidies. However, these were partially offset by a reduction in expected credit loss after a thorough reconciliation at the end of the last fiscal year and the derecognition of expected credit loss on the sale of a portion of its handset receivable books.
To address Cell C’s recapitalisation and working capital needs, The Prepaid Company Proprietary Limited (TPC) was obligated to purchase an additional R1.2 billion of prepaid airtime in four quarterly installments of R300 million each.
CEC liquidated part of its handset receivable book to financial institutions to fund Cell C’s working capital requirements. The proceeds from this sale were channeled from CEC to TPC and ultimately to Cell C through the purchase of airtime.
Other group entities, especially TPC, saw a decrease in core headline earnings due to the end of certain rebates and a reduction in discounts from Cell C after its recapitalisation.
Earnings per share improved from 30.48 cents in FY23 to 72.49 cents in FY24. However, after adjusting for contributions mainly from Cell C’s recapitalisation transaction in FY23 and FY24, earnings per share and headline earnings per share fell by 35% to 65.07 cents 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:
