Wrap Text
Audited results for the year ended 31 May
2020
Blue Label Telecoms Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
JSE share code: BLU ISIN: ZAE000109088
(Blue Label, BLT, the Company or the Group)
AUDITED RESULTS FOR THE YEAR ENDED 31 MAY 2020
FINANCIAL HIGHLIGHTS AND SALIENT FEATURES
- Successful completion of the disposal of the Blue Label Mobile Group and the handset division
of 3G Mobile
- Revenue of R21.1 billion*
- Gross profit of R2.12 billion
- Increase in gross profit margin from 9.21% to 10.05%
- Net cash generated from operating activities of R1.3 billion
- Interest-bearing borrowings reduced to R2.3 billion (2019: R3.2 billion)
- Headline earnings of 58.16 cents per share (2019: 312.49 cents loss per share)
- Core headline earnings of 62.71 cents per share# (2019: 304.77 cents loss per share)
* On inclusion of the gross amount generated on "PINless top-ups", prepaid electricity, ticketing and gaming,
the effective increase equated to 7% from R56.0 billion to R59.9 billion.
# On exclusion of negative contributions by the ceased operations of WiConnect and fair value downward adjustments,
core headline earnings equated to 86.13 cents per share.
Core headline earnings for the year ended 31 May 2020 amounted to R562 million, equating to core headline earnings
of 62.71 cents per share. Core headline earnings for the year ended 31 May 2019 amounted to a loss of R2.78 billion,
equating to a negative 304.77 cents per share.
On exclusion of extraneous costs of R210 million in the current year and R3.66 billion in the comparative year, as
illustrated in the tables below, core headline earnings from trading operations declined by R100 million (11%) from
R872 million to R772 million, equating to core headline earnings of 86.13 cents per share. Core headline earnings for
the current year, after the exclusion of extraneous costs, comprised R632 million from continuing operations and
R140 million from discontinued operations.
Earnings per share and headline earnings per share increased from a negative 727.81 and 312.49 cents per share in the
prior year to a positive 13.89 and 58.16 cents per share respectively in the current year.
The financial results of Blue Label Mobile, the handset division of 3G Mobile and WiConnect, totalling R93 million
(2019: R122 million), are disclosed in core headline earnings from discontinued operations in both the current and
comparative years and are not included in revenue, gross profit, EBITDA and net profit/(loss) after taxation.
Group revenue generated by the continuing operations within the Group declined by 10% to R21.1 billion. As only the
gross profit earned on "PINless top-ups", prepaid electricity, ticketing and gaming is recognised as revenue, on imputing
the gross revenue generated thereon, the effective growth in revenue equated to 7% from R56.0 billion to R59.9 billion.
Gross profit declined by 2% from R2.17 billion to R2.12 billion, partially limited due to an increase in margins from
9.21% to 10.05%.
Extraneous Extraneous
Group costs* Remaining Group costs** Remaining Growth Growth
May 2020 May 2020 May 2020 May 2019 May 2019 May 2019 remaining remaining
GROUP INCOME STATEMENT R'000 R'000 R'000 R'000 R'000 R'000 R'000 %
Revenue 21 135 326 - 21 135 326 23 602 264 - 23 602 264 (2 466 938) (10)
Gross profit 2 124 611 - 2 124 611 2 173 685 - 2 173 685 (49 074) (2)
EBITDA 825 364 (387 754) 1 213 118 257 300 (1 066 437) 1 323 737 (110 619) (8)
Impairments on associates
and joint venture - - - (2 639 564) (2 639 564) - -
Share of profits/(losses)
from associates and
joint ventures 16 598 - 16 598 (3 693 431) (3 696 133) 2 702 13 896 514
- Cell C - - - (3 609 496) (3 609 496) - -
- Oxigen Services India - - - (86 637) (86 637) - -
- Blue Label Mexico (5 806) - (5 806) (24 096) - (24 096) 18 290 76
- Other 22 404 - 22 404 26 798 - 26 798 (4 394) (16)
Net profit/(loss) from
continuing operations 226 786 (376 824) 603 610 (6 672 923) (7 372 270) 699 347 (95 737) (14)
Core headline earnings 562 132 (209 979) 772 111 (2 783 155) (3 655 111) 871 956 (99 845) (11)
- from continuing
operations 469 113 (163 240) 632 353 (2 904 973) (3 642 066) 737 093 (104 740) (14)
- from discontinued
operations 93 019 (46 739) 139 758 121 818 (13 045) 134 863 4 895 4
Gross profit margin (%) 10.05 10.05 9.21 9.21
EBITDA margin (%) 3.91 5.74 1.09 5.61
Weighted average
shares ('000) 896 409 896 409 913 208 913 208
EPS (cents) 13.89 82.04 (727.81) 88.41 (6.37) (7)
HEPS (cents) 58.16 81.58 (312.49) 88.90 (7.32) (8)
Core HEPS (cents) 62.71 86.13 (304.77) 95.48 (9.35) (10)
- from continuing
operations 52.33 70.54 (318.11) 80.71
- from discontinued
operations 10.38 15.59 13.34 14.77
* The predominant negative contributions to Group earnings in the current year were attributable to:
- Fair value downward adjustments of the Glocell loan and an unrealised foreign exchange loss on the USD20 million
liquidity support provided to SPV2 (1).
- Impairments of goodwill relating to Blue Label Connect and a partial impairment relating to Glocell Distribution (2).
- Extraneous expenditure within the retail division as a result of the closure of the WiConnect stores (3).
- Once-off expenditure and income (4).
Extraneous Fair value
costs* losses(1) Impairments(2) WiConnect(3) Once-offs(4)
May 2020 May 2020 May 2020 May 2020 May 2020
R'000 R'000 R'000 R'000 R'000
EBITDA (387 754) (115 065) (213 584) - (59 105)
Net profit/(loss) from
continuing operations (376 824) (96 481) (213 584) - (66 759)
Core headline earnings (209 979) (96 481) - (183 773) 70 275
- from continuing operations (163 240) (96 481) - - (66 759)
- from discontinued operations (46 739) - - (183 773) 137 034
** The predominant negative contributions to Group earnings in the prior year were attributable to:
- Cell C's trading losses, impairment of its property, plant and equipment, the impact of a derecognition of its
deferred tax asset and the consequent impairment of Blue Label's total investment therein (5).
- Fair value downward adjustments of the complete exposure relating to SPV1 and SPV2 (the structure of which was
detailed in the trading statement published on SENS on 22 February 2019) and the Glocell loan (6).
- Partial impairments of goodwill relating to Viamedia and Blue Label Connect and a partial impairment of the
investment in the SupaPesa joint venture (7).
- An impairment of Blue Label's total investment in the Oxigen India Group, including 2Dfine Holdings Mauritius, as
well as providing for loan impairments and guarantees payable thereon (8).
- Expenditure within the retail division of the WiConnect stores (9).
- Once-off expenditure and income (10).
OSI
Extraneous Fair value adjust-
costs** Cell C(5) losses(6) Impairments(7) ments(8) WiConnect(9) Once-offs(10)
May 2019 May 2019 May 2019 May 2019 May 2019 May 2019 May 2019
R'000 R'000 R'000 R'000 R'000 R'000 R'000
EBITDA (1 066 437) - (873 877) (50 398) (193 364) - 51 202
Impairments on associates
and joint venture (2 639 564) (2 521 152) - - (118 412) - -
Share of profits/(losses)
from associates and
joint ventures (3 696 133) (3 609 496) - - (86 637) - -
- Cell C (3 609 496) (3 609 496) - - - - -
- Oxigen Services India (86 637) - - - (86 637) - -
Net profit/(loss) from
continuing operations (7 372 270) (6 130 647) (837 831) (50 398) (398 412) - 45 018
Core headline earnings (3 655 111) (2 616 427) (837 831) - (232 826) (13 045) 45 018
- from continuing
operations (3 642 066) (2 616 427) (837 831) - (232 826) - 45 018
- from discontinued
operations (13 045) - - - - (13 045) -
The increase in EBITDA of R568 million was attributable to the movement in extraneous costs of R679 million. In the
current year these costs amounted to R388 million, of which R66 million pertained to fair value downward adjustment of
the Glocell loan, R49 million to the unrealised foreign exchange loss on the USD20 million SPV2 liquidity support,
R156.5 million to an impairment of goodwill relating to Blue Label Connect, R57 million to a partial impairment relating
to Glocell Distribution and R59 million to once-off expenditure. The comparative year included extraneous costs of
R1.1 billion, of which R874 million pertained to fair value losses relating to SPV1, SPV2 and the Glocell loan and
R193 million to guarantees payable and loan impairments recognised on behalf of Oxigen Services India.
On exclusion of the above extraneous costs both in the current and comparative year, EBITDA declined by R111 million
to R1.21 billion.
No further fair value losses relating to the SPVs, with the exception of the unrealised foreign exchange loss on the
USD20 million SPV2 liquidity support, were recognised in the current year as the exposure thereto was fully accounted
for as at 31 May 2019. As the carrying value of Blue Label's investment in Cell C was fully impaired for the year ended
31 May 2019, the financial results of Cell C did not have any impact on Blue Label's earnings for the current year.
The Blue Label Group generated positive cash flows from its trading operations for the year ended 31 May 2020. This,
together with the proceeds received from the disposals of the 3G handset division and the Blue Label Mobile Group, have
been applied to reduce interest-bearing debt resulting in the strengthening of the Group's balance sheet.
COVID-19 PANDEMIC
In spite of certain restrictions caused by the Covid-19 pandemic, Blue Label has continued to deliver essential
services, including electricity, airtime, data and other digital services, as well as providing financial transactional
services. The lockdown regulations and the downturn in economic activity have not impacted negatively on airtime, data
and electricity sales volumes. The Group's digital expertise has enabled uninterrupted access of all its products and
services through banks, formal retailers, independent retailers, petroleum forecourts and spaza shops across South Africa.
Cash flow generated by the core businesses within the Group has consequently not been negatively impacted.
The products and services that Blue Label provides fulfil essential needs of the consumer, even more so during the
lockdown period due to home confinement. In essence, such demand would only decline if consumer cash resources dwindle
as a result of a decline in their income. In a situation of this nature, Blue Label's products and services would remain
a priority in consumer spend and retain a level of resilience in comparison to other consumer goods and services.
The Group's retail business, starter pack distribution, gaming vouchers and ticketing were negatively impacted during
the initial lockdown period. Starter pack distribution and gaming voucher trading volumes are now back to pre-Covid-19
levels.
The lockdown, however, had a significant negative impact on the retail operations of WiConnect and, given the
uncertainty of the duration of the pandemic and the resultant losses attributable thereto impacting on its financial
feasibility, a decision was made prior to year-end to cease the operations of the WiConnect retail stores. This resulted
in a negative impact of R318 million on the group's basic earnings for the year ended 31 May 2020. The actual cash outflow
required for the closure of the stores, which is included in the R318 million expense, will however be confined to
approximately R30 million, in that the balance of such negative earnings represents all trading losses which have been
expended, impairments to property plant and equipment and goodwill.
Challenging economic conditions, an unfavourable trading environment, margin compression as a result of reduced
incentives from the mobile networks and an increase in product costs, exacerbated by Covid-19, necessitated an impairment
of goodwill in Blue Label Connect of R156.5 million, a partial goodwill impairment in Glocell Distribution of R57 million
and a fair value downward adjustment of the Glocell loan, net of taxation, of R47.8 million.
SUBSEQUENT EVENTS
Blue Label Mexico
Blue Label Telecoms is currently in the process of concluding the disposal of its 47.56% interest in Blue Label
Mexico, the structure of which is yet to be finalised. Once completed, shareholders will be notified accordingly.
BANKING FACILITIES
On 29 November 2019, The Prepaid Company's Investec banking facilities totalling R2.176 billion were successfully
renewed, of which R1.5 billion was extended for a period of 12 months to 31 March 2021 and R676 million for nine months
to 31 August 2020. Of the latter amount, R542 million has been paid to date.
As at the date of publication of the 31 May 2020 financial statements, The Prepaid Company renegotiated a further
extension of the R1.5 billion facility from 31 March 2021 to 30 September 2021, demonstrating Investec's confidence in
Blue Label. The exposure to Investec is required to be no more than R1 billion as at 31 March 2021.
As at 31 May 2020, The Prepaid Company's Investec facilities were disclosed as current borrowings, as the extension to
30 September 2021 was only granted in August 2020.
On 9 September 2016, Comm Equipment Company (CEC) entered into a debt funding agreement with Investec and Rand
Merchant Bank. This debt funding was divided into three separate facilities, namely senior facility A of R858 million,
senior facility B of R650 million and mezzanine facility of R410 million. In February 2020, the proceeds of R604 million
from the sale of the 3G Mobile Handset division were applied against the senior A facility. All three facilities were
due to expire on 31 August 2020.
CEC's facilities have been renegotiated to 31 August 2021 comprising R267 million for senior facility A, R200 million
for senior facility B and R411 million for the mezzanine facility.
As at 31 May 2020, CEC's debt facilities were disclosed as current borrowings, as the extension to 31 August 2021 was
only granted in August 2020.
APPRECIATION
The Board of Blue Label would once again like to express its appreciation to its suppliers, customers, business
partners and staff for their ongoing support and loyalty.
SHORT-FORM ANNOUNCEMENT
This short-form announcement is the responsibility of the directors of the Company. This short-form announcement is
based on an extract of the audited summarised Group annual financial statements released on SENS on 27 August 2020.
The announcement itself is not audited and does not contain full or complete details.
The summarised Group financial statements have been audited by PricewaterhouseCoopers Inc., who expressed a modified
opinion thereon. The auditor also expressed a modified opinion on the consolidated annual financial statements from
which the summary consolidated financial statements were derived.
Any investment decision by investors and/or shareholders should be based on consideration of the full SENS
announcement and audited Group annual financial statements. These results together with a copy of the accompanying
auditor's reports and key audit matters may be requested by contacting Investor Relations by e-mail at
nicolaw@blts.co.za and are available for inspection at the registered offices of the Company during office hours
and on the Company's website (www.bluelabeltelecoms.co.za) at no charge.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/BLU/FYresults.pdf.
For and on behalf of the Board
LM Nestadt BM Levy and MS Levy DA Suntup* CA(SA)
Chairman Joint Chief Executive Officers Financial Director
27 August 2020
* Supervised the preparation of the audited Group annual results.
Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine**, GD Harlow*, JS Mthimunye*, DA Suntup, J Vilakazi*
*Independent Non-Executive **Non-Executive
Company Secretary: J van Eden
Sponsor: Investec Bank Limited
Auditor: PricewaterhouseCoopers Inc.
www.bluelabeltelecoms.co.za
Date: 27-08-2020 07:15:00
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