Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Blue Label Telecoms Ltd (JSE:BLU, Financial) reported a significant increase in gross revenue from ZAR76.8 billion to ZAR89.3 billion, reflecting a 16% growth.
- The company has maintained a high system stability and resilience, achieving over 98% uptime across all transactional systems.
- Blue Label Telecoms Ltd (JSE:BLU) continues to invest in bolstering its in-house platforms and growing its digital footprint in South Africa.
- The company has made significant strides in executing cost-saving and revenue assurance initiatives, particularly in its Blue Label Distribution segment.
- Cell C, a subsidiary of Blue Label Telecoms Ltd (JSE:BLU), has shown improvements in network quality and operational efficiency, contributing to overall growth.
Negative Points
- Blue Label Telecoms Ltd (JSE:BLU) faced a challenging operating environment with high interest rates, high inflation, and record unemployment in South Africa.
- Load shedding significantly impacted the company's operations, particularly in the first nine months of the financial year.
- Gross profit decreased by 5% from ZAR3.48 billion to ZAR3.3 billion, indicating a decline in profitability.
- Comm Equipment Company (CEC), a subsidiary, faced a challenging financial year with earnings declining by ZAR188 million due to increased credit defaults.
- Core headline earnings per share declined by 34% to ZAR0.6866 per share, compared to ZAR1.0483 per share in the prior year.
Q & A Highlights
Q: At your previous results presentation, you said investors should expect a dividend and/or buyback either in August or October this year. Can you provide an update on this?
A: We did not declare a dividend this year. We have focused on reducing our debt, which is now lower than anticipated. We have a final commitment of ZAR300 million to Cell C, which will be completed in the last quarter. The board will reconsider dividends and share buybacks next year.
Q: Does Cell C require any further funding from Blue Label, whether it be working capital or any other form?
A: (EL Kope, CFO) From an operating cash flow perspective, Cell C will be positive, but this will be used to cover recapitalization requirements. There may be strategic needs for additional funding from Blue Label in the future.
Q: Hypothetically speaking, if Blue Label gets the green light to take control of Cell C, what is the update on this?
A: We expect regulatory approvals from Eskom by September 19 and from Comm Comm by late October. Assuming approvals are granted, we should have control by the end of October.
Q: Traffic is up 30% to 76%, but service revenue is only up 2% to 4%. Are you being very aggressive on pricing? What EBITDA margin did you achieve for the year?
A: (Jorge Mendes, CEO) We have been aggressive in the wholesale and MVNO space, leading to significant traffic growth. Prepaid mobile broadband also saw growth. Our EBITDA margin for the fiscal year was 16%.
Q: What is driving the prepaid airtime revenue decline? Is it more competitive pressures from networks pushing recharges onto their own platforms?
A: The decline is due to strategic business decisions rather than competitive pressures. We have seen a significant increase from banking platforms, which are our main competition. Overall, our margins remain strong.
Q: Is the increase in electricity revenue driven by Eskom price increases versus volume increases? Have your commission rates on electricity recharges declined?
A: Blue Label does not benefit from Eskom tariff increases. We earn commissions based on kilowatt sales, not revenue. While revenue has increased, margins have compressed due to reduced commissions from municipalities.
Q: Could you discuss the quantum of your external debt position today? How much is recap related versus asset-backed?
A: (Dean Suntup, Finance Director) Our debt position remains at ZAR4 billion. This includes ZAR1.9 billion from CEC's facility with African Bank and ZAR1.16 billion in working capital facilities. We have repaid over ZAR500 million in airtime sale and repurchase obligations.
Q: What are the remaining funder covenants regarding dividends and buybacks? When can we expect them to be mute?
A: We expect to meet all funder covenants by the end of September. After that, we will reconsider dividends and buybacks.
Q: Prepaid and wholesale revenue growth was higher than total revenue growth. What dragged the overall total revenue growth down? How is it being addressed?
A: (EL Kope, CFO) The decline is due to lower performance in postpaid and equipment revenue, which is now accounted for under an agency model. We are implementing operational improvements to address this.
Q: What is the gross interest payable debt in Cell C, including the current and non-current portion of borrowings and leases?
A: (EL Kope, CFO) As of May, our long-term interest-bearing debt is just under ZAR3.8 billion, with leases at around ZAR2 billion. The current component is less than ZAR1 billion.
Q: Can you give us the EBITDA for the second half of the year only?
A: (EL Kope, CFO) About 60% of our EBITDA of ZAR1.93 billion came in the second half of the year, reflecting improved operational efficiency and better trading conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
