Blue Label profits surge — but there’s a catch – MyBroadband

Blue Label Telecoms has released its annual financial results for the year ended 31 May 2024, revealing a substantial decline in revenue and an increase in profit for the year.

Group revenue declined by 22.8% from R18.9 billion in May 2023 to R14.6 billion in May 2024. At the same time, profit for the year increased by 129% from R285 million in 2023 to R653 million in 2024.

However, Blue Label explained that uptake of its PINless product will cause its topline revenue to decline every year as the amount goes straight to its gross profit.

PINless includes vouchers for prepaid electricity, ticketing, and gaming.

Blue Label said that adding the gross amount generated by PINless, its effective revenue increased from R72.3 billion to R76.8 billion — a 6% increase.

The company also that the above excluded the effect of Cell C’s finances.

“The predominant negative contributions to the May 2023 basic, headline and core headline earnings per share are primarily associated with the recapitalisation transaction of Cell C,” Blue Label explained.

With the impact of Cell C’s recapitalisation included, Blue Label’s revenue declined by 24% from R18.8 billion to R14.6 billion, while net profit after tax dropped by a whopping 34% from R886 million in May 2023 to R581 million in May 2024.

Blue Label explained that its results included extraneous net positive contributions to group earnings attributable to the accounting treatment relating to the recapitalisation transaction of Cell C.

This included expected credit loss and negative fair value movements of R59 million, and finance income of R600 million resulting from the loan to Cell C for its debt funding requirements.

Additionally, Blue Label compensated for extraneous negative contributions to Group earnings in the prior year primarily attributable to the recap’s accounting treatment.

This includes expected credit losses and fair value movements of R110 million.

It also included recognition of the company’s share of Cell C’s net accumulated losses from 1 June 2019 to 31 May 2023, limited to R1.329 billion.

Blue Label also partially reversed its initial R2.5 billion impairment of its investment in Cell C, in line with an improvement in its equity valuation.

It reversed the impairment by R962.5 million, which accounts for the R1.329 billion net accumulated losses and additional investments in Cell C amounting to R366 million.

Blue Label also explained that The Prepaid Company (TPC), its subsidiary and Cell C’s shareholder, still contributes towards the mobile operator’s working capital requirements.

“As part of the recapitalisation transaction of Cell C, and to further assist with their working capital requirements, The Prepaid Company Proprietary is obligated to purchase R1.2 billion of additional prepaid airtime through four quarterly payments of R300 million each,” it added.

“To fund these working capital requirements for Cell C, CEC sold a portion of its handset receivable book to financial institutions. The funds generated from this transaction are transferred from CEC to TPC, and ultimately to Cell C through the acquisition of airtime as referred to above.”

It noted that the remaining entities within the group faced reductions in core headline earnings due to the termination of rebates and a reduction in discounts from Cell C following its recapitalisation.