26 Aug - 9 min read

Audited results for the year ended 31 May 2021

Audited results for the year ended 31 May 2021

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 2021

Financial Highlights and Salient Features
- Revenue of R18.8 billion*
- Gross profit of R2.38 billion (2020: R2.12 billion)
- Increase in gross profit margin from 10.05% to 12.66%
- Interest-bearing borrowings reduced to R1.7 billion (2020: R2.3 billion)
- Headline earnings of 86.16 cents per share (2020: 58.16 cents per share)
- Net cash generated from operating activities of R1.5 billion (2020: R1.3 billion)
- Core headline earnings of 89.65 cents per share** (2020: 62.71 cents per share)
*  On inclusion of the gross amount generated on "PINless top-ups", prepaid electricity, ticketing and gaming,       
   the effective increase equated to 10% from R59.9 billion to R66.0 billion.
** On exclusion of non-recurring income of R47 million in the current year and extraneous costs of R163 million 
   in the prior year, core headline earnings per share from continuing operations increased by 16% to 81.50 cents 
   per share compared to 70.54 cents per share in the prior year.

Group results
Core headline earnings for the year ended 31 May 2021 amounted to R788 million, equating to core headline earnings 
of 89.65 cents per share, of which R763 million related to continuing operations and R25 million to discontinued
operations.

Core headline earnings for the prior year amounted to R562 million, equating to 62.71 cents per share, of which 
R469 million related to continuing operations and R93 million to discontinued operations.

On exclusion of non-recurring income of R47 million in the current year and extraneous costs of R163 million 
in the prior year, as illustrated in the tables below, core headline earnings from continued operations increased 
by R84 million from R632 million to R716 million. On exclusion of the items noted in the tables below, core headline 
earnings per share from continuing operations increased by 16% from 70.54 cents per share in the prior year to 
81.50 cents per share.

On exclusion of non-recurring income and extraneous costs in both the current and prior year, earnings per share 
and headline earnings per share from continued operations increased by 15% to 77.31 cents per share and 17% to 
78.01 cents per share respectively.

Earnings per share amounted to 94.55 cents per share, of which 91.67 related to continuing operations and 2.88 cents
per share related to discontinued operations. In the prior year earnings per share amounted to 13.89 cents per share,
of which 25.30 related to continuing operations and (11.41) cents per share related to discontinued operations.

The financial results of WiConnect in the current year of R25 million, as well as those of Blue Label Mobile, the
Handset division of 3G Mobile and WiConnect, totalling R93 million in the prior year, are disclosed in core headline
earnings from discontinued operations and are not included in the continuing operations' revenue, gross profit, EBITDA,
and net profit after taxation.

Revenue generated by the continuing operations within the Group declined by 11% to R18.8 billion. As only the gross
profit earned on PINless top-ups, prepaid electricity, ticketing and gaming are recognised as revenue, on imputing 
the gross revenue generated thereon, the effective growth in revenue equated to 10% from R59.9 billion to R66.0 billion.

Gross profit increased by R259 million (12%) to R2.38 billion, congruent with an increase in margins from 10.05% to 12.66%.

Group income statement
For the year ended 31 May 2021

                                                           Extraneous                             Extraneous                                      
                                                   Group       income*   Remaining        Group        costs**   Remaining      Growth      Growth
                                                May 2021     May 2021     May 2021     May 2020     May 2020      May 2020   remaining   remaining
                                                   R'000        R'000        R'000        R'000        R'000         R'000       R'000           %
Revenue                                       18 821 290            -   18 821 290   21 135 326            -    21 135 326  (2 314 036)        (11)
Gross profit                                   2 383 254            -    2 383 254    2 124 611            -     2 124 611     258 643          12
EBITDA                                         1 360 273      131 777    1 228 496      825 364     (387 754)    1 213 118      15 378           1
Share of profits/(losses) from                                                                                  
associates and joint ventures                      2 951       (6 554)       9 505       16 598            -        16 598      (7 093)        (43)
- Blue Label Mexico                               (6 554)      (6 554)           -       (5 806)           -        (5 806)      5 806         100
- Other                                            9 505            -        9 505       22 404            -        22 404     (12 899)        (58)
Net profit from continuing operations            805 286      126 175      679 111      226 786     (376 824)      603 610      75 501          13
Core headline earnings                           787 580       71 663      715 917      562 132     (209 979)      772 111     (56 194)         (7)
- from continuing operations                     762 599       46 682      715 917      469 113     (163 240)      632 353      83 564          13
- from discontinued operations                    24 981       24 981            -       93 019      (46 739)      139 758    (139 758)       (100)
Gross profit margin (%)                            12.66                     12.66        10.05                      10.05
EBITDA margin (%)                                   7.23                      6.53         3.91                       5.74
Weighted average shares ('000)                   878 463                   878 463      896 409                    896 409
Share performance from continuing operations                                                                    
- EPS (cents)                                      91.67                     77.31        25.30                      67.34        9.97          15
- HEPS (cents)                                     83.32                     78.01        48.73                      66.93       11.08          17
- Core HEPS (cents)                                86.81                     81.50        52.33                      70.54       10.96          16
* The predominant positive contributions to Group earnings in the current year were attributable to:
- realised foreign exchange gain on the USD20 million liquidity support provided to SPV2(1);
- partial recoupment of losses by the Retail division as a result of the closure of the WiConnect stores in the prior
  year(2); and
- once-off income, including the disposal of the Group's interest in Blue Label Mexico(3).

                                                                                          Extraneous      Fair value                                
                                                                                              income*      movements(1)   WiConnect(2)   Once-offs(3)
                                                                                            May 2021        May 2021       May 2021       May 2021
                                                                                               R'000           R'000          R'000          R'000
EBITDA                                                                                       131 777          16 009              -        115 768
Net profit from continuing operations                                                        126 175          16 961              -        109 214
Core headline earnings                                                                        71 663          16 961         24 981         29 721
- from continuing operations                                                                  46 682          16 961              -         29 721
- from discontinued operations                                                                24 981               -         24 981              -
** The predominant negative contributions to Group earnings in the prior 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(4);
-  impairments of goodwill relating to Blue Label Connect and a partial impairment relating to Glocell Distribution(5);
-  extraneous expenditure within the Retail division as a result of the closure of the WiConnect stores(6); and
-  once-off expenditure and income(7).

                                                                          Extraneous     Fair value                                                  
                                                                               costs**    movements(4)   Impairments(5)   WiConnect(6)   Once-offs(7)
                                                                            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 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

On exclusion of the above non-recurring income of R132 million in the current year and extraneous costs of R388 million
in the prior year, EBITDA increased by R15 million from R1.21 billion to R1.23 billion.

The anticipated increase in overheads, which included costs attributable to additional headcount and expenditure incurred 
in order to enhance IT Infrastructure, escalate the quantum of distribution channels, enhance capacity in the Customer 
Interaction Centre and implement value added services and financial service strategies, contributed to the limited 
increase in EBITDA.

The Blue Label Group generated positive cash flows from its trading operations for the year ended 31 May 2021.

Subsequent events
Glocell Distribution Proprietary Limited
On 29 June 2021, The Prepaid Company acquired the remaining 52% shareholding in Glocell Distribution for a total purchase 
consideration of R137 million, of which R126 million was discharged by way of a conversion of debt owing by Glocell 
Proprietary Limited, the owners of 40% of the company, to The Prepaid Company. The balance of 12% was acquired by 
The Prepaid Company for R11 million. Over and above the cost of acquisition of 52% of Glocell Distribution by The Prepaid 
Company, the latter assumed Glocell Proprietary Limited's obligation of R105 million to Investec Bank Limited.

Banking facilities
Subsequent to year-end, The Prepaid Company renegotiated a further extension of its Investec facility to 30 September 2022, 
whereby the facility of R1.45 billion was increased by R105 million relating to the Glocell Proprietary Limited facility as 
referred to above. From December 2021 the exposure to Investec is required to be reduced by R50 million per month, with the 
balance owing to be no more than R1 billion.

As at 31 May 2021 the Investec facility is disclosed as current borrowings, as the extension to 30 September 2022 was only 
granted in August 2021.

In August 2021, CEC entered into a debt funding agreement with Investec. Its mezzanine facility with Investec was due to expire 
on 31 August 2021 but has been extended to 31 March 2022.

As at 31 May 2021 CEC's debt facility was disclosed as current borrowings, as the extension to 31 March 2022 was only granted 
in August 2021.

Airvantage and AV Technology put obligations
In October 2020, the minority shareholders of Airvantage Proprietary Limited (Airvantage) and AV Technology Limited (AV Tech) 
exercised their rights to put their 40% shareholding therein to Blue Label Telecoms (BLT), in line with the initial agreements 
that were concluded between the parties in 2017. The purchase consideration under the put options, as determined by the parties 
in December 2020, for the 40% shareholdings in Airvantage and AV Tech, amounted to R152 million and USD4.6 million respectively 
(purchase price).

In February 2021, the parties concluded an agreement legislating for a deferral of the purchase price payable to the minority 
shareholders of Airvantage and the minority shareholder of AV Tech from 31 December 2020 to 31 March 2021, with subsequent 
extensions being granted, payable in six equal monthly instalments, inclusive of interest, commencing on 30 November 2021.

If Cell C Limited is able to pass a solvency and liquidity test, the primary obligation in respect of the put options are 
transferrable to Digital Ecosystems Proprietary Limited (DE), formerly Blue Label Mobile Proprietary Limited, in terms of the 
agreement concluded with it in September 2019.

An agreement between BLT and DE was reached in August 2021, whereby the parties agreed that BLT's primary obligations to the 
minority shareholders will be transferred to DE ahead of any Cell C test in respect of its solvency and liquidity. This agreement 
is subject to the fulfilment of certain conditions precedent.

If, however, Cell C is unable to pass the solvency and liquidity test in the future, the primary obligation in respect of the put 
options may revert back to BLT.

Appreciation
We are thankful to all our staff members who have adapted to new ways of working during these unprecedented times and continue 
to contribute to the Group's performance. The Board of Blue Label wishes to express its appreciation to its suppliers, customers 
and business partners for their continued support and commitment to the Group.

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 26 August 2021. 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 investors@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/2021/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

26 August 2021

* Supervised the preparation and review of the Group's audited year-end results.

Directors: LM Nestadt (Chairman)*, BM Levy, MS Levy, K Ellerine**, GD Harlow*, NP Mnxasana*, JS Mthimunye*, DA Suntup,
J Vilakazi*, PL Zim*
*Independent Non-Executive                  **Non-Executive

Company Secretary: J van Eden

Sponsor: Investec Bank Limited 

Auditor: PricewaterhouseCoopers Inc.

Additional information available online at www.bluelabeltelecoms.co.za

Date: 26-08-2021 02:01:00
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