RESULTS - Blue Label Telecoms · » Rolling out micro-ATM POS to access last mile: • biometric...
Transcript of RESULTS - Blue Label Telecoms · » Rolling out micro-ATM POS to access last mile: • biometric...
RESULTSfor the year ended 31 May 2017
Group highlights for the year ended 31 May 2017
2
» Earnings continue to escalate:
• Revenue to R26.3 billion
• Gross Profit by 19% to R2.2 billion
• EBITDA by 7% to R1.3 billion
• Earnings per share by 14% to 117.92 cents
• Headline earnings per share by 18% to 117.98 cents
• Core headline earnings per share by 17% to 120.09 cents
• Dividend declared by 11% to 40 cents per share
» A new era dawns in developing a rich ecosystem - acquisitions
HIGHLIGHTS
0
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Group Gross Profit
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3640
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ts
Dividends declared per share
South Africa DistributionBrett Levy – Joint CEO
South African Distribution Segment:
• Prepaid Airtime, Data and Starter/SIM packs
• Handsets and Tablets
• Market
• Retail Distribution Channel
• Prepaid Electricity, Water and Gas
• Ticketing
• Fintech and other Value Added Services
Acquisitions of 45% of Cell C and 100% of 3G Mobile
Shareholder Profile
SOUTH AFRICAN DISTRIBUTION
Financial and Operational Highlights
4
» Revenue consistent at R25.7 billion
» PINless top-up revenue increases by R2 billion to R6.1 billion,
when imputed to revenue effective growth is 7%
» Gross profit up 21% to R1.9 billion
» Gross profit margins expand from 6.15% to 7.43%
» Core net profit up 19% to R893 million
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Prepaid Airtime Revenue Growth
2017
2016
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Direct Top Up - PINless Airtime Growth
2017
2016
SOUTH AFRICAN DISTRIBUTION
Prepaid Airtime, Data, Starter/SIM packs
5
» Maintaining 700k to 1m new SIM connections per month:
• consumers improving understanding of market dynamics
• changing cell number rather than porting
• MNOs migrating 2G users to 3G devices and smartphone uptake
» Growth in sales:
• convergence of voice, data and content with network offerings
• benefits of utilising data analytics
• rolling-out new Android terminals
• airtime from corporate/banking channel
• data from independent and corporate channels
20%
60%
10%10%
Airtime
Corporate Sales
Independents
Formal Retail
Petroleum
35%
31%
24%
10%
Data
Corporate Sales
Independents
Formal Retail
Petroleum
SOUTH AFRICAN DISTRIBUTION
Handsets and Tablets
6
» Existing Tier 3 hardware selling under Boost, Verssed and Blaupunkt brands:
• comprising handsets, phones, tablets, phablets and POS devices
• augmented with smart watches, fitness bands and educational robots
• Boost brand redesigned and features upgraded
» Existing Tier 4 bolt-on, Reware:
• sources, refurbishes and distributes pre-owned smartphones
• rapidly growing market
• outlets in Sandton and Braamfontein
» Acquisition of 3G Mobile brings new Tiers 1 and 2 constituting a complete
hardware business, housed under one roof
SOUTH AFRICAN DISTRIBUTION
Market
7
» “Magnet for foot traffic”
» Main market/informal - 85% of revenue:
• achievements in direct distribution methods in rural areas
• truck & footsoldier/gig-rig reach
• retention and acquisition of quality merchants
• shifts in consumer buying patterns to prepaid
• ensuring our merchants do more our products and services
» Formal market - 15% of revenue:
• growth in food and pharmaceutical sectors
• Chat 4 Change sales up 30%
• growing distribution in retail channel
» Strengthening our management team
SOUTH AFRICAN DISTRIBUTION
Retail Distribution
8
» Integration strategy of distributing hardware products in retail channels
» Route to market includes Edcon, Ideals, Choppies, Dischem and Take-a-lot
» Edcon customers utilise cash or group approved credit facilities
» Challenging and competitive retail landscape
» Blue Label Connect:
• merchandise includes post paid, hybrid, VAS - wholesale and retail
• mobile wallet and money transfer services
» Edgars Connect:
• “One stop connectivity destination store across the nation”
• Extensive range of mobile products and services, specialising in:
• mobile devices, tablets, wearables, accessories, gadgets, home automation & security, wifi routers and laptops
• Cell C post paid contracts
• airtime, data, prepaid electricity, bill payments
• ticketing, including sport, travel, events, expos, entertainment & lifestyle shows, and Hollywood bets
• rolling-out stand alone stores in rural areas, centres and malls, 64 stores currently open
SOUTH AFRICAN DISTRIBUTION
Prepaid Electricity
9
» Market*: 10m prepaid meters installed in addressable market of 19m
» Commissions earned up 9% to R215 million
» Equates to R14 billion in sales revenue
» Growth drivers:
• Prepaid24 – enhancing retail online reach
• Utilities World - back-end integration into municipalities
• re-award of distribution contracts
• distribution on behalf of additional municipalities
• retail and corporate/banking channels
*Source: Eskom
32%
17%
36%
15%
Electricity
Corporate Sales
Independents
Formal Retail
Petroleum
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Prepaid Electricity - Revenue
2017
2016
2015
SOUTH AFRICAN DISTRIBUTION
Prepaid Electricity, Water and Gas
10
» UniPIN’s redeemed:
• value R825 million
• quantity (volume) 8.3 million vouchers
» 8 years of growth
» Prepaid Water and Gas:
• increasing interest from service providers
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400,000,000
600,000,000
800,000,000
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Prepaid Electricity – 8 year perpetual growth in revenue
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UniPIN Redemptions
Quantity (thousands) Value (R millions)
SOUTH AFRICAN DISTRIBUTION
Ticketing
11
» Ticketing solutions for events, sports and transport sectors
» Ticketpro strategy - market differentiation; brand awareness; market share
» Raising national presence:
• available in >1,000 stores
• entrenched in our merchant base and across retail channels
• ticketing and access management for ~600 events, such as:
• Premier soccer league, Telkom Knockouts, DSTV Delicious, Getaway Show, Joburg Day,
MTN Joyous Celebration 21, Miss SA 2017, FIA World Rallycross of South Africa, The
TOPS at Spar Wine Show, Whisky Live, Wedding Expo, Mama Magic Expo, Decorex
• Growth in transport ticketing sales - Putco:
• commuter bus service, available through >200 outlets in rural areas
• serving >250,000 passengers/month
» Launched Ticketpro consumer mobile app and Ticketpro Travel
» >2.3 million event tickets sold
» 74 different venues
» Revenue increasing
SOUTH AFRICAN DISTRIBUTION
Fintech Products and other Value Added Services
12
» Bill Payments
• transaction volumes increasing ~200%
• striving to meet enhanced requirements of bill issuers
• constantly adding more issuers to bill payments engine
» Debit and Credit Card Acquiring
• white labelling for loyalty programmes
» Wallets and Money Transfers*
• money transfers launched across Edcon Group
• evolving into payment ecosystem:
• replacing debit and credit cards
• greater convenience and lower pricing for consumers
• tailwinds from low-cost smartphones
* Frost & Sullivan estimates 60% of adults in Africa are unbanked
SOUTH AFRICAN DISTRIBUTION
Acquisition of 45% stake in Cell C
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» Strategy for developing a rich ecosytem
» 45% stake in Cell C for R5.5 billion effective 2 August 2017
» Rationale for vertical integration with Cell C:
• creating value: ROI in medium term
• margin defence: existing trading relationship
• commercial synergies: multiple shared services
» Funding through hybrid of own cash and vendor placements
» ‘Business as usual’ in constructive relationships with other MNOs
SOUTH AFRICAN DISTRIBUTION
Acquisition of 3G Mobile
14
» Announced 27 June and effective 2 August 2017
» Distributor of all major Tier 1 & 2 mobile device and handset manufacturers:
• Apple, Samsung, Huawei, ZTE and Nokia
» Also offers financing for the mobile handset element of post paid contracts
» Earnings accretive
» R1.9 billion acquisition structured in two stages:
• initial: 47.37% for R900 million (R250 million in BLU shares + R650 million in cash)
• subsequent: 52.63% for R1 billion
» 3G Mobile complements our existing new and refurbished hardware business
» Integrates our approach to distributing complete range of handsets and tablets
» Enhances our ecosystem
SOUTH AFRICAN DISTRIBUTION
Shareholder Analysis as at 11 August 2017
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Top Shareholders:
» Allan Gray – 18.31%
» Shotput – 11.43%
» B Levy – 7.25%
» M Levy – 6.41%
» 36One – 4.89%
» Sanlam – 3.41%
» Richmark – 3.14%
» Investec – 2.52%
» Alexander Forbes – 2.27%
Notes:
» Shareholders holding >2% of issued capital account
for ~60% of total issued share capital
» ADR programme through BNY Mellon
» Market capitalisation R14.5 billion
Beneficial Shareholders – 31 May 2017
South Africa 86% USA 9% UK 3% Rest of World 2%
Free Float – 31 May 2017
Free float 57%
Strategic holders 41%
Below threshold 2%
InternationalMark Levy – Joint CEO
International Distribution Segment:
• Oxigen Services India
• Blue Label Mexico
Mobile Segment
Solutions Segment
Big Data
Technology
Group Prospects
17
Oxigen Services India – Synopsis
» Government’s frequent introduction of new legislation and technology
» Government demonetises currency in November 2016
» Requires fintech sector to modify strategies
» Developing offline opportunities and scaling back on-line
» Revenue constant
» Product mix by contribution to revenue:
• financial services - 73%
• airtime & others - 17%
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INTERNATIONAL
Airtime & DTH21%
Bill Payment3%
Travel & others0%
BC Banking Business
36%
OMTS35%
AEPS on Micro ATM3%
Oxigen Wallet (App)2%
Segmental (Revenue)
135 135 141 143 142 156
146
163 166 165 166 163
168 173 178 175 185
152
100
134 129
146
124 128
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
$m
Total Revenue (GTV)
FY 15-16 FY 16-17
Demonetisation
18
Oxigen Services India – Offline Airtime Recharge
» Traditional, POS, offline products
» Rolling out micro-ATM POS to access last mile:
• biometric scanner for Aardhaar authentication
• connected to NPCI enabling cash deposits and withdrawals
• expansion into retail fuel forecourts, rural fertilizer industry and dairy co-ops
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INTERNATIONAL
Oxigen’s ecosystem:
- connects 170 banks
- reaches >200,000 retail outlets
- serves >150 million unique customers
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Oxigen Services India – Offline Banking
» Services akin to a bank
» Comprehensive payments and financial services solutions
» Connects to NPCI centralised bill payments system (Bharat)
» 24/7 link to Immediate Payment System (IMPS)
» Business Correspondent banking – revenue increase 23%
» Money transfers and remittances:
• partnerships with State Bank of India and Ratnaker Bank Limited
• revenue under pressure due to demonetisation
• now connecting India and Nepal
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INTERNATIONAL
32 32 34 36 37
44 40
49 55 53
45
56
63 65 64 63 70
50
18
39
46
56
48 50
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Business Correspondent Banking
FY 15-16 FY 16-17
Demonetisation
61 62 63 66 64 67 65
70 70 64 66
55
61 62 64
68 73
60
41
54 49 51
32 29
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Oxigen Money Transfer Services
FY 15-16 FY 16-17
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Oxigen Services India – Online e-Wallets
» e-wallets landscape evolutionising:
• Government’s UPI simplifies transfers between merchants and consumers
• wallets must be linked to bank accounts
• competitive market requires deep marketing spend
• peers offering discounting/cash backs
» Oxigen adopting B2B2C approach
» Enterprise route of acquiring subscribers by white labelling platform
» Loyalty Service Platform with retailer Future Group
» >30 million customers
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INTERNATIONAL
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Blue Label Mexico - Highlights
» Mobile penetration ~69% in >122 million population
» Consistent growth strategy to build market share:
• expanding POS network
• distributing more products
» Revenue contracted but trend is rising
» Gross profit increase of R26.6 million (32%)
» Share of loss narrows from R63 million to R37 million
*source: IFTEL
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INTERNATIONAL
Telcel Movistar AT&T OMV
Market Share * (Prepaid) Q 1 71,4% 21,9% 6,5% 0,2%
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
MX
P M
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on
s
Total Revenue
FY 15-16 FY 16-17
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
MX
P M
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on
s
Gross Profit
FY 15-16 FY 16-17
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Blue Label Mexico – Active Devices
» 81,000 devices deployed
» 61,000 active POS devices*
» Our POS is a magnet for foot traffic with growth in sales/store:
• longer duration POS in market = lower churn
• data analytics
• cash collection for merchants
» Higher ARPU’s:
• bill payments, card payments and food vouchers
• merchant base offering more products and services
* active is defined as devices registering a transaction
during the past month
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INTERNATIONAL
0
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Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
ARPU
FY 15-16 FY 16-17
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Blue Label Mexico – Airtime and SIM cards
» Airtime
• main revenue driver
• blended margin improving
• 70% of devices transact airtime top-ups
» SIM Cards
• revenue growth
• distribution on behalf of MNO’s and MVNO’s
• extensive route to market
• education and awareness training
• gaining traction whilst leading the way in maturing market
• business model includes income stream from:
sales of SIM cards
annuity earned on SIM cards
23
INTERNATIONAL
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Revenue Airtime
FY 15-16 FY 16-17
Revenue SIMS
2015-2017
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Blue Label Mexico – Bill Payments
» Another year of growth
» Revenue up 59%
» Total transactions up 23%
» 30% of merchants transacting bill payments
» Marketing campaigns underline convenience of paying
bills at Red Qiubo stores
24
INTERNATIONAL
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Revenue Services
FY 15-16 FY 16-17
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Total Services Transactions
FY 15-16 FY 16-17
25
Blue Label Mexico – Financial Services
» Growth continues
» Incentivising merchants to increase terminal activity
» Credit and Debit Card Acceptance and Acquiring
» Partnership with Visa and CitiBanamex
» Revenue growth up 55%
» No. of transactions up 42%
» Food Vouchers
» Servicing Edenred, Si Vale, Sodexo and Inbursa customers
» Revenue growth up 77%
» No. of transactions almost doubled
25
INTERNATIONAL
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Credit and Debit Transactions
FY 15-16 FY 16-17
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Credit and Debit Revenue
FY 15-16 FY 16-17
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Food Vouchers Revenue
FY 15-16 FY 16-17
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Food Vouchers Transactions
FY15-16 FY16-17
26
Mobile Segment
» Core net profit contribution R56 million
» Via Media
Content, entertainment and information for mobile phones
through subscriptions:
• predominant contributor to net profit contribution
• B2C and B2B platforms
• extensive infotainment catalogues available in 8 African
countries and 10 languages
• cross-leveraging product suites with partners
» Size of A2P market:
26
MOBILE
Entertainment and information
content:
>R3 billion market size. 3G
subscribers in sub-Sahara driving
growth of new and rich media content.
Financial services:
Focus on airtime advance, handset
credit, remittances, statements,
mobile payments etc.
VAS (traditional LBS):
Includes customers of MNO’s,
Insurers, Medical Aids
Converged communications:
Total SMS market size contracts 20%
to 1.2 billion - 1.5 billion SMS’s /month
» Cellfind
Messaging, VAS and financial services for mobile phones:
• largest enabler in target market of sub-Sahara
• doubled sending capacity to >2,000 SMS’s/second
• 3.2 billion SMS’s sent FY17, up 23%
• founding member of WASPA
27
Solutions Segment
» Core net profit R19 million
» Blue Label Data Solutions – data scientists supplying analytical services
» Supplying recent, clean and accurate data
» 86 million consumer-base and expanding:
• generating ~1 million unique qualifying leads up >100%
• sending 329 million SMSs up 26%
» POPI & FAIS Acts and TCF principles
» Rebuild opt-in register every month
» Expanding database:
27
SOLUTIONS
86 million unique
cell numbers
42 million ID
numbers linked to
full contact details
2.5 million right
party contacts
2 million email
addresses linked
to ID’s
18 million on opt-
in register
28
Big Data
» Creating insight to customer profiles and preferences
» Upselling and cross selling various bouquets of products and services
» Intelligently understanding consumer behaviour
28
SOLUTIONS
29
Technology
» Proprietary platforms supporting growing neutral aggregation
» Enhanced Android devices roll-out
» Transaction Junction expanding banking solutions across merchant base
» Stable platforms
» Transactions peaking annually in December
29
TECHNOLOGY
6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5
2015 2016 2017
Transaction Volumes
AEON EFT BLM Total» Blue Label Ventures:
• Boutique business accelerator launched.
• Assists technical entrepreneurs in post revenue
scale-ups
• Nurtures from incubation phase into more mature
businesses
30
Group Prospects
» Blue Label is one of the primary distribution channels for Cell C’s products and services. The acquisition provides a compelling value
proposition to the Group, to Cell C and its customers through vertical integration that will afford both companies the opportunity to
realise synergies in product distribution. Cell C now has a sustainable capital structure to deliver its strategic objectives.
» 3G Mobile is one of Africa’s largest distributors and financiers of mobile devices and handsets to major retailers and cellular network
providers. It has distribution rights for all major tier 1 and tier 2 mobile devices and allied products from the manufacturers thereof.
Through its wholly owned subsidiary Comm Equipment Company, it provides the financing of the mobile handset component of post-
paid and hybrid contracts to Cell C, with the capability of extending such services to other networks and channels. These functions
supplement Blue Label's strategic objectives to provide value added services to both Cell C and its own customer base. 3G Mobile
provides the ideal platform to combine Blue Label's low cost and certified pre-owned mobile handset divisions into a consolidated
group. The acquisition thereof is both earnings accretive and provides a solid foundation for distribution into the burgeoning low cost
smartphone market.
» Blue Label Mexico is expected to provide a positive contribution to Group profitability, given its consistent growth in revenue
generation at sustainable improved gross profit margins and compounding annuity revenue generated from starter packs.
» “Big Data” creates the opportunity to upsell and cross sell various bouquets of products and services that Blue Label has to offer
through its distribution channels by intelligently understanding consumer behaviour.
» Value added services, including the provision of short term finance for products and services required by consumers, are initiatives
that are currently under consideration.
30
PROSPECTS
Financial ReviewDean Suntup – Financial Director
32
Highlights
32
FINANCIAL
Increase in
revenue to
R26.3 billion
Increase in
gross profit
of 19% to
R2.2 billion
Increase in
EBITDA of
7% to R1.3
billion
Increase in
headline
earnings per
share of 18% to
117.98 cents
Increase in
core headline
earnings per
share of 17%
to 120.09
cents
Increase in
dividend per
share of 11%
to 40 cents
Net asset
value per
share
amounted to
R7.32
Increase in
cash and cash
equivalents by
R762 million
to R1.35
billion
33
Income Statement
33
FINANCIAL
May 2017 May 2016 Growth Growth
R’000 R’000 R’000 %
Revenue 26,311,875 26,204,722 107,153 0%
Change in inventories of finished goods (24,139,293) (24,375,028) 235,735 1%
Gross profit 2,172,582 1,829,694 342,888 19%
Other income 16,814 126,294 (109,480) (87% )
Overheads (858,073) (715,429) (142,644) (20% )
EBITDA 1,331,323 1,240,559 90,764 7%
Depreciation, amortisation and impairment charges (112,851) (98,183) (14,668) (15% )
EBIT 1,218,472 1,142,376 76,096 7%
Net finance expense (60,833) (20,211) (40,622) (201% )
Net profit before taxation 1,157,639 1,122,165 35,474 3%
Taxation (332,037) (318,783) (13,254) 4%
Net profit after taxation 825,602 803,382 22,220 3%
Gain on associate measured at fair value 160,200 - 160,200
Share of loss from associates and joint ventures (164,941) (71,770) (93,171) (130% )
Minority interest (33,896) (40,022) 6,126 15%
Net profit attributable to equity holders of the parent 786,965 691,590 95,375 14%