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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
/
30
Financial Director’s report
continued
The decline in EBITDA of R76 million
was directly attributable to a negative
turnaround in foreign exchange
movements.
The share of net losses from
associates and joint ventures
comprised the following:
Oxigen Services India and
2DFine Holdings Mauritius
The financial performance of Oxigen
Services India for the six months
ended November 2016 was equity
accounted for, of which the Group’s
share of losses amounted to
R120 million. The major portion
of these losses was attributable to
substantial expenditure incurred on
the marketing of the brand and the
acquisition of wallets.
The Group’s share of losses in 2DFine
amounted to R5.4 million for the
six months ended November 2016.
These losses were attributable to
interest incurred on historical loans
from Gold Label Investments and
Blue Label.
In the prior year, the Group’s share of
profits amounted to R19.7 million.
This pertained to a gain on dilution of
R30 million, being the Group’s share
of the increased net asset value
emanating from a rights issue in
Oxigen Services India, offset by a
share of losses of R10.2 million
relating to interest incurred on the
above loans. The gain on dilution
was deducted as a headline earnings
adjustment, resulting in a negative
contribution of R59.3 million by the
International segment to core
headline earnings.
With effect from 30 November 2016,
Oxigen Services India and 2DFine have
been accounted for as venture capital
investments, and as a result thereof
the investments are measured at fair
value. Consequently, any further
losses incurred by the above entities
from that date will have no impact on
Group earnings.
The differential between the carrying
value of the investments and their
fair value amounted to R160 million
and has been accounted for in the
reviewed condensed Group statement
of comprehensive income as a gain on
associate and joint venture measured
at fair value. The fair value gain of
R160 million and the Group’s share of
losses for the year of R125 million,
equated to a net positive contribution
of R35 million to Group earnings.
Blue Label Mexico
BLM’s losses declined from
R130 million to R74 million, of
which the Group’s share amounted to
R37 million after the amortisation of
intangible assets. In the comparative
period the Group’s share of losses
amounted to R63 million.
The decline in losses was achieved in
spite of a reduction in revenue by
23%. This decline was caused by
intense competition amongst carriers,
resulting in lower tariffs payable by
the end user. However, in the latter
half of the financial year pricing
stabilised, resulting in an increase
in revenue during that period.
The overall decline in revenue was
compensated for by an increase in
gross profit of R26.6 million (32%),
underpinned by higher gross profit
margins.
The increase in gross profit was
primarily attributable to BLM
becoming a multicarrier distributor as
opposed to historically being confined
to one network. This has created a
more competitive environment
amongst the networks to the benefit
of the Company.
Focus on cost efficiencies resulted in
a decrease in operational expenditure
by 9%. While the resultant EBITDA
remained negative, it increased by
R42.7 million (61%). Bill payments,
credit and debit card acquiring, food
vouchers and compounding annuity
revenue emanating from starter pack
distribution are perpetually increasing,
which together with improved
margins and expense containment
resulted in a decline in losses.
Mobile
May 2017
R’000
May 2016
R’000
Growth
R’000
Growth
%
Revenue
347 858
291 856
56 002
19%
Gross profit
200 079
182 533
17 546
10%
EBITDA
99 101
111 142
(12 041)
(11%)
Core net profit
56 327
64 273
(7 946)
(12%)
Core headline earnings
56 289
65 333
(9 044)
(14%)