As this report would reflect through our powerful brands and footprint, our diverse and enhanced product offering, and our improved liquidity position and healthy balance sheet, the Group has effectively positioned itself as future-ready, while our back-to-basics strategy and robust operating model serve as proof of our resilience and adaptability, as we continue to create sustainable value for our stakeholders.
We are however acutely aware of the difficult macroeconomic conditions within which we operate, and there is no denying that the South African economy is under severe strain and that many consumers are struggling due to the increased cost of living.
The petrol price is at its highest levels ever; the annual inflation rate of 7.8% in July 2022 was the highest reading since May 1998; South Africa has experienced more days of loadshedding this year than any other year; and our unemployment rate is growing at a worrying pace.
Despite these challenging times, the Group’s gross revenue continued to grow by 10%, from R66.0 billion to R72.3 billion.
With back-to-basics solidified as central to our strategic approach, our core businesses have delivered sterling results.
That is why the consistent implementation of our strategy, as well as the centrality of our customers and their experience, building and agile, resilient and future-ready organisation and preserving and creating best value for all stakeholders are the basis for our strategic successes.
Cell C continued to manage expenditure while maintaining its prudent approach to liquidity management with a clear focus on stringent cash management, supported by a careful and agile funding strategy for the business. With substantial milestones reached on the recapitalisation process during the reporting period, post the conclusion of this process, a stronger balance sheet will further enhance performance capacity and growth.
Good progress was made with its differentiated network strategy, achieving a 50% network migration to end May 2022. This is a critical enabler to the transition to a digital lifestyle company and is in line with shifts in the global telecoms industry to make more efficient use of existing network infrastructure.
As an aggregator of wholesale capacity and building scale and buying power, the business has moved away from a capex-intensive model, to utilisation of a virtual radio access network on a partner infrastructure provider.
Cell C still retains its identity as a mobile network operator, maintaining control of its spectrum, subscribers, billing system, core and transmission. This strategy allows Cell C to focus on investing in innovative products and services that meet the needs of current and future customers.
While we remain inspired by our results and the resilient performance, the difficult economic times provided us with an opportunity to reassess the kind of value we create for all those who depend on our existence, but more importantly, we also took some time to re-examine the ways in which we create and preserve value.
Through this re-evaluation, we developed five value drivers: customer centricity, optimisation of data and digital innovation, building capacity for a future-ready organisation, continued investment in IT infrastructure and being a partner in youth development.
Value driver 1: Customer centricity
As the COVID-19 pandemic intensified, customers’ digital habits altered their preferences; it also proved that those companies that easily adapt to the changing needs of their diverse customers are most likely to recover from its impacts.
The introduction of our ubiquitous Blu Voucher and Ringas voucher during this period was therefore not only proof that we could introduce the right kind of product at the right time, but also added to our growth as we constantly look for the products society needs and how we can make our offerings better and more accessible.
In terms of Blu Voucher, we continue to onboard redemption partners while simultaneously driving enablement at key national retailers and chains and enabling the wholesale of Blu Voucher through other channels, extending a strong month-on-month growth trend in sales. A campaign was also launched to drive increased sales through incentivisation of consumers, merchants and staff. A significant increase in Ringas’ sales resulted from the addition of data to the Ringas offering.
In gaming, we continue to perform well ahead of expectations as it has become a mainstream in the South African market. Growth has emanated from the robust and consistent expansion of the top gaming partners as well as the addition of new gaming partners.
Our money transfer and remittances product enable consumers to send airtime to 160+ countries around the world directly from our Blu Approved merchants, and we have seen healthy growth as a result of ongoing focus on the category. As a result of this growth, we are currently exploring new international transfer corridors.
During the next financial year, we will drive value in this segment by focusing on our most valuable resource, our merchant network.
Value driver 2: Optimisation of Data and Digital Innovation
Over the last financial year, the Group has embraced cloud-based technologies enabling the build of a centralised Group Living Data Ecosystem consisting of the CRM database (BluCORE) as well as a transactional database (BluFusion). This has resulted in improved performance, cost reduction and data democratisation to all Group subsidiaries. Aggregated Group data was used to develop the alternative scorecard, resulting in an increase in acquisitions of new to credit clients from the cash economy, as well as providing and increase campaign approval rates to reduce vetting costs.
Using advanced analytics, we have developed a range of live BI dashboards, which have enabled senior managers to make positive changes to commercial agreements, commissions structures and business processes, most notably seen in the stabilisation of the declining Cell C postpaid base. Similarly, the prepaid market share report was developed for Cell C, giving a window into market share movements.
A successful POC was executed using first-party data in digital marketing with all performance benchmarks exceeded, and a minimum viable product (MVP) has been deployed for the POPIA portal, the first of its kind in South Africa, which allows data subjects to access and maintain their personal information independently. Internal development of models off the back of this central data asset has enabled us to bring these services in-house, resulting in improved campaign performance and significant cost reduction.
Looking ahead, we aim to further leverage our alternate data to create new opportunities to deploy new products beyond telco credit vetting such as nano advances and Buy Now Pay Later (BNPL) services. Technical teams will be focusing on ingesting additional data from sources across the Group to grow our centralised data warehouse, enabling new data monetisation use cases and driving improved model performance.
From a campaigning and distribution perspective, we intend to focus heavily on developing digital channels to support our current distribution footprint, using our suite of data models as an accelerator. We will be looking to shift our business intelligence capabilities from pure descriptive (historical) reporting to predictive and prescriptive reporting (forecasting). The intention is to begin building on strategic relationships with external partners, such as the large banks to secure long-term growth for the Group with data and analytics as the linchpin.
Value driver 3: Building Capability and Capacity
We would never be able to achieve what we have if it was not for the amazingly talented, innovative, disciplined and capable team we have built and refined over the years.
As we strive to attract only the best skills in the industry, we understand the difficulty we experience and, building on our winning recipe to succeed, we have looked at the organisation and ensured that our structure is one that is scalable and follows strategy, based on clear choices and priorities to create long-term shareholder value.
From being reactive to being proactive through ensuring that we collectively focus on Brilliant Basics, differentiating the business from our competitors, building an aligned organisation based on trust, alignment and the best interests of BLT as a Group, and defining required capabilities and the right operating model.
It is our way of doing things, a mindset that cultivates and builds a values-based, “all-in” culture that supports the execution of our strategy.
Our success depends on our talent sustainability and therefore the framework available to all managers with the success management tools are in place to help build talent in the right occupational levels and continue building a ready-for-future organisation.
Our organisation is expanding, and the demand of new skills for a ready-for-future organisation continues to grow. Working together with all subsidiaries to understand their critical roles and the critical skills required to stay relevant is high on our agenda.
More than 36% of all terminations in 2022 were due to a desire for a more flexible work-life balance, which was considerably higher than those recorded prior to COVID. More and more professionals are in search of a healthier company culture and better work-life balance as opposed to just wanting a higher salary. The traditional workplace has undergone extreme changes and we are indeed at the forefront of not only becoming the most attractive alternative for the best qualified and experienced professionals, but also striving to create the ideal working conditions, and inculcating the right culture in order to improve our value proposition.
In Blue Label we know that our culture has been built over many years and it has differentiated us and kept us going and growing, and for this reason we continue to build on our values in order to maintain and create a sense of purpose and belonging. WeLead was initiated to create a growth mindset that allows our subsidiary leaders and employees #teamblu to focus on growing the business while growing themselves and their careers. Our focus is to include everyone to be part of our dream by continuously growing our business and ourselves. We are mindful of the necessity to create an inclusive business with and for the community we serve while driving collaboration with all of Blue Label’s subsidiaries.
An inclusive leadership culture shifts the impact on the employer-employee relationship. We believe the right culture is a huge factor in driving long-term employee engagement and needs to be solved through experimenting, as we contemplate future models of working. Our already strong culture helps drive organisational performance and customer satisfaction, while ensuring we are able to secure the talent, relationships and resources we need to remain relevant and competitive.
The talent pool that wants to work for organisations with robust environmental and social commitments will only continue to grow. This is not just an add on for us, caring for a better future is our code. We have worked on a range of initiatives and introduce a shared approach on our social responsibility with our employees, positioning us as an employer of choice.
Value driver 4: Continued Investment in IT infrastructure
Our technology business generates enormous value for Blue Label by implementing incremental innovation that allows the Group to be relevant, improve the customer experience and support revenue growth.
In the past year, we prioritised investing in the stabilisation of our core systems and started preparing for the modernisation of our current infrastructure to become cloud ready. Last year, we enabled our API-centric approach and, as a result, deployed our API gateway where we can curate and host our customers. Furthermore, cybersecurity threats remain a critical ongoing risk and form a significant part of our technology investments. Stringent standards for information and infrastructure security controls have been reviewed and reinforced over the last year. We proactively assess our vulnerabilities and risk of exposure on an ongoing basis while driving cyber risk prevention, assessment and education programmes to maintain vigilance. We are embedding security as a core component within platform delivery via governed development mechanisms and implemented detection capabilities and response processes in our environment.
Over the past 12 months, we designed and approved our IT governance framework based on COBIT (Control Objectives for Information Technologies). We renewed our governance framework to ensure that we can maintain the maximum level of maturity to drive control delivery through project portfolio and systems change management, which now ensures alignment of technology investments with governance controls. We are currently in the implementation phase of our approved IT Governance Framework and aim to complete it within FY23.
Our new low-code delivery, management tools and methodologies enable agile software development and release. As a result, our business can launch MVPs to the market faster and compete aggressively through the investment in various platform-innovation initiatives across the Group. For example, the NFC bus platform for Putco has been successfully implemented in Ticketpro, and the BLD voucher product range was expanded with the addition of Global Airtime vouchers.
These strategic elements are underpinned by our constant drive towards customer-centric design and user experience, which stands central to our world-class business solutions across our national and international businesses.
As we look ahead, we will continue to modernise our core systems by investing in our voucher management, fintech and billing platforms that enable us to go to market faster while simultaneously enabling simplicity, scalability, and ease of use for our merchants and customers. Our nano advances project is progressing well and will be deployed in the market in FY23. At the same time, we will automate our manual processes through the deployment of our Robotic Process Automation (RPA) tools. Our new financial ERP solution selection and implementation is progressing well.
To enable certain of these platforms, we continue to drive the implementation of cloud technologies and infrastructure. Our voucher management and fintech platforms will be cloud native (AWS and Azure), transforming the Group into a cloud-hosted business. This financial year we will deploy our external marketplace to explore and integrate our services, thereby enabling our customers, suppliers, and partners to build our offering into their solutions while continuing to grow and invest in our staff training programmes to be future-ready.
Value driver 5: Partner in Youth Development
We started this organisation with little skills and experience, but a passion to make a positive contribution to our country and our economy. We dreamt big but started small and we have seen the same drive and commitment in the youth of our country when we interact with them. With youth unemployment at the most concerning levels, we have made a significant investment in the development of young people and through these efforts, provide them with meaningful employment or income-generation opportunities.
Throughout the Group, Blue Train has provided learning and employment opportunities to 3 600 young people to date, and we will expand this to 8 000 in the next three years.
These young people are deployed across the Group and learn valuable, much-needed relevant skills that they can, once done with their learnership programmes, continue to apply within the Group and in other areas outside the Group.
We are also changing our vendor profile and focusing more on younger people, and through a number of targeted interventions, we hope to ensure a growing number of young people benefit from our existence and the services and products we have to offer.
And while we are proud of the relationships established with many young development organisations and other community partners, we will strengthen these partnerships in future because we remain committed to the development of young people, and also because we have a responsibility towards future generations.
Blue Label is an entrepreneurial story, and as we have found, entrepreneurship can play a meaningful role in the development of our economy by alleviating poverty and addressing other social ills. We know this well and that is why we remain committed to this country and hope to continue making a meaningful investment in the youth and promoting entrepreneurship as a catalyst for socio-economic change.
Building on the progress and achievements of the last few months and seeing the positive changes in our economy despite persistent pressure on consumer spend, we will continue to place greater emphasis on the changing needs of our customers, and we will continue to look for opportunities that would ensure that we offer them the best possible solutions.
We will continue to enhance our service offering and make sure that we remain ahead of the game by focusing on our value drivers and the refinement of our strategy to ensure sustained growth.
Strengthening our relations with those who are directly impacted by our business and those who impact our business and products, would also be a key priority as threats and challenges in the fintech and telecommunications space need to be identified early and addressed collaboratively.
With the pandemic behind us and the protracted war in Ukraine, the world is readjusting to a new normal and we, as an organisation and a corporate citizen, have made the required changes internally and approaches externally to ensure that we remain resilient.
As we readjust to the new normal, noting the sacrifices made by our valued employees, we wish to thank everyone who consistently offer their skills and expertise to ensure that we remain ahead of the game, that we deliver on our promise of driving financial inclusion for the mass market, and deliver the best value for our stakeholders.
In these uncertain times, our long-term strategy as well as our back-to-basics, customer-centric approach are crucial in ensuring our long-term sustainability and to do this, we would always rely on our committed employees.
We also wish to express our sincerest gratitude to our Board for the trust they continue to show in our leadership as well as for the vigorous oversight that they exercise in meeting their fiduciary duties. Their guidance, advice and support has been immeasurable, and we know that we can count on them as we grow.
We are proud of what we could achieve with them and through them and would always be indebted to them.
Our business partners and vendors who assist us in maintaining our leadership position and expanding our footprint also deserve our appreciation.
Brett Levy
Joint Chief Executive Officer
Mark Levy
Joint Chief Executive Officer
30 September 2022
