Blu Label Unlimited Group Ltd · JSE:BLU
Blu Label Unlimited — Blue Label Telecoms — FY2017 Earnings Presentation
50 slides from Blu Label Unlimited's earnings presentation, August 2017
Slide 1: Results for the year ended 31 May 2017
RESULTS for the year ended 31 May 2017
Slide 2: Group highlights for the year ended 31 May 2017
Group highlights for the year ended 31 May 2017 2 Group Gross Profit » Earnings continue to escalate: 2,500,000 • Revenue to R26.3 billion 2,000,000 • Gross Profit by 19% to R2.2 billion 1,500,000 • EBITDA by 7% to R1.3 billion 1,000,000 • Earnings per share by 14% to 117.92 cents 500,000 • Headline
Slide 3: South Africa Distribution
South Africa Distribution Brett 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 4
Slide 4: Financial and Operational Highlights
Financial and Operational Highlights 4 Prepaid Airtime Revenue Growth 3,500 Millions » Revenue consistent at R25.7 billion 3,000 2,500 » PINless top-up revenue increases by R2 billion to R6.1 billion, 2,000 when imputed to revenue effective growth is 7% 1,500 2017 1,000 » Gross profit up 21% to R1.9
Slide 5: Prepaid Airtime, Data, Starter/SIM packs
Prepaid Airtime, Data, Starter/SIM packs 5 Airtime » Maintaining 700k to 1m new SIM connections per month: 10% 20% • consumers improving understanding of market dynamics 10% Corporate Sales • changing cell number rather than porting Independents • MNOs migrating 2G users to 3G devices and smartphone
Slide 6: Handsets and Tablets
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
Slide 7: Market
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
Slide 8: Retail 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
Slide 9: Prepaid Electricity
Prepaid Electricity 9 Prepaid Electricity - Revenue 1,400 Millions » Market*: 10m prepaid meters installed in addressable market of 19m 1,200 » Commissions earned up 9% to R215 million 1,000 800 » Equates to R14 billion in sales revenue 2017 600 2016 » Growth drivers: 400 2015 • Prepaid24 – enhancin
Slide 10: Prepaid Electricity, Water and Gas
Prepaid Electricity, Water and Gas 10 UniPIN Redemptions 100 900 » UniPIN’s redeemed: R’millions Thousands 90 800 80 700 • value R825 million 70 60 600 500 • quantity (volume) 8.3 million vouchers 50 40 400 30 300 » 8 years of growth 20 200 10 100 » Prepaid Water and Gas: - - • increasing interest f
Slide 11: Ticketing
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 manag
Slide 12: Fintech Products and other Value Added Services
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 » Wal
Slide 13: Acquisition of 45% stake in Cell C
Acquisition of 45% stake in Cell C 13 » 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
Slide 14: Acquisition of 3G Mobile
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
Slide 15: Shareholder Analysis as at August 2017
Shareholder Analysis as at 11 August 2017 15 Top Shareholders: Notes: » Allan Gray – 18.31% » Shareholders holding >2% of issued capital account » Shotput – 11.43% for ~60% of total issued share capital » B Levy – 7.25% » ADR programme through BNY Mellon » M Levy – 6.41% » Market capitalisation R14.
Slide 16: International
International Mark Levy – Joint CEO International Distribution Segment: • Oxigen Services India • Blue Label Mexico Mobile Segment Solutions Segment Big Data Technology Group Prospects
Slide 17: Oxigen Services India – Synopsis
Oxigen Services India – Synopsis 17 Total Revenue (GTV) Demonetisation 185 178 » Government’s frequent introduction of new legislation and technology 173 175 168 152 146 163134 166 165 166 163128 » Government demonetises currency in November 2016 141 143 142 156 146 129 124 135 135 100 $m » Requires
Slide 18: Oxigen Services India – Offline Airtime Recharge
Oxigen Services India – Offline Airtime Recharge 18 » 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 fertiliz
Slide 19: Oxigen Services India – Offline Banking
Oxigen Services India – Offline Banking 19 Business Correspondent Banking » Services akin to a bank 63 65 64 63 70 Demonetisation 56 » Comprehensive payments and financial services solutions 50 46 48 50 56 39 55 53 » Connects to NPCI centralised bill payments system (Bharat) 44 49 45 37 40 36 » 24/7
Slide 20: Oxigen Services India – Online e-Wallets
Oxigen Services India – Online e-Wallets 20 » 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 adop
Slide 21: Blue Label Mexico - Highlights
Blue Label Mexico - Highlights 21 Total Revenue » Mobile penetration ~69% in >122 million population » Consistent growth strategy to build market share: MXP Millions • expanding POS network • distributing more products » Revenue contracted but trend is rising » Gross profit increase of R26.6 million
Slide 22: Blue Label Mexico – Active Devices
Blue Label Mexico – Active Devices 22 ARPU 10,000 » 81,000 devices deployed 9,000 » 61,000 active POS devices* 8,000 7,000 » Our POS is a magnet for foot traffic with growth in sales/store: 6,000 • longer duration POS in market = lower churn 5,000 4,000 • data analytics 3,000 • cash collection for m
Slide 23: Blue Label Mexico – Airtime and SIM cards
Blue Label Mexico – Airtime and SIM cards 23 Revenue Airtime » Airtime 500 450 • main revenue driver 400 350 MXP Millions • blended margin improving 300 250 • 70% of devices transact airtime top-ups 200 150 100 50 » SIM Cards 0 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May • revenue growth FY 15-1
Slide 24: Blue Label Mexico – Bill Payments
Blue Label Mexico – Bill Payments 24 Revenue Services » 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 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May FY
Slide 25: Blue Label Mexico – Financial Services
Blue Label Mexico – Financial Services 25 Credit and Debit Revenue Credit and Debit Transactions » Growth continues » Incentivising merchants to increase terminal activity » Credit and Debit Card Acceptance and Acquiring Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Slide 26: Mobile Segment
Mobile Segment 26 » Core net profit contribution R56 million » Via Media » Cellfind Content, entertainment and information for mobile phones Messaging, VAS and financial services for mobile phones: through subscriptions: • largest enabler in target market of sub-Sahara • predominant contributor to n
Slide 27: Solutions Segment
Solutions Segment 27 » 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
Slide 28: Big Data
Big Data 28 » Creating insight to customer profiles and preferences » Upselling and cross selling various bouquets of products and services » Intelligently understanding consumer behaviour SOLUTIONS 28
Slide 29: Technology
Technology 29 Transaction Volumes » 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 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
Slide 30: Group Prospects
Group Prospects 30 » 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 sy
Slide 31: Financial Review
Financial Review Dean Suntup – Financial Director
Slide 32: Highlights
Highlights 32 Increase in Increase in Increase in Increase in headline gross profit EBITDA of revenue to earnings per of 19% to 7% to R1.3 R26.3 billion share of 18% to R2.2 billion billion 117.98 cents Increase in Increase in core headline Increase in Net asset cash and cash earnings per dividend p
Slide 33: Income Statement
Income Statement 33 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)
Slide 34: Income Statement Highlights
Income Statement Highlights 34 May 2017 May 2016 Growth Growth R’000 R’000 R’000 % Revenue (R'billion) 28 Revenue 26,311,875 26,204,722 107,153 0% 24 20 Gross profit 2,172,582 1,829,694 342,888 19% 16 GP margins 8.26% 6.98% 1.27% 12 8 EBITDA 1,331,323 1,240,559 90,764 7% 4 - Net profit 786,965 691,5
Slide 35: South African Distribution
South African Distribution 35 May 2017 May 2016 Growth Growth R’000 R’000 R’000 % Revenue 25,786,396 25,722,540 63,856 0% SA Distribution Rest of the Group Gross profit 1,917,023 1,582,743 334,280 21% (excluding Corporate) GP margins 7.43% 6.15% 1.28% Core headline EBITDA EBITDA 1,388,296 1,133,433
Slide 36: South African Distribution Revenue
South African Distribution Revenue 36 Gross Transaction Value (R'billion) 48 40 32 24 Electricity Pinless 16 Reported Revenue 8 - 2017 2016 2015 2014 2013 FINANCIAL 36
Slide 37: Associates and Joint Ventures
Associates and Joint Ventures 37 May 2017 R’000 Net profit after tax 825,602 Gain on associate measured at May 2017 May 2016 Growth Growth 160,200 R’000 R’000 R’000 % fair value Share of losses from (164,941) (164,941) (71,770) (93,171) (130%) associates and joint ventures Oxigen India (119,831) (27
Slide 38: Share Performance
Share Performance 38 May 2017 May 2016 Growth Growth R’000 R’000 R’000 % Net profit attributable to equity holders of parent 786,965 691,590 95,375 14% Headline earnings adjustment 362 -23,329 23,691 102% Headline earnings attributable to equity holders of parent 787,327 668,261 119,066 18% Core Hea
Slide 39: Balance Sheet
Balance Sheet 39 Summarised Group Statement of Financial Position as at May 2017 May 2016 R’000 R’000 Investment in Associates & JVs (R'million) Non- current assets 2,198,757 2,275,161 1,200 Property, plant and equipment 111,599 100,434 Intangible assets and goodwill 1,115,754 1,201,773 Investment i
Slide 40: Cash Flow
Cash Flow 40 Summarised Group Statement of Cash Flows May 2017 May 2016 R’000 R’000 Cash Flow (R'million) 2,000 Cash generated by operations 1,753,991 744,185 1,800 Interest received 52,300 42,082 1,600 Interest paid (105,518) (48,207) 1,400 Taxation paid (338,814) (305,118) 1,200 Cash flows from op
Slide 41: Thank You
Thank You BLUE LABEL TELECOMS
Slide 42: Strategy creating value
Strategy creating value 42 OPPORTUNITY DELIVERY VALUE ADDING » Prepaid provides certainty » Robust, scalable, agnostic and proprietary » >150,000 POPs in SA technology platform – AEON » Prepaid is an alternative payment method » Organic growth, with vertical integrated » Postilion switch for financi
Slide 43: Charting our Growth
Charting our Growth 43 Revenue Gross PINless Transactional Values* Gross Profit 30 25 2,500 25 20 2,000 20.13 20 R'million R’billion R'billion 15 16.18 1,500 15 13.12 10 1,000 10 10 .56 8.16 5 5 500 - - - 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 *Includes gross elec
Slide 44: Blue Label factsheet
Blue Label factsheet 44 » Founded in 2001 » Business model underpinned by long-term distribution contracts » Products and services include • airtime, starter packs, data and content • electricity, water and gas • ticketing • financial, fintech and value adding services » Listed as BLU on JSE in 2007
Slide 45: Group Operating structure as at 31 May 2017
Group Operating structure as at 31 May 2017 45 Blue Label Blue Label Blue Label Mobile Blue Label Solutions Corporate South Africa International Blue Label Distribution Gold Label Investments Cellfind Datacel Blue Label Accelerator Oxigen Services India The Prepaid Company (58.88%) Simigenix CNS Cal
Slide 46: Technical Overview
Technical Overview 46 SUPPLEMENTARY
Slide 47: Peer group
Peer group 47 VERTICAL HORIZONTAL PEERS HORIZONTAL PEERS NETWORKS BY POS * DEVICE PEERS ELECTRICITY TICKETING MEXICO* » B lu e L a b e l T e le c o m s » Cigicell / Blue Label Telecoms » Ticketpro / Blue Label » Red Qiubo / Blue Label Mexico - J S E lis t e d » Conlog Telecoms » ATM » B la c k h a w
Slide 48: Barriers to Entry
Barriers to Entry 48 » Lag times in negotiating supplier and customer contracts can hinder integration » Long term contracts – ensure there is no cheaper pricing in the market » Lock-out periods for processing new and developing existing technologies. Roll-out of devices takes time » Time: as custom
Slide 49: Making a Difference in South Africa
Making a Difference in South Africa 49 For Consumers: For Merchants: » Sophisticated proprietary technology » Main/informal market comprises 1.5 million merchants and is » Distributing innovative products and services » Critical driver of economy contributing ~50% to GDP* » Airtime, Starter packs, p
Slide 50: Blue Label Telecoms
<L»> BLUE LABEL TELECOMS