Blue Label Telecoms has reported higher full-year earnings as margins improved due to growth in “PINless top-ups”, prepaid electricity, ticketing and universal vouchers.
Even then, the JSE’s best performing stock for 2025 had a tough day in trading as some reacted to the complexity surrounding the business.
The prepaid specialist group, which sells prepaid vouchers for cellphone data, airtime and electricity, is preparing to change its name to Blu Label Unlimited Group.
The group is undergoing a significant restructuring process that involves the separation of its telecom and non-telecom business units.
In light of this strategic shift, the board believes it is prudent for the company’s name to reflect this new direction by omitting the reference to telecom.
For the year to end-May, the group reported a 31% increase in earnings before interest, tax, depreciation and amortisation (ebitda) to R1.6bn.
Group revenue amounted to R14.1bn. Only the gross profit earned on “PINless top-ups”, prepaid electricity, ticketing and universal vouchers is recognised as revenue, so on imputing the gross revenue generated from these sources the effective growth in revenue equated to 7%, resulting in a total revenue of R96bn compared with R89.3bn a year ago.
Core headline earnings per share (HEPS) rose to 461.63c from 76.08c a year ago.
Gross profit rose 2% to R3.38bn, while gross profit margins improved to 24.02% from 22.57%.
The group reported a reversal of investment impairment of R1.559bn relating to the initial impairment of R2.5bn on Blue Label’s investment in Cell C, originally recognised in May 2019.
Of the total impairment, R962.5m was reversed in November 2022, with the balance of R1.559bn reversed in the current year, in line with an improvement in Cell C’s equity valuation.
Joint CEO at Blue Label Mark Levy said: “This year’s results are a testament to the strength of our core businesses and the depth of our relationships across every segment we serve. But more importantly, they set the stage for what comes next.”
In May, Blue Label — valued at R14.8bn on the JSE — said it was considering spinning off Cell C as part of the group’s restructuring, in a move that would result in all four of SA’s big telecom companies being listed on the local bourse.
Earlier in August, Blue Label renewed its cautionary announcement, saying the terms and conditions of the proposed restructure were still being developed in consultation with the group’s financial advisers. They remained subject to engagement and approvals by the boards of Blue Label and Cell C, as well as shareholder and regulatory consents.
Cell C has long harboured ambitions of going public — a plan first floated by former CEO Jose Dos Santos in 2018. However, that plan came to nothing as the company struggled to make a profit, making its initial public offering (IPO) a challenging prospect for investors.
Blue Label’s shares are up more than 178% for the year to date on the JSE, driven in part by excitement about the restructuring of Cell C and signs of the group’s turnaround.
However, the stock took a hit on Wednesday, closing 17.74%% down at R13.08.
Flagship Asset Management’s Philip Short says the share price movement is likely an overreaction.
“It’s definitely not justified,” he said.
Even then, Short noted that Blue Label reported little operating cash flow.
“There was an increase in receivables of R1.3bn worth of airtime and devices to Cell C, which will reverse as part of upcoming restructure. Without this, Blue would have had very strong operating cash flow.”
Second, the group hinted at 500% core headline earnings growth in a trading update last week.
However, “it was not true earnings that was driving that upgrade but rather the re-evaluation of Cell C’s valuation as it moved into profitability,” Short explained.
He said it was likely that those who bought Blue Label shares without fully understanding this dynamic were now selling off after the earnings release.
“But the core Blue Label business has strong earnings. I think we’ll see a reversal in the coming weeks as investors,” Short said.
Update: August 27 2025
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