Blue Label signals earnings boost after Cell C write down
Blue Label Telecoms on Thursday (23 January) notified shareholders that it expects its earnings for the current half year period to be more than 20% higher, following its decision to fully impair its exposure to Cell C in 2019.
The group said that it expects headline and core headline earnings per share for the six months ended November 2019, to increase by more than 20% in comparison to the previous corresponding reporting period.
This translates to basic, headline and core headline earnings per share improving by at least 2.52 cents, 3.00 cents and 2.28 cents compared to the reported losses on basic, headline and core headline per share of 12.59 cents, 15.02 cents and 11.39 cents achieved as at 30 November 2018 respectively.
According to Blue Label, for the six months ended November 2018, fair value losses totalling R493 million and the group’s share of equity accounted losses in Cell C amounting to R133 million were recognised.
No further fair value losses related to the Special Purpose Vehicles (SPVs) were recognised in the current reporting period as the exposure to the SPVs has been fully accounted for as at 31 May 2019, it said.
“As the carrying value of Blue Label’s investment in Cell C was fully impaired for the year ended 31 May 2019, the financial results of Cell C during the current period will not have an impact on Blue Label’s earnings for the current reporting period.
“The above two factors are the primary contributors to the expected growth in earnings,” it said.
In September 2019, Blue Label reported a decline in earnings for the year ended May 2019, including a 3% drop in group revenue to R25.9 billion as losses incurred by Cell C weighed.
Losses at Cell C amounted to R3.6 billion, while Oxigen Services India lost R86.6 million, and Blue Label Mexico lost R24 million.
The group reported a headline loss of 312.49 cents per share, and a core headline loss of 304.77 cents per share.
Earnings per share and headline earnings per share decreased from 131.13 and 130.44 cents per share to negative 727.81 and negative 312.40 cents per share respectively. Net asset value per share decreased from R10.88 to R2.59.
Although the core businesses of the Blue Label Group continued to generate profit, the predominant negative contributions to group earnings were attributable to Cell C’s trading losses, among other factors.
In an interview after the results were published, Blue Label Telecom co-chief executive officer Brett Levy admitted that the company’s investment into Cell C was a bad move for the group, but he remained hopeful that the operator can turn things around.
When Blue Label acquired its stake in Cell C in August 2017, the group’s share price was sitting around R16.50. In the two years that followed, it had fallen 84% to R2.60 at the time of its annual results.
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