Blue Label counts the cost of Cell C losses

Blue Label on Thursday (26 September) 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, impairment of its property, plant and equipment, the impact of a de-recognition of its deferred tax asset and the impairment of Blue Label’s total investment therein;
• Fair value downward adjustments of the exposure relating to SPV1 and SPV2, pertaining to the initial recapitalisation of Cell C;
• An impairment of Blue Label’s total investment in the Oxigen India group, including 2DFine Holdings Mauritius (collectively, OSI), as well as providing for loan impairments and guarantees payable therein; and
• Partial impairments of goodwill and an investment in a joint venture company.

“It is evident that the investment in Cell C had a significant negative impact on group earnings,” Blue Label said.

“However, the contemplated national roaming agreement will result in substantial cost savings for Cell C by reducing network and capital expenditure. These savings will further be enhanced on completion of an  intended extensive capital restructure objective.”

Cell C incurred trading losses of R1.56 billion, impairments of its property, plant and equipment of R2.2 billion and de-recognised its deferred tax asset of R4.09 billion.

The group’s 45% share amounted to R3.609 billion.

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