Cell C owner sees jump in earnings

 ·15 Feb 2024

Blue Label Telecoms – which owns roughly half of Cell C – has seen a massive boost in profit.

In a trading update for the year ended 30 November 2023, the group said that its core headline earnings per share amounted to R420 million (November 2022: R35 million), equating to core headline earnings of 47.15 cents per share (November 2022: 3.94 cents per share).

In addition, the group said that it expects its headline earnings per share to increase to between 45.87 and 45.95 cents per share. (2022: 2.09)

Earnings per share are also expected to increase to between 45.49 and 45.84 cents per share (2022: (8.74)):

FinancialNov 2022
Cents per share
Nov 2023
Cents per share
Earnings per share(8.74)45.49 – 45.84
Headline earnings per share2.0945.87 – 45.95
Core headline earnings per share3.9447.07 – 47.23

However, when excluding the positive contributions of R65 million in the current period and the negative contributions of R421 million in the comparative period, both due to the recapitalization transaction of Cell C, core headline earnings declined by R100 million (22%) to R355 million.

Core headline earnings per share dropped by 23% and also dropped from 51.72 cents per share in the comparative period to 39.90 cents per share.

The group said that the decline in core headline earnings was due to a decrease of R119 million in the Comm Equipment Company (CEC), while all other entities in the group saw an increase of R19 million (10%) compared to the comparative period.

“The anticipated decline in CEC’s core headline earnings was a result of a decline in gross profit stemming from increased expenditure related to the distribution agreement, as well as a significant increase in the expected credit loss compared to the comparative period,” the group said.

“This increase aligns with the expansion of CEC’s subscriber base and the deteriorating macroeconomic environment in South Africa, characterised by rising interest rates, power outages, and a depreciating rand.”

“CEC has increased its ECLs in anticipation of heightened future losses, aligning with the approach taken by other consumer lenders.

In addition, when excluding the positive and negative contributions from both the current and comparative periods, mainly due to the recapitalisation transaction of Cell C, earnings per share dropped by 23% to 38.42 cents per share.

Headline earnings per share also dropped by 22% to 38.66 cents per share, respectively.

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