Messy results for Blue Label

At face value, Blue Label Telecoms, which owns just under 50% of Cell C, has seen its profits increase in the six months ending November 2023 (1H2024).

However, when excluding the various positive and negative contributions flagged by asterisks in its financial report, the group ended up with a significant decline in earnings, making for a messy and confusing result.

In a trading update for the six month period, the group noted headline earnings per share increased from 38.66 cents per share in the six months ended 30 November 2022 (H1 2023) to 45.91 cents in H1 2024.

Core headline earnings also increased from 3.94 cents per share in H1 2023 to 47.15 cents per share in H1 2024.

The negative contributions in H1 2023 to basic, headline and core headline earnings per share were
primarily due to the recapitalisation transaction of Cell C, it said.

But excluding the positive contributions of R65 million in the current period and the negative contributions of R421 million in the prior period, core headline earnings actually declined by R100 million (22%) from R455 million to R355 million, the group said.

Core headline earnings per share also dropped by 23% from 51.72 cents per share to 39.90 cents per share.

This decline was mainly due to a decrease of R119 million in the Comm Equipment Company (CEC), while the group’s remaining entities increased by R19 million.

“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 previous period,” the group said.

Reported earnings per share increased from -8.74 cents in H1 2023 to 45.67 cents per share in H1 2024.

However, when excluding the contributions from the recapitalisation transaction of Cell C from both the current and prior periods, earnings per share dropped by 23% to 38.42 cents per share and headline earnings per share declined by 22% to 38.66 cents per share.

The group’s revenue also declined by R2.2 billion (23%) to R7.6 billion.

“However, as only the gross profit earned on ‘PINless top-ups’, prepaid electricity, ticketing and universal vouchers is recognised as revenue, on imputing the gross revenue generated from these sources, the effective growth in revenue equated to R4.5 billion (12%), resulting in total revenue of R43.8 billion
compared to the prior period of R39.3 billion.”

Gross profit increased by R58 million (4%) from R1.540 billion to R1.598 billion following an increase in margins from 15.67% to 21.08%.

“This increase in margins can be partially attributed to the growth in “PINless top-ups”, prepaid electricity, ticketing and universal vouchers, where only the gross profit earned thereon is recognised as revenue.

“Furthermore, load shedding continues to be a significant challenge faced by our organisation. It has negatively impacted the sale of prepaid electricity, prepaid airtime, starter packs and our call centre operations, all of which are significant revenue streams for the group.”

The group’s reported key financials can be found below:

Excluding the stated contributions, Blue Label’s earnings were:

• Core headline earnings – R355 million (22% decline)
• Core headline earnings per share – 39.90 cents (23% decline)
• Earnings per share – 38.42 cents per share (23% decline)
• Headline earnings per share –  38.66 cents per share (22% decline)

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