Cell C offices
Cell C offices in Midrand

JSE-listed group Blue Label Telecoms woes mount as Cell C continues to negatively impact the company.

Blue Label Telecoms, which owns 45% of Cell C, on Thursday informed investors that its earnings will take a knock.

The company attributed this to ongoing Cell C woes.

Blue Label Telecoms said its earnings for the year to end-May 2019 will take a R6.71 a share knock.

It attributed this 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 its total investment.

The earnings will also be dragged lower by the fair-value downward adjustments and trading losses and impairments in its Indian operations.

Although the core businesses of the Blue Label group continued to generate profits, the predominant negative contributions to the May 2019 basic, headline and core headline earnings per share 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 complete exposure relating to SPV1 and SPV2 (the structure of SPV1 and SPV2 was detailed in the trading statement published on SENS on 22 February 2019). •
  • A fair value downward adjustment of Glocell Distribution, attributable to the impact of unfavourable wholesale trading conditions therein.
  • 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. This was attributable to an anticipated corporate transaction not materialising.
  • Partial impairments of goodwill relating to Viamedia and Blue Label Connect and a partial impairment of the investment in the SupaPesa joint venture.

The company expects core headline earnings from the balance of the entities within the Blue Label group to be between R885 million and R922 million compared to R716 million in the prior year.

“This equates to a growth of between 24% and 29%.”

After taking into account the increase in the weighted average number of shares in issue, core headline earnings per share from the balance of the entities within the Blue Label group is expected to be between 96.95 cents and 100.95 cents for the year ended 31 May 2019, compared to 83.65 cents in the prior year, the company added.

“This represents an increase of between 16% and 21% on the prior year.”

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