Cell C recap wrecks Blue Label’s interim earnings

February 18, 2023 Siyabonga Mtangana

Blue Label Telecoms warned on Friday that its interim results for the six months to end-November 2022 will show up to a 99% plunge in headline earnings per share (Heps).

The company, which is the largest shareholder in mobile operator Cell C, said the slump in earnings is attributable mainly to the recapitalisation deal for Cell C, which was concluded during the reporting period.

Earnings per share will decline by as much as 116%, to a loss of as much as 9.95c/share. Heps could come in at as little 0.87c/share, Blue Label said.

The company blamed various factors for the decline in earnings:

Extraneous expenditure and income, which it did not expand upon in its trading statement;
A loss on modification of a financial instrument as a result of the deferral of a R1.1-billion loan owing by Cell C. This loan was renegotiated and reclassified from “trade and other receivables” to “loans to associates”;
The partial reversal of the initial impairment of Blue Label’s investment in Cell C – Blue Label had attached a nil carrying value to Cell C after the scale of the problems at the mobile operator became apparent;
Recognition of Blue Label’s share of Cell C’s accumulated losses not guaranteed, up to the extent of the aggregate of the reversal of the initial impairment of Blue Label’s investment in Cell C as well as any additional investments in the operator.

With these factors excluded, the core businesses of Blue Label “continued to generate further growth in revenue, gross profit and core headline earnings per share”.

“On exclusion of the above extraneous contributions of R421-million in the current period and non-recurring income of R148-million in the prior period, core headline earnings increased by R55-million (14%). Core headline earnings per share increased by 13%,” the company said.

Read: Blue Label says it may seek control of Cell C

Blue Label’s shares closed down 4.9% at R5.20/share on Friday on twice the normal daily trading volume. Over the past 12 months, the shares have fallen by 3.7% and remain well below their all-time high above R20 reached in 2016. – © 2023 NewsCentral Media