Finance house CEC to drag on Blue Label earnings

Blue Label Telecoms, the JSE-listed group that’s in the process of buying control of mobile operator Cell C, said its underlying core headline earnings will decline by R100-million, or 22%, in the six months ended 30 November 2023.

Although core headline earnings per share (Heps) will jump by more than 1 000%, this is not a true reflection of the group’s underlying performance.

“On exclusion of the positive and negative contributions from both the current and comparative periods, primarily resulting from the recapitalisation transaction of Cell C, earnings per share and Heps declined by 23% to 38.42c and by 22% to 38.66c, respectively,” it said.

It explained that the decline in core headline earnings is due to a decline in subsidiary Comm Equipment Company’s (CEC’s) performance, the result of a fall 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”.

“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.”

Blue Label describes CEC as a “specialist finance house that empowers established South African enterprises with accessible, intelligent finance”.

Credit losses

It said CEC has increased its expected credit losses in anticipation of higher future losses in line with the “approach taken by other consumer lenders”.

Core headline earnings for the period ended 30 November 2023 amounted to R420-million (November 2022: R35 million), leading to core headline earnings of 47.15c/share (November 2022: 3.94c/share).

Read: Cell C’s best days are still to come: Jorge Mendes

Blue Label will report its interim financial results next week, where it will likely provide more information about the challenges facing CEC and progress on the turnaround project at Cell C.

Blue Label shares were trading 1.7% higher at R3.51 apiece at 10.54am in Johannesburg. As of Wednesday’s JSE closing, the shares have sagged 39% in the past year.   – © 2024 NewsCentral Media

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