Blue Label warns of loss on Cell C, Indian interests

Duncan McLeod

Blue Label Telecoms will take an almost R2.88 per share hit to its headline earnings for the full year to May 31, 2019, thanks to the ongoing woes at Cell C, it warned yesterday.

The share price fell to an alltime low of R2.51 shortly after the trading statement was released, but recovered ground to R2.65 shortly after 11.30am.

Blue Label said the Cell C impairments and trading losses, coupled with other challenges, including at its operations in India, will serve as a major drag on its full-year headline earnings – to the tune of R4.05 per share. Fair value downward adjustments and trading losses and impairments in its Indian operations will also knock the numbers lower.

These factors will knock its earnings per share by R8.23, with Cell C trading losses and related impairments amounting to negative earnings per share of R6.71.

Although the core businesses of the Blue Label group continued to generate profits, the negative contributions to the May 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 derecognition 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 Blue Label investment vehicles, special purpose vehicle one (SPV1) and SPV2.

A fair value downward adjustment of Glocell Distribution, attributable to the impact of unfavourable wholesale trading conditions.

An impairment of Blue Label’s total investment in the Oxigen India group, including 2Dfine Holdings Mauritius, as well as providing for loan impairments and guarantees payable.

“This was attributable to an anticipated corporate transaction not materialising,” it said.

Partial impairments of goodwill relating to ViaMedia and Blue Label Connect and a partial impairment of the investment in a joint venture called Supa Pesa.

“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 are expected to be between 96.95c and 100.95c for the year ended 31 May compared to 83.65c in the prior year.

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

This article was published with the permission of TechCentral.