Cell C sinks Blue Label earnings

Blue Label Telecoms

Blue Label Telecoms informed shareholders that its basic, headline, and core headline earnings per share for the year ended 31 May 2023 will decrease by more than 60%.

The company released a trading statement informing shareholders, as per JSE listing requirements, that its earnings are expected to decrease significantly for the year ended 31 May 2022. 

Blue Label said its core businesses have demonstrated growth in revenue, gross profit, and core headline earnings per share for the year ended 31 May 2023.

According to the company, excluding the extraneous contributions of R523 million in the current year and the non-recurring income of R214 million in the prior year, its earnings increased by around 9%.

Excluding these factors, the company’s core headline earnings increased by R78 million (9%) from R847 million to R925 million.

Earnings per share and headline earnings per share increased by 8% to 100.35 cents per share and by 9% to 101.24 cents per share, respectively.

The company said the predominant extraneous contributions to the May 2023 basic, headline and core headline earnings per share, resulting from the recapitalisation transaction of Cell C, were attributable to: 

  • Expected credit losses and fair value movements of R88 million; 
  • Loss on modification of a financial instrument of R57 million primarily due to the renegotiation and reclassification of the CEC deferral amount of R1.1 billion, owed by Cell C, from ‘trade and other receivables’ to ‘loans to associates and joint ventures’; 
  • Finance costs of R322 million resulting from increased borrowings related to airtime sale and repurchase obligations, as well as the issue of Class A Preference shares; 
  • Finance income of R238 million resulting from a loan to Cell C for its debt funding requirements; 
  • A partial reversal of R962.5 million relating to the initial impairment of R2.5 billion of Blue Label’s investment in Cell C as of 31 May 2019, in line with an improvement in its equity valuation; 
  • Recognition of the company’s share of Cell C’s net accumulated losses for the period from 1 June 2019 to 31 May 2023, limited to R1.329 billion, being the aggregate of the partial reversal of the initial impairment of R962.5 million of Blue Label’s investment in Cell C, as well as additional investments therein amounting to R366 million.

Blue Label is expected to release its full-year results at the end of August.

Blue Label expected earnings