Shares jump 7% as Blue Label puts write-downs behind it
The positive results are mainly due to write downs and impairments made previously that did not affect the current period
Shares in prepaid airtime and electricity distributor Blue Label Telecoms jumped almost 10% on Monday after the company said it expects a rise in full-year earnings of more than a fifth.
The shares ended trading 7.01% stronger on Monday at R2.90 and are up 9% so far this year. The company has a market capitalisation of R2.6bn.
The company, which owns 45% of mobile network Cell C, said basic, headline and core headline earnings per share for the year to May are expected to increase by more than 20% in comparison to the same period in 2019. In the year to May 2019 it reported losses on basic, headline and core headline earnings per share of 727.8c, 312.4c and 304.7c respectively.
Blue Label said the positive results are mainly due to writedowns and impairments in the previous year that did not affect the current period.
These include Cell C’s trading losses; impairment of its property, plant and equipment; impairment of its total investments in Oxigen India and 2Dfine Holdings Mauritius; and partial impairments relating to Viamedia, Blue Label Connect and its SupaPesa joint venture.
Blue Label, which is led by joint-CEOs Brett and Mark Levy, did not disclose when it will release the full-year results.
The JSE-listed technology group, which has lost 80% of its value over the past two years, said in March it had returned to profit in its half year to end-November after writing off its investment in struggling mobile operator Cell C.
Cell C has battled to make consistent profits since its launch in 2001 and has R8.7bn in debt on its balance sheet. The operator’s declining fortunes have resulted in its largest shareholders, Blue Label and Net1, which together hold 60% of its equity, writing their combined R7.5bn investment down to nil. Blue Label has previously indicated it could take its 45% stake in the mobile operator down to about 30%.
Competition authorities recently approved Cell C’s recapitalisation programme aimed at addressing the company’s debt burden.
Blue Label reported interim core headline earnings, which include discontinued operations, of R390m from a loss of R128m previously. Revenues from airtime, electricity, ticketing and gaming rose 12% to R30.2bn, the company said.
One of the main growth areas for the business has been Blue Label’s prepaid electricity business. Its revenue contribution grew to R11.4bn, up 14%.
Blue Label said Covid-19 had “a significant negative impact on the retail operations of WiConnect”, despite recent efforts to implement a turnaround strategy for the unit.
The company took a decision to close down WiConnect, which sells smartphones, tablets, gadgets, accessories, airtime, data, event tickets, bus tickets and bill payments, due to the uncertainty of the pandemic. This will result in a negative impact of about R330m on the group’s basic earnings for the period.
Blue Label said it generated positive cash flows from its trading operations for the year.
“This, together with the proceeds received from the disposals of the 3G handset division and the Blue Label Mobile Group, have been applied to reduce interest-bearing debt and in turn the strengthening of the group’s balance sheet.”
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