Blue Label hit by Cell C impairment


Blue Label hit by Cell C impairment

Published Date: 2019-09-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Blue Label hit by Cell C impairment

Trading losses and impairments at the mobile network operator are largely to blame for an expected loss at Blue Label.

Blue Label Telecoms will report a significant full-year loss after impairing its total investment in Cell C as well as a number of its other investments. However, the group said its core businesses continued to generate profits.

In an updated trading statement, the group said earnings per share (EPS) for the year to end-May would fall by as much as 845.93c to a loss of 729.81c. Last year it reported earnings of 116.12c per share. Core headline earnings per share would decline by up to 427.38c to a worst-case loss of 306.77c, it said. Cell C alone stripped 671.33c from EPS.

It blamed the deterioration on trading losses and impairments at Cell C, which necessitated the impairment of its investment in the mobile network operator. Blue Label became Cell C's biggest shareholder when it bought a 45% interest for R5.5 billion in 2017 to give it a platform to enhance the distribution of its products. The investment was also aimed a reducing Cell C's high debt levels.

Blue Label said a number of fair value downward adjustments also impacted its financial performance, including one on airtime vendor Glocell Distribution due to unfavourable trading conditions. It also impaired its investment in Oxigen India, with partial impairments of goodwill related to Viamedia and Blue Label Connect and a partial impairment of its investment in the SupaPesa joint venture.

Excluding the impairments and downward adjustments, Blue Label said its other divisions grew core headline earnings by between 24% and 29%, with core headline EPS up by a smaller 16% to 21% due to an increase in the weighted number of shares in issue.

The group confirmed earlier this week that its results would be released on 26 September after the JSE warned that it may suspend its shares if they weren't published by the end of the month. They were delayed from last month as it was still in the process of determining the value of its stake in Cell C.

After falling as much as 5.3% to a new all-time low, the company's shares turned around to close 3.8% higher at R2.75.

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