JSE-listed Blue Label Telecoms on Thursday posted a 19% increase in core headline earnings, excluding the Cell C and SPV revaluations that dragged overall financial performance during the six months to November 30, 2018.
The group, facing a share price plunge of nearly 14% at the time of writing and hitting a low of R5.20 a share during the day, posted a 3% lift in core headline earnings a share to 55.13c, excluding the multimillion-rand Cell C and the SPV adjustments.
“The end of last year was a really difficult time for this country in so many different aspects. Our sector obviously came under a lot of pressure from July last year. [Despite this,] Blue Label, in our opinion, had an absolutely phenomenal year,” Blue Label joint CEO Brett Levy said at the company’s half-year results presentation.
During the half-year under review, core headline earnings for the six months under review equated to a negative 11.39c apiece, post a dilution resulting from the issue of additional shares to facilitate part-payment of the acquisitions of Cell C and 3G Mobile, as well as the negative impact of the fair value downward adjustment of R493-million relating to the derivative instruments on the SPVs.
The 2017 comparative period incorporated the group’s share of profits in Cell C of R928-million, inclusive of the recognition of a deferred tax asset of R865-million, which was a one-off recognition.
Core headline earnings from the balance of Blue Label’s entities increased by R80-million, from R431-million in 2017 to R510-million in the half-year to November, equating to core headline earnings a share of 55.13c.
This comes as the company continues to emphasise that Blue Label and Cell C remain different “engines” and that Blue Label was not encompassed by Cell C alone. However, the amount the two engines can do together once vertically integrated will bring organic growth that is exponential.
It will, he warned, take time to become vertically integrated.
“The last 12 months, for us as Blue Label, has been an extremely difficult time – difficult from a market perspective and difficult from watching our share price being hammered by 50% to 60%.
“We had to sit back and work out and think about the strategy of what we had done and the strategy of what we were doing and, I think, when you look back at it, Blue Label was lost along the way in the last 12 months,” he said, noting the spotlight of Cell C’s performance in the past year.
However, the Levy’s have solid confidence in Blue Label’s strategy.
“The punishment does not fit the crime. We have a clear strategy and we have a clear vision. we know exactly what we are doing, we ask the market to give us time,” he said.
Joint CEO Mark Levy pointed out that Blue Label remains a strong performing separate entity, however, it had become binary in Cell C's performance.
“Blue Label had sterling results last year and decent results this year. The sad reality is that investors are really looking at what happens with Cell C and will re-adjudicate Blue Label,” he told media.
Blue Label, which owns a 45% stake in Cell C, reported a share of losses in Cell C of R128-million.
However, Cell C reported an earnings before interest, taxes, depreciation and amortisation (Ebitda) of 21% - a strong performance relative to the market, the company said.
Cell C further concluded a binding term sheet with the Buffet consortium to become a minority shareholder in Cell C.
“With Buffet’s support the Cell C balance sheet will be bolstered and ensure Cell C’s sustainable growth for the future,” the group said.
The deal remains subject to certain conditions precedent.
Meanwhile, Blue Label posted revenue of R12.3-billion, a 10% decline on the comparative period, as only the gross profit earned on PINless top-ups, prepaid electricity and ticketing were accounted for.
However, including the gross amount generated on PINless top-ups, prepaid electricity and ticketing, the effective gross revenue increase equated to 7%.
Gross profit for the six months to November increased 15% to R1.31-billion, while the gross profit margin increased from 8.37% to 10.63%.
Excluding the SPV adjustments, Blue Label posted a 13% increase in Ebita to R872-million.