Blue Label expects significant rise in 2020 earnings

24th August 2020 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

JSE-listed Blue Label Telecoms expects to swing back into the black during the year ended May 31, 2020.

The group’s trading statement indicates that earnings a share will increase between 740.97c and 742.42c apiece to between 13.16c and 14.6c in the year under review.

Headline earnings a share of between 57.84c and 58.47c are expected, an increase of between 370.33c and 370.96c, while core headline earnings a share of between 62.40c and 63.01c are expected, which is an increase of 367.17c to 367.78c apiece.

This will be a turnaround on the prior year’s performance, which reported losses on basic, headline and core headline earnings a share of 727.81c, 312.49c and 304.77c respectively.

The preceding year’s losses were as a result of Cell C’s trading losses, impairment of its property, plant and equipment; the impact of a derecognition of its deferred tax asset and the consequent impairment of Blue Label’s total investment therein; and a fair value downward adjustment of the complete exposure relating to Special Purpose Vehicle (SPV) 1 and SPV2 and the Glocell Distribution loan.

Further, the 2019 financial year performance was hampered by an impairment of Blue Label’s total investment in the Oxigen India group and partial impairments of goodwill relating to Viamedia and Blue Label Connect and a partial impairment of the investment in the SupaPesa joint venture.

Despite certain restrictions caused by the Covid-19 pandemic, the group continued to deliver essential services, including electricity, airtime, data and other digital services, as well as providing financial transactional services during the year under review.

“The lockdown regulations and the downturn in economic activity have not impacted negatively on airtime, data and electricity sales volumes. Cash flow generated by the group strengthened, with cash generated from operating activities amounting to R1.3-billion against cash used of R81-million in the prior year,” Blue Label said in a trading update.

Negative contributions to the May 2020 basic, headline and core headline earnings per share included fair value downward adjustments of the Glocell loan and an unrealised foreign exchange loss on the $20-million liquidity support provided to SPV2; impairments of goodwill relating to Blue Label Connect; a partial impairment relating to Glocell Distribution and the 3G Mobile handset division and the Blue Label Mobile Group discontinued operations; and extraneous expenditure and goodwill impairment within the retail division as a result of the closure of the WiConnect stores.

“On exclusion of the above negative contributions to core headline earnings of R210-million in the current year and R3.66-billion in the comparative year, core headline earnings declined by R100-million from R872-million to R772-million, resulting in core headline earnings of 86.13c a share, compared with 95.48c apiece in the prior year,” the company noted.

The core headline earnings for the current year of R772-million, after the exclusion of the negative contributions, comprised R632-million from continuing operations and R140-million from discontinued operations.

The decline in core headline earnings of R100-million was partly attributable to starter pack distribution, gaming vouchers and ticketing being negatively impacted during the initial lockdown period.

“This included the group having to incur a general increase in allowances raised for expected credit losses and exposure to the Edcon group amounting to R41-million, net of taxation. Of this amount, R21-million related to the WiConnect retail stores,” Blue Label concluded.