Blue Label back in the black as Cell C pain thaws
JSE-listed distributor of prepaid secure electronic tokens of value, Blue Label Telecoms, is back in the black, returning to profit after two consecutive years of loss.
The company released its results for the half-year ended November 2019 on Friday, showing an increase in revenue of 2% to R11.5 billion. Gross profit went up 10% to R1.21 billion and gross profit margin surged from 9.75% to 10.52%.
Blue Label excluded fair value losses of R493 million from its interim results after writing down its investment in mobile carrier Cell C last year.
“As the carrying value of Blue Label's investment in Cell C was fully impaired for the year-ended 31 May 2019, the financial results of Cell C during the current period did not have any impact on Blue Label’s earnings for this reporting period,” the company said in a statement.
Blue Label is the largest shareholder in mobile operator Cell C, with a 45% stake. During the previous financial year, the operator’s losses stood at R8 billion. Blue Label was forced to write down its investment in Cell C to nil.
Blue Label Telecoms joint-CEOs Mark and Brett Levy recently quit the Cell C board and were replaced by Gary Harlow and Jerry Vilakazi as Blue Label’s representatives.
Cell C has been under pressure for some time, facing a legion of problems including job stoppages, declining revenue and debt management challenges.
The operator suffered yet another huge blow after another key shareholder was forced into a write-down of value in the telco.
Net1, which holds a 15% stake in Cell C, said it “believes the fair value of Cell C at 30 June 2019 (Net1’s fiscal year end) is nil ($0)”.
Furthermore, earlier this month, Blue Label Telecoms told shareholders that Cell C had missed December’s interest payment on a $184 million (R2.7 billion) loan, as well as capital plus interest payments on loan facilities with Nedbank, China Development Bank Corporation, Development Bank of Southern Africa and Industrial and Commercial Bank of China.
In the current reporting period, Blue Label’s earnings per share and headline earnings per share increased from a negative 15.11 cents and 17.54 cents per share to a positive 34.83 cents and 39.98 cents per share respectively.
The company’s core headline earnings for the half-year ended 30 November 2019 amounted to R390 million, equating to core headline earnings of 43.18 cents per share compared to core headline losses of 13.90 cents per share in the previous period.
Turning to other sections of the business, Blue Label says agreements for the disposal of the company’s interests in Blue Label Mobile and the handset division of 3G Mobile were entered into on 25 September 2019 and approved by shareholders on 4 December 2019.
Blue Label says with regard to the disposal of 3G Mobile's trading operations, all suspensive conditions have been fulfilled and the purchase price of R544 million was received on 14 February 2020.
“In relation to the disposal of Blue Label Mobile, certain conditions precedent remain outstanding, the completion of which is at an advanced stage. Upon fulfilment thereof, R350 million of the selling price of R450 million, as well as all monies paid by Blue Label Mobile towards the acquisition of Hyve Mobile and Mobile Content Africa amounting to approximately R81 million, will be received.
“The remaining R100 million plus interest thereon will be contingent on the terms of the conditions contained in the circular to shareholders published on 6 November 2019,” read the statement.
Cell C will present its results separately at a date still to be announced.