Blue Label expects earnings decline, delays financial results

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Mark and Brett Levy, joint-CEOs of Blue Label Telecoms.
Mark and Brett Levy, joint-CEOs of Blue Label Telecoms.

JSE-listed Blue Label Telecoms is expecting a decline in basic, headline and core headline earnings per share for the year ended 31 May 2019.

The company this afternoon issued a statement on SENS announcing that it is pushing back the publication of its full-year financial results.

Blue Label, which is Cell C's majority shareholder, said: “Shareholders are advised that basic, headline and core headline earnings per share for the year ended 31 May 2019 are expected to decrease by more than 20% in comparison to the year ended 31 May 2018.”

Blue Label’s audit for the year ended 31 May 2019 is substantially complete, says the company.

However, it notes that the group is currently in the process of determining the valuation of its investment in Cell C, incorporating the effects of the transactions that are currently in progress.

The outcome will have an impact on the carrying value of the investment, the assessment of the remaining fair values of SPV1 and SPV2 (as detailed in the trading statement published on SENS on 22 February 2019) as well as the recoverability of the existing deferred tax asset within Cell C.

It adds that an extensive process is currently being undertaken by Cell C management in order to perform an assessment of the extent of the impact that the above transactions will have on Cell C’s financial statements, which are currently being finalised.

Accordingly, the board of directors of Blue Label wish to advise shareholders that its financial results for the year ended 31 May 2019 will be released on SENS on 26 September 2019.

In August 2017, Blue Label completed Cell C's recapitalisation through a R5.5 billion investment, as well as a further subscription of shares from Net1 UEPS Technologies for R2 billion.

Blue Label holds a 45% stake in Cell C, Net1 owns 15%, and 10% is held on behalf of Cell C management and staff. 3C Telecommunications' shareholding is 30%.

Cell C has been under pressure for some time, facing myriad problems, including job stoppages, declining revenue and debt management challenges.

In February, Blue Label announced Cell C’s unaudited results for the year ended 31 December 2018, reflecting a R638 million loss.

Two weeks ago, the operator was downgraded by a global rating agency.

Standard & Poor’s downgraded Cell C’s debt rating further after the operator renegotiated terms of its R1.4 billion debt.

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