JOHANNNESBURG – Blue Label Telecoms fell 3.51 percent on the JSE on Monday after the group delayed the release of its annual financials for the year ended May in order to take into account how Cell C’s troubles would impact its bottom line.
Blue Label, the majority shareholder in Cell C, which has underperformed in a highly competitive market, told shareholders that the release of the financial results had been postponed to September 26 instead of next Tuesday (August 27) as expected.
“Blue Label’s audit for the year ended May 31, 2019, is substantially complete. However, 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,” said the group.
It said the outcome would have an impact on the carrying value of the investment, the assessment of the remaining fair values of SPV1 and SPV2 (Blue Label investment vehicles), and the recoverability of the existing deferred tax asset within Cell C.
“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,” it said.
In February, Blue Label said the Buffet Consortium, backed by billionaire Jonathan Beare, planned to become a minority shareholder in Cell C in an effort to change its fortunes.
Blue Label owns 45 percent of the mobile operator after injecting R5 billion in 2016.
The group said on Monday that it projected that headline and core headline earnings per share for the financial year would decline more than 20 percent compared with 2018.
Embattled Cell C is in a liquidity crunch that has resulted in its struggle to pay its bills.
Last week, MTN announced that Cell C had a bill of R393 million over the past six months for a roaming agreement, and that it had written off R211m of the amount, and was “evaluating a sustainable solution to the network roaming agreement with Cell C”.
Cell C chief executive Douglas Craigie Stevenson last month penned an open letter to shareholders saying the goal for the group was to become significantly better focused on operational performance, sound business ethics and accountability throughout the business.
Craigie Stevenson, who joined Cell C as chief operating officer in October 2017 following the Blue Label recapitalisation, said in the letter that Cell C had appointed commercial law firm Bowmans to investigate “any parts of the business where we suspect that there may be irregular business practices and have also hired PricewaterhouseCoopers to do a full procurement audit and review of our processes”.
He also said that the group had appointed Deloitte as independent financial restructuring advisers to assist in “optimising business processes”.
Blue Label last month moved to reassure its shareholders that no material concerns or issues had been uncovered as a result of Cell C’s new management conducting a “deep dive” into business practices in a drive to achieve greater efficiencies.
“This is an ongoing process and shareholders will be updated as progress is made. In anticipation of the transaction resolving the liquidity position at Cell C, and launching the new, improved operating model, Cell C’s management and board are ensuring that Cell C is sufficiently geared to run the business as required,” said Blue Label.
Blue Label shares closed 3.51 percent lower on the JSE at R3.30.