Blue Label Telecoms, which holds 45 percent in troubled Cell C, has flagged strong earnings and cash flow growth for the six-month period ended November 30, 2020. Photo: Simphiwe Mbokazi African News Agency (ANA)
Blue Label Telecoms, which holds 45 percent in troubled Cell C, has flagged strong earnings and cash flow growth for the six-month period ended November 30, 2020. Photo: Simphiwe Mbokazi African News Agency (ANA)

Blue Label forecasts 45% profit surge in interim basic earnings

By Dineo Faku Time of article published Feb 18, 2021

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JOHANNESBURG - BLUE Label Telecoms, which holds 45 percent in troubled Cell C, has flagged strong earnings and cash flow growth for the six-month period ended November 30, 2020, as the sale of its Mexican portfolio paid off handsomely.

Blue Label expects a surge of up to 45 percent in interim basic earnings to 50.62 cents a share up from 34.83c a share a year earlier, primarily due to the disposal of the group’s 47.56 percent stake in Blue Label Mexico, coupled with the partial recoupment of losses at the retail division of the WiConnect stores in the period under review.

Last September, Blue Label Mexico was sold to co-shareholder Grupo Bimbo for $11.5 million (about R188m) as Blue Label focused on deleveraging following lower-than-expected performance by the group’s international divisions.

Blue Label closed its WiConnect retail following continued losses incurred on a monthly basis as the negative impact of the Covid-19 lockdown, and the uncertainty of the duration weighed heavily on the business.

“A decision was made to cease the operations of the WiConnect retail stores in the prior financial year,” said the group.

Blue Label said yesterday that despite several headwinds, the group’s performance remained resilient in an adverse economic environment.

“In spite of the Covid-19 pandemic, the group has continued to deliver essential services, including electricity, airtime, data and other digital services, as well as providing financial transactional services, which have not been negatively impacted,” said Blue Label.

Operating activities generated R970m, and core headline earnings for the current period amounted to R376m, of which R351m related to continuing operations and R25m to discontinued operations.

Blue Label said on exclusion of non-recurring income pertaining to foreign exchange gains of R22m, core headline earnings from continued operations amounted to R329m, equating to core headline earnings of 37.35 cents per share.

Last year Blue Label said it would focus its efforts on the South African distribution businesses and deleverage the business in order to ensure a more robust and liquid balance sheet going forward.

Blue Label shifted its focus to core operations through the sale of the Blue Label Mobile and 3G Handset divisions. In the 2019 financial year the group impaired its entire investment in Cell C and last year unveiled a complex recapitalisation of Cell C to ensure that Cell C would be in a position to continue operations.

Blue Label’s share price rose 3.76 percent on the JSE yesterday to close at R5.24.

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