Blue Label share price nosedives as it's hit by massive headline loss
JOHANNESBURG – Blue Llabel Telecommunication's share price nosedived in intraday trade on Thursday as the markets baulked at its last-ditch effort to clear debts via an asset sale.
The telecoms group posted a headline loss per share of 312.49 cents and a core headline loss of 304.77c for the year ended May.
The company attributes the losses to mobile network subsidiary Cell C’s trading losses, impairment of its property, plant and equipment and the impact of a de-recognition of its deferred tax asset and the impairment of Blue Label’s total investment therein.
Blue Label owns a 20 percent stake in Cell C, which it acquired for R5.5 billion in 2017. It added that an impairment of its total investment in the Oxigen India group also contributed to losses.
The group's joint chief executive, Bret Levy, was at pains to assure shareholders that Cell C was not an albatross around its neck.
He said that the R1bn it expected to raise from the disposal of Blue Label’s interests in Blue Label Mobile and the handset division of the Prepaid Company's 3G to Mobile Investment holding company DNI 4PL Contracts would clear all debt and rejuvenate the company.
The asset sale was announced late on Wednesday.
“This is not a fire sale, we are not selling anything that affects our core business. We aim to reduce debts to zero over the next 12 to 24 months, which will help generate cash for us,” Levy said.
Blue Label, whose core business is the virtual distribution of secure electronic tokens of value – prepaid airtime, electricity, ticketing and transactional services, grew gross revenue by 10 percent over the previous period to R57.8bn. Gross profit increased to R2.6bn from R2.3bn, while gross profit margin increased 10.23 percent.
Its fortunes, though, turned to a R6.6bn loss on Cell C’s trading losses and impairments, which account for R6.1bn; SPV&Glocell fair value downwards adjustments, which took R838 million off the books; impairments of R398m for Oxigen India losses and impairments; as well as the R147m impairments on ViaMedia, Blue Label Connect and SupaPesa.
“The core of the business grew by 26 percent and that is good. It has been a challenging two years but what we are doing is focusing on our core business, extending the reach and product set in our core distribution business,” he said.
Blue Label shares closed 12.13 percent lower at R2.97 on the JSE on Thursday.