Blue Label Telecoms, listed on the JSE, reported a more than 60% decline in full-year profits as it completed a recapitalization exercise to rescue its struggling subsidiary, Cell C, from its debt burden.
- The recapitalization transaction, which took approximately a year to finalize, aimed to address Cell C’s R7.3 billion debt and provide liquidity for the company to restructure, operate, and grow.
- Blue Label provided a secured loan of R1.03 billion to Cell C, enabling the settlement of claims and concluding the recapitalization in September of the previous year.
- In its financial results for the period ending in May 2023, Blue Label reported a 62% drop in headline earnings per share (Heps), amounting to 45.55 cents per share compared to 121.01 cents per share in the prior year.
- Core headline earnings per share, excluding contributions from the Cell C recapitalization transaction, increased by 9% to 104.83 cents per share.
- Cell C’s revenue decreased from R13.3 billion to R11.8 billion, and net profit swung from a profit of R4.9 billion to a loss of R2.4 billion in the reporting period.
- Load shedding (power outages) had a negative impact on Blue Label’s business, affecting the sale of prepaid electricity, prepaid airtime, and call center operations, leading to disruptions, delays, and additional costs.
Despite the challenges faced, Blue Label Telecoms reported a 6% increase in group revenue to R18.9 billion and highlighted efforts to mitigate the effects of load shedding. The company’s share price experienced a slight lift during early morning trade.