Blue Label Telecoms, a significant player in the South African telecommunications market and the major shareholder of Cell C, has announced a remarkable surge in profit according to its trading update for the fiscal year ending on November 30, 2023. This growth comes amidst a backdrop of economic challenges facing South Africa.
The company revealed that its core headline earnings per share skyrocketed to R420 million, a substantial increase from R35 million reported in November 2022. This translates to core headline earnings of 47.15 cents per share compared to 3.94 cents per share in the previous year.
Furthermore, Blue Label Telecoms anticipates its headline earnings per share to rise to a range between 45.87 and 45.95 cents per share, a significant improvement from 2.09 cents per share in 2022. Earnings per share are also projected to increase, ranging between 45.49 and 45.84 cents per share compared to a loss of 8.74 cents per share in the previous year.
However, when accounting for the effects of the recapitalization transaction of Cell C, with positive contributions of R65 million in the current period and negative contributions of R421 million in the comparative period, the core headline earnings saw a decline of R100 million (22%) to R355 million. Core headline earnings per share also dropped by 23% from 51.72 cents per share in the comparative period to 39.90 cents per share.
Blue Label Telecoms attributed this decline in core headline earnings to a decrease of R119 million in the Comm Equipment Company (CEC), while other entities within the group experienced an increase of R19 million (10%) compared to the previous year.
“The anticipated decline in CEC’s core headline earnings was a result of a decline in gross profit stemming from increased expenditure related to the distribution agreement, as well as a significant increase in the expected credit loss compared to the comparative period,” stated the group.
“This increase aligns with the expansion of CEC’s subscriber base and the deteriorating macroeconomic environment in South Africa, characterized by rising interest rates, power outages, and a depreciating rand.”
CEC has taken measures to increase its expected credit losses in anticipation of heightened future losses, aligning its approach with that of other consumer lenders operating in the challenging economic environment.
Moreover, when excluding the effects of the recapitalization transaction of Cell C from both the current and comparative periods, earnings per share dropped by 23% to 38.42 cents per share, while headline earnings per share also declined by 22% to 38.66 cents per share, respectively.
This financial report from Blue Label Telecoms underscores both the company’s resilience and the broader economic challenges facing South Africa’s telecommunications sector. Despite the impressive profit growth, the decline in core headline earnings signals the impact of various economic factors on the company’s operations. As South Africa navigates through its economic challenges, companies like Blue Label Telecoms remain crucial players in driving growth and innovation within the telecommunications industry.
