Blue Label Telecoms (BLT) is a company that specializes in selling secure tokens of value, such as airtime, starter packs, and electricity. A significant part of its operations has been influenced by its 45% stake in Cell-C, acquired in September 2016. The acquisition, which cost R7.55 billion, including R3.9 billion paid through the issuance of 272 million shares, has had a substantial impact on Blue Label's financial performance due to the challenges faced by Cell-C.
Cell-C's financial troubles became evident when S&P Global Ratings downgraded its debt to CCC- from CCC+ in April 2019, citing an "unsustainable" capital structure. With Cell-C's debt levels reaching R8.9 billion, nearly three times Blue Label's market capitalization (less than R3 billion), the situation became a significant concern. However, on 25th August 2021, Blue Label announced that it had secured new financing for Cell-C. Further, on 22nd September 2022, the company disclosed a R1.03 billion recapitalization of Cell-C, increasing its stake in the telecom to 49.5%, which positively impacted Blue Label's share price.
Despite these challenges, Blue Label has managed to achieve positive cash flows and benefited from the sale of its 3G handset division, which helped reduce its debt levels. In its results for the six months ending 30th November 2023, the company reported a 23% decline in revenue and a 22% drop in headline earnings per share (HEPS). The company attributed this decline mainly to a R119 million decrease in contributions from the Comm Equipment Company (CEC), though other group entities saw a R19 million increase compared to the prior period.
In a trading statement for the year ending 31st May 2024, Blue Label estimated a HEPS increase of between 73% and 77%. The company explained that, excluding the positive contributions of R66 million in the current year and the negative contributions of R523 million in the comparative year (primarily due to the Cell-C recapitalization transaction), core headline earnings declined by R312 million (34%) from R925 million to R613 million.
Technically, Blue Label's share price had been in a downward trend until it broke through the trendline on 29th February 2024 at 360c. Since then, the share price has risen to 505c, marking a gain of 40% in under six months.
Cell-C's financial troubles became evident when S&P Global Ratings downgraded its debt to CCC- from CCC+ in April 2019, citing an "unsustainable" capital structure. With Cell-C's debt levels reaching R8.9 billion, nearly three times Blue Label's market capitalization (less than R3 billion), the situation became a significant concern. However, on 25th August 2021, Blue Label announced that it had secured new financing for Cell-C. Further, on 22nd September 2022, the company disclosed a R1.03 billion recapitalization of Cell-C, increasing its stake in the telecom to 49.5%, which positively impacted Blue Label's share price.
Despite these challenges, Blue Label has managed to achieve positive cash flows and benefited from the sale of its 3G handset division, which helped reduce its debt levels. In its results for the six months ending 30th November 2023, the company reported a 23% decline in revenue and a 22% drop in headline earnings per share (HEPS). The company attributed this decline mainly to a R119 million decrease in contributions from the Comm Equipment Company (CEC), though other group entities saw a R19 million increase compared to the prior period.
In a trading statement for the year ending 31st May 2024, Blue Label estimated a HEPS increase of between 73% and 77%. The company explained that, excluding the positive contributions of R66 million in the current year and the negative contributions of R523 million in the comparative year (primarily due to the Cell-C recapitalization transaction), core headline earnings declined by R312 million (34%) from R925 million to R613 million.
Technically, Blue Label's share price had been in a downward trend until it broke through the trendline on 29th February 2024 at 360c. Since then, the share price has risen to 505c, marking a gain of 40% in under six months.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.