Blue Label says volumes recovering after Covid-19 hit
JSE-listed technology group Blue Label Telecoms, the largest shareholder of Cell C, says it has seen a recovery in volumes after Covid-19 initially hit ticketing sales and gaming vouchers.
The group said on Thursday volumes for these items were now back to pre-Covid-19 levels, but cash flow generated by its core businesses had not been negatively affected.
The lockdown regulations and the downturn in economic activity had not negatively affected airtime, data and electricity sales volumes, the group said, though it had seen writedowns in its year to end-May.
Challenging economic conditions, an unfavourable trading environment and pressure as a result of reduced incentives from the mobile networks and an increase in product costs, exacerbated by Covid-19, necessitated a writedown of goodwill in Blue Label Connect of R156.5m.
Blue Label had written off Cell C in its previous financial year, meaning the financial results of the mobile operator did not affect it in the current period.
Blue Label is Cell C’s largest shareholder, and that company has struggled to make consistent profits since it became South Africa’s third mobile operator in 2001. Cell C has also grappled with a hefty debt burden.
Cell C’s declining fortunes have resulted in Blue Label and Net1 writing down their combined R7.5bn investment in the operator to nil.
Excluding extraneous costs of R210m in the current year and R3.66bn in the comparative year, core headline earnings from trading operations fell 11% to R772m, Blue Label said.
In morning trade on Thursday, Blue Label’s share was up 4.66% to R2.92, having fallen almost 60% over the past two years.
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