Blue Label Telecoms says it expects a big recovery in earnings for the six months ended November 2019, after impairing its investment in Cell C.

The group said in an updated trading statement on Monday (24 February), that the basic, headline and core headline earnings per share for the interim period will increase by more than 20% in comparison to the prior period.

The Blue Label Group generated further growth in revenue, gross profit and core headline earnings per share, it said.

“This was a resilient performance in an adverse economic environment. The group continues to increase market share and bolster its product and services mix to defend and grow its positions in the market.”

The group, specialists in prepaid products and the electronic distribution of virtual merchandise, has undergone a torrid time since its acquisition of a majority holding in mobile operator Cell C.

However, Cell C is no longer a feature following Blue Label’s decision to fully impair its exposure to the struggling operator, in 2019.

It noted on Monday, that the comparative period reflected fair value losses of R493 million relating to the exposure to Cell C investment vehicles SPV1 and SPV2 as well as to the recognition of the group’s share of equity accounted losses in Cell C of R133 million.

On exclusion of these negative contributions, core headline earnings amounted to R487 million in that period, it said.

“No further fair value losses relating to the SPV’s were recognised in the current reporting period as the exposure thereto was fully accounted for as at 31 May 2019,” Blue Label said.

The above two factors are the primary contributors to the growth in earnings.

Core headline earnings for the current period amounted to R390 million, inclusive of non-recurring once off costs of R61 million, it said.

The group expects to publish its results on Friday, 28 February.

Read: Blue Label signals earnings boost after Cell C write down