Blue Label Telecoms Integrated Annual Report 2019

56 Blue Label integrated annual report 2019 Operational review The financial year ended 31 May 2019 was focused on integrating the acquisitions made in the preceding two years, and refining operating structures and processes to improve our ability to service customers and maximise benefits for existing and new operations while adapting to changing market conditions. Improving the agility and security of our IT systems, which is the bedrock of our business, has been a major focus this financial year. Blue Label’s primary trading market in the South African cellular industry has been significantly impacted by competitive MNO pricing pressure coming to the fore in June/July 2018. The depressed South African economy has also contributed to the tough trading environment. Blue Label is proud of its resilience, its stated strategy of expanding both its reach and product portfolio to produce additional revenue streams which enhance Blue Label’s financial performance. Core headline earning for the Group equated to a negative 304.77 cents per share, down from a positive 135.62 cents per share recorded in the 2018 financial year. The loss was largely attributable to Cell C’s trading losses, impairments of its property, plant and equipment, derecognition of its deferred tax asset, fair value downward adjustments of the exposure relating to SPV 1 and SPV 2 and the consequent requirement to write down the investment in Cell C to zero. These losses were further exacerbated due to the impairments of Blue Label’s total investment in Oxigen India Group, as well as providing for loan impairments, guarantees payable therein, as well as impairments of goodwill and investments in a joint venture. On exclusion of the negative impacts as detailed below*, the Blue Label business did, however, grow strongly, recording a 26% increase in its core headline earnings. The review that follows provides more detail on the operating performance of primary businesses in the Group. Financial performance within these businesses and divisions can be referred to the Financial Director’s report on pages 40 to 46. * On exclusion of the negative impact attributable to: u u Cell C’s trading losses, impairment of certain of its property, plant and equipment, the impact of the derecognition of its deferred tax asset and the impairment of Blue Label’s total investment in Cell C; u u Fair value downward adjustments of the exposure relating to SPV1 and SPV2 pertaining to the initial recapitalisation of Cell C and the Glocell loan; u u An impairment of Blue Label’s total investment in the Oxigen India group, including 2Dfine Holdings Mauritius, as well as providing for loan impairments and guarantees payable therein; and u u Partial impairments of goodwill and an investment in a joint venture.