JSE-listed Blue Label expects to report a surge in earnings bolstered in part by 58.18%-owned subsidiary Oxigen Services India’s fair value gains of R150-million in the six months ended November 30, 2016.
Earnings a share are expected to increase by 54% to 58% to between 80.79c and 82.89c for the six months under review.
Headline earnings per share (HEPS) are expected to come in 52% to 56% higher at between 80.86c and 83.09c and core HEPS some 50% to 55% higher at between 81.90c and 84.63c for the half-year under review.
“The investment in Oxigen was initially of a long-term nature, as it was expected to emulate the business model of the South African distribution operations.
“However, its profile has changed from that of the traditional group business to one of generating growth in the market value of the investment with a view to unlocking the group’s share thereof,” Blue Label said in a trading update to shareholders on Friday.
Oxigen is now viewed as a venture capital investment with a fair value gain, less deferred taxation and the group’s share of losses in Oxigen for the period under review, equating to a net increase of R135-million to Blue Label’s half-year earnings.
While the change in focus to financial services means that the unit is unlikely to generate profitability in the short to medium term, the company's market value is expected to increase exponentially in conjunction with its growth in wallet subscribers.
“This, in turn, creates the potential to unlock the investment value in the future and the group is pursuing this new strategy with respect to its investment in Oxigen,” Blue Label pointed out.
Excluding the reported net increase, core HEPS would have ranged between 62.25c and 63.34c apiece, equating to a growth of between 14% and 16%, mostly attributed to organic growth.