Johannesburg, Monday - Cell C published a trading update for its operational performance for the period from January to September 2023 (YTD Sept'23) and July to September 2023 (Q3'23), as well as its audited numbers for FY'22 and FY'2l.
The company's business stabilisation efforts are yielding improved results, positioning it to return to growth and enhanced competitiveness in the market.
This year has been a rebasing year for Cell C. Despite operating in a challenging landscape, exacerbated by load shedding, Cell C's business demonstrated resilience by maintaining the revenue position of Rl0.09 billion (YTD Sept '23) versus Rl0.14bn in 2022. The Average Blended Revenue Per User (ARPU) for the consumer base has increased from R74 in 2022 to R80 by the end of Sep'23 due to an increase in high-quality subscribers. Cell C has now aligned to the industry norm of reporting on consumer ARPU which is a combination of Prepaid and postpaid service revenue. Previous reporting had been at net revenue and inclusive of other revenues outside of consumer.
Our Direct expenses have increased by 7% year on year. The main drive being the finalisation of the network transition in Jun'23. As at Sep'22 the network transition progress was at 65%. The increase in the roaming costs has a direct impact on the gross margin which also shows a reduction of 23%. This will continue to be a difference between Cell C and the balance of the industry. The focus to prioritise key performance indicators has begun to yield results with Q3'23 reflecting a growth trajectory in revenue and continued cost management. This entailed driving the return to growth and profitability, leveraging the improved network quality, and creating awareness with customers on the better connectivity, as well as launching propositions to induce trial. This was further buoyed with embedding a culture of execution excellence, building staff and stakeholder confidence.
As a result, Q3'23 saw overall revenue growth of 1.5% amounting to R50 million compared to Q3 '22. This increase has been driven by improved execution for Prepaid, and continued growth in Wholesale, Postpaid and Equipment sales. Q3'23 has been the first quarter in 2023 where Cell C is showing revenue growth versus prior year.
Whilst Q3'23 was a rebasing of performance, the FY'22 audited numbers reflect a business in transition, which includes the impact of the recapitalisation process that started on 30 Sep'22.
Revenue declined by 9% in FY'22 compared to FY'21 despite a marginal increase in the customer base in 2022. Whilst the network transition implemented in line with Cell C's capex-light operating model, resulted in an increase in roaming costs. Despite the increase in direct costs, the gross margin percentage improved from 29% in 2021 to 30% in 2022 due to a change in product mix.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) reduced by 509% due to revenue reduction, the continued evolution of direct expenditure in line with the network transition plan and lower operating costs. A declining asset base due to the network transition reduced site operating expenses within operating expenses.
The Net Profit before tax ended at R5,2bn in 2022. The main drivers of the movement have been the recapitalisation and the continuation of the network transition. Depreciation reduced by 39% year on year, in line with the network transition, with material impairments having occurred in 2021. Although the recapitalisation included debt restructure, the financing costs remained high in 2022 as recapitalisation only occurred in Sep'22. The large once-offs in 2022 in other gains relates to the recapitalisation impact. A benefit of R8.9 billion was realised due mostly to the debt concessions related to recapitalisation. The other gains would not repeat in 2023 as these relate to the recapitalisation transaction.
The objective of recapitalisation to reduce debt has been achieved with interest bearing debt moving from R9 billion to R3 billion. Property, plant, and equipment decreased by Rl billion because of the network transition and resultant decommissioning of network assets. The lease concessions have also contributed to deleveraging the balance sheet. We have also issued an effective 11% of shares as part of the recapitalisation transaction which changed Cell C's shareholding. Overall negative equity improved year on year but remained negative on 31 Dec'22 and is expected to remain at these levels until the business turnaround is completed.
Jorge Mendes, Cell C CEO, expressed his confidence in the company's prospects, "With our newly formed management team, building a great culture, a fully operational network, and a robust strategy, Cell C is well-positioned to drive growth and profitability. We have implemented several strategic initiatives to drive revenue generation and reverse the struggling performance we experienced in the past."
Cell C is confident that the reduction of its asset base in line with the capex-light model will allow Cell C to focus on driving profitable growth in the future.
Mendes concluded that Cell C remains committed to providing high-quality telecommunications services and enhancing customer experiences."I am pleased that in the last quarter of 2023, we are seeing improved performance momentum. By leveraging our robust network infrastructure, we aim to capitalise on growth opportunities in the market and deliver sustainable performance in coming years."
About Cell C
Cell C is a telecommunications company in South Africa, which is committed to delivering innovative products and solutions as well as reliable connectivity to its customers. Now on SA's best network and a Kantor Top 30 Brand, Cell C enriches the lives of individuals and communities and empowers businesses by connecting them to the digital world.
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