Cell C's Profit Shows Progress Amid Ongoing Challenges

Despite posting a profit in 2022, Cell C acknowledges that it remains in a period of significant transformation.

In a recent trading update, Cell C revealed audited results for the financial years 2021 and 2022, along with January to September 2023 results and Q3 2023 results.

For the 2022 financial year (FY22), revenue saw a 9% decline compared to FY21, despite an increase in the customer base. The network transition, aligned with Cell C’s capex-light operating model, led to increased roaming costs. Despite the rise in direct costs, the gross margin percentage improved from 29% in 2021 to 30% in 2022 due to changes in the product mix.

EBITDA (Earnings before interest, taxes, depreciation, and amortization) dropped by 509% due to reduced revenue, continued evolution of direct expenditure following the network transition plan, and lower operating costs. The declining asset base due to the network transition reduced site operating expenses.

However, the group reported a net profit before tax of R5.2 billion in FY22, primarily attributed to recapitalization and the ongoing network transition.

“Although the recapitalization included debt restructuring, the financing costs remained high in 2022 as recapitalization only occurred in Sep’22,” stated the group. Large one-offs in 2022 in other gains were related to the recapitalization impact.

While the group acknowledges 2023 as a rebasing year, it maintained its revenue position at R10.09 billion (YTD Sept ’23) versus R10.14 billion in 2022.

The average blended revenue per user (ARPU) increased from R74 in FY22 to R80 by the end of 2023 YTD due to an increase in high-quality subscribers.

Direct expenses increased by 7%, mainly due to the finalization of the network transition, impacting the gross margin and showing a reduction of 23%. Despite this, the group emphasized the positive impact of its focus on key performance indicators, with Q3 2023 demonstrating revenue and cost management improvements.

With an overall revenue growth of 1.5% (R50 million) from Q3 2022 to Q3 2023, Cell C recorded its first quarter of growth compared to the previous year. CEO Jorge Mendes expressed confidence in the deduction in the asset base, following the capex-light model, enabling a focus on driving profitable growth in the future. He highlighted the improved performance momentum in the last quarter of 2023 and the strategic initiatives implemented to achieve sustained growth and profitability in the coming years.