Celcom falls short of prospectus

The AltX-listed company had 19% whittled off its shares, which temporarily traded at 86c.

Celcom’s prospectus, issued in November, forecast revenue of R684m and R22m in profit for the year to June 30, but earnings could be 40% below expectations due to its depressed performance.

Earnings would be at least 20% worse than expected, and headline earnings would be 20%-35% lower than forecast. Headline earnings a share were expected at 10%-25% less than originally hoped.

Celcom sells ring tones and airtime and other cellphone accessories.

Blame for the dip in performance is being laid on a variety of changes to its trading conditions, which have hit its cellphone accessories division, Celcom.

One dent has come as rival retailers sell cellular contracts sweetened by “free” games consoles, DVD players or holiday vouchers. Celcom is still playing catch-up with that trend and its directors said it was “appropriately adapting”.

Grey imports through unauthorised channels and the supply of counterfeit cellphone accessories have also taken their toll, hitting the sales of genuine branded accessories.

Celcom and the network providers were taking steps to limit the effect of grey imports and fake products, the company said, which should be helped by a trade and industry department campaign to clamp down on illegal imports.

A third factor paring the figures has been Celcom’s slow progress in taking its business further into Africa. It had treated its success further north as a given and factored it in as a “material assumption underlying its forecast”. Although the managers had been actively pursuing that expansion, its implementation was taking longer than anticipated.

Celcom’s other divisions, its V Cellular Stores and Virtual Payment Solutions, were significantly outperforming their forecasts, it said. The V Cellular Stores that it acquired before listing had been integrated into the group and cost savings were beginning to be realised.

Its shares were listed at R1 last November and have traded as high as R1,50, with the floatation of 23-million shares being 10 times oversubscribed. The company is now trading under a cautionary notice.