Cell C released its annual financial performance for the 12 months ending December 2020, posting a loss of R5.5 billion after tax.
The company highlighted that although it posted a R7.5 billion loss in the first half of 2020 due to a once-off impairment, it showed a R2.1 billion profit in the second half.
Total revenue for the 12-month period was down by 8% to R13.8-billion (2019: R15.1-billion), with the largest part of the revenue contribution from its prepaid base at R6.2-billion (2019: R6.9-billion).
Cell C said that its strategy of focusing on more profitable customers is bearing fruit as the average revenue per prepaid customer (ARPU) has increased by 28% on a year-on-year basis, despite a decline in its prepaid subscriber base by 15% to 9.2-million customers.
Normalised EBITDA was almost 30% higher at R4.1-billion as a result of the positive impact of cost containment initiatives and the stabilisation of subscriber revenue and gross margin, Cell C stated.
Cell C’s gross margin declined by 7% and its direct expenses were 9% lower at R7-billion (2019: R7.7-billion) due to cost optimisations.
It also reported that its total subscriber base was back up to over 12.5 million (H1 2020: 11.7 million).
Zaf Mahomed, Chief Financial Officer of Cell C says that although the company made a full year loss due to impairments and once-off costs, the latter six months of 2020 was encouraging.
“Our results reflect a business in transition. We are starting to see the impact of our changes which included a focus on more profitable subscribers and through the reduction in costs a shift to revenue generating activities. The foundations are now in place,” Mahomed said.
Considering the once-off costs which included expenses allocated to impairment, recapitalisation and the costs associated with network restoration, the normalised EBITDA was 30% higher at R4,1-billion (2019: R3,2-billion).
EBIT improved from a loss of R5,3-billion in the first six months of 2020 to a profit of R1,8-billion in the second half.
“Our turnaround strategy has improved our financial performance as a mobile network operator and Cell C is operationally more efficient. Over the next three years we will fully transition to roam on partner networks — all with the aim of providing a quality network, innovative value offerings for our customers and ensuring a profitable and sustainable business,” said Cell C CEO, Douglas Craigie Stevenson.
Stevenson said that the decrease in Cell C’s overall operating costs (on an annual basis the business removed more than R500m worth of expenditure) and the focus on more profitable customers, has resulted in positive cash flow as reflected in its cash EBITDA being reported at R844-million (2019: R240-million).
“Cell C is now generating cash and the performance shows that the business is operationally stronger. The fit-for-purpose entity can effectively implement its business strategy and with a recapitalisation will benefit from a revised capital structure with manageable debt to ensure long-term sustainability.”
Craigie Stevenson said the Cell C team is focused to turn the company into a profitable, innovative player and is on track in achieving that ambition.