{"id":813213,"date":"2025-02-20T09:00:00","date_gmt":"2025-02-20T07:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=813213"},"modified":"2025-02-20T09:00:04","modified_gmt":"2025-02-20T07:00:04","slug":"one-of-south-africas-biggest-companies-technically-insolvent","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/813213\/one-of-south-africas-biggest-companies-technically-insolvent\/","title":{"rendered":"One of South Africa’s biggest companies technically insolvent"},"content":{"rendered":"\n

Cell C remains technically insolvent, but there are some signs of improvement for the embattled telco company.<\/p>\n\n\n\n

Blue Label’s interim results for the six months ended 30 November 2024 show that Cell C has assets totalling R13.8 billion, while liabilities amount to R17.14 billion.<\/p>\n\n\n\n

A company is technically insolvent when its liabilities outweigh its assets. This results in a company having negative equity, which, in Cell C’s case, totals -R3.3 billion<\/mark>.<\/p>\n\n\n\n

Negative equity means that a company will not be able to settle all of its liabilities with its assets if it is liquidated. <\/p>\n\n\n\n

Companies that are technically insolvent often need drastic measures to improve their financial situation. <\/p>\n\n\n\n

For instance, when Pick n Pay became technically insolvent, it underwent a two-step recapitalisation plan, which included a R4 billion rights offer and the IPO of Boxer worth R8 billion. <\/p>\n\n\n\n

Cell C’s technical insolvency is not new, but the group’s position has worsened compared to the prior six-month period, where its negative equity was -R3.2 billion.<\/p>\n\n\n\n

However, it should be noted that Cell C is showing signs of improvement, with its negative equity position improving from the -R4 billion recorded in the 2024 financial year.<\/p>\n\n\n\n

Blue Label is pumping billions into Cell C. As per the latest recapitalisation, the Blue Label-owned The Prepaid company lent Cell C R1.03 billion to pay off debt claims and purchased R2.4 billion in airtime.<\/p>\n\n\n\n

The Prepaid Company now has a 63.19% economic interest in Cell C, which is much higher than the previous 45%. <\/p>\n\n\n\n

Cell C’s latest income statement also points to signs of life, with the net loss before taxation dropping from R336 million in the prior comparable period to R149 million.<\/p>\n\n\n\n

Balance Sheet<\/th>30 Nov 2023
(Last Year)<\/th>		31 May 2024
(previous)<\/th>		30 Nov 2024
(Latest)<\/th><\/tr><\/thead>
Assets (R’000)<\/td>12 242 924<\/td>14 130 474<\/td>13 813 396<\/strong><\/td><\/tr>
Liabilities (R’000)<\/td>16\u00a0634\u00a0611<\/td>17 309 515<\/td>17\u00a0141\u00a0677<\/strong><\/td><\/tr>
Equity (R’000)<\/td>(4\u00a0391\u00a0687)<\/mark><\/td>(3 179 041)<\/mark><\/td>(3\u00a0328\u00a0281)<\/strong><\/mark><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n

Blue Label results <\/strong><\/h2>\n\n\n
\n
\"\"<\/a><\/figure><\/div>\n\n\n

Blue Label’s results over the period were a mixed bag, with revenue dropping by 4% to R7.2 billion, while gross profit increased by 2% to R1.6 billion. <\/p>\n\n\n\n

Blue Label, however, noted that only gross profit earned on \u201cPINless top-ups,\u201d prepaid electricity, ticketing, and universal vouchers is recognised as revenue.<\/p>\n\n\n\n

When the gross revenue generated from the sources is in considered, the effective revenue growth equates to R3.5 billion (+8%), and total revenue grows to R47.4 billion.<\/p>\n\n\n\n

The group’s EBITDA decreased by 6% to R653 million, while core headline earnings recorded a marginal increase of R5 million to R424 million. <\/p>\n\n\n\n

The group said that the decline in EBITDA and growth in core headline earnings were partly driven by a reduction in the Comm Equipment Company (CEC) subscriber base and a lower ARPU. <\/p>\n\n\n\n

It was also due to the increased finance costs associated with selling a portion of the CEC handset receivable book.<\/p>\n\n\n\n

The proceeds from the sale were transferred from CEC to The Prepaid Company and eventually to Cell C via the acquisition of airtime. <\/p>\n\n\n\n

Earnings per share dropped by 4% to 43.98 cents per share, while headline earnings per share increased slightly to 46.01 cents per share. <\/p>\n\n\n\n

Financials<\/strong><\/td>H1 FY24<\/strong><\/td>H1 FY25<\/strong><\/td>% Change<\/strong><\/td><\/tr>
Revenue (R’000)<\/td>R7 581 356<\/td>R7 245 092<\/td>-4%<\/td><\/tr>
Gross Profit (R’000)<\/td>R1 597 881<\/td>$1 625 720<\/td>+2%<\/td><\/tr>
EBITDA (R’000)<\/td>R697 003<\/td>R653 155<\/td>-6%<\/td><\/tr>
Earnings per share (cents)<\/td>45.67<\/td>43.98<\/td>-4%<\/td><\/tr>
Headline earnings per share (cents)<\/td>45.91<\/td>46.01<\/td>0%<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Cell C remains technically insolvent, but the company is showing some signs of life, with its net losses before tax shrinking.<\/p>\n","protected":false},"author":95,"featured_media":733943,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[6064,42,895],"class_list":["post-813213","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-blue-label","tag-cell-c","tag-financial-results"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813213","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=813213"}],"version-history":[{"count":10,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813213\/revisions"}],"predecessor-version":[{"id":813265,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813213\/revisions\/813265"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/733943"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=813213"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=813213"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=813213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}