Cell C has disclosed its recent financial outcomes, revealing its persisting insolvency despite the September 2022 recapitalization. The balance sheet for the full year 2022 portrays assets at R5.798 billion and liabilities at R15.092 billion, resulting in a negative equity of R9.294 billion. Essentially, Cell C lacks the means to meet its current obligations, including short-term borrowings, with its existing assets, indicating technical insolvency.
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Of notable concern is that Cell C’s liabilities are almost three times the value of its assets, posing a considerable challenge for a turnaround. The full-year 2022 results follow a series of agreements between Blue Label, Cell C, and its financial stakeholders aimed at restructuring and refinancing the mobile operator.
The deal involved settling creditors’ claims at 20 cents to the rand, effectively addressing Cell C’s substantial debt burden. Post-recapitalization, the remaining R2.9 billion debt was appropriately classified, primarily as long-term, unlike the initial scenario where all bonds and debt were short-term due to the R9 billion debt deadline.
The recapitalization had a noticeable impact, reducing Cell C’s current liabilities from R17.691 billion to R10.732 billion. However, non-current liabilities increased by R1.1 billion due to elevated contract liabilities and other payables.
While overall negative equity improved year on year, remaining negative by the end of 2022, Cell C remains optimistic about its prospects. Despite challenges, the mobile operator states that its business stabilization efforts are generating improved results.
Despite maintaining revenue at R10.09 billion year-to-date to September 2023, comparable to R10.14 billion in 2022, Cell C faces a significant decline in subscribers, dropping to 8.2 million from 17.2 million five years ago.
Challenges include escalating expenses, with direct expenses rising by 7% year on year, partly attributed to network transition. Roaming costs also impacted the gross margin, reflecting a 23% reduction.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 509%, primarily due to reduced revenue. Cell C’s CEO, Jorge Mendes, remains confident in the operator’s future, emphasizing a focus on cultural transformation, a fully operational network, and a robust strategy to drive growth and profitability. He notes a positive performance momentum in the last quarter of 2023.
