Cell C’s recap lifeline close, says shareholder Blue Label
Blue Label Telecoms, the largest shareholder of Cell C, says the telco will be recapped this year as the key partners have made huge inroads in negotiating the funding deal.
Brett Levy, Blue Label’s joint-CEO, says Cell C recap negotiations have been strenuous for the past year-and-a-half, but in the last two months, all parties to the proposed deal have been engaging, and conclusion of the transaction will happen before year-end.
Levy engaged the media on Cell C today, when presenting Blue Label’s financial results for its year to end-May.
The JSE-listed group wrote off Cell C last financial year, and the mobile carrier’s financials were not included in the current period.
Cell C has been facing mounting financial pressure, and the recapitalisation programme has been on the cards for a while to try rescue the business.
In May, the Competition Commission recommended conditional approval of the proposed acquisition of certain Cell C assets by special purpose vehicle Gatsby SPV, but the deal is yet to be concluded.
“This deal is and has been very complicated, just to put it briefly. We have dealt with two Chinese banks, two Chinese vendors, American bondholders, Lebanese banks, Lebanese bondholders, and South African banks,” says Levy.
“So to get everyone around the table and to agree on what we call the final umbrella agreement, which we started over a year-and-a-half ago, has proven to be a lot more difficult than we have ever envisaged and has taken a lot more time.
“The good news that I need to tell you is that we have really made huge inroads in the last three to four months. We believe we are really close to a term sheet with all the lenders and shareholders. We believe we are going to recap this business this year,” says Levy.
“There is no indication why we shouldn’t recap it this year.”
He believes the recap is extremely fair for shareholders and lenders, and adds that all the stakeholders “have been playing ball to get this over the line and make sure that Cell C is recapped”.
Meanwhile, for the period under review, Blue Label group revenue generated by continuing operations declined by 10% to R21.1 billion.
The company’s gross profit declined by 2% from R2.17 billion to R2.12 billion, which Blue Label says was partially limited due to an increase in margins from 9.21% to 10.05%.
Blue Label’s earnings per share and headline earnings per share increased from a negative 727.81c and 312.49c per share in the prior year to a positive 13.89c and 58.16c per share respectively in the current year.
According to the company, cash generated from trading operations totalled R1.7 billion.
“Working capital movements comprised an increase in trade receivables of R148 million, an increase in advances to customers of R65 million and a decrease in trade payables of R397 million, offset by a decrease in inventory of R795 million.”
Blue Label says after incurring net finance costs and taxation, net cash generated from operating activities amounted to R1.3 billion.