Baptism of fire for Cell C interim CEO after R638m loss

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Douglas Craigie Stevenson, Cell C's interim group CEO.
Douglas Craigie Stevenson, Cell C's interim group CEO.

Cell C's newly-appointed interim CEO Douglas Craigie Stevenson expects a "tough ride" at the helm of SA's third biggest mobile operator.

This morning, Cell C's majority shareholder Blue Label Telecoms announced Cell C's unaudited results for the year ended 31 December 2018, reflecting a R638 million loss.

In August 2017, Blue Label Telecoms completed Cell C's recapitalisation through a R5.5 billion investment, as well as a further subscription of shares from Net1 UEPS Technologies for R2 billion.

The recapitalisation reduced Cell C's debt from previous levels of as high as R20 billion to no more than R6 billion. At the close of the transaction, Blue Label held 45% in Cell C.

One of the biggest highlights was for the six months ended November 2018, when Cell C's net loss amounted to R634 million.

For the 10 months ended May 2018, Cell C's net profit amounted to R1.14 billion. This comprised trading losses of R782 million offset by the recognition of a deferred tax asset amounting to R1.92 billion, the company says.

In a statement, Blue Label says the recapitalisation of Cell C enabled it to reduce its inventory holding, and, in turn, to recognise the pre-existing rebates received from the sale of the inventory on a piecemeal basis over the course of that period.

Post the recapitalisation of Cell C, core headline earnings for the six months ended 31 May 2018 amounted to R286 million in comparison to the R310 million earned in the current reporting period, equating to growth of 8%, says Blue Label.

Cell C announced the appointment of Craigie Stevenson this morning and he has hit the ground running, as he presented the telco's results at Blue Label's Sandton offices.

He replaces Jose Dos Santos, who announced his resignation as CEO this month.

"Believe me, we want to get rid of this net loss as fast as possible and that is where we will focus a huge amount of our efforts. I am very much aware of what I need to do in my position," said Craigie Stevenson.

"I am very much aware of plans that I need to execute in order to get where we want to be," he added.

Analysing Cell C's debt and finance cost, Craigie Stevenson noted that net finance costs are R2.7 billion including finance and leases including foreign exchange, as well as R1.8 billion excluding finance leases and including foreign exchange.

"The market is as competitive as it possibly could get at the moment. I know I am in for a tough ride and I am sure you are going to give me more time," he said.

Blue Label also announced Cell C has concluded a binding term sheet with the Buffet consortium in terms of which Buffet shall, subject to the fulfilment of certain conditions precedent, become a minority shareholder in Cell C.

With Buffet's support, Blue Label believes the Cell C balance sheet will be bolstered and ensure Cell C's sustainable growth for the future.

Meanwhile, also on Craigie Stevenson's to-do list is solving industrial action by some Cell C workers belonging to the Information Communication Technology Union.

Cell C says the industrial action relates to bonus payments made in 2018 for work-related performance in 2017.

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