Blu Label Unlimited Group Limited (BLU) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to Blue Label's Audited Annual Results Presentation for the year ended 31st of May 2021. I'd like to thank everybody for joining the call and a special welcome to our Chair, Mr. Larry Nestadt; our fellow Board colleagues; my brother and Co-CEO, Mark Levy; as well as our shareholders and employees of Blue Label. Just before I begin with the highlights and our key performances for the year, I'd like to talk briefly to Blue Label's theme of the year, resilience. And I'd like to pay tribute specifically to the resilience of our people for their magnificent efforts over what has, of course, been a very tough year. Over the past year, our back-to-basics focus has served us well. We identified the areas in geographies that we specialize in and focused on finding ways to maximize those opportunities even further. This will continue to be our approach in the short and medium term to add value to customers and suppliers while becoming more efficient at what we do. This year, we proudly celebrate 20 years in business, a remarkable achievement of what has been 2 decades filled with milestones and treasured memories from what were very humble beginnings. Let me start with COVID-19. In terms of COVID-19, as we slowly exit the national third wave and as government's vaccination program gains further momentum, we are proud to acknowledge how our resilient group has handled the pandemic. Firstly, to anyone on the call who's recovering from the virus or who have unfortunately lost a loved one, our thoughts are with you through this difficult time and we wish you and your families only good health. I can honestly say that Blue Label responded proactively when the initial lockdown was announced 18 months ago. The BLT return-to-work guide was developed for managers to provide an awareness of health and well-being protocols, readiness for our workforce and steps taken to ensure that our sites and offices are ready to begin operations once again. As the lockdown moved to Level 3 and 2 and then recently back to Level 4, we revisited our protocols to ensure the safety of all employees for returning to work. Together with regular temperature checking and availability of hand sanitizers and face masks, we introduced COVID managers, COVID captains and quarantine marshalls, who support infected employees in their reintegration into the business. Finally, we reconfigured our workspaces and meeting rooms to allow social distancing. Our performance and operating model both remain resilient, and we continue to deliver essential services, including electricity, airtime, data and other digital and financial transactional services to the communities despite the COVID-19 pandemic. In terms of specific highlights and despite the challenging economic environment, core headline earnings for the year ended 31st of May 2021 amounted to ZAR 788 million, of which ZAR 763 million related to continued operations and ZAR 25 million to discontinued operations. This equated to core headline earnings of just under ZAR 0.90 per share. Core headline earnings for the prior year amounted to ZAR 562 million, of which ZAR 469 million related to continued operations and ZAR 93 million to discontinued operations. This equated to ZAR 0.627 per share. As the carrying value of Blue Label's investment in Cell C was fully impaired for the year ended 31st of May 2019, the financial results of Cell C did not have any impact on Blue Label's earnings for the current or prior year. Gross profit increased by ZAR 260 million to ZAR 2.38 billion and improved margins as only the gross profit earned on PINless top-ups, prepaid electricity, ticketing and gaming are recognized as revenue. The effective growth in revenue generated equated to ZAR 66 billion for the year, an increase of 10%. The continued strong performance by the PINless top-ups channel was attributable largely to continued growth from our partnership with Capitec. The group continues to increase market share and bolster its product and services mix in order to defend and expand its positions in the market. Furthermore, in the airtime and data prepaid market, there has been a consistent adoption of convenience driven by consumers. Direct-to-consumer strategies and easy ways of transacting renders PINless, via the banks, a far better way for consumers to transact. The steady growth of PINless in these channels has proven an obvious threat to traditional off-line airtime and data products. Price also been another differentiator. The traditional off-line wholesale play is a challenging model to maintain and drive new customer acquisitions. With this in mind, our business is going through a complete digital transformation of its current wholesale model as well as a very strong focus on a direct-to-consumer business model. The RINGAS platform is the main driver allowing for this digital transformation. RINGAS is a universal voucher that allows consumers to top up any network. Using the correct technology solution, we have the ability to drive for the short to medium term a disruptive PINless wholesale strategy. We currently have 20 million consumers transacting on the RINGAS platform since its launch in only September 2020. And to date, the platform has exceeded ZAR 1 billion in revenue. Moving over to SA Distribution. The COVID-19 pandemic certainly impacted many of our merchants and the consumers despite coming out of the first Level 3 lockdown in the first half of this year. In addition, the change in consumer behavior of purchasing products through digital channels has remained, and we foresee this trend continue into the new financial year. We are extremely proud of the resilience shown by our people over this time. The business continues to live up to its purpose of enabling the fulfillment and upliftment of people in South Africa by providing a wide range of diverse, value-adding products, services and solutions, which continues to grow through ever-expanding convenient channels. The prepaid SIM market remains under pressure due to saturated market conditions and constant subscriber churn. The landscape at distribution level has also become more competitive than ever due to the oversupply of SIMS into the market by certain network operators and through certain distributors removing stock from the market to create demand and sell-through on their own SIM packs. However, we remain focused on our efforts to acquire new subscribers through our strategic partnerships as their focus and strategy surrounds direct-to-consumer activation as well at the rural landscapes within South Africa. Nevertheless, our performance for the year was positive, congruent with the increase in our distribution of SIM packs in comparison with the previous year. Moving over to our informal market. Two decades ago, we launched Blue Label to take advantage of the explosive growth in prepaid airtime. Making these products accessible together with financial inclusion remains our driving philosophy. Over the years, our growth was largely due to our financial institutions and informal market merchants. Through the improvement and growth of the customer interaction center, we have enhanced our customer value proposition, and we look forward to growing this important segment going forward. Moving on to CEC. CEC achieved profit after tax of ZAR 289 million for FY '21, a growth of 35% on the prior year. From a debt perspective, CEC has decreased its debt facilities by ZAR 306 million to ZAR 410 million. Strategically, CEC has taken the decision to exit its DSTV funding book. This will allow it to reduce its debt by a further ZAR 140 million to ZAR 150 million. Another highlight of the year was the implementation of Project Boston, which is an agreement between Cell C and CEC whereby various back-office functions relating to the operations of the Cell C postpaid base are outsourced to CEC. Prior to this, Cell C retained all credit risk on subscriber, but the bad debt risk now sits with CEC. The potential upside of this new arrangement is that with the guidance of our credit specialists from BluNova, the insights and experience of the Vodacom collections team and overall data-driven approach to the postpaid business, CEC may reduce bad debt risk and realize the benefits. Moving over to Cell C. Cell C has experienced a significant turnaround in profitability. The performance is largely driven by optimization of costs and network strategy. Earnings are up, margins are stabilizing and there's a single-minded focus on cost management. A fit-for-purpose Cell C can effectively implement its business strategy and will benefit from a revised capital restructure post-recapitalization to ensure long-term sustainability. I will deal with the update on the Cell C recap during questions. At this point, I'd like to hand you over to my brother, who will continue with the balance of our presentation. Thank you.

Thank you, Brett. Good afternoon, all. I trust you are all keeping well. Our presentation to you today will elaborate on various core companies within the Blue Label Group with the emphasis on the benefits achieved resulting from our investment in our IT infrastructure. Cigicell once again outperformed expectations, delivering a strong increase in revenue. Prepaid and third-party electricity vending continues to remain core to our operations at this stage. And through the ongoing evolution of our business model, we look at this traditional business as a stepping stone in the future to a more diversified and enhanced margin business. We continue to strive for exclusivity in our municipal contracts as this will enable us to launch an innovative model for them and simultaneously yielding them higher returns. This also encompasses our revenue protection and enhancement models on a risk-free basis for them, which assist municipalities to unearth lost and stolen revenue. The Cigicell model assumes all the risk by investing its own resources and processes and will only be remunerated when there's an upside in the revenue of the municipality, which is predetermined prior to the execution of the program based on the historic collections for the prior 12 months. Our growth strategy is embedded in the integration and optimization of the [ Vacayo ] service offerings within the Cigicell Group for sharing revenue to South African municipalities while continuing to ensure that we protect, retain and expand the existing customer base. Moving on to UniPay. UniPay is the development of a single bill payment business solution. This is an exciting new product offering, which is focused on driving meaningful growth in the digital bill payment environment. This solution will not only offer both large and small power users the ability to pay their bills online, but will also offer any consumer the ability to pay any of their postpaid bills conveniently and securely online. We continue to develop innovative solutions across multiple customer channels. VRM oversees the strategic planning, implementation and evaluation of municipal services, including data integrity and verifications, credit control and self-collections as well as immigrant registrations to ultimately integrate and optimize revenue management within the Cigicell Group. They've also established themselves as an experienced service provider for TID rollovers, which has a national completion date by end 2024. Electricity network stability is key to revenue enhancements and improvements for both the consumer and municipality. Therefore, VRM oversees and adds value to conduct the strategic planning and coordinates project execution between role players for electricity infrastructures. Moving on to Blue Label Data Solutions. Blue Label Data Solutions is a premier provider of data lead generation, supply and management services in South Africa and has been a founding member of the Direct Marketing Association and has a full WASPA affiliate accreditation. The business supplies in excess of 150,000 qualified hot leads on a monthly basis to 24 different call centers across multiple products and clients. Our major differentiation in the marketplace is our quality, contactability, reliability and compliance of our data. We also make use of various analytical companies to enhance our data whilst performing quarterly updates on our entire database. The continued strategy of Blue Label Data Solutions is to take full control of the value chain by ensuring the following: control of data sets to ensure compliance, own and manage the full chain up to the sale of the product, maintain the relationship with our clients we have had over the years and own the products that we sell. The business has been consulting with legal advisers as well as other POPIA specialists over these last couple of years to ensure that we are in a secure position now that the deadline for POPIA has arrived. Moving on to I Talk Holdings. I Talk Holdings has had a difficult year from a financial performance perspective due to the call center limitation imposed on us due to COVID. Despite this, it has been extremely successful in many ways as we have enhanced our operations and business model to ensure improved, sustainable, long-term growth. The business now has diversified from 2 major campaigns to 18 campaigns, which will limit the concentration reliance and allow for blended revenue structure going forward. As the limitations ease, we have made additional dialing seats available in order to ramp up sales volumes with our campaign partners. iTalk2U is a safe and secure web-based application that was developed during the COVID-19 pandemic where working remotely was becoming the new norm. Essentially, iTalk2U is a decentralized sales platform that allows people to make sales and earn a commission per sale whilst working remotely, essentially a work-from-home call center, the Uber of call centers. iTalk2U is aimed to be the example and market leader in South Africa by providing an employment solution, empowering the people of South Africa and creating opportunities. Their vision is to employ, educate and uplift the people of South Africa by providing a work-from-home sales solution. There is a significant corporate social responsibility element, and iTalk2U can make a real and tangible impact on thousands of people's lives. There will be training centers set up around the country, which will act as a starting point and the building blocks for those people who cannot afford their own PCs yet. This will allow the agents an opportunity to prove themselves and earn enough to buy their own hardware to take fully offsite after a few months. This will also encourage entrepreneurship in rural areas and allow people to set up many call centers. There will be a large focus on training the agents, not only training on call center and online sales, but also on budgeting techniques and the ability to watch other training videos. The system will also have an interactive rewards program in place, which allows agents the ability to purchase online products such as airtime, data and electricity through the platform. Moving on to Blue Train. Blue Train has been created to assist with the solving the country's large youth unemployment rate and is looking to employ and train over 4,000 unemployed youth over the next year, which will be utilized to grow various entities in the BLT Group at no additional cost by leveraging of government and tax incentives. We have developed a full training facility, which can accommodate the training of 2,000 people per month. Moving on to Transaction Junction. Transaction Junction has displayed remarkable resilience over the year despite the significant impact of the lockdown on retailers. Its diversification strategy is both on the innovative in-house technology platform, which leverages digital channels and opens this platform to multiple parties, allowing the company to enable disparate solutions across several retail segments. TJ's success is continuously recognized by the banking sector, resulting in their solutions being certified across the 5 dominant retail banks in the country and currently is the only payment provider to do so. With Transaction Junction's own proprietary technology layer, the company is not impacted by external supplier constraints or rand-dollar exchange rates. Its technology solutions now support the retail space and has become increasingly focused on omnichannel retail strategies with a full omnichannel payment service layer to service all their customers' digital needs. Over the past year, we have seen a merchant acquisition rate of over 100%. Leading retailers such as SPAR, TotalEnergies, Nando's, KFC, Seattle Coffee, Burger King, Food Lover's Market, Pick n Pay and other major retail brands which use services directly or indirectly to enhance their own digital portfolios and various environments. TJ now processes well over 2 billion transactions per annum and services over 50 merchant retail platforms with payment services at approximately 50,000 till locations and includes a fully certified e-commerce platform. This positions it to provide solutions in the virtual and physical retail environment via a single platform. On Ticketpro, Ticketpro is one of the disappointments of the past year, though no fault of its own, was Ticketpro. This business was severely affected by the restrictions on in-person events. Although during the year, we introduced streaming events, and 3 of our programs are currently appearing on DSTV. We have used this quiet period to rebuild the ticketing engine, creating one of the most innovative bus transport ticketing systems in the country, perhaps even in the world. While our cash flows from this division may have been impaired in the short term, the future forward transport ticketing makes good use of idle resources, and we look forward to seeing the gains from it. BluNova is the data consolidation insights and decisioning arm of Blue Label. It assists various businesses within the group by digitizing and building automated transactional businesses through our data analytics and decisioning expertise. BluNova offers services in the categories of strategy and insights, marketing and sales, credit risk decisioning and management as well as decision automation. It brings together the massive data assets into a supercomputing cloud platform, developing unique data insights and transaction opportunities. Moving on to technology. The year -- this year presented opportunities for our customer-facing platforms as well as our internal back-office technologies to prove itself fit for purpose during these unprecedented times. Blue Label is ready to embrace the fast-track digital remote working context like a few others. This has resulted in ongoing high-quality service uptime across our innovative technology businesses. Our refactored platforms are being driven through aggressive transformation programs to leverage our newly established always-on strategy. And we remain highly innovative in our approach to diversify through vertical and forward integrations of our technology across industry segments. Various initiatives have been launched, which will unlock opportunities for Blue Label to leverage off and build the gig economy. Our technology has enabled Ticketpro to launch a world-first fully flexible events platform, which will cater for any form of events, seated or unseated, physical or virtual, local or international, and which will be offered as a white-labeled technology platform. Transaction Junction offers a leading 3D secure payment gateway, processes person-to-person push payments with numerous retailers and has concluded the development of its own PCI-certified switch called Imbeko. Blue Label Connect will soon launch its [ Rubik ] platform and -- which is an online service where consumers will be able to purchase any contract from any mobile network and multiple additional consumer goods and services. Our RINGAS ubiquitous airtime product launched by TPC has reached 20 million consumers in less than a year and will become a key differentiator for the transformation of the bulk print industry through new software planned to go to market this year. All of these services will be leveraging our new technology backbone and centralized API gateway architecture. This allows us to commercialize our integrations faster and on the best available technologies. And most importantly, it enables the business model transformation, which was not previously possible. This sets us up for a decade of wins and a fruitful 2022. Moving on to our digitization strategy. Blue Label's digitization journey has progressed well over the past year, with a specific focus on future-fit platforms for our various businesses. During the past year, our businesses have developed the digital transformation road maps, which are already delivering market-ready solutions. Looking back over the past year, we continue driving digital adoption of new technology and approaches, during which we launched a number of new and innovative digital solutions to the market. Looking forward, we are planning to continue the investment in our digital platform solutions with focus on initiatives to grow our current businesses as well as innovative opportunities to generate new business. By mining and enriching our data, we are able to build insight-led business decision services, which should enable us access to that segment of the market that has been historically neglected. Thank you. I now hand you over to our Group Financial Director, Dean Suntup.

Good afternoon, ladies and gentlemen. In spite of the COVID-19 pandemic impacting many of our merchants and their consumers, our performance and operating model both remain resilient and we continue to deliver essential services, including electricity, airtime, data and other digital and financial transactional services to the communities throughout this challenging period. Across all segments, we have sought to expand the merchant base while nurturing the existing base and ensuring sustainable and improved merchant profitability. The financial highlights for the year ended to 31 May 2020 were as follows. Revenue of ZAR 18.8 billion. An inclusion of the gross amount generated on PINless top-ups, prepaid electricity, ticketing and gaming, the effective increase equated to 10% from ZAR 59.9 billion to ZAR 66 billion. Gross profit increased by 12% to ZAR 2.38 billion, increase in gross profit margins from 10.05% to 12.66%, EBITDA of ZAR 1.36 billion. Net cash generated from operating activities of ZAR 1.5 billion. Interest-bearing borrowings have been reduced to ZAR 1.7 billion from ZAR 2.3 billion in the prior year. And core headline earnings per share increased by 16% from ZAR 0.7054 per share to ZAR 0.8150 per share, on exclusion of the nonrecurring income of ZAR 47 million in the current year and extraneous cost of ZAR 163 million in the prior year. Core headline earnings for the year ended 31st of May 2021 amounted to ZAR 788 million, equating to core headline earnings of ZAR 0.8965 per share, of which ZAR 763 million related to continuing operations and ZAR 25 million to discontinued operations. Core headline earnings for the prior year amounted to ZAR 562 million, equating to ZAR 0.6271 per share, of which ZAR 469 million related to continuing operations and ZAR 93 million to discontinued operations. On exclusion of the nonrecurring income of ZAR 47 million in the current year and extraneous costs of ZAR 163 million in the prior year, core headline earnings from continued operation increased by ZAR 84 million from ZAR 632 million to ZAR 716 million. Accordingly, core headline earnings per share from continued operations increased by 16% from ZAR 0.7054 per share in the prior year to ZAR 0.8150 per share. On exclusion of nonrecurring income and extraneous costs in both the current and prior year, earnings per share and headline earnings per share from continued operations increased by 15% to ZAR 0.7731 per share and 17% to ZAR 0.7801 per share, respectively. The financial results of WiConnect in the current year of ZAR 25 million as well as those of Blue Label Mobile, the handset division of 3G Mobile and WiConnect, totaling ZAR 93 million in the prior year, are disclosed in core headline earnings from discontinued operations and are not included in continuing operations, revenue, gross profit, EBITDA and net profit after taxation. Revenue generated by the continuing operations within the group declined by 11% to ZAR 18.8 billion. As only the gross profit earned on PINless top-ups, prepaid electricity, ticketing and gaming are recognized as revenue, on imputing the gross revenue generated thereon, the effective growth in revenue equated to 10% from ZAR 59.9 billion to ZAR 66 billion. The group continues to increase market share and bolster its products and service mix to defend and grow its position in the market. Gross revenue generated on PINless top-ups increased by ZAR 4.2 billion, 28%, from ZAR 15 billion to ZAR 19.2 billion. And gross gaming revenue increased by ZAR 421 million, 45%, from ZAR 934 million to ZAR 1.35 billion. The group's ticketing revenue declined by ZAR 239 million from the prior year as a result of COVID-19 pandemic negatively impacting thereon. Net commissions earned on the distribution of prepaid electricity amounted to ZAR 279 million. Revenue generated on behalf of the utilities increased by 18% from ZAR 22.7 billion to ZAR 26.7 billion. Gross profit increased by ZAR 259 million, 12%, to ZAR 2.4 billion, congruent with an increase in margins from 10.05% to 12.66%. On exclusion of the nonrecurring income of ZAR 152 million in the current year and extraneous costs of ZAR 388 million in the prior year, EBITDA increased by ZAR 15 million from ZAR 1.21 billion to ZAR 1.23 billion. The anticipated increase in overheads, which included costs attributable to additional headcount and expenditure incurred in order to enhance the IT infrastructure, escalate the quantum of distribution channels, enhanced capacity in the customer interaction center and implement VAS and financial service strategies contributed to the limited increase in EBITDA. The Blue Label Group generated positive cash flows from its trading operations for the year ended 31st of May 2021. Moving to the balance sheet. Total assets increased by ZAR 1.1 billion to ZAR 11.5 billion, of which noncurrent assets accounted for ZAR 0.5 billion and current assets, ZAR 4.6 billion. Noncurrent assets included an increase in intangible assets and goodwill of ZAR 518 million, advances to customers of ZAR 121 million and other receivables of ZAR 22 million. These increases were offset by a decrease in investments in the loans to associates and joint ventures of ZAR 135 million, financial assets at fair value through profit and loss of ZAR 29.5 million, capital expenditure net of depreciation of ZAR 4.5 million and right-of-use assets of ZAR 29 million. Of the net increase in intangible assets and goodwill of ZAR 518 million, additions to intangible assets amounted to ZAR 693 million, offset by amortization of ZAR 170 million and disposals of ZAR 4 million. Of the total additions to intangible assets, ZAR 545 million relates to the cost borne by the group in terms of the subscription income-sharing arrangement and ZAR 111 million to subscriber acquisition costs. The net decrease of ZAR 135 million in investments in and loans to associates and joint ventures comprise the group's net share of profits totaling ZAR 3 million, acquisition of an associate of ZAR 5.5 million, net loan increases of ZAR 7.4 million, offset by the disposal of ZAR 128 million, primarily relating to Blue Label Mexico, its share of the movement in foreign currency translation reserves amounting to ZAR 8.8 million and dividends received of ZAR 14 million. The material net increase in current assets included increases in inventory of ZAR 389 million, cash and cash equivalents of ZAR 402 million, offset by a decrease in trade and other receivables of ZAR 178 million. The stock turn from continuing operations equated to 22 days compared to 11 days for the financial year ended 31st of May 2020. The debtors collection period from continuing operations increased to 59 days compared to 57 days for the financial year ended 31st of May 2020. Net profit attributable to equity holders amounted to ZAR 831 million, contributing to the accumulated capital and reserves of ZAR 3.2 billion. Current liabilities increased by ZAR 320 million, comprising an increase in trade and other payables of ZAR 1.4 billion. This increase was offset by decreases in financial liabilities at fair value of ZAR 366 million, financial guarantee contracts of ZAR 95 million and borrowings of ZAR 612 million. Average credit terms from continuing operations equating to 116 days compared to 94 days for the financial year ended 31st of May 2021. The decrease in financial liabilities at fair value was primarily due to the liquidity support payment of ZAR 331 million, which is at USD 20 million to SPV2, and a foreign exchange movement of [ ZAR 19 million ] thereon. The decrease in financial guarantee contracts of ZAR 95 million was largely due to a settlement of a corporate guarantee of ZAR 54 million on behalf of Oxigen Services India, a reduction in the group's obligation relating thereto amounting to ZAR 25 million and foreign exchange movements of ZAR 9 million thereon. Moving on to the cash flow statement. Cash generated from trading operations totaled ZAR 1.7 billion, working capital movement comprised an increase in trade payables of ZAR 765 million, an increase in advances to customers of ZAR 150 million, and an increase in inventory of ZAR 391 million, offset by a decrease in trade receivables of ZAR 172 million. After incurring net finance cost and taxation, net cash generated from operating activities amounted to ZAR 1.5 billion. Net cash flow utilized in investing activities amounted to ZAR 246 million, primarily attributable to the liquidity support payment of ZAR 331 million to SPV2, the purchase of intangible assets of ZAR 37 million, capital expenditure of ZAR 71 million and net loans granted of ZAR 20 million. This was offset by cash inflows from proceeds on the disposal of Blue Label Mexico of ZAR 191 million, proceeds on the disposal of capital assets of ZAR 8 million and dividends received from a joint venture of ZAR 14 million. Cash flows utilized in financing activities amounted to ZAR 820 million, of which ZAR 613 million related to the net decrease in borrowings, ZAR 57 million to dividend payments to noncontrolling interest, ZAR 50 million to lease payments, ZAR 54 million to the settlement of the financial guarantee and ZAR 44 million to treasury shares acquired. Cash and cash equivalent accumulated to ZAR 2.4 billion as of the 31st of May 2021. We are thankful to the Board of Directors for their continued support and commitment to the group. Thank you. The floor is now open for questions.

[Operator Instructions] The first question comes from [ Nick Kreher ] from [ Signal AM ].

Sorry about that. Can you give us an update on what's happening with Cell C? Number one. And number two, can you provide me with the number -- the change in working capital that hit the income -- the cash flow statement, please?

Sure. Dean?

Yes. So Nick, if we can start with the change in working capital, what you would have seen is that we had an increase in inventory -- I'm sorry, Nick. We had an increase in inventory of ZAR 390 million, that particularly related to that we had more stock of Cell C. With regards to trade and other receivables, we had a decline of ZAR 172 million. So a large portion of our book was collected during that period. With regards to trade and other payables, you'd see that there is an increase of ZAR 771 million. That has a direct link to the CEC book that the trade payables of the amounts that are owing by Cell C -- owing to Cell C and Vodacom. Yes, so I think our working capital structure, we -- it hasn't changed significantly. And yes, over to you, Brett.

Perfect. Thank you, Dean. I'll break the Cell C question into 2. The first one on Cell C, how it's doing itself, and the second one, I guess, I'll preempt the recap question. So over to you, Zaf, just first on Cell C itself.

[Audio Gap] was up by 19%.

Sorry, Zaf. Start again.

Hi. Can you hear me now?

Yes.

So from a sales and operational perspective, we've been focusing on our turnaround, which we've shared to the market. That has really been around operational efficiency, growing profitably from our customer base and making sure the recap is done. Brett will talk to the recap. From a revenue perspective, although our revenue was slightly down, we increased our ARPU by -- a year-on-year increase of about 19%. Our operating costs have come down by about 10%. And we continue to extract operational efficiencies out of the business. The reason for the massive turnaround in our profitability is made up of 2 things. Number one is significant impairments in the comparative period, and number two, it's better performance in the last 12 months. Thank you. Brett?

Thank you, Zaf. On part of -- the second part of the question, which is on the recap. We're pleased to tell you that we have come to terms with the banks and that we will be releasing information very, very shortly to the market. Any other questions on the line?

Apologies. I just want to check with Nick, if he has any questions.

Yes. Sorry, I think you guys in your room broke away as you're going through the working capital numbers. Would you mind repeating them?

Sure. We had an increase in inventory of ZAR 391 million. This related specifically to us holding a larger portion of Cell C stock. If we look at our trade and other -- the trade and other receivables, it declined by ZAR 172 million. This resulted in us collecting more of our book and getting a more effective book. With regards to trade and other payables, you would see that there was an increase of ZAR 771 million. This portion particularly related to CEC with regards to amounts owing to Vodacom and Cell C as part of the new restructure within CEC. But overall, if you can see, we generated -- net cash generated from operating activities of ZAR 1.5 billion in the current year, similar to prior year of ZAR 1.3 billion. As we've always said, the business is a very cash-generative business. And I think now with our stated strategy of going back to basics, our cash generation is significant.

Thank you, Dean. Any other questions on the line?

We have no further questions on the audio line. Can we move over to the webcast?

Yes. Thank you. We'll come back to the lines at the end again, just to check. So just moving over to the questions. First question, a couple of questions. We'll do them all from Philip Short. First question, media release this week said the facility with Investec and RMB as part of the recap has been finalized. Can you please comment on this as well as give a high-level road map on the way forward? I did answer it briefly to Nick. I'll answer it again. We're proud to say that we have come to terms with the banks and that we will be announcing something as I said very shortly. No more we can say on that at this specific time, but we will release something very shortly. The second question from Phil is, can you please talk through CEC's ROE profile and current cash flow run rate? Over to you, Dean.