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

Good afternoon, ladies and gentlemen. The year ended 31st of May 2026 was a significant year for Blu Label. Against a challenging consumer backdrop, we remain focused on disciplined execution and continue to make progress in building a simpler, more focused group. Our core platform continued to generate cash, supported by disciplined cost management, improved liquidity and a continued focus on the quality of earnings and returns on invested capital. The most significant milestone during the year was the successful restructuring and subsequent listing of Cell C. This was a transformational transaction for the group. It significantly derisked our exposure to Cell C, reduced complexity and improved the visibility of future earnings. At the same time, our retained shareholdings ensured that Blu Label continues to participate in the future value creation of Cell C. Importantly, the listing also provides Cell C with a transparent market valuation, strengthened governance and independent access to capital. As a result, Blu Label's relationship with Cell C has fundamentally changed. We are now positioned as a strategic shareholder focused on supporting long-term value creation rather than providing ongoing operational and financial support. During the year, the Board also resumed dividend distributions, declaring and paying an interim dividend of ZAR 0.435 (sic) [ ZAR 0.4356 ] per share. A final dividend of ZAR 0.10 per share has subsequently been declared, bringing the total dividend for the year to ZAR 0.5356 per share. In addition to the dividend, the Board has also decided to return further capital to shareholders through a share repurchase program. This will be implemented under the general authority granted by shareholders and will remain subject to prevailing market conditions. The Board has also adopted a formal dividend policy, which will be reviewed annually. Under this policy, we will target an annual distribution of between 30% and 50% of core headline earnings generated by our underlying businesses, excluding Blu Label's share of Cell C earnings. These distributions may take the form of a cash dividend, distributions in specie or share repurchases or an appropriate mix thereof as determined by the Board at the time. Cell C will be treated separately and is therefore additional to this distribution target. Of the cash dividends received from Cell C, we intend to return between 50% and 70% to Blu Label shareholders, either through a cash dividend or where appropriate, through a distribution of Cell C shares of equivalent value. The balance will be retained and applied to reducing the group's debt. This will lower finance costs, strengthen the balance sheet and over time, increase the cash available for future distributions to shareholders. I will now take you through the key highlights of our normalized financial performance before concluding with an overview of the balance sheet and our cash position. The group's financial results for the year ended 31st of May 2026 were materially impacted by a series of strategic transactions. These included the acquisition of control of Cell C, the implementation of pre-listing restructuring initiatives and the subsequent partial disposal pursuant to the listing. As a result, Cell C transitioned from being equity accounted as an associate to consolidated as a subsidiary and thereafter reverted to associate status. These transactions introduced the level of accounting complexity that created volatility in the underlying performance of the group. Although the related accounting treatments are required, they are not indicative of Blu Label's core operational performance. Accordingly, to provide a clearer understanding of the group's core performance, I will focus primarily on our normalized financial information, which excludes the financial results of Cell C, the contribution from Comm Equipment Company for the 6-month period to 30 November 2025, impairments and loss on disposals recognized during the year and all extraneous items arising from the Cell C restructuring transaction and subsequent listing. This approach provides a more relevant basis from which to evaluate the group's sustainable earnings profile and ongoing performance. Normalized financial performance. On a normalized basis for the year ended 31st of May 2026, the financial highlights were as follows: revenue of ZAR 9.4 billion as only the gross profit earned on PINless top-ups, prepaid electricity, ticketing and universal vouchers are recognized as revenue, the imputed gross revenue generated from these sources amounted to ZAR 99.9 billion. Gross income of ZAR 2.555 billion, EBITDA of ZAR 923 million, net profit after tax of ZAR 677 million, headline and core headline earnings of ZAR 681 million, core headline earnings of ZAR 0.7533 per share, a final dividend of ZAR 0.10 per share, bringing the total dividend for the year to ZAR 0.5356 per share and the commencement of a share repurchase program. Following the successful restructuring of Cell C and the relinquishment of control, the group will equity account its 49.53% interest in Cell C going forward. This equity accounted contribution will include CEC's earnings following the disposal of CEC to Cell C in November 2025 and its integration into the Cell C Group. Accordingly, the group's normalized earnings will incorporate its proportionate share of Cell C's annual profitability, which will be added to the core headline earnings base of ZAR 681 million. This is expected to provide a more comprehensive view of the group's total earnings. Normalized group revenue. Group revenue, excluding Cell C's consolidated results for the 3 months ended 30 November 2025 and CEC's results for the full 6-month period amounted to ZAR 9.4 billion. As only the gross profit earned on PINless top-ups, prepaid electricity, ticketing and universal vouchers are recognized as revenue, on imputing this gross revenue generated from these sources, the effective growth in revenue equated to ZAR 6.7 billion, 7%, resulting in total revenue of ZAR 99.9 billion compared to the prior year of ZAR 93.2 billion. Gross revenue generated on PINless top-ups increased by ZAR 3.3 billion from ZAR 21.8 billion to ZAR 25.1 billion. Electricity revenue generated on behalf of the utilities increased by ZAR 1.9 billion, 4% from ZAR 44.2 billion to ZAR 46.2 billion. Commission earnings primarily calculated based on kilowatt hour consumption declined by ZAR 40 million, 13% from ZAR 319 million to ZAR 279 million. The decline in commissions was driven by margin compression despite overall growth in gross electricity revenue, supported by NERSA approved tariff adjustments and inflationary increase linked to kilowatt hour usage. Gross ticketing revenue declined by ZAR 174 million, 13%, resulting in a decline in commissions earned of ZAR 11 million. The decline was primarily attributable to lower sale volumes in music festivals and concerts, which have historically generated lower margins, offset by a growth in commuter bus channel revenues. Gross revenue from universal vouchers increased by ZAR 3.4 billion, 22% from ZAR 15.3 billion to ZAR 18.7 billion, underpinned by continued expansion of BluVoucher sales through financial institution channels. Normalized EBITDA amounted to ZAR 923 million for the year, reflecting the continued resilience of the group's core distribution and payment platforms. Headline earnings and core headline earnings both amounted to ZAR 681 million, and core headline earnings per share amounted to ZAR 0.7533 per share. The reported financial results. Blu's reported financial results included Cell C's equity accounted contribution for the 3 months ended 31st of August 2025, its consolidated results for the 3 months ended 30th of November 2025 and Comm Equipment's results for the full 6-month period as the disposal became effective only at the end of November 2025. Included in headline earnings adjusted for the year ended 31st of May is a net loss of ZAR 5.6 billion, which is added back in arriving at headline earnings. This primarily comprised a net loss of ZAR 5.19 billion relating to the group's investment in Cell C. Turning to the balance sheet. The group's balance sheet has been materially simplified following the successful implementation of the Cell C pre-listing restructuring and the subsequent listing with much of its historical complexities associated with Cell C's funding instruments and restructuring-related transaction now unwound. Key structural changes included debt-to-equity conversion, TPC's outstanding debt claims against Cell C were waived as these amounts were not supported by pre-listing valuations. There was a disposal of CEC. TPC disposed of its 100% shareholding in CEC to Cell C in exchange for additional Cell C shares. There was an airtime asset transfer, whereby TPC returned airtime to Cell C in exchange for newly issued equity. And finally, an SPV restructure where the special purpose vehicles that held equity interest in Cell C were restructured, further simplifying the group's financial structure. In this regard, key balance sheet movements include a reduction in Cell C airtime inventory held by the group of ZAR 3.8 billion. There was a reduction in loans to Cell C of ZAR 3.2 billion, representing The Prepaid Company's and Comm Equipment Company's outstanding debt claims against Cell C. The loss of control of the Cell C Group, including CEC, which resulted in the full derecognition of CEC's assets and liabilities. This included a reduction in intangible assets of ZAR 955 million, goodwill of ZAR 335 million, trade and other receivables of ZAR 448 million, together with a decrease in advances to customers of ZAR 1.6 billion. Interest-bearing borrowings declined by ZAR 1.7 billion following the derecognition of the CEC facility with African Bank. Financial assets at fair value through profit and loss of ZAR 372 million were reallocated to the investment in Cell C following the completion of TPC's acquisition of SPV1 and Gramercy's shareholding in Cell C. Investments in associates and joint ventures increased from ZAR 1.7 billion to ZAR 6.3 billion, driven primarily by Blu Label's investment in Cell C. Of this amount, ZAR 1.4 billion, comprising a 15.95% interest in Cell C sold to Sisonke Growth Partners has been reclassified as an asset held for sale, leaving a balance of ZAR 4.8 billion recognized within the investments in associates and joint ventures. Cash and cash equivalents increased by ZAR 143 million. This was primarily driven by the proceeds of ZAR 2.7 billion received from the sell-down of a 30% shareholding in Cell C based on an equity valuation of ZAR 9 billion. The proceeds have been applied towards the settlement of certain interest-bearing borrowings and other debt obligations and to the payment of the interim dividend of Blu's shareholders amounting to ZAR 398 million. Interest-bearing borrowings declined by ZAR 783 million, primarily due to the derecognition of the ZAR 1.7 billion African Bank facility and the settlement of the current SPV5, Gramercy and Pref A liabilities amounting to ZAR 668 million. These reductions were offset by the ZAR 1.5 billion bridging facility raised in September 2025. As a result, the group is positioned with a simpler and more transparent balance sheet and enhanced financial flexibility. Moving to the cash flow statement. The cash flow statement includes Cell C's consolidated results for the 3 months ended 30th of November 2025. Cash generation remains a central focus for the group, and Blu Label continues to demonstrate strong cash conversion once restructuring-related impacts are excluded. Normalized EBITDA translated into operating cash flows, supported by disciplined working capital management and capital expenditure aligned with the group's asset-light business model. Net cash generated from operating activities on a normalized basis will amount to approximately ZAR 60 million per month. Thank you. I will now hand over to Brett, who will take you through the operational performance and strategic outlook in more detail.

Thank you, Dean. The numbers show a resilient underlying performance in a difficult market. They also show the progress we have made in simplifying Blu Label. We are more focused. Our balance sheet is cleaner and our core platforms continue to generate cash. From a high level, just to go through our performance, this is a snapshot. Our revenue normalized ZAR 9.4 billion. Our gross income reached ZAR 2.5 billion and our EBITDA of ZAR 923 million. Our normalized net profit after tax was ZAR 677 million. Headline and core headline earnings were ZAR 681 million or ZAR 0.75 (sic) [ ZAR 0.7533 ] per share. The scale of the platform is also important. Effective gross revenue increased by 7% from ZAR 93 billion to just under ZAR 100 billion. That is a solid result against a challenging consumer backdrop. Dean has taken you through the detail. I will focus on what is changing across the group and where we see the next phase of value creation. It hasn't been an easy consumer out there. We also had problems with xenophobia and some underlying things that crept into the middle of the year. The operating environment became noticeably harder from March. We saw pressure across prepaid, informal and essential service channels. It was visible in trade activity. It was also visible in consumer volumes. South African unemployment increased to 32% in the first quarter of 2026. Household debt service costs remained high at 8.4% of disposable income. The combination placed real pressure on affordability and transaction frequency, but our scale helped. So did our procurement strength and the breadth of our platform. Those advantages allowed us to absorb some of the pressure, the consumer pressure across the prepaid ecosystem. The pressure was evident across the wider sector. Public results showed similar softness in prepaid and value-sensitive segments. MTN South Africa reported service revenue growth of only 0.7% in the first quarter of '26 despite strong growth in data traffic. Vodacom had also experienced prepaid softness before returning to growth following pricing and proposition changing. Telkom performed more strongly once again. So this was not a uniform decline across the sector. It was a market shaped by high price sensitivity, changing buying patterns and different operator strategies. In that environment, our reach, procurement capability and product breadth remain important from a competitive advantage. We have been simplifying our group and sharpening our focus. The most important change this year was structural. We simplified the group. Cell C now operates independently, as you all know, with its listing on the 27th of November 2025. That has reduced complexity and improved transparency. It also allows us to focus more sharply on our core cash-generative platforms. At the same time, our newer businesses are moving from development into execution. The result is a cleaner group with strong cash generation and clear growth optionality. Our progress for the year, our focus and our cash. We made progress across each part of the portfolio. The core business remained resilient despite the sector headwinds. Blu Label Distribution delivered a standout year. BluAdvance expanded across more products and channels. BluNova became more central to how we manage risk, improve margins and drive growth. Cigicell and BluEnergy advanced our municipal revenue assurance and energy opportunities, and Cell C became an independently funded and separately listed business. These are meaningful steps in the last year. They leave Blu Label better positioned for the next phase. Our integrated cash-generative ecosystem. We now think about the group through 4 connected platforms. First, distribution and payments. This remains a high-volume cash engine. Our second, data intelligence. This improves margin, reduces risk and creates new commercial opportunities. Our third, embedded financial and digital services. These platforms use our data and distribution reach to scale. And fourth, infrastructure and energy. This gives us exposure to long-term structural demand. Each platform can stand on its own. Together, they are stronger. They share customers, they share data, distribution and capability. This is how the ecosystem compounds value. Our distribution and payments were our core earnings engine. Distribution and payments remain the foundation of Blu Label. Blu Label Distribution had an exceptional year. The wider platform also remained resilient despite industry pressure. Product mix continues to matter. We operate across airtime, data, electricity, vouchers, ticketing, devices and related services. That breadth gives us scale and resilience. Robtronics adds another growth avenue in handsets and hardware. Our focus is clear: protect the core, improve the mix and grow through channels where we have an advantage. Data is now a commercial asset. Data has moved well beyond being an internal support function. It is now a commercial asset for the group. It helps us select risk more accurately. It improves how we target customers and it supports better margins and stronger retention. This is a practical capability. It is already improving decisions across the business. Turning data into margin retention and growth. BluNova is at the center of that capability. It supports credit scoring and risk management. It helps prevent fraud and retain customers. It also improves lead generation and campaign performance. We are already seeing value across Cell C, BluAdvance and Distribution. Over time, data will become a horizontal growth lever across the group. That means better decisions, lower risk and more value from every customer relationship. Our BluAdvance product platform. BluAdvance continues to perform well in a difficult market. It addresses a real consumer needs through small essential self-service advances. The platform includes electricity advance, airtime advance and voucher-based solutions. Its integration with distribution gives it reach, data and margin advantages. The consumer base is growing, so is the range of channels and products. The opportunity now is to scale carefully. We will remain disciplined on credit quality, customer outcomes and returns. Treasury and procurement, margin discipline in a low-growth market. Treasury and procurement remain important strategic enablers for this group. Our improved cash position strengthens our negotiating position. It supports better supply and network terms. It also helps us reduce financing costs. The close integration with distribution gives us additional reach and margin benefits. This capability becomes even more important in a low-growth market. When volumes are under pressure, procurement discipline helps us protect margins. Strong cash management also gives us greater flexibility and allows us to respond quickly to opportunities. This is an area where our scale creates a real advantage. That gives you a sense of our core platforms and the capabilities that connect them. I will now hand you over to Mark. He will take you through Cigicell and BluEnergy, where we are seeing real progress and significant opportunities to scale.

Thank you, Brett, and welcome, everybody. Let me take you through 2 areas of the business where we are seeing some really interesting progress and importantly, where we're seeing significant opportunities to scale both Cigicell and BluEnergy. I'll start with Cigicell and then move through the progress we are making with Cigicell across municipal revenue assurance and our large power user projects together with the balance of the BluEnergy offering. Let me now turn to Cigicell because this is an area where we are seeing a number of the group's capabilities come together in a very practical way. The opportunity here is actually quite simple. For municipalities, the challenge is about making sure that they buy correctly, bill correctly, know their customers and collect properly. That is the ecosystem we are building through Cigicell. And importantly, we are moving beyond the traditional prepaid electricity business into a much broader municipal revenue assurance program. We are working with municipalities across a number of different interventions, including smart metering, revenue assurance, credit control, data cleansing and verification, meter audits, incident management and large power user programs. The common thread across all of these is that we're helping municipalities improve the quality of billing and ultimately improve their revenue collection. The opportunity is significant, but we also recognize that these are complex projects involving multiple stakeholders and in many cases, municipal processes and procurement. So far, our focus has been proving the model, demonstrating tangible outcomes and then scaling it from there. Against this backdrop, let me move to BluEnergy, where we see a very significant opportunity to participate in the changing South African energy market, particularly with the municipal environment. Our position is complementary to Eskom's IPP program and municipal supply, but gives us a differentiated route to market through our existing municipal relationships and capabilities. At its simplest, BluEnergy brings together power aggregation, trading, wheeling and embedded generation. We are looking at multiple verticals rather than relying on one model. That includes trading power from independent power producers, wheeling that power through our LPU network of multiple offtakers and developing generation directly at nodes on the municipal grid. We are also seeing an opportunity around batteries, both as part of a renewable generation solution and as a stand-alone opportunity. The important point is that these are not theoretical opportunities. We are building this around contracted offtake, which gives us greater earnings visibility and limits our volume risk. And we have a neutral advantage here because we can leverage capabilities that already exist within Blu Label, including payments, billing, onboarding, risk management and our relationships across municipal environments. If you look at the South African electricity market, the scale of opportunity becomes clear. We estimate that around 65% of the South African electricity consumption is driven by commercial and industrial customers with close to 40% of that demand sitting within the municipal grid. That creates a very interesting market opportunity for us. Our approach is, therefore, deliberately diversified. Trading allows us to participate in the buying and selling of power. Wheeling allows us to use our LPU network to move power from generation sites to multiple offtakers. Our nodal generation model is where we physically generate power within the municipal grid under contracted PPAs. And within the nodal generation, we have both rooftop and ground-mounted projects. Rooftops can be brought online more quickly while ground-mounted projects are larger and have longer development time lines. And then we have batteries, which can either be paired with these generation assets or operate as a stand-alone proposition. The battery opportunity is particularly interesting because it allows us to shift when electricity is supplied. For example, we can charge using solar generation and discharge during higher value peak periods. So rather than thinking about Blu Energy as simply a solar generation business, we see it as a broader energy platform spanning trading, wheeling, generation and storage. Let me give you a more tangible update on our nodal status. We currently have a 400-megawatt Stage 1 opportunity, which is the first 1- to 3-year opportunity for the business. Within that, we have 180 megawatts named portfolio across 7 individual projects with the projects progressing through different stages of development. The first 28 megawatts is rooftop generation and is ready to execute with construction targeted for the fourth quarter of 2026 and the first quarter of 2027. We then have 82 megawatts of committed ground-mounted projects, which are moving through execution, followed by another 70 megawatts of near-term ground-mounted pipeline. Beyond those named projects, we have a further 220 megawatts in the future pipeline currently at targeting and origination stage. So an important message here is that we have moved from discussing an opportunity to actually building a portfolio with contracted PPAs, secured sites and grid connection and projects progressing through feasibility, permitting and execution. And we are continuing to build the pipeline beyond that initial 400-megawatt opportunity. We have also put the financing framework into place for these projects with the intention of funding a significant majority of these project costs through project finance, depending on the individual project. So we are being disciplined about capital deployment while building sizable energy platforms. On the nodal portfolio, this gives you a little bit more detail on the composition of that portfolio. The 180 megawatts named portfolio comprises of 7 projects across 3 phases. Phase 1 is a 28-megawatt rooftop portfolio that projects -- the 2 projects of 9 megawatts and 19 megawatts. These are the projects that are furthest advanced and are therefore the first to come through. Phase 2 is 80 megawatts of ground-mounted generation comprising of 3 projects. And then Phase 3 adds another 70 megawatts across 2 further ground-mounted projects. What is important is these are not simply development sites on a map. We have contracted PPAs, site secured and grid connections secured and the projects are moving through the remaining feasibility, permitting and development processes. That gives us a much greater degree of visibility than you would have with conventional early-stage development pipeline. And importantly, we are continuing to build beyond the named 180-megawatt portfolio. So we see this as the beginning of a much larger opportunity rather than the end state of the business. Let's circle back to Cigicell and talk about some of the tangible progress we have made there. The smart metering opportunity is particularly important because it gives municipalities better visibility over consumption, improves billing accuracy and ultimately supports better revenue collection. To date, we have deployed more than 50,000 meters. We are now moving into a new phase of approximately 10,000 to 15,000 additional meters with that program commencing imminently. The economies of these projects are attractive because the revenue is contracted over a 3-year period with gross profit weighing towards the first year. We are also seeing tangible evidence that these interventions work. Across our deployments, we have seen approximately a 10% improvement in revenue following the NERSA tariff increases. That is important because we are not asking municipalities to take our word for the opportunity, we are demonstrating measurable improvements in the underlying revenue base, and we are also making steady progress on non-treasury funded projects. The constraint there remains municipal funding availability, particularly for smart metering deployments, but the order pipeline is increasing. So the opportunity expanding beyond the treasury funded programs as municipalities are increasingly recognizing the need to improve revenue collections and billing integrity. On the revenue assurance program, the broader revenue assurance opportunities where I think Cigicell's proposition becomes particularly interesting. We are working across credit control, data cleansing and verification, meter audits, installations, incident management and vetting, and we are seeing tangible progress across a growing number of projects. On a credit control interventions, for example, we assisted municipalities with cash collections in excess of ZAR 450 million during the past financial year. That demonstrates the scale of the problem municipalities are dealing with, but also the opportunities for us that help address it. We have also seen particularly strong results in prepaid water. In some instances, municipalities have seen revenue improvements of as much as 93% following the deployment of smart prepaid water meters. We're also very focused on the social and economic impact of these projects. Where we operate, we use local labor, provide training and skills transfer into the communities in which we are active. And on the indigent registration, we have already registered tens of thousands of indigent customers. This is important because it helps municipalities establish credible beneficiary registers, improves equitable share optimization and reduces fraud. There are millions of more customers which still need to be brought to these systems, which illustrate the scale of the long-term opportunity. So what we are trying to demonstrate here is very simple. We're moving from theory to execution, and we are measuring the outcomes. And finally, I want to touch on our large power users or LPU projects because these demonstrate both the complexity of what we're doing and the potential scale of the opportunity. These are large and complicated municipal projects, and they do take time to move through the various stages, but we have already made some good progress. In Tshwane alone, the proof-of-concept phase is complete. We started with a ring-fenced group of around 300 customers and identified approximately ZAR 380 million of revenue leakage. Importantly, based on the customers impacted by the intervention, we have identified potential revenue improvements of around 30%. In Ekurhuleni, the pilot phase has commenced covering approximately 2,250 customers. At this stage, we estimate an upside of improvement of about ZAR 80 million with early-stage revenue improvements of around 18% following the interventions. We have signed several other municipalities and are currently trying to conclude and finalize their respective SLAs in order for the projects to move into initiation phase. We estimate billions of rands of billing and collection shortfalls across the targeted areas of operation. So while these projects are complex and take time to execute, the scale of the underlying opportunity is substantial. And importantly, we are now seeing progression from the proof of concept to pilot to execution. This is really the story across Cigicell. We have a number of different interventions we have demonstrated that the model works, and we are increasingly moving into larger scale projects where the financial impact for municipalities and therefore, the opportunity for Cigicell becomes increasingly more meaningful. So taken together, Cigicell and BluEnergy gives us exposure to 2 very significant structural opportunities in the municipal market, improving the way electricity is bought, generated and billed and collected, while at the same time, helping municipalities improve the sustainability of their revenue base. So to conclude, what I hope we've demonstrated is that both BluEnergy and Cigicell are moving from being opportunities in development to businesses where they are seeing increasingly tangible execution and commercial transaction. Within BluEnergy, we have a growing contractual pipeline across generation, trading, wheeling and storage. And with Cigicell, we are increasingly demonstrating the ability to help municipalities improve billing, collections and revenue assurance with measurable outcomes already being achieved. There's still a lot of work to do, particularly given the complexity of operating in the municipal environment, but we are making good progress and remain very excited about the opportunities ahead. Thank you very much, everyone. I'll hand you now back to Brett.

Thank you, Mark. Let me close with Cell C, our approach to capital allocation and the outlook for the year ahead. Cell C, an independent platform positioned for growth. Cell C's full year performance reflects the completion of its turnaround and the beginning of the next phase of its growth journey. Revenue reached ZAR 12.6 billion and service revenue of ZAR 11.6 billion. The business generated free cash flow of ZAR 1.56 billion (sic) [ ZAR 1.056 billion ], supported by a disciplined and capital-efficient operating model. Cell C ended the year with 8.8 million subscribers, excluding MVNO HLR base. That represents 1.3 million subscribers and added during the year. It continues to lead South Africa's MVNO market with 5.7 million MVNO HLR subscribers on its platform. Cell C is now stronger, simpler and more agile. Its capital-efficient partnership-led model positions the business to scale and capture the opportunities ahead. Cell C shareholding disciplined and value-led optionality. Blu Label remains a meaningful shareholder of Cell C. We remain aligned with its long-term value creation. Over time, we may reduce our holding to a more strategic position. Any reduction will be responsible, staged and sensitive to value. It will also take account of market conditions, liquidity, B-BBEE requirements and the necessary approvals. Improving liquidity in Cell C is important for all stakeholders. We, therefore, intend to retain flexibility and act in the best interest of Blu Label and its shareholders. From a capital allocation, disciplined, flexible and value-led, our capital allocation priorities are straightforward. First, support the core cash-generative platforms. Second, maintain balance sheet flexibility. Third, fund high-conviction growth opportunities where the returns are clear. And fourth, return surplus capital where that is value-accretive. From our dividend and share purchase -- repurchase program, reflecting the group's strong financial performance and confidence in its future cash-generating capacity, the Board has declared a final dividend of ZAR 0.10 per share, bringing the total dividend for 2026 financial year to just under ZAR 0.54 per share. In addition, on the 25th of August, the Board approved a share repurchase program under the general authority granted by shareholders at the last AGM. Repurchases will be undertaken subject to market conditions and the relevant regulatory requirements for as long as the Board considers them to be value accretive to shareholders. The program provides Blu Label with additional flexibility to allocate capital efficiently and, where appropriate, acquire shares at a level that the Board believes will deliver incremental value to shareholders over the longer term. The principle is simple. We will remain disciplined and allocate capital where it can create the greatest value. Our outlook, disciplined execution in a challenging environment. The consumer and trade environment remains difficult. We do not expect affordability pressures to disappear quickly, but Blu Label enters a new financial year in a stronger position, a group that is more focused, a group that is more liquid and the core platforms remain cash generative. BluAdvance, BluNova, Robtronics, Cigicell and BluEnergy provide clear growth optionality. Our priorities for 2027 are cash generation, liquidity and execution. We will protect margins, manage costs and working capital tightly and remain disciplined in how we deploy capital. We have strong platforms. We have a simpler structure, and we have meaningful opportunities in front of us. Our job now is to execute. Board transition. Before we close, I want to recognize an important Board transition. To the legendary Larry Nestadt, our Chairman, thank you for your extraordinary contribution to Blu Label over 19 years. You have led the Board since 2007. Your guidance, judgment and commitment have helped shape this business over many years. Mark and I and the entire Blu Label team are deeply grateful. We are also delighted to welcome Lindsay Ralphs as our new Chairman. Lindsay brings extensive leadership and governance experience. We look forward to working closely with them as Blu Label enters this new chapter. Thank you to our entire Board, our leadership team and every Blu Label employee. Thank you also to our customers, our partners, our shareholders, for your continued support. I will now open the floor to questions.

Good afternoon, everybody, again. How are you? I'll start with anybody online? Does anyone online have a question?

At this stage, we have no questions from the telephone lines.

Thank you. Okay. So I'll start with the questions that have come through to us, obviously. The first question is from [ Herman Lloyd ]. Can you give us a scope of the size of the buyback and when it will commence? An update on the B-BBEE, the Sisonke loan refinance would also be appreciated. Okay. Great one to start with, I guess, top of everyone's mind that's come through on a few of the questions to us throughout the day and a few of the questions today as well. So let me start with the buyback. The Board of Blu Label, we'll continue buying shares as long as we believe it's accretive for shareholders. We obviously believe at the current price, it is very accretive for shareholders that it is a very good investment for Blu Label to buy back its shares. And obviously, as it is requested by the JSE on the rules of when reporting has to take place, we will report it each time that it needs to. But in short, as long as it's accretive, we will continue to buy. The second question is on the update of the B-BBEE Sisonke finance. So when we listed Cell C, as you would have known immediately in our results of November, which we presented in February to all of you, we put it for asset for sale immediately, which means that we have until the end of November to refinance the Sisonke transaction. And in short, we will deliver it in the time frame that we promised the market. Over to the second question is from [ Dylan Bradfield ]. What is -- are the commissions on revenue assurance with municipalities? I'll hand it over to you, Mark.

Just as a stated policy, a few presentations ago, we explained that the commercials or commissions are under pressure from municipalities and hence, the need to start pivoting this business into what we call the BluEnergy revenue assurance, indigent management, credit control and so forth. So we actually predicted the compression in commission. So what we've been doing is slowly starting to implement these new programs, revenue assurance being one of them as per your question, Dylan. And that equated to about a ZAR 66 million net commission earned by us. So as some of the margins in the traditional vending decreases, we are substituting that with planned other incomes and revenue streams like the metering, like the revenue assurance, which have the opportunities or the potential of being far greater than the commission sacrifice that we're doing. Our intention is to try and get longer-term agreements to try and ensure that you have a lot more visibility over the next 3, 5, 10 years in terms of the production of energy and the revenue assurance programs.

Thank you, Mark. The next question is from [ Presh ]. It's got a bit of the first question, so you can see if there's anything to add on to this to, Mark, again, the first part of it. Congratulations on the results. I have 2 questions. First one, electricity throughput increased 4% from ZAR 44 billion to ZAR 46 billion, basically the revenue on electricity, yet commission income fell 13% from ZAR 319 million to ZAR 279 million, ZAR 40 million. What drove that compression? And should we regard the lower take rate as the new normal? Or is there scope for recovery?

So as we explained, we earn commission on kilowatts or megawatts sold. So when you see a NERSA increase of 10% or 15%, you'll see your revenue increase but your commission earned starts to decrease because if a guy could, let's say, buy ZAR 100 for 10 megawatts, the ZAR 100 today would give him 8 megawatts, but he cannot afford more than 100. So we're seeing an increase in our revenue and a decrease in the consumption of megawatts being consumed. Hence, the reason for pivoting and changing the business model in terms of driving additional revenue from other aspects within the municipal framework. So you have these 3-year agreements. We're at different tenure points for each commission earned agreement. They're renewing on a regular basis. But what we are seeing is a lot bigger appetite in terms of finding the lost or stolen electricity, and that will more than compensate for any loss in electricity vending commissions.

Thank you, Mark. The second part of [ Presh's ] question to you, Dean -- to you, Dean. The group invested ZAR 474 million in intangible assets during the year. How much relates to Cell C, CEC? How much is genuine growth investment? And how much is recurring expenditure required simply to maintain the existing Blu platforms? What should we assume as sustainable annual maintenance CapEx?

Thanks. So if I can start with that, as you mentioned, the ZAR 474 million was the intangible asset additions. Of that amount, ZAR 136 million related to Cell C and CEC. So just to put in perspective, we consolidated Cell C for 3 months. And in those 3 months, we would bring on their balance sheet. So their additions was ZAR 152 million and CEC's addition was ZAR 119 million, which is ZAR 272 million. So of the ZAR 474 million, what relates to the core Blu would be ZAR 202 million. Now as you're aware, we have a BluSKY platform, which is our operating platform. We have spent quite significant additions in the current year with regards to modernizing all these platforms. So that would be the reason why it will be higher this year than next year. So if we say we got ZAR 201 million of additions relating to intangible assets in the current year of the ZAR 141 million, which is the fixed assets, ZAR 69 million related to Blu Label. In next year, we actually envisage this figure to be substantially lower to approximately just below ZAR 100 million.

Thank you, Dean. Next question is from [ Johan Barth ]. Hopefully, I pronounced the name correctly. Sorry if I didn't. Your normalized EBITDA fell from about ZAR 535 million in the first half to roughly ZAR 387 million in the second half. What changed so sharply between the 2 halves? And is H2 now the better indication of the underlying earnings base? Back to you, Dean.

Yes. So I think definitely, H2 won't be the half that we need to look at. You need to look at both halves. If we look at it in a normal perspective, normally, our first half is 55% and our second half is 45%. Now as you mentioned, there was quite a significant drop to ZAR 387 million. I think this needs to be looked at directly together with the Sisonke deal that we have. With regards to the cash that we get from the Sisonke deal, what that will result in is additional EBITDA margins because naturally, when we have that cash, we can utilize it within our trading operations. So when you look at our normalized EBITDA of ZAR 922 million (sic) [ ZAR 923 million ] in the current year, next year on our budget, we would have taken our EBITDA higher than that because we would have the cash, which we will be receiving the cash in. And ultimately, we will then earn a higher EBITDA and a lower interest cost. So on the ZAR 922 million (sic) [ ZAR 923 million ], EBITDA will grow and then the interest cost will come down.

Thank you, Dean. The next question is from [ Dylan Bradfield ]. Is there any update on the B-BBEE loan? Okay. We've dealt with that. The AFS mentioned another 6 months. Okay, it's all on the Sisonke. I think we've answered that. So hopefully, that puts that one to bed. The next question is from [ Johan van R ]. Note 1.4 discloses finance income of ZAR 277 million for FY '26, of which ZAR 223 million is related to partly interest received from Cell C. Note 9, loans to associated joint ventures were at 31st of May following the debt wave and the pre-listing restructuring. Is the ZAR 223 million of interest income included in the normalized net profit after tax of ZAR 677 million and the core headline earnings of ZAR 681 million, i.e. ZAR 0.75 per share. If it is, what is the FY '27 starting core headline earnings base once it falls away and once it replaces it. So in essence, over to you, Dean, is it included in the ZAR 677 million core?

So as you mentioned, Johan, those related to the Cell C debt funding instruments. We have excluded all the debt funding instruments from the normalization. So what you would find next year is a lower finance income. We also against that, we would have eliminated Cell C's interest income, which was ZAR 159 million of that during the year. So next year, you'd find the lower finance income. All recapitalization transactions and listing costs have been taken out of that ZAR 681 million. That is our normalized core headline earnings.

Thank you, Dean. This is a question that's come up quite often during the day and throughout the time as well. So we will clarify it, obviously, clearly now. It's to do with our debt position from Johan again. Note 3.2.2 states that the total consolidated debt to adjusted consolidated EBITDA covenant steps down from 3.5x as of the 31st of May to 2.5x for all measurement periods expiring thereafter. Against gross borrowings of ZAR 4.67 billion, a 2x5 (sic) [ 2.5x ] test implies adjusted consolidated EBITDA of approximately ZAR 1.87 billion versus normalized EBITDA of ZAR 923 million. Could you please define adjusted consolidated EBITDA as it is used in facility agreements, in particular, whether it includes Blu Label share of Cell C's earnings or EBITDA? What was the actual ratio as of the 31st of May? And what headroom do you expect at the next measurement date? Over to you, Dean.

Okay. So if we look at it, if I can start with regards to the Cell C earnings in our calculations with regards to our debt-to-EBITDA, we do not include Cell C's EBITDA in those calculations with the banks. If I can then start by then analyzing our debt profile. As you mentioned, we have ZAR 4.7 billion of debt. I think the key here is to split that debt up. So firstly, we have ZAR 2.7 billion of working capital facilities, as we've always mentioned to everyone. And further over and above that, we have approximately ZAR 1.9 billion at the 31st of May that's used for trading facilities. So when we calculate our EBITDA to debt ratios with the banks, they exclude the ZAR 1.9 billion. I understand that, that is just trading where we buy stock, get certain deals. As we've always mentioned, we do early settlement deals and large bulk discounts, so they don't include it. If we look at our calculations with regards to the 2.5, those can be met. We've always met our covenants with the banks. Actually, at the 31st of May, you would know that the covenants was 3.5. We were below that. What we also do include in our calculations with the banks on the covenant calculations is any guarantees that we have out from, for example, Lombard or any Investec, any noncash back guarantees. We still need to include that in our calculation, which amounts to approximately ZAR 412 million. So we're significantly below our 3.5. We were at 2.88. And going forward, it will be below the 2.5 mark. Sorry, Brett, just one thing with regards to that is the 2.5, when we calculated the 2.5, we looked forward. So we take into account, as I mentioned, with regards to the cash coming in, naturally, our EBITDA will grow significantly from the ZAR 922 million (sic) [ ZAR 923 million ], and thus, it will be below the 2.5 mark.

No forward-looking statements, Dean. Okay. So over to the next question. Omair Khan from Anchor Capital. On capital allocation, at what share price or P/E multiple does the buyback become attractive for the group? And consequently, when does the share price or PE multiple become unattractive for the group? It's obviously a very good question, Omair. Obviously, markets can have a view. From a Board point of view, it is extremely attractive at the current price for us. Maybe it's a good discussion to have somewhere down the line when you work in what Cell C's earnings in Blu Label will be and our own earnings to the current price. I think it speaks for itself. So in short, we will continue buying as long as we see it attractive. The price will -- the Board will determine this on an ongoing basis, so not a set time quarterly or 6 monthly. It will be an ongoing basis. And as long as we find it attractive, and I think in some cases, it speaks for itself, we will continue with it. If we should happen to stop it, we will obviously inform the market that we're stopping it, but not for now. The next question is from [ Dylan Bradfield ]. Blu has some big one-offs through the income statement, ZAR 140 million from FV yield loss on B-BBEE derivative instruments and ZAR 115 million on doubtful debts. There were some other one-offs nearing ZAR 45 million. Can we normalize some of these for FY '27? And I think, Dean, sorry, just on this, also just clarify what the ZAR 115 million on doubtful debt is.