Cell C releases its maiden interim results as a listed company (JSE: CCD)
The MVNO business remains a key growth engine
Cell C has released results for the six months to November 2025. The significance is that these are the first results since the company listed at the end of 2025. If you want to understand more about the group strategy, you should check out this podcast I recorded with CEO Jorge Mendes in December.
Unlike the other big names in the telco space, Cell C isn’t searching for growth in the rest of Africa – at least not at this stage. MTN (JSE: MTN) and Vodacom (JSE: VOD) have been on an exceptional run, but much of it is thanks to improved macro factors in Africa that are outside of their control. And we don’t have to go far back in the history books to see how rapidly that macro situation can deteriorate.
Cell C is therefore a much simpler group from a macro perspective, but they have also missed out on the surge in Africa. Risk vs. reward is on full display here.
The key differentiator at Cell C is the Mobile Virtual Network Operator (MVNO) business that has leading market share in this space. This is the technology through which companies like Capitec (JSE: CPI) offer cellphone-related services (e.g. Capitec Connect). There are many companies with large distribution networks that see the opportunity for value-added services as a way to boost margins and grow share of wallet from existing customers.
Growth in the Wholesale business of 22.5% is a very useful growth engine, but Cell C still derives the majority of its revenue from “traditional” services like Prepaid and Postpaid (contract) revenue. For context, Wholesale generated R840 million in revenue in this period vs. R3.9 billion across Prepaid and Postpaid combined.
Prepaid has been a competitive bloodbath recently, so 1.6% net revenue growth to R2.7 billion is pretty good. The number of subscribers increased by over 1 million. Average revenue per user (ARPU) fell by 8.4% to R71, primarily due to the 14% effective reduction in data tariffs. The deflationary nature of the service offering is one of the biggest challenges for the telco companies.
Postpaid revenue has increased by 2.3% to R1.2 billion, with that growth expected to improve as they integrate the Comm Equipment Company (CEC) business. They are deliberately focusing on higher quality Postpaid customers that offer a larger ARPU, with a 4.4% improvement in that metric to R240.
A number of other revenue streams came under pressure due to the regulated reduction in mobile termination rates. On the plus side, the Enterprise business achieved double-digit growth, albeit off a small base. Overall, the Other segment experienced a drop in revenue of 11% to R886 million.
Absolutely nobody talks about the Other segment, yet it generates more revenue than Wholesale! This won’t be the case for much longer, though.
Once you add it all together, you find revenue growth of just 1.8% to R6.7 billion, showing you how hard it is to drive meaningful growth in South Africa (and why competitors went off to Africa in search of riches).
There are plenty of once-off items in the expense base, so the company has reported adjusted EBITDA to give a better indication of the underlying performance. This important metric actually dipped by 1.1% to R917 million, with significant expense pressures on lines like personnel, IT and marketing.
Profitability will need to be on a more appealing trajectory going forwards, something that isn’t easy to do when revenue growth is in the low single digits.
The company’s growth story is being supported by a balance sheet that is much cleaner than pre-IPO when it was intertwined with Blu Label (JSE: BLU). The net debt to EBITDA ratio of 0.6x is healthy. Cell C follows a capex-light model with capex investment of R895 million in this period, so that helps with keeping the balance sheet in a healthy range.
Looking ahead to the second half of the year, they expect an acceleration in Prepaid and Postpaid revenue, while the Wholesale segment is expected to grow by more than 20%. The pressure in Other revenue streams is expected to continue, while Enterprise (within the Other bucket) is expected to have another strong period.
And in case you’re wondering why I didn’t mention Headline Earnings Per Share (HEPS), here’s why: thanks to the once-offs in the numbers that even HEPS doesn’t make allowances for, they’ve reported HEPS of R205.84. The share price is R29, so that would put Cell C on a Price/Earnings multiple of 0.07x (because you would have to annualise the interim numbers). This is clearly not “correct” at all as an indication of value.
The results will become easier to interpret and understand over time as these once-offs are worked out of the system.
Ethos Capital is repurchasing 41.5% of its shares (JSE: EPE)
This is from the proceeds of the Optasia (JSE: OPA) sell-down
Ethos Capital has been talking for ages about unlocking value and returning capital to shareholders. These things do take time, especially when the portfolio consists of multiple underlying investments.
When Optasia listed towards the end of last year (check out this podcast with Optasia CEO Salvador Anglada to learn more), it gave Ethos Capital an opportunity to monetise a chunk of its stake. These proceeds can now be used to repurchase shares from investors.
How big is this repurchase? Well, Ethos Capital is looking to repurchase 41.5% of its shares in issue. In other words, they are returning nearly half of the value of the company to shareholders!
And when I say value, what I really mean is the net asset value (NAV), not the market value. You see, the NAV per share is R8.10, whereas the current market price is R7.52. The total value of the planned repurchase is R860 million, which works out to 44.6% of the market cap due to the share price trading at a discount to NAV per share.
It’s worth noting that the NAV has increased since the last reported estimate of R7.57 that was announced in December. This is because of the positive movement in the Optasia share price.
The default election for shareholders is to accept the repurchase offer. Any shareholders who don’t want to accept it must inform their broker by Friday, 6th March.
Mustek’s profitability looks much better (JSE: MST)
HEPS has almost quadrupled
Mustek’s profits are jumping around like an excited Jack Russell at the moment. For the six months to December 2025, the IT group expects HEPS to increase by between 250% and 270%. It’s hard to process percentage movements that are this high, so it’s easier to think in absolutes: HEPS will be between 82.13 cents and 86.83 cents vs. 23.47 cents in the comparable period.
Apart from a drop in finance costs, and a helpful forex situation as the rand has strengthened, they have also attributed this performance to cost control and equity-accounted investments. We will have to wait for 25 February to get all the details.
And in case you’re wondering, the share price hasn’t had a chance to react to this yet. Although it closed 4.5% higher on the day, that move happened in the morning and this announcement came out in the late afternoon.
Could the worst finally be behind them at KAP? (JSE: KAP)
After such a long period of disappointment, there’s plenty of positive momentum here
KAP is one of those companies that just couldn’t catch a break for the longest time. But the winds of change may well be blowing, as HEPS for the six months to December 2025 is expected to be between 28% and 35% higher.
This percentage growth tells us that interim HEPS will be between 22.0 cents and 23.2 cents. Annualising the results at KAP feels extremely brave, but it’s worth noting that the share price is R2.33 and hence the Price/Earnings multiple on an annualised basis would be roughly 5x. The market still has plenty of scars from KAP, with the valuation reflecting this track record.
The best segmental stories appear to be PG Bison (thanks to higher production and sales volumes) and Feltex (domestic new vehicle assembly volumes are up). They’ve also enjoyed lower finance costs.
Safripol remains the biggest headache, with the polymers sector in a cyclical low that is so stubborn it would make the platinum sector blush.
Detailed results are expected on 26 February.
With the valuation at such modest levels, what is your expectation of the share price trajectory this year?
Nibbles:
- Director dealings:
- After a substantial recent sale by the founders of WeBuyCars (JSE: WBC) gave bears something to shout about, we’ve seen an encouraging purchase of shares in the company by other directors. The Chairperson has bought R10 million in shares and the CFO has bought R2.5 million in shares.
- The CFO of Mantengu (JSE: MTU) has bought another R6.3k worth of shares.
- Mahube Infrastructure (JSE: MHB) released a firm intention announcement on 9 December 2025 in relation to the approach by Sustent Holdings. They should’ve released a circular to shareholders within 20 business days, but this didn’t happen. Delays are not uncommon for deals announced in the festive season. An extension has been granted by the Takeover Regulation Panel (TRP) out to 9 March 2026. Let’s see if they can meet that deadline.
- Labat Africa (JSE: LAB) announced that Financial Director David O’Neill has retired with immediate effect due to reasons of ill health. He is 78 years old.
