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 de-risked 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 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 a 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 six-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 for 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 75.33 cents per share. A final dividend of ZAR 0.10 per share, bringing the total dividend for the year to ZAR 0.5356 per share. A commencement of a share repurchase program. Following a 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 three month ended 30 November 2025, and CEC's results for the full six-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 these 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 and are pinned by continued expansion of Blu Voucher sales through financial institution channels.
Normalised 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 Label's reported financial results included Cell C's equity accounted contribution for the three months ended 31st of August 2025. Its consolidated results for the three months ended 30th of November 2025.
Comm Equipment Company's results for the full six-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. The Prepaid Company's outstanding debt claims against Cell C were waived as these amounts were not supported by pre-listing valuations. There was a disposal of Comm Equipment Company. The Prepaid Company disposed of its 100% shareholding in Comm Equipment Company to Cell C in exchange for additional Cell C shares. There was an airtime asset transfer, whereby The Prepaid Company returned airtime to Cell C in exchange for newly issued equity. 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 sheets 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 Comm Equipment Company, which resulted in the full de-recognition of Comm Equipment Company'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 de-recognition of the Comm Equipment Company 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 The Prepaid Company'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 Label's shareholders amounting to ZAR 398 million. Interest-bearing borrowings declined by ZAR 783 million, primarily due to the de-recognition 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 three 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 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 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 services cost 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 2026, 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. 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 four 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 risks 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 Advances, airtime advance, and voucher-based solution. 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 two areas of the business where we are seeing some really interesting progress, and importantly, where we are seeing significant opportunities to scale both Cigicell and BluEnergy. I will 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 bar correctly, bill correctly, know their customers, and collect properly. That is the ecosystem we are building through Cigicell.
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, indigent management, and large power user programs. The common thread across all of these is that we are 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 improving 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 RPP 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 off-takers, 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 standalone opportunity. The important point is that these are not theoretical opportunities. We are building this around contracted off-take, which gives us greater earnings visibility and limits our volume risk.
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 off-takers. Our nodal generation model is where we physically generate power within the municipal grid under contracted PPAs. 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 timelines. Then we have batteries, which can either be paired with these generation assets or operate as a standalone 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 BluEnergy 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 MW stage 1 opportunity, which is the first one to three-year opportunity for the business. Within that, we have 180 MW name portfolio across seven individual projects, with the projects progressing through different stages of development.
The first 28 MW 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 MW of committed ground-mounted projects, which are moving through execution, followed by another 70 MW of near-term ground-mounted pipeline. Beyond those named projects, we have a further 220 MW in the future pipeline currently at targeting and origination stage. The 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. We are continuing to build a pipeline beyond that initial 400 MW 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. 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 MW name portfolio comprises of seven projects across three phases. Phase 1 is a 28-megawatt rooftop portfolio that projects. There are two projects of 9 MW and 19 MW. These are the projects that are furthest advanced and are therefore the first to come through. Phase 2 is 80 MW of ground-mounted generation comprising of three projects. Then Phase 3 adds another 70 MW across two further ground-mounted projects. What is important is these are not simply development sites on a map.
We have contracted PPAs, sites secured, and grid connection 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. Importantly, we are continuing to build beyond the named 180 MW portfolio. 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 three-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. 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, indigent management and vetting. 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.
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. What we are trying to demonstrate here is very simple. We are moving from theory to execution, and we are measuring the outcomes. Finally, I want to touch on our large power users or LPU projects because these demonstrate both the complexity of what we are 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-fence 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 ZAR of billing and collection shortfalls across the targeted areas of operation. While these projects are complex and take time to execute, the scale of the underlying opportunity is substantial. 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 to larger scale projects where the financial impact for municipalities, and therefore the opportunity for Cigicell, becomes increasingly more meaningful. Taken together, Cigicell and BluEnergy gives us exposure to two 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. To conclude, what I hope we have 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.
With Cigicell, we are increasingly demonstrating the ability to help municipalities improve billing, collections, and revenue assurance with measurable outcomes already being achieved. There is 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 will 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, 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, BEE 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 interests of Blu Label and its shareholders. From a capital allocation discipline, 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. 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 efficiency 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. 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 him 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 will start with anybody online. Does anyone online have a question?
At this stage, we have no questions from the telephone lines. Thank you.
Thank you. Okay, I will start with the questions that have come through to us, obviously. The first question is from Herman Lloyd. Hi, Herman. How are you? Can you give us a scope of the size of the buyback and when it will commence? An update on the BEE, the Sisonke loan refinance would also be appreciated. Okay, great one to start with. I guess top of everyone's mind. It has come through on a few of the questions to us throughout the day and a few of the questions today as well. Let me start with the buyback. The board of Blu Label will continue buying shares as long as we believe it is 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 is accretive, we will continue to buy. The second question is on the update of the BEE Sisonke finance. 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 timeframe that we have promised the market.
Over to the second question, is from Dylan Bradfield. Hello, Dylan. How are you? What is all the commissions on revenue assurance with municipalities? I will 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, hence a need to start pivoting this business into what we call the BluEnergy revenue assurance, indigent management, credit control and so forth. We actually predicted the compression in commission. 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. 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 Odea. How's it, 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 two 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?
As we explained, we earn commission on kilowatts or megawatts sold. 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 MW, the ZAR 100 today would give him 8 MW, but he cannot afford more than ZAR 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 three-year agreements with different tenure points for each commission earned agreement. They're renewing on a regular base.
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. The group invested ZAR 474 million in intangible assets during the year. How much relates to Cell C and CEC? How much is genuine growth investment? And how much is recurring expenditure required simply to maintain the existing Blu Label platforms? What should we assume is sustainable annual maintenance CapEx?
Thanks. 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 . Just to put in perspective, we consolidated Cell C for three months, and in those three 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 Label would be ZAR 202 million. As you are 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.
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 Johann Baas. Hi, Johann. Hopefully, I pronounced the surname 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 two halves? Is H2 now the better indication of the underlying earnings base? Back to you, Dean.
Yes. 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 normal perspective, normally our first half is 55%, and our second half is 45%. 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.
When you look at a normalized EBITDA of ZAR 922 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 922, EBITDA will grow, and then the interest cost will come down.
Thank you, Dean. The next question is from Dylan Bradfield. How's it, Dylan? Is there any update on the BEE loan? Okay, we've dealt with that. The AFS mentioned another six 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 Johann van Rhyn. Note 1.4 discloses finance income of ZAR 277 for FY 2026, of which ZAR 223 is related to partly interest received from Cell C. Note 9, loans to associated joint ventures were null at 31st of May following the debt waive and the pre-listing restructuring. Is the ZAR 223 of interest income included in the normalized net profit after tax of ZAR 677 and the core headline earnings of ZAR 681, i.e., ZAR 0.75 a share? If it is, what is the FY 2027 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?
As you mentioned, Johann, those relate 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've 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 Johann 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 2.5 x for all measurement periods expiring thereafter. Against gross borrowings of ZAR 4.67 billion, a 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's 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. 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. Firstly, we have ZAR 2.7 billion of working capital facilities, as we've always mentioned to everyone. Further over and above that, we have approximately ZAR 1.9 million at the 31st of May that's used for trading facilities. When we calculate our EBITDA to debt ratios with the banks, they exclude the 1.9. They 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 Insurance or any Investec. Any non-cashback 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.
Thank you, Dean.
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 922, and thus it will be below the 2.5 mark.
No forward-looking statements, Dean. Okay. Over to the next question. Omar Khan from Anchor Capital. Omar, how are you? 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 P/E multiple become unattractive for the group? It is obviously a very good question, Omar. Obviously, markets can have a view. From a board point of view, it is extremely attractive at the current price for us. Maybe it is 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. In short, we will continue buying as long as we see it attractive. The price, the board will determine this on an ongoing basis.
Not a set time quarterly or six monthly. It will be an ongoing basis. 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 are 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 fair value yield loss on BEE 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 2027? I think, Dean, just on this also, just clarify what the ZAR 115 million on doubtful debts is.
Yeah. Thanks, Dylan. Let us start with the Sisonke. As you know, we raised the IFRS 2 charge with regards to Sisonke, which was a written call option. Once we do the restructuring financing, as Brett mentioned earlier with regards to Sisonke, the ZAR 140 million will fall away out of our accounts. We will not have the ZAR 140 million.
114.
What?
ZAR 114 million, I think.
No, ZAR 140 million with regards to Sisonke. If we look at our bad debts, I am not sure with regards to the 115, but what we do have included in our bad debts is a figure of ZAR 215 million. It is ZAR 216 million, of which of that ZAR 216 million, ZAR 210 relates to CEC. With regards to our bad debts or ECLs going forward, as we mentioned, it is a simplified business and the ECL will be very small in FY 2027.
In essence, the bad debt is only to CEC.
It relates specifically to CEC.
Blu Label really has a minimal amount of bad debts in the group.
Correct.
Okay, the next question is from Presh again. It has been answered. Basically, how much did we make from revenue assurance for the past year? Mark answered a net of ZAR 66 million. As you can see, it is obviously becoming a serious number in our world. The next question is from Paul Whitburn. How is it, Paul? "Hi, Brett. When do you expect the receipt of cash from Sisonke?" Okay, I think we have answered that. "Why have you not disclosed the absolute rand amount of the share buybacks?" As explained already. "Why not unbundle Cell C to shareholders to unlock value and increase liquidity for Cell C?" Okay, this is a great question, by the way. Not that the rest were not. They were all good, right?
Let us start with why now, right? As you are all aware, Blu Label is in a lockout period until November 27 of this year. When we listed Cell C, we obviously put ourselves in a lockout period for 12 months that we were not able to sell or do anything with our Cell C shares. So that is obvious reason why you have seen nothing till date, and you will not see anything until the end of the year. More importantly, if you read our new dividend policy, it reads like this. From a Blu Label core point of view, whatever we earn, not cash generated, Blu Label will pay out 30%-50% of our profits in a cash dividend. Over and above that, we have entered into a share buyback program.
Over and above that, whatever dividends that Blu Label receives from Cell C, we will pay out between 50% and 70%, so higher than our own dividend ratio, and that will be paid out either in cash or in a dividend in specie to our shareholders, and therefore returning value to the Blu Label shareholders. Over and above that, to your question of unbundling it, these are discussions that will take place for the next couple of years. It is a great question. There is obviously a certain amount of money that Blu Label, the company, will always like to get back because of the money that they injected into Cell C, and that goes into our own debt and our own trading and obviously makes a massive difference in our world. Then, of course, your question will always be on the excess of that amount.
I can tell you that our board will consider it seriously and is already considering it. That unlocks the liquidity, of course, as well of the Cell C. As we know, there is no liquidity in Cell C or very little liquidity in Cell C, and that is waiting, obviously, for the unlock from us. From our side, by the way, whatever we choose to do will be done in a very responsible manner. It will be done with the market knowing way in advance what we are doing, if possible. Of course, there will be no panic and no anything because there is no panic. Blu Label is very satisfied where Cell C is. We think that their results were, in our estimation, exactly to what was promised in the PLS.
We think they are positioned really nicely in the market, and we really think that Cell C is going to do well. We are going to watch this space carefully from our side.
The next question of Paul Whitburn's was, "How far we are the earnings from" Okay, we have answered that, revenue assurance, sorry. Your last question is probably the most interesting question, and I will leave it to the market to actually answer. "How different is Blu Label's core business compared to Flash and Shop2Shop tier? What are the comments on the valuation of core Blu Label business excluding Cell C and the implied 24 times P/E multiple assumed for Flash in the proposed merger with Shop2Shop?" I am going to leave that to the market to do their own work on Flash and Shop2Shop and Pepkor's tier. They are a very good competitor in certain ways to us.
They run a great business, but 90% of what we do in the market is very different to them. We all play in the same market, but very differently, if I can say that. There are pieces across each other and we all coexist. It is a big market. They specifically in their market, in the informal market, their drop safes, their POS terminals, their closed-loop environment of how they do buying and selling, take nothing away from them. It is a very good business Shop2Shop. I doubt that they should be on their P/E and we should be on our P/E, which means I am not mocking their P/E. I am just not so sure the difference between them and us is realistic. Let time tell and let the market talk for itself, of course.
The next question is from Alan Amler. Can you give us indication of your growth in money terms for new project that Mark Levy has spoken about, FY 2026, FY 2027, and FY 2028? In essence, what money do we require for CapEx rollout?
From an income generation point of view, we do not see significant income generation in this financial year because these projects can take between 6 and 18 months of going. There has been a lot of interest in funding these projects. Because we are generating a lot of cash within the municipalities and can use those to securitize the installments, we are seeing a nice request to advance up to 90%, even up to 100% of each project because of the cash certainty that we have. Our CapEx demands, we do not foresee it being a massive drawdown on Blu Label. In some cases, we may have very little drawdown on the CapEx side.
Thank you, Mark. If I miss one or two of the questions, it's not purposely. They overlap, I think, with a lot of the questions that we've answered. The next question is from Jonathan Kennedy-Goode. Can you comment as to whether Blu Label's share buyback will commence immediately? The answer is yes. The guidance of the share buyback we've spoken to. Will it commence immediately? The answer is yes. The next question is from Nick Krige. It is still very difficult to determine earnings power and cash flow. Can you provide some guidance at the EBITDA level? I think we've done that, so I think we're good. The difficult part, and I know it's becoming repetitive from our side, but we mentioned it again in our February results. It was a complicated transaction, Cell C.
It was a complicated 7 years to let Cell C get to the position of survival. Not only survival, but to listing to an EBITDA, which you've seen it's created, to a profit that you've seen it's making, and obviously to a debt ratio. I exclude Comm Equipment Company out of it because it's a separate book that's against the handsets to a very low level of debt. I think with that, and I'm not quite sure how many people thought that we could get Cell C back, that people thought that Cell C would survive, and not only survived, it's here to stay, and it's here to play an important part in this market. In doing so, it complicated our results. We understand that. We know that they were very complicated. We try to simplify them, but we couldn't.
It comes with the territory of what we were dealing with. We made it clear that this is our last complicated results, and I can assure you, as the market, are not looking as forward as the three of us that are sitting at this table for our February results, where they are not complicated, where they are much more simplified and exactly how the results should be presented, and we look forward to it as much as everybody else. The next question is from Paul Whitburn. Was there any earnings from the treasury function in the second half? No, is the answer. We're waiting for the Sisonke money to come in. Obviously, it's a big check for us. It's a big number in our world. The second part of it is any indication what this could bring in the year ahead?
I think I've mentioned it before, so I'm going to say it again. Blu Label looks to return anywhere between 18% and 26% on all cash that we have that is free. So it is a very big number in our world. The next question is from Johann again. Can you quantify how much of Sorry. Okay, it's a little bit different, this question. I'm not sure we can break this up for you now. I'm happy to have a separate chat. But Johan's question is, of the normalized EBITDA of ZAR 923 million, what is generated traditionally by the airtime and data distribution businesses after adjusting for minority interest? Do you want to answer it separately?
Yeah, we prefer to answer that separately also, as it is confidential information with regards to margins.
Clear.
Agreed.
Perfect.
We can break it down further.
Happy to have a separate chat, Johann. We obviously answer what we can and what is not under confidentiality. The next question is from Philip Short. How should we see new electricity projects contributing to the earnings in 2027 and beyond?
It is a great question. It all depends on how quick we can get these projects up and running. They should have a meaningful contribution to earnings, and that we are talking about from June 2027 onwards. That would provide, specifically on the BluEnergy, an annuity income for between three and 10 years. On the revenue assurance, also between three and 10 years. So both setups can significantly change and add to our earnings.
Thank you, Mark. Two more questions, unless you see any more that we're sitting with at least. Jonathan Kennedy-Goode: Management mentioned that our cash generation is around ZAR 60 million per month in the core business. A few questions. Number one, is that the current rate already? How much of that is going to be deployed in treasury versus used to the buyback? Do not answer the second one. Answer the first one.
Yes. If we look at it naturally, we generate slightly more in our first half of the year and slightly less in the second half of the year. If I look at normalization, which is easier to normalize in the second half of the year, because as we mentioned, that was more of a cleaner year, a cleaner half. Our free cash flow conversion rate is approximately 65%. If you look at our cash conversion ratio, it is approximately 82%. So we are still generating cash, as we have always said to you. Ultimately, this is the reason for now the dividend policy and how we will move forward.
What does the 62% equate to?
The 60?
-2% equate to? That is Jonathan's question, the rand value.
Of the free cash on that side. It would be approximately in the second half, if we had operating activities of approximately ZAR 316 million. We had cash generated from operating activities of ZAR 316. In the second half, our acquisition of intangibles and PPAs were approximately ZAR 120 million, and that left us with our free cash flow for the six months, which is ZAR 182 million over our normalized profit, as we mentioned, of ZAR 282 million. That would be the 64%. If you look at your operating cash flow, you would have ZAR 316 million over our normalized EBITDA in the second half of ZAR 387 million, which would be the 82%.
Approximately ZAR 55 million to ZAR 60 million a month, to your question, Jonathan. The last question that we have from Nick Krige. It is in my opinion that the Cell C share price is suffering because of the low float and potential overhang. These are typical negatives linked to having two entry points into a share. What is stopping Blu Label from addressing these issues immediately? Surely, unbundling Cell C is an obvious lever to pull to unlock value for Blu Label and Cell C. Agree on all fronts, Nick. As we said, we are in a lockout until 27 November. It is status quo as it is. It was announced to the market on the listing. There is nothing that has changed from it.
I do believe as Cell C puts out their clean results and as Blu Label puts out our clean results, I am sure it will unlock interest in Cell C, of course. We will not create an overhang, and I want to just end with it and repeat it. We are not an urgent seller. There is no overhang because we will do it in accordance with the market and responsibly with the market. It will be a discussion, obviously, at our next results because we come out of the lockout as we obviously go into a lockout of our half-year results. I think that is it. Just to end, you would have seen an announcement. Our chairman, Mr. Larry Nestadt, who has been a great mentor to the three of us, great guidance to this company, has been with us for 19 years.
He felt it was just time. 19 years is a good innings, that it was time for him to move on. We just, first of all, want to thank Larry for really the support and the mentorship over 19 years and the guidance, that goes for our whole board that is currently there, of course, as well. Then to welcome Lindsay Ralphs, who has taken over from Larry. Last day was our board meeting yesterday, and Lindsay takes over from today. We welcome Lindsay. We think he is obviously depth of experience in The Bidvest Group, and what he has done throughout his life will be extremely valuable to Blu Label Unlimited Group and extremely valuable to Mark and myself and Dean. Welcome, Lindsay, and of course, we look forward to working with you into the future. Then, of course, to the Blu Label staff and employees.
It is not simple out there, but you give us 100% or 150% every day, and we thank you tremendously. One question has just come in, and I think it is a good question, so I am going to actually just bring it in. Sorry, I did close out, but it is just a good one to hear. It is from Kaleem Hannibal, and it says: How could this year's municipal elections and the upcoming general elections influence Cigicell's municipal revenue recovery model, specifically regarding contract stability?
It is a great question, and we are really looking forward to the outcome. I think if you look at where we find ourselves at a municipal level, there seems to be a lot of chaos all over the place or lacking in service delivery. A fresh broom sweeps clean. We do believe that there are going to be significant changes within the municipal landscape. I think that for us would bring in a lot of positivity. There are a lot of projects that are very simple to execute, that can provide a meaningful return to those municipalities in a very short space of time, and in turn, give them additional cash flow in which to deliver services to their communities they serve. I think we are very bullish about these municipal elections. We really think a shake-up in some of these municipalities would be good.
I think we are going to look at a new era of hopefully better productivity out of these municipalities, which we can help them achieve with these projects we have been promoting.
Thank you, Mark. Thank you, Dean. Thank you, everyone. Wishing you all a great day.
Thank you.
Thanks.