Chairman's report

LARRY NESTADT

As economies recover from the devastation caused by COVID-19 and the supply chain disruptions of the Ukraine-Russia war, many also had to contend with the subsequent inflation surge, driven primarily by the fiscal and monetary stimuli provided by governments in response to the pandemic.

LARRY NESTADT Chairman

DEAR SHAREHOLDERS,

As economies recover from the devastation caused by COVID-19 and the supply chain disruptions of the Ukraine-Russia war, many also had to contend with the subsequent inflation surge, driven primarily by the fiscal and monetary stimuli provided by governments in response to the pandemic.

And while our local economy is also recovering, albeit slower than expected, the energy crisis and the financial pressure that consumers are experiencing as a result of growing inflation and the rise in interest rates continue to impact our performance, due to the essential nature of our services and products that we provide.

These macroeconomic influences are also the reasons why the JSE's telecommunication index has seen losses of around 25% during the last six months as the weaker rand and policy uncertainty in the sector continue to scare international investors off, with local investors being more cautious than normal.

These factors, combined with increased competition and a drastic shift in consumer patterns, continue to influence how we do business and how we utilise innovation to stay ahead of the game.

The implementation of our "back to basics" operational plan in 2021 resulted in the emergence of a greater sense of purpose and cohesion but it also delivered a more resilient organisation that could operate optimally during the COVID-19 pandemic and that could withstand the significant operational and economic headwinds that we experienced during the last two years. However, the post-COVID-19 recovery has been undermined by frequent and extended load shedding throughout our reporting financial year.

Focusing on developing more margin-accretive products, ensuring stronger growth in our distribution network and placing greater emphasis on digitisation and technological innovation, Blue Label again delivered a resilient performance.

INCREASED BOARD VIGILANCE

It is against this backdrop that the Board had to intensify its oversight role. This is not only done to respond speedily and appropriately to these rapid operational changes but also to ensure that Blue Label's strategy remains relevant, that execution is always key and that we, as a responsible citizen, are able to respond adequately to the varied demands and expectations of our different stakeholders.

While the Board remained focused on the reduction of debt, it continues to consider strategies that would return value to shareholders through dividend and share buy-back programmes.

ESG and sustainability considerations and new regulation and compliance requirements demanded that we hasten the restructuring and strengthening of the Board.

As previously mentioned, the Board is on a measured process to rejuvenate its composition by augmenting it with members who have diversified skills and experience.

During the last few months, we have noted the resignations of three of our most experienced non-executive directors; Gary Harlow, Lazarus Zim and Kevin Ellerine. Their wealth of knowledge and industry experience served Blue Label well over the years and we would always be grateful for their contribution.

In line with our succession plan we have welcomed two outstanding women, Lindiwe Mthimunye and Happy Masondo to the Board and look forward to working with them.

Our approach to succession planning was always focused on broadening the diversity of the Board's experience and ensuring Blue Label's future stability. As our operational environment changes, the skill-set and competence of the Board as a collective is changing appropriately.

INTEGRATING SUSTAINABILITY AND ESG

ESG and sustainability will continue to be top priority for Blue Label and by integrating both into our strategy, we continue to make significant progress.

As a starting point, we have conducted materiality assessments to identify where our highest level of sustainability impact could be and in turn, linking these matters to our strategic response, policies and performance management. We are committed to creating measurable value for all our stakeholders towards a just and socio-economic sustainable future.

We have identified the following areas as key impact areas:

  • Our ability to create employment, learnerships and direct entrepreneurial merchant opportunities;
  • Creating financial inclusion for communities by digitally connecting consumers to products and services that would ordinarily be out of reach and decarbonising the supply chain through our digitised distribution channels; and
  • Building our brand loyalty through the highest levels of trust in our products and services and always treating customers fairly.

This process is ongoing, and the Board will continue to monitor our obligations and make sure that we meet or exceed expectations as we continue to create and preserve value for all our stakeholders.

We have already identified key milestones and set strict timelines to ensure that everyone is on board. This, we believe, would allow us to measure our impact with greater efficiency and make sure that we integrate sustainability into decision-making across the entire Blue Label Group.

We will continue to ensure compliance with both local and international ethical demands and continue to pursue excellence in the execution of this purpose.

CELL C SET FOR GROWTH

The conclusion of the long-awaited recapitalisation in September 2022 was a significant step in the overall process to deleverage Cell C's balance sheet.

One of the critical regulatory requirements that they had to meet following the recapitalisation, was the application for an Electronic Communications Network Services and Electronic Communications Services licence. Our robust regulatory compliance was affirmed by ICASA, when the licence was issued, firmly supporting our ability to do business and trade as a mobile network operator.

To pursue its growth strategy, Cell C has focused on investment into innovating products and services that will add value to customers, operating from a more competitive platform that offers the same quality connectivity to all South Africans.

Most importantly, Cell C is restructuring its board and management by appointing industry experts onto the Board and introducing a new management team with new innovative ideas about how to return Cell C to positive operating results. Jorge Mendes, a former senior executive at Vodacom, was appointed as CEO of Cell C with effect from 1 July 2023.

Notwithstanding the challenges as a business in transition, Cell C is a leaner, more agile and fit-for-purpose entity that, along with the recapitalisation of the current debt structure, is well‑positioned on a growth trajectory that will enhance shareholder value.

OUTLOOK AND APPRECIATION

Over the years, Blue Label developed products and provided services that are deemed essential for living. We established ourselves as a partner for growth and development and created opportunities that give people hope and a living. While consumer spending is down, we will not take our customers' loyalty and commitment to our brands for granted.

We will continue to invest in technology and digital innovations to make our products and services more accessible and readily available. In doing so, we will expand our distribution network and expand our dominance in the market.

We are a truly South African brand and our commitment to this country and its people are unquestionable.

We owe all our stakeholders the best value that we can offer, and the Board remains committed to doing just that.

Finally, I wish to express my sincerest appreciation to all my colleagues on the Board for their support and for always putting Blue Label first. I also wish to thank management and the staff who worked tirelessly under very difficult economic challenges as well as the loyalty and support from our various stakeholders.

I remain excited about the future and look forward to another fulfilling year.

Larry Nestadt

Chairman

29 September 2023