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Strong rand knocks MTN

Group service revenue down 10.8% to R124.4 billion on currency swings.

MTN Group delivered good underlying operational results in the 2017 financial year, but the strong rand and several large once-off items dented the numbers.

Before the effects of currency swings and various pro forma adjustments, group service revenue climbed by 7.2%, but the reported number declined by 10.8% to R124.4 billion. This was on the back of a 34.2% improvement in data revenue (or 19.4% reported) and 14.2% growth in digital services revenue (-6.9%).

The group reported a sharp swing back into profitability, with headline earnings per share (Heps) — a key performance measure watched by South African investors — of R1.82, from a Heps loss of 77c previously.

Heps were impacted by several once-off and non-cash post-tax items totalling R4.83. The adjustments included costs related to the Nigerian regulatory fine of 46c, hyperinflation adjustments excluding impairments of 96c, net foreign exchange losses of R1.59, a MTN Zakhele Futhi share-based payment expense of 24c and a loss on the derecognition of a loan to an IHS tower subsidiary of R1.58.

The group declared a final dividend of R4.50/share, bringing the total for the year to R7.

“MTN delivered a solid overall performance for the year, with progress on many fronts, despite difficult economic conditions as well as operational and regulatory challenges in certain markets,” CEO Rob Shuter said in a statement.

“MTN Nigeria showed strong constant currency revenue growth and MTN South Africa’s post-paid business displayed encouraging improvements.”

He said the foundation is now in place for the group to deliver “strong growth over the medium term”.

Challenging conditions

Macroeconomic conditions were challenging across several MTN’s key markets, Shuter said. “Nigeria experienced a markedly weaker naira as well as hard currency liquidity challenges earlier in the year, but this showed signs of improvement as the year progressed. Although South Africa entered a technical recession in the first quarter of 2017, growth resumed in the second quarter and the rand strengthened considerably against the US dollar during the latter part of the year. Many of the currencies in our other markets weakened. In Iran, economic growth slowed somewhat and the rial weakened.”

Full-year capital expenditure was R31.5 billion, slightly ahead of the R30 billion previously guided.

“Over the next few years, we expect to deliver upper-single-digit constant currency service revenue growth for the group, driven by mid-single-digit growth from South Africa and double-digit growth from Nigeria,” Shuter said. “Over the same period, we expect to see an expansion in group Ebitda margins.” Ebitda, or earnings before interest, tax, depreciation and amortisation, is a measure of operational profitability.

“We are confident the foundation is now in place for MTN to deliver strong growth in the medium term. Through the continued execution of our strategy, we anticipate improved service revenue and Ebitda growth as well as accelerating free cash flows over this period. Going forward, we will manage our holding company gearing at levels that are appropriate for a business with our corporate structure and risk profile and will adopt a rebased progressive dividend policy.”

MTN said it expects to pay a total dividend of R5/share for 2018, growing at 10% to 20% over the medium term. “The re-basing of the dividend follows the marked changes in currency exchange rates across a number of our markets. This will allow us to ensure that the dividend is funded from operational cash flows over the medium term.” 

This article was first published on TechCentral. To access the original, please click here.


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