M-Cell Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06) ("M-Cell")
a JOHNNIC group subsidiary
AUDITED RESULTS FOR THE year ENDED 31 MARCH 2001
55% to 3,5 million subscribers
39% to R8 337,3 million
38% to R2 791,5 million
47% to 74,5 cents per share
Consolidated income statement
For the years ended 31 March 31 March
2001 2000 %
Rm Rm change
Revenue 8 337,3 6 007,9 39
Cost of sales (3 352,6) (2 324,3)
Gross profit 4 984,7 3 683,6 35
Operating expenses - net (2 193,2) (1 662,4)
Earnings before interest,
taxation, depreciation and
amortisation ("Ebitda") 2 791,5 2 021,2 38
Depreciation (688,5) (522,1)
Amortisation (148,3) (130,7)
Profit from operations before
goodwill amortisation 1 954,7 1 368,4 43
Goodwill amortisation (411,2) -
Profit from operations 1 543,5 1 368,4 13
Finance costs (264,6) (235,0)
Finance income 81,6 92,9
Share of losses of associates (0,6) (0,8)
Profit before taxation 1 359,9 1 225,5 11
Taxation (585,3) (407,6)
Profit after taxation 774,6 817,9 (5)
Minority interests (61,1) (229,3)
Attributable earnings 713,5 588,6 21
Contribution to
attributable earnings:
South Africa 1 199,2 616,3 95
MTN 1 194,3 615,3 94
Orbicom 4,9 1,0
Rest of Africa (74,7) (29,0)
MTN (68,8) (29,0)
Orbicom (5,9) -
Corporate head office and interest 0,2 1,3
Basic headline earnings 1 124,7 588,6 91
Goodwill amortisation (411,2) -
Attributable earnings 713,5 588,6 21
Basic earnings per ordinary
share (cents)
- Headline 74,5 50,7 47
South Africa 79,5 53,2 49
Rest of Africa (5,0) (2,5)
- Attributable 47,3 50,7 (7)
Dividend per ordinary
share (cents)
- interim 3,0 2,3
- final 7,0 5,6
Total 10,0 7,9 27
Number of ordinary
shares in issue:
- weighted average ('000) 1 508 874 1 160 090
- at year end ('000) 1 620 244 1 249 132
Summarised group statement
of changes in equity
For the years ended 31 March 31 March
2001 2000
Rm Rm
Balance at 1 April 1 923,4 788,4
Net profit attributable to
ordinary shareholders 713,5 588,6
Dividends (162,1) (96,9)
Net goodwill arising on acquisition
of subsidiaries written back - 1 274,5
Share capital issued at a premium
less share issue expenses 12 175,5 6 429,5
Share election reserve 113,5
Goodwill written off against share
premium account - (7 054,1)
Variation of interests (15,8) -
Exchange differences arising
on translation of foreign entities 18,9 (6,6)
Ordinary shareholders' interest 14 766,9 1 923,4
Summarised consolidated balance sheet
As at 31 March 31 March
2001 2000
Rm Rm
ASSETS
Non-current assets 19 842,1 4 659,5
Property, plant and equipment 5 491,3 3 923,4
Goodwill 11 198,2 -
Intangible assets 2 868,3 523,7
Investments and loans 247,0 211,6
Deferred taxation 37,3 0,8
Current assets 2 440,8 1 703,3
Bank balances, deposits and cash 804,9 332,7
Other current assets 1 635,9 1 370,6
Total assets 22 282,9 6 362,8
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' interest 14 766,9 1 923,4
Minority interests 143,8 580,2
Total equity 14 910,7 2 503,6
Non-current liabilities 4 595,1 2 014,0
Long term liabilities 3 889,2 1 505,3
Deferred taxation 705,9 508,7
Current liabilities 2 777,1 1 845,2
Non-interest bearing liabilities 2 302,0 1 349,5
Interest bearing liabilities 475,1 495,7
Total equity and liabilities 22 282,9 6 362,8
Net asset value per ordinary
share (rand)
- book value 9,11 1,54
Segmental analysis
For the years ended 31 March 31 March
2001 2000 %
Rm Rm change
GEOGRAPHIC
Revenue
South Africa 7 960,2 5 877,0 35
Rest of Africa 377,1 130,9 188
8 337,3 6 007,9 39
EBITDA
South Africa 2 686,6 2 003,6 34
Rest of Africa 107,8 24,0 349
Corporate head office (2,9) (6,4)
2 791,5 2 021,2 38
BUSINESS GROUPING
Revenue
Wireless telecommunications
(MTN) 8 247,1 5 928,0 39
Satellite telecommunications
(Orbicom) 90,2 79,9 13
8 337,3 6 007,9 39
EBITDA
Wireless telecommunications
(MTN) 2 784,2 2 013,8 38
Satellite telecommunications
(Orbicom) 10,2 13,8 (26)
Corporate head office (2,9) (6,4)
2 791,5 2 021,2 38
Notes
1. Basis of accounting
These consolidated condensed annual financial statements are prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice ("GAAP") and Schedule 4 of the South African Companies Act. The
accounting policies are consistent with those used in the annual financial
statements for the year ended 31 March 2000, except that goodwill arising
after 1 April 2000 is accounted for as an asset in the balance sheet and
amortised over a maximum period of 20 years. Goodwill totalling R7 054,1
million was written off directly against share premium in the previous year.
2. Comparatives
Where necessary, comparative figures have been adjusted to conform with
changes in presentation in the current year.
3. Earnings per ordinary share
The calculation of basic headline earnings per ordinary share is based on
attributable earnings before goodwill amortisation
of R1 124,7 million (2000: R588,6 million) and a weighted average of 1 508
874 016 (2000: 1 160 089 660) ordinary shares in issue.
No fully diluted earnings per ordinary share, in respect of debentures
convertible into ordinary shares, have been disclosed as the potential
dilution is not material.
4. Audited results
These year end results have been audited by our auditors
PricewaterhouseCoopers Inc., who have performed their audit in accordance
with South African Statements of Generally Accepted Auditing Standards
issued by the South African Institute of Chartered Accountants. The auditors
will issue an unqualified audit report on the annual financial statements.
5. Listings requirements
This preliminary announcement has been prepared in compliance with the
Listings Requirements of the JSE Securities Exchange South Africa.
6. Corporate governance
The company ascribes to the principles of good corporate governance, details
of which will be included in the annual financial statements.
As at 31 March 31 March
2001 2000
Rm Rm
7.Interest bearing liabilities
Long term liabilities 3 889,2 1 505,3
Current liabilities 475,1 495,7
- call borrowings 5,0 0,9
- short term borrowings 470,1 494,8
4 364,3 2 001,0
8. Capital expenditure incurred
South Africa 1 753,2 1 407,0
Rest of Africa 465,8 106,4
2 219,0 1 513,4
9. Contingent liabilities and
commitments
Guarantees (R) 98,9 -
Guarantees (US$) - 108,0
Operating leases 907,1 710,2
Commitments for capital expenditure
- contracted 259,7 167,3
- approved but not contracted 1 941,2 1 815,4
10. Investments
Unlisted investments at
directors' valuation 29,0 35,7
11. Cash and cash equivalents
Bank balances, deposits and cash 804,9 332,7
Loans to affiliated companies
receivable on demand 3,8 48,6
Call borrowings (5,0) (0,9)
803,7 380,4
Summarised consolidated cash flow statement
For the years ended 31 March 31 March
2001 2000
Rm Rm
Cash inflows from operating activities 2 914,8 1 567,0
Cash outflows from investing activities (4 663,7) (1 788,4)
Cash inflows from financing
activities 2 187,8 359,1
Net increase in cash and
cash equivalents 438,9 137,7
Cash and cash equivalents at beginning
of year 380,4 251,2
Foreign entities translation adjustment (15,6) (8,5)
Cash and cash equivalents at end
of year 803,7 380,4
Commentary
Overview
M-Cell has enjoyed a very successful year during which basic headline
earnings per ordinary share increased by 47% to 74,5 cents from 50,7 cents
in the previous year.
Key achievements during the year include:
- M-Cell increased its shareholding in Mobile Telephone Networks Holdings
(Pty) Limited ("MTN") to 100% with effect from 17 July 2000.
- MTN successfully obtained a licence to operate a mobile telecommunications
network in Nigeria in January 2001.
- MTN launched its operations in Cameroon which, despite a slow start,
recorded rapid growth since December 2000.
- All MTN's operations in Swaziland, Rwanda and Uganda delivered positive
profits despite being in operation for a relatively short period of time.
- MTN's total subscriber base grew by 55% to reach 3,5 million at year-end.
- Orbicom has initiated an electronic funds transfer ("EFT") project for the
banking community in Ghana.
The group continues to grow its wireless data and other value added
services. This has been achieved through:
- Alliance partnerships by MTN with Italy's Aliasnet, Unisys, America
Online's ("AOL") subsidiary ICQ to licence MTN's proprietary mobile Internet
technology, Remote Interactive Voice Response ("RIVR") and to provide two-
way messaging technology from PC to mobile telephone and mobile telephone to
PC.
- Growth of MTN's mobile portal through MTN ICE and MTNsms.com.
- The acquisition by MTN in June 2000, of a 60% stake in Citec (Pty)
Limited, a Tier One Internet Service Provider, to increase the range of data
services provided to corporate customers and position the group for data
services over the internet, with effect from June 2001.
- An alliance partnership by Orbicom with Lockheed Martin Global
Telecommunications for the provision of internet, and communication services
via satellite throughout Africa.
- The acquisition by MTN with effect from January 2001 of a 30% stake in
NewBucks Holdings Limited, the owners of the e-Bucks brand, for the
provision of an enhanced customer loyalty program in alliance with other
Johnnic group subsidiaries and the FirstRand group.
- Growth of MTN's mobile portal through MTN ICE and MTN sms.com.
Results
Total revenue increased by 39% on last year at R8 337,3 million as a result
of strong growth in MTN subscribers. MTN subscribers grew by 55% compared to
last year to reach 3,5 million. The non-South African subscriber base
increased by 166%. This has resulted in the contribution to revenue by the
non-South African operations, although still relatively small, increasing
from 2% of total revenue in the previous year to 5% of total revenue in the
current year, an increase of more than 100%.
Ebitda grew 38% on last year to R2 791,5 million with Ebitda margins
remaining stable at 34% in the current financial year. Margins improved in
the second half of the year following reductions in handset subsidies to
prepaid customers and improved inventory control over the December period.
Payment of the R2,3 billion (US$285 million) fee for the acquisition of the
licence in Nigeria was only made at the end of February 2001. Therefore,
although interest bearing liabilities doubled to R4 364,3 million from
R2 001,0 million last year, finance costs remained virtually unchanged as
the interest impact of the additional borrowings will only be felt in the
new year. The Nigerian licence fee has been funded by borrowings.
All the non-South African operations, with the exception of Cameroon and
Nigeria, returned a positive contribution to headline earnings this year.
This has resulted in a loss from non-South African operations of R74,7
million.
Basic headline earnings grew 91% to R1 124,7 million from R588,6 million
last year. The growth in basic headline earnings from the South African
operations was 95%. However, basic headline earnings per share grew 47% on
last year to 74,5 cents from 50,7 cents last year as a result of dilution
arising out of the issue of 366 million shares to Transnet Limited in
settlement for the purchase of their 23% stake in MTN plus a further
dilution arising out of the acquisition of MTN shares in exchange for M-Cell
shares issued to MTN employees on conversion of their employee debentures on
vesting.
Goodwill arising out of the acquisition of the additional 23% of MTN from
Transnet Limited in July 2000 totalling R11 524,0 million is being amortised
over a period of 20 years. The charge from the date of acquisition in the
current financial year amounted to R411,2 million. This has had the effect
of reducing the growth in attributable earnings to only 21% from last year
at R713,5 million from R588,6 million last year.
Share premium of R12 175,5 million was raised on the issue of M-Cell shares
to Transnet Limited in settlement of the purchase of their stake in MTN as
well as M-Cell shares issued to MTN employees on conversion of their
debentures.
Capital expenditure, excluding licence acquisition costs, totalling
R2 219,0 million was incurred during the year, of which R1 753,2 million was
expended on the South African operations of MTN.
The MTN South Africa operations generated R2,99 billion cash flow from
operations which, after covering finance costs, taxation, dividends and
capital expenditure resulted in free cash in excess of R0,82 billion. The
total group cash outflows from investing activities of R4 663,7 million was
made up primarily of the acquisition of the Nigerian licence and the capital
expenditure mentioned above.
REVIEW OF OPERATIONS
Mobile Telephone Networks Holdings (Pty) Limited ("MTN")
South Africa
MTN South Africa continued to experience solid growth during the year with
subscribers increasing 49% to 3,21 million from 2,16 million in the previous
year. The bulk of the growth occurred among prepaid subscribers who
increased 62% from last year and now represent 76% of the total South
African subscriber base.
The use of non-voice services such as SMS messaging has also increased
during the year, particularly among prepaid subscribers. The MTN network
carries more than 200 million messages each month. In addition, the mobile
data portal, MTN ICE, now has over 500 000 registered users availing
themselves of a variety of data services. Data revenues now account for
2,4% of total revenues, although the bulk of these emanate from non-voice
SMS usage.
MTN confirmed its leadership position in the field of innovation with the
introduction of cell phone banking in South Africa in partnership with one
of the country's leading commercial banks. ATM top-ups for prepaid customers
and other virtual airtime distribution were introduced during the year and
now account for over 25% of recharge volumes.
Revenue grew 36% compared to last year to R7 870,0 million from
R5 797,2 million while Ebitda increased 34% to R2 670,7 million from
R1 989,7 million in the previous year. Ebitda margins declined marginally
compared with last year to 33,9% from 34,3% due to lower margins earned from
prepaid subscriber business as a result of lower than expected prepaid
incoming call revenues and higher than expected prepaid subscriber growth as
well as the reduction of handset accessory stock holdings early in the
financial year. Headline earnings grew a healthy 94% on last year to
R1 194,3 million from R615,3 million.
Rest of Africa
The non-South African operations of MTN enjoyed a number of successes this
year, which culminated in the award of a mobile telecommunications licence
in Nigeria. All three operations that were launched in 1998 in Swaziland,
Uganda and Rwanda, have established themselves as clear market leaders in
their respective countries of operation and are producing positive profits.
MTN Cameroon had a slow start but has since shown rapid growth since
December 2000, and it is currently outperforming the competition in the
country.
Total subscribers grew 166% to 289 825 from 108 960 last year. This has
fuelled a 188% increase in revenues to R377,1 million from
R130,9 million in the previous financial year. More than 90% of the
subscribers are prepaid customers.
Ebitda rose 373% to R113,5 million from R24,0 million last year. A net loss
of R68,8 million after finance charges was recorded, primarily arising from
the new operation in Cameroon.
Orbicom (Pty) Limited ("Orbicom")
Orbicom is realising its goal of transforming itself from being a
broadcasting service provider into a convergence player offering a diverse
range of products and services to the broader African market. Some major
achievements during the year include, among others, the substantial
establishment of an EFT network and banking switch system in Ghana; the
acquisition of licences to uplink to the PAS 10 and the NSS 703 satellites;
the substantial establishment of a platform to provide IP over satellite
services; and the signing of a memorandum of agreement with Lockheed Martin
Global Telecommunications to provide Internet access and Internet- based
services to Africa.
Revenue increased by 13% to R90,2 million from R79,9 million last year,
while Ebitda and headline earnings declined to R10,2 million and a loss of
R1,0 million was recorded primarily as a result of developmental losses that
were incurred in the non-South African operations.
Prospects
The group has enjoyed enormous success in the past year even though the
telecommunications industry worldwide has suffered from a derating, driven
primarily by the high fees paid by operators in Europe for 3G licences and
the heavy debt burdens incurred in the process.
The acquisition of a cellular licence in Nigeria has been a significant
milestone in the group's quest to become the leading provider of
communications services in Africa. MTN's entry into Nigeria, which has a
population of approximately 120 million, creates enormous opportunities for
the group. As was initially the case in South Africa, losses will be
incurred in the first few years of operation in Nigeria including the
interest costs of the borrowings put in place to fund the operation.
Although these may temporarily dampen the overall earnings growth of the
group, future growth in earnings and cash flows are expected to be strong as
has been demonstrated by the existing African operations.
The exploitation by the group of opportunities presented by the convergence
in the telecommunications, media and technology sectors is beginning to bear
fruit. A number of companies have been set up to develop these opportunities
into full businesses.
Shortly before year-end, Airborn, a newly formed company within the
M-Cell group, announced a multi-million dollar deal with Unisys, the world's
largest systems integrator. Airborn connects mobile devices to the Internet
prototype and has patented its interactive RIVR product on a worldwide
basis.
Orbicom has expanded its role beyond its traditional satellite services. The
company is now becoming a significant player in the EFT market as well as a
provider of value added IP over satellite products.
The group currently is seeking clarity on the recently published
telecommunications policy directive. Submissions have been made to the
relevant body in this regard.
M-Cell is considering participating in the bidding process for the Second
Network Operator ("SNO") licence should the regulatory environment be
conducive and economically viable. The company is undertaking research and
analysis to place it in a positive position to participate either directly
or through an appropriate structure in the opportunity. The group also notes
the confirmation of the third cellular licence. This will provide certainty
for the industry. MTN is well prepared for the entrance of new competition.
The group believes that this will stimulate the market.
Due to the strong cash flow position of the group's South African
operations, the group is not entirely dependent on equity to fund expansion
and can reasonably afford to carry significant levels of debt. However,
foreign exchange regulations limit the amount of funds that can be taken
offshore to fund growth.
The group continues to explore funding alternatives for its offshore
operations. The group, however, welcomes the recent relaxations made by the
South African Reserve Bank.
Shareholder matters
M-Cell has always enjoyed a stable shareholder base. The group however notes
the following changes that have been announced by some of its major
shareholders:
- Transnet has announced that it intends to sell its holding in M-Cell to a
strategy equity partner ("SEP"). Discussions in this regard are continuing.
- Johnnic Communications Limited has announced that it will unbundle its
shareholding in M-Cell with effect from 9 July 2001. This is welcomed by M-
Cell as it will improve the liquidity in the shares of the company.
Strate
M-Cell has been scheduled to transfer its share capital to Share Transaction
Totally Electronic ("STRATE"), an electronic settlement platform for share
transactions on the JSE Securities Exchange South Africa ("JSE"), in
November 2001. In terms of the revised Listings Requirements of the JSE
Securities Exchange South Africa, the move to STRATE is obligatory, and will
ensure M-Cell's participation in a sophisticated settlement process in line
with international best practice.
Shareholders will receive further communication in this regard upon
distribution of the annual report.
Dividend
M-Cell's core businesses operate in high growth sectors. The group had
adopted a dividend policy which will allow the businesses to retain and
reinvest the bulk of the cash it generates to fund future growth. A target
dividend cover ratio of five to six times headline earnings will be
followed.
Capitalisation share award and cash underpin
The directors have resolved to award capitalisation shares ("the
capitalisation award") as a dividend to shareholders registered in the
records of
M-Cell at the close of business on Friday, 13 July 2001 ("the record date").
Shareholders will also be entitled to elect to decline the award of
capitalisation shares in respect of the shareholding by renouncing their
entitlement to such capitalisation shares in favour of Johnnic Holdings
Limited, M-Cell's controlling shareholder, which has agreed to act as
underwriter, and to instead receive cash of 7 cents per share.
Shareholders receiving the capitalisation award will be issued new ordinary
shares in M-Cell. The number of new shares to be issued per share held on
the record date will be determined as the ratio that 7 cents multiplied by
1,06 bears to the weighted average traded price of M-Cell shares on the
JSE Securities Exchange South Africa ("the JSE") for the three days ending
Thursday, 9 August 2001 ("the closing price").
The new ordinary shares to be issued pursuant to the capitalisation award
will be issued as fully paid shares of 0,01 cents each by way of a
capitalisation of part of M-Cell reserves and will rank pari passu in all
respects with the M-Cell ordinary shares presently in issue. The issue of
new shares will only be made to ordinary shareholders of M-Cell on the basis
of whole shares. All fractions of new shares will be aggregated and sold on
the JSE for the benefit of the relevant shareholders. Subject to the
approval of the JSE, new M-Cell ordinary shares to be issued will be listed
on the JSE on or about Wednesday, 15 August 2001.
Documentation, which is subject to the approval of the JSE, containing the
full details of the right of election will be posted to shareholders on or
about Friday, 20 July 2001. In order to be valid, completed election forms
will need to be received by M-Cell's transfer secretaries by no later than
12:00 on Friday,
10 August 2001. Should a valid election form not be timeously received, M-
Cell will automatically issue capitalisation shares to all relevant
shareholders concerned.
It is expected that share certificates in respect of the new M-Cell ordinary
shares and, if applicable, cheques in respect of the dividend and fractions,
will be posted to shareholders on or about Wednesday, 15 August 2001.
For and on behalf of the Board
I Charnley J R D Modise
(Chairperson) (Director)
13 June 2001
Johannesburg
These results can be viewed on the website at http://www.m-cell.co.za
E-mail: investor_relations@johnnic.co.za
|