MTN GROUP LIMITED - GROUP REVIEWED INTERIM RESULTS FOR THE HALF YEAR ENDED 30
SEPTEMBER 2003 AND CAUTIONARY ANNOUNCEMENT
MTN GROUP LIMITED
Registration number:1994/009584/06
ISIN code: ZAE 000042164
Share code: MTN
Group reviewed interim results for the half year ended 30 September 2003 and
cautionary announcement
Revenue up by 30%
EBITDA up by 61%
Adjusted headline earnings per share up by 102%
Total number of subscribers increased by 39%
Review of results
MTN Group Limited ("MTN Group") posted a strong performance for the first half
of the 2004 financial year. Consolidated revenue rose to R11272 million, a 30%
increase over the comparable period last year. Earnings before Interest, Tax,
Depreciation and Amortisation ("EBITDA") increased by 61% to R4334 million,
resulting in Profit after Taxation ("PAT") of R2133 million, a 168% increase
over the same period last year. The Group produced interim headline Earnings Per
Share ("EPS") of 127,1 cents (September 2002:60,9 cents), adjusted to 123,3
cents due to the exclusion of deferred tax credit of R63 million raised by MTN
Nigeria. This compares to adjusted headline earnings of 60,9 cents to September
2002, and 142,8 cents for the year to March 2003. 7,9 million capable
subscribers were recorded in the Group"s managed operations, up 39% since
September 2002.
While the South African operations showed satisfactory revenue growth of 26% to
R7105 million, the Group"s international operations increased revenue by 39%
from R2969 million to R4117 million, despite the impact of the strong Rand on
consolidation of their results. The international operations contributed 37% to
Group revenue during the review period. The overall EBITDA margin for the Group
increased to 38,4%, from 30,9% for the comparable half year. Both MTN Nigeria
and MTN Uganda recorded EBITDA margins of over 50% for the period, whilst the
other international operations achieved EBITDA margins of well over 40%. MTN
South Africa"s EBITDA margin showed improvement to 28,5% from 26,4% for the 6
month period to March 2003. This was primarily due to operational cost
containment in South Africa, coupled with higher overall cost to revenue
efficiencies.
Net finance costs for the Group declined by 3% to R271 million against the
comparable half year. This resulted from lower debt levels due to strong
operating cash-flow generation and slower than anticipated network expansion in
MTN Nigeria. Foreign exchange losses were also lower than expected, given the
relative strength of the Rand. The unrealised losses incurred on the
international sinking fund policy taken out as an indirect US dollar hedge
increased by R43 million during the half year. The Group has achieved a
comfortable level of EBITDA-to-net interest cover of 16 times.
The Group"s effective tax rate, excluding goodwill amortisation charges, remains
low at 18,8%, primarily due to MTN Nigeria being tax exempt for a period of five
years as a result of its pioneer status, coupled with its deferred tax credit.
Consolidated PAT increased to R2133 million from R796 million, representing
18,9% of revenue, compared with 9,2% in the previous half year. Attributable
earnings for the Group increased by 157% to R1 813million.
Adjusted headline EPS increased by 102% to 123,3 cents. South African wireless
operations contributed 57,0 cents per share, a 25% increase compared to the same
period last year. International operations performed above expectations,
contributing 66,5 cents per share.
The Group"s total assets have increased by 2,7% to R28925 million since 31 March
2003. Long-term liabilities reduced to R2610 million from R3235 million, while
short-term borrowings of R1649 million were recorded. These short-term
borrowings include the Naira equivalent of US$170 million relating to a facility
within MTN Nigeria, which has subsequently been repaid on 21 November 2003 from
draw-downs against a limited recourse, medium-term project finance facility of
US$345 million (with an additional US$50 million stand-by facility provided by
the International Finance Corporation ("IFC")).
As at 30 September 2003, the Group had cash on hand of R2755 million as well as
securitised cash deposits of R776 million against Letters of Credit in Nigeria.
Taking both cash balances into account, net debt for the Group has further
reduced to R728 million at 30 September 2003, from R2707 million at 31 March
2003. Consequently, the debt/equity ratio for the Group (excluding goodwill)
decreased to 8% from 35% at 31 March 2003. The Group"s net unhedged US$ debt
position has declined to an acceptable US$50 million as compared to US$157
million at 31 March 2003.
MTN Nigeria accounted for 65% of the Group"s total capital expenditure for the
period. It is expected that total capital expenditures for the full year will be
lower than the capital commitments of R6,6 billion disclosed at 31 March 2003.
This is partly due to the stronger Rand as well as a slower than anticipated
pace of network roll-out in Nigeria.
The Group"s international growth strategy continues to gain momentum and
consequently, our results are continuously affected by exchange rate
fluctuations. During the review period, the Rand appreciated by 12% against the
US$ and by between 7% and 15% against the functional currencies of the Group"s
major international operations. On translation into Rand, this had the effect of
reducing the assets and liabilities of international operations reflected in the
consolidated balance sheet, as well as their revenues and earnings. Foreign
currency translation reserves were reduced by R436 million during the period.
Operational review
MTN SOUTH AFRICA
MTN South Africa ("MTN SA") demonstrated that the South African market remains
buoyant, with an increased level of net connections
relative to the same period in the previous year. This was aided by the launch
of new products into the market such as MTN Mychoice Top-up, a world first low-
end hybrid prepaid/contract product, coupled with attractive connection
incentives. A total capable subscriber base of 5 360 000 was recorded, with net
connections for the six months of 130 000 for post-paid and 507 000 for pre-
paid.This represents an increase in the subscriber base of 13% since 31 March
2003.
Blended Average Revenue Per User per month ("ARPU") of R207 was achieved for the
six-month period, marginally up on the full year figure to March 2003 of R206.
Both post-paid and pre-paid subscriber ARPU edged upwards from R607 and R101 at
March 2003 to R609 and R103 for the six-month period. Data services, including
SMS, contributed 4,0% of total revenue.
MTN INTERNATIONAL
MTN Nigeria experienced strong demand for its services, requiring a controlled
sign-up of new subscribers to match the available
network capacity, while accelerated network roll-out continued. By 30 November
2003, the number of base stations had increased to 652
from 378 at 31 March 2003, while the number of operational switches had also
increased to 14. Whilst capital expenditure has been lower than anticipated for
the period, it is expected that the entire capital expenditure budget will be
fully committed by year-end. Over the
half-year, the subscriber base increased by 33% to 1 381 000, recording ARPU of
US$55.Taking market conditions into consideration, MTN Nigeria announced the
introduction of a new tariff plan, as well as the provision of a per-second
billing option, to be effective from 1 December 2003. It is envisaged that some
of the negative impact of such tariff reductions will be off-set by increased
utilization.
MTN Cameroon continues to perform satisfactorily indicating a sustainable
turnaround of this operation which has maintained market
leadership in a highly competitive environment. A total of 526 000 subscribers
was recorded as at 30 September 2003, representing a 22% increase since 31 March
2003 with ARPU stabilizing at US$22. Agreement has been reached regarding
recovery of outstanding
interconnect debtors in both MTN Nigeria and MTN Cameroon.
MTN Uganda, MTN Rwanda and MTN Swaziland all show signs of a slow down and the
beginnings of a more mature phase in their respective life-cycles. MTN Uganda
has experienced a decline in ARPU from US$28 to US$23 as a result of currency
devaluation during the first
quarter of 2003, as well as the general dilution of its subscriber base as it
rolls out into the rural parts of the country bringing on new subscribers with a
lower average usage. Subscriber numbers of 416 000, 132 000 and 78 000 were
recorded for the three operations respectively.
STRATEGIC INVESTMENTS
Strategic Investments continues to explore synergistic opportunities adjacent to
the core mobile business. Lower revenues were recorded
during this period against the comparable half year, primarily due to the
appreciation of the Rand against the foreign currencies in which much of
Orbicom"s revenue is denominated.
Prospects
Assuming current market conditions prevail, the Board is confident that the
South African operation will continue its strong free cash flow generation while
international operations are expected to maintain positive subscriber growth,
underpinned by significant ongoing capital investment in network roll-out,
particularly in MTN Nigeria. The Group now derives an increasing proportion of
earnings from outside South Africa and, as a result, is becoming more
susceptible to foreign exchange rate movements. In line with our vision of being
the leading communications provider on the continent, the Group continues to
explore value-enhancing investment opportunities.
Dividend
Although the Group generated significant free cash over the period, the majority
of these cash resources have been re-invested into the
international expansion programme, as well as into the reduction of borrowings.
Accordingly, no interim dividend is proposed. The Board
regularly reviews the Group"s dividend policy, taking cognizance of potential
expansion opportunities with a view to optimising returns to
shareholders.
Post balance sheet events
Subsequent to 30 September 2003, the Group disposed of 3,0% of its investment in
MTN Nigeria to the IFC and approximately 2,3% to its local Nigerian partners
subject to certain terms and conditions, at a total value of US$28 million. Its
effective interest in MTN Nigeria has reduced to 74,2% as a result.
Subsequent to year-end, the Group acquired an additional 9% of the equity of MTN
Rwanda.
Cautionary announcement
Shareholders are advised that the Company has entered into negotiations which,
if successfully concluded, may have an effect on the price of the Company"s
securities. Accordingly, shareholders are advised to exercise caution when
dealing in the Company"s securities until a further announcement is made.
For and on behalf of the Board
M C Ramaphosa P F Nhleko
(Non-executive Chairman) (Group Chief Executive Officer)
Sandton
1 December 2003
Certain statements in this announcement that are neither reported financial
results nor other historical information are forward-looking statements,
relating to matters such as future earnings, savings, synergies, events, trends,
plans or objectives.
Undue reliance should not be placed on such statements because they are
inherently subject to known and unknown risks and uncertainties and can be
affected by other factors that could cause actual results and Company plans and
objectives to differ materially from those expressed or implied in the forward-
looking statements (or from past results).
Unfortunately the Company cannot undertake to publicly update or revise any of
these forward-looking statements, whether to reflect new information of future
events or circumstances or otherwise.
OPERATIONAL DATA
Six months Six months Year
ended ended ended
30 Sept 30 Sept % 31 March
2003 2002 change 2003
South Africa
Subscribers 5 360 000 4 284 000 25 4 723 000
ARPU (Rand) 207 210 (1) 206
Swaziland
Subscribers 78 000 63 000 24 68 000
ARPU (Rand) 209 210 - 206
Cameroon
Subscribers 526 000 316 000 66 431 000
ARPU (US$) 22 21 5 21
Nigeria
Subscribers 1 381 000 609 000 127 1 037 000
ARPU (US$) 55 60 (8) 57
Rwanda
Subscribers 132 000 90 000 47 105 000
ARPU (US$) 23 28 (18) 27
Uganda
Subscribers 416 000 298 000 40 363 000
ARPU (US$) 23 34 (32) 28
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed % Audited
Rm Rm change Rm
Revenue 11 272 8 684 30 19 405
Cost of sales (4 730) (3 595) (8 321)
Gross profit 6 542 5 089 29 11 084
Operating expenses
- net of sundry income (2 208) (2 402) (4 867)
Earnings before interest,
taxation, depreciation and
amortisation (EBITDA) 4 334 2 687 61 6 217
Depreciation (977) (767) (1 651)
Amortisation (92) (138) (233)
Profit from operations
before goodwill
amortisation 3 265 1 782 83 4 333
Goodwill amortisation (299) (298) (596)
Profit from operations 2 966 1 484 100 3 737
Finance income 99 73 124
Finance costs (370) (352) (957)
Share of profits of
associates 2 1 1
Profit before taxation 2 697 1 206 124 2 905
Taxation (564) (410) (687)
Profit after taxation (PAT) 2 133 796 168 2 218
Minority interest (320) (91) (289)
Attributable earnings 1 813 705 157 1 929
HEADLINE EARNINGS
CALCULATION
Attributable earnings 1 813 705 157 1 929
Exclude: non-headline
earnings items
Goodwill amortisation 299 298 596
Gain on disposal of 20%
shareholding in MTN
Cameroon (91) (91)
Provision (released)/created
against loan arising on
disposal of MTN Cameroon
to reflect net asset value (10) 91 49
Basic headline earnings 2 102 1 003 110 2 483
Less: adjustment
Reversal of deferred tax
credit (see note 9) (63) - (128)
Adjusted headline earnings 2 039 1 003 103 2 355
HEADLINE EARNINGS PER
ORDINARY SHARE
CALCULATION
Attributable earnings per
share (cents) 109,6 42,8 156 117,0
Effect of goodwill
amortisation 18,1 18,1 36,1
Net effect of disposal of
stake in MTN Cameroon (0,6) - (2,5)
Basic headline earnings
per share (cents) 127,1 60,9 109 150,6
Effect of reversal of
deferred tax credit
(see note 9) (3,8) - (7,8)
Adjusted headline earnings
per share (cents) 123,3 60,9 102 142,8
Contribution to adjusted
headline earnings per
ordinary share (cents)
Wireless telecommunications
(MTN) 123,5 61,6 100 144,6
- South Africa 57,0 45,6 25 90,2
- Rest of Africa 66,5 16,0 316 54,4
Satellite communications
(Orbicom) (0,2) (0,7) (1,8)
Adjusted headline earnings
per share (cents) 123,3 60,9 102 142,8
Number of ordinary shares
in issue:
- Weighted average (000) 1 654 341 1 646 566 1 648 530
- At period end (000) 1 656 452 1 651 292 1 652 057
SUMMARISED CONSOLIDATED BALANCE SHEET
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 22 152 23 359 22 842
Property, plant and equipment 9 331 9 045 9 374
Goodwill 10 033 10 599 10 298
Intangible assets 1 941 3 193 2 263
Investments and loans 618 449 734
Deferred taxation 229 29 173
Non-current prepaid tax - 44 -
Current assets 6 773 5 660 5 314
Bank balances, deposits, cash
and amounts receivable on demand 2 755 1 529 1 542
Securitised cash deposits* 776 1 248 586
Other current assets 3 242 2 883 3 186
Total assets 28 925 29 019 28 156
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" interest 18 481 16 458 17 063
Minority interests 1 086 941 882
19 567 17 399 17 945
Non-current liabilities 3 402 2 778 4 042
Long-term liabilities 2 610 1 822 3 235
Deferred taxation 792 956 807
Current liabilities 5 956 8 842 6 169
Non-interest bearing liabilities 4 307 4 207 4 569
Short-term borrowings 1 408 4 379 1 394
Call borrowings 241 256 206
Total equity and liabilities 28 925 29 019 28 156
Net asset value per ordinary
share (rand)
- Book value 11,16 9,97 10,33
Net debt/equity 4% 21% 15%
Net debt/equity (excluding
goodwill) 8% 54% 35%
* These amounts are placed on deposit with banks in Nigeria to secure letters of
credit.
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Net cash generated by operations 4 064 2 892 6 735
Net finance cost (232) (279) (721)
Taxation paid (558) (426) (684)
Cash inflows from operating
activities 3 274 2 187 5 330
Cash outflows from investing
activities (1 435) (1 859) (4 333)
1 839 328 997
Cash (out)/inflows from financing
activities (177) 974 187
Net movement in cash and cash
equivalents 1 662 1 302 1 184
Cash and cash equivalents at
beginning of period 1 922 1 230 1 230
Foreign entities translation
adjustment (294) (11) (492)
Cash and cash equivalents at end
of period 3 290 2 521 1 922
SUMMARISED GROUP STATEMENT OF CHANGES IN SHAREHOLDERS" EQUITY
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Balance at beginning of period 17 063 15 916 15 916
Effect of adoption of AC133 (15) - -
Restated opening balance at
beginning of period 17 048 15 916 15 916
Net profit attributable to
ordinary shareholders 1 813 705 1 929
Share capital issued at a premium
less share issue expenses 56 138 148
Exchange differences arising on
translation of foreign entities (436) (301) (930)
Balance at end of period 18 481 16 458 17 063
SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
Wireless telecommunications (MTN)
- South Africa 7 105 5 647 12 298
- Rest of Africa 4 117 2 969 6 972
11 222 8 616 19 270
Satellite communications
(Orbicom) 50 68 135
11 272 8 684 19 405
EBITDA
Wireless telecommunications (MTN)
- South Africa 2 027 1 635 3 389
- Rest of Africa 2 308 1 056 2 842
4 335 2 691 6 231
Satellite communications
(Orbicom) (1) (4) (14)
4 334 2 687 6 217
PAT
Wireless telecommunications (MTN)
- South Africa 941 749 1 485
- Rest of Africa 1 492 354 1 355
2 433 1 103 2 840
Satellite communications
(Orbicom) (3) (11) (29)
Corporate head office (goodwill) (297) (296) (593)
2 133 796 2 218
NOTES
1. Accounting policies and basis of preparation
This condensed consolidated interim financial information has been prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice (GAAP) and Schedule 4 of the South African Companies Act (Act No 61 of
1973) as amended. The accounting policies are consistent with those used in the
annual financial statements for the year ended 31 March 2003, except for the
adoption of the accounting statement on recognition and measurement of financial
instruments (AC133).
All significant international subsidiaries are incorporated in the condensed
consolidated interim financial information as foreign entities, using the ruling
exchange rate at half year-end for translation of assets and liabilities and the
weighted average exchange rate during the period for translation of income,
expenditure and cash flows. Exchange differences arising on consolidation are
taken directly to a foreign currency translation reserve.
2. Headline earnings per ordinary share
The calculations of basic and adjusted headline earnings per ordinary share are
based on basic headline earnings of R2102 million (2002: R1 003 million) and
adjusted headline earnings of R2039 million (2002: R1003 million) respectively,
and a weighted average of 1654341082 (2002: 1646566391) ordinary shares in
issue. No fully diluted earnings per ordinary share, in respect of debentures
and options convertible into ordinary shares, have been disclosed as the
potential dilution is not considered to be material.
3. Independent review by the auditors
This condensed consolidated interim financial information has been reviewed by
our joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba vsp Inc., who
have performed their review in accordance with the Statement of South African
Auditing Standards applicable to review engagements.
A copy of their unqualified review report is available for inspection at the
registered office of the Company.
4. Listing requirements
This interim announcement has been prepared in compliance with the Listings
Requirements of the JSE Securities Exchange South Africa.
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
5. Capital expenditure incurred 1 466 1 834 4 235
6. Commitments and
contingent liabilities
Operating leases 554 782 1 515
Contingent liabilities 48 95 52
7. Commitments for capital
expenditure
- Contracted for 2 351 1 791 1 144
- Authorised but not
contracted for 2 660 2 614 5 467
8. Cash and cash equivalents
Bank balances, deposits and cash 2 755 1 529 1 542
Securitised cash deposits 776 1 248 586
Call borrowings (241) (256) (206)
3 290 2 521 1 922
9. Recognition of deferred tax asset
The Group"s subsidiary in Nigeria has been granted a five-year tax holiday under
"pioneer status" legislation. Capital allowances arising during this period may
be carried forward and claimed as deductions against taxable income from the
sixth year of operations onwards. A deferred tax credit relating to these
deductible temporary differences has been recognised in the results to 30
September 2003 in terms of the requirements of South African Statement of
Generally Accepted Accounting Practice AC102 - Income Taxes, which requires a
deferred tax asset to be recognised for all deductible temporary differences to
the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilised.
As previously disclosed, although the Group has complied with the requirement of
AC 102 in this regard, the Board of Directors has reservations about the
appropriateness of this treatment in view of the fact that no cognizance may be
taken in determining the value of such deferred tax assets for uncertainties
arising out of the effects of the time value of money or future foreign exchange
movements.
The Board therefore resolved to report adjusted headline earnings (negating the
effect of the deferred tax credit of R63 million) in addition to basic headline
earnings, to more fully reflect the Group"s results for the period.
10. Post-balance sheet events
MTN International (Mauritius) Limited has disposed of approximately 5,3% of MTN
Nigeria for an amount of US$28 million.
A medium-term limited recourse financing facility of US$345 million (with an
additional US$50million standby facility) was concluded on 4 November 2003, and
from the first draw-downs made on 21 November 2003, MTN Nigeria"s short-term
commercial paper facility of US$170 million has been repaid.
The Group acquired an additional 9% of the equity of MTN Rwanda.
Directorate: M C Ramaphosa (Chairman), P F Nhleko* (CEO), D D B Band, S L
Botha*, I Charnley*, Z N A Cindi, R S Dabengwa*, P L Heinamann, S N Mabaso, R D
Nisbet*, A F van Biljon, L C Webb (alternate) *Executive
Company Secretary: M M R Mackintosh 3 Alice Lane, Sandown Extension 38,
Sandton, 2196 Private Bag 9955, Sandton, 2146
Registered office: 3 Alice Lane, Sandown Extension 38, Sandton, 2196
American Depository Receipt (ADR) programme: Cusip No. 55271U109 ADR to ordinary
share 1:1
Depository: The Bank of New York, 101 Barclay Street New York NY 10286, USA
Office of the South African Registrars: Computershare Limited (Registration
number: 1958/003546/06) 70 Marshall Street, Johannesburg, 2001 PO Box 61051,
Marshalltown, 2107
Joint auditors: PricewaterhouseCoopers Inc., 2 Eglin Road, Sunninghill, 2157
Private Bag X36, Sunninghill, 2157 and SizweNtsaluba vsp Inc., 1 Woodmead
Drive, Woodmead Estate, PO Box 2939, Saxonwold, 2132
E-mail: investor_relations@mtn.co.za
These results can be viewed on the Group"s website at http://www.mtngroup.com
Sponsor
Merrill Lynch South Africa (Pty) Limited
|