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MTN GROUP LIMITED - Condensed consolidated financial results for the six months ended 30 June 2021

Release Date: 12/08/2021 07:05
Code(s): MTN     PDF:  
Wrap Text
Condensed consolidated financial results for the six months ended 30 June 2021

MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
(Share code MTN)
(ISIN: ZAE000042164)
(MTN or the Group)

Condensed consolidated financial results for the six
months ended 30 June 2021

MTN is a pan-Africa mobile operator with the strategic intent of
Leading digital solutions for Africa’s progress. We have 277 million
customers in 21 markets and are inspired by our belief that everyone
deserves the benefits of a modern connected life.

-   Group service revenue grew by 2.1% (19.7%*)
-   EBITDA (before once-off items) grew by 6.6% (24.1%*)
-   EBITDA margin (before once-off items) up 1.5 percentage points (pp)
    to 44.8% (up 1.6pp* to 44.9%*)
-   Reported HEPS at 387 cps, down 10.0%; non-operational impacts
    decreased HEPS by 118 cps
-   Holding company (Holdco) net debt down to R36.7 billion (from
    R43.3 billion); leverage improved to 1.4x from 2.2x in December
-   Return on equity (ROE) improved to 18.3% YoY, from 14.1%
-   Capex of R14.8 billion (R11.6 billion under IAS 17, with capex
    intensity of 13.3%)
-   Subscribers decreased by 2.3 million to 277.3 million, impacted by
    new SIM registration regulations in Nigeria (excluding Nigeria,
    subscribers were up 5.4 million)
-   Active Mobile Money (MoMo) customers increased by 27.9% year-on-
    year (YoY) to 48.9 million
-   MoMo value of transactions up 88.3% YoY to US$115.2 billion
-   No interim dividend declared, in line with 2021 guidance
*Constant currency information after accounting for the impact of the
pro forma adjustments as defined and included throughout this Stock
Exchange News Service of the JSE Limited (SENS) announcement.

Any forward-looking financial information disclosed in this results
announcement, including the dividend guidance, is the directors’
responsibility and has not been reviewed or audited or otherwise
reported on by our external joint auditors.

Certain information presented in these results constitutes pro forma
financial information. The responsibility for preparing and presenting
the pro forma financial information and for the completeness and
accuracy of the pro forma financial information is that of the
directors of MTN. This is presented for illustrative purposes only.
Because of its nature, the pro forma financial information may not
fairly present MTN’s financial position, changes in equity, and
results of operations or cash flows. This pro forma financial
information has not been audited or reviewed or otherwise reported on
by our external joint auditors.

Certain financial information presented in these consolidated
financial results has been prepared excluding the impact of
hyperinflation, impairments of goodwill, property, plant and
equipment, intangible assets and joint ventures & associates, fair
value gain on acquisition of aYo, impairment loss on remeasurement of
disposal groups, loss on deconsolidation of MTN Syria, impairment of
investment in MEIH, impairment of Iran receivable, gain on disposal
of ATC Ghana and ATC Uganda and constitutes pro forma financial
information to the extent that it is not extracted from the segment
disclosure included in the reviewed condensed consolidated financial
results for the six months ended 30 June 2021. This pro forma financial
information has been presented to eliminate the impact of the pro
forma adjustments from the consolidated financial results to achieve
a comparable YoY analysis. The pro forma adjustments have been
calculated in terms of the Group accounting policies which are
consistent with International Financial Reporting Standards (IFRS)
and as disclosed in the consolidated financial statements for the year
ended 31 December 2020.

Constant currency information has been presented to remove the impact
of movement in currency rates on the Group's results and has been
calculated by translating the prior financial reporting period’s
results at the current period’s average rates. The measurement has
been performed for each of the Group's currencies, materially being
that of the US dollar and Nigerian naira. The constant currency growth
percentage has been calculated based on the prior period constant
currency results compared to the current interim results. In addition,
in respect of MTN Irancell, MTN Sudan, MTN South Sudan and MTN Syria,
the constant currency information has been prepared excluding the
impact of hyperinflation. The economies of Sudan, South Sudan, Iran
and Syria were assessed to be hyperinflationary for the period under
review and hyperinflation accounting was applied. Hyperinflation
accounting was applied to MTN Syria until loss of control by the

This short-form announcement is the responsibility of the directors
and represents only a summary of the information contained in the full

interim financial results. Consequently, it does not contain full or
complete details. Any investment decisions made by investors and/or
shareholders should be based on consideration of the full interim
financial results as a whole and investors and/or shareholders are
encouraged to review the full interim financial results as follows:

On MTN’s website at:

and on SENS on the JSE’s website at:

This announcement is itself not reviewed or audited but is extracted
from the underlying unmodified reviewed information by the external
joint auditors of MTN, being PricewaterhouseCoopers Inc. and Ernst
and Young Inc., available for inspection at MTN’s registered office
at no charge, and at the offices of our sponsors from 09:00 to 16:00

The external joint auditors’ unmodified limited assurance report
prepared in terms of ISRE 2410 is also available for inspection at
the MTN’s registered office, weekdays from 09:00 to 16:00.

The directors of MTN take full responsibility for the preparation of
this announcement and ensuring that the financial information has been
correctly extracted from the underlying reviewed information.

Copies of the full interim financials may be requested by emailing or calling 083 912 2300.

The Group’s results and segmental report are presented in line with
the Group’s operational structure. The Group’s underlying operations
are clustered as follows: South Africa (SA), Nigeria, the Southern
and East Africa (SEA) region, the West and Central Africa (WECA)
region and the Middle East and North Africa (MENA) region and their
respective underlying operations.

The SEA region includes Uganda, Zambia, Rwanda, South Sudan, Botswana
(joint venture-equity accounted), eSwatini (joint venture-equity
accounted) and Business Group. The WECA region includes Ghana,
Cameroon, Côte d’Ivoire, Benin, Congo-Brazzaville, Liberia, Guinea
Conakry and Guinea Bissau. The MENA region includes Iran (joint
venture-equity accounted), Syria, Sudan, Yemen and Afghanistan.
In line with the Group’s strategy announced in March 2021, MTN Ghana
results have been reported under the WECA region effective 1 January
2021 (previously included in SEAGHA region). Prior year numbers have
been restated for SEA and WECA accordingly.
MTN Syria results have been disclosed up to February for 2021 and up
to 31 December for 2020, as a result of loss of control effective
February 2021, following MTN Syria being placed under judicial

Group President and CEO Ralph Mupita comments:
“Notwithstanding the many challenges presented by the COVID-19
pandemic, MTN delivered a solid H1, exceeding most of the Group’s
medium-term targets through sustained commercial momentum as we
executed on our Ambition 2025 strategy.

Our sustained investment in our networks and platforms, strong market
positions, leading African brand and capital allocation disciplines,
have placed MTN in a strong position to be able to support societies
that we operate in to navigate the COVID-19 pandemic. We believe that
drive for faster digitalisation of economies is a structural change
that will accelerate through the pandemic and beyond.

In H1, we continued to prioritise the health and safety of our people
as well as sustain initiatives to support the continent’s recovery
from the pandemic’s devastating impacts on lives and livelihoods. By
12 July 2021, we had recorded 2 452 COVID-19 infections and mourned
the loss of 18 of our staff across the markets.

We are encouraged by the rollout of COVID-19 vaccination programmes
across our markets. By 12 July 2021, we had recorded 1 780 (8.1%) of
our staff vaccinated with at least one dose. Our efforts to support
the rollout of vaccines across the African continent continue, and we
anticipate that the US$25 million vaccine donation to the Africa
Centres for Disease Control and Prevention (Africa CDC) will be fully
utilised in H2 2021 as vaccine availability improves. One million
vaccine doses were distributed by the Africa CDC in H1 2021, ahead of
challenges in securing vaccines through the COVAX facility as the
Delta variant became more prevalent.

We added our voice to the calls by the World Health Organisation and
the Africa CDC for COVID-19 vaccine equity for developing markets.
The push for herd immunity across the world and a return to broad-
based socio-economic global growth will not be possible while
developing markets battle to access vaccines. Public private
partnerships focused on a sustainable future for our planet will be
critical in order to successfully navigate this pandemic.

With the launch of the #OneMorePush campaign, we have extended our
partnership with the Africa CDC. This campaign encourages people to
not give up in the fight against COVID-19 – and to continue to wear
their masks, wash their hands and practise social distancing, at a
time when vaccination levels across our markets still lag developed

 A key part of Ambition 2025 is to create shared value to support the
progress of Africa. Notwithstanding the challenges of slow vaccine
rollout in the period, we were encouraged by the progress in digital
and financial inclusion across our markets. We reduced the cost to
communicate to ensure that we remain true to our core belief that

everybody deserves the benefits of a modern connected life. We added
approximately R50 billion of economic value during H1 to sustain
societies that went a long way in supporting the nation states in
which we operate and serve.

Group service revenue grew by 19.7%* and EBITDA increased by 24.1%*,
with continued operating leverage as the EBITDA margin expanded by
1.6pp* to 44.9%*. This reflects pleasing service revenue growth from
our large operations, operating leverage achieved and on-going
execution of our expense efficiency programme. All MTN South Africa’s
(MTN SA) business units recorded good growth, and both MTN Nigeria
and MTN Ghana delivered double-digit percentage increases in service

Reported HEPS were impacted by a number of non-operational and once-
off items, which included accounting adjustments relating to our
Middle East portfolio and material COVID-19 donations to the AU for
vaccines and the Coalition Against COVID-19 (CACOVID) in Nigeria.
Excluding these items, adjusted HEPS increased by 31.5%. This
supported the further expansion of our adjusted ROE, which was up by
4.2pp to 18.3% versus June 2020.

The solid results were delivered despite a 2.3 million decline in the
number of subscribers to 277.3 million, due to new industry-wide SIM
registration regulations in Nigeria. These included a ban on new SIM
activations, which was lifted in April 2021. New additions in Nigeria
have since remained muted, as expected, owing to the new registration
requirements. Excluding Nigeria, Group subscribers increased by
5.4 million and we expect subscriber growth to normalise over time as
more of MTN’s enrolment centres in Nigeria are certified for SIM
registration. Active data subscribers increased by 3.1 million to
117.4 million.

In our platform businesses, the number of monthly active users (MAU)
rose by 27.9% YoY to 48.9 million for MoMo and by 299.7% YoY to 8.0
million for ayoba. The growth in these businesses is underpinned by
the momentum in their underlying value drivers, which continued to
trend strongly in the period.

The work to structurally separate the fintech business by the end of
Q1 2022 is on track. We are pleased to announce the InsurTech alliance
with the Sanlam Group across Africa. This strategic alliance has the
potential to change the face of insurance in Africa by leveraging the
brand and reach of MTN, together with Sanlam’s licensing, insurance
expertise and extensive footprint. Through this partnership, we will
develop and distribute a comprehensive range of insurance, investment
and savings products to MTN customers using digital channels. We
believe that this will support our ambition to scale our InsurTech
portfolio more rapidly in line with our pan-African focus. Our

InsurTech business, through aYo, currently has 6.3 million active
policies with a 2025 target of 30 million policyholders.

The structural separation of the fibre business is also underway and
is targeted to be completed in the next two years.

The focus on the faster de-leveraging of our balance sheet is
progressing well, with the continued improvement in consolidated net
debt-to-EBITDA to 0.6x (from 0.8x) and Holdco leverage to 1.4x (from
2.2x). This was boosted by cash of R9.3 billion upstreamed from our
Operating Companies (Opcos) (including R4.0 billion from Nigeria) in
H1, as well as R1.8 billion in proceeds from the sale of Belgacom
International Carrier Services SA (BICS) in February 2021 as part of
our asset realisation programme (ARP). There is also good progress
being made to realise value in our stake in IHS in the near term as
well as in the work on a transaction for the tower portfolio in MTN
SA, which remains on track for a decision by the end of Q3 2021.

Our exit from the Middle East, in line with the pan-African focus of
our strategy, is underway. The Group has initiated an exit of Syria,
through abandoning the operation given regulatory actions and demands
that make operating in the market untenable. We reserve our rights to
seek redress through international legal processes given the actions
of the Syrian authorities that have left us with no other choice than
to exit. In H1, MTN Syria represented less than 1% of MTN Group EBITDA,
prior to deconsolidation in February 2021. Exploration of the options
to exit Yemen and Afghanistan in an orderly manner is ongoing and we
will keep the market updated as the processes develop.

Looking ahead, we remain focused on executing on Ambition 2025,
driving growth, deleveraging the Holdco balance sheet and unlocking
value, while navigating the impacts of the pandemic. We maintain our
Group capex guidance of approximately R30.1 billion for the year, on
current currency assumptions, as we remain committed to investing in
the capacity and resilience of all our networks as well as scaling
our platforms to drive accelerated growth and achieving our medium-
term targets.”

Group revenue increased by 20.0%* to R86.7 billion (2020: R84.1

Basic earnings per share (EPS) decreased by 78.0% to 148 cents (2020:
674 cents). 2021 EPS were impacted by impairment losses of 71 cents
relating to MTN Yemen and derecognition losses relating to MTN Syria
of approximately 262 cents. There was some offset arising from the
gain on disposal of BICS, amounting to approximately 67 cents. EPS in
June 2020 had included the benefit from gains amounting to

approximately 341 cents on the disposal of the ATC Uganda and ATC
Ghana tower associates announced in March 2020.

Reported headline earnings per share (HEPS) declined by 10.0% to 387
cents (2020: 430 cents). HEPS were negatively impacted by net non-
operational and once-off items amounting to 118 cents from the
following items: hyperinflation (excluding impairments) of 5 cents
(10 cents in 2020), the impact of foreign exchange gains and losses
of -99 cents (28 cents in 2020), the reversal of the time value loss
recognised on the Irancell receivable of 0 cents (8 cents in 2020)
and material COVID-19 donations of -24 cents (0 cents). We thus
continued to show pleasing momentum in the growth of underlying
earnings at the bottom line; on an adjusted basis HEPS was up 31.5%
to 505 cents.

Dividend and medium-term dividend policy update
As previously communicated, the board of directors of MTN (Board) has
suspended dividend payments until March 2022 (H1 20: no interim
dividend). At that time, the Board will communicate a revised medium-
term dividend policy along with the announcement of FY 2021 results.

We have also previously advised shareholders that the Board
anticipates paying a minimum ordinary dividend of at least 260cps as
a final dividend for FY 2021. On assessment of the progress of cash
upstreaming from Nigeria, ARP delivery and COVID-19 impacts, the Board
will consider returning further cash to shareholders, in line with
our capital allocation framework, in the form of special dividends or
share repurchases after the release of FY 2021 results.

For and on behalf of the board,
MH Jonas               RT Mupita                 TBL Molefe

Group Chairman         Group     President   and Group CFO

11 August 2021

Date of release 12 August 2021

Lead sponsor

JP Morgan Equities (SA) Proprietary Limited

Joint sponsor

Tamela Holdings Proprietary Limited


Date: 12-08-2021 07:05:00
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