MTN issues notice for significant earnings increase

MTN has notified shareholders that it expects to report a substantial increase in earnings for its half-year results.

The first half of MTN’s 2023 financial year ended on 30 June 2023, and it expects to release its results on 14 August.

MTN expects earnings per share to increase between 10% and 20% (or 45 cents to 89 cents). This translates to a range of R4.90 to R5.34 per share.

“[Earnings per share] includes impairment losses that mainly relate to property, plant and equipment and associates of 13 cents (June 2022: 25 cents), an impairment loss on remeasurement of disposal groups of 21 cents (June 2022: 52 cents) and a net profit on the disposal of SA towers and other assets of 3 cents (June 2022: 16 cents),” MTN explained.

Similarly, MTN expects a headline earnings per share increase of 0% to 10% (or 0 cents to 51 cents). This translates to a range of R5.06 to R5.57 per share.

MTN explained that it restated its headline earnings in line with its announcement at its last full-year results that the deferred tax income on the disposal of its South African towers of R1.1 billion was not included in its interim results last year.

“[Headline earnings] were negatively impacted by some non-operational and once-off items of approximately 207 cents (June 2022: 94 cents) for the six-month period,” MTN stated.

“These include hyperinflation excluding impairments of 38 cents (June 2022: 2 cents), foreign exchange (forex) losses of 169 cents (June 2022: 88 cents) and an IFRS 2 charge arising from the MTN Ghana localisation transaction of 0 cents (June 2022: 4 cents).”

JSE listing requirements stipulate that companies must alert shareholders as soon as they are reasonably confident that their results will be 20% higher or lower than the previous corresponding period.

“Further to the above, the company notes the volatility in forex rates in key markets during H1 2023, including rand depreciation against the US dollar and the liberalisation of forex rates in Nigeria (the naira float),” MTN said.

“Within the aforementioned 169 cents of forex losses outlined in the above guidance, is 128 cents from Nigeria, of which approximately 95 cents was incurred in the month of June 2023 (the month of the naira float).”

RMB’s Matete Thulare recently told Moneyweb Now that South African companies like MTN and MultiChoice face a substantial drop in their Nigerian profits.

He explained that the naira has been devaluing since President Bola Ahmed Tinubu took office in May. It has weakened more than 40% against the rand since the start of the year.

Thulare said companies like MTN have been struggling with the backlog of dollars in Nigeria, which has forced some businesses to turn to unofficial sources.

“That’s undermining the Central Bank’s effort to close the gap between the official market and the black market rates,” he said.

Nigeria’s Central Bank has said it would allow the currency to trade freely until it finds a new market-related level.

While this is a positive step forward for the country, it will take time before reaching this level, and a weak currency will fuel inflation, which Nigeria and the rest of the world are already struggling with.

As a result of the limited forex reserves in Nigeria and Ghana, MTN said it elected for scrip dividend options to pay its 2022 financial year dividends.

“For MTN Nigeria, the ordinary shares created from the scrip dividend election have been approved by Nigeria’s Corporate Affairs Commission and are awaiting final regulatory approval for the shares to be credited to the respective Central Security Clearing System accounts of qualified shareholders,” it said.

“For MTN Ghana, the allocation was completed towards the end of June 2023.”

Therefore, the impacts of the election of the scrip dividend options are not material in the H1 2023 results, MTN stated.

“They will however be accretive to attributable earnings once all allocations are finalised, although this does negatively impact cash upstreamed to the group,” said MTN.

“These effects, particularly rand depreciation against the US dollar and election of the scrip dividend options, have thus also impacted the Group’s holding company (Holdco) leverage in the period, which is anticipated to be towards the upper end of the guidance range of ‘less than 1.5x’.”

MTN said its consolidated net-debt-to-EBITDA is expected to broadly align with its December 2022 level.

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MTN issues notice for significant earnings increase