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MTN GROUP LIMITED - SUMMARY OF THE AUDITED RESULTS FOR THE YEAR ENDED
31 MARCH 2004 AND DIVIDEND DECLARATION
MTN Group Limited
Registration: 1994/009584/06
ISIN code: ZAE000042164
Share code: MTN
SUMMARY OF THE AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2004 AND DIVIDEND
DECLARATION
FINANCIAL HIGHLIGHTS
Revenue increased to R23,9 billion up 23%
Profit after tax increased to R4,3 billion up 94%
Adjusted headline EPS* increased to 253,1 cents up 77%
Subscribers** increased to over 9,5 million up 42%
Dividend of 41 cents declared to shareholders
* Earnings per share
** Capable and active subscribers
Operational Data
31 March 31 March %
2004 2003 change
South Africa
Subscribers 6 270 000 4 723 000 33
ARPU (Rand) 203 206 (1)
Nigeria
Subscribers 1 966 000 1 037 000 90
ARPU (US$) 51 57 (11)
Cameroon
Subscribers 581 000 431 000 35
ARPU (US$) 24 21 14
Uganda
Subscribers 495 000 363 000 36
ARPU (US$) 22 28 (21)
Rwanda
Subscribers 146 000 105 000 39
ARPU (US$) 22 27 (19)
Swaziland
Subscribers 85 000 68 000 25
ARPU (Rand) 223 206 8
REVIEW OF RESULTS
Trading Performance
MTN Group Limited ("the Group") posted a strong performance for the 2004
financial year, reflected by the 77% increase in adjusted headline earnings per
share to 253,1 cents.
The Group"s consolidated revenue increased by 23% year-on-year to R23 871
million. Earnings before interest, tax, depreciation and amortisation ("EBITDA")
increased by 44% to R8 983 million, resulting in profit after tax ("PAT") of R4
312 million, 94% up on the previous financial year. The Group"s headline
earnings per share have been adjusted to exclude the financial impact of the
deferred tax asset recognised by MTN Nigeria Communications Limited ("MTN
Nigeria"). All of the Group"s wireless telecommunications operations were
profitable at the PAT level during the year.
MTN Group"s international growth strategy continues to gain momentum, with non-
South African operations accounting for 36% of the Group"s revenue, 50% of its
EBITDA and 46% of its adjusted headline earnings during the year. As a result,
the Group"s earnings are increasingly impacted by the fluctuation of the Rand
against the US dollar and the currencies of the operating countries. During the
2004 financial year, the average Rand exchange rate appreciated by between 21%
and 50% year-on-year against the functional currencies of the Group"s
international operations. The average exchange rate between the Nigerian naira
and the Rand was 18,4 compared to 13,2 in the 2003 financial year. This had the
effect of reducing the earnings, as well as assets and liabilities of the
international operations reflected in the consolidated results on their
conversion into Rand.
The South African operations showed higher than anticipated growth, with revenue
increasing by 22% to R15 184 million. The Group"s international operations
increased revenue by 25%, from R6 972 million to R8 687 million. The overall
EBITDA margin for the Group increased to 37,6%, from 32,0%. MTN South Africa"s
EBITDA margin increased to 30,1% from 27,6% (excluding Orbicom and MTN Network
Solutions), this turnaround primarily being due to operational expenditure
efficiencies coupled with strong revenue generation. The Group"s international
operations recorded a healthy EBITDA margin of 51,4%.
Net finance costs declined by 27%, from R828 million to R604 million, as a
result of strong operating cash-flow, delays in capital expenditure and the 27%
appreciation of the Rand against the US dollar. Included within net finance
costs are foreign exchange losses of R224 million (2003: R325 million). The
Group has achieved a level of EBITDA-to-net interest cover of 15 times.
The Group"s effective tax rate, excluding goodwill amortisation charges was
18,3%, compared to 19,6% last year, mainly due to MTN Nigeria being tax exempt
because of its pioneer status, coupled with the raising of the deferred tax
asset arising on capital allowances.
Adjusted Headline EPS increased by 77,% to 253,1 cents. South African wireless
operations contributed 135,8 cents, whilst the contribution of the international
operations increased by 116% to 117,3 cents.
Balance Sheet And Cash Flow
The Group"s total assets have increased by 14% to R32 000 million since 31 March
2003. During the financial year, MTN Nigeria secured a limited recourse US$345
million medium-term, project finance facility to fund its network roll-out. By
year-end, 86% of such facility had been drawn and these funds were used to repay
short-term debt. The Group"s long-term liabilities increased to R4 376 million
from R4 056 million, while short-term borrowings reduced from R1 394 million to
R334 million. In addition, borrowings were positively impacted upon by the
strong Rand, as most of the Group"s borrowings are foreign currency denominated.
At 31 March 2004, the Group had cash on hand of R5 336 million, of which R1 688
million relates to securitised cash deposits against letters of credit in
Nigeria. Total borrowings including overdrafts amounted to R4 149 million
resulting in the Group being in a net positive cash position of R1 187 million
at 31 March 2004, compared with a net borrowed position of R2 712 million at 31
March 2003. The net unhedged US dollar debt position of MTN Mauritius has
declined to US$5 million (2003: US$157 million). During the period, the Group
fully utilised the SARB approval of R911 million granted for network expansion
within the Nigerian operations.
Total capital expenditure for the Group of R5 048 million was recorded, of which
MTN Nigeria accounted for 67%.
The International Finance Corporation (IFC) is a key lender in the international
portion of MTN Nigeria"s medium-term project finance facility and in accordance
with the underlying terms, MTN Mauritius disposed of 3% in MTN Nigeria to the
IFC. A further 1,5% was disposed of to local partners in Nigeria to enable them
to consolidate their shareholding in MTN Nigeria.
MTN Mauritius increased its shareholding in MTN Rwanda by 9% to 40% during
October 2003.
OPERATIONAL REVIEW
MTN South Africa
MTN South Africa ("MTN SA") experienced strong subscriber growth over the year,
demonstrating that the South African market remains buoyant. Net new connections
of 1 547 000 subscribers for the year were achieved, the highest ever in MTN SA,
of which 193 000 were post-paid and 1 354 000 pre-paid subscribers. MTN SA"s
total capable subscriber base as at 31 March 2004 was 6 270 000. This is a year-
on-year increase in the subscriber base of 33% in total, comprising 20% on post-
paid and 36% on pre-paid segments since 31 March 2003. The subscriber mix
continued to shift towards pre-paid, which now constitutes 81% of MTN SA"s
capable base (defined as subscribers which have made or received a call in the
last three months).
The introduction of innovative new products, together with competitive pricing
strategies have been key drivers behind the healthy growth in subscribers. MTN
SA introduced the MTN Mychoice Top-up range in August 2003, a world first,
hybrid pre-paid/contract product allowing subscribers a minimum monthly contract
with additional airtime topped up with pre-paid vouchers.
Blended average revenue per user per month ("ARPU") of R203 was achieved for the
current financial year, marginally down on the figure to March 2003 of R206.
Post-paid ARPU edged downwards from R607 at March 2003 to R597 for the current
year, while pre-paid ARPU increased from R101 at March 2003 to R104. Data
services, including SMS, contributed 5% towards total revenue (excluding handset
revenue).
Overall market share has remained steady at approximately 38%.
MTN International
MTN Nigeria experienced strong demand for its services, requiring a controlled
sign-up of new subscribers to match the available network capacity. SIM card
sales were suspended for some 20 weeks during the financial year. Accelerated
network roll-out continues in a challenging operating environment, with the
number of base stations increasing from 478 at 31 March 2003 to 839 a year
later. The number of operational switches has also increased to 16. Capital
expenditure incurred of R3 403 million was in line with expectations; however,
included in this figure is approximately R1 084 million of infrastructure
equipment which had been received in Nigeria at year-end but not yet
commissioned.
Over the period, the active subscriber base (defined as subscribers which have
made or received a call in the last month) increased by 90% to 1 966 000. MTN
Nigeria"s ARPU decreased from US$57 to US$51, driven by the lowering of tariffs
from December 2003 and deeper penetration into the market, coupled with the
depreciation of the naira against the US dollar.
MTN Cameroon continues to deliver satisfactory results and has maintained its
leadership in a highly competitive market. A total of 581 000 active subscribers
was recorded at 31 March 2004, representing a 35% increase year-on-year, with
ARPU increasing from US$21 to US$24.
MTN Uganda recorded 495 000 active subscribers and has experienced a decline in
ARPU from US$28 to US$22, as a result of currency devaluation of approximately
10% during the year, and a general dilution as new subscribers with lower
average usage join the network.
MTN Rwanda and MTN Swaziland show signs of a slow down in growth and the
beginning of a more mature phase in their respective life-cycles. Active
subscriber bases of 146 000 (including 40 000 subscribers through SuperCell in
the DRC) and 85 000 were recorded for these operations respectively.
Strategic Investments
The Strategic Investments division continues to explore growth opportunities
synergistic with the core mobile business, and its mandate has been extended to
include international business development. Following a period of consolidation,
MTN Group has intensified its focus on identifying new mobile licence prospects
in what is currently a highly competitive arena. A joint venture has been
initiated with MTN Nigeria to explore electronic airtime top-up alternatives.
PROSPECTS
The Group will continue to explore value-enhancing international expansion
opportunities. While such expansion is expected to provide further growth as
well as diversification of earnings and risk, the Group will become more
susceptible to foreign exchange-rate movements. Assuming that current market
conditions prevail, the Board is confident that the South African operation will
maintain its strong free cash flow generation for the Group, which will fund
further expansion, while the international operations are expected to maintain
positive subscriber and revenue growth, underpinned by the significant ongoing
capital investment into network roll-out, particularly in MTN Nigeria.
DIVIDEND
After thoroughly reviewing the Group"s growth prospects and taking account of
its expected financial performance, the board of directors has recommended the
reinstatement of a conservative dividend policy which will allow the Group to
pursue growth opportunities while returning excess cash to shareholders, thereby
optimising its capital structure. A conservative dividend cover of 6-7 times on
adjusted headline earnings will be followed, with a declaration of an annual
dividend. Accordingly a dividend of 41 cents per share for the year has been
proposed, as detailed below.
For and on behalf of the Board
MC Ramaphosa PF Nhleko
(Chairman) (Group Chief Executive Officer)
Sandton,
10 June 2004
Declaration Of Ordinary Dividend
Notice is hereby given that a dividend (number 5) of 41 cents per ordinary share
has been declared and is payable to shareholders recorded in the register of MTN
Group Limited ("the company") at the close of business on Friday, 2 July 2004.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa, the company has
determined the following salient dates for the payment of the dividend:
Last day to trade cum-dividend Friday, 25 June 2004
Shares commence trading ex-dividend Monday, 28 June 2004
Record date Friday, 2 July 2004
Payment of dividend Monday, 5 July 2004
Share certificates may not be dematerialised/rematerialised between Monday, 28
June 2004 and Friday, 2 July 2004, both days inclusive.
On Monday, 5 July 2004 the dividend will be electronically transferred to the
bank accounts of certificated shareholders who make use of this facility. In
respect of those who do not use this facility, cheques dated Monday, 5 July 2004
will be posted on or about that date. Shareholders who have dematerialised their
shares will have accounts held at their Central Securities Depository
Participant or Broker credited on Monday, 5 July 2004.
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.
Consolidated Income Statement
Year ended Year ended
31 March 31 March
2004 2003
Audited Audited* %
Rm Rm change
Revenue 23 871 19 405 23
Cost of sales (9 659) (8 321)
Gross profit 14 212 11 084 28
Operating expenses - net of (8 204) (7 347)
other operating income
Profit from operations 6 008 3 737 61
Finance income 144 129
Finance costs (748) (957)
Share of profits of 9 1
associates
Profit before taxation 5 413 2 910 86
Income tax expense (1 101) (687)
Profit after taxation (PAT) 4 312 2 223 94
Minority interest (612) (289)
Net profit 3 700 1 934 91
Calculations of headline
earnings
Net profit 3 700 1 934 91
Goodwill amortisation 599 596
Gain on disposal of 20%
shareholding in
MTN Cameroon - (91)
Impairment (9) 49
(reversed)/raised against
loan arising on disposal of
MTN Cameroon to reflect net
asset value
Loss on disposal of 4,5% 72 -
share in Nigeria
Basic headline earnings 4 362 2 488 75
Adjustment:
Reversal of deferred tax (174) (128)
asset (see note 11)
Adjusted headline earnings 4 188 2 360 77
Reconciliation of headline
earnings per ordinary share
(cents)
Attributable earnings per 223,6 117,4 90
share (cents)
Effect of goodwill 36,2 36,2
amortisation
Effect of disposal of stake (0,5) (2,5)
in MTN Cameroon
Effect of loss on disposal 4,4 -
of 4,5% stake in MTN
Nigeria
Basic headline earnings per 263,7 151,1 75
share (cents)
Effect of reversal of (10,6) (7,8)
deferred tax asset (see
note 11)
Adjusted headline earnings 253,1 143,3 77
per share (cents)
Contribution to adjusted
basic headline earnings per
ordinary share (cents)
South Africa 135,8 88,9 53
Rest of Africa 117,3 54,4 116
253,1 143,3 77
Number of ordinary shares
in issue:
- Weighted average (000) 1 654 380 1 646 933
- At period end (000) 1 657 724 1 649 959
* Restated for the consolidation of share trusts
Summarised Consolidated Balance Sheet
Year ended Year ended
31 March 31 March
2004 2003
Audited Audited*
Rm Rm
ASSETS
Non-current assets 23 357 22 854
Property, plant and equipment 11 042 9 374
Goodwill 9 753 10 298
Intangible assets 1 646 2 263
Investments and loans 560 746
Deferred assets 356 173
Current tax assets 8 643 5 303
Cash at bank and on hand 3 648 1 551
Securitised cash deposits ** 1 688 586
Other current assets 3 307 3 166
Total assets 32 000 28 157
EQUITY AND LIABILITIES
Shareholders" equity
Share capital and reserves 19 848 17 056
Minority interests 1 418 882
21 266 17 938
Non-current liabilities 4 376 4 056
Borrowings 3 710 3 249
Deferred tax liabilities 666 807
Current liabilities 6 358 6 163
Non-interest-bearing liabilities 5 919 4 563
Interest-bearing liabilities 439 1 600
Total equity and liabilities 32 000 28 157
Net asset value per ordinary
share (rand)
- Book value 11,97 10,34
Net cash (debt)/equity 0,06 (0,15)
Net cash (debt)/equity (excluding 0,10 (0,35)
goodwill)
* Restated for the consolidation of share trusts
** These monies are placed on deposit with banks in Nigeria to secure letters
of credit
Summarised Consolidated Cash Flow Statement
Year ended Year ended
31 March 31 March
2004 2003
Audited Audited*
Rm Rm
Cash inflows from operating 8 597 5 393
activities
Cash outflows from investing (4 898) (4 391)
activities
Cash inflows from financing 233 187
activities
Net movement in cash and cash 3 932 1 189
equivalents
Cash and cash equivalents at 1 931 1 234
beginning of year
Foreign entities translation (632) (492)
adjustment
Cash and cash equivalents at end 5 231 1 931
of year
* Restated for the consolidation of share trusts
Summarised Group Statement Of Changes In Shareholders" Equity
Year ended Year ended
31 March 31 March
2004 2003
Audited Audited*
Rm Rm
Opening balance at 1 April 17 056 15 916
Effect of adoption of AC133 (15) -
Effect of consolidation of share - (12)
trusts
Restated opening balance at 1 17 041 15 904
April
Net profit 3 700 1 934
Issue of share capital 95 148
Currency translation differences (988) (930)
19 848 17 056
Segment Analysis
Year ended Year ended
31 March 2004 31 March 2003
Audited Audited*
Rm Rm
REVENUE
South Africa 15 184 12 433
Rest of Africa 8 687 6 972
23 871 19 405
EBITDA
South Africa 4 522 3 375
Rest of Africa 4 461 2 842
8 983 6 217
PAT
South Africa 2 244 1 461
Rest of Africa 2 664 1 355
Corporate head office (596) (593)
(goodwill)
4 312 2 223
* Restated for the consolidation of share trusts
Notes
1. Basis Of Accounting
These condensed consolidated preliminary results have 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). 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 AC133: "Financial instruments - recognition and
measurement". In addition, in order to comply with the directive issued by
the JSE Securities Exchange South Africa on 16 February 2004, the Group
results include the effects of consolidating the MTN Staff Incentive Scheme
and the MTN Group Share Trust. The 2003 comparatives have been
appropriately restated.
2. Comparatives
Where necessary, comparative figures have been adjusted to conform with
changes in presentation in the current year.
3. Headline Earnings Per Ordinary Share
The calculation of basic and adjusted headline earnings per ordinary share
are based on basic headline earnings of R4 362 million (2003: R2 488
million), adjusted headline earnings of R4 188 million (2003: R2 360
million) and attributable earnings of R3 700 million (2003: R1 934 million)
respectively, and a weighted average of 1 654 380 353 (2003: 1 646 933 535)
ordinary shares in issue. Diluted earnings per ordinary share, in respect
of debentures and options convertible into ordinary shares, have not been
disclosed as the potential dilution is not considered to be material.
4. Independent Audit By The Auditors
These condensed consolidated preliminary results have been audited by our
joint auditors PricewaterhouseCoopers Inc. and SizweNtsaluba vsp Inc., who
have performed their audit in accordance with Statements of South African
Auditing Standards.
A copy of their unqualified audit report is available for inspection at the
registered office of the Company.
5. Listing Requirements
This preliminary announcement has been prepared in compliance with the
Listings Requirements of the JSE Securities Exchange South Africa.
31 March 31 March
2004 2003
Audited Audited
Rm Rm
6. Interest-bearing liabilities
Call borrowings 105 206
Short-term borrowings 334 1 394
Current liabilities 439 1 600
Long-term liabilities 3 710 3 249
4 149 4 849
* Restated for the consolidation of share trusts
7. Cash and cash equivalents
Bank balances, deposits and cash 3 648 1 551
Securitised cash deposits 1 688 586
Call borrowings (105) (206)
5 231 1 931
8. Capital expenditure incurred 5 048 3 919
9. Commitments for capital
expenditure
- Contracted for 3 516 1 144
- Authorised but not contracted 5 986 5 467
for
10. Change in accounting policy
10.1 The Group now consolidates share
incentive trusts, the effect of
which was as follows:
31 March 31 March
2004 2003
Audited Audited
Rm Rm
Increase in profit after tax 1 5
Increase/(decrease) in opening - (5)
accumulated profits
The change in accounting policy has no effect on the
minority interests.
10.2 With effect from 1 April 2003 the Group has adopted accounting statement
AC133. Opening reserves at 1 April 2003 have been decreased by an amount of
R15 million in the statement of changes in equity. In terms of the
transitional provisions of AC133, comparative figures have not been
restated.
The impact of AC133 on the balance sheet at 31 March 2004 is to increase
interest free loans by R24 million, representing the fair value adjustment
whilst embedded derivatives of R14 million have been recognised as an
asset.
11. Deferred Tax
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 asset tax
relating to these deductible temporary differences has been recognised in
the results to 31 March 2004 in terms of the requirements of South African
Statements 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 requirements
of AC102 in this regard, the Board of Directors has reservations about the
appropriateness of this treatment in view of the fact that no cognisance 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 asset of R174 million) in addition to basic headline
earnings, to more fully reflect the Group"s results for the period.
www.mtngroup.com
MTN Directorate:
MC Ramaphosa (Chairman), PF Nhleko* (CEO), DDB Band, SL Botha*, I Charnley*,
ZNA Cindi, RS Dabengwa*, PL Heinamann, SN Mabaso, RD Nisbet*, JHN Strydom,
AF van Biljon, LC Webb (alternate)
* Executive
Company secretary:
Ms MMR 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, US
Office of the South African Registrars:
Computershare Investor Services 2004 (Pty) Limited
(Registration number: 2004/003647/07)
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
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
Date: 10/06/2004 05:16:18 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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