Mtn Group Limited · JSE:MTN
Mtn — H1 2020 Earnings Presentation
49 slides from Mtn's earnings presentation, August 2020
Slide 1: Financial results for the six months ended 30 June 2020
Financial results for the six months ended 30 June 2020
Slide 2: Disclaimer
Disclaimer The information contained in this document (“presentation”) has not been verified independently. No representation or warranty express or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions containe
Slide 3: Agenda
Agenda 1 Operational and strategic review 2 Financial review 3 Looking ahead 3
Slide 4: Operational review
Operational review Rob Shuter Group President and CEO 4
Slide 5: Highlights
Highlights Strong financial performance in a challenging operating environment +9,4%* +32,7%* +18,0%* Service revenue Data revenue Fintech revenue R80,2bn R22,7bn R6,1bn +10,9%* +1,2pp* +53,6% EBITDA EBITDA margin Adjusted HEPS R41,8bn 49,7% 384cps 12,0%^ Group Holdco Capex/Revenue Net debt/EBITDA N
Slide 6: COVID-19
COVID-19 Prioritising our people, customers & network | Accelerated digitalisation | Efficiency & liquidity focus Managing Impacts Future focus the crisis • Lockdowns • Work from home • Agile working Social • Economic slowdown • Y'ello Hope packages • Support to staff & communities (our people & com
Slide 7: Key group trends in H1 through COVID-19
Key group trends in H1 through COVID-19 Short-term “V-shaped” recovery | Data & fintech acceleration | Longer-term economic impacts still uncertain Subscribers gross adds Active data users gross adds MoMo users net adds Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Voice tr
Slide 8: Quarter to quarter performance in H1
Quarter to quarter performance in H1 Q1 largely “pre-Covid” | Resilience & commercial recovery during Q2 Subscriber net adds Active data users net adds MoMo users net adds Churn lags recovery Recovery during Q2 “Cashless in Covid” theme 6,5m 3,6m 2,9m 3,2m 4,1m 0,4m Q1 20 Q2 20 Q1 20 Q2 20 Q1 20 Q2
Slide 9: South Africa
South Africa Sustained momentum in underlying turnaround; double-digit EBU growth Market context Key activities Solid results ► Macroeconomic weakness impacting ► Execution on prepaid pricing and CVM ► Underlying consumer & enterprise consumer spend delivered growth ► Focus on data first (“Mega Deal
Slide 10: Nigeria
Nigeria Strong operational and commercial performance | Data momentum sustained Market context Key activities Solid results ► Macroeconomic weakness, oil ► Market share gains, additional ► Added 6,8m subscribers price & forex volatility impacting registration devices & CVM consumer demand & spend ►
Slide 11: Regional operational review
Regional operational review All regions performed well | WECA turnaround completed | Business model resilient SEAGHA WECA MENA +18,9%* +7,0%* +21,8%* service revenue service revenue service revenue +28,8%* +25,3%* +45,2%* data revenue data revenue data revenue MTN Ghana strong results - double-digit
Slide 12: Strategic review
Strategic review Rob Shuter Group President and CEO 12
Slide 13: Return to growth in DIGITAL, rapidly scaling FINTECH
Return to growth in DIGITAL, rapidly scaling FINTECH Digital revenue Fintech revenue +24,6%* to R1,5 billion +18,0%* to R6,1 billion MoMo users grew by 3,6m to 38,3m active users Active in 16 MTN markets & OTT Increased activity with $61,2bn transaction value 2m monthly active users and 11 752 trans
Slide 14: Indexing up ENTERPRISE growth, WHOLESALE progress
Indexing up ENTERPRISE growth, WHOLESALE progress Enterprise revenue Wholesale revenue +14,2%* to R7,9 billion -30,7%* to R1,8 billion Double-digit growth in key markets New external deals billed to the value of US$13m MTN South Africa on solid growth trajectory Strong performance in GlobalConnect,
Slide 15: Sustaining VOICE growth, accelerating the DATA growth curve
Sustaining VOICE growth, accelerating the DATA growth curve Voice revenue Data revenue +2,6%* to R44,5 billion +32,7%* to R22,7 billion Added 10,6m subscribers to 261,5m Added 6,5m active data users to 101,9m MOU per sub increased 6,2% Expanded coverage to 54,1m more people CVM focus, contributes 3%
Slide 16: MTN portfolio review and asset realisation programme
MTN portfolio review and asset realisation programme Focus on Pan-African strategy • Exit the Middle East in an orderly manner over the medium-term • The Middle East assets contributed <4% to group EBITDA in H1 Simplifying the portfolio & focusing on • Advanced discussions to sell our 75% stake in M
Slide 17: Financial review
Financial review Ralph Mupita Group Chief Financial Officer 17
Slide 18: Items impacting reported results
Items impacting reported results Significant Changes in Currencies transactions accounting policy Rand weaker than naira, Disposal of assets and Recycling of FCTR disposal Closed weaker against the dollar assets held for sale Weaker average rand exchange rate ATC tower companies • FCTR released to r
Slide 19: Key Group trends in H1 through COVID-19
Key Group trends in H1 through COVID-19 Solid business model supports resilience in financial performance Voice revenue Data revenue Digital revenue Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Fintech revenue Wholesale revenue SMS & other revenue Jan Feb Mar Apr May Jun J
Slide 20: Group income statement
Group income statement Benefited from solid local currency service revenue growth and improvement in associates and JVs earnings % change % change constant (Rm) H1 20 H1 19 reported currency* Revenue 84 076 72 505 16,0 7,8 Service revenue1 80 247 67 875 18,2 9,4 EBITDA before once-off items 36 403 3
Slide 21: MTN South Africa
MTN South Africa Cell C and Telkom revenue impacts wholesale | Costs well controlled | Margin expansion (Rm) Service revenue Expenses EBITDA & capex -2,5% -10,8% 36,5% 39,9% EBITDA margin 18 061 14 227 17 610 25,8% 16,7% Capex intensity 12 689 7 726 Voice1 7 139 -7,6% +3,3% 8 436 EBITDA 8 641 8 166
Slide 22: MTN South Africa service revenue
MTN South Africa service revenue Good consumer performance and double-digit enterprise growth, Cell C on cash basis of accounting with R673m service revenue not recognised -2,5% 97 178 18 061 267 17 610 -166 -827 H1 19 CBU prepaid CBU postpaid Wholesale EBU Interconnect H1 20 and other H1 YoY 1,7% 3
Slide 23: MTN Nigeria
MTN Nigeria Data, fintech, digital & wholesale drives service revenue & EBITDA growth EBITDA margin impacted by accelerated 4G rollout and forex impacts on network costs (Rm constant currency) Service revenue Expenses EBITDA & capex +12,4% 53,8% 51,2% EBITDA margin +18,8% 28 103 13 748 18,0% 20,8% C
Slide 24: Group service revenue
Group service revenue Data, digital and fintech drive growth. Some pressure on voice growth, wholesale a drag (Rm) +9,4% 304 935 80 391 80 247 5 606 -806 -274 -144 73 502 1 124 H1 19 Voice1 Data2 Digital3 Fintech4 Wholesale5 SMS, ICT H1 20 Hyperinflation H1 20 CC and Other6 CC reported +2,6% +32,7%
Slide 25: EBITDA
EBITDA Strong group-wide performance and overall margin improvement despite pressure on the top line EBITDA (Rm) +10,9% 5 495 41 780 920 1 851 572 255 36 285 32 731 270 -314 H1 19 SA Nigeria SEAGHA WECA MENA Head office H1 20 Other* H1 20 CC CC reported EBITDA margin (%) +1,2pp 6,6 49,7% 41,9% 0,8 1
Slide 26: Finance costs
Finance costs Forex gains in head office resulting from foreign-denominated loan receivables Group leverage improved in the period, holdco leverage impacted by weak rand and upstreaming pressure in Nigeria (Rm) Leverage Finance costs H1 20 H1 19 Group H1 20 H2 19 Net interest paid 7 049 5 833 Cash a
Slide 27: Statement of financial position
Statement of financial position IHS fair valued at R30,7bn in the period. MTN Syria classified as non-current asset held for sale (Rm) H1 20 H2 19 Change % Right of use asset 49 565 44 984 10,2 Other property, plant and equipment 103 618 98 312 5,4 Intangible assets and goodwill 42 148 36 866 14,3 O
Slide 28: Capex
Capex Investment focused on capacity and resilience in the period. Full year capex of cR24bn forecasted for FY 2020 Capex (Rm) – IAS 17 H1 20 Capex allocation (%) Transmission 26 281 13% 26 018 21% IT systems Radio and 53% infrastructure 10 052 19,3% 6% 17,5% 7% Core network 12,0% Other 2018 2019 H1
Slide 29: Leverage and liquidity management
Leverage and liquidity management Leverage impacted by rand depreciation, remains well within covenants R59,6bn R57,5bn R55,3bn Debt reduction and optimisation of mix remain priorities 52,3% • Continued solid operational performance USD / EUR 51,1% 50,0% • Focus on cash upstreaming from the markets
Slide 30: Statement of cash flows | IFRS
Statement of cash flows | IFRS Operating FCF increases 117,8% supported by operating leverage Inflow in other financing activities driven by an increase in borrowings in head offices 41 780 -5 641 265 -4 908 -6 046 +516% +117,8% 2 768 12 093 -13 357 3 518 7 259 -6 136 2 310 -260 -7 034 EBITDA Workin
Slide 31: Improving returns
Improving returns 1,3pp improvement in ROE, underpinned by solid operational performance +1,3pp 9,9% -3,3% -0,3% 0,5% 0,3% 17,1% -2,8% 14,1% 12,8% -3,0% December 19 Group Depreciation Finance Cost Taxation JV and Head office H1 20 Non- H1 20 ROE EBITDA and Associates costs ROE Operational Adjusted i
Slide 32: Progress against our medium-term guidance
Progress against our medium-term guidance KPI Target Performance H1 20 Group: double-digit growth Service revenue South Africa: Mid-single-digit growth Nigeria: Double-digit growth EBITDA margins Improving margins Group capex intensity Reducing intensity Holdco leverage ≤ 2,0x Asset realisation > R2
Slide 33: Looking ahead
Looking ahead Rob Shuter Group President and CEO 33
Slide 34: COVID-19 response
COVID-19 response Y’ello Hope – cR1,8bn of value to our stakeholders through Y’ello Hope initiatives | Efforts need to be sustained Customers Government relief fund Information & live updates on COVID-19 Support procurement of essential goods, Stay in contact with friends & family unemployment & SMM
Slide 35: Resilient business model and investment case
Resilient business model and investment case Strong Exciting position in the demographic right markets opportunity • High growth regions • Fast-growing youthful population • In 3 of 4 largest economies • Low data, fintech and digital adoption • Top two positions in all markets • Enterprise and whole
Slide 36: MTN priorities for the remainder of 2020
MTN priorities for the remainder of 2020 Evolving telco Digital player Fintech player Growth • Building the subscriber base • Sustain revenue growth • SA and Nigeria scaling • Data adoption & home connectivity • Ayoba acceleration & platform build • Accelerate USSD to MoMo app • Enterprise services
Slide 37: Thank you
Thank you #GoodTogether 37
Slide 38: Appendices
Appendices par]
Slide 39: Key SA and Nigeria trends in H1 through COVID-19
Key SA and Nigeria trends in H1 through COVID-19 Easing of restriction has aided a recovery in financial performance Service revenue Voice revenue Data revenue South Africa Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Nigeria Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun
Slide 40: Share of results of associates and joint ventures after tax
Share of results of associates and joint ventures after tax Discontinuation of Jumia & resumed equity accounting in Mascom (Rm) H1 20 H1 19 % change Telco joint ventures 706 475 48,6 - Iran 445 430 3,5 - Botswana 214 - 100,0 - eSwatini 47 45 4,4 Digital Group (45) (304) 85,2 - Jumia (formerly AIH) -
Slide 41: Adjusted HEPS
Adjusted HEPS Strong growth in earnings in the period R (cents) H1 20 H1 19 Change % Attributable earnings per share 674 254 165,4 Impairment of goodwill, PPE and associates 52 16 Impairment loss on remeasurement of disposal group (Syria) 46 - Gain on dilution / disposal of investment in JV (341) (7
Slide 42: IranCell 100%
IranCell 100% 2 248 1 -1 351 -127 22 908 -494 -82 691 H1 19 Revenue Other income Expenses Depreciation Finance Equity Income Tax H1 20 CC costs income CC H1 19 CC and H1 20 CC at constant currency These amounts exclude the impact of hyperinflation 42
Slide 43: Taxation
Taxation Group effective tax rate impacted by withholding tax and non-taxable gain from TowerCo disposal Reconciliation to corporate tax rate Statutory tax rate 28,0% (Rm) H1 20 H1 19 % Change Non-deductible Sudan expenses 2,7% Normal tax 5 890 3 268 80,2 Deferred tax asset not recognised 1,6% Defer
Slide 44: Capex | IAS 17
Capex | IAS 17 Capex rollout delayed across our markets (Rm) 16,9% 12,0% 12 244 10 052 3 366 3 674 3 390 3 256 2 831 1 896 1 093 1 250 813 634 483 335 221 202 SA Nigeria SEAGHA WECA MENA Iran^ Other Group H1 19 H1 20 Capex intensity ^ Iran capex at 49% and is not part of the consolidated group capex
Slide 45: Net debt
Net debt Cash and Net interest-bearing Net debt/(cash) Net debt/(cash) (Rm) cash equivalents◊ liabilities H1 20 H2 19 South Africa 1 509 - (1 509) (1 310) Nigeria 18 218 23 540 5 322 7 796 SEAGHA 2 719 5 676 2 957 1 391 Ghana 1 422 1 839 417 114 Uganda 500 2 137 1 637 423 Other 797 1 700 903 854 WEC
Slide 46: Net debt composition
Net debt composition Continued focus on optimising mix of debt Nigeria borrowings Head office borrowings (%) (%) 94% 48% H2 19: (92%) H2 19: (50%) Naira ZAR USD USD 6% 52% H2 19: (8%) H2 19: (50%) Nigeria cash Head office cash (%) (%) 4% H2 19: (5%) 93% ZAR H2 19: (82%) USD Naira EUR 7% USD 60% H2 1
Slide 47: Statement of cash flows | IFRS
Statement of cash flows | IFRS (Rm) H1 20 H1 19 Change % Cash generated from operations 32 771 20 906 56,8 Dividends received from associates and joint ventures 265 338 (21,6) Net interest (paid) / received (6 046) (5 260) (14,9) Tax paid (4 908) (2 288) (114,5) Cash generated by operating activitie
Slide 48: Macro indicators | FX average rates
Macro indicators | FX average rates Rand weakened against most currencies Local currency appreciation against ZAR (YoY % change) ZAR: LC strengthening/ 125 (weakening) ZAR: Local currency H1 20 H1 19 (Jun 20 vs Jun 19) 121,1% 120 120,6% Nigerian naira 22,71 25,49 (10,9%) 115 113,4% Iranian rial 8
Slide 49: Macro indicators | FX closing rates
Macro indicators | FX closing rates ZAR: LC strengthening/ (weakening) ZAR: Local currency Jun-20 Dec-19 (Jun-20 vs Dec-19) Nigerian naira 22,25 26,09 (14,7%) Iranian rial 9 101,60 8 120,61 12,1% Ghanaian cedi 0,34 0,41 (17,1%) Cameroonian franc 33,55 41,78 (19,7%) Ugandan shilling 214,52 26