Mtn Group Limited · JSE:MTN
Mtn — H1 2021 Earnings Presentation
54 slides from Mtn's earnings presentation, August 2021
Slide 1: MTN Group Results presentation H1 2021
MTN Group | Results presentation for year six month period ended 30 June 2021 Leading digital solutions for Africa’s progress
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 Operational review Financial review Looking ahead 3
Slide 4: Operational review
Operational review Ralph Mupita | Group President and CEO
Slide 5: Context for the period under review
Context for the period under review Resilient and well-positioned for accelerating growth in our operating context Macro environment MTN presents challenges & opportunities is well-positioned in our markets • COVID-19 impact on lives & livelihoods • Sustained network and platforms investment • Chall
Slide 6: Highlights
Highlights Solid financial performance +19.7%* +32.2%* +39.7%* Service revenue Data revenue Fintech revenue R81.9bn R25.6bn R7.5bn +24.1%* +1.6pp* +31.5% EBITDA EBITDA margin Adjusted HEPS R38.8bn 44.8% 505cps 13.3% (capex intensity) Net debt/EBITDA +51.2% Capex Holdco Group Operating free cash flow
Slide 7: Progress against our medium-term guidance
Progress against our medium-term guidance KPI Target Performance Group: Low to mid teens 19.7%* Service revenue South Africa: Mid-single-digit growth 9.3% Nigeria: Mid teens 23.8%* Accelerate fintech platform growth >20% service revenue contribution 9.0% Holdco leverage 1.5x 1.4x Asset realisation
Slide 8: COVID-19 – focus on social, commercial, network and funding
COVID-19 – focus on social, commercial, network & supply chain and funding & liquidity Infection and vaccination rates across the Group Cases in MTN Vaccines Total Active 1 dose 1 dose cases cases in MTN in Africa 2 452 374 1 780 ~51m (8.1%) (3.7%) Recoveries Deaths Fully vaccinated Fully vaccinated
Slide 9: Quarter-to-quarter performance
Quarter-to-quarter performance Acceleration in most key trends in Q2 Subscriber net adds Active data users net adds MoMo users net adds SIM activations normalising Steady progress Scaling MoMo 2.3m 1.8m (0.7m) 1.3m 0.2m (1.7m) Q1 21 Q2 21 Q1 21 Q2 21 Q1 21 Q2 21 Voice revenue Data revenue Fintech re
Slide 10: South Africa
South Africa Strong performance – healthy consumer business, double-digit growth in enterprise and wholesale Market context Key activities Solid results • Macroeconomic pressures • R3.0bn network investment | 5G acceleration • Data traffic up 57% • ICASA ITA spectrum auction • Solid operational exec
Slide 11: Nigeria
Nigeria Increased usage supports revenue growth | Maintained momentum in data | SIM registration Market context Key activities Solid results • Macroeconomic pressures • Accelerating SIM registrations • +83% data traffic • Challenging FX environment • 4G rollout | Expanded network & spectrum (800MHz)
Slide 12: Regional operational review
Regional operational review Robust performance across all regions | Double-digit top-line growth SEA^ WECA^ MENA^^ +30.4%* +17.4%* +40.7%* service revenue service revenue service revenue +38.0%* +36.9%* +56.0%* data revenue data revenue data revenue • Challenging environment for MTN Uganda; • Double
Slide 13: Accelerating fintech platform
Accelerating fintech platform Strong momentum in fintech KPIs during H1 2021 | Solid growth metrics Wallet Transaction & revenue 48.9m MoMo users +27.9% YoY 17 292 tx per minute +47.1% YoY 856k MoMo Active agents +44% YoY US$115.2bn tx value +88% YoY 24% of MTN airtime sales^ +79% YoY Payment & e-co
Slide 14: MTN asset realisation programme and portfolio transformation
MTN asset realisation programme (ARP) & portfolio transformation ~R1.8 billion delivered in the first six months of the year E-commerce portfolio Tower Co investments Localisation & other Pan-African Focus Pan-African Focus • Completed sale of BICS with • Ethiopia: Progress to date cash proceeds of
Slide 15: Creating shared value
Creating shared value Significant economic value added across our markets | Cash taxes paid of R7.2bn, up 47% YoY • Reduce GHG emissions Eco- • Improve energy efficiency Economic responsibility • Water management value-added Salaries and wages • Increase access and reduce cost to communicate Sustain
Slide 16: Financial review
Financial review Tsholofelo Molefe | Group CFO
Slide 17: Items impacting reported results
Items impacting reported results Currencies Significant transactions Other Recovery of rand vs prior year: Disposal of assets Nigeria upstreaming of cash Average rand stronger than naira (+22.3%), & extraordinary items Closing rate stronger against the dollar (+2.5%) Stronger average rand exchange r
Slide 18: Group income statement
Group income statement Good operational results across the Group | Positive operating leverage with improvement in EBITDA margin % change % change constant (Rm) H1 21 H1 20 reported currency* Revenue 86 673 84 076 3.1 20.0 Service revenue1 81 947 80 247 2.1 19.7 EBITDA before once-off items2 38 797
Slide 19: Group service revenue
Group service revenue (Rm) +19.7%* 2 130 1 049 425 82 903 81 947 6 314 311 -956 3 397 69 277 H1 20 Voice Data Digital Fintech Wholesale SMS, ICT H1 21 Hyperinflation H1 21 CC and Other CC reported +8.9% +32.2% +23.8% +39.7% +60.6% +13.0% H1 20 CC and H1 21 CC at constant currency 19
Slide 20: Fintech revenue
Fintech revenue Contributes 9% to Group service revenue | Strong AFCF progression, +37% Fintech highlights (Rm) Fintech revenue contribution by services offered Remittances, H1 20 H1 21 Banktech & other 6% Revenue 5 370 7 500 +39.7%* Payments 13% EBITDA^ 2 474 3 412 +37.9%* EBITDA margin 46.1% 45.5%
Slide 21: South Africa
South Africa Solid data, digital & wholesale growth | Expenses impacted mainly by handsets & network costs | Margin expansion (Rm) Service revenue Expenses EBITDA and capex +9.3% 39.9% 41.4% EBITDA margin 19 252 +9.7% 16.7% 13.6% Capex intensity 17 610 13 921 7 021 Voice1 -1.6% 12 689 +16.4% 7 138 9
Slide 22: South Africa service revenue
South Africa service revenue Consumer, enterprise and wholesale business units all delivered healthy and sustained growth (Rm) +9.3% 731 19 252 -32 219 68 236 420 17 610 H1 20 Prepaid CBU Postpaid EBU Postpaid EBU Other Wholesale^ Other H1 21 YoY 4.0% 7.3% 17.5% 8.6% 62.4% -0.9% 9.3% growth ^ Recogn
Slide 23: Nigeria
Nigeria Voice & data drive strong service revenue growth | Expenses up due to network costs | Margin expansion (Rm) constant currency Service revenue Expenses EBITDA and capex +23.8%* 51.3% 53.1%* EBITDA margin 21.2% 23.6% Capex intensity 28 447 +19.1%* 13 349 17 567 Voice +12.6%* 22 976 +28.2%* 11
Slide 24: Expenses
Expenses Expense efficiency programme yielding results, evident in 1.6% reduction YoY on reported expenses Group expenses Expense efficiency programme (Rm) +16.7%* 53 791 Savings realised by area Savings realised by region 48 453 SA 16% Mobile MENA 28% network 31% 22 163 Cost of Sales +16.5%* 21 552
Slide 25: Group EBITDA
Group EBITDA Solid revenue growth and expense efficiencies enabled continued margin improvement EBITDA (Rm) +24.1%* 1 139 1 713 59 39 310 3 430 34 626 31 667 1 385 -83 -4 684 H1 20 SA Nigeria SEA WECA MENA Head office H1 21 Other^ H1 21 CC CC1 reported EBITDA margin (%) +1.6pp* 43.3% 0.4 0.7 0.3 0.4
Slide 26: Finance costs
Finance costs Impacted by FX losses | Underlying finance costs lower on reduced debt (Rm) (Rm) Finance costs H1 21 H1 20 Holdco leverage H1 21 H2 20 Net interest paid 2 700 3 902 Cash and cash equivalents (22 242) (20 640) Finance costs – leases 3 116 3 147 Interest-bearing liabilities 58 899 63 922
Slide 27: Adjusted HEPS
Adjusted HEPS Benefited from strong operational performance Reported Reported (Rcents) H1 21 H1 20 change % Attributable earnings per share 148 674 (78.0) Impairment of goodwill, PPE and associates 73 53 Loss on deconsolidation of subsidiary 262 - Impairment loss on remeasurement of disposal groups
Slide 28: Capex
Capex Acceleration of investment and expanding capacity despite varying lockdown restrictions | FY 21 capex of ~R30bn Capex (Rm) Capex breakdown Capex per category Capex per region 28 524 2% 1% Radio Access 2% 2% 26 168 SA 13% IT Systems 27% Nigeria 24% 38% Site Infrastructure SEA 11 568 23% Transmi
Slide 29: Statement of cashflows
Statement of cashflows Operating FCF increased 51.2%, driven by positive operating leverage 1 704 4 773 1 094 292 34 626 -7 195 -4 471 +51.2% 13 194 -17 629 4 542 -1 107 5 804 -6 930 -3 895 EBITDA Non-cash Syria^ Working Tax paid Dividends Net interest Acquisition Operating Dividends Other Other FX
Slide 30: Holdco net debt
Holdco net debt Faster deleveraging of Holdco balance sheet | Settled US$300m of debt in the period R59.6bn Maturity profile 20 000 17 500 52.3% R43.3bn 15 000 USD / EUR R36.7bn 10 740 12 500 48.0% 43.7% 10 000 7 160 ZAR 47.7% 7 500 7 160 47.7% 52.0% 52.0% 5 000 56.3% 7 874 7 550 2 500 4 822 5 390 3
Slide 31: Statement of financial position
Statement of financial position Improved cash position supported by stronger rand | IHS valued at R30.5bn (Rm) H1 21 H2 20 % change Property, plant and equipment 92 625 100 576 (7.9) Right of use asset 44 241 46 156 (4.1) Intangible assets and goodwill 39 486 39 069 1.1 Other non-current assets 55 2
Slide 32: Improving returns
Improving returns Improving quality of earnings | ROE up 1.3pp vs December 2020 (+4.2pp YoY) | Driven by solid operational performance +1.3pp 1.3% 0.9% 3.1% 0.5% 18.3% -3.1% 17.0% -1.4% ROE Group EBITDA Depreciation and Finance Cost Taxation JV and Associates NCI & Other ROE December 2020 Amortisati
Slide 33: Looking ahead
Looking ahead Ralph Mupita | Group President and CEO
Slide 34: Progress against 2021 priorities
Progress against 2021 priorities Priority Progress in H1 SA service revenue and EBITDA margin: 9.3% and 41.4% Accelerate SA & Nigeria growth Nigeria service revenue and EBITDA margin: 23.8%* and 53.1%* InsurTech alliance with Sanlam Position infrastructure assets & fintech for accelerated growth 14
Slide 35: Factors impacting the H2 2021 outlook
Factors impacting the H2 2021 outlook COVID-19 Emerging from 3rd wave of infections with potential for 4th waves | Impact on lives and livelihoods Macroeconomic Key markets remain challenged. SSA projected to grow by 3.4% Currencies EM currency volatility | Naira and Rand impacts material to the Gro
Slide 36: Conclusion
Conclusion Key take-aways 1 Solid H1 performance through sustained commercial momentum • 5.4m subscribers added in H1 (excl. MTN Nigeria) • ROE expanded 4.2pp YoY to 18.3% | Operating cashflow up 51.2% to R13.2bn 2 Accelerating deleverage of our Holdco balance sheet • Holdco leverage at 1.4x, H1 cas
Slide 37: Investment case | A compelling Africa growth story
Investment case | A compelling Africa growth story Africa’s leading and Exciting demographic scale connectivity and opportunity infrastructure business #1 or #2 subscriber share in all our markets Fast-growing, youthful population ‘Second to none’ and well-invested networks Low data, fintech and dig
Slide 38: Appendices
Appendices
Slide 39: Definitions
Definitions • Capex based on IAS 17 excludes capex attributable to right-of-use (RoU) assets • TERS: Temporary Employer/Employee Relief Scheme • GMV: Gross Merchandise Value • Service revenue excludes device and SIM card revenue • Voice revenue comprises of outgoing voice (excludes international roa
Slide 40: COVID-19
COVID-19 Continued work on four focus areas and creating shared value Social Commerical Network & Funding & (our people & communities) (including our customers) supply chain liquidity • Health & safety focus, WFH • Innovative offers & • Safeguard capacity & • Resilient balance connectivity resilienc
Slide 41: MTN Nigeria net adds trend
MTN Nigeria net adds trend Improving trajectory of net adds for the past six months Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 41
Slide 42: Macro indicators | FX average rates
Macro indicators | FX average rates Rand strength against most currencies a headwind to reported service revenue Local currency against ZAR (YoY % change) 130 ZAR: LC 120 ZAR: Local currency H1 21 H1 20 Strengthening/(weakening) 110 Nigerian naira 27.78 22.71 22.3% Iranian rial 15 563.66 8 092.49
Slide 43: Macro indicators | FX closing rates
Macro indicators | FX closing rates Stronger closing rand positively impacted Holdco debt and leverage ZAR: LC ZAR: Local currency H1 21 H2 20 Strengthening/(weakening) Nigerian naira 28.68 27.28 5.1% Iranian rial 14 639.50 17 458.88 (16.1%) Ghanaian cedi 0.41 0.40 2.5% Cameroonian franc 38.66
Slide 44: Middle East contribution to Group results
Middle East contribution to Group results Opco Holding NAV Contribution to Contribution to Rm Group revenue Group EBITDA MENA Afghanistan 100.0% 523 1.2% -0.9% Yemen 82.8% (671) 1.3% -1.3% Syria 75.0% - 0.4% -0.1% Iran 49.0% 9 956 44
Slide 45: Forex losses/(gains) breakdown
Forex losses/(gains) breakdown Forex losses / (gains) H1 21 H1 20 Head offices 696 (2 879) South Africa 56 805 South Sudan 582 381 Sudan 509 162 Zambia 136 118 Yemen 61 161 Other 27 400 Net forex losses/(gains) 2 067 (852) 45
Slide 46: Share of results of associates and joint ventures after tax
Share of results of associates and joint ventures after tax Improved performance in Iran drives results (Rm) H1 21 H1 20 % Change Telco joint ventures 1 086 510 112.9 Iran 781 248 214.9 eSwatini 54 47 14.9 Botswana 251 215 16.7 Digital group (58) (45) (28.9) MEIH (4) (22) 81.8 IIG (54) (23) (134.8)
Slide 47: Irancell 100%
Irancell 100% Delivered very robust set of results in an economy operating under US sanctions & the impact of COVID-19 pandemic 1 717 4 873 -58 1 494 -277 -1 011 -225 471 H1 20 CC Revenue Other income Expenses Depreciation, Finance costs Equity income Income Tax H1 21 CC Net profit Amortisation Net
Slide 48: Taxation
Taxation Group effective tax rate impacted mainly by the non-deductible loss on deconsolidation of MTN Syria Reconciliation to corporate tax rate Reconciliation to normalised tax rate Statutory tax rate 28.0% Standard tax rate: 28.0% Non-deductible Sudan expenses 1.3% Sudan non-deductible expenses 1
Slide 49: Net debt
Net debt Improvement driven by a better operational cash position (Rm) Cash and cash equivalents◊ Net interest-bearing liabilities Net debt / (cash) H1 21 Net debt / (cash) H2 20 South Africa 3 257 - (3 257) (1 901) Nigeria 12 640 20 168 7 528 1 877 SEA 1 246 2 972 1 726 1 725 Uganda 584 1 437 853 1
Slide 50: Net debt composition
Net debt composition Nigeria borrowings Head office borrowings 88% 56% H2 20: (92%) H2 20: (52%) Naira ZAR USD USD 12% 44% H2 20: (8%) H2 20: (48%) Nigeria cash Head office cash 4% H2 20: (4%) 93% ZAR H2 20: (93%) USD Naira EUR USD 7% 73% H2 20: (18%) H2 20: (66%) 23% H2 20: (30%) (Rm) Total Naira d
Slide 51: Capex | IAS 17
Capex | IAS 17 (Rm) 12.0% 13.3% 11 568 10 052 4 049 3 390 2 831 3 032 2 790 2 166 980 1 137 483 335 563 268 202 292 SA Nigeria SEA WECA MENA Iran^ Other Group H1 20 H1 21 Capex intensity ^ Iran capex at 49% and is not part of the consolidated Group Capex 51
Slide 52: Statement of cash flows | IFRS
Statement of cash flows | IFRS Higher cash generated from operations due to better performance across the group (Rm) H1 21 H1 20 Change % Cash generated from operations 42 197 32 771 28.8 Dividends received from associates and joint ventures 292 265 10.2 Net interest (paid) / received (4 471) (6 046
Slide 53: Holdco leverage scenarios
Holdco leverage scenarios 1.4x 0.1x 0.1x -0.1x 1.3x 1.2x -0.2x Holdco leverage Inclusion of Holdco leverage 20% weaker 20% weaker Cash upstreaming Holdco Net H1 21 Nigeria inflows (incl Nigeria inflows) USD/ZAR closing USD/ZAR Average stress less 10% Debt Stress 53
Slide 54: Disciplined capital allocation framework
Disciplined capital allocation framework 1 Organic growth Well-invested networks and platforms | Improving capex intensity 2 Stabilise leverage Rebalancing the mix to have rand debt making up at least 60% of Holdco net debt 3 Return cash to shareholders through dividend Anticipate paying a minimum o