MTN FY16 Results review

The latest MTN results show a headline loss of 77c per share.

MTN full year results for 2016 show the company to have realised a headline loss of 77c per share. The loss is the first annual loss in more than 20 years for the group and can be attributed to a number of factors

The negative contributors to the Headline loss per share realised is as follows

  • Nigerian regulatory fine 500c
  • Foreign Exchange losses 329c
  • MTN equity interest in Nigeria Tower 122c
  • MTN Zakhele Futhi 88c
  • Professional Fees in fine settlement 73c
  • Digital Group Investment loss 39c
  • Hyperinflation 37c

The Nigerian Regulatory Fine and professional fees relating to the fine, as well as the equity interest in Nigeria Towers are considered non-reoccurring items, although the group is still under investigation by the Nigerian authorities for allegedly repatriating around $14bn from the country illegally between 2006 and 2016, which remains a possible negative catalyst to future earnings. 

Looking at the divisional performance, the group shows similar trends to that of the telecommunications sector, in that growth in data revenue remains strong, while voice revenue continues to decline. 

The group will need to continue focusing on key initiatives to address the declining voice revenue trend as the division still accounts for the vast majority of group revenue (64% including incoming and outgoing). The new management team has reiterated its commitment to improving operational efficiencies though digitisation and finding new revenue streams particularly within the digital services offering.

Some of the other salient features of the group results are as follows

  • Group subscribers increased by 3.3%
  • R12.5bn repatriated from MTN Irancell Joint venture (continued repatriation going forward likely although at a more normalised rate)
  • Final dividend of 450c proposed (down 54%)

The market has reacted very positively to the results despite the group positing a headline loss for the period. Earlier guidance via a company trading statement had perhaps prepared the market for the lacklustre performance to have been realised in the FY16. The results were however slightly ahead of consensus estimates, and perhaps the intraday rally in the MTN share price also reflects relief in the proposed dividend offering which might have been in doubt beforehand.  The exaggerated gains do however suggest that part of the extended rally move may be related to short covering within the share. 

MTN broker ratings 02 03 2017

The average broker rating for MTN, as per a Thompsons Reuters survey of thirteen analysts, suggests that the MTN Group remains a hold for now. 

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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