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MTN Group_ Q2_ Results transcript

11/09/2021 | 01:45pm EST

MTN Group Interim Results to

30 June 2021

Presentation transcript

Date: 12 August 2021

MTN Group Interim Results

12 August 2021



Thato Motlanthe

Good afternoon and welcome to MTN Group's interim results presentation. My name is Thato Motlanthe and I look after Investor Relations for the Group. I trust that everyone is keeping safe and healthy in these challenging times that we're in as we continue to host our results on the virtual platforms until such a time we're able to safely host everyone in the auditorium again. Before we get started, and in terms of housekeeping, our standard disclaimer and safe harbour statement should on the screen now, and that covers our presentation for today.

If you think about 2021, thus far it has certainly been a year of continued change and transition with businesses across the world having to adjust to what is turning out to be an ever-changing environment which is shaping and changing the future. For MTN's part we've been working quite hard not only to keep pace with it but also to take the lead in the evolving landscape that we're in. In the presentation today we will provide you as our varied and valued stakeholders - and of course that includes the many MTNers across the markets - with a view of our operational, financial an ESG performance in the first six months. And in terms of the agenda for today the programme will run as follows.

Up first, MTN Group President and CEO, Ralph Mupita, will come up and give us a strategic and operational overview. He will be followed by Tsholofelo Molefe, who is our CFO, and she will give us highlights on the financial performance. Ralph will then come back to the stage to run us through some of the key focus areas for the next six months and beyond. We will then close off the session with a Q&A segment and Ralph and Tsholo will respond to your questions. At this point, just to note that you can send your questions through the webcast platform and we will voice those questions out for you. For those tweeting during the session, the hashtag is #MTNInterims21 and our Twitter handle is @MTNGroup. On that note let me welcome Group President and CEO , Ralph Mupita. Thank you very much.

Ralph Mupita

Thato, thanks very much. I would like to extend my welcome as well to all the investors and broader stakeholders who are joining us on various media platforms for our H1 2021 results. I'm

MTN Group Interim Results

12 August 2021



also extending welcome to the 18,000 MTNers who are also joining us via various media platforms. Tsholofelo and myself feel very privileged to be able to represent you in reporting to the capital markets the results that we've achieved in the period under review.

I think it's important from a context point of view before we get stuck into the results to step back and think through the context of how we operated in the last six months and what has enabled MTN to be able to be resilient through the challenges but also to be able to take advantage of the opportunities. I think the first thing that I think you will all agree is that we have been in a macro environment that has been very challenging. COVID-19 has had significant impacts on lives and livelihoods across our footprint and I guess more broadly across the globe.

In the developing markets that we operate in the macro challenges have been a lot more significant, and we've seen these challenges come through in currencies under pressure and GDP growth under pressure. And we've been able to navigate these challenges during the period, but it hasn't all been challenges. I think you would well agree with me that there have been a series of opportunities that have come.

And those opportunities really are about the digitalisation that is accelerating across our markets. We don't believe that this is a cyclical trend but actually something that is actually more structural. In our results that we will present I think you will agree with me at the end that we are indeed in a structural change in how people are consuming digital services and using connectivity.

So what has enabled MTN to take advantage of the opportunities? We would argue that there are at least three factors if not more. The first is that we have sustained investment in our networks and our platforms over a period of time and created an advantage particularly in our networks to be able to take advantage of the demand that has surged particularly over the last 18 months.

We have very strong market positions pretty much across all our markets. We've spoken in the past that we have number one and number two positions. And having that scale enables us to have efficiencies where we're able to provide more services but also deliver quality earnings and returns to our investors and broader stakeholders.

We are also very focussed on capital allocation. Disciplined capital allocation is a feature of this management team. We're very focussed on that, and I think the investors would probably repeat the ladder of capital priorities, and we have been executing with that capital framework in mind. And very importantly, what you have is a management focussed on execution, executing on our strategy, executing on our vision. And this is the underpin of the results that we will talk about

MTN Group Interim Results

12 August 2021




If I start with the financial highlights I won't go through all the key metrics save for commenting on four of them. Tsholo will do a fine job in covering the rest. The adjusted headline earnings per share is a standout number that we would like to point out in terms of our financial results. The adjusted headline earnings look at the core operational earnings momentum of the business, and that's just shy of 32% up in the period.

I think the other call out in the financial highlights that I would pick is just the balance sheet. We've spoken to investors in the past that we do want to have a faster deleveraging of the HoldCo balance sheet. And we have executed on that in the period. At the end of December 2020 our HoldCo leverage was 2.2x. We set a target in March of this year that we want to be under 1.5x.

And through this period on the basis of the upstreaming that we've seen in the markets, stronger upstreaming actually in the first half of this year than last year, as well as Rand strength, we have been able to see our HoldCo net debt position coming down to 1.4x. And Tsholo will elaborate in more detail how that debt profile has improved. And we are well on track to doing what we said we would do, which is to deleverage faster and create greater financial flexibility for the group balance sheet.

The other standout item that I would pick on the financial highlights is the operating free cash flow which is up 51%. I think at the end of the day service revenue has to convert to cash flow and we're seeing a good conversion of that coming though in the period.

For me one of the most impressive numbers to point out in the highlights has been the ROE. Many of you will remember in 2018 we spoke about ROE as our new target because at that time we were generating returns on equity below the cost of equity. I think what we can say pleasingly is we've seen very good ROE improvement in the business. In 2018 we were at 11.5% and now we're talking about 18.3%, which is getting us towards our target of ROEs above 20%, creating sufficient headroom between the cost of equity or the cost of capital for the Group. And this is something that we are very focussed on as a management team.

The other point that I would like to highlight on this slide is really about the dividend and the dividend policy. We just want to reiterate with this interim results presentation that we're maintaining the position that we communicated in March, which is that we anticipate that the board will declare a minimum dividend of 260 cents per share in March 2022 as a final dividend. So there is no interim dividend right now.

MTN Group Interim Results

12 August 2021



And the board will apply its mind having reflected on upstreaming, particularly from Nigeria, how the ARP programme is progressing, and just more broadly the COVID-19 impacts across the market. And on the basis of assessing those conditions in March next year and seeing how we've progressed, particularly with the ARP programme and, as I mentioned, Nigeria upstreaming, the board remains open for further shareholder distributions at that point in time. So I just wanted to make sure that we clarify that point right upfront as we know that is possibly a Q&A question from some of our investors.

Just moving to the progress against the medium term guidance, we enhanced our medium term guidance in March this year. We were more specific on what we saw as service revenue growth at the Group level moving to low to mid-teens. South Africa we've maintained the mid-single digits, and Nigeria we spoke about double digit growth. That is more in line with around the mid-teens given the inflation environment in Nigeria. We also updated the guidance with Fintech because our belief is that we can accelerate the Fintech business towards 20% over the next five years. And we are well advanced with that. So those were the changes that we made against our medium term guidance.

And I would make two call-out statements on this chart. The first is South Africa. I think South Africa's performance has been exceptionally strong. To Godfrey, Dineo, Giovanni and the broader team in South Africa, you guys have executed very well. And I think as we will show the investors when Tsholo takes us through the financial performance of South Africa, this business is firing on all cylinders and we are ahead of the medium-term guidance of 4% to 6% having achieved the 9.3%. So I think that's one of the stand-out comments I would make in terms of the medium term guidance delivery in the half.

The other one is the HoldCo leverage. As I mentioned, the HoldCo leverage at the half year is in our range that we want it to be in, below 1.5x. And with the additional upstreaming that we received from Nigeria post the half on a pro forma basis that's 1.2x. And as I mentioned earlier on, we are at 2.2x and we've made material progress. Tsholo will take us through how we've managed to get the cash upstreamed from Nigeria. I want to also extend our thanks to our colleagues in Nigeria who worked with us at Group to be able to get that upstreaming. Karl, Modupe, Ismail and also the interactions that we've had with authorities in Nigeria.

Just moving beyond the medium term guidance and just coming to reflect on COVID-19, at MTN we continue to focus on the four programmes to manage both the COVID-19 challenges as well as the opportunities. So our focus on the four programmes is social, commercial as another priority area, and the network and supply chain, and finally, funding and liquidity. And we've

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MTN Group Ltd. published this content on 09 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 November 2021 18:44:11 UTC.

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