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| 1. |
Basis of preparation |
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The condensed consolidated interim financial information (“interim financial information”) announcement was
prepared in accordance with International Financial Reporting Standards (“IFRS”) IAS 34 – Interim Financial
Reporting and in compliance with the Listing Requirements of the JSE Limited and the South African
Companies Act (1973), on a consistent basis with that of the prior period. |
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| 2. |
Headline earnings per ordinary share |
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The calculations of basic and adjusted headline earnings per ordinary share are based on basic headline
earnings of R5 660 million (June 2006: R4 816 million) and adjusted headline earnings of R6 040 million
(June 2006: R4 640 million) respectively, and a weighted average of 1 860 430 (June 2006: 1 666 091) ordinary
shares in issue. |
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6 months
ended |
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6 months
ended |
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12 months
ended |
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30 June
2007 |
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30 June
2006 |
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31 December
2006 |
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Reviewed |
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Reviewed |
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Audited |
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|
Rm |
|
Rm |
|
Rm |
Net profit attributable to company’s
equity holders
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5 555 |
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4 804 |
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10 610 |
| Adjusted for: |
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| Loss on disposal of property, plant and equipment |
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32 |
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6 |
|
40 |
| Impairment (reversal) of property, plant and equipment |
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73 |
|
6 |
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(22) |
| Basic headline earnings |
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5 660 |
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4 816 |
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10 628 |
| Adjusted for: |
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|
|
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|
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| Reversal of deferred tax asset |
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(223) |
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(283) |
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(650) |
| Reversal of the subsequent utilisation of deferred tax asset |
|
436 |
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— |
|
— |
| Reversal of put option in respect of subsidiary |
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| – Fair value adjustment |
|
132 |
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(8) |
|
120 |
| – Finance costs |
|
111 |
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177 |
|
301 |
| – Minority share of profits |
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(76) |
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(62) |
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(153) |
| Adjusted headline earnings |
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6 040 |
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4 640 |
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10 246 |
| Reconciliation of headline earnings per
ordinary share (cents) |
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| Attributable earnings per share (cents) |
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298,6 |
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288,3 |
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605,4 |
| Adjusted for: |
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| Loss on disposal of property, plant and equipment |
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1,7 |
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0,4 |
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2,3 |
| Impairment (reversal) of property, plant and equipment |
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3,9 |
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0,4 |
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(1,2) |
| Basic headline earnings per share (cents) |
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304,2 |
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289,1 |
|
606,5 |
| Reversal of deferred tax asset |
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(12,0) |
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(17,0) |
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(37,1) |
| Reversal of the subsequent utilisation of deferred tax asset |
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23,5 |
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— |
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— |
| Reversal of put option in respect of subsidiary |
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9,0 |
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6,4 |
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15,3 |
| Adjusted headline earnings per share (cents) |
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324,7 |
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278,5 |
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584,7 |
| Contribution to adjusted headline earnings per ordinary share (cents) |
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| South and East Africa |
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141,6 |
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224,8 |
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289,5 |
| West and Central Africa |
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237,2 |
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124,3 |
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325,8 |
| Middle East and North Africa |
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12,4 |
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(4,6) |
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2,7 |
| Head office companies |
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(66,5) |
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(66,0) |
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(33,3) |
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324,7 |
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278,5 |
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584,7 |
| Number of ordinary shares in issue: |
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| – Weighted average (000) |
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1 860 430 |
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1 666 091 |
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1 752 305 |
| – At period-end (000) |
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1 861 208 |
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1 666 948 |
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1 860 268 |
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Adjusted headline earnings adjustments
Deferred tax asset
The Group’s subsidiary in Nigeria had been granted a five-year tax holiday under “pioneer status” legislation. On
31 March 2007, MTN Nigeria exited “pioner status”, and from 1 April 2007 became subject to income tax in
Nigeria. A deferred tax asset of R2,7 billion was created during “pioneer status” in respect of capital allowances on
capital assets that are only claimable after the company comes out of “pioneer status”. The above has resulted in
the commencement of the reversal of the deferred tax asset shown as an adjustment of R436 million to the
adjusted headline earning figure.
A deferred tax credit of R223 million (June 2006: R283 million), excluding minority interests relating to deductible
temporary diff erences, has been recognised for the period ended 30 June 2007 in terms of IAS 12 – Income Taxes.
As previously disclosed, although the Group has complied with the requirements of IAS 12 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 eff ects of the time value of money or future foreign exchange movements. The Board therefore resolved to
report adjusted headline earnings (negating the eff ect of the deferred tax asset) in addition to basic headline
earnings, to more fully refl ect the Group’s results for the period.
Put option in respect of subsidiary
The implementation of IFRS requires the Group to account for a written put option held by a minority
shareholder of one of the Group subsidiaries, which provides them with the right to require the subsidiary to
acquire their shareholdings at fair value. Prior to the implementation of IFRS, the shareholding was treated as a
minority shareholder in the subsidiary as all risks and rewards associated with these shares, including dividends,
currently accrued to the minority shareholders.
IAS 32 requires that, in the circumstances described in the previous paragraph:
| (a) |
the present value of the future redemption amount be reclassifi ed from equity to fi nancial liabilities and that
financial liability so reclassifi ed subsequently be measured in accordance with IAS 39; |
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| (b) |
in accordance with IAS 39, all subsequent changes in the fair value of the liability, together with the related
interest charges arising from present valuing the future liability be recognised in the income statement; and |
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| (c) |
the minority shareholder holding the put option no longer be regarded as a minority shareholder but rather
as a creditor from the date of receiving the put option. |
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| Although the Group has complied with the requirements of IAS 32 and IAS 39 as outlined above, the Board of
Directors has reservations about the appropriateness of this treatment in view of the fact that: |
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| (a) |
the recording of a liability for the present value of the future strike price of the written put option results in
the recording of a liability that is inconsistent with the framework, as there is no present obligation for the
future strike price; |
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| (b) |
the shares considered to be subject to the contracts are issued and fully paid up, have the same rights as any
other issued and fully paid-up shares and should be treated as such; and |
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| (c) |
the written put option meets the defi nition of a derivative and should therefore be accounted for as a
derivative, in which case the liability and the related fair value adjustments recorded through the income
statement would not be required.
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3.Independent review by the auditors
These condensed consolidated results have been reviewed by our joint auditors PricewaterhouseCoopers Inc.
and SizweNtsaluba VSP, who have performed their review in accordance with the International Statement on
Review Engagements 2410. A copy of their unqualifi ed review report is available for inspection at the registered
offi ce of the Company.
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6 months
ended |
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6 months
ended |
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12 months
ended |
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30 June
2007 |
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30 June
2006 |
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31 December
2006 |
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Reviewed |
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Reviewed |
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Audited |
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Rm |
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Rm |
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Rm |
| 4. |
Capital expenditure incurred |
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6 256 |
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3 290 |
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9 778 |
| 5. |
Contingent liabilities and commitments |
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Contingent liabilities |
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610 |
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1 030 |
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911 |
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Operating leases |
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1 490 |
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777 |
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837 |
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Finance leases |
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608 |
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625 |
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592 |
| 6. |
Commitments for property, plant and equipment
and intangible assets |
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– Contracted for |
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7 022 |
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4 913 |
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3 268 |
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– Authorised but not contracted for |
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8 446 |
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6 140 |
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13 163 |
| 7. |
Cash and cash equivalents |
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Bank balances, deposits and cash |
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12 744 |
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9 666 |
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9 961 |
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Call borrowings |
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(1 448) |
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(117) |
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(953) |
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11 296 |
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9 549 |
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9 008 |
| 8. |
Interest-bearing liabilities |
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Call borrowings |
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1 448 |
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117 |
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953 |
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Short-term borrowings |
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8 475 |
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1 136 |
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3 439 |
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Current liabilities |
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9 923 |
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1 253 |
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4 392 |
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Long-term liabilities |
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24 531 |
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7 991 |
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28 587 |
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34 454 |
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9 244 |
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32 979 |
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| 9. |
Other non-current liability |
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The put options in respect of subsidiaries arise from arrangements whereby minority shareholders of two of the
Group’s subsidiaries have the right to put their remaining shareholdings in the subsidiaries to Group companies.
On initial recognition, these put options were fair valued using eff ective interest rates as deemed appropriate
by management to the extent that these put options are not exercisable at a fi xed strike price. The fair value will
be determined on an annual basis with movements in fair value being recorded in the income statement. |
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| 10. |
Financial market instrument |
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The financial market instrument relates to fair value movement on the foreign exchange contracts and
currency options in respect of the Investcom transaction. This has been treated as a cash flow hedge. |
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| 11. |
Post-balance sheet events |
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On 12 July 2007, the government of Benin suspended the current licence of MTN Benin and another mobile
operator. The government has proposed amendments to the licence conditions including a signifi cant increase
in licence fees.
MTN management has been in ongoing discussions with the authorities in Benin to obtain clarity on the
status of the current licence. MTN management has obtained positive legal confi rmation on the validity of
its existing licence
The value of the net assets of this operation at 30 June 2007 was R1,6 billion, which is inclusive of goodwill of
R845 million and intangibles of R260 million. MTN holds 75% equity in the Benin operation. |
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