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Integrated report for the year ended 31 December 2015 |
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Directors' reportfor the year ended 31 December 2015 NATURE OF BUSINESSMTN Group Limited (the Company) incorporated in the Republic of South Africa on 23 November 1994 carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associated companies. The Company is listed on the JSE Limited. The Company’s registered address is 216 14th Avenue, Fairland, Roodepoort, Gauteng, 2195. ACCOUNTING PRACTICESThe Group and the Company annual financial statements were prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and Interpretations as issued by the IFRS Interpretations Committee (IFRIC) and comply with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee (APC) and Financial Reporting Pronouncements as issued by the FRSC, the JSE Listings Requirements and the requirements of the Companies Act. FINANCIAL RESULTSThe Group recorded a profit after tax for the year ended 31 December 2015 of R23 570 million (2014: R37 702 million). Full details of the financial results of the Group and the Company are set out on pages 10 to 145 of these annual financial statements and accompanying notes for the year ended 31 December 2015. SALE OF TOWERSAs part of the Group’s strategy to monetise its investment in tower infrastructure, it sold its mobile network towers in MTN Nigeria Communications Limited in two tranches to IHS Holding Limited (IHS). The second tranche closed during the current year (refer to note 2.3). CAPITAL EXPENDITURECapital expenditure for the year ended 31 December 2015 totalled R29 611 million (2014: R25 406 million) which comprise the following:
1 The majority of work in progress relates to long-term network infrastructure projects. Licences and Spectrum acquired during 2015:
* Excluding the effects of hyperinflation. RELATED PARTY TRANSACTIONSDetails of related party transactions are set out on pages 122 and 123 of these annual financial statements. YEAR UNDER REVIEWThe detailed reviews of performance and the activities of the Group and the Company are contained in the reports of the executive chairman and the financial review as set out on pages 4 to 9 and 30 to 41 of the integrated report. BORROWING POWERSIn terms of the memorandum of incorporation (MOI), the borrowing powers of the Company are unlimited. However, all borrowings by the Company are subject to limitations set out in the treasury policy of the Group. The details of borrowings are disclosed in note 6.1. GOING CONCERN The directors have reviewed the Group’s and Company’s budget and cash flow forecast for the year to 31 December 2016. On the basis of this review, and in light of the current financial position and existing borrowing facilities, the directors are satisfied that the Company and the Group have access to adequate resources to continue in operational existence for the foreseeable future, are going concerns, and have continued to adopt the going concern basis in preparing the annual financial statements. SUBSIDIARY COMPANIES AND JOINT VENTURES Details of subsidiaries and joint ventures in which the Group has a direct or indirect interest are set out in note 9.1 of the annual financial statements. All Group entities have a year end consistent to that of the Company with the exception of Irancell Telecommunication Company Services (PJSC) (MTN Irancell), a joint venture of the Group, that has a year end of 21 December. DISTRIBUTION TO SHAREHOLDERSFinal dividend Notice is hereby given that a gross final dividend of 830 cents per share for the period to 31 December 2015 has been declared payable to shareholders. The number of ordinary shares in issue at the date of this declaration is 1 844 049 073 (including 10 400 061 treasury shares). The dividend will be subject to a maximum local dividend tax rate of 15% which will result in a net dividend of 705.50 cents per share to those shareholders who bear the maximum rate of dividend withholding tax of 124.50 cents per share. The Company’s tax reference number is 9692/942/71/8. In compliance with the requirements of STRATE, the electronic settlement and custody system used by the JSE, the salient dates relating to the payment of the dividend are as follows:
No share certificates may be dematerialised or rematerialised between Thursday, 24 March 2016 and Friday, 1 April 2016, both days inclusive. On Monday, 4 April 2016, the dividend will be transferred electronically to the bank accounts of certificated shareholders who make use of this facility. In respect of those who do not use this facility, cheques dated Monday, 4 April 2016 will be posted on or about that date. Shareholders who hold dematerialised shares will have their accounts held by the Central Securities Depository Participant or broker credited on Monday, 4 April 2016. The board confirms that the Company will satisfy the solvency and liquidity test after the completion of the dividend distribution. Interim dividendA gross dividend of 480 cents per share (2014: 445 cents per share) amounting to R8 808 million (2014: R8 225 million) in respect of the half-year period ended 30 June 2015 was declared on 5 August 2015 and paid to shareholders on 31 August 2015. Before declaring the dividend, the board:
The payments of future dividends will depend on the board’s ongoing assessment of the Group’s earnings, financial position, cash needs, future earnings prospects and other future factors. Shareholders on the South African register who dematerialised their ordinary shares receive payment for their dividend electronically, as provided for by STRATE. For those shareholders who have not yet dematerialised their shareholding in the Company in certificated form, the Company operates an electronic funds transmission service, whereby dividends may be electronically transferred to shareholders’ bank accounts. These shareholders are encouraged to mandate this method of payment for all future dividends by approaching the Company’s share registrar, Computershare Investor Services Proprietary Limited, whose contact details are set out in the integrated report. SHARE CAPITALAuthorised share capital There was no change in the authorised share capital of the Company during the year under review. The authorised ordinary share capital of the Company is 2,5 billion shares of 0,01 cent each. Issued share capital The issued share capital of the Company is R184 549 (2014: R184 836) comprising 1 845 493 245 (2014: 1 848 355 889) ordinary shares of 0,01 cents each. MTN Zakhele Scheme Details of the MTN Zakhele Scheme are set out in note 8.1. Details of participation in the MTN Zakhele Scheme by directors of the Company, the Group secretary, directors and the company secretaries of major subsidiaries are set out on page 131 of the annual financial statements. SHARE PRICE PERFORMANCEDetails of the share price performance of the Company are set out on page 120 of the integrated report. CONTROL OF UNISSUED SHARE CAPITALThe unissued ordinary shares are the subject of a general authority granted to the directors in terms of section 38 of the Companies Act. As this general authority remains valid only until the next annual general meeting (AGM), shareholders will be asked at that meeting to consider an ordinary resolution placing the said unissued ordinary shares, to a maximum of 10% of the Company’s issued share capital, under the control of the directors until the next AGM. ACQUISITION OF THE COMPANY’S OWN SHARESAt the last AGM held on 27 May 2015, shareholders gave the Company or any of its subsidiaries a general approval in terms of section 48 of the Companies Act, by way of special resolution, for the acquisition of its own shares. As this general approval remains valid only until the next AGM, to be held on 25 May 2016, shareholders will be asked at that meeting to consider a special resolution to renew this general authority until the next AGM, subject to a maximum extension of 15 months. No shares of the Company were acquired by the Company
or any of its subsidiaries as part of a share buy-back during
the year. During 2014, a subsidiary of the Group acquired
During the year, 3 361 466 (2014: 2 537 561) shares were delivered back to the Company by MTN Zakhele. A total of 1 917 294 of these shares were cancelled by the Company during the year. Further details of the authorised and issued shares are set out in note 8.1. SHAREHOLDERS’ INTERESTDetails of shareholders’ interest and a shareholder spread analysis are disclosed in Annexure 1 of the annual financial statements. DIRECTORATEThe composition and profiles of the board of directors of the Company are set out on pages 44 and 45 of the integrated report and the information on the board and board committees, its activities, meetings, attendance, and any other information are set out in the summarised corporate governance report of the integrated report. Details of the directors’ remuneration and shareholding are set out in note 10.2 of the annual financial statements. RETIREMENT BY ROTATION OF DIRECTORSIn accordance with the Company’s MOI, AT Mikati retires by rotation at the forthcoming AGM. The retiring director, being eligible, offers himself for re‑election. In accordance with the Company’s MOI, S Kheradpir retires at the forthcoming AGM. The retiring director, being eligible, offers himself for election. In accordance with the policy adopted by the board and the MOI of the Company, directors who have been in office for an aggregate period in excess of nine years are required to retire at the next AGM and at each AGM thereafter. Accordingly, KP Kalyan, MJN Njeke, JHN Strydom, AF van Biljon and J van Rooyen who have served on the board for an aggregate period in excess of nine years, retire at the forthcoming AGM and are eligible and offer themselves for re-election following an evaluation of their independence. The profiles of the directors retiring by rotation and seeking re-election are set out in the notice of the AGM. APPOINTMENTS AND RESIGNDuring the year under review, S Kheradpir was appointed to the board as an independent non-executive director with effect from 8 July 2015. PF Nhleko was appointed as executive chairman with effect from 9 November 2015. The appointments are subject to shareholder approval at the next AGM to be held on Wednesday, 25 May 2016. RS Dabengwa resigned as the Group president and chief executive officer and executive director on 9 November 2015. F Titi resigned as an independent non-executive director on 31 December 2015. There were no other director appointments or resignations other than those mentioned above during the year under review. INTERESTS OF DIRECTORS AND PRESCRIBED OFFICERSDetails of the interests of directors and prescribed officers are provided in note 10.2. DIRECTORS AND PRESCRIBED OFFICERS’ SHAREHOLDINGS AND DEALINGSDetails of the interests of directors and prescribed officers’ shareholdings and dealings are provided in note 10.2. EMPLOYEE SHARE SCHEMESDetails of the Group’s share schemes are provided on pages 80 to 85 of the integrated report and in note 8.4. MERGERS AND ACQUISITIONSDetails of the Group’s acquisition and disposals are disclosed in notes 9.3 and 9.4. EVENTS AFTER THE REPORTING PERIODDetails of events after the reporting period are set out in relevant notes within the financial statements. LEGAL AND REGULATORY MATTERSDetails of the Nigerian Communications Commission fine imposed on MTN Nigeria are provided in note 6.3. AMERICAN DEPOSITARY RECEIPT (ADR)A sponsored ADR facility is in place. This facility is sponsored by the Bank of New York and details of the administrators are reflected in the integrated report. ANNUAL GENERAL MEETINGThe AGM will be held on Wednesday, 25 May 2016. Refer to the notice of the twenty-first AGM for further details of the ordinary and special business for consideration at the meeting. INTERNAL FINANCIAL CONTROLSDuring the year under review, the board, through the audit committee, assessed the results of the formal documented review of the Group’s system of internal controls and risk management, including the design, implementation and effectiveness of the internal financial controls conducted by internal audit and considered information and explanations given by management and discussions with the external auditors on the results of the audit. Although certain weaknesses in financial controls, whether in design, implementation or execution were identified, the board does not consider these control weaknesses (individually or in combination with other weaknesses) to have resulted in actual material financial loss, fraud or material errors. Based on the above results, nothing has come to the attention of the board that caused it to believe that the Group’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable annual financial statements. The board’s opinion is supported by the audit committee. To ensure adequate operational oversight, leadership, governance and regulatory compliance across all 22-country operations, the board reviewed the Group operating structure and will implement from 2016 a structure which categorises the operations into three regions, namely: West and Central Africa (WECA), South and East Africa (SEA), and Middle East and North Africa (MENA), with a vice president responsible for each region. A Group chief operating officer will oversee the three regions. These changes will improve the management oversight role and strengthen commercial, governance and technical aspects across the Group. AUDIT COMMITTEEThe report of the audit committee appears on pages 3 and 4 of the annual financial statements. AUDITORSPricewaterhouseCoopers Incorporated and SizweNtsalubaGobodo Incorporated will continue in office as joint auditors in accordance with section 90 of the Companies Act. Johan van Huyssteen and Suleman Lockhat will continue as the registered audit partners undertaking the audit for PricewaterhouseCoopers Incorporated and SizweNtsalubaGobodo Incorporated, respectively. The audit committee reviewed the independence of the auditors during the period under review and satisfied itself that the auditors were independent of the Group. |