MTN Group Limited Integrated Report 2016

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Financial review continued
Reconciliation of pro forma financial information
ZAR (million)
Actual
2016
Hyper-
inflation(1)
Tower
profit(2)
Zakhele
Futhi
impact(3)
Nigeria
regulatory
fine(4)
Actual
2016
adjusted
Revenue 147 920 1 026 – – – 146 894
Other income 335 – 31 – – 304
EBITDA 40 751 246 31 (1 008) (10 499) 51 981
Depreciation, amortisation and
impairment of goodwill◊ 26 609 791 – – – 25 818
Profit from operations 14 142 (545) 31 (1 008) (10 499) 26 163
Net finance cost 10 495 (228) – – 1 044 9 679
Share of results of joint ventures
and associates after tax (127) (1 851) – – – 1 724
Monetary gain/(loss) 1 723 1 723 – – – –
Profit/(loss) before tax 5 243 (445) 31 (1 008) (11 543) 18 208
Income tax expense 8 346 35 – 593 – 7 718
Profit/(loss) after tax (3 103) (480) 31 (1 601) (11 543) 10 490
Non-controlling interests (489) 195 – – (2 444) 1 760
Attributable (loss)/profit (2 614) (675) 31 (1 601) (9 099) 8 730
EBITDA margin 27,5% 35,4%
Effective tax rate 159,2% 42,4%
(1) Represents the exclusion of the impact of hyperinflation and related goodwill impairment for certain of the Group’s subsidiaries (MTN
Syria, MTN South Sudan and MTN Sudan) and the Group’s joint venture in Iran, being accounted for on a hyperinflationary basis in
accordance with International Financial Reporting Standards (IFRS) on the respective financial statement line items affected. During
2015, the Iranian economy was assessed to no longer be hyperinflationary and hyperinflation accounting was discontinued effective
1 July 2015.
The economy of Sudan was assessed to no longer be hyperinflationary effective 1 July 2016 and hyperinflation accounting was
discontinued from this date onwards.
The economy of South Sudan was assessed to be hyperinflationary effective 1 January 2016 and hyperinflation accounting was
applied for the year ended 31 December 2016.
(2) Represents the exclusion of the financial impact relating to the sale of tower assets during the financial year on the respective financial
line items impacted, which include:
• Tower sale profits for the year related to the Ghana release of deferred profit of R31 million (2015: Nigeria tower profit of R8 233 million
and Ghana release of deferred gain of R30 million).
(3) Represents the IFRS 2 Share based payment impact of MTN Zakhele Futhi. MTN made a public offer of ordinary shares to qualifying
BEE investors. The Group recognised an IFRS 2 Share-based payment expense of R1 008 million and a tax expense of R593 million.
The deferred tax expense is recognised by MTN Zakhele Futhi mainly in respect of the capital gain on the investment in MTN and is
not eliminated on consolidation.
Note: Certain financial information presented in this integrated report constitutes pro forma financial information. The pro forma financial
information is the responsibility of the Group’s board of directors and is presented for illustrative purposes only. Because of its nature,
the pro forma financial information may not fairly present MTN’s financial position, changes in equity, results of operations or cash flows.
An assurance report has been prepared and issued by our joint auditors PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc.
in respect of the pro forma financial information included in this integrated report that is available for inspection on the website .
1. The financial information presented in this integrated report has been prepared excluding the impact of hyperinflation and the relating
goodwill impairment, tower profits, the Nigerian regulatory fine (consisting of the re-measurement impact when the settlement was
entered into and the finance costs recognised as a result of the unwind of the initial discounting of the liability) and the MTN Zakhele
Futhi impact (consisting of the share-based payment expense, net of the deferred tax impact recognised by MTN Zakhele Futhi
arising on the capital gain on the investment in MTN) and constitutes pro forma financial information to the extent that it is not extracted
from the segment disclosure included in the audited financial statements for the year ended 31 December 2016. This pro forma
financial information has been presented to eliminate the impact of hyperinflation and the relating goodwill impairment, tower profits,
the Nigerian regulatory fine (as defined above) and the MTN Zakhele Futhi impact (as defined above) from the financial results in order
to achieve a comparable analysis year on year. Hyperinflation adjustments and the relating goodwill impairment, tower profits, the
Nigerian regulatory fine (as defined above) and the MTN Zakhele Futhi impact (as defined above) have been calculated in terms of
the Group accounting policies disclosed in the consolidated financial statements for the year ended 31 December 2016.
2. Constant currency (“organic”) information has been presented to illustrate the impact of changes in currency rates on the Group’s
results. In determining the change in constant currency terms, the current financial reporting year’s results have been adjusted to the
prior year’s average exchange rates determined as the average of the monthly exchange rates which can be found on
investors. The measurement has been performed for each of the Group’s currencies, materially being that of the US dollar and
Nigerian naira. The organic growth percentage has been calculated based on the current year constant currency results compared
to the prior year results. In addition, in respect of MTN Irancell, MTN Sudan, MTN South Sudan and MTN Syria, the constant currency
MTN Group Limited Integrated Report 2016 44