Directors' report
for the year ended 31 December 2017
NATURE OF BUSINESS
MTN Group Limited (the company) incorporated in the Republic of South Africa on 23 November 1994 (company registration: 1994/009584/06) carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associated companies. The group is listed on the JSE Limited.
The company's registered address is 216 14th Avenue, Fairland, Roodepoort, Gauteng, 2195.
ACCOUNTING PRACTICES
The group and the company annual financial statements were prepared in accordance with IFRS as issued by the IASB and Interpretations as issued by the IFRIC and comply with the SAICA Financial Reporting Guides as issued by the APC and Financial Reporting Pronouncements as issued by the FRSC, the JSE Listings Requirements and the requirements of the Companies Act.
FINANCIAL RESULTS
The group recorded a profit after tax for the year ended 31 December 2017 of R4 541 million (2016: loss after tax of R3 103 million).
Full details of the financial results of the group and the company are set out in these annual financial statements and accompanying notes for the year ended 31 December 2017.
CAPITAL EXPENDITURE
Capital expenditure for the year ended 31 December 2017 totalled R31 461 million (2016: R35 268 million) which comprise the following:
| 2017 Rm |
2016 Rm |
||||
|---|---|---|---|---|---|
| Property, plant and equipment | 28 004 | 32 095 | |||
| Land and buildings | 474 | 186 | |||
| Leasehold improvements | 165 | 62 | |||
| Network infrastructure | 16 520 | 13 540 | |||
| Information systems, furniture and office equipment | 1 317 | 1 630 | |||
| Capital work in progress/other1 | 9 423 | 16 594 | |||
| Vehicles | 105 | 83 | |||
| Intangible assets | 3 457 | 3 173 | |||
| Software | 2 197 | 1 868 | |||
| Capital work in progress | 1 260 | 1 305 | |||
| 31 461 | 35 268 | ||||
| 1 | The majority of work in progress relates to long-term network infrastructure projects. |
Licences and spectrum acquired during the year:
| 2017 Rm |
2016 Rm |
|||
|---|---|---|---|---|
| Syria | 12* | 54* | ||
| Nigeria | 14 | 1 396 | ||
| Scancom (MTN Ghana) | 72 | 973 | ||
| Congo SA | – | 266 | ||
| Yemen | – | 468 | ||
| Sudan | 567 | – | ||
| Other | 34 | 141 | ||
| 699 | 3 298 |
* Excluding the effects of hyperinflation.
RELATED PARTY TRANSACTIONS
Details of related party transactions are set out in note 10 of these annual financial statements.
YEAR UNDER REVIEW
The results of the group and company have been set out in the attached financial statements.
BORROWING POWERS
In 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.
The directors have reviewed the group's and company's budget and cash flow forecast for the year to 31 December 2018. 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 these 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 SHAREHOLDERS
Before declaring dividends, the board:
- Applied the solvency and liquidity test.
- Reasonably concluded that the company would satisfy the solvency and liquidity test immediately after payment of the interim and final dividend.
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.
Final dividend
Notice is hereby given that a gross final dividend of 450 cents per share for the period to 31 December 2017 has been declared payable to shareholders. The number of ordinary shares in issue at the date of this declaration is 1 884 269 758 (including 9 983 286 treasury shares held by MTN Holdings and 76 835 378 shares held by MTN Zakhele Futhi).
The dividend will be subject to a maximum local dividend tax rate of 20% which will result in a net dividend of 360 cents per share to those shareholders who bear the maximum rate of dividend withholding tax of 90 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:
| Last day to trade cum dividend on the JSE | Monday, 26 March 2018 |
| First trading day ex dividend on the JSE | Tuesday, 27 March 2018 |
| Record date | Thursday, 29 March 2018 |
| Payment date | Tuesday, 3 April 2018 |
No share certificates may be dematerialised or rematerialised between Tuesday, 27 March 2018 and Thursday, 29 March 2018, both days inclusive. On Tuesday, 3 April 2018, 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 Tuesday, 3 April 2018 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 Tuesday, 3 April 2018.
The board confirms that the company will satisfy the solvency and liquidity test after the completion of the dividend distribution.
Interim dividend
A gross dividend of 250 cents per share (2016: 250 cents per share) amounting to R4 494 million (2016: R4 585 million) in respect of the half-year period ended 30 June 2017 was declared on 3 August 2017 and paid to shareholders on 28 August 2017.
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:
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196
PO Box 61051, Marshalltown, 2107
SHARE CAPITAL
Authorised 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 cents each.
Issued share capital
The issued share capital of the company is R188 427 (2016: R188 427) comprising 1 884 269 758 (2016: 1 884 269 758) ordinary shares of 0,01 cents each.
MTN Zakhele Futhi Scheme
Details of the MTN Zakhele Futhi Scheme are set out in note 8.1.
Details of participation in the MTN Zakhele Futhi Scheme by directors of the company, the group secretary, directors and the company secretaries of major subsidiaries are set out in note 10.2 of the annual financial statements.
CONTROL OF UNISSUED SHARE CAPITAL
The 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 SHARES
At the last AGM held on 25 May 2017, 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 24 May 2018, 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.
SHAREHOLDERS' INTEREST
Details of shareholders' interest and a shareholder spread analysis are disclosed in annexure 1 of these annual financial statements.
Details of the directors' remuneration and shareholding are set out in note 10.2 of these annual financial statements.
RETIREMENT BY ROTATION OF DIRECTORS
In accordance with the company's MOI, KC Ramon, A Harper, NP Mageza and MLD Marole will retire at the forthcoming AGM. The retiring directors, being eligible, offer themselves for re-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, AT Mikati, KP Kalyan 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 will be set out in the notice of the AGM.
APPOINTMENTS AND RESIGNATIONS
RA Shuter was appointed as group president and CEO with effect from 13 March 2017 and RT Mupita as group chief financial officer with effect from 3 April 2017.
A van Biljon retired as a non-executive director on 31 December 2017.
There were no other director appointments or resignations other than those mentioned above during the year under review.
INTERESTS OF DIRECTORS AND PRESCRIBED OFFICERS
Details of the interests of directors and prescribed officers are provided in note 10.2.
DIRECTORS' AND PRESCRIBED OFFICERS' SHAREHOLDINGS AND DEALINGS
Details of the interests of directors' and prescribed officers' shareholdings and dealings are provided in note 10.2.
EMPLOYEE SHARE SCHEMES
Details of the group's share schemes are provided in note 8.4.
MERGERS AND ACQUISITIONS
There were no material changes in shareholding during the current or prior year.
EVENTS AFTER THE REPORTING PERIOD
Details of events after the reporting period are set out in relevant notes within these financial statements.
AMERICAN DEPOSITORY 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: Cusip No 62474M108 ADR.
ANNUAL GENERAL MEETING
The AGM will be held on Thursday, 24 May 2018. Refer to the notice of the 23rd AGM, when issued, for further details of the ordinary and special business for consideration at the meeting.
During 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.
AUDIT COMMITTEE
The report of the audit committee appears in the Financial statements of this report.
AUDITORS
PricewaterhouseCoopers Incorporated and SizweNtsalubaGobodo Incorporated will continue in office as joint auditors in accordance with section 90 of the Companies Act.
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.