Capital allocation and enhanced risk management

Transcription

1 Capital allocation and enhanced risk management MTN Group Limited Ralph Mupita Group CFO UBS conference 26 March 2018

2 Agenda Recap on 2017 results Capital allocation Enhanced risk management 2

3 Recap on 2017 results 3

4 2017 group financial results - salient features + 6,8%* + 7,2%* + 34,2%* +14,2%* Group revenue R133bn** Group service revenue R124bn** Group data revenue R28bn** Group digital revenue R13bn** R47,0bn** R31,5bn** 182 cents 665 cents Group EBITDA +2,5%* Group capital expenditure 23,7% of revenue HEPS -51,9%*** Adjusted HEPS -15,1% Final dividend of 450 cents per share * Constant currency view is shown and is adjusted for hyperinflation, tower profits, Nigeria fine and MTN Zakhele futhi impact ** Reported *** Reported excluding the Nigeria regulatory fine 4

5 2017 group financial results - HEPS Impacted by non-operational items ZAR (cents) Change% Attributable earnings / (loss) per share 246 (144) NM Impairment of goodwill, PPE and non-current assets NM Profit on exercise of exchange right (IHS) (335) - (100,0) Other (4) 7 NM Basic headline earnings / (loss) per share 182 (77) NM Nigeria regulatory fine NM Basic headline earnings per share (excluding Nigeria regulatory fine) (51,9) Nigeria fine interest ,2 Hyperinflation (excluding impairments) NM Foreign exchange losses and gains (32,3) MTN Zakhele Futhi (72,7) Loss on derecognition of loan (IHS) ,0 Adjusted headline earnings per share (excluding non-operational items) (15,1) 5

6 Medium-term targets Service revenue growth* Group upper single digit growth South Africa mid single digit growth Nigeria double digit growth Improving EBITDA margins Capex intensity between 20% to 15% Adjusted holdco leverage 2,0x 2,5x Dividend policy of 500 cents in 2018, growing 10% to 20% per year * Constant currency Adjusted Holdco leverage = Holdco net debt / SA EBITDA + cash upstreaming 6

7 Growth capital allocation and cash generation Top line growth EBITDA growth Lower Capex Higher FCF Revenue EBITDA Capex Operating FCF Service revenue Other revenue EBITDA margin EBITDA Capex intensity Capex Operating free cash flow Constant currency 7

8 Capital allocation 8

9 Capital allocation Incremental ROIC > WACC +2% Seeking projects with payback < 4 years Conflict markets to be self funding Smart capex Investing appropriately for network and NPS leadership Reducing unitary costs for network equipment Appropriate group and opco gearing Stabilise net debt Maintain sufficient headroom in facilities Dividends Operating cash flow fund dividends over the medium term Dividend growth aligned to the investment case Maintain financial flexibility for risk and growth opportunities M&A Nigeria and Ghana IPO Proceeds to be used for de-leveraging, growth opportunities, share buy-backs and special dividends 9

10 Capex profile actual and 2018 guidance Capex 2017 ZAR (million) ** SA SEAGHA Nigeria WECA MENA Iran* Other Group 2018 guidance 2017 *Iran Capex at 49% and is not part of the consolidated Group Capex ** Reported 10

11 Capital allocation drivers smart capex Input Customers Device Market & Position, Market share Network utilisation and Demographics Telecom expense breakdown Usage behaviour SIM QoS data Technology breakdown Model Segmentation Market Potential Competitor Network Financial Output Market sizing and market share analysis New site establishment plan per city, province Modernisation plan per BTS Expected growth of Usage or Throughput per year Period of investments Expected Load per site, City, Province Revenue, OPEX, CAPEX per year Percentage of Market share per year NPV, ROI, Payback Output sample data from MTN Iran Smart Capex Model 11

12 Capital allocation drivers - price book savings RAN HW + SW standardisation key highlights - illustrative Hardware Average Hardware Pricing (unitary), Old vs New Prices USD 000 Software Software Pricing (Tiered annual unitary pricing/site), Old vs New Prices USD 000 SA SA SEAGHA Nigeria Old Price - USD per annum New Price - USD per annum Old Price - USD per annum New Price - USD per annum Key Benefits Price reduction YoY Price erosion for future years established and agreed Fully enabled hardware with maximum capacity Extended free warranty/support period Simplified & streamlined configurations, from 900 to 26 configurations Key Benefits Price reduction YoY Price erosion for some vendors already secured Flat fee per model (easy to deploy and to predict) Independent of traffic or subscriber growth Unlimited SW features all you can eat SW feature list) 12

13 Leverage and funding Leverage Nigeria borrowings (%) Group (ZAR million) Cash and cash equivalents (22 575) (35 052) 49% 2016: (65%) Interest bearing liabilities Net debt Group leverage # 1,3 1,1 51% 2016: (35%) Naira USD Holdco (ZAR million) Cash and cash equivalents (7 452) (11 422) Interest bearing liabilities Net debt Adjusted Holdco leverage 2,7 2,6 Head office borrowings (%) 55% 2016: (58%) ZAR USD 45% 2016: (42%) # Group leverage = Group net debt / EBITDA adjusted for hyperinflation, MTN Zakhele Futhi and tower profits Adjusted Holdco leverage = Holdco net debt / SA EBITDA + cash upstreaming Cash and cash equivalents include restricted cash and current investments; Interest bearing liabilities includes a foreign currency translation decrease of R6.9bn since Dec 16 13

14 Debt and maturity profile Focus on managing holding company debt profile and refinancing risk Instruments Amount due 2018 GBFs 750 Bonds and CPs Term facilities Bonds and CPs Bonds and CPs Term facilities Term facilities Eurobond Bonds and CPs Term Facilities Eurobond Bonds and CP s Eurobond Total in ZAR^ ZAR denominated facilities USD denominated facilities ^Principal repayments 14

15 Enhanced risk management

16 MTN Group s top risks Risk Risk description 1 Foreign exchange volatility and weakening currencies 2 Operational and compliance risks 3 Increased regulatory pressures 4 Suboptimal cash generation and upstreaming to the group 5 Political and economic risk in our key markets: South Africa, Nigeria and Iran 6 Spectrum cost and availability 7 Ability to successfully execute large group strategic and change programmes 8 Returns on capex deployed 9 Optimisation of investment portfolio 10 Increasing cyber and information risks 16

17 Enhancements to risk management framework Splitting lines of assurance Our risk & compliance functions & internal audit functions will be separate functions OpCo internal audit functions will report directly to the Group Strengthening our Compliance functions We are strengthening resource capacity by more than 200% Embedding risk appetite into decision making Aligning our risk thresholds with the BRIGHT strategy Rollout of escalation framework Group-wide framework to escalate risk events through executive and governance committees Strengthening management KPIs on Governance Increased focus on closing findings, preventing repeat findings, lowering % of ineffective controls Strengthening process consistency Creating a dedicated focus on policy and procedure compliance Implementation of group-wide ERP solution 17

18 Thank you Questions?