This is why MTN is making a loss in the first half of 2016

MTN has warned shareholders ahead of the release of its interim results that it will be making a sizeable loss in earnings per share.

In a trading statement issued on Thursday, MTN warned shareholders that it expects
to report for HY2016 a basic headline loss per share of between 285 cents and 255 cents and a basic loss per share of between 315 cents and 285 cents.

In the prior year comparable period, MTN reported headline earnings per share of 654 cents and earnings per share of 653 cents.

According to MTN, the big drop in earnings is primarily down to its operations in Nigeria.

“The Nigerian regulatory fine had a material impact on results for the period,” the group said.

“The income statement charge reflects the present value of the balance outstanding at 10 June 2016 of Naira 280 billion (USD1,418 billion, using the exchange rate prevailing at the time), reduced by the reversal of the provision made in December 2015 of Naira 119,6 billion (USD 600 million, using the exchange rate prevailing at the time).”

“In total the net effect of the Nigerian regulatory fine on the current period was a negative impact of 474 cents per share (cps),” it said.

Other factors accounting for the loss are:

  • The depreciation of the rand and operating currencies against the USD, earnings were further negatively impacted by foreign exchange losses of 135 cps.
  • Losses from tower companies of 136 cps (largely impacted by foreign denominated loans);
  • Increased short-term losses from the digital businesses (Africa Internet Holdings and Middle East Internet Holdings) when compared to the previous reporting period.
  • Hyperinflation adjustments in respect of MTN Irancell.
  • Higher professional services charges were also a drag in the period.
  • The underlying operational results for HY2016 were further affected by the under-performance of MTN Nigeria.
  • The relatively weaker operational performance of MTN South Africa, which is expected to report a decline in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin, impacted by the marked increase in handsets sold during HY2016.
  • The basic loss per share was in addition impacted by impairment on property, plant and equipment in South Sudan as well as goodwill impairments in Guinea Conakry and Afrihost Proprietary Limited.

MTN is expected to present its interim results on Friday, 5 August.

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This is why MTN is making a loss in the first half of 2016