MTN Zakhele, the BEE investment arm of mobile operator, MTN, says it continued to decrease its debt during the financial year ended December 2015.
Set up in 2010, MTN Zakhele is a vehicle for qualifying black South Africans to invest in MTN Group. It has a 4% stake in the mobile operator.
Most MTN Zakhele shareholders, some 87%, hold fewer than 500 shares each, ensuring the broad-based nature of the scheme.
MTN Zakhele chairperson, Sindi Mabaso-Koyana, said in a statement on Tuesday, that the company received greater-than-expected dividends from the mobile operator and was able to repay debt in excess of the budgeted repayment schedule.
MTN Zakhele received R964.6 million in dividend income from MTN Group, up from R836,5 million in 2014.
“This income was used firstly to pay the Company’s permitted operational costs and tax. The remainder of the dividend income was used to pay dividends owed to preference shareholders and to reduce MTN Zakhele’s notional vendor financing (NVF),” Mabaso-Koyana said.
In 2015, MTN Zakhele paid preference shareholders R211.3 million, up from R201.8 million in 2014, and partly settled the NVF with a payment of R688.8 million (compared to a payment of R581.8 million in 2014), it said.
According to Mabaso-Koyana, shares in the company continued to be traded actively between qualifying black investors during the year.
Prior to the listing on the JSE in September 2015, MTN Zakhele shares worth R373 million changed hands. After the listing on the JSE, shares worth R35.5 million were traded in November and December 2015.
A total of 21,000 trades took place across both platforms. This compares to a trading value in 2014 of R902 million in more than 42,000 deals, the company said.
The company said that the performance of its share price is linked to that of MTN Group. “To this end, the decline in the share price of MTN Group over the past few months due to, among other factors, the imposition by the Nigerian authorities of a fine has also led to a decline in the share price of MTN Zakhele.”
At the end of 2015, the MTN Zakhele share closed at R73.90, down 32% from the closing price of R108.50 a year earlier.
“However, it is important to note that the share price at the end of 2015 still represents an almost 270% gain on the initial investment of R20 per share investors paid for each MTN Zakhele share in 2010,” Mabaso-Koyana said.
The company’s profit after taxation for 2015 was R2.2 million – down from R724.2 million in 2014.
“The sharp decline is as a result of a non-cash adjustment arising from the revaluation of the derivative financial asset, based on the MTN Group share price. This derivative financial asset is revalued at the end of each financial year and is determined
by reference to the MTN share price at year end,” said Mabaso-Koyana.
The MTN Group share price declined from R221.41 at 31 December 2014 to R132.89 at 31 December 2015 resulting in a loss of R871.9 million recognised for the year in the books of MTN Zakhele, the chairperson said.