MTN shares slide 6% on lower earnings, Iran sanctions

Mobile telecommunications company MTN [JSE: MTN] reported a 6.96% decline in headline earnings per share, for the six months ended June 30.

The share price, which opened at R113.50, dipped just over 4% following the release of the interim results on Wednesday morning. By 11:41, its shares had slid nearly 6% to trade at R107.33.

The group reported a decline in headline earnings per share (HEPS) from 231 cents to 215c. The HEPS were negatively impacted by a swing of 21c in the contribution from associates and joint ventures, according to the report.

HEPS were also impacted by interest on a regulatory fine in Nigeria, foreign exchange losses and gains.

Excluding these items, HEPS declined from 346c to 280c, the report read.

The group, however, reported improvements in service revenue, up 10.2%, driven by voice revenue growth. Overall revenue came to R62.8bn, down 3.1% from R64.8bn reported for the same period last year. Operating profit was up 4% to R10.8bn, from R10.4bn. Net profit declined 5.2% from R5.2bn reported previously to R4.9bn.

Net debt increased to R69.8bn, from R57.15bn reported at the end of the 2017 financial year. This was impacted by the weaker rand and the payment of the final dividend under the previous dividend policy, the report read. 

An interim dividend of 175c per share was declared.

'Encouraging' 

CEO Rob Shuter said the group had an encouraging first half, with improved operational performance across markets such as Nigeria, Ghana and South Africa.

"We resolved some key regulatory issues in Cameroon and Benin, launched the initial public offering of MTN Ghana and made progress on the IPO of MTN Nigeria.

"As part of our ongoing portfolio review, we agreed to the sale of MTN Cyprus.

"During the period the US announced the decision to withdraw the Joint Comprehensive Plan of Action with Iran and will re-impose economic sanctions with the country. The first round of sanctions came to effect on August 7 and the second round will come into effect on November 5.

"The sanctions may limit the ability of the group to repatriate cash from MTN Irancell, including future dividends," MTN warned.

MTN said it would continue to monitor the situation. So far MTN has repatriated approximately €88m (approximately R1.36bn) from MTN Irancell.

This includes €61m relating to the full 2017 dividend due and a further €27m of historic dividends.

"Opportunities for repatriation within the legislative framework continue to exist, however MTN Group has not factored these into our cashflow forecasts," the report read.

The group’s target growth is 10% to 20% for the medium term. "We are confident that MTN remains well placed to deliver on our medium-term guidance," the report read.  

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