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MTN Zakhele reports solid numbers ahead of switch in listing to JSE

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 (Duncan Alfreds, Fin24)
(Duncan Alfreds, Fin24)

From MTN Zakhele:

MTN Zakhele (RF) Limited has announced solid financial results for 2014. “The sustained solid operational performance of MTN ensured that in 2014 MTN Zakhele has been able to further reduce its levels of debt and strengthen its financial position,” says the Company chairman, Thulani Gcabashe.  “2014 also marked the first full year of trading in MTN Zakhele shares via the MTN Zakhele share trading platform. Robust trade and a sharp increase in the share price highlight the value that investors continue to see in the scheme.”

Established in 2010, MTN Zakhele is a vehicle for previously disadvantaged South Africans to invest in MTN Group, a leading emerging markets telecommunications provider. MTN Zakhele owns approximately 4% of MTN Group and its sole business is the holding of these shares and administering the associated funding.

Benefiting from MTN Group’s performance

MTN Zakhele received R836m in dividend income from MTN Group, up from R658m received in 2013.   These dividends were used firstly to pay the Company’s permitted operational costs as well as taxes due to the tax authorities. Thereafter, the dividend income was used to meet financing obligations to the preference share funders and reduce its notional vendor financing (NVF).

In 2014, MTN Zakhele paid its preference shareholders dividends of R201,8m. This compares to a dividend payment of R152,6 million in 2013. The NVF funding was partially settled during the 2014 financial year with a payment of R581,8mn. This compares to a partial settlement of R2,1bn in 2013. The funds used to reduce the NVF in 2013 came from the issue of R1,7bn worth of preference shares which were issued by MTN Zakhele as part of the refinancing of its debt.

The Company recorded a profit after taxation of R724,2m, compared to R123,5m in 2013. The increased profit recorded in 2014 is a result of a non-cash adjustment arising from the revaluation of the derivative financial asset and an increase in the dividends received from MTN Group.

The MTN Group results released in March 2015 included an encouraging 20,3% increase in its dividend, despite challenging market conditions. “This dividend payment bodes well for MTN Zakhele’s position in 2015,” says Gcabashe.

Trading platform update and JSE listing

In 2014, shares worth R902m changed hands in more than 42 000 transactions on the MTN Zakhele share trading platform. More than 45 000 black individuals and groups (amounting to approximately 42% of the shareholder base) are registered to trade on the trading platform. At the end of December 2014, the MTN Zakhele share traded at R108.50. The share is currently trading in the region of R122.00, more than six times the R20 investors paid for each share in 2010.

The Company operates this trading platform under a Financial Services Board (FSB) temporary exemption from the requirement to be licensed as an exchange, which will expire on 30 June 2015. “The JSE is in the process of making amendments to its BEE board in order to accommodate restricted schemes like MTN Zakhele. MTN Zakhele will begin the process of listing once these amendments have been made. Shareholders will be advised in due course of developments relating to the listing,” says Gcabashe. MTN Zakhele has applied for a further extension to the licence exemption as it continues to work towards a listing in order to enable shareholders to continue to trade their shares in a secure environment.

Looking ahead

Gcabashe says MTN Zakhele and MTN Group are reviewing the future of MTN Zakhele when the current share trading restrictions expire on 25 November 2016. “The shareholders will be informed as soon as the review by MTN Group and MTN Zakhele has been completed.”

With respect to shareholder dividends, Gcabashe says it remains the intention of MTN Zakhele not to declare dividends in respect of MTN Zakhele shares until all of its funding liabilities have been settled, in accordance with the funding agreements. “Over the years, the Company has benefited from this stance, steadily reducing the cost of debt. The board remains confident that this is the right approach. Alongside MTN Zakhele’s robust funding structure, this approach will continue to benefit shareholders in years to come.”

Gcabashe will step down as Chairman of MTN Zakhele by mutual agreement owing to his appointment as Chairman of the Standard Bank Group Limited, effective from 28 May 2015.

The annual general meeting of the Company which will be held in Sandton on July 6 2015.

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