Doubts over payments from its Nigerian subsidiary have prompted MTN Group to suspend the payment of the final dividend for the 2020 financial year.
The South African-based telecommunications company said though net profit increased 87% to $1.1 billion, compared to $594 million in 2019, it won’t pay a final dividend as debt remains high. The company also did not pay interim dividends during the period.
Its Nigeria subsidiary, MTN Nigeria however paid a final dividend of N$420 million to its shareholders during the period.
According to a report by the Wall Street Journal, the group said it was unable to meet its dividend obligations due to the timing of proceeds from its asset realisation programme coupled with the impacts of the Covid-19 pandemic, which have kept debt levels above target.
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MTN announced its Asset Realisation Programme (ARP) in March 2019 with the goal of simplifying its portfolio through the sale of some assets, reducing debt and risk, improving returns, and realising proceeds of at least $1 billion over three years.
Recall that MTN Nigeria attributed its marginal growth in 2020 profit before tax to a rise in finance cost due to increased borrowings. MTN Nigeria is the largest contributor to earnings, accounting for a third of the group’s topline.
MTN Nigeria recorded moderated profit in 2020 due to the increased cost of doing business. Despite 15.1% increased earnings from N1.17 trillion to N1.35 trillion, finance cost, made up mainly of interest expenses and foreign exchange loss increased by 17.69% to N143.69 billion.
Operating expenses rose by 21.3% from N544.79 billion to N660.75 billion. This muted profit level to N205.21 billion from N203.28 billion, a mere 0.9% growth.
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Outgoing CEO Ferdi Moolman attributed the performance to the challenges during the period. “2020 was a challenging year for all. The unprecedented disruption that the Covid-19 pandemic caused the businesses and people we serve, challenged us in new and demanding ways.”
MTN rode the wave on the back of data and digital platforms earnings which grew by 51.2% and 107.2% respectively due to the lockdown which boosted patronage of the services.
The group expects to pay at least $0.17 per share final dividend in 2021 with no interim distribution.
