MTN Zakhele Futhi gets R75m injection
JOHANNESBURG - MTN ZAKHELE Futhi, the mobile operator’s special purpose empowerment vehicle, has received a further R75 million to lessen the blow from MTN Group’s decision to withhold the final dividend for the year to the end of December 2020.
The scheme’s chairperson, Belinda Mapongwana, said the money would enable MTN Zakhele Futhi to meet its cash requirements for the next 12 months.
Last September, MTN Zakhele received a R15m injection to meet its financial commitments after MTN withheld its interim dividend in the six months to the end of June last year.
“The 2020 financial year has been a challenging year for MTN Zakhele Futhi, and for the first time in recent history MTN Group announced that no interim dividend would be paid for the six-month period ended June 30, 2020, having a direct impact on MTN Zakhele Futhi’s liquidity,” Mapongwana said.
Mapongwana said the amounts provided had negatively impacted the gearing in the company due to the interest-bearing nature of all funding provided by MTN Holdings.
“The MTN Zakhele Futhi board will continue with their efforts to protect the investment made by its shareholders,” Mapongwana said.
MTN Zakhele Futhi had anticipated a year-end dividend from MTN.
However, MTN Group announced that as a result of uncertainties around cash upstreaming from Nigeria, the timing of their asset realisation programme proceeds and the impact of Covid-19, it was suspending their dividend policy and would not declare a final dividend for the financial year to the of December 2020.
“As MTN Zakhele Futhi’s only material investment and asset consists of MTN shares, the company is entirely dependent on the receipt of dividends from MTN.
The suspension of MTN’s dividend policy has therefore had a significant impact on the ability of MTN Zakhele Futhi to continue as a going concern and created material uncertainty around this assumption,” Mapongwana said.
The Covid-19 pandemic has had a material impact on empowerment schemes, which rely on dividends to fund interest and capital repayment commitments on their loans.
The head of research at Kagiso Asset Management, Abdul Davids, said the MTN shares had recovered from the mid-R30 lows of March last year, but were still below the R100 level they were two years ago.
“If their share price continues to languish at these levels, MTN Zakhele Futhi will require further funding,” said Davids.
MTN Zakhele Futhi, which holds around 4 percent of MTN Group, said the decline in the share price since the prior financial year had resulted in a fair value loss of R1.139 billion being recognised in the statement of comprehensive income.
The company swung to a R146.1m profit after taxation in the year to the end of December 2020 compared with the R38m loss a year earlier.
MTN Zakhele Futhi said it was in the process of extending its third-party preference share financing, which is due on November 23 next year, and would update the market once the terms and conditions of the refinancing had progressed.