TheCable

MTN Nigeria Plc posted a record turnover of N1.35 trillion at the end of the 2020 financial year — which stands atop the revenue numbers of Nigeria’s listed companies.

The figure represents an increase of 15 percent, stepping ahead from the increase of over 12 percent in turnover the company recorded in 2019.

The company’s audited financial report at the end of December 2020 shows a gain in earnings momentum in the final quarter. Growth records in both revenue and profit accelerated over the last three months of the financial year.

With the improvement in revenue, the communications company turned around its earnings story for the year from a drop of 3.3 percent at the end of the third quarter to a slight improvement at full year. It remains a sharp slowdown from the 40 percent profit growth in the preceding financial year but at least better than the declining profit records in the interim reports.

The final quarter accounted for about 28 percent of the full year turnover in 2020 and roughly 30 percent of the year’s closing profit figure of N205 billion.

The company’s earnings come mainly from airtime/subscription from which 57 percent of the full year turnover figure for the year was generated. Its contribution to total revenue dropped from 62 percent in the preceding financial year, as the revenue line was affected by the economic lockdown of last year.

Revenue from data services was simultaneously boosted by the economic lockdown and therefore provided the drive for revenue improvement in the year. Earnings from data services rose by over 51 percent in the year. This was supported by value added services, which grew rapidly by 25 percent and interconnect and roaming services, which went up by 10 percent.

A slowdown in costs against the revenue improvement in the final quarter made possible the enhanced profit performance the company recorded during the period. Operating profit stepped up from 7.5 percent at the end of the third quarter to 8.5 percent growth to stand at about N427 billion at the end of the year.

Rising finance expenses however waged the flow of operating profit down to the bottom line. An increase in finance expenses and a decline in finance income claimed much of the increase in operating profit. A further strain came from tax expenses, which left the bottom line flat at N205 billion.

The company faced generally rising costs well ahead of the revenue improvement in the year. The resulting operating pressure therefore hindered profit performance. Compared to the 15 percent increase in revenue, direct network operating cost — the company’s biggest expenditure line, rose by almost 26percent to close at over N310 billion at full year.

Other major rising costs are cost of handsets and accessories — which grew by 61 percent to over N20 billion while employee benefits rose by more than 47 percent to N45 billion.

Also, finance expenses grew rapidly for the second year and posed a big challenge to the company in 2020. MTN Nigeria paid roughly N144 billion in finance expenses through last year’s operations — which represents an increase of about 18percent in the year.

The increase in finance expenses was reinforced by a drop of 21percent in finance income to nearly N16 billion over the period. This pushed up the growth in net finance expenses to 25 percent to close the year at N128 billion.

The company’s management devoted as much as 30 percent of operating profit to meet net finance expenses at the end of December 2020, rising from 26 percent in 2019. MTN Nigeria carries a huge balance sheet debt portfolio of N521 billion — which represents an increase of 26 percent at the end of 2020.

Also, total finance leases expanded by over 30 percent to stand at N642 billion at the end of the year, accounting for 55 percent of the finance expenses at the end of the period.

The strong growth in operating expenses hindered the company’s ability to convert the 15 percent growth in turnover into profit. Pre-tax profit only edged up by 2.6 percent to roughly N299 billion. After tax profit crept up from N203billion in 2019 to N205 billion in 2020.

The incursion of costs on earnings lowered net profit margin from 17.4 percent in the prior financial year to 15.2 percent at the end of the 2020 financial year. The company is paying a final cash dividend of N5.90 per share, top on the interim cash dividend of N3.50 per share.