FX Losses, Finance Costs Threaten MTN's Scrip Dividend Plan

FX Losses, Finance Costs Threaten MTN’s Scrip Dividend Plan

Telecommunication giant, MTN Nigeria’s scrip dividend plan faces challenges from the company’s large foreign currency transactions revaluation losses in the first half of 2023. The telco company also saw its earnings impacted negatively amidst intense rivalry with its competitors in the market.

The company secured Securities and Exchange Commission (SEC) approval to register additional ordinary shares issued through its scrip dividend plan following shareholders’ endorsement at the Annual General Meeting, Futureview Financial Services analysts said in an update.

In correspondence to the Nigerian Exchange Limited (NGX), the premium board firm revealed that 5,192 shareholders have chosen to receive their 2022 fiscal year dividends in the form of new ordinary shares, totaling 641,047,053 shares.

Detailed showed that each new share of the telecom giant is valued at 2 kobo and priced at N232.68 per share – analysts at Futureview said this will elevate the total issued shares to 20,995,560,103.

“Scrip dividends involve issuing additional shares to shareholders instead of cash dividends”.

Futureview analysts said MTN’s adoption of this strategy as a way to generate funds without incurring significant costs, bypassing the challenges of high borrowing expenses. “This approach enhances MTN’s valuation by retaining dividends within the scrip shares program”, analysts said.

While expanding the share capital to 20 billion ordinary shares could potentially impact earnings per share (EPS), analysts said the company’s rising share price trajectory could counterbalance the dilution effect with potential capital gains.

The extra shares received might also be seen as reinvestment of dividends, potentially yielding greater value based on the company’s future profitability, the investment firm said in the report.

“It’s important to note that recent foreign exchange losses and high finance costs have affected the company’s earnings outlook”, Futureview said. MTN Nigeria Plc reported N238 billion foreign exchange loss as a result of the devaluation of the naira in the first half of 2023. 

In its financial statement, MTN Nigeria recognised that its finance charge was impacted by the devaluation of the Naira from N461.10/$1 in December 2022 to N756.08/$1 in June 2023 following the FX policy change.

However, the telecom giant said its revenue popped higher to N1.158 trillion, a surge of 22% from N950.086 billion in the comparable period in 2022. But then, its net income declined to N128.688 billion, representing a decline of 29% below N181.629 billion profit reported 12 months earlier.

#FX Losses, Finance Costs Threaten MTN’s Scrip Dividend Plan Treasury Bills Yield Steadies, Money Market Rates Decline

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