Telkom on Monday warned investors that it headline earnings per share (HEPS) for the six months to end-September 2022 will be cut by 55% compared to the prior interim period in 2021.
HEPS is South Africa’s main profit gauge.
Telkom advised shareholders that reported HEPS and reported basic earnings
per share are expected to decrease by between 45% and 55% compared to the prior
interim period ended 30 September 2021.
Telkom attributed the expected loss mobile postpaid vs prepaid mix changing which had the
impact of deferring revenue over 24 – 36 months, as well as the cost base increasing.
The resultant reduction in earnings is a combination of the following:
• The impact of revenue deferral resulting from the continued growth of our post-paid
mobile sales reduced revenue recognised by R299 million;
• A shift in mobile product mix coupled with the upfront spend on handsets recorded
immediately (while associated revenue is recognised over 24 – 36 months) increased
the cost of handsets, equipment, software and directories by more than 30% from
R2 453 million in the prior period;
• Maintenance costs and service costs also increased materially reflecting an increased
mobile network for the period. Maintenance costs increased by more than 10% from
R1 924 million, while service fees increased by more than 20% from R1 611 million,
also impacted by higher backup energy costs due to accelerated loadshedding during
the period;
• These costs were partially offset by savings in other areas as payments to other
operators, employee costs, marketing, and other expenses were well managed;
• Net finance charges and fair value movements also partially offset the impact of
increased costs and declined by more than 15% from R659 million due to a favourable
foreign exchange hedging position during the period; and
• Reduced taxation for the period also contributed in offsetting the impact of higher costs.
Notwithstanding the weaker performance in earnings and challenging trading environment,
Telkom expects to sustain its topline revenue compared to the prior period.
The Group’s interim results for the six months ended 30 September 2022 will be released on SENS on 23 November 2022.
