Inflationary pressures and increased operational costs plunged South Africa’s Telkom full year headline earnings per share (HEPS) by 76.6% to fell to 134.6 cents from 575.3 cents in the previous year.
The company also said HEPS – South Africa’s main profit gauge – was impacted by lower EBITDA (earnings before interest, tax, depreciation and amortisation).
“This was due to a 19.8% decline in EBITDA and a 9.5% increase in depreciation, amortisation, impairments and write-offs*, partially offset by a lower tax expense compared to the prior year,” said Telkom.
The company said it was also attributable to the impact of accelerated loadshedding and a 25.5% increase in cost of handset and equipment – higher mobile handset sales of 14.8% and increase in IT hardware and software revenue of 65.8%. “This excludes a R1 065 million provision for costs associated with the restructuring initiated in the last quarter of the financial year.
However, group revenue was marginally up by 0.9% to R43 138 million despite challenging trading conditions as its mobile and broadband strategies continued bearing fruit.
“The migration of revenues from legacy to newer technologies, our investment in the Mobile post-paid base to drive higher annuity revenue, and the impact of sustained loadshedding put pressure on our operating costs.”
Serame Taukobong, Telkom Group CEO said the year was characterised by unprecedented levels of loadshedding, constrained consumer spending, and dynamic competition against the backdrop of a sluggish economy with persistent inflationary pressures.
“As we continued to manage the transition to nextgeneration technologies, Group performance was under pressure from a pronounced reduction in legacy revenues for the year,” he said.
“Despite this, revenue grew marginally. However, the incremental costs of loadshedding reduced overall profitability, notwithstanding our efforts to manage operating costs.”
Technology evolution, market changes and economic factors adversely effected Telkom, resulting in an impairment of R13 billion (excluding tax effects), in two of the group’s cash cash-generating units, Openserve and Telkom Consumer.
Taukobong said the process for the disposal of Swiftnet is at an advanced stage with the decision on the offers received expected during the first half of the current financial year.
“Telkom will undergo further restructuring to consolidate its core infrastructure assets to support its growth ambitions.”
Following an approach from a consortium of Afrifund Investments, Axion and others for the potential acquisition of a controlling stake in Telkom, Telkom is assessing the offer in line with its duty to assess offers it receives.
“While we are committed to returning cash to shareholders in the medium term, the board has resolved to postpone the dividend for another year, to first strengthen our cash position, as we navigate the cost transformation journey”, concluded Taukobong.
