Telkom expects big earnings increase

Telkom expects to report increased basic and headline earnings per share when it releases its interim results for the six months ended 30 September 2020 (H1 FY21), the company said in a trading update on Tuesday.

The operator advised shareholders that reported headline earnings per share (HEPS) is expected to increase by 15% to 25%, while reported basic earnings per share (BEPS) is expected to increase by 19% to 27% compared to the prior corresponding period for the half-year ended 30 September 2019.

“This was mainly driven by approximately 16% growth in operating profit as a result of solid growth in Group EBITDA, partially offset by an increase in the effective tax rate from 28.8% in the prior period to 34.8%,” Telkom said.

The operator noted that its performance was sound despite a difficult trading environment due to the adverse impact of COVID-19 on the economy.

“Group revenue showed resilience in the face of this pandemic, remaining broadly flat compared to the prior period,” the operator noted.

The table below summarises the expected movements in earnings.

Reported Movement Expected earnings
BEPSĀ  176.8 cents 33.6 to 47.7 cents higher 210.4 to 224.5 cents
HEPSĀ  183.4 cents 27.5 to 45.9 cents higher 210.9 to 229.3 cents

Cost management

Telkom said its mobile business continued its growth trajectory, placing it solidly as the third-largest mobile operator in South Africa.

The operator added its management “relentlessly focused on its sustainable cost management programme” to protect EBITDA and margin.

“Group EBITDA increased more than 5% from R5.604 million reported in the prior period and EBITDA margin expanded compared to the prior period,” Telkom said.

“The Group EBITDA performance was also supported by the reversal of R66 million relating to the Expected Credit Loss (ECL) COVID-19 impairment on receivables (provision) that was recognised at the 31 March 2020 financial year-end (FY20),” it added.

On an underlying basis, excluding the once-off reversal of the provision of R66 million, group EBITDA increased by more than 4%, Telkom stated.

The Group’s interim results for the six months ended 30 September 2020 will be released on 10 November 2020.

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Telkom expects big earnings increase