Boost for Telkom

Telkom’s share price surged as much as 8% on Thursday after issuing an upbeat trading update ahead of its half-year results, which it is set to release next week.

The stock traded as low as R26.66 at the start of the day but rose to a high of R28.76 following Telkom’s announcement.

The company notified shareholders that it expects to report basic earnings growth of between 5% and 15% for the six months ended 30 September 2024.

Headline earnings could decrease by 5% or increase by up to 5%, Telkom said.

This would bring the company’s basic earnings per share to between 210.2 cents per share and 230.2 cents.

Therefore, its basic earnings would be an estimated R1.03 billion on the lower end or R1.13 billion on the higher end.

Similarly, the company’s headline earnings would be between 185.2 cents per share and 204.8 cents per share.

However, Telkom said several once-off adjustments should also be taken into account.

Tekom noted that its reported figures include restructuring costs and a R451 million after-tax charge relating to the termination its obligation in terms of the Telkom Retirement Fund (TRF).

It also includes the consequential derecognition of the corresponding funding plan asset recognised under IFRS Accounting Standards.

The TRF is a hybrid fund that was started on 1 July 1995 as a defined contribution plan for current employees and a defined benefit plan for retired employees on pension. 

However, recently, the Financial Sector Conduct Authority (FSCA) approved a change to the fund’s rules.

“In the current period, the Financial Sector Conduct Authority approved a rule amendment for the conversion of the TRF from a defined benefit fund to a defined contribution fund,” Telkom stated.

“This approved rule amendment removes the funding obligation risks towards the pensioners.”

Subsequent to Telkom’s trading statement, the company assured that the fund would continue to pay out all pensions.

“The rule amendment allows for independent functioning from Telkom as an umbrella fund and opened up for all employees of Telkom,” it stated.

When adjusting for these once-off items, Telkom said its basic earnings per share growth would have been between 60% and 70%.

This would have brought the company’s basic earnings to R1.57 billion on the lower end and R1.67 billion on the higher end.

Similarly, its adjusted headline earnings per share are expected to increase by between 50% and 60%.

Below is a chart of Telkom’s share price during November and a table giving an overview of Telkom’s expected earnings.