Telkom’s latest financial results

Telkom today published a JSE trading statement, and for the sake of completeness the full statement is provided below:

Telkom is currently finalising its results for the year ended 31 March 2010, which are expected to be released on or about Monday, 21 June 2010.

In South Africa, EBITDA continues to be impacted by increases in operating costs which outstrip revenue growth.

In Nigeria, economic and competitive conditions were tough. In addition, inventory write downs and subsidies were higher and accordingly, Multi-Links Nigeria will report EBITDA losses higher than that of the previous year. The level of inventories and inventory commitments were abnormally high given the market circumstances of Nigeria and have been normalised.

As previously reported we successfully concluded the sale and unbundling of our 50% stake in Vodacom during the year which resulted in the following unusual items impacting earnings for the year:

   1. profit on the sale of our 15% share in Vodacom of R18,535 million;
   2. gain on the unbundling of our 35% share in Vodacom of R25, 688 million;
   3. capital gains tax on the sale and unbundling of our Vodacom shares of R1,353 million;
   4. secondary taxation on companies (‘STC’) on the special dividend relating to the sale of Vodacom of R977 million;
   5. reversal of the deferred tax asset relating to capital gains tax on the Vodacom sale of R421 million;
   6. compensation expense recognised in terms of IFRS2 relating to the amendment of the Telkom Conditional Share Plan of R946 million;
   7. fair value loss on the mark to market valuation of Vodacom shares held at 31 March 2010, of approximately R15 million;

Other once off items impacting the results include:

   1. impairment of goodwill in Multi-Links Nigeria of R2.1 billion and impairment of Multi-Links assets of approximately R3.2 billion as a result of the continuing poor performance of Multi-links attributable to the local and global economic factors, intensely competitive mobile market, and the relative disadvantaged scale of these operations, has necessitated the full impairment of the Multi-Links net asset value;
   2. STC on the special dividend declared of R135 million; and
   3. profit on disposal of Telkom Media of R68 million.

Normalised headline earnings per share (‘HEPS’) from continuing operations for the period, which excludes all the unusual items listed above, are expected to be between 5% higher and 15% lower than the normalised HEPS of 506.1 cents for the year ended 31 March 2009.

Headline earnings per share, which includes the STC on the special dividend, the compensation expense and the fair value loss on Vodacom shares, are expected to be between 80% and 100% lower than the reported HEPS of 606.7 cents for the year ended 31 March 2009.

Basic earnings per share (‘BEPS’) including the profit on sale and gain on unbundling of Vodacom and all expenses related to the transaction are expected to be 1,505% to 1,525% higher than the BEPS of 457.4 cents reported for the year ended 31 March 2009.

BEPS from continuing operations for the year are distorted by the accounting for the sale and unbundling of our 50% stake in Vodacom.

Normalised BEPS from continuing operations, which excludes the profit on sale and gain on unbundling of Vodacom and all expenses related to the transaction, are expected to be between 5% higher and 15% lower than the normalised BEPS of 456.6 cents per share for the year ended 31 March 2009.

The main differences between basic earnings and headline earnings are the profit on the sale and gain on unbundling of our 50% share in Vodacom and the related capital gains tax and impairments and write-offs relating to property, plant and equipment and intangible assets.

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Telkom’s latest financial results