Telkom announces huge earnings boost — but there’s a catch

Telkom has informed shareholders that it expects to report much higher earnings in its upcoming half-year results compared to the same period last year.

For the six months ended 30 September 2023, Telkom expects to show 45%–55% increased basic earnings per share, while headline earnings will be 40%–50% higher.

Telkom explained that it disposed of assets, with profits from the sales and lower depreciation costs positively impacting earnings.

It also restated its already-poor headline earnings from the last year to be even lower.

Impairment of assets also impacted earnings positively.

“The difference between [basic earnings] and [headline earnings] is due to the net impact of impairment of assets and profit and loss on sale of assets,” Telkom explained.

“The increase in earnings is due to improved performance by the group for the period with both revenue and Ebitda growth within guidance provided at the annual financial results presentation for the year ended 31 March 2023.”

Telkom said the positive effects impairments and lower depreciation had on earnings were partially offset by higher net finance charges in the first half of its 2024 financial year.

“The non-recurrence of a R102 million gain on foreign exchange and fair value movements recognised in H1 FY2023 [also offset the gains],” Telkom explained.

Regarding the restatement of its headline earnings for the period 1 April to 30 September 2022, Telkom said it correctly calculated and accounted for tax in its statement of profit or loss and other comprehensive income.

“However, the Group incorrectly adjusted for the headline earnings, relating to the profit on disposal and impairment of property, plant and equipment and intangible assets.”

This led to a R21 million overstatement of headline earnings and a 4.3c overstatement of headline earnings per share for the period ended 30 September 2022.

This means the baseline Telkom is comparing from is even lower than previously reported.

Telkom took a beating at its interim results last year, reporting 17.3% lower Ebitda, 51.9% lower headline earnings per share, and a 26.2% decrease in its cash balance.

This was due to the company’s overall operating revenue declining by 0.7% from around R21.29 billion to R21.15 billion between September 2021 and 2022.

Mobile service revenue, which accounted for the most significant chunk of this revenue, was also down 0.7% — declining from R8.85 billion to R8.78 billion.

That was despite Telkom’s active mobile subscribers climbing from 16.26 million to just over 18.02 million, an increase of 10.9%.

Disregarding the restatement to compare like for like, Telkom said headline earnings will still be up 35% to 45% due to the aforementioned asset sales and improved performance.

Telkom said it expects to release its interim financial results for the period ending 30 September 2023 on or around 21 November 2023.

Now read: Telkom is selling its towers — CEO gives updated timeline

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Telkom announces huge earnings boost — but there’s a catch