{"id":472545,"date":"2022-12-04T12:59:05","date_gmt":"2022-12-04T10:59:05","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=472545"},"modified":"2022-12-04T12:59:55","modified_gmt":"2022-12-04T10:59:55","slug":"telkom-has-a-big-problem","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/472545-telkom-has-a-big-problem.html","title":{"rendered":"Telkom has a big problem"},"content":{"rendered":"

Telkom\u2019s net debt to EBITDA ratio increased 2,654% over the last eight years, and is getting worse.<\/p>\n

Telkom\u2019s interim results for the six months ended 30 September 2022 revealed that revenue declined 0.7% from R21.3 billion to R21.2 billion.<\/p>\n

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) were down 17.3% from R5.978 billion to R4.942 billion.<\/p>\n

Headline earnings per share (HEPS) was down 51.9%, and basic earnings per share (BEPS) declined by 52.5%.<\/p>\n

Delving deeper into Telkom\u2019s interim results revealed a company with a rapidly increasing debt burden without the necessary growth to support it.<\/p>\n

Telkom\u2019s net debt increased from R14.1 billion in September 2021 to R16.3 billion in September 2022.<\/p>\n

With Telkom\u2019s lower EBITDA, the company\u2019s net debt to EBITDA ratio increased from 1.1 to 1.7 over the last year.<\/p>\n

As Telkom struggled to service its debt from earnings, it raised loans of R3.3 billion to fund the settlement of maturing debt.<\/p>\n

These figures, although concerning, only tell part of Telkom\u2019s debt story.<\/p>\n

Telkom\u2019s net debt increased by 2,896% over the last eight years \u2014 from R545 million in 2014 to R16.326 billion in 2022.<\/p>\n

Over the same period, Telkom\u2019s EBITDA only increased 13% \u2014 from R4.4 billion to R4.9 billion.<\/p>\n

The result is that Telkom\u2019s net debt to EBITDA ratio increased 2,654% between September 2014 and September 2022.<\/p>\n

Telkom\u2019s current net debt to EBITDA ratio of 1.7 is significantly higher than the company\u2019s medium-term guidance of less than 1.2.<\/p>\n

Another problem for the telecommunications operator is the decline in free cash flow (FCF).<\/p>\n

Telkom\u2019s FCF declined from -R839 million for the six months to September 2021 to -R1.887 billion for the six months to September 2022.<\/p>\n

The situation looks even more dire when you go back to 2014. Over the last eight years, Telkom\u2019s free cash flow decreased from R1.785 billion to -R1.887 billion \u2014 a 206% decline.<\/p>\n

Without an increase in revenue and EBITDA, and with a rapid increase in debt, it is not clear what Telkom\u2019s plan is to turn the situation around.<\/p>\n

Telkom CFO Dirk Reyneke said although their gearing is the highest it has been in recent years, it is no cause for concern.<\/p>\n

\u201cWe believe with R2.5 billion in cash and R2.3 billion in unused facilities, there is enough headroom to fund and invest in strategic initiatives,\u201d he said.<\/p>\n

He added that their debt levels remain within acceptable limits and that Telkom\u2019s balance sheet is strong despite its increasing debt.<\/p>\n

Reyneke added that they are not close to their covenants \u2014 the limits at which they can no longer lend money \u2014 from banks and other lenders.<\/p>\n

The charts below show Telkom\u2019s deteriorating financial situation over the last eight years.<\/p>\n

\n

Telkom’s net debt (lower is better)<\/h2>\n

\"\"<\/a><\/p>\n

 <\/p>\n

\n

Telkom’s EBITDA (higher is better)<\/h2>\n

\"\"<\/a><\/p>\n

\n

Telkom’s net debt to EBITDA ratio (lower is better)<\/h2>\n

\"\"<\/a><\/p>\n

\n

This article was published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0Telkom reveals fixed-5G pricing<\/a><\/h2>\n","protected":false},"excerpt":{"rendered":"

Telkom has a debt problem \u2014\u00a0and it’s getting worse.<\/p>\n","protected":false},"author":341111,"featured_media":467825,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[80335],"tags":[35,109],"class_list":["post-472545","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-headline","tag-telkom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/472545"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341111"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=472545"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/472545\/revisions"}],"predecessor-version":[{"id":472553,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/472545\/revisions\/472553"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/467825"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=472545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=472545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=472545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}