Telkom shares surge on expected whammy profit for the full year

Telkom outlet at the Galleria Mall in Durban. SUPPLIED.

Telkom outlet at the Galleria Mall in Durban. SUPPLIED.

Published Jun 13, 2024

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Nicola Mawson

Telkom climbed 5.7% to close at R24.99 per share yesterday on news that normalised headline earnings per share (HEPS), a core measure of profitability would climb by as much as 205% in the year to end-March.

The telecoms company also said that basic earnings per share, on a normalised basis would gain by as much as 450%.

Telkom, which recently sold its masts and towers business Swiftnet for R6.75 billion, said next-generation revenues grew by approximately 7% and now comprise almost 80% of its total revenue.

Reported earnings before interest, tax, depreciation, and amortisation (Ebitda), grew by about 18%, while normalised Ebitda grew in line with its previous guidance of 5%, it said.

It explained that growth in earnings was also positively impacted by lower depreciation and write-offs in the 2024 financial year when compared with last year, although these gains were partially offset by higher net finance charges and foreign exchange and fair value movements in the current fiscal year.

Net finance charges and fair value movements increased by approximately 47% from R1.485 billion mostly because of higher lending rates during the year.

South African interest rates are currently at a 14-year high, with the repo rate at 8.25% and the current prime lending rate 11.75%.

Total depreciation and amortisation for property, plant and equipment and intangible assets decreased by some 23% from R7.145bn in the prior year, while write-offs of property, plant and equipment and intangible assets reduced to approximately R80 million from R13bn a year ago.

The telecoms company booked an impairment of R13bn on its legacy copper business last year, pushing profits down by more than three quarters and cancelling dividends.

Telkom, which was the target of an unsolicited bid in the middle of last year, also said that restated HEPS would improve by as much as 1 165% after it adjusted the measure because it incorrectly adjusted for tax on the headline earnings relating to the profit on disposal, impairment and write-offs of property, plant and equipment and intangible assets last year.

“This resulted in a R47 million overstatement of headline earnings, which led to a 9.7 cents overstatement of HEPS in the prior year,” it said in a trading statement issued yesterday.

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