- Telkom has said that it’s earnings in 2024 and 2025 should benefit from investments it has made in future technologies and solutions.
- Despite this HEPS and BEPS are down by significant margins and don’t include even more losses incurred during restructuring.
- Telkom has said that loadshedding, lower consumer spending and a sluggish economy aren’t helping its business either.
Loadshedding, consumers spending less, competition and a sluggish economy are how Telkom chose to describe the past year in its annual results announcement for the year that ended 31st March 2023.
“As we continued to manage the transition to next-generation technologies, Group performance was under pressure from a pronounced reduction in legacy revenues for the year. Despite this, revenue grew marginally. However, the incremental costs of loadshedding reduced overall profitability, notwithstanding our efforts to manage operating costs. Competition intensified in the mobile, fibre and IT services businesses. In response, we have embarked on a Group-wide cost transformation journey to return the Group’s profitability to above 25% in the medium term while driving revenue growth in ever-evolving markets,” Telkom told shareholders on Tuesday morning.
Revenue for the year was up 0.9 percent to R43 billion bolstered by mobile service revenue improving by 1.8 percent to R17.8 billion as Telkom grew its customer base by 18.3 million.
IT revenue was up 13.7 percent to R6.3 billion and Swiftnet, Telkom’s mast and tower business drew in 0.9 percent more revenue or R1.3 billion.
The firm is adamant that its investments in future technologies will become apparent in the next and future financial years.
In the meantime however, Telkom’s earnings before interest, taxation, depreciation, and amortisation (EBITDA) are suffering. Here the telco saw a 19.8 percent decline in EBITDA and it doesn’t include a much larger cost.
EBITDA and headline earnings per share (HEPS) exclude the impact of a R1 billion restructuring cost and a tax impact of R288 million after tax. Basic erosion and profit sharing (BEPS) figures also don’t include the R13 billion impairment charge and R3.4 billion tax impact of that charge.
Even with those exclusions, HEPS was down 76.6 percent to R1.34 and BEPS was down 86.8 percent to R0.71 for the year.
“Along with the cost transformation journey, we aim to improve our EBITDA margin to historical levels of around 25% in the medium term. While we rebase our cost base in FY2024, all business units have also been tasked with driving top-line growth while simultaneously evolving their business models to drive the future sustainability of Telkom,” shareholders were told.
The telco has also said that despite this year being the final year of a three-year dividend period, it needs to tack on another year.
“The Board has concluded that in light of the Group’s cash position and the current economic environment, the resumption of a dividend should be postponed for at least another year. While we are committed to returning cash to shareholders in the medium term, we consider it prudent to first strengthen our cash position as we navigate the Telkom cost transformation journey along with market and economic conditions,” the firm said.
Telkom now has the hard job of showing shareholders that its investments will be worthwhile.
Unfortunately, loadshedding isn’t going away and we continue to live in a tough economic environment. The telco has a tough market to operate in and it’s going to have to get creative about righting the ship.
Of course, the telco could finally reach an agreement to be acquired, one such offer is reportedly on its table as we speak.
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