Johannesburg - Telkom yesterday announced a 15.5 percent rise in normalised headline earnings for the year to March 31, marking the conclusion of a successful three-year turnaround strategy implemented in 2013.
The country’s biggest landline provider reported 3 878 job cuts and reduced losses at its mobile business during the financial year. Normalised headline earnings per share (HEPS) increased to 658c, while operating revenue gained 13.9 percent to R37.3 billion.
Read: Telkom Mobile shines in results
Chief executive Sipho Maseko said: “This financial year marks the end of the turnaround phase of our business. We have executed well on the targets we set for ourselves three years ago, which included de-risking the mobile business, managing traditional revenue decline, focusing on operational and capital efficiencies and improving customer experience.”
Star performer
Maseko said the mobile business had been a star performer – reducing its earnings before interest, tax, depreciation and amortisation (Ebitda) loss from R2.2bn three years ago to R43 million this year. He said since the fourth quarter, the business had shown sequential break-even on a monthly basis.
Telkom’s share price has risen by 298 percent since May 2013 when it traded at R12.50 per share. It has since rallied to its peak of R82.35 per share in April last year, but far from its record high of R183 per share of October 2007. Yesterday, its shares rose 8.33 percent to R65.
“We plan on an aggressive fibre roll-out as our number one priority, while simultaneously deploying other capital resources with a focus on revenue generation and cost efficiency as we seek to grow earnings,” Maseko said.
Overall Ebitda rose 16 percent to R11bn compared with R9.4bn the previous year.
Telkom said it had spent R757m in the current financial year to connect 81 503 homes to its fibre network and that it would intensify its fibre roll-out plan to capture more customers. Telkom will pay a dividend of R2.70 a share, up 10 percent on the previous year. Net income declined 27 percent to R2.25bn.
Ian Cruickshanks, an independent analyst, said the results were an indication of how much Telkom had improved in conducting its business lately.
Slow process
“However, it is going to be a long and slow process to see the results of the turnaround strategy completely realised. It was overstaffed and it has done well to cut its employees by almost 20 percent,” he said.
“As an investor I wouldn’t put my money in the business yet. However, if I had shares in the company I would continue to hold.“
On the negative side, Telkom has seen its fixed-line subscribers decline from 3 439 000 last year to 3 217 000 – the biggest loss since 2001.
Total fixed-line traffic also declined from 16.3 billion minutes per year to 14.9 billion minutes per year.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers said: “The management team has demonstrated solid execution in the first phase of the turnaround strategy and we believe Telkom is now in a much stronger position to compete for growth in the (information and communications technology) market.
“The full integration of the recently acquired (Business Connexion), further cost efficiencies in the core business, a strong balance sheet and now a much more focused management team are likely to continue to drive improved return on investment to Telkom stakeholders.”
He said the fixed-line voice segment would remain a challenge for Telkom as the market continued to shift towards data and mobile usage.
BUSINESS REPORT