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Telkom shares climb 11% on expected surge in annual earnings

Telkom’s share price rose by more than 11 percent on the JSE yesterday afternoon after the telecommunications company released a strong trading update that expected a huge surge in earnings for the year to the end of March. Photographer Lalinka Mahote/African News Agency (ANA)

Telkom’s share price rose by more than 11 percent on the JSE yesterday afternoon after the telecommunications company released a strong trading update that expected a huge surge in earnings for the year to the end of March. Photographer Lalinka Mahote/African News Agency (ANA)

Published May 19, 2021

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DURBAN - TELKOM’S share price rose by more than 11 percent on the JSE yesterday afternoon after the telecommunications company released a strong trading update that expected a huge surge in earnings for the year to the end of March.

Telkom said it expected its headline earnings per share to increase by between 145 and 155 percent, to between 509.9 cents and 530.7c a share, up from 208.1c last year.

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Its basic earnings per share were likely to rise by between 300 and 310 percent, to between 484.4c and 496.5c, up from 121.1c reported a year earlier.

The group attributed the expected increase in earnings mainly to the 20 percent increase in earnings before interest, tax, depreciation and amortisation (Ebitda) during the period compared to last year.

In last year’s full-year results,Telkom reported an 8.7 percent decline in Ebitda to R10.3 billion.

Telkom also benefited from a lower tax rate of 30.5 percent, compared to a tax rate of 37.6 percent a year earlier.

“The strong performance includes the impact of voluntary severance packages, voluntary early retirement packages and section 189 retrenchment packages of R270 million and the related tax impact of R76m in the current year, while prior-year earnings include R1.19bn and the related tax impact of R332m relating to voluntary severance packages, voluntary early retirement packages and retrenchments,” the group said.

The share price climbed to a dayhigh of R43.56 a share after the release of the trading update, up from Monday’s closing price of R38.80. The share closed at R44.14.

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Telkom attracted the wrath of trade unions last year when 3 000 jobs were put on the line as the group tried to contain costs in the midst of the uncertainty created by the Covid-19 pandemic.

Telkom recognised a total provision of R1.1bn in last year’s results relating to the impairment of trade receivables and contract assets, of which R626m was because of the expected impact of Covid-19, which had an negative impact on the 2020 results.

The group said yesterday the impairment of receivables and contract assets remained high, in line with the prior year, which included a provision of R626m reflecting the uncertain environment relating to Covid-19.

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Telkom said it had achieved strong underlying performance in the current period, with solid growth in underlying operating profit, driven by strong growth in underlying group Ebitda compared to the prior year.

“The growth in underlying group Ebitda was underpinned by a robust performance in the mobile business, and effective and sustainable cost management.

The mobile business continued its growth trajectory in service revenue, while the overall sustainable cost-management programme outperformed management’s expectations.

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The mobile business showed a strong growth in 2020 by achieving a 54.4 percent increase in service revenue to R12.6bn and remained the fastest-growing mobile business in South Africa, with 12 million customers.

Telkom will release its results on May 24.

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