Telkom said its management would relentlessly focus on cost savings as profit after tax during the year ended March 2020 took a 60 percent nosedive. Photo: Tracey Adams/African News Agency (ANA)
Telkom said its management would relentlessly focus on cost savings as profit after tax during the year ended March 2020 took a 60 percent nosedive. Photo: Tracey Adams/African News Agency (ANA)

Telkom's annual profit after tax plunges 60%

By Dineo Faku Time of article published Jun 22, 2020

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JOHANNESBURG – Telkom said on Monday that its management would relentlessly focus on cost savings as profit after tax during the year ended March 2020 took a 60 percent nosedive.

Telkom, the partially state-owned company, said that group profit after tax had fallen to R2.08 billion compared with R3.34bn a year earlier on lower earnings before interest, taxation, depreciation and amortization (Ebitda). 

Ebitda was lower due to the impact of the fixed voice revenue decline of 22.2 percent on group Ebitda and the increase in finance charges and fair value movements resulting in a knock in adjusted headline earnings a share. Adjusted headline earnings a share fell by 30.2 percent to 504.6 cents owing to an increase in finance charges and fair value movements.

The company said the cost savings would be made through its sustainable cost management programme, which included the restructuring programme and other cost levers to protect the profitability of the business.

“The full benefits of the two-phase restructuring programme are expected to flow in over the next 12 to 24 months. Management will continue to exercise discipline in allocation capex making sure that we invest in projects that give us reasonable returns. We are cognisant that Covid-19 may have a negative impact on our business,” said Telkom.

The company said it would will continuously assess the capex spend in line with revenue forecasts.  

Despite the fall in profit, Telkom  reported a 3 percent revenue increase to R43bn, mainly driven by a 54.4 percent increase in mobile service revenue.

Group chief executive Sipho Maseko said Telkom's performance was resilient and was underpinned by capital investments of R7.8bn in the period.

Maseko said the mobile business continued to gain scale and remains the fastest-growing mobile business in South Africa.

“Our group revenue performance represents how ongoing investment – particularly in mobile, IT and masts and towers – enables Telkom to grow new revenue streams and offset traditional business shrinkage. 

“We are seeing good returns on our investment, with mobile service revenue increasing by more than half and the connectivity rate for fibre-to-the-home improving from 38.4 percent in the prior year to 48.2 percent in the current year – the highest in the market,” Maseko said.

BUSINESS REPORT

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