Telkom expects big profit jump

Telkom has issued a trading statement to inform stakeholders that it expects a big jump in profit for the 2024 financial year compared to the year prior.

The network operator says it is in the process of finalising its annual results for the financial year, which are scheduled for release on 18 June 2024.

Telkom expects its baseline earnings per share (BEPS) to increase by between 114% and 124%.

It also included figures for “normalised” BEPS and headline earnings per share (HEPS), which exclude once-off restructuring costs and a once-off impairment charge and their related tax impacts.

Telkom listed a once-off restructuring cost of R1.065 billion, with a related tax impact of R288 million, and a once-off impairment charge of R13 billion, with a tax impact of R3.5 billion.

When excluding these costs, Telkom expects “normalised” BEPS to increase by between 440% and 450%.

It expects its HEPS to increase by between 195% and 205% for the year ended 31 March 2024.

It anticipates an HEPS figure of between 368.2 and 380.6 cents per share, up from 124.8 cents per share the year before.

Telkom included a restated HEPS figure for 2022/23, which it explained was due to an incorrect tax adjustment resulting in an overstatement of HEPS in the financial year.

Compared to the restated figure, Telkom expects HEPS to be between 1,155% and 1,165% higher than the previous year.

Telkom said the expected earnings growth has been positively impacted by lower depreciation and write-offs during the 2024 financial year.

It also said the difference between basic and headline earnings was largely due to the impact of impairment of assets and profit or loss on the sale of assets.

It’s worth noting that these earnings figures do not include the sale of Telkom’s tower business, which has yet to be concluded.

It arranged a meeting of stakeholders on 24 May 2024 to vote on whether Telkom will dispose of Switnet, its masts and towers business.

The news came after a consortium led by UK-based Arctis submitted an offer to buy Swiftnet for R6.75 billion.

According to the operator, Swiftnet has around 4,000 sites across South Africa and leases co-location space to major mobile network operators.

“Telkom’s market capitalisation does not represent its intrinsic value,” it said.

It is for this reason that the Telkom board wants to explore all strategic options available to it.

“The disposal is in line with such value-unlock strategy and involves the disposal of a non-core asset, allowing Telkom to reduce debt from the disposal proceeds,” it added.