By Lehlohonolo Lehana..
Telkom warned investors that its headline earnings per share will slump when it reports results for the six months to end-September 2022 later this month.
In a trading statement ahead of its interim results, the group said that it expects headline earnings to drop by 45% to 55% compared to the same period last year.
This decline is mainly due to Telkom’s mobile postpaid vs prepaid mix changing, which had the impact of deferring revenue over 24 – 36 months, as well as the cost base increasing, it said.
Telkom said that the impact of revenue deferral resulting from the continued growth of its post-paid mobile sales reduced revenue recognised by R299 million.
Meanwhile, a shift in its mobile product mix coupled with the upfront spend on handsets recorded immediately increased the cost of handsets, equipment, software and directories by more than % from R2 453 million in the prior period.
“Maintenance costs and service costs also increased materially, reflecting an increased mobile network for the period. Maintenance costs increased by more than 10% from R1 924 million, while service fees increased by more than 20% from R1 611 million, also impacted by higher backup energy costs due to accelerated load shedding during the period,” it said.
These costs were partially offset by savings in other areas – such as payments to other operators, employee costs, marketing, and other expenses, which were well managed.
“Net finance charges and fair value movements also partially offset the impact of increased costs and declined by more than 15% from R659 million due to a favourable foreign exchange hedging position during the period,” it said, adding that reduced taxation for the period also contributed in offsetting the impact of higher costs.
“Notwithstanding the weaker performance in earnings and challenging trading environment, Telkom expects to sustain its topline revenue compared to the prior period,” it said.
Overall it expects basic earnings to drop by between 152 and 125 cents per share, and headline earnings to drop between 157 and 129 cents per share.
The group’s interim results for the six months ended 30 September 2022 will be published on 23 November 2022.