By Lehlohonolo Lehana.
Telecommunications group Telkom warned it wouldn’t pay dividends for a fourth year, believing it prudent to first strengthen its balance sheet after suffering an annual loss of about two-thirds of its market value.
Telkom published its annual financial results on Tuesday that showed high levels of load shedding, constrained customer spending, robust competition and high inflation are having a serious impact on the company.
The group suspended dividends three years ago to preserve cash as market conditions became more difficult.
“The board has concluded that, in light of the group’s cash position and the current economic environment, the resumption of a dividend should be postponed for at least another year,” it said on Tuesday.
“While we are committed to returning cash to shareholders in the medium term, we consider it prudent to first strengthen our cash position as we navigate the Telkom cost transformation journey along with market and economic conditions.”
The group posted a massive R10 billion loss in its latest annual results, driven by impairments and other investment costs.
Telkom’s business operations have come under massive pressure from a highly competitive market and an adverse trading environment brought about by overall weaker economic conditions in the country.
The group announced a restructuring process in February 2023, where it extended voluntary early retirement packages and voluntary severance packages to all employees in the group.
More than 1,700 employees were affected, and as a result, restructuring costs of R1 billion were recorded during FY2023.
To date, 1,165 employees have accepted voluntary severance and early retirement packages, Telkom said, adding that the consultation processes are continuing and are expected to be concluded in the first half of FY2024.
The costs associated with the voluntary packages were included in Telkom’s pro forma adjustments and contributed to the reported R10 billion loss. The packages carry a related tax impact of R277 million.
“The year was characterised by unprecedented levels of load shedding, constrained consumer spending, and dynamic competition against the backdrop of a sluggish economy with persistent inflationary pressures,” CEO Serame Taukobong said.
“As we continued to manage the transition to next-generation technologies, group performance was under pressure from a pronounced reduction in legacy revenues for the year.”
“Despite this, revenue grew marginally. However, the incremental costs of load shedding reduced overall profitability, notwithstanding our efforts to manage operating costs.”
While Telkom is trying to cut costs as part of its turnaround, the group is also looking to sell some of its businesses.
Telkom on Monday confirmed it has received an unsolicited non-binding indicative letter from a consortium for the acquisition of a controlling stake in the telecommunications group.
As Telkom assesses the merits of the non-binding potential majority acquisition, it has requested more information from the consortium, which is led by former CEO Sipho Maseko, through Afrifund Investments, and comprises Axian Telecom and the Government Employees Pension Fund, managed by the Public Investment Corporation.
“In this regard, the company has requested the consortium to provide further clarity on several matters, including the proposed offer price and certainty of funding. As such, discussions remain of an exploratory and non-consensual nature, there being no certainty that the outcome of these discussions will result in a transaction,” Telkom said in an update to shareholders.
Shareholders are advised to exercise caution when dealing in the company’s shares, amid continued detailed media speculation, until a further announcement is made.