Telkom hikes dividend, says turnaround is complete

Telkom on Monday reported a 15.5% increase in headline earnings for the year ended March 2016, while operating revenue climbed 13.9% to R37.3 billion.

Normalised profit after tax reached R4 billion, compared to R3 billion for the previous period.

This, the company said, marks a conclusion of a successful three-year turnaround strategy implemented in 2013.

The board declared a dividend of 270 cents, up 10% on the previous year’s total dividend.

Key financial highlights:

• Group net revenue up 4% to R28 billion
• Normalised headline earnings per share (HEPS) increased by 15.5% to 658 cents
• Operating revenue up by 14% to R37 billion
• Normalised EBITDA increased by 16% to R11 billion
• Capital expenditure increased by about 17% to R6 billion
• Normalised free cash flow of almost R4 billion
• Declared dividend increased by 10% to 270 cents

Telkom Group CEO Sipho Maseko said: “The mobile business has delivered a star performance during this phase, reducing its EBITDA loss from more than R2 billion three years ago to R43 million this year. Since the fourth quarter, the mobile business has been breaking even on a monthly basis.”

Telkom reported a 23.8% rise in active mobile subscribers to 2.7 million, from 2.18 million before. Pre-paid customers rose 19% to 1 912 415, with Post-paid customers up 37.2% to 794,272.

Improvements

• Active customer growth of 23.8% with improved blended ARPU of R89
• 81,503 homes passed with fibre
• LTE integrated sites up 9.9% to 1 448
• Mobile sites integrated increased to 2,663, from 2,510
• Mobile service revenue up 39.3%

Operating revenue grew 14% to R37 billion with net revenue up 4%, boosted by the inclusion of Business Connexion (BCX) in the group consolidation and solid performance from the company’s data services.

The performance was partially offset by a 2% decline in voice and subscriptions revenue as voice usage continued its downward trend and customers continued to substitute mobile services for fixed lines, Telkom said.

The company said it responded to this trend by migrating customers from legacy services such as fixed-line voice to bundled, converged, and next generation data products where demand is strongest.

Retrenchments

During the year, Telkom said that 3,878 employees accepted voluntary severance packages (VSPs) and voluntary early retirement packages (VERPs) and a further 437 employees were affected by outsourcing.

As a result, employee expenses reduced by 10%, Telkom said.

“We have been mindful to retain key skills and attract new talent, especially scarce and business critical skills. Our investment in training and development is key to our efforts to transform our culture and ensure that we achieve our strategic objective of equipping our employees with the appropriate skills and experience to put our customers first in a very competitive ICT environment,” said Maseko.

Capital outlay increased by 17% to R6 billion as the group invested in key priority areas which include fibre, LTE and mobile, IT systems, maintenance and rehabilitation as well as service on demand.

“In the year ahead, an aggressive fibre rollout is our number one priority, while simultaneously deploying our other capital resources as we focus on revenue generation and cost efficiency to grow earnings,” said Maseko.

During the year, Telkom announced its intention of implementing a more flexible and agile operating model. Towards this end, it launched Openserve, the network and wholesale business.

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