Telkom full year profit slides despite mobile growth

Telkom on Monday reported a 6.55% drop in operating profit for the year ended March 2018, to R4.939 billion, with revenue flat at R41.018 billion.

The group reported a 19.2% decrease in profit after tax to R3.158 billion. This, it said was mainly attributable to an increase in the taxation expense and a 3.6% decrease on earnings before interest, taxation, depreciation and amortisation (EBITDA) of R10.544 million

This resulted in an 18.4% decrease in headline earnings per share (HEPS) to 597 cents.

Salient features:

  • Mobile service revenue up 47.2% to R5.2 billion;
  • Group EBITDA down 3.6% to R10.544 billion with an EBITDA margin of 25.7%;
  • HEPS down 18.4% to 597.0 cents per share;
  • Free cash flow up 465.7% to R501 million;
  • Capex down 8.6% to R7.9 billion;
  • Annual dividend down 16.3% to 355 cents per share.

Chief executive officer, Sipho Maseko said: “The year was characterised by a tough economic environment, political uncertainty and intense competition as well as the consequent low business and consumer confidence.

“We felt the impact of the weak economic environment, as the private and public sectors respectively deferred and lowered their information communications and technology (ICT) spend. This impacted Telkom’s performance, particularly in BCX, which serves the business sectors.”

He said that the growth in the mobile business was underpinned by capital investment, extension of distribution channels, increased store footprint and innovative data-led products which resonated well with customers.

“Our mobile business is now a key driver of growth in the group, offsetting the decline in BCX and Openserve.”

Maseko said that he pricing transformation journey that Openserve embarked on two years ago is starting to bear fruit, with the rate of decline in their revenue slowing down.

“Despite the price reductions and ongoing voice revenue pressures, Openserve’s overall revenue declined by only 2.9% while data traffic grew massively in the network.

“The weak economy led to deferred corporate ICT spend and reduced public sector spend, which hampered BCX’s performance,” he said.

“Our focus going forward is to increase the contribution from the new generation revenue streams. Despite their lower margin compared to traditional revenue streams, the new generation revenue streams will ensure Telkom’s long-term sustainability.”

The chief executive said that mobile and fibre remain key capex focus areas, “and we have strong returns – mobile service revenue grew by 47.2% and our active fibre to the home connectivity rate increased to 30.7% (FY2017: 18%) within three years of deployment, which is in line with international trends”.

Read: Telkom safe from junk – is stable, with no liquidity issues: Moody’s

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Telkom full year profit slides despite mobile growth