Telkom says it is now ‘solidly’ the third largest mobile operator in South Africa – surpassing Cell C – as a result of continued growth and a strong financial performance over the last six months.
In a trading statement to shareholders on Tuesday (3 November), the group said that it expects headline earnings for the six months ended September to be between 15% and 25% higher than before.
The boost in earnings was mainly driven by 16% growth in operating profit as a result of solid growth in group earnings before interest, tax, depreciation and amortisation (EBITDA).
This was partially offset by an increase in the effective tax rate from 28.8% in the prior period to 34.8%, it said.
Shares in the group surged nearly 9% in mid-day trade on Tuesday.
“The group performance was sound despite a difficult trading environment due to the adverse impact of Covid-19 on the economy. Group revenue showed resilience in the face of this pandemic, remaining broadly flat compared to the prior period,” it said.
Telkom noted that its mobile business continued its growth trajectory, now placing it its as the third largest mobile operator in the country. In June 2020, Cell C and Telkom were on par in terms of subscribers – however, Cell C has since seen subscriber numbers decline to 11.7 million.
“Management relentlessly focused on its sustainable cost management programme to protect group EBITDA and margin. Group EBITDA increased more than 5% from R5.604 billion reported in the prior period and EBITDA margin expanded compared to the prior period.
“Management optimised both direct costs and opex with a significant improvement in total cost to revenue ratio compared to the prior period,” it said.
The group EBITDA performance was also supported by the reversal of R66 million relating to the expected credit loss Covid-19 impairment on receivables recognised at the 31 March 2020 financial year end.
On an underlying basis, excluding the once-off reversal of the provision of R66 million, group EBITDA increased by more than 4%, it said.
- Basic earnings per share: seen 19-27% higher at 210.4 to 224.5 cents per share
- Headline earnings per share: seen 15-25% higher at 210.9 to 229.3 cents per share
The difference between BEPS and HEPS recorded in the first half of the year is due to the impairment of assets and profit or loss on sale of assets, Telkom said.
The group will publish its interim results on 10 November 2020.