Turnaround strategy paying off: Telkom

Telkom CEO, Sipho Maseko, says that the group’s results for the first six months of the 2015 financial year confirm that the business is on track for future growth.

Telkom on Monday (17 November) reported a profit after tax of R1.2 billion, from R3.0 billion recorded in the same period in 2013.

This, the group noted, is significantly lower than the previous year and was driven by a one-off R2.173 billion net gain recognised on the curtailment of the post-retirement medical aid liability included in the comparative reporting period, as well as retrenchment, voluntary early retirement and severance package costs of R325 million for 406 employees in the current reporting period.

Net revenue was stable at R13.3 billion, which is a 1.6% increase against the prior comparable period.

Operating profit however, almost halved to R1.6 billion, from R3 billion in 2014, having reported R4.6 billion in annual profit for the year ended March 2014.

Group operating revenue decreased 0.5% to R15.911 billion, driven by the continuous decline in fixed-line voice revenue and lower data leased line revenue resulting from self-provisioning by other licensed operators, partly offset by higher mobile revenue.

Group EBITDA excluding one-off items increased by 12.1% to R4.4 billion. The increase was driven by the benefit from lower payments to mobile operators and lower employee expenses due to lower service and interest cost as a result of the lower post-retirement medical aid liability, which was curtailed in the prior period as well as lower full-time and part-time staff headcount, Telkom said.

Headline earnings per share excluding  one-off items increased 14.9% to 261.7 cents.

“Our multi-year turnaround strategy, which began in 2013, is paying off,” said Maseko.

“We expect that this positive momentum will continue for the remainder of the financial year.”

He said that the operating environment has been challenging over the past six months. The telecoms industry remains very competitive and as a result, margins are under strain, particularly in the enterprise segment.

“Our transformational strategies, which began in 2013, are still on track, and our results for the first six months of the 2015 financial year confirm our continuous intent of stabilising the business for future growth.”

“Over the next six months, we will continue rigorously focussing on project selection, concentrated roll-outs and relevant technology deployment, and expect an accelerated capital expenditure over this period,” Maseko said.

“We are aware of the significant challenges that lie ahead for the next six months, including the continuous decline in voice revenue, self- provisioning by other licensed operators and the need to improve our service offering,” he said.

Subject to the financial performance of the group, the operating environment, growth opportunities and debt and cash levels, the board intends to reinstate a dividend for the 2015 financial year.

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Turnaround strategy paying off: Telkom