Telkom sets aside R234 million for retrenchments

In a trading update on Monday (3 November), Telkom advised that it has made provision for retrenchment and voluntary severance and retirement packages of approximately R234 million, after tax.

According to trade union, Solidarity, approximately 676 employees affected by Telkom’s section 189 retrenchment process have been placed in alternative positions within the company, while 302 employees took voluntary severance packages.

A further 105 employees, who have not been placed in alternative positions, received termination notices on 1 October 2014.

On Monday, the group referred to the trading statement published on 10 October 2014 whereby it advised that the results to be reported on for the six months ended September 2014 would be at least 20% lower than those of the prior corresponding period.

It said that the results to be reported on include the following items that are not part of the results from normal business operations:

  • Provision for retrenchment and voluntary severance and retirement packages of approximately R234 million after tax in the current period;
  • The net curtailment gain recognised on the post retirement medical aid liability of R2.173 billion in the prior period.

Reported earnings for the six months ended September 2014 are expected to be 55% – 65% or 311 – 368 cents per share lower, from 566.2 cents at the end of September 2013, it said.

Normalised earnings per share would be 80% – 90% higher, or 112 – 127 cents per share higher, from 140.6 cents in 2013.

Telkom said that reported headline earnings per share for the period ended September 2014, would be 60% – 70% lower, or 390 – 455 cents per share lower, from 566.2 cents in 2013.

However, normalised HEPS are anticipated to be 10% – 20% higher, or 22 – 45 cents per share higher, from 224.2 cents before.

Telkom said that the expected increase in normalised basic earnings as a result of:

  • Lower payments to mobile operators resulting from the reduction in termination rates;
  • lower asset impairments and write offs; and
  • a decrease in expenses relating to the post-retirement medical aid liability due to the curtailment and settlement of part of the liability in the prior period.

This, the group said, was partially offset by lower foreign exchange gains as a result of the implementation of hedge accounting from 1 October 2013, which results in certain foreign exchange gains and losses not being recognised in earnings in the current period, and higher taxation.

The main reason for the expected increase in normalised basic earnings per share compared to the increase in normalised HEPS is the asset impairments and write offs in the prior period which are excluded from the calculation of headline earnings per share, Telkom said.

The group is expected to release its interim results on 17 November 2014.

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Telkom sets aside R234 million for retrenchments