Telkom Faces Sharp Decline In Earnings
Telkom faces a sharp decline in earnings for its financial full year ended 31st March 2023. The telecommunication group said it could swing into loss, this caused by the R13 billion impairment of assets being mulled by the board. The trading statement shared on Wednesday, 17 May 2023 stated that the group anticipated headline earnings
Telkom Faces Sharp Decline In Earnings
Telkom faces a sharp decline in earnings for its financial full year ended 31st March 2023. The telecommunication group said it could swing into loss, this caused by the R13 billion impairment of assets being mulled by the board.
The trading statement shared on Wednesday, 17 May 2023 stated that the group anticipated headline earnings per share go between 85% and 105% from the previous comparable period.
Headline earnings per share will see a massive drop in shares as it anticipates a drop between 489 to 604 cents per share.
The telecoms shares were trading almost 30% lower at R22.11 a share.
“Shareholders are advised that the board is currently considering an impairment-of-assets charge in respect of the group’s cash-generating units, namely Openserve, Telkom Consumer, Gyro and BCX, in the amount of approximately R13-billion (excluding tax effects). This follows Telkom’s strategy to accelerate its migration to newer technologies,” it said.
“The non-cash impairment charge that may materialise following the review by the board will not impact the group’s earnings before interest, tax, depreciation and amortisation generated from operations [and] will have no impact on Telkom’s cash position. Nor will it impact the group’s compliance with debt covenants and its ability to fund its capital expenditure programme,” it said.
According to a report by TechCentral, Restructuring costs and “marginal” revenue growth due to consumers’ moving away from the company’s products both contributed to the collapse in earnings as did the “deliberate upfront investment in working capital for handsets and equipment [and] costs associated with the impact of accelerated load shedding caused by an unreliable power supply”.
“The difference between the Beps and Heps … is due to the net impact of the impairment of assets and the profit/loss on the sale of assets,” the company explained.
BEPS excludes the R13 billion and once-off restructuring cost of R1.1 billion and a related tax impact of R288 million, which will still decline by as much as 90% and HEPS will drop by as much as 80%.
