Photo by: Bloomberg
Telkom on Wednesday reported that its normalised earnings for the financial year ended March 31, would rise, but said reported earnings would drop on retrenchment payments and other costs not normally part of the business.
The JSE-listed company reported that basic earnings per share (EPS) would decline by between 10% and 30% on the 758c reported in the prior year, while the normalised EPS would jump 100% to 120% higher than the prior year’s 285c apiece.
Telkom expected its reported headline earnings per share (HEPS) to fall 20% to 40% compared with the 861c reported in the year to March 2014, while normalised earnings would surge to between 40% and 60% higher than the 388c achieved last year.
During the year under review, the company provided for R591-million in retrenchment and voluntary severance and retirement packages, with a related tax benefit of R165-million while a tax benefit of R546-million was reported on the payment to an insurer for the transfer of post-retirement medical aid liability for certain pensioners.
However, the company reported a R743-million benefit from the reduction in mobile termination rates and the resultant lower payments to mobile operators, as well as lower asset impairments and write-offs and a decrease in expenses relating to the post-retirement medical aid liability, which led to an increase in normalised earnings.
Despite a challenging operating environment compounded by competitive pressures and regulatory interventions, Telkom reported that it had further stabilised the business and had “performed reasonably well” during the year under review.
Telkom’s revenues were stabilised with a continuous focus on cost and operating efficiencies resulting in an improvement in the earnings before interest, taxes, depreciation and amortisation margin in line with the company’s guidance.
“Although we managed to further improve on cost efficiencies in certain areas, we experienced delays in the implementation of other initiatives. The delayed initiatives included the workforce reduction initiative and the renegotiation of certain key contracts,” the company added in an update to shareholders.
Marketing expenses, consulting and business transformation expenses and vehicle costs were reduced, as was expenditure relating to the group’s post-retirement medical aid liability for in-service members, certain pensioners and part-time staff.
“These savings were partially offset by annual salary increases, higher bad debts and higher electricity costs as the economy and the challenges around energy supply negatively impacted our results,” Telkom pointed out.
The group aimed to publish its financial results for the year on June 8.