JSE-listed Telkom expects a double-digit drop in earnings for the year ended March 31 as restructure costs and one-off Covid-19-related impairments slash headline earnings per share (HEPS) and basic earnings per share (BEPS).
HEPS is expected to decrease by between 65% and 70% to between 186.2c and 217.2c apiece during the year under review, while basic BEPS is expected to plunge by between 75% and 80% to between 140.9c and 112.9c a share.
Telkom, which will publish its financial results on June 22, attributed the decline to one-off costs relating to the R1.18-billion restructuring programme and the R626-million additional impairment of trade receivables and contract assets owing to Covid-19.
“The negative impact of Covid-19 on the South African economy is expected to put further pressure on consumers with studies predicting that a number of customers are likely to default on their obligations as they fall due.
“As a result, Telkom took a prudent approach in line with the Saica guidance by estimating an increase in customer default rates for our customer base, and this has been incorporated in the calculation of the group’s expected credit losses,” Telkom said in a trading update on June 15.
Telkom recognised a total provision of R1.14-billion, of which R626-million is an additional impairment of trade receivables and contract assets owing to the expected impact of Covid-19.
Excluding one-off costs relating to voluntary severance packages and voluntary early retirement packages and the additional provision, Telkom’s group normalised HEPS and BEPS are expected to decrease 30% to 35% and 35% to 40% respectively for the year ended March 31.
This underlying performance is attributed to lower earnings before interest, taxes, depreciation and amortisation (Ebitda) owing to the impact of declining fixed-voice, the increase in finance charges and fair value movements.
Telkom’s balance sheet, however, was strengthened during the year under review, through a repayment of R1.2-billion and the refinancing of debt at a competitive market interest rate.
“We have extended the maturity profile of our debt to reduce the refinancing risk of the debt book,” the group commented.
Telkom has also improved its liquidity position to R4.7-billion and undrawn committed facilities of R5.5-billion.
“On an underlying basis, our gearing improved compared to the first half of the year. Excluding financial leases and one-off items mentioned above, our net debt to Ebitda is 0.7x in the 2020 financial year.”