Shares in Telkom shot up as much as 8% on Wednesday as the state-affiliated telecoms provider said it expects to report growth in interim earnings of up to a third.
The fixed-line operator expects to report headline earnings per share (HEPS), which strip out the effect of one-off financial events, of between 186.1c and 199.4c, translating to an increase of up to 50% for the six months to August 2023.
Having reported HEPS of 137.2c in 2022, Telkom has since restated this to 132.9c. A similar restatement has been made to basic earnings per share (BEPS).
The group, which has hired former Transnet finance chief Nonkululeko Dlamini to be its CFO, said it correctly calculated and accounted for tax in its statement of profit or loss and other comprehensive income on September 30, 2022. However, the group “incorrectly adjusted for the headline earnings, relating to the profit on disposal and impairment of property, plant and equipment and intangible assets.”
This led to a R21m overstatement of headline earnings and a 4.3c overstatement of HEPS for the six month period ended September 2022.
Market players appear to have welcomed the news of an earnings uplift with shares rising more than 5% in morning trade on Wednesday. At 1pm, the stock was up 2.84% at R24.27, far below the R96 levels reached back in 2019.
The group said the increase in earnings was due to improved performance for the period with both revenue and earnings before interest, tax, depreciation and amortisation (ebitda) growth within the guidance provided at its last annual results presentation.
Growth in earnings has also been positively affected by lower depreciation after asset impairments recognised in the 2023 financial year. However, this has been partially offset by higher net finance charges in the period under review, as well as the nonrecurrence of a R102m gain on foreign exchange and fair value movements recognised in the previous comparable period.
In June, Telkom reported that it had raised a R13bn impairment charge relating to subsidiaries Openserve and Telkom Consumer, the mobile unit for the full year to end-March 2023.
Total depreciation, amortisation and write-offs decreased by about 20% from R3.549bn in the prior period, while net finance charges increased by about 50% from R655m in the prior period, largely due to lending-rate increases as well as a higher net debt balance.
Telkom is expected release its earnings report for the period on November 21.
Telkom has been the subject of much investor interest over the last year, having most recently received an unsolicited offer by a consortium led by former CEO Sipho Maseko, to acquire a controlling stake in the group.
The company, led by Serame Taukobong, ultimately rejected the offer by the consortium comprising Maseko’s Afrifund Investments and its Madagascar-based Axian Telecom partner.
By market close Telkom’s share price had pulled back to be up just 1.91% at R24.05.
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