Shareholders are reaping the benefits of Telkom’s continued growth, with the group increasing its dividend after reporting that annual profit rose by more than a quarter as its data-led strategy continues to bear fruit.
The group on Tuesday announced that profit for the 12 months to end-March rose 27.5% from a year earlier to R3.55bn and increased its payout ratio to a range of 40%-60%, with a total dividend of 270.1c — 45% of free cash flow.
The group’s latest dividend is 65.7% higher than last year, with the government, the group’s largest shareholder, in line to pocket about R550m.
The group reinstated its ordinary dividend a year ago, ending a four-year drought for shareholders while the group fought to pay down debt and invest in its mobile business. At the time, Telkom did declare a special dividend from the cash proceeds after selling Swiftnet, its masts and towers business.
“It was important for us to first see a positive free cash flow position, which was the R400m we delivered about three years ago,” group CFO Nonkululeko Dlamini said at a presentation to investors.
“Last year we were [at] R2.8bn. The focus is to ensure that from underlying performance, we get comfortable that the free cash flow will continue to be delivered with stringent management of working capital and investing in the right places … for growth in the business.”
The head of finance is looking for a dividend level that will be “sustainable for shareholders”.
“It’s a progression. And again, in the uncertain economic conditions, we did not distribute 100%. We’re comfortable with the range [in] which we’ve distributed,” she said.
Group revenue for continuing operations was up 1.4% to R44.48bn, driven by growth in the consumer business and Openserve but partly offset by a decline at BCX.
Group data revenue was up 7.6% to R26.6bn, contributing 59.8% to the total, while mobile data revenue grew 10.5% and fibre-related data revenue 6.3%.
Group earnings before interest, tax, depreciation and amortisation (ebitda) rose 5.8% to R12.48bn, reflecting structural improvements in the cost base, Telkom said.
Headline earnings per share were up 21.5% to 708.5c, and free cash flow increased by 10.4% to just more than R3bn, reflecting disciplined cash generation management.
CEO Serame Taukobong said the group’s mobile business surpassed 25-million subscribers and sustained service revenue growth for the 14th consecutive quarter.
Openserve milestone
“Openserve [the group’s fibre business] also achieved a remarkable milestone, recording full-year overall revenue growth for the first time in nine financial years, an indication the transition to fibre services is largely complete,” he said.
Taukobong said the group’s data-led strategy remains the focus for growth.
“Having established the OneTelkom approach as the backbone of South Africa’s digital future, we are focused on the next phase of value creation. This will be through further increasing efficiencies and improving growth across the board,” he said.
“By allocating capex to projects that enhance returns, we will continue the disciplined execution that is by now the hallmark of our transformation.”
For the 2027 financial year, Telkom’s capex intensity will remain at 12%-15%, primarily funding mobile and fibre to support revenue growth, while cost efficiencies protect margins. The combined effect will be geared towards free cash flow generation and a prudent leverage position.
Telkom shares gained 1.62% to close at R62.88 on Tuesday, taking the gains so far this year to more than 60%.
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