Telephony group Telkom is expecting a massive decrease in headline earnings per share (HEPS) and basic earnings per share (BEPS) in the six months ended September.
Telkom advised shareholders today that HEPS and BEPS are expected to decrease by between 45% and 55% compared to the prior interim period ended 30 September 2021.
This, the company says, was mainly due to Telkom’s mobile postpaid versus prepaid mix changing, which had the impact of deferring revenue over 24-36 months, as well as the cost base increasing.
“The resultant reduction in earnings is a combination of the following: the impact of revenue deferral resulting from the continued growth of our postpaid mobile sales reduced revenue recognised by R299 million; a shift in mobile product mix coupled with the upfront spend on handsets recorded immediately (while associated revenue is recognised over 24-36 months) increased the cost of handsets, equipment, software and directories by more than 30% from R2.4 billion in the prior period.”
In addition, Telkom says maintenance costs and service costs increased materially, reflecting an increased mobile network for the period.
“Maintenance costs increased by more than 10% from R1.9 billion, while service fees increased by more than 20% from R1.6 billion, also impacted by higher backup energy costs due to accelerated load-shedding during the period.”
According to Telkom, these costs were partially offset by savings in other areas, as payments to other operators, employee costs, marketing and other expenses were well managed.
“Net finance charges and fair value movements also partially offset the impact of increased costs and declined by more than 15% from R659 million, due to a favourable foreign exchange hedging position during the period; and reduced taxation for the period also contributed in offsetting the impact of higher costs.”
Notwithstanding the weaker performance in earnings and challenging trading environment, Telkom says it expects to sustain its topline revenue compared to the prior period.
Serame Taukobong, Telkom Group CEO, will present the company’s interim results for the six months on 23 November.
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