Healthy results: Telkom Group CEO Sipho Maseko, centre, at the company’s annual results presentation in Midrand on Monday. Picture: FREDDY MAVUNDA
Healthy results: Telkom Group CEO Sipho Maseko, centre, at the company’s annual results presentation in Midrand on Monday. Picture: FREDDY MAVUNDA

Telkom put in a “solid performance” in a tough operating environment, delivering a 56% higher dividend for shareholders in the year to March 2017. The share jumped 5.32% by the close of trade on Monday.

The result was boosted by the integration of the group’s cloud computing operation BCX and the “robust performance” of the mobile business.

It declared a final dividend of R2.91, taking the total for the year to R4.22. In the 2016 financial year, Telkom paid only a final dividend of R2.70.

“We made significant strides in a difficult operating environment characterised by regulatory uncertainty, increased competition and a weak economic environment,” Telkom CEO Sipho Maseko said.

“We accelerated our capital investment … focusing on fibre roll-out and our mobile business. We have now created the implementation capability to support strategic growth areas.”

Capital expenditure shot up 43.3% to R8.6bn. Fibre expenditure powered up 82.6% to R2.4bn, while mobile capital expenditure rocketed 193.3% to R1.9bn. The mobile business played a starring role, delivering revenue growth of 38.4% and earnings before interest, tax, depreciation and amortisation (ebitda) of R660m, after four years of ebitda losses.

Group revenue was up 9.8% to R41bn, with headline earnings per share rising 12.4% in the year. The increase was mainly driven by a lower tax expense and the inclusion of BCX for a full year. But overall ebitda was flat at R10.9bn, with an ebitda margin of 26.7%.

A 4.7% fall in fixed-line voice revenue to R14.6bn was compensated for by 21.7% growth in mobile voice revenue to R1bn.

After-tax profit grew 66% to R3.8bn, boosted by a retrenchment drive in financial 2016, which cut employee costs 13%.

“It was a mixed result in my view,” Mish-al Emeran, an analyst at Electus Fund Managers, said on Monday.

It was positive that the group ebitda margin was ahead of market expectations. Also, mobile services revenue grew off a low base, while the mobile business posted profits.

But fixed-line voice usage, subscription and data revenue were in a declining trend, while higher group capex dragged on free cash flow conversion.

Emeran said the effective tax rate of 15.2% was not sustainable, although it was a positive surprise and a key driver of the higher headline earnings per share. The benefits of cost rationalisation were now “largely complete” and Telkom was guiding to lower ebitda margins of 23% to 25% in financial 2018.

“This, together with a normalisation of the effective tax rate ... implies that Telkom will need to significantly grow the top line to match this year’s [headline earnings per share] performance,” Emeran said. “Given the challenges in its fixed-line business, it remains to be seen whether that rate of top-line growth is possible.”


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