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Picture: REUTERS/SIPHIEW SEBEKO
Picture: REUTERS/SIPHIEW SEBEKO

Listed fixed-line operator Telkom is expected to report a more than 60% drop in earnings for the year to end March, driven by expected Covid-19-related losses and the costs of its restructuring programme. 

On Monday, the group said headline earnings per share (HEPS) are expected to decrease by between 65% and 70%, while basic earnings per share are expected to fall by 80% compared with the previous year.

The fixed-line operator said these reductions are mainly due to one-off costs of about R1.2bn relating to its restructuring programme.

The group had planned to retrench 3,000 employees but delayed the process because of the Covid-19 pandemic that has resulted in a national lockdown.

Telkom has additionally impaired some of its trade receivables and contract assets due to Covid-19, to the tune of R626m.

The company estimates an increase in customer defaults because of consumer pressure brought on by Covid-19, which has been factored in the calculation for the expected credit losses. As a result, the group made a total provision of R1.14bn. 

This has also had the effect of reducing profit before tax.

“Notwithstanding the expected economic challenges, the group has not seen a deterioration in its debtors’ book performance from March 2020 to May 2020,” Telkom said. 

Without the effects of the retrenchment costs, Telkom said HEPS would be expected to decrease by 30% to 35%, and BEPS to decrease by 35% to 40%

Telkom, set to release its full year earnings report on June 22, said the biggest challenge for the year was the decline of fixed-voice revenue, which was 22% lower than last year. This was, however, offset by the growth of more than 50% in mobile service revenue for the year.

The extent of the decline in fixed voice on the company’s earnings before interest, taxes, depreciation and amortisation (ebitda) was not offset “as it has a higher margin than the mobile business”.

Factoring that in, normalised ebitda for the group is set to decline by 7% to 10% from R11.3bn in 2019.

Shares in Telkom were trading 0.76% firmer late Monday afternoon at R23.84, down 32.5% so far in 2020. 

gavazam@businesslive.co.za

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