Telkom shares leap higher on jump in earnings

JSE-listed telecommunications operator Telkom said on Tuesday that it expects headline earnings per share (Heps) to rise by as much as a quarter in the six months to 30 September 2020, sending its shares leaping higher.

The earnings update, which comes a week before Telkom reports its interim results, saw the company’s shares trading up almost 10% in Johannesburg at R28.60 each shortly before 10am.

Interim Heps, Telkom said, will rise by between 15% and 25% compared to the same period a year ago, while basic earnings per share are expected to increase by between 19% to 27%.

The improved earnings performance has been mainly driven by a 16% growth in operating profit on the back of “solid growth” in earnings before interest, tax, depreciation and amortisation, or Ebitda. The earnings growth would have been even better if it wasn’t for an increase in Telkom’s effective tax rate, from 28.8% to 34.8%.

“The group performance was sound despite a difficult trading environment due to the adverse impact of Covid-19 on the economy,” Telkom said. “Group revenue showed resilience in the face of the pandemic, remaining broadly flat compared to the prior period.”

Mobile grows

The mobile business continued its growth trajectory, placing Telkom Mobile “solidly as the third largest mobile operator in South Africa”, ahead of Cell C, it said.

“Management relentlessly focused on its sustainable cost management programme to protect group Ebitda and margin. Group Ebitda increased more than 5% from the R5.6-billion reported in the prior period and Ebitda margin expanded compared to the prior period. Management optimised both direct costs and opex with a significant improvement in total cost-to-revenue ratio compared to the prior period.”

The group Ebitda performance was also supported by the reversal of R66-million relating to a Covid-19 impairment on receivables provision that was recognised at the 31 March 2020 year-end. – © 2020 NewsCentral Media

Duncan McLeod is Editor of TechCentral. This article was first published on TechCentral, here.