Telkom Group delivers strong earnings growth in challenging operating environment

Telkom SA SOC Limited published Interim Results for the six months ending 30 September 2021 reflecting strong earnings growth in the first half of the financial year.

In a period marred by civil unrest, global semiconductor shortage and a third wave of COVID 19, Telkom sustained revenue and delivered EBITDA growth of 1.2%.

Telkom Group CEO Sipho Maseko stated:

“The results attest to the success of our investment strategy and prudent cost management through the volatility of the last quarter.”

Telkom’s sustainable cost management programme saw operating expenses decline 3.1% year or year contributing to the expansion of the EBITDA margin by 0.5 ppt to 28.1%.

Reported Headline Earnings Per Share (HEPS) increased by 30.4% to 285.5 cents while Basic Earnings per Share (BEPS) increased by 27.3% to 276.8 cents compared to the prior period.

Mobile subscribers increased by 18.8% to 16.3 million subscribers with mobile revenue from Telkom up 9.7% to R10 366 million. Telkom Mobile continues to optimise the cost to serve as it grows, with the optimization of roaming expenses contributing to the improvement in EBITDA.

“Our strategy to build a data led network continues to serve us well with 10.3% growth in mobile broadband customers representing a surge of over 65.5% of our active customer base,”

says Sipho Maseko.

Openserve has stabilised topline revenue at R6 720 million. Over the period, homes passed with fibre increased by 54.2% to 707 399. The number of homes connected with fibre surpassed the number of homes connected with copper by 43.7%.

Telkom’s enterprise business was the most affected by the economic challenges over the period, with BCX revenue declining by 6.1% to R7 461 million.

Gyro masts and towers (Swiftnet) increased revenue by 7.3% to R674 million.

According to Maseko, Telkom remains on track for the listing of the masts & towers business on the Johannesburg Stock Exchange (JSE) before the end of the financial year.

“The listing will affirm the valuation of the masts & towers and contribute to the overall valuation of the Telkom business.”

Key salient features

  • Revenue flat at R21.3 billion
  • EBITDA up 1.2% to R6.0 billion with EBITDA margin at 28.1%
  • BEPS and HEPS up 27.3% and 30.4% respectively
  • Capex up 22.7% to R3.6 billion with capex to revenue ratio of 17.0%
  • FCF down from R211 million to negative R839 million. Net debt to EBITDA flat down 0.2 times from 0.9 times as at 31 March 2021

Telkom will be better placed to take a holistic view of the capital allocation and following deliberation by the Board, make an announcement on the dividend policy at the end of the financial year, Maseko concludes.

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