Telkom SA SOC Limited (JSE: TKG) expects a substantial increase in profits for the fiscal year ending March 31, 2024. The company is set to release its annual results on June 18, 2024. Despite economic challenges, Telkom anticipates improved financial performance driven by demand for next-generation technologies and cost optimization.
Financial Highlights
Telkom projects a notable increase in both Basic Earnings Per Share (BEPS) and Headline Earnings Per Share (HEPS). The company expects BEPS to rise by more than 20% compared to the previous fiscal year.
Earnings Breakdown
The anticipated changes in BEPS and HEPS are as follows:
| Earnings (cents per share) | FY2023 (Reported) | FY2024 (Expected) | Expected Increase (%) |
|---|---|---|---|
| BEPS | (2 058.9) | 281.1 – 486.1 | 114% – 124% |
| BEPS (Normalised) | 71.0 | 383.5 – 390.6 | 440% – 450% |
| HEPS | (35.5) | 374.6 – 378.2 | 1 155% – 1 165% |
| HEPS (Normalised) | 124.8 | 368.2 – 380.6 | 195% – 205% |
Telkom’s earnings increase is due to operational performance improvements and cost-saving measures. This growth offsets the negative impact of higher finance charges and foreign exchange movements.
Operational Performance
Telkom’s next-generation technologies saw continued demand, boosting operational performance. These technologies now represent nearly 80% of total Group revenue, growing by approximately 7%.
EBITDA Growth
The Group’s reported EBITDA grew by approximately 18%. Normalised EBITDA growth was around 5%, in line with guidance.
Depreciation and Write-Offs
Depreciation and write-offs significantly decreased in FY2024. Total depreciation and amortisation dropped by approximately 23%, from R7 145 million to R5 502 million. Write-offs of property, plant, and equipment reduced to approximately R80 million from R13 508 million in the previous year.
Finance Charges and Movements
Net finance charges and fair value movements increased by approximately 47%, from R1 485 million to R2 183 million. Higher lending rates during the year largely drove this increase.
Restatement of Prior Year HEPS
Telkom restated its FY2023 HEPS due to an incorrect tax adjustment. This error resulted in a R47 million overstatement of headline earnings. The correct HEPS for FY2023 is 35.5 cents per share, not 45.2 cents as previously reported.
Restated Earnings Breakdown
The restatement details are as follows:
| Description | Original | Restated |
|---|---|---|
| HEPS (cents per share) | 45.2 | 35.5 |
| Overstatement | 9.7 | – |
| Total Overstatement (R million) | 47 | – |
The restatement ensures accurate reflection of Telkom’s financial performance.
Pro Forma Financial Information
Telkom provided normalised BEPS and HEPS on a pro forma basis. These figures exclude once-off restructuring costs and impairments from the prior year.
Normalised Earnings Breakdown
| Description | FY2023 (Normalised) | FY2024 (Expected) |
|---|---|---|
| BEPS (cents per share) | 71.0 | 383.5 – 390.6 |
| HEPS (cents per share) | 124.8 | 368.2 – 380.6 |
Conclusion
Telkom’s improved financial outlook for FY2024 reflects strategic focus on next-generation technologies and cost optimisation. The company’s efforts have driven substantial growth in earnings despite economic and market challenges. Telkom will present its annual results and a detailed analysis on June 18, 2024.