Telkom on Monday warned investors that its headline earnings per share will slump by as much as 55% year on year when it reports results for the six months to end-September 2022 later this month.

Both basic and headline EPS will crash by between 45% and 55%, the company said in a trading statement.

Telkom blamed a change in its mobile post-paid vs prepaid mix, which “had the impact of deferring revenue over 24-36 months, as well as the cost base increasing”.

Specifically, Telkom apportioned blame to:

The impact of revenue deferral resulting from the continued growth of its post-paid mobile sales, which reduced revenue recognised by R299-million;
This shift in the mobile product mix, coupled with the upfront spend on handsets recorded immediately (while associated revenue is recognised over 24-36 months), impacted earnings. Handset, equipment, software and other costs rose by more than 30% from the R2.45-million in the prior period; and
Maintenance costs and service costs increasing materially. Maintenance costs increased by more than 10% from R1.92-billion, while service fees increased by more than 20% from R1.61-billion. This was impacted by higher backup energy costs due to load shedding.

These costs were partially offset by savings in other areas: payments to other operators, employee costs, marketing and other expenses were well managed, Telkom said.

Top line steady

“Net finance charges and fair-value movements also partially offset the impact of increased costs and declined by more than 15% from R659-million due to a favourable foreign exchange hedging position during the period.”

Telkom also paid less tax in the latest six-month period.

“Notwithstanding the weaker performance in earnings and challenging trading environment, Telkom expects to sustain its top-line revenue compared to the prior period,” the company said. Telkom will publish its interim results on 23 November, said in the trading update. – © 2022 NewsCentral Media