Telkom said on Friday that it’s revenue will remain flat for the six months to end-September, despite the growing demand from South African consumers for fixed and mobile broadband.

Though basic (Beps) and headline earnings per share (Heps) will rise by between 20% and 35%, this is not a measure of the underlying operational performance but rather the result of a significant decline in finance charges and other factors.

“Notwithstanding the strong performance in earnings, the trading environment remains challenging. Telkom expects to sustain its top-line revenue compared to the prior year and grow its profitability slightly ahead of revenue,” the company said.

Heps will increase by between 25% and 35% and Beps by between 20% and 30% compared to the same period a year ago, Telkom said. “This was mainly due to a significant decline in finance charges, fair-value movements and foreign exchange losses compared to the prior period.”

These declined by 35% to R659-million. This is because:

Telkom’s funding strategy and the ongoing settlement of maturing debt resulted in finance charges reducing by 25% to R541-million. “Our conservative funding approach enabled us to strengthen our balance sheet by repaying maturing debt of approximately R1.1-billion in the prior financial year, with R900-million repaid in the first half of the prior financial year. In the first half of the current financial year, we settled a further R100-million maturing debt. Our funding strategy allowed us to balance our cost of debt ratio to 52:48 floating to fixed. This ensures that the risk to changes in interest rates remain balanced.”
Fair-value movements and forex losses reduced by more than 90% to R17-million due to currency volatility and a favourable forex foreign exchange hedging position.

The difference between Beps and Heps is due to the impairment of assets and profit or loss on sale of assets.