Telkom forecasts 200% earnings surge despite market challenges

Telkom, a prominent telecommunications company listed on the Johannesburg Stock Exchange, provided a detailed financial forecast in a trading update on Wednesday, June 12, 2024. The company anticipates a significant surge in its earnings, projecting an increase of as much as 200% for the fiscal year that concluded on March 31, 2024 (FY2023). Telkom has scheduled the release of its full financial results for the said fiscal year on Tuesday, June 18, 2024. Following this optimistic announcement, there was a noticeable uptick in Telkom’s share price on the stock market.

Despite facing a tough economic climate and challenging market conditions, Telkom has managed to signal a promising outlook for its financial performance. The company attributes this expected improvement to a robust operational performance, which has been bolstered by the sustained consumer interest in its advanced technology offerings. Additionally, Telkom has implemented various cost-saving measures that have further contributed to the anticipated earnings boost. The company also noted that certain non-recurring items that had affected the previous year’s financials were not present in this fiscal period, which has helped enhance the earnings figures.

Telkom reported that revenues from its next-generation technology services saw a rise of around 7%, representing a substantial portion—nearly 80%—of the company’s total revenue. This growth underscores the successful adoption and integration of these technologies into the company’s revenue streams.

In terms of shareholder communication, Telkom has announced that both the reported basic earnings per share (BEPS) and the restated headline earnings per share (HEPS) for FY2023 are projected to exceed the previous year’s figures by over 20%. This forecast is an encouraging sign for investors and reflects the company’s positive momentum heading into the next fiscal year.

In its detailed financial guidance, Telkom reported a robust increase in its earnings before interest, taxes, depreciation, and amortisation (EBITDA), which is a key indicator of a company’s operating profitability. The EBITDA for the financial year 2024 rose by approximately 18%. However, when adjusted for certain factors to provide a normalized figure, the increase stands at about 5%.

Further contributing to the growth in earnings, Telkom highlighted that there was a decrease in depreciation and write-offs for the financial year 2024. This was partly due to the asset impairments that were recognized in the previous year, 2023, which did not recur to the same extent in 2024. Specifically, the company reported a significant reduction in write-offs of property, plant, and equipment, and intangible assets, which amounted to roughly R80 million, compared to a much larger figure of R13,508 million in write-offs and impairments in the prior year.

Despite these positive factors, Telkom noted that there were increased net finance charges and fair value movements, which rose by approximately 47% from R1.485 billion in the previous year. This increase was largely attributed to higher lending rates experienced during the year. These financial costs, along with foreign exchange fluctuations, acted as a drag on the overall growth in earnings for the financial year 2024.

Nevertheless, the anticipation of improved earnings for 2024 was well-received by the market. Investors responded favorably to Telkom’s trading update, which was reflected in the company’s share price. After the announcement, Telkom’s shares experienced a significant boost, climbing more than 6% as trading commenced in Johannesburg on Wednesday. This positive market reaction underscores investor confidence in Telkom’s financial health and future prospects.