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Telkom profits are surging


These are some impressive figures

Telkom’s profit increased for the six months ended September 30, 2023.

Despite a difficult operating environment marked by load shedding, high-interest rates, and intense load shedding, headline earnings per share increased 46.7% to 195.0 cents during the period.“Profit for the period was boosted by lower depreciation charges and growth in EBITDA, while higher interest rates materially increased net finance costs compared to the comparative period,” Telkom said.

Overall group revenue increased by 2.5% to R21.78 billion, owing primarily to increased mobile traffic, monetization of the group’s fiber infrastructure, and the expansion of the IT business.“Our cost-reduction initiatives bore fruit, partially offset inflationary increases, and resulted in operating expenses increasing by below inflation at 2.4%. Despite this increase, group EBITDA grew by 1.7% to R5,025 million, limited by higher bad debt provisions,” they added.

Profit before taxes was R1.3 billion (2022: R899 million) and profit after tax was R976 million, up from a restated profit of R641 million in 2022. The group’s total capex was also reduced by 14.8%, or slightly more than R500 million, to R3.14 billion.

“The decrease aligns with our strategy and the cyclical nature of capital expenses. The decline in mobile capex spent is due to the investment in backup power in the comparative period to mitigate the impact of accelerated load shedding not evident in the current period.”

“We mainly invested in our mobile business, which expanded its mobile footprint by 4.1% to 7,684 integrated sites. Despite increased profits and revenue, the company has yet to declare an interim dividend.

FinancialsH1 2023H1 2024Change
RevenueR21.23 billionR21.23 billion+2.5%
CapexR3.69 billionR3.14 billion-14.8%
Basic Earnings Per Share131.6 cents200.2 cents+52.1%
Headline Earnings Per Share132.9 cents195.0 cents+46.7%

More specifically, the group’s Fibre Business Openserve saw operating revenue fall by 2.7% over the period as legacy revenue declines hampered performance.

However, next-generation revenue increased by 6.9% to R4,526 million, owing to a 9.1% increase in fixed data revenue, which was fuelled by growth in high-speed fiber broadband connectivity and a steady expansion across carrier and enterprise connectivity.

Telkom Consumer revenue increased by 1.4%, while total external revenue from mobile operations increased by 4.1% to R11,035 million, driven by 5.8% growth in mobile service revenue. BCX’s revenue increased by 0.7% to R7,043 million, owing primarily to double-digit growth in the IT business, offset in part by legacy declines in the Converged Communications business.

Swiftnet, Gyro’s mast and towers business, continued to commercialize, owing primarily to additional tenancies in the existing portfolio and ongoing equipment upgrades by mobile network operators to increase capacity. Although Gyro’s revenue from continuing customers increased by 6.8% to R499 million, total revenue was reduced by 1.2% to R652 million due to terminations.

Prior to releasing the results, the group stated that it had identified a preferred bidder for the sale of Switnet, which Nedbank previously estimated to be worth R8.7 billion. “While we saw positive momentum in the current period, the increasingly challenging economic environment we operate in will continue to impact the performance across the entire telecommunications industry as we manage load shedding through prioritizing alternative energy investments,” they mentioned.

Despite the challenging macroeconomic environment, our FY2024 guidance remains unchanged. Group revenue and EBITDA are expected to grow in the low to mid-single digits as we focus on driving top-line growth and leveraging cost savings to improve profitability by FY2025.

The company also stated that it will continue to invest in infrastructure to allow for future growth, with the capex-to-revenue ratio expected to be at the lower end of its 16% to 18% guidance for FY2024, which is consistent with the company’s cautious approach to capex for the year.