Telkom rings up costs of restructuring programme
Interim profit forecast to fall
TELECOMS company Telkom warned investors yesterday that its interim profits would take a substantial knock due to costs related to severance and retirement packages paid out as a result of the company’s restructuring programme.
In a notice to shareholders yesterday, Telkom said it expected to report basic earnings per share for the half year to September to fall by between 45 and 65 percent compared with the previous interim period when the firm generated basic earnings per share of 217.4c.
Normalised basic earnings per share are forecast to fall by between 10 and 30 percent from 263.2c in the half year to September 2014.
It said headline earnings per share were expected to be between 65 and 85 percent lower than in the same period a year ago, when the group generated headline earnings per share of 215.8c. Normalised headline earnings per share are forecast to fall by as much as 5 percent or rise by as much as 15 percent from 261.7c in the half year to September 2014.
“The primary reason for the higher increase in normalised basic earnings per share when compared to normalised headline earnings per share is the higher gain on the sale of assets in the current period, which are excluded from the calculation of headline earnings per share,” Telkom said.
News of the expected decline in profits caused Telkom shares on the JSE to fall by as much as 6.3 percent, before closing 4.55 percent down at R67.90, valuing the company at about R35.5 billion.
Telkom, which releases its results for the six months in November, said yesterday that it had made a provision of R1.5bn for voluntary severance and retirement packages, compared with R325 million in the same period in 2014.
This affected 3 108 employees, compared with 406 employees last year, with a related tax benefit of about R446m in the current period from R91m in the previous period.
“The increase in normalised basic earnings for the six months ended September 30, 2015 is mainly as a result of: Lower employee expenses due to lower headcount emanating from the voluntary severance and retirement packages in the prior financial year; and higher profit on sale of properties,” Telkom said.
The company said this was partly offset by “higher accelerated depreciation as we align our asset base to technology evolution and initiatives driving our strategic intent”.
Provision
Telkom is due to release its results for the six months to September 30 on or about November 16.
The news yesterday comes as the telecoms group pulls out all the stops to acquire mobile service provider Cell C. But it is locked in a stalemate with the company’s major shareholder, Oger Telecom, which is pricing a sale at R22bn, while Telkom is offering slightly more than R14bn.
Oger has set a deadline of late November for the renewed offer, according to the source.
Telkom is conducting due diligence about whether to make a new offer.