Telkom’s group CEO has promised to take bold action to improve the organisation’s performance.
On Friday Telkom SA reported its 2013 annual results with an increase in profit after tax, excluding a R12-billion impairment, of R501-million from R179-million in the prior period. The impairment was taken to bring the net asset value of the group in line with current market realities.
Revenue declined 1,7% to R32,5-billion largely as a result of continued pressure on the group’s fixed line operations. Data revenue, which constituted 33% of total revenue, increased 5,5% as a result of a 5,2% increase in the number of ADSL subscribers to 870 505.
Operating expenses increased 2,2% to R32-billion for the year. This was primarily due to increased cost of procurement, provisions for voluntary severance packages, a Competition Tribunal fine and other legal matters.
Lower revenue and higher operating costs placed strain on EBITDA, which declined 16,8% to R7,109-million. Notably, however, free cash flow remained strong at R2,132-million after capital investment of R5,738-million, which increased 20% year-on-year. This can be largely attributed to the substantial investment in the upgrade of the group’s network.
Telkom remains lowly geared, with net debt decreasing 46% to R2,1-billion from the prior period. Strong cash flow from operations and low gearing places the group in a solid position to fund its capital expenditure programme.
The group reported a basic earnings loss of 2 276,2 cps as a result of the inclusion of the impairment. Headline earnings per share was 87cps, which is a 73,2% decrease from the prior period.
“Our results reaffirm the need to take bold action to turn around the Group’s financial trajectory,” says Sipho Maseko, group CEO of Telkom.
“Despite the current financial performance, there is significant opportunity for Telkom to build a profitable and sustainable business that is able to support South Africa’s economic development.
“Success will require a complete transformation of the group. A full strategic review is currently underway focusing on medium and short-term interventions to unlock value. Tough decisions will have to be made, particularly regarding costs. In this regard our immediate focus will be reviewing our staff numbers, optimising our property portfolio and decommissioning of unprofitable services.
“Furthermore, it is critical for us to put our customers at the centre of what we do to improve our service delivery and enhance their experience. The upgrade of Telkom’s network, which will accelerate over the medium-term, is essential to achieve this objective.”
Telkom is well positioned through its fixed line infrastructure and network to play a vital role in the rollout of broadband on a commercial basis.