Telkom turnaround strategy remains on track
Telkom SA SOC Limited today published its interim results for the six
months ended 30 September 2014. Key highlights are:
- Group EBITDA excluding one-off items increased by 12.1% to R4.4bn
- Headline earnings per share excluding one-off items increased 14.9% to 261.7 cents
- Net revenue increased 1.6% to R13.3 billion
- Net debt to EBITDA remains low at 0.1x
- Operating expenses, excluding depreciation and one-off items, decreased 2.4% to R9.2 billion
During the period under review, Telkom recorded strong cash flow, improved
operating margins, and a healthy performance from our mobile business in
particular.
Net revenue was stable at R13.3 billion, which is a 1.6% increase against
the prior comparable period. This, in light of the tough economic and business
environment, shows the resolve of management to curtail losses and improve
the business going forward. Fixed-line voice and interconnection revenues
remained under pressure and decreased 11.0% to R4.3 billion; while mobile
revenue increased 55.0% to R1.4 billion.
“Our results for the first six months of the 2015 financial year confirm
that the business is on track for future growth. Our multi-year turnaround
strategy, which began in 2013, is paying off,” said Sipho Maseko, Group
Chief Executive Officer of Telkom.
“We expect that this positive momentum will continue for the remainder
of the financial year.”
Group operating expenses remain an area of focus as we address our entire
operating cost base, extracting efficiencies as well as improving our ability
to respond to an evolving industry. As part of our multi-year cost transformation
programme, the focus has been to reduce all costs including employee, marketing
and security costs. We also decreased our number of leased vehicles. Operating
expenditure, excluding depreciation, decreased by 2.4% to R9.2 billion.
This was largely due to a R199 million reduction in employee expenses relating
to lower service and interest cost as a result of the lower post-retirement
medical aid liability and a lower headcount.
Group EBITDA improved 12.1% to R4.4 billion, with a consolidated EBITDA
margin (excluding one-off items) increasing to 27.7%. The mobile business
produced a solid performance with EBITDA improving 50.7% from the prior
period. We expect to realise our operating margins as cost savings linked
to our various initiatives begin to filter through.
Our capital structure remains strong as we continue to take a measured
approach to our capital investment programme with a focus on returns. In
this regard, we continue our focus of extracting efficiencies from our
assets and liabilities. This has resulted in a significant increase in
free cash flow to R1.7 billion. Over the next six months, we will
continue rigorously focusing on project selection, concentrated roll-outs
and relevant technology deployment, and expect an accelerated capital investment
over this period.
Customer service remains a high priority throughout the group, and we
made good progress over the period. We were recognised as the best Fixed
and Mobile broadband provider at the 2014 MyBroadband conference.
These awards are based on services offered and innovation in the broadband
space.
We are aware of the significant challenges that lie ahead for the next
six months, including the continuous decline in our fixed voice revenue,
self-provisioning by other licensed operators and the need to improve our
service offering.
We remain determined to successfully execute our strategy by focusing
on the following priorities and enablers in the near-term:
- Deliver a superior customer experience;
- Disciplined capital allocation with greater emphasis on productivity and
returns;
- Complete corporate transactions – awaiting approval for MTN agreement
and BCX;
- Improve efficiency – address all costs; and
- Find revenue growth – to secure our future.
“We will continue to accelerate the positive momentum achieved in the
past six months of the financial year. We are focused on improving customer
service and are committed to stabilising Telkom to build a better future,”
concluded Maseko.