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Further trading statement
Telkom SA SOC Limited
(Registration number 1991/005476/06)
JSE share code: TKG
ISIN: ZAE000044897
("Telkom" or the "Group")
Updated trading statement
Shareholders are referred to the trading statement dated 8 April 2013
whereby shareholders were advised that the results to be reported on
next would differ by at least 20% from those of the previous
corresponding period.
Shareholders are further referred to the updated trading statement
released on 5 June 2013 wherein it was announced that the board of
directors ("the Board") is considering impairing the carrying value of the
assets of the Group and that a further announcement would be released
once the Board had reasonable certainty in terms of the range.
Shareholders are accordingly advised that the Board has completed its
review and has taken a decision to impair the carrying value of its
assets by R12 billion. After the impairment the net asset value (“NAV”)
per share is cR34.
In its deliberation the Board has given consideration to, inter alia, the
following factors:
- The considerable period of time that Telkom’s shares have been
trading at a significantly lower value relative to its NAV.
- The returns from some of the legacy assets of the Group which
are below commercial norms as a consequence of technology
changes, competition from mobile operators and an evolving
regulatory landscape.
- The migration of services from legacy assets to assets that are
based on new technologies which will rapidly escalate over the
next few years and further reduce the returns from some of the
above noted legacy assets.
The impairment charge is a non-cash item and it will not impact the
significant cash flow (EBITDA), which the Group generates from its
operations. It is akin to an accelerated depreciation charge, which has
no impact on Telkom’s strong cash position, low indebtedness and
ability to fund its capital program from its own resources. Basic earnings
per share from continuing operations however has been adversely
impacted by the non-cash impairment charge and is therefore expected
to be 2,229cps to 2,343cps lower than the previous corresponding
period for the year ended 31 March 2013.
The non-cash impairment charge is excluded from headline earnings
per share from continuing operations, which is expected to be between
232cps and 244cps lower than the previous corresponding period. The
decline in headline earnings is largely as a result of the cost of voluntary
severance packages of approximately R430 million and a provision of
approximately R592 million for the Competition Tribunal fines and other
legal matters.
The Board is committed to taking the necessary steps to address the
major challenges that have impacted the financial performance of the
Group in recent years. To this end, the Board aims to strengthen
customer relationships, improve operational efficiency and settle the
outstanding Competition Commission claims. The Board is also focused
on ensuring that the Group’s execution plans can deliver an increased
return on invested capital. Shareholders will be informed of progress on
these matters in due course.
Telkom will release its results for the year ended 31 March 2013 on 14
June 2013. This updated trading statement has neither been reviewed
nor reported on by the Group's external auditors.
Pretoria
11 June 2013
Sponsor
The Standard Bank of South Africa Limited
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