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Telkom's earnings take a hit as restructuring gets well underway

by , 17 November 2014

Earlier today, Telkom released its results for the six-months to the end of September.

The telecoms company posted a big hit to earnings as restructuring costs mount.

Let's take a closer look at what Telkom revealed…

Telkom posted a fall of 67% in earnings

Telkom [JSE:TKG] reported a drop of 67% to its earnings for the first half of its financial year, reports Fin24. One of the main contributors to the drop in earnings was the “restructuring costs” of retrenching employees.

Diluted headline earnings per share came in at 212.1c, adds Fin24. That’s down from 649.8c for the same period last year.

The company is also aware of “significant challenges” that lie ahead over the rest of its financial year, says BDLive. This includes “the continuous decline in voice revenue, self-provisioning by other licensed operators and the need to improve its service offering”.

Telkom posted revenue of R16.2 billion over the period, reports Bloomberg. This was similar to the same period last year.

Telkom battles for its market share

CEO Sipho Maseko said the “operating environment has been challenging over the past six-months,” adds Bloomberg. He says the “industry remains very competitive, and as a result, margins are under strain”.

Over the period, one large cost was the “voluntary retrenchment and severance packages” Telkom paid out to managers, says Fin24. The cost of these packages to 406 managers was R325 million.

This year, Telkom’s share price has “more than doubled,” adds Fin24.

At time of writing, shares in Telkom were trading 1.13% lower at R62.38.

With the restructuring of the business well underway, time will tell if this pays off as the company struggles to thrive in a competitive industry.

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Telkom's earnings take a hit as restructuring gets well underway
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