Telkom this morning warned shareholders that basic earnings per share and headline earnings per share would be significantly lower year-on-year when it reports results for the six months ended 30 September.
The company states that figures to be reported include two items that are not part of the results from normal business operations: a provision for retrenchment and voluntary severance and retirement packages of approximately R234 million after tax in the current period; and the net curtailment gain recognised on the post-retirement medical aid liability of R2.1 billion in the prior period.
Year-on-year, says Telkom, reported and normalised earnings for the period are expected to differ as follows: reported basic earnings per share are expected to drop by 55%-65% (311cps to 368cps) from 566.2 cents per share, while normalised basic earnings per share are expected to be 80% ? 90% (112cps to 127cps) higher, from 140.6 cents per share.
Similarly, in terms of headline earnings per share, Telkom says reported figures will be 60% ? 70% (390cps to 455cps) lower, from 649.8 cents per share, while normalised headline earnings per share would be 10% to 20% (22cps to 45cps) higher, from 224.2 cents per share.
Telkom says the increase in normalised basic earnings for the six months ended 30 September are mainly as a result of lower payments to mobile operators, resulting from the reduction in termination rates; lower asset impairments and write-offs; and a decrease in expenses relating to the post-retirement medical aid liability due to the curtailment and settlement of part of the liability in the prior period.
This, the company adds, was partially offset by "lower foreign exchange gains as a result of the implementation of hedge accounting from 1 October 2013, which results in certain foreign exchange gains and losses not being recognised in earnings in the current period; and higher taxation".
The main reason for the higher increase in normalised basic earnings per share (80% ? 90%) when compared to the increase in normalised headline earnings per share (10% ? 20%) is the asset impairments and write-offs in the prior period which are excluded from the calculation of headline earnings per share.
Cost of retrenchments
Telkom's provision for retrenchment and voluntary severance and retirement packages of R234 million comes as the company seeks to cut costs and streamline its operations. In total, Telkom stated it would seek to cut about 2 500 managers over all three phases of this process.
However, most of these employees are expected to be placed in new positions once restructuring has been completed. In August, Telkom announced its group-wide restructuring process would proceed, after consensus between it and the labour unions was reached.
Last month, the company reported 302 management-level staff had taken voluntary severance packages and voluntary retirement packages, meaning the company had exceeded its stated target of 223 job cuts in this phase.
Telkom will release its results for the six months ended 30 September on 17 November.
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