A stringent focus on key business imperatives and the execution of group strategy helped Telkom SA Limited grow headline earnings per share 175% to 863.6c from 314c in its first full year as a listed company.
Telkom declared a final dividend of 110c a share to shareholders for the year ended March 2004, thanks to sustained revenue from traditional voice services and market endorsement of value-added data and mobile services.
Telkom`s strategy to defend core revenues and enhance operating efficiencies lifted group operating revenue by 8.8% to R40.795 million (2003: R37.507 million). Basic earnings per share grew 177.5% to 812c (2003: 292.6c) through a 39.5% increase in operating profit to R9.088 million (2003: R6.514 million) and a reduction of finance charges, which included net losses of R776 million arising from measuring derivates at fair value and currency volatility.
EBITDA margins expanded to 40% from 35%, underpinning the generation of strong cash flows. This allowed the group to slash debt and invest capital in driving growth and supporting ongoing cost savings. Telkom advanced on its stated plan to contain net debt to equity within a 50% to 70% range. Net debt decreased 33.8% to R13.362 million (2003: R20.171 million), bringing the net debt to equity ratio to 60.6%, compared to 109.9% in the previous period.
Group capital expenditure decreased 7.1% and represented 13% of group revenue, in line with the group`s guidance of maintaining capital expenditure in the range of 12% to 15% of group revenues. Baseline expansion and core support capital expenditure was largely for the deployment of technologies to support the growing data businesses and expenditure for access line deployment in high growth residential areas. Telkom`s continued focus on rehabilitating its access network, increasing its investment in maximising efficiencies and eliminating redundancies in the transport network, all contributed to network evolution capital expenditure of R668 million.
Telkom`s CEO, Sizwe Nxasana, said the group achieved these sterling results by design, emphasizing that its fixed-line business remained a strong investment case.
"Growth can be attributed to a strong operational performance across the group. Benefits began to accrue with the harnessing of synergies between the fixed-line and mobile businesses, both in driving operational efficiencies and in integrated product and service offerings. Also, Telkom entered into joint retail distribution and customer payment collections during the year," he said.
The fixed-line segment accounted for 75.0% of group operating revenue with an increase of 4.6%, primarily due to strong growth in data services revenue and increased traffic revenue. The mobile segment accounted for 25% of group operating revenue, driven largely by customer growth that is evident in a decrease in contract churn.
During the year, Telkom advanced its strategy to become the data provider of choice with the launch of VPN Supreme, a dedicated IP service, and TelkomInternet powered by Satellite. A strong focus on retaining fixed-line voice customers resulted in the rebranding of TelkomDirect, the repositioning of Telkom branches and the closure of non-viable outlets.
Nxasana said: ``Telkom management will continue to scrutinise the business to extract efficiencies. At the same time however, focus will shift outwards to seek new growth opportunities. Both Telkom and Vodacom consider pursuing African expansion and stand to benefit from growing domestic markets as SA`s socio-economic transformation process accelerates and yields consumer and business customers.``
Share
* Telkom is the largest communications provider on the African continent based on operating revenues and assets.
* Telkom`s current market capitalisation as at 31 March 2004 is R43.9 billion (US$6.9 billion)
* The shareholding structure is as follows: 38.3% South African government, Thintana (SBC and Telekom Malaysia) 30.0%, and freefloat 31.7%.