Telkom's market capitalisation hit R31.4 billion yesterday, as its shares gained 2.97%, even though it warned reported earnings would drop.
The company's share price gained 174c and is closing in on its year high of R62.15 - which it saw in September - as it ended the day at R60.30. By comparison, the JSE's all share index moved 0.6% higher.
Telkom's share price was hard hit after government binned a proposed offer from Korea-based KT Corporation that would have led to a R3.3 billion injection; previous CEO Nombulelo "Pinky" Moholi's resignation; and a R449 million Competition Tribunal fine.
Telkom, which listed in March 2003, saw its share hit a 10-year high on 12 September 2007, when it closed at R92.69, before it started a downwards trajectory. About five years ago, the stock was trading at around the mid-R50 level. It started to recover after hitting an all-time low last May, of R11.93, after it impaired its legacy assets, a move welcomed by the market despite the drag in its bottom line, and improved operating profit.
Once-off effect
Yesterday's increase comes despite the listed company warning reported basic earnings per share would be between 55% to 65% lower - or between 311c and 368c per share - lower than the 566.2c a share in last year's interims. On a normalised basis, which strips out unusual items, this measure will be 80% to 90%, a 112c to 127c per share gain, than last year's normalised 140.6c per share.
Headline earnings, a measure viewed by analysts as an indicator of core performance, will drop on a reported basis, losing between 60% and 70% to be between 390 and 455 cents per share lower than last year's 649.8 cents per share. When this figure is normalised, headline earnings per share will be 10% to 20% higher than the 224.2 cents per share reported last year, a 22 to 45 cents per share gain.
Telkom explains the reported figures include a once-off effect, which include a retrenchment and voluntary severance provision of R234 million, which has been made in the first half of the year, and last year's R2.17 billion benefit after it curtailed post-retirement medical aid benefits.
The telco is in the midst of a retrenchment process and has said 302 management-level staff had already taken voluntary severance packages and voluntary retirement packages.
Normalised basic earnings have benefitted from lower termination payments to mobile operators, lower asset impairments and write-offs as well as lower expenses after curtailing the post-retirement medical aid liability. However, these gains were partially offset by lower foreign exchange income and higher tax.
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