Shares in Telkom have started to tick back up after hitting an all-time low of R11.93 on 6 May, a level that took the stock down to below its initial listing price of a decade ago.
Since then, however, the stock recovered to R16.35 on 10 June, before losing slight ground again. Yesterday, it closed slightly off, dropping 0.31% or 5c to R15.95, while the JSE's all share index lost 3.06%.
The recovery in the stock follows an announcement, subsequently implemented, that Telkom was looking at writing down the value of its legacy assets, in what was an accelerated depreciation move.
The share also gained on the back of its results, at which CEO Sipho Maseko said decisive action would be taken to fix the company.
Telkom impaired its network by R12 billion, which dragged it to a loss of R11.7 billion in the year to March. However, the impairment is a non-cash item, and does not affect its operations, but was rather a bid to clean the slate and bring its stock price in line with its net asset value, which is now R34.
Telkom noted that, when the carrying value of an entity's net assets is more than the market capitalisation, it is an indication that the carrying value of the assets may be impaired. The write-down was welcomed as an indicator that Telkom is starting to gain a dose of reality and will begin to turn around.
In the full year, Telkom reported total turnover of R33.1 billion, lower than last year's R33.7 billion, as voice revenue dropped. Operating expenses, which include the R12 billion write-down, leapt significantly from R31.3 billion to R44 billion, dragging Telkom to a comprehensive loss of R11.7 billion, as it has to take the non-cash charge through the income statement.
Stripping out the impairment, operating expenses increased at a lower level than inflation, at 2.2%, to R32 billion. Stripping out the write-down, Telkom reported a post-tax profit of R501 million, an improvement on its continuing operations profit of R179 million last year.
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