SA's largest cellular operator Vodacom will next month report a drop in headline earnings per share for the half year, as financial costs and a tough environment take their toll.
The company's announcement hammered its share price, which lost 2.34%, to sell at R54.20 in mid-morning trade. Its peer, MTN, was up 0.38%.
Vodacom said its headline earnings per share would be between 10% and 20% lower for the six months to September, and earnings per share would drop by between 95% and 105%.
The company says the drop in headline earnings per share is due to higher finance charges and losses on the reassessment of financial instruments.
Headline earnings were also impacted by lower profitability in its Democratic Republic of Congo operation, which resulted in the reversal of a deferred tax asset worth R500 million.
The announcement says a R3.2 billion impairment of the company's Gateway acquisition would drive down earnings per share. Vodacom bought Gateway last year for an enterprise value of $675 million.
Revenue growth
However, the company says revenue has grown in the six months to September. The operator, which listed on the JSE in May, says group revenue should be up about 10%, while operating profit should improve 8%. Vodacom says it is “encouraged by its core operating performance”.
Vodacom's results, which will be released on 9 November, will be the first set of figures from the group since its listing, apart from a quarterly update released in July for the three months to June.
At the time, the company indicated that group mobile customers increased 19.5%, from the prior year quarter, to 41.3 million, and SA revenue was up 8.2% year-on-year. However, revenue from its international mobile operations declined 8.1%, compared to the same quarter last year.
Sell off
He adds that the market may have been expecting a better performance in earnings per share, but the operator is still sound operationally and margins should only be slightly down.
Kaplan says some of the share movement can be attributed to concerns over the interconnect rate dropping, which could impact Vodacom's profitability.
In addition, some speculative shareholders may have sold off early because of the company's expected results, but the movement in share price did not indicate a long-term view, which would become clear in a day or two, he adds.
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