Telkom (TKG) H2 2024 earnings summary

Executive summary

• Revenue increased 1.6% to R43.2 billion, driven by mobile and fibre data growth, improved operational efficiency, and next-generation connectivity, despite declines in fixed-voice and equipment sales.

• EBITDA rose 5.2% to R10 billion, with margin expanding to 23.2%, supported by cost optimisation and operational improvements.

• Net profit surged to R1.9 billion, reversing a prior year loss, with profit after tax up 443.6% and HEPS up 201.3% to 376.0 cents.

• Free cash flow turned positive at R424 million, up from negative R2.7 billion, driven by higher profits and better working capital management.

• Swiftnet disposal approved by shareholders for R6.75 billion, with proceeds to reduce debt and strengthen the balance sheet; regulatory approvals pending.

Financial highlights

• Mobile service revenue grew 6.8% to R22.6 billion, with mobile data revenue up 10.6% and IT revenue up 10% to R6.1 billion.

• Next-generation fibre connectivity revenue increased 14.5%, now 76.4% of Openserve's revenue.

• HEPS rose to 376.0 cents, BEPS to 385.5 cents, and operating profit increased 134.7% to R4.5 billion.

• Capex-to-revenue ratio at 14.2%, with capex at R6.1 billion and 50% allocated to network expansion.

• Net debt to EBITDA improved to 1.7x, within the guided range.

Outlook and guidance

• Medium-term guidance maintained: low to mid-single digit revenue growth, 12%-15% capex to sales, and net debt/EBITDA between 1.5x-1.9x.

• Dividend policy reinstated, targeting 30%-40% of free cash flow, but no dividend declared for FY24; board to reconsider in FY25.

• Focus on NGN revenue, cost optimisation, smart capex deployment, and sustainable growth as an infrastructure company.

• Proceeds from Swiftnet disposal to support future capex and potential dividend resumption.

• Openserve aims to increase fibre connectivity rate to 50% and expand 5G and small cell sites.