Telkom sees jump in full-year earnings on cost cuts, one-off items

Telkom SA expects to post a nine-fold increase in 2013 earnings following a raft of belt-tightening measures and a hefty writedown the previous year.

The fixed-line telecoms company said on Thursday (29/05/2014) that headline earnings for the year ended March 31 were likely to be 772 to 789 cents a share, compared to a restated 86.2 cents per share a year earlier, and analysts will be looking closely to see how much of that is the result of the aggressive turnaround strategy introduced by Chief Executive Sipho Maseko.

Telkom formally reports its full-year earnings on June 13.

By shedding jobs, asking suppliers for discounts and cutting back on expenses, Maseko, the sixth chief executive at the state-controlled company since 2005, is aiming to cut 1 billion rand in annual costs over the next five years.

Telkom’s shares jumped more than 5% to 38.30 rand by 1207 GMT, having added as much as 8% earlier.

Johannesburg’s All-share index was down 0.2%.“That is what the market has been waiting for years. If management is actually delivering on (the cost cuts), then the market is really going to like it,” said Reuben Beelders, portfolio manager at Gryphon Asset Management in Cape Town.

Telkom also said it would benefit from lower depreciation charges — the previous year’s earnings were weighed down by a 12 billion rand ($1.1 billion) writedown — and by a one-time tax benefit of 246 million rand. – Reuters

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