Telkom has moved to correct media report on its free cash flow position which create an inaccurate perception of payment to suppliers and the company’s financial year end reporting numbers.
Read: Three red flags in Telkom financials (May 27)
Telkom reported an improved free-cash-flow position for a second consecutive year citing improved business performance and contributions from its cash release initiatives, which includes handset financing and the voluntary Supply Chain Finance programme (SCF) as significant contributors.
Group CFO Dirk Reyneke says, “Our free-cash-flow is most certainly positive R2.1 billion, despite once-off payments relating to Voluntary Severance and Early Retirement Packages (VSP/VERP) of R1.3 billion and prior year’s tax payments of R1.2 billion. This growth was driven primarily by the 20.6% growth in cash generated from operations, underpinned by the growth in our mobile business as well as the stated cash release initiatives of R1.2bn.”
“Deducting the increase in trade and other payables of R3.15 billion from the free cash flow result as per your published article is incorrect. The amount disclosed as trade and other payables as at 31 March 2021 reflects amounts due and payable, is based on agreed payment terms with our suppliers, has been audited by our external auditors and is in accordance with International Financial Reporting Standards (IFRS)”.
Our current payment policy of 90 days on average is not unique and is aligned to best practice across corporate South Africa. The Supply Chain platform provides Telkom suppliers with a mechanism to receive early settlement on invoices and is described in more detail below.
Telkom suppliers are eligible to register on the SCF platform. Once the invoice is approved and loaded on the platform, the suppliers can then decide which invoices they would like to trade for early payment, at very attractive financing rates. The traded invoices will be financed by a financial institution with Telkom settling the financing arrangement 90 days thereafter.
“This model is both sustainable and beneficial to all parties involved”.