Telkom on Tuesday warned shareholders that headline earnings per share (Heps) for the six months ended September 30, 2019 will fall by as much as 40%, sending the telecommunications operator’s shares tumbling on the JSE.
The share price later recovered and was up 1.87% to R63.69 by 15:10.
Heps and basic earnings per share are both expected to fall by between 30% and 40%, Telkom said in a statement to shareholders. Normalised Heps will fall by between 40% and 50%.
The company blamed a significant increase in net finance charges and fair-value movement of between 120% and 130% from R443 million reported in the same period a year ago — based on IFRS16 accounting standards. Excluding the impact of IFRS16, the net finance charges and fair-value movement increased by between 80% and 90%.
“The increase in the finance charges largely relates to increased borrowing in support of the investment in our mobile business; the cost of hedging increase as a result of the increase in the forward exchange contracts order book; and exchange and fair-value movements as a result of foreign exchange adjustments due to market conditions and the conversion of floating-rate debt to fixed-rate debt using interest rate swaps in line with our guideline,” it said.
“Overall in the period under review, this net movement represents a loss versus a reported gain in the corresponding period of the prior year.”
The impact of IFRS16 on profit after tax was “immaterial” at between R50 million and R60 million, Telkom said.
The market reacted immediately to the trading update, sending the shares tumbling by more than 8% by 15:15 in Johannesburg. In the past year, the share price has appreciated by more than 20%.
Telkom is expected to publish its interim results on November 12.
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