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Johannesburg – Telkom [JSE:TKG] has decided to impair the carrying value of its assets by R12bn, according to a trading statement issued on Tuesday.
Its net asset value will, therefore be reduced from about R57/share to R34/share.
The announcement follows earlier trading statements on April 8 as well as June 5 in which shareholders were advised that the board was considering impairing the carrying value of the group’s assets.
Shareholders were also advised that the results to be reported on next would differ by at least 20% from those of the previous corresponding period.
According to the statement Telkom's shares have been trading at a significantly lower value relative to its NAV.
The returns from some of the legacy assets of the group are below commercial norms as a consequence of technology changes, competition from mobile operators and an evolving regulatory landscape.
Furthermore, the migration of services from legacy assets to assets are based on new technologies, which will rapidly escalate over the next few years and further reduce the returns from some of the assets.
Telkom points out that the impairment charge is a non-cash item and it will not impact the significant cash flow (Ebitda), which the group generates from its operations.
The impairment is akin to an accelerated depreciation charge, which, according to the statement, has no impact on Telkom's strong cash position, low indebtedness and ability to fund its capital program from its own resources.
Telkom’s basic earnings per share from continuing operations, however, has been adversely impacted by the non-cash impairment charge and is therefore expected to be 2 229cps to 2 343cps lower than the previous corresponding period for the year ended March 31 2013.
The non-cash impairment charge is excluded from the headline earnings per share from continuing operations, which is expected to be between 232cps and 244cps lower than the previous corresponding period.
The decline in headline earnings is largely as a result of the cost of voluntary severance packages of approximately R430m and a provision of approximately R592m for Competition Tribunal fines and other legal matters.
“The board is committed to taking the necessary steps to address the major challenges that have impacted the financial performance of the group in recent years,” according to the statement.
“To this end, the board aims to strengthen customer relationships, improve operational efficiency and settle the outstanding Competition Commission claims.”
The board also wants to focus on ensuring that the group's execution plans can deliver an increased return on invested capital.
Telkom plans to release its results for the year ended March 31 on June 14.
Its net asset value will, therefore be reduced from about R57/share to R34/share.
The announcement follows earlier trading statements on April 8 as well as June 5 in which shareholders were advised that the board was considering impairing the carrying value of the group’s assets.
Shareholders were also advised that the results to be reported on next would differ by at least 20% from those of the previous corresponding period.
According to the statement Telkom's shares have been trading at a significantly lower value relative to its NAV.
The returns from some of the legacy assets of the group are below commercial norms as a consequence of technology changes, competition from mobile operators and an evolving regulatory landscape.
Furthermore, the migration of services from legacy assets to assets are based on new technologies, which will rapidly escalate over the next few years and further reduce the returns from some of the assets.
Telkom points out that the impairment charge is a non-cash item and it will not impact the significant cash flow (Ebitda), which the group generates from its operations.
The impairment is akin to an accelerated depreciation charge, which, according to the statement, has no impact on Telkom's strong cash position, low indebtedness and ability to fund its capital program from its own resources.
Telkom’s basic earnings per share from continuing operations, however, has been adversely impacted by the non-cash impairment charge and is therefore expected to be 2 229cps to 2 343cps lower than the previous corresponding period for the year ended March 31 2013.
The non-cash impairment charge is excluded from the headline earnings per share from continuing operations, which is expected to be between 232cps and 244cps lower than the previous corresponding period.
The decline in headline earnings is largely as a result of the cost of voluntary severance packages of approximately R430m and a provision of approximately R592m for Competition Tribunal fines and other legal matters.
“The board is committed to taking the necessary steps to address the major challenges that have impacted the financial performance of the group in recent years,” according to the statement.
“To this end, the board aims to strengthen customer relationships, improve operational efficiency and settle the outstanding Competition Commission claims.”
The board also wants to focus on ensuring that the group's execution plans can deliver an increased return on invested capital.
Telkom plans to release its results for the year ended March 31 on June 14.
