Group financial performance for the year was solid, underpinned by new technology revenue growth as well as benefits from our cost optimisation strategy. This solid performance, combined with continued focus on working capital management contributed to a positive free cash flow performance. The solid financial performance was delivered despite economic headwinds, characterised by high interest rates, GDP and currency depreciation, and customer spending constraints.
Group revenue
up 1.6% to
R43.2 billion
Mobile service revenue
up 6.8% to
R19.0 billion
Next-generation (NGN) revenue
up 7.0% to
R34.4 billion
NGN fibre connectivity revenue
up 14.5% to
R5.6 billion
Group EBITDA
up 5.2% to
R10.0 billionwith an EBITDA margin of 23.2%
Normalised headline earnings per share (HEPS)
up 201.3% to
376.0 cents per share
Normalised basic earnings per share (BEPS)
up 442.8% to
385.5 cents per share
Free cash flow (FCF) up 115.6% to R424 million
Net debt to EBITDA
improved by
0.1x to 1.7x
Nonkululeko Dlamini
The execution of our strategy supported by our sustainable financial framework is progressing. Despite the economic and competitive challenges, we improved our profitability, underpinned by strong growth in next‑generation revenue and cost containment, while maintaining a solid balance sheet.
Headline earnings prior period error
On 31 March 2023, the Group incorrectly adjusted for tax on headline earnings, relating to the profit on disposal of property, plant and equipment and intangible assets, write-offs of property, plant and equipment and intangible assets and impairment of property, plant and equipment and intangible assets.
The accounting consequences of this incorrect tax adjustment was a R47 million overstatement of headline earnings or understatement of headline loss that was used in calculating HEPS for FY2023. The impact on HEPS for FY2023 is a decrease of 9.7 cents per share.
Adoption of IFRS 17 (Insurance Contracts)
The Group disaggregated the presentation of its insurance results business on the face of its statement of profit or loss and other comprehensive income as a result of adopting IFRS 17 with effect from 1 April 2023. The disaggregation resulted in the Group introducing an insurance revenue line in the statement of profit or loss of R281 million (FY2023: R203 million) and an insurance service expense line of R184 million (FY2023: R209 million). This impact is neutral on profit after tax.
IFRS 15 prior period error (principal versus agent)
In the current financial year, it was identified that a number of revenue transactions in BCX, for which the Group would have been considered to be an agent, using information available at that time, were incorrectly recognised and presented on a gross basis (as a principal) in prior years.
This incorrect application of the accounting principles in FY2023 has been adjusted as a prior period error through the reversal of revenue and cost of handsets, equipment, software and directories and other expenses and only recognising the margin as revenue (on a net basis). Refer to note 2.7 of the annual financial statements for each materially affected line item as part of the correction of the error.
There is no impact on EBITDA and profit after tax.
Masts and towers classified as held for sale
The masts and towers business met the IFRS 5 (Non‑current Assets Held for Sale and Discontinued Operations) requirements during FY2024, and has been classified as held for sale and subsequently presented as a discontinued operation in the annual financial statements. Refer to note 12.2 of the annual financial statements for details.
For purposes of presenting and analysing the total performance of Telkom Group, the consolidated statement of profit or loss, consolidated statement of financial position and all related key performance indicators and messages in the results for FY2024 and FY2023 were adjusted to include the profit as well as the assets and liabilities of the masts and towers business, and are therefore based on total operations.
Restructuring costs
The Group announced a restructuring process in February 2023 and extended voluntary early retirement packages and voluntary severance packages to all employees in the Group. More than 1 700 employees were affected, and as a result, restructuring costs of R1 065 million and the related tax impact of R288 million were recorded in FY2023. For normalised comparative analysis, the impact was excluded from FY2023.
Cash flow of R1 068 million for the restructuring cost paid was recorded in FY2024.
Impairment of assets
In accordance with the outcome of the IAS 36 impairment review in FY2023, the Board impaired the Group's cash‑generating units, namely Openserve and Telkom Consumer, in the amount of R13 017 million with a related tax impact of R3 477 million. For illustrative purposes the impact was excluded from FY2023.
Growth in
revenue
from new
technologies
Continued
focus on cost
optimisation
Earnings
improvement
FCF focus
gaining
traction
Solid
financial
position
Group revenue increased by 1.6% to R43 230 million, driven by an increase in mobile data and NGN fibre data connectivity revenue of 10.6% and 14.5%, respectively. Total data revenue from mobile and NGN fibre increased pleasingly by R2 088 million or 11.7%, to R19 933 million from FY2023. This was partially offset by a 23.4% decrease in fixed-voice revenue due to the ongoing migration to modern technologies such as fibre and LTE, a 20.7% decrease in customer premises equipment (CPE) revenue and a 6.8% decrease in mobile handset sales.
Mobile service revenue growth of 6.8% to R19 026 million was supported by a steady 11.9% increase in active subscribers to 20.4 million with a 1.5% improvement in pre-paid ARPU. The blended ARPU of R84 marginally declined by 2.7%, indicative of the macroeconomic difficulties encountered by our post-paid customer base. Mobile data revenue growth of 10.6% was underpinned by the 9.5% growth in mobile broadband subscribers to 12.7 million.
Group EBITDA increased by 5.2% to R10 041 million, with the EBITDA margin expanding 0.8 ppt to 23.2% compared to FY2023. The Group revenue increase of 1.6%, and the decrease in the cost of handset, equipment and directories and payments to other operators of 3.4% and 2.1%, respectively. These were offset by a 1.4% higher operating expenditure (opex) and a 9.0% increase in sales commissions and incentives from Mobile.
The opex increase is mainly attributable to the 16.6% increase in maintenance, in line with the growth in mobile sites integrated, increased subcontractor expenses as well as the 34.2% increase in impairments of receivables due to the deterioration of macro-economic conditions. This was partially offset by a 12.9% decrease in other expenses, mainly due to lower third-party costs and the containment of discretionary spend. There was also a 4.0% decrease in employee expenses due to the 15.0% reduction in headcount, 0% salary increases for management and the 5.0% average salary increase for bargaining unit employees, which was only effected in the third quarter of FY2024, which also contributed to cost containment.
Mobile cost to serve improved by 0.7 ppt to 27.7% compared to 28.4% in the prior year. The year-on-year decrease in cost to serve was mainly driven by the optimisation of roaming costs as we maintained stringent roaming traffic thresholds and our focus on migrating traffic to our network.
Total operations
Rm
* Includes other revenue items, mobile voice, masts and towers and directories revenue and other income.
Normalised HEPS increased by 201.3% to 376.0 cents while normalised BEPS increased by 442.8% to 385.5 cents compared to the prior year. The BEPS increase was mainly due to the 134.7% increase in operating profit, which was driven by a 27.2% decrease in depreciation, amortisation, write-offs and impairment expenses, partially offset by a 48.0% increase in finance charges and fair value movements and a higher taxation expense. The latter was driven by the 337.2% increase in profit before taxation.
Total operations
Cents per share
FCF increased by 115.6% to R424 million (FY2023: negative R2 722 million). Excluding the restructuring and the spectrum acquisition costs paid, FCF increased by 190.5% to R2 464 million. The increase was primarily due to the 68.6% increase in cash generated from operations. This was mainly driven by a R1 915 million working capital improvement, which was attributable to efficient working capital management and the increase in profit before taxation of 337.2% or R1 956 million compared to the prior year. 19% lower capex spend also contributed to higher FCF.
| Rm | FY2024 | FY2023 | % |
| Cash generated from operations excluding restructuring cost paid | 11 303 | 6 705 | 68.6 |
|---|---|---|---|
| Repayment of lease liability | (1 201) | (1 086) | (10.6) |
| Interest received | 447 | 282 | 58.5 |
| Finance charges paid | (2 304) | (1 456) | (58.2) |
| Taxation paid | (422) | (547) | 22.9 |
| Cash generated from operations before dividend paid and received (excluding restructuring cost paid) | 7 823 | 3 898 | 100.7 |
| Spectrum acquisition | (972) | – | (100.0) |
| Cash paid for capital expenditure | (5 359) | (6 620) | 19.0 |
| Adjusted FCF (excluding restructuring cost paid) | 1 492 | (2 722) | 154.8 |
| Restructuring cost paid | (1 068) | – | (100.0) |
| FCF | 424 | (2 722) | 115.6 |
Bank and cash balances increased by 13.5% to R3 939 million from the prior year and borrowings increased 3.0% to R20 858 million. This resulted in a net debt increase of 0.9%. Net debt to EBITDA improved slightly to 1.7x compared to 31 March 2023, driven by higher earnings. With further support from our unutilised facilities, amounting to R5.6 billion, we have adequate headroom to fund our strategy.
Loans raised amounted to R9 363 million as the Group increased the utilisation of committed facilities during FY2024 to repay maturing bonds, loans and funding needs while negotiating and securing long-term debt. The utilisation of committed facilities gave rise to a higher amount of loans raised and corresponding loans repaid, with net funding paid of R150 million.
| Balance sheet | FY2024 Rm |
FY2023 Rm |
Change % |
| Cash balances | 3 939 | 3 469 | 13.5 |
|---|---|---|---|
| Interest-bearing debt | 14 217 | 14 356 | 1.0 |
| Operating balance | 14 356 | 11 932 | (20.3) |
| Net funding (repaid)/raised | (150) | 2 320 | 106.5 |
| Other | 11 | 104 | 89.4 |
| Lease liabilities | 6 641 | 5 889 | (12.8) |
| Opening balance | 5 889 | 5 374 | (9.6) |
| IFRS 16 lease liability increase | 752 | 515 | (46.0) |
| Net debt | 16 919 | 16 776 | (0.9) |
| Net debt/EBITDA (times) | 1.7 | 1.8 | (0.1) |
| Average cost of debt (%) | 10.1 | 8.6 | (1.5) |
| NGN revenue growth |
|
|
| Cost optimisation |
|
|
| Smart capex deployment |
Network expansion, prioritising growth areas:
|
|
| Cash generation |
|
|
| ESG strategy delivery |
|
We expect Group revenue to grow at low to mid-single digit in FY2025. Underpinned by our ongoing sustainable cost management and revenue growth, we aim to grow Group EBITDA at low to mid-single digit to FY2025. We will invest capex in identified growth areas and expect a capex to revenue ratio of between 12% and 15% per annum to maintain a healthy balance sheet with net debt to EBITDA of between 1.5x – 1.9x.
| Drivers | FY2025 (CAGR*) | ||
| New revenue streams (Fibre, Mobile and IT businesses) | Low to mid-single digit EBITDA growth | ||
| Sustainable cost management programme | Low to mid-single digit EBITDA growth | ||
| Capex to fund growth | 12% – 15% | ||
| Adequate balance sheet capacity to fund growth | Net debt to EBITDA of 1.5x – 1.9x |
* Compound annual growth rate.
Management has considered the Group's business plans and is confident that Telkom will be in a position to pay dividends in the near term, with FY2025 targeted as the first year-end to consider paying a dividend.
A revised dividend policy has been approved by the Board. The new policy will be based on available free cash flow while prioritising a strong balance sheet and future capex requirements. The policy proposes a dividend payout range of 30% to 40% of free cash flow after taking into account capex investments. The dividend will be declared and paid on an annual basis, with a resulting dividend yield comparable with local telecommunications companies.
Nonkululeko Dlamini
Group Chief Financial Officer.