JSE-listed Telkom expects a significant triple-digit decline in earnings for the year ended March 31, 2023, sending its share price plunging nearly 30% in early morning trade on Wednesday. By mid-morning, the share price had improved somewhat, but was still nearly 13% lower than Tuesday's close.

Marginal revenue growth as the company migrates from legacy to new generation technologies; a deliberate upfront investment in working capital for handsets and equipment; the costs associated with the impact of accelerated loadshedding; and inflationary cost pressures all contributed to the decline in earnings for the year ended March 31, 2023.

In addition, a provision for the restructuring process further impacted basic earnings and headline earnings in the year under review, Telkom explained in a trading update to shareholders, published on Wednesday.

Basic earnings per share (BEPS) are set to contract between 2 495.2c and 2 602.5c, falling to a basic loss a share of between 1 958.6c and 2 065.9c in the 12 months to March 31, 2023, from BEPS of 536.6c reported in the year ended March 31, 2022.

On a normalised basis, BEPS will be 375.6c to 482.9c lower year-on-year at between 53.7c and 161c, excluding one-off restructuring costs of R1.07-billion and the related tax impact of R288-million, together with the one-off impairment charge of R13-billion and the related tax impact of R3.5-billion.

Telkom expects that its headline earnings per share (HEPS) will be 85% to 105% lower during the year under review, falling to between a headline loss a share of 28.8c and a HEPS of 86.2c, compared with HEPS of 575.5c in 2022.

On a normalised basis, however, HEPS are expected to be 60% to 80% lower at between 115.5c and 230.1c, excluding the one-off restructuring costs and the one-off impairment charge.

“Shareholders are advised that the board is currently considering an impairment of assets charge in respect of the group’s cash generating units, namely Openserve, Telkom Consumer, Gyro and BCX, in the amount of about R13-billion, excluding tax effects,” Telkom said in its trading update.

In February, Telkom announced a restructuring process, impacting up to 15% of employees in the group.

“In line with the consultation process with unions, Telkom extended voluntary severance packages and voluntary early retirement packages to all employees in the group,” Telkom said, pointing out that it is currently engaging its social partners, including concluding organisational manning.

The cash outpayment relating to the restructuring will occur in the 2024 financial year.

Telkom’s results for the year ended March 31, 2023, are expected to be released on June 13.