JOHANNESBURG (Reuters) -South African telecommunication firm Telkom reported on Tuesday a 62.3% rise in full-year earnings and boosted free cash flow, allowing it to resume dividends and sweeten the pay-out with a special dividend after a four-year suspension.
In 2020, the operator of South Africa's biggest fixed-line network announced the suspension of dividends for the next three financial years starting in 2021 to conserve cash for spectrum auctions and strengthen its financial position.
However, after reaching the initial target, the under-pressure operator delayed resuming dividend payments as it faced challenging market conditions.
"This year's robust performance and strategic execution allow us to share the fruits of our success with shareholders by distributing both an ordinary and a special dividend. In total, the group will return 1.3 billion rand ($73.28 million) to its shareholders," Telkom said in a statement.
Telkom declared a final dividend of 163 cents per share and a special dividend of 98 cents per share, thanks to proceeds from the disposal of its mast and tower business Swiftnet.
The operator also upgraded its medium-term guidance for revenue growth to mid-single digit growth from low to mid-single digit, betting on its continued industry-leading mobile service revenue growth and fibre connectivity ratio.
By 0849 GMT, Telkom shares surged 7% to 42.81 rand after rising by 10% at market open.
Majority-owned by the government, Telkom said its headline earnings per share for continuing operations rose to 467.5 cents in the year ended March 31.
Revenue increased by 3.3% to 43.8 billion rand, surpassing expectations due to strong growth in mobile service revenue, which rose 10.2%, and fibre-related data revenue, up 10%. Analysts surveyed by LSEG had forecasted revenue of 43.5 billion rand.
"They are gaining share in the mobile market ... and their peers are growing between 2% and 3% here, and therefore what we're seeing is substantial market share gains from Telkom from their data and strategy," SBG analyst Nadim Mohamed said.
Its free cash flow improved to 2.8 billion rand from 424 million rand, driven by cost-optimization initiatives, improvement in revenue and disposal programme.
"Cash generation is the strongest Telkom has seen in a long time. They also had large asset disposals over the period and those have also helped reduce debt on the balance sheet," Peter Takaendesa, Chief Investment Officer at Mergence Investment Managers said.
($1 = 17.7410 rand)
(Reporting by Nqobile Dludla; Editing by Jacqueline Wong, Sherry Jacob-Phillips and Kim Coghill)
By Nqobile Dludla
