Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — H1 FY2004 Earnings Presentation
29 slides from Telkom Sa Soc's earnings presentation, September 2003
Slide 1: Telkom SA Limited Group interim results
Telkom SA Limited Group interim results Six months ended September 30, 2003 Ticker - JSE: TKG, NYSE: TKG ADR ratio 1: 4
Slide 2: Six months of delivery
Six months of delivery • Headline EPS up 171% to 335.9 cents • Group revenue growth of 10% • Group EBITDA margin of 38% • 25% reduction in group capital expenditure • Free cash flow growth of 284% to R3.9bn • Debt repayment of R3.5bn • Group net debt to equity ratio of 85% • Interim dividend of 90.0
Slide 3: Delivery against medium-term targets
Delivery against medium-term targets EBITDA margin (%) Capex to revenue (%) Net debt to equity (%) 13 38 Target = 10 – 15 Target = mid 30s 123 9 32 85 Target = 50 – 70 Sep-02 Sep-03 Sep-02 Sep-03 Sep-02 Sep-03 3 Performance ahead of business plan
Slide 4: A strategy focused on earnings growth
A strategy focused on earnings growth In ZAR millions Solid revenue Operating profit Net profit growth of growth of R1.8bn growth of R1.4bn R1.0bn 20,110 18,316 1,663 4,250 2,811 644 Sep-02 Sep-03 Sep-02 Sep-03 Sep-02 Sep-03 Revenue growth, cost savings and lower interest charges 4 driving strong ea
Slide 5: A strategy fit for the future
A strategy fit for the future 5 ....... but delivering results today
Slide 6: BEE – a business imperative
BEE – a business imperative For the March 2003 financial year For the March 2003 financial year Designated groups being African, Indian, Coloured, Disabled and Female employees 6 A leader in BEE strategic initiatives
Slide 7: Fixed-line review
5 Fr 2g Fixed-line review
Slide 8: Fixed-line financial highlights
Fixed-line financial highlights In ZAR millions Sep-02 Sep-03 % Revenue 14,563 15,372 6 Operating profit 1,894 3,025 60 EBITDA 4,396 5,748 31 Capital expenditure 1,487 1,199 (19) Operating profit margin (%) 13 20 - EBITDA margin (%) 30 37 - Capex to revenue (%) 10 8 - Before Inter-segmental eliminat
Slide 9: Protecting core by staying relevant
Protecting core by staying relevant Access line growth (%) Voice traffic growth (%) Total 1 Total (2) Local 2 PSTN (6) Long (1) distance Fixed- (5) ISDN 18 mobile International (3) outgoing Prepaid 4 Interconnect 6 4.8 million lines 16.6 million minutes in H1 9 ISDN and international hubbing provide
Slide 10: Greater penetration of data services
Greater penetration of data services Data revenue • 23% data revenue growth in In ZAR millions leased lines and managed services 17% increase • 48% growth in internet customers 2,474 • ADSL gaining momentum 2,112 Æ 11,522 customers • Voice-over-Internet Protocol Æ International call centres • New pr
Slide 11: Reduced costs by R536 million in H1
Reduced costs by R536 million1 in H1 In ZAR millions, cost savings in six months to Sep-03 compared to prior year period 388 • 11% decrease in payments to other operators 251 • 24% decrease in materials & maintenance 107 • 18% decrease in operating leases 130 • 4% decrease in employee expenses 1. R8
Slide 12: Increasing employee efficiencies
Increasing employee efficiencies • Employees reduced by 137 142 1,570 in H1 Æ 63% natural attrition Æ 36% voluntary 35,361 retrenchments Æ 1% involuntary 33,828 retrenchments • 37 appointments in H1 2003 (266 in H1 2002) • Increased employee Mar-03 Sep-03 efficiencies Æ 142 lines per employee Fixed-
Slide 13: Capital investment for the future
Capital investment for the future Fixed-line capex ZAR millions % change on prior period • Baseline spend driven Base expansion and core: 637 (9%) by data revenue growth Æ ISDN, Diginet, WANs. 53% Network evolution: 213 (38%) • Network evolution 18% spend Æ rehabilitating access network and evolving
Slide 14: Mobile review
5 Fr 2g Mobile review
Slide 15: Mobile financial highlights
Mobile financial highlights In ZAR millions Sep-02 Sep-03 % Revenue 9,441 11,296 20 Operating profit 1,838 2,451 33 EBITDA 3,027 3,698 22 Capital expenditure 1,718 1,129 (34) Operating profit margin (%) 20 22 - EBITDA margin (%) 32 33 - Capex to revenue (%) 18 10 - Net debt to equity (%) 67 35 - 100
Slide 16: Strong SA mobile performance
Strong SA mobile performance Customers Gross connections ARPUs In Thousands In Thousands In ZAR 20% increase 38% increase 1% decrease 2,248 8,522 181 179 7,130 1,625 Sep-02 Sep-03 Sep-02 Sep-03 Sep-02 Sep-03 100% of Vodacom. 16 Maintaining market leadership position
Slide 17: African operations provide solid growth
African operations provide solid growth Customers Revenue EBITDA In Thousands In ZAR millions In ZAR millions 98% increase 26% increase 90% increase 1,070 691 167 549 540 88 Sep-02 Sep-03 Sep-02 Sep-03 Sep-02 Sep-03 100% of Vodacom, only 50% consolidated in Telkom. Before inter-segmental elimination
Slide 18: Group financial review
Group financial review
Slide 19: Group income statement highlights
Group income statement highlights In ZAR millions Sep-02 Sep-03 % Revenue 18,316 20,110 10 EBITDA margin (%) 32 38 EBIT 2,811 4,250 51 EBIT margin (%) 15 21 Net profit 644 1,663 158 HEPS (ZAR cents) 123.9 335.9 171 EPS (ZAR cents) 115.6 298.5 158 Earnings growth delivered through strong operational
Slide 20: Decreased interest expense
Decreased interest expense Group finance charges • 7% decrease in interest In ZAR millions expense Æ Interest expense net of investment income 7% decrease decreased 17% 1,285 • 5% increase in finance charges due to: Æ R561 million net fair value 2,869 and exchange losses • Interest coverage 367 561
Slide 21: Impact of Rand strength
Impact of Rand strength • Revenue Æ Lower international interconnection Æ Translation of Vodacom’s other African operations • Operating costs Æ Reduced payments to other operators Æ Reduced materials and maintenance Æ Positive impact on operating margins • Capital expenditure Æ Reduced fixed-line ca
Slide 22: Group cash flow highlights
Group cash flow highlights In ZAR millions Sep-02 Sep-03 % Operating activities 3,462 5,771 67 Cash generated from operations 4,041 6,256 55 Investing activities (2,453) (1,893) (23) Additions to PPE (2,346) (1,763) (25) Financing activities (1,178) (3,810) 223 Net cash (279) 897 - Operating free ca
Slide 23: Reduced capital expenditure
Reduced capital expenditure Capex vs depreciation Group capex to revenue (%) In ZAR millions, Sep-03 March 31. 32 3,346 2,723 26 1,763 15 1,199 13 9 564 623 Group Fixed-line Mobile1 2001 2002 2003 Sep-02 Sep-03 Capex Depreciation 1. 50% of Vodacom 23 Fixed-line capex budget revised down from R5bn to
Slide 24: Group balance sheet highlights
Group balance sheet highlights In ZAR million Mar-03 Sep-03 % Total liabilities 34,612 30,813 (11) Total debt 22,984 19,961 (13) Net debt1 20,096 17,018 (15) Net debt to equity (%) 110 85 Total assets 53,154 51,007 (4) Capital and reserves 18,348 19,987 9 1. Net debt is defined as total interest-bea
Slide 25: Group debt maturity
Group debt maturity Group total debt ageing In ZAR millions, March 31 TL08, R3.5bn May- Repaid TL03 04, YTM 17.3% Eurobond E500m, R4.3bn in Sep-03 Apr-05, YTM1 16% 5,429 5,173 4,973 4,682 4,576 TL06 Oct-06, R1.5bn YTM 10.9% 1,553 2004 2005 2006 2007 2008 2008 thereafter 1. Including forward cover co
Slide 26: Dividend reinstated
Dividend reinstated • Dividend policy Æ Board approved payment of an annual dividend subject to financial performance, debt levels, interest coverage and cash flows Æ Aim to progressively increase dividends • Once-off interim dividend Æ 90.0 cents per share • Interim dividend payment date Æ December
Slide 27: Financial objectives
Financial objectives Operating margins in H2 is expected to Margin expansion be lower than H1 Long-term objective of margin expansion H2 capex is expected to be higher than H1 Increase free cash Strategy to continue growing operational flow cash flow Continue debt repayment, target debt Solid earnin
Slide 28: Forward-looking safe harbour
Forward-looking safe harbour All statements contained herein, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of the Telkom Group, that are not statements of historical fact constitute “forward-looking statements” within the meaning of the US
Slide 29: Investor Relations
Investor Relations [email protected] Tel: +27 12 311 5720 Fax: +27 12 311 5721 Ticker - JSE: TKG, NYSE: TKG ADR ratio 1: 4