The condensed consolidated provisional annual financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and in compliance with the Listings Requirements of the JSE Limited, the South African Companies Act, 2008, as amended, the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the Financial Reporting Standards Council.
The condensed consolidated provisional annual financial statements are presented in South African Rand, which is also the group’s presentation currency. All financial information presented in Rand has been rounded off to the nearest million.
The condensed consolidated provisional annual financial statements are prepared on the historical cost basis, with the exception of certain financial instruments initially (and sometimes subsequently) measured at fair value. Details of the Group's significant accounting policies are consistent with those applied in the previous financial year except for those listed below. Refer to note 2.2
Significant accounting judgements, estimates and assumptions
In preparing these condensed consolidated provisional annual financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those applied to the consolidated financial statements for the year ended 31 March 2015.
Significant accounting policies
The condensed consolidated provisional annual financial statements have been prepared in accordance with the accounting policies adopted in the Group's last annual financial statements for the year ended 31 March 2015, except for the adoption of the amendments, new standards and remeasurements described below and note 2.2
The following new standards and amendments to standards have been adopted.
| Standard(s), Amendment(s) | Salient feature of the changes | Effective date |
|---|---|---|
| IFRS 5 Non-current Assets Held for Sale and Discontinued Operations | Amendment to the accounting treatment of changes to a plan of sale or to a plan of distribution to owners. The amendment clarifies that changing between disposal methods would not be considered a new plan of disposal but rather a continuation of the original plan. This amendment has been adopted and has no impact on the group. |
1 January 2016 |
| IFRS 7 Financial Instruments Disclosures | Servicing contracts disclosures: Application guidance to clarify whether a servicing contract gives rise to continuing involvement in a transferred asset for the purposes determining the transfer disclosure requirements. This amendment has been adopted and has no impact on the group. | 1 January 2016 |
| IFRS 7 Financial Instruments Disclosures | Offsetting disclosures to the condensed interim financial statements: Amendment clarifying the applicability of previous amendments to IFRS 7 issued in December 2011 with regard to offsetting financial assets and financial liabilities in relation to interim financial statements prepared under IAS 34. As per this amendement the IFRS 7 amendment is only applicable to the condensed interim financial statement to extent that it is required by IAS 34 and provides an update to information provided in the most recent annual report. | 1 January 2016 |
| IFRS 14 Regulatory Deferral Accounts | This new standard describes the financial reporting requirements for 'regulatory deferral account balances' that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation. This standard is applicable to first time adopters of IFRS.This amendment is not applicable to Telkom. | 1 January 2016 |
| IAS 1 Presentation of Financial Statements | Amendment aiming to ensure that an entity does not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. This amendment has been adopted and has no material impact on the group. | 1 January 2016 |
| IAS 19 Employee Benefits | Discount rate: requirement to use the market yields on government bonds denominated in the currency of high quality corporate bonds in cases where there is no deep market for such bonds for the purpose of discounting post-employment benefit obligations. This amendment has been adopted and has no impact on the group. | 1 January 2016 |
| IAS 34 Interim Financial Reporting | Certain disclosures are to be given either in the interim financial statements or incorporated by a cross-reference from the interim financial statements to some other statement. These disclosure must also be available to users on the same terms and at the same time as the interim financial statements for the interim financial report to be complete. This amendment has been adopted and has no impact on the group. | 1 January 2016 |
| IFRS 10, IFRS 12 and IAS 28, Investment Entities: Applying the Consolidation Exception | Amendment granting exemption from preparation of consolidated Financial Statements for an intermediate parent entity that is subsidiary of an investment entity even if that parent entity measures all of its subsidiaries at fair value. Consequential amendments have also been made to IAS 28 exemption from applying the equity method for entities that are subsidiaries and hold interest in associate and joint venture. This amendment has been adopted and has no impact on the group. | 1 January 2016 |
The group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
During the current reporting period, the Group reassessed the accounting treatment of the Telkom Retirement Fund (TRF). The rules of the fund provide employees who were appointed prior to 1 September 2009 retiring from the defined contribution plan with an option to receive a pension from the fund.
Should a retiree elect to receive the pension, the employer is thereafter exposed to longevity and other actuarial risk. Such a pension is based on the plan assets allocated to the employee at the point of retirement based on the defined contribution portion of the plan. Those employees that do not elect to receive a pension from the fund would use their allocated plan assets to invest in annuities with unrelated parties. The classification rules within IAS 19 require that, where the employer is exposed to any actuarial risk, the entire fund be classified as a defined benefit plan (DB). This change in classification impacted on the statement of financial position, the statement of profit and loss and other comprehensive income. At 31 March 2016 the obligation balance is R1.274 billion (Rnill 2014; R812 million 2015).
It should, however be noted that there is a difference between the IAS 19 project credit unit methodology valuations and the Fund actuaries’ valuation, which reflects that the assets of the TRF are sufficient to cover the TRF's liabilities towards active members and pensioners. The TRF is in a sound financial condition as at the valuation date in terms of section 16 of the Pension Funds Act, as amended. As at the latest statutory valuation date there was a surplus of R536 million in the pensioners account per the statutory valuation (after taking into account the solvency reserve of R2.3 billion). Refer to note 2.3 and 2.4
For the year ended 31 March 2015
| As previously reported Rm |
Reclassification of Trudon Group as not held for sale* Rm |
Reassessment of Telkom Retirement Fund** Rm |
Restated Rm |
||
|---|---|---|---|---|---|
| Continuing operations | |||||
| Operating revenue | 31 675 | 1 085 | 32 760 | ||
| Payments to other operators | 2 930 | 2 930 | |||
| Cost of sales | 2 787 | 462 | 3 249 | ||
| Net operating revenue | 25 958 | 623 | - | 26 581 | |
| Other income | 699 | 32 | 731 | ||
| Operating expenses | 18 270 | 147 | 54 | 18 471 | |
| Employee expenses | 9 354 | 54 | 54 | 9 462 | |
| Selling general and administrative expenses | 4 712 | 43 | 4 755 | ||
| Service fees | 3 212 | 7 | 3 219 | ||
| Operating leases | 992 | 43 | 1 035 | ||
| EBITDA | 8 387 | 508 | (54) | 8 841 | |
| Depreciation of property plant and equipment | 4 500 | 6 | 4 506 | ||
| Amortisation of intangible asset | 758 | 21 | 779 | ||
| Write-offs impairment and losses of property plant and equipment and intangible assets | 220 | 220 | |||
| Operating profit | 2 909 | 481 | (54) | 3 336 | |
| Investment income | 283 | 10 | 293 | ||
| Finance charges and fair value movements | 471 | 2 | - | 473 | |
| Interest | 560 | 2 | - | 562 | |
| Foreign exchange gains and fair value movements | (89) | - | - | (89) | |
| Profit before taxation | 2 721 | 489 | (54) | 3 156 | |
| Taxation (income)/expense | (168) | 122 | 18 | (28) | |
| Profit from continuing operations | 2 889 | 367 | (72) | 3 184 | |
| Profit from discontinued operations | 367 | (367) | - | - | |
| Profit for the year | 3 256 | - | (72) | 3 184 | |
| Other comprehensive income | |||||
| Items that will not be reclassified to profit or loss | |||||
| Defined benefit plan actuarial losses | (944) | - | (1 009) | (1 953) | |
| Defined benefit plan asset ceiling limitation | 448 | - | 251 | 699 | |
| Income tax relating to components of other comprehensive income | 139 | - | 18 | 157 | |
| Other comprehensive loss for the period net of taxation | (357) | - | (740) | (1 097) | |
| Total comprehensive income for the year | 2 899 | (812) | 2 087 | ||
| Total operations | |||||
| Basic earnings per share (cents) | 617.1 | 603.0 | |||
| Diluted earnings per share (cents) | 604.5 | 590.7 | |||
| *Refer to note 8. | |||||
| **Refer to note 2.2. | |||||
At 31 March 2015
| As previously reported Rm |
Reclassification of Trudon Group as not held for sale* Rm |
Reassessment of Telkom Retirement Fund** Rm |
Restated Rm |
||
|---|---|---|---|---|---|
| Assets | |||||
| Non-current assets | 30 554 | 301 | - | 30 855 | |
| Property plant and equipment | 24 387 | 92 | - | 24 479 | |
| Intangible assets | 2 793 | 189 | - | 2 982 | |
| Other investments | 2 231 | - | - | 2 231 | |
| Employee benefits | 452 | - | - | 452 | |
| Other financial assets | 28 | - | - | 28 | |
| Finance lease receivables | 413 | - | - | 413 | |
| Deferred taxation | 250 | 20 | - | 270 | |
| Current assets | 10 511 | 616 | - | 11 127 | |
| Inventories | 552 | 86 | - | 638 | |
| Income tax receivable | 1 | 10 | - | 11 | |
| Current portion of finance lease receivables | 200 | - | - | 200 | |
| Trade and other receivables | 4 895 | 493 | - | 5 388 | |
| Current portion of other financial assets | 1 247 | - | - | 1 247 | |
| Cash and cash equivalents | 3 616 | 27 | - | 3 643 | |
| Assets of disposal group classified as held for sale | 917 | (917) | - | - | |
| Total assets | 41 982 | - | - | 41 982 | |
| Equity and liabilities | |||||
| Equity attributable to owners of the parent | 25 676 | - | (812) | 24 864 | |
| Share capital | 5 208 | - | - | 5 208 | |
| Share-based compensation reserve | 126 | - | - | 126 | |
| Non-distributable reserves | 1 507 | - | - | 1 507 | |
| Retained earnings | 18 835 | - | (812) | 18 023 | |
| Non-controlling interest | 363 | 363 | |||
| Total equity | 26 039 | - | (812) | 25 227 | |
| Non-current liabilities | 4 421 | 39 | 812 | 5 272 | |
| Interest-bearing debt | 3 244 | - | - | 3 244 | |
| Employee related provisions | 437 | 15 | 812 | 1 264 | |
| Non-employee related provisions | 39 | - | - | 61 | |
| Deferred revenue | 687 | - | - | 687 | |
| Deferred taxation | 14 | 2 | - | 16 | |
| Current liabilities | 11 403 | 80 | - | 11 483 | |
| Trade and other payables | 5 571 | 64 | - | 5 635 | |
| Shareholders for dividend | 19 | - | - | 19 | |
| Current portion of interest-bearing debt | 1 612 | - | - | 1 612 | |
| Current portion of employee related provisions | 1 867 | 15 | - | 1 882 | |
| Current portion of non-employee related provisions | 302 | 1 | - | 303 | |
| Current portion of deferred revenue | 1 502 | - | - | 1 502 | |
| Income tax payable | 344 | - | - | 344 | |
| Current portion of other financial liabilities | 185 | - | - | 185 | |
| Credit facilities utilised | 1 | - | - | 1 | |
| Liabilities of disposal group classified as held for sale | 119 | (119) | - | - | |
| Total liabilities | 15 943 | - | 812 | 16 755 | |
| Total equity and liabilities | 41 982 | - | - | 41 982 | |
| *Refer to note 8. | |||||
| **Refer to note 2.2. | |||||
At 31 March 2015
| As previously reported Rm |
Reclassification of Trudon Group as not held for sale* Rm |
Restated Rm |
|||
|---|---|---|---|---|---|
| Cash flows from operating activities | 6 226 | 55 | 6 281 | ||
| Cash receipts from customers | 31 852 | 1 100 | 32 952 | ||
| Cash paid to suppliers and employees | (25 210) | (943) | (26 153) | ||
| Cash generated from operations | 6 642 | 157 | 6 799 | ||
| Interest received | 470 | 32 | 502 | ||
| Finance charges paid | (491) | (2) | (493) | ||
| Taxation paid | (274) | (132) | (406) | ||
| Cash generated from operations before dividend paid | 6 347 | 55 | 6 402 | ||
| Dividend paid | (121) | - | (121) | ||
| Cash flows from investing activities | (5 113) | (55) | (5 168) | ||
| Proceeds on disposal of property plant and equipment and intangible assets | 253 | - | 253 | ||
| Proceeds on disposal of investment | 750 | - | 750 | ||
| Additions for capital expansion | (5 015) | (55) | (5 070) | ||
| Increase in repurchase agreements | (1 101) | - | (1 101) | ||
| Cash flows from financing activities | 685 | - | 685 | ||
| Loans raised | 1 000 | - | 1 000 | ||
| Loans repaid | (310) | - | (310) | ||
| Finance lease capital repaid | (170) | - | (170) | ||
| Settlement of derivatives | 165 | - | 165 | ||
| Net increase in cash and cash equivalents | 1 798 | - | 1 798 | ||
| Net cash and cash equivalents at beginning of year | 1 841 | - | 1 841 | ||
| Trudon cash and cash equivalents classified as held for sale | (27) | 27 | - | ||
| Effects of foreign exchange rate differences on cash and cash equivalents | 3 | - | 3 | ||
| Net Cash and cash equivalent at the end of year | 3 615 | 27 | 3 642 | ||
| *Refer to note 8. | |||||