Commenting on Telkom’s group results, Mergence Head of Equities, Peter Takaendesa, said there was improvement in terms of operational cash generation. However, the group’s return on invested capital remained much lower than its cost of capital and any cash returns to shareholders in future would largely depend on operational cashflows in order to protect the balance sheet. Peter feels there is no pressure to sell more assets at this stage, with the disposal of BCX being put on hold. However Telkom could be forced to strengthen it balance sheet by selling assets again over the next 3-5 years as the company is still facing structural challenges and likely pressure on the sustainability of the improved cash generation we have seen over the past year.
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