TeamTalk shares jump 22% as first-half earnings rebound

Wednesday 17th February 2016

TeamTalk shares jumped 22 percent after the listed telecommunications firm's first-half profit rebounded from a year earlier when it wrote down the value of its Farmside broadband services unit. It sees further gains in the second half.

Net profit climbed to $1.1 million, or 4 cents per share, in the six months ended Dec. 31, from $3,000 a year earlier, when it wrote down the value of its internet services provider unit by $1.1 million, the Wellington-based company said in a statement. Earnings before interest, tax, depreciation and amortisation rose 6.5 percent to $6.4 million, while revenue slipped 0.3 percent to $28.7 million.

"Margins are under pressure as customers continue to demand more services at a lower cost, but unfortunately a lot of our costs don't follow the same path," chairman Roger Sowry and managing director David Ware said in their report. "Nevertheless, despite experiencing a half year that never quite hit the high notes, we are pleased to report that our results, in being ahead of the same period last year, stayed largely in line with our forecasts."

The stock climbed 13 cents to 73 cents, the highest level since Jan. 7. The shares plunged 57 percent through 2015 after a series of profit warnings and the need to refinance its debt weighed on the stock.

TeamTalk overhauled its operations through the second half of the 2015 financial year as it struggled to embed its Farmside acquisition into the wider business, forcing it to write down the value of the rural internet provider.

The company said annual earnings would be similar to 2015, when it posted net profit of $1.3 million on sales of $57.8 million.

"While not expecting any spectacular or miraculous improvements in profit in the second half of this year, we believe the group is building on its robust platform as it looks to more effectively utilise its shared infrastructure and expertise so we expect the second half to be better than the first with an overall result for the year broadly in line with that of last year," Sowry and Ware said.

Its ISP business still delivers its biggest chunk of revenue, though that slipped 2.6 percent to $12.3 million in the half, while ebitda dropped 33 percent to $930,000, with a weaker New Zealand dollar increasing the cost of Farmside's satellite bandwidth.

The company's CityLink broadband network lifted sales 4.3 percent to $6.8 million while earnings gained 23 percent to $3.5 million, and its mobile radio division increased ebitda 12 percent to $2 million on a 1 percent gain in revenue to $10 million.

The board declared an interim dividend of 4 cents per share, payable on April 15 with an April 8 record date, and it intends the final dividend to match that, forecasting an annual payment of 8 cents.

BusinessDesk.co.nz

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