TeamTalk's profit up

Niche telecommunications company TeamTalk has again reported
an annual profit that caught the eye of brokers.

Earnings before interest and tax rose 18% to $8.6 million in
the year to June, revenue rose 2% to $32.4 million and
reported profit was up nearly 16% to $5.4 million.

Debt was reduced by $2.3 million and a fully-imputed dividend
of 20 cents per share was declared.

Managing director David Ware said the broadband segment was
the star performer for the group, with operating earnings up
18.8% to more than $8 million from a total of $13.1 million.

The broadband segment comprised CityLink and Araneo, which
both targeted business customers with high-end, specialised
broadband services; both companies improved on the previous
year. While there were many highlights for the year, the two
that stood out were CityLink’s successful launch of CBDfree
wi-fi in Wellington and Araneo’s successful tender in the
Government’s Remote Schools Broadband Initiative, he said.

“While neither had a material impact on the financial results
for the year just gone, they are both good examples of
initiative and enterprise as the group attempts to stay ahead
of the pack by developing new market niches.”

Mr Ware said every year he wrote about the strength of the
company in generating cashflow and the 2012 financial year
was no exception.

With the strong profit, the group was able to invest more
than $4 million in capital expenditure for the future, pay
$4.6 million in dividends and still reduce debt by $2.3
million in the period.

At balance date, debt stood at $16 million or only 1.2 times
operating earnings compared with $18.3 million, or 1.5 times,
a year ago.

“We’re certainly not textbook. We simply do whatever it takes
to deliver on our promises,” he said.

Craigs Investment Partners broker Greg Easton described
TeamTalk as a small company in a large, complicated market.

“It has found its niche and is providing services to
customers that some of the other telecommunications companies
don’t want to be involved with. It is a small operating
company making nice profits and providing a very reliable

TeamTalk saw a rise in its radio revenue during the year. Mr
Easton said that during the earthquakes in Christchurch,
mobile and landline networks went down but TeamTalk’s radio
network continued operating.

The radio network was a key asset that should provide value
in coming years.


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