Ann: HALFYR: TTK: TeamTalk FY15 Interim Result

• Release Date: 25/02/15 13:37
• Summary: HALFYR: TTK: TeamTalk FY15 Interim Result
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					TTK
25/02/2015 13:37
HALFYR
PRICE SENSITIVE
REL: 1337 HRS TeamTalk Limited

HALFYR: TTK: TeamTalk FY15 Interim Result

Name of Listed Issuer: TeamTalk Limited

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Reporting period: 6 months to 31 December 2014
Previous corresponding period: 6 months to 31 December 2013

This report has been prepared in a manner which complies with generally
accepted accounting practice in New Zealand (NZ GAAP) and gives a true and
fair view of the matters to which it relates and is based on unaudited
financial statements.

CONSOLIDATED OPERATING STATEMENT
Current Half Year NZ$'000; Up/Down %; Previous Corresponding Half Year
NZ$'000

OPERATING REVENUE:
Total Operating Revenue:

28,794; Down 2.3%; 29,475

OPERATING SURPLUS BEFORE UNUSUAL ITEMS AND TAX:

26; Down 99.1%; 2,777

Unusual items for separate disclosure:
0; 0%; 0

OPERATING SURPLUS BEFORE TAX:
26, Down 99.1%; 2,777

Less tax on operating profit:
23; Down 96.3%; 616

NET SURPLUS AFTER TAX AND EXTRAORDINARY ITEMS:
3; Down 99.9%; 2,161

NET SURPLUS (DEFICIT) ATTRIBUTABLE TO MINORITY INTERESTS:
0; 0%, 0

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF THE LISTED ISSUER:
3, Down 99.9%; 2,161

Basic earnings per share:
0.0 cps; Down 99.9%; 7.6 cps

Diluted earnings per share:
0.0 cps; Down 99.9%; 7.6 cps

Net Tangible Assets per share
(1.3) cps; Down 110.7%; 12.1 cps

Interim Dividend:

4.0 cps, Down 60%, 10.0 cps

Record Date: 10 April 2015
Payable Date: 17 April 2015

Imputation tax credit on latest dividend: 1.5556 cps

A supplementary dividend of 0.7059 cps will be payable on 17 April 2015 to
shareholders who are not resident in New Zealand.

The company's Dividend Reinvestment Plan (DRP) has been suspended so will not
be in operation in respect of the interim dividend.

Control of Entities Gained or Lost During the Period

Nil

FROM THE DIRECTORS
Our Strategy
We are leveraging our group-wide scale and expertise to do the jobs that the
big guys can't (or won't) do.
TeamTalk is a niche telecommunications network operator.  We will win because
we're nimble and we're committed to continually improving service levels as
well as providing great value for our customers.
We've had a tough half-year but we are emerging as a stronger, more focused,
company because of it. Operations
To a large extent we find ourselves in a similar situation to other telcos as
the whole sector has had to reorganise and adapt in the face of an uncertain
and changing industry.

As outlined in our recent market announcement we have not achieved some of
the growth that we expected to offset revenue declines in other areas while a
number of one-off costs compounded the situation.
We have always been extremely aware of the value of a dollar but in light of
the renewed challenges we have instituted tighter controls on discretionary
spending, further reviewed our capex programme and are looking to gain
efficiencies from moving a number of functions across the group onto shared
platforms.
Our immediate priority remains rural New Zealand as that is the area where we
see the most opportunities.
While not readily apparent in the numbers there are increasing signs that
Farmside is gathering some real momentum as our group-wide expertise is
allowing them to offer new products to those who live in some of the
country's most hard-to-reach places.

Farmside's Timaru-based call centre continues to get good customer feedback
while other telcos continue moving their operations offshore.  A new customer
care system is allowing Farmside to better monitor, and therefore further
improve, customer services while a back-office overhaul, combined with new
Product and Sales Managers, is enabling more effective and timely sales and
marketing initiatives - all of which ultimately lead to better responsiveness
to the customer.
The group can add the completion of the Chatham Islands contract to its list
of achievements, with the most isolated school in the country on Pitt Island
hooked-up to faster internet with Farmside just before Christmas.
A lot of the initiatives in CityLink are focused on moving beyond its
Wellington base.  It is about to launch a push into the Auckland market where
there are significant opportunities for faster fibre services. CityLink has
also been extending its internet exchange operations - having recently
expanded to include Dunedin and securing Network for Learning, which services
all of the country's schools, as a customer.
A new technology platform for CityLink's cbdfree wi-fi service has helped
generate record traffic numbers with our ongoing challenge being to convert
some of those eyeballs into revenue.  The use of wi-fi is ever expanding with
The Ministry of Culture and Heritage having recently signed a contract with
CityLink to provide wi-fi services at the War Memorial in Wellington as part
of this year's ANZAC Day commemorations.
The TeamTalk Mobile Radio division has not been standing still either having
just signed an important new long-term contract with Ambulance New Zealand
and St. John Ambulance.  Of key significance is that this isn't just an
extension but also an expansion of service with further talks underway.  We
believe that this underlines our status as a reliable provider of mission
critical communications services.
Despite often being viewed as old technology we believe that steady growth in
the suite of new applications for mobile radio networks continues to offer
solid opportunities for growth in this division.

The Result
As previously announced our half year result is well behind where we
projected it would be as both revenue declines and cost increases impacted
the result.

We had expected a drop in Farmside's revenue as customers continue to move
from satellite products to cheaper, lower margin RBI wireless products but
what we had been expecting was further growth in Mobile Radio to help offset
this.  Part of the issue in the Mobile Radio result is that as we move into
solution selling there is more lumpiness in the revenue and variability in
margins.  Importantly though most of what we expected to do in the first half
has been deferred by the customer so not lost.
Costs were generally well managed across the group however we were hit with a
totally unexpected utility bill going back over many years which cost us over
$0.25 million. We also incurred restructuring expenses in some parts of the
group and additional recruitment and contracting costs in other parts as we
sought to reshape the resources and capabilities of the group.
Our bottom line result was also negatively impacted by a continuing high
non-cash impairment charge in Farmside and a mark to market revaluation loss
on our fixed rate interest rate swaps.
Cash generation over the period was also weak, so debt was correspondingly
higher than expected.  We have discussed this with Westpac and given that our
existing funding facility matures in December this year we will, as planned,
refinance for a new term prior to June 30.

For a more detailed breakdown of the business units' results see the Segment
Reporting note within the financial statements.   Governance
Good corporate governance is a vital part of the foundations for any company
and we continue to work on improving our governance.
In June last year we established a small advisory board to focus specifically
on assisting David Ware with Farmside's operations.  That board has played an
integral part in a lot of the recent developments in Farmside but we feel it
is now time to integrate it more fully into the group. Accordingly the
Farmside advisory board will be disbanded in March with Reg Barrett joining
the TeamTalk parent company board from that time.
This move not only provides continuity as regards Farmside expertise but it
also assists in succession planning as Russ Ballard, after 10 years of
service, has indicated he does not intend to seek re-election when he retires
by rotation at this year's Annual Meeting.
Further additions to the board are under consideration with announcement
expected by the end of the financial year.
Dividend
The Directors have declared a fully imputed dividend of 4.0 cents per share
payable on Friday 17th April.  The record date for entitlement to the interim
dividend is 5pm on Friday 10th April.  A supplementary dividend of 0.7059
cents will be payable to shareholders who are not resident in NZ.  The
Dividend Reinvestment Plan remains suspended so will not be in operation for
the interim dividend.
It is the board's current intention that the final dividend for the 2015
financial year will also be 4.0 cents per share bringing the total for the
year to 8.0 cents.
The decision to reduce the dividend was not taken lightly but we needed to
carefully balance the factors around financial performance, debt reduction
and balance sheet flexibility while at the same time investing to expand the
business offering and delivering service improvements to customers.

Outlook
The long-term view has not changed.
Our future is all about building on our strong foundation.  We remain
enthusiastic about the opportunities available to the group and in particular
we remain keen to expand our presence in the rural broadband market as both a
network operator and retailer. The margins will remain tight, but we will
continue rolling out new products and investing in our infrastructure to give
us a competitive advantage.
While we expect the second half of the current financial year to be lower
than the previous corresponding period we do expect a bit of an improvement
on the half year just gone and we look forward to reporting back to you on
our progress at year end.

Roger Sowry (Chairman) David Ware (Managing Director)
End CA:00261131 For:TTK    Type:HALFYR     Time:2015-02-25 13:37:40