Ann: HALFYR: TTK: TeamTalk Interim Result Announc

• Release Date: 27/02/13 15:03
• Summary: HALFYR: TTK: TeamTalk Interim Result Announcement
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TTK
27/02/2013 13:03
HALFYR

REL: 1303 HRS TeamTalk Limited

HALFYR: TTK: TeamTalk Interim Result Announcement

Name of Listed Issuer: TeamTalk Limited

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Reporting period: 6 months to 31 December 2012
Previous corresponding period: 6 months to 31 December 2011

Directors' Review

Your directors are pleased to present the half year report for TeamTalk
Limited for the six months ended 31 December 2012.

It has been a busy half year for TeamTalk with the highlight undoubtedly
being the purchase of 100% of BayCity Communications (Farmside) in December.
This was our first significant acquisition in seven years and while it is
still early days we remain confident that it will prove to be a major part of
our growth in future years.

The TeamTalk group put in a solid operating performance in the half year
period although it isn't easy to see that in the numbers.  Our profit for the
period has been heavily impacted by the Government, investment bankers and
the accountants, all of whom have seemingly conspired to cause a far from
satisfactory result.

The following table summarises our result:

$'000 Radio  Broadband Farmside  Group
Revenue & Other Income 8,262  7,485  997  16,744
Total Costs excl. Depreciation & Farmside acquisition costs - 6,414 - 3,775 -
750 - 10,939
sub-total 1,848  3,710 247  5,805
Farmside acquisition costs - 667  -    -    - 667
EBITDA 1,181  3,710  247  5,138
Depreciation - 683  - 1,216  - 181  - 2,080
EBIT  498  2,494  66  3,058
Net finance costs - 486
Pre-tax Profit   2,572
Tax   - 872
Group Profit for Period    1,700
Non-controlling interests    4
Net Surplus Attributable to Shareholders of the Company 1,704

The Mobile Radio division is making the transition from primarily only
selling mobile radio airtime to selling complete customer solutions which
include airtime, handsets and data applications.  By providing our customers
with these additional services we except to increase our revenue and attract
new customers in what has traditionally been a gently declining market.  This
transition, while challenging, is progressing well and the company has built
up a useful sales funnel which is likely to result in a modest upswing in
revenue and EBITDA in the second half of the year.

CityLink, our ultra-high speed broadband division, is also coming through its
own transition period as it has had to respond to the new environment set by
the Government via the UFB initiative and single source purchasing of
telecommunications services for Government organisations.  The main thrust of
this transition is that CityLink is developing products and services which
make use of Chorus's UFB fibre.  This not only allows CityLink to extend its
reach beyond its traditional Auckland and Wellington CBD markets but it also
enables us to defer capital expenditure, perhaps indefinitely, by leasing
fibre rather than installing our own cables.

Overall CityLink is connecting new customers faster than ever before.  This
means we are rapidly offsetting the revenue leakage caused by the
Government's single sourcing with revenues generated from new customers.

Similarly Araneo continues to grow, particularly in rural areas, albeit from
a comparatively small base.  A highlight for the period was commencing to
supply broadband services into some of the country's most remote schools on
the back of an MED contract that it had previously won.  This further cements
the company's position as the number one provider of terrestrial broadband in
hard to reach parts of the country.

We completed the Farmside acquisition on December 17th so this result
includes two weeks contribution from our new subsidiary but also a large
expense relating to legal, due-diligence and advisory fees incurred upon the
successful acquisition.

We are excited about the opportunities that Farmside brings to the group as
they occupy a unique position in the rural market space.  Located in Timaru
it's a business built by rural people for rural people.  Its core business is
the provision of broadband satellite services where, as the exclusive
supplier in NZ, it is ideally positioned to service the 40,000 or so
dwellings that will not be served by any other means.  It is also well placed
to sell services over the network funded by the Government's Rural Broadband
Initiative (RBI).

Farmside is performing in line with expectations outlined at the time of the
acquisition however in the immediate short term results are likely to be
influenced by steps we're taking to position the company for growth.

Dividend

The Directors have declared a fully imputed dividend of 10 cents per share
payable on Friday 26th April 2013.  The record date for entitlement to the
interim dividend is 5pm on Friday 19th April 2013.  A supplementary dividend
of 1.7647 cents per share will be payable to shareholders who are not
resident in New Zealand.

The Company's Dividend Reinvestment Plan, which enables eligible shareholders
to conveniently increase their equity stake in TeamTalk at a 3% discount to
the market price, will continue to be in operation for this dividend.

Outlook

The Government is progressing with its planned imposition of a new tax on the
telco sector.  The grandiose sounding Telecommunications Development Levy
(TDL) is in fact little more than a tax on the industry in order to subsidise
the rural initiatives being undertaken by Vodafone and Chorus. We had
initially thought that a number of niche services, such as is typically sold
by our group, could be exempt from this levy however it has recently been
clarified that this is not the case.  Accordingly we have made a provision in
these accounts for 18 months of this levy, going back to July 2011, for a
total of $0.6 million. Going forward we estimate the expanded group's
liability for the TDL to be around $0.5 million each year.

At year end we gave guidance that we expected EBITDA for the current year to
be broadly in line with 2012 but with lower interest and depreciation
expenses for the bottom line to be ahead.  To provide an update on this is
clouded by the Farmside acquisition and some of the other factors outlined
above. However, the impact of the TDL will mean, even excluding the one-off
costs incurred for the Farmside acquisition, that EBITDA from the TTK group
excluding Farmside will be lower than 2012.   In addition accounting
standards will require us to make a number of non-cash charges as we amortise
various intangible assets in relation to the Farmside acquisition.

While we expect the full year result to be lower than 2012 we certainly
expect the second half of the year to be better than the first.  Putting the
one off Farmside acquisition costs to one side underlying cash generation
remains strong meaning we plan to continue our policy of paying annual fully
imputed dividends of 20c per share.  Furthermore we are confident that the
group is adjusting to the changes in the environment brought on by the
Government's UFB and RBI initiatives and we will be able to capitalise on the
new opportunities that these moves will bring.

Reporting period: 6 months to 31 December 2012
Previous corresponding period: 6 months to 31 December 2011

The financial statements have been prepared in accordance with generally
accepted accounting practice in New Zealand.  They comply with NZ IFRS, which
constitutes NZ GAAP, and give a true and fair view of the Group's results and
are 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:

16,686; Down 0.8%; 16,816

OPERATING SURPLUS BEFORE UNUSUAL ITEMS AND TAX:

2,572; Down 31.5%; 3,756

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

OPERATING SURPLUS BEFORE TAX:
2,572, Down 31.5%; 3,756

Less tax on operating profit:
872; Down 18.1%; 1,065

NET SURPLUS AFTER TAX AND EXTRAORDINARY ITEMS:
1,700; Down 36.8%; 2,691

NET SURPLUS (DEFICIT) ATTRIBUTABLE TO MINORITY INTERESTS:
(4); Up 33.3%, (3)

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF THE LISTED ISSUER:
1,704, Down 36.7%; 2,694

Basic earnings per share:
7.2 cps; Down 37.9%; 11.6 cps

Diluted earnings per share:
7.2 cps; Down 37.9%; 11.6 cps

Net Tangible Assets per share

21.3 cps; Down 53.5%; 45.8 cps

Interim Dividend:

10.0 cps, 0%, 10.0 cps

Record Date: 19 April 2013.
Payable Date: 26 April 2013.

Imputation tax credit on latest dividend: 3.8889 cps

A supplementary dividend of 1.7647 cps will be payable on 26 April 2013 to
shareholders who are not resident in New Zealand.

The company's Dividend Reinvestment Plan (DRP) will be in operation in
respect of the interim dividend.  The last date for the receipt by the Share
Registrar of an election notice for participation in the DRP is 5pm on 19
April 2013.

Control of Entities Gained or Lost During the Period

On December 17 2012 the Company acquired 100% of the shares of BayCity
Communications Limited (t/a Farmside). Results for the 14 day period of the
Company's ownership have been included in the financial results for the 6
months to December 31 2012.  The impact in the current accounting period on
the Company's financial performance as a result of the acquisition is an
increase in Revenue of $997,000 and an additional $247,000 of EBITDA.
End CA:00233517 For:TTK    Type:HALFYR     Time:2013-02-27 13:03:51