Ann: FLLYR: TTK: TeamTalk FY14 Result

• Release Date: 27/08/14 16:03
• Summary: FLLYR: TTK: TeamTalk FY14 Result
• Price Sensitive: No
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					TTK
27/08/2014 16:03
FLLYR

REL: 1603 HRS TeamTalk Limited

FLLYR: TTK: TeamTalk FY14 Result

Name of Listed Issuer: TeamTalk Limited

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Reporting period: 12 months to 30 June 2014
Previous corresponding period: 12 months to 30 June 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 audited
financial statements.

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

OPERATING REVENUE:
Total Operating Revenue:

61,009; Up 31.9%; 46,241

OPERATING SURPLUS BEFORE UNUSUAL ITEMS AND TAX:

(7,557); Down 240.6%; 5,375

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

OPERATING SURPLUS BEFORE TAX:
(7,557), Down 240.6%; 5,375

Less tax on operating profit:
791; Down 55.6%; 1,780

NET SURPLUS AFTER TAX AND EXTRAORDINARY ITEMS:
(8,348); Down 332.2%; 3,595

NET SURPLUS (DEFICIT) ATTRIBUTABLE TO MINORITY INTERESTS:
0; Down 100%, (2)

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF THE LISTED ISSUER:
(8,348), Down 332.1%; 3,597

Basic earnings per share:
(29.5) cps; Down 312.7%; 13.87 cps

Diluted earnings per share:
(29.5) cps; Down 312.7%; 13.87 cps

Net Tangible Assets per share
6.1 cps; Down 52.8%; 12.93 cps

Final Dividend:

7.5 cps, Down 25%, 10.0 cps

Record Date: 10 October 2014
Payable Date: 17 October 2014

Imputation tax credit on latest dividend: 2.9167 cps

A supplementary dividend of 1.3235 cps will be payable on 17 October 2014 to
shareholders who are not resident in New Zealand.

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

Control of Entities Gained or Lost During the Period

In September 2013 TeamTalk purchased the remaining 4% of Araneo Limited that
it didn't already own making it a wholly owned subsidiary of the group.  The
transaction had no material impact on the group's financial results for the
period.

Chairman and Managing Director's Report to Shareholders
Financial Year ending 30 June 2014

2014 was a tough year and one in which we certainly didn't get it right on
all fronts.  Our broadband and mobile radio businesses remained on track, but
our rural ISP business Farmside failed to meet expectations.

Farmside
With Farmside we made two mistakes - first of all we underestimated the
difficulty in building a strong, experienced management team in what is a
very dynamic market and secondly we underestimated the success of the
Government funded Rural Broadband Initiative ("RBI").  We are increasingly
getting to grips with both of these factors and while we're not yet out of
the woods there are a number of positive signs.
On a positive note our customer service is, once again, second to none and
that is starting to be reflected in lower rates of churn.  We are also having
good success migrating our existing satellite customers on to RBI based
services.  This is a bit of a double edged sword as while it generally
results in a better service for the customer and an extended contract term it
also unfortunately results in lower margins for the company.  On the
downside, gaps in some key elements of the management team has meant that we
haven't been able to capitalise on many of the opportunities open to us so
the rate of new customer acquisitions has been much lower than anticipated.
Notwithstanding some bright spots in the outlook for Farmside we have, as a
result of their disappointing performance, made the decision to write down
the value of the goodwill associated with this investment by $11.4 million.
This non-cash charge brings the carrying value of the business down to a far
more conservative level but does cause some distortions within our published
financial statements.  As detailed in note 19 in the financial statements
this impairment charge would have triggered a breach of our banking covenants
as at 30 June. However, we kept the bank fully informed of developments and
subsequent to balance date sought confirmation from them that this non-cash
charge would not be included in earnings for the purposes of calculating
covenant compliance.  Westpac responded promptly with no conditions or
additional costs so accordingly we are in full compliance with all our
banking covenants.

Mobile Radio
The Mobile Radio business is continuing to transition from selling airtime
only into being a full solutions based business selling integrated voice and
data applications and associated equipment alongside the airtime.  We have
had some success with notable contract wins including firms such as NZ Bus
and Vector Gas with this new activity being the prime driver in the $2.0
million (12.2%) increase in revenue in the segment.  Unfortunately this
increased revenue has yet to flow through to the bottom line as we are still
grappling with what it takes to deliver these new services in an efficient
and cost effective manner.
We have talked about this transition for a number of years now and while
performance to date has been a bit rocky we do expect that in the coming year
these activities will start contributing in a more meaningful way to our
financial results.

Broadband
The broadband segment continues to make steady progress and it contributed
over 50% of the group's EBITDA.  While the Government funded Ultra-Fast
Broadband initiative continues to exert downwards pressure on prices it is
doing little to the volume of services sold.  Overall a small increase in
revenue was matched with tight control of costs to deliver a gain in EBITDA
of $0.6 million (7.2%).
Importantly CityLink, our core fibre-optic business, remains strong and
continues to push the boundaries in the broadband space with innovative new
products and services that are designed specifically for demanding business
customers.
The following table summarises our result:

$'000 Radio  Broadband Farmside  Group
Revenue & Other Income 18,590 15,170 27,249 61,009
Total Costs excl. Depreciation (15,660) (6,862) (22,792) (45,314)
EBITDA 2,930 8,308 4,457 15,695
Depreciation, Amortisation & Impairment (1,432) (2,340) (5,994) (9,766)
EBIT 1,498 5,968 (1,537) 5,929
Net finance costs    (2,086)
Profit before goodwill impairment & income tax   3,843
Goodwill impairment    (11,400)
Profit / (Loss) before income tax    (7,557)
Tax    (791)
Group Profit / (Loss) for Period    (8,348)

Group Profit for Period prior to Goodwill Impairment  3,052

Rural
As a sign of both where we are looking to take the group and that the
activities straddle each of the group companies our rural activities deserve
a section all of their own.
We have reported in previous years on the success that Araneo had in
obtaining Government grant funding to help fund network infrastructure to
provide broadband services to a number of remote rural schools and
communities.  During the current year we were successful in another two
tenders - this time to provide broadband services to both the Haast / South
Westland region and on to the Chatham Islands. While there is nothing
immediate in the pipeline we're confident that our strong track record in
getting services out to some of the most remote spots in the country will
mean we're well placed if further tenders do get announced.
In addition we are in the process of developing some new products and
services that should have much wider commercial appeal across the rural
market.  These initiatives will call on the skills of each group company and
we believe represent a very real growth opportunity for the group.  We would
hope to be able to talk a little bit more about this at the Annual Meeting.

Strategy
Our objective remains unchanged and we continue to strive towards being the
best little telco - we want to provide the best customer experience, the best
and most consistent returns for you our shareholders and create the best
place to work. Our strategy to get there also remains unchanged - we listen
closely to our customers, we think very carefully about every dollar we spend
and we make stuff happen.
As noted above our next step is to start making some real progress in the
rural sector.  First and foremost that means kick starting Farmside and using
our TeamTalk assets as the basis to launch new products and services into
this market. The other focus in the mobile radio business is to improve the
efficiency of our business model.  At CityLink the focus will be on
continuing to grow our core business and push the boundaries with ever more
new products and services.

Dividend
The directors have declared a fully imputed dividend of 7.5 cents per share
payable on 17 October bringing the total for the year to 17.5 cents.  The
record date for entitlement to the final dividend is 5pm on Friday 10
October.
The Dividend Reinvestment Plan ("DRP") remains suspended for the final
dividend.

Board & Governance
As announced at last year's Annual Meeting Joe Pope is retiring by rotation
at this year's meeting and will not be seeking re-election.  Joe has been our
Chair since we first listed back in 2004 and on his watch the company has
increased substantially in terms of size, capability and prospects.  Being
Chairman of any public company is a challenging role and we've all
appreciated Joe's commitment and contribution to the company for such a long
period of time.
As Joe is not seeking re-election he has, effective today, stood down as
Chairman.  In his place the Board has elected Roger Sowry as the new Chair.
Roger has been a TeamTalk director since early 2012 and prior to that was a
CityLink director for almost three years so is more than ready to step into
Joe's shoes.
Separately to this we've been streamlining the group's governance processes.
The formal board that was established as a condition of the acquisition of
Farmside has been disbanded and replaced with a smaller advisory board
consisting of former senior Vodafone executive Reg Barrett and former FX
Networks CFO Derek Locke.  The prime focus for these seasoned executives is
to provide the MD with operational support in relation to the Farmside
business.  The strategic, core financial and regulatory compliance functions
previously performed by the Farmside board are now the responsibility of the
main TeamTalk board.  Overall we view this move as simply another step in the
evolution of our group.
Outlook
We've got a lot of work ahead of us and for the next year pure financial
measures aren't necessarily going to be the best measure of our progress.
Our plans are to invest in the rural space to both build infrastructure and
acquire customers - neither of which is cheap but both which are necessary to
place the company on the growth trajectory that you expect.  Overall we're
expecting to see our revenue grow and EBITDA to be marginally down as we
continue with our transformation.
We expect to maintain the dividend at its current level of two 7.5 cent
dividends each year.
Although we've had a few ups and downs this year overall we're pleased with
what we've achieved this year and we are excited about the opportunities in
front of us.

Roger Sowry David Ware
Chairman     Managing Director
End CA:00254490 For:TTK    Type:FLLYR      Time:2014-08-27 16:03:54