Ann: ADDRESS: TTK: Chair and MD's Address to Annual Meeting

• Release Date: 22/10/15 11:03
• Summary: ADDRESS: TTK: Chair and MD's Address to Annual Meeting
• Price Sensitive: No
• Download Document  13.51KB

					TTK
22/10/2015 11:03
ADDRESS
NOT PRICE SENSITIVE
REL: 1103 HRS TeamTalk Limited

ADDRESS: TTK: Chair and MD's Address to Annual Meeting

The following are the presentations made by the Chair and Managing Director
at TeamTalk's 2015 ASM held on 21st October. 2015.

First, the Chair, Roger Sowry:

Ladies & Gentlemen
Good afternoon, it is now the advertised time so I will commence the meeting.
 For those of you who don't know me, I am Roger Sowry and I am the Chairman
of TeamTalk Limited.
On behalf of the Board and staff, I welcome you to the 2015 annual general
meeting of TeamTalk Limited.  I thank you for your interest in the affairs of
the Company and I am pleased to declare the meeting open.
Before proceeding with the formal business of the day, I would like to
introduce the other Directors of the company.
As of the close of this meeting Russ is retiring from the TeamTalk board.
He's been on the board since early 2005.  He came on board to replace
Beverley Wakem who had been a director at the time of the IPO but had to opt
out once she became ombudsman. Anyway Russ has been a tireless contributor
to the board over the ensuing 10 years and we wish him all the very best for
his future.  That said he remains a shareholder and strong supporter of our
company so I'm sure this won't be the last TeamTalk annual meeting that he
attends.
We also welcome Reg Barrett to his first meeting as a Director of TeamTalk.
Reg has a long career in the telecommunications Industry which no doubt he
will touch on later in the meeting.
Also in attendance today are representatives of our Auditors, KPMG and our
legal advisors, Crengle, Shreves & Ratner.
I also want to acknowledge our managing director David Ware - who 21 years
ago - founded TeamTalk and also thank the other senior management who are
here today including Nick Willis, Daniel Cummins, Peter Nijmeijer and others.
Do feel free to corner them after the formal bit of this meeting and ask them
anything that takes your fancy as to what you'd like to know about our
business.
Before we get to other business I just want to take a couple of minutes to
talk about the year just gone.
It will come as no surprise to anyone in this room that it was a tough year
with a very disappointing first six months in particular and while the second
half was better it was still below where we had planned.
All things being equal we expect this year to follow a similar pattern with
the second half once again picked to be better than the first half.
David will cover more of this in his address but I would like to make just a
couple of observations about the telco sector. The whole sector faces
challenges reflected, for instance, in Spark's CEO Simon Moutter noting last
year that the combined annual profit of the country's five biggest phone
companies has fallen to half that of New Zealand's smallest major bank, ASB
Bank.
There is no hiding the fact that the Board have had to reduce the dividend
during the past year.
As a stock that seems to be heavily weighted by the share market on its
ability to deliver yield, we have seen the market reduce the share price over
the year as a result.
I (and my fellow directors) believe we have the dividend now at a sustainable
level.
This was reinforced by the ability for the company to extend our Banking
facility on terms as good as, if not better than, previously.
In response to all of this we have to change the way we do things and
leverage off our assets, expertise and special features. This is certainly
what we're doing - and with over 350 high-sites, extensive fibre networks,
six state-of-the-art internet exchanges across the country, satellite
partners helping to service places others can't get to, with a network and
thousands of happy customers from Northland to Bluff (and as far west as the
Chathams) we think we have some real opportunities. Our annual report
highlighted the "getting our ducks in a row" theme and that has been a big
part of the last year with the business undoubtedly in a better position
internally than this time last year.
On behalf of the Board, I also want to thank TeamTalk staff, and David Ware
for their commitment to moving ahead.
Now to today's meeting programme:
First, I will invite David Ware to provide you with a review of the Company's
activities.
Then we will proceed straight to the agenda items as set out in the notice of
meeting.

Managing Director's (David Ware) Presentation

Welcome

It's great to see so many familiar faces and it's great to see some new face.

I am sure that by the end of this session you will have a good understanding
of where TeamTalk is at, where it's going and what the prospects are for your
investment.  At TeamTalk AGMs we do things a little differently in that we
have staff from right across the company here.

The reason we do that is that we think it's important that all staff, not
just the board and senior management, hear from you, our owners, and learn
firsthand what you expect from us.  So if you have got time I would
appreciate it if you could stay at the end, have a beer and have a chat with
the guys and tell them what you think and of course feel free to ask them
about any aspect of the business.

Before I commence the formal part of my presentation I would like to
acknowledge the contribution that Russ Ballard has made to the board over the
last ten years.  Russ always puts the shareholders first and if I ever needed
a reminder of that I got one once a year when I sat down to negotiate my
salary as he was Chair of the Remuneration Committee.  I can assure you Russ
is a tough negotiator and in those negotiations he always put the
shareholders first.  But on a more serious note I really did appreciate
sitting down with you Russ and tapping in to your wisdom and your experience
form all those years as a CEO. So thank you Russ.

What I am going to talk about today is three things:

i. The broader telecommunications environment,
ii. What happened last year; and
iii. Where we are at and, most importantly, where we are going over the next
year or so.

So let's look at the environment.  Picking up on Roger's comments it is a
tough market out there.  When a company like Vodafone New Zealand who has a
great management team hasn't made any money in New Zealand in the last two
years you know it's a tough market.  The reason for that is there is a lot of
price competition particularly in mainstream telecommunications products like
cellular and broadband.  All the big telcos are responding to this
competition in much the same way.  They are going for economies of scale by
acquiring small and medium sized telcos and their taking costs out of their
business.  The way you take costs out of a telco is you reduce the markets
you focus on and you reduce your product set and that way you can simplify
your business and then fire lots of staff.

This commercial environment is a two edged sword for TeamTalk. We're not
immune from the price competition even though we try to avoid the mainstream
markets but it does also opens up opportunities for us.  We're a niche player
and we do things around the fringes and as the major telcos pull back to
focus on core markets opportunities are opening up for us.

Of course the government continues to meddle in telecommunications.  Where
would we be without government intervention?  There are three things that you
need to be aware of that the government is doing:

i. Firstly they're changing the way they purchase telecommunications services
for their own internal use.  This could be a threat or an opportunity for us,
we will just have to wait and see;
ii. Secondly they're reviewing a lot of regulations.  The Telecommunications
Development Levy, The Telecommunications Act, the price of copper, radio
spectrum stuff, you name it they're reviewing it.  So what does this mean for
TeamTalk? Who knows? Traditionally this government has favoured the big guys
but you never know your luck in the big city. What it does do is create
uncertainty and makes me reluctant to invest.
iii. The third thing you need to watch is the hundred million dollars the
government is investing in rural infrastructure.  Like the last round they
will give most of the money to one or two telcos so they can build rural
infrastructure, obviously an opportunity or a threat for us.  The opportunity
is if we can win some of this money and build out infrastructure ourselves as
we have in Haast and the Chathams while the risk that somebody else gets the
funding and they build out subsidised infrastructure over the top of us.

So what happened at TeamTalk last year?  Well, you have seen the numbers -
they were crap. There were three reasons for this:

i. The first was market conditions.  As I said we are not immune to price
competition;
ii. Secondly - we had some bad luck as the ball just didn't bounce our way.
This happens from time to time - this time it included a large utility bill
that hit from the blue; and
iii. The third reason was I made some mistakes.  We tried some things and
they didn't work and when we restructured the business we got some
appointments wrong.  We made a push into the Auckland market with our fibre
business and we underestimated the competition.  We expected to make more
money out of wi-fi than we are, I guess we fell into the same trap as the
rest of the industry on that one.  We have learnt from our mistakes and have
appointed a new executive team.  They know what's expected of them as does
everybody else in the company.

Turning to our operating divisions, let's look at Farmside.  Our objective
there is to be the number one rural telco.  We think that's very achievable
given the changing market conditions. There's two things we need to do to
achieve that:

i. Firstly we have to earn the trust and confidence of the rural community -
and that's something you don't do overnight; and
ii. Secondly we are going to build out our own rural infrastructure.

We have made good progress with the rural community, we have built great
relationships with key rural supplier which opens up new channels to market
for us and we are launching new products that our rural customers really
appreciate.  On the infrastructure side of things this has been an R&D year -
we've tested all sorts of technologies in the field and now we have a very
good understanding of what technology works where, what it takes to win
customers and how much it costs to keep them.  We won't roll anything out
until we understand what's happening with the government's rural
infrastructure initiative but rest assured we have got plans A, B and C.

Our second division is the Business Broadband Division.  We've bought
together our CityLink fibre business, Araneo with its high speed wireless
broadband and our business satellite business - putting them all together
makes it easier for our customers to buy from us and it seems to be working.
The division had a solid year last year, tempered perhaps a little bit by a
slowness in the government segment.  Overall we've got a great team, they
know what they're doing and I am happy with how they are tracking.

Finally we have Mobile Radio.  It's fair to say I took my eye off the ball
with this division and the results weren't what we expected.  We've got a new
management team in place headed by a very capable executive Daniel Cummins
and TeamTalk employee number three Kevin Brown. The big win for us last year
was taking control of the KorKor digital mobile radio network. This is the
second largest mobile radio network in the country and it throws a few more
tools in our tool box.

We're also quite busy internally we have bought together our Engineering and
Operations teams into one, so as to make us more responsive to our customers,
and we have refinanced the business.  You will recall that this time last
year our bank debt was all current, well this year we refinanced it with our
incumbent bank (Westpac) at what I am pleased to say is a very sharp rate.

So looking forward.  Clearly we have still got a lot of work to do.  This
year is all about selling more things to more people.  We're not interested
in acquisitions or doing anything clever - it's just putting our head down,
bum up and making it happen.  At Farmside we're launching new products which
will open up new markets for us and we're building on our relationships with
rural supplies companies to expand our channels to market.  We're also
looking to sell more things to our existing customers with new services.

The Business Broadband division is doing the right things we expect it to
continue to grow and we're looking to a modest uplift on the back of
increased government business and the results of our restructuring.

Mobile Radio has work to do.  We've started selling complete solutions to
customers which include not just airtime but also handsets, GPS, dispatch
software, man down alerts and all sorts of other things.  We have been
successful with some sales but we have got to streamline our processes to
maximize margin.  We see the big opportunities for growth this year being
driven by the new Occupational Health & Safety.  Now that Directors and
Managers are personally liable for the safety of their field workers we see
more resource being invested in this area and mobile radio is far and away
the best solution for many of these applications.

So overall it's a tough market.  I am disappointed with our result but I am
feeling good about where we are at.  We've got the best management team we
have ever had on board.  We've got an outstanding team, some pretty cool
products and some loyal customers and rest assured we know absolutely what's
expected of us.

Thank you for your time.
Ends

Geoff Davis
Finance Director
TeamTalk Limited
End CA:00272173 For:TTK    Type:ADDRESS    Time:2015-10-22 11:03:00