TeamTalk boosts 1H profit 27%, signals lower dividend to fund rural broadband expansion

TeamTalk [NZX: TTK], which bought the rural telecommunications provider Farmside in 2012, lifted first-half profit 27 percent, and plans to trim dividend payments from October to fund expansion into rural internet services.

Net profit rose to $2.16 million, or 7.6 cents per share, in the six months ended Dec. 31 from $1.7 million, or 7.2 cents, a year earlier, the Wellington-based company said in a statement. The gains came from its mobile radio and broadband units, while its Farmside rural service continued to lag, and it plans to scale back future dividend payments to help fund expansion in the rural sector as a network operator and retailer.

"Although the Farmside acquisition has not met our short-term expectations we remain very confident in its future," managing director David Ware said. "We are seeing modest revenue upturn and expect an increase in profitability to follow."

From October TeamTalk will cut its annual dividend to 15 cents per share in two equal instalments, from 20 cents previously. The board declared a 10-cents-per-share interim dividend today, payable on April 11 with an April 4 record date.

In December, TeamTalk said it expected to maintain its current dividend in 2014, with earnings growth to gather momentum in the second half of the financial year.

The company boosted revenue 77 percent to $29.5 million in six-month period from a year earlier, and increased earnings before interest, tax, depreciation and amortisation 51 percent to $7.7 million.

The mobile radio unit lifted external sales 2.3 percent to $8.5 million and boosted EBITDA 24 percent to $1.5 million, while the broadband unit increased external revenue 1.6 percent to $7.6 million, with a 5 percent gain in earnings to $3.9 million.

The internet service provider unit's sales surged to $13.6 million from $997,000 a year earlier, while boosting EBITDA to $2.2 million from $247,000.

TeamTalk's operating cash flow climbed to $3.7 million in the half from $1.7 million a year earlier, leaving the company with cash and equivalents of $968,000 as at Dec. 31.

The shares fell 1.4 percent to $2.15.

(BusinessDesk)