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GENERAL: TTK: TeamTalk Pre-Close Update

10 Jun 2016 16:28NZX
10 June 2016

TeamTalk Pre-Close Update

In the lead up to financial year-end TeamTalk Limited ("TeamTalk") provides
the following update on its results and its activities.

Major Strategic Initiatives - Optus
Over the last few years the financial performance of Farmside, our rural
focused ISP business, has suffered as customers have moved away from services
delivered over satellite to alternative services delivered, in the main, by
the Government funded Rural Broadband Initiative ("RBI") network.
This migration has had a material negative impact on earnings with both
EBITDA impacted and some additional large non-cash charges as we had to
write off the value of the satellite equipment installed at the customer''s
premises.  There has also been a material lift in capital expenditure
requirements to fund the new RBI based customer installations.
In spite of the negative impact on its results Farmside has been active in
migrating its own customer base as part of a customer pledge to provide the
most appropriate service for each customer.  While in many cases that is an
RBI service there are still large areas of rural New Zealand where satellite
is the most appropriate broadband solution.
Accordingly, in an initiative to be announced separately today (see following
NZX release), Farmside are delighted to announce that agreement has been
reached with Optus Satellite Pty Limited which will enable it to provide
greatly improved satellite services with faster speeds and increased data
caps.
The agreement with Optus is a multi-year contract that will progressively
deliver improved financial results and cash returns as Farmside will be able
to buy satellite bandwidth on materially better terms than the current
provider with a number of other incentives provided to facilitate the switch.

In the short term however there will be a negative impact on the financial
results of the group as the switch involves several million dollars of
capital expenditure over the next six or so months as new equipment is
installed at several thousand individual premises right across the country
and further non-cash charges will arise as existing customer equipment is
rendered obsolete and written off accordingly.
Despite these short term costs we believe that the move is an exciting one
for Farmside that will, from day one, provide a better customer experience,
reduced rates of churn and a chance to offer additional services which, in
turn, should translate into improved financial results.
"Farmside is the market leader in RBI services and continues to build on that
position.  This initiative with Optus complements our RBI market position by
enabling Farmside to provide a competitively priced satellite based service,
which is materially better than we are currently able to offer, for those
tens of thousands of households not in RBI zones" said TeamTalk Chairman
Roger Sowry.

FY16 Trading Update
TeamTalk''s previous guidance, released at the time of the interim result in
February, was for the second half of the current financial year to be better
than the first half with an overall result for the year in line with that
reported in FY15.
Despite the encouraging start to the half subsequent results have not met
expectations and we now expect EBITDA for the second half to be slightly down
on the $6.4 million reported in the first six months.
In addition a number of non-cash charges and write-offs (principally related
to the Optus satellite migration project noted above as well as some
accelerated depreciation charges relating to a change to the useful life
assumption for residential customers'' broadband equipment) will mean that
reported earnings for the second half will be negative with the overall
bottom line reported result for the year around the breakeven level.

Dividend
We previously reported an intention to pay a 4c final dividend bringing the
total for the 2016 financial year to 8c.  In light of the second half
earnings not improving as expected, the substantial capital requirements
required over the coming period to support initiatives like the Optus
migration project and the desire to afford the incoming CEO as great a level
of flexibility as possible when working with the board to formulate a
strategic direction for the group the board has decided to suspend its
previous guidance in respect of the final dividend.

Summary
The TeamTalk board is disappointed with the results for the year which
reflect a difficult trading environment.  By the same token the board
believes that there are a number of attractive options available to each of
the businesses within the group and it remains committed to investing in
them.  "While the short term results may be impacted we believe that
opportunities, such as the Optus initiative, must be pursued as they will
deliver better services to customers and improved returns to shareholders"
said Mr. Sowry.
We expect to provide a further update when we release our full year results
on the 24th of August.

-----------ENDS----------
For more for information contact:

Roger Sowry
Chairman
TeamTalk Limited
(027) 445-5753
End CA:00283870 For:TTK    Type:GENERAL    Time:2016-06-10 16:28:48
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