Strong Result For Teamtalk's First Year

26 August 2004

Strong Result For Teamtalk's First Year

The Directors are pleased to present the financial results for TeamTalk Limited for the year ended 30 June 2004. It has been a significant and successful year for the company. TeamTalk has made a successful transition from private to public ownership with the listing on the NZX in May 2004. Results have exceeded the IPO forecasts and there has been a strong share price performance since listing.

Trading Result

Operating performance for the year exceeded expectations with a Net Surplus for the year of $2.62 million, which is 26% ahead of the prospectus forecast. This reflects stronger than anticipated demand for services in the second half of the year, including TeamTalk's recently launched finance product, together with continued tight control of costs. Over the year there was continued modest growth in both subscriber numbers and revenue per subscriber.

As signalled to the market with its profit upgrade announcement in May the company has exceeded its IPO forecasts. The key comparatives are:

Group 2004
Forecast Actual
$000 $000
Operating Revenue 19,560 19,892

EBITDA 7,974 8,606
Net Surplus Before Tax 3,534 4,372

Net Surplus After Tax 2,086 2,622

Earnings per share (pre goodwill amortisation) 14.6 17.3
Dividends (cps) 15.0 16.5

Dividend

The Directors have declared a fully imputed final dividend of 9 cents per share. Combined with the interim dividend of 7.5 cents per share paid in May 2004 this takes the dividend for the year to 30 June 2004 to a total of 16.5 cents per share.

The record date for entitlement to the final dividend is 5pm 15th October 2004. Payment is to be made on 22nd October 2004.

The increase in the final dividend from the 7.5 cents outlined in the prospectus reflects the better than anticipated financial performance and the continued strong cash generation of the company. Even with the increase in the final dividend the total dividend payments represent only just over half of the available free cash flow.

Dividends for the year to 30 June 2005 will be at least equal to the 16.5 cents paid in respect of the 2004 financial year.
Balance Sheet/ Cash flow

A key strength of the company is its ability to generate strong cash flow. Notwithstanding the fact that during the year the company became a full tax payer TeamTalk still generated $8.0 million cash from operations. Even allowing for the $2.4 million invested in capital expenditure and finance leases this, plus the net $5.3 million raised in the IPO, enabled the company to reduce net debt from $18.3 million to $10.3 million at the same time as paying dividends totalling $3.0 million.

Total tangible assets stood at $32.9 million at 30 June 2004.

Outlook

Our immediate plans are centred on maintaining and growing our core business. In particular we are focused on adding value to our existing products.

As our experience with equipment finance grows we are progressively expanding our finance book. We expect equipment finance to make an increasingly significant contribution in the future.

We have recently completed development of a new alarm transport service that provides an exceptionally reliable method for security and other companies to monitor alarms from remote sites. While initial progress was slower than anticipated commercial deployment of this service has now begun.

In addition we are considering acquiring a number of small businesses that are closely allied to TeamTalk’s existing business activities. Beyond these small acquisitions the company is continuing to explore other acquisition opportunities that can leverage the company’s core competencies and balance sheet. However, the Directors continue to take a conservative approach to any business acquisition opportunities.

The Directors expect that the projected Net Surplus for the year ending 30 June 2005 will be in line with the result achieved for the June 2004 financial year.

Conclusion

TeamTalk delivered a strong performance during a year of substantial change. The Directors express their appreciation to all staff who have again contributed to another good result for the company.

ENDS

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