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TeamTalk Announces $8 Million IPO, NZSX Listing

Monday 5th April 2004

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Mobile radio communications company TeamTalk today announced the launch of an $8 million Initial Public Offering and New Zealand Stock Market listing.

TeamTalk is offering up to 3.43 million new shares and up to 1.14 million existing shares at the price of $1.75 per share. The market capitalisation of the company upon the successful completion of the offer will be $35 million.

TeamTalk's strong and reliable cash flow generating ability and low ongoing capital expenditure requirements will ensure the company is capable of supporting an attractive dividend yield.

TeamTalk expects to pay a fully imputed annual cash dividend of 15 cents per share for each of the 2004 and 2005 financial years by way of two equal payments. At the offer price of $1.75 this equates to an annual yield of 12.8% before tax and inclusive of imputation credits.

Additionally, the interim cash dividend of 7.5 cents per share for the six months ending 31 December 2003 is payable in May 2004. Therefore, investors can expect a dividend yield before tax and inclusive of imputation credits of 19.2% for the first twelve months after quotation on the NZSX.

TeamTalk's Chairman and Independent Director Joe Pope said the IPO and listing was a logical progression for the company.

"This IPO will enable a number of new shareholders to join us and will help position the company for the next phase of its development. Listing on the NZSX will also provide increased valuation and pricing transparency for existing shareholders and enhance TeamTalk's market profile," Mr Pope said.

The company's forecast operating revenue for the 12 months to 30 June 2004 is $19.56 million. The pro-forma underlying EBITDA for that period is forecast at $7.03 million. The projected operating revenue for the twelve months to 30 June 2005 is $19.62 million with the pro-forma underlying EBITDA projected to be $8.01 million.

Of the offer proceeds $4 million will be used to repay bank debt with the remainder used for general operational purposes. As at 30 June 2004, TeamTalk's forecast net debt will be $10.1 million. This corresponds to a 30 June 2004 forecast net debt/total asset ratio of less than 30%.

TeamTalk chief executive David Ware said that the company has developed a two-pronged growth strategy.

"We intend growing our core business by adding value to existing products and services, and will expand, primarily through acquisition, into allied business areas," Ware said.

"The company has identified some key market segments where mobile radio's price and features represent a compelling proposition.
One of TeamTalk's strengths which will appeal to potential investors is the company's strong cash flows.

"In the two years to 30 June 2003, TeamTalk generated over $20 million of operating cash flow (before financing charges), a large part of which was used to repay debt. We can now use that cash flow to pay dividends and further expand our business," Ware said.

"Additionally, because we have established networks, a programme of preventative maintenance and the recent acquisition of a substantial quantity of network infrastructure assets at very attractive prices, we do not envisage having to make substantial capital expenditures in the foreseeable future.

"Therefore, we will be able to make dividend payments well in excess of reported net profit after tax. We project that Free Cash Flow (net operating cash flow less net investing cash flow) will be well in excess of two times the reported profit in each of the 2004 and 2005 financial years.

"Even after the payment of dividends, we expect to have in excess of $3 million per annum of cash available either to repay debt or expand the business," Ware said.

After the successful completion of the offer, TeamTalk's management will hold approximately 11% of the shares in the company.

Active Communications Ltd, a wholly owned subsidiary of Active Equities, will remain the majority owner of TeamTalk, with a 51.5% shareholding following a successful completion of the IPO. Active Communications remains committed to TeamTalk and has agreed not to offer to sell or dispose of any shares for a period of at least 12 months from the start of quotation on the NZSX.

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