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TeamTalk keeps dividends on hold, ploughs earnings growth into network upgrades

Thursday 23rd August 2018

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TeamTalk shares fell 2.2 percent after the company said it will reinvest earnings growth into network upgrades during the next two years. 

The Wellington-based telecommunications provider had considered resuming dividend payments after the sale of its rural internet services provider Farmside to Vodafone New Zealand last year generated enough cash to repay debt and shore up the balance sheet. That plan's been put on hold while TeamTalk rolls out a new digital radio network across the country and upgrades its fixed-line network in the Auckland and Wellington CBDs. 

TeamTalk said the digital radio network supports its existing business and opens new revenue streams in conventional radio, while the wired network upgrade will let it offer new services to broadband customers. As at June 30, it had capital commitments totalling $3.5 million to deliver services to its customers and build the radio network. 

"The board believes firmly that the investment we are making in our infrastructure over the next two years will deliver significant returns to our shareholders," chair Roger Sowry said in a statement. "As such the board believes that substantial reinvestment of our profits into the business at this time will be of considerable benefit to shareholders rather than a resumption of dividends this financial year." 

The shares fell 2 cents to 90 cents, trimming their 14 percent gain this year. 

TeamTalk's capital spending more than doubled to $6.8 million in the year ended June 30. It signed up to a $27 million, three-year lending facility with Bank of New Zealand in June, replacing an earlier facility with Westpac New Zealand. That funding line gives TeamTalk headroom to invest in the upgrades. 

Net profit fell to $4.4 million, or 15.6 cents per share, in the June year, from $5.1 million a year earlier when it reaped a bigger gain on the sale of Farmside. Earnings before interest, tax, depreciation and amortisation increased 4.7 percent to $12.1 million on largely flat revenue of $34.2 million. 

Chief executive Andrew Miller said health and safety legislative changes and the Christchurch and Kaikoura earthquakes meant "many organisations are now considering diversity across their communications portfolio and mobile radio is critical in providing this service". 

(BusinessDesk)

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