Specialist tele-management and business communication strategies player, TeleMasters, has announced exceptionally strong returns for the third quarter. Despite the cash purchase of Motion Telecoms and the payment of a 6c dividend for its half-year results, the company remains cash flush, and shareholders are likely to be very happy.
The first company on the Alternative Exchange (AltX) to start paying quarterly dividends to shareholders, TeleMasters is creating smiles for everyone involved in the company. Having listed on the JSE Limited on 12 March 2007, the third quarter outstripped its initial performance forecasts by some distance, the TeleMasters June 2008 third quarter results reflect ongoing health and capacity for continued growth.
TeleMasters' revenue is up 19%, before tax profit up 18%, after tax profit up 9% (inclusive of a R698 000 STC tax, which amounts to 16% of total tax paid by the company). Gross profit is up 5% and EPS up 8.7% to 19.57c per share. Retained earnings are up 54%.
"It has been a good period for the company," says Mario Pretorius, TeleMasters' Executive Chairman. "TeleMasters is offering great value at current price levels, with a 13.3% dividend yield. Future prospects are also good - new technologies are being rolled out that will put in place a very versatile platform able to deliver ongoing efficiencies and cost savings. Our ISO certification is also pending, which means quality assurance is becoming more and more of a strength."
"The payment of quarterly dividends has also been very well received in the market," adds Pretorius. "This innovation has made TeleMasters attractive to investors, and this position has been reinforced by an exceptionally strong last quarter."
"With one of the highest dividend yields on the JSE, we offer exceptional value." Pretorius says the change in investor climate since the sub-prime crisis has left many investors wary of investing purely for possible share price growth. "Quarterly reporting and quarterly payment of dividends is our way of communicating our performance regularly." He continues: "Value investing and the pursuit of real returns, as in dividends, should be top of mind for investors."
Pretorius is certainly not exaggerating about TeleMasters' last three months. Over this period, the company's revenue was up 28%, before tax profit up a staggering 92%, after tax profit up 76% and EPS up 76%.
"Importantly, we remain very well-positioned in terms of cash flow," Pretoria elaborates. "Even after paying cash for the acquisition of Motion Telecoms and paying half-year dividends of 6c we are at +9.6%, which is very positive. It reflects the general heath of the company - over the reporting period we added 62 new dealers to our existing network of 160, so our reach and market penetration is constantly growing, which is great."
The TeleMasters board announced a 3c dividend for the quarter, while the cumulative TeleMasters dividend for 2008 already stands at 9c, compared to a 12c total for the 2007 financial year.
Operational review and outlook
Trading conditions continue to be good despite a general decline in the South African economy. Our business is largely unaffected by the economic decline since the nature of the business ensures that clients receive a substantial savings on their communications costs.
In declining markets, we see an increased demand for products, which when implemented, reduce the operational costs of a business. We anticipate continued growth in our dealer market, which over the past period has increased by 62 to 212.
Certain of the acquisitions we were pursuing did not realise, and the board remains committed to only pursuing acquisitions that will be cash generative and will add value to the business. Currently, we have numerous leads in the market, but nothing has yet materialised to the point of informing the market. We are confident in TeleMasters' ability to maintain growth based on our diverse existing communications product range and track record, thus ensuring continued growth of shareholder value.
For and on behalf of the Board:
MB Pretorius
Executive Chairman
BR Topham
Chief Financial Officer
*Please click here to see Interim Results document for full detail.
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