Business communication company TeleMasters has decided to recommend a lower dividend than previously paid out, due to the poor trading conditions in SA currently.
Within its reviewed provisional condensed consolidated results statement, for the year ended 30 September 2011, the company says the board of directors is confident about the future prospects of the company, as the conversion from its traditional cellular least-cost routing business to an Independent Communications Authority of SA (ICASA)-licensed business continues to take place.
“However, the board points out that the conversion process will take a longer period before the increased profitability will be realised. This, combined with the poor trading conditions, has resulted in the board taking a cautious view regarding the working capital of the group and prudently deciding to recommend a lower dividend than previously paid,” says the company.
It adds that this will have the effect of the group being able to self-fund the switch-over to the services of a fixed-line operator.
“The board will take every effort to ensure the group remains profitable and cash flush, but cautions shareholders that dividends may be lower during the next few quarters until trading conditions improve.”
Quarterly dividends over last year saw the company pay out an average of 4c per share, but yesterday, for the first quarter of 2012, a dividend of 1c per share was declared.
Fixed dependency
“Our revenue growth of 13% is on the back of the sale of airtime to a large once-off client. These sales of R85 210 724 are not expected to be a recurring business in the new year,” says TeleMasters.
“The reduction in the differential due to changes in the interconnect rates resulted in smaller client agreements being mutually terminated.”
The company says its business model remains strictly based on ensuring healthy operating margins take preference over revenue that is not profitable.
Upgrading tech
The company says its upgrade to being a fully-licensed fixed-line operator is due to the changes in the telecoms environment.
It explains that embracing the new technology will result in greater savings for clients.
“This transition is taking longer than expected, due to various system and sales changes we have needed to develop. The changing of the platform away from pure cellular least-cost routing (LCR) has meant a greater investment in time and to a lesser degree capital, to tweak the offering, which has only become fully marketable in the last quarter of the year.”
TeleMasters says this change is important in the longer term as the margins from the fixed-line operation are more sustainable and potentially more profitable.
CEO Mario Pretorius previously said moving customers onto its own network is “trickier” than the company expected, due to the high levels of technology involved. “We are learning as we go along.”
He also said the group had no choice but to move away from LCR, because of lower interconnect rates. “The ground was falling away from under our feet.”
Debt free
The company says it remains cash positive despite paying out 17c (2010: 14c) per share in dividends and reducing long-term borrowings to the point that during the next financial period it will be almost debt free.
“Our net asset value per share increased 9.5%, to 78.40c per share, after paying out 71% of our earnings to shareholders as we did not require the cash for growth during this transitory period to fixed-line operator.
“Earnings per share grew by 27.94% over the past year during a difficult operating environment in the telecommunications industry. The decision to not renew long-term contracts on the cellular service platform can be clearly seen by the lack of connection incentive bonus received.”
The company operates exclusively in the South African corporate market and is now a full ICASA-licensed fixed-line service provider. It provides clients access to digital telecommunication technologies.
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