Teamtalk announces $8m IPO and NZX listing

9.45am

Mobile radio communications company TeamTalk today announced the launch of an $8 million initial public offering (IPO) and New Zealand Exchange listing.

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

The IPO promoters said TeamTalk had strong and reliable cash flow-generating ability and low ongoing capital expenditure requirements would ensure it was capable of supporting an attractive dividend yield.

TeamTalk expects to pay a fully imputed annual dividend of 15 cents per share in 2004 and 2005. At the offer price of $1.75, this equates to an annual yield of 12.8 per cent before tax and inclusive of imputation.

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 pre-tax yield of 19.2 per cent for the first 12 months after quotation on the NZX.

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.

The company forecast operating revenue for the 12 months to 30 June of $19.56 million. The pro-forma underlying ebitda (earnings before interest, tax, depreciation and amortisation) for that period is forecast at $7.03 million.

The projected operating revenue is $19.62 million, with the pro-forma underlying ebitda projected to be $8.01 million.

Some $4 million of the offer proceeds will be used to repay debt, with the remainder used for general operational purposes.

At June 30, 2004, TeamTalk's forecast net debt will be $10.1 million, corresponding to a forecast net debt/total asset ratio of less than 30 per cent.

Because the directors take the view a 30 per cent gearing is conservative, "the company will therefore be well placed for any opportunities that might arise".

Chief executive David Ware said that the company had 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," he said.

The company had identified key market segments where mobile radio's price and features gave it an advantage.

"Increasingly, our customers are relying on data and computer applications rather than using voice calls to manage their mobile workforces.

"Around 30 per cent of all calls across TeamTalk's networks are now data calls, and we expect this percentage to increase over time as we add new products and services to our existing range."

The company said the successful acquisition of Telecom's mobile radio business unit in 2001 had demonstrated the company's ability to successfully integrate acquired businesses.

Mr Ware said one of TeamTalk's strengths was its 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," Mr Ware said.

Having established its networks, it did not anticipate substantial capital expenditure. Dividends would be above profit in 2004 and 2005.

"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," Mr Ware said.

Following the offer, TeamTalk's management will hold approximately 11 per cent of the shares in the company.

The 1.14 million shares offered by existing shareholders consist of up to 1.0 million shares from Sakahyam Telco Ltd, and up to 142,857 shares from David Ware.

Active Communications Ltd, a wholly-owned subsidiary of Active Equities, will remain the majority owner of TeamTalk, with a 51.5 per cent share following the IPO. It 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 NZX.

The minimum investment allocation is 2000 shares. A public pool will comprise 9 per cent of the offering and scaling will be applied. The offer will close at 5pm on April 30, with expected quotation and trading on the NZX on May 6.

- NZPA