Zintel shares fall sharply on profit warning

5.00pm

Shares in telecommunications company Zintel Group fell sharply today after it warned its first half profit to September would be lower as a result of the timing of sales revenue and investing in future growth..

The shares fell 14c, or nearly 10 per cent, to $1.30. The shares have traded between 96c and $1.56 in the past 12 months.

Net profit would be 11-14 per cent less than the corresponding period in 2003, but Zintel said it expected full year to recover notwithstanding costs incurred this year in the start up of its Ericsson Enterprise business in Australia.

Zintel, established in 1995 introduced the concept of toll-free word numbers to the New Zealand business market. It manages toll-free 0800 and 0508 telephone calls and is listed on the alternative exchange.

Managing director Nick Gordon said the first half last year was exceptionally strong at $3.3 million before tax while the company made a second half net profit of $2.83m to March 31.

"This year, that trend will reverse and overall we expect a small increase in pre-tax profit for the full year, after expending a budgeted $1.1m setting up the Ericsson business in Australia without significant revenue income," Mr Gordon said.

"It is a case of one step backward to move two steps forward and I am absolutely confident of the long-term growth prospects for Zintel Group. This year has been affected by timing delays of customer orders in Ericsson Enterprise NZ, increased investment to capitalise on growth opportunities of the existing business, as well as the effort and cost being expended in setting up the Ericsson business in Australia."

Zintel in New Zealand also came under competitive pressure late last year and early this year that affected recurring revenue and margins.

Mr Gordon said a number of initiatives had been successfully implemented as counter measure and Zintel expects a stronger second half performance.

The company said it was experiencing strong cash flow with its projected bank balance around $4m (compared with $2.9m at September 2003) and no debt or term liabilities.

The board plans to maintain the half year dividend.

- NZPA