TeleMasters shares fall despite bet on a new business model
The company is moving away from the traditional variable billing service to subscription-based services
Listed technology firm TeleMasters said on Tuesday earnings and cash flow for the six months to December 2019 had increased, driven by cost saving measures and building an annuity-based business model.
The company operates in the telecom sector and specialises in custom telecom solutions for businesses. The primary segments is serves are voice service providers, cloud PBX service providers and internet service providers.
Revenues for the period fell to R42.3m from R53.6m in the previous comparable period.
TeleMasters said the revenue decrease was as a result of the company moving away from the traditional billing service it offered in the past to subscription-based services.
“This gives us and our customers the opportunity to budget for and plan communication expenses throughout the year, thus providing a clear return on investment benefit,” the company said.
Earnings per share increased to 3.9c from 1.34c in the previous six months, a 191% increase.
Headline and diluted headline earnings per share also increased to 3.9c from 1.34c in the previous six months.
A settlement was reached with Huge Group in respect of a long-standing dispute, which had a one-off positive earnings and cash flow affect of R1.72m, the company said.
The business is now focused on four areas: communications, cloud, security and connectivity.
In the coming year, TeleMasters will focus on identifying and acquiring complementary businesses to make it more competitive and improved its profitability. “As part of our new direction, we are also placing renewed focus on our marketing strategy. As a first step, we successfully rebranded our principal operating subsidiary as Catalytic Connections.”
The company declared a 1.50c interim dividend out of retained earnings, payable at the end of April.
While the full affect Covid-19 cannot yet be determined, TeleMasters' board of directors is of the opinion that, “the group has sufficient resources to continue as a going concern for the immediate future”.
ICT and infrastructure support services are classified as essential business services and while no new installations will take place during the lockdown period, TeleMasters customer support and sales staff will continue to work remotely.
“Our objective during this time is to support our customers while safeguarding our employees,” the company said.
Petri Redelinghuys, founder of Herenya Capital Advisors, recently said the Covid-19 crisis might create an interesting opportunity for Telemasters and similar companies, who stand to benefit from any major shift of the corporate mindset with regards to remote working, as more people work away from the office, relying more technology and communication services to get work done.
Shares in TeleMasters fell 24.64% to end the day at 52c a share, giving the company a market value of R21.84m.