VTL - Vital Telecommunications (formerly Team Talk)

[financewiz]

I agree with your analysis Snoopy, I really want Vital to prosper I love their new branding but I'm not seeing enough traction and also concerned by their Sales Manager leaving rather abruptly - doesn't bode well for their next earnings release.

[waikare]

Taken from their News Release..........

27 August 2021

VITAL Increase Profit: Declares dividend of 2.0 cents
VITAL Limited (NZX: VTL), the publicly listed telecommunications services provider today
announced its annual result for the financial year ended 30 June 2021.
• Profit after tax of $0.841m, an increase of 14.5% compared to $0.734m June 2020.
• Revenue $35.24m, an increase of 5.6% compared to $33.36m June 2020.

[nztx]

All the increases seem fine but VTL's Div Payouts in past 3 years (paid once a year in Oct) show the reverse:

2019 3.0 cps
2020 2.5 cps
2021 2.0 cps

(all fully imputed)

[Snoopy]

All the increases seem fine but VTL's Div Payouts in past 3 years (paid once a year in Oct) show the reverse:

2019 3.0 cps
2020 2.5 cps
2021 2.0 cps

(all fully imputed)

Well I have some good news. As a result of the declared dividend, that will be paid in FY2022, the 'capitalised dividend valuation' of this company has increased (was 28cps)!

Year	Dividends as Declared	Gross Dividends	Gross Dividend Total
FY2018	0c +0c	0c + 0c	0c
FY2019	0c + 0c	0c + 0c	0c
FY2020	3.5c + 0c	4.86c + 0c	4.86c
FY2021	2.5c + 0c	3.47c + 0c	3.47c
FY2022	2.0c +0c	2.78c + 0c	2.78c
Total			11.11c

Averaged over 5 years, the dividend works out at 11.11c/5 = 2.22c (gross dividend) per year.

I have considered a capitalised dividend rate of 5% as appropriate for Chorus. However, taking account of VTL being a much smaller beast with a concentrated two area geographical market for broadband, I feel a 6% capitalised dividend rate is more appropriate here. This assumption, combined with the five year average of earnings gives a 'fair value' for VTL shares as:

2.22c / 0.06 = 37cps

SNOOPY

[nztx]

Well I have some good news. As a result of the declared dividend, that will be paid in FY2022, the 'capitalised dividend valuation' of this company has increased (was 28cps)!

Year	Dividends as Declared	Gross Dividends	Gross Dividend Total
FY2018	0c +0c	0c + 0c	0c
FY2019	0c + 0c	0c + 0c	0c
FY2020	3.5c + 0c	4.86c + 0c	4.86c
FY2021	2.5c + 0c	3.47c + 0c	3.47c
FY2012	2.0c +0c	2.78c + 0c	2.78c
Total			11.11c

Averaged over 5 years, the dividend works out at 11.11c/5 = 2.22c (gross dividend) per year.

I have considered a capitalised dividend rate of 5% as appropriate for Chorus. However, taking account of VTL being a much smaller beast with a concentrated two area geographical market for broadband, I feel a 6% capitalised dividend rate is more appropriate here. This assumption, combined with the five year average of earnings gives a 'fair value' for VTL shares as:

2.22c / 0.06 = 37cps

SNOOPY

probably looks a bit better grossed up for notional coy tax

I tend to look at net dividends landing in the hand as a yardstick when comparing apples with apples

Bean Counters are conservative like that

[Southern Lad]

Taken from their News Release..........

27 August 2021

VITAL Increase Profit: Declares dividend of 2.0 cents
VITAL Limited (NZX: VTL), the publicly listed telecommunications services provider today
announced its annual result for the financial year ended 30 June 2021.
• Profit after tax of $0.841m, an increase of 14.5% compared to $0.734m June 2020.
• Revenue $35.24m, an increase of 5.6% compared to $33.36m June 2020.

Friday’s announcement was far more down beat than what we seen in the past. In addition to mentioning the COVID headwinds in terms of customers, shipping delays and skilled worker shortage, we had no mention of the $2 million of annual cost savings that were expected now that the massive capital expenditure project is complete. At the half year announcement back in February, VTL were advising that $1.8m of the $2.0m target had been identified and that $1.2m was expected to be fully realised in FY22. Have VTL recoiled from these savings, or is it a case of these savings now been consumed by the other headwinds?

Presumably depreciation and amortisation expense will increase once the new network is fully switched on, although I note that D&A expense for FY21 is $13.466m compared with $10.637m in FY20 so maybe that increase is already largely reflected. The FY21 increase is all in the wireless network segment.

The immediate challenge is the the Public Safety Network RFP. A lot of management focus is going into attempting to secure this contract, rather than presumably driving the existing business. Does anyone have any insights to the consequences for VTL of the contract:

- What is the expected annual turnover and what profitability could be expected?
- Who are VTL’s competition in this RFP.
- What is the timing for the outcome of the RFP process?
- What additional capital spend will be required if successful and how will this be funded?
- What revenue losses will arise from existing clients (e.g. St John and Wellington Free Ambulance) if VTL don’t win the contract?

[Snoopy]

The immediate challenge is the the Public Safety Network RFP. A lot of management focus is going into attempting to secure this contract, rather than presumably driving the existing business. Does anyone have any insights to the consequences for VTL of the contract:

- What is the expected annual turnover and what profitability could be expected?
- Who are VTL’s competition in this RFP.
- What is the timing for the outcome of the RFP process?
- What additional capital spend will be required if successful and how will this be funded?
- What revenue losses will arise from existing clients (e.g. St John and Wellington Free Ambulance) if VTL don’t win the contract?

Good questions Southern Lad

https://portal.fireandemergency.nz/n...ork-programme/

If you follow the fire service press release (above) on this topic,

"By moving communications services to cellular networks and Digital Land Mobile Radio (LMR), the PSN programme can improve Emergency Services’ performance, capacity and help ensure improved communication in some of New Zealand’s remotest areas."

If you believe what Vital have said in past annual reports, they are the only operators with a 'nationwide digital land radio network'. So you would have to assume that they will be a 'shoe in' for this service contract, provided the government is happy with whatever 'monopoly pricing' they build into their contract proposal. I presume whatever system they tender can piggy back on any remote physical tower infrastructure that has already been set up for the St John's contract. This would suggest to me that any PSN contract incremental capital spend would likely be built into the tender (termed customer capital spend), and paid for directly by the end users. St Johns and the Wellington Free Ambulance are not government owned. So I don't think this PSN contract would have any effect on any existing contract Vital has signed with either ambulance service.

The bidders for the cellular networks bit of the contract, I guess, would come down to Spark, 2 degrees and Vodaphone. Whether Vital has partnered with these three or just tendered for the digital radio piece of the contract on its own I do not know. But I remain a little confused as to how the contract splits between 'digital radio' and 'mobile'. Here is what Spark said in a 2019 podcast on St John Ambulance (my post 1799 in the Spark thread).

"St Johns Ambulance, in 2018 started on a 3 year 'digital transformation' of the St John organization. Ambulances have become their own mobile electronic terminal. Paramedics have their own linked tablets and information can be sent to the hospital before the patient arrives, and passed on directly back to the patients own personal doctor."

This sounds way better than any digital radio service. So does this mean that digital radio is only a back up when the cellphone network is down or the site to be reached is too remote for cell tower communications access? I don't really understand how digital radio dovetails with cellular networks in these emergency service applications.

On the timing of the contract, look at Section 3.1.4 of the "Statement of Performance Expectations 1st July 2021 to 30th June 2022"

https://www.crowninfrastructure.govt...2021-FINAL.pdf

It says the tenders are in and being evaluated and that procurement should be underway by the end of 2021.

As to expected turnover and profitability of this PSN contract, I have no idea!

SNOOPY

[Southern Lad]

Thanks Snoopy - appreciate your backgrounder which helps sets the PSN scene for me.

[financewiz]

Good questions Southern Lad


This sounds way better than any digital radio service. So does this mean that digital radio is only a back up when the cellphone network is down or the site to be reached is too remote for cell tower communications access? I don't really understand how digital radio dovetails with cellular networks in these emergency service applications.

On the timing of the contract, look at Section 3.1.4 of the "Statement of Performance Expectations 1st July 2021 to 30th June 2022"

https://www.crowninfrastructure.govt...2021-FINAL.pdf

It says the tenders are in and being evaluated and that procurement should be underway by the end of 2021.

As to expected turnover and profitability of this PSN contract, I have no idea!

SNOOPY

Any thoughts on what it would mean if Vital don't win the RFP. I guess it just means the loss of the St John's Ambulance part of the business...

[Snoopy]

Any thoughts on what it would mean if Vital don't win the RFP. I guess it just means the loss of the St John's Ambulance part of the business...

Vital only re-signed St John Ambulance a couple of years back and built their new digital radio network on the back of that contract. So I don't think the RFP contact under tender now will have any effect on this relationship.

What I do not know is if Fire or Police use any of Vital's legacy radio networks already. If they do, and the RFP contract is awarded to various local Radio Telephone operations instead of Vital, then Vital will be a loser.

SNOOPY