Communications group TeleMasters has posted a significant increase in operating profits for the six months to 31 December 2013 (up to R3,5-million, from R107 028 in the comparative period). This is despite a decline in revenue, down to R55,1-million from R70,7-million in the comparative period.

This profit lift was due to margin improvements as a result of a partial change over in the technological platform used by TeleMasters, from a Least Cost Routing (“LCR”) only platform to a combined LCR and Digital Direct offering.

“These newer offerings and innovations boosted our margin to 29%, when compared with the prior period’s 14,8% gross margin” says TeleMasters CEO Mario Pretorius. “It is clear from the current operating results that this
represents a substantial improvement in our profitability and on-going sustainability.”

Pretorius says that TeleMasters – a provider of voice, data and cloud-based corporate communication – is re-capturing market share lost as a result of changes to the interconnect pricing model as it offers higher quality
communications solutions based on new technologies.

“Our new Digital Direct solution is a superior quality communications product that offers substantial savings to our customers, as opposed to a fixed-line agreement with an incumbent fixed line operator and using only Least Cost routing.”

As a countrywide supplier of fixed-line, fixed cellular, fixed data and virtual PBX services, TeleMasters continues to work on its transition from a fixed cellular agency to a fully ICASA-licensed fixed-line telecommunications company.

The company has invested in a unique set of technologies that delivers the highest quality of voice, whilst also successfully implementing and profitably rolling out its virtual PBX service.

EPS (and HEPS) for the interim period came in at 5.55 cents per share, down from the comparative period EPS of 10.45 cents per share, but this is mainly due to a once-off profit in the prior period relating to a gain on de-recognition
of a liability.

Net asset value per share amounts to 77.61 cents (March 2012: 73.11 cents). Pretorius is satisfied with the company’s positive working capital position and balance sheet, as well as healthy key ratios and very low debt profile.

TeleMasters has a unique dividend policy as it pays a quarterly dividend. A dividend of 0.5 cents per share was declared for the first three months of the financial year and a further one cent per share has been declared for the six month interim period. Pretorius says the board remains committed to paying quarterly dividends which should rise to higher levels in line with improved profitability and cash generation.

Subsequent to the period end, there has been some corporate activity and a new subsidiary, which will help the company target a specific SME segment of the market, has been acquired for a purchase price of R600 000.

TeleMasters continues to be involved in litigation with a previous customer, Huge Group Limited, relating to outstanding receivables of approximately R4,3-million. Pretorius notes that this receivable is adequately secured through a
cession of 10-million shares held against the debt owed and the matter is currently going through an arbitration process. He expects a positive outcome within the current quarter.

Pretorius concludes that the TeleMasters’ Board is bullish on the operational outlook and expects profitability to grow to higher levels in the coming periods.