KeyTech Six Month Net Income
KeyTech’s consolidated net income for the six month period ended 30th September 2011 is $9,196,458 — three times the $3,145,031 net income the Bermuda telecommunications company reported for the same period last year.
Included in the current six month period is a gain of $10,516,501 arising on the merger of M3 Wireless and CellularOne reflecting the fair value of 42 percent of assets in the merged company in excess of the previous book value of M3 Wireless.
A one-time impairment to the carrying value of BTC’s rental telephone equipment and related inventory totaling $4,098,930 is included in expenses for the period.
In the current six month period the goodwill and intangible assets value of KeyTech’s Cayman telecommunications business totaling $2,953,641 were impaired primarily due to lower residential revenues as the Cayman resident population contracted.
Included in the current six month period are $519,385 of staff separation costs as compared to $2,984,999 of staff separation costs in the prior period.
Excluding these four items adjusted net income for the period was $6,251,913 compared to $6,130,030 for the prior period.
“As anticipated, we have seen on-going economic challenges in our markets which have affected revenues. We have reduced our operating costs to offset these revenue declines,” said KeyTech CEO Sheila Lines [pictured]. “Notwithstanding current economic conditions we have continued to make major investments in fiber networks in Bermuda and Cayman to ensure our businesses are well placed to meet customer demands for reliable and higher data speeds.
“We will shortly be completing the rebuild of our Hamilton fiber network to a full Metro-Ethernet network for corporate customers and the fiber island-wide core network. Our next phase will be to extend the fiber reach to residences”.
Operating revenues for the period were $45,473,372 compared to $55,800,775 for the six month period ending September 30th 2010, a decrease of $10,327,403 with $7,561,705 of the decrease due to the effect of the accounting change post merger in May 2011 for M3 Wireless. M3 Wireless was consolidated as a subsidiary prior to merger, post merger KeyTech records a share of net profit in CellOne.
Of the remaining $2,765,698 revenue reduction, $1,187,728 relates to reduced use of wireline voice services and $1,579,417 in reduced software and hardware revenues reflecting our strategic move from selling low margin hardware and software and focusing on recurring connectivity revenues. Around the world wireline voice revenue continues to decline as customers increasingly rely on wireless and data messaging services for personal and business communications.
Total expenses decreased by $8,311,217 including staff separation costs and the one time impairment of BTC’s rental telephone assets and by $9,944,533 excluding these costs.
Of the underlying $9,944,533 decrease $7,008,373 reflects the deconsolidation of M3 Wireless in May and $2,936,160 is the result of continued efforts to reduce expenses in the difficult economic environment that is affecting revenues. Total expenses for the period were $45,896,141 compared to $54,207,358 for the same period last year.
“In the current period our primary focus has been on our core connectivity businesses, both in terms of substantial investment in fiber network assets, to enable new data products, and in terms of customer engagement,” said KeyTech CEO Sheila Lines.
“We have made efforts to retain and grow our customer base and where economic conditions allow, grow revenues. We continue to seek efficiencies in our operating business model to preserve share holder value and to ensure our cost base is competitive.”
In May 2011 the operations of M3 Wireless merged with those of CellularOne creating CellOne.
“We realistically assessed the industry trends and the market opportunities available to us, noting the challenges with growing revenue and increasing value while operating in a small geographic market served by three established providers. We determined that a merger with CellularOne would retain wireless diversification and best serve our shareholders ” said Sheila Lines. “The merged CellOne is performing well operationally and meeting our expectations.”
Share of profits of affiliated companies for the six month period were $1,980,677 compared to $1,450,267 in the prior period, with Bermuda CableVision contributing profits of $1,592,744 [$1,779,583 in 2010], CellOne profits of $487,719 and QuoVadis a loss of $99,786 [$329,316 loss in 2010].
“This initial period for CellOne includes merger expenses and does not reflect the full expected future cost synergies when the operational merger of the two companies is completed. We anticipate the full synergistic benefit on operating costs will commence in our next fiscal year” said KeyTech CEO Sheila Lines. “QuoVadis digital certificate growth in Europe has been strong, offsetting reduced earnings from the Bermuda infrastructure business.”
During the six month period, KeyTech invested $4,801,646 in capital assets compared to $6,643,768 during the prior period.
Basic and fully diluted earnings per share for the six month period ended 30th September 2011 were $0.63 compared to $0.21 for the same period last year.
Investment income and realized gains and losses from marketable securities for the period were $12,621 compared to $17,173 for the prior period. Income from non-controlling interests for the period was $nil, compared to $87,548 for the same period last year.
The company declared a dividend of $0.12 per share for the quarters ending June 30, 2011 and September 30, 2011.
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