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Jason Bull
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Vital Limited Analysis

Overview

Vital is the provider of fundamental nationwide infrastructure and communication services that are Vital to New Zealand. We have been providing connected, seamless, integrated communications and coverage in New Zealand's most remote locations for over 25 years. We own and operate fibre in Auckland and Wellington positioned to take advantage of growing data consumption, are the largest commercial provider of nationwide radio in New Zealand and provide linking radio services through microwave to some of the remotest parts of New Zealand.

We serve many customers across New Zealand including; Government, Civil Defence, Emergency Services, Health, Utilities, Public Transport, Education, Logistics & Freight, Agriculture and Channel partners.

We look forward to providing Vital services for another 25 years.

Vital is the new name of TeamTalk and CityLink.

Performance

The following information was extracted from Vital Limited's Half Year report, released on 21 February 2024:

FINANCIAL PERFORMANCE

Vital Limited ("VTL" or "Company") reported a modest net profit after tax of $0.05 million for the first half of FY23 versus a loss of $0.19 million in the prior financial year period. The result includes an after-tax lease adjustment accounting loss of $0.10 million (prior period included a loss of $0.38 million), so the adjusted result for the interim period was a net profit of $0.15 million.

While the underlying result (net of the lease accounting loss) is a small profit of $0.15 million, this is not where VTL wants to be given the size and value of the network infrastructure the Company owns and operates. VTL's turnaround strategies are geared toward generating a fair and adequate rate of return on the Company's network asset base, and a key to this will be further stabilising and growing revenue.

VTL's revenue declined 4.9% to $13.46 million with recurring revenue down slightly. The decline in the Wireless segment was mainly from the active decision to de-commission a non-commercially viable network. Recurring revenue continued to fall in the Wired (i.e., fibre) network where ongoing rationalisation of customer circuits is still occurring at a slightly faster rate than new circuit additions, however we are seeing momentum with increasing feasibility requests. The macroeconomic environment is seeing customers focused on costs. VTL's channel strategy in Wireless is generating customer gains through dealer partners. The Company's channel and customer engagement efforts in Wired, including a customer portal to automate circuit ordering, are beginning to gain traction although there is further work required to fully complete order automation so any revenue effect is unlikely until FY2025.

VTL's first half profit was net of lease accounting adjustment losses (after tax) of $0.05 million. Lease adjustments through the Income Statement are required when lease terms are changed; this is a non-cash accounting entry resulting from differences in balance sheet asset and liabilities created on the lease renewal or alteration. VTL has around 350 lease sites around New Zealand.

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