KeyTech profits plunge 37%

By Alex Wright- Royal Gazette

KeyTech Ltd. suffered a $4 million fall in profits during 2008/09 as the economic crisis began to take effect with customers changing their plans for the future.

Net income for the company slid to $10.6 million for the year ended March 31, 2009 from $14.6 million for the prior year period.

Total revenues for 2008/09 also decreased 2.8 percent or $3 million to $105.5 million due to declines in fixed line local voice revenue, consistent with industry trends, and in hardware sales.

But partially offsetting these declines was an increase in data revenues for the year, with prior year revenues rising by three percent as the growth in data and cellular revenue streams more than compensated for the diminishing fixed line local voice revenue.

KeyTech also announced in its results for the financial year ended March 31, 2009, that the company had successfully completed a number of major infrastructure projects and substantially advanced others to strengthen its position as a diversified communications service provider, with investment in infrastructure for the year reaching $46.3 million, of which $26.4 million was spent on the Challenger submarine cable system.

However, it proved to be a year of two halves in terms of operating performance with the company’s dual approach of targeting revenue growth in data and tight control of operating costs achieving anticipated net income results, but by the end of the second quarter, September 30, 2008, the changing world economic conditions had started to impact revenue opportunities with customers rethinking their plans in expectation of a continued global recession in 2009.

“Like our customers, we re-evaluated our short-term economic outlook and implemented a number of initiatives, both short and long-term, that we believe will effectively cut costs while improving both product and customer service,” said KeyTech CEO Sheila Lines. “We have reduced maintenance rates with a number of suppliers, frozen executive salaries at current pay levels and revamped organisational structures with a reduced total number of staff positions.”

KeyTech’s total operating expenses for 2008/09 increased by 0.7 percent, or $700,000, due to a $4.3 million rise in maintenance costs driven by higher electricity costs, construction of temporary office space as the internal renovations of its headquarters continued and increased warranty and materials costs.

Partially offsetting these maintenance cost increases were reductions in all other categories of operating expenses year-over-year.

Due to poor investment conditions in 2008/09 and also the realisation of a substantial portion of marketable securities in the summer of 2008 to fund capital projects, investment income combined with realised gains, losses and depreciation on investments decreased from income of $1.1 million in the prior year to a loss of $400,000 in the current year. Equity earnings in affiliates increased by $600,000 in the current year.

Three major capital projects were completed by the company during the year, including the Challenger high speed submarine cable, M3 Wireless’s WCDMA/3G network, and BTC’s Internet protocol Next Generation Network.

In addition, M3 Wireless introduced the much sought after iPhone to Bermuda in April.

“Challenger forms a key platform of our long-term strategy of growing data revenues as does the launch of M3 Wireless’ high speed 3G network which interoperates with M3 Wireless’ existing 2G network, providing additional network resiliency”, said Ms Lines.

In the Cayman Islands, KeyTech’s subsidiary WestTel, started construction of a fibre network in George Town with a service offered to customers on the first section in March 2009.

“We anticipate that the economic environment will continue to be challenging and we have taken steps to prepare to weather a softer revenue environment,” said Ms Lines.

Annual dividends paid to shareholders totalled 60 cents per common share, the same level as the previous year. A one-for-10 share dividend for shareholders was declared and issued fully paid on July 24, 2008. The dividend for the KeyTech shareholders for the quarter ending June 30, 2009 will be 15 cents per share.