30 August - 5 September 2001

Maltacom’s financial performance for first six months of 2001

Profits down by 17.3%, as operating costs increase

by Ivan Brincat

Maltacom plc’s profits after tax for the first six months of the year have decreased by 17.3 per cent to Lm4m compared to Lm4.8m the year before.
And while mobile traffic registered an increase in turnover to Lm4,694,000, this sector led to an operating loss of Lm2,141,000 also due to the launch of Go Mobile.
Maltacom chairman Maurice Zarb Adami attributed these huge losses in this sector due to investments made in Go Mobile and because of salaries paid out before the launch of the mobile company.
However, he did not reply to questions by The Malta Business Weekly as to when the company expected to break even or
how many subscribers the company needed to get a return on its investment.
Mr Zarb Adami said there was a loss in this sector because the suppliers had to be paid for the equipment installed by the company. “There are costs related to equipment and even depreciation which cannot be covered by mobile traffic immediately. One has to wait to reap the desired fruits and make profits,” he said.
He added that more customers meant paying a higher licence fee. “It is normal to have expenses exceeding revenue in the first years of operation in any business,” he said.
Go Mobile has been operating for the past nine months but has exceeded the set targets. Mr Zarb Adami said Maltacom had targeted 30,000 subscribers but the com-pany had 50,000 now which meant that the company had to invest in more equipment.
Despite the decrease in profits registered for the first six months of the year, the company increased its turnover by 8.9 per cent to Lm24.2m.
The company continued to register an increase in revenue from line rentals (six per cent), mobile interconnection (eight per cent), internet and internet related services (31 per cent) and other services by 158 per cent.
The group’s earnings per share for the period were down by 16.7 per cent to 4 cents while the company’s earning per share was retained at the same level of 4c5.
Meanwhile, the domestic traffic volume went down by 2.99 per cent, international interconnection traffic was up by 17.08 per cent, domestic and international mobile interconnection traffic was up by 60.9 per cent and 65.9 per cent respectively.
The Group’s finance drector Edgar Borg said the results of the six-month period ended 30 June 2001 have maintained positive past trends. The Group’s turnover has increased and at the same time certain costs have been contained. Furthermore, there was an increase in earnings before interest, taxation, depreciation and amortisation of 4.2 per cent.
He noted that despite these positive results, the increase in group administrative and distribution costs mainly brought about by the subsidiary companies’ operations, outweighed the results.
The main drivers behind the revenue growth is an increased subscriber base for the company and the cellular operators’ networks and also the continuous expansion registered by the subsidiaries which contributed substantially to the Group’s turnover for the current period.
The importance of mobile telephony in the Maltese market continued to increase. Competition in the market brought tariff revisions which resulted in an increase in the mobile operators’ subscriber base, mainly arising from the pre-paid cards and services.
This contributed to the increase in mobile interconnection revenues by about 7.5 per cent over 2000.
Revenue from internet and
related services registered an increase of 31 per cent. Although this represents only four per cent of the Group’s revenue, this revenue source is expected to grow in future.
The group suffered a decrease in turnover from the radio paging
service and tele-sales office-based services such as telex and telegrams and bureaufax which have continued to decline in relative importance.
The labour cost incurred during the period for the group has increased by 8.4 per cent over the same period last year. This increase is the result of the recruitment build-up in certain subsidiary companies following the expansion of their operations and to some extent the annual pay awards granted under collective agreements. This increase was to some extent countered by a decrease in average head count.
Although the company decreased its workforce through early retirement schemes, the group saw the average head count increase from 1,597 in June 2000 to 1,744 in June 2001.
The Group continued its restructuring process during the period to be able to deal effectively with the early removal of its monopolies. Although this process is not complete, significant and important improvements were registered. This contributed to an increase in the administration and distribution costs of 66.4 per cent partly emanating from the increased costs of marketing and promotional activities, advertising and research and development costs, which have increased by 121.2 per cent for the company alone. Another contributing factor was expenses incurred by subsidiaries with the objective of enhancing the services offered at present and by entering into new ventures.
The company registered a significant decrease of 32.2 per cent in professional fees incurred by the company as a result of an initiative taken to decrease these costs and use internal resources as much as possible.
Maltacom said it was the Group’s strategy to diversify, acquire new skills and share in the introduction of new technologies through joint venture companies. During the period under review, the group had four associated companies and disposed of one investment in March.
During the period under review, no share was taken of Vodafone’s profits due to the Group’s intention to dispose of its shareholding, but
a dividend of Lm600,000 was accounted for.

Maltacom appoints new corporate broker

Christopher J. Pace of Globe Financial Stockbrokers Ltd has been appointed corporate stockbroker to Maltacom plc. Mr Pace is a member of the Malta Stock Exchange. The corporate stockbroker to a listed company acts as a point of contact between the investor, the company, the media and the regulator, preparing reports, releasing information, and issuing company announcements.
Mr Pace said: “We feel extremely privileged to have been chosen to serve in this capacity, and we intend to work hard on behalf of Maltacom, its shareholders, and its staff.”
Andrew Zarb Mizzi, managing director of Globe Financial Stockbrokers, says that the company will bring to bear the full weight of its alliance with the Globe Organisation when fulfilling its corporate brokerage responsibilities. “We shall ensure that Maltacom complies at all times with its continuing obligations under the bye-laws of the Malta Stock Exchange,” he said. “We intend to manage Maltacom’s relationship between the domestic market and the financial press, providing an informed point of contact for existing and prospective investors in Maltacom shares, or any other securities that Maltacom may issue.”
Christopher J. Pace, through Globe Financial Stockbrokers, is also corporate broker to Middlesea Insurance, and was joint sponsoring broker when Middlesea was listed on the Malta Stock Exchange. Globe Financial Stockbrokers Ltd was also the sponsoring broker to Barclays Investment Funds, when these were listed on the Malta Stock Exchange. The company was set up in 1991 to specialise in trading activity on the newly formed Malta Stock Exchange. It is active in the field of corporate financing, and recently assisted in the public offer of Verdala Finance plc.