Farsons addressing realities of the marketplace through investment, re-engineering

Farsons is 'reinventing' its group activities, Farsons Group chief executive Louis A. Farrugia said yesterday in the wake of financial results following a difficult year. The Farsons Group announced results for the year ending January 31, 2006, last week. Group turnover amounted to Lm26,189,000, a slight 1.8% decrease over the previous year's Lm26,669,000.

Group profit from continuing operations amounted to Lm752,000; profit for the financial year, after accounting for losses of Lm542,000 from discontinuing operations (including a one time impairment charge of Lm404,000), amounted to Lm210,000.

The board of directors has commented that the results were affected by the trading environment in which there was a decrease in demand from tourist outlets, increased activity from parallel imports and lower than average temperatures in the summer months of 2005. Additional losses were incurred by certain subsidiary companies.

The board declared that definite action has been taken to address these issues. This includes the selling of the Galleria Entertainment Complex and the downsizing and reorganisation of Guido Vella Ltd. The company has also implemented a cost reduction exercise in operations and administration, together with an early retirement scheme for its employees.

The board is confident that these measures will restore the Farsons Group to a healthy profit within the short term.

"Farsons Group is already taking action to address these realities through a heavy investment programme and by re-engineering our workforce and work practices to ensure that we are well equipped for this changing scenario," Mr Farrugia said.

"We are confident that we will return to healthy profitability within a very short period of time. We are in fact reinventing the group's activities and this will allow us to improve our profitability and adjust our core businesses to suit market trends."

Investment programme proceeding as planned

The investment programme, Mr Farrugia said, was proceeding according to plan. The new soft drinks building was ready and machinery is being ordered. The site for the new Logistics Centre had been excavated and the contract for construction work had been awarded.

This new logistics Centre, covering an area of some 12,700 m2, would centralise all the group's beverages distribution.

It will also incorporate within it new stores for Wands Ltd and Anthony Caruana Ltd, resulting in a more efficient, leaner operation that would give a better product to the consumer and a more efficient service to clients.

In so doing, this investment would free the five depots spread across Malta and the large Wands site. "Our board of directors has approved a strategy whereby these sites will be prepared to be put on the market once they are vacated.

"These sites total in excess of 25,000 m2 of land and include some prime locations. The revenue derived from the sale of these plots of land will be used to part fund the investment programme," Mr Farrugia said.

The third and final phase of the investment plan was the construction of a new Brew House. This would take place in 2009-2011. The first two phases would cost Lm11 million and Farsons are confident that they will finish them on schedule in December, 2007, and within budget.

Re-engineering process at Farsons

Asked how the trade unions have reacted to proposals for work practice changes, Mr Farrugia replied that the wage bill was one of the major costs of the group. The need to address its size was a fundamental part of its re-engineering process.

Following the announcement of an early retirement scheme in 2005, the targeted number of possible retirees has accepted to retire voluntarily.

"May I point out that we are taking these measures in consultation with both the GWU and UHM, who are proving to be very mature interlocutors on this issue as they have fully understood the implications of the challenges facing the group," he said.

"With the full collaboration of the unions, work practices and manning levels are being amended to result in higher efficiencies and outputs,"

The clear understanding is that the jobs and excellent employment conditions prevailing within Farsons Group can only be preserved and also improved if all employees are willing to adapt to the changes in work practices required.

Extensive training and retraining programmes are part of this effort to maintain a competitive edge.

Business park/retail outlets plan for Mriehel

Mr Farrugia said the Farsons Group was focusing more on its property portfolio. In the next five years the group will be releasing a sizable amount of land and property to start new income streams.

The investment programme would also release an area of some 22,000 m2 in Mriehel to be used in the best possible way. One idea being considered by the Farsons Group is a business park, complemented with a large area for retail outlets while retaining valid current architectural structures.

Mr Farrugia said 2005 had been a difficult year for the Group. Looking ahead, he said these difficulties, however, had not discouraged the group but had renewed its enthusiasm to face the challenges ahead.

"The market place has changed and we are changing to ensure that we are able to address these new realities and rise to the test, as we always did in the past," he said.

An interim and final dividend has been approved by the board for recommendation to the annual general meeting, to be held on June 28.