Go results overshadowed by pension provision
EBITDA up 13 per cent to €25.7 million
Go's 2008 half-year results published last Thursday were overshadowed by the pension provision in terms of the Court Appeal judgment in favour of some of the company's former employees. Two days before the interim results' announcement, Go stated that the total cost for implementing the pension scheme is expected to be approximately €13.16 million and a provision of €11.8 million was taken in the 2008 half-year report. This led the telecoms group to report a pre-tax loss of €1.4 million.
Meanwhile, the group's earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 13 per cent to €25.7 million. The group also reported that it continued to enjoy a healthy liquidity position as a result of the significant free cash flow from its operations.
During the first half of the year, net cash generated from operating activities amounted to €27 million but despite this strong cash flow, the directors failed to declare an interim dividend. When questioned on this decision during the stockbrokers' meeting held last
Friday, Go chairman Sonny Portelli explained that the board of directors did not review the company's dividend policy and the level of dividends for 2008 will be decided upon at a later stage after having further insight into the expected full-year results. Mr Portelli also explained that this one-time provision dented the group's interim results which otherwise were ahead of expectations.
The key highlights of the half-year results are:
• Revenue up 1.6 per cent to €64.2 million;
• EBITDA before pension provision of €25.7 million (+13 per cent);
• Pension provision of €11.8 million;
• Loss for the period of €4.4 million; and
• Net asset value per share of €1.784.
Go turnover during the half-year increased by 1.6 per cent to €64.2 million with the chief financial officer, Edmond Brincat claiming that there was an increase in turnover across all business units (fixed voice, mobile, broadband and TV). The strongest growth was recorded in the TV segment as Go Plus subscribers fast approach the 30,000-mark. In the broadband sector, the group experienced a 12 per cent growth in subscribers while in the mobile market turnover grew by 7.6 per cent despite the effect of reduced roaming charges. This was as a result of an increased market share in post-paid customers which generate a higher Average Revenue Per User (ARPU) than pre-paid customers.
Cost of sales climbed 12.4 per cent to €37.8 million mainly due to a rise in the depreciation charge to €12.9 million (June 2007: €10.6 million). Administrative and distribution expenses decreased by 12.7 per cent to €13.7 million mainly due to a decline in the company's number of employees.
This resulted in group earnings before interest, tax, depreciation and amortisation before the provision for pensions of €25.7 million, an increase of 13 per cent over the comparative period last year.
Shareholders' funds as at June 30 totalled €181 million resulting in a net asset value per share of €1.784.
During the first half of the year Go also recognised a loss of €2.7 million from its 50 per cent shareholding in Forgendo Ltd, the company which together with Emirates International Telecommunications Malta Ltd owns the shareholding in Forthnet. Mr Brincat explained that the loss recognised in the first half of this year is within the company's business plan and that Forthnet is on track to achieve its targets. As at June 30, Forgendo's equity stake in Forthnet was of 23.7 per cent but this increased to 33.9 per cent following the rights issue which was necessary to complete the acquisition of NetMed, the sole pay-TV company in Greece and Cyprus. Forthnet also announced its half-year results this week with the company approaching breakeven as it reported a loss before depreciation of €1.7 million during the second quarter of the year. The Forthnet financials do not yet include the consolidation of NetMed as this will commence this month.
Separately NetMed's EBITDA during the second quarter of the year grew by 5.8 per cent to €15.1 million with a profit before tax of €11.8 million (+12.6 per cent). A report by CitiGroup dated August 29 indicates that the "new" Forthnet is estimated to generate a pre-tax profit of €38 million in 2009 surging to €74 million during the following year. Should this be achieved, Go will be a prime beneficiary through its shareholding in Forgendo.
With limited growth opportunities in Malta (other than the spin-offs from the business within SmartCity), shareholders in Go will be closely monitoring developments at the Greek telecoms company as this investment is likely to be the only meaningful contributor to profit growth and shareholder value in the near term.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
Meanwhile, the group's earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 13 per cent to €25.7 million. The group also reported that it continued to enjoy a healthy liquidity position as a result of the significant free cash flow from its operations.
During the first half of the year, net cash generated from operating activities amounted to €27 million but despite this strong cash flow, the directors failed to declare an interim dividend. When questioned on this decision during the stockbrokers' meeting held last
Friday, Go chairman Sonny Portelli explained that the board of directors did not review the company's dividend policy and the level of dividends for 2008 will be decided upon at a later stage after having further insight into the expected full-year results. Mr Portelli also explained that this one-time provision dented the group's interim results which otherwise were ahead of expectations.
The key highlights of the half-year results are:
• Revenue up 1.6 per cent to €64.2 million;
• EBITDA before pension provision of €25.7 million (+13 per cent);
• Pension provision of €11.8 million;
• Loss for the period of €4.4 million; and
• Net asset value per share of €1.784.
Go turnover during the half-year increased by 1.6 per cent to €64.2 million with the chief financial officer, Edmond Brincat claiming that there was an increase in turnover across all business units (fixed voice, mobile, broadband and TV). The strongest growth was recorded in the TV segment as Go Plus subscribers fast approach the 30,000-mark. In the broadband sector, the group experienced a 12 per cent growth in subscribers while in the mobile market turnover grew by 7.6 per cent despite the effect of reduced roaming charges. This was as a result of an increased market share in post-paid customers which generate a higher Average Revenue Per User (ARPU) than pre-paid customers.
Cost of sales climbed 12.4 per cent to €37.8 million mainly due to a rise in the depreciation charge to €12.9 million (June 2007: €10.6 million). Administrative and distribution expenses decreased by 12.7 per cent to €13.7 million mainly due to a decline in the company's number of employees.
This resulted in group earnings before interest, tax, depreciation and amortisation before the provision for pensions of €25.7 million, an increase of 13 per cent over the comparative period last year.
Shareholders' funds as at June 30 totalled €181 million resulting in a net asset value per share of €1.784.
During the first half of the year Go also recognised a loss of €2.7 million from its 50 per cent shareholding in Forgendo Ltd, the company which together with Emirates International Telecommunications Malta Ltd owns the shareholding in Forthnet. Mr Brincat explained that the loss recognised in the first half of this year is within the company's business plan and that Forthnet is on track to achieve its targets. As at June 30, Forgendo's equity stake in Forthnet was of 23.7 per cent but this increased to 33.9 per cent following the rights issue which was necessary to complete the acquisition of NetMed, the sole pay-TV company in Greece and Cyprus. Forthnet also announced its half-year results this week with the company approaching breakeven as it reported a loss before depreciation of €1.7 million during the second quarter of the year. The Forthnet financials do not yet include the consolidation of NetMed as this will commence this month.
Separately NetMed's EBITDA during the second quarter of the year grew by 5.8 per cent to €15.1 million with a profit before tax of €11.8 million (+12.6 per cent). A report by CitiGroup dated August 29 indicates that the "new" Forthnet is estimated to generate a pre-tax profit of €38 million in 2009 surging to €74 million during the following year. Should this be achieved, Go will be a prime beneficiary through its shareholding in Forgendo.
With limited growth opportunities in Malta (other than the spin-offs from the business within SmartCity), shareholders in Go will be closely monitoring developments at the Greek telecoms company as this investment is likely to be the only meaningful contributor to profit growth and shareholder value in the near term.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.