GO reports €45.2m loss caused by Greek subsidiary

GO plc said today that it made a pre-tax loss of €45.2 million last year as it suffered the poor performance of its Greek subsidiary.

In a statement, it said it needs to rebuild its reserves after having been negatively impacted by the performance of subsidiary Forgendo. As a result, no dividends will be paid to shareholders.

The directors said that  Forgendo Limited's performance had significantly reduced the reserves of the GO Group.

"The Directors consider it to be in the Group's best interest to ensure that it rebuilds an adequate level of reserves. The Directors recommend that at the forthcoming Annual General Meeting to be held on 9 May 2012, the shareholders approve that no dividends are paid."

Forgendo is jointly owned with the GO's immediate parent on a 50/50 basis and currently holds 41.27% of the issued share capital of Forthnet S.A., a telecommunications company operating primarily in Greece.

GO said that 2011 was  characterised by financial uncertainties substantially impacting the Eurozone in general and a number of countries within the Eurozone in particular. Greece was one of the worst impacted countries.

"This economic climate has seriously impacted Forthnet. Despite an acceptable operating performance, Forthnet's results include a charge of €128.5 million representing an impairment charge attributable to goodwill arising from Forthnet's investment in Nova, its TV arm. The results of Forthnet have significantly diluted GO's carrying value of its investment in Forgendo.

"Furthermore, given the volatility currently prevailing in Greece, the Directors no longer consider it prudent to retain a value based on a value in use assessment of Forthnet and as of December 2011, the carrying value of this investment reflects the share price of Forthnet as quoted on the Athens Stock Exchange at the reporting date."

These events, GO said, led it  to recognise a charge of €62.3 million representing a write-down in the value of its shareholding in and amounts receivable from Forgendo as at December 2011 to €3.6 million.

The company said that the Maltese operations have continued to deliver a healthy level of operating profit and it made an operating profit of €18.4 million. Although this represented a decline of €4.4 million when compared to 2010, if one excluded one-time charges relating to pension obligations and voluntary retirement schemes, GO achieved growth of 2.2% in its normalised operating profit from €23.1 million in 2010 to €23.7 million this financial year.

Normalised EBITDA amounted to €51.4 million, an increase of €2.3 million (4.6%) over the comparative period.

The company said the reduction in revenue from mobile business, substantially impacted by regulation, and the continued decline in traditional fixed-line voice services have been offset by growth in TV and data services in general.

The Group also experienced growth in data hosting and related activities.

The Group retains a strong presence in the local market and continues to offer a wide range of services to its large customer base through more than 500,000 customer connections.

"As the Group's incumbent position in fixed-line voice services continues to be challenged, the Group continues to grow its base of customers who make use of broadband, TV and mobile services, albeit growth is slowing down as market reaches saturation."

The Group's total cost base amounted to €108.8 million. Whilst this represented a marginal reduction of €1.2 million over the previous year, discretionary expenditure continued to be addressed and in general only expenditure directly related to sales activity experienced growth.

Of note, GO said, was the growth in costs relating to the TV business as a result of the substantial growth in client base and the acquired role as the main provider of premium content in general and sports in particular.

GO said it continues to streamline processes and to invest in technology and innovation, which allow it to continue to right-size its operations.

The average number of persons employed by the Group during the year amounted to 1,014, a reduction of 3.7% over the previous year.

LOSS BEFORE TAXATION

The Group said it was reporting a loss before taxation of €45.2 million (2010: €9.1 million). The loss per share amounted to €0.503 (2010: €0.189).

Net cash generated from operations amounted to €35.1 million (2010: €43.2 million). Both years include one time  items relating to pensions and voluntary retirement costs, whilst the comparative period include a refund of VAT relating to prior periods. Normalised cash flow from operations for 2011 amounted to €40.4 million, marginally below the €40.9 million generated in 2010.

In 2011 the Group maintained its investment programme at the same level of 2010 and invested €25.6 million.