€45.2 million loss caused by ‘situation outside Go’s control’

Go plc’s poor financial results for last year are due to a “well-documented situation outside Go’s control”, chief executive officer David Kay told The Times Business, as he highlighted the communications group’s achievement in increasing its operating profit in Malta’s saturated and increasingly complex market.

Last Friday, Go reported a pre-tax loss of €45.2 million for 2011, almost five times the €9.1 million pre-tax loss reported in 2010. Normalised operating profit for 2011 amounted to €23.7 million, up from the €23.1 million reported in 2010.

The results of Go’s continued domestic success – the group has more than half a million customer connections – were cancelled by the negative impact of Go’s investment in Forgendo, the joint venture which has in recent years amassed a 41.27 per cent stake in Greek communications company Forthnet.

Go said on Friday that events in Greece and issues affecting Forthnet had hindered its ability to establish the value of its investment through a value-in-use assessment. The board decided that, given the circumstances, the value assigned to the investment in Forthnet through Forgendo should reflect the share price of Forthnet as quoted on the Athens Stock Exchange.

Go had 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.

For the first time since 1998, Go’s board is not recommending the payment of a dividend. Last year, the full-year dividend was cut by half. Go has not declared an interim dividend for four years.

Asked how Go was committed to generate shareholder value given the dissatisfaction with recent bottom line performance, Mr Kay said: “Shareholder value comes from adopting a long-term strategy which, in the case of Go, is based on an ongoing investment programme to ensure that we acquire and retain customers by offering the latest technology backed by exceptional value propositions and good customer care. This is augmented by constant vigilance on expenditure to ensure that Go remains well positioned to sustain its operational and profitability levels.”

He described Go’s operating profit increase as an “impressive feat given the challenges of a saturated market, fierce competition, regulatory pressure and the continued inaction to curtail illegal activities”.

Mr Kay added Go would continue to closely monitor the macroeconomic climate in Greece and Forthnet’s operations.

Go, he stressed, had full confidence in Forthnet’s management which had guided the company to growth in spite of the difficult circumstances it faced.

“Given the volatility of the situation, it is difficult to predict and commit to particular action regarding this investment,” he pointed out.

The chief executive said Greece’s telecommunications market was not saturated and still showed signs of growth.

Forthnet was already represented in one in five Greek households and its management firmly believed it could further grow its market presence. It also had contracts in place for premium television content which spanned several years, allowing the company to retain its leadership in TV services provision.

“This is a time for a prudent approach, with a careful eye on costs, to get through the turbulence impacting Greece in general,” Mr Kay said.