Despite challenging market conditions faced by its core businesses, the Eden Leisure Group is strong with a healthy cash flow, chairman Ian De Cesare told The Times Business.
While its entertainment business continues to grow, the group is expecting a testing season for its Intercontinental Hotel. Mr De Cesare says the Bay Mobile operation has met difficulty, and piracy still affects its multiplex company.
Earlier this month, the De Cesare family business, which employs 500 full- and part-time staff, reported revenues for 2008 in excess of €23 million and pre-tax earnings of €5.5 million.
Mr De Cesare says the group's financial advisors are identifying the best way to proceed with the redemption of a bond issue which matures next year.
"The current financial turmoil has raised several questions and we are looking at every option available," he says. "It is possible that we will roll over all or part of the bond, or we might refinance in total or in part through additional borrowing. We have hundreds of registered loyal bond holders who have been paid a healthy coupon, on time, every year, for eight years and whom we have kept appraised of our activities over the years."
Bondholders are offered membership of the group's investor relations programme, entitling them to free or discounted use of Eden's business offers.
"We believe that the interest would remain to retain this investment, but in this market, at this time, nothing is set in stone. The group is currently standing on solid ground with significant cash headroom being generated annually to allow us to comfortably service all our commitments."
Revenue and profit at the Intercontinental, Malta's largest hotel, dropped by 11 per cent, due to a 21 per cent increase in five-star rooms, a weak British currency and the economic climate. The group said that a planned €1 million refurbishment programme of the Intercontinental's 110 Club rooms funded through existing cash flows went ahead last winter in preparation for an improvement in market figures.
Mr De Cesare says the group expects tourist arrival numbers to show some real signs of recovery in the last quarter this year.
"All markets are suffering," he pointed out. "However some positive signals are expected from France, Italy and, even if with small numbers, from Greece. We look with a lot of attention to the Eastern European countries and Russia."
He says that the performance of the crucial British market is "very difficult to predict but the negative impact will be above the average double-digit decline of other European markets."
Room rates have been adjusted according to market conditions and marketing has focused on the key message: "create great hotels guests love".
Eden Leisure's entertainment operations yielded a 7.6 per cent increase in turnover in 2008, and an 8.5 per cent increase in income before fixed charges over 2007.
Mr De Cesare indicates that radio station 897 Bay, the Eden Car Park, entertainment venue Bay Arena and the group's service management company fared best from among the group's operations.
"897 Bay has been particularly successful, being constantly surveyed as the most popular station attracting an astronomical figure of over 50 per cent of listeners in the young adult market," he pointed out. "Our other operations, the Eden Cinemas, Eden Superbowl and Cynergi performed well for the year."
The group has had an energy cost-cutting strategy in place since last year and the results have been "significantly above expectations". Hundreds of halogen lights have been removed and investment in longer life, energy saving PL lamps has greatly reduced consumption.
The piracy issue continues to hit a raw nerve, after the group lobbied authorities to take action - to no avail.
"Meetings were held with the Ministry of Justice and Home Affairs when Tonio Borg was minister on the issue of double standards of regulation of cinema and complete non-regulation of the illegal DVD trade in Malta," Mr De Cesare recalls.
"While cinema films are subject to film classifications, DVD rentals or purchases are not. Any child can rent or buy a cinema adult classified film from a rental shop. We also lobbied on amending the Criminal Code, closing loopholes and increasing fines for those caught with copyrighted and illegal materials. To date - and to our knowledge - nothing has materialised on either issue.
"We also had meetings with the Ministry of Competitiveness and Communications and former Minister Ċensu Galea on the coordination of the law change required to close loopholes in the illegal DVD trade. At one stage, we were asked to propose our amendments to the law for adoption, but these efforts were not contemplated due to, we were told, EU-based bureaucracy."
The group, he emphasises, faces unfair competition from the illegal DVD trade and the non-regulation of the market. Cinema-goer numbers decrease annually while the "cowboys" trade under outdated regulations.
He cites the UK scenario as one the local market should emulate: the British Board of Film Classification has evolved into an independent, self- funding body regulating and classifying both the cinema and DVD markets.
Eden Leisure boldly launched Bay Mobile, the mobile virtual network operator, in October. It was the first real challenge to Malta's two network operators. The Bay brand and significant offers on events, free airtime and SMS were "instrumental" in attracting subscribers.
"The customer response was fantastic when we launched," Mr De Cesare says. "Unfortunately, we were less than satisfied with the service given to us by our service provider and we experienced several difficulties in the first couple of months. These have now been resolved, but we still have to persuade customers whose experience was less than a happy one that Bay Mobile should be the preferred mobile provider for the youth market."
But things have changed. Mr De Cesare explains Malta has become one of the most densely populated mobile operator markets in the world, with operators increasing to six in just six months.
"The reality is that most people already have phones and any increase in market penetration will only serve to fragment and dilute the market where people will have more than one or even two SIM cards but spend the same amount or less using special offers of the various operators. Fortunately, as an MVNO, our capital investment in this business was relatively small."