3 JULY 2002

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Of bonds, cash flow and family-run businesses

The bond issue by the Mizzi Organisation was an instant success. KURT SANSONE talks to Maurice F. Mizzi about new investments and the company’s prospects for the future

The bond issue closed a few hours after being opened to the public. Did the speed by which the offer closed surprise you?

I was confident that the bonds were going to be taken up, maybe not in three to five hours, but I believed in the potential of such an investment. Raising almost Lm15 million in a couple of hours is no mean feat. We have a good reputation in the market, our track record says it all. We are a steady Organisation with a sound balance sheet and good financial results. More importantly we have a good name with our customers because we do not believe in gimmicks. The success shows that investors trust the board of directors, the chairman, the company’s management and direction.

I am pleased with the outcome. The bond issue gave the public a chance to participate in one of the leading organisations in Malta.

How is the organisation going to invest the money raised?

We are going to re-finance three major projects, which the group undertook over recent years. The Waterfront Hotel is one of these projects. We need to re-finance what has already been done and strengthen its reputation as a leading hotel on the island. We have also allocated money for the new Muscat Motors showroom and garage facility, the Arkadia complex in Gozo and the expansion of the Continental Cars premises.

How is the Mizzi Organisation different from other family run companies in Malta?

Almost 25 years ago the board of directors took a bold decision to appoint a chairman who was not involved directly in the running of the company. This change meant that the chairman would bring in more objectivity and carry more clout, being an outsider. The formula worked because the chairman could see developments objectively. We have had an impressive string of chairmen. Albert Mizzi was the first person to occupy the post, then came current Chief Justice Noel Arrigo, the now deputy prime minister Lawrence Gonzi and the former BOV chairman John C. Grech.

The move was not an easy one to make. A lot of egos have to be sacrificed when a company is not run by one of the shareholders, but it is in the best interest of the company and with us all Mizzi Organisation comes first and before anything else.

Furthermore, each company is run separately with its own management structure. The company directors then report to the organisation’s board. The philosophy is that each company has to stand on its own two feet and management has to know the status of the company’s wellbeing every month. If there is a blip we know where it is and act immediately. A lot of companies wait for the annual accounts to be published to know the state of affairs. But the annual general meeting may be too late to correct any problems that may have arisen during the year. That is why acting immediately is of paramount importance to us.

Is the bond issue a forerunner for an IPO?

At the moment it is not the right time for anybody to go public. The market is depressed and does not seem to be getting any better. But the organisation is open to all ideas and I am not against going public. We are a modern company and we would take what we think are the right decisions at the right time. Mizzi Organisation is alive and we respond to market changes in a fast way.

How many people does the organisation employ?

If we take into account also the companies where we do not have 100 per cent shareholding we employ over a 1,000 people. If we consider only those companies where we have 100 per cent shareholding Mizzi Organisation employs over 700 employees. It is a big responsibility.

What customer philosophy does the group have?

The benefit of the doubt is given to the customer. Whenever possible we try not to let the customer leave our premises unsatisfied.

Which companies have shown the biggest growth in the organisation?

The car side has had its good years and despite the general slump experienced last year and also this year we have a significant market share of the car market. Under normal circumstances the market should expand and I estimate that the average yearly sales of new cars in Malta would settle down at around 10,000 cars. Last year registrations were around 7,500. The Group has between 30 and 35 per cent market share of that amount. In 2001 Continental Cars alone had 19 per cent of the market, which made it the company with the largest share in the car market.

General Soft Drinks has also grown. I cannot fail to mention our two new arms, Arkadia and Waterfront. The hotel has had good occupancy rates and since February we experienced an average 95 per cent occupancy rate, which is excellent by any standard.

What is your assessment of the tourism sector?

Malta has good five star hotels. The tourist quality has gone up but it is important that we look after our environment, especially the sea. We have to do our best to stop sea pollution. The sea is one of our best assets and if we pollute it, it will affect seriously our tourist trade.

Our next biggest asset after the sea is our history. Take Hagar Qim, it is an amazing place and yet we are not looking after it enough.

Everybody grumbles about the cash flow problem and yet all this money is being invested in bond issues. How do you explain this?

There seems to be a lot of money around. The man in the street has the money but some companies are over stretched giving the impression that the economy is not performing. The main problem arises from the fact that there are too many businesses competing in the same field. It is a Maltese syndrome by which everybody follows the leader thus creating over saturation. This problem is further aggravated by the smallness of the market. However, the market is very cautious, people are looking more after their investments but are spending less.

What about the banks tightening credit terms?

The banks have internationalised their policies and when they see a problem they prefer to close down a company rather than pump in more cash to keep it afloat. I would say that it is an educational experience rather than a shock for the Maltese businessman. It came as a shock for businessmen who did not know what they are doing.

What are the organisation’s prospects for the future?

In the next 10 years I see us developing and consolidating what we are doing. The group is very well diversified and consolidating what we have is very high on our list of priorities. But as I said, we are always open to new ideas and will respond to the market accordingly.


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Editor: Saviour Balzan
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