29 March 2006

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Business Today

GlobalCapital’s generous distribution of profit

By a special correspondent

The financial statements published by GlobalCapital last week had company shareholders cheering after the board of directors’ recommended a dividend of 4c5 gross, which brings the total dividend paid out in 2005 at 6c.
The Board of Directors recommended a final ordinary dividend of 1c5 gross per share and a special dividend of 3c gross per share giving a total final dividend of 4c5 gross. Taking into consideration that the shareholders of this Company received an interim dividend of 1c5 gross per share, the total dividend payout for 2005 is 6c gross, representing a 100% increase compared to the 3c gross of 2004. Definitely the 2,000 shareholders in this Company appreciate the Board’s policy of distributing as much profits as possible.
GlobalCapital has achieved strong results in 2005. These are reflected in the profit before tax at Lm2.625million in 2005 compared to Lm1.4million in 2004. This is an exceptional increase of 87.1%. Income from commission and fees receivable increased by Lm620,500 and reached circa Lm3.1million in 2005 against the Lm2.5million registered in 2004.
The balance on the long term business of insurance technical account before tax has increased from Lm185,000 in 2004, to reach Lm787,000 in this financial year. Net Investment Income reached Lm922,000 which is over 10 times that earned in 2004.
These positive figures led to an Operating Profit of Lm1.7million in 2005 against the Lm1.3 million of the previous year. The Group increased its Operating Profit by 29.7% despite having higher administrative expenses, commissions payable, and direct marketing costs. Moreover, GlobalCapital also took a higher impairment of goodwill in 2005.
One must point out that even though in 2005 there was an increase in expenditure this was at a lower rate than the increase in income. The Group also published a series of notes to the condensed consolidated financial statements. These notes assist analysts and investors in interpreting results and show that the Board of Directors believe in best practice accountability towards their shareholders.
The notes also explain which new and revised International Financial Reporting Standards (IFRS), were adopted in 2005 and their consistency approach with those of the previous financial year.
An important figure which analysts of Financial Statements look for is the Earnings Per Share. These results show that this year it has reached 12c2 which is a 52.5% increase on the 8c of 2004. The Profit after Tax in 2005 represents a return on shareholders’ funds of 14.4% against the 10.6% of 2004. The Board of Directors emphasise in their financial review, that the Group has registered positive results from all its main divisions: investments, insurance and property. This is a result of the innovative approach, variety of products and quality of service provided by GlobalCapital.
The net assets of the Group being the shareholders’ funds, have reached circa Lm11.2million from the Lm10million registered the previous year. The increase in net assets during 2005 is of 12.3%. The total assets are Lm28.5million. The condensed cash flow of the Company shows that GlobalCapital increased its balance of cash and cash equivalents at the end of 2005, and the entity used more net cash during the year in investing activities. They also generated more cash in 2005 compared to 2004 in financing activities.
Currently, GlobalCapital is trading at a P/E ratio of nearly 17 and at a share price of over Lm2 and with a net asset value of 84c8, the price to book value is over 2.4 times. Since the gross dividend for the year (Ordinary and Special) stands at 6 cents, the shareholders have registered a gross dividend yield of 3.02% per annum and their dividend cover is 3.13 times.
With a market capitalisation of over Lm27 million, GlobalCapital is the smallest market capitalisation company in the financial services sector of the Malta Stock Exchange.

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