20 September 2006

The Web
Business Today

Maltacom results confirm company had stopped functioning during privatisation process

It hasn’t been a good week for Maltacom with the half yearly results published last week showing a poor performance and the company’s new CEO declaring in interviews that the organisation is overmanned.
As a consequence the company registered the lowest share price for the year.
The poor interim results definitely do not correspond to the beginning of a new era for the company.
In the first six months of this financial year, the Maltacom Group did not register one iota of growth. The half-year results showed an 18% year-on-year drop in profits, a marginal decrease in revenue and a rise of 8.3% in cost of sales which brought a gross profit decrease of 9% to Lm12.5 million.
The results confirm the CEO’s statement earlier this summer that the privatisation process had put a lot on hold for the company.
The group had Lm26.6 million in revenue which is half a percentage point short of the same period last year. The cost of sales exceeded Lm14 million, which is over Lm1,000,000 spent in 2005. Having a lower revenue figure and a corresponding higher cost decreased the resultant gross profit to Lm12.5 million.
The Group registered higher operating expenses, saved in administrative costs, earned less in other income but more from net financial income. The positive figures were not enough to save the day and Maltacom had a lesser profit before tax at Lm6.3 million. This is equivalent to an annualised return of 13.9% on shareholders’ funds. After deducting the tax charge, the profit topped Lm4.2 million which is equivalent to 4c1 in earnings per share.
The group’s segmental accounts also reveal sustained losses in its core and local access network operations, less profits from retail activities, but more earnings from other non-regulated activities. The way costs have skyrocketed, whilst revenue remained static necessitate drastic action. The statement by CEO David Kay that costs need to be trimmed is welcome news for shareholders but not enough to see improved results at the end of the year.
Maltacom’s balance sheet is healthy. Total assets reached Lm115 million and are mainly financed from shareholders’ funds. The gearing ratio is a low 8% and the entity only has Lm11.3 in interest bearing loans and borrowings against a cash balance of Lm15.5 million.
This cash pile will serve for the investments the Group has to carry out to utilise the licenses it holds in 3G, broadband wireless access and digital terrestrial television. Surely the Lm2.3 million capital commitments reported in the company announcement are a far cry from the mentioned Lm30 million injection which the new majority shareholder pledged on acquisition of government’s stake.
The board approved the payment of an ordinary interim dividend of 1c5 per share net of tax. This together with a net asset value of 86 cents is the positive part for investors. Since the shareholders’ forum, the annual general meeting is still eight months away questions may only be addressed by the financial intermediaries who are scheduled to meet the executive within a fortnight.
Statements made by top Maltacom officials that a business as usual policy was being followed whilst the privatisation process was in full swing, are not reflected in the published interim results. For shareholders, it is better to believe this to be an incorrect statement then to conclude that those running Maltacom at the time were knowingly immobilised.

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