• Group profit before tax reaches €20.4 million, compared to a loss of €14.1 million in the comparative period in 2011;
• Strong performance also reflects a one-off Gain of €11.4 million, following the sale of property in Qawra;
• Successful programme of cost containment underway;
• EBITDA before nonrecurring costs amounts to €24.5 million;
• Healthy level of cash generation.
GO plc delivered a positive performance in the six months ending on 30 June 2012, with the Group returning to profitability.
During the first six months of the current financial year, the Group registered an operating profit of €11.4 million, an increase of €2.1 million over 2011. Furthermore, GO also recognised a gain of €11.4 million following the sale of property in Qawra.
Whilst the results of 2011 had been negatively impacted by the impairment of the Company’s investment in Forthnet through Forgendo, no material impairment was recognised on this investment during the first six months of this year. GO has therefore reported a profit, before tax, of €20.4 million, compared to a loss of €14.1 million in the comparative period of January to June 2011.
The results for the six month period ended June 2012 and the comparative period were both negatively impacted by voluntary retirement costs and pension obligations, items considered to be of an unusual nature, size or incidence whilst during the six month period ending on 30 June 2012, GO secured the recovery of a long outstanding receivable not attributable to trading activities. The removal of the combined impact of these exceptional items resulted in a normalised operating profit of €10.5 million in 2012 compared to €12.4 million registered in the comparative period. The deterioration in the operating performance of the Group is substantially due to lower revenues, which were not compensated for by a decrease in costs.
The Group’s revenue amounted to €63.6 million, compared to €65.2 million in 2011, representing a decline of 2.4%, which is essentially the result of a combination of lower retail revenues reflecting intense competition across all product lines and lower wholesale revenues attributable to a reduction in mobile termination rates as mandated by the Malta Communications Authority.
Whilst the Group retains a strong client base, a substantial portion of which through bundled services, average revenue per user (ARPU) of most products is under pressure, resulting in lower revenues from most products when compared to 2011. It is therefore encouraging to highlight the continued growth in TV services and an ever increasing proportion of clients opting for Homepack, the Group’s highly successful bundle of services aimed at satisfying all telecommunication needs of a household.
Cost of sales and administration costs excluding exceptional costs of an unusual nature, size or incidence amounted to €53.6 million, which represent a marginal increase of €0.3 million over the comparative period. Whilst the Group successfully pursued cost reductions in various areas, it also experienced increased incidence of costs directly related to sales activity and, exceptionally, in the operation of its networks as, throughout the period under review, the Group’s mobile business was migrating to new state of the art technology resulting in a one-time only substantial increase in costs.
The Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) and before costs of an unusual nature, size or incidence, amounted to €24.5 million, as against €26.1 million for the comparable period. Cash generation remains healthy and, as at 30 June 2012, the Group held cash and cash equivalents of €12.4 million, an increase of €5 million over the level reported as at 31 December 2011.
Yiannos Michaelides, Chief Executive Officer of GO plc, said: “In spite of the challenges faced by the industry, in particular competitive and regulatory pressure, GO has delivered positive and encouraging results and continues to generate healthy cash flows. There is no doubt that this is a result of the Group’s investment programme which has allowed it to improve the quality of existing services and widen its product portfolio.
Whilst the Group experienced marginal loss in fixed-line voice connections, it has returned to growing its broadband and TV client base, whilst our mobile client base remains stable. The Group’s ongoing investments in the mobile core and access infrastructures will continue to strengthen the Group’s position in this important segment. During the first half of 2012, the Group continued to pursue the rightsizing of its operations, and headcount levels are just below 900. These reductions become possible as the Group improves business processes which help improve response time to client needs and further contain costs.’’
Deepak Padmanabhan, GO’s Chairman, commented: “The Group trusts that all shareholders will welcome the positive performance and our return to profitability as reported in the interim results. The Group believes that its stated strategy will allow it to remain the service provider of choice for the majority of customers in Malta, ensuring long term sustainability of its operations in this market.
Of course, our investment in Forthnet, through Forgendo, in Greece, also remains on the agenda. As previously stated, the bulk of the Greek investment write-downs have now been taken into account.
Going forward, we believe that our priority is now to evaluate what is in our shareholders’ best interest with regards to this business. We shall also endeavour to maintain clear lines of communication with all stakeholders on this matter.’’
Yiannos Michaelides, Chief Executive Officer at GO addresses stockbrokers and press during the Interim Financial results news conference