Malta’s quad-play telecoms provider GO plc announced its financial results for the year ended 31 December 2008.
Whilst maintaining its revenue levels, the Group recorded a loss before taxation amounting to €1.3 million compared to a €27.6 million profit in 2007. This drop in profits is the result of various one time transactions including the Cable & Wireless Pensions provision and the share of the results of Greek telecoms company Forthnet. If these one time transactions are excluded, the results for the year reflect a positive operational performance when compared to the previous year.
This profitability represents a negative return of 0.6% (2007: positive 13.8%) of the average shareholders’ funds and of negative 0.4% (2007: positive 10.2%) of the average total assets employed. Earnings per share for the year amounted to a negative €0.03 (2007: €0.165).
The Board of Directors is recommending the payment of a final dividend of €0.12c net of tax per share for the approval of the shareholders at the next Annual General Meeting to be held on 15 May 2009 which dividend will be payable on 20 May 2009. This net dividend will be payable to shareholders who will be on the register of shareholders as at 17 April 2009.
In 2008, GO’s turnover amounted to €130.3 million (2007: €131.9 million) – a decrease of 1.2% over 2007. However, this decrease is mainly the result of the group’s decision to discontinue its international call centre business as a result of the lack of profitability of this business unit.
Revenue from core services remained strong. The declining trend in traditional fixed line services continued throughout the year, which decline was mitigated by the continued growth in broadband and TV services. Mobile also continued with its growth rate, albeit at a lower rate.
Overall, the group increased turnover from its core services. This is encouraging performance when one considers that the year has been characterised by increased competition and further regulation, both at the EU as well as the local levels, which have put increased pressure on the group’s retail activities.
The group registered an operating profit of €11.8 million when compared to an operating profit of €28.6 million in 2007. However, both years included one-off transactions, namely a charge for pensions of €12.9 million in 2008 and income of €9.6 million from a VAT claim refundable in 2007, besides voluntary retirement costs in both years. If these transactions are excluded, the group’s operational performance improved by 14.6% from €23.3 million in 2007 to €26.7 million this year. This performance is the result of the group’s revenue performance, the termination of the loss making international call centre business, reduced depreciation, tighter control over costs and a leaner organisation.
In 2008 the group registered a loss before tax of €1.3 million. Whilst the group registered improved operational performance as already explained, it was impacted by two major transactions. Following a court judgement on 7 July 2008, the Company had to recognise a charge of €12.9 million in respect of past pension costs. Furthermore, the group is recognising its share of the results of Forgendo Limited which have lead to a charge of €15.6- million. Although Forthnet registered a loss in 2008, this result is in line with Forgendo’s expectations.
Cash generation remains healthy allowing the Group to sustain its investment programme and retain the payment of a dividend. Overall the Group continues to enjoy a strong balance sheet enabling it to pursue various investment opportunities.
The group’s operations remain strong and are supported by a robust balance sheet ensuring the group’s ability to pursue its objective of remaining the leading Maltese telecommunications service provider.
Commenting about these results, GO Chairman Sonny Portelli said, “In 2008, GO experienced growth in broadband, mobile and television services, which are making up for the decline in revenues from traditional fixed line voice services which continued in the year. Forthnet’s results for the year are in line with Forgendo’s (GO and EIT) expectations. Moreover, this investment is expected to deliver significant benefit over the medium term.”
He added, “Despite the competitive and regulatory pressures, last year GO managed to maintain its level of turnover. When factoring out the one-off transactions, the operational profitability is very positive.”
GO Chief Executive Officer David Kay said: “2008 was an important year during which we continued our programme of transformation to maintain our leadership in the local telecoms market. We have made investments in our networks to ensure that provision of leading edge services is maintained and the customer benefits from better and improved services.”
Mr Kay said the second submarine fibre-optic cable to Europe via Interoute was completed in December 2008, while the company continued investing to enhance broadband access in the last mile towards customers’ premises. With regards to TV infrastructure, coverage was extended nationwide and a state-of-the-art upgrade was made in the digital TV headend. Mr Kay said GO maintained its leadership in the mobile broadband network infrastructure with 3G / HSDPA service available nationwide.
On the commercial front, Mr Kay reported a growth in business. The TV service grew considerably with the current TV subscriber base in excess of 35,000 customers.
“In the case of mobile, we have increased our post-paid market share. Moreover we have seen significant growth in mobile broadband market,” Mr Kay said.
“Broadband too saw an increase in subscriber base. This has been further augmented recently with the acquisition of Nextweb’s broadband client base. The decline in fixed line business has been marginal, and GO has maintained its strong market position,” he added.
In 2008, several more quad-play outlets offering all four services have opened. Mr Kay referred to the launch of the first quad-play bundle, Home Pack, which proved to be very popular. In addition, throughout the year, GO launched the bundled fixed-wireless broadband offering – Broadband Everywhere, as well as the free on-net fixed calling tariff plan – Talk Anytime. In December, GO launched its range of BlackBerry solutions.
Referring to the GfK telecoms research, Mr Kay said the results confirmed GO as leading telecoms company for customer experience, innovation, reliability and value for money.
On the organisational front, GO continued its internal reorganisation with all functions either merged or in the process of being merged, namely Commercial, IT and Engineering/ Networks, Finance and HR. Mr Kay said that now one call centre is serving all the services offered by the Group. This is one example of increased efficiencies and synergies within the Group leading to reduction in costs.
Mr Kay said various group-wide cost-reduction initiatives have started in 2008 and will continue this year. The company launched its last Voluntary Retirement Scheme to right size its fixed line operations and this scheme will terminate in end May or before.
GO’s top level objectives for 2009 are five-fold: To retain customers and up-sell via bundled services; pursue new business opportunities such as data centre business; continue to focus on customer needs, improve systems and streamline processes to retain revenues at a time when market is not expected to grow; rationalise costs including headcount; and finalise restructuring process.
Photo: GO’s Financial Presentation – from left: David Kay, GO’s Chief Executive Officer, Sonny Portelli, Chairman and Edmond Brincat, Chief Finance Officer.