GO plc - Interim Results

On 13 August, GO plc published its interim financial statements covering the six months ended 30 June 2014.

Performance Overview

GO reported a 0.4% increase in revenues during the first half of the year to €60.8 million despite the competitive market that the Group operates in. GO explained that during the first half of the year, GO revamped its product portfolio, particularly through its Limitless Homepack, which resulted in a growth in its client base as the product offering was well received by the market. GO’s overall client base surpassed 500,000 connections. GO further explained that despite it continued to face a decline in fixed-line telephony, this is being compensated by a growth in the other product sectors, namely broadband, TV and mobile. Despite the negative impact on the average revenue per user (ARPU) from intensified competition across all product lines and a decline in roaming rates mandated by the Malta Communications Authority and the EU Commission, GO managed to increase its retail revenues thereby outperforming international trends.

Cost of sales declined by 2.1%, as the Group pursued cost reductions in most areas. This resulted in an improved gross profit margin of 40.1% (H1 2013: 38.6%). Administrative expenses were contained, although the Group reported that it also experienced increased costs in certain areas directly related to sales activity. GO’s operating profit (before exceptional items) amounted to €11.8 million, which is a 13.3% increase over the comparable period in 2013.

The first 6 months of 2014 were again characterised by expenses related to voluntary retirement costs as GO maintained its efforts to optimise operations and align its organisation structures to reflect market conditions. The exceptional charges amounting to €2 million reduced the increase in operating profit from 13.3% to just 3.4%.

After deducting finance costs, pre-tax profits of €8.5 million represent an increase of 3.1% over the comparative period last year. The tax charge during the first six months amounted to €2.6 million, resulting in a profit for the period of €5.9 million (+10.2%).

GO’s total assets declined by 6.5% to €219.5 million from the beginning of 2014, as the Group used most of its cash balances to pay off some borrowings (€14.8 million) and the final dividend in respect of the 2013 financial year (€7 million). Total equity dropped by 1.2% to €102.3 million. During the first half of 2014, GO extended a loan of €6 million to the Cypriot holding company Forgendo to enable it to finance its participation in the increase in share capital of the Greek telecom company Forthnet. On 1 July 2014, Forthnet had announced that it received a non-binding offer from the Greek incumbent OTE to acquire Forthnet’s pay-TV company NOVA for a consideration raning between €250 to €300 million on a debt-free cash-free basis. On 17 July, Forthnet also confirmed that it received a joint non-binding indicative proposal from Vodafone Group Services Ltd and Wind Hellas Telecommunications SA for the possible acquisition of all the shares in Forthnet not owned by them, including those owned by GO through Forgendo – read the news item here.

Meanwhile, on 9 July 2014, GO confirmed that it converted the loan into additional equity in Forgendo.

Dividend

For the seventh consecutive year, the Board of Directors resolved to determine the extent of a dividend distribution for 2014 on the basis of the full-year results. As such, no interim dividend was declared.

Outlook 

GO’s strategy continues to remain focused on four pillars: i) investment in technology; ii) investment in solutions, applications and processes to serve clients more efficiently and effectively; iii) investment in content; and iv) revamping offers to customers. GO made significant investments in mobile internet and fibre technology which are envisaged to enable GO to deliver an unparalleled quality of service to its clients. In the business segment, GO retained its leading position in the market, providing unmatched infrastructure services to the business community.

On the investment side, GO entered into a share purchase agreement for a 25% stake in Cablenet Communications Systems Limited, a company incorporated in Cyprus which is currently reported to be the leading broadband provider in Cyprus. This agreement is yet to be executed and is subject to regulatory and other approvals in place.

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GO plc – Interim Financial Statements for the six months ended 30 June 2014.