GO plc - Interim Results Review

GO plc published its interim results to 30 June 2008 following a Board of Directors’ meeting held on 28 August.

The Directors did not declare an interim dividend despite the fact that the Group continues to generate significant free cash flow from its operations amounting to €27 million. The Directors explained that the amount of the dividend distribution for 2008 will be based on the full results for the year.

The key highlights of the half-year results are:
• Revenue up 1.6% to €64.2 million;
• EBITDA before pension provision of €25.7 million (+13%);
• Pension provision of €11.8 million
• Loss for the period of €4.4 million;
• Net asset value per share of €1.784.

GO’s turnover during the half-year to 30 June 2008 increased by 1.6% to €64.2 million with the Chief Financial Officer Mr Edmond Brincat stating during the stockbrokers’ meeting of 29 August that there was an increase in turnover across all business units (fixed voice, mobile, broadband and TV). The strongest growth was recorded in the TV segment as Go Plus subscribers fast approach the 30,000-mark. In the broadband sector the Group experienced a 12% growth in subscribers while in the mobile market turnover grew by 7.6% despite the effect of reduced roaming charges. This was as a result of an increased market share in post-paid customers which generate a higher Average Revenue Per User (ARPU) than pre-paid customers.

Cost of sales climbed 12.4% to €37.8 million mainly due to a rise in the depreciation charge to €12.9 million (June 2007: €10.6 million). Administrative and distribution expenses decreased by 12.7% to €13.7 million mainly due to a decline in the Company’s number of employees. Group EBITDA before the provision for pensions amounted to €25.7 million, an increase of 13% over the comparative period last year.

However these interim results reflect an extraordinary item relating to the Court of Appeal judgement held on 7 July 2008 where the company was mandated to set up a pension scheme effective from 1 January 1975 to ex-Cable and Wireless employees. The Group estimated that the cost to date of past and future benefits payable under the scheme amounts to €13.2 million and the Group recognised this charge as an additional provision amounting to €11.8 million. The financial, technical and legal analysis of the interpretation of the judgement is still ongoing.  On the other hand, costs relating to the voluntary early retirement scheme amounted to a further €0.3 million (June 2007: €4.3 million).

During the first half of the year, GO also recognized a loss of €2.7 million from its 50% shareholding in Forgendo Ltd, the company which together with Emirates International Telecommunications Malta Ltd owns the shareholding in Forthnet. GO’s Chief Financial Officer Mr Edmond Brincat explained that the loss recognized in the first half of 2008 is within the company’s business plan and that Forthnet is on track to achieve its targets. As at 30 June 2008, Forgendo’s equity stake in Forthnet was of 23.7% but this increased to 33.9% following the rights issue which was necessary to complete the acquisition of NetMed, the sole Pay-TV company in Greece and Cyprus. Forthnet also announced its half-year results this week with the company approaching breakeven as it reported a loss before depreciation of €1.7 million during the second quarter of the year. The Forthnet financials do not yet include the consolidation of NetMed as this will commence in September 2008. Separately NetMed’s EBITDA during the second quarter of 2008 grew by 5.8% to €15.1 million with a profit before tax of €11.8 million (+12.6%). A report by CitiGroup dated 29 August 2008 indicates that the ‘new’ Forthnet will generate a pre-tax profit of €38 million in 2009 surging to €74 million during the following year. Should this be achieved GO will be a prime beneficiary through its shareholding in Forgendo.

GO incurred a loss before tax during the half-year ending June 2008 of €1.4 million when compared to a profit before tax of €12.5 million in the comparative period last year, the main impact being the pension provision. After providing for a tax charge of €3 million, GO’s loss after tax during the period under review amounted to €4.4 million.

Total assets as at 30 June 2008 of €253 million include cash balances of €20.2 million. Shareholders’ funds as at 30 June 2008 totalled €181 million resulting in a net asset value per share of €1.784.

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