MaltaPost plc - Full-Year Results Review

On 15 January MaltaPost plc published its financial results for the year ended 30 September 2008. The postal operator registered a record pre-tax profit of €2.9 million, 74% higher than 2007 and more importantly 28% higher than the forecasts published at the time of the company’s Initial Public Offering in January 2008.

In line with the Dividend Policy published in the IPO Prospectus, the Company also recommended the payment of a dividend, the first dividend to the General Public investors who subscribed to the company’s shares twelve months ago. The Directors are recommending the payment of a net dividend of €0.04 per share representing a net yield of 4.9% (after tax) on the current market price of €0.82 and a net yield of 8% on last year’s €0.50 share price offering at the IPO. Shareholders have the option of receiving the dividend either in cash or by the issue of new shares at a price of €0.77 per share. The dividend will be paid on 4 March 2009 following approval at the Annual General Meeting scheduled for 17 February.

The key highlights of MaltaPost’s full-year results are:
– Turnover up 10 per cent to €20.5 million;
– EBITDA of €3.4 million (+47 per cent);
– Pre-tax profits up 74 per cent to €2.9 million;
– Cash of €7.95 million and shareholders’ funds of €9 million
– No debt;

During the year, MaltaPost’s total revenue grew by 10% to €20.5 million and this improved turnover (principally in the first half of their financial year) was attributed to an overall increase in the company’s activity mainly as a result of increased volumes of mail ahead of the General Elections in March 2008 as well as sales of philatelic/numismatic issues commemorating the introduction of the euro on 1 January 2008. MaltaPost and Lombard Bank issued a 30,000 limited edition set of Malta euro coins and miniature stamp sheets carrying a selection of the new coins. During the year, MaltaPost also began encashing government social welfare cheques in order to start diversifying its services away from traditional mail activities.

The preliminary profit announcement does not reveal the extent of the financial services contribution to overall revenue. In the previous financial year to 30 September 2007, revenue from financial services only accounted for 1% of total income compared to around 14% for the international industry average. One of MaltaPost’s main objectives following the acquisition of a majority shareholding by Lombard Bank Malta plc in the company was to use the bank’s expertise and its own vast branch network to provide low-cost financial services. Should this materialise in the years ahead, it will help the postal operator counteract the continued decline in traditional mail volumes. This is also being mitigated by the healthy increases registered to date in parcels and express mail services as a result of more frequent on-line shopping. During the year, MaltaPost reportedly saw a 22% increase in parcel and courier volumes. Moreover, a media article recently stated that there was a 52% increase in parcel volumes over the Christmas period. This should show up in the financial results for the current financial year to 30 September 2009.

Revenue could also be enhanced through the sale of MaltaPost stationery and other items such as telecommunications products, and this should also help it to diversify its income stream further. In fact, on 30 November 2008, the Chief Operations Officer of Melita plc reported that Melita signed an agreement with MaltaPost to sell its products and services through the post-office branch network. This new source of revenue is also likely to commence during the current financial year.

MaltaPost’s total costs, incorporating staff costs, other operating costs and depreciation amounted to €17.9 million (Sept 07: €17.1 million). Staff costs were marginally lower at €10.1 million and the charge for depreciation declined to €0.87 million from €0.93 million. Meanwhile other expenses increased to €7 million (Sept 07: €6 million). These mainly incorporate costs incurred for international outgoing mail.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by almost 50% during the year under review to €3.4 with the EBITDA margin improving to 16.7% from 12.6% the previous year.

Interest receivable on the company’s portfolio of financial assets increased to €0.35 million from €0.29 million in the previous year. The postal operator recorded a pre-tax profit of €2.9 million and after deducting tax expenses of €1 million, the profit for the year amounts to €1.9 million, a growth of 72%.

The balance sheet as at 30 September clearly reflects the financial strength and robust fundamentals of the company with zero borrowings and cash of €7.95 million apart from other financial assets of €3.8 million. Shareholders funds’ amounted to €9 million translating into a net asset value per share of €0.32. The pre-tax return on equity is a very healthy 33% with an equally attractive return on assets of 9%.

The September 2008 full-year results together with the announcement of a healthy dividend is not only positive news for MaltaPost shareholders but also for shareholders in Lombard Bank as a result of the latter’s 63.8% shareholding in the postal company. Lombard’s full-year results to 31 December 2008 should reflect a strong contribution from MaltaPost when these are published on 12 March 2009. Lombard had increased its equity stake beyond the 60% level in recent months through purchases of further MaltaPost shares on the Malta Stock Exchange at around current price levels. Lombard’s additional investment in MaltaPost is a further strong signal of support for the postal operator. The challenge for MaltaPost will be to sustain such profitability levels in the near term as it seeks to counteract the effect of e-substitution.

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