GO plc - Interim Results

On 13 August, GO plc published its interim financial statements covering the six months ended 30 June 2013.

Performance Overview

During the first six months of 2013, the Group generated €60.5 million in revenue representing a 4.9% drop from the previous comparable figure. The drop in turnover was due to intense competition across all product lines resulting in lower ‘Average Revenue per User’ (ARPU) levels. Furthermore, mobile revenue continues to be negatively impacted by the ongoing annual reduction in mobile termination rates and roaming as mandated by the Malta Communications Authority and the European Union (EU). Nonetheless, the interim report states that GO retained a strong client base of over 500,000 connections with the decline in traditional fixed-voice connections compensated by growth in broadband, TV and mobile (reversing some of the recent decline in market share).

Despite a 5.5% drop in cost of sales to €37.2 million, the Group’s gross profit for the period under review still declined by 3.7% to €23.4 million. However, the gross profit margin slightly improved to 38.6% compared to 38.1% in the first half of 2012.

Similarly, the GO Group registered a 5.8% reduction in administrative expenses (excluding non-recurring items) to €13.4 million. The interim report explained that the cost savings achieved reflect the Group’s drive to lower costs across all business areas. Nonetheless, the Group still experienced some higher levels of expenditure relating to sales activity and network operations.

As a result, GO registered an operating profit before exceptional items of €10.37 million representing a 1.2% drop from the comparable figure in the first half of 2012.

The 2013 interim results were adversely impacted by €0.2 million in provisions for pensions as well as €0.8 million in voluntary retirement costs. Furthermore, the €1.6 million reversal of a long outstanding receivable not attributable to the Group’s trading activities registered in the first half of 2012 was not repeated during the period under review. As a result, the Group’s operating profit amounted to €9.4 million compared to €11.4 million in the first six months of 2012.

Net finance costs were unchanged at just below €1.1 million.

In the first half of 2012, the financials of GO plc included the €11.4 million gain on the property exchange between the Group and the Government of Malta, a €0.7 million charge in respect of adjustments arising from the fair valuation of land and buildings as well as a €0.57 million impairment charge on the Group’s indirect investment in Forthnet which was brought down to nil. These items were not repeated during the period under review.

As a result, the pre-tax profit of the Group for the period under review amounted to €8.3 million compared to €20.4 million in the first half of 2012 which was boosted by the gain on sale of property. After accounting for a tax charge of €2.9 million, the Group’s net profit amounted to €5.4 million translating into an earnings per share of €0.053 (June 2012: €0.151).

The balance sheet as at 30 June 2013 shows a 9.8% decrease in total assets to €214.8 million compared to the figures as at 31 December 2012 mainly due to the 61% drop in cash balances to €10.6 million as the Group distributed the €9.9 million final dividend with respect to the 2012 financial year and repaid €15.9 million in borrowings. As a result of this, the Group’s total liabilities also shrunk by 13.9% to €117.6 million compared to the 2012 year-end figures. In the first six months of 2013, the Group’s equity also declined by 4.4% to €97.1 million as the profit registered during the period under review was offset by the dividend payment.

Commenting on the results, the Directors noted that during the period under review, GO maintained its strategy of providing its customers with the best possible experience through a three pronged approach. These include investment in its technology (namely extending its ‘Fibre to the Home’ and IPTV networks), revamp of consumer offers (bundled value offers and acquisition of TV content) and improved processes and procedures to service clients more efficiently and effectively.

Dividend

For the sixth consecutive year, the Board of Directors resolved to determine the extent of a dividend distribution for 2013 on the basis of the full-year results. As such, no interim dividend was declared.

Outlook 

Going forward GO intends to maintain the its three pronged strategy. Nonetheless, the Directors warned that the dynamics of the telecommunications market is characterised by shrinking profitability. As such, GO will continue its efforts to pursue other cost saving measures in a bid to offset further downward pressures on profitability and the Group indicated that it will continue to challenge the way it carries out its business and to evaluate new opportunities to grow its activities with a view of pursuing sustainable levels of profitability in the best interest of its shareholders.

With respect to their investment in Forthnet, GO stated that while this was completely written off in its financial statements, this investment remains on the agenda and is constantly being monitored. GO also explained that it is closely following recent events which highlight the strategic importance of Forthnet within the Greek telecommunications market.

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GO plc – Interim Financial Statements for the six months ended 30 June 2013.