Highlights of Interim Directors’ Statements

The formal requirement for companies to publish semi-annual Interim Directors’ Statements was removed exactly four years ago with changes by the European Commission to the Transparency Directive.

Despite the removal for companies to issue such publications, most companies across the international financial markets continued to issue Interim Directors’ Statements or Trading Updates as they are commonly referred to in the UK to keep the market regularly abreast of the most important developments.

Unfortunately in Malta, only a few of the companies continued to recognise the need to maintain a regular flow of information to the market via these Interim Directors’ Statements. In recent weeks, some of the companies listed on the Regulated Main Market published such announcements and the main highlights are reproduced below.

Malta International Airport plc is the only company that publishes condensed financial statements when releasing its semi-annual Interim Directors’ Statements in May (providing Q1 highlights) and November (providing figures for January to September). On 6 November 2019, MIA published an Interim Directors’ Statement confirming that its performance was superior to the corresponding period last year and also published condensed financial statements. These financial statements showed that revenues grew by 9.2% to €77.3 million, operating profits increased by 11.5% to €43.1 million and profits after tax climbed by just over 8% to €26.9 million. It is also worth highlighting that despite the €12 million in capital expenditure incurred by MIA during 2019, as at the end of September 2019, MIA remained debt-free (excluding a lease liability of €52.2 million) and also held cash balances and fixed-term deposits amounting to a total of €29.6 million compared to a cash balance of €20.3 million as at 31 December 2018.

MIA stated that with traffic projections remaining in line with expectations, the final quarter of the current financial year is expected to follow the same positive trend registered in the first nine months when passenger traffic grew by 6.5%. As a result, MIA is expecting to surpass the financial targets as set out at the start of the year. On 17 January 2019, MIA had forecasted a 5.8% increase in passenger numbers to a new record of 7.2 million. The company had also said that it was targeting revenues to amount to €96 million and a net profit of €31 million.

Following the publication of the financial information of MIA for the first nine months of the year, one can perform additional analysis to gauge the level of earnings actually generated in the fourth quarter of 2018 and use this information to estimate the revenue and profitability that the airport operator could generate during the whole of 2019.

During the final quarter of 2018, MIA had registered passenger movements of 1.52 million translating into revenue of €21.4 million and a net profit of €5.44 million. Although MIA indicated that during the final quarter of 2019 it expects to perform along the same trends of the first nine months (passenger growth of 6.5%), and the October traffic statistics show a 8.8% growth in passenger movements, if one conservatively assumes that the company will only achieve the same revenue and profit in the fourth quarter of 2019 as that in the comparative period last year, MIA should therefore achieve overall revenue of at least €98.7 million in 2019 (+7% over 2018 and also higher than the estimate of €96 million at the start of the year) and a net profit of at least €32.3 million (+6.6% over 2018 and also higher than the estimate of €31 million at the start of the year).

International Hotel Investments plc had last issued an Interim Directors’ Statement in November 2017. Earlier this month, IHI explained that year-end forecasts continue to show that targets set for the current financial year ending on 31 December 2019 will be reached with EBITDA numbers expected to outperform 2018 results.

Furthermore, IHI explained in the Interim Directors’ Statement that exchange rate fluctuations in key markets where it owns and operates hotels and real estate (namely in Russia and the UK) are expected to contribute to a positive impact in the consolidated financial results, thus reversing the negative trends experienced in recent years. As a result, although it is too early for IHI to determine the impact of any valuation movements on investment properties or assets held by the Group, profits after tax are likely to be impacted positively.

IHI made reference to two important developments. The company stated that it made further progress in its commitment to commence a programme of asset disposals, having as its main aim the realisation of capital gains from financially mature hotels besides the releasing of equity to fund further acquisitions across the world. In this respect, IHI confirmed that a marketing exercise is underway for the sale of the Corinthia Hotel in Prague.

Incidentally, a few months ago, IHI’s majority shareholder Corinthia Palace Hotel Company Limited (CPHCL) also disposed of its hotel in Prague. This was announced via Corinthia Finance plc since CPHCL is the guarantor to the bonds in issue of this finance vehicle. The sale of this property enabled Corinthia Finance to redeem in full the €7.5 million 6% unsecured bonds 2019/22 on 10 October 2019. Moreover, the announcement revealed that CPHCL will transfer €20 million arising from the sale of the hotel to a reserve account for the purpose of redeeming part of the €40 million 4.25% unsecured bonds maturing on 12 April 2026.

The most interesting aspect for IHI shareholders is that in an updated Financial Analysis Summary also published on 30 August 2019, it was stated that CPHCL is recognising “a profit on disposal of the Panorama Hotel and adjacent garage amounting to €43.8 million”. Moreover, it is important to note that the Panorama Hotel in Prague and the adjacent garage had an aggregate carrying value of €43.9 million in the financial statements of CPHCL as at 31 December 2018. IHI shareholders should therefore be attentive to upcoming announcements to gauge whether the company will also be managing to register a capital gain from the ongoing sale of the Corinthia Hotel in Prague which had a balance sheet value of €88.3 million as at 31 December 2018.

Bank of Valletta plc was the first company to issue its Interim Directors’ Statement, when on 28 October 2019, it noted that its performance was broadly in line with expectations. On the positive side, net interest income was marginally higher when compared to the corresponding period last year and commission and trading income also registered a slight improvement as the bank’s efforts at seeking alternative revenue sources to mitigate the impact of the de-risking initiatives and competitive pressures are yielding positive results. On the other hand, BOV’s performance reflects the higher costs attributed to the transformation programme which is aimed at lowering the bank’s risk profile and ensure long-term sustainability. Furthermore, the bank also recorded lower reversals of loan impairment provisions.

BOV announced that its capital ratios continued to improve while the bank also continued with its capital optimisation plan and, as outlined in the publication of the FY2018 results, BOV is still actively seeking to raise additional Tier 1 Capital by the end of this year which will further strengthen its regulatory capital.

BOV also highlighted that its ongoing transformation programme covers a number of specific streams, mostly relating to governance and risk management and is primarily aimed towards the strengthening of the bank’s regulatory capital position, lower the risk profile while ensuring long term viability in line with its primary strategic priority.

Last week, the fourth smallest company on the Regulated Main Market by market capitalisation – Main Street Complex plc – also published a detailed Interim Directors’ Statement updating the market on its performance since the start of the year. The company mainly highlighted that it registered an 8% increase in footfall to the highest ever recorded since the complex opened for business 15 years ago and it achieved full occupancy in July 2019 when the last remaining outlet was leased out. However, the company indicated that due to the delay in reaching full occupancy, the 2019 financial targets as set out in the IPO Prospectus dated 23 April 2018 are not likely to be achieved. The company had projected a net profit for the year of €0.42 million and indicated a net dividend of €0.0218 per share. Instead, Main Street Complex plc is now expecting to reach these targets in the 2020 financial year. The company also indicated that it continues to actively seek prospective investments that would lead to the eventual expansion of its business.

Malta Properties Company plc announced that during the third quarter of 2019, its performance was in line with expectations and showed an improvement over the same period last year. The company confirmed that the construction of the Zejtun exchange and data centre is progressing and handover to the tenant is expected during the last quarter of 2020. MPC is also reportedly actively working on the plans for the development of two other sites which are expected to be vacated in 2021. Malta Properties indicated that discussions continued with SmartCity (Dubai) FZ-LLC regarding the possible acquisition of 91% of the shares in SmartCity (Malta). MPC also announced that it is in active discussions on acquiring other properties and an announcement will be made in due course.

Although the level of detail provided to the market found in the various Interim Directors’ Statements issued to date vary, they nonetheless provide a good update to the investing community ahead of the publication of the full-year financial statements in the months ahead.

  Print This Page Disclaimer