Malta’s quad-play telecoms provider GO plc announced its financial results for the year ended 31 December 2010. The Group reported increased turnover and operating profit while the number of customer connections and services increased significantly in 2010 to over 515,000.
In 2010 the Group registered an operating profit of €22.8 million as against €7.4 million in 2009. However, while 2010 includes immaterial one-time adjustments, the performance of 2009 was negatively impacted by various one-time material transactions for voluntary retirement schemes, impairment loss on other receivables, provision for pensions and financial liabilities written back. Normalised operating profit for 2010 amounted to €23.1 million as against €18.6 million in 2009. Normalised EBITDA amounted to €49.1 million, an increase of €6.6 million (15.4 per cent) over the previous year.
In spite of a challenging economic environment and increased competition, the Group managed to increase its turnover from €123.7 million in 2009 to €132.3 million in the year under review, representing growth of 7.0 per cent. Revenue from mobile voice and data services remained stable whilst growth achieved in broadband and digital TV services more than offset the reduction the Group continues to experience in traditional fixed-line voice services.
The Group continues to strengthen its presence in the local market and during 2010 grew its subscriber base across all main product lines. In 2010 the Group increased its customer connections by almost 38,000, an increase of 8.0 per cent over 2009, thereby surpassing the 500,000-customer connections milestone.
Control over expenditure remains one of the GO Group’s main focus areas and during 2010 most discretionary cost items either experienced a reduction or remained stable. Of significance are savings in employee benefit expenses amounting to €3.6 million, representing a reduction of 11.9 per cent over 2009 cost. During the year the Group had an average headcount level of 1,053 FTE, a reduction of 21.7 per cent in the headcount level of a year before. The increased costs are invariably directly related to increased activity, primarily driven by TV operations or as a direct consequence of more intense competition, which is leading to increased subscriber acquisition and retention costs. During 2010 the Group was also impacted by the significant increase in electricity rates which led to an increased cost of utilities of more than €1.2 million.
The positive operating performance of the Group was negatively impacted by the Group’s share of the results of Forgendo Limited. Forgendo is the entity that GO jointly owns with its parent through which both companies invested in Greek telecommunications service provider Forthnet S.A. As at 31 December 2010 Forgendo held 40.99 per cent of Forthnet’s share capital.
During the year under review, the investment in Forgendo negatively impacted Group results by €28.3 million. During 2010, Forthnet’s performance suffered as a result of the economic environment currently prevailing in Greece. While the company continued to grow its telecommunications business, this growth did not make up for the reduced profitability of the TV business. Furthermore, both Forthnet and Forgendo recognised impairment losses on the value of their investment as this has been re-valued to reflect the current Greek economic environment and its impact on the company’s outlook.
Net cash generated from operations amounted to €43.2 million. Although this represents a significant increase over the €18.4 million net cash generated in 2009, the comparative results include payments amounting to €19 million in respect of staff reduction schemes and pension obligations. In 2010, such payments amounted to €1.1 million. Cash generation was sufficient to fund the Group’s investments, to pay declared dividends and result in an improved cash position at year-end when compared to the previous year.
The Group has recorded a loss before taxation amounting to €9.1 million (2009: €3.2 million).
The Board of Directors is recommending the payment of a final dividend of €0.05 net of tax per share for the approval of the shareholders at the next annual general meeting to be held 8 June, which dividend will be payable on 11 June. This net dividend will be payable to shareholders who will be on the register of shareholders as at 9 May.
Commenting about these results, GO plc chairman Deepak Padmanabhan said: “2010 has been yet another challenging year for the Group, which registered growth in its operating performance in spite of a challenging economic environment and very aggressive competition. International events, particularly those in Greece, have negatively impacted GO’s investment in Forthnet.”
He added, “The Group has assiduously laid down solid foundations over the years but we must persevere with the restructuring programme embarked on in 2009 as we must continuously improve our cost base and ensure that we are maximizing revenue streams as customer trends evolve as a result of changing technology and lifestyles.”
GO’s chief executive officer David Kay said: “2010 reinforced our position as the leading quad-play company in Malta, with €16 million invested to ensure that we can continue to delight our customers with new products and services, with ever-better quality and value propositions, not only in the short-term but also the long-term.”
Mr Kay added, “During 2010, we reached our aim of becoming the market leader in Internet and the addition of premium TV content has helped us to retain as well as to attract customers. The proliferation of smartphones has boosted the use of mobile data while the bundling of services under the Home Pack and Business Pack brands remains very attractive to our customers.
“We have an exciting investment programme during 2011 that includes the roll-out of television over broadband, and investment in mobile to improve speeds and reliability. This will serve to strengthen our position as leader in the telecommunications and entertainment markets.”