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Financial analysis: Interim reporting season is over

The interim reporting season came to an end last week with numerous companies issuing their financial statements by the deadline of August 31.

As explained some weeks ago, the main focus during the latest earnings season was the results of the two largest banks in view of the sudden change in the interest rate environment last year, as well as Malta International Airport plc, given the stronger-than-expected recovery in passenger movements.

As was widely expected, all three companies published very positive results at the start of the reporting season between end July and early August, with HSBC Bank Malta plc and MIA also declaring an interim dividend to shareholders which is payable in the coming days. Among the various other companies that published their financial statements in recent weeks, a number of important details emerge.

GO plc generated record revenues in the first half of the year of over €120 million, with particularly strong growth recorded once again in Cyprus. The group reported a double-digit growth in EBITDA to €45.3 million. Prior to the publication of the financial statements, the company declared a net interim dividend of €0.07 per share which was paid in early August.

On the same day of GO’s interim results publication, another noteworthy announcement took place by GO and its subsidiary BMIT Technologies plc, whereby the salient details were provided of the planned transaction between the two companies.

Subject to shareholder approval at the extraordinary general meeting on September 25, BMIT will acquire the majority of GO’s existing portfolio of tower sites for circa €47 million. Earlier this week, the shareholder’s circular was also published, providing additional information on the planned corporate action.

Another notable development was the reinstatement of dividends by RS2 plc following an absence of five years. The company announced a scrip dividend issue to both ordinary and preference shareholders totalling €3 million. As explained by the company’s CEO during the recent annual general meeting, the financial performance in H1 2023 remained subdued.

The CEO had indicated during the meeting that should the company succeed in concluding some major contracts, shareholders will start being rewarded, given the improved financial visibility. Hopefully, the company can provide additional details on the financial impact of such contracts, including updated revenue forecasts for the coming years.

In line with the trend across the banking sector, Lombard Bank Malta plc also registered a positive financial performance with a 43 per cent jump in operating profit to €7.4 million, when excluding the impact of impairment provisions which boosted the financial results of the comparative period as a result of a one-off significant recovery on a long outstanding non-performing loan.

Lombard once again confirmed that it will shortly seek to increase its capital base by circa €50 million in an upcoming rights issue.

Meanwhile, Simonds Farsons Cisk plc and Trident Estates plc will be reporting on their July 2023 interim financial statements by the end of September, given their different financial year-end. The financial performance of Farsons should reflect the evident strength across the tourism and leisure sectors.

The last few months of the year are likely to see a number of important developments

With the interim reporting season now over, the majority of companies will next report on their performance in April 2024 − the deadline for publication of the 2023 annual report. A time frame of eight months without any news to shareholders is far too long. For this reason, more companies need to adopt a more frequent communications strategy similar to that carried out by some of the larger local companies and all international companies.

The key financial information and market commentary published by Bank of Valletta plc, HSBC Bank Malta plc, Malta International Airport plc and APS Bank plc is very helpful for the investing public.

All other companies should replicate such semi-annual announcements in May and November each year.

In the midst of the busy reporting season, the Treasury announced new Malta Government Stock issues for a maximum of €400 million. As always, it would be interesting to gauge the take-up by both retail and institutional investors (including the pricing during the auction process), especially once this new offering comes so soon after the July issuance, also of €400 million.

If the Treasury is once again successful in raising the entire €400 million, this would take the total issuance in 2023 to circa €1.15 billion, excluding the 62+ Malta Government Savings bonds. In this respect, it would be important for the Treasury to then clarify the overall remaining amount required to be raised this year, especially in view of the upcoming pipeline of new corporate bond issuance until the end of the year.

In fact, earlier this week, International Hotel Investments confirmed that it expects to imminently tap the market in order to refinance the upcoming two bond redemptions totalling €45 million. In their interim financial statements published recently, the statement of financial position indicates that just over €250 million in bank borrowings and bonds are due for maturity in the short term. The change in the interest-rate environment is negatively

impacting IHI’s financial performance as interest expenses increased by €4.5 million in the first half of the year to €17.3 million. It is, therefore, important to keep monitoring the progress of their debt refinancing and the rates being granted for such facilities.

During the final quarter of the year, APS Bank plc is also anticipated to offer new fixed-income instruments following approval by shareholders during the last annual general meeting, allowing the directors to issue a maximum of €150 million in bonds or other fixed-income securities.

The last few months of the year are likely to see a number of important developments taking place concurrently, with several companies seeking support from the investing public for their capital requirements. The sizeable amount of liquidity within the financial system, which is largely still not benefiting from the rate hikes by the ECB, is likely to lead to strong support for a number of these new issues subject to fair pricing by the issuers concerned, as investors actively seek ways to mobilise their funds into income-generating assets.

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