The Business Observer Newspaper - 30th July 2015

INTERVIEW

Issue 31

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July 30, 2015

Distributed with the Times of Malta

RS2’s chief executive officer Mario Schembri says management services will give the software company regular income. see pages 10 and 11 >

NEWS Contactless cards are the way of the future, according to the CEO of Visa Europe, Nicolas Huss. see page 5 >

PHOTO: CHRIS SANT FOURNIER

Occupational pensions possible without employer contribution Vanessa Macdonald Automatic enrolment occupational pensions would instil a savings culture to supplement third pillar pensions, even if the employer is not expected to match employees’ contributions, according to consultant David Spiteri Gingell.

Mr Spiteri Gingell said it was important to consider an automatic enrolment savings scheme being proposed by the Pensions Strategy Group as something completely distinct from the state pension – and also one that could exist independently of fiscal incentives if absolutely necessary, at least at the beginning.

“I always assumed that tax incentives are necessary to incentivise savings for retirement. In an ideal world incentives should be introduced but you have to acknowledge

that these reduce government’s income as consumption is deferred to the future. So if it came to a choice between limited third pillar take up in 2020 or introducing the automatic enrolment without incentives, I would definitely say ‘just get it going’.”

In such an event, the Strategy Group is recommending a completely different model to that in both the 2004 and 2010 reports, leaving out the need for the employer to also make a contribution, one of the main bones of contention for both the government and for employers’ representatives at the time, who felt this was an expense the economy could well do without.

Instead, the group underlines that in event that third pillar performance in 2020 is not as expected, serious attention should be given to introducing mandatory enrolment in a savings fund, with the possibil-

ity of opting out, based on sound behavioural science which shows that the vast majority do not opt out.

“In 2004 and again in 2010, we made a mistake of using technical jargon which deflected the ensuing discussion from what we were trying to resolve: the fact that we need to imbue a savings culture if a person wants in retirement a quality of life similar to that enjoyed while in employment. No more and no less.

“Ideally you try to nudge a person into a savings culture as soon as they join the workforce. What is so clever about automatic enrolment is that it catches the employee at the moment when his or her inertia is at its lowest, so they are less likely to opt out. It is also based on the thinking that if you start saving at a young age, you get used to living without that portion of your income, even as other priorities like buying a house or raising children come along,” he said.

Mr Spiteri Gingell said that the task force had studied two models – one in New Zealand (Kiwisaver) and the other in the UK (Nest) – but Malta could design its own. The recommendation presented by the group, he underlined, cautions against doing so before the third pillar pensions had sufficient time to establish themselves.

The Strategy Group found significant differences between the state of play 11 years ago when the first report was issued and now – with much more positive news to report.

In 2004, less than 30 per cent of women worked. Now around 50 per cent do – and when you look at those aged 35 and younger, Malta’s average is significantly higher than that of the EU. “This means that households in the future are much more likely to have two pensions, rather than continued on page 3

INDUSTRY FOCUS e freight and logistics sector in Malta is an important pillar of the country’s economic set-up. But what are the challenges facing this sector? see pages 8 and 9 >

CASE STUDY Demand for property has prompted a revival in buying on plan, gazumping and sale/ rent-back agreements, according to Re/Max managing director Kevin Buttigieg. see pages 12 and 13 >

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NEWS

Property intermediaries are ‘e keyword is choice’ concerned about White Paper continued from page 1

A property intermediary is concerned that the new regulations being proposed for real estate agents will force her to raise the amount of commission from two per cent to around five per cent.

Property intermediaries or introducers, known as sensara, range from full-timers like Janice Azzopardi, to part-timers who get to hear about properties for sale through their work – anything from notaries dealing with inheritances to village grocers – and match them to a buyer.

At present, these intermediaries charge one per cent to both the buyer and seller of the property – but Ms Azzopardi, who set up a website at the beginning of the year, is convinced that the task force drafting the White Paper on the regulations is determined to bring the commission in line with the five per cent charged by real estate agents.

Ms Azzopardi is sick and tired of the way that real estate agents try to portray intermediaries in a negative light – and is quite willing to say so.

“Let me say, loud and clear, that I acknowledge that there are a lot of cowboys out there who know nothing about property, who become intermediaries opportunistically because they hear that something is for sale.

“Many of them know nothing about the legal or financial side of buying and selling a property, let alone about its price and condition. But there are people like myself who have worked in both the construction and property industry for decades,” she said passionately.

The task force is made up predominantly of real estate agents and developers, who she believes are obviously looking at their own agenda.

“Real estate agents know that only a percentage of the public turns to them, and they are constantly trying to show what valueadded they offer through their services, databases and so on.

“But they are only as good as their staff and I know from working with some of them that there are times when a ‘property

consultant’ takes someone to view a property that they themselves have never seen!

“The big companies are aware of this – which is why the leaders from the main real estate agents are the ones pushing for higher standards through the White Paper. The intention is to do this by making it obligatory to have a warrant – which would in turn impose the need for training, which many sensara would not be able to afford – but I cannot see why they should also tamper with the commission, as seems to be the case,” she said, saying she would fight any such attempts to prevent her from offering a cheaper service, in the interest of the consumer.

There are an estimated 600 property intermediaries in Malta – but the actual number could be much higher as some people only ever sell a handful of properties and do not pursue further business.

“I keep costs very low and focus on a few locations that I know well. I can afford to provide a service for just two per cent – and that is already built into the price on my website so what is quoted is what the buyer gets and the seller pays. And the price valuations that we give customers are much more realistic. Isn’t that what competition is all about?

“Like all the serious stakeholders, I am convinced that we should do all we can to raise the level of professionalism and prevent cowboys from giving the sector a bad name. But let us do this without curbing competition.

“I am all in favour of getting a licence or warrant. I am more than convinced that I would pass with flying colours! I wonder how many of the existing ‘consultants’ would...” she said with disdain.

trying to survive on one. That changes the landscape.

“The second thing that has changed since 2004 and 2010 is that the third pillar pension has now been introduced. For everybody out there it was a no-brainer. And yet for 11 years, we denied all those people the chance to be nudged into saving. Finally a breakthrough!

“Maybe its design has been criticised but it is a learning process and that is why we need to wait until 2020 to evaluate its success, reviewing it and tweaking it along the way. It is a learning process for society as well: to become educated and knowledgeable of complex saving instruments. Then – and only then – if the third pillar does not deliver for any reason, we should seriously look at automatic enrolment,” he said.

The Strategy Group is also recommending home equity release through a proper regulated framework, given that 77 per cent of the Maltese own their homes.

“Does home ownership have anything to do with pensions? It has to do with quality of life in retirement! The point is that if you want a quality of life that goes beyond the basic pension, you have to save and to leverage your assets.

“In Malta, we still have the tradition of leaving our property to our children but perhaps the time has come for a new model which will give people a choice to liquidate their assets to increase their retirement income – without losing the right to live in them. The keyword is choice,” he explained.

He was quite honest about the fact that there were many other decisions to be made in due course – such as whether employers

“If you want a quality of life that goes beyond the basic pension, you have to save”

should also make a contribution and whether the government should offer fiscal incentives – but at least the principle of automatic enrolment needed to be accepted.

The 2015 recommendation states that the government should “should strategically assess the introduction of a mandatory opt-in, voluntary opt-out framework, which would see the employer responsible for managing the administration aspects of the scheme and the government responsible for the fiscal incentive”.

There are other conditions to be decided: the automatic enrolment scheme could be limited to companies of a certain size – as in the UK – and the fund could exempt categories of earners like those on very low income as it might not make sense for them to save in this way.

The third pillar has so far failed to attract any takers because of the implementation cost (in fact it is being extended to non-annuity insurance products) but an automatic enrolment scheme should have much more of a critical mass, making it much more attractive to providers.

Nevertheless, it could still prove expensive to administer.

Mr Spiteri Gingell said if automatic enrolment were ever to be introduced, options exist with regard to lowering the cost of administration. Sweden, for example, had introduced a clearing house concept, which in Malta’s case this could be the inland revenue department, through which all contributions would be channelled.

“These would then go to whatever financial services firm is providing the pension instrument.

Kiwisaver in New Zealand uses a default low-risk (and therefore low-interest) fund but gives the saver the option to move their savings into something with a higher return – which, over time, the majority do. We have to remember that the government’ has no role in the performance of savings for retirement, just as it has no role when you invest in unsecured bonds.

“The government, of course, has the responsibility for setting regulatory framework and policy instruments directed to stimulate people to channel their money to save for their future retirement.”

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Lower interchange fees could undermine investment The interchange fees levied on credit and debit card transactions may have been reduced at the insistence of the European Commission but the chief executive officer of Visa Europe, Nicolas Huss, is not convinced that the savings will be passed on to the customer.

He is even more concerned that the lower fees may have a negative impact on the investment being made by card issuers – especially in those countries which are most lacking in card payment infrastructure.

“It is ironic that so much was said about interchange fees when in so many countries they were already very low, especially in countries which already had a robust infrastructure.

“That infrastructure comes at a cost – perhaps often underestimated – whether you are talking about the point-of-sale (POS) systems required by retailers, the banks’ security systems, and even card payment systems at petrol stations,” he said.

“Historically, the bank issuers’ investment has benefitted both retailers and customers; now that €6 billion is moving to large retailers.

This will clearly have an impact on the business model of the issuers but our real concern is that there is no commitment from the merchants to invest any of that money in security or innovation for the customers,” he said, pointing out that Visa Europe recently spent over €1 billion on a new system, with more than €200 million invested every year in new technology and innovation.

“I don’t want to give the impression that we are resisting regulation as we believe it is a good thing. It establishes a level playing field –

which is always welcomed by those who are happy to have competition. But cards have become such a commodity that everyone expects them to be free!” he admitted.

Mr Huss said that if there were insufficient investment, take-up by merchants – known as the acceptance rate – might stagnate.

“My point to regulators or governments is always the same: you need to be very careful as it is in everyone’s interest to encourage card use as the alternatives – cash or cheques – are much more expensive and much less secure.”

The situation in Malta is dynamic, with 811,000 credit and debit cards used in Malta and numbers growing steadily – but that is still just 1.9 cards per person, above the EU average but still lower than in many other countries.

“Cash usage is well above the average that we see in the EU. Cheque usage has disappeared in most countries, and very few countries in Europe still use them – Malta and France being the exceptions.

“And even the way that people use their cards here poses a great opportunity for us as many customers withdraw money at the ATM and then spend it, rather than paying directly with their card!” he smiled.

One way to increase usage would be to increase the number of accepting merchants – there are only 9,000 outlets that have POS, for example, and cards are not yet accepted at petrol stations.

One solution is awareness across all the levels of stakeholders – centred around the fact that cash and cheques are more expensive to use than current interchange levels.

VISA EUROPE CEO NICOLAS HUSS

“The payment part of your purchase is simply disappearing. That is the new evolution”

“The cost for management, administration and security is not visible and straightforward but it has been proved by studies,” he said.

“And cards are also an excellent way to fight the shadow economy!”

In spite of the odd horror story that makes the front page, card fraud is very low. The European Central Bank recently reported that fraud through ATMs and POS was going down but that cases relating to ‘card not present’ payments (CNP) – such as over internet – are going up. The ECB said improvements would come from more uptake of Europay, Mastercard and Visa (EMV) standards – which have effectively prevented almost all the fraud through POS. “Last week’s fraud figures showed historical lows for three to four years – slightly up in Europe but down for Visa overall. CNP is a new challenge and a lot of what

we are doing now is focussed on making sure that we keep up with increased security as e-commerce and m-commerce take off,” he said, referring to products like Visa’s ‘V.me’ – digital wallet – and Verified by Visa, which offers an extra level of security through the use of a unique password, and which is now used in 56 per cent of online intra-European e-commerce transactions.

New forms of payment like Apple Pay and contactless cards are actually boosting card usage and offering increases security and efficiency.

“The fact that most of the digital giants – not only Apple but also Samsung and Google – are using our card system to build new commercial propositions and ways of payments is the proof that our system is very efficient, and very cost-effective.

“By 2020, all of our terminals will be contactless. We have

seen more than one billion transactions over the past 12 months, and 25 per cent of our cards are contactless.

“Transport for London was hoping to reach 20 per cent of ‘day travel’ paid by contactless cards by the end of 2016 but got there within a few months of launch. People have simply replaced their Oyster card with their Visa contactless card or by using the mobile app.

“Imagine the ways this could be used. Say I buy coffee from the same place every day on my way to work. As I approach, a window would pop up on my mobile asking if I want my order to be prepared. I say yes, and my cappuccino is ready and I don’t have to pay because the payment is done by the app!

“I already do this with my taxi through an app. The payment part of your purchase is simply disappearing. That is the new evolution.”

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NEWS

PHOTO: CHRIS SANT FOURNIER

Useful information missing from IRD property form The Building Industry Consultative Council has called a number of stakeholders together, asking them to come up with a list of amendments to the property declaration form introduced less than three months ago.

Schedule 8 to Legal Notice 147/2015 has to be filled in by anyone buying a property and has to be attached to the contract. It was drawn up with the Inland Revenue Department (IRD) in mind – but the BICC sees it as a golden opportunity to collate comprehensive property market statistics.

“You have all this information now being gathered but with a few changes it could be much more useful in terms of statistics,” BICC chairman Charles Buhagiar said.

The form gathers data that was until now not available to entities like the National Statistics Office and the Central Bank of Malta.

“The form is a step in the right direction and it serves the IRD’s purposes. But it is a shame that they could not wait long enough to consult with us as we would have been able to get it right first time,” Mr Buhagiar said.

“We had said some time ago that we wanted to design a better property price index… But sometimes the left hand doesn’t know what the right hand is doing!”

Apart from sales volumes, advertised prices and type of property, the BICC believes it is also important to have timely information – because this is very important for investors.

“The CBM uses advertising prices while the NSO uses contracts – but there could be a year between the time that a property is put on the market and the time the contract is signed,” he pointed out.

The Schedule 8 form gathers several aspects that were not previously available – useful for both the NSO and the CBM – such as the age of the property, its finishing and surroundings, and even its amenities. But it does not ask about the number of bedrooms and bathrooms, which could have a significant impact on the price.

It also does not give any indication of whether the property is freehold or on emphyteusis, for example.

“It is in everyone’s interest to be able to pick up trends and monitor them”

Another lacuna for the statistical buffs is property bought on plan, where the buyer is more or less buying air space, as this is not covered by the Schedule 8 form. And these properties have a separate contract for the actual construction work - which does not have to be deposited in the registry.

“This is perfectly legal but it is going to skew the figures substantially,” he said, suggesting something that is likely to ruffle quite a few feathers: “We are proposing that the construction contract should also be registered.”

Mr Buhagiar has asked the banks which offer mortgages to suggest ways to create one standardised form that would meet their own requirements, as it would save considerable time and energy – if needs be with an annex for additional relevant information like whether the property has a planning permit or not. He has also asked the CBM and the NSO to suggest changes and will be meeting them all after the summer to collate all the recommendations.

Apart from additional data fields, he also feels that the form needs tweaking to make it clearer, pointing out that it asks for the footprint and built area which should be better defined to make it easier for the average buyer to fill in.

The form was introduced by the IRD in order to make it easier to identify underdeclarations in property sales – without having to rely on the government architects’ random visits. The information on the form allows the IRD’s computer system to immediately flag any suspicious amounts and Mr Buhagiar said he had been told that whereas government architects were previously sent to check around 40 per cent of property purchases, that figure had gone down to around 12 per cent – a considerably more efficient use of resources, and one more likely to catch offenders.

He acknowledged that statistics were not meant to capture exceptions but trends, saying that there would always be outliers.

“As estate agents rightly point out, there is also an intangible element of demand which determines a premium over the market price. Some buyers are willing to pay well over market price,” he said.

“But it is in everyone’s interest to be able to pick up trends and monitor them.”

The BICC chairman believes that once the changes are made – which he seems quite optimistic about – a significant database could be built up over time. But he does not want to stop there: he would like to see a ‘cadastre’, a comprehensive registry common overseas, which would include details of ownership and tenure, as well as value and which would serve as a unique identification for each and every property.

“The more information we have, the easier it is for all the stakeholders at every stage of the purchase,” he said.

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INDUSTRY FOCUS

Freight and logistics: the way forward The freight and logistics sector in Malta is an important pillar of the country’s economic set-up which employs approximately 5,000 people. But what are the challenges facing this sector? Is there potential for growth?

Kevin Filletti, sales manager at Attrans, believes an increase in ferry services and connections from mainland Europe would help the business grow.

“At the moment, one of the main problems local transporters are facing is that just one solitary shipping line operates into and out of our port. Due to having no other form of competition, the shipping line has complete control of the market and the prices it charges. Furthermore, the ship departure and arrival days are fixed.

“The Valletta Grand Harbour also suffers from a number of bottlenecks such as old practices, lack of discipline and procedures, gate limitations and lack of quay space to organise professional cargo operations. The port and all associated costs are quite high; for example, port charges in Malta are double what they are in Spain,” Mr Filletti says.

In the past 10 years, he adds, the number of cargo vessels calling in Malta have declined. But the amount of TEUs handled has doubled during that time, partly due to larger vessels entering the port.

“The government would do well to invest more and develop Malta as a true transhipment hub, in the hope that the imbalance of trade will no longer be problematic, especially since a very sizeable amount of trailers still leave Malta empty.

“Aside from lowering port costs, the transport and logistics industry will flourish should the companies be allowed to set up their very own bonded area. As things stand, there are currently only very few bonded areas in Malta besides the ports and Ħal Far, all of which have limitations and associated high costs.

Malta is the only country in the EU where a transport company needs a customer escort to transport goods from outside a port; in other countries, it would be taken care of by a simple transit procedure.”

Asked whether finding drivers is a problem, Mr Filletti replies:

“Some of the market’s most popular and prominent transporters have already begun to shift to a web-based business” “Aside from obvious barriers such as language and the long time away from home, one of our major struggles in finding appropriate drivers is experience. Since our trucks and drivers are required to travel all around Europe, not many local drivers have the required road knowledge or experience, especially since speed and efficiency are pivotal in all our operations.

“On another note, not many individuals are aware that in order to be a driver of such goods, one must be certified, such as for hazardous material and different types of pharmaceuticals.”

Mr Filletti says that the industry is continually evolving and that technology has allowed organisations to reduce huge amounts of indirect costs from travelling by replacing face-to-face meetings with remote technologies.

“Modern communicative technologies have made anyone in the world a quick telephone call away.

Still, we can’t simply transfer existing ways of working – management styles, work practices, collaboration technologies and workplaces – into our offices and hope to be successful. We make sure to support each office, with a diversity of needs.

“Attrans invests heavily in different components we use on board our vehicles, as well as out. I believe e-commerce will play a very large role in transport in the years to come. Some of the market’s most popular and prominent transporters have already begun to shift to a web-based business.”

Charles Schiavone, Malta country manager for DHL, explains that the demand for the transportation of physical documents today is growing. He says: “When the fax machine was developed, one would imagine that technology could have been a serious threat to documents by courier. This was not the case, not even when the internet evolved.

“The demand for the transportation of physical documents today is growing and we are seeing an increase in this product line year on year. Parcel

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carriage is another product line, and this was also unaffected by technology.

“Today we are experiencing a different reality with online shopping. It’s more on the receiving end where we are delivering hundreds of parcels every day to the local community, a B2C phenomenon that we see as a big challenge.

“A real threat today for our business model is the global economy, as well as the country’s economy where you operate from.

If this is not doing well, we will feel it directly.

“Another threat nowadays is the fact that international companies are increasingly becoming targets for criminals, and we respond to this by focusing on our security and safety, which are paramount to our customers, shipments and staff.

“Notwithstanding this, spare parts, samples and other goods have to be shipped out and received at the other end every day, and DHL has used the technology advances to make sure that its service is kept at optimum levels,” he says.

For GMC Transport Co. Ltd, which specialises in services to the pharma industry, distribution is an important activity in the integrated supply-chain management of pharmaceutical products. Sara Buttigieg, a director at GMC, says: “To maintain the original quality of pharmaceutical products, all entities involved in the distribution process have to comply with the principles of Good Distribution Practice (GDP). GDP can be described as that part of quality assurance that ensures that the quality of a pharmaceutical product is maintained by means of adequate control of the numerous activities, which occur during the distribution process.

“With respect to transportation, requirements include care of the product during transport, control of temperature, risk assessments of transport routes and control over the vehicle used. These are ensured through investment in technology and written procedures, which allow for continuous training of key personnel, appropriate storage

conditions, and regular maintenance and calibration of vehicles and equipment,” she says.

Ms Buttigieg says that to reinforce the company’s efforts inmaintaining high quality standards GMC Transport has worked extremely hard on gaining accreditation through ISO 9001:2008 Certification.

She adds: “We have based our foundations on a tradition of commitment to our customers.

Inspection, auditing and certification of compliance with such a quality system based on GDP principles strengthens that commitment and provides a formal mechanism for improvement by triggering appropriate corrective and preventive measures.

“In the highly regulated pharmaceutical industry, quality and consistency are absolutely vital to meeting best-practice standards.

ISO 9001:2008 Certification assures companies in this field that we have met these high standards to provide them with the highest quality of transportation service.”

Jet Freight Ltd offers project cargo services for one-off, non-standard, much of which was aimed at Libya.

Has this business line been hit or is the company still working for the offshore platforms?

Chief executive officer Olvin Galea says: “We have serviced major operators in the oil and gas industry for the past years. The instability in the African region has brought new challenges in the way shippers and agents operate, but the business still managed to service its operations.

“Our project cargo department services also import and export to Malta and other countries such as Scotland with a competitive direct import and export service. Our team is optimistic about Malta confirming its role as a main hub in the Mediterranean area and we are focused on delivering our services in time every time.”

Importers still lament that there are bottlenecks at the ports and that costs are still high. What is the way forward? Joe Gerada, managing director of Thomas Smith, explains that the entries to Malta are mainly of three types: container sea freight, trailer sea freight and air freight.

“ere is optimism about Malta confirming its role as a main hub in the Mediterranean” “In each case, if the shipping agent, freight forwarder and importer are organised, speed of entry – which is what I am understanding is referred to by ‘bottlenecks’ – should not be an issue, particularly if goods are of EU origin.

“As shipping service suppliers we should know what our customer needs, what his time tolerances are; and there is no reason why these should not be met. We have some very fast transit times available and you will find airfreight competing with trailers sometimes,” he says.

Mr Gerada says the buyer will always complain unless it’s a glamour, luxury, fashion item, which unfortunately shipping is not. “In my opinion competition is dealing with any cost issues except where they are a result of inefficiencies because of old unnecessary practices or if some government institutions or departments work limited hours – summer is a case in point.

“I feel the private sector which includes overseas shipping lines, airlines, trailer companies, local shipping agents and freight

forwarders have sharpened their act, and today offer many efficient and cost-effective solutions. Some prices for moving freight are actually unreasonable from a supplier point of view, but then market forces are what they are and they dictate.”

Maltapost believes it plays an important role in the logistics sector.

Chief commercial officer Mark Vella says Maltapost offers a fast and secure local courier delivery service to anywhere in Malta and Gozo to local businesses, shops and individual customers. Services are available within Malta, within Gozo, and between the two islands.

“Maltapost also offers a range of international courier services, which are available to hundreds of countries worldwide with guaranteed delivery times. These services include integrated insurance as well as pick-up of the client’s parcel from any address in Malta and Gozo.

“This service delivers to a final destination within an established timeframe and offers full traceability and proof of delivery. An alternative economic service offered by Maltapost is the registered mail service; it is fast, secure, can be insured, and provides a signature from the addressee as a proof that the item has been successfully delivered. Tracking facility is available on the Maltapost website,” he says.

“With the collaboration of partners worldwide, a national retail network across Malta and Gozo, an extensive delivery fleet and a dedicated team of delivery specialists, Maltapost offers flexible courier solutions for all delivery requirements.”

With online shopping steadily on the increase, and with the launch of hubs in the UK and US, Maltapost offers an alternative address in these countries for customers who would like to shop from online stores which do not deliver to Malta.

“As e-commerce continues to drive up the demand for parcel deliveries, Maltapost’s vision is to provide flexible solutions designed around clients’ needs and lifestyles by investing in technology and innovation,” the spokesman says.

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INTERVIEW

CEO MARIO SCHEMBRI (LEFT) AND CHAIRMAN RADI ABD EL HAJ INSPECT A REFURBISHMENT PROJECT IN THE MOSTA HEADQUARTERS. PHOTOS: CHRIS SANT FOURNIER

Banking on shareholders Listed companies have several ways of calculating their success. Clearly it helps to declare a profit, and if the shareholders get dividends that is even better. But the CEO of RS2 has another metric that he stands by: that so many of shareholders that trusted the company with their money almost a quarter of a century ago are still there.

“Our priority is to make sure that we repay the shareholders who have faith in us.

It is as simple as that. The majority of the shareholders bought in at the very beginning and I do not think that they regret it at all!” Mario Schembri grinned.

He joined RS2 16 years ago, when the card payment software company was just five-years-old, and has seen it grow along with his own career. From an apartment in Sliema, they moved to an apartment in Gżira, but a few years ago needed somewhere which fitted better into their corporate profile.

“In this business if you want to expand, to get the right type of client, give the right image of our company as forward looking, you cannot do that from an apartment,” he said, adding that the company had also grown to 180 employees.

“We looked at a number of sites as we wanted to buy not rent. In the end we came to Mosta as it has a 6,000 sq.m. footprint, which can cater for our current and future needs. We are only using 40 per cent of it at the moment, and are already planning to expand to take over the full site within 24 months.”

The company is simultaneously opening premises in Xewkija, a move that Mr Schembri had first brought up five or six years ago.

“There were two aspects. First of all, we always had issues finding the right people, as there is so much competition for recruitment. Secondly, we had a lot of dedicated Gozitan staff who had to commute every day.

“What if we had a base in Gozo and were able to recruit Gozitan university graduates,

offering them the possibility to work in their field in line with their qualifications? And what if our existing staff no longer needed to commute?” he said.

The idea was clearly valid and once the time was right the wheels were put in motion. A site offered by the Gozo Ministry was chosen and the building was demolished and rebuilt to RS2’s design, with the same feel as its Mosta premises, meaning not only the appropriate IT and security infrastructure, but also meetings rooms, canteen and gym, “just as there is in Mosta”, he beamed.

The company’s 25 Gozitans, who come from a variety of departments, will be moving there when it opens next month but the 900 sq.m. building can take around 80-100 people, which would prove handy if RS2 goes ahead with the idea of having a call centre there.

“Thanks to IT, it does not matter whether people are in Malta or Gozo so the staff includes everything from project managers and business analysts to technical and even accounting staff,” he added.

“Good connectivity is crucial in our line of work so we have fibre optic lines, microwave links, a secondary system and even a back-up to the secondary system. If one provider goes down, we can switch to the other and if they are both down, there is another back-up.”

The company is expanding but some things will not change: the core of all the development work will always be done in Malta and Gozo.

“Nowhere else; that is a company commitment,” he said, tapping the desk for emphasis.

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RS2 was one of the pioneering software firms in Malta to realise the wisdom of licensing – rather than selling – its worldrenowned Bankworks software.

“You give your client the right to use your software but the product and intellectual property remains ours. We tell them how to implement it and set up the interfaces and off they go. In theory we do not ever need to see them again – although we always do,” he smiled.

However, RS2 has gone one step further, into managed services – managing the licence on behalf of the client – based in the new wing at Mosta, designed to meet all the international certification required.

“Licensing is very important but it is a one-time payment, with maintenance over and above that. Managed services will give us a recurrent revenue – invoicing month after month. At the moment managed services represents around 7-8 per cent of revenue but over the coming five or six years, we believe that it will eventually overtake licensing. After two years, we are already at break even,” he explained.

Apart from expanding operations in Malta, the company is also expanding its clientele overseas. It has just signed an agreement with a client in Vietnam and has negotiations underway with a number of other potentials in Asia.

“It is a totally different market which needs to be accommodated with regards to language and time zone. In fact chairman Radi Abd el Haj and I have been to the Philippines as will be opening an office there in the next 6-8 months, manned by around 30 staff, to look after the Asian market,” he said.

In the US, RS2 has already gained a footprint through acquisition. The 50 per cent shareholding of RS2, ITM, and RS2 eventually bought out the other shareholder in Transworks, keen to invest and grow the business on that side of the Atlantic.

“The company had a lot to offer and it did not make economic sense to start from scratch when there was a live company that we could rebrand as RS2 Americas,” he said.

“Transworks was mainly a processing company but it never managed to get the client that we needed. So now we are expanding the scope to licensing and managed services, with software specifically designed for the US market.”

The company is still concluding new agreements in Europe, and Mr Schembri politely coy about the possibility of concluding with another large client, as you

would expect from a listed company. One issue that has cropped up repeatedly is the 18.25 per cent shareholding by Barclays, he admitted. The bank was originally a client but then took up shareholding, which could possibly be seen as a conflict of interest by its other banking clients.

“We are asked about it at every annual general meeting,” he sighed. “We raised this point of view with Barclays, and before we even finished the sentence they had understood immediately. In fact, they have a member on the board, for example, and if there is any negotiation with another client which could be considered in any way as competitive, the board member is not present.

“Their scope was not to find out about our competitors but to work with us!”

The company has barely had time to catch its breath in recent years, using its turnover to grow organically.

RS2 reported a €4.2 million pre-tax profit last year and had only resorted to an IPO to raise money for the building in Mosta because it made financial sense to do so in spite of a healthy €4.5 million cash balance.

At some stage, however, it may want to grow in a quantum leap, which would mean more acquisitions.

“Let me just say that we are looking at it, although that does not necessarily mean we will go ahead. We are looking at mergers and acquisitions – mainly the latter – to see whether we can tap into the US market in particular.

There are many areas we can go into. We would be looking for companies that could supplement our software, to make it even better than it is. And if we find that it is feasible, after discussing with our accountants and advisors and board, then yes. We might be looking at acquisitions.

“Our net gearing is about 13 per cent, which is very low, and which would help us if we were looking for financing. We have always taken a conservative view about borrowing as we are fortunate to be able to self-finance our daily operations,” he said.

“One year out of the last seven we did not declare a dividend. I told shareholders very clearly at the time that this was not because we did not want to pay dividends but because we knew we would have to spend millions on this building and felt this was the best way to go.

“They understood and in the following years they got dividends. This year they got double the previous year. They are quite happy with our performance,” he beamed.

THE MOSTA HEADQUARTERS PROJECT IS THE RIGHT IMAGE FOR THE GROWING COMPANY.

“We would be looking for companies that could supplement our software, to make it even better”

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CASE STUDY

Property demand spawning new solutions There is such a demand for property that almost dormant practices like buying on plan are seeing a revival, Re/Max Malta managing director Kevin Buttigieg said.

“I never thought I would see selling on plan coming back into use! But we just sold four blocks in Sliema as soon as the permit was issued – the owner hasn’t even started digging the foundations. That is how crazy it is.

“It is great for the buyer as they pay roughly 10-15 per cent less if they can put down 10 per cent of total. And, of course, those able to put down more can negotiate a better discount.

“It helps developers with their cash flow and leverage, and represents considerable saving on financing costs. They want the money to get on with new developments.

The real estate market is the strongest it has been in 30 years,” he said.

The demand for property for both rental and sale means that as the favourite hotspots run out of candidates, other areas start to pick up.

“And projects in certain areas are making them more attractive. For example, the south has started to explode because of Skyparks and Smart City as people – local and foreign – want to live close to where they work,” he said.

Never one to sit still, Mr Buttigieg and his brother Jeff are even more out of breath than normal for this time of year. By the end of June, Re/Max had already hit the €200 million work – almost in line with full year sales last year of €237 million. And with promises of sale up 70 per cent, Mr Buttigieg is very pleased indeed with the forecasts.

“My target is €450 million worth of sales – and that is just short of the half billion mark,” he said, nearly bouncing in his chair.

“And our letting department should be up by 35-40 per cent more than in 2014.

Compared to the rest of Europe, residential rentals are getting a return of 4-8.5 per cent return while commercial rentals are getting from five per cent to as high as 11 per cent, which is phenomenal. Not to mention the capital appreciation, which depends on where and what you buy – and how it is finished.”

Indeed, he stressed that quality has become a key factor, for both Maltese and foreigners, and for anything from a €90,000 apartment to a €5 million villa.

“It has improved tremendously, but we still need to see more. The projects we are seeing nowadays, for instance the Q1 units at Tigné Point and the Fort Cambridge common parts are all very nicely done. And the new two-storey development by architect Ray Demicoli at Portomaso is unique.

In fact, it was sold out even before it was officially launched,” he said.

And it is not just on the finishing that expectations are rising but also on size: “For an upmarket one bedroom people expect over 60 sq.m. – even up to 100 sq.m, while for a two-bedroom apartment it has to be over 100 sq.m., and for a three bedroom 220 sq.m. and over.”

Another trend he has noticed relates to office buildings. Some businesses which own their own offices have sold the property for 80-90 per cent of the value, releasing liquidity they need to grow their companies’ operations. They then rent back the property and retain the right to buy it back in a few years, for a pre-agreed capital appreciation.

“The market is so buoyant that we are seeing all sorts of transactions now. It is a good

RE/MAX MALTA MANAGING DIRECTOR KEVIN BUTTIGIEG

sign,” he said, adding that premium properties offer attract so many potential tenants that they have started to try to outbid each other – a common practice overseas but not in Malta.

“At least promise of sale is as sound as a contract – and defaults are very, very rare, at least so far,” he said.

Residential demand is being met by casting the net wider across Malta but with office space it is not that easy. There are several new projects that will be coming online in the next few years – the Spinola Bay development, the new high-rise building in Mrieħel, the Farsons Business park, to name but a few – but that is already going to be too late for some companies.

“We usually manage to find a solution if a company needs 2,000 sq.m. of office space, but those who want 6,000-8,000 sq.m. will need to wait until end 2016 or end 2017.

“Some companies could not wait and have gone to other countries but there is a constant stream of new enquiries and many companies that are already here are growing and moving to bigger and bigger premises, vacating space for new ones,” he said.

There has been a tremendous surge in rentals as expatriates move to Malta to work or live. But Re/Max believe that many of these could be persuaded to buy – and is actually planning a series of seminars on the topic. Success, however, would in turn cause more problems, especially for the ultra high net worth individuals now coming to Malta through the citizenship scheme.

“They are not finding what they want. We have not managed to persuade Maltese developers of this, although we were more successful with foreign investors. For example, there are some who bought a large plot and instead of squeezing four villas on to it will build one massive villa... They really believe that they will get a good return on their money – and I agree with them,” he said.

“At the moment, the Individual Investor Programme (IIP) applicants are renting but we believe that once they get used to Malta and settle in, say within six to eight months, another 10 to 15 per cent of them will want to buy. People of that calibre love Malta or hate it. I predict that 70-80 per cent of them will love it.”

Government policies have provided incentives for many sectors, not just

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CASE STUDY

prospective citizens. For example, the firsttime buyer scheme which ended in June also contributed in no small way to Re/Max’s results – and Mr Buttigieg confirmed that the Federation of Estate Agents is encouraging the government to come up with another property scheme in the next Budget.

The government also has the last word over another factor that could have a major impact on the sector: an airstrip in Gozo.

“Gozo would be a haven for IIP clients – as soon as the airstrip for private jets is available. It has to happen and when it does, Gozo will go crazy. Prices in Gozo have already started going up. This is partly because the fad of buying houses in Sicily has also run its course as there were enough horror stories to put people off,” he said.

With all this activity, the sector has a few horror stories of its own. The real estate agents are anxious to self-regulate and Re/Max was among the first agencies to start pushing for this reform, along with the Federation of Real Estate Agents. A White Paper is due to be issued by the government for consultation, which would propose the licensing of property negotiators, with a mandatory exam.

Although the details are not yet known, Mr Buttigieg quite openly stated that he hoped the White Paper would wipe out the traditional introducer or intermediary – sensara (see related story on page 3).

“The old system of the sensara, in my opinion, just does not make sense and should be abolished. If I meet you in the street and give you directions to a house that is for sale, in theory I could ask you for an introduction commission! That is what the law allows...” he fumed.

“I don’t mind being harsh. They can all go to hell! Sensara do nothing for the government because many do not pay tax. They are a menace to professionals as they do not give any service to their clients. Most do not even have a back-up office. I acknowledge that some are trying to set up an office – but at that stage they are no longer sensara but real estate agents. And they simply could not afford to charge just one per cent and one per cent [from the vendor and buyer] if they wanted to offer any kind of infrastructure like an office, website with search facilities and so on. It would impossible to sustain at those rates!

“In any case, most try to charge five per cent commission, just as real estate agents do. A handful of them might be good but the government and real estate agents want to see a properly licensed sector, regulated by an appropriate government body.”

AN AERIAL SHOT OF TIGNÉ, SLIEMA.

“e old system of the sensara just does not make sense and should be abolished”

THERE HAS BEEN A SURGE IN RENTALS AS EXPATRIATES MOVE TO MALTA TO WORK OR LIVE.

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e Business Observer is Malta’s leading business newspaper distributed with the Times of Malta every fortnight.

Editorial Vanessa Macdonald, Head of Content (Business), Times of Malta.

EDITORIAL

Worrying points on economic agenda Both the Prime Minister and the Finance Minister are usually very selective when they come to speak about the island’s economy. In their reaction to foreign reports about Malta’s economy, they invariably latch on to assessments and projections that are most favourable to the country, leaving out remarks or warnings that may not go down well or which could deflect attention away from the positive aspects of the reports.

There is indeed a great deal that is positive in recent reports about Malta’s economy, but there are also matters that could create difficult challenges unless they are tackled with some degree of urgency. Taking the islands’ economic outlook first, the latest report by the credit rating agency Standard and Poor’s agrees with the European Commission’s country report about the advances being made in economic expansion, even though S & P projects a somewhat lower rate of growth than the European Commission.

According to the country report, the economy is expected to continue expanding in 2015–16 at roughly the same rate as that registered last year, 3.3 per cent, whereas Standard and Poor’s expects growth to be close to three per cent on average in 2015–2018. In any case, it believes the economy will continue to outpace the eurozone as a whole, notably, it holds, because of investments in the energy sector.

This remains to be seen but, clearly, there is broad agreement that the economy is performing well. However, the agency insists, as other agencies and organisations have done, that unless further reforms in the pension and health care systems are made, public finances will become strained.

There are other worrying points, such as the banks’ non-performing loans, which rose to 9.1 per cent as of March this year. Even

though the banks’ aggregate loan loss provisioning rose to 42 per cent as of September 2014, the agency still believes that this is low and that the issue remains a challenge to the economy.

But what ought to be brought to the forefront of the country’s economic agenda is the agency’s warning that “the nominal unit labour costs have been increasing at one of the fastest rates in the euro area, posing risks for competitiveness when many euro area neighbours are undertaking structural reforms and internal devaluations.”

The EU country report had made the same warning when it said that unit labour costs had increased more dynamically than in competitor countries, reflecting both higher domestic inflation and contained labour-cost developments in the competitor countries. It had earlier noted that price inflation is higher than the average in the euro area.

When Malta still has a long way to go before reaching the living standards obtainable in other EU countries, it will be difficult to suppress workers’ just expectations for improved earnings, more so when the economy is doing so well. So, if competitor countries keep containing costs in these difficult times, Malta stands to lose in competitiveness if it keeps raising unit labour costs.

In these circumstances, cutting the energy costs for industry, as the government has done, may not even be enough to compensate for other increased costs. There are other areas that require attention, such as, for instance, loss of export market shares and sluggish productivity. For the country to keep up the current rhythm of development it is registering now, it would have to go into these problems as well.

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BUSINESS OPINION

What’s new for insurance accountants The long overdue restructuring of accounting for insurance contracts is now on our doorstep. There are many proposals, and the International Accounting Standards Board’s publications deliver continued clarifications.

Just in time, the board has put forward suggestions for revised key standards affecting the insurance industry.

IFRS 4 Phase I Insurance Contracts left many gaps in view of the fact that its implementation, which dates back to 2004, was intended only to enhance disclosure requirements for insurance companies and serve as a temporary fix, while a more formal re-evaluation of insurance accounting took place.

Standard-setters argue that, while insurance contracts expose entities to long-term and uncertain obligations, its accounting does not provide existing and potential investors, lenders and other creditors with the information they need to understand the financial statements of insurers and compare financial data between market players.

Relevant standards will be coming into effect in the medium-term, these being IFRS 9 Financial Instruments (published, effective January 1, 2018) and IFRS 15 Revenue from Contracts with Customers (published, currently proposed to be effective by January 1, 2018).

IFRS 4 Phase II Insurance Contracts is not yet published and its effective date is expected to be approximately three years after issue.

The proposed remedy is a single-accounting approach, but despite the significant benefits that are expected to emerge, a critical

“Volatility in profit or loss and equity may be created due to the use of current assumptions in measuring insurance liabilities” area within the current proposals that remains is volatility.

Volatility in profit or loss and equity may be created due to the use of current assumptions in measuring insurance liabilities or due to changes in the values of minimum guarantees arising from short-term market rate fluctuations.

The accounting treatment of the corresponding investment portfolio and, therefore, the adoption of IFRS 9 plays an important role in managing such volatility. Although the permissible measurement bases for financial assets – amor-

tised cost, fair value through profit or loss and fair value through other comprehensive income – are similar to IAS 39 Financial Instruments: Recognition and Measurement, the criteria are significantly different.

Insurers therefore need to consider options and elections available under IFRS 9 and the forthcoming insurance contracts standard to minimise the mismatches between the accounting for insurance contract liabilities and the financial assets held to back them.

Ensuring financial assets are classified appropriately under IFRS 9

will require insurers to determine the objective of the business model in which the financial assets are managed, and, where relevant, analyse the contractual cash flow characteristics of financial assets.

Naturally, entities holding financial assets at amortised cost will face more significant initial volatility upon initial application of the standard.

With respect to the revenue stream of an insurance company, the board iterates that revenue from insurance contracts should be consistent with that from non-insurance

contracts, in effect implying the application of IFRS 15. Although this new revenue standard does not apply to insurance contracts, it may be relevant to other arrangements an insurer may take on – such as asset management, insurance broking and claims handling.

Insurance companies should therefore determine which contracts fall entirely, or partially, in scope of the new revenue standard through a comprehensive review of contracts with customers.

The insurance accountant will then apply the new revenue recognition standard to any such non-insurance agreements or noninsurance components within insurance contracts.

Insurance entities are already undergoing an operational challenge with the upcoming Solvency II, effective from January 1, 2016. We view – as an imperative – the immediate need for insurance accountants to understand the ways in which the requirements of the new IFRSs can be incorporated with Solvency II’s ground-breaking change.

Having a single internal governance process that looks at the entity’s reporting under each of these frameworks together and using a single set of analytical reviews and approvals will ensure that any inconsistencies are identified, discussed and thoroughly understood by management before going live.

Deferring the amalgamation of such standards is sure to place an entity doing so at a disadvantage against the forward-looking market player.

This article was submitted by KPMG.

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APPOINTMENTS

Julian Zarb elected to Tourism Society (UK) Julian Zarb has been elected for a threeyear period as board member within the Tourism Society (UK).

The Tourism Society is an organisation for people working in tourism and travel, including educators and students, and others interested or involved in the visitor economy across all its sectors worldwide.

The current membership is around 1,000 individuals, representing tour operators, hotel chains, PR, marketing and representation companies, tourist attractions, national, regional and local tourist boards, restaurants, trade media, charities, consultants, academics, students and educational establishments, among others.

Mr Zarb has been working in the hospitality and tourism sector for over 25 years and is a visiting senior lecturer at the University of Malta.

JULIAN ZARB

New faces for Malta Institute of Accountants MARK ABELA

Former technical director Mark Abela has been appointed chief executive officer of the Malta Institute of Accountants (MIA), reporting to a new president and council.

A Certified Public Accountant, Mr Abela joined the MIA in 2012, having previously worked with PricewaterhouseCoopers (now PwC), the Ministry of Finance, the European Financial Reporting and Advisory Group in Brussels and with Deloitte Malta.

The CEO’s role was created following changes to the MIA Statute made at the 2014 AGM. He reports to the newly-elected president Franco Azzopardi, who is taking over from outgoing president Maria Micallef who served for two years.

The rest of the new council members are Etienne Borg Cardona, Simon Flynn, Maria Micallef, Noel Mizzi, William Spiteri Bailey (vice president) and Franz Wirth, who were elected for the term 2015 – 2017. These joined the other seven council members elected at the 2014 annual general meeting: Fabio Axisa (secretary), Christopher Balzan, David Delicata (treasurer), Anthony Doublet, Hilary Galea-Lauri, Ivan Grixti and Stephen Paris.

ELKEN CALLEJA

New head at Haud Systems Haud Systems, an industry leader in spam filtering and revenue assurance for network operators, announced the appointment of Elken Calleja as head of business analysis and forecasting.

Mr Calleja will be responsible for the direction and guidance of the team of analysts in the operational, financial and strategic analysis of new and existing business opportunities and projects as well as handling of the budget tracking and resource planning.

He has a background of more than a decade in the telecommunication industry.

“At the moment, Haud is undergoing an exponential growth in both customer acquisition as well as overall revenue performance, also due to its global expansion,” he said.

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STOCK MARKET REVIEW

Positive start to interim reporting season Edward Rizzo The interim reporting season commenced last week with the publication of the half-year financial statements of Plaza Centres plc and Mapfre Middlesea plc.

Most of the companies that have their equity listed on the Malta Stock Exchange have a December year-end and according to the Listing Rules these companies have until the end of August to publish their financial statements for the six months to June 30.

As such, in the coming days and weeks, a further 14 companies will be publishing their interim financial statements and this will provide an opportunity for analysts and investors to review the performance of these companies and hopefully gain further insight into the outlook for the full financial year.

Plaza kicked off the reporting season on July 21, revealing a 6.7 per cent increase in revenues to €1.23 million and an 8.7 per cent growth in profits before tax to a record of €0.78 million during the first half of 2015. The improved financial performance largely reflected the higher rental rates achieved from the recent new lease agreements. Plaza reported that it signed new agreements with Subway, Havaianas and Scholl Foothealth Centre and these outlets opened during the period under review.

During the first half of 2015, average occupancy remains unchanged at the 93 per cent level as these new tenants replaced other tenants who vacated the complex in earlier months. Plaza’s financial performance was also positively impacted by a decline in finance costs following the partial repayment of bank borrowings.

Plaza also gave a brief commentary on the company’s immediate outlook. It reported that average occupancy within the complex is expected to be maintained at 93 per cent during the third and fourth quarters of this year. Moreover, in addition to the new lease agreements mentioned above, Just Burger Food Co. commenced operations in July replacing the McDonalds operation on Level 0 and the F&F International fashion retailer is scheduled to open in September. The directors of Plaza reported that they do not anticipate a significant change in the company’s performance in the second half of their financial year.

Given the profitability growth in the first half of the year, Plaza should register another record financial performance during 2015.

However, no mention was made in the announcement of any expansion plans being contemplated.

Earlier this year, CEO Lionel Lapira had informed financial analysts that discussions are ongoing with the owners of a large site in close proximity to the complex, as well as with the authorities with a view to addressing the parking shortage.

Market participants expect companies to provide regular updates on developments of such a nature from one reporting period to the next.

The second company to issue its interim financial statements was Mapfre Middlesea plc last

Thursday. Total income from insurance activities generated by the Mapfre Middlesea Group increased substantially to €14.7 million compared to just over €6 million in the previous comparable period. Furthermore, the group’s investment portfolios registered higher returns during the period under review compared to the first six months of 2014, especially those of MSV Life plc.

Additionally, the positive performance of the MSE Share Index during the first half of 2015 resulted in positive movements on the portfolio of the holding company which had registered losses during the same period of 2014.

Mapfre Middlesea’s performance was also boosted by a one-off saving from the renegotiation of the reinsurance treaty which led to a 12.2 per cent reduction in administrative expenses to €1.2 million.

As a result of these various factors, Mapfre Middlesea positively surprised the market with a significant increase of 85.2 per cent in pre-tax profits to €15.2 million.

While this is valuable news for Mapfre’s shareholders, it is also very important for the larger number of shareholders of Bank of Valletta plc. BOV owns 31 per cent of Mapfre Middlesea and 50 per cent of MSV Life plc and therefore the Mapfre Middlesea results will positively impact the BOV financial statements for the

“Mapfre’s equity is by far the strongest performer this year with a significant hike of 81 per cent”

current financial year ending September 30. However, investor sentiment towards BOV is likely to continue to be clouded by the current political controversies hitting the headlines on a regular basis as well as the pending court case in Italy which was first communicated to the market in early April.

Meanwhile, earlier this week, Mapfre Middlesea confirmed that following the preliminary agreement signed with Allcare Insurance Ltd in May, it entered into a Sale of Business Agreement on July 24 by virtue of which Allcare agreed to transfer and sell to Mapfre its economic activity constituting a business as a going concern operated on a stand-alone basis with effect from July 31. The two companies also entered into a Portfolio Transfer Agreement pursuant to which Allcare is to transfer to Mapfre its general insurance business portfolio as at July 1 on a going-concern basis.

The total consideration is of €1.1 million together with a deferred payment of up to a maximum of €0.5 million payable over a three-year transitory period.

Mapfre’s equity is by far the strongest performer this year with a significant hike of 81 per cent.

After reaching a new multi-year high of €1.86, the share price retreated to €1.64 but recovered to €1.80 earlier this week following the strong financial results and the announcement of its acquisition of Allcare.

By the time of writing, Malta International Airport plc had not yet published their interim financial statements following the board meeting held yesterday. MIA should be reporting an improved profit figure based on last week’s half-year traffic results. The interim reporting season will continue with

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the results of Malita Investments plc being published tomorrow. At the start of next week, HSBC Bank Malta plc will be issuing its interim financial statements and all the other companies should comply with their obligation by the end of August. To date, only Tigné Mall plc, Lombard Bank Malta plc and MIDI plc have announced the date of their respective board meetings to approve their half-year financial results.

The reporting season is an important time as it assists analysts and investors to review individual company performances in detail and to obtain an update from the company on its immediate outlook as well as the strategy going forward.

While the semi-annual publication of financial results, especially from the larger capitalised companies, normally leads to an immediate impact on investor sentiment as such announcements provide direction to individual equities and the market in general, Go plc’s unexpected announcement last week could somewhat overshadow any newsflow of a financial nature.

Local investors are likely to give added weight to this unforeseen development and although Go replicated a press release issued by Emirates International Telecommunications on Sunday

afternoon (providing some further information following the very brief announcement of Thursday morning), investors will keenly await other announcements in due course on the expected time frame of the disposal of shares by the majority shareholder; the likely course of action including any further extraordinary general

meetings required and, more importantly, the identity of the buyer/s interested in this controlling stake together with the indicative price range of any nonbinding offers received.

Although the summer months are normally characterised by weakening trading volumes across the equity market, such material

developments in Go plc and possibly also in other companies could lead to heightened activity in the weeks and months ahead as investors increasingly speculate on the likely outcome.

Edward Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved

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BUSIENSS ??UPDATES

HSBC Malta launches €75 million Malta Trade for Growth Fund HSBC Bank has launched a new €75 million Malta Trade for Growth (MTFG) Fund following the success of the first €50 million trade fund launched in December 2013.

The aim of the €75m MTFG Fund is to help Maltese companies take their business beyond Malta to new frontiers and achieve international growth thanks to HSBC Group’s ability to capture value from its global presence, in particular through the creation of new trade corridors in the emerging markets.

The first MTFG Fund, launched in 2013, was snapped up by eager businesses in just under a year in what stands as a clear demonstration of the Maltese businesses’ desire to grow globally. A number of businesses within various economic sectors benefited from the first €50m fund.

During the launch of the second tranche of the MTFG Fund, HSBC Malta also unveiled its Why Malta? video in five languages: Arabic, French, German, Italian, and Mandarin – in addition to the already-available English version. The video promotes Malta as a business destination and highlights the way HSBC can help businesses set up base in Malta as well as local businesses to thrive internationally.

The launch at the Saluting Battery at Upper Barrakka Gardens was led by Minister for Finance Edward Scicluna, who was joined by HSBC Malta CEO Mark Watkinson, head of

hsBc MalTa head of coMMercial Banking Michel cordina welcoMing The guesTs, Joined By hsBc MalTa ceo Mark waTkinson, head of gloBal Banking and MarkeTs JaMes woodeson and MinisTer for finance edward scicluna. righT: Viewing excerpTs of WHY MALTA? Video, now in fiVe inTernaTional languages aparT froM english: araBic, french, gerMan, iTalian, and Mandarin.

commercial banking Michel Cordina, head of global banking and markets James Woodeson, and a number of guests.

Mr Cordina said: “The €75m fund helps investors, traders and businesses in Malta to flourish by connecting them to international trade opportunities, particularly within growing and emerging markets and also by encouraging international investment in Malta. This fund and the Why Malta? video are

aimed at continuing to support the Maltese economy to prosper.”

“With offices on the ground in 60 markets, and more than 7,000 relationship managers operating worldwide, HSBC is in a unique position to connect potential customers in new markets, provide local insight through people on the ground, and offer the financial support for businesses to expand globally,” Mr Cordina added.

Prestigious award for BPC founder The late Joseph Brockdorff, founder of BPC International, has been posthumously awarded the Gold Award by the Institute of Maltese Journalists (IGM). This is the institute’s most prestigious honour, recognising those who have made significant contributions and shown extraordinary commitment in championing journalism in Malta. The judging panel was chaired by President Emeritus George Abela. The Gold Award, sponsored by Tumas Fenech Foundation for Education in Journalism, was presented by President Emeritus Dr Ugo Mifsud Bonnici.

Though ‘JB’, as he was known, was not a journalist, his unswerving support for the institute, his wise counsel and far-sighted strategic input over many years of

The laTe Joseph Brockdorff

support were game-changing factors which helped journalism in Malta gain a more professional and sustainable footing. Testament to this was the fact that the award ceremony was the 25th one since its inception.

The award was collecTed By Joseph Brockdorff’s widow, aurelia Brockdorff. also presenT for The presTigious cereMony were (froM righT) daVid Brockdorff, Bpc Managing direcTor, woJTek Brockdorff, adaM Brockdorff, audrey Brockdorff and JaMes Brockdorff.

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e Business OBSERVER |

July 30, 2015

BUSINESS ??UPDATES

Workplace savings: a simple and effective alternative to second pillar pensions Behavioural economics teaches us that the majority of people believe making investment decisions is difficult and complicated, and as such they avoid taking any long-term decisions. This creates a barrier for people needing to save for their retirement. They either find it hard to make the right investment decision or will refrain completely from saving.

Many people will either lack financial capability, time, motivation or self-control with regards to retirement planning decisions. In order to deal with complexity and uncertainty, human nature will take the path of least resistance and avoid decision-making even if it is in their best interest.

The consequence is that people do not start saving for their future

until it is too late. There is a simple solution to this which is already being used successfully throughout the world – Workplace Savings including auto-enrolment.

The concept is very straightforward. All employers over a certain size are required to facilitate access to a savings scheme for all employees, with personal contributions being deducted from payroll and invested in a pre-selected default fund. Typically, this default fund should offer guarantees or a lifecycle strategy which automatically de-risks the savings as one approaches retirement.

The auto-enrolment part means every employee automatically joins the scheme and starts saving unless they choose to opt out by signing a note to that

effect. Given that everyone knows they need to save for their future and the human inertia effect, it has been proved that the opt-out rate in such schemes is incredibly low (just nine per cent in the UK for example).

Auto-enrolment through the workplace not only avoids the complexity and costs of second pillar pensions (employers do not need to contribute but are free to do so if they want), it enables people to start saving for their retirement without having to make an investment decision or find the personal time to start a plan.

Advice is available through the workplace for those who want it.

Stuart Fairbairn is chief officer, Business Development at MSV Life PLC.

Air Serbia introduces summer flights to Malta Air Serbia is the national airline of the Republic of Serbia. The airline is engaged in the transport of passengers and cargo in scheduled and charter services, crew and airline staff training and other business activities.

Air Serbia serves more than 30 Euro-Mediterranean destinations, including Malta, directly from the hub at Belgrade’s Nikola Tesla International Airport. The service to/from Malta will run twice a week during the summer season, on Tuesdays and Saturdays.

Air Serbia also serves for long-haul and international destinations in Asia, Australia and the Americas through their codeshare partners and shareholding equity partner Etihad Airways, the

national airline of the United Arab Emirates. The carriers currently operate a fleet of 19 aircraft, comprising two Airbus A 320, six Airbus A 319, four 737300, three ATR 72-200 and three ATR 72-500.

Air Serbia has been a member of the International Air Transport Association (IATA) since 1961. It was one of the first airlines to receive the IATA Operational Safety Audit (IOSA) Certificate in 2005.

Air Serbia has very recently appointed ABC Logistics as their exclusive Cargo GSAs on the Maltese islands. For service and cargo rate enquiries, contact ABC Logistics on 2577 3244 or by sending an e-mail to info@abcmalta.com.