The Business Observer Newspaper, 10th September Issue

INTERVIEW

Issue 34

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September 10, 2015

Distributed with Times of Malta

Shareholders mull cruise terminal bid

PHOTO: CHRIS SANT FOURNIER

e Libyan Investment Authority has $67 billion to look after, in spite of the UN freeze. But chairman Hassan Bouhadi sees no reason why this cannot be done in a ‘smart’ way. see pages 10 and 11 >

NEWS Mater Dei could save ‘millions’ by investing in IT systems to help with administration. Ivan Bartolo of 6PM explains what his company has already done for UK hospitals. see page 3 >

NEWS Vanessa Macdonald Companies holding 69 per cent of the shares in the cruise terminal have 21 days in which to decide whether to exercise their pre-emption rights after a Turkish company made a bid for the remaining shares.

It was recently announced that FSG Co. Ltd., Malta International Airport and Bank of Valletta entered into a binding share purchase agreement for the sale of their aggregate 30.97 per cent shareholding in Valletta Cruise Port to Global Liman Isletmeleri, a 100 per cent subsidiary of Global Yatirim Holding. However, the other shareholders have pre-emption rights and may decide to buy the 30.97 per cent shareholding themselves.

Angelo Xuereb, the chairman of AX Holdings, said his group was still

evaluating the Turkish offer, and that it was therefore premature to take any decision.

The other holders of ordinary shares are Perquisite Holdings, M. Demajo (Port Ventures) and Infrastructure World International.

A source familiar with the terminal operations said that the project needed an injection of around €40 million to develop the atrium – currently still being used as a car park – and the old power station, which was earmarked as a mixed use retail and entertainment space. The quays also need to be aligned to allow more berthing flexibility, especially as cruise ships get larger.

“It is a good time for FSG, MIA and BOV to exit – and it is unlikely that the Turks would have been interested in a smaller shareholding than 30 per cent,” the sources said.

He said that the Turks, which have interests in other major ports including Barcelona, would probably be open to making considerable investments.

Valletta Cruise Port CEO Stephen Xuereb declined to comment on the possible purchase, until the pre-emption process was completed “in accordance with the company’s Memorandum and Articles of Association”.

“Up to this moment in time, the existing shareholders have invested in excess of €37 million in order to restore and develop this unique destination. Valletta Cruise Port is the only cruise port where cruise passengers actually disembark at a destination in itself,” he said, noting that there had been a 75 per cent aggregate growth rate since the consortium took over the

cruise operations from the government in 2002.

2015 is on course to be a record year in terms of passenger movements, up 20 per cent over 2014, and bookings in hand for 2016 indicate that the terminal will exceed 2015.

In the financial year ended November 30, 2014, the terminal company made €1.8 million profit before tax, from an income of €7.7 million, of which €2 million came from passenger tariffs, €1.4 million from rental income and €3.1 million from retail income. A further €1.2 million came from services.

The operators have a 65-year temporary emphyteusis against which it pays the government a revenue-related fee and ground rent. The company has an authorised share capital of €22 million.

Will the new accounting requirements for SMEs prove to be more popular than GAPSE? Or will pressure from banks and creditors push for the status quo to be maintained? see page 6 >

INDUSTRY FOCUS From where it grows to how to store – and when to drink it – knowing about wine makes all the difference between a sound investment and a dud. see pages 8 and 9 >

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NEWS

PHOTO: MATTHEW MIRABELLI

Administration systems could save ‘millions’ at Mater Dei Vanessa Macdonald Health administration systems using the latest technology could save Mater Dei millions of euro, 6PM CEO Ivan Bartolo said.

“Several hospitals in the UK are using one of our file tracking systems and found that it paid for itself within nine months, just through reduced labour. And that does not include the time wasted at outpatient clinics and in wards when records cannot be found,” he said.

He also suggested that patient records should be scanned and moved off site, freeing up space in the hospital for clinical use.

“We estimate that if you put all the patient records at Mater Dei back to back, they would extend for seven kilometres. Imagine if you could make better use of that space by having them offsite. The records could eventually all be digitised but until then,

you could have a service level agreement with the storage provider to find a file and scan all that is required within a certain time,” he said.

The 6PM Group is one of very few in the world to make systems which can track

“It paid for itself within nine months, just through reduced labour”

medical files, send out appointment reminders and monitor medical stocks.

“There are other suppliers which do one or two of these but they are not integrated the way our systems are,” he said.

6PM has a system known as iFIT which uses radio trackers to locate not only medical files but also equipment, again saving invaluable time and cutting down on theft.

It also tracks laboratory tests, from the sampling stage to the results, which can also speed up the system, enabling earlier release of patients.

“It is frustrating that we have been so successful in helping UK hospitals but that there is as yet no patient administration strategy for Mater Dei. It would take at least two or three years to draw up but at the very least, we should get started,” he said.

“I believe as an organisation we have much to offer. We will keep on trying,” he shrugged.

EY launches annual conference Malta: Open for business is the chosen theme for the 11th edition of EY’s Malta attractiveness survey which will be held on October 7 at the Westin Dragonara Resort, St Julians.

The national conference brings together key public and private stakeholders in the Maltese economy to review, discuss and explore new ways for Malta to maintain its momentum at becoming the chosen hub for foreign direct investors.

Ronald Attard, country managing partner at EY Malta said: “EY is committed to help governments and businesses make informed investment decisions to improve their respective business environment while lightening barriers that may intercept future growth. We aim to examine our attractiveness as a country while analysing the reality and perception of FDIs which are already operating on the island, as well as their impact on our economy.”

This year’s line-up of foreign speakers includes former EU Commissioner Peter Mandelson, one of the architects of Tony Blair’s ‘New Labour’; Jan Peter Balkenende, former Prime Minister of the Netherlands; and Paul Brody, America’s sector strategy leader at EY. The event is supported by The Malta Chamber of Commerce, Enterprise and Industry, FinanceMalta, the Malta Gaming Authority, John Taylor, HSBC Bank Malta, GO plc, Mizzi Motors, Bank of Valletta and Malta Enterprise.

Early registration is recommended by sending an e-mail to mas@mt.ey.com, or online www.ey.com/mt/mas.

PETER MANDELSON

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NEWS

Local firm to launch Rambo game A Sliema-based start-up will be releasing the official Rambo game for smartphones tomorrow, tapping into a 20 million-strong fan base.

The €3.99 game was developed

by Play Magic in a joint venture with UK publisher Reef Entertainment, on behalf of the licence holders for the Rambo franchise – in under eight months.

“We invested over €160,000 in this product, which is actually very competitive for this quality of game,” CEO Giuseppe Crugliano said.

“We hope it will take the company into the next level, attracting venture capitalists to help us grow. But we also hope it will help to bring Malta to the attention of the bigger players in the industry.”

Malta is now hosting a number of developers for digital games of skill but when Mr Crugliano first came here in 2013, he was one of the pioneers.

He got involved with game development in his native town.

“I was born in a flat over the biggest arcade in town,” he quipped – and after university worked with some emerging and established game studios in Italy.

He started his own start-up studio in 2003 after seeking investors in New York, but decided to return to Italy to build up his own company from the ground.

In just a few years, his company, Twelve Games, became one of the leading players, developing and releasing a number of games across various Sony and Nintendo console platforms. The headcount went up to 30 developers from all over Italy and Europe and by 2008, when the recession hit, it had over €1 million worth of contracts in hand with three publishers that unfortunately went bankrupt.

Work dried up and he found himself once again with just a handful of employees.

He shook himself off and tried again, this time venturing into alternative markets such motionsensing games, at the time still virgin territory. Things again picked up and his company was producing games for entities such as PrimeSense, Xtr3D, Softkinetic and Leapmotion to name just a few

– but he knew that the time had come to move back to his original core market if he wanted to grow.

“It was hard to lure top talent to south Italy,” he admitted.

He considered New York and Vancouver before being contacted by Malta Enterprise, which was at the time offering grants to build up this sector.

He thought the island had potential as the next European Silicon Valley and went to pitch for the first console game to be made in Malta.

It got very positive feedback and there was potential deal in the pipeline, but after negotiation –

“If Rambo is a commercial success, it will pave the way for us to invest into the development of the game we had first pitched to Malta Enterprise”

probably because of apparent changes in the plan for digital games at Malta Enterprise – nothing was signed.

By then his company was already creating original intellectual property across a wide range of formats including PC, console and mobile, and they were researching the upcoming new virtual reality.

In February 2014, Twelve Games became Play Magic, entering into a partnership with Reef Entertainment to develop the official Rambo mobile game.

“We brought a piece of Hollywood to Malta through a mobile videogame,” he proudly states.

“All through our own strengths and efforts without any of the support, grants or investment we expected before moving in Malta.”

The first-person shooter game will have chapters from the first three Rambo movies, with beautiful hand-painted frames from the movies interspersed between the action sequences.

The Oculus Rift, a virtual reality head-mounted display developed

by Oculus VR, will be released early next year along with other competitors from Sony, HTC, Razor and others – and Play Magic is ready for the quantum leap through another big sci-fi TV series IP. In the meantime, a new mobile racing game based on Cartoon Network’s Gumball television series is in development.

“If Rambo is a commercial success, it will pave the way for us to invest into the development of the game we had first pitched to Malta Enterprise that we have not yet been able to work on. We want to create a massive portfolio of games based on international licences and original intellectual properties.

“We restarted interesting discussions with Malta Enterprise thanks to the invaluable support of a local consultancy firm, our new board of directors from UK and the Malta Digital Gaming Association members.

“We found a fresh and different climate with a better understanding of our sector that give us hope for potential collaboration to help grow the digital game industry.”

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September 10, 2015

NEWS NEWS STORIES

Simplified accounting rules to come into force For accounting periods ending on or after January 1, 2016, small entities have to prepare their annual financial statements in accordance with the accounting rules laid out in the recent legal notice on the General Accounting Principles for Small and Medium Enterprises (GAPSME).

Previously, under the version known as GAPSE, small entities still had a choice whether to draw up their annual financial statements in accordance with the simplified GAPSE framework or in accordance with IFRS as adopted by the EU. Since these entities account for the larger part of the companies registered in Malta – 97 per cent or circa 19,000 of the companies registered in Malta – it is only to be expected that the take-up of GAPSME will be larger than the disappointing take-up of GAPSE. Medium-sized entities (that have two of the three following criteria: balance sheet: €20,000,000; net turnover: €40,000,000; average employees: 250); are still allowed to choose between the GAPSME reporting framework and IFRS. Large entities and public interest entities are required to adhere with IFRS as adopted by the EU. GAPSME presents a simplified financial reporting framework with limited disclosures to reflect what is required by the accounting directive. Consequently, the financial statements of these entities will be shorter. Among other things, small entities will not be required to prepare a statement of changes in equity or a cash flow statement and are

exempted from the preparation of the management report or directors’ report. Small groups are also exempt from the preparation of consolidated financial statements.

In many cases, GAPSME will also avoid the fair value measurement issues that often arise with IFRS, Anthony Doublet, the assurance leader at EY Malta, pointed out.

GAPSE was enacted in 2009 under the Accountancy Profession Act, but had to be updated to reflect the requirements of new EC Directive 2013/34/EU, which foresees maximum harmonisation as far as thresholds and accounting obligations of small

companies are concerned. The directive also contains requirements applicable to medium and large entities.

The GAPSME legal notice is the result of decisions taken during the transposition process by representatives of the government, the accountancy profession (the Accountancy Board and the Malta Institute of Accountants) and a wide range of stakeholders from the private and the public sectors.

The institute was a key contributor in the design phase of the legal notice.

The MIA is aware that GAPSME may have an impact on creditors who are already finding it hard to assess risk and manage credit.

“Small entities are no longer required to present a cash flow statement. This could be detrimental to creditors if they base their risk and credit assessment on this statement.

“The notes to the financial statements of small entities have also been shortened and cannot exceed those disclosures that are set out in the accounting directive – with the exception of certain medium-sized entity disclosures that can also be applied to small entities if the member state so chooses,” MIA chief executive officer Mark Abela said.

“Malta has decided to take up this member state option. In our view, assessment of risk should not be carried out solely on the basis of historical statutory financial statements.”

The MIA will publish official guidance and other explanatory information on its portal and in its publications, supplemented by a concerted training initiative. It is also

teaming up with the Malta Chamber of Commerce, Enterprise and Industry to organise an information session on the subject.

The chamber acknowledged that the take-up of GAPSE had been very low “for a number of reasons”, but said that this should now change.

“First of all, GAPSE was optional when introduced and resulted in a general reluctance on the part of businesses to change their accounting systems. This may have been the result of banks and the Inland Revenue Department still preferring more disclosure of information.

“The Malta Chamber sounds a note of caution that in spite of these developments, smaller companies will still need to have their accounting house in order for the purposes of bank lending, tax inspections and to protect the interests of minority shareholders,” a chamber spokesman said.

WHAT IS A SMALL ENTITY? To qualify as a small entity, you must meet at least two of the three following criteria: Balance sheet total: €4,000,000 Net turnover: €8,000,000 Average number of employees: 50

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September 10, 2015

INDUSTRY NEWS STORIES FOCUS

An investment in good taste Is there anything which conjures up images of a stately home as surely as a butler gently wiping the dust off a bottle of vintage from the cellar? The discreet hum of a wine fridge may now have as much mystique but its contents are far more likely to be a good investment.

That is, if you buy the right wine to start with – and if you store it in the right environment.

As with art, buying fine wine is not only a business decision but also a personal one.

Zoran Crncevic, the brand manager at Charles Grech, said this is why the wine and spirits importer encourages customers to ‘try before they buy’.

“Our wine boutiques in Sliema, Birkirkara, Ta’ l-Ibraġ and Ta’ Xbiex offer a specificallydesigned wine tasting area where clients can sample and enjoy any wine from our wide portfolio at shelf price.

“We also run frequent wine-tasting events at the World of Wines shop, Ta’ Xbiex, where our private clients get the opportunity to taste wines holding different price tags, including the expensive ones,” he said.

Customers usually seek out highly exclusive wines – either those from a very small production or those that hold nobility – based on recommendations.

“This is where the trust between the client and the shop assistant is indispensable. Our retail team regularly receive training, including tastings, in order to be as competent as possible to professionally and successfully assist the specific client’s with their requests,” he said.

One of the challenges for an importer is to step out of the comfort zone and to stock wines from lesser known wine regions and newly emerging wine countries.

“There is no doubt that some regions perform better than others and that some wine countries are locally more popular than others,” Mr Crncevic said.

“For small- to medium-sized importers to serve the market truly successfully, however,

this is what you need to do. Your prime strategy should be to serve the market with highly established and world-renowned wine producers regardless the popularity of a region they come from.”

Mirachem clearly also follows this creed. It represents 50 companies from 18 countries, and chief commercial officer Nicholai Grech said this includes “interesting” ones from Syria and Israel.

He warned, however, that even wellknown regions can hold some surprises.

“For example, there are also some exciting wines from lesser known regions in Italy with autochthonous grape varieties such as Sagrantino in Umbria which I strongly recommend,” he said.

When it comes to buying wine as an investment, though, customers tend to be very conservative, and tend to look at Italy or France.

But Mr Crncevic said from his experience, they were even more focused: “I would shortlist that and take it a step further. When people want to invest wine, they only look at Bordeaux. There are some wines from Italy and US which have proven to be a good investment. But Bordeaux has the history and the set-up, so people go for it.”

One of the problems with spending hundreds of euro on a bottle of wine is being sure that it has not travelled half way around the world, changing hands and being inappropriately stored, he added.

“We are lucky that tourists and foreigners living on the island go all out for locally produced wines, which helps the smaller wineries to survive”

“When you buy wine intended as an investment, buy from a reputable broker, and leave it in Bordeaux!” he advised.

One way to avoid the problem of moving a fine wine is, of course, to buy it locally.

In the past decades, Maltese wines have gained a respectable place on most wine lists. Marsovin Winery CEO Jeremy Cassar explained that over the past 25 years, Marsovin invested in its estate wines and boutique wines – with success.

“This started with our first single vineyard wine, Marnisi, in 1992 and, more recently, with our boutique wine Primus, introduced in 2011, with steady yearly increases in sales.”

Economies of scale are definitely an issue in Malta, but an established winery like Marsovin can afford to produce these upmarket wines due to the extensive set-up both in terms of expertise it employs and technology it invests in.

“Without these resources it would not be possible to produce the premium quality we have achieved. What is more, without the sales of other wines such as La Torre, La Valette and Caravaggio, it would be much more difficult to sustain the production of the premium wines,” he said.

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INDUSTRY FOCUS

Clearly, the Maltese are becoming ever more loyal to home-produced wines and are even ready to pay a higher price for better quality Maltese wines. But if Marsovin finds that the economies of scale are a challenge, imagine how much more difficult it is for a boutique winery.

Joseph Walker, the estate manager of the Maria Rosa Wine Estate, said that he has to find ways to promote and market his wines on a very restricted budget.

Apart from taking part in fairs and community events, he organises wine-tasting sessions, with the added attraction of being the hub of the entire process.

“We grow and harvest our own grapes and produce our wines on the estate – which means that our wines are produced from grapes that we look after throughout the year.

No third parties are involved in the production and bottling of our wines,” he said.

Persuading outlets like restaurants or retailers to stock their wines is another headache: “Large producers can afford to offer freebees such as refrigerating equipment, discounts on quantities sold, and similar packages, something we are not in a position to do due to financial restrains.

Restaurant wine lists are also notoriously difficult to break into, but the growing demand for local wines is helping, he said.

“We are lucky that tourists and foreigners living on the island go all out for locally produced wines, which helps the smaller wineries to survive.”

Meridiana Wine Estate has also found a devoted following – but has followed a very different business path to Marsovin, which relies on a spectrum of wines. Estate manager Karl Chetcuti explained that Meridiana focused almost exclusively on premium

Storing your investment

wines when it was created over 20 years ago but has since expanded.

“Over the years Meridiana has become synonymous with premium wine and demand has grown consistently as wine consumers started changing their approach and realised that even Malta can produce some great wines.

“Meridiana also managed to create a ‘mid-level’ premium wine – Fenici – in order to satisfy this growing sector. The last 20 years has also seen a significant increase in the number of good quality restaurants which has contributed significantly towards a growing market.

“The return on investment makes sense only if you look at it on a long term basis but, in the meantime, passion and pride create enthusiasm and optimism,” he smiled.

Indeed, passion is a crucial component in

wine-marking, as with most other products.

Philippe Martinet, the founder of the eponymous fine wine company, said even mainstream winemakers are realising that their products were fast becoming a commodity.

“Over the years, winemaking became very uniform. It became all about machines and equipment and chemistry. But over the past decade, people are demanding more ‘personality’ from their wines and winemakers are ditching tractors and technology and focusing more on the ‘where’ rather than the ‘how’,” he said.

“We are seeing the return of the vineyard, rather than the winemaker. It is about the terroir and the locality and the grape... Bordeaux used to have the most conservative winemakers but even they are now making fully organic, geodynamic wines!”

Wine fridges are better for both long-term storage and also to age wine. Depending on what wine you are storing, the temperature should be between 4ºC and 18ºC. The most important thing is that the temperature does not fluctuate by more than 2ºC to 3ºC – at least not too frequently. Try to also control the humidity levels and keep them higher than 50 per cent.

Not everyone finishes a bottle in one session. This does not necessarily mean that the rest will deteriorate as long as it is treated with care. The first thing to do is to remove the oxygen left in the bottle. Use a device – usually a pump – to extract the air from the bottle, creating a vacuum.

You can also replace the oxygen with an inert gas, most commonly argon. This gas is non-reactive and is frequently added to freshly bottled wines to prevent oxidation.

Once opened, how long can you keep a bottle with the new storage solutions? It depends on the wine: some are more sensitive than others. Some wines start deteriorating after four hours. The trick is not to store open wine on its side as this increases the surface area exposed to oxygen. And never let the temperature of the wine go higher than 20ºC. Luke Lyttleton, director, Frizoll

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September 10, 2015

INTERVIEW

Protecting a nation’s coffers ere is not much that the chairman of the Libyan Investment Authority, HASSAN BOUHADI, can do with its assets until the UN freeze is lifted, but he told VANESSA MACDONALD that they still need to be managed, ready to help Libya rebuild its future.

Try to imagine Hassan Bouhadi’s frustration. The UN-backed attempts to negotiate a unity government have been held up by the absence of a team to represent the Tripoli-based rival government. The country is shattered, with an estimated €500 billion – yes, billion – needed to get its basic infrastructure up and running.

The chairman of the Libyan Investment Authority has in front of him a pile of charts and presentations on how the $67 billion it holds should be used. But for now, all he can do is push ahead with the authority’s plans for the day the UN sanctions are lifted.

This is not to say that he has been twiddling his thumbs since he was appointed in October 2014 with a three-year term.

He faces a number of challenges. For a start, his position is contested by Abdulmajid Breish, who was appointed by the rival government and is claiming to be the rightful chairman of the authority in spite of the Isolation Law enacted to ringfence the new process from those associated with the previous regime.

The authority itself is embroiled in two lawsuits against Goldman Sachs and Société Générale in an attempt to get compensation for billions it claims the two companies lost through virtual negligence.

He also admitted that the authority has not received any oil revenue for the past six or seven years, adding “It is not for me to comment!” when asked where the revenue was going.

The LIA started out with $63 billion of the country’s wealth, now up to $67 billion, of which a quarter is invested in equity and fixed

income. These investments are being looked after by a team in Malta, and although they cannot be touched – frozen by the 2011 UN Sanctions – the dividends provide a “few million” which are used to run the LIA, hire consultants and pay for the litigation.

“Our priority is to make sure that we do not lose our investments and that the portfolio retains its value,” he said, from his sleek offices on St Barbara Bastion in Valletta.

Forty per cent of the wealth is invested in five 100 per cent-Libyan owned subsidiaries: LAB, which is involved in energy and telecoms; OilInvest in oil and energy; Lafico, which is mainly involved in real estate and investment; LLIDF, a local development fund; and the Long Term Portfolio. There is also $19 billion held as deposits in the Libyan Central Bank.

Lafico is in turn involved with over 500 other companies through various business models, all of which are still operating unencumbered by sanctions. These are his largest headache.

“We spend most of our time as a board solving problems there. Banks are wary of Libya so we have to help the companies with the ‘know your customer’ process – to show who is authorised and who isn’t. We facilitate their business and make sure that they do not get disadvantaged by what is happening in Libya today. Around 90 per cent of them are outside Libya – including some in Malta.”

This is one of the main reasons that the LIA’s offices are here: “In 2013, firm Oliver Wyman was contracted to draw up a restructuring plan. One of the conclusions was that we needed to have an office which was close to Libya but in a safe environment.

HASSAN BOUHADI. PHOTO: DARRIN ZAMMIT LUPI

The situation in Libya was deteriorating and the board decided to establish an office in Malta. It is easier for our partners, stakeholders, banks, legal advisers and so on to come to Malta than to come to Tripoli!” he said wryly.

“We spoke to the Maltese government and they were very welcoming.”

He sees a role for Malta even once security has been re-established: “Our investment team will be in London as we want to be close to the city to attract the right talent. But the Malta office will coordinate all the decisions taken in Libya. So Malta will be there even after the unity government is formed.”

However, Mr Breish does not see Malta’s present role that way, claiming that his presence in Tripoli gives him more ‘legitimacy’ as the ‘rightful chairman’.

These little jibes clearly irritate Mr Bouhadi, who pointed out that the LIA reports to “the internationally-recognised body that represents the Libyan state”.

“There is no confusion. I was appointed chairman in October 2014. It is not a matter of opinion; it is a matter of law.

“The House of Representatives [HOR] was democratically elected and the LIA is embedded in the democratic structure. The LIA is non-political and non-partisan. This is very important as Law 13 [which establishes the LIA’s mandate[ specifies that the members of the board of trustees are ex-ufficio so there is continuity – in both the board of trustees and the board of directors. The head of the latter is the prime minister – whoever that may be in the future: Abdullah al-Thani has been there for two years, even before the HOR,” he said.

He also stressed the ties that the LIA maintains with Libya, saying that meetings were held every month rotating between Malta and Libya.

The fact that board members are appointed on an ex-ufficio basis is not necessarily reassuring in a country where power could change hands again – and again – before there is finally stability. Wouldn’t it be best to entrust the sovereign wealth fund to an international authority until things have settled?

Mr Bouhadi disagrees, arguing that the UN freeze was the best way to control things at present – even though the sanctions need to be reviewed.

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NEWS INTERVIEW STORIES

“Turning the wealth over to the international community is not the solution!

“The UN freeze has protected Libyan assets and it was maintained at the request of the Libyan government and the LIA. Even when it was imposed at the beginning, we had the chance of unfreezing it – but the government and the LIA chose not to. The freeze is doing a lot of good in protecting the assets – although nobody envisaged that it would last for four years,” he said.

“The international community has pledged to do whatever possible to protect Libyan assets. I have been talking to them – the US, the UK, the EU, the UN – for the past four months, pointing out that four years is a long time by any measure. Imagine if you have the same position in the stock market for four years – in spite of the stock market fluctuation over that period.

“These assets need to be managed. Maintain the freeze – but let us manage the assets.

I call it a smart freeze... The community has asked us to submit a proposal on how this can be done and we have now hired a consultant to come up with a mechanism.”

The international community’s interest is not entirely altruistic. A number of countries – and companies – would benefit from a stable and thriving Libya. But there is also another agenda: a stable Libya is less likely to have power vacuums and disenfranchised people and therefore would be a less likely breeding ground for fundamentalists like IS. When the assets are eventually unfrozen, could they find their way into IS hands? How would he reassure the international community?

“This is a security issue, which you would have to ask the right experts about. This has to be worked out with the unity government. At the end of the day, there are all the checks and balances,” he stressed. “Since 90 per cent of the investments are outside Libya, they are regulated by international regulators depending on the jurisdiction, like any major financial institution.”

Progress is being made on a number of fronts. In spite of the frosty stand-off between Mr Breish and Mr Bouhadi, they have agreed to work together for the greater good when it comes to the legal proceedings against Goldman Sachs and SocGen. Their agreement to present a united front has helped to move things along, with the courts appointing BDO as the receiver, which is now managing the proceedings: “They may listen to [both Breish and me] but they have the executive power to act.”

Mr Bouhadi is in the meantime drawing up plans for the future, knowing that oil revenue alone will never be enough to rebuild Libya.

AN OFFSHORE OIL PLATFORM AT THE BOURI OILFIELD OFF THE COAST OF LIBYA. PHOTO: DARRIN ZAMMIT LUPI/REUTERS

The LIA will split the wealth between three funds. The Future Generation Fund, basically the equity and fixed income, will provide long-term income – even when oil runs out.

The Stabilisation Fund will help the government by providing a buffer for rainy days: “When oil prices are high – bear in mind that

“ I am very passionate about building up the institutions as they did not have a big role under Gaddafi, when Libya was run by individuals...”

oil is 97 per cent of the national income of Libya – a percentage will go into this fund to even out the impact when oil prices are low.”

The Local Development Fund will promote the private sector, which was all but wiped out in the 1980s and 1990s by the Gaddafi regime.

“The Libyan people became hostage to their public salaries. That was one of Gaddafi’s ways of mobilising the masses,” he explained.

The fund will establish investment and financing sources for Libyan start-ups and SMEs and well as incubation resources and consultancy. It will also be used to train Libyans, preparing them to compete in the region and to find jobs outside the borders.

Another role for the fund will be to engage with multinational corporations like GE, Siemens, in which Libya holds shares.

“We will engage with them as the right conduit through which they can conduct business in Libya. This will also help to create jobs, our biggest challenge,” he said.

The third role for the LIA will be to attract new foreign direct investment, most likely through public/private partnerships, to manage large megaprojects like airports, power generation, etc.

He stressed that the private sector held the key to the future as a third of Libya’s budget for 2013 was for salaries with another third for subsidies, leaving very little for development or investment.

“Promoting jobs through the private sector will lessen the burden on the public purse, leaving money to be spent on infrastructure.

“The revolution broke the political chains but not the economic chains. By promoting the private sector, the Libyan citizen will be able to use his creativity to control his economic destiny, which was not available during those decades. It will allow him to lead a dignified life without being a hostage to his public salary,” he said pensively.

He clearly has a vision – but knows that it will take time to rebuild what took decades to destroy. He just as clearly does not want to waste time having to prove his mandate over and over again.

In a recent interview with Chris Wright of Forbes, he expressed frustration with the international community, seeing its recognition of the HOR and the government as being somewhat guarded. He would clearly prefer a more unequivocal endorsement.

“You cannot protect the assets if you do not clarify who is responsible for them. My wish was for the international community to have protected Libyan institutions right from the beginning.

“I am saying this as a technocrat: you cannot be 100 per cent responsible for the assets but only have 50 per cent of the say.

I am very passionate about building up the institutions as they did not have a big role under Gaddafi, when Libya was run by individuals...

These institutions serve all the Libyan people.”

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September 10, 2015

CASE STUDY

IVAN BARTOLO. PHOTO: CHRIS SANT FOURNIER

Profiling your health It has been almost 15 years since entrepreneur Ivan Bartolo set up 6PM, and during that time he has happily “reinvented” it several times, setting up in new countries, merging and acquiring, divesting and closing, going public with equity and a bond, and becoming a specialist in healthcare rather than a general software provider.

And yet, he does not take the company’s success for granted.

There may be little more than a decade till he retires – if he can ever drag himself away – but he happily confides that his personal wish would be to reinvent it “oh, at least another four or five times by then”.

“What would I like to see 6PM doing by the time I retire? I would like us to be providing all the software for free and making our money from the download of apps onto our smartphones. A complete shift!” he laughed, adding that he had not yet shared this idea with his board.

The company’s history has followed the path of a video game, acquiring tokens from which it derived strength for the next level, navigating its way through mines that forced unexpected changes of direction, but always surviving, always getting higher and higher points.

“Take an HIV patient who is on a regular course of treatment but whose next appointment is in several weeks’ time. With the app, now in testing, the patient would be able to log all the side effects or impact on a daily basis”

In 2010, the group acquired 70 per cent of shareholding in Softweb. Since then, it has been rebranded as Agilis, and is still providing commercial services like payroll and accounting packages to the local market. But this is now no longer aligned with its healthcare focus and he admitted that it could possibly be put up for sale.

A year later, the group bought computer and electronics company Compunet for €1 million in 2011. Online purchases eroded much of its revenue base and the shop at 6PM’s headquarters was closed a few months ago, leaving the company to sell its exclusive brands as a wholesaler on a B2B basis. But the acquisition was far from a disappointment, if for no

other reason than it brought Brian Zarb Adami with it, now 6PM’s chief technology officer. It also meant that 6PM charted another course, such as opening a data centre which hosted services.

It was also the key to one of 6PM’s most successful products: the file tracking system iFIT. “It was only thanks to the infrastructure we bought through Compunet that we created this most important proposition,” he said.

In fact, after Softweb and Compunet, 6PM made its greatest changes, not only moving from a service company to a products company – but also opting to narrow its focus on the health sector.

“In 2011, we had to decide whether to look either at a vertical strategy focussing on one market

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September 10, 2015

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NEWS CASE STORIES STUDY

or keep a horizontal strategy doing different things within the IT world. It definitely pays off, in our experience, to focus on one vertical sector,” he said.

“6PM has built up a wealth of knowledge and talent and skills and I am not only talking about IT skills – which everyone can have.

We understand the data set, the statutory requirements, the global standards like HL7 and GS1... Unless you specialise, you would never achieve a certain status.”

6PM Group also spread its footprint geographically, setting up offices in Macedonia in 2011, an investment of some €2 million. It was another underperformer in the past year, due to political unrest. Its focus on EU membership is also eroding its cost competitiveness, something that would only get worse with accession. 6PM has moved offices since then and among its headcount of 40 there are now commercial staff looking to expand into the Balkan market.

After Compunet, the group did not make any other local acquisitions, but turned its eyes overseas, looking for strategic acquisitions.

Its most recent is Blithe Computer Systems in the UK now operating as 6PM Blithe, which gives it a foothold into IT solutions for sexual health and substance abuse centres, leveraging its 700 installations in the UK. 6PM is now operating in over 150 hospitals as a result of this acquisition.

Its original foray into health was aimed at hospital management: creating efficiency in hospitals by automating processes. It has since expanded into the clinical solution zone, with solutions for stroke management, dementia and HIV, with the intellectual property mostly jointly owned with the NHS. “We market them as ‘built by clinicians for clinicians’. There are other advantages. Because we work with a particular hospital to develop a solution, it finds a home there straight away, which reduces commercial risk considerably. And it provides a reference site for other hospitals as the products are promoted at con-

ferences by medical practitioners considered to be world experts,” he said.

This evolution necessitated a rethink about the group’s structure, which by now had 200 employees spread across offices in Macedonia, Ireland, the UK and Malta.

“Until the beginning of the year we were structured geographically. It was very evident that this created ‘us and them’ scenario that I was not at all happy with. We have now changed that and the structure is based on five distinct business functions – business development, technology, operations, commercial and finance – spread across the different locations. So you can have people from any unit working in any country,” he explained.

The group also made a paradigm shift in its business models at the beginning of the year. It had been selling software on a perpetual licence, getting one off revenue with subsequent income for support and maintenance. It is now selling three-year, renewable licences, which he believes will succeed, in no small part due to the technological implications of changing systems that create a certain inertia.

“In 2018, we expect exponential curve in revenue because of the renewals,” he said.

The group is also trying to find clients which are normally too small to make the six-figure investment in its systems. In 2016, it will move its products to the cloud, offering a consumption model which will allow small centres to pay a fee per patient.

In 2017, the big challenge will be to launch mobile apps to create a bridge between patient and clinician, he enthused.

“Take an HIV patient who is on a regular course of treatment but whose next appointment is in several weeks’ time. With the app, now in testing, the patient would be able to log all the side effects or impact on a daily basis. Imagine if the clinician knew how the treatment was progressing...!

Imagine if you could get notifications on your mobile to remind

“People have professional profiles and social media profiles. ey now need to think in terms of health profiles”

you to log in details into a personalised profile! Like a personal health blog...

“So when the clinician asks that million dollar question – how have you been feeling? – you can give an accurate reply. It will make the next round of treatment much more accurate and efficient.”

With pressure on health providers to reduce costs, these apps not only save money but improve efficiency and quality of care, he stressed.

He believes smartphones and tablets have the potential to make a real difference, whether through reminders and feedback, or monitoring of vital signs.

“People have professional profiles and social media profiles. They now need to think in terms of health profiles... If you go to your

doctor with symptoms, he or she can only judge by what the readings are at the time – which could be misleading. We are gradually encouraging people to build up their own health profile, taking note of their blood pressure and other parameters on a regular basis. Then it becomes much easier to notice abnormal results... and the system would notify the doctor and raise the alert if necessary.

“And when you see the doctor, he or she knows what is ‘normal’ for you over the past weeks or months...”

He is concerned that efficiency will become more and more of an issue in the 21st century “In the 20th century, we focused on living longer. But we did not take into account that when we live longer, we must also be able to afford it,” he said.

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

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

EDITORIAL

Delivering the wrong message The government’s White Paper on the reform of school transport and traffic congestion is a perfect example of why so many problems in Malta defy solution. We give knee-jerk reactions to crises without careful assessment; we commission expert reports and ignore them; we propose holistic solutions but then cave in to sectorial pressure which compromises the rest.

How sad that one of the world’s most renowned thinkers, Edward de Bono, has taught the world how to approach problems and yet we cannot take a ‘hat’ or six out of his toolbox!

There is no doubt that traffic congestion is an issue but it is not only about road rage and being late. Economist Philip Von Brockdorff, assisted by Maria Attard and Frank Bezzina, wrote a report for the European Commission which showed that the external cost of traffic was €273 million in 2012 – four per cent of GDP. He also worked out the impact of school transport. Halving the number of cars taking children to school would not reduce the external costs at all between now and 2030. The only thing it would do is prevent these external costs from rising even more. Without changing school transport or making other policy shifts, the costs would rise to €322 million.

But why on earth should we take these findings into account? They don’t fit into the perception of popular solutions so it is easier to ignore them. (At least we cannot argue them away in this case by dismissing them as ‘foreigners who don’t understand the local context...)

The same applies to the bizarre line in an otherwise comprehensive White Paper which said that services “delivered by heavy vehicles should not coincide with the heavy morning traffic time”. This prompted the Malta Chamber of Commerce, Enterprise and Industry to issue a curt statement pointing out that the problem of traffic congestion “will

not be solved by passing the parcel from one sector to the other”.

What would the impact be on productivity – and competitiveness – if deliveries were banned for a few hours each day?

The naïveté of the proposal is a sad indicator of how little the challenges facing businesses is understood, seeing the trucks as the culprit rather than acknowledging the cost to businesses of having those delivery trucks held up for hours in traffic.

The situation is the result of decades of poor decisions about where to site schools, where to put double lines, when to enforce illegal parking.

It is about the poor decisions allowing pizzerias, pastizzerias and confectioners to open which will clearly need deliveries to be dropped off and which will tempt customers to double park because they will only be there for a few minutes. And we still haven’t learned, proposing to open a supermarket in a road which is already a bottleneck into Sliema.

Of course, there has been progress, but for there to be a real change the government needs to consider the painful options, from congestion charges to real enforcement of illegal parking. The recent video of a bus shunting a parked car down a road in St Julian’s may have been a rogue incident but we have all spent way too long stuck in jams because buses and trucks are unable to get past cars not to understand that there are too many people into many vehicles on too narrow streets.

School transport is clearly an issue – as is woefully obvious from the noticeable difference during school holidays. But as the Chamber says, the business community deserves more than “one line in a 14-page document”: “Malta deserves a holistic plan for transportation which includes an efficient public transport system, a European-level road network and better observance of traffic laws by all involved, in order for traffic to flow more smoothly.”

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BUSINESS OPINION

ECHR imposing changes to rent laws ECHR

Daniel Buttigieg A landmark judgement was delivered last month by the European Court of Human Rights, which is bound to change the interpretation of our municipal rent laws.

In the case of ‘Zammit and Attard Cassar v Malta’, the ECHR decided that Articles 3 and 4 of the Reletting of Urban Property (Regulation) Ordinance which prohibit an increase in pre-1995 rents, violate the owner’s property rights as protected by Article 1 of Protocol 1 of the European Convention on Human Rights since this law imposed an unfair and excessive burden on the owner.

Rent laws state that in a pre-1995 lease, upon the expiration of the lease period, the owner of the property cannot refuse the renewal of the lease, raise the rent or impose new conditions unless authorised by the Rent Regulation Board.

Moreover the raise in rent, even if authorised by the board, cannot exceed 40 per cent over and above the ‘fair rent’ at which the property could have been leased in 1914. In practical terms, the fair rent – which is anything but – makes it impossible for the owner to demand an in-

crease in rent since the maximum increase can only amount to 40 per cent over the rent rate applicable a hundred years ago. This law is befitting to all urban leases, irrespective of whether the lease period was agreed to by the parties or stipulated by law.

This led to situations where, prior to 1995, an owner rented out a property and, unless the tenant infringed the limited conditions of the lease imposed by law, the owner could not refuse the renewal of the lease or raise the rent, leading to a situation where the rent remained the same despite the tenant and his family possessing the property for decades.

Obviously, the rent would reflect the market price of the property at

the time of the contract. However, since such a lease is indefinite, over the years the rent becomes a pittance when compared to the increase in the property’s market value.

This landmark judgment dealt with a commercial store originally rented out in the 1970s. However, the rationale adopted by the ECHR can be used in interpreting laws applicable to all pre-1995 leases.

Contrary to a number of local judgments, the ECHR decided that despite the fact that upon commencement of the lease the landlord knew or ought to have known about the limitations imposed by the law, this is not tantamount to subjecting oneself to the law and waiving one’s right to peacefully

enjoy the property because the landlord could not have been in a position to envisage the extent of inflation in property prices in the decades to come. Therefore, the restrictions imposed by the law constitute an interference in his enjoyment of his property. Apart from that, the court also noted that the landlord cannot effectively waive a right which he never had to begin with.

The ECHR considered that once the law interferes with the enjoyment of one’s property, a fair balance must always be struck between the general interest of the community, for which the law was enacted, and the requirements for the protection of one’s fundamental rights.

Despite this, the owner suffered an unfair and excessive burden since the court did not provide adequate procedural safeguards aimed at striking a fair balance between the interests of the tenant and those of the owner. Due to the pittance in rent being paid, which is far less than the market value of the property, the tenant could make inflated profits to the detriment of the owner who was not receiving a just rent. Consequently, the interference by the state in controlling the use of property was not justified since the prejudice suffered by the owner was not proportionate to the general interest for which the law was enacted.

One must consider that this law was put in effect in the 1930s when the social, economic and political landscape was very different to what it is today. What was essential and in the public interest over 80 years ago cannot be deemed of same importance in 2015. Amendments to the rent laws in 1995 and 2010 were a step in the right direction; however, they still do not strike a fair balance since the changes were minimal when considering the excessive and disproportionate burden suffered by property owners.

Daniel Buttigieg is a lawyer with Fenech & Fenech Advocates. www.fenechlaw.com This article is not intended to offer professional advice and you should not act upon the matters referred to in it without seeking specific advice.

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APPOINTMENTS

Farsons appoints Group Head of Food Business

JOHN BONELLO GHIO

John Bonello Ghio is taking on the role of Group Head of Food Business at Farsons with a focus on developing and overseeing its food business sector.

He will lead the teams at Food Chain, which he has been managing since joining in 2011, as well as overseeing and developing the food importation and distribution business of Quintano Foods.

The food business a critical growth area of the Farsons Group, supported by continued investment both in Food Chain Ltd through extensive refurbishment programmes and planned openings of new restaurants (within its three franchise businesses, namely Burger King, Pizza Hut and KFC) as well as at Quintano Foods Ltd through substantial investment in its operations.

Mr Bonello Ghio joined the Farsons Group in 2011. He will be reporting to Farsons Group chief executive Norman Aquilina and will join the group executive board.

Belair gets new letting manager Anthony Gera has been appointed letting manager at Belair Property, and is now in charge of the letting teams within all Belair Property offices. Mr Gera joined Belair in 2008 as a letting consultant and has consistently been one of the top performers on letting since then, especially on commercial letting.

“The property letting market has become more competitive and increasingly challenging considering the lack of properties needed for the demand we have. We believe Anthony is the right person to take our letting performance to yet another level,” managing director Ian Casolani said.

ANTHONY GERA

MACM council elected

MICHAEL GALEA

Calamatta Cuschieri’s new managing director Calamatta Cuschieri has appointed Michael Galea as managing director of two of its group companies, namely its investment management and fund services divisions.

Mr Galea has 14 years’ experience in the finance industry and a successful track record involving banking and treasury operations, portfolio management, fund servicing and corporate finance.

In his new role, he will be responsible for overseeing the daily operations of the groups’ institutional business with a particular emphasis on all fund related matters, including the Calamatta Cuschieri Funds SICAV plc, CC’s proprietary UCITS fund platform.

At a group level, he forms part of the executive management team where he has been appointed chief business development officer.

Charles Xuereb has been reappointed as the president of the Malta Association for Credit Management (MACM) for a further two-year period. Mr Xuereb was first elected president of the MACM in 2013. He is the chief financial officer of Simonds Farsons Cisk and is a fellow of the Institute of Accountants.

The other council members are Peter Wirth, Hugh Mercieca, Louis Bianchi, Joseph Dimech, Charles Arapa, Michael Degaetano, Mario Delicata, Antoine Galea, Joe Hili and Anthony Rossi.

The MACM is a notfor-profit organisation, providing a central national organisation for the promotion and protection of all credit interest pertaining to Maltese businesses.

CHARLES XUEREB

ALFREDO MUÑOZ

New CEO for Mapfre Middlesea Felipe Navarro López de Chicheri will be taking over from Alfredo Muñoz as the CEO of Mapfre Middlesea.

Mr Navarro López de Chicheri, a Spanish national, is an insurance professional with a proven track record within Mapfre, having held various senior management positions. Mr Muñoz, who has led the company for the past four years, will take on a major role at another company within the Mapfre Group.

Mr Navarro López de Chicheri is a board member at MSV Life plc and was a board member at Mapfre Middlesea between April 2012 and April 2014.

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September 10, 2015

STOCK MARKET REVIEW

AN SAD ISPOT STORE IN POLAND.

PTL Holdings expects lower profits as exports terminated Edward Rizzo PTL Holdings plc, a subsidiary of Hili Ventures Ltd, published its updated Financial Analysis Summary (FAS) on August 21. Since the FAS was published after July 1, PTL was not only obliged to update its forecasts for 2015 but was also required to provide its projections for 2016.

PTL Holdings was established in 2013 as a holding company and financing arm of three IT companies which were acquired by Hili Ventures recently. Initially, PTL Ltd (formerly Philip Toledo Ltd) was acquired in 2012 and two larger acquisitions took place in 2014: SAD in June 2014 for €40.35

million and Apco in August 2014 for €8.8 million.

Although the prospectus published at the time of the bond issue of PTL Holdings in November 2014 provided financial statements for 2013 and 2014, these were drawn up on a pro-forma basis and were useful for illustrative purposes only since they assumed that PTL Holdings had control over both SAD and Apco during the review period.

As such, the 2014 audited financial statements of PTL Holdings published on April 30, 2015, should not be compared to the figures found in the prospectus.

On the other hand, one can compare the 2015 projections published in November 2014 to the FAS update of a few weeks ago.

In November 2014, PTL had expected revenue to amount to €117.4 million during 2015 and it now expects this to rise to €143.4 million. Notwithstanding the 22 per cent additional revenue for 2015, PTL expects to generate earnings before interest, tax, depreciation and amortisation (Ebitda) of only €6 million which

is 20 per cent below the figure of €7.5 million projected in November 2014. In fact, the 2015 Ebitda margin is expected to shrink to 4.2 per cent compared to the earlier expectations of 6.4 per cent.

Unfortunately, the FAS does not provide justification for this wide variance. This would have been useful information for the many investors who invested in PTL bonds during the primary market offering in November 2014 as well as those who continued to support this bond despite the rally in the bond price on the secondary market to above 111 per cent.

One of the major reasons for the expected dilution in Ebitda could be due to the termination of the SAD export business, comprising the distribution of electronic goods across a number of European countries.

In the 2015 interim financial statements, it was disclosed that this business was being discontinued due to a change in Vat regulations and the risks associated with cross-border sales of technology items. During the first few months of 2015, this line of business

generated total revenue of €34.8 million. The updated FAS provides the Ebitda breakdown across the different business units for both 2015 and 2016. The Ebitda contribution of the SAD export business during the first few months of 2015 was €1.9 million, representing a margin of 5.5 per cent.

Meanwhile, the core business of SAD, comprising the resale of Apple products through the various iSpot outlets across Poland together with the business-tobusiness offering, is expected to generate €95.4 million in revenue in 2015 and Ebitda of €3.8 million, giving a margin of only 3.9 per cent.

The contribution from PTL Ltd and Apco is expected to be minimal in 2015 with Ebitda of €0.4 million and €0.3 million respectively.

However, the directors expect the Ebitda of both PTL Ltd and Apco to rise significantly in 2016 despite a minor improvement in revenue generation. The Ebitda of PTL Ltd is expected to jump to €1.4 million in 2016 from only €0.4 million in 2015 (with the Ebitda margin rising to 12.4 per cent from 3.8 per cent in 2015) and Apco’s

Ebitda is anticipated to reach €0.9 million in 2016 from €0.3 million in 2015 (with the Ebitda margin surging to 37.4 per cent from 11.4 per cent in 2015).

The FAS does not explain the assumptions behind the significant improvement expected by both PTL Ltd and Apco in 2016. Should PTL Ltd and Apco succeed in achieving this projected growth, the contribution of these two entities to overall Ebitda of PTL Holdings will improve from 11.3 per cent in 2015 to 37 per cent in 2016. Furthermore, SAD’s revenue is expected to grow by 9.8 per cent in 2016 to €104.8 million and Ebitda to rise by 15.8 per cent to €4.4 million with the Ebitda margin edging up to 4.2 per cent from 3.9 per cent in 2015.

Despite the expected improvement from PTL Ltd and Apco, PTL Holdings remains highly dependent on SAD to generate sufficient cash to cover its interest payment obligations and the repayment of the bonds upon maturity. As such, a lot depends on the Apple brand and SAD’s ability to maintain its nonexclusive franchise agreement with Apple Inc.

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STOCK NEWS MARKET STORIES REVIEW

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

PTL Holdings plc - EBITDA Segmental Analysis

based on company projections for the financial years ending 31 December 2015 & 2016

million)

5

EBITDA Contribution (

The more important ratios for bond investors to follow from one review period to the next are the interest cover and the gearing ratio.

Notwithstanding the weaker-than-expected Ebitda contribution in 2015 compared to the original forecasts, the interest cover is still anticipated to amount to 2.3 times in 2015 and this is expected to improve to 2.5 times in 2016. On the other hand, PTL Holdings remains one of the most highly-leveraged companies among the bond issuers on the Malta Stock Exchange. The gearing ratio forecasted as at the end of the current financial year is expected to remain above 86 per cent, represented by shareholders’ funds in excess of €7 million and total debt of almost €45 million.

The Financial Analysis Summary has once again proved to be a useful document to enable investors to monitor the performance of bond issuers. However, such companies should also convene meetings with financial analysts to discuss industry trends and to provide more indepth explanation on the financial statements, including the variances within the forecasts. This would greatly assist investors in their decision-making.

2015 (P)

4

2016 (P)

3

2

1

0

-1

PTL

PTL Holdings plc Financial Highlights

SAD

SAD Exports (Discontinued)

APCO Systems

2015 Projections

2015 Projections

Original

Revised

'000

Non-operating entities

2016 Projection

'000

'000

Revenue

117,449

143,369 10,776 130,215 2,378

22.1% 28.3% 23.3% -31.4%

118,582 11,314 104,769 2,497

-17.3% 5.0% -19.5% 5.0%

Operating Expenses

109,957

137,353

24.9%

112,249

-18.3%

EBITDA

7,492

6,016

-19.7%

6,332

5.3%

Net Interest Expense

2,773

2,647

-4.5%

2,491

-5.9%

Interest Cover (times)

2.7

2.3

-14.8%

2.5

8.7%

3,476

2,414

-30.6%

2,701

11.9%

PTL SAD APCO

Profit before tax

8,396 105,586 3,467

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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BUSINESS UPDATES

A simple guide to eSkills Malta Foundation core-satellite investing equips the workforce Diversification is a widely grasped financial concept by investors worldwide and this can be achieved through investment funds, which hold several different underlying positions. The notion of core-satellite investing is quite simple: maintaining a stable core holding while adding smaller satellite positions to spice up the portfolio composition.

Apart from enhanced diversification effects, this concept also delivers a risk-managed exposure with the added benefits of returns.

The concept of core-satellite portfolio can be applied to direct investments in individual bonds and/or equities or indirectly through investment funds. The latter generally provide greater diversification benefits, professional management and immediate action to time-sensitive events. At the initial stages of setting up a core-satellite portfolio, investors should primarily select bonds, equities or investment funds that suit their predominant investment objectives.

In other words, the core holding, ideally representing a substantial amount of the total portfolio, should be made up of investments in line with the investor’s risk tolerance levels, preferred asset class and distribution type. The greater the percentage allocated to the core, the more the portfolio’s performance will replicate the performance of the markets or investment funds in which the core holding is invested.

In the context of a portfolio, the selected satellite holdings add up to a remaining portion of the total portfolio value and can be made up of a number of different holdings to increase diversification.

Prior to selecting the satellite holdings and in order to take full benefit of this investment approach, investors must consider investments that differ from the core holding. By investing in different assets and investment strategies, investors benefit from an added level of diversification. Satellite investments are generally used to enhance the portfolio return through opportunities within the selected markets. Source: Valletta Fund Management Ltd.

The opinions expressed herein should not be interpreted as investment advice. Investments in the Vilhena Funds SICAV plc should be based on the full details of the prospectus, offering supplement and the KIID which may be obtained from Valletta Fund Management Ltd, Bank of Valletta plc branches/investment centres and other licensed financial intermediaries. VFM is licensed to provide investment services in Malta by the MFSA. VFM, TG Complex, Suite 2, Level 3, Brewery Street, Mrieħel, BKR 3000, Malta. Tel: 2122 7311, e-mail: infovfm@bov.com www.vfm.com.mt

with the right digital skills The eSkills Malta Foundation is a coalition of various representatives from the government, industry and education who work together to create the skills base and life-long quality growth required for a digitally enabled knowledge economy. It is important for Malta to be innovative and competitive and the foundation aims to instigate changes that help the country in developing a strong and suitable workforce equipped with the right digital skills.

The foundation, which brings together representatives from the Ministry of Education, MITA, Malta Enterprise, the Malta Communications Authority, the Malta Gaming Authority and the Chamber of Commerce, has several tasks at hand including that of giving advice to government and stakeholders on e-skills matters, contributing to the expansion of ICT educational initiatives and leading an ICT professionalism development programme.

The foundation also instigates further reform in the ICT educational offering, contributes to capacity-building in the ICT education community and facilitates access to innovative, creative hubs for eskills development and ICT leaders.

With ICT skills becoming more and more mandatory, both in one’s education as well as in employment, the eSkills Malta Foundation appreciates the fast rhythm of change in technology that many times is easier implemented than changed within the education sector. Because of this, the Foundation was setup specifically to ensure that there is a stronger interaction between the requirements of the industry and the education and training offered by Malta’s educational stakeholders.

The eSkills Malta Foundation is currently Malta’s national point for the EU’s eSkills for Jobs 2015 project – a communication and awareness-raising campaign on the need for citizens to improve their command of ICT skills for work.

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BUSINESS UPDATES

Charles Grech appointed to represent Penfolds wines Charles Grech wines division was recently entrusted with the official and exclusive distribution of the famous Australian winemaker, Penfolds. From the earliest winemaking days of Australian history, Penfolds has figured prominently and few would argue the importance of Penfolds influence on Australia’s winemaking psyche. Without the influence of Pen-

folds, the modern Australian wine industry would look very different indeed. Sitting comfortably outside of fad and fashion, Penfolds has taken Australian wines to the world on a grand stage and forged a reputation for quality.

Available in all Charles Grech Retail Outlets and The Bistro, as well as local premium restaurants.

September 10, 2015