FEATURE
Issue 43
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January 28, 2016
Distributed with Times of Malta
Brent crude was down to $29.25 a barrel at one point this week but local operators in the oil and gas sector are nevertheless pragmatic about the long-term prospects, maximising opportunities arising out of the downturn. see pages 10 & 11 >
NEWS e reduction of the performance guarantee for SMEs is just one of dozens of measures over past years to streamline public procurement and encourage competition. e amount awarded in 2015 was double that of 2014. see page 3 >
Banks to meet competition office Vanessa Macdonald In the coming weeks the Office for Competition will meet the banks to discuss recommendations made with regards to their charges and practices. “The Office will have to first wait for the outcome of these meetings before deciding any further steps it might take,” the director general for competition Godwin Mangion said. “It will take any necessary action by imposing remedies and/or fines only in the case where it finds an infringement of the Competition Act.” Last year, the MFSA and the Office for Competition within the Malta Competition and Consumer Affairs Authority were asked by the Finance Ministry to review banking charges and loans to SMEs respectively with a view to improving competitiveness. (See summary of recommendations)
The Finance Ministry commissioned the investigation following calls from both local and international institutions, including the Central Bank of Malta and the European Commission, expressing concern over “high interest rates” which could increase SME costs and “erode the country’s competitiveness”. Mr Mangion noted that the report concerning interest rates charged by banks on SME loans issued by the Office for Competition formed part of a sector inquiry in terms of the Competition Act. “Under the Competition Act, where the trend of trade, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the Maltese market, the Director General may conduct an inquiry into a particular sector of the economy,” he explained. The report on bank charges was issued by MFSA, the regulator for the sector.
MCCAA recommendations (July 2015)
■ Free of charge quotations for SMEs ■ More information on business loans (also in Maltese) ■ All charges to be listed on bank websites ■ Restricted information on future pricing ■ EU-funding through more than one bank ■ Encourage SMEs to shop around ■ Government to set up credit register
NEWS e reform of the pension system will never work unless there is also an understanding of the importance of saving for retirement. e financial literacy strategy launched this week hopes to instill this culture. see page 5 >
MFSA recommendations (October 2015)
■ Review charges for incoming and outgoing payments. ■ Reduce and cap charges to retail outlets for use of local debit cards ■ Review bank charges on loans, particularly for businesses ■ Assess renewal fees for their reasonableness. ■ Reduce charges for credit transfers ■ No additional fees for withdrawals from third party ATMs
OPINION Justice Minister Owen Bonnici has more or less ruled out giving the ‘commercial court’ a more formal basis in the near future but lawyer Conrad Portanier argues that there is too much at stake for it to be delayed. see page 15 >
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News
Government contracts have doubled in 2015
GOVERNMENT CONTRACTS COVER EVERYTHING FROM ROADWORKS – SUCH AS THE COAST ROAD –TO THE PURCHASE OF MEDICINE. PHOTO: MARK ZAMMIT CORDINA
Government contracts
500
400 477
300
375 348
250
261
200
253
209
125 0
100
€166
€233.5
€291.5
€182.6
€371.7
2011
2012
2013
2014
2015
Contracts
Value
0
€ million
“Apart from the benefit to economic operators, the system is also much more transparent”
2015, below the value of €500,000 (exclusive of VAT), and to introduce the concept of a single bond for multiple contracts. Three more legal notices are planned to align the Maltese public procurement regulations with the new EU Public Procurement Directives, which will yet again simplify the system. The Department of Contracts is liaising with the Public Contracts Review Board to ensure that the new EU directives will come into force before April 2016. Anthony Cachia, head of contracts, believes that all these measures are in the public interest. “A more efficient and effective public procurement system is geared towards increasing economic operators’ participation, thus increasing competition, while at the same time guaranteeing good value for public funds,” he said. Of course, the changes made since 2013 are not the first attempt to improve the system. A major change had been the introduction of electronic tendering in 2011, which has now become the government’s main tool for the procurement of supplies, services and works. The latest figures up to the end of November 2015 show that over 14,800 electronic tenders were published online, involving 3,000 bidders. “Apart from the benefit to economic operators – most visible in terms of a reduction in operational administrative costs – the system is also much more transparent as throughout the process, economic operators have all the information at hand.”
Number of contracts
The government awarded €371.7 million worth of contracts in 2015, just over double the amount for 2014. However, the number of contracts was only 37 per cent higher, meaning that the average for each contract was much higher: €780,000 in 2015 compared with €525,000 in 2014. The figures only cover contracts handled by the Department of Contracts, and do not include tenders issued directly by contracting authorities where the budget falls under the department’s threshold, or entities like Mita, the Grand Harbour Regeneration Corporation and local councils. Since 2013, the Department of Contracts has been trying to simplify procedures and reduce bureaucracy associated with procurement, particularly when it comes to the administrative burdens on economic operators. There has also been a concerted effort to make it easier for SMEs to bid for contracts. Since then, the department – which has also restructured internally – issued 23 procurement policy notices and 18 circulars to streamline procedures. Some of the changes were considerable, such as the removal of the participation fee or cost related to purchase the tender document, the elimination of the bid bond where the value of the tender is under €500,000 (exclusive of VAT) and the removal of past experience requested from economic operators to qualify for a tender with a value under €500,000 (exclusive of VAT). More recently changes were also made to reduce the performance guarantee, for all public contracts signed after December 1,
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NEWS
Only €97 a month invested for retirement Only a quarter of respondents to a university survey have a retirement plan – and those who do only invest an average of €1,161 annually – €97 per month. In a dissertation survey covering 1,255 respondents, Ann Marie Mangion found that only 21.9 per cent held specific plans for their retirement and only 21 per cent of those aged 53 or under knew what their applicable state pension would be. These are some of the facts being used to highlight the need for a financial literacy programme, which will include a more comprehensive study to ascertain the figures on a more representative, nationwide basis. The proposed study is one of the action points drawn up by the Retirement Income and Financial Literacy Commission under the aegis of the Ministry for the Family and Social Solidarity (MFSS) presented last Tuesday. The commission was set up on the recommendation of the Pensions Strategy Group (PSG) following public consultation. The commission includes senior representatives from the Malta Financial Services Authority, Finance Malta, the Department of Social Security, and the Department of Quality and Standards in Education. The first aim of the programme is to increase understanding of the importance of saving for retirement. “Research overseas shows that not only do individuals display low levels of financial literacy but also that financial illiteracy is linked to lack of financial planning and insufficient resources in retirement – given that, for many persons, financial security in retirement depends on the State pension. What explains this low level of retirement preparedness in developed countries? Why do people do so poorly when it comes to designing and carrying out retirement saving plans?”, the commission asked.
BASIC FACTS 97 per cent of households own at least one financial asset, with 83 per cent holding an interest-bearing deposit with a bank. 21.6 per cent own some form of debt security, mainly corporate bonds and government securities. Equity in the Malta Stock Exchange or elsewhere is held by 13.4 per cent of all households, while eight per cent own mutual funds. 24.2 per cent of all households are covered by a life insurance policy or participate in a retirement scheme. Source: Central Bank of Malta “Research shows that no reform of the pensions system alone results in meaningful change unless this is complemented by the inculcation of a culture of selfresponsibility for retirement achieved by instilling an understanding of the importance of saving for retirement. “Also disconcerting is … a distinct absence of knowledge of how Malta’s pension system works and how this impacts a person’s retirement income – an absence of knowledge that cuts across all strata of society.”
The second pillar of the strategy relates to increasing financial literacy and retirement planning. “The levels of financial literacy among citizens are a global concern. The causes of the 2008 financial crisis are many. There is, however, little doubt that individuals and financial institutions failed to understand the risks they took when they invested in the financial market. “Moreover, younger generations face increasing financial risks as they are confronted with more sophisticated financial products than previous generations.
“Furthermore, they are given access to financial services and products at an ever-younger age. These developments do not appear to be matched by an equivalent increase in their financial skills. “Improving financial literacy is an essential means towards greater economic, social and financial inclusion and an integral part of financial reform to prevent future crises,” the commission added. The educational programme will span age categories from secondary students to adults,
backed by a three-year targeted communication strategy. “We need to get across the message that retirement planning should include a serious and deliberate analysis of life and financial issues – and certainly not one limited to investment management. “There is also significant misunderstanding about the amount that can be safely withdrawn from a retirement account. “People only consider the average investment returns without weighing the downside risk and results if there are poor years. And as the life expectancy of Maltese citizens continues to increase, the risk that pensioners outlive their financial assets is a significant growing challenge,” the commission said. Many people are over optimistic about expected returns on savings and investments and their ability to manage such savings and investments. There are shortcomings particularly with regard to educating people on how the State pension works, the expected level of income in retirement from a State pension because of life choices, etc. The management of savings to secure the highest rate of return is critical – particularly in a state of play where interest rates in banks on saving deposits within the eurozone are low. If one invests €500 annually between 35 and 65 years of age in a normal savings accounts with an interest rate of 0.1 per cent, the capital of €15,000 would increase to €15,734.80. On the other hand, if the same capital were invested in a savings account with an annual three per cent interest rate return, the capital would increase to €25,001.34, PSG member David Spiteri Gingell explained. Public consultation on the strategy is open until March 23. Feedback should be sent to financialeducation.mfss@gov.mt.
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NEWS
€60m for new SME scheme A new scheme being administered by Bank of Valletta will provide €60 million worth of financing for over 800 Maltese SMEs. The scheme, first mentioned by Parliamentary Secretary for EU Funding Ian Borg in December 2014, was announced earlier this week. It is being offered following an agreement between BOV and the European Investment Fund, part of the European Investment Bank Group. The agreement means SMEs will be offered financing of up to €500,000 at lower interest rates with less stringent collateral requirements. The scheme – SME Initiative Malta – is a joint financial instrument of the European Commission, EIB Group and the government of Malta and aims to stimulate SME financing by providing partial risk cover for SME loan portfolios originated by
financial institutions. Alongside €15 million from its EU Structural and Investment Funds resources contributed by the government of Malta, the SME Initiative is co-funded by the EU through Horizon 2020 resources, as well as EIB Group resources. This is not the first time that BOV has been able to offer special terms to SMEs. BOV had leveraged the guarantee put up by the government for Jeremie – €10 million originally, with another €2 million put up later – by almost six times. During the period of the instrument, over 700 loans were granted, amounting to €62 million. This time, the leverage is four times the government guarantee. In December 2014, Mr Borg had said that unlike with Jeremie, it was “probable” – and preferable – that more than one bank would be able to offer the SME initiative.
Incentive for widows boosting part-time but not full-time work A move by the government to allow widows to earn more than the minimum wage without losing all or part of their pension has failed to encourage many to take up full-time employment – but has boosted the numbers working part-time. Both governments had been pressured to remove the restriction, which meant that widows were getting a reduced pension because their income exceeded the national minimum wage and/or they had dependent children under the age of 21 who were still in education. In the Budget for 2014, the restriction was raised and the Department of Social Security within the Ministry for the Family and Social Solidarity set about contacting women who were not receiving any pension at all because their income exceeded the national minimum wage. The
department also wanted to contact women who might be interested in going back to work under the new conditions. The number of widows working part-time increased from around 460 in 2013 to 719 in 2014 –
“Out of the widows who do work, those over retirement age represent 56 per cent”
however, it is hard to know how much of this is a result of the Budget measure as the number has anyway been increasing slowly but surely over the past five years. In 2010, there were just over 300 widows working part-time. However, the number of widows working full-time has hardly budged, if anything going down from 1,141 in 2013 in 2013 to 1,108 in 2014 and down again to 1,031 by the third quarter of 2015. However, the department unveiled some interesting figures: there are 551 widows over retirement age who are still working – 54 of them full-time, 453 on part-time basis and 44 on reduced hours. In all, 16,315 persons receive a widows’ pension of which 2,041 are under retirement age. This means that out of the widows who do work, those over retirement age represent 56 per cent.
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INDUSTRY FOCUS
Seeking sources of growth It seems that 2015 will be remembered by local economy operators as the years of mergers and acquisitions, as companies consolidated to futureproof their momentum – but will the trend continue in 2016? Anita Aloisio, the partner for specialist advisory services at Nexia BT, believes that these mergers may be a signal that organisations may have already reached the maximum level of organic growth. “Those companies would have reached their growth potential with their existence level of competence. Since we all know that developing competences and building organisations is a long winding road, combining these skills with those of existing organisations may indeed yield quicker results,” she said. “Mergers, when managed and implemented with discretion help organisations to immediately increase their capabilities and resources, both physical and human and also offer the opportunity to extend the range of services, thus reaching a wider client base.” In the local context, this concept might actually make even more sense, since human resources are limited and competition is very fierce. “Rather than help with attracting with recruitment per se, a merger might attract candidates who aspire to work for a larger organisation that can offer interesting career paths,” she added. One sector that has seen considerable consolidation is the insurance one – but sometimes this
means less competition and fewer options for clients. Fiona Borg, the chief operations officer for business development at MIB, lamented that the number of insurance companies and agencies to write Maltese risks have gone down to five insurance companies, two Lloyds’ agents and three agents for international principals. The rest are branches, agents or tied insurance intermediaries of the same local insurance companies. “This means that at most you can only have 10 different quotations, or fewer depending on the risk to be insured. As an independent insurance brokerage firm operating in Malta for 40 years, servicing most of the top corporate entities in Malta, we sometimes have no other alternative but to seek quotations direct from the international market to offer the clients a wider spectrum of insurance alternatives, prior to securing the policies. “Without this approach, a client approaching different brokers will have a limited choice of solutions,” she said.
The pressures posed by each new regulation makes it harder for companies to survive alone, and Ms Borg said that the Insurance Distribution Directive that will come into force in two years’ time will be no exception. “This could mean that smaller firms may be affected badly, with more potential mergers and acquisitions to be seen in the coming years.” Of course, the insurance sector is not the only one looking warily at Brussels. The financial services sector is concerned about attempts to harmonise tax in the EU – in spite of the fact that tax is only one of the country’s competitive advantages. Josef Mercieca, senior tax manager at BDO Malta, still believes it would cause considerable upheaval: “Being unable to control the level of taxation for companies based in Malta and the fiscal incentives granted to foreign investors to utilise Malta as a tax-friendly jurisdiction could make us lose our competitive edge, endanger thousands of jobs and damage our economy.
“The introduction of such a system would mean that Malta would have to fundamentally change its tax model and be immediately put at a disadvantage. It is of paramount importance that Malta keeps challenging and resisting such harmonisation attempts,” he said. BDO chief executive officer Mark Attard said this meant it was more important than ever for Malta to build on past success. “Malta needs to develop and modernise the services presently offered, while moving ahead of its competitors by expanding its service offerings to attract virtually untapped foreign investment in other areas of this industry. “A large part of Malta’s success in this industry can be attributed to its reputation as a highly regulated jurisdiction and while it’s imperative to retain this reputation we must do so efficiently and effectively,” Mr Attard said. EU Directives can also create opportunities for local companies. The Waste Electrical and Electrical Equipment Directive, better known as WEEE, means a new
“With the economy due to grow by 3.6 per cent this year, ancillary services are also seeing rising demand”
niche for GreenPak Coop Society Ltd this year. Chief executive officer Mario Schembri believes that the new system will be more effective than the eco-contribution system, which is being dismantled. “Many believe mistakenly that eco-taxation brings about solutions in the protection of the environment. After 12 years since eco-taxes were imposed on many products, the government is convinced that such fiscal instruments do not lead to recycling of products and is removing the eco-tax regime. “Since setting up GreenPak in 2004, the cooperative has maintained that taxes do not lead to an increase in recycling. Rather, GreenPak operates an industryowned waste recovery scheme that recycles thousands of tonnes of waste materials on behalf of the companies that own GreenPak,” he said, explaining the innovative business model. “Today, GreenPak provides waste recovery services – free of charge to the public – to over 70 per cent of the Maltese population, a system financed by over 1,300 companies.” With the economy due to grow by 3.6 per cent this year, ancillary services are also seeing rising demand. Thomas Smith did not opt for M&A but rather for diversification, feeling that it was better to be able to offer its clients a comprehensive shipping service to cater to growing imports, exports – and the removal of personal effects. Managing director Joe Gerada explained that clients satisfied one particular service tended to stay with the provider for others, “until
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INDUSTRY FOCUS
we become the true one-stop shop for him”. With diversification, the trick is to maintain the same high standards across all areas of activity. “We have put a lot of effort and investment to get here. Being established for over a century-anda- half, we have had enough time to do this,” he smiled. “If you can maintain the same wavelength as an industry leader then you can be easily accepted as a supplier to that leader.” For some companies, growth will come from internationalising but that brings its own risks, as the local companies have to take a leap into the unknown. There are, however, more tools than ever for doing due diligence. Simon Camilleri, the CEO of Creditinfo Malta Ltd, said there was no excuse to plead ignorance. “We provide company and individual international reports which mean Maltese companies can trade with a lot more transparency and confidence. Many companies have had their fingers burnt relying on verbal recommendations or just taking a risk – for the sake of a few euros! Information is available on virtually any company in the world. One mistake on a big order can force a company to close,” he warned. Of course, with so much competitive pressure, companies have to look after every cent – which makes credit management very important. “Most definitely, with the economic challenges in Europe and tighter credit controls, by law many companies have to carry out due diligence. Every week there is a new story regarding money laundering, or a collapsed business. Companies should make calculated decisions based on information provide. If you credit check someone first, there is a greater chance you will get paid,” he stressed. For some companies – those that offer online services – there are simply no borders at all, but that does not mean there are no challenges. Fexserv Financial offers foreign currency services and general manager David Borg Hedley said some events were already on the horizon – the possible British referendum on EU membership; presidential elections in the US and other countries – but others would undoubtedly crop up.
“Exchange rates very much depend on a number of these factors and hence we believe that that volatility will be no less than what we have seen last year.” Apart from benefiting from being online, Fexserv also has the advantage of technology, which will continue to offer it new ways to serve its clients. “Statistics overseas have shown that adoption of financial technology could double among digitally active consumers within the next 12 months and we believe that Malta will not be far off. The smartphone has incorporated our alarm clock, camera, diary and so many more things we used to use other gadgets for. Payment solutions and money transfers are the next big thing for these impressive devices.” Of course, technology comes with its own downside and GFI Software has been very successful at protecting companies that rely on IT. Sergio Galindo, president and chief operating officer at GFI Software, admitted that while the internet was a wonderful thing many business owners may not be aware of what risks unfiltered internet access can have, not only on employee productivity but also on company resources.
“Web filtering is not about being big brother or about spying on your employees but about actively protecting the company’s assets and making sure employees are happy but also productive”
“These days, social media seems to be the worst offender when it comes to lost productivity and bandwidth wastage. Web filtering software can help businesses preserve users’ productivity but at the
same time leaving the internet open to productive web browsing. Sites like Facebook, Twitter and even news sites can be blocked or alternatively, a time limit can be set on the amount of time used on these sites. This way, your employees can still access their favourite websites without affecting the company’s bottom line. “Web filtering is not about being big brother or about spying on your employees but about actively protecting the company’s assets and making sure employees are happy but also productive,” he said. Of course, some companies can only grow locally due to their very nature. Three companies that are a great example of this are marina operators Creek Developments, dry-cleaning company Portughes, and boutique hotel management company Hotelogique. Sarah Gauci Carlton, the commercial manager of Creek Developments, said that when there were no expansion opportunities, the option was to exploit its resources to the maximum. Over the past few years it has become established as a winter berthing destination of choice, attracting a discerning international clientele during the off-peak season when berths are available. There is also a high incidence of
returning and recommended long-term winter visitors, both international and from other local marinas. “With a focus on quality, after five years of intensive investment in the infrastructure and human capital of the Msida and Ta’ Xbiex Marina, Creek Developments is well on the way to achieving its goal of becoming the standardsetting Mediterranean marina,” she said. For Portughes, the challenge is to retain and acquire customers locally, which it does by focussing on excellence and precision, a reputation built up over its 100year history. Managing director Ian Portughes explained that staff are trained by professionals in the UK, while equipment and chemicals are constantly updated and upgraded, not only offering the latest technology but also more efficiency in terms of cost price and time. For Hotelogique, the challenge is a different one: boutique hotels are a relatively recent development but a niche which is growing faster than anticipated. Managing partner Jan Karl Farrugia helps owners and investors wade through challenges ranging from sales and marketing of the properties, to staff selection and training, leaving them free to look after daily operations and finances. Apart from that, when dealing with hotels of a low number of keys, it makes more sense to have an overall holistic operational service. “The key element is safeguarding the property, which is the main asset of the investment, while at the same time selling the rooms at the best market rates. Our involvement is normally six months to a year before the opening of the hotels, and we have refused projects that we feel that would not be viable for the investors and us as a management company. “There is clearly a lot of interest as is evident from applications and ongoing developments – and not just in Valletta and the Three Cities. The service we provide, to selective projects, ensures that the hotels we operate will survive when the competition grows, and also when times get tougher.”
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FEATURE
Looking for the silver lining in oil slump Vanessa Macdonald It is easy to underestimate the impact of oil going below the $30 a barrel barrier, a crash of 30 per cent just since the beginning of this year. Even Reuters has admitted that the price has crossed “the fuzzy line separating a rational response to fundamentals from an irrational fear where the only way forward is down, down, down”. Its descent from $100 a barrel since mid-2014 was explained away as a reaction to factors of supply and demand, but things have now gone too far, many say. Is oil sustainable at below $30? It is certainly spurring a period of consolidation. Local operator Bluhull Group believes that onshore and offshore drillers that are able to adapt to low oil prices by maximising efficiency will survive the downturn. “The low oil prices today are the result of an oversupply. Oil production levels globally are greater than consumption. Various factors such as the slowdown in economic power houses such as China, increase in oil production from shale formations in the US, and even the anticipated ramped up oil production in Iran results in downward pressures on the oil price,” managing director Jonathan Borg said. “Eventually, irrespective of the oil price on the market, oil in storage must be sold, as storage costs weigh on the economics, resulting in a buyer’s market, and a vicious cycle of declining oil prices.” He also look a long-term perspective of the current crisis, pointing out that between 1986 and the end of 2003, oil prices hovered largely between $20 and $45 per barrel. He was upbeat, saying that the effect on the Maltese economy can only be seen in a positive light. “Primarily, this is due to the fact that Malta is not an oil producer and
STACKED RIGS ALONG WITH OTHER IDLED OIL DRILLING EQUIPMENT AT A DEPOT IN DICKINSON, NORTH DAKOTA, THE US. PHOTO: ANDREW CULLEN/REUTERS
therefore consumers will benefit, once low oil prices trickle through the economy. “Secondly, Malta’s oil and gas service industry is based on services rendered to the oil and gas industry in North Africa, much of which is now attracted to Malta’s stability as a base for storage and logistics, and who therefore may choose to operate from here,” he said. Even the decommissioning of rigs (see graph) provides opportunities. Malta’s growing importance as a rig stack location is a substantial boost to the local economy, Mr Borg said. A rig stack location is one that essentially allows for the “parking of rigs” in ports or nearoffshore locations either to effect repairs or to wait out until contracts are won.
“Projects to install new platforms or purchase new drilling rigs have been put on hold or cancelled” “The excellent service and professionalism that offshore drillers received from our local port authorities and service companies has made Malta an internationally renowned location in the oil and gas industry. “Despite low oil prices therefore, the oil and gas service industry locally is performing well. Indeed, never have there been so many rigs in Maltese waters as today, with five currently present and more on the way,” he said.
Neil Patterson, Medserv’s chief strategic development officer, explained why the crisis is not hurting the company in Malta as much as others elsewhere. “The types of services that Medserv provide – the loading and discharge of vessels, the storage of materials – is largely independent of the price of oil. It is more affected by the volume of materials handled and transhipped. “As Medserv is supporting mainly producing assets/fields, we are
largely immune from the worst of the effects of this oil price fall,” he said. Another aspect of the oil and gas industry is exploration, and Mr Patterson explained that as the price of oil drops the first casualties are the more exotic exploration projects, usually offshore and in new locations or where there is a higher risk of not finding oil. “Wells offshore are significantly more expensive than land wells to drill, and thus they tend to be delayed or deferred first,” he said. “Secondly, gas is much more difficult to monetise than oil. Gas requires a pipeline to market or liquefaction to LNG and sea transportation to market. These development projects have been badly affected. This is despite the
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FEATURE
flight to gas from coal and oil for the generation of power. “This is why you see Shell pulling out of the Alaskan Arctic Chukchi Sea exploration play and little activity offshore Tanzania (gas), and Mozambique (gas),” he added. Of course, wells and gas fields cannot simply be put on hold. Oilfields and gas fields lose pressure over time as the hydrocarbons are extracted. Fields in production require a steady stream of activity to maintain production flows and reservoir pressure. This includes infill drilling, water injection drilling and other activities to ensure wells continue to produce at optimum rates. “Without this constant support, the field will decline rapidly and become uneconomic. Production support is what Medserv provides for the offshore Libya fields. The work we are doing today will ensure the output of the fields through 2018 and beyond,” he explained. Another major area of cost-cutting in a low oil environment is the construction of additional oil facilities – onshore and offshore – which affects some sectors of the industry quite badly. “Projects to install new platforms or purchase new drilling rigs have been put on hold or cancelled. The oilfield construction companies are feeling the pain much more than many other service companies.” Mr Patterson picked up on Mr Borg’s point about Malta’s advantage when it comes to reduced activity levels. “One opportunity resulting from the downturn and the laying up of many floating rigs, jack-ups and offshore construction vessels is the need to find a parking space for all this floating hardware. Many of these specialised vessels are very large and require deep water anchorage. “The area designated for this type of vessel in the Grand Harbour is currently full of an assortment of rigs, parked awaiting the call for work. In the past rig owners took this opportunity to carry out maintenance work or upgrades, but in today’s environment they are just as
Oil sector by numbers
26
Offshore rigs in the Mediterranean out of worldwide total of 1,500 Source: Statista
258,000
Global layoffs from oil and gas sector in 2015 Source: Graves and Co.
$522 billion Investment by oil and gas companies in 2016, down 22% on 2015 total Source: Rystad Energy
Rig count overview & summary count Area US
Last count January 15, 2016
Court 650
Change from last year -1,026
Canada
January 15, 2016
220
-213
International
December 2016
1,095
-218
SOURCE: BAKEE HUGHES
likely to take the decision to scrap the older, less well equipped rigs and slim down their fleets. “Medserv has suitable anchorages offshore Filfla island and additional anchorages in Greece and Oman for the parking of these vessels. We envision that there will be more opportunities like this in 2016,” he said. Of course, it is not all rosy. The production support that Medserv provides from its base in Malta to the offshore Libyan platforms and drilling rigs has seen a decrease in activity, but the strategic importance of these Libyan fields output to the European Union, and Italy in particular, means that activities to maintain output have been kept in place. One exception to the slowdown has been the major gas find by ENI offshore Egypt.
ABLECARE OIL SIMULATOR
“The Zohr gas field is being fasttracked for development through a relatively simple subsea pipeline tie-in to the existing pipeline network and brought onshore. Egypt has a ready market for this gas and its economy will benefit from being self-sufficient in energy once the gas is brought ashore. This development activity makes Egypt an important place to be located in order to provide the additional logistics services required,” he added. “The cost of drilling is particularly affected by the day rate of the drilling rig. Offshore deep water Egypt requires the largest modern drill ships such as the Saipem 10000. These ships are expensive to hire. The rates for these ships has dropped from around $600,000 to $350,000 per day as a direct result of current oil
pricing. Where possible, contracts have been terminated or at the very least renegotiated. There is a similar pattern of day rate reductions for supply boats and anchor handling vessels – the two workhorses for the offshore marine support. “During any downturn, companies that are well-established, and have already invested in facilities, equipment and personnel are much better able to withstand the effects of the downturn. New entrants to the market will face severe pressure on pricing, and entry costs and thus significant financial pressure to survive.” Angelique Maggi, the deputy chairwoman of Ablecare Oilfield Services Group, pointed out that Malta was benefiting on another front: while drilling assets are being cold stacked and older assets decommissioned, training cannot be put on hold. “This downturn gives all an opportunity to stop, reflect but most importantly ‘do’,” she explained. “We have invested heavily in training equipment, including a drilling simulator, so as to provide for an immersive training environment.
1,457
Decommissioned rigs (onshore and offshore) 2015/16 leaving 1,965 active Source: Baker Hughes
96.49
Demand in million barrels per day by end of 2016, up from 94.69 mb/day now. Supply stood at 96.88 mb/day at the end of 2015. Source: International Energy Agency This offers the opportunity for qualitative training rather than a ‘butts on seats’ approach. During the second quarter of this year, besides providing tailor-made training solutions to targeted clients, we will be also delivering accredited IADC and IWCF well control courses. “This investment in oil and gas career training, coupled with the maritime hub facility, will keep Malta in the high ranks of professional service facilities to the oil, gas and maritime industry,” she said. (Additional reporting by Reuters)
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CASE STUDY
inking out of the box The trick when it comes to engaging people in a project is to find something they can relate to. So asking students what is wrong with their backpack is a simple but effective way to catch their attention. It served as the perfect way to help them, over a period of five to six hours each, to use creativity and then innovation to come up with a solution – a better backpack – a skill that Microsoft believes will be fundamental to their future success. The project is part of a comprehensive workbook handed out to over 250 students, ranging from children to adults, who attended a pilot project at the Microsoft Innovation Centre at Skyparks. The project was entrusted to MIC Malta, one of 120 centres around the world, by the global company’s head office, something that MIC Malta’s business development manager, Edward Portelli, is clearly proud of. Microsoft Corp. believes very strongly in the synergy between entrepreneurship and IT. It partnered with the University of Stamford and its entrepreneurship guru Tina Seelig to come up with a curriculum that they will offer across the globe. The first step was to set up a pilot project to make sure that the language was right for a global audience, making it accessible to different cultures. Malta was chosen for its good mix of students and good ecosystem. “And also the level of eagerness – which was quite evident from the forum!” Mr Portelli smiled. “Prof. Seelig called every night from the US to see how her material was being used as she was very excited too. “Many tweaks will be made but once the global curriculum is finalised, we hope to get a global licence to run the course on a regular basis.”
EDWARD PORTELLI, MIC’S BUSINESS DEVELOPMENT MANAGER. PHOTO: CHRIS SANT FOURNIER
“Many tweaks will be made but once the global curriculum is finalised, we hope to get a global licence to run the course on a regular basis” The centre was picked in no small part because of its achievements over the past three years, all aimed at boosting the concept and culture of entrepreneurship. Apart from offering office space for startups, over 400 events have been held there, from small internal meetings to large student events. This has been possible, in no small part, to its ever-growing list
of corporate partners, the Education Ministry, as well as educational institutions including the University of Malta. The centre was one of the first incubation centres in Malta but Mr Portelli wanted it to extend its remit into the education space, getting students excited about technology and entrepreneurship.
“There is a lot happening in schools with new curricula and new ways of teaching and we want to align with that. We have a lot of events which help them understand what entrepreneurship is, what building a company means – especially if you come from the IT sector,” he said. Until a few years ago, there was very little available to help
start-ups besides Malta Enterprise’s Corradino Business Incubation Centre. Since then, the University launched its Take Off Incubation Centre and PwC came up with a ‘pro bono’ fund. Fortunately, the players aligned their resources and a forum was set up two years ago which still meets on a regular basis, identifying gaps in what Mr Portelli calls the ‘ecosystem’.
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CASE STUDY
“We all set out to complement each other, rather than compete with each other. We support a number of start-ups from Take Off and regularly visit University to work with the start-ups there, helping them with technology, such as understanding the new business models that become possible with cloud computing. “We organise events together, too, such as the annual hackathon organised by the ICT Students Association. It is a great collaboration and we are finding our key areas of complementarity. The University is also mapping the start-up scene through the forum, which will help to create more structure in future activities.” Apart from the educational side, the centre is also very important as a base for start-ups – providing office space as well as IT resources. For example, the BizSpark programme gives them €60,000-€100,000 of Azure cloud computing services free of charge. Around 80 start-ups have so far used it – ranging from someone wants to try out an idea to ones that are already scaling out and moving to bigger markets (see box, right) – although it is hard to assess how many of them will succeed: the failure rate for new companies is notoriously high, and it is even higher for technological companies, as much as 90 per cent according to some studies. This means that having 10 companies that ‘graduated’ from the centre is already better than the odds. But Mr Portelli hates to think in terms of failure and success. “There are so many different stages; it is too early to say if they will be successful or not. We have people who have been here for three years and who are still working, while with others you can tell even now that within six months, they will peter out. “But one of the key benefits of being at the centre is that those that do not succeed still benefit from experience and gain expertise through the mentoring part of the programme.
“And it is easier for entrepreneurs to give their ideas a try as they do not have to invest as much upfront, thanks to the support they get from here. Some of them are very risk-averse and not willing to – or able – to give up their jobs to work full-time on their idea. The centre allows them to keep their options open! “Even those who fail sometimes go away and come back with an innovative twist on their original idea. Unfortunately, failure is not in our culture as Maltese. It is so important to come up with ideas without fearing failure. You cannot make it unless you try. There is no guaranteed formula for success. Even planning is no guarantee as there are so many unknowns in innovative sectors where there is no tried and tested formula.” As more and more start-ups come through the centre’s doors, Mr Portelli is already thinking about ways to capture all the lessons learnt from both the successful and unsuccessful companies.
“Apart from the educational side, the centre is also very important as a base for start-ups – providing office space as well as IT resources”
“This could be something that we need to explore: getting them back to see what went wrong… Sometimes it is about stamina, they just give up too soon. Sometimes, they have a good idea but it is the wrong place or time. Or they position themselves wrongly in the market,” he mused. “It depends on the character of the entrepreneur too.” The start-up programme allows entrepreneurs to use the centre and resources for three years but they can extend their stay for another year if they are at a crucial point in scaling up. The centre can cater for 25 users at any one time, particularly since so many also work from home. The centre is also very active when it comes to corporate social responsibility, allowing NGOs to use the space for events, as well as donating thousands of euros of Microsoft software. Free cloud services are offered to both students and lecturers, and there are also ‘camps’ to update post-secondary students with the latest in technology and entrepreneurship models. Mr Portelli believes that instilling a culture of entrepreneurship underlies all that the centre does – but stresses that the aim is not necessarily to get people to start their own business. “It is also about how you work within a company in an entrepreneurial way. It is about not simply waiting for instructions but about defining the problem and solving it, which our educational system is not designed to do. “We define entrepreneurship as looking for a problem, defining it and finding a solution for it.” The new regional manager for Malta, Panayiotis Ioannou, is also thrilled with the outcome of the pilot. “It will have a great impact on our visibility here. It is testimony to the work done here over the years and it shows that Microsoft Corporation is aware of this! We have already been proposed for another project,” he smiled.
A success story Start-ups joining the BizSpark programme gain access to all of Microsoft’s development and infrastructure tools needed to run the business. Advice is also provided on the best use of tools to cater for the start-up’s specific needs such as Visual Studio, Windows Server and Operating system, SharePoint, SQL Server and Office. The Microsoft Innovation Centre also offers technology consultancy, coworking space, meeting rooms and access to partner resources. One success story is Booking & Co. Established in 2008 and officially launched in 2010, the company is the only Maltese expert company in travel technology and has a portfolio of over 400 hotels across Europe, South America and the Asia-Pacific region. In Malta, the company is today the market leader with over 40 local properties in its portfolio. “I never planned to open a software company but I had the idea and when the opportunity and the right people came along, I took the plunge. Today I don’t look back,” said Clifton Dingli Bennetti the company’s chief technology officer. “We succeeded in establishing a strong foothold because unlike other companies who try to source and fight their competitors, we sought to collaborate with them and offer something which was unique. “At Microsoft’s Innovation Centre, we found all the technology and logistical support that start-up companies need when starting off. Our operations grew tenfold in a matter of a few years and from the BizSpark programme we moved on to BizSpark Plus which – besides free software and tools such as Visual Studio and Office – meant that we benefited from a grant of up to $60,000 of free Azure cloud services for a year.”
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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every fortnight. Editorial Vanessa Macdonald, Assistant editor, Times of Malta.
EDITORIAL
A stronger public safety watchdog The government has commissioned a review of safety at public events but even a cursory read of the report prepared by the CEO of the Occupational Health and Safety Authority, Mark Gauci, shows the glaring shortcomings at present. The report was requested after a supercar crashed into the crowd at Paqpaqli għall-Istrina but the issue of public safety was once again in the spotlight after 74 people were injured after a banister collapsed at a Paceville nightclub. Two issues emerge. One is that the current authority is restricted to occupational health and safety, which precludes public events. The other is that there is no single entity responsible for public events, with the police seemingly the default through its remit as the entity that issues event permits. The list of those involved is endless, from Mepa and the Transport Authority, to the Malta Tourism Authority, the Building Regulations Board and the Health and Safety Surveillance Board. Although the police clearly have a role in the issue of permits and in the organisation of public events, the question is whether they have the expertise required. Health and safety covers an incredibly broad remit, as the two accidents above show… but there are many others. There are fire risks, toxic hazards, evacuation plans, and crowd control. There are issues with regards to exits in theatres and cinemas, the load bearing capacity of floors, the ventilation of car parks, and the sparks from fireworks. Mandatory insurance cover is sometimes too low for the number of patrons involved and sometimes the rules allow small establishments to bypass certification for fire and ventilation. Mr Gauci has recommended that the two issues be solved simultaneously. He believes that the remit of the OHSA could be extended from
just occupational health and safety to that of the public in general. The first problem is that the authority in its current form has hardly got the resources to cope with the current workload. Based on legislation drafted in 2000, it is meant to monitor compliance, take enforcement and investigate but there are on average 3,000 non-fatal accidents and four fatalities a year. Going off the terrifying stunts posted on social media, the OHSA clearly has a tough job trying to get people to take even common sense precautions, let alone proper safety measures. The second comment is that the sector with most influence is the insurance one as it is often the one to bear the brunt of negligence. As court compensation payouts increase, so too does the pressure on it to make sure that its clients have taken all the precautions to avoid injuries and deaths. Insurance companies have considerable expertise when it comes to assessing risk; this is their lifeblood, after all. Risk assessment could be outsourced to them. The government has given the public until February 13 for feedback. Accepting the recommendations will only be the first step in setting out clear demarcations of responsibility with one overall authority, ensuring that there is the expertise to assess risk, and the right resources to enforce, with non-criminal penalties – currently capped at €11, 646.87 for fines and a two-year jail-term – that are enough of a deterrent. More importantly, there has to be enough governance to guarantee that no one is ever allowed to cut corners or to bribe anyone, at any stage, to turn a blind eye. We are talking about people’s lives here. Public health and safety is one area where there really should be zero tolerance to ignorance, nepotism or corruption.
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BUSINESS OPINION
Justice reform for commercial law
Conrad Portanier I write with reference to the interview with Justice Minister Owen Bonnici carried in The Business Observer on January 14 in relation to the ministry’s initiatives to speed up commercial cases. Needless to say, every initiative is commendable. However, if Malta is to achieve any tangible results, we need to go way beyond the measures being proposed by the Ministry for Justice. In the eyes of many serious international institutions, the way our enforcement and judicial system works is at odds with Malta’s drive to attract serious institutional foreign investment. Insofar as the proposed insolvency law reform is concerned, my understanding is that this consists of some fine-tuning to certain laws aimed at speeding up enforcement and to facilitate certain corporate recoveries. Although the proposals are all positive legislative amendments, these remain shortterm fixes. Insofar as the arbitration initiative is concerned, as laudable and
innovative as it may seem, this remains another piecemeal approach to a huge and complex problem of delays in commercial dispute resolution and enforcement in Malta. In my view, Malta needs a holistic and more thorough approach to commercial and insolvency legislation led by leading commercial practitioners in the field, a major legislative project such as occurred in Malta in the years 1994/1995. This would encompass a new Insolvency Act which would resolve the various uncertainties and bring together the myriad laws dealing with insolvency. This should be coupled with a fresh look at our corporate legislation to bring it in line with recent developments overseas. Necessity is the mother of invention. One must remember that many competing jurisdictions recently overhauled their commercial and insolvency laws due to the economic downturn suffered during the financial crisis. Malta, in contrast, escaped rather unscathed by the crisis, but this left us complacent in our legislative efforts. As for the need for a specialised commercial court, this should not be so easily dismissed by the government. One has to mention a few initiatives of other jurisdictions competing for international business. London: in 2015, the High Court in London established a socalled ‘Financial List’, a specialist court that will be staffed by judges with particular experience of financial disputes.
“Malta needs a holistic and more thorough approach to commercial and insolvency legislation...” Singapore: the Singapore International Commercial Court (SICC) was officially launched in 2015 and the SICC serves to entrench Singapore’s position as the premier dispute resolution hub in Asia, with a jurisdiction to hear matters of an ‘international’ and ‘commercial’ nature. We should not forget that Singapore was ranked first out of 148 countries in the 2013-2014 World Economic Forum report with regard to the efficiency of the legal framework in settling disputes. Ireland: a specialised Commercial Court as a division of the High Court has been established since
2004 to deal specifically with commercial cases with a value of not less than €1,000,000 or specific important commercial matters. While I am aware that in practice there is a commercial division of the First Hall of the Civil Court dealing with commercial law issues and very ably handled by selected judges, it is respectfully submitted that the judicial infrastructure requires a different and more focused approach to commercial law aspects. My suggestion is the establishment of a specialised Commercial Court with jurisdiction to hear large commercial disputes and
with a set of specific flexible procedures designed to achieve a fast final judgement. This would of course require a different approach to the way disputes are currently handled and a rigorous ‘no nonsense’ approach to large commercial litigation. The process would require detailed preparation at pretrial stage (possibly involving a mandatory full disclosure process at pretrial stage) and a completely different approach by the lawyers involved, with penalties involved for any lawyer or party who contributes to a delay or who does not respect the length and content of pleadings. Cases coming before this Commercial Court should have a minimum threshold or relate to important commercial aspects. This Commercial Court would then be in a position to determine any issues of substance relating to shipping, aviation, banking, company law, financial services and intellectual property with a degree of efficiency, specialisation and sensitivity to the commercial nature of the dispute. Possibly, the Commercial Court would also be able to hear so-called ‘test cases’, so important in establishing certainty of law. Whereas tweaks to the law could be useful, without a bolder big bang approach, insofar as insolvency and large commercial disputes are concerned, I regret to say that we would not be addressing the nub of the matter. Conrad Portanier is a partner at Ganado Advocates.
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APPOINTMENTS
Hili Ventures’ group finance appointments Hili Ventures has announced two key appointments within its top finance team. Long-standing finance director Richard Abdilla Castillo has been appointed managing director for transactions and major projects, focusing on mergers and acquisitions, major transactions and key projects. Geoffrey Camilleri, who joined Hili Ventures as deputy finance director in August 2014, has been JOSIANNE BRIFFA
Compliance officer for Mapfre Josianne Briffa has been appointed compliance officer for Mapfre Middlesea, taking over from Carlo Farrugia who will retain his position as company secretary. Ms Briffa will retain her current positions as compliance officer for MSV Life and Growth Investments Ltd so that there will be one compliance officer for the local Mapfre Group companies, incorporating Mapfre Middlesaa plc and MSV Life plc.
Paul Abela reconfirmed as GRTU president Paul Abela has been confirmed as GRTU president for the year 2016. The executive council also elected six vice presidents as follows: Philip Fenech – policy and strategy; Marcel Mizzi – finance and administration; Christian Vassallo – sections; Joseph Zerafa – districts and localities; Michael Galea – international relations; and Mario Debono – training and development.
named group chief financial officer. They will be based in Malta and report to Hili Ventures’ chief executive officer Melo Hili. Their appointments come at a crucial stage in Hili Ventures’ growth. In the next few months, all divisions will be engaged in expansion in the sectors and markets in which they are already present, while seeking new ventures outside their current footprint in earnest.
RICHARD ABDILLA CASTILLO
GEOFFREY CAMILLERI
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STOCK MARKET REVIEW
Internationalisation strategies of companies Edward Rizzo A number of local institutional as well as retail investors claim that due to the limited growth opportunities in Malta, they prefer having a larger proportion of their investment portfolios exposed to foreign companies listed on the more liquid overseas stock exchanges than to Maltese listed securities. However, how many of these investors realise that a number of companies listed on the Malta Stock Exchange have little exposure to Malta, mainly carrying out their respective operations in international markets? The announcement on October 8 by Medserv plc which spoke about the way it entered into a conditional share purchase agreement for the acquisition of three companies in the Middle East for $46 million, is the latest example of the internationalisation strategy of publiclytraded Maltese companies. Medserv just concluded the dual funding programme to carry out this acquisition which effectively doubles the size of the company. Medserv is not new to operating outside Malta. Although it has had a logistical base in Malta throughout its 43-year history (mainly to assist international oil companies and their subcontractors for work offshore Libya), Medserv also set up shop in Misurata, Libya some years ago and more
recently opened a similar facility in Cyprus after being awarded a lucrative contract by ENI. The upcoming acquisition of METS in the Middle East will enable Medserv to make substantial progress in its long-term plan of increasing its geographic presence, strengthening its portfolio of services and expanding its customer base with additional international oil and gas companies and subcontractors. Apart from Malta, Cyprus and now the Middle East, Medserv is also tendering for work in Egypt, Portugal and as far as Trinidad & Tobago. As such, this seems to be just the start of more rapid international expansion. Probably the company regarded as the pioneer in adopting a successful internationalisation strategy is International Hotel Investments plc, the subsidiary of the Corinthia
“A number of companies listed on the Malta Stock Exchange have little exposure to Malta” Group. Most local investors are surely well versed with the humble origins of Corinthia and its success in expanding to foreign jurisdictions in the 1990s. The setting up of IHI and the listing of the company’s shares on the MSE in 2000 was intended to pursue this expansion strategy in a more structured man-
ner, including the addition of important international shareholders. Although last year IHI made a significant acquisition in Malta which contributed to it becoming more dependent on hotel and property development locally, the bulk of its sizable asset base is still international with a portfolio of owned-hotels and other real estate in London, Lisbon, Budapest, St Petersburg, Prague and Libya. Moreover, following last year’s acquisition of Island Hotels Group, IHI is also exposed to the Spanish market through the Costa Coffee franchise. The ambitions of IHI and its hotel management arm CHI are to seek further international expansion and chairman Alfred Pisani has been speaking about various other international projects in the pipeline. Another company that was given little importance by local investors
at first but which has grown exponentially over the past five years, winning significant international contracts, is RS2 Software plc. This IT company set up in Malta over 25 years ago to service its Maltese customers. It then expanded internationally across a variety of markets. The more notable develoments came in recent years when Barclays Bank entered into a licence agreement for £8.5 million to utilise RS2’s card management software and quickly followed this by an acquisition of an equity stake of 18.25 per cent. Another larger contract by a global processing company amounting to €16.5 million was awarded to RS2 in 2014 and the 10-fold increase in the value of the company over the past five years makes this the best performing equity, by far, on the MSE. Although RS2 can be regarded as a Maltese
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STOCK MARKET REVIEW
company and is still listed on the MSE, it should surely be regarded as an international company given its shareholder structure, its client base and its target of continuing to expand internationally, especially in Asia and the US. Other companies that are very much dependent on their overseas operations include 6pm Holdings plc, which was always very much focused on the UK market – in fact, its reporting currency is sterling. In more recent years, while remaining very much focused on work from Britain’s NHS, the company also set its sights on other regions, namely Macedonia and Ireland. Grand Harbour Marina plc, which would not normally be placed within the same league as the above companies, also expanded internationally. Its acquisition of a 45 per cent stake in a Turkish marina some years ago also makes this company dependent on international markets. Furthermore, while many of the companies above achieved significant success internationally and all have further very ambitious goals in new markets, we also had sour experiences with companies that suffered significantly as a result of ill-timed investments and unfortunate circumstances. Two that immediately come to mind are Middlesea Insurance plc and the failure of Progress Assicurazioni SpA, as well as the difficulties faced by GO plc in the Greek market. The significant losses faced by Middlesea Insurance (now Mapfre Middlesea) from the bankruptcy of its sizeable operation in Italy is not easily forgotten as it wiped out a large amount of reserves and a rights issue was needed to shore up the company’s finances. Likewise, the write-off of the Greek investment of GO plc was also a sour experience for the company’s numerous shareholders and the market at large. However, while Forthnet is still operational (and some value could be recovered if it is taken over by international suitors who expressed an interest), GO rightly did not lose its appetite for international expansion. In fact, only last week, GO confirmed that it exercised its option to increase its stake in Cypriot telecoms company Cablenet from 25 to 51 per cent. Cablenet is a private telecoms
“Local companies need to depart from customary practice and disclose more information to the investing community, including financial forecasts and projections of key financial figures and performance indicators” company and we never had access to its financial statements, but GO’s executives claim that the Cypriot company is profitable and growing at double-digit figures. In an interview last May, GO’s CEO Yiannos Michaelides claimed that the size of this company could eventually surpass that of the GO Group. Following the acquisition of the additional stake, GO’s chairman Deepak Padmanabhan again confirmed that Cablenet is performing strongly, delivering “steady, double-digit growth in both revenue and Ebitda over recent years”. He also stated that Cablenet offers significant potential for GO. This is a very interesting development for shareholders, especially in view of the fact that GO’s board is seeking potential investors following the decision by the majority shareholder to dispose of its investment.
Another Malta-listed company that transacted its business mainly internationally is Fimbank plc. The initial years of its international expansion were very successful and led to the sale of its stake in GTF in India for a very sizeable profit. However, in more recent years, its subsequent ventures in India and Russia led to significant losses for shareholders. Hopefully, a new consolidation strategy, including the downsizing of some of its international operations, will now start bearing some positive results as indicated by the directors of Fimbank last November when announcing that the third quarter of their 2015 financial year was a profitable one. In addition to the above companies, which have equity listed on the MSE, some only have bonds listed but are nevertheless very involved across international markets.
In this category, apart from some affiliated to the Corinthia Group, Mariner Finance plc, Premier Capital plc, PTL Holdings plc and Hili Properties plc feature, the three latter ones ultimately owned by Hili Ventures Ltd. Premier Capital, this week also announced that it had made a $65 million acquisition of the development licensee of the 66 McDonald’s restaurants in Romania. Companies operating and expanding internationally are more prone to being taken over either by competitors or instutional investors. Local investors experienced this recently with Crimsonwing plc. It would be surprising if some of these companies did not feature on the radar screens of possible buyers as takeover targets given their recent successes and ambituious strategies of entering new markets. In view of their growth strategies, these local companies need to depart from customary practice and disclose more information to the investing community, including financial forecasts and projections of key financial figures and performance indicators. The disclosure of such information may encourage both local and foreign retail and institutional investors to gain a small exposure to these companies as part of their overall investment portfolios. 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. © 2016 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
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APPOINTMENTS / BUSINESS UPDATES
db San Antonio Hotel + Spa appoints new general manager
BRADLEY DINGLI (LEFT), GENERAL MANAGER DB SAN ANTONIO HOTEL + SPA WITH VINCENT DEGIORGIO, DIRECTOR, DB HOTELS + RESORTS
Incorvaja takes over Le Méridien Alex Incorvaja has taken the role of general manager at the five-star Le Méridien St Julian’s Hotel & Spa, part of Starwood Hotels & Resorts. “Alex has the perfect profile for taking this property forward. His extensive background in hotel operations, coupled with sales, PR and marketing expertise, is truly going to be an asset for Le Méridien St Julian’s,” said Robert Koren, vice president and regional director for Southern Europe at Starwood Hotels & Resorts. Mr Incorvaja has over 20 years of international hospitality and tourism industry experience, gained through working in leading luxury hotel chains in Malta and Italy. Prior to joining Le Méridien St Julian’s Hotel & Spa, he spent the six years heading the Malta Tourism Authority’s office in London and was responsible for the
ALEX INCORVAJA
promotion of Malta’s most important source market, which saw arrivals increase by 17.5 per cent during his tenure.
ANDREW BEANE (RIGHT)
HSBC Malta CEO says Maltese economy is poised for growth Malta was an integral part of the story of a changing world and was well positioned to capitalise on the opportunities the future global economy holds for the country, HSBC Bank Malta CEO Andrew Beane said. Mr Beane was speaking at The Economist’s The World in 2016 gala dinner, where HSBC Bank Malta was the lead sponsor. “While, of course, we need to navigate the immediate challenges right in front of us, we equally need to position ourselves to thrive in a new economic world order driven by the growth of emerging markets and an ever more integrated global economy. This is a transformational and permanent structural change and I think here in Malta we are extraordinarily well positioned to capitalise upon this,” he said. According to Mr Beane, the future global economy will be significantly larger and more closely integrated than today, creating many opportunities for Maltese businesses to grow. “The global economy will also be a digital economy where it matters far less how big or small you are,” he added, quoting from the latest HSBC report Trade Winds, available at HSBC Global Connections.
Bradley Dingli has been appointed general manager of db San Antonio Hotel + Spa, Qawra, succeeding Vincent Degiorgio who has become the director of the db Hotels + Resorts chain. Mr Dingli has a 17-year track record in the hospitality industry, having worked for four- and five-star hotels both locally and abroad. He studied at ITS Malta, has a Higher Diploma in Hotel Management and graduated from the University of Malta with a BA (Hons) in Tourism
Studies. “I am very enthusiastic about joining the winning team running the db chain, a fast-growing and leading service provider in the hospitality business,” he says. “Having been San Antonio’s GM for nine years and three years as financial controller, becoming the director of the db chain is the next step in an exciting journey which constantly opens up new horizons,” Mr Degorgio says. “Together with my colleagues our focus will remain that of giving excellence to our clients.”
New board at JCI Malta A new JCI Malta board took office in January for 2016, led by Clayton Mercieca as national president. The other officials are Annalisa Schembri – immediate past president; Rachel Cassar – deputy president and vice-president international; Daniela Grech – secretary general; Bernard Pollacco – VP training, Jonathan Mifsud – VP memberships and growth; Christian Vella – VP communications; Daniel Walters – local president de La Valletta (business & networking); Emma Schembri – local president de Wignacourt (social & community); and Karl Wismayer – treasurer. The motto for the year will be ‘Service to Humanity’ which echoes one of the JCI Values: ‘Earth’s greatest treasure lies in human personality and service to humanity is the best work of life’.
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BUSINESS UPDATES
Hotel Juliani named top hotel in Malta for 2016 Hotel Juliani has won TripAdvisor’s wellrespected Travellers’ Choice award for 2016 for the second consecutive year, securing its place among the top one per cent of hotels in the world. The hallmarks of Travellers’ Choice winners are remarkable service, quality and value. “It’s always a surprise to wake up to such great news but also very rewarding for our team,” said hotel manager Georgios Rouvelas. “We are a customer-oriented hotel and are always improving our facilities, communication and service standards. Guest satisfaction is our top priority, and for us this has been a winning approach. This award is particularly significant for us as it is a direct reflection of our guests’ experiences and loyalty.” Located in a meticulously converted seafront townhouse in St Julian’s, Hotel Juliani retains a taste of the past, yet behind its original façade lie the state-ofthe-art facilities of a top hotel. It recently opened three new designer suites and unveiled a new Cybex© and TRX® fitness centre and boardroom facilities, and is making plans to refurbish all of its 47 hotel rooms in the near future. Visit bit.ly/julianitripadvisor for reviews and opinions of Hotel Juliani from TripAdvisor members.
e Phoenicia wins prestigious 2016 TripAdvisor Travellers’ Choice Award Malta’s longest-established 5-star hotel, The Phoenicia, has won the 2016 TripAdvisor Travellers’ Choice Award for Luxury Hotels, having already won multiple TripAdvisor Awards including the coveted Certificate of Excellence last year. TripAdvisor is the world’s largest travel site and offers trusted advice from real travellers on a wide variety of travel choices. Accepting the 2016 TripAdvisor Travellers’ Choice Award on behalf of the hotel, General Manager Charles Azzopardi said, “The management team would like to thank all of the staff at The Phoenicia for their great work to achieve this award. We’re very excited to be the winner of this prestigious award once again and would like to thank all those clients who have stayed with us, especially those who have written about their experiences at the hotel and in Malta.” The Phoenicia Malta recently became the first Maltese hotel to join ‘The Leading Hotels of the World’, heralding a new era for this much-loved grand hotel located on the doorstep to Malta’s capital Valletta, as part of CampbellGray Hotels’ portfolio. The hotel will be reopening in spring 2016 after extensive refurbishment and restoration. For further information, visit www.phoeniciamalta.com or www.facebook.com/phoeniciahotel, or call 2122 5241.
Frank Salt appointed exclusive agent for Business Office Services in Mrieħel Frank Salt Real Estate has recently been engaged as sole agents for Malta’s latest high-profile office development – Business Offices Services International (BOSI) in Mrieħel. “If one is looking for office space in Malta, BOSI’s rental options are definitely worth looking into,” commented Rit Schembri, commercial property division manager for Frank Salt Real Estate. “This exciting development provides contemporary office spaces with immediate occupancy, complemented by state-ofthe-art meeting and conferencing services and all other office amenities. We are proud to have been trusted with its promotion.” Mrieħel is home to the MFSA, Malta’s Financial Services Authority, and is also the base for a number of key financial services providers, including Bank of Valletta, HSBC Bank Malta and Big Four firms PwC and Deloitte. BOSI’s office block is the latest addition to the field, offering an excellent selection of quality office space to let for
companies and business professionals. Similar BOSI office developments can be found in Luxembourg, Cyprus, Hong Kong, Singapore and Mauritius, among others.
More information, including the latest office availability, site plans and rental office packages, can be obtained by calling on 2379 4181 or by visiting www.franksalt.com.mt/ bosi-malta.