The Business Observer Newspaper 19th May Issue

INTERVIEW

Issue 51

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May 19, 2016

Distributed with Times of Malta

ree years ago, Tony Zahra took on the challenge to turn around Malta Industrial Parks’ finances and to clean up its tenancies, freeing it up to plan for the future. see pages 10 and 11 >

NEWS

Manoel Island project boosted to €500 million Vanessa Macdonald Midi envisages that the Manoel Island project will cost as much as €500 million, forcing it to consider bringing in a majority shareholder.

Chief executive officer Luke Coppini said that the potential for the island was considerably different to what it was when the concession was originally granted in 2000 – with foreigners seeking high-end property among the factors.

“We need to create something which is unique – not just for Malta but even internationally – putting it on the world map. This is why Midi cannot do it on its own and why the board took a conscious decision to seek a strategic partner,” he said.

Although the search for an investor has been public knowledge for a while, this is the first time that Midi has acknowledged that the eventual partner could insist on a majority shareholding. Under the terms of the parliamentary concession, Midi requires approval if the new partner takes more than 40 per cent of the shares.

Mr Coppini said that Midi was keeping the government and the Planning Authority abreast of developments. Since the search for a partner began, Mr Coppini said there had been no shortage of investors interested in coming on board, but he also made it clear that the group was not impressed because someone waved wads of cash under their noses.

“The quality of some of the investors was not exactly what we had in mind,” he said politely.

“This is a very important point I would like to emphasise. There were a number of serious investors – but also some, let us say, less serious ones. When you do due diligence, there are a number of question marks and the offers do not always turn into anything tangible. And we have had some interesting ideas, including someone who wanted to buy Fort Manoel as his residence,” he smiled.

“We are a publicly-listed company and our top priority is not to announce a strategic partner willing to buy Manoel Island. We need to make sure that whoever joins us has all the credentials to develop

it. The last thing we want is for the project to stall at a later stage.

“We are totally determined to come up with a reliable partner with an international name who has the necessary funding to create what the island deserves.”

The process dragged on as the group struggled to wade through the various offers and ideas so that it could submit an application to the Planning Authority for the island’s masterplan. But the board then took a deep breath and decided to start afresh. The group engaged an American ‘end to end’ global strategy consultant, who conducted extensive research internationally and locally to understand the market and the supply gaps that need to be filled.

Midi then set about the task of choosing a master planner, whittling down 20 world-renowned firms to a shortlist of five. A few weeks ago, a Midi delegation went to London to see their concept pitches, which evidently made an impression on Mr Coppini.

“It was an incredible experience to go to an office employing 800 architects and draughtsmen – for

PHOTO: STEVE ZAMMIT LUPI

a company which employs 10,000 worldwide. It was impressive to see how excited these masterplanners are about Manoel Island, which they see as a precious and unique piece of land,” he gushed.

He believes that by October, Midi will be in a position to embark on a professional investor search, going to investment bankers “who have the right connections and obviously will have a different approach”.

“It has been an expensive exercise. But the approach is much more structured and we are convinced that we will have the right product, the right masterplan, the right master planners, a sustainable business model and, hopefully, the right strategic partner.

“Our intention and desire is obviously to be part of the Manoel Island development. But it is not entirely up to us. If we find the right investor, with the right investor profile, who insists on a majority shareholding, we would have to discuss this with government. It would all be in the interest of the development and also of the 750 shareholders.”

See more about Midi on page 3

Midi Group’s finances were being weighted down by its heavy gearing. CEO Luke Coppini said restructuring had brought it down to healthier levels – with the sales from Q1 apartments meaning it could pay its first dividend. see page 3 >

NEWS e government has still revealed nothing about the security of supply agreement it is proposing to strike with Electrogas, meaning supposedly short-term guarantees will need to stay in place for a while longer. see page 5 >

STOCK MARKET REVIEW Analyst Edward Rizzo is concerned that the sale of GO will lead to its delisting, leaving 8,000 shareholders with nearly €150 million of investments back in their hands. see pages 18 and 19 >

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NEWS

Midi Group reduces gearing to 36% Midi Group has managed to reduce its gearing ratio from a high of 76 per cent down to a respectable 36 per cent last year – enabling the company to report an after-tax profit of €9.9 million compared to a loss of €2.2 million in 2014.

And perhaps even more relevant for its 750 shareholders: it also paid a dividend for the first time since it went public in 2009.

The man brought in to sort out the financials a few years ago was Luke Coppini who admitted that “the more you are developing, the more you borrow and hence the higher your gearing ratio”.

“Our borrowings are now under control and our liquidity is also relatively under control. The profit is also the result of restructuring and containment of costs, as well as of better project management,” he added.

The company had over two years of very low production in terms of construction at Tigné Point. This was reversed in early 2013 when construction on the section known as Q1 started. Midi had a very successful launch generating €38.8 million last year from sales of 38 apartments, with the final one sold in the first quarter of 2016 for what he described as a “decent profit”.

However, the reality is that the next few years will see the same relatively arid scenario as this year as construction will be underway on Q2 with completion date scheduled for around April/May 2018.

“Unfortunately, selling on plan does not affect your profit and loss!

However, we hope to sell one particular apartment in Q2 in shell form,” he smiled.

Q2 will offer 58 apartments and two penthouses, spread over 13 levels. For the first time in Midi’s history, it opted for a phased launch, offering 32 of the apartments and the two penthouses for sale in the third week of March: 27 apartments were snapped up.

Apart from that, the average selling price for these 27 apartments was €8,300 per square metre, almost 30 per cent higher than what it achieved for Q1.

The company has seen considerable changes since the project was

MIDI CEO, LUKE COPPINI

first designed after it got the concession in 2000. One change has been the influx of expatriates, resulting in an increase in “buy to let” by both Maltese and foreigners. However, outright purchases remain the main option, with the latter either buying to live there or to use as their second residence.

“We even have some who own multiple properties there, as they plan to bring other family members over,” he said.

The Individual Investor Programme has also resulted in increased demand – but it is frustrating as there is not much available to offer.

“All they can purchase at the moment is the space! But they do rent properties there with the foresight of buying as soon as something is available,” he said.

Midi is also ploughing ahead with the business centre, which will start to look quite different in the coming weeks once the façade is glazed. However, apart from selling one floor outright to a “good client”, Midi is still tweaking the internal designs before committing to other

“is was the first dividend but hopefully it will not be the last” tenants, reacting to feedback which showed that even the top finishes it had in mind “might not be high enough!”, he said.

It is also mulling concepts for the iconic Tigné Fort as it prefers to complement planned restaurants with a “suitable operation to give it more substance”.

“Just having four or five restaurants would not be enough, given the context of the mixed use of the complex. We believe it could be quite feasible to have a boutique hotel of around 20 rooms overlooking the courtyard – but it would have quite a different model for the operator to similar sized hotels in Valletta as the site is spread over 5,000 square metres with considerable maintenance. We issued a call for expressions of interest which had a deadline a few weeks ago. We re-

ceived a significant response which we are now evaluating,” he said.

The only sour note in 2015 was the buy-out of Siemens’ 50 per cent shareholding in SIS, resulting in an impairment of around €500,000. Its poor performance had taken observers by surprise as SIS was set up specifically to service Tigné Point and therefore had a guaranteed client with guaranteed revenue.

Mr Coppini admitted that Siemens had for some years been doing lots of restructuring and SIS – which was run by a CEO appointed

by Siemens – was not on its radar.

“It was losing money for a number of reasons: it had ventured into some side operations for which it was not really geared in terms of resources. In early 2015, it indicated that it wanted to exit and Midi snapped up the opportunity to take

full ownership, buying it for €1 but absorbing the debts.

“Apart from that, Siemens was committed to upgrading the €5 million plant providing heating and cooling, which had been giving us problems for some time.

This will cost €2 million for which Midi – through SIS – will only pay half. So we now have a fullyowned subsidiary with a fully-upgraded plant. Our plan is that over the next three years it will come back to profitability.”

With all this going on, shareholders must be wondering whether the dividend pay-out will become a regular occurrence.

“For three years our focus was to get the development back on track, which I believe we have done. We are now in a position where we can pay a dividend without constraining in any way the development that needs to go on.

“In 2016 we are not expecting profits to be in line with 2015 but it does not mean that our cash flows cannot sustain a reasonable dividend. This was the first dividend but hopefully it will not be the last.”

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NEWS

Security of supply agreement still pending Almost a year later, the government has still not given any indication of whether the European Commission has any objections to the security of supply agreement between the government and Electrogas, the company building the gas power station.

The spokesman for competition policy of the European Commission declined to comment beyond confirming to The Business Observer that “the European Commission is in contact with the Maltese authorities on this matter”.

The government has also ignored questions about the procedure being followed, how many meetings, if any, were held, and whether the European Commission requested any further information.

It has also not given any indication as to whether the preliminary reaction to the agreement was positive or negative, let alone what the alternative would be if it were turned down.

The government was forced to authorise a temporary €88 million bank guarantee for a €360 million loan taken out by private consortium Electrogas last year pending the EU’s approval of the security of supply agreement.

The agreement stipulates that the government would step in and

“Electrogas insists the security of supply agreement is part and parcel of the original competitive process”

buy the electricity if Enemalta reneged on the deal with Electrogas to purchase electricity produced by the new gas plant. Since then, there has been no information about how the European Commission views this agreement in terms of compliance with State aid issues.

Electrogas insists the security of supply agreement is “part and parcel of the original competitive process” and that the guarantee was only temporary, to cover a bridge loan taken out with four

major banks, including Bank of Valletta and HSBC. “As soon as the EU has ratified the security of supply agreement, the [government] guarantee will be rescinded and the company will enter into long-term project finance agreements with its group of international banks,” Electrogas had said.

Electrogas last December published accounts for financial year 2014, in which it confirmed that it has signed turnkey construction

contracts worth €296 million and a €30 million contract with Enemalta for development fees and for “the right to supply gas and power”. It also explained that a bridge loan of €110 million for partial financing of the construction works was replaced by full project interim financing of €450 million in the third quarter of 2015.

Electrogas also said that it had signed a contract with Enemalta outlining the conditions of sale of

gas and electricity for 18 years following the construction of the facilities. In April 2015, it also signed a 10-year contract for the purchase of LNG supplies from Socar for its operations.

The shareholders have guaranteed €90 million of the loan and the financial statements say that it was envisaged that this would be replaced by shareholder funding in due course.

It has not yet published its accounts for 2015.

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NEWS

inking outside the box It has become a bit of an urban myth that Roger Bannister’s 1954 sub-four-minute mile was a “miracle”. The reality is that the record was only a few seconds above the ‘four-minute barrier’ and when he did break it that historic day, he was followed across the finishing line by Australian John Landy just 0.8 seconds behind him – still under the ‘miracle’ threshold.

Be that as it may, the race has become engrained in legend as proof that you can overcome limiting beliefs. The story has been used by Simon Clarkson to show how this has an impact on others.

MEDICAL STUDENT ROGER BANNISTER BECAME THE FIRST PERSON IN RECORDED HISTORY TO RUN A MILE IN UNDER FOUR MINUTES ON MAY 6, 1954.

“Bannister was better able – at both a conscious and subconscious level – to question the limiting beliefs that were flying about on this mythical barrier. Once he had

run the first sub-four minute mile, it was almost like opening the floodgates. And you see this with a variety of human achievements.

“Once we have seen it, we believe

we can also do it. If we have a limiting belief about a particular challenge we face, it is going to stifle the ability we have to overcome that problem,” he stressed.

Mr Clarkson is an economics graduate and worked in investment banking before delving into the science of “thinking” to see how it could be applied to companies.

He shudders at being labelled a ‘motivational speaker’ as he prefers to think that he offers substance and not just style, using his sessions to give his audience ‘tools’ which can help them change the way they think.

Neuroscience and its impact on organisational thinking is being used by various companies, one of the reasons that Mr Clarkson was chosen by Nathan Farrugia’s Up Academy for Executive Performance as its first speaker for a series of planned events.

Mr Clarkson’s approach is clearly explained in his You Tube videos.

One of the most striking shows him getting two audience members to throw a ball to each other. He explains that, when we are children, catching a ball is quite an achievement but as we become more proficient, the various movements and coordination become embedded, forming an ever “wider” thought pathway that eventually become an automatic reflex.

To prove his point, he pretends to throw the ball – prompting the catching reflex in the other person.

But by actively thinking about the reflex, the person on the receiving end can stifle the reflex to catch the ball until it is actually in the air.

What has this got to do with organisations and innovation?

“e more we use certain thought pathways and build on them, the more engrained a certain behaviour becomes”

Quite a lot, he explains: “The more we use certain thought pathways and build on them, the more engrained a certain behaviour becomes, forming a learned behaviour, a habit. The same applies in a positive way when we build up a skill or an ability. Therefore, in order to be able to change that, the same process works in reverse. If we start to think in a different way, we start to build a different pathway and the more we engrave that new pathway, the more we start to drive a different behaviour,” he stressed.

“What drives performance in any organisation is people’s behaviour.

The more you understand the origins of that behaviour, the more we can understand how to overcome it.

It gives us a great degree of control to be able to drive performance at an organisational level as well.”

One context where this benefits an organisation is when it comes to innovation as the default reaction tends to be for a new idea to be shot down.

“First of all, we should demystify ‘innovation’. Many people think that it is about inventing a product.

But you can innovate in your day-today behaviour, doing something in a different way, perhaps something that will save you time, for example.

That is a form of innovative thinking.

“Very quickly in a room, a team starts to think alike – executive teams that work together for any extended period of time fall into the habit of thinking alike and seeing daily issues from the same angle.

“An idea will be put out and will almost certainly be undermined by people saying why it will not work: it did not work before, we don’t have the resources to do it, etc. And these may be good reasons.

“But that immediately kills any oxygen that could have sustained that idea which might have worked – maybe not as first proposed but perhaps its second or third iteration.

“Too many organisations set out to innovate but kill it dead because rational thinking comes into the equation too soon.

“The key to innovation is allowing the brain to break its normal patterns, assumptions, predispositions and perceptions.

“So driving a culture of innovation is all about welcoming people to share an idea even if it is not fully formed.”

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INDUSTRY FOCUS

PALUMBO RECENTLY INSTALLED PV PANELS ON THE ROOF OF THE SHIPYARD BUILDINGS, SAYING PAYBACK WOULD BE JUST 10 YEARS.

Getting a greener bottom line The government has launched another three subsidy schemes for solar energy which will allow 7,000 families to benefit from 50 per cent of the cost of photovoltaic panels, up to a maximum of €2,300.

The schemes will receive EU funds and will cost €15 million but EU Funds parliamentary secretary Ian Borg said they were part of a bigger €58 million investment in sustainable energy.

These new schemes are not being driven merely by altruism: last November, the European Commission said Malta was unlikely to reach its 2020 targets. A UN report published last March also found that Malta was a laggard when it came to renewable energy production.

Malta generated just 4.7 per cent of its energy from renewable

sources in 2014, according to Eurostat. It has committed itself to generating 10 per cent of its energy from renewable sources by 2020.

The most recent progress report from 2015 indicated that some member states, including Malta, “need to assess whether their policies and tools are sufficient and effective in meeting their renewable energy objectives. In 2013/2014 Malta had a trajectory of only three per cent”, the European Commission representation in Malta said.

Failure to do so means Malta could be looking at fines – although these have never been quantified.

Altruism and targets apart, there are sound business principles behind investing in energyfriendly equipment. Palumbo, for example, recently installed PV panels on the roof of the shipyard buildings, saying the payback period was estimated to be 10 years.

Ryan Xuereb, the managing director at Econetique Ltd, said PV panels have become increasingly

“e schemes will receive EU funds and will cost €15 million”

more efficient while decreasing in cost.

“When one considers that on top of that you can also get an incentive from the government to install a PV system, the investment becomes a ‘no brainer’.

“It is, however, important to have a PV system installed by a professional company with specifically trained engineers and installers. This ensures that you will get the maximum return on your investment with peace of mind,” he said.

He also pointed out that some businesses might also consider using the roof for a water heating system.

“Nowadays, with technological advances, heat pumps can provide all the hot water you need when you need it at an extremely low cost. When you also take into account that roof space is limited in Malta you might be better off opting to install a domestic hot water heat pump in conjunction with a PV system on roof.

“This way the cost of producing hot water is reduced to a minimum without compromising roof space.

Nowadays half the production of energy from one PV panel in conjunction with a heat pump means you can have hot water whenever you need,” he explained.

Of course, energy and hot water are not the only way for a business

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INDUSTRY FOCUS

to improve its green credentials and save money.

Altern pointed out that there are two approaches: energy saving and energy generating. The former help to reduce the building’s energy footprint, and examples include LED lighting, building insulation, and combined heat and power systems. On the other hand, energy generating systems such as photovoltaic and solar water heaters exploit renewable sources of energy to generate electrical and thermal energy.”

Altern offers a ‘plan-do-checkact’ approach which starts off with an energy audit which will identify key metrics and consequently propose factual and applicable solutions.

Its managing director Matthew Spiteri believes that the key to achieving a net carbon neutral building involves the application of standard evaluation tools, such as energy audits, leading to customised, integrated solutions.

“One should remember that the shift to energy sustainability is never just about one solution alone,” he said.

PV installations were rare until a few years ago but the government subsidies prompted a flurry of companies to import and install panels, which – as can be imagined – resulted in

inexperienced and sometimes shoddy workmanship.

The GRTU decided to set up GRTU Approved Certification a few years ago to give customers peace of mind.

“There were problems, varying from unsafe systems to systems installed so hastily and carelessly that could easily be described as eyesores. When the certification was introduced, the companies that were operating professionally immediately subscribed and needed no improvements: their aim was to prove to their customers they were providing professional installations,” a GRTU spokesman said.

“Others also subscribed, but were asked to make improvements, which most did. A few did not manage to reach the standard and were either removed from the list or voluntarily withdrew.”

“It is to be clarified that in the past, GRTU did not shy away from expelling companies which did not operate satisfactorily in terms of safety, both for the owner of the dwelling as well as third parties.

Most importantly, clients of GRTU Approved retailers have the opportunity to seek remedial action in case they are not completely satisfied by the service provided, or have doubts on any aspect of the sale and installation. This service

“Payments are only made once the installation is completed and certified” is now being provided completely free of charge, including the site visits,” the chamber said.

Certification standards are maintained by regular random inspections of installations as well as insisting that providers give clients all the necessary information. It also covers quality in materials and workmanship.

The GRTU has added another benefit by tying in the certification to an eco-loan scheme whereby the interest is paid by the retailer and the customer has the right to involve GRTU if something is wrong with the installation.

“Payments are only made once the installation is completed and certified, ensuring the client is

protected at all times,” the spokesman explained.

Bank of Valletta has also designed a product for its environmentally-aware clients. The BOV Eco Personal Loan has been complemented by a Special Scheme, whereby the bank helps to finance the purchase of solar water heaters and photovoltaic systems purchased from participating retailers.

Both the processing fees and the security are being waived, while the interest is being discounted and being paid by the retailers themselves.

Recently the bank widened the scope of the BOV Eco Personal Loan to cater for the purchase of new motor vehicles whose carbon dioxide emissions are below 100g/km, or 130g/km where the applicant is concurrently scrapping another motor vehicle under the Government Car Scrappage scheme. Purchase of electric and hybrid motor vehicles and conversion of engines to operate on auto gas are also being considered under the same product.

The BOV Eco Personal loan can be used to finance eligible projects ranging from €500 to a maximum of €40,000.

In the case of the Special Scheme, the loan amount varies between €1,000 and €15,000.

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INTERVIEW

Cleaning up industrial-grade problems

TONY ZAHRA

TONY ZAHRA was appointed chairman of Malta Industrial Parks three years ago. He explained to VANESSA MACDONALD that he had to balance cleaning up legacy issues with getting things moving for the future.

MIP has just reported a pre-tax profit of €5.2 million on a turnover of €14 million. This is much better than it was...

The results have been encouraging. It means we have more money to invest in expanding operations and to invest in future economic growth.

the permits, develop it and start getting your return. During that time economic cycles can change. You have to be careful that whatever you develop takes into consideration future needs and that if there are strong headwinds, you can survive the period until the sun comes out again – as it always does.

There have been a number of significant changes to MIP’s investment portfolio. In February 2014, MIP was given a concession agreement for €46.5 million. What this was? You now have assets of several hundred million…

Basically we have a service level agreement (SLA) with the government to operate properties on behalf of the government. MIP uses the straight line method for accounting for its turnover. It is just a way of presenting its accounts; we have not increased our assets but converted part of tangible assets to intangible, taking the amortisation over the period of the SLA.

Apart from the head office, what have you taken over?

Other buildings and some land at Luqa including the old terminal building.

MIP has taken out nine loans, three of which are linked to Air Malta: €50.8 million directly for Air Malta land and €69.5 million which is part Air Malta and part Ricasoli. Has the government merely solved the Air Malta problem by transferring the burden to you?

Not quite. It is MIPs remit to administer property and the Air Malta sites are among them.

People assume the head office site is invaluable because of what MIA did with SkyParks…

MIA did a very good job there but in Malta, there is no gold in the ground. It takes several years from the time you conceive the idea, get

Isn’t that already being used for cargo?

Some of the building has tenants – but not all of it. There is a big opportunity, because these sites could be transformed into valuable properties. But I am a bit cautious: if anyone doing a project of this nature does not acknowledge that he might have problems on the way, then he is not being realistic… However, we are going to be well financed so that if there are problems, we can overcome them.

Two years ago when I interviewed you, MIP was saddled with almost €100 million in ‘apparent’ debt. What happened?

We did a couple of things. The most important is that we renegotiated many of the loans, spreading them across a longer period than before, and also renegotiated the interest rates, which saved us a lot of money. The result is showing in the profits too.

You said the profits would help with projects… What about the removal of asbestos?

“e rent is not ‘optional’... If you have money for a car or a yacht, then you have to pay us the rent” This year, we budgeted €1 million for the removal of asbestos, which was used widely in the 1970s and part of the 1980s. Virtually all the factories that have sloping roofs – called northern lights – have asbestos.

Asbestos is not a problem unless it is disturbed – and when it is disturbed, there cannot be anyone in the building. So we are tackling it as and where we can when units become available, doing the work in between tenants, so we don’t disrupt operations unnecessarily.

In addition, it is a question of resources as there are only a few companies in Malta which can handle this specialised operation. It will take time but we will eventually tackle all the factories.

What have you achieved with regards to collecting arrears and evicting non-paying tenants?

The first thing we did was to invoice ahead of the rental due date. The rent is due and payable on the day it is due, so we now invoice two months before and have people who chase payment, a system which is more in line

with what would happen in the private sector.

We also make it a point to remind tenants that the rent is not ‘optional’. Obviously, occasionally, companies run into genuine difficulties so we spend some time listening to them as we are not out to make their lives even more difficult. However, we have to be convinced that you are in difficulties. If you have money for a car or a yacht, then you have to pay us the rent.

One of the biggest problems was that people were allocated spaces which are no longer being used for productive activity. Have you evicted anyone?

If they are not using the factory for economic activity, we are telling them: ‘Please give us the property back because we need it badly for people that want to use it.’

Great. But have you managed to free up any space?

Yes. We would like to think that the people that we talk to are reasonable. We are also

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INTERVIEW

very reasonable people. But MIP can also be strong and take bold action against abusers…

You just signed a new MOU with the Chamber of Commerce, Enterprise and Industry.

How does it differ from the one signed in 2012, which does not seem to have been very successful?

The 2012 agreement was based on service charges and so on. We are now going in a different direction. The first agreement we signed was for Mrieħel, an industrial area which is only 25 per cent handled by MIP while the rest belongs to private entrepreneurs. We were looking after our part but the private sector was not doing the same with theirs.

Now, we set up a foundation for the Mrieħel estate where the private sector and the public sector pooled in money to look after the estate.

It is being managed by the private sector with representatives from the government, chaired

by Louis Farrugia of Farsons. Who better to look after it than the people that are there?

We are looking to replicate this model for the other industrial estates with the respective associations as the private sector will do a much better job than we can.

We recently found out that MIP will probably lose the EU funding for the Safi Aviation Park extension…

We depend exclusively on contractors. We come up with a project, apply to the Planning and Priorities Co-ordination Division (PPCD) and go to tender through the government procurement channels. But then the contractor has to deliver. In PPCD contracts there are penalties if projects are not completed in time and MIP will ensure that they are imposed.

So it is not MIP that will lose the money…

Logistics may sound simple but it is not as there are regulation issues, customs and port practices and other rules and regulations.

The government has indicated that this is the way it wants things to go.

MIP HAS TAKEN OVER AIR MALTA’S HEAD OFFICE AS WELL AS THE OLD TERMINAL.

We have been waiting for the Ta’ Qali crafts village for some 25 years. Is it actually going to happen now that you have a permit?

Ta’ Qali’s €18 million financing should be coming from EU funds for the current Budgeting period. We presented a good bid to he PPCD for the project and expect an official reaction very soon. As soon as we get the go ahead – in the next year or so – we would be ready to press the button.

I have had a lot of pressure put to bear on me but we have a clear vision for Ta’ Qali.

We had big names that wanted to get space there. But no, this has to be for artisanal operations. It should only be a for one or two-man entities working there and selling their crafts.

And we do not need several canteens… Every-

one wants to have a few tables and chairs outside their factory!

There was considerable controversy over the development of Park 4 at the edge of the airport.

Will it go ahead?

It will happen but at the right time. At the moment there is a lot of development at Safi Aviation Park with large investments by companies like Aviation Cosmetics, Medavia, SR Technics and others.

Once Safi Aviation Park is fully utilised, Park 4 will be the next phase.

Stakeholders have been talking about logistics but the government has not come up with the Act yet, after years of talking…

How do you see logistics? Is it pie in the sky or will it really offer value added?

We have already granted space to internaitonal and local companies involved in logistics and related activities. As we said before. you should not rush on this issue because there are implications.

You need to compare now to where we started 40 years ago when manufacturing started in Malta. At that time, we needed huge factories, mostly for textiles, employing 300 or 400 people with enormous machinery.

Since then manufacturing has shrunk – not only in terms of numbers but also in terms of space required.

And the space has to be different too, which requires investment in the units.

And who would be responsible for the free trade zones? Malta Freeport Corporation thinks it should be, not Malta Enterprise…

Where does that leave you?

Malta Enterprise has been leading the initiative as has been the practice with other new industrial niches like aviation, maritime, ICT, healthcare etc.

A number of government authorities will form part of a group of important stakeholders that will eventually facilitate the flow of goods through and within Malta.

There may eventually be a regulating agency – existing or new. What is most important is that Malta captures a portion of logistic activities that are happening in the Med.

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CASE STUDY

Laying the right foundations to prevent a property bubble Chris Grech, the Dhalia chairman who was among the first people to call for regulation of the real estate sector, has warned that the new system must be in place in the next six months.

“The industry must be policed if it is to be held accountable, so nobody can con any potential customer, including foreigners, or raise their expectations about the possible return on their investment. If that were to happen, we would destroy Malta’s reputation for property as Panama Papers has done for the financial sector,” he said.

He noted that the number of people employed by the sector had grown four or fivefold in as many years, and that there was a growing percentage of people who do not deliver the right service.

“Do all agencies insist on a police conduct certificate? We worry because we have turned people down because they do not have one – and we then hear that they are working somewhere else… We are entrusted with the biggest investment of people’s lives. We need to be qualified to do so,” he said.

The government issued a White Paper on regulation of the sector a few months ago and the aim was to issue the new framework by summer. But he admitted that his original vision – self-regulation – may have been “a bit of a dream”, which he had based on the British model.

“That is what I would have wished for, but that could not work here. Unfortunately, we don’t agree among ourselves and a number of estate agents are not prepared to invest in the future of the industry. This is why it is important that a regulation

framework should be set up and imposed by government. This is the only direction we could have taken and I think it is the best option for success.”

The growing number of property negotiators is the result of a boom in the property sector, fuelled by the influx of foreign buyers, but unfortunately this is the time at which sectors are most vulnerable to cowboys out to make a quick buck.

“They harm the industry as their only priority is to close the deal and earn a commission,” he said, shaking his head.

Another problem is that the public believes that it is real estate agents that drive up prices to persuade vendors to list with them as well as to boost their commissions. But Mr Grech scoffs at the idea: “Real estate agents don’t drive up prices. We don’t have the power to do that! We advertise properties and show people round. Prices react to the market – to supply and demand.

“Let me give you an example.

Estate agents did not fuel the influx of investors from overseas but they are obviously the ones who reacted to it, showing them the right

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CASE STUDY

properties offering value for money, and guiding them with regards to capital movement, residence and citizenship, permits and so on. We have a stake in making sure that it is successful,” he said.

However, that does not mean that he is oblivious to the potential instability that would result from having everyone jump on the bandwagon, particularly when it comes to ‘buying to let’. Other agents have already voiced concern that investors are not always acting rationally and are so desperate to buy property that they do not take into account price and location.

“I agree with them and I have the same concern. The market is growing too fast. Anyone sensible can see this! I cannot see how the Malta Developers’ Association could possibly deny this!

“But what can we do about it?

We are not blowing up the bubble ourselves: it is the investors who are causing this,” he said, adding that developers were falling over each other to put up tower blocks in a number of locations.

The proposed regulation also revealed another fault line in the current system, which was highlighted during the last Business Observer breakfast, when sensara Janice Azzopardi vociferously defended their business model and its right to exist.

“I know the lady at the event was very defensive and felt that regulation would work totally against them. I feel totally the opposite.

“The profession is important as part of the modus operandum of the industry. Dhalia has been around for the past 35 years and has always used sensara. They know who owns – or inherits – properties in villages. This local information has always helped us to update our database and to put properties on the market.

“But sensara lack buyers – especially in the past, although some of them now advertise, which they never did a decade or so ago.

Bringing buyers and sellers together has never been their strong point. This is why the most effective ones are those that worked with estate agents. They referred

DHALIA CHAIRMAN CHRIS GRECH. PHOTO: MATTHEW MIRABELLI

properties to us to put on the market and when we sell them, one per cent was paid to them. So they got their commission for the work they did.

“We still work with a number of local sensara to this day as we have developed relationships with them and see them as our eyes and ears on the ground,” he said.

He is, however, pragmatic about the impact that they have on the market, insisting that they do not contribute to the market to the same extent as real estate agents – and would never be able to do so as they do not accumulate large databases.

“They cannot appease a potential buyer who will want to see multiple properties, perhaps in multiple locations,” he argued.

One point of contention is the fact that sensara would also need to be trained and get certified if they wish to be registered. At first, Mr Grech, thinking out loud, pondered whether they could be trained to different standards reflecting the more limited clientele. Could there be a two-tier licence – say a basic and an advanced one?

“Sensara do not necessarily take on the full responsibility of both buyer and seller. But sensara should have the opportunity to go the whole hog and insist on the same opportunities”

“Perhaps. Sensara do not necessarily take on the full responsibility of both buyer and seller.

“But sensara should have the opportunity to go the whole hog and insist on the same opportunities. However, they then have to be prepared to go through the process. Some sensara are elderly and have no access to computers.

Some might even be illiterate which would make it hard for them to get certified,” he said.

The trick with having a two-tier system would be ensuring the consumer protection that it is supposed to provide.

“It is not an easy one. The local sensara are part of our tradition and that should not die because of progress. But some people are going to have to be shelved, unfortunately. It is very difficult to have two weights and two measures.

Regulations should have one policy – not different ones for different people. But we are talking about the exceptions who will not go through the pain of training.

“It is a difficult situation but we need to think up new ways to find a solution. We cannot argue that things have to stay the way they

always were. They will resist change but you cannot ignore reality. The majority of them are not equipped to provide the service the customer deserves. They don’t have the information on banking and market value, for example.

“A substantial amount of investors, developers and property owners want to work through estate agents because they want exposure to the overseas target market.

“One has to realise that up to very recently, 90 per cent of the market was local. But it is now changing and the percentage is falling very fast. Very soon we will have 50 per cent of our market being foreigners…

“The percentage of foreigners and businesses buying and leasing property is increasing, although the number of Maltese in absolute terms is not declining. In 2015 – there was an increase of 35 per cent in terms of sales and this is just the beginning. There will be thousands of apartments in upmarket areas coming on the market in the next two to three years – and others in residential areas around the island. We are experiencing a surge.”

Mr Grech believes that regulation will contribute to stabilise the market, pointing out that the alternative does not bear thinking about.

“We need to remember the past. The bubble did burst in 2009 – but fortunately it was not a big burst because banks had already throttled back on loans.

“If we try and work closely as a body with the banks, the financial sector, the Chamber of Commerce and the business community, we could try to correct the market together – rather than thinking about bursting bubbles, which sounds negative… It is a very big challenge but it will work if everyone does their part by thinking about the long-term benefits and building up a solid foundation.

“It needs to be at government level too. You will have organisations like the MDA which challenge this view and challenge how this could be done! We need to find a system where prices do not keep going up.”

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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

Strategic questions for Air Malta

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There are two aspects to the Air Malta strategic partnership which are yet to be explained: what is the value-added of the deal for Air Malta and what is the value-added of the deal for Alitalia/Etihad.

They say that the devil is in the detail but, in this case, the broader picture has yet to be revealed.

Let us start from the basics: was there an alternative? The airline needed to become financially viable and all the attempts to make it so were brave and successful to a point. But only to a point.

The airline, at some stage, would have had to be split into a ‘good airline’ and a ‘bad airline’, as has happened with various entities in other member states. This might still happen in the hands of the new partner, which might shed the troublesome or less lucrative aspects of the operations, such as ground handling.

Could the airline have been sold to private Maltese investors, as has been claimed? Perhaps, although the business model would have been even harder without the economies of scale another airline would bring (although it remains to be seen whether these are in Malta’s long-term strategic interest or not).

So if it had to be another airline, does Alitalia make sense for Air Malta, and – crucially – does Air Malta make sense for Alitalia?

For years, the rallying cry of myriad stakeholders has been that Malta needs a national airline which would put national priorities first, protecting the route network which feeds our tourism and economic ties.

Will the Alitalia deal achieve this? Will the 49 per cent shareholding it is considering give it managerial control? Will this minority stake

give it the right to tinker with the already much diminished route network? So far, we have no idea why an airline still shaking off its own death throes would want another hub less than an hour from its base in Rome.

With Hunan Airlines, touted as a contender last year, Air Malta’s excellent landing slots in major airports were an obvious lure for a carrier seeking European routes. But what does Alitalia lack that Air Malta could offer? And what new tourist flows or business links would it bring, compared to what a Chinese airline would have brought, for example?

The only clue we have is from Alitalia CEO Cramer Ball, who said: “We have… to look closely to see whether… our networks can complement each other in areas such as southern Italy.”

Would Air Malta be reduced to a regional hub for the Italian airline?

There is one other aspect to the partnership: getting the unions on board. In the past, it took around 18 months to negotiate a collective agreement and the stated intention is for this to be done in one month, which seems optimistic to the point of naivety.

It is an unfortunate truism that unions do not grandstand with foreign companies the way they do with local ones, let alone with the government. This alone would make the deal a great breakthrough.

Some answers will be obvious quite soon; others may take longer to materialise. So far, all we know is that Air Malta’s code-sharing focus would switch from the Star Alliance to the Sky Team.

Let us hope that the deal would bring more, much more.

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BUSINESS OPINION

Competitiveness boards: more of the same?

Philip von Brockdorff In its latest attempt to enhance the level of competitiveness in the eurozone, the European Commission is proposing to establish National Competitiveness Boards (NCBs) the aim of which is to increase the effectiveness of economic policy governance by reducing policy differences across member states.

Though competitiveness cannot be seen as an end in itself, it is quite obvious that in the globalised world economy, the eurozone can ill afford to lag behind emerging economies and the US in the competitiveness race. The strategy adopted so far has focused largely on attempts to reduce labour costs via labour market reform. This has produced mixed results at best.

Trade unions’ influence has waned and union representation has been hit by falling numbers of members. And yet, competitiveness still remains an issue for the eurozone. There are several reasons for this and one could reasonably argue that focusing on wage competitiveness alone

is too narrow a view. What competitiveness needs is a multifaceted approach. Most employers, I suspect, would also agree with this view.

At a recent European Economic and Social Committee meeting, a representative of Business Europe (representing business across Europe) argued strongly in favour of NCBs as institutions responsible for evaluating competitiveness in the eurozone. At no point, however, did he state that competitiveness strategy should focus exclusively on wage competitiveness. He also emphasised that NCBs need to have institutional independence.

In my view, this is critical for the success of NCBs but can anyone really guarantee the independent thinking and analysis of these NCBs? Also, whereas I can see the merit of NCBs as institutions engaged in research and policy recommendations, do we really need another institution when we already have the Malta Council for Economic and Social Development (MCESD)? Perhaps it may make more sense for existing academic institutions to take the lead and direct research in the area of competitiveness and competitiveness strategies.

Granted, we need more quality research – but that can be achieved by engaging teams of researchers from related disciplines.

If there is agreement on NCBs, however, these institutions need to engage expertise mirroring the diversity of opinions, as one would find in the MCESD. A ‘winner takes all’ situation needs to be

“Do we really need another institution when we already have the Malta Council for Economic and Social Development? avoided at all costs. The interests of trade unions need to be fully respected and be involved in macroeconomic dialogue. The economic objectives cannot be allowed to sideline the achievements of the European Social Model.

The NCBs can prove useful if they monitor economic performance and policies against the

background of global competiveness, propose effective strategies and identify new investment opportunities in the medium and long term. If this were to be the case, this would not overlap with the role of MCESD and Malta’s NCB would actually engage with social partners at MCESD. The NCB’s technical assessments and proposals would feed into

MCESD’s agenda, raising the level of debate at MCESD. Whereas wage dynamics is well within the remit of the NCBs, they should refrain from engaging in wage-setting. This ought to be left to the trade unions and the collective bargaining process. That said, trade unions cannot behave like ostriches and bury their heads in the sand. They cannot ignore the many changes taking place in the eurozone’s labour market.

Malta’s labour market landscape is also changing rapidly with inward migration (EU and non-EU workers) becoming ever important in its contribution to economic growth. Trade union representation among migrant workers remains low and trade unions need to do more to interact with increasing numbers of EU and third country nationals working in Malta.

We also need further research into the economic and social impact of migrant workers. As an institute capable of carrying out research, Malta’s NCB would be well placed to do this.

In general, research would serve to enhance macroeconomic dialogue between social partners and shape government policy, keeping in mind national fiscal targets as well as ECB’s target inflation rate. Anything short of this and we would be right to argue that NCBs would be more of the same.

Philip von Brockdorff is the head of the Economics Department at the University of Malta.

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APPOINTMENTS/NEWS

New appointments at APS Bank New IT manager at Medserv Edward Farrugia has been appointed group IT manager for the Medserv Group of Companies as the group continues to strengthen its team and infrastructure to allow for further global expansion.

Mr Farrugia has a strong IT and technical background and extensive experience in the ICT field, having held major roles as project manager at British Airways, head of sales at KPMG Crimsonwing and his most recent role as head of IT at Foster Clark Products Ltd. “Bringing our systems in line will allow us to improve our efficiency and help ensure the client receives a seamless service. Systems availability is critical to our operations and strengthens the infrastructure we provide our clients with,” said Godwin Borg, chief operations officer at Medserv.

Altaro expands European operations Altaro, a Maltese software company specialising in back-up and recovery solutions for businesses, has announced its plans to expand into Europe. The European commercial team will be guided by Colin Wright, who has been appointed as the company’s vice president of EMEA Sales. Mr Wright has more than 20 years’ experience in the technology sector.

“With a significant portion of our 30,000 customers from the UK, Germany, Austria and other European countries, we felt that the time was right to invest in our European operations by appointing a seasoned sales professional with a proven track record of commercial success within Europe,” commented cofounder and vice-president Stephen Chetcuti Bonavita.

“Coupled with opening our first international office in the UK, these are important steps in positioning ourselves as a recognised brand in the back-up software industry.”

Wilhelm Attard (right) and Anthony Buttigieg have joined APS Bank as head of operations support and head of retail and commercial banking, respectively.

Mr Attard has over 25 years’ experience in financial services, most recently with HSBC and previously with Bank of Valletta and Midland Bank, in Malta.

At HSBC he was engaged in various senior roles across a number of areas, including change programmes.

He is currently the vicesecretary of the Institute of Financial Services currently acting as vice-secretary.

Mr Buttigieg has 39 years’ experience in the banking industry in Malta, working for Mid-Med Bank and HSBC in successively senior and executive positions, most recently as regional director. During his extensive career he has headed teams/projects in

2012 8% 38%

7%

47%

areas such as commercial, retail, direct, contact centre and risk.

“They bring expertise, experience and ideas to our retail and commercial strategy.

“These appointments form part of the strengthening of our management line-up and will give further impulse to the bank’s development,” said chief executive officer Marcel Cassar.

FSS Company Capital gains Other

7%

2015

35%

8%

50%

Two more chiefs for BOV Bank of Valletta has appointed Ernest John Agius as chief operations officer and Albert Frendo as chief business development officer for credit, bringing the total number of chiefs up to six.

Mr Agius joined the bank in June 2015 and has significant experience in the management of large projects.

Throughout his carrier he held a number of senior executive positions. His previous position within the bank was that of change management executive. As COO, he will be responsible for the management and delivery of change projects within the bank.

An accountant by profession, Mr Frendo joined the bank in 1992. He has occupied various key positions at the bank, including that of chief officer credit, his most recent role being that of chief officer corporate finance. In his new role, he will be responsible for the bank’s credit business development and management.

Company tax increases share of revenue Company tax has grown by 42 per cent between 2012 and 2015, much faster than FSS tax, which only grew by 26 per cent, meaning that it now represents half of the government’s tax revenue.

Capital gains tax has grown by a staggering 54 per cent during that time but remains a minor share of the total.

Source: Parliamentary question

18

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STOCK MARKET REVIEW

Rumblings from annual general meetings

Edward Rizzo The annual general meeting season is now well under way. Last week alone, there were three AGMs. I do my utmost to attend most of the meetings since I feel it is very important for financial analysts and advisors to keep abreast of company developments. Invariably company executives deliver detailed presentations on their previous year’s financial performance and their immediate strategic objectives.

The remarks from top executives generally provide important hints to shareholders.

But I also think it is important for market participants to attend to get a feel of general sentiment among the numerous investors who turn up at these events. While some investors attend for the reasons well known to many, other investors truly turn up with the objective of understanding how their company is fairing.

Moreover, this is an annual opportunity for shareholders to question management on certain issues of interest.

One of last week’s AGMs was that of GO plc. It is widely known that the telecoms group is on the verge of a takeover and earlier this month, GO confirmed that it received a number of binding offers for the entire issued share capital of the company. During the AGM, chairman Deepak Padmanabhan confirmed this and explained that these offers are currently being evaluated and a preferred bidder will be selected very soon. Since Emirates International Telecommunications (Malta) Ltd owns 60 per cent of GO, it had been disclosed at the time of the extraordinary general meeting in October

GO CHAIRMAN DeepAk pADMANAbHAN GO’s MINORIty sHARes ARe wORtH €145.6M

“Lack of new issuance could also lead to a dangerous overvaluation of certain equities as the sizeable liquidity chases some of the few remaining equities on the market” 2015, that any bidder would need to be prepared to acquire up to 100 per cent of the company. This is due to the fact that according to the Listing Rules, any investor acquiring more than 50 per cent plus one share must make a mandatory bid for the remaining shares.

Additionally, should a potential buyer exceed 90 per cent of the issued share capital during a takeover process, they may elect to squeeze out the remaining shareholders and subsequently delist. This is what took place over the past 18 months in the acquisi-

tion of Crimsonwing plc and Island Hotels Group Holdings plc.

The possible delisting of GO plc should the eventual bidder acquire above 90 per ent was foremost among many investors’ concerns when talking to a number of shareholders after the AGM of last week.

Since GO is significantly larger than both Crimsonwing and Island Hotels Group, the impact on the market would be much greater. It is worth highlighting that there are over 8,000 shareholders of GO owning the ‘free

float’ of 40 per cent compared to a few hundred investors in the two other companies delisted over recent months. Moreover, with a current market capitalisation of €364 million, the value of shares held by these numerous investors amount to €145.6 million – far larger than the combined market cap of the two previously delisted companies let alone the €9 million and €12.1 million proceeds left in the hands of the free-float shareholders when Crimsonwing and Island Hotels Group were taken over.

Some investors remarked that the eventual acceptance of the GO voluntary bid would place them in a difficult situation since they would then need to seek alternative investment opportunities in an already limited local equity market and at a time when investor liquidity is also at very high levels.

Other investors at the AGM (mainly pensioners), who are dependent on generating regular income from their investment portfolio, also remarked that they would need to substitute their investment with other securities which similarly generate an income stream to supplement their living standards.

These two concerns clearly portray the imminent challenges facing the domestic financial market.

Following the delistings of Crimsonwing and Island Hotels Group and possible upcoming delistings of GO and also 6pm Holdings plc, the equity market is unfortunately shrinking rather than getting larger.

This is even more critical given the current environment with interest rates on traditional term deposits at close to zero at the larger more-established banks. This scenario normally encourages a greater number of investors to seek alternative investment options via the stock exchange. However, for this to happen, the market must present opportunities to the investing public.

I have aired these matters in some of my weekly columns over the recent months. These concerns are now also being felt by many local investors. Although we are likely to experience an increase of bond issuances in the months ahead, we must not shy away from the fact that there has been a lack of equity issuance on the MSE. In this respect, it is noteworthy to highlight that the last offer of shares on the Malta Stock Exchange was that from Tigné Mall plc back in May 2013.

The launch of Prospects will unfortunately not fill this void in the market. Few pensioners would be willing to gain exposure in their portfolio to micro enterprises

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STOCK MARKET REVIEW / OPINION

(both local as well as international) that may be admitted to this new market.

This void can only be filled by attracting the more mature local companies having a profitable track record to list their shares on the Official List. In order for this initiative to gather momentum and achieve a degree of success, the MSE, market participants and advisors normally entrusted with assisting a company to list on the MSE (namely accountants, lawyers and stockbrokers) need to step up their efforts and embark on a campaign explaining the listing process as well as the benefits that may be derived by a number of companies who may qualify but are not aware about these advantages.

Failure to do this could place the equity market in an unfortunate situation where it would remain too small to cater for the growing liquidity in the hands of investors. This increased availability of investible funds is not only due to the unprecedented low interest rate environment but may be exacerbated by the delisting of GO plc.

Lack of new issuance could also lead to a dangerous overvaluation of certain equities as the sizeable liquidity chases some of the few remaining equities on the market.

Although present shareholders of these companies would be happy to see a further upturn in share prices, this would be a dangerous situation for the local market in general.

Euphoric sentiment caused by irrational demand is not healthy and many would remember the painful and long recovery process that ensued following the unsustainable peaks in 2000 and 2006.

With regard to bubbles and euphoric sentiment, at a recent AGM a representative of a

number of shareholders asked a company to consider a share split since he argued that this would help the company’s share price to continue rising.

In my opinion, this is a rather irresponsible recommendation.

However, I will tackle the concept of share splits in further detail in the coming weeks.

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

“Many would remember the painful and long recovery process that ensued following the unsustainable peaks in 2000 and 2006”

D&A: a game changer?

Eric Muscat and Adrian Mizzi Data & Analytics (D&A) is expected to impact and alter the competitive business landscape in the near future, setting the scene for the creation of a differentiated competitive edge through the strategic exploitation of data and analytics.

While D&A has graduated from a relatively unknown term to a business buzzword, the term D&A – however – may have been abused and its connotations and key messages were distorted over time.

Much has been said about the concept of data and that organisations should invest in data mining and visualisation tools to extract useful information. Like many other countries, Malta underwent a staged developmental process, over the last decade. Several initiatives were undertaken to mine data, to build data warehouses and more recently lakes, and to implement business intelligence (BI) solutions.

The term BI added to the confusion. On the one hand, it conveyed the message of sophistication while on the other hand, the term was frequently associated with projects that failed to deliver what the business was promised: namely adding business value.

This was due to a culmination of factors, chiefly project fatigue; too much focus on building the data warehouse; less focus on how to process the data and poor advice on the appropriate technology stack. The resultant effect was that few organisations managed to reap the benefits of what ultimately became known as “BI projects”.

D&A is not the new label on old “BI bottles”, that is, it should not be if it is to be successful. The approach and the business mindset need to change. Lessons from failed BI projects have taught the industry that the focus should be on identifying the right data sources and focusing on those that are readily available.

Perhaps less attention and importance should be given to data consolidation and cleansing. Although two very important aspects, experience shows that they drain financial and technical resources and sometimes lead to project delays and abandonment. The focus should shift more on to analytics. Analytics refers to a

scientific approach where advanced statistical mathematical techniques use to examine data and extract meaningful information extracted.

This approach, uses descriptive analytics to assess the findings in a scientific way – the first step in an ‘investigative’ journey. The journey moves into predictive analytics where we project the past experience on to what would happen to an outcome in the future. Prescriptive analytics takes this a step further: it attempts to optimise the outcome.

Predictive analytics has been around for the last 20 years and has been applied successfully in the engineering field, including oil and gas exploration, medicine and more recently in the business fields. Prescriptive analytics is considered by some as an obvious extension to predictive analytics. However, it sends an important message to the business: prescriptive analytics is about optimisation of processes using underlying data whereas predictive analytics stops at predicting a business outcome given past experience.

A tangible example could relate to a customer requiring assistance to optimise his debtors. The first step would be to review the demographics of the customers.

Through descriptive analytics, charts and graphs would illustrate the mix of the customers that pay late. For instance, using predictive analytics, one can predict with a degree of certainty that customers who purchase a particular product and fall within a particular age bracket, have a propensity for not paying. Recommendations would be proposed accordingly.

Prescriptive analytics might lead to the recommendation of adopting different payment terms using an automatic system when selling the product. This will optimise the debt collection process as the client is receiving real-time advice. All of this is driven by the data that the organisation already possesses.

D&A is progressively becoming the scale by which performance and growth is measured driving business decisions and disrupting traditional business models. … D&A is a game changer.

Eric Muscat is a partner and Adrian Mizzi is associate director for advisory services at KPMG Malta.

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BUSINESS UPDATES

Top international experts to participate in Malta’s first Big Data Summit Malta’s first Big Data Summit will be held on June 22 at Xara Lodge, Rabat. The first event of its kind to be held here aims to bring together a group of international experts and leaders to discuss how big data and advanced analytics are transforming today’s business world.

This event will address key major developments where Big Data is having an impact, including the IT industry, especially in disciplines like artificial intelligence (AI), smart transportation and the future of the motor car, journalism, financial services and marketing as well as the Internet of Things (IOT).

Presentations will be made by some of the key players in Big Data today, including Tableau, Qlik, Microsoft, Zendesk and Salesforce. as well as accomplished independent international speakers from diverse organisations, including the International Consortium of Investigative Journalists (ICIJ).

The event is targeted at CEO/Csuite executives, chief information officers, business professionals, data architects, financial services professionals, software engineers and specialists from a variety of sectors, including iGaming, banking, insurance, retail, manufacturing and the public sector.

The Big Data Summit is being sponsored by Zendesk, Tableau, Qlik, Microsoft, CreditInfo and Lexus. For more details and to register please visit www.bigdatasummit.org.

hsBC Ceo andreW Beane announCed the promising utilisation of the €75 million fund at THE ECONOMIST event.

HSBC Malta’s latest trade finance fund: €60 million take-up Charles radClyffe, serial entrepreneur and Big data expert; Wilfried grommen, Cto at heWlett paCkard; mattheW Caruana galizia, founding memBer at iCiJ data unit; aBdalla kaBlan, entrepreneur and finanCial data analytiCs expert; and neil sammut, data sCientist at teradata.

A sterling reputation, a loyal client base Frizoll was founded in 1935 and is a fourth generation family-run business. The company’s main aim is to provide top-quality products and after 80 years in the business, Frizoll’s reliable services are the best form of advertisement.

Efficient and consistent services have resulted in a sterling reputation and a loyal client base.

Besides being the leader in the local manufacturing business, Frizoll is also an importer of industrial and commercial refrigeration equipment from reputable brands.

Brands include Frost-trol, Frigomeccanica, Framec, Royal Frigo and Zoin. Frizoll has a very wide range of products including refrigerated counters, chest freezers,

upright fridges and freezers, cold rooms, condensing units, stainless steel cabinets, warm displays and also spare parts.

Frizoll can supply refrigeration equipment for any establishment, including custom made-tomeasure cold rooms, as well as repair services for all the aforementioned equipment.

Frizoll offers free delivery for all products (excluding spare parts), free on-site estimates and provides clientele with excellent aftersales services for purchased products.

Opening hours are from Monday to Friday, from 7am until 4pm. Ample parking space is available.

A €75 million trade fund launched by HSBC Bank Malta 10 months ago to help Maltese businesses expand internationally has crossed the 80 per cent utilisation mark, becoming another attestation to the potential of Malta’s rapidly expanding economy.

This was announced by HSBC Bank Malta CEO Andrew Beane during a speech delivered during The Economist Mediterranean Leadership Summit.

The Malta Trade for Growth Fund was launched in June 2015 for businesses seeking capital to strengthen export. The €75 million fund came on the heels of the first €50 million fund in 2013, which was completely exhausted in under a year.

“Business tends to find a way to grow and can serve as a good force to catalyse economies. Despite challenges around Malta, businesses in Malta have registered confidence in the domestic economy by absorbing the fund,” said HSBC Malta Head of Commercial Banking, Michel Cordina.

HSBC Malta established the Malta Trade for Growth Fund as a vehicle to internationalise businesses and support the long-standing entrepreneurship that has been a hallmark of Maltese businesses for many years. The fund grants businesses with a sound expansion plan access to HSBC’s trade and lending resources, as well as its worldwide network of local trade experts.

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e Business OBSERVER

| May 19, 2016

BUSINESS UPDATES

Financially-feasible Introducing Malta’s first Prohibition-style bar energy-saving measures Altern Ltd was set up to promote and implement sustainable energy solutions within the local and foreign sector. Today Altern offers services such as energy auditing and implements products such as photovoltaic (PV) systems, LED lighting and combined heat and power (CHP).

Altern is now providing a unique opportunity for businesses of any size to implement PV and LED projects with a payment structure of up to five years. Such a scheme offers the possibility to generate cost savings, helping business grow and become more efficient.

Altern LED products are designed, developed and built in Malta, with flexibility integrated into all its products.

Altern’s LED lights can be built in different shapes and sizes, using different types of LED chips, with different sizes, colours and temperatures.

This offers a unique opportunity to designers, architects and home owners to implement light that is personal and custom-designed.

Altern, your sustainable choice, is found at KW17A, Corradino Industrial Estate, Paola. Call 2099 6465, send an e-mail to info@altern.com.mt or visit www.altern.com.mt

Malta’s first ever 1920s prohibitionstyle bar, The Thirsty Barber, is opening in St Julian’s later this month.

The Roaring Twenties were a prosperous and culturally exciting period.

However, in the US and Canada, a law prohibiting alcohol was set into place, supposedly to reduce crime rates. The Prohibition backfired – criminal and gang activities ironically ended up soaring during this era.

Speakeasies were hidden sections of an establishment that were created to sell alcohol illegally during the Prohibition. To enter a speakeasy, one would have to say a password to the doorperson to prove that they were not really secret agents. The name ‘speakeasy’ came from a bartender’s term that people were meant to ‘speak easy’ when at a bar, in order to avoid drawing suspicion to themselves.

It took three interior designers over eight months to create an

authentic, handcrafted barberthemed speakeasy.

The Thirsty Barber boasts a unique cocktail list, developed by a team of qualified and experienced mixologists. One can choose from a variety of Prohibition-era cocktails, martinis and champagne cocktails, some of

which are also to share. The bar’s signature cocktail also happens to be the most expensive on the island.

Doors will be open to anyone over the age of 21. Entrance to the bar must be via pre-booking.

Visit www.thethirstybarber.com to find out more.

Alberta installs high-definition CCTV system at Casino Malta Casino Malta has entrusted Alberta with the installation of more than 100 Avigilon HD cameras ranging from fixed cameras to Pan Tilt Zoom cameras.

These monitor different casino areas including the gaming tables, the slot machines, the cashier cage, the vault, the soft count room and the main doors.

All cameras run at real-time and the

cameras monitoring the gaming tables also have high-quality audio microphones installed.

The casino personnel manage the system using the Avigilon Control Centre network video management software (NVMS) with high-definition stream management TM (HDSM) technology to minimise network loads.

The Avigilon system also helps Casino Malta meet the Malta Gaming Authority’s requirements for casino operations while delivering fast and accurate incident resolution. The Avigilon end-to-end surveillance solution provides superior image quality and ensures high-level performance and reliability while dramatically expediting searches.

Nicolai Cozonac, Casino Malta security surveillance manager, stated that a key benefit for the casino was Avigilon’s ability to integrate with critical security systems such as Paxton access control. By installing a solution with superior image quality, the casino attracts new guests and proves the Olympic Casino’s commitment to customer service.