The Business Observer Newspaper 5th November Issue

INTERVIEW

Issue 38

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November 5, 2015

Distributed with Times of Malta SECTORS LIKE HOTELS, HOSPITALS AND AIRLINES HAVE A WIDE VARIETY OF STAFF WITH A RANGE OF WORKING CONDITIONS.

Bank of Valletta has been in the news for all the wrong reasons over the past few months. But chairman John Cassar White has to keep focused on the bank’s long-term sustainability. see pages 10 and 11 >

NEWS

Collective bargaining units unworkable – MEA Vanessa Macdonald Collective bargaining units would not work in practice and are impossible to cover by legislation, the Malta Employers’ Association is warning.

The Employment Relations Board recently proposed to the constituted bodies that a minimum of six employees could form their own collective bargaining unit – but while acknowledging that such units could make operational sense in some contexts, the MEA is adamant that they should be applied only on a case-by-case basis.

“There are many cases where companies have very diverse groups of employees with very diverse working conditions – look at airlines, hotels and hospitals. We have numerous examples of companies with multiple house unions for industrial and non-industrial staff,” MEA director general Joe Farrugia explained.

The problem is that legislating would be too blunt a tool and could end up with medium-sized companies being split into several collective bargaining units, which would make management and industrial relations a logistical nightmare.

“Imagine. In theory, a company with 50 employees could have eight collective bargaining units!” he said.

The units could have advantages and disadvantages for the various stakeholders. Sometimes it would be easier for management to reach agreements with smaller units as their needs might be quite specific.

And in some cases, the units could whittle away the majority representation of a union to the advantage of the second-largest. But the mention of recognition sparks a strong reaction from Mr Farrugia.

The proposal is part of a longoverdue review of the Employment and Industrial Relations Act which started last year – and union

recognition is one of the “crucial aspects”, in his view.

The MEA would like to see union recognition legislated, repeating its oft-cited concern that inter-union rivalry was causing more disputes than union/management clashes.

As it is, when there are claims by a union that it represents the majority of employees, especially when there are both industrial and non-industrial groups, it must go to the Industrial Tribunal – and in the absence of guiding legislation, decisions could be anomalous.

The MEA has long argued that it wants proof of paid-up membership and not a ballot by employees of which union it wants to represent them. In the past, there have been employees who are not members of either trade union (or of both) who still vote, he said. In fact, one of the controversial proposals being put forward by the board is for those who opt to stay out of a union to still pay towards a fund as they

ultimately still benefit from the package negotiated by the union.

The General Workers’ Union is also firmly against the inclusion of any definition of collective bargaining units in the legal notice, stressing that such issues should be the competence of the Industrial Tribunal and that each and every case should be considered on its own merits.

“The GWU is strongly against fragmentation within the places of work, as this creates unnecessary tension among the different categories of employees and among the different unions representing the workers at the place of work. The GWU also strongly believes that such fragmentation will put in danger the harmony that exists within our national industrial relations system and mechanism,” it said.

The proposals have now been sent to Civil Dialogue Minister Helena Dalli, along with the feedback from other constituted bodies.

e Rent-a-Car Association is asking the government to reduce registration tax on its members’ vehicles, saying this would encourage fleet renewal and upgrade the product. see page 3 >

NEWS It seems just yesterday that Global Capital’s auditors were concerned about its viability. New chairman Paolo Catalfamo has not only promised to solve its financial woes but also to take it international. see pages 5 and 6 >

NEWS e Malta Insurance Association is hoping to reach an agreement on motor repair standards which it feels will benefit all the stakeholders, both in terms of cost and timing. see page 6 >

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NEWS

Pleas for lower rent-a-car registration tax The Rent-a-Car Association is once again asking the government to consider lowering the registration tax on self-drive cars, saying it would encourage a newer fleet, also benefitting new car importers.

Association secretary Matthew Brincat said the proposed cut to 30 per cent of the normal level – first made just after the 2013 election – would cost the government some €700,000 in lost revenue.

“Our 45 members buy around 1,000 cars every year. Of course, some of these are fleet expansion, but the majority are fleet renewal,” he explained.

“Reducing the registration tax would encourage them to upgrade their product so the government will gain from the additional turnover. At present, most companies change cars once they are four or five years old. But the industry considers the optimum to re-sell a rental car to be after just six months –

this is why rental cars always smell new! After this the ‘used’ price drops quite dramatically, as does the number of buyers.”

The reduced tax is just one of the concessions being lobbied for by the association, this being one lost in the general reform of car registrations in 2010.

The association also wants an operators’ licence to be introduced, with a minimum of 20 cars in order to qualify. The Transport Authority was against this as it would hinder new entrants, but the association feels that a professional set-up is impossible unless there is a critical mass of vehicles.

“Unless you have a reasonably sized fleet, how can you justify having your own tow-truck, and a transporter to move a dozen cars around simultaneously? How can you afford to have enough spare cars for emergencies or a spray booth and mechanic to get cars repaired and back on the road again?” he argued.

The association is asking for the incentives in the hope of alleviating some of the pressure on its members, who are already seeing their rates under serious pressure from competition and from regulation.

A flurry of complaints across Europe prompted the European Commission to tighten up consumer protection last July (see box) – but Malta has also seen its

share of controversy. The European Consumer Centre in Malta had to step earlier this year after hundreds of complaints were made because the local operators of international car rental franchise Goldcar – not an association member – was charging clients €9 a day to take cars to Gozo.

Goldcar Malta has since changed its policy and lifted the

extra charge, saying this was just “a misunderstanding”.

“The island cannot afford any bad publicity. We have to be as professional as possible to reassure clients who are afraid of scams… Our members are looking carefully at the new terms and conditions being applied by the major European companies as it is inevitable that the smaller ones will follow,” Dr Brincat said.

NEW CONSUMER RIGHTS The European Commission has been working closely together with European consumer authorities to better enforce consumer rights in the car rental sector.

As a result, five major car rental companies agreed to significantly review how they deal with consumers. Most of the new procedures should be in force by the end of 2015.

■ Improved transparency when booking online: - Clearer information about all mandatory charges and optional extras

- Clearer information about key rental terms and requirements, including deposits charged on the consumer’s card; ■ Better information at the booking stage about optional waiver and insurance products, including their prices, exclusions and applicable excesses.

■ Improved and more transparent fuel policies ■ Clearer and fairer vehicle inspection processes ■ Improved practices for taking additional charges from customers: consumers are given a reasonable opportunity to challenge any damage before any payment is taken.

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NEWS

Global Capital to use passporting for international expansion 2015 has been a strange year for Global Capital. In April, its majority shareholder went up in a puff of scandal, and in August, its auditors warned that there was a “material uncertainty” about its ability to continue as a going concern.

What a difference a few months make. The interim results were positive and a ‘knight in shining armour’ has turned up with money to invest – and a bulging address book of potential clients.

Paolo Catalfamo’s company, EIP, may have only bought an 8.93 per cent shareholding in Global Capital, but that was enough in the circumstances to get him the chairmanship of the board, and to let him appoint the majority of its directors.

His involvement was supposed to be quite different. Over 18 months ago, the serial entrepreneur had been eyeing the UK as a location for expansion but he heard about Global Capital as a possible acquisition. It was a pleasant surprise to find that the majority shareholding was held by BAI in Mauritius as he was Italy’s consul there and was able to follow up the lead.

When he met BAI’s owner Dawood Rawat in Malta in March 2014, he faced an uphill struggle to persuade him to sell but, in May 2014, he went ahead and made an offer. It never took root. Undeterred, Prof. Catalfamo decided he liked what he had seen in Malta and set up other interests here, but in April 2015, when BAI was embroiled in a massive scandal, he made another offer for the 48.45 per cent shareholding it holds. It seemed to have been ‘in the bag’ once a Share Purchase Agreement was signed but it was not as easy as that. The deal got caught up in a political storm in Mauritius and has not materialised. He said it was unlikely that BAI would sell to EIP or to anyone else for the foreseeable future.

GLOBAL CAPITAL CHAIRMAN PAOLO CATALFAMO

“I went to the annual general meeting and I realised how many hundreds of small investors there are who had put their savings into Global Capital. I promised myself that nothing bad should happen to them” For Global Capital, this was a real set back as it was in dire need of recapitalisation, both in order to repay €13.8 million outstanding bond that was maturing in 2016,

as well as to meet Solvency II capital requirements at a Group level.

Prof. Catalfamo’s determination to find another way into the company got him thinking outside the

box and in the end, EIP bought the 8.93 per cent shareholding held by Aberdeen Asset Management.

“I went to the annual general meeting and I realised how many

hundreds of small investors there are who had put their savings into Global Capital. I promised myself that nothing bad should happen to them,” he said.

Through his company, EIP, he provided reassurance of his commitment to put up to €15 million into Global Capital, enough to help it meet its immediate recapitalisation needs – but he would clearly like to hold more shares than he currently does.

“My intention is to grow the company and any new shares will be issued equally.”

Continued on page 6

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NEWS

€20 million property portfolio being tackled Continued from page 5 Growing the company is no small challenge considering that Global Capital had not made a profit for over six years – starting with a €6 million loss from the markets in 2008. His job has been made that much easier by Reuben Zammit, who has put his seven years’ experience within the company to good use since he was made chief executive officer in June 2014.

“In six months,” Mr Zammit said, referring to the profit of €223,000 announced for year ending December 2014, after accumulated losses of €18.6 million in the past four years, “we managed to achieve what the board thought would take two years.”

Prof. Catalfamo brings various factors with him beside deep pockets. A finance professor at the Villanova School of Business, the prestigious university in Philadelphia, he already owns several companies and has extensive contacts built up over his three decades in the sector, as well as the courage to call a spade a spade.

It was very reassuring for the team of 55 that many of the things within Global Capital he identified as being wrong were already being tackled by Mr Zammit.

One of them was the €20.4 million property portfolio, which included a multimillion euro baronial castle in Collalto Sabino outside Rome, and property in Croatia, both of which are still up for sale, four units in Bulgaria which had been sold, and a small place in Barcelona.

The 15-bedroom castle is unique – meaning it is not easy to sell – so Global Capital is now looking at ways to monetise its

potential, perhaps by renting it to a management company that already handles similar properties.

“Perhaps at the time that Global Capital bought it, they wanted to diversify but certainly now, with the EU directives on insurance, property investment would be precluded. So, what can we do with it? It could be run as a small hotel, offering a mediaeval experience,” Prof. Catalfamo shrugged.

“The intention was to use it for events like weddings and conferences but the market is very limited as the place is so big!”

Global Capital also had properties in seven sites in Malta, and although these are all rented

“Property is not our core business and it is not something that we have a background in.

We are scaling down and we will sell whenever we find the right price”

out and provide income, Prof.

Catalfamo believes that this is a right time to sell as the market is so buoyant.

“Property is not our core business and it is not something that we have a background in. We are scaling down and we will sell whenever we find the right price,” Mr Zammit added.

That leaves life and health insurance, and investments. The former are part of the British American legacy, which eventually led to a merger with Global Financial Services Group Plc in 2003.

Nevertheless, this and investments are likely to be the main revenue streams, and it will now be up to the new board to decide on the way forward – most likely by offering these services overseas using passporting rights.

“We will create new products to be offered through a new company with the appropriate licence, and offer individual account management and management of unit-linked policies – under the umbrella of the life insurance company, so there will be more integration,” Prof. Catalfamo explained.

“The timing is right. Clients are wary of being associated with Switzerland as the implication is that they want to evade or avoid taxes. Some of them are going to Dubai – but since this is not regulated, Malta is becoming the new ‘place to be’. And very quickly.”

Does that mean he will also try to get a banking licence, long a dream for Global Capital?

“In my experience, everyone wants to own ships and banks.

It is the fantasy of every entrepreneur. For the moment we will concentrate on what we are doing.”

Insurers seek more efficient motor claims The Malta Insurers’ Association is close to reaching an agreement with stakeholders which will help to raise the standards of motor repairs after accidents.

This is not the first attempt to find a solution: 10 years ago, the Malta Standards Authority had already tried to do so at the behest of the GRTU and the MIA. At the time, the intention was to set up an accreditation system for the repairers, classifying them into five categories depending on the complexity of the work. The intention was to make the system voluntary for the roughly 300 repairers at that time. Training had been provided and progress had been made but MIA president Julian Mamo admitted that what there was today was “a very watered-down version” of what the association wants.

The association has again engaged consultants to consider the interests of all the stakeholders, starting off with the surveyors and insurers, then extending the process to repairers and sprayers.

“We want to reach consensus with repairers, insurers and the insuring public to have repairers that are committed and willing to invest in their infrastructure. In this way standards will be uniformly high, which benefits the end user and the insurers. We do not want botch jobs or shoddy repairs getting back on the roads where they could possibly cause more accidents.

“We have to find a way to make it economically viable for this investment to happen. We are committed to raising the game and improving the quality as we feel this will more efficient in terms of not only timing but also cost.

“The whole thing needs to be sharpened up but we cannot do it on our own. I can confirm that a lot of progress has been made and we hope to have the framework ready in the coming weeks.”

There were just under 14,500 traffic accidents in 2014, with €66.6 million paid in motor insurance premiums and €43.8 million paid out in claims.

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INDUSTRY FOCUS

Taking logistics at face value… added Logistics seems to be the buzz word at the moment. Conference workshops dedicated to it always seem to be the most dynamic, with a variety of stakeholders putting forward complaints about past limitations, updates on present opportunities and ideas for the future.

Warehousing and storage has until now been largely linked to the oil and gas industries, thanks to our geographical location, the Freeport and more recently Medserv. However, the government has already started to promote Malta as a hub for ‘third party logistics’, and has been promising legislative changes for some months, with a number of proposals on the table, ranging from the creation of free trade zones to the inclusion of logistics as a qualifying activity for incentives.

But it is clear that the sectors involved are not waiting idly by.

They clearly believe that logistics can provide an exciting new range of activities and that it is never too soon to start working on the infrastructure this will require.

Arrow Express, for example, recently invested in new premises which it describes as an “e-fulfilment centre”, basically a logistics centre catering mainly for businesses involved in e-commerce.

Managing director Nikki Zammit explained that the company spent some time looking for the right location which had sufficient space to house offices as well as warehousing under one roof. Like many of those involved in logistics, he is quick to dispel the impression that warehousing is just somewhere to store clients’ goods, he explained.

“The value-added that we can offer clients as a company are complementary to our freight forwarding, express courier services and domestic distribution/delivery activities. Such value-added activities could relate to ‘pick, pack and dispatch’ activities among others. As an example, a client who would have his stock in storage on our premises would be

able to send us his sale orders periodically as required. We would pick the ordered items, pack them according to the sales order and then dispatch each order individually both locally and overseas as required and directed by our client. We would also be in a position to provide clients with reports for any stock held on an ongoing basis, while also providing the service of periodical physical stock takes as required.”

The creation of additional free trade zones, announced as part of the maritime policy, would complement the Freeport. Peter Bonavia, the general manager at Carmelo Caruana Co. Ltd, believes they would offer a number of benefits to traders.

“The economic benefits include the deferral of customs duties and tax for items imported from outside the EU and operational benefits such as the possibility of having indefinite customs taxexempt storage opportunities.

“Other benefits include the consolidation of items transported from various countries from the EU and third countries, the application of value-added services and the redistribution to regional countries which are non-EU,” he said.

Like Mr Zammit, Mr Bonavia sees value-added services as going well beyond storage, suggesting that this could include product labelling, packaging, assembly and kitting for products in transit.

For freight companies, hubbing solves one of the fundamental problems of operating in a country which has far more imports than exports: the empty return leg to suppliers in Europe.

Franco Azzopardi, the chairman and chief executive of Express Trailers, said in an interview (see pages 12 and 13): “There are 101 things that could be done, from hubbing to re-processing and packaging. It would narrow the gap for us between import and export, as the products would almost certainly be sent to mainland Europe by Ro-Ro and then road freight,” he explained.

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INDUSTRY FOCUS/NEWS

Mr Azzopardi also raised a few red flags, including the need for more space at Ħal-Far and rising port fees – including a charge for containers filled with empty pallets. The topic of port fees, however, is complex and Joe Gerada, the managing director at Thomas Smith, has spent long enough in the industry to be wary of the blanket statements that crop up regularly in the media.

“Port fees are a wide term and such statements should be more specific. Which port fees are going up? By how much have they done so over the last 10 years? How does that compare with other costs that have gone up which affect our competitiveness? In principle all costs effect our competitiveness,” he said.

“Costs are usually our suppliers’ selling prices, and those are determined by supply and demand.

The larger the number of suppliers, i.e. the more competition there is, the more prices will trim themselves. Shipping services are supplied in a market of quite fierce competition and port fees are also partially determined by this.

“Market trends point towards increased online shopping, not only of small items but also bulky and heavy items such as furniture” “I would, however, also invite anyone who wishes to check if there are any components in port costs that are not influenced by supply and demand, but are a result of old port practices. This is a very old subject and having worked in shipping in Malta for so many years, I no longer have any aspirations that this part will change. All involved know the age old story,” he shrugged.

In the meantime, amid of all this talk of Malta being a hub,

another logistics operator is creating its own network of hubs around the world to cater for freight coming to Malta.

Following the success of hubs in the UK and the US, Maltapost launched new hubs in Germany, the UK and another one in Italy which will be functional in the coming weeks.

Mark Vella, Maltapost’s chief commercial officer, said that the company’s new hubs in Germany and the UK were geared up to truck heavy items – within specified dimensions.

“Market trends point towards increased online shopping, not only of small items but also bulky and heavy items such as furniture. Besides handling the delivery of items from the EU and the US, Maltapost also handles the last mile delivery: to the clients’ address of choice or preferred Post Office.

“This is one of Maltapost’s competitive edges as it collects and delivers from and to every address on the islands, six-daysa-week and operates through a comprehensive retail network of outlets,” he said.

WAREHOUSING AND STORAGE HAS UNTIL NOW BEEN LARGELY LINKED TO THE OIL AND GAS INDUSTRIES, BUT THERE ARE PLANS TO WIDEN OUT.

Malta leads in gas emission increase Most EU member states managed to reduce their greenhouse gas emissions between 1990 and 2012 – but there were exceptions, with Malta leading the carbon dioxide guzzlers, with an increase of 56.9 per cent.

Taken across the EU, Eurostat reported yesterday that the average was a decrease of 17.9 per cent but eight countries saw increases, many of the others being member states whose economies were under pressure: Cyprus, Spain, Portugal, Ireland, Greece, Austria and Slovenia.

The EU is now confident that it can cut greenhouse gas emissions by 20 per cent by 2020, and has set itself a target of 40 per cent reductions by 2030.

Twenty member states have already reached their 2020 energy consumption targets, aiming to bring consumption back to the levels of the 1990s.

Malta fared better in this context, managing to bring its consumption down by 20 per cent.

However, it was also at the bottom end of the rankings for renewable energy. All member states have been improving the percentage of energy derived from renewable energy but while 13 member states managed to double it over the last 10 years, Malta still only got 3.8 per cent in 2013, the second lowest. Malta’s target is to reach 10 per cent of energy from renewable sources by 2020.

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INTERVIEW

Profits amid controversy In spite of rising regulatory and compliance costs and impairment provisions of €32.7 million, Bank of Valletta managed to announce a record pre-tax profit for 2014/15 of €117.9 million.

Chairman JOHN CASSAR WHITE nevertheless told VANESSA MACDONALD that future expectations should be realistic.

BOV has been in the headlines far too often over the past years, for its Electrogas involvement, the golden handshake to Michael Falzon, House of the Four Winds, and even bonus payments. Is all this controversy good for a bank of systemic importance?

Not at all. However, I think the controversy was built on false assumptions. Unfortunately for the bank, it is hard to respond because there are often professional secrecy considerations and we are not free to discuss customers’ or employees’ matters.

What I can tell you is that the regulators are not worried about these issues, and whenever we meet them we speak about things which are far more important and which deserve to be discussed more openly.

So the regulators have not called you in to discuss any of these issues?

No. Not at all.

Last year when we spoke, the Asset Quality Review of the European Central Bank (ECB) had been completed, but it was at that time too early to say what changes would be needed. Could you update us?

The AQR and the stress tests were the beginning of what is called the Single Supervisory Mechanism.

As of November last year we fall under the jurisdiction of the ECB and the Malta Financial Services Authority (MFSA).

There have been major changes.

The first was that we had to slim down the executive team to a more reasonable level. We had a recommendation from our consultants on this matter which we discussed with our regulators – this was in the interim period before the Joint Supervisory Team came into force – and they agreed.

There was also much more emphasis on risk management, a broad spectrum of activities that hits many areas.

On the credit side we were advised to be more prudent with our provisioning policy, and are therefore adopting much more prudent rules to provide for loans that do not perform well.

Another change, which has generated a lot of controversy, affects the selection of directors. In the past, the regulators always had the prerogative of refusing candidates to serve on the board – although in the case of BOV, I believe this happened only once many years ago.

Today we have been told it will not be at all unusual for candidates not to be approved.

How many were refused? We know about George Portanier because he went to court to fight it …

Two failed the bank’s suitability test, but that is only the first step.

There are still two other steps: the MFSA and the Joint Supervisory Team (JST).

CHAIRMAN JOHN CASSAR WHITE ANNOUNCING THE BANK’S RESULTS. PHOTO: CHRIS SANT FOURNIER

Isn’t it extraordinary that someone who has been a director for decades should be deemed ‘unsuitable’?

Speaking in general and not about any particular director, I don’t think the length of service means that you are suitable as a director. In some cases it might actually be a disadvantage because the importance of fresh ideas is being highlighted at all levels of the bank. You become a victim of ‘group think’ when people work together for too long and don’t contradict each other as they want to co-exist peacefully.

You reduced the number of chief officers from 11 to four, effectively putting the old executive team into third tier.

That is quite a lot of upheaval – and it will not help if a new CEO is appointed.

Even the CEO has to be approved by the JST. I cannot just pick someone unless they pass the solid criteria embedded in the European Banking Authority’s regulations and guidelines.

It is the duty of the board of directors to ensure that an executive team is in place which they believe can lead the bank forward. Of course, there is subjectivity in this.

We have to shoulder this responsibility very carefully. We were advised, both by our consultants and our regulators, that the board should be more vigilant and intrusive in the way that it challenges decisions taken by the executive team, and should also look at the business model. For too long the bank has adopted a

model which was ‘more of the same’. We are realising that this is not necessarily the way ahead. We are going to look at areas where we see growth which carries a manageable risk.

I found it interesting to see the chief risk officer’s office here at House of Four Winds …

There are two reasons. He is the link with the regulators and we are in touch with them virtually on a daily basis. So logistically it makes sense as he can provide the information they require – often at very short deadlines.

He also attends every board meeting, together with the chief operating officer and the chief executive officer.

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INTERVIEW

One of the things to emerge from the AQR was that you were underprovisioned by €16 million in corporate lending. This year your impairment provisions went up by €13.3 million to €32.7 million. Is there a connection between the two?

Not necessarily. The AQR and stress tests showed we were underprovisioned in one area but overprovisioned in another, but we could not set off one against the other.

What you see this year is mainly accounting provisions, not prudential ones. We also have to make the latter – for example, if we see a geopolitical risk that could affect our balance sheet, even if it is not linked to a particular account or accounts.

The tendency is to be more granular and to look at specific accounts.

Most of the time we are talking about facilities that were granted 10 or 15 years ago.

Shouldn’t most of them have been paid off by now?

We have some long-term investments like hotels and so on. Usually we lend short-to-medium-term but there is rolling over, which we should be careful of. It is good practice – except when you do so to kick the can further down the road so someone else can deal with it at some other time!

Your dividends have been going down from 33 per cent of profits to 27.7 per cent and this year even lower. You said that even 25 per cent might be too high in future … Where do you see it levelling off?

I cannot say. In the short term there will not be any big earthquakes in the bank’s income and profits. However, it is difficult to predict profitability in the medium term as regulation is becoming such an important feature.

Before we recommend a dividend, we have to discuss it with the regulators and I can tell you that they are being very tough on the distribution of profits. We can issue scrip dividends, converting reserves into shares that people can sell.

As you know we are going to increase our capital, so distributing dividends can go against this principle. This year we reached a compromise for both the interim and

final dividends, balancing what shareholders expect as a reward for their investment in the bank and what regulation allows us to do.

The record profits will definitely add more fuel to the recent reports by the MFSA and the Malta Competition and Consumer Affairs Authority that banks could do more, both with regard to retail services like EPOS and ATMs, and to SME lending. Can’t you afford to be more generous?

This argument is going on throughout the EU; and electronic payments are coming under the increasing scrutiny of regulators.

If the European Commission decides that banks should be charging less for the services they charge, mainly for point-of-sale terminals, then obviously we will comply with any directives.

The big disadvantage for us as a small bank is that the amount of information technology investment you need to make to support such a small customer base means our margins are much narrower than those of bigger banks.

I tend to disagree with the regulators when it comes to the risk premium that banks should charge – and I don’t think any of them would ever attempt to intervene!

It is the primary responsibility of a bank director and the board itself to manage risk – which also implies pricing that risk.

It is not true, as has been implied, that there is no competition in lending. Quite the contrary. The margins on lending have been going down in real terms, because of competition. We fight to the last cent to keep our clients!

We are, of course, not interested in taking on clients who are not credit-worthy. I have made it very clear that companies in Malta are under-capitalised, which means that banks are expected to take on more risk than is normal in other countries. Malta ranks among the top countries when it comes to bank borrowing as a percentage of GDP. This means some businesses do not plough extra cash into their business but use it to buy property, as they believe that it will give them a better return.

“We will have to pull out of business lines which are not profitable – and there are one or two which we are considering”

We are doing our best to provide finance to SMEs, but we are not here to provide venture capital.

Interest rates are still 1.2 percentage points above eurozone banks – and Maltese banks are the profitable ones! Aren’t you the local bank that boasts the slogan “Your success is our goal”? You are only doing what you are being forced to do ...

I beg to differ. I don’t think there is anything wrong with a bank making money and making good profits, as that is how you survive when there is a rainy day.

The test was in 2007/08 when no local bank needed rescue by taxpayers. That is because we were prudent and because we had enough reserves to deal with provisioning.

Banks are likely to become less profitable because regulation is making us increase capital and increase provisions, so we will have to pull out of business lines which are not profitable – and there are one or two which we are considering. We have to be very careful.

The bank will be spending a considerable amount on IT in the coming two to three years to make up for the ‘benevolent neglect’ of the past 15 years. I don’t understand. The bank has been boasting about being at the forefront of technology with internet and mobile banking, Visa security systems and so on.

We have a very good internet banking system. What we are talking about is the core banking system, which is the heart and soul of

what we do. Like many other banks, over a period of time the bank lost its connectivity. We have changed so many different systems that they no longer speak to one another – which brings with it a lot of risk.

Our last banking system was bought in 2000. Fifteen years is a long time in IT! I called it ‘benevolent neglect’ because I do not think anyone deliberately tried to save money by not investing in IT. I am not referring to that at all. What I think has happened is that people took IT for granted and underestimated its complexity.

Our regulators were worried about the systems and we have given the go-ahead for a replacement. We have shortlisted two companies out of six bids and are in the final stages of the adjudication.

We have not yet got a definite figure on what it will cost, but that is not what worries me: it is the upheaval that it will cause – including training of staff, testing and so on.

The Opposition said that the change of House of Four Winds’ contract from rental to lease is against the law. What happens now?

I don’t want to enter into political arguments. If any regulatory authority decides that the lease is not legal, then we will abide by whatever decision is taken.

We wanted to protect our multimillion-euro investment in this building as it would have been written off over 26 years.

I think the original contract was not ideal. This board was not the one that decided to take House of Four Winds. I would have preferred to build a state-of-the-art training centre … I have no emotional attachment to this place.

Are you going for another term as chairman?

The names of all the present directors and the two additional candidates – including the overnment’s nominees – have been submitted to the regulators. It is up to them to decide who is ‘fit and proper’ to hold the positions.

But your name is on the list?

Yes. It is.

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CASE STUDY

Space at Ħal Far groupage needs to double The amount of groupage freight has increased five-fold since the Ħal Far groupage depot was opened a few decades ago – and it has long outgrown the space allocated to it. The chairman and CEO of Express Trailers, Franco Azzopardi, said that the space for warehousing needs to at least double to cope with demand, warning that economic growth meant the pressure would intensify.

“Over the years there has been a massive shift from containerised freight towards trailer service by groupage, especially from Europe.

Importers have embraced the advantage of groupage as it is more efficient and sustainable to get smaller shipments,” he said.

Express Trailers has three warehouses at Ħal Far – more than any of its competitors – but still finds it hard to cope. And there is simply no space available for it to expand.

Adding more footprint is one option, but Mr Azzopardi believes that it is not the best solution.

“There is a police regulation dating to 1979, well before EU accession, that stipulates that all groupage has to go through Ħal Far. We can start off a debate about why groupage from Ro-Ro vessels has to follow this rule, but that which comes on the catamaran does not. I fail to understand why what is sauce for the goose is not sauce for the gander.

“I am not saying that groupage from the catamaran should go through the complex but that groupage from the Ro-Ro should not. The Ro-Ro lines that come to Malta are all from EU ports. There is the rare cargo in transit coming from non-EU countries like Russia, and I understand that that

would need to go through customs as it would be entering the EU via Malta. But in my view, the rest should not have to. Perhaps there are other reasons for it that I fail to see, but we should be clamouring to lift that regulation …

“We struggle to get everything out within two days of the vessel’s arrival. Clients who get their goods in smaller amounts – those who use ‘just in time’ production or who need spare parts – tend to need it more urgently than those who are filling warehouses with stock. So for many of our customers even a few days makes a big impact ... Not to mention the frustration of knowing that your shipment is in Malta but that you cannot access it!” he fumed.

He believes that Ħal Far would be more than adequate if the EU freight were exempted from having to go there – although this would also create a need for more warehousing outside the complex.

On this point, however, Mr Azzopardi was much more upbeat.

The amendment to the Business Promotion Act is currently at an advanced stage and should make logistics and warehousing a ‘qualifying activity’ for incentives – and the maritime policy recently published envisages the creation of new free trade zones.

“We have been talking about it for a number of years and it would be extremely positive if it actually happened. A free trade zone would be optimised if there were some form of added value or processing. For example, a meat exporter processing carcasses and exporting. There are 101 things that could be done, from hubbing to re-processing

“We can start off a debate about why groupage from Ro-Ro vessels has to follow this rule, but that which comes on the catamaran does not” and packaging. It would narrow the gap for us between import and export, as the products would almost certainly be sent to mainland Europe by Ro-Ro and then road freight,” he explained.

The greatest challenge for freight companies is that they are full on the way to Malta but empty going back, a cost that has to be absorbed by importers.

“A free trade zone would create a better balance in terms of outbound trips for us.”

But Mr Azzopardi’s face clouded over yet again as he thought about the impact of this growth on Express Trailers.

“It means that we would make more investment but unfortunately we do not qualify for any investment tax credits. In my view

we are being handicapped. Express Trailers has around €7 million worth of vehicles and trailers on the road – but whereas a manufacturing company, for example, would get years of tax exemptions, every euro we earn is taxable.

“I fail to understand why the manufacturer is a qualifying company but the supply chain is not! How would a manufacturing company survive without logistical support?”

Talk of the outbound trailers going back to Europe empty sparked yet another controversial issue: the transportation of pallets back to suppliers.

Trailers delivering the pallets back to the original suppliers were until now considered to be “empty” but Valletta Gateway Ter-

minals has decided that they will be considered to be a “full load” and the former €33 charge would therefore go up to €250.

And Mr Azzopardi fears that the shipping companies would take the cue from VGT and also charge for a full trailer, which means their charge would go up from €500 to €1,000.

“So instead of €530, the charges could be as much as €1,250!

We cannot understand why VGT did this as it makes no difference to them whether a trailer is empty or full of pallets. These cost €5-7 each and suppliers who do not get them back charge for them. These charges have to be force-fed down the value chain somehow, and they just make us less competitive!”

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CASE STUDY

Discussions on this new charge are still going on with the constituted bodies, and Mr Azzopardi is crossing his fingers that they will be able to fight this.

But he is also sceptical as he feels that once an issue gets this far without consultation with stakeholders, it is much harder to get right.

Another example of this was a draft legal notice issued when talk about traffic mitigation measures were at their peak some weeks ago. The authorities are proposing to ban heavy traffic from a long list of roads between 7am and 9am, and between 4pm and 6pm on workdays, a move which the Chamber of Commerce, Enterprise and Industry is fighting tooth and nail.

“I always worry when something gets this far without proper consultation. We happened to get a copy of the draft from a client, but we really should have heard about it through the Association for Truck and Trailer Operators.

They were very obviously not consulted as the draft legal notice does not even make sense!” he said, shaking his head.

“The draft says that ‘No motor tractor (including agricultural tractor) and no motor

“New charges have to be force-fed down the value chain somehow, and they just make us less competitive” DIVERSIFICATION: EXPRESS TRAILERS HAS WON A CONTRACT TO REBUILD SIDE-LOADERS FOR SWEDISH COMPANY HAMMAR.

IN A NUTSHELL Express Trailer’s turnover is €27 million a year. It employs 190 people and operates 151 tractor units and vehicles, and 283 trailers and containers. The family-owned company is now in the third generation and recently appointed a second non-family independent director, Frederick Micallef. The board was reduced from nine to seven, with two non-family directors, three family ones with executive management roles and two without management involvement. vehicle with trailer (except such motor vehicles drawing empty trailers and/or trailers carrying containers) may be used on any road listed in the second schedule’.

Does this mean that only tractor units without a trailer cannot circulate during such time but that all other kinds of commer-

cial vehicles (without a loaded trailer) will? What is meant by ‘motor vehicle with trailer’? Is there any threshold on the length/weight or type of motor vehicle that will be subject to this new regulation? Will a tractor unit with a semi-trailer (which is identical to a trailer carrying container) be allowed

to circulate irrespective if full or empty?” he asked.

To accommodate the same amount of work, the sector would either have to work outside normal hours – with all the overtime and costs that might entail – or squeeze it into fewer hours, which would merely transfer the traffic congestion to other times.

“Or else we would need more resources to make the same number of deliveries in fewer hours!

And who will pay for that investment?” he said, once again pointing out that freight companies do not qualify for tax incentives.

“I don’t believe that it will go through, but my concern is how the ministry comes up with something like this without consulting the stakeholders, including ATTO!” In spite of all these challenging issues, this is a good time for Express Trailers. They are one of the very few official rebuilders for Swedish company Hammar, which makes flatbeds with cranes to side load containers.

“We have won their trust, particularly thanks to our key mechanic, Noel Vella, who is also the head of maintenance and fleet management. He has done all the courses with them and even went to Vietnam to help them with a project there.

“We completely refurbish and recondition the flat beds and add the cranes, ready for export. We anticipate doing around six a year and are talking to Malta Enterprise about getting help.”

He smiles wryly.

“Well, at least for this we are a qualifying activity!”

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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

Human side of unemployment When asked how those struck off the unemployment register would make ends meet without social benefits, the chairman of the Employment and Training Corporation Clyde Caruana was not sentimental: “That is their problem.”

His stance is not as hard-hearted as it might seem. He is convinced that those being struck off are benefit abusers, who have no real intention of finding a job. The ETC has been clamping down – and one of the ways to do this was to look at who actually turns up to sign the register: failure to do so is a not-so-subtle clue that the person is “busy” elsewhere.

According to a recent Parliamentary Question, 1,079 people were struck off the register because they did not turn up to sign in time, without giving sufficient reason. Some whined that they were stuck on a bus, which failed to strike any chord of sympathy: the ETC is unlikely to have pounced on the basis of a single half-hour delay.

The government is serious about cutting abuse – half of those claiming unemployment in summer 2014 have been struck off the register – and it has claimed to be saving public coffers almost €3 million every year.

This is €3 million which was going into the pockets of those who are cheating the system, part of which is now being far better spent on schemes to help those who genuinely want a job.

The figures bear this out: Part II of the ETC unemployment register includes workers who have been dismissed from work due to disciplinary action, who left work out of their own free will, who refused work or training opportunities or were struck off the register after an inspection by law enforcement personnel.

These increased only marginally, from 498 in 2013, to 511 in September 2015. What does this imply? Clearly, those struck off are

not turning up again in any hurry – which strengthens the belief that they were doing undeclared work and that they were therefore not relying on benefits to survive.

Of the 4,924 registered unemployed, 4,413 of these were on Part I – such as school-leavers, re-entrants or those made redundant (the numbers in 2014 were 6,599 and 6,120 respectively). That means around 1,600 have found jobs.

Abusive registrants are only part of the story. Almost a quarter of those registering for work are under 30 – Mr Caruana’s age. How worrying that our educational system is churning out so many young people who lose hope (if they ever had any to start with) of finding a proper job! The ETC has set up a mandatory training scheme for youths, to which 560 signed up. Mr Caruana was realistic: if 40 per cent get a job as a result, that would be a victory.

As a result of economic growth, job creation and abuse clampdown, our unemployment rate, according to Eurostat, is 5.1 per cent, compared with the EU average of 10.8 per cent.

We currently lie third from the top, only behind Germany and Czech, and a far, far cry from Greece’s 25 per cent rate and Spain’s 21.6 per cent.

These are not just numbers. There is a human cost to being unemployed. Gallup research last year showed that about one in five Americans who have been unemployed for a year or more are depressed – almost double the rate among those who have been unemployed for five weeks or less. Individuals suffer, households suffer, society suffers.

Culling the unemployment abusers and putting the money saved on benefits to better use is one approach. But understanding why so many end up “unemployable” is just as important.

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BUSINESS OPINION

Fin Tech: an alternative for Malta

Karl Mercieca and Chris Meilak

Until quite recently, new types of alternative finance were frowned upon by many. “A tiny niche”, “a short-lived fad with lots of misplaced enthusiasm”, they said.

The tide, however, appears to be turning. Research by Cambridge University and EY clearly indicates that the exponential growth of this sector is beginning to attract institutional investors and many European governments, as well as spawning a spate of related innovations. The Economist is speaking of a “Fin Tech revolution”.

Financial technology (Fin Tech) originally referred to peerto-peer lending, crowd-funding and online or mobile payment.

Now associated there’s much more under its umbrella, combining data and algorithms to automate wealth management, online foreign exchange and remittances, cryptocurrencies and the blockchain, mobile finance and invoice trading.

The European alternative finance market (including the UK) as a whole grew by 144 per cent in 2014, reaching €3bn. Angel List lists

“Research clearly indicates that the exponential growth of this sector is beginning to attract institutional investors and many European governments, as well as spawning a spate of related innovations” around 4,000 Fin Tech start-ups.

A number of European countries have been quick to respond to this opportunity.

In 2014, the UK Financial Conduct Authority set up an Innovation Hub, tasked with fostering “useful innovation in financial services”. The Swiss Financial

Market Supervisory Authority has just authorised a Bitcoin stock exchange. The Fintech and Payments Association is teaming up with government to implement Ireland’s International Financial Services Strategy. And Guernsey has just published its Fin Tech strategy.

In Malta we do have some examples of companies offering e-money and payment gateway services. But Malta could aim to be a key player and strengthen its regulatory regime. One may argue that a number of aspects are already covered by existing regulation. But if

we are to compete, we need to fulfil the expectations of people in the industry and rethink the regulatory regime.

There may be a small time window in which to offer an alternative regime. And Fin Tech should be seen as complementing Malta’s existing financial services institutions and tapping skills available in the local gaming industry; it will not be a substitute.

If we are serious about this, we need to think and act quickly before it is too late. We need a national champion of this new sector from the political side and another national champion from the regulatory/technical side.

Needless to say, consensus from both parties is essential and our political history has shown that when there is a strong-enough will, it is doable. The private sector and key private practitioners also have a role to play, for instance, through the participation in consultative fora (possible through existing structures such as Finance Malta).

It is therefore with great anticipation that we keep an eye out on the local market for indications of a thrust towards this new sector. It is critical that the relevant authorities act swiftly and seize the moment to ensure that we manage to grab a piece of the action in this innovative market.

Karl Mercieca leads the Asset Management Advisory Services at EY Malta while Chris Meilak is an economist within EY Malta’s Economic Advisory sub-service line.

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ANALYSIS

Can UN climate talks catch up with the real world?

Megan Rowling While companies and citizens find ways to cope with climate change on the ground and push governments to swap fossil fuels for clean energy, officials negotiating a UN deal to curb global warming often appear stuck in a time warp, experts say.

At final talks before a Paris summit at the end of the month due to agree the new deal, South Africa’s top climate diplomat Nozipho Mxakato-Diseko told journalists climate change was a day-to-day reality for developing states and “a matter of life or death” for some.

Yet the discussions in Bonn seemed far off dealing with the impacts of worsening extreme weather and rising seas as an urgent threat, tripping up over procedural rows and the precise wording of a 51-page draft text to be taken to Paris.

Mxakato-Diseko, who chairs a key group of 134 developing states at the climate talks, insisted success in Paris would hinge on industrialised countries committing more public money to help poorer nations adapt to growing climate stresses and adopt renewable energy. But some climate change experts and developed-country negotiators see this as an old-fashioned view of the world.

Insisting that rich governments alone pay to fix the consequences of their historically high carbon pollution symbolises what a European Union official described as “very

TURBINES BEHIND ROWS OF SOLAR PANELS IN AVIGNONET-LAURAGAIS, FRANCE. PHOTO: FRED LANCELOT/REUTERS

“e new agreement must reflect today’s reality” rigid and somewhat outdated rhetoric”, dividing the world according to income levels in the early 1990s, when the bedrock UN convention on climate change was crafted.

“To be effective, the new agreement must reflect today’s reality and evolve as the world does,” said Elina Bardram, head of the European Commission team, at the October talks in Bonn.

That reality, experts say, means recognising that all countries, rich and poor, need to play a part in curbing planet-warming emissions

by moving away from dirty energy sources and protecting their people from climate change impacts.

With China now the world’s top emitter of greenhouse gases, and India fourth after the United States and the European Union, efforts by major emerging economies to develop in a greener way are a centrepiece of the new accord now being stitched together.

Whatever is agreed at the Paris conference starting on November 30, the six-year process leading up to it has resulted in 155

governments submitting national climate action plans for the coming decades, including 114 developing countries. That in itself is a huge achievement, analysts say.

“The world has changed significantly, and Paris will be a recognition of that,” said Saleemul Huq, director of the Dhaka-based International Centre for Climate Change and Development (ICCCAD).

Developing nations have made a big concession by putting forward plans to use more solar, wind and water power and to conserve forests, but there is a limit to how far they can shoulder more of the burden of curbing climate change, he added.

An analysis of the national climate action plans, released last week by the UN climate change secretariat, found that a quarter of the emissions reductions pledged are conditional on receiving financial and technical support to make them happen.

Meanwhile, expertise in preventing floods or building solar power systems is increasingly being shared across borders in the southern hemisphere, as well as between the north and south, along with funding to put those ideas into practice.

Until wealthy governments clarify how they will make good on a promise to mobilise $100 billion a year in climate change funding for vulnerable nations by 2020, the G77 and China group of developing countries is expected to continue using finance as a bargaining chip at the UN talks. (Reuters)

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STOCK MARKET REVIEW

BOV warns of challenging times ahead

Edward Rizzo Last Friday afternoon, BOV announced pre-tax profits of €117.9 million during the 2014/15 financial year which came to an end on September 30, 2015. This is a record performance and represents an increase of 13 per cent over the pre-tax profits generated in the 2013/14 financial year. It is also €2.1 million higher than the previous record of €115.8 million in the 12 months to September 30, 2013.

A deeper analysis of the financial statements is necessary to understand the trends across the main business segments. Core profits of the BOV Group improved by 4 per cent (€3.4 million) to €91.3 million.The bank registered strong double-digit growth in both net interest income as well as net commission and trading income.

Despite the low interest rate environment, net interest income grew to €144.8 million (the highest level since the record of €147.8 million in 2012). BOV benefited from the reduction in interest payable as customers continued to opt for shorter term deposits despite the minimal rate of interest.

Net commission and trading income improved by 17 per cent to €87.3 million with the bank reporting a strong performance across all business lines, including investment-related services, credit cards and foreign exchange activities.

The double-digit growth in income was sufficient to offset the increase in operational costs and the large rise in impairments. Operating costs rose by 16 per cent to €108 million on the back of the new regulatory environment, the increased contributions towards the Deposit Guarantee Scheme and the Single Resolution Fund as well as the

A larger capital base will make it harder for the bank to continue to register double-digit returns on equity higher costs in human resources and IT. The pressure on costs is not likely to abate in view of the stiff regulatory environment, the necessary investment in IT infrastructure and human resources as well as the collective agreement that ought to come into force in the near term.

Moreover, BOV revised the methodology towards its provisioning policy following the Asset Quality Review and the stress tests carried out by the European Central Bank (ECB) last year. The individual assessment of the loan exposures that are deemed to have higher specific risks resulted in an overall impairment charge of €32.7 million, a significant increase of €13.3 million over the impairments recognised in the previous financial year.

The BOV Group’s financial performance was boosted by the positive conditions across the financial markets, mainly the bond market.

Fair value movements including the

profit on sale of Malta Government Stocks arising from BOV’s participation in the quantitative easing programme amounted to €14.8 million, an increase of €5.8 million or 64 per cent over last year.

The buoyant performance of the bond market also positively impacted the share of profits from the insurance associate companies. In fact, the contribution from MSV Life plc and Mapfre Middlesea plc improved by €4.6 million to €11.8 million.

While the record profit figure is partly due to the robust performance across the bond markets, some other financial indicators continue to point towards the strong fundamentals of the BOV Group. The improvement in the cost-to-income ratio to 41.8 per cent and the post-tax return on equity of 12.4 per cent are strong indicators by international standards. Most banks across the eurozone do not

manage to operate with such a good cost efficiency ratio and few institutions manage to generate a doubledigit return on equity.

On the other hand, the drop in the loan-to-deposit ratio to 47 per cent is a matter of concern. Although this shows the very high levels of liquidity and the trust placed by many depositors, it presents serious challenges to the bank when managing such levels of liquidity during a period of historically low interest rates – including negative rates for banks placing overnight deposits with the ECB. In fact, BOV’s chairman John Cassar White and chief financial officer Elvia George both warned about the challenging times ahead. In his address to the financial community last Friday afternoon, Mr Cassar White repeatedly highlighted the very big changes that are occurring across the European banking industry following

the new regulatory regime as from November 2014.

In respect to the continued decline in the loan-to-deposit ratio following the extraordinary €1.4 billion increase in deposits and the relatively weak loan growth, the chairman also hinted at the possibility of introducing high charges for customers for handling deposits as well as negative interest rates to discourage further growth in the deposit base.

Mr Cassar White also laid out a number of issues that need to be addressed by BOV as a result of the new regulatory landscape. The top priority relates to the bank’s capital requirements. He explained that so far BOV had adequate levels of capital in terms of Tier 1 and Tier 2, but this will change in the coming years.

By way of example, the chairman noted that in 2016 capital must also be set aside for the growing custody business. CEO Charles Borg noted that the €150 million subordinated bond programme, which forms part of Tier 2 capital, will be completed by early next year and this will be followed by an increase in the equity base (Tier 1). Mr Borg indicated

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STOCK MARKET REVIEW

that the bank wished to complete this equity issuance well in advance of new capital requirements coming into force in January 2018.

The news of the bank’s plans to raise additional equity is consistent with the messages from both BOV’s chairman and CEO in recent years.

They had both talked about the possibility of a rights issue for the past two years. Last Friday’s revelation of the more urgent need to raise fresh equity should not therefore be a major surprise to observers of local market developments.

Mr Borg maintained that a decision needs to be taken after giving due consideration to the appetite of the current shareholders, especially the larger ones. This may be rather delicate given the present shareholding structure with the government owning 25.23 per cent of the issued share capital and Italian bank Unicredit SpA, the second largest shareholder, with a stake of 14.55 per cent. The remaining 60.22 per cent is held by over 18,000 retail and institutional investors.

The chairman indicated that the upcoming increase in Tier 1 and Tier 2 capital will also have implications on the future dividend policy and overall profitability levels. A larger capital base will make it harder for the bank to continue to register double-digit returns on

equity. Moreover, Mr Cassar White acknowledged that the bank struggled to convince the regulators to allow them to maintain this year’s final dividend at the same level as the previous year.

Although the absolute dividend is unchanged from last year at €0.08 per share net of tax, the increase in profits naturally resulted in a further decline in the dividend payout ratio. A further reduction in

the payout ratio in the years ahead is therefore expected due to the need for additional equity to be retained by banks across Europe.

BOV’s chairman also hinted that future dividends may also take the form of scrip issues (as opposed to standard cash dividends) to encourage shareholders to retain capital within the bank.

The need for additional equity via a mix of a reduction in dividends as

well as rights issues or a new equity injection is evident across the European banking landscape.

Following the news of the upcoming capital raising exercise

by BOV, market participants and the bank’s wide shareholder base will be more attentive to announcements related to the method, the amount required and the timing of the Tier 1 equity plans.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results.

Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

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BUSINESS UPDATES

Why work at Frank Salt Real Estate?

Passport to Luxury: Introducing Chivas 12 ‘Made for Gentlemen’

by Globe-Trotter British luxury brands Chivas Regal and Globe-Trotter have partnered up to design and produce an exciting series of collectibles for the whisky connoisseur and world traveller – the Chivas 12 ‘Made for Gentlemen’ by Globe-Trotter limited edition gift tin, 20-inch carry-on cases and a madeon-request steamer trunk.

The limited edition gift tin houses a bottle of Chivas 12 blended Scotch whisky and showcases a vibrant tale of international travel. Inspired by the tradition of applying stickers onto one’s luggage to showcase destinations visited, bespoke luggage stickers were hand-drawn by the British illustrator Andrew Davidson to celebrate iconic cities and adorn the contemporary tin design.

The launch event took place on October 28 at Quarterdeck Bar, Hilton.

The evening, organised by Farsons Beverage Imports Company Ltd, was a great success and included a prize draw to win one of the limited edition Chivas 12 ‘Made for Gentlemen’ carry-on cases. Chivas cocktails were served throughout the night and included the signature Chivas-Globetrotter cocktail, ‘The Maximilian’, to commemorate the collaboration.

Frank Salt Real Estate is on a mission to double its workforce and promote a professional work ethic in the local real estate industry, as part of its five-year expansion plan.

Working in property provides an excellent opportunity to make good money, while meeting new people and allowing constant personal development. Frank Salt Real Estate offers a secure and professional working environment, backed by over 45 years of experience.

Thanks to our reputation for professionalism and trust, combined with our hands-on sales approach, we guarantee a constant flow of clients as well as the largest database of properties to showcase.

The sales and letting team at Frank Salt Real Estate is made up of people from all over the island and from many different fields,

all of whom have opted to take up this new challenge. Hailing from backgrounds in hospitality, the arts, legal professions and engineering, this great mix of characters and experiences makes the Frank Salt Real Estate team of property consultants the

company’s foremost asset and the best on the islands.

Those interested in finding out more about what Frank Salt Real Estate can offer them are invited to contact the HR Division on careers@franksalt.com.mt or on 2277 0000.

Taking the fear out of retirement Retiring is something most look forward to but dread at the same time. We look forward to the part where we can relax and enjoy our newfound freedom but we fear boredom and worry that our health will not sustain our independent lifestyle.

Hilltop Gardens in Naxxar, aimed at taking the fear out of retirement, will be opening its doors to residents later on this year and it will offer a choice of luxurious apartments and penthouses, spread over an area of 17,000sq metres of land.

Every apartment comes with an array of on-demand services such as help with domestic chores, assistance with shopping and maintenance, as well as other inhome care and tailor-made assistance that will help make long-term independent living easier.

The Hilltop Gardens Retirement Village will also have a state-of-the-art residential care home for those who have, or develop higher dependencies. Convalescence, rehabilitation and palliative care services will be provided by the multidisciplinary team of healthcare professionals within the Village. Moreover the care home, which offers short-term and long-term care, includes a

purposely-built dedicated Memory Support Unit for persons with dementia as well as physio-hydrotherapy pool and physiotherapy hall.

The home also includes a fitness centre, a library, a chapel, a restaurant, a billiard room, a multipurpose hall, an indoor and outdoor pool, a hairdressing salon, a 24-hour general practitioner, and many other services.

For more information you can visit www.hilltop retirementliving.com

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BUSINESS UPDATES

Evolve: First local lab equipment service provider to be awarded ISO 9001:2008 Management System Certificate Evolve Ltd is pleased to announce it has been awarded the ISO 9001:2008 Management System certificate by EuCI European Certification Institute for trading, installation and maintenance of medical and scientific equipment and spare parts. Continuing with its commitment to excellence, the company is the first and only service provider to have received this certification in the scientific and healthcare sector in Malta thus far.

ISO 9001:2008 certification is based on quality management principles to guide and govern all operations from top to bottom. The goal is to insure customers receive consistently high-quality products and services. Being ISO 9001:2008 certified means customers can be confident that Evolve is committed to quality and outstanding customer service.

“We are extremely proud of our team and their efforts to attain the ISO 9001:2008 certification” says Christopher Busuttil, Evolve’s

managing director. “It means that quality is not just an ideal, but a reality. All our policies and procedures document that; indeed our people show it in how they work and how they engage with our customers. This certification reflects our commitment to quality and our commitment to our customers. It is a rubber stamp for our efforts and modus operandi, not a goal per se’. ” EuCl director Andre’ Sant says: “We are pleased to acknowledge that Evolve has demonstrated effective implementation of the quality management system. ISO 9001:2008 certification provides evidence to customers, suppliers and employees of their commitment to producing a quality product and providing customer satisfaction.”

Evolve Ltd is a subsidiary of the Attard & Co Group of Companies and is the second company within the group to be awarded this certification.

Calvin Klein Jeans opens at e Point Calvin Klein Jeans will be opening its doors at The Point Shopping Mall tomorrow. As the latest brand to join Trilogy Ltd, the newest CKJ collection features timeless, modern classics in menswear, womenswear, underwear and accessories.

Calvin Klein Jeans is the casual expression of a modern designer lifestyle. It is rooted in denim and is famous for its unique details and innovative treatments, as well for its bold, sexy advertising campaigns. Calvin Klein Underwear is also the world’s leading designer underwear brand for men and women. It is known across the globe for its cutting-edge products and groundbreaking visuals, consistently delivering superior fit and quality.

Calvin Klein Jeans, The Point Level 0, Tigne Point, Sliema Opening hours: Mon - Sat 9.30am to 7.30pm (also open Sundays till end December) T: 2010 0713.