The Business Observer Newspaper, 3rd November 2016

INTERVIEW

Issue 63

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November 3, 2016

Distributed with Times of Malta

PM to intervene in looming correspondent bank crisis

Between Electrogas, BWSC and the interconnector, Enemalta chairman Fredrick Azzopardi has more sources for electricity than he could dream of.

But the oversupply of generated power poses its own problems. see pages 10 and 11 >

Vanessa Macdonald Prime Minister Joseph Muscat and Finance Minister Edward Scicluna are to go to the US in the coming weeks in an attempt to encourage banks there to offer correspondent banking services to local operators.

Speaking at the launch of the Malta Stock Exchange’s strategic plan for capital markets, Dr Muscat said they would be meeting top level representatives from various banks to ensure that the services now in force are not withdrawn.

Correspondent banks have been scaling back their services in an attempt to cut down on the huge compliance costs and risks resulting from their dealings with banks in other jurisdictions. However, in recent years, it became easier to prevent the chance of a misstep by severing services than to manage the risk of being inadvertently embroiled in money laundering or terrorist financing.

As a result, they have terminated business relationships with entire regions or classes of customers.

“This so-called ‘de-risking’ practice has negatively impacted correspondent banking.

De-risking is not in line with the Recommendations of the Financial Action Task Force and is a serious concern to the international community… De-risking can result in financial exclusion, less transparency and greater exposure to money laundering and terrorist financing risks,” the FATF stressed.

In June 2015, the FATF clarified the application of the risk-based approach to correspondent banking relationships but the financial sector sought further clarification on regulatory expectations. As a result, it clarified that correspondent financial institutions are not required to conduct customer due diligence “on each individual customer of their respondent institutions’ customers”.

The Prime Minister said that the government had been working on this problem for some months, with input from the Central Bank of Malta and the Malta Financial Services Authority.

NEWS If you listened to gossip, you would think property prices were inflated but a study by the Central Bank of Malta actually shows that they are, in fact, slightly undervalued. see page 3 >

INTERVIEW

“I know that this is not a headline-grabbing subject,” he said, “but I do know that it is crucial for the future of our economy. I want to reassure the sector that we are working on this at the political level.”

Bank of Valletta relies on a network of correspondent banks for its international transactions, one of which is Deutsche Bank. CEO Mario Mallia acknowledged that this problem was being felt worldwide but added that international organisations like the IMF and the Basel committee were concerned.

“International awareness of this problem is mounting and organisations are realising that regulation has to be realistic and proportional.

I know that there are moves to make regulation more equitable and I believe that the tide is turning…,” he said.

“Obviously, smaller countries get hit hardest as they do not generate enough volumes to

justify the increasing compliance costs. So countries like Malta are definitely at a disadvantage.

“However, we cannot be complacent. I talk to our correspondent banks regularly and they have no problems with Malta or with BOV. We are trying to diversify our sources and initiatives at the political level – this has to be done through the international regulatory bodies – can help a great deal.

“If Malta were to be cut out of the networks, it would be a huge problem! How else could you make payments or receive funds from abroad? But we are not even close to being at that stage. We are not in a situation where we are struggling to find correspondent banks. In fact, we were at the Sibos conference in Geneva in September where we made contact with a number of banks who are interested in establishing a correspondent relationship,” he reassured.

With profits being squeezed by lower risk-appetite, Bank of Valletta faces tough choices. CEO Mario Mallia explains the future strategy is based on quality not quantity. see page 5 >

NEWS e Comprehensive Economic and Trade Agreement between Canada and the EU has finally been signed.

But it is still too early to signal a thaw in popular opposition to trade agreements. see page 17 >

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NEWS

House prices slightly undervalued – CBM It may come as a surprise to those trying to get on to the housing ladder but a study has shown that as at 2015, house prices were not overvalued but rather slightly undervalued by around 2.5 per cent.

A Central Bank of Malta analysis by William Gatt and Owen Grech, using a variety of models and techniques, showed that house prices relative to income peaked in 2005 and, following a correction phase, reached a trough in 2012. The revival of the housing market since 2013 gradually closed the gap, bringing house prices close to equilibrium levels by the end of 2015.

Between 2000 and 2015, house prices nearly doubled, increasing by 2.6 per cent in real terms per annum, on average, although with significant fluctuations.

“The notable rise in house prices over time has led to growing concerns about the possible existence of a housing bubble, a situation where there is a misalignment between the market price of an asset and its underlying value as determined by economic fundamentals, making the property market prone to price corrections that generate adverse macroeconomic consequences,” the report explained.

Another key metric is the house price-to-income ratio, which tracks the affordability of property over time. The authors found that house prices were undervalued relative to income between the mid-1980s and the early 2000s, with the degree of misalignment narrowing gradually. This was followed by a period of overvaluation which peaked in 2005.

This equilibrium was gradually restored by 2009. Since then, house prices have been undervalued, although the trough was reached in 2012 and as at 2015 house prices stood close to their equilibrium value.

According to advertised prices, the market hit a peak in 2007, reflecting similar developments in many advanced economies but then hit a trough in 2009.

During this period, dwelling investment fell significantly to 3.5 per cent of GDP in 2010 – half that at the peak of the market. The report noted that investment continued to fall to a low of around 2.6 per cent of GDP by 2014, but has since picked up, mirroring the recent increases in activity and house prices.

Factors behind this recovery include the recent changes to the capital gains tax and tax on rental income, as well as the reduction of stamp duty paid by first-time buyers. These policies are believed to have boosted demand for property, mainly apartments and maisonettes. The current low interest rate environment may also have stimulated portfolio rebalancing, increasing demand for property as a higher yielding asset.

Estimates of house price misalignment 30%

The study also looked at the correlation between rents and house prices, particularly since the former have seen a cumulative increase of about 23 per cent since 2012. However, both house prices and rents have risen by roughly the same amount since 2006, suggesting that the recent increases in the latter were not out of line with fundamentals. They also forecast that rents would continue to go up: “It is expected that the large influx of foreign workers over the past few years, as well as the societal changes discussed above, should have led to an increase in the percentage of the population renting at market prices in 2015, and continue to raise it further in 2016 and beyond.”

The most important aspect of the exercise was to determine what the macroeconomic impact would be of a rise in house prices of 10 per cent – whether the rise turned out to be permanent or temporary – but the complex models they used showed that it would be limited – only reaching 0.22 percent deviation from baseline levels, and even this was subject to important caveats.

The authors concluded with two main recommendations. They argued that more timely and representative data was needed on both house prices and rents, making it possible to identify misalignments and allow

20%

10%

0%

-10%

-20% 1985

1990

1995

2000

Deviation from long run equilibrium

policymakers to take corrective action in a timely manner.

They also said that policies were needed to make the market more efficient when it came to matching demand and supply.

“For instance, easing restrictions on the sale of property boosts the supply of housing and reduces the stock of otherwise vacant property which dilapidates over the years.

This, in turn, eases pressure off prices, contributing to a lower likelihood of unsustainable price increases,” they said.

2005

2010

2015

SOURCES: AUTHOR’S ESTIMATES

The authors stressed the importance of understanding the sector because of its far-reaching implications on wealth and, in turn private consumption; housing investment; and collateral, which in turn influences non-performing loans as well as banks’ and borrowers’ ability and willingness to lend and borrow, respectively.

“Developments in house prices therefore influence macroeconomic performance and the stability of the financial system,” they warned.

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INTERVIEW

BOV CEO MARIO MALLIA. PHOTO: DARRIN ZAMMUT LUPI

Taking a more calculated risk Bank of Valletta reported a profit of €146 million for financial year 2015/6 but €27.5 million of that came from the sale of its shares in Visa Europe. is means its operating profit was only €500,000 more than the previous year’s.

Chief executive officer MARIO MALLIA told Vanessa Macdonald this is the result of the bank’s lower risk appetite.

Adjusted for the Visa Europe sale, BOV’s profits are more or less the same as last year’s – albeit also dragged down by lower profits from associates and subsidiaries. Is this the beginning of the new phase that chairman John Cassar White has been warning about?

The bank wants to diversify its sources of income and, at the same time, shed risk which is not justified, in our opinion, by the return. When you shed risk that will obviously affect your profits so you will have a safer bank with lower returns. Part of that is reflected in our financial status.

BOV said that it would drop some business lines and diversify into others. So far we know BOV has dropped trusts – after getting embroiled in a court case – but we have heard nothing about what you are going to go into…

We learned our lesson from the case and said that we did not want to be in businesses where the risk was not justified and where we do not have core competencies and strengths.

There are other lines we are currently winding down and which are being de-risked. For example, we are not interested in business

with companies that do not have an economic presence or ‘substance’ in Malta.

Obviously this is having an impact on the short-term profitability of the bank but we believe we have to look at the long term, so we are developing sustainable business. It is no longer about quantity but quality.

“We believe we have to look at the long term, so we are developing sustainable business.

It is no longer about quantity but quality”

However, you need to replace this activity with something new or the bank will shrink…

We are developing certain lines of business, like investment services where we are bringing more value to the retail market. We have a number of products coming online at the moment. We are also looking at the digitisation of our services because today we can no longer rest on our branch network, saying that we have a presence in every town and village in Malta. That is no longer relevant.

These two things are at the forefront of our initiatives.

BOV is very proud of being the ‘local bank’.

Are you free to drop lines that are not very lucrative – or is there political pressure from your main shareholder, the government, to keep them in order to keep the economy going?

We are free to do what we need to – and that is why we are doing it.

A lot of what you do is still very insular and local. You have been talking about internationalisation for some time. The bank has a BBB+ rating from Fitch. Do you exploit this with syndicated loans?

Today, the Maltese economy has internationalised so when you finance sectors of the

local economy, you are financing overseas risk. So internationalisation has come to us, whether we were looking for it or not. However, as you say, there is a multitude of opportunities. We have to be careful because we are financed by depositors’ funds – we do not borrow on the money market – so our risk appetite has to reflect that. We cannot go into speculative ventures and we cannot risk depositors’ funds unduly. But yes, we are looking at these kinds of ventures: more syndicated loans, securitisation – within our risk appetite.

You are embarking on a huge upgrade of the bank’s core IT systems. What will this mean for customers?

Before we can start talking about glamorous delivery channels, we have to have a solid foundation: our core system. This will not directly impact customers but indirectly it will as our processes will be more efficient: shorter response times and better customer services. While this is under way, we will put all other initiatives on hold unless they are mandated by regulatory requirements, with the exception of the development of digital channels for the future.

Continued on page 6

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e Business OBSERVER

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November 3, 2016

INTERVIEW

Identifying threats and opportunities Continued from page 5

The regulatory strategy is to sever the link between sovereigns and banks which was one of the vicious circles which fuelled the 2008 crisis. This is why banks are being told to cut back on their links with sovereigns.

We have two types of exposure: credit to public sector companies and treasury exposure to Malta Government Stocks and Treasury Bills.

There is a balancing act so if we are going to increase our exposure to the former, we must reduce our exposure to the latter, and vice versa. We have set internal limits on government exposure but they will not prevent us from lending to government because we can avail of this counter-balancing.

The chairman referred to competition from “small banks in small flats”. The reality is that these have limited services but a much better cost-to-income ratio. Isn’t it time to start making tough decisions about the branch network?

We have started an exercise to revisit the branch network to see whether each of our branches should be a self-contained bank as it is today; at the moment, you can go into any branch for a whole suite of services. Is that the model to follow in the future? We don’t think so.

We are not thinking of reducing our network coverage but of optimising their use, by having branches which specialise in personal credit or investment services, for example. It is not necessary to have all branches providing all services from A to Z. Would I be correct in saying that any other bank besides BOV would be able to close branches but that as the ‘local bank’ you are under pressure to keep them open for social reasons…

You assume that they are not profitable.

Whenever we had branches which were not pulling their weight we relocated them.

And you know, I do see a future for branch banking. It is not passé. I know there was a time when we thought that we should be focusing on ‘clicks not bricks’. Some banks tried that but came back to the original format. Branches, whether you like it or not, are and continue to be a touch point with customers. Perhaps the younger generation, who use other channels, do not use branches as much – which is why we have to ensure that we develop more channels for the millennials.

Banif has been sold to a Qatari investor who is going to ‘grow the bank considerably’. Will they beat you to the gate on Islamic finance?

I am not sure whether Islamic finance is in their plans. It is a niche which we are also exploring. It will never be more than a niche.

That is not what Joe Portelli, the chairman of the Malta Stock Exchange, thinks. It is one of the three new thrusts he outlined in the Capital markets Strategic Plan last week….

Will the Development Bank be viewed differently? Could you channel money to government projects through it without affecting your sovereign exposure?

We will work with the bank through guarantees, where it is possible to do so. But it will also be part of our sovereign exposure.

So it will fall within the same limits.

Islamic finance has been around for quite some time and I think in Malta, demand for it, from our experience, has not been high.

If we develop it, it would be as a niche. We are not looking at it – at least in the medium term – as one of the pillars of our business.

A new product has been launched, MyNey, which offers merchants electronic payments without the expenses associated with ePOS systems, particularly the hated transaction fees. How are you going to compete?

Through digitilisation. This is the type of disruption we see coming our way. If you are not the disruptor, you will be disrupted.

So we need to develop our own channels or form alliances with the disruptors. Nowadays, disruptors are aligning themselves with big banks because it is a symbiotic relationship.

MyNey is a universe which enables money transfers. It is free as long as you keep the money in the system. It is one of a number of initiatives under way. We are very aware of them and are very interested in them.

They are a threat and an opportunity as you can provide services to these disruptors

“Islamic finance has been around for quite some time and I think in Malta, demand for it, from our experience, has not been high” which they need: they need bank accounts at the end of the day. But we can work with them; we can buy their technology; we can form a strategic alliance with them. They can go where we cannot. We go to the higher end of the market and they go to the lower end, so we can help each other.

Has BOV’s holding of government paper changed over the past years – given regulatory pressures – and what is the future strategy?

What about your guarantee to cover the Electrogas deal? What happened to the security of supply agreement?

That is a commercial agreement and we cannot give information on our customers.

UniCredit is selling off several subsidiaries and shares in other companies. Isn’t it about time BOV had a more active strategic partner?

UniCredit is a strategic partner. It has helped BOV in a number of ways…

Name one.

They do help on due diligence procedures as we can see how they handle this, for example. That is where it stops. It depends on what you mean by ‘more active’.

Helping you with international opportunities, for example, like more syndicated loans.

We have our own networks of banks and of international partners. We have our own office in Milan. A more active bank could be of help but I do not see it as a critical issue.

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e Business OBSERVER

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November 3, 2016

INDUSTRY FOCUS

Festive forecasts Erika Cassar Rouvelas Director, Zest and Hotel Juliani.

Glimmer of hope for restaurants Restaurants might get a longawaited break to help them open on Sundays and public holidays, according to industry sources.

As it currently stands, hotels have collective agreements which enable them to pay staff normal rates on Sundays and public holidays, but for some reason the same does not apply to restaurants.

Chris Hammett, the owner of The Villa in Balluta, explained that restaurants must pay their staff double on Sundays and public holidays, and in the case of the latter must also give a day off in lieu.

“Generally, labour represents almost a third of the costs for a successful restaurant and once you take into account the cost of the food and administration and

so on, then the remaining margin is only between five and 20 per cent net.

“So, on Sundays and public holidays – which are very popular days for families, for example – if the cost of labour is 60 per cent, it is almost impossible to make it worth opening,” he said.

There is now a glimmer of hope as it is one of many clauses in the old labour laws which are now being reviewed.

The sources said that a review of the Employment Regulation Order has been languishing for some time but that it finally seemed that progress was being made, on this and various other anomalies which affect various sectors and have become outdated with time.

There were around 9,000 people working in restaurants in 2015, with income reaching €600 million last year.

“Hotels are given considerable importance but there are hundreds of restaurants which are just as important to the economy. So many of them go out of business and it is important for the government to look at reasons why and see what policies could help,” Mr Hammett said.

Tourism Minister Edward Zammit Lewis had said last May that revised restaurant regulations would be unveiled within the ext few months. The changes would make it easier to apply for new permits, enforce rules and cut down on bureaucracy, the minister said.

With the recent launch of a new menu at Zest Restaurant, we are expecting the last quarter of the year to be very busy as patrons join us to try new dishes. Additionally, at Zest Outside Catering we typically end the year on a high note as we help our clients organise private and corporate Christmas functions beginning as early as November.

Our corporate clients are hosting very interesting events this year. We see our clients improving their retention rates amid a rapidly changing labour market by rewarding personnel with Christmas parties that leave a lasting impression.

Richard Cleland Managing director, Cleland and Souchet We are anticipating strong sales over this festive season for our corporate hamper sales and our retail gift sales, due to the growth in corporate demand.

It is becoming increasingly clear that clients are after quality hampers as hampers are, in truth, a reflection of the brand regaling them.

Companies want to offer their clients bespoke and original items in the form of a hamper that shows that care and detail have gone into the selection of the products by the company gifting the hamper, rather than the oft-found bundling of commercial products in standard packaging.

At Cleland and Souchet, we recognise this and seek to ensure that the hampers we offer are in line with this growing local trend.

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November 3, 2016

INTERVIEW

PHOTO: STEVE ZAMMIT LUPI

Fuelling controversy e debate rages on about the new Electrogas power station and its floating storage, the utility tariffs and use of the interconnector. Enemalta chairman FREDRICK AZZOPARDI tried to put things into context when he spoke to Vanessa Macdonald.

Delimara III and Electrogas will both be without a gas supply for weeks every year assuming that there will be stormy weather. If we can manage without them for three days four times a year, why do we need them at all?

The principle is based on ‘n-1’.

You have various generating equipment which all have different capacity. You always have to assume that the largest one is out of action.

You have to be sure that you can cope with the peak demand – around 434MW – at any given time. The largest generating unit we have is the interconnector, which delivers 200MW. So if that is out of the picture – for maintenance or repair (it would take months to fix if the damage is at sea!)

– then you have to have enough generating capacity to cope.

You are worrying me. So what if there is a storm during one of these interconnector down times?

We would have problems... But this is a risk that you have to take in perspective. This would mean ‘n-2’ – not only out largest asset being unavailable but also the second largest one.

If you had two assets down, which is highly improbable albeit theoretically possible – what would it leave us with? We would have Delimara IIA and IIB, one turbine of which was kept for emergencies and uses diesel, and which would provide 120MW. And also half of Delimara III, which works on gasoil, and can provide a further 72-75MW. And you also have to

take into account PV installations…

Remember that storms do not coincide with times of peak demand: that is a fact. People do not use air conditioning during storms and the summer peak is much higher than the winter one. So as things stand, it should not be a problem even if both assets were out. We would cope.

Wouldn’t you sleep much easier if there were a land-based tank able to store a few days’ gas, enough to get us through the time the tanker would have to leave its jetty during a storm?

You plan and try your best but you cannot always cover for every single risk.

How much would it cost to install a storage tank for three days’ worth of gas? Wouldn’t that be the smart thing to do?

Let us be very cautious when we are talking about emergencies and so on. Let us not alarm people.

There is always the ‘chance’ of a catastrophe or problem, like the fire in the tunnel a few weeks ago.

If I were a foreign investor, would I be satisfied with the reply that it might never happen? Isn’t this why we have invested so much in extra telecommunications cables, to ensure backup?

There is always risk, even with cables. The point is whether that risk is of an acceptable level.

But what is acceptable to you and the government might not be acceptable to investors…

It will be acceptable. Let us say that we have a second interconnector. There could still be a risk, as the supply could be curtailed at short notice – which has happened, and for a whole week. We have had headaches, believe me.

The IPPC reports also say that Electrogas will provide the base load of electricity, with BWSC as secondary source for peak times. Will the interconnector therefore be idle much of the time?

Everyone is aware that there is a power purchase agreement and gas supply agreement with Electrogas and with Delimara III, which we have to respect. However, we do have an element of flexibility, not only with regard to daily requirements but we can also plan in

advance. We can still decide from where we want to dispatch.

We have built a software model which determines from where to buy electricity. For example, we have a commitment made in advance to purchase a certain amount from the interconnector – which could be more expensive or cheaper today.But it is an important part of our mix.

What about political pressure to buy more from Electrogas or Delimara III? There is no political pressure. The only pressure I have is to keep generation costs as low as possible.

Dispatch decisions are taken by a special unit of five engineers, who work round the clock, taking decisions hours in advance.

“ere is no political pressure. e only pressure I have is to keep generation costs as low as possible.

Dispatch decisions are taken by a special unit of five engineers, who work round the clock, taking decisions hours in advance”

Last year we saw very high use of the interconnector and there were noticeable drops in the carbon dioxide emissions. Will this change?

Carbon dioxide emissions went down earlier – when we turned off Marsa power station. But this was not turned off because of emissions or because of the interconnector. It could finally be turned off because the Kappara distribution centre, which had never been upgraded, was finally done.

By increasing the load that Kappara could carry, it was no longer the distribution bottleneck.

Delimara was then enough to cater for the whole of Malta.

Also remember that we purchase electricity from the interconnector – which provides power generated from plants that emit carbon dioxide.

But they don’t count towards our 2020 targets?

Cross-border purchases matter.

When the two gas plants are commissioned, our carbon dioxide footprint per megawatt hour will be less than that of the Italian purchases.

In 2014, Enemalta plc made a loss of €18.3 million – but the €27.6 million loss from ongoing operations was offset by €9.3 million from its now discontinued petroleum operations. What will your 2015 report show? And how does it look for 2016 – you hinted that you could end up in the red…

The results for 2015 were discussed recently at our annual general meeting and will be pub-

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INTERVIEW

lished in the coming months. The target was to be in the black by 2017 and bearing in mind that there are still a few months to go, the indications are that we will be able to achieve this by 2016.

You are paying a fraction of what you were for electricity, you’ve reduced your headcount and technical losses, are more efficient and you are moving into profitable territory. Why shouldn’t tariffs be reduced?

This is a very important question.

We hear so much about what is happening to the price of oil this year – without anyone explaining what we would do if the price went up again next year…

Various governments have opted for price stability and this means that Enemalta must have a balance between price stability and its own financing.

What fraction of operating costs is oil – and will be gas?

You have to remember that we had debts of €380 million to repay.

Our five-year plan said we would be profitable in 2017 but you also have to consider our balance sheet.

Perhaps you would be right to query this if the profits stayed in our pockets. But we knew that we had to invest €50-60 million a year in distribution and decided to up that to €80 million.

We felt it was wiser to accelerate projects as the beneficiaries would be consumers – not directly because their bills would be lower but because power cuts are down by almost 80 per cent to 63 minutes from over four hours.

We have a duty to see what improvements can be made to the service. Some people may feel that we should concentrate on reducing tariffs but the reality is that we are cheaper than the EU average – for both residential and commercial users – something that even the political parties agree on now.

You mentioned the outstanding debts: what is the repayment programme?

The debt was transferred to a special purpose vehicle, and we have debts of €350 million and loans of around €260 million. We have 30 years in which to pay them.

We want to repay some of the money, but it is not that easy: we wanted to pay off a loan of €10 million but although we would save on the interest costs, we would have to pay €5-6 million more in early repayment penalties!

So we cannot exploit the lower interest rates.

Standard and Poor’s has improved your credit rating from B+ to BB-.

What does that mean for you in terms of financing?

This is why we are trying to pay off these loans. At this moment, we are slightly cash rich, so it does not make sense to keep the cash – on which we are getting a pittance in interest. And the investment is now being financed by Enemalta, not through external loans.

You had arrears of €136 million in 2014. Last year they were down by €20 million. What are they now?

There is only around €77 million due, of which €32 million are current bills which have been outstanding for less than 45 days.

2016/7 HIGHLIGHTS -

ENEMALTA CHAIRMAN FREDRICK AZZOPARDI

€80m 3-year investment on electricity network: 6 new distribution centres 100km of new high voltage cable network connections 80 new 11kV substations and 100 upgraded 6 new 33kV and 132kV distribution centres 2017: distribution centres in Mrieħel and Ricasoli €30m saved in non-technical losses in 2015 760 cases of electricity theft stopped – 25% more than in previous 4 years Solar farms for over 1MW approved by European Commission

Last time we spoke, you were still trying to come to grips with the smart meters to make them tamper proof… Who paid for the modifications in the end?

The meters have been upgraded so that the tampering of the past has been addressed. This was done

by Enel, so the original meter is no longer being produced and only upgraded ones are being installed.

We did not pay anything for this upgrade.

Of course, when it comes to tampering, you can only say that they are tamper-proof against the types of tampering that now exist. You cannot predict what might be developed…

The ones which were installed prior to the tampering were not upgraded as we are now on the look-out for that sort of abuse and would be able to identify it as soon as it happened and catch the culprits. So we don’t need to change them.

The first project undertaken by International Renewable Energy Development Ltd, a joint venture set up in which Enemalta 70 per cent, and Shanghai Electric Power has 30 per cent, was in a wind farm in Montenegro. How is that working out?

The project is on target. We are already looking into projects in

other countries but it is still preliminary. We are optimistic…

And the other joint venture – International Energy Services Centre?

This joint venture is aimed at maintenance services. It is very busy on the conversion on the Delimara power station, and is providing backup services to Enemalta.

Once the projects at Delimara are completed, it will be able to consider work elsewhere. It already has contacts with factories, for engineering services related to energy – so we are trying to diversify.

The first phase of our transformation was to combat existing problems, but we were also trying to plan ahead so that we could anticipate future demand for connections. For example, we plan two new distribution centres in Mrieħel and Ricasoli for next year, the former by end 2017 and the latter in around 18 months’ time.

We are also waiting to see what the plans are for Paceville as we want to understand what demand there will be.

Even the new currency printing firm, Crane Currency, is very energy-hungry so we are also studying what will be required.

We are being very proactive, both from the commercial side and the distribution side.

“We are also waiting to see what the plans are for Paceville as we want to understand what demand there will be”

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e Business OBSERVER

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November 3, 2016

CASE STUDY

Some very Happy Meals ahead Premier Capital managing director Victor Tedesco is already picking up some phrases in Romanian to add to the ones he has already learned in Greek, Estonian, Latvian and Lithuanian. He does so, however, knowing that he can rely on his team of 7,000 to engage with McDonald’s customers more fluently when they need to.

The need to speak Romanian is relatively new: Premier Capital took over the developmental licence for the country in January, adding 67 restaurants to its 66 or so in Malta, the three Baltic states and Greece.

However, Mr Tedesco does not see this as a case of having too many eggs in one basket. Quite the contrary: “The economy of this EU member state is stable; GDP is good and there is a feel good factor there. And the potential for growth is enormous: it has 20 million people and we only had 67 restaurants – actually that has already gone up to 68!” he said.

When it comes to fast food restaurants, McDonald’s is the market leader in Romania and Malta, is lagging in Greece and is head to head with its main competitor in the Baltics.

“This is why we are investing in Greece, as when the economy starts to pick up, we will be ready...” he added. “We said it had hit rock bottom four years ago! I think it has now. At one point 18 months ago, the economy was recovering but political instability, changes in the VAT rate and capital controls rocked the boat again.

Despite this, summer was not bad: it started late but the season lasted longer… We also opened a restaurant in Santorini. Tourism in Greece keeps going up and half our restaurants are on the islands.”

It has been an exciting journey for the company, part of Hili Ventures, a journey which started demurely in 1995 when the first McDonald’s restaurants opened in

PREMIER CAPITAL MANAGING DIRECTOR VICTOR TEDESCO (LEFT) AND CHAIRMAN MELO HILI. PHOTO: CHRIS SANT FOURNIER

Malta. Premier Capital was set up in 2005 and took over the local licence, and started to look beyond its shores in 2007.

Its senior management team is now responsible for restaurants serving a staggering 100 million customers every year – and given the structure of the company, it is able to contemplate even more growth without putting too much strain on its current resources: the well-established teams in each country pretty much run themselves.

In fact, the company has already set a target of 151 restaurants by

“Premier Capital’s senior management team is now responsible for restaurants serving a staggering 100 million customers every year” 2018 and 202 by 2025, meaning it would then employ a veritable army of 10,000 people – although Premier Capital chairman Melo Hili was not giving

away any clues about possible new markets.

“We are always looking for opportunities. There is nothing on the horizon but if an opportunity

comes along, we are prepared for it,” he said. “And there is opportunity in our existing markets too. In the Baltics, for example, Lithuania is the largest of the three states but we only have 11 restaurants there.”

Expansion does not come cheap: the company will be investing €155 million in the next 10 years. Some of this growth is being funded through a bond issue for €65 million – the second largest ever in Malta and the largest ever corporate one – with a coupon rate of 3.75 per cent. The bonds mature in 2026 and €30 million of them will be offered to the

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CASE STUDY

holders of a redeemed bond which had a coupon rate of 6.8 per cent.

The unprecedented amount of the unsecured bond might mean sleepless nights for many managing directors but the company has an Ebitda of €10.4 million and its operating profit of €5.8 million for the first half of the year is set to rocket to €20 million this year thanks to the Romanian operation, which has doubled the number of restaurants and will add €128 million to the 2016 turnover.

The forecast is that turnover will reach €230 million this year with Ebitda up to €29 million, and €275 million and €39 million respectively by 2018.

McDonald’s Corporation – which has seen its consolidated revenue fall from $28 billion in 2013 to $25 billion last year due mainly to a global refranchising drive – has stepped up its efforts to satisfy evolving customer choices.

Over the years, apart from numerous tweaks to its menu to reflect healthy eating trends, it has also reviewed aesthetic tastes and opened McCafés in many stores. Premier Capital has followed a similar strategy. Out of Premier Capital’s 133 stores, 40 have McCafés.

“We are modernising the experience in all the countries through service, production and assembly, what we call ‘SPA’. It has changed

“We are modernising the experience in all the countries through service, production and assembly... it has changed the whole way we service our customers” MCDONALD’S IN BUCHAREST, ROMANIA

the whole way we service our customers, with ordering kiosks where you can pay by card. The kitchens are now using the ‘Made For You’ approach, so orders are only prepared after you place the order which allows us to have more items on the menu, offering more flexibility,” Mr Tedesco said.

By 2018, Malta, Greece and the Baltics will all be using the SPA system, with Romania to be completely converted by 2021.

The latest US innovation – all day breakfast – has not hit Malta yet, but Mr Tedesco said that it was very important to see each market as a separate entity with the same core products on the menu – and some localisation.

“The regular promotions and premium offers are very important,” he said, smiling when asked whether the successful McFtira would be repeated in Malta.

“About four per cent of our sales are breakfasts, which we

introduced across the market last year, and McCafés do really well and account for 12-13 per cent of our turnover in those outlets.

“This year we relocated the Buġibba restaurant. But the real earners are drive-thrus so this is always what we would go for if we had a new location. These outlets generate 48 per cent of their sales from the drive-thru service. In Malta, the two restaurants which are drive-thrus are the busiest by far, together serving more than 2.2

million customers a year! By the end of this year, we will serve 7.2 million customers across Malta.”

Times are changing and McDonald’s in Malta is not only competing in the quick service restaurant sector but also with kiosks, food trucks and gourmet burger outlets.

“It is not only branded competition but even single outlets... And deliveries is another aspect we cannot compete with. It is simply not part of our business model,” he admitted.

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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

e need for correspondent banking While the government and Opposition rightly defend Malta’s right to determine corporate tax levels to keep the flow of foreign direct investment – mainly in financial services and e-gaming – a new threat is evolving that may put the viability of some financial services operators at risk.

The stricter bank supervisory regimes in the US and the EU has had a profound effect on the way banks interact. All banks, but especially smaller ones, depend on correspondent banking relationships with banks in other jurisdictions. Following the 2008 financial crisis, US and EU regulators focused on preventing banks being used for financial crime and money laundering. In the US in particular, anything to do with online gambling, tax avoidance and evasion, adult entertainment and arms trafficking is shunned and banks caught facilitating the transfer of funds from these activities risk heavy fines – and their licences.

The EU’s anti-money laundering directive is making it equally difficult for banks to abide by the strict rules. Current anti-financial crime regulation not only insists on banks knowing their customers – but also on knowing their customers’ customers!

Numerous banks reacted by drastically curtailing the correspondent banking services they offer – especially to smaller banks. They rarely go into details about why – only saying that the cost of new regulatory requirements makes it no longer feasible.

The problem is so huge that the Bank of International Settlements – a kind of club of central banks – set up a Committee on Payments and Market Infrastructure to find a balance between anti-financial crime regulation and the need to restore correspondent banking services.

Its July 2016 report mainly proposes new layers of bureaucracy that banks should adopt before accepting deposits or making transfers on behalf of their clients – hardly a solution. Why are these developments important for Malta? First of all, they affect the operations of banks in Malta in the same

way: it is no secret that the majority of banks have stopped opening accounts for companies not operating in Malta or connected with electronic gaming. The few banks that do have tightened due diligence processes, resulting in very long delays to open accounts and to affect international money transfers.

Another sector hugely affected by the restrictions on correspondent banking services is payment gateways – financial service providers that facilitate e-commerce transactions for merchants for a fee. These gateways use the Visa and MasterCard clearing networks to settle transactions.

Money laundering schemes are not exclusively connected with big ticket money transfers: they also use the gaming industry to clean money through large volumes of small transactions paid by credit cards either directly through banks or through payment gateways. Regulators acknowledge that payment gateways provide an important service to merchants but that they can also be used for illegal financial fraud.

Local banks are now expected to terminate relationships with payment gateways that fail their ongoing due diligence tests. This will in turn affect the payment mechanism used by small operators who rely on payment gateways to clear their credit card payments.

Local politicians might argue with their counterparts in Brussels on the importance of preserving Malta’s fiscal sovereignty; they are unlikely to find it easy to convince large international banks to restore full correspondent banking relations to the few banks that support e-gaming and the financial services operators in Malta. Decisions taken in banks’ board rooms are normally not influenced by what politicians want but by what regulators decide is important to preserve the stability of banking.

Malta certainly needs a Plan B and cannot rely solely on the presently prospering electronic gaming and financial services industry that is often perceived internationally as not always squeaky clean.

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Advertising Enquiries Tel: 21 320713 Email: info@contenthouse.com.mt Advertising Sales: Matthew Spiteri Head of Sales Rose Caruana Advertising Sales Executive Lindsey Napier Marvic Cutajar Advertising Sales Coordinators

Printer Progress Press Ltd.

BUSINESS INSIGHT

Sterling set to fall after EU divorce Jonathan Cable Sterling is likely to drop around five per cent against the dollar soon after Britain starts its formal divorce proceedings from the European Union next year but it is not expected to weaken to parity with the euro, a Reuters poll found.

Since Britons voted on June 23 to leave the EU, the pound has dropped almost 20 per cent against the dollar, a decline that is not yet over, according to the poll of over 60 foreign exchange strategists taken in the past few days.

Prime Minister Theresa May has said she intends to trigger Article 50, which starts the two-year countdown to leaving the EU, before the end of March, and the median forecast suggested after she does the pound would fall to $1.15.

Many people think May is leaning towards a “hard Brexit” – imposing controls on immigration but giving up access to the EU single market – which would hinder trade and further hurt sterling.

But details about what form the talks will take have been scant, and data since the referendum have generally been better than expected, so the outlook is far from clear.

“Next year we see the economy holding up somewhat better than some commentators still fear, while hopefully we should get a little more clarity on Brexit arrangements,” said Chris Hare at Investec, who sees little downwards movement.

Still, forecasts were generally lowered in the latest monthly poll from an October survey after the pound had a torrid few weeks, falling to a 31-year low, which while a boon for exporters means inflation is likely to rise rapidly.

With inflation expected to rise above the Bank of England’s target next year, the central bank is not expected to ease policy today.

Bank Rate is already at a record low of 0.25 per cent. That poll published last week predicted another 15 basis points would be taken off early next year.

“Many people think [eresa] May is leaning towards a ‘hard Brexit’” In contrast, the United States Federal Reserve is widely expected to raise interest rates next month, around a year after it last tightened policy.

That would lend additional support to the dollar. The pound is currently trading around $1.216, and medians from the

wider poll put the pound at $1.21 in six months and at $1.23 a year from now. In last month’s poll, the six- and 12-month forecasts were for $1.27.

A few forecasters said the pound may reach or fall below parity with the dollar, the first time anyone has made that forecast in over 20

years of Reuters polls on the currency. The pound has also struggled against the euro but only around a sixth of the analysts who answered an extra question said the pound would reach parity with the common currency.

“We don’t think EUR/GBP will fall below parity as the euro is under depreciation pressure as much as sterling,” said Colin Asher at Mizuho Securities.

One euro is currently worth about 89.9 pence and in six months it will be 89.7 pence. In a year, a euro will get you 88.7 pence. (Reuters)

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NEWS

Ceta signed in spite of hurdles Vanessa Macdonald In spite of 11th hour hurdles from Wallonia, and growing discontent with trade deals on both sides of the Atlantic, the EU and Canada managed to overcome all the obstacles and signed the Comprehensive Economic and Trade Agreement (Ceta) last weekend.

“The people of Canada and the European Union have opened a new chapter in their relationship. More than half a billion people on both sides of the Atlantic will enjoy new opportunities. For many people, it will mean new jobs and better jobs,” said European Commission president Jean-Claude Juncker.

Canada is the EU’s 12th largest partner for important and the 13th largest for exports, based on 2015 figures. But, in spite of this, Ceta was seen as a test case for the much larger TransAtlantic Trade and Investment Partnership between the EU and the US as the failure of the first would have almost certainly doomed the second to an ignominious fizzling out.

Canada is not a major market for Malta, with 1.6 per cent of its exports and six per cent

of its imports. However, the Office of the Deputy Prime Minister welcomed the agreement, saying it should provide better market access for goods and services and the promotion of investment flows.

“Malta recognises that the current political environment revolving around trade policy and specifically trade agreements is not an easy one. However, it will continue to support an open and liberal trade agenda within the EU,” a spokesman for the deputy prime minister said.

“Economically this should benefit consumers and businesses alike as lower costs and greater choice are created by Ceta as a result of the elimination or reduction of tariff and non-tariff barriers.

“Ceta will provide greater market access for businesses to operate between Malta and Canada on goods and services, while providing greater choice for our consumers. Malta also considers the Ceta as a new opportunity to stimulate investment flows with Canada through the creation of greater certainty for investors in the two countries.”

From day one, Ceta will scrap almost all customs duties, saving EU firms hundreds of

CANADA’S PRIME MINISTER JUSTIN TRUDEAU (LEFT) AND EUROPEAN COUNCIL PRESIDENT DONALD TUSK AT THE SIGNING CEREMONY OF THE COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT IN BRUSSELS ON OCTOBER 30. PHOTO: FRANÇOIS LENOIR/REUTERS

millions of euros a year in duty payments. The mutual recognition of so-called “conformity assessment certificates” for a wide range of products, from electrical goods to toys, will also facilitate trade and save costs.

It will make it easier for service suppliers to travel between the EU and Canada and will allow EU companies to bid for Canadian public contracts at all levels of government.

Over 140 European Geographical Indications of food and drink products –from Tiroler Speck from Austria, to Gouda and Roquefort

cheeses from the Netherlands and France – will enjoy a high level of protection in the Canadian market, which did not exist until now. This aspect has been hotly debated by both the EU and US sides in TTIP. In addition, Ceta introduces a new investment court system and enhanced rules on investment protection.

As such it serves as an important step towards the EU’s ultimate goal of having a global investment court – another of TTIP’s major sticking points.

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STOCK MARKET REVIEW

BOV no longer in immediate need of equity injection Edward Rizzo Last Friday, Bank of Valletta plc published its annual financial statements for the year ended September 30, 2016. As expected, the results were significantly impacted by the exceptional gain arising from the sale of shares in Visa Europe. On June 22, BOV had informed the market that the total consideration from this transaction amounted to €29.1 million.

The annual financial statements published last week show that BOV generated record pre-tax profits of €145.9 million during its last financial year, up 23.7 per cent from the previous financial year. However, excluding the exceptional gain of €27.5 million recognised in the financial statements, the adjusted profit of €118.3 million is only marginally ahead from the previous year. This should still be considered to be a very positive outcome given the very tough conditions across the banking sector.

The unprecedented interest rate environment with negative rates of interest on deposits placed by financial institutions with the European Central Bank is very damaging for banks, especially those with high levels of liquidity. Most Maltese banks are in this situation which under normal circumstances is considered to be a very healthy sign for banks. However, in a negative interest rate environment, having excessive levels of deposits places downward pressure on interest income.

BOV’s balance sheet as at September 30, 2016, shows a total amount of €9.2 billion in customer deposits (an increase of €621 million over the previous year) and €4 billion

in loans to customers, representing a minimal change over the previous year. The widening gap between the level of deposits and loans is negatively impacting the bank’s profitability. In fact, the loan to deposit ratio has dropped to 44 per cent from 64 per cent four years ago.

Apart from the negative interest rate scenario and the high levels of liquidity, the other major factor impacting the banking sector is the stiffer regulatory environment which is translating into a higher cost base.

This was also evident in BOV’s financial statements over recent years.

During the year ended September 30, 2016, operating expenses increased by four

per cent to €112.8 million. Four years ago, operating expenses were €90 million.

Shortly after the publication of the financial statements last Friday, BOV convened its customary semi-annual presentation for financial analysts. Chairman John Cassar White gave a very detailed presentation, explaining the main highlights that characterised the bank’s performance during the financial year under review.

As indicated above, the normalised profit was marginally higher over the previous year. Despite the downward pressure on interest income arising from the negative interest rate environment, net interest income still improved by 2.8 per cent to €148.8 mil-

lion as many retail customers continued to opt for short-term deposits thus helping the interest expense to continue to decline.

Net fee and commission income improved by 5.6 per cent, however, profit from foreign exchange activities declined by 9.2 per cent as the bank transacted lower volumes of business reflecting the de-risking strategy currently being implemented.

The single major item that impacted the financial performance was the €10 million decline in impairments. On the other hand, however, the share of profits from the insurance associate companies (MSV Life plc and Mapfre Middlesea plc) shrunk by €8 million to only €3.7 million.

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STOCK MARKET REVIEW

Bank of Valletta plc Advances, Deposits & Advances to Deposit Ratio for the financial years ended 30 September 2003 - 2016 10

Deposits & Loans (

billions)

9

0.70

8

0.60

7

0.50

6 5

0.40

4

0.30

3

0.20

2

0.10

Deposits

Advances

2016

2015

2014

0.00

Advances to Deposit Ratio

“e basis for the calculation of a dividend is now determined by the strength of the balance sheet and the capital ratios rather than the underlying profitability” Although the adjusted profit before tax of €118.3 million was a positive development, two key financial metrics which ought to have pleased market observers were the return on equity and the capital ratio. The adjusted after-tax return on equity after excluding the one-off gain from the Visa transaction was of 11 per cent.

Although this is at its lowest level in the past five years (down from a high of 15 per cent in the 2011/12 financial year), it is very uncommon nowadays to find a bank across the eurozone generating double-digit returns on equity. Moreover, the strengthening capital position of the bank is another very positive development as the Core Tier 1 ratio improved to 12.8 per cent from 11.3 per cent last year.

BOV’s chairman spoke at length about the four cornerstones of the bank’s longterm strategic priorities. Mr Cassar White

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0

2003

1

Advances to Deposit Ratio (times)

0.80

stressed that the short-term profitability of the bank was not a top priority. Rather, the major focus is to ensure the long-term stability and sustainability of the bank for all stakeholders. The other immediate priorities are to replace the core IT system of the bank, to strengthen corporate governance and revise the business model of the bank.

The chairman explained that the bank’s executive management team makes every effort to protect the interests of depositors as well as the numerous shareholders. Mr Cassar White also highlighted the fact that the mentality that dividends to shareholders should increase in line with an increase in profitability does no longer apply. The chairman explained once again that dividend payments are now approved by the regulators (the European Banking Authority). The basis for the calculation of a dividend is now determined by the strength of

the balance sheet and the capital ratios rather than the underlying profitability.

This point had been highlighted in the past few years. In fact, it may be surprising to many that following the eight per cent increase in the interim dividend distributed last May, the directors once again recommended an equivalent hike in the final dividend to a gross dividend of €0.0852 per share for approval at the upcoming Annual General Meeting. However, the dividend payout ratio has declined over the past few years from 44.5 per cent in 2012 to 33.3 per cent in the financial year that recently came to an end.

Another surprising outcome from the meeting with analysts was that as a result of the strong rise in the capital ratio to 12.8 per cent, BOV is not in any immediate need for an equity injection. Until some months ago, BOV’s executive management had indicated that BOV may need to increase its equity base, possibly via a rights issue in 2017, ahead of more stringent capital requirements as from 2018. However, last Friday, Mr Cassar White explained that a capital raising exercise is now very unlikely to materialise in 2017 and may be postponed further into the future. The timing of the sale of the Visa investment may have been the key factor that impacted this decision, which should be very comforting for shareholders.

On the other hand, however, the change in the business model from one based on

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

growth to one focused on quality may dampen short-term profitability levels. Mr Cassar White stated that this was the most delicate aspect to explain to shareholders.

Naturally, a lower risk attitude coupled with higher profit retention to increase the capital base in a consistent manner will undoubtedly result in lower returns for shareholders.

Mr Cassar White also made reference to the changes taking place in the banking sector compared to a very different mentality several years ago. The chairman also argued that those people (including politicians, shareholders and employees) who do not appreciate the significant changes taking place in the banking landscape are “self-delusional”.

Apart from the various developments highlighted above, another aspect that had been mentioned by the chairman in a media article which will impinge on the profitability of all banks in the future is the implementation of a new financial reporting standard (IFRS 9) dealing with the provisioning policy. Although very little mention of this was made in last week’s meeting, this is another factor that needs to be considered by financial market observers ahead of its implementation in January 2018.

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

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BUSINESS UPDATES

An 18-year success story in Europe A magical fairy light theme for your corporate Christmas party Many people do not consider lighting to be an important element when creating a magical atmosphere at their party or event. Jugs understand the striking effect of lighting and have developed this idea into a fullblown magical fairy light-themed party, transforming whichever venue one chooses for an event into a fairy light wonderland.

Some of the highlights include fairy light walls, panelling and ceilings, magnificent chandeliers and centerpieces, illuminated bistro tables and moon lights, white sheers and drapes, and more. All of this is set up against a pure white backdrop, instantly bringing a magical white Christmas to life.

The events team at Jugs focus on creating new and innovative ideas and concepts in order to continue to wow clients and their guests. The company has grown substantially over the past few years and has restructured and created divisions focused on particular areas of the business. The team-building team specialise in creating and managing team-building events, the AV division focuses on the technical sound and light requirements, while the dedicated events team put all their energy into creating breathtaking and impactful events. www.jugsmalta.com

Will you be buying, selling or merging a business in 2017?

MALTA-BASED M&A ACTIVITY

Since 2008, more than 155 Merger and Acquisition (M&A) deals have been announced involving Maltabased targets. Many other deals never hit the headlines. While the financial services, gaming and ICT sectors have captured most of the action, KPMG is seeing exponential developments across the midmarket sphere, including in other services offerings, importation and retail spaces.

The company expects local dealmaking activity to persist on a growth trajectory as M&A is increasingly featuring on the agenda of business owners, boards and management. These are indeed exciting times, with local M&A spurred on by economic recovery, lower cost of finance and encouraging levels of investor and market confidence.

OPPORTUNITY SCANNING

With dedicated M&A professionals and industry champions in its local office, and close integration with its leading global M&A network, KPMG is increasingly called in for opportunity landscape discussions. The advisory team considers one’s strategic objectives, walks through the deal process, shares insights and experiences, and builds a list of potential targets to engage in discussions, enabling a business driver or owner to appreciate the potential risks and opportunities from an M&A deal.

Will you be making deals in 2017?

For more information contact David Pace, partner – Deal Advisory on davidpace@kpmg.com.mt or Roberto Vitale, senior manager – Deal Advisory on robertovitale@kpmg.com.mt

For the 18th consecutive year, due to the strong performances of the Kangoo, the Master and the multiple award-winning Trafic, Renault topped the European LCV sector, as defined by the European Automobile Manufacturers’ Association (ACEA).

In the European market, the Renault’s LCV sales also expanded by 11.4 per cent in all markets, including Germany, Italy and Spain. In the United Kingdom, the best ever levels of sales were achieved with a 1.2 per cent increase.

Likewise, France’s market share increased to 32.85 per cent, the brand’s best performance since 2006.

The Kangoo, Trafic and Master all topped their

respective segments. 2015 was a strong year in the LCV market with a global sales increase of 12.4 per cent.

Renault’s current LCV range available in Malta includes the Kangoo as a panel van capable of carrying a load of 800kg or a crew van for five people.

The Trafic and Master are capable of carrying between 1,030kg to 1,540kg or as passenger vans with 8+1 or 16+1 seating configuration respectively. The range includes a five-year manufacturer’s warranty, and is available for viewing or a test drive from the Renault showrooms in Mosta Road, Lija. For more information, call 2143 3601/2/3.

RENAULT HAS TOPPED THE EUROPEAN LCV SECTOR WITH ITS KANGOO, MASTER AND TRAFIC RANGE.

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November 3, 2016

BUSINESS UPDATES

Konnekt appoints two new directors to board

Palazzo Castelletti marks third anniversary Palazzo Castelletti is celebrating its third anniversary.

It now boasts three top-notch restaurants: the San Andrea à la carte restaurant, RedWhite Pizza, Pasta and Grill and Trois Wine Bar, which are all rated among the top in Malta by various dining reviews.

The palazzo is open seven days a week for both lunch and dinner, has two completely separate kitchens and employs more than 35 full-time and part-time employees.

These numbers highlight that it is by no means a small operation, and that throughout these past

Konnekt has announced the appointment of Hazel Refalo and Kenneth Bonnici to its board of directors.

Ms Refalo joined Konnekt in 2011 and has more than 15 years of experience in the human resources and recruitment sectors.

Before joining Konnekt, she held HR manager positions within the recruitment, media and financial services sectors. At Konnekt, Ms Refalo held the position of head of operations where she was responsible for managing and overseeing operational matters, human resources within the company, as well as coaching and mentoring the team. Apart from taking an active role in defining the strategic objectives of the business, she will retain her executive role in the implementation of the strategy.

Mr Bonnici will join the Konnekt board in a nonexecutive capacity. An experienced CFO, board director and adviser focusing on execution, performance improvement and organising businesses for growth, his previous roles include business advisory partner with Grant Thornton, and, more recently, group CFO with Ixaris, an international payments business.

He is a CIMA-chartered global management accountant with undergraduate and tertiary degrees in operations and business management.

Established in 2007, Konnekt today employs more than 35 professionals exclusively focused on delivering different recruitment solutions to clients. www.konnekt.com

years, the palazzo has managed to keep growing from strength to strength. Palazzo Castelletti’s operations are now expanding into other localities around Malta as well, with Castelletti Bistro having opened in Sliema and another catering outlet to open shortly in Valletta. Palazzo Castelletti also caters for all sorts of private functions and events including weddings and exclusive dining, among others.

Bookings and more info can be made directly with the Palazzo Castelletti team on 2145 2562 or 9910 9911 or send an e-mail to info@palazzocastelletti.com.

Drive safer with Zeiss lenses Zeiss Vision Care’s DriveSafe lenses are the perfect lenses to deliver on drivers’ need for good vision in all conditions.

The newly-developed Zeiss Luminance Design Technology (LDT) gives wearers improved vision in low-light conditions such as dawn, dusk, rainfall or night. LDT takes into account the size of pupils in poor light, hence resulting in a more relaxed and better vision. With the addition of the special Zeiss DuraVision DriveSafe anti-reflective coating, glare from oncoming cars or street lights can be reduced by up to 64 per cent. This coating offers the same hardness and cleaning properties as the DuraVision Premium coating.

The lens design also makes it easier for progressive lens wearers to quickly refocus between the roads ahead, the dashboard and rear view or side mirrors, optimising distance and intermediate viewing zones so as to reduce horizontal head movement.

Zeiss DriveSafe lenses are the ideal vision solution not just for driving but for all day wear. Zeiss DriveSafe, as well as the entire range of high-end Zeiss optical lenses, are exclusively available from selected optical shops in Malta.

For more details about Zeiss DriveSafe, call 2381 1100, send an e-mail to info@classoptical.com or look up the Zeiss Optical Malta Facebook page.