The Business Observer Newspaper - 12th March 2015

INTERVIEW

Issue 21

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March 12, 2015

Distributed with Times of Malta

Schemes extended to commercial electric vehicles Vanessa Macdonald

NEWS The Investor Compensation Scheme is calculating how much it will have to pay to the victims of the Maltese Cross Financial Services collapse – but it will fall far short of the full amount lost. see page 3 >

Transport Malta is anticipating a good response to its grant scheme for the purchase of electric vehicles by commercial companies.

The first grants were issued last year for non-commercial electric vehicles, giving €5,000 if the driver scrapped a vehicle, or €4,000 if not.

There was also a grant of €1,500 towards an electric quadricycle, and since these can be bought second-hand from the UK for around £5,000, it brought the cost down to very accessible levels.

The current scheme was extended to second-hand electric vehicles as these were very often put onto the market within a short time with very low mileages.

But since the heaviest users tend to be commercial vehicles like delivery vans, TM decided to extend the scheme. Companies can now get a total of €10,000 towards electric vehicles, which they can use towards the purchase of as many as they wish.

The government’s target is to have 5,000 electric cars by 2020. With just 205 on the islands at the end of 2014, up from 80 in 2012 – of which only 24 are commercial – there is clearly a long way to go.

But the situation was not conducive to increasing those figures.

“Importers claimed that there was no demand because there was no infrastructure – but there was no infrastructure because there were only a few cars. It was a chicken-and-egg situation and someone had to step in to break the impasse,” the national coordinator of the Malta National Electromobility Platform Peter Paul Barbara said.

The schemes were part of an action plan for electromobility launched in November 2013, which set out dozens of projects. The Continued on page 3

To become a world leader, you need to have a world vision. Andy Gatesy of Toly explains the concept behind its new corporate centre. see pages 10 and 11 >

NEWS Eco-tax has to be phased out within six months, but there is still a lot to be done before the waste management schemes under the WEEE directive can be adopted. see page 5 >

INDUSTRY FOCUS

VICTOR BATTISTINO (LEFT) AND PETER PAUL BARBARA WITH THE QUADRICYCLE THEY USE.

With record low interest rates persisting, there is a clear bias towards shorter-term investments – but that does not mean the options are obvious. Leading stakeholders give their advice. see pages 8 and 9 >

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NEWS

90 charging points ready Continued from page 1 clock is ticking: the Alternative Fuels Infrastructure Directive will come into force soon and each member state has to set up a suitable infrastructure. The standard is to have around one charging point for every 10 cars – which means Malta would need 500. So far, 45 pillars have been installed in various places, each with two charging points.

“Since technology is changing so fast, it does not make sense to install all 500 points as they would be obsolete by the time there were enough vehicles to merit the number,” he said.

Transport Malta has so far had two pilot projects. The first for electric vehicles, Demo EV, was launched in September 2011 roping in the Gozo, Resource and Transport Ministries, Transport Malta and Enemalta. Demo EV, which tapped into the EU’s Life+ programme, brought 24 cars to Malta.

Ryan Buttigieg, general manager of International Cars which imports the Kia Soul, believes that there is a social obligation involved.

“EVs are not a cost-effective operation for importers but without such initiatives, ecological responsibilities and objectives cannot be met. The major benefit will be to create brand value and recognition,” he said.

“We had ‘roadshows’ – if you excuse the pun – and got prominent people, including journalists, to

use the cars for a while. But apart from the exposure, the important thing is that it pushed us to start installing charging points straight away,” MNEP senior manager Victor Battistino added.

Mitsubishi provided eight iMiEVs to the government, which generated a steady stream of enquiries from both individuals and companies, but uptake was lower than expected, Industrial Motors managing director Ian Mizzi said.

“From our informal research, there are three main obstacles to the adoption of the technology.

One is fear of being among the first adopters of the technology. People prefer others to lead the way and take the ‘risk’.

“The second is the high price of EVs. Most people make the mistake of comparing the purchase price of an electric vehicle to that of a similar-sized conventional internal combustion engine (ICE) vehicle. What they should be comparing is the total cost of ownership, which is much lower.

“The third is ‘range anxiety’, but this fear is exaggerated in a small country such as ours. Typically, the Mitsubishi i-MiEV can achieve around 120-150km range on a single charge,” Mr Mizzi said – enough for three to four days for the average user.

The second project centred around the port and the theme of carbon-neutral transport. Photovoltaic panels on the roof of the Transport Malta building are being commissioned and three solar-powered charging stations

are being built by the Transport Ministry, using co-funding from the EU. These use PV panels to generate the electricity and can take up to four cars simultaneously.

But the aspect that has Mr Barbara as enthusiastic as a child is the possibility of eventually installing fast charging points for public use to complement those in the Transport Malta car park, which will charge 80 per cent of the battery in newer EVs within less than 20 minutes.

“Technology is moving fast and the latest buses, which will be put on the market soon, can take a superfast booster charge – in just four minutes!” he said.

The factors that worked against electric cars are all being whittled away. The cost of the cars is coming down dramatically – one which cost €38,000 three years ago now costs €16,500 – and they are holding their value much more than they did when they were still ‘exotic’ and used only by early adopters.

Meanwhile the technology of batteries and charging stations is improving, which means that vehicles can travel further on one charge.

The return on investment and practicality is all starting to make real sense. At this point in time electricity from the government’s charging points is free, for example, with just a nominal charge for the administration of the scheme which allows drivers to book slots at the charging points via an online portal.

But while agreeing that the increase in charging points would solve ‘range anxiety’, Mr Butttigieg feels that the monthly expense of enrolling for the charging point card could be prohibitive for their use.

The MNEP hopes that drivers will focus on the long-term savings, which are considerable.

“We estimate that the average driver would save some 60 per cent of their fuel costs – around €900 to €1,000 on petrol every year.

It can cost as little a €1.80 to fully charge a car,” Mr Barbara said.

“And the maintenance is much less as there are no moving parts, and no oil or filters to worry about.”

Maltese Cross compensation reaches €2m The Investor Compensation Scheme has so far paid out over €2 million to customers of failed investment firm Maltese Cross Financial Services – but the amount could go up even further.

The maximum compensation that may be payable by the scheme amounts to €20,000, or 90 per cent of an investor’s eligible claims, whichever is the lower – but sources have confirmed that there are investors who had over €500,000 invested.

Since the scheme is subrogated into claimant’s rights up to the maximum claimed, the only way that they could recoup any further funds would be if they took court action – or through out-ofcourt settlements.

This basically means that the victims can only take action for amounts over the €20,000 they will get through the scheme.

The scheme, which is being used for the first time, can itself institute legal action for the recovery of the funds it will pay out.

Last August the Malta Financial Services Authority (MFSA) established that Maltese Cross Financial Services was not in a position to meet its obligations. The shortfall was subsequently found to be around €6-7 million.

MCFS director Jean Claude Bugeja is currently in court on the matter, charged with fraud and misappropriation. His assets have been frozen and the court has allowed him a basic allowance of €14,000 a year on which to live.

The scheme has already handled around 200 claims, but investors had until the end of January to lodge their claims and the additional ones submitted by the deadline are now being processed, according to the MFSA. Until now, the total number of clients has been estimated at around 220 but the MFSA, which has this information, has never divulged it.

The Investor Compensation Scheme is a rescue fund for customers of failed investment firms which are licensed by the MFSA. It pays compensation if a licensed investment firm is unable or likely to be unable to pay claims against it – usually when the licensed firm stops trading or becomes insolvent.

The scheme is managed by a management committee appointed by the MFSA.

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NEWS

GRTU prepares proposals for waste directive Vanessa Macdonald The GRTU is putting together its proposals for the replacement of the despised eco-tax – a promise made by the government in the last Budget – but there are still numerous hurdles.

The tax has to be removed by September 2015.

The issue has been delegated to the Environment Ministry, which will also have to find a way to put into force the environmental contributions Malta should be imposing through the Waste Electrical and Electronic Equipment (WEEE) Directive.

This tax will apply to everything that operates with either electricity or batteries, from white goods to toys, from sports equipment to power tools. The new system will cover hundreds of items, a considerable increase compared to the eco-tax.

The cost of the eco-tax imposed on products no longer made sense as time went on, as it did not keep abreast with technological advancements which saw IT equipment change drastically in weight, size and components. The extra cost imposed by eco-tax made Maltese businesses uncompetitive compared to purchases made abroad and from the internet, and to add insult to injury there was also no proof that the money collected was being used to take care of the environmentally-correct disposal of these goods.

It is estimated that the financial contributions imposed by the directive should be lower than those under the eco-tax regime – although the cost depends on a vast number of variables which are still being worked out. It might be more for some products: for example, it is expensive to collect refrigerant gas

as well as the gas and mercury from the old-style cathode ray tube television sets and monitors.

So far, MEPA has issued a number of permits to carry out waste management related to WEEE, including to GRTU’s fully-owned subsidiary, Green MT. Those selling goods that fall under the directive have until June 2015 to join a recycling scheme or to present plans for how they intend to comply with the directive.

“We need to get moving as otherwise, Malta will not reach its recycling targets and it will be fined,” GRTU vice-president Marcel Mizzi warned.

He acknowledged that considerable numbers of items that fall under the directive were already being sold for scrap – for as much as €100 for a van-load – but since this disposal method is hardly in line with the directive specifications, it cannot be registered with the European Commission.

Other countries can focus on manufacturers and very large operators and easily meet the EU set targets. In Malta, entire logistical

“ere are a lot of questions nobody seems to have the answer to yet” operations will be needed and pretty much all waste must be collected if we are to reach the targets.

“It might make sense for the different operators and permit holders to pool resources to make the operation more viable and cost-effective,” GRTU CEO Abigail Mamo said.

“Discussions with the different operators are ongoing and so far all options are still being considered, including exporting the waste.”

There are a lot of questions nobody seems to have the answer to yet. For example, one of the options is for the recycler to be paid by weight while the charge will be passed on to the customer by item.

Mr Mizzi said that GRTU has a fair amount of data about what was

put onto the market and how much it costs to recycle.

“Perhaps I am making it sound easier than it actually is! With packaging, it was straightforward as we had only a few categories like paper and cardboard, or glass. Can you imagine working out the recycling cost for a car? You would have to look at the cost of recycling the metal, the bumper, the windscreen and so on ...”

The GRTU members hope that the WEEE Directive will help them to compete, by levelling the playing field when it comes to those who currently evade eco-tax, as well as by bringing their costs into line with those of overseas suppliers.

“But the only way to ensure that small items ordered online get into the recycling channels would be to intercept them through Maltapost, which does not seem to be an option unfortunately,” he said.

Identifying items on which the WEEE has already been paid is another problem.

“A number of our members want the WEEE cost element to show on the receipts as then the customer

knows what he has been charged for. And it would be much easier to identify those who are cheating.

“My personal preference would be for retailers to buy stickers showing the tax that has been paid on that item – similar to the banderols showing excise tax paid on wine – but that poses logistical problems. Could you put ugly stickers on toys or mobile phones, for example? And some goods are sold in packaging and fixing a sticker only makes sense if it is on the product directly.

“Of course, that all depends on enforcement in any case. Enforcement by the VAT Department was one thing, but now that MEPA will be in charge it will need to step up its enforcement efforts. MEPA enforcement of the Packaging Directive already leaves much to be desired.

“GRTU expects guarantees that our efforts and those of our members are matched with proper enforcement by MEPA. GRTU would gladly carry out inspections and enforcement itself, but we have no executive powers.”

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COMMENT

e future outlook for iGaming

Russell Mifsud The iGaming industry is rapidly evolving from all angles, with changes such as new laws, EU directives, emerging jurisdictions, technological developments and consolidation shaking up the industry as a whole and, as a result, changing the rules of the game.

For starters, barriers to entry are growing higher as margins are being squeezed – so much so that if you are planning on entering or perhaps even remaining competitive within the industry, it is imperative to remain ahead of the game, knowing your market inside-out, thinking innovatively and using new trends to your advantage, in order to stand out and differentiate yourself.

With more jurisdictions jumping on the bandwagon and determined to regulate and raise revenue, compliant operators inevitably will feel the pinch to their bottom lines, which is likely to be reflected in lower odds, less attractive bonuses and higher rakes – all of which non-compliant operators pick up on and, in theory, offer a more profitable return to players.

It is fundamental that new rules are policed and that authorities remain vigilant.

The new regime in the UK – where the existing remote gaming, betting and pool betting duty rates of 15 per cent are now applied on a point-of-consumption basis – begs the question as to whether an underground market will expand, where unlicensed entities will be in a better position to offer a more appealing opportunity to players.

Concurrently, speculation is rife as to whether ‘sign-up bonuses’ may be reeled in as a means of cutting marketing costs, which is a further instance illustrating how the industry has been and will continue shifting focus from player acquisition to player retention.

Free bets will begin to change from big hand-outs to cleverlycapped sure bets in order to draw in customers. As a result, affiliates will also feel the pinch, unless they too roll with the times and adapt to suit their partners’ market strategies.

Yet, the trouble with generalising lies in ‘game theory’: sign-up bonuses are one of the major differentiators between land-based and online operators, and between competing remote gaming entities which are becoming ever more homogeneous in a market that lacks loyalty. Should all operators reduce their sign-up bonuses, it would be a matter of time until an operator digs into its pockets and attempts to capture the market with a more attractive offering.

With increasing consolidation in the industry, one cannot help but wonder what the playing field will look like in the coming years.

Competition has been cutthroat across the globe, with the big fish taking advantage of their liquidity to acquire competitors to further secure their position and strengthen barriers to entry.

Similarly, many B2B game suppliers may well expand into the B2C market through major acquisitions.

As more fragmented companies conglomerate and merge, are we to expect less focus on innovation? While the industry is synonymous with innovation, I would like to see the manner in which games are going to evolve.

Doubtlessly the human mind is hard-coded to feel drawn to playing classic games such as roulette and blackjack. But will such games entice the millennial generation?

Such highly-optimistic individuals who have grown up playing games and expect more of an immersive, rewarding experience in return for their time are easily distracted.

To my mind skill games coupled with social gaming and elements of gamification, such as loyalty programmes, and intricate game designs combined with behavioural economics through the use of Big Data will prove to be the predominant force in gaming for the future generation and, dare I say, for all industries in the years to come.

Naturally, the new “gamified” generation will not only constitute your client base, but also form part of your workforce. Management will need to adapt their skill set to attract millennials in order to maximise their extraordi-

“If you are planning on entering or perhaps even remaining competitive within the industry, it is imperative to remain ahead of the game”

nary ability at problem-solving, organising matters out of chaos, multitasking and being self-directed leaders thriving on a diet of continuous positive reinforcement. Corporations that meet the needs of the highly-fluid generation will be able to crush their competition, as the effect will be reaped from both an inside-out and an outside-in perspective.

Last, but not least, due to increasing regulation in television marketing, social platforms have become one of TV media’s go-to marketing channels.

On that note, though, the industry has come to realise that social gaming is not synonymous with hard-core money gambling despite the initial appeal back in 2012. When a bet is placed, a return on investment is anticipated, but when a deposit is made on a game that is not perceived to be gambling-oriented, players tend to be satisfied with sheer entertainment.

The trick will be for the industry to combine the gold-rush with the fun-seeking aspects.

This will prove to be another key to customer retention. It will not be a matter of simply marrying the two, but customising them to amalgamate the offering and tap into the right target market.

As the rules of the game transform into nuances of every colour, one thing is clear. Successful industry operators are tying up their shoe laces to go with their best suits. May the best man win.

Russell Mifsud is a manager specialising in i-Gaming at KPMG.

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INDUSTRY FOCUS

When money makes money Benjamin Franklin once said that investment in knowledge pays the best interest. With interest rates persisting at record low levels, making the right decision on how and where to invest your money is harder than ever.

The investor has to weigh up numerous factors, ranging from their risk appetite to the liquidity they might want. However, the wise man would take the time to check out various options to find one that comes closest to what he or she wants – and needs.

The president of ifs-Malta, Simon Grech, said it was only logical to want to maximise the return on investment, even more so in the prevailing low interest rate environment which at times see returns not even covering inflation.

“However, the fundamental principle that the return on your investment is proportional to the risk one takes cannot be forgotten.

Yes, there are possibilities for higher return, but these come with a higher risk of losing your investment or part thereof. Unfortunately, a lot of investors tend to forget the latter. Furthermore, investment decisions should be taken in accordance with one’s profile and tolerance to risk,” he said.

One thing is sure: capital markets have become more buoyant in recent years, with admissions to listings to the Malta Stock Exchange main market, through Initial Public Offerings reaching a very significant 14 corporate bonds and 14 government bonds during 2014.

These instruments tapped the market to the tune of some €300 million in the case of the corporate bonds, and €650 million in the case of government bonds.

IPOs were consistently oversubscribed. This, combined with the fact that the majority of applicants are retail investors, confirms that the appetite for new investment opportunities to come on to the capital market is very high.

Cliff Pace, the business development manager at the Malta Stock Exchange, noted that the investing public soak up government bond issues in surprising quantities.

“The recent issue of €120 million worth of government bonds attracted over 11,000 applications, which collectively added up to €440 million. That is an incredible statistic that speaks volumes for

the credibility and confidence in government paper, in spite of what could be described as relatively low coupon rates.

“There is also significant appetite for corporate bonds, which tend to be shorter term, but which obviously carry a higher risk premium than government paper, and therefore offer a higher coupon rate. The prevalent low market interest rates, together with the fact that corporate bonds are normally issued without any tangible security, unlike traditional bank lending, have clearly translated into a number of organisations seeking financing through the capital markets and investors are clearly keen to invest in this type of financial instrument, as well as the more traditional bank deposits,” he explained.

This year, there should be a good number of bonds coming on to the market, partly as a result of rollover of existing bonds, and partly as a result of new issues and issuers. The problem is that listed instruments are mostly owned by the retail investor, who tend to have a ‘buy to hold’ culture, and therefore investors seeking to buy instruments on the secondary market generally need to pay a premium to entice sellers to the market, Mr Pace added.

“The fact that there is no capital gains tax paid on the sale of listed securities makes this a very attractive market for investors, who can be fairly certain of finding a buyer on the secondary market in the event that they wish to liquidate their investment for one reason or another.”

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INDUSTRY FOCUS

Of course, with this much demand, the problem becomes supply. The MSE’s challenge is to get more companies to list and in order to fulfil its role as the capital market operator in Malta, the Exchange is currently working on a new product which, once it receives the approval of the regulatory authorities, will target SMEs as potential issuers for either equity or bonds, in a market that will be regulated by the Exchange.

“The movement of capital from savers and investors to businesses and corporate entities – who at the end of the day are the drivers of the economy, through traditional bank finance or the capital market – is critical for the continued development of the economy. Capital investment generates stability and growth in the business community, and therefore increases the level of turnover and employment opportunities in the market,” Mr Pace said.

The dilemma facing investors is whether they should tie up their capital for longer periods to get the best available interest rates, or go for shorter term investments in the hope that rates will improve, allowing them to move their money to the higher yields.

Elaine Bonello, a director at Financial Planning Services Ltd, is sceptical as she sees little to gain from short-term investments.

“Bank rates are negligible – even if you tie up funds for five years, which is far from ideal at the moment. Yields on short-term bonds are equally unexciting: the yield on a five-year MGS is around 0.8 per cent. And on international bond markets we are now seeing the phenomenon of negative interest rates.

According to figures by JP Morgan there is more than $2 trillion in negative yielding government bonds with a maturity of more than one year. So especially for pensioners looking to supplement their income, the short term still does not offer any solutions,” she said.

To compound matters, many issuers – both government and corporate – are taking advantage of historic low rates and issuing extremely long-dated bonds. For example just this week, the UK

reopened a 53-year bond due for repayment in the summer of 2068.

“And since as they say ‘tutto il mondo e paese’, because of strong investor demand, the government was able to borrow at a record low rate of 2.62 per cent,” she pointed out.

“There is undoubtedly a lot of liquidity and the Maltese investor loves his coupon. This was amply proved by the incredible oversubscription of last month’s MGS issue, where government received applications amounting to €443 milllion for a €180 million issue.

“Given a choice, the Maltese investor is always keener to invest in bonds and naturally, issuers are well aware of this. In fact, based on the constant oversubscription we see for all bond issues, there is not enough supply to meet the exceptionally strong demand.”

With so many people chasing so few investment opportunities, there may be the temptation to leap at every opportunity, but Mr Grech of ifs-Malta warns that investors should do their homework before taking the plunge.

“Making the right decision at the outset is important, as to reverse it

“Capital investment generates stability and growth in the business community, and therefore increases the level of turnover and employment opportunities in the market” later on can prove to be very costly.

This also calls for ethical behaviour on the part of the investment provider.

“While I am sure the majority act in a responsible and ethical manner, unfortunately, instances of misselling tend to tarnish the industry’s reputation and this then results in more rules and regulations. The investor is truly protected when taking an informed decision and education of providers and customers is what we should all therefore strive to achieve,” he said.

Property remains a favourite with locals, especially with demand for rental making it a good option for those who want a regular return on

their investment. As with capital market investments, however, knowledge can make the difference between a good and bad decision.

Reuben Sciberras, general manager of Belair Property, said that developments in the rental market make buy-to-let a very viable proposition for those seeking a sound investment with a good return.

“However, when looking at this investment, you need to verify with your estate agent that the property is being bought at a price which would give an annual return of around five per cent when rented out. A sound knowledge of the rental market is crucial for anyone to take an informed decision, and it should be

based on a conservative estimate of what the rental value of the property really is,” Mr Sciberras said.

“When considering a buy-to-let investment, you also have to take into account that the property being bought will most certainly appreciate, hence ending up with an asset which is more valuable over a period of time, and which, if well taken care of, could bring a higher value should you decide to sell.

“Another important consideration is that the tax arrangements are similar to other financial products on the market, should you decide to adopt the recently introduced flat 15 per cent tax on income derived from the rental.

“Last but not least, with a minimal cost in getting a property manager on board, investing in a buy-to-let could turn out to be hassle-free, as they take care of all the requirements from beginning to end, leaving the investor to enjoy the results without having to deal with tenants, administration and financial matters,” he said.

The return from rental of five to six per cent is not the only advantage – even though it is considerably higher than even fixed term deposits, which offer on average three per cent for a five-year term.

Patrick Xuereb, the regional manager for Frank Salt Real Estate in St Pauls’ Bay and Mellieħa, said that rentals also give an immediate and regular effect.

“You get a ‘pay cheque’ at the end of the month… You cannot say the same thing about a financial investment, where you normally have to leave the investment for a good number of years to see a proper return.

“There is also greater security and a sense of capital guarantee which very few – if any – financial investments offer. Property in Malta is always an asset,” Mr Xuereb said.

Capital appreciation on property could also be from three to seven per cent per annum, depending on the type of property and the location.

Whichever option investors go for, perhaps it would be wise to end with another quote from Founding Father Benjamin Franklin: “Wealth is not his that has it, but his that enjoys it.”

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INTERVIEW

inking out of the box Several years ago, during an interview, Andy Gatesy had expressed his frustration with the time it was taking to get extra factory space.

His family company, Toly, was growing and he needed to expand production capacity.

The years have been kind. Since then, he opened and closed a manufacturing site in India, his China site flourished and new manufacturing sites in South Korea proved to be a huge success.

And yet, when the chance came up for a new site in Bulebel, more manufacturing floor space was the last thing on Mr Gatesy’s mind.

An avid believer in Malta and its economy, Mr Gatesy is a regular speaker in conferences about manufacturing. But he believes that local businesses need to break out of the insular mode and think bigger if they want to survive.

“Toly’s business has evolved over the past 45 years and it has become a world leader. We had to make a huge leap forward with regards to our corporate presence. A world leader needs world-leading offices,” he said, repeating a phrase he had used at the official opening a few weeks ago.

The company makes packaging for cosmetics, and he was well aware of the fact that these are not mere powders, gels and serums, but so much more: “Cosmetics and face care products... these are all about luxury and glamour, even when there is serious medical research which has gone into their creation! We wanted to be able to communicate to our clients that we understand this,” he said.

“Five years ago, we produced items for 10 out of the top 30 luxury brands. That has now gone up to 21. And we have also moved up the value-added chain. This is something that manufacturers in Malta must do as that is where we have a competitive advantage. We have to communicate that move...”

It took time to make his vision a reality but the result is something that is, in his words, the “largest in the industry”.

His dream was to create a corporate centre – in Malta – where new clients would walk in and stop in awe. Rather than ‘wow’ them with manufacturing speed and flexibility alone, he wanted to ‘wow’ them with the capacity for innovation and creativity.

The first challenge was to find a site which was close enough to the factories so the search was focussed on Bulebel. The original Playmobil factory site had been abandoned for 12 years but it was too large for what he had in mind.

The solution was to let Multipackaging take the production area and keep the offices.

“It was ideal. We are only paying factory rates which means we got all this area for what we are paying for just 150 sq.m. in Paris.

This has been a great leap forward, not just for us but for Malta as it shows that we understand that there is much more to manufacturing than just actual production,” he said.

The result of the €2 million investment was a reception with a sweeping wall that pays homage to the various brands it has worked for, and an innovation centre that includes a showcase of all the product lines.

“This is a trends wall,” he said, pointing to a series of mood boards and videos with themes such as art deco, black and white geometric patterns, and animal prints.

“We have a team that is constantly monitoring the worlds of art and fashion so that we can propose ideas to our clients,” he said.

The look of the packaging is only one aspect of innovation, however. The company uses new materials such as carbon fibre and new heat transfer printing methods, as well as cutting edge ideas for ways to dispense

“Toly’s business has evolved over the past 45 years and it has become a world leader. We had to make a huge leap forward with regards to our corporate presence. A world leader needs world-leading offices”

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INTERVIEW

precious drops of serums, or apply powders with built-in brushes. The creative team came up with a perfume bottle that lights up and dozens of different types of clasps.

Prototypes are made on 3D printers to be able to show clients what ideas would look like in reality – saving considerably on time and money.

“It costs us tens of thousands of euro to create a prototype,” he said.

Packaging is now also being made ‘smart’ and apart from dispensing the product also tells you when it is running out, for example.

“We constantly have to push the boundaries. We want to be the most creative in the industry

and we come up with over 100 new packaging concepts every year. We have to think out of the box!” he said, seemingly unaware of his pun.

In addition to its manufacturing bases, Toly has sales offices in the US, Brazil, Europe and Asia but many of the business functions like finance, logistics and sales had already been consolidated in Malta five years ago. These have now all been relocated to the new corporate centre, which now caters for 200 servers, 11 exhibitions and shows every year – “It costs almost €100,000 to take part with a suitable stand” – and sales in six currencies across all the time zones of the world.

“Many of our European customers are already talking about reshoring, bringing business back to Malta from our factory in China”

Each corridor and corner of the centre reflects the company’s values of people, passion, pride and creativity, whether 1.5m high portraits of its key personnel with their own quotes, a jigsaw-piece shaped table or the original tools and toys made by his father and company founder in the UK decades ago.

Malta now accounts for around a third of the company’s production and is the largest single manufacturing site. It can cope with 15 different lines a day – with a minimum order quantity of 10,000.

He is upbeat about the current year, after having seen business drop some 20 per cent last year, especially since the aim is to take

the business from €55 million to €100 million within a few years.

“There is no doubt that consumer demand for luxury products slowed down last year. But the variables are stacked in our favour at the moment with the euro crashing and now worth 15 per cent less than last year. And the electricity costs will go as from April,” he said.

“This will make the Maltese factory much more competitive.

Many of our European customers are already talking about reshoring, bringing business back to Malta from our factory in China. These are such exciting times,” he said.

“I hope you can see how passionate we all are about what we do.”

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| March 12, 2015

CASE STUDY

Business models need regular update in current economic climate The chief executive officer of a family-owned Belgian company believes that business models need to be changed every three to five years if companies are to survive – and Caroline Van Marcke knows what she is talking about.

She belongs to the third generation of a business started in 1929 which now has an annual turnover of €400 million, part of which comes from a little bank with a big heart tucked away in East Street, Valletta.

The odds are against the survival of family businesses beyond the second generation, but Ms Van Marcke thinks this is a great shame.

“I think there will be a revival of family businesses. If you see the turmoil that we are encountering now – both economically and politically – you realise that other business models are under stress. I believe that every business model needs to change every three to five years. You need to be flexible and you have to have a long-term vision. That is very complicated for non-family businesses,” she said.

She is a firm believer in the fact that the success of a family business depends on its values – and that these have to be accepted by all the family members.

“The family has to understand the business and most importantly that the business is not at the service of the family but that the family is at the service of the business.

There is a big difference.

“And for the business to survive, it must have a long-term vision; it has to have a soul,” she said with passion.

“You do not do it for yourself. It is a long-term project. It is about the people you employ, the community you work in. And each genera-

tion must communicate that to the next: the children know that if they do not want to stay in the business or if they do not embrace the same philosophy, there is a mechanism for them to move out. But those that stay know that they have to follow that philosophy.”

The Van Marcke Group sells sanitary ware, heating systems and kitchens via 142 outlets in Europe and the US – but these are products linked to resources with important sustainability impacts: water, electricity, oil and gas.

In 2000, when she was working in the marketing and merchandising division of the group, she came across a study conducted in the north of Belgium which found that residences were the biggest polluters with regards to carbon dioxide emissions, beating not only the transport sector but also industry.

“And what are the major factors?

Air conditioning, heating and warm water – all products that are part of our business.

“The study had a real impact on me so I went to my father and we decided that we had to make changes to make our company a sustainable one.”

“e business is not at the service of the family but ... family is at the service of the business”

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CASE STUDY

Apart from sourcing innovative, eco-friendly ranges for their portfolio of 26,000 products, they created a centre in Brussels to showcase the technology and explain to customers why some are better than others. They also set about ensuring that installers were properly trained in these new technologies by developing courses offered by the group’s own learning centre, the Van Marcke college, which now trains an average of 77 students on a daily basis.

“Sometimes the investment being made in these new technologies costs the equivalent of a new car so the client needs to understand why it is important to make such a financial commitment to get long-term rewards,” she said.

Indeed, one of the products provided by Izola Bank is an eco-loan, helping Van Marcke clients to purchase environmentally-friendly products.

“By allowing people to pay over a few years, it becomes much more feasible for them,” she said.

The roots of the bank go back much further – and wider – though.

Since 1979, her father had had a manufacturing plant in Malta, making office furniture. He loved the country and when changes were made to the Banking Act in 1994, he thought it was the perfect time to set up the bank he had been dreaming of. The group wanted a bank to handle the internal treasury

and transaction requirements of its 54 companies. Within a decade, it started offering factoring and then internet banking and a credit card to its group customers.

In 2009, it decided to offer services to Maltese customers, starting with a term deposit and it then launched a five-year €9 million bond locally. Last year it started lending to targeted Belgian consumers and the time was ripe this year for it to launch an online savings account for Malta – Izola Saver – with plans to also offer it to Belgian and French customers in a few months’ time.

The bank, located in an elegant townhouse in Valletta, is a far cry from the minimalist feel of many retail banks.

Its CEO, Andrew Mifsud, is the sort of banker who comes across as serious and dependable, in the best sense of the word. But he acknowledged that things have changed considerably since 1994, and that the time had come to reposition the bank and to communicate its new outlook.

“We started out as a very different type of bank in the sense that we were servicing the group companies. Over the last 10 years, we started venturing much more to the public: to the customers of the group in Belgium and France and also to the public in Malta. The vision of the group is that we will carry on building on that.

“We started an exercise a couple of years ago to understand the current image and brand and got some very valuable feedback.

There were obviously positive elements but there was room for further development and improvement of the actual brand,” he said.

They commissioned Visual Trends to rebrand the bank but the soft-spoken Ms Van Marcke was quick to reassure its stakeholders that while this exercise is part of the evolution of the bank, it would not be a revolution.

“Our group vision is to be a global challenger. But we are different; we have a different perspective of things. We are a family-held bank as part of a family-held group so for us it is the long-term vision that matters most. We will never take the short-term view; we are cautious, although this does not mean conservative. That is not what we are at all.”

What does she mean by a “global challenger”? When asked whether she wanted to have a branch on every high street, she joked “Never say never!” but the family has clearly its feet on the ground. In fact, the slogan of the current branding campaign is based on being the “preferred second choice”, knowing that the range of products they currently offer is too narrow to be a primary bank. And while the bank is proud of the eco-loans it offers to promote Van

Marcke’s green agenda, it does not intend to go into retail loans like mortgages and car loans.

“Internationally, the investment vehicles some banks use are sometimes very speculative. We would never do that. For the bank’s board of directors, it is all about knowing exactly where we invest our customers’ and our own money and understanding the risks involved.

That is what we mean by caution,” she said.

Unlike many of the smaller banks, Izola, which has just reported a profit before tax of €3.5 million with assets of €148 million, is not targeted at high-net-worth individuals. While its initial term deposits had a minimum investment

of €10,000, its Izola Savers platform will have a savings entry level of €25. Once clients open their savings account online, they can open a term deposit online using the funds in the savings account, with a minimum investment of just €500.

“We have always been there to deliver products and services to everybody. We have more than 20,000 clients, and while some of our clients employ thousands, many are just sole operators.

“What is important is that all our clients, whether large or small operators, are satisfied with our service. This has always been part of our philosophy and I do not see it changing any time soon,” she added.

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

EDITORIAL

e need for forbearance Banks have found themselves in an unenviable position, trying to maintain an impossible balancing act between the European Central Bank (ECB), their shareholders and their clients.

The ECB want banks to have ideally have clean balance sheets with no skeletons but it also wants more lending to entities like SMEs – who have high potential to turn into skeletons.

Shareholders want profits which will raise the share price and generous dividends and they do not want to see these eroded by impairments.

Clients want loans so that they can get on with their business, either slogging it out until times get better or seizing opportunities now that “creative destruction” has weeded out the competition.

Unfortunately for the main Maltese banks, they are being caught in a net which has been cast to catch foreign banks which either failed outright or have not been profitable.

Over the past decades, local banks made huge improvements to their risk management, and the ratio of non-performing loans has been slowly but very steadily falling. It was a painful process: there was time soon after the take-over of Mid Med by HSBC when the Government Gazette carried pages and pages of court auctions against defaulters who had been arrears for a considerable amount of time, assuming that no bank would ever dare to take action. Just as the banks were more careful about who they loaned money to, customers became more aware of their obligations.

Banking relationships became more about mutual respect and less about conflict-averse, ‘head in the sand’ approaches from both sides.

Banks in Malta also took a more prudent view many years ago with regard to the loans for speculative property development, as supply skyrocketed.

But the ECB’s asset quality review has forced them to accept a totally different view of their loan books. Bank of Valletta was found to have an underprovision of €16 million and HSBC Malta of €30 million.

This forced the banks to transfer would-be profits into undistributable reserves, having a material impact on their bottom line. In fact Bank of Valletta Group registered a pre-tax profit of €104.1 million, compared with €115.8 million last year, with an impairment total of €19.4 million.

HSBC Malta reported a 42 per cent decline in their profits to €52.1 million, with impairments standing at €22.5 million.

Shareholders want those impairments to be reduced as soon as possible – but clients whose accounts have been flagged as being in any one of the fifty shades of ‘doubtful’ need banks to show forbearance, one of the cardinal principles of banking relationships, and one which has contributed in no small part to the success of the local banks’ business models.

Forbearance is defined as both tolerance and restraint in the face of provocation, and the act of giving a debtor more time to pay rather than immediately enforcing a debt that is due.

Banks face a dilemma. To make the numbers look better as quickly as possible for the sake of the ECB and their shareholders, they can send out their big sticks, even though this will probably mean recovering only part – perhaps a very small part – of the amounts due.

But doing so would probably mean the kiss of death for their clients, right at a time when what they most need is forbearance: breathing space and hand-holding.

The short-term gains would whittle away the long-term relationships.

What will we have gained if we have banks with a squeaky clean loan book trying to operate in a graveyard of foreclosed businesses with no newcomers encouraged to take risks?

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

Publishers Allied Newspapers Ltd. Content House Group Ltd.

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BUSINESS OPINION

Are corporate service providers over-regulated?

Monica Galea John The Company Service Providers Act 2013 came into force in December 2013 implementing Article 36 of Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.

The act imposed for the first time on corporate or company service providers (CSPs) an obligation to register with the Malta Financial Services Authority (MFSA).

On March 21, 2014, the MFSA published the rules that supplement the act’s legal framework and include the more detailed regulatory requirements binding all those persons who offer company or corporate services by way of business as defined by the act.

The aim of both the act and the applicable rules is to ensure at all times that the persons acting as CSPs are persons of integrity, thus

curbing as much as possible the potential abuse of the financial system. The rules apply to existing or prospective company service providers who are residents of Malta or operate in or from Malta.

Among other things, they provide comprehensive guidelines on the application process, the financial and organisational requirements that each registered person is required to meet and also the conduct of business rules to be observed.

Barring the categories of corporate service providers who are exempt from the requirement of registration (e.g. lawyers, notaries, legal procurators and certified public accountants as well as persons or entities authorised to act as trustees under the Trusts and Trustees Act, Chapter 331, persons having a licence from a relevant regulatory authority in an approved jurisdiction), this act impacts a vast majority of CSPs.

Certainly since the publication of the rules in March of last year, all those practitioners subject to the act would have acquired a much better understanding of their obligations and have accordingly implemented substantial changes to their internal structures. Undoubtedly, they would have also understood that these obligations are both significant and onerous. Obligations range between obtaining prior MFSA approval for proposed changes to the constitutive documents of a registered CSP (including a transfer or acquisition of material ownership interests, cessation of business, dissolution or merger) to identifying whether activities of a company (formed by a registered CSP) are legal or require licensing in the country where they shall be carried out. While the former obligation may be a lengthy though achievable process, the latter obligation may be very difficult – if not costly – to apply in practice.

In this context, the office of the compliance officer takes on an increasingly important role. Every registered CSP is bound to appoint a compliance officer who is entrusted with overseeing the activities of the CSP, exercise proper day-to-day control and ensure adherence to the act and the rules by the CSP’s staff in practice on an ongoing basis. Essentially, registered CSPs must be able to display sufficiency of financial means and effective organisational attributes and resources, such as competent staff, staff training, decision-making procedures, clear communication and reporting lines, internal mechanisms of control, adequate business records and sound work, compliance and reporting procedures, including measures to safeguard the security and confidentiality of information.

A CSP is further obliged to appoint an MLRO which role may be fulfilled by the compliance officer.

“e rules apply to existing or prospective company service providers who are residents of Malta or operate in or from Malta”

Unlike in the case of the compliance officer, the MLRO must be an officer of the CSP of sufficient seniority and command. He/she must also satisfy all the requirements set out in the FIAU’s implementing procedures. No appointment to any of these two offices may be made without the MFSA’s prior written consent.

While one cannot dispute the fact that the act contributes towards maintaining high standards of competence throughout the sector and achieve a level playing field for all competitors, be they local or foreign corporate services providers operating from Malta, many practitioners fear that an overly strict regulatory framework for CSPs which inevitably brings about an undesired increase in the cost of regulatory compliance, may stifle the industry and harm business in Malta.

On the other hand, others do not perceive it as a potential loss of competitiveness but as a positive step towards ensuring at all times high standards of competence, integrity and corporate governance within their operations.

Long-term effect? Time will tell.

Meanwhile, we keep our fingers firmly crossed.

Monica Galea John works in the Financial Services Department of Fenech and Fenech Advocates

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APPOINTMENTS

Jugs Malta appoints new GM

CFO at PTL Group Marina Carabott has been appointed as the chief financial officer of the PTL Group.

She occupied the post of external auditor with KPMG Malta for five years, before joining Hili Ventures in December 2012 where she was involved with several key finance projects. In June 2014 she was appointed director of finance with Hili Co. Ltd.

Group head for Momentum International pensions providers Momentum Pensions Group has appointed Susan Brooks as group head of administration and investment.

The company has operations in Malta, Gibraltar, the Isle of Man and the United Kingdom.

Ms Brook has worked in a senior capacity in a variety of financial institutions, in particular Allied Irish Bank (AIB), where she managed its pensions unit. She also lectured in pensions management and policy at the National College of Ireland.

She is Momentum’s second major appointment of the year, following Paul Forman’s appointment as head of sales for the UK in January.

Jugs Malta has appointed a new general manager, Bernard Micallef Cann. He has been involved in creating and running team-building activities for almost 20 years.

He joined Jugs Malta as a fulltimer two years ago but has been deeply involved with the company since it was set up.

The company founders and directors, Josef Gafa` and Gianni Zammit, have been the driving force behind the company for almost 15 years.

Jugs Malta specialises in producing tailored activities and events. Jugs also provides audio-visual equipment and technical support.

GIANNI ZAMMIT, BERNARD MICALLEF CANN, JOSEF GAFA’

Strategic transition at Elmo Insurance Elmo Insurance has promoted two employees, Chris Cuschieri and Anthony Cauchi, as general managers.

In January 2015 the company’s general manager, Lino Ferris, retired from his position and was appointed special projects manager. Mr Cuschieri has worked for the company for the past 24 years while Mr Cauchi has been with the company for 20 years.

Originally formed as a result of a merger in 1981 between C&H Bartoli and Cassar & Cooper, Elmo became a fullyfledged local insurance company in 2004.

FROM LEFT: ANTHONY CAUCHI, LINO FERRIS AND CHRIS CUSCHIERI

New chief at Go Charmaine Farrugia has been appointed as chief transformation and business planning officer at Go. Ms Farrugia originally joined MobIsle Communications, a fully-owned subsidiary of Go plc, in 2000. She was recently heading the strategic marketing function at Go and over the past years she has been involved in driving strategic changes within the commercial function. Ms Farrugia also played a critical role in the business planning function spanning across the different departments at Go.

Lady Judge appointed chair of IOD The Institute of Directors has appointed Lady Barbara Judge, CBE, to take over the reins from Ian Dormer as global chairman as from May 1.

Lady Judge has enjoyed a broad and successful international career as a senior executive, chair and non-executive director in both the private and public sectors. She was a public member of the International Ethics Standards Board for Accountants, and deputy chairman of the UK Financial Reporting Council which regulates UK corporate governance and accountants.

In February 2013, she was assessed as one of the 100 most powerful women in the UK by BBC Radio 4.

Deloitte Global selects new CEO Punit Renjen has been selected as Deloitte Global’s new chief executive officer. Currently Deloitte US member firm chairman of the board, he will assume the new role on June 1, the start of Deloitte Global’s new fiscal year.

Mr Renjen, who has been with Deloitte for 28 years, succeeds Barry Salzberg, who will retire from Deloitte Global and become a full-time faculty member of Columbia Business School. Mr Salzberg also plans to serve on public company boards.

The Deloitte network is composed of 47 member firms, operating in 150 countries and employing more than 210,000 people worldwide.

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e Business OBSERVER

| March 12, 2015

STOCK MARKET REVIEW

Implementing QE in Malta

Edward Rizzo Following the announcement by the European Central Bank on January 22 about its €60 billion per month quantitative easing (QE) programme starting in March 2015, many questioned how QE will be implemented in Malta.

Executives of the Central Bank of Malta entrusted with the QE programme held an information meeting last week to explain the procedures for its implementation or, as it is now referred to, the Public Sector Purchase Programme.

The Central Bank confirmed that it would be required to purchase around €36 million per month in Malta Government Stocks between

March 2015 and September 2016.

The Central Bank representatives highlighted that the ECB promised that it would continue to purchase €60 billion worth of assets across the eurozone until inflation shows signs of approaching the two per cent level – with no definite enddate announced.

Any national central bank across the eurozone is allowed to purchase sovereign bonds with a maturity profile ranging from two years to a maximum of 30 years.

Naturally, since the longest-dated MGS matures in 2040, the Central Bank of Malta needs to limit any purchases to a maximum maturity of 25 years.

An important consideration for retail investors is that the QE

programme will only be eligible for minimum quantities of €100,000 (nominal) per MGS and therefore investors holding amounts less than this in any particular security cannot take advantage of this programme. Another important fact is that the ECB (via national central banks) will only buy in the secondary market and therefore will not be competing with other investors for new issues on the primary market.

Retail investors holding less than €100,000 nominal in any MGS would need to continue trading their MGS on the regular secondary market and the Central Bank made it a point to highlight that this QE programme will not conflict with its market making function which will

“e ECB (via national central banks) will only buy in the secondary market and therefore they will not be competing with other investors”

continue to be provided on a daily basis as we have been accustomed for many years.

In order to take advantage of the QE programme, a member of the Malta Stock Exchange (a broker) would need to negotiate with the QE desk at the Central Bank on behalf of their retail and institutional clients. Once a price is agreed, the trade will be conducted via the Over-The-Counter (OTC) market and not via the regular market where the large majority of trades take place nowadays.

Another change is that trading in the ‘QE window’ will close at 1.30pm on the OTC market rather than at 12.30pm on the regular market. There is also the possibility of negotiating deals until 2.30pm but the actual trade will then be passed on the following day.

Despite the change in the trading ‘venue’ and the timing, settlement of executed trades will still take place in the normal procedure on a T+2 basis, i.e. two business days after the trading day. The Central Bank will also be making use of its right to amend the indicative price list during the

course of its trading session. Currently, market participants and investors are accustomed to viewing the website of the Central Bank at around 10.30am to obtain the indicative bid prices at which the Central Bank is willing to buy and the offer prices – in the few instances they have stock available for sale.

The Central Bank explained that any changes to the indicative prices would be published by 11.45am and could reflect some QE trades conducted earlier on in the day. As such, market participants and investors need to constantly keep abreast of price movements during the day.

The OTC trades in the ‘QE window’ will not be visible on the website of the MSE. Instead, the ECB will be publishing the aggregate purchases of securities across the eurozone on a weekly basis.

Ever since the announcement in late January, many international analysts questioned whether the ECB would manage to implement its bond-buying programme given that – in view of the relatively low level of risk of government paper –

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STOCK MARKET REVIEW

banks, pension funds and insurance companies opt to retain sovereign bonds in their portfolios in line with regulatory capital requirements. The question is more pertinent to Malta given the particular circumstances across the local financial system with most financial institutions already holding very high levels of liquidity and a large number of retail investors also struggling to find a suitable number of investment opportunities.

This was exacerbated by the recent MGS issue which was insufficient to meet the extraordinary demand of €443 million; the Treasury will be refunding €260 million in the coming days.

Statistics indicate that 65 per cent of all MGS are either held by retail investors or financial institutions (banks). So if retail investors and banks, who already have high amounts of liquidity, are also in the market to purchase MGS, who will be selling via the QE window?

A further nine per cent is held by resident insurance companies which, most probably, would also be unwilling to sell their current MGS holding as the alternative investment options at the prevailing low yields will further disrupt their asset-liability management functions.

The ECB also revealed during last week’s press conference that it would also purchase securities

with negative yields, so long as these are not below the ECB deposit rate at the time of purchase, currently -0.2 per cent.

Although since the initial announcement on January 22, sovereign prices across the eurozone (including Malta) continued to surge and yields tumbled, this latest aggressive stance by the ECB may indicate that prices may rise further during the initial phase of the QE programme.

On the other hand, it is worth noting that if any national central bank cannot purchase sufficient securities to fulfil its allocation, the ECB will allow substitute bond purchases in a specific list of a number of international and supernational institutions and agencies such as the Council of Europe Development Bank, the European Investment Bank, and various others.

These substitute purchases should therefore enable the ECB to reach its €60 billion target each month across the eurozone. So local investors should not assume that the Central Bank will buy at all costs.

Moreover, although €36 million per month may be initially viewed as a large amount, an average value of €70 million per month was traded across the MGS secondary market during 2014, which increased to €82.7 million in January and a record €143 million last month.

“e Central Bank … will be required to purchase around €36 million per month in Malta Government Stocks ” 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

Holdings of MGS by Category as at December 2014

Others 12%

Non-Money Market Fund Resident 5% Individuals 35% Central Bank of Malta 7%

Resident Insurance Company 9%

Resident Credit Institutions 32% Source: Malta Stock Exchange & Central Bank of Malta

Further price gains from the additional demand coming to the market may well instigate certain retail investors to realise some of the extraordinary gains on their MGS holdings. However, many will question where to invest the resultant funds in order to generate a regular income stream. Without adequate investment opportunities from the private sector, many retail investors will possibly still be reluctant to dispose of their MGS, irrespective of the price offered.

Other investors may, on the other hand, view this as an opportunity to reduce their long-

term MGS holdings before some of these gains start to fizzle out. This is likely to happen once the QE programme comes to an end.

At a later stage, significant price drops can be expected from current levels, especially in the longer-term securities, once economic data begins to indicate that a recovery is gathering momentum as this would imply that interest rates will eventually start to rise. Although most international economists do not expect that rate hike before 2019, bond prices normally ‘react’ ahead of the event.

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

Given these unprecedented circumstances, market participants, regulators and other authorities need to openly discuss what measures are necessary to ensure a deeper capital market is in place that can fulfil the growing requirements of retail and institutional investors as well as support economic growth in Malta.

To facilitate this process, some regulations may need to be reviewed such as the free float requirement, i.e. the percentage of shares held in public hands when companies are conducting an Initial Public Offering.

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

University of Leicester upcoming courses With nearly 20 years’ experience providing distance learning programmes, the University of Leicester’s School of Management is recognised as one of the top management schools around the world.

The university provides flexible supported distance learning qualifications designed to meet the needs of a diverse student body. Students hail from around the world, ensuring an international focus to the MBA and MSc programmes. More than 100,000 candidates from over 80 countries have graduated from the prestigious Association of MBAs (AMBA) accredited Leicester MBA. FHRD represents locally the School of Management within the University of Leicester. This has provided Maltese students

throughout the last 15 years the opportunity to immerse themselves into their chosen area of specialisation and become leading practitioners. Upcoming academic courses include MBAs and Masters programmes in a number of fields such as marketing, management and finance.

Applicants wishing to pursue an MSc in finance by the University of Leicester can also benefit from a tax credit under the Get Qualified scheme offered by Malta Enterprise.

All training programmes are recognised and accredited by the National Commission for Further and Higher Education.

■ More information may be obtained by calling 2131 3550; sending an e-mail: dl@fhrd.org; or online: www.fhrd.org

db San Antonio Hotel inaugurated HSBC celebrates the Prime Minister Joseph Muscat inaugurated the db San Antonio Hotel + Spa as part of a new chain – db hotels and resorts which also includes the db Seabank Resort & Spa. With an investment of €32 million in refurbishment and extension, the db San Antonio was completed in a record time of six months and it is now the Maltese hotel with the second largest number of rooms.

Architecturally built in a Moorish style, its 515 rooms spread across 10 floors, enjoy state-ofthe-art comforts and amenities.

Residents and non-resident guests can choose from its five restaurants offering cuisines from around the world. Two of the restaurants will open their doors by the end of the year.

The db San Antonio Hotel also boasts four indoor, outdoor and rooftop pools, a fitness centre, spa facilities with Moroccan treatments and conference facilities.

Silvio Debono, chairman of the Seabank Group said: “In the last three years, our group has invested a total €72 million in the db Seabank and the db San

Antonio to offer excellence to all our guests. We have ambitious plans for our new hotel chain and we are looking at both the local and foreign markets.”

Vincent Degiorgio, director of db Hotels + Resorts asserted: “Over 30 companies employing around 900 people worked on this investment project. In addition, over 1,000 employees worked to supply it with goods and services to get it up and running. The job was executed with positive synergies throughout, making it possible to complete it in a record time of six months.”

power of technology HSBC Bank Malta plc is celebrating the power of technology through the launch of a Digital Week to highlight the benefits of digital banking to its customers.

The week-long campaign with the slogan Think. Feel. Do. Digital is running until Monday.

All HSBC Malta branches will display new posters featuring the various digital options available to customers.

A specially-conceptualised digital mascot will be visiting a number of branches to greet

and encourage customers to use the bank’s digital and automated channels.

HSBC Personal Internet Banking customers may try their luck at an online competition available on the HSBC website and stand a chance of winning an Apple iPad. The popular HSBC Mobile Banking App has now exceeded the 20,000 download, and the number of customers using the app to carry out their banking transactions has also increased considerably.

HSBC IS ENCOURAGING CUSTOMERS TO THINK, FEEL. DO. DIGITAL, DURING THE DIGITAL WEEK.

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e Business OBSERVER

| March 12, 2015

BUSINESS UPDATES

Pathways for the next generation of accountants Mario P. Galea

Curtain opens on the highlight of the Manoel eatre BOV Performing Arts Festival Rehearsals are under way at the Manoel Theatre as the production team, cast and chorus come together with the Malta Philharmonic Orchesta to ensure that everything is ready to bring Gaetano Donizetti’s comic opera L Elisir d’Amore to life this evening.

Premiered at the Teatro della Canobbiana in Milan on May 12, 1832, this opera was a triumph that secured Donizetti’s place as one of the leading Italian opera composers of his day.

The plot may be the standard poor boy falls in love with rich girl, with a series of complications in between leading to the ‘they lived happily ever after’ ending, but there is more to the production that makes it an enriching experience for audiences every time.

The production combines a touching love story and hilarious comedy with beautiful music, such as the much-loved aria Una furtive lagrima.

The performance will feature Maltese artists among the cast, including Cliff Zammit Stevens (alternating with Matteo Mezzaro) in the role of Nemorino and

Francesco Aquilina and Rosabelle Bianchi who share the role of Giannetta. Adina is played by Madina Karbeli and Shoushik Barsoumian, while Pilippe-Nicolas Martin and Valdis Jansons play Belcome and Emilio Marcurri and Luciano Miotto play Dulcamara.

Performances are being held today, tomorrow and on Sunday at 7.30pm, with a pre-opera talk for ticketholders at 6.45pm.

■ More information may be obtained online at www.teatrumanoel.com.mt and by e-mail: bookings@teatrumanoel.com.mt

Reliable electrical and plumbing services Mizzi Brothers Installations (MBI) is a privately-owned and locallyoperated family business offering high quality electrical and plumbing services across the Maltese islands through its dedicated and skilled team. MBI strives to assist clients by offering the best possible service and by seeing to all electrical, plumbing and drainage requirements.

MBI offers a highly efficient, dependable and punctual service at

competitive prices. Excellent payment terms can also be negotiated.We have been entrusted with numerous jobs, and whether we are working for homeowners or commercial clients, we always

aim to meet and exceed their expectations every time.

■ More information may be obtained by calling: 7988 8149 or sending an e-mail: simonmizzi26@gmail.com

It doesn’t matter where accountants carry out their work from. It doesn’t matter what means you use to work. What matters is that you reach your destination safely, punctually, steadfastly and pay due consideration to the interests of others.

The notion of accounting as a new profession in Malta in the middle of the last century was that of someone who keeps books and later also prepares the tax return. While the original notions remain, today’s notion of an accountant is far wider and more sophisticated.

Getting here was arduous. The business world has positively changed the way people live today, sometimes hurting people in the process. It has also changed the accountant’s role from one of detecting to that of preventing damage to society through unethical practices.

Today’s accountant is surrounded by volumes of standards, rules and regulations which channel the members of the profession into a narrow band of how to do things. This, however, by no means narrows the variety of disciplines that accountants engage in, but a red line of ethics runs through all that they do. So, for instance, if accountants keep books they cannot also audit them, and if they advise on a key number in the

balance sheet they cannot then also provide assurance thereon, unless they have all the necessary safeguards in place.

This state of affairs has not dampened the accountants’ character however, and their sense of judgement based on their extensive professional training and experience remains of undeniable value to business owners and company directors who report to society on their financial performance and health, as well as the readers of those reports; to the users of public money as well as the providers of capital, that is to society as a whole.

Today’s accountant has a role that brings him much closer to society. The culture, the social dilemmas, the regulation of the financial, business and accountancy worlds turned accountants into guardians of correct behaviour both within their own profession as well as of ethical conduct in their clients’ interaction with society.

Accountants lend credibility in whatever they do; a rather onerous statement to make. A responsibility which demands not only a lot of professionalism but also constant consideration as to why an accountant practices their profession beyond keeping books and tax returns.

An accountant’s place is in society.

Mario P. Galea is Chairman MIA Ethics Committee.

List your property and win with Belair and Hilton Belair Property recently announced its collaboration with Hilton Malta in a campaign entitled ‘List with us’, through which property owners who list their property with Belair are in for a chance of winning one of three grand prizes courtesy of Hilton Malta.

“The idea behind the ‘List with us’ campaign is to simplify the procedure for owners to list their property for sale or rental while highlighting the fact that Belair Property is synonymous with excellent service, based on carefully selected experienced and qualified property consultants who are there to guide owners on how to correctly price their property by giving crucial and honest advise on valuations, how to prepare their property for viewings by potential clients, as well as

giving expert guidance and advise on sale and rental agreements,” explained Reuben Sciberras, General Manager, Belair Property.

By simply completing a web form online via www.listwithus.belair.com.mt, owners will immediately be contacted by a Belair representative.

Apart from the promise of exceptional service, owners have the added benefit of automatically being included in the draw for a chance to win one of the fabulous prizes offered by Hilton Malta, which include a Saturday buffet dinner for four at the Oceana Restaurant; dinner for two at the award winning Blue Elephant Restaurant, and an amazing one night stay in a relaxation suite at the Hilton Malta.