The Business Observer Newspaper - 23rd April

INTERVIEW

Issue 24

|

April 23, 2015

Distributed with Times of Malta

e Registrar of Companies, Joe Caruana, has embarked on a comprehensive exercise to improve companies’ compliance – using both carrots and sticks. see pages 10 and 11 >

NEWS e dreaded eco-tax will be removed, but there are still a number of question marks over the WEEE regulations that will replace it. see page 3 >

Italian bid for Global Capital Vanessa Macdonald A company owned by two Italians has come forward to make a bid for the 48.5 per cent Mauritius shareholding in Global Capital, just days after the Malta Financial Services Authority suspended for 10 days the listing and trading of the shares.

EIP plc is part-owned by Paolo Catalfamo, who has a long career in asset management and private banking. Mr Catalfamo was also the honorary consul general for Mauritius in Italy.

He owns 10,000 shares in EIP, with the remaining 90,000 shares held by Andrea Zitelli.

“It is too early to say what we will do if the bid is successful. We saw the potential and made a bid, but we would clearly like to get involved in asset management, as that is my business,” Mr Catalfamo told The Business Observer.

Unable to comment further on

the bid, he confirmed that he planned to do “a lot of business” on the island, with one other company already set up as a special purpose vehicle.

The company was formed in Malta in May 2014 and its registered address is Ganado Advocates. Its memorandum of association lists various activities, with the main one being financing or refinancing the funding requirements of any group company. EIP has authorised share capital of €500,000.

Things unravelled when the majority shareholder in Global Capital plc, BAI Co (Mtius) Ltd, was put under the control of conservators by the authorities in Mauritius.

BAI Co. was placed under conservatorship after the banking licence of its sister company, Bramer Banking, was revoked after the Central Bank of Mauritius discovered a ‘Ponzi’ investment scheme involving $693

million at the bank. A Ponzi scheme involves returns being paid out to investors from incoming money rather than from genuine returns on investments.

Global Capital chairman and director Dawood Rawat tendered his resignation on April 3, while directors Arun Shankardass and Oumeshing Sookdawoor stepped down on April 17. Joseph Aquilina was appointed interim chairman.

Global Capital said at the time that its business and operations were totally separate and distinct from those of any of its shareholders, including BAI, and that the appointment of conservators of BAI did not relate to the business, operations or assets of the Global Capital Group.

Global Capital was the result of a merger in 2003 between Global Financial Services Group, which traces back to 1987, and British American Insurance Co., whose

roots in Malta go back to 1965. Through its subsidiary companies, Global Capital principally operates in three main areas: insurance, investment and property services.

It was listed on the Malta Stock Exchange in 2001.

Global Capital last reported its finances in August, when its interim report showed a loss before taxation of €966,897, compared with a profit of €65,541 for the same period in 2013, partly because of fair value losses.

The company has been restructuring, exiting its investment and advisory business and divesting of part of its property portfolio.

Global Capital has nominal share capital of €8.7 million, with 13.2 million shares listed on the Malta Stock Exchange, held by around 1,500 shareholders, which include one of Global’s founders, Chris Pace, Aberdeen Asset Management and Sparkasse.

OPINION More regulation of directors is needed to prevent them from moving on to form new companies after they have destroyed others, the Malta Association of Credit Management is arguing. see pages 5 and 6 >

CASE STUDY Vodafone decided some time ago to invest in 4G rather that Wi-Fi. CEO Amanda Nelson said that it was definitely the right option. see pages 12 and 13 >

e Business OBSERVER

|

April 23, 2015

3

NEWS

GRTU and ministry clash over eco-tax removal The Environment Ministry has issued a consultation document on the removal of eco-tax and its replacement by the WEEE Directive – but it has already met with resistance from the GRTU. All member states were supposed to transpose the WEEE directive into national law by 2004 and actually did so by 2006. But Brussels was not happy with the way Malta interpreted it and issued first a formal notice and then a reasoned opinion.

Malta had anyway pre-empted WEEE by introducing the eco-contribution in 2004, based on the ‘polluter pays’ principle, ostensibly making importers pay towards the recycling or treatment of a list of items ranging from beverage containers and mattresses to car tyres and fridges. It ranges from a few cents to €69.88 per item.

The new WEEE tax would 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, and would be implemented in two phases across various categories of products.

The promise to remove the unpopular eco-contribution was made in Budget 2015. It is estimated that the financial contributions imposed by the directive should be lower than those under the eco-tax regime for most products.

Minister Leo Brincat has already held separate meetings with the Chamber of Commerce, Enterprise and Industry as well as the Chamber of Small and Medium Enterprises (GRTU). He also plans to consult the Malta Council for Social and Economic Development.

One of the stipulations of the draft law is that importers need to take up one of the various waste management schemes by mid-June or

submit a plan on how they would align themselves with the Waste Electrical and Electronic Equipment Directive (WEEE) of the EU. The GRTU is demanding “without any reservation” a clear guarantee from the government that it will first exempt all those operators that between 2007 and 2015 were carrying their environmental obligations under eco-contribution, from the legal obligations under the WEEE Directive covering the same period.

“This is a cardinal point for the GRTU and a priority because it is not acceptable that an operator pays an environmental tax twice on the same product. GRTU will be evaluating the draft Legal Notice and will be consulting its members before presenting its official comments to the minister in the coming weeks,” the GRTU said.

The government is proposing to introduce a bank guarantee imposed on each self-compliant producer or third parties placing

“e new system will cover hundreds of items, a considerable increase compared to the eco-tax”

electrical and electronic waste (EEE) on the market showing that the management of all WEEE will be financed.

The level of bank guarantee is calculated on the basis of a flat rate per tonne of the average weight of EEE placed on the market in Malta in the three preceding years. A capping of €50,000 is being established such that the bank guarantee for selfcompliant will not exceed for individual producers.

By way of example, a self-compliant producer who places 50 tonnes of EEE on the market

would require a bank guarantee of about €10,000 in 2016 increasing to €15,000 in 2021. For producers placing more than 50 tonnes of EEE on the market, the bank guarantee would increase accordingly, to a maximum cap of €50,000 for a single producer.

The bank guarantees would provide cover against the costs required for the management of a producer’s WEEE if he defaults for any reason, limiting the government’s exposure to resultant liabilities.

The amendments also propose a fine at a flat rate of €750 per tonne of EEE for unregistered operators.

Collective WEEE management schemes will pay the proposed bank guarantee based on the waste placed on the market by its members – but this would comparatively be less than that required from selfcompliant producers.

The government estimates that the global bank guarantee to be paid by all the scheme(s) would range between circa €300,000 in 2016 to circa €460,000 by 2021.

The consultation is asking for feedback on the guarantees as well as asking whether any other changes should be made to the WEEE regulations.

It isalso asking for the main reasons why producers fail to register with the competent authority in a timely manner.

Eco-tax has to be removed by September 2015. The government brings in €7.8 million a year from it.

This consultation closes on May 8.

Feedback should be sent to consultations.msdec@gov.mt.

e Business OBSERVER

|

April 23, 2015

5

OPINION

Company directors should be well regulated Josef Busuttil The relative ease with which limited liability companies may be set up in Malta has made the protection of limited liability accessible to a large number of people. In reality, they may be unable or unprepared to assume the duties and responsibilities expected from company directors, fail to exercise adequate management skills, and lack proper regard to the financial interests of the company’s creditors.

Limited liability should strictly serve as a legitimate stimulus to generating entrepreneurial activity and in order to protect business people from their honest commercial mistakes and failures. But unfortunately, it is being abused by some of the directors of companies who deliberately or recklessly

cause their companies to run up unsustainable debts through overtrading, lack of planning or even fraudulent objectives.

These insolvent companies will consequentially end up in a liquidation process and finally be struck off the Company Registry.

The net result is losses of thousands, and in some cases millions, of euro to unsecured creditors.

If we truly expect transparency and honesty in the local business environment, companies and company directors should be well regulated. I strongly believe that a person who wants to assume the role of a company director (irrespective of the size, industry sector and type of company), should apply for some sort of ‘licence’, which would be obtained only after rigorous due diligence and training.

“Limited liability... is being abused by some of the directors of companies who deliberately or recklessly cause their companies to run up unsustainable debts through overtrading” This due diligence should include the past involvement/s and any history related to the person’s business/trade experience, while training is necessary to make sure that the prospective company director is skilled and competent enough to assume this role. I don’t expect that a director should read an MBA programme, but every director should be aware of the very basic skills in doing business.

Does it make sense for every company director to be familiar with pertinent business legislation and skilled in good business practices?

Should every company director know his or her obligations and responsibilities as articulated in the Companies Act? Should every company director know the proper employment process and the obligations and

responsibilities towards his/her employees, emanating from Employment Law? Should every company director know his responsibilities and obligations vis-à-vis VAT and tax legislation?

Should every company director know his/her obligations and responsibilities with regard to data protection legislation?

Should every company director be aware of some basic business ethics, fair trading and competition in order to have a better business environment for the benefit of our economy at large?

One of the main concerns in doing business in today’s business world is customers’ payment defaults, extending credit, late payments and bad debts, which can Continued on page 6

6

e Business OBSERVER |

April 23, 2015

OPINION

Importance of appropriate gearing Continued from page 5 have serious consequences on the local business environment and the economy.

The Maltese business environment lacks the necessary skills and awareness of the importance of maintaining appropriate gearing in order to sustain sound cash flow, which is the lifeblood of any business. Very often, Maltese trade creditors are being faced with customers who overtrade and who do not request and utilise credit responsibly. Hence, a company director should be well skilled in how to grant and manage credit to ensure sound cash flow and secure profitable sales. The way forward would be an obligatory basic business training programme.

What about directors who lack the required skills, integrity or honesty in their commercial dealings? Are these directors managing other companies – or, even worse, continuing to occupy the role of directors in them? Are these directors establishing new companies of their own, hiding behind different company names?

The Maltese Companies Act contemplates the disqualification of directors or company secretaries to combat this commercial abuse. The disqualification of directors aims at preventing new companies being deliberately established to avoid the debts of insolvent predecessors, thus maintaining the integrity of the business environment.

This act clearly states that upon an application of the Attorney General or the Registrar of Companies, the court may issue a disqualification order against any person if it is satisfied “that such person is or has been a director of a company which at any time has become insolvent, whether while he was a director or subsequently; and that his conduct as a director of that company, either taken alone or taken together with his conduct as a director of any other company or companies, makes him unfit to be involved in the management of a company.”

The law also stipulates that a disqualification order is an order whereby a person shall not, without the leave of the court, be “a director or company secretary of a company; or a liquidator or provisional administrator of a company; or a special manager of the estate or business of a company; or concerned in any way, whether directly or indirectly, or take part in the promotion, formation or management of a company, for a specified period beginning with the date of the order.”

Additionally, any person who, while being subject to a disqualification order, acts in contravention of it, shall be guilty of an offence and liable on conviction to a fine or imprisonment or to both.

Knowing this piece of legislation is in place is one thing, but is there the appropriate enforcement system to protect the local market and to deter improper conduct in the management of limited companies? If such a system exists, is it effective and efficiently implemented? Are all the directors of insolvent companies actually being

“Is there the right enforcement system to protect the local market and deter improper conduct?”

reported and investigated? Are liquidators giving the necessary information to the Registrar, so that an application would be made in court? Are the creditors of insolvent companies being asked to produce the necessary documents for investigation purposes?

In the UK, a Disqualification Unit within the Department of Trade and Industry operates with success. Insolvency practitioners in the UK have a statutory duty to report any directors of a failed company who they believe to be unfit. Although it

is not easy to prove ‘unfitness’ and bring up a case, according to the UK government figures there have been an average of 1,195 disqualifications a year.

The common criteria used to determine whether a director is unfit are ■ continuing to trade at the time when the company was insolvent; ■ failure to keep proper accounting records; ■ failure to prepare and file accounts or make returns to Companies House as required; ■ failure to submit or pay over to the Crown any tax which may be due.

The unit decides whether or not there exists a prima facie case of unfitness that justifies a case being brought. Once the court orders a disqualification, the UK Registrar of Companies is notified of the order, and the information is put onto the Register of Disqualified Directors, which is open to the public for inspection and is also posted online.

It is time local authorities give adequate thought to ways of effectively enforcing this legislation. Ef-

ficient means should be developed by which the commercial public, companies’ liquidators and possibly auditors, who are in direct contact with these insolvent companies and their respective directors, can report these people to the authorities.

It is also time that the police or the Registrar of Companies develop a team of forensic accountants.

This team is needed to investigate insolvent companies and to take the necessary legal action against directors who have contributed to the collapse by their negligence, misconduct or misappropriation of company assets, to the detriment of their creditors.

A director disqualification tribunal should also be considered to hear all applications for disqualification on the grounds of unfitness. Besides offering a fairer trial and better access to justice, a tribunal would also serve to promote the policy behind the legislation.

I would also refer to the number of local registered companies which are not filing their accounts as obliged by law. Comparing once again our scenario with that of the UK, there are financial penalties for late filing and the penalties are doubled if a company files accounts late in two consecutive years. Ultimately, a company can be struck off the public record. Additionally, failure to file annual returns or accounts is a criminal offence which can result in directors being fined personally in the criminal courts.

The honest directors of various Maltese companies need the legal protection their competitors in other countries already enjoy – to secure better business practice in the local economy and to enhance profitability. It is all well and good to enact legislation to help our economy improve, but what is the use of having legislation in place without implementing it with a proper enforcement system?

Josef Busuttil is the director general of the Malta Association of Credit Management. www.macm.org.mt

8

e Business OBSERVER |

April 23, 2015

INDUSTRY ?? FOCUS

Getting our heads out of the cloud Has it really only been a few decades since we walked around with brick-sized mobiles and all had a Hotmail email address? There is no doubt that the IT revolution has changed the way in which we do business – as well as organise our daily lives – but not all companies have kept up with the implications of the new way of doing things.

Take websites, for example. At first companies were merely uploading their brochures online, but they have now realised that the two media are different.

Jason Potter, the founder of The Other Guys, said that it was important to have a strategy which allowed both to work hand in hand, as they had different audiences – and impacts.

“It also depends on your business, as each has a different need or goal to both print and web based communications. It is part of our job not just to create but also to work together with clients to ensure both parties fully understand any objective or goals. In this approach we ensure that we are not just producing work but also educating and working side by side our clients to

produce a finished product that both satisfies the client’s needs/wants and also maximises their business goals,” he said.

Setting up a website is not an end in itself, however, and while companies understand the need to update their brochures on a regular basis, they do not always appreciate a website’s need for dynamic content.

Maurice Aquilina, the director of M7Alpha Creative Studios, pointed out that more often than not, the website provides the first impression for prospective.

“You’ve spent money, improved your search engine rankings and, finally, you’re getting valuable visits.

Do not blow it now! In the fierce online competition for exposure, you might not get a second chance.

“From a design and technical point of view, updates are crucial to keep your website up and running smoothly. You or your web designer/developer should schedule regular check-ups to all your site’s functions. See that your website looks and works well on various mobile devices and that no new browser release breaks anything,” he advised.

“On the information side, it is quite obvious that old, outdated content will give that same impression of your business; slow, sluggish, irrelevant. Frequent updates and fresh content will get your customers engaged and excited about what you have to offer… while

earning valuable search engine ranking points in the process. Bill Gates once said that ‘content is king’, just make sure yours is the one leading!”

IT has also changed the way in which businesses operate and there are now numerous software

development companies which realise that each sector has very specific requirements. ISB Ltd has specialised in real estate and hotels, for example, with considerable customisation offered.

“The ideal is to have a suite of inhouse developed, readily-available software solutions around which you build the concepts of customisation, flexibility and scalability,” director Alan Darmanin explained, adding that it also made ISB’s business model easy to export. In fact, ISB serves clients in Malta, Switzerland, UK, France and North Africa.

“This presents us with superb potential and possibilities to sell solutions internationally since real estate, hospitality and ecommerce businesses in various countries usually have varying business processes that would require software flexibility.

“No two businesses ever have the same needs and business processes, even if coming from the same country. Business decisionmakers have understood that the concept of one-size-fits-all software solution too often has undesired effects, usually requiring organisations to model their business

e Business OBSERVER

|

April 23, 2015

9

INDUSTRY FOCUS

around the software solution rather than the other way round,” he said.

Another company which has grown internationally on the back of its customisation potential is PTL. Business intelligence consultant Daniel Mangion believes that the best way for a company to grow is to deepen the bond with its existing client base by selling them more of its products and services.

“This approach – through acquired knowledge – then offers the spring board to selling the same services to new clients, thus increasing the client base.

“A business can also expand by moving into a new market, by introducing a new product or service or by optimising sales by learning about new delivery channels,” he said.

Of course, it is not only businesses that have gained from IT. Government agency Mita has also used IT to improve accessibility to government services.

An eID enables individuals to securely identify and authenticate themselves when transacting with government in any of the available online services. The eID was introduced in 2005, and its take-up amongst organisations was substantial, however its use amongst citizens remained relatively low, Mita’s Roderick Spiteri said.

“Today, in total there are about 61,000 active eID accounts. With the aim to increase take-up, the eID account is being provided to all citizens as part of the National ID Card rollout process, which is expected to be completed by September 2015,” he said.

“The eID system is critical for certain services that require secure authentication, such as taxation and health services. In fact, it was reported that in 2014, 97 per cent of corporate tax returns were submitted online.”

He is still not content, however, believing that the increase in utilisation of eServices among citizens needs to be promoted further.

“An exercise is being conducted to simplify the authentication process, increase usability and facilitate accessibility. Furthermore, a review is being performed to ensure the eID authentication process is

applied only where necessary,” he added.

Software can help businesses gather information but that in itself can create a problem: data overload.

Dominic Scicluna, the head of business development at Exigy, is an advocate of business intelligence.

“Normally, the power of a business intelligence (BI) tool is not evident until it is actuallyimplemented, at which time deficiencies and inefficiencies within the business are exposed.

“The benefits of the tool are reaped in when the business gets aligned and starts reacting to its data trends. These patterns and trends will emerge through the tool’s powerful reporting functionality, which provides a 360 degree view of the business at a particular

point in time and drives more accurate budgeting and forecasting.

“As different users start using the system, they will immediately recognise the insight the tool delivers across all levels of management. BI provides easy access to the right data at the right time, driving more proactive decision-making,” he said.

“Perhaps the most challenging step is to get the business to trust the output of BI. Once such a hurdle is overcome, the requests for new information will grow up to an extent that the system becomes an indispensable tool for the business.”

With software getting so much of the attention, it is easy to overlook the hardware. Paolo Dellamano, managing director of GC Renting which operates the Grenke franchise in Malta, warned that because

of the extremely quick development of new software dedicated to business, and as they need more and more powerful performances by the IT where they are installed, IT equipment should be changed at least every three years if not two.

“There is also a problem linked to the material obsolescence of the electronic components of computer motherboards and chipsets that after two years of heavy usage start to deteriorate.

“This is the reason – for example – why the warranties given by more or less all the IT brands on electronic parts have a maximum extension of two years! They perfectly know that after this period of time several problems may happen.

“At the end of the day, it’s really more expensive to keep IT

“Maltese businesses assume they are operating off the radar and therefore exempt from security threats and disasters”

equipment efficient after three years than to change it with the very latest technology.”

It is not only software and hardware that can fail. The overwhelming reliance of companies on IT can leave them vulnerable to everything from data theft to data loss.

Curt Gauci, director and cofounder of Kinetix IT Solutions, believes that the weakest link tends to be devices.

“There is no denying that mobile devices have totally transformed the way we work. In our experience, however, most companies are not aware of the threats they are exposing themselves to in terms of data leaks – and are definitely not prepared to handled them “The largest corporate security vulnerability is data loss and it is getting harder to protect it. With greater work flexibility comes greater vulnerability to data loss or security breaches. How many times have you left your tablet, mobile or even laptop behind? The unfortunate thing is that it usually takes such occurrences to sound an alarm bell with business owners, alerting them of the importance of implementing a data leak prevention strategy,” he said.

“Maltese businesses assume they are operating off the radar and therefore exempt from security threats and disasters. Threats to a company’s critical business data present themselves in various forms, from data leaks, hardware and system failures, human error and viruses, to burglary, power surges and blackouts, among others! With disasters like power cuts and floods, all too many companies assume these could never happen to them,” he said.

“Thankfully, Malta is not particularly affected by natural disasters.

International research and reports state that of the companies that lose their data in disasters such as these, 90 per cent are out of business within two years and nearly 50 per cent never reopen their doors at all.

If this alone does not sound any alarm bells, simply think of the repercussions – the time and money lost should you experience a massive system failure and lose all your business data.”

10

e Business OBSERVER |

April 23, 2015

INTERVIEW ??

Ensuring businesses have the truth, the whole truth and nothing but Vanessa Macdonald The Company Registry is going on the warpath against companies that do not file their annual reports and accounts – but don’t expect any banging on drums. That is simply not Joe Caruana’s style.

He has been Registrar of Companies since 2011, and has been slowly but steadily introducing a more proactive approach, realising the importance of of paying more attention to who companies appoint as directors – especially when these have a disreputable business record – and to timely filing to enable businesses to take informed credit management decisions.

Consider the latter: in 2014, 20,000 sets of accounts were filed with the ROC. But there are around 45,000 active companies. Even when you adjust that figure for shipping companies that do not need to file accounts, it still means that around 13,000 could be in default.

But that word – ‘around’ – is important. There have been over 69,000 companies registered since the ROC was set up in 1965, and while around 1,000 are dissolved every year through ‘natural causes’, there are almost certainly others which are no longer active but have not been dissolved.

Mr Caruana admits that there might be many reasons behind the delays, and he is anxious to clean up the records to get a clearer picture of the reality.

“Statistics is perhaps not our strongest point,” he said wryly. “I am trying to tackle this, a bit at a time. We look at companies which have not filed annual returns or accounts and paid the registration fee for one or two years in a row and start the ‘defunct’ process,” he said.

JOE CARUANA

This legal process involves sending a letter to the company and verifying that it has been received. If there are no objections, three months from the date of publication of the notice they are struck off.

“So far, 3,600 companies were declared defunct since the Companies Act came into force in 1996. We started going through the files slowly but have recently been accelerating the process. We want to avoid the carelessness prevalent with regard to the filing of accounts,” he said.

Mr Caruana would certainly like to see the process made easier for companies which choose to dissolve, as it is currently unnecessarily

costly to do so – rubbing salt into the wounds of any companies going into dissolution because they are not doing well.

“As it stands, shareholders have to appoint a liquidator and an auditor. I would like to change this. If it is a private company, which is solvent at the time they wish to dissolve, with no creditors or no problems settling their debts, why not allow them to get by with just a liquidator? In the UK, all they have to do is present a declaration to the registrar and they do not even need a liquidator!” he argued. The data clean-up process is a distraction from the huge workload already carried by the ROC.

“We look at companies which have not filed annual returns or accounts and start the ‘defunct’ process”

Its 31 staff had to deal with the registration of over 5,200 new companies in 2014, compared with just 2,400 in 2004. The numbers have been going up sharply since 2010 and, now that it seems fairly safe to assume that the trend will continue, he is planning to add five new staff by the end of the year.

New registrations are only one aspect of the work. Just as important is their maintenance as they send notifications – such as increases in capital, changes in directors, etc. – which need to be vetted and registered as promptly as possible, tens of thousands a year.

However, the late or non-filing of accounts is something that he would also like to tackle as a priority.

“The majority of companies do file their accounts – they are usually the ones that are doing well.

The ones that don’t could be going through a difficult patch, or might disagree with their auditors, or perhaps the auditor himself falls behind and misses the deadline.

“To me, this issue goes beyond the filing of accounts: it is a concern that there are still people who do not actually believe in the need to have accounts or to audit them, especially sole traders who see it as a waste of time if there are no other shareholders. We try to be pragmatic, but the law is there and there is really no excuse.

“There are also some companies which simply do not want other people to know how they are doing, whether they are doing well or doing badly,” he said with a hint of frustration creeping in.

The fines actually charged to defaulters are only a fraction of what is permissible by law. Does this send out the right zero tolerance message?

e Business OBSERVER

|

April 23, 2015

11

INTERVIEW

“We charge just a little over 1 per cent of the maximum allowed: €25 and then another 50c per day. Even then, people complain that the fines are too high as they accumulate so fast, especially if more than one year’s accounts are overdue. I can assure you that even at the levels that we charge the fines, they are already a deterrent.

“But if we were to apply the maximum, not a single company would ever be registered! In the future we might consider changing the fines to an increasing scale depending on how long the company fails to submit its documentation.”

In an ideal world, the fact that a company does not file its accounts would be enough of a red flag for its clients to walk away – but unfortunately, there are enough cases in court to show that many businesses get bitten.

Mr Caruana knows that this is something that needs to be tightened up. Last year, the ROC issued 500 warning letters about unfiled documents and unpaid fines, and while most companies regularise their positions when they receive notification, those which ignore them get a judicial letter and are eventually taken to court.

“There are many people who drag their feet and try to avoid paying the fines for as long as they can.

The problem is that enforcement drains our resources and creates even more work for us,” he said, stressing that he is more interested in improving compliance than in issuing fines to defaulters.

One way to do this is to make the system more proactive. Recent investment in IT means that the ROC will soon be able to send a reminder to companies when their returns and accounts are due. The system, currently in testing phase, will then notify them again once the deadline passes and fines start to accumulate. And after a specified time, the fine itself will be issued automatically.

“At the moment this has to be done manually,” he said. “We have no alert system, so a desk officer might not notice that a company is in default for a year or two, by which time the fine will have accumulated.

If we had a way of warning them that they are in default, the company could take action sooner.

“We are now asking companies to send one or more e-mail addresses to which notifications can be sent. This information should be sent to systemsupport@ rocmalta.com.mt.”

Mr Caruana is adamant that the ROC is not there to punish firms.

For example, there are sometimes minor – and obviously genuine – errors in documents submitted, such as typing errors, incorrect ID cards and balance sheets that do not match up. In such cases, the ROC logs them as having been received, stopping the ‘clock’ that would otherwise lead to fines for delays. However, he hopes that the advent of company service providers will

improve the situation – especially for new companies.

“Now we have added an element of due diligence as the company service providers are registered with the MFSA to provide this service, including assisting in the setting up of a company, drawing up their memorandum and articles of association, providing a registered office on their behalf and often even acting as directors. They are also obliged to do due diligence on their clients, although admittedly this is mostly aimed at the prevention of moneylaundering,” he said.

“I hope company service providers will go beyond setting up a company and will guide their clients with regard to their obligations. Directors have huge responsibilities under the Companies Act, with regard to the health and safety of employees, payment of VAT and income tax and so on.

“We have actually drawn up a sheet which we send to all new companies which briefly outlines these issues. But I agree that some people take the decision to become a director too lightly.”

Of course, some of the companies which do not file accounts – as well as some which do – have something to hide, but Mr Caruana was clear about the duties of the ROC. “The registrar’s obligation is to ensure that the accounts are correct and are published. It is never foolproof. If someone wants to commit fraud, they will almost always find a way. But that is for the police and the courts to handle.

This was never the registrar’s role.

The registration of a company is everyone’s right – although it is not there to be abused.”

The ROC has some powers which it does not – at least yet – wield as effectively as it could: disqualifying directors. It is terrifyingly easy for someone who has acted dishonestly or in bad faith to set up another company and become a director again.

The Attorney General and the ROC have the power under Article 320 of the Companies Act to ask the court to disqualify someone from being a director – for a particular length of time.

“As far as I know, no-one has ever been disqualified in Malta,” he shrugged. “The problem is that, as with any other court case, you have to have proof. And it is a very costly procedure, not one this office would undertake lightly unless there were a very good chance we would win.

“We want to make sure that companies do not get bitten by people with a history of acting in bad faith.

We must find a way to do this.”

The court can disqualify a director who meets two criteria: if the person was a director of a company which became insolvent; and it is clear that his conduct makes him unfit to be involved in the management of a company.

“If we know of cases, we might consider doing something about them. I would like us to be proactive,” he insisted.

“It is a concern that there are still people who do not acually believe in the need to have accounts or to audit them”

“I did come across someone who was being appointed as a director who I knew had been convicted – and we stopped the process. We also check the lists of people who are interdicted and in such cases, we instruct the com-

pany on how to proceed. This would apply to people convicted of fraud, theft, crimes affecting public trust or receiving stolen goods. But if they appeal, then you have to wait until that process has been exhausted,” he said, adding

that very few people who were convicted would actually attempt to become directors again.

Once again, Mr Caruana’s sense of fair play was evident: “I feel that the clauses are rather harsh as there is no time limit associated with this. For example, if you had someone found guilty of stealing a car stereo when he was a teen, it means he will never be able to become a director, no matter how much he reforms. Perhaps here it should depend on the gravity of the crime, as it is in the UK.” The IT project will help to tighten up the system. For example, it could cross-check the proposed director with his other involvements, and if he is also a director of other companies which are behind with the filing of their accounts, the ROC will suspend the registration of the new company until the position has been regularised.

“You have to prioritise. The workload is considerable with some 30 new company registrations a day. But the most important thing is that the word will spread and companies will realise that we mean business.”

12

e Business OBSERVER |

April 23, 2015

CASE??

STUDY

4G rather than Wi-Fi ‘no-brainer’ – Nelson The choice to invest in 4G rather than Wi-Fi was a “no-brainer” as there was no comparison between the two technologies, the chief executive officer of Vodafone Malta Amanda Nelson said.

“Nowhere in the Vodafone Group have we implemented WiFi, and for very good reasons.

“4G is extremely high speed, between two and 10 times faster than public Wi-Fi according to our measurements.

“People think about home Wi-Fi which is shared with just a few people and which is relatively secure. It is very different with public Wi-Fi, which is not always

secure. There is no password and since you cannot control how many people are going to be using it at any point in time, the operators cannot give any kind of guarantee on speed.

“Of course, the closer you are to where the Wi-Fi is transmitted, the better the signal, as with any technology, but the difference is more extreme with Wi-Fi than with mobile,” she said, adding that for people on the move, the experience with Wi-Fi was not as seamless as it would be for mobile.

“Another thing that people overlook is that when you open up

people’s home Wi-Fi to public use, you are still using their electricity!

I don’t think anyone has ever asked for their permission as it is all in the terms and conditions!”

Vodafone Malta introduced 4G 18 months ago and is still the only operator offering the service – at present covering 70 per cent of the country.

“I can assure you that it is the right 70 per cent,” she smiled, noting that the most densely populated areas had been covered.

“I cannot tell you exactly when the remaining 30 per cent will be covered, as that is commercially sensitive, but we will

“Vodafone realised it had to act fast to ensure that the (4G) service did not get a bad name when people received their bills”

be going for 100 per cent nationwide coverage.”

The shift to 4G took many by surprise as the quantum shift in speed – five to 10 times faster than 3G – meant they could consume considerably more data – even though they may have been browsing for the same length of time.

“For example, You Tube videos load faster, so you can watch more of them,” she explained.

This generated a number of complaints when people received their bills, but Vodafone realised that it had to act fast to ensure that the service did not get a bad name.

e Business OBSERVER

|

April 23, 2015

13

CASE STUDY

“People are afraid of bill shock with data, much more so than with voice where they know what a call will cost. However, the reality is that 90 per cent or more of those who use 4G are within their bundles and were not paying anything extra. We do appreciate that if you make data easier for customers to use you need to adapt your pricing and way of charging for it.

“We have seen data growing not just this year but also in previous years, including with 3G, and we have been adapting as we went along,” she said.

Vodafone Malta tackled the issue in four ways: lower rates; notifications about usage; larger allowances for business users; and an educational campaign.

It introduced 80 per cent lower rates for out-of-bundle usage of just €2 for 100MB – a few days’ worth for the average user – and whereas before notifications were sent only when people had reached 80 per cent and then 100 per cent of their usage, they are now being sent one after each €10 extra has been run up.

“While we were developing the automated notifications, we were actually calling people if they were coming to the end of their bundle, and adjusting their pricing manually,” she said.

For heavy users they also brought out large add-on bundles, while the Red business tariffs also include hefty data allowances: the Red Premium allows 5GB of data and the Enterprise tariffs up to 8GB. Ivan Zammit, the head of the Enterprise Business Unit, said business models were changing.

“There has been a tremendous shift in the way businesses use fast mobile networks to mobilise their workforce and increase productivity – as well as making sure that customer care can also be given outside normal working hours.

Apart from this, mobility gives employees flexibility in terms of work-life balance.”

The education campaign is also very important, as many people are not really aware of their data

usage, especially when it comes to social media. For example, Facebook videos play automatically unless the phone settings are changed, and some apps also use high-definition video as a default.

Even with Whats App, there is a great difference in data usage between text, photos and videos.

“This has been part of our Relax campaign. Our radio ads, brochures and website explain what you can do with 100MB and of course our staff in stores are also there to help,” he said.

The changes to pricing do not apply only to 4G data: there has also been a massive reduction over the years in roaming, much of it under pressure from the European Commission. However, Ms Nelson said that some of the initiatives went beyond what had been mandated.

“We offer a very low rate for roaming – not only to the EU but also a cluster of other countries where Vodafone is present, such as Australia, Egypt and so on. We also have a daily rate of €1.50 if you are in the UK or Italy. Unfortunately, there are some countries where we cannot charge a low fee as the cost to us is very high.”

Europe is still not satisfied with the significant decrease in roaming tariffs, and there is still debate on whether the way forward will be a full ‘take your home tariff abroad’ approach or a daily allowance, although Ms Nelson believes the former is unlikely.

“The reality is that our premium tariffs have really large roaming and international calling bundles so that they are worry-free for our very-high-value customers. But there are also many people who only need roaming once or twice a year who would not want to pay extra every month, which is why we believe in the daily rates,” she said.

Ms Nelson admitted that the roll-out of 4G had used up more than the company’s normal annual investment, but the Vodafone Group had made a two-year global investment of billions of euro which Malta was still tapping into.

AMANDA NELSON

“We have been over-investing for a few years to get 4G, and the level of investment will not drop back.

I can tell you that network improvements are our top priority”

“We have been over-investing for a few years to get 4G, and the level of investment will not drop back. I can tell you that network improvements are our top priority – though I cannot disclose what and when. I can tell you that IT and improving the customer ex-

perience are right up there too, around billing and online.

“Another investment you will have seen this year is on the retail experience. Our new destination store in Birkirkara, with its very different look and feel, will remain the key destination store for us.

We are also going to be investing in other retail outlets,” she said.

Another investment which has proved to be very popular is the free upgrade to high definition for Vodafone to Vodafone voice calls – for those with the appropriate handsets – which now account for one in every five calls.

“We have already had four million calls on HD Voice and since we recently also rolled it out to our 4G customers, use will grow dramatically. Customers notice the difference immediately as there is no background noise when you are speaking, which is especially good when you are in a busy place,” she said.

Vodafone may already have an investment plan, but things change constantly. Recently, for example, the Malta Communications Authority launched a consultation paper on the wholesale access to Go’s planned fibre-tothe-home network. Would it interest Vodafone?

“Yes, it would interest us. If you look at our strategy in Europe, Vodafone is moving from being a mobile-only operator and fibre is the most future-proof technology.

So yes, we would always look at opportunities, although I cannot guarantee or commit.”

Vodafone already uses fibre to provide telephony and broadband connectivity to offices and large business, Mr Zammit explained.

Ms Nelson added that Malta “absolutely” needs an FTTH network as cable would not be enough to cope with customer needs – but that Go could not shoulder the burden alone.

“I believe that the best way to go about this would be to have a network with fair access. Otherwise it would probably not happen fast enough as you would need more than one operator to justify building the network. We would also need a lot of government support because of the practicalities of building that sort of infrastructure in Malta. That would be our position: do it once; have some kind of independent infrastructure provider; and then compete on service,” she said.

e Business OBSERVER

|

April 23, 2015

15

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

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

EDITORIAL

More direction needed for directors The interview with Registrar of Companies Joe Caruana and the opinion piece by Josef Busuttil, the director-general of the Malta Association of Credit Management, raise very important points which could have farreaching consequences.

At first glance, the routine filing of new company registrations and chasing them to file their annual accounts on time seem far removed from controversy. However, the two articles in this issue of The Business Observer show how much more can and should be done to prevent the tainting of the local economy by abusive company directors.

To start with, it is alarming that no company directors have ever been disqualified under Article 320 of the Companies Act. It has never been invoked, in spite of many high-profile cases over the past years, cases which left many creditors high and dry.

There are cowboys in every economy, but the fact that these can leave a trail of destruction behind them and set up a new company without setting off any alarm bells is terrifying.

It is also worrying that there are some 13,000 companies – out of 33,000 eligible ones – which did not file their annual accounts. Even if you take into account that many of these are probably inactive and simply cannot be bothered – or cannot afford – to dissolve, that is still flagrant disregard of the law and means those doing business with them are not taking informed decisions.

When so many companies are flouting their obligations, it is no wonder that proper credit risk assessments are near impossible. And it is no wonder that so many deals go spectacularly wrong.

Unfortunately, those bitten by deals gone wrong all too often put it down to bad luck – or worse, as just a business hazard to be expected – and do not take it any further.

We must stop accepting this lackadaisical way of doing things. In the past, there were many more filters, from the guilds that kept tight control over their membership to the dormant register of traders (still in the Commercial Code, requiring a Chamber of Commerce, Enterprise and Industry certificate of good conduct).

Directors that infringe the clauses of the Companies Act should be disqualified – and as publicly as possibly – to prevent them from cheating others. Companies which do not file accounts for a set number of years should be declared defunct.

At the moment, the deterrents are hardly working. Only 1.0 per cent of the actual fine for late reporting is being applied – and only 3,600 companies have been declared defunct since the Companies Act came into force in 1996.

Mr Caruana pleads for a more lenient approach, such as having specific periods of disqualification linked to the severity of the infringement or crime. He also argues that the fines for late filing mount up quickly and are quite substantial even at 1.0 per cent of what could be charged.

His humane approach is all well and good – but only if there is enough enforcement. Carrots only work when there is a stick in the other hand.

The Registrar of Companies is well aware of this and is tackling it on a number of fronts. He is no longer relying on manual checks to identify which companies are in default – and is setting up an automated system for notifications and the issue of fines. He is also checking to see which companies should be declared defunct.

He has an important suggestion on simplifying the procedures required for dissolution, while Mr Busuttil has equally-valid suggestions on ways to ensure that directors fully appreciate their roles and responsibilities.

Trust is a cornerstone of business. But should trust be blind?

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Allied

N E W S PA P E R S

A M E M B E R O F T H E A L L I E D G R O U P O F C O M PA N I E S

Advertising Enquiries Tel: 21 320713 Email: info@contenthouse.com.mt Advertising Sales Petra Urso Publications Sales Manager Darren Agius Advertising Sales Executive

Printer Progress Press Ltd.

Progress PRESS

A M E M B E R O F T H E A L L I E D G R O U P O F C O M PA N I E S

BUSINESS OPINION

Malta’s growth potential in focus PHOTO: MATTHEW MIRABELLI

Philip von Brockdorff Last week I was asked to give my reactions to the latest Malta Country Report by the European Commission at a conference organised by the EU Representation in Malta.

Such conferences are not only very useful but also provide opportunities for insights into our economy.

Despite one of the lowest levels of GDP per capita and accounting for less than 1 per cent of the total eurozone economy, we have seen consistent economic growth.

This mainly reflects growth in our potential output, which depends on the way the economy is structured, the level of technology and its economic resources.

The economy is expected to grow further this year – around 3 per cent in real terms. What is also evident is that we are moving fast towards more diversified and value-added services, partly explaining why the capital intensity of the Maltese economy is among the lowest in the EU (more pronounced in the private sector).

We have seen labour’s contribution to potential output growth

rising as a result of increasing participation by women in the labour force (the largest increase across the EU) amid very low unemployment.

The net effect of this is that the gap between actual and potential GDP has virtually closed. The question that needs to be asked is whether this momentum can be sustained in the next few years with relatively low levels of capital intensity in the private sector, an especially-low level of labour efficiency, and levelling out of further increases in participation by women.

These pose challenges to maintaining our economic growth momentum, though there has been a noticeable increase in investment and private consumption in recent months (a significant contributor being government consumption).

The increasing shift to value-added services (which would in part explain why our capital investment remains relatively low) has also had a positive impact on our current account of balance of payments, though the continued rise in tourism services has significantly

contributed to our exports. The significance of the depreciation of the euro and how it affects our competitiveness cannot be downplayed either. The euro value could further impact the economic growth rate, and our economy is becoming increasingly exposed to the exchange rate of the euro especially as we seek new markets outside the eurozone and in non-EU countries.

The Country Report states that rising employment has masked a “sluggish productivity performance”, and that our labour productivity

“e gap between actual and potential GDP (in Malta) has virtually closed. e question is whether this momentum can be sustained in the next few years”

stood at only a third of the EU average in 2012. The reality is that we have low expenditure on research and development and therefore very limited product innovation We have known this for years, but can we realistically expect an economy the size of ours to provide a regular stream of innovative solutions and products as in economies the size of Germany or France?

Our innovative solutions are aimed at addressing our perennial problem of scale. Yet there is hardly any recognition for such solutions which have facilitated economic growth in our economy. How else would one explain low levels of unemployment amid increasing participation by women and despite relatively-low levels of productivity?

Though there is further scope for increasing participation, especially among women and older persons, women’s participation is unlikely to increase at the same rate as in recent years. But with an increasing number of vacancies being filled by non-Maltese, any restrictions to labour supply would be offset.

It is evident that such solutions are needed to maintain economic momentum. What we cannot legislate for is the continued unrest around the Mediterranean and the extent of economic recovery in the eurozone. Given our vulnerability to this, our economy’s potential output would need to grow much higher than our eurozone partners’. That is not easy to achieve year in, year out.

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

e Business OBSERVER

|

April 23, 2015

17

INTERVIEW

A duty of care – but to whom?

On June 1, David Sproul starts his second term as chief executive of Deloitte UK. Vanessa Macdonald asked him about the wide-ranging debate on the future direction of auditing.

Who is an audit aimed at?

The shareholders, the public interest, the business model used by management?

That question has been asked by many people. Many investors say the audit does not give them what they need. But when you ask them what they do need, they are not sure.

What is the purpose of the audit?

Firstly an audit has to be seen in terms of the whole annual report and what is disclosed.

One of the debates is that they are getting so long and include so much information that it is impossible to sift through. Is all that information actually helpful?

The second thing is trying to understand exactly what an audit is there for. Certainly we have seen that extended reporting gives auditors the chance to explain more clearly the process they go through when determining the main risks in a company.

I am not sure I know what the destination is, but we are definitely going through change.

In 2013 you said an audit was a review of financial instruments, not an assessment of the business model. But this seems to be what people are after: to know if a company is sustainable ...

Of course, if we think that the business model is not sustainable from a purely financial point of view as a ‘going concern’ over the coming year, obviously we would have to pick that up.

It takes you back to the opening point about whether an audit is for shareholders or directors. Directors would probably, in the main, say it is the job of the audit committee, the risk committee and the board of directors to manage a company’s sustainability. They do not need that external verification.

“Technology will make it far easier to identify control weaknesses, or if things are being processed in a way which is creating a misstatement”

DAVID SPROUL

Is it part of the role now? No, it is not. Could it be? Yes – but it would come at a price.

Deloitte was the first firm to do an extended audit (of Vodafone in 2013). Since then you found 290 risks of material misstatement in 73 audits for FTSE 350 companies.

What would have happened had those risks not been identified?

It is unclear. It would not be right to say that had they not been identified there would have been an audit failure, for example.

Would the company have failed? It is impossible to know

as it depends on what else was happening in those businesses and how they reacted to the red flags raised, whether the remedies and the improvement in controls would have otherwise happened.

When you find those risks, you have to make sure that the company responds, but it is hard to extrapolate from that and say that there would have been a bigger financial failure.

The risks are based very much on the information you are given.

With public interest entities, the

intention is for auditors to take on a more investigative role and to also look for information that you are not given. How on earth would you price that in?

Auditing has always been based on sampling as you simply cannot look at every single transaction.

We can be very smart about our sample but still acknowledge that it is just a small sample out of millions of transactions.

What is interesting is that the combination of big data and analytic tools now available mean you can now look at every transaction.

We would be able to go in and actu-

ally ‘plug in’ to the company’s systems and reprocess every single transaction in a certain area and have the technology kick out things which are out of line so we can concentrate on those. It is causing us to take a different view of materiality and a more forensic view of transactions.

It is not designed to change our ability to spot deliberate fraud, for example, but technology will make it far easier to identify control weaknesses, or if things are being processed in a way which is creating a misstatement.

I also think we will get to almostreal-time auditing in public companies. There is no reason in theory why technology cannot monitor transactions as they happen and throw up exceptions there and then.

This will not happen this year or next, but if you roll forward 10 or 15 years ...

You are also in favour of integrated reporting which considers “how a business uses and affects the resources it relies on”. How do you see this going forward?

Should it be voluntary?

There is a range of views in companies at the moment as to the importance it has to them and as to the ability to drive consistency of comparison. It will only get significant take-up if it is mandated.

Consumer-facing companies are more likely to move voluntarily towards more integrated reporting as they know it is important to their consumers that they are a purpose-driven, socially-aware organisation.

Frankly, companies which are less consumer-facing will not choose to do it just because of public opinion, at least not quickly...

However, if public interest is very strong, it is more likely for politicians to bring it in.

18

e Business OBSERVER |

April 23, 2015

STOCK MARKET ?? REVIEW

Sterling uncertainty ahead of general election

Edward Rizzo Unlike shares or bonds, the performance of a currency cannot be viewed in isolation but must be analysed in comparison to another currency. In fact, very different results emerge when comparing the performance of sterling against the euro and the US dollar.

In recent weeks, sterling hit a five-year low against the US dollar but traded at a seven-year high against the euro.

For Maltese investors, the sterling vs euro exchange rate is naturally of more significance than the performance of the pound vs the US dollar.

Those involved in the tourism industry would be pleased at the recent strengthening of sterling against euro, because UK nationals find it cheaper to travel to EU destinations such as Malta. On the other hand, imports from the UK have become more expensive and importers may need to factor this into their costings because they may not be able to pass on the full extent of the higher costs arising from the currency difference to consumers.

One sector that ought to have been significantly impacted by this outcome is the importation of motor vehicles. While imports of second-hand cars boomed from

late 2008 onwards as sterling weakened, the strengthening of the pound over recent months ought to have negatively affected importers of second-hand vehicles from the UK. Meanwhile, new car importers may have benefited from this outcome.

The 10-year chart of sterling when compared to the euro shows the increased volatility over recent years. Sterling had weakened significantly at the start of the financial crisis in 2008 and had reached almost parity against the euro in December 2008. The value of the British pound recovered slightly afterwards but remained weak in comparison to its historical average. In fact, as the chart indicates, despite the 13.6 per cent rally in sterling since the end of 2012, the value of the British pound is still 8.7 per cent below the peak of €1.52 reached in January 2007.

Apart from the normal economic factors at play which generally impact exchange rates, the upcoming general election in the

UK taking place on May 7, which is the most unpredictable in many years, is also possibly playing its part on currency movements from one week to the next.

The polls currently indicate that support for the two main political parties in the UK (the Conservatives led by the current Prime Minister David Cameron and the Labour Party by Ed Miliband) is very close and neither party is likely to secure a majority. The election outcome is therefore a very close call and there is a growing danger of a hung Parliament with neither Labour nor the Conservatives winning an overall majority and both possibly also struggling to replicate a coalition government similar to the one of the past five years.

The biggest risk to further sterling strength is the election of a Conservative-led government, because there is a very strong chance that a referendum on the UK’s continuing membership of the EU will be held next year or in 2017. The strategy of the Conservative Party centres around

“Volatility is expected to intensify in the weeks ahead due to the uncertain outcome of the general election.

Once the results are confirmed, more clarity is expected on the implications for sterling”

renegotiating the UK’s relationship with the EU across five key areas before a referendum taking place.

The Labour Party does not envisage the possibility of a referendum and therefore there is a lower likelihood that Britain can leave the EU. However, a future Labour-led government is set to pursue looser fiscal policy which could lead to a higher deficit and possibly a weakening credit rating. This could also lead to a negative impact on sterling going forward.

Apart from the foregoing, the future role of Scotland could also be another factor irrespective of the outcome of the election, and this could also lead to negative sentiment towards sterling in the future.

Volatility is therefore expected to intensify in the weeks ahead due to the uncertain outcome of the general election. Once the results are confirmed, more clarity is expected on the implications for sterling, although a hung Parliament can lead to an extended period of political uncertainty and thus currency

e Business OBSERVER

|

April 23, 2015

19

STOCK MARKET REVIEW

volatility. Continued sterling strength against the euro is more unlikely if a Conservative-led coalition is formed, mainly due to the referendum on EU membership.

Moreover, the recent publication of economic data showing a slower rate of growth in the UK economy, coupled with indications from the Bank of England of a delay in interest rate hikes, could also cloud positive sentiment towards sterling in the immediate future.

However, many international currency strategists believe that the recent strength of sterling vs the euro is being driven much more by factors across the EU, particularly slow growth, monetary easing in Europe and the Greek debt negotiations, rather than specific UK issues such as the high degree of political uncertainty and economic data emerging from the UK. Both economically and in terms of prospects for interest rate changes, the eurozone is out of sync with Britain. The economic performance of the eurozone is still very weak indeed, and last month’s launch of the quantitative easing programme by the European Central Bank is one of the major factors which led to the renewed weakness of the euro during the first few months of 2015 against most currencies including sterling. Additionally, the continued uncertain

SOURCE: THOMSON REUTERS

outcome of negotiations with Greece and news from the European Central Bank on the success of the QE programme will probably be among the main catalysts behind future exchange rate movements.

Any indication of an improving inflation outlook, coupled with possible talk of an earlier end to the QE programme before September 2016 could lead to a partial reversal of the recent trend and a strengthening of the euro in the months ahead.

Maltese investors should therefore become more accustomed to increased foreign exchange volatility. This was also evident in the aftermath of the shock decision in January by the Swiss National Bank which led to a 30 per cent decline in the value of the Swiss franc within minutes of the announcement.

The immediate outlook for the euro against sterling is also clouded by the fluid situation across the eurozone.

Investors should therefore adopt a degree of caution when considering investment opportunities in non-euro currencies, because the increased volatility across currency markets could have a large bearing on their investment portfolio performance.

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

Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. Š 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

e Business OBSERVER

|

April 23, 2015

21

BUSINESS UPDATES

Just when you thought it was safe to go to the theatre…

Sparkasse Bank Malta appoints Head of Legal Sparkasse Bank Malta plc has announced the appointment of Danièle Cop as Head of Legal within its Legal and Compliance Department.

“Given Sparkasse’s steady growth in the banking and financial services sector, the everincreasing regulatory demands faced by the industry and the level of sophistication of customer demands, the bank has sought to strengthen its competences, resources and expertise at all levels,’’ says managing director Paul Mifsud.

To assist the bank in achieving this goal, Ms Cop recently joined the bank as Head of Legal. Before joining the bank she was a partner at one of the top-tier law firms in

Malta, specialising in laws and regulation governing funds, custody, prime brokerage and investment and payment services. Ms Cop studied law at the University of Antwerp and obtained a postgraduate degree in Economic Law at VUB in Brussels in 2001.

“We are very proud to have Ms Cop join us at Sparkasse Bank Malta plc – her experience and knowledge of the regulatory and legal aspects governing the financial services sector, coupled with her excellent reputation among service providers, is a major asset for the bank,” continues Mifsud.

“We are confident that this will translate into added value to our discerning customers.”

A leader in office equipment Strand Electronics is a limited liability company which was established in 1987 as a member of M.C. Holdings. It is an affiliate of Alf. Mizzi Group of Companies, one of Malta’s largest organisations. Among its well-established brands are Kyocera Document Solutions, Bosch Security Systems, Martin Yale and eInstruction (Interwrite) Interactive Whiteboards.

With a client base in excess of 2,000, Strand Electronics is committed to quality as a basic business principle. Quality means providing customers with products and services that satisfy their expectations.

The company’s business activities include the sales, hire, leasing and repair of electronic equipment, including office equipment such as Kyocera Multifunction Devices & Laser Printers, NSi AutoStore Software Solutions, Martin Yale Shredders and Interwrite Interactive Whiteboards.

The company prides itself with the Professional Equipment Division, which includes the supply, installation and maintenance of intruder alarms, fire alarms, CCTV systems, telephone systems, nurse call systems, PA & evacuation systems, hall porters, access control and door-entry solutions and infrastructure and cable management.

The company is one of Malta’s leaders in office equipment and a significant player in the ELV sector.

Another of its prides is a proven track record of client satisfaction from purchase, delivery and installation to after-sales service. A total of 18 people are employed with the company, 10 of whom are part of the after-sales team, thus proving the importance of customer care.

Visit web site www.strandelectronics.com or address any queries to sales@strandelectronics.com, where the experienced sales team will be happy to help.

Three actors getting through 186 films in 90 minutes? Sounds impossible, right? But that’s precisely what the Mostly Harmless production of Completely Hollywood (abridged) attempts to do.

This hilarious new show, starring Alan Montanaro, Joe Azzopardi and John Montanaro, cuts through the glitz and glamour of tinsel town and boils movie-making down to its barest essentials. Described as “pure genius!” by the Daily Express and “an instant classic!” by the BBC, Completely Hollywood (abridged) has been wowing audiences around the globe.

Mostly Harmless Productions are the same team that brought you smash-hit shows like Yes, Prime Minister; My First Time; God’s Official; Legally Blonde and The Complete Works of William Shakespeare (abridged).

Completely Hollywood (abridged) will be performed at the University’s Sir Temi Zammit Hall, Msida, from May 1.

For more information, visit www.mostlyharmless.com.mt, send an e-mail to info@mostlyharmless.com.mt; or call James Calvert on 7978 2020 or John Montanaro on 9944 3716.

22

e Business OBSERVER |

April 23, 2015

BUSINESS ??UPDATES

Diversification in investors’ portfolio is important John Bellamy The current equity bull market has just celebrated its sixth birthday, and investors have experienced some extraordinary gains. The length of this bull run is above average for the asset class, but pales into insignificance when compared to the 30year-plus period that bonds have enjoyed.

There are strong arguments that both markets may struggle for returns in the short to medium term.But with bank deposits offering so little, what should investors do?

The answer lies in time horizon and diversification. Investors should ensure that they have the appropriate time horizon to allow them to see through the peaks and troughs that investment markets will deliver.

Moreover, a diversified portfolio will help reduce this volatility of returns. A balanced portfolio that gives global multi-currency exposure to both equities and bonds should give superior riskadjusted returns to a single asset class, single geography and single currency portfolio.

Global bond investing allows for exposure away from home market liquidity issues into Europe and beyond. A blend of sovereign, investment and noninvestment-grade credit largely in developed, but with some emerging market exposure, should be embraced.

The currency exposure that comes with this should be carefully managed to ensure that the

underlying investors base currency is the dominant one, but also that opportunities that exist elsewhere are exploited.

For example, the QE programme established earlier this year is likely to put pressure on the euro in the coming years relative to other regions that are not printing, and where the outlook for currency is more encouraging.

Similarly, equities international investment comes with a raft of benefits. The developed markets of North America, Japan and the UK offer a broader exposure to industries such as IT and mining that are less well represented in Europe. It is also widely expected that the socalled emerging economies of Asia and Latin America will grow at a significantly faster rate in the years ahead, and in the longer term there will be an opportunity cost of ignoring them.

“It is widely expected that Asia and Latin America will grow faster in the years ahead”

New Chivas Regal Extra takes luxury whisky to the next level Chivas Regal, the world’s first luxury whisky, introduces Chivas Regal Extra – its first new global expression since 2007. Complementing its collection of premium blended Scotch whiskies, Chivas Regal Extra is one of the richest, most generous-tasting blends within this category, crafted for those who look for more. Chivas Regal Extra has a fruity, sweet nose with notes of ripe pears, creamy toffee and a hint of ginger.

Chivas Regal Extra was launched on March 26 at Electro Lobster Project in Balluta. The evening, organised by Farsons Beverage Imports Co. Ltd, was a great success. Guests included members of the trade and bartenders guild.

Kinetix launches service to provide low visibility on IT support costs

John Bellamy is Waverton Investment Management, Fund Manager for the Vilhena Global Balanced Multi-Manger Fund

The opinions expressed herein should not be interpreted as investment advice. Past performance is not a guarantee to future performance. The value of the investment can go down as well as up and any initial charges may lower the amount invested and the amount received upon redemption.

Investments should be based on the full details of the Prospectus, Offering Supplement and the KIID which may be obtained from Valletta Fund Management Limited (“VFM”), Bank of Valletta plc branches/investment centres and other licensed financial intermediaries. VFM is licensed to provide investment services in Malta by the MFSA. The Vilhena Funds SICAV plc is licensed by the MFSA and qualifies as a UCITS. Issued by VFM, TG Complex, Suite 2, Level 3, Brewery Street, Mriehel BKR 3000, Malta. Tel: 21227311, Fax: 22755661, e-mail: infovfm@bov.com, website: www.vfm.com.mt.

Source: Waverton Investment Management.

To mark the special occasion, Chivas cocktails were served throughout the night and included the signature Chivas Claw which was created especially for the event. Food items, catered by Electro Lobster Project, were carefully selected to accompany the Chivas Regal Extra cocktails: the Chivas Claw, the Hoots Mon Spritz, the Chancellor, and the Next Level. At the end of the night guests were given goodie bags that included Chivas whisky stones, an informative booklet on Chivas Regal Extra, a pocket square and coasters.

For any enquiries about the product, contact Farsons Beverage Imports on 2381 4400.

CURT GAUCI, DIRECTOR AND CO-FOUNDER OF KINETIX IT SOLUTIONS.

Are IT support costs creeping up on you? IT powers your business, so can you afford to compromise on IT support? This is the IT support conundrum that most are faced with, balancing the cost of the service and reliability and stability of your infrastructure.

An effectively managed IT infrastructure should allow for a more productive workplace, less downtime, fewer ugly surprises, but most importantly should simply let you get on with it. Reliable and cost-effective IT support is critical to the success of a business.

Streamlining your IT infrastructure allows you to manage your systems more effectively and efficiently. In our experience and from feedback we have received from our clients, the only pain that would then be left to

tackle would be the lack of visibility when it comes to IT support-related costs. These are typically billed by the number of hours spent and can at times creep up on the business.

In order to address this, we have launched a new service offering, a managed IT support service at a fixed cost. Once processes are streamlined, this model allows our clients to have full visibility on what their IT solutions and infrastructure cost them. No more hidden surprises!

At Kinetix we pride ourselves on making things simple for our clients – simple yet effective. Kinetix IT Solutions is a local leading IT Systems Integrator. Kinetix are HP, Cisco, Microsoft, Kerio, Trend Micro and Symantec certified partners. Website: www.kinetix.com.mt; e-mail: info@kinetix.com.mt; T: 2013 2000.