Maltacom Annual Report 2006

Transcription

2006 ANNUAL REPORT & FINANCIAL STATEMENTS
CONTENTS
Chairman’s Message
CEO’s Review
Board of Directors
Report of the Directors
Report of the Remuneration Committee to the Shareholders
Corporate Governance
Report of the Independent Auditors on Corporate Governance Matters
Preparation of Financial Statements and Directors’ Responsibilities
Report of the Independent Auditors on the Financial Statements
Income Statement
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Share Register Information
Company Information
Additional Information for Non-Maltese Investors
Five Year Record
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iii
vi
FINANCIAL STATEMENTS
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06
10
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12
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14
16
18
20
OTHER FINANCIAL INFORMATION
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CHAIRMAN’S MESSAGE
I am pleased to report about another good year for
your Company.
Results
Our results for 2006 were robust, with revenues of Lm55.5
million, and profits before tax of Lm12.1 million.
Cash flow
The incentives which were introduced in 2005, whereby our
clients were encouraged to settle their bills on time, remained
effective. Debtor days continued to fall; in fact at the end
of the 2006 they stood at 44 days, facilitating the continued
generation of free cash flow by your Company.
Revenues for the group were nearly one per cent more than
those reported at the end of the previous year.
Adjusting to change
Profits before tax were 25 per cent less than the results of the
previous year. However the reason for this result was a positive
one – I will amplify later.
During the first five months of the year, we were all focussed
on the Company’s impending privatisation.
Dividends
2006 was quite an exceptional year for your Company.
During the following seven months, we put in place a strategy
of growth through the transformation of our business.
The news on dividends is, once again, positive.
The Board is recommending a final net dividend of 5
cents, resulting in a full year net dividend of 6 cents 5 per
share, representing a pay out ratio of 66% of earnings
before exceptional items, compared with the 59% that we
recommended last year.
This recommendation demonstrates the Board’s continuing
progressive dividend policy, as well as its confidence in the
Group’s prospects for the future.
About our business
Our fixed-line business sustained further erosion in its revenue
streams during the year under review, as was expected and
predicted; however, the erosion in this revenue stream was
more than made up for by the strong growth in our new
wave industries, namely mobile and broadband. Both these
businesses have contributed significantly to our results.
Additionally, I am pleased to report about a new area of
growth in our diverse lines of business. Our ‘Call Centre’
services, operated by our subsidiary Telepage Ltd, registered
significant growth during 2006. Telepage’s positive
performance continues into this year.
i
MALTACOM PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2006
Change, and the management of change, occupied and
focussed the minds of our management, and of our people.
We were busy introducing a new ethos into our business.
We also targeted the acquisition of Multiplus which will ensure
that we remain the leading player in the local telecoms market.
The acquisition of Multiplus is meant to be a powerful
demonstration of our determination to remain the leading
operator in Malta on the basis of the most extensive service
portfolio delivered over state-of-the-art infrastructure with
exceptional customer service.
Voluntary retirement scheme
We are also endeavouring to cut down on our costs.
Exceptionally, these efforts translate into considerable
expenditure in the short term, in order to ensure substantial
savings over the long term.
The ‘Voluntary Retirement Scheme,’ wished by our people,
and utilised by more than 200 of our workforce, has cost
us Lm3.2 million.
It is the main reason why our profits, before taxes, for 2006,
were lower than those of the previous year. Yet, the long term
benefits from this expenditure are assured, and will render your
company more efficient, and consequently more competitive.
These activities, together with other initiatives, represent our
determination to continue contributing to the community
wherein we operate, and on whom we depend so much for our
continued successes.
Regulation
Looking ahead
I have declared in the past, and I reiterate: we believe that a fair
and flexible regulatory regime is good, for the Group as well as
for our market.
Overall, during 2006, we have performed well. We have met
our expectations, and delivered on our strategic objectives.
However, we also believe that the Regulator must not lose sight
of the fact that Malta is a very small market, and regulating on
the principle that one size fits all is dangerous, and is not in the
long-term interests of the market.
There must be a realisation that service providers can only,
and will only, continue to deploy high amounts of capital
expenditure, if the returns on their investments are attractive.
Throughout Europe today, regulatory risks are posing the
gravest concerns in our industry. These risks are magnified and
become unreasonable in a small market like Malta.
Our job now is to maintain the momentum of: change,
transformation, and innovation, which we have achieved to-date.
I am confident that we shall be successful, and that we will
continue delivering to you, our shareholders, as we have done
in the past.
I conclude by thanking:
Our People, for their excellent work throughout the year;
Our clients, for their continued loyalty to our various services; and:
You, our shareholders, for your continued trust and support for
our initiatives. Your Board is so grateful for your support.
We continue to hope that the Regulator takes heed of these
realities and of these concerns.
Our social responsibilities
Throughout 2006 we continued with our support for worthy
social initiatives.
Our total commitment to the ‘Telecare’ project remained in place.
Additionally, we worked closely with MCAST to assist worthy
students from that Institution to attain their professional
ambitions. We also continued to support the ‘L-Istrina’ initiative.
Sonny Portelli
Chairman
2 April 2007
ii
CEO’S REVIEW
A milestone year
2006 was a milestone year for Maltacom Group marked by
the crystallisation of the process of privatisation and the
ensuing process of changes brought about by this important
development. As you all know, in May 2006 Dubai Holding LLC,
which is the ultimate parent company of Emirates International
Telecommunications Malta Ltd (EIT is a joint venture between
TECOM Investments and Dubai Investment Group), acquired the
Government of Malta’s 60 per cent controlling stake in Maltacom.
Privatisation has led to a series of inevitable changes within
the Group. The process started with the development of a
group wide Value Creation Plan which outlined the new overall
strategic objectives of the Maltacom Group for the coming
years. It also identified the means to achieve these objectives.
A series of key projects were defined as part of this plan, some
of which have already been implemented, whilst others will be
executed over the coming months and years. For this purpose,
a Transformation Office was set up to monitor and track the
progress of the various projects, as well as handle change
management issues.
In 2006, the Group managed to maintain its revenues in the
face of intense competition and extensive regulation of the
core services. We also managed to maintain Group profitability
levels, if one-time and voluntary retirement schemes charges
(VRS) are excluded. The decline in traditional fixed-line core
services is being compensated by growth in broadband
and mobile services. Moreover, the trend of significant cash
generation and strong balance sheet was maintained.
Strategic developments
2006 saw a number of strategic developments such as the
streamlining of the fixed-line operations, with the merger of
Coreswitch Limited and Wirenet Limited into the Company.
Furthermore, the process was set in place to also merge
into the Company another two subsidiaries, DataStream
Limited (Maltanet) and Monitoring Services Limited,
effective from January 2007. All of these initiatives were
aimed at consolidating the Group’s resources and optimising
iii
efficiency and effectiveness. As part of this reorganisation,
a voluntary retirement scheme was launched in October
2006 leading to a reduction in headcount of over
200 employees.
The year was also characterised by a changing landscape in
the market we operate in, with the introduction of number
portability, carrier select/ pre-select, as well as the entry
of new players, especially in the fixed-line business. Part
of our strategy to counter the new market entrants was to
launch a series of commercial initiatives aimed at ensuring
we retain our customer base. Moreover, in 2006 we initiated
the process of acquiring Multiplus – an exercise which
was concluded in February 2007. With the acquisition of
Multiplus, Maltacom became the only local quadruple-play
telecoms organisation offering fixed, mobile, broadband
Internet and digital television.
Another important milestone was the agreement signed
between go mobile and Nortel Networks for the roll-out of a
3G network in 2007.
All these important developments were implemented
within a new corporate structure that focuses on the
Group’s main business units, and which is based on its
strategic objectives.
Major initiatives
In November 2006, Maltacom completed a €6.7 million Fixed
Line Switching Network Upgrade project by migrating this
platform to softswitch technology, thus ensuring a sound
platform for future enhanced services. This upgrade will
facilitate the eventual roll-out of next generation services,
such as services resulting from the convergence of fixed and
mobile services.
Maltacom increased its international IP transit capacity by 3 x
STM4 to a total of 1.8Gbps offering unparalleled bandwidth in
Malta. Moreover, the Company improved the resilience of the
national portion of the submarine cable and activated IP back-
up over microwave link to Sicily. These developments have led
to increased resilience and capacity and resulted in improved
performance in the delivery of Internet bandwidth to both
residential as well as business customers.
In the year under review, the Company undertook various
projects to improve the ADSL service in rural areas as well as
to enhance customer support tools. Other technical projects
included the improvement of the IP core network. 2006 also
brought a number of changes within the team running the IP
Networks, with the main focus being the introduction of the
24X7 IP Network Operations Centre. This has improved the
overall quality of service provided to end customers.
Maltacom’s payphone system was upgraded via the migration
of its operation to the Easyline pre-paid platform.
In the commercial area, Maltacom offered its customers a
number of benefits such as Frequent Caller Bonanza (family
and friends type of offer) and free off-peak calls. Moreover
a number of bundled offers were launched in 2006, with a
combination of broadband and mobile, fixed and broadband,
and fixed and digital TV.
Local fixed-line traffic and revenue continued to decrease,
although there was a significant increase in international
calling. Maltacom’s fixed-line subscriber base remained on
similar levels as previous years.
In 2006, the broadband customer base experienced a
significant growth of 30 per cent. 24X7 customer support
was extended to all Maltacom broadband customers, via the
Maltacom-owned Dial-It call centre, whilst connection speeds
were upgraded from 2Mbps to 4Mbps at no extra costs.
On the mobile front, in September 2006 go mobile signed
an agreement for the supply of a state-of-the-art 3G network
infrastructure in Malta. This agreement gave go mobile
a competitive edge in the provision of the latest wireless
applications, including video telephony and wireless broadband.
In 2006, go mobile became the first mobile operator in Malta
to launch a streaming service whereby customers can watch
television and video clips on their mobile handset. This service
is powered by EDGE technology.
go mobile’s subscriber base increased by 5 per cent to reach
the 164,000 mark last year – representing a 48 per cent market
share. The company’s roaming service was further augmented
and is currently available in 179 countries over more than 300
foreign operators.
In the call centre business, Dial-It managed to secure new
international and local contracts. 2006 witnessed a strong growth
in the call centre operations and an increase in client portfolio.
The turnover of Telepage Limited, the company operating the
Dial-It call centre, increased by 49 per cent in 2006.
Market environment
Carrier select and pre-select were introduced in 2006 with the
result that new operators could utilise Maltacom’s infrastructure
to start offering customers an alternative telephony service. So
far, we have seen a minimal negative impact of such services on
our business.
Last year, Maltacom and go mobile signed interconnection
agreements with two local companies for the provision
of two-way communication between subscribers of the
respective operators. Number portability was also introduced
in 2006, and new operators are expected to enter the market
as Mobile Virtual Network Operators or via Broadband
Wireless Access networks.
All these developments pose serious challenges, but also new
opportunities for growth. By developing group wide synergies
and rationalising our resources, Maltacom Group will be in a
position to face these new forms of competition and maintain
its leading role in the market.
Our vision
The vision of the Maltacom Group for the coming years can
be summarised into three statements: We want to exceed
customer needs; We want to be the employer of choice in
Malta; We want to maximise shareholder value.
In order to achieve this vision, we have set the goal of being a
truly customer centric organisation. This will be achieved by the
reorganisation of our Commercial Division and the way we deal
with customers via our call centre, retail outlets and other touch
points. We want to become a customer-centric organisation, and
focus our energies towards enhancing the customer experience.
In this regard, a Business Process Reengineering exercise,
with the assistance of a world-class business consultancy
firm, was initiated so as to address changes in processes and
procedures, in particular those within the Commercial and
Technical divisions.
In addition, we want to be the leading provider of quadruple
play services in Malta with a strategy focused on convergence
of our services. In order to do so, we want to be on the
cutting edge of innovation in the field of communications and
information technology.
The internal reorganisation of our company is aimed at
developing a performance driven company with a culture of
rewards and recognition for excellence. In doing so, Maltacom
Group will develop into an operationally efficient organization.
Another important aspect is the review of the Group’s capital
structure and investment strategy. Thanks to our strong
financial position, we are able to invest in new technologies
like 3G, as well as enhance the content and accessibility of our
digital TV operations. We are investing heavily into hosting and
co-location facilities, whilst continuing with our programme of
upgrading our networks.
iv
Future growth
2007 will be a transition year in which a number of changes will
take place that will help us transform the way we do business.
We have set in motion organisational changes which will ensure
the future sustainability and profitability of the Group.
All the talk about convergence is not only about technology
and customer experience, but also on cost rationalisation
and maximisation of resources. This is the strategy we have
adopted, which will see us make best use of the Group’s
ability to create synergies in as many areas as possible, and
minimise duplicity.
Clearly, the environment we are operating in has changed, and
will continue to change. Similar to our European incumbent
operators’ counterparts, we have to adapt to the increased
regulatory pressures, falling prices, changes in technology and
other competitive threats.
However, I am confident that we are well equipped to face
these challenges and move forward and grow further our
business. Our strategic outlook coupled with our efforts to
continue enhancing customer experience will surely see us lead
the market.
As stated earlier, the Maltacom Group has entered the digital
TV market, and the remarkable take-up of the Multiplus
digital TV offering in the first few months is an indication that
we mean business in this area too. go mobile’s 3G and 3.5G
(HSDPA) technology will signify faster wireless download
speeds for our customers.
The bundling of converged services will result in added
value for money for our customers and increased client
retention. Further growth is also expected from the increasing
international business of our call centre activity. Needless to
say, Smart City will signify a significant business potential for
the Maltacom Group, which we intend to exploit to the full.
v
David Kay
CEO
2 April 2007
BOARD OF DIRECTORS
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MR SONNY PORTELLI [CHAIRMAN]
DR FRANCIS GALEA SALOMONE LL.D. [COMPANY SECRETARY]
MR PETER J BALDACCHINO
MR JOHN ELLUL VINCENTI
MR JAMES KINSELLA
DR AHMED MAHJOUB
MR DEEPAK PADMANABHAN
MR JOHN SEVASTA [WORKER DIRECTOR]
MR OSMAN SULTAN
THE NOBLE PAUL S TESTAFERRATA MORONI VIANI
vi
REPORT OF THE DIRECTORS
For the Year Ended 31 December 2006
The directors are pleased to present their report together with the financial statements of Maltacom Group for the year
ended on 31 December 2006.
1
Principal activities
The Group is Malta’s leading telecommunications and ancillary services provider. The services provided by the Group
include fixed-line and mobile telephony services, broadband and Internet services including Voice over Internet Protocol
services (VoIP), radio paging and call centre operations.
The Company and certain subsidiary and associated companies, and their activities, are regulated by and are subject to
the provisions of the Electronic Communications (Regulation) Act, 2004.
2
Business review and future developments
A review of the business of the Group during the year under review and an indication of likely future developments are
given in the Chief Executive Officer’s Review on page iii of this annual report.
3
Review of financial performance
During the year ended 31 December 2006, the Group generated a profit before tax of Lm12.1 million. Although this
result represents a decline of Lm4 million when compared to 2005, during the year under review the Group incurred
charges amounting to Lm3.2 million in voluntary retirement schemes.
The Group continues to suffer from a decline in revenues from traditional fixed-line services, however, it is experiencing strong
growth in broadband and mobile services resulting in a marginal growth in Group revenues which in 2006 amounted to
Lm55.5 million.
During 2006, the Group’s cost structures remained at 2005 levels, however, initiatives launched during 2006 are
expected to reduce costs, particularly within the Company, starting in 2007. One such major initiative is the Voluntary
Retirement Scheme which is leading to a reduction of over 200 employees from fixed-line operations. During the year
the Company continued with the streamlining of fixed-line operations and Coreswitch Limited and Wirenet Limited were
merged into the Company. Furthermore, the process was set in place to also merge into the Company another two
subsidiaries, DataStream Limited and Monitoring Services Limited, with effect from 1 January 2007.
The results of the Company are adversely affected by a number of high value transactions mainly the charge for
Voluntary Retirement Schemes as outlined above and the reversal of fair value adjustments on investment properties
recognised in prior years which became owner-occupied as a result of the merger of Coreswitch Limited and Wirenet
Limited into the Company.
4
Share capital
The Company did not modify in any way the structure of its share capital during the year. No further issues were made
and neither did the Company acquire ownership of or any rights over any portion of its issued share capital.
5
Dividends and reserves
An interim dividend of Lm0.015 per share out of the Company’s retained earnings amounting to Lm1.5 million was
declared on 15 September 2006 and paid on 27 October 2006. The directors recommend that at the next Annual General
Meeting, the shareholders approve the declaration of a dividend of Lm0.05 net of taxation per share payable on 6 June
2007. Total distributions relating to this year’s operations amount to Lm0.065 per share.
The amount of Lm5,065,524 has been transferred to the dividend payment reserve.
Retained profits carried forward at the balance sheet date amounted to Lm55.9 million (2005: Lm54.6 million) for the
Group and Lm58.4 million (2005: Lm57.6 million) for the Company.
1
6
Directors
The directors who served on the Board during the year under review or up to the date of this report are listed hereunder.
With the exception of Mr John Sevasta, who is an employee of the Company, none of the directors in office during the
year or at the balance sheet date held an executive appointment with the Company or its subsidiaries.
Mr Sonny Portelli (Chairman)
Mr James Kinsella
Mr Osman Sultan
Ms Patricia Cook Geery
Mr Deepak Padmanabhan
Dr Ahmed Mahjoub
Mr John Ellul Vincenti
Mr Peter J Baldacchino
Mr Vince Farrugia
Mr Alfred Rizzo
The Noble Paul S Testaferrata Moroni Viani
Dr Chris Said LL.D.
Mr Charles Camilleri
Mr John Sevasta (Worker Director)
Further to the execution of the share purchase agreement with Emirates International Telecommunications (Malta) Limited,
Mr Charles Camilleri, Mr Vincent Farrugia, Mr Alfred Rizzo and Dr Chris Said, all of whom had earlier during the Eighth
Annual General Meeting been reappointed directors of Maltacom p.l.c., tendered their resignation from office. Mr James
Kinsella, Mr Osman Sultan, Ms Patricia Cook Geery and Mr Deepak Padmanabhan were appointed directors in their stead
as from 19th May 2006. On the 17th July 2006, Ms Patricia Cook Geery relinquished her post of Director, with Dr Ahmed
Mahjoub being appointed to the Board with effect from the same date. In terms of Article 56.1, the term of appointment of
the directors still in office other than the Worker Director, expires at the forthcoming Annual General Meeting. The Worker
Director’s term in office expires on 1 January 2008.
The Noble Paul S Testaferrata Moroni Viani, Mr Peter J Baldacchino and Mr John Ellul Vincenti have offered themselves
for re-election at the Ninth Annual General Meeting. Mr Michael Warrington has also submitted a nomination for
election to the post of director at the Ninth Annual General Meeting. No further nominations have been received for the
election to the three seats on the Board representing the Company’s shareholders.
Of the directors of the Company, only Mr Sonny Portelli and Mr Deepak Padmanabhan (together with Mr David Kay
- Chief Executive Officer) were acting as directors of the following subsidiary and associated companies at 31
December 2006:
DataStream Limited, Go Mobile Limited, Innovate Software Limited, Innovate Limited, Mobisle Communications Limited,
Monitoring Services Limited, Telepage Limited, Terranet Software Limited, Worldwide Communications Limited and
Datatrak Holdings plc.
7
Disclosable interests
At 31 December 2006, two of the directors of the Company, namely Mr Peter J Baldacchino and the Noble
Paul S Testaferrata Moroni Viani, held 1,200 shares and 94,444 shares respectively, either directly or indirectly through
their immediate families or entities controlled by them. The other directors did not hold any interests in the Company.
None of the directors of the Company have any interest in the shares of the Company’s subsidiaries nor any disclosable
interest in any contracts or arrangements either subsisting at the end of the financial year or entered into during the
financial year.
2
8
Substantial shareholdings
Except for the holdings listed below, the directors are not aware of any person holding 3% or more of the share capital of
the Company at the balance sheet date.
Emirates International Telecommunications (Malta) Limited
Maltacom Employees’ Foundation
9
Number of ordinary shares
Percentage held
60,786,292
60.0
3,039,315
3.0
Remuneration committee and corporate governance
The activities of the Remuneration Committee and the Group’s arrangements for corporate governance are reported on
pages 4 to 9.
10
Auditors
The auditors, KPMG, have expressed their willingness to continue in office.
A resolution to appoint the auditors and to authorise the directors to fix their remuneration will be proposed at the
Annual General Meeting.
Approved by the Board of Directors on 2 April 2007 and signed on its behalf by:
Sonny Portelli
Chairman
3
Peter J Baldacchino
Director
REPORT OF THE REMUNERATION COMMITTEE TO THE SHAREHOLDERS
The Maltacom plc Remuneration Committee (‘Group Remuneration Committee’) is pleased to submit its ninth report to
the shareholders.
The Group Remuneration Committee is composed of Mr Sonny Portelli (Chairman), the Noble Paul S Testaferrata Moroni Viani and
Mr Deepak Padmanabhan, all of whom are non-executive directors of the Company. Mr Yves Heymans, Chief Human Resources
Officer of Tecom Investments has been appointed an ex officio member of this committee. The Company Secretary, Dr Francis
Galea Salomone has also been appointed Secretary to the Group Remuneration Committee.
Introduction
The Group Remuneration Committee monitors the remuneration awarded to Board members ensuring that they are consistent
with the remuneration policy adopted by the Company. The Group Remuneration Committee also makes recommendations on the
remuneration of senior managers of all companies within the Group, whose grades are not regulated through collective agreements
with unions. It monitors the remuneration of the individuals who serve on the Boards of Directors of the companies forming part of
the Group, whether executive or otherwise. The Group Remuneration Committee considers whether the remuneration packages
of the individuals falling within its remit are cost-effective, fair and reasonable for the responsibilities involved, and are sufficiently
dependent on achieving the goals of attracting, retaining and motivating individuals of the quality required.
Service contracts
Mr John Sevasta is employed by the Company on a basic indefinite contract basis under the Employment and Industrial Regulations
Act. Should his basic indefinite contract be terminated in a manner not in accordance with Maltese employment legislation, he may
become entitled to compensation as laid down in the statutory provisions.
The remaining directors have no service contracts with either the Company or its subsidiaries.
Base salaries
The base salaries of all senior managers are established in accordance with the Company’s formal salary structure.
The Group Remuneration Committee is satisfied that in all cases the base salaries established are in line with the criteria described
in the introduction to this report. In particular, in reaching this conclusion, the Group Remuneration Committee has paid due
regard to market conditions and remuneration rates offered by comparable organisations for comparable roles and to the Group’s
established performance-related remuneration and evaluation system.
Bonus scheme
Members of the senior management are each entitled to a cash performance bonus of up to 15% of their base salaries. In addition,
the Board of Directors may approve additional bonuses for outstanding performances and achievements. Performance is measured
on the basis of appraisals drawn up or endorsed by the Chief Executive Officer (‘CEO’).
The rate at which the bonus is paid depends on the Group Remuneration Committee’s evaluation of the CEO’s assessment of the
individual officer’s performance.
4
REPORT OF THE REMUNERATION COMMITTEE TO THE SHAREHOLDERS
Directors’ remuneration
The Honorarium paid to members of the Board of Directors is set at Lm5,000 per annum, whilst the Honorarium for the Chairman of
the Board of Directors is set at Lm7,500 per annum.
The aggregate emoluments earned throughout the year by the directors from the Company and the other members of the Group
were as follows:
2006
Lm000
2005
Lm000
40
22
16
----78
===
60
12
13
----85
===
Payments to directors
Non-executive directors
Non-executive chairman
Executive director
Share options and pensions
Neither the Company nor its subsidiaries operate a share option scheme. Nor are they committed to awarding pensions to retired
directors or senior executives.
Sonny Portelli
Chairman, Group Remuneration Committee
2 April 2007
5
CORPORATE GOVERNANCE
Introduction
The Code of Principles of Good Corporate Governance (“the Code”), incorporated in the Listing Rules published by the Listing
Authority - the Malta Financial Services Authority, requires listed companies to make a statement of disclosure on the application of
the principles of, and compliance with, the provisions of good corporate governance set out in that Code.
Compliance
Good corporate governance is the responsibility of the whole Board of Directors, and has been and remains a priority for the
Company. The Board has reviewed the Company’s compliance with the Code, and hereby provides its report thereon.
The Board considers that the Company has been generally in compliance with the Code throughout the year except when
circumstances warrant otherwise. In accordance with the provisions of the Company’s Articles of Association, the appointment of
directors to the Board is exclusively reserved to the Company’s shareholders, except in so far as appointment is made to fill a casual
vacancy on the Board, and which appointment would expire at the Company’s Annual General Meeting following appointment. In the
event of co-option to fill a casual vacancy, suitable candidates would be identified and their appointment proposed to the Board of
Directors by a sub-committee composed of two of the Company’s non-executive directors and the Company’s Chairman. The Worker
Director is co-opted by the Board of Directors in accordance with the result of an employee electoral process held every two years.
The auditors have reported on corporate governance matters in their report on page 10. The Statement on Preparation of Financial
Statements and Directors’ Responsibilities is set out on page 11.
Group governance
The supreme organ of the Company, and therefore the Group, is the shareholder group acting collectively in General Meeting. The
Company’s Board of Directors, the members of which are appointed by the shareholders, is primarily tasked with the administration
of the Company’s resources in such a way as to enhance the prosperity of the business over time, and therefore the value of the
shareholders’ investment. Rules and regulations on their own cannot deliver prosperity. This can only be sought through good
strategies, people, teamwork, leadership, enterprise, integrity, experience and skills, relationships and the proper control of risk.
The structures and governance processes are therefore designed to reflect and promote these attributes.
The Board
Board members are appointed by the shareholders at the General Meeting for a term of office which lasts until the next Annual
General Meeting. The Board has the overall responsibility for the activities carried out within the Company and the Group and thus
decides on the nature, direction, strategy and framework of the activities and sets the objectives for the activities.
The Board is currently chaired by Mr Sonny Portelli and comprises eight non-executive directors and one director who, as a Worker
Director, holds also an executive office within the Company.
Non-Executive Directors
Mr Sonny Portelli (Chairman)
Mr Deepak Padmanabhan (appointed on the 19th May 2006)
Dr Ahmed Mahjoub (appointed on the 17th July 2006)
Mr Osman Sultan (appointed on the 19th May 2006)
Mr James Kinsella (appointed on the 19th May 2006)
Mr Charles Camilleri (resigned on the 19th May 2006)
Mr Vincent Farrugia (resigned on the 19th May 2006)
Mr Alfred Rizzo (resigned on the 19th May 2006)
Dr Chris Said (resigned on the 19th May 2006)
Ms Patricia Cook Geery (appointed on the 19th May 2006 and resigned on the 17th July 2006)
Executive Director
Mr John Sevasta
6
For the purposes of the current Code, the Board considers all the non-executive directors as independent. The Board has a
formal schedule of matters reserved to it for decisions, but also delegates specific responsibilities to various board committees
and subcommittees, the most prominent being the Audit Committee, the Group Remuneration Committee and the Executive
Committee. Directors receive board and committee papers in advance of meetings and have access to the advice and services of
the Company Secretary. Directors may, in the course of their duties, take independent professional advice on any matter at the
Company’s expense. The Directors are fully aware of their responsibility always to act in the best interests of the Company and its
shareholders as a whole irrespective of whoever appointed or elected them to serve on the Board. As delegated and monitored by
the Board, the Company Secretary keeps detailed records of all dealings by Directors and senior executives of the Company and its
subsidiaries in the Company’s shares and all minutes of meetings of the Board and its sub-committees. The roles of Chairman and
Chief Executive Officer are required to be filled by separate individuals, and the Chief Executive Officer is appointed by the Board
for a definite period of time.
During the year under review, Dr Francis Galea Salomone was confirmed as Company Secretary. With effect from the 16 June 2006,
Mr. David Kay was appointed Chief Executive Officer.
During the year under review the Board met eleven times.
On joining the Board, a Director is provided with a presentation by the departmental heads on the activities of their respective
business unit in the Company and subsidiaries. The Directors receive monthly management accounts on the group financial
performance and position.
The Board has the responsibility to ensure that the activities are organised in such a way that the accounts, management of funds
and financial conditions in all other respects are controlled in a satisfactory manner and that the risks inherent in the activities are
identified, defined, measured, monitored and controlled in accordance with external and internal rules, including the Articles of
Association of the Company.
The Chairman of the Board informally evaluates the performance of the Board members, which assessment is followed by
discussions within the Board. Through this process the activities and working methods of the Board and each committee member
are evaluated. Amongst the things examined by the Chairman through his assessment are the following; how to improve the
work of the Board further, whether or not each individual member takes an active part in the discussions of the Board and the
committees; whether they contribute independent opinions and whether the meeting atmosphere facilitates open discussions.
Under the present circumstances the Board does not consider it necessary to appoint a committee to carry out a performance
evaluation of its role as the Board’s performance is furthermore also under the scrutiny of the shareholders.
Director’s dealings
Directors are informed and duly reminded of their obligations on dealing in securities of the Company within the parameters of the
law and the Listing Rules. A proper procedure of reporting advanced notices has been endorsed by the Board of Directors in line
with the Principles, the Listing Rules and internal code of dealing.
At 31 December 2006, two of the directors of the Company, namely Mr Peter J Baldacchino and the Noble Paul S Testaferrata
Moroni Viani, held 1,200 shares and 94,444 shares respectively, either directly or indirectly through their immediate families or
entities controlled by them. The other directors did not hold any interests in the Company.
None of the directors of the Company have any interest in the shares of the Company’s subsidiaries nor any disclosable interest in
any contracts or arrangements either subsisting at the end of the financial year or entered into during the financial year.
7
Board committees and corporate governance
Group Remuneration Committee
The Group Remuneration Committee composed of non-executive directors makes proposals to the Board on the Group’s
remuneration policy for executive and non-executive directors. This committee monitors the remuneration awarded to Board
members ensuring that they are consistent with the remuneration policy adopted by the Company and the evaluation of the
performance of the Directors concerned. Directors’ fees are approved in aggregate by shareholders at the Annual General Meeting.
The Group Remuneration Committee is chaired by Mr Sonny Portelli, the other members being the Noble Paul S Testaferrata
Moroni Viani and Mr Deepak Padmanabhan. Mr Yves Heymans, Chief Human Resources Officer of Tecom Investments has been
appointed an ex officio member of this committee. The Company Secretary, Dr Francis Galea Salomone, has also been appointed
to act as Secretary to the Group Remuneration Committee.
Directors’ emoluments are disclosed in aggregate rather than as separate figures for each Director as required by the Principles.
The Group Remuneration Committee met three times in 2006. The Report of the Group Remuneration Committee to the
shareholders is set out on pages 4 to 5.
Audit Committee
The Audit Committee of the Board supports the work of the Board in terms of quality control of the Group’s financial reports and
internal controls. It is chaired by Mr Peter J Baldacchino, its other members being Mr Deepak Padmanabhan and Mr John Ellul
Vincenti. The Chief Finance Officer, the Director of Internal Audit, and the external auditors of the Company attend the meetings
of the Audit Committee. Other senior managers are requested to attend when required.
The Audit Committee, having been approved by the Listing Authority in terms of the Listing Rule 8.64, scrutinizes and monitors
related party transactions. It considers the materiality and the nature of the related party transactions carried out by the Company
to ensure that the arms’ length principle is adhered to at all times.
As part of its duties, the Audit Committee receives and considers reports on the system of internal financial controls and the audited
statutory financial statements of all companies comprising the Group. The Audit Committee establishes an annual audit plan for the
internal audit function co-ordinated with the external audit plan. The internal audit activities and compliance activities are monitored
on a continuous basis. The Audit Committee held ten meetings during the year. The external auditors attended all of these meetings.
Risk Management Steering Committee
The Risk Management Steering Committee is made up mainly of members of the Management Team and the Internal Audit
Directorate, and is chaired by the Chief Executive Officer. The remit of this committee is to identify and deal with the risks faced by
the Group. The Risk Management Steering Committee is responsible for the risk management approach of the Group.
Annual General Meeting
Shareholders’ influence is exercised at the Annual General Meeting (AGM), which is the highest decision-making body of the
Company. All shareholders, registered in the Shareholders’ Register and having notified their attendance properly, have the right
to participate in the Meeting and to vote for the full number of their respective shares. A shareholder who cannot participate in the
Meeting can be represented by proxy.
Business at the Company’s AGM will cover the Annual Report and Financial Statements, the declaration of dividends, the election
of directors and the approval of their remuneration, the appointment of the external auditors and the authorisation of the directors
to set the external auditors’ fees. Shareholders’ meetings are called with sufficient notice to enable the use of proxies to attend,
vote or abstain. The Company clearly recognises the importance of maintaining a regular dialogue with its shareholders in order
to ensure that its strategies and performance are understood. It communicates with the shareholders through the AGM by way of
the Annual Report and Financial Statements and by publishing its results on a regular basis during the year. This it does through the
Investor Relations Section on the Company’s internet site, the Office of the Company Secretary, and Company announcements to
the market in general. A freephone service is reserved for communication by shareholders with the Company. Regular meetings are
held with analysts and stockbrokers.
8
Internal control
The key features of the Group’s system of internal control are as follows:
Organisation
The Group operates through boards of directors of the subsidiaries and the associate with clear reporting lines and delegation of
powers. The Company’s Chairman is also the chairman of the Boards of Directors of all the Company’s subsidiaries.
Control environment
The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all of its
operations. Group policies and employee procedures are in place for the reporting and resolution of fraudulent activities.
The Group has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in
order to achieve Group objectives. Lines of responsibility and delegation of authority are documented.
The Group and the individual companies comprising it have implemented control procedures designed to ensure complete and
accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include
physical controls, segregation of duties and reviews by management, internal audit and the external auditors.
Risk identification
Group management is responsible together with each company’s management, for the identification and evaluation of key
risks applicable to their areas of business. These risks are assessed on a continual basis and may be associated with a variety of
internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and
regulatory requirements.
Information and communication
Group companies participate in periodic strategic reviews which include consideration of long-term financial projections and the
evaluation of business alternatives.
Monitoring and corrective action
There are clear and consistent procedures in place for monitoring the system of internal financial controls. The Audit Committee
meets at least four times a year and, within its terms of reference, reviews the effectiveness of the Group’s systems of internal
financial controls. The Audit Committee receives reports from management, internal audit and the external auditors. The Directors
confirm that they have reviewed the system of internal control through the monitoring process set out above.
Corporate social responsibilities
The Group has continued with its commitment to behave ethically and contribute to economic development while improving
the quality of life of its work force and their families, as well as of the local community and society at large. Various initiatives and
activities were organised throughout the year by the Company and the Group within the context of the Group-wide strategy.
Going concern
The Directors, as required by the Listing Rule 9.40.19 have considered the Company’s operating performance, the balance sheet
at year end, as well as the business plan for the coming year, and they have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. For this reason, in preparing the financial statements, they
continue to adopt the going concern basis in preparing the financial statements set out on pages 13 to 66.
9
REPORT OF THE INDEPENDENT AUDITORS TO MALTACOM P.L.C.
On Corporate Governance Matters
In addition to our audit on the financial statements, we have reviewed the Directors’ Statement on pages 6 to 9 on the Company’s
compliance with the Code of Principles of Good Corporate Governance in terms of the Listing Rules published by the Listing
Authority - the Malta Financial Services Authority.
In terms of Listing Rule 8.39, as independent auditors of the Company, we are required to include a report on this Statement
of Compliance.
We read the Statement of Compliance and consider whether it is consistent with the audited financial statements. We consider
the implications for our report if we become aware of any apparent misstatements or material inconsistencies with these financial
statements. Our responsibilities do not extend to considering whether this statement is consistent with other information, other
than the financial statements, included in the Annual Report and Financial Statements.
We are not required to, and we do not perform any additional work necessary to express a separate opinion on the effectiveness
of either the Group’s system of internal financial control or the Company’s corporate governance procedures, or its risk and control
procedures, nor on the ability of the Group to continue in operational existence.
In our opinion, the Statement of Compliance set out on pages 6 to 9 provides the disclosures required by the Listing Rules 8.37
and 8.38 issued by the Listing Authority.
Joseph C Schembri (Partner) for and on behalf of
KPMG
Certified Public Accountants
2 April 2007
PREPARATION OF FINANCIAL STATEMENTS AND DIRECTORS’ RESPONSIBILITIES
The Companies Act, 1995 (the “Act”) requires the directors of Maltacom p.l.c. (the “Company”) to prepare financial statements
for each financial period which give a true and fair view of the financial position of the Company and the Group as at the end of
the financial period and of the profit or loss of the Company and the Group for that period in accordance with the requirements of
International Financial Reporting Standards as explained in note 2.1 to the financial statements.
In preparing such financial statements, Article 14 of the Third Schedule to the Act, requires the directors to:
• adopt the going concern basis unless it is inappropriate to presume that the Group will continue in business;
• select suitable accounting policies and apply them consistently from one accounting period to another;
• make judgements and estimates that are reasonable and prudent;
• account for income and charges relating to the accounting period on the accruals basis; and
• value separately the components of asset and liability items on a prudent basis.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy, at any time, the
financial position of the Company and to enable them to ensure that the financial statements have been properly prepared in
accordance with the provisions of the Act.
The directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors, through oversight of management, are responsible to ensure that the Company establishes and maintains internal
control to provide reasonable assurance with regard to reliability of financial reporting, effectiveness and efficiency of operations
and compliance with applicable laws and regulations.
Management is responsible, with oversight from the directors, to establish a control environment and maintain policies and
procedures to assist in achieving the objective of ensuring, as far as possible, the orderly and efficient conduct of the Company’s
business. This responsibility includes establishing and maintaining controls pertaining to the Company’s objective of preparing
financial statements as required by the Act and managing risks that may give rise to material misstatements in those financial
statements. In determining which controls to implement to prevent and detect fraud, management considers the risks that the
financial statements may be materially misstated as a result of fraud.
Signed on behalf of the Board of Directors on 2 April 2007 by:
Sonny Portelli
Chairman
11
Peter J Baldacchino
Director
REPORT OF THE INDEPENDENT AUDITORS ON THE FINANCIAL STATEMENTS
To the Shareholders of Maltacom p.l.c.
We have audited the financial statements of Maltacom p.l.c. (the “Company”) and of the Group of which the Company is the parent
(the “financial statements”) set out on pages 13 to 66, which comprise the balance sheets as at 31 December 2006, and the income
statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
As described on page 11, the directors are responsible for the preparation and fair presentation of these financial statements of
the Group in accordance with International Financial Reporting Standards as adopted by the EU and of the Company in accordance
with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal
control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether
due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable
in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the
Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinions
In our opinion, the financial statements:
(a)
give a true and fair view of the financial position of the Group as at 31 December 2006, and of its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by
the EU;
(b)
give a true and fair view of the financial position of the Company as at 31 December 2006, and of its financial
performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards; and
(c)
have been properly prepared in accordance with the provisions of the Companies Act, 1995 enacted in Malta.
Joseph C Schembri (Partner) for and on behalf of
KPMG
2 April 2007
INCOME STATEMENT
The Group
Revenue
2006
2005
2006
2005
Note
Lm000
Lm000
Lm000
Lm000
5
55,476
54,960
29,502
32,718
(28,610)
(29,093)
(19,420)
(21,149)
31
698
Cost of sales
Write-back of international traffic and leased circuit costs
7
Gross profit
Other operating income
The Company
6
Administrative and distribution expenses
698
31
--------
--------
--------
--------
26,897
26,565
10,113
12,267
721
746
1,547
2,395
(12,535)
(11,310)
(6,598)
(6,254)
(3,155)
-
(3,155)
-
Voluntary retirement costs
7
Prior year fair value adjustments on investment property
7
-
-
(1,330)
-
Other operating expenses
8
(253)
(426)
(210)
(579)
Results from operating activities
Finance income
Finance expenses
Net finance income
9
--------
---------
-------
-------
11,675
15,575
367
7,829
--------
---------
-------
-------
879
871
10,439
8,265
(435)
(508)
(112)
(194)
--------
--------
--------
-------
444
363
10,327
8,071
--------
--------
--------
-------
Net reversal of impairment losses on equity investments
10
-
372
4
608
Profits/(losses) on realisation of investments
10
-
(325)
36
(570)
Share of result of associate
11
(43)
71
-
-
--------
--------
--------
--------
(43)
118
40
38
--------
--------
--------
--------
Profit before tax
12
12,076
16,056
10,734
15,938
Income tax expense
13
(3,934)
(4,831)
(3,417)
(4,952)
--------
--------
--------
--------
Profit for the year
Earnings per share
14
8,142
11,225
7,317
10,986
====
====
====
====
8c0
11c1
7c2
10c8
===
===
===
===
The Group has not discontinued any operations within the meaning of IFRS 5 - “Non-Current Assets Held for Sale and
Discontinued Operations” during either 2006 or 2005. Group Revenue and Operating Profit are therefore derived entirely
from continuing operations.
13
BALANCE SHEET
As at 31 December 2006
The Group
The Company
2006
2005
2006
2005
Note
Lm000
Lm000
Lm000
Lm000
Property, plant and equipment
15
59,855
61,820
45,369
41,888
Intangible assets
16
5,338
5,537
484
569
Investment property
17
-
-
2,144
7,594
Investments in subsidiaries
18
-
-
7,943
7,990
Assets
Investment in associate
19
935
978
1,201
1,483
Other investments
20
13,702
14,127
13,400
13,771
Loans receivable from subsidiaries
21
-
-
1,920
2,354
Finance lease receivables
22
262
294
262
294
Deferred tax assets
23
574
1,271
185
16
---------
--------
---------
--------
80,666
84,027
72,908
75,959
---------
--------
---------
--------
24
1,028
819
453
408
-
50
-
-
Trade and other receivables
25
13,925
15,399
12,961
14,560
21
-
-
1,400
676
2,314
1,491
2,930
3,247
Total non-current assets
Inventories
Term deposit investment
Tax recoverable
Cash at bank and in hand
Total current assets
Non-current assets classified as held for sale
26
Total assets
16,694
12,441
14,007
7,594
----------
----------
----------
----------
33,961
30,200
31,751
26,485
----------
----------
----------
----------
2,014
1,992
2,014
1,992
----------
----------
----------
----------
116,641
116,219
106,673
104,436
=====
=====
=====
=====
25,328
25,328
25,328
25,328
Equity
Share capital
27
Reserves
27
7,664
7,291
7,159
7,057
Retained earnings
55,901
54,607
58,395
57,652
---------
--------
---------
---------
Total equity
88,893
87,226
90,882
90,037
---------
--------
---------
---------
14
BALANCE SHEET
As at 31 December 2006
The Group
The Company
2006
2005
2006
2005
Note
Lm000
Lm000
Lm000
Lm000
28
1,903
5,267
702
1,667
16
12
16
12
Liabilities
Interest-bearing loans and borrowings
Provisions
Total non-current liabilities
28
-------
-------
-----
-------
1,919
5,279
718
1,679
-------
-------
-----
-------
8,252
7,532
5,077
4,899
Derivative liability used for hedging
29
-
23
-
23
Trade and other payables
30
17,577
16,159
9,996
7,798
----------
---------
----------
----------
25,829
23,714
15,073
12,720
----------
---------
----------
----------
27,748
28,993
15,791
14,399
Total current liabilities
Total liabilities
Total equity and liabilities
----------
---------
----------
----------
116,641
116,219
106,673
104,436
=====
=====
=====
=====
The financial statements on pages 13 to 66 were approved by the Board of Directors on 2 April 2007 and were signed on its behalf by:
Sonny Portelli
Chairman
15
Peter J Baldacchino
Director
STATEMENT OF CHANGES IN EQUITY - THE GROUP
Fair
Insurance Dividend
Share Other Hedging value contingency payment Revaluation Retained
Total capital reserve reserve reserve
reserve reserve
reserve earnings
Lm000 Lm000 Lm000
Balance at 1 January 2005
79,371 25,328
Cash flow hedges - effective
portion of changes in fair value*
17
Change in fair value of other investments*
381
Deferred taxation*
(19)
Revaluation of land and buildings
405
Dividends approved at general meeting
and paid
(2,128)
Interim dividend paid
(2,026)
Transfer from retained earnings:
Unrealised gains
Transfer to insurance contingency reserve
Dividends proposed for approval at
general meeting
Profit for the year
11,225
--------- --------Balance at 31 December 2005
87,226 25,328
===== =====
87,226
(17)
Change in fair value of other investments*
13
Deferred taxation*
13
Revaluation of land and buildings
(405)
and paid
(4,559)
(1,520)
Unrealised gains
Dividends proposed for approval
at general meeting
Profit for the year
8,142
---------Balance at 31 December 2006
88,893
=====
Lm000 Lm000
Lm000
Lm000
Lm000
Lm000
1,576
-
(21)
100
2,128
-
50,260
-
17
(6)
-
381
(13)
-
-
-
405
-
-
-
-
-
(2,128)
-
-
(2,026)
243
-
-
-
50
-
-
(243)
(50)
------1,819
====
----11
===
----347
===
----150
===
4,559
------4,559
====
----405
===
(4,559)
11,225
--------54,607
=====
25,328
1,819
11
347
150
4,559
405
54,607
-
-
(17)
6
-
13
7
-
-
-
(405)
-
-
-
-
-
-
(4,559)
-
-
(1,520)
-
213
-
-
-
50
-
-
(213)
(50)
--------25,328
=====
-------2,032
====
----===
----367
===
----200
===
5,065
-------5,065
====
- (5,065)
8,142
------ ---------- 55,901
=== =====
* Net income recognised directly to equity
16
STATEMENT OF CHANGES IN EQUITY - THE COMPANY
Fair
Insurance Dividend
Share Other Hedging value contingency payment Revaluation Retained
Total capital reserve reserve reserve
reserve reserve
reserve earnings
Lm000 Lm000 Lm000
82,368
17
and paid
(2,128)
Change in fair value of other investments
and investment in associate*
725
Net increase in fair value of investment
property
439
Deferred taxation*
(344)
(2,026)
Unrealised gains
general meeting
Profit for the year
10,986
--------Balance at 31 December 2005
90,037
=====
90,037
(17)
Dividends approved at general
meeting and paid
(4,559)
Change in fair value of other investments
and investment in associate*
(275)
Net increase in fair value of investment
property
(439)
Deferred taxation*
338
(1,520)
Transfer to retained earnings:
Unrealised gains
general meeting
Profit for the year
7,317
--------Balance at 31 December 2006
90,882
=====
Lm000
Lm000
Lm000
Lm000
25,328
956
-
347
100
2,128
-
53,509
-
-
17
-
-
-
-
-
-
-
-
-
-
(2,128)
-
-
-
-
-
725
-
-
-
-
-
-
(6)
-
(13)
-
-
-
439
(325)
-
(2,026)
-
208
-
-
-
50
-
-
(208)
(50)
--------25,328
=====
------1,164
====
-----11
===
------1,059
====
-----150
===
4,559
------4,559
====
25,328
1,164
11
1,059
150
4,559
114
57,652
-
-
(17)
-
-
-
-
-
-
-
-
-
-
(4,559)
-
-
-
-
-
(275)
-
-
-
-
-
-
6
-
7
-
-
-
(439)
325
-
(1,520)
-
(61)
-
-
-
50
-
-
61
(50)
--------25,328
=====
------1,103
====
------ -------791
=== ====
-----200
===
5,065
------5,065
====
* Net income recognised directly to equity
17
Lm000 Lm000
- (4,559)
- 10,986
------ --------114
57,652
=== =====
- (5,065)
7,317
------ ---------- 58,395
=== =====
CASH FLOW STATEMENT
The Group
Cash flows from operating activities
Profit for the year
Adjustments for:
Income tax expense
Depreciation, amortisation and write-downs
Net financing income
Share of associate’s results
Write offs and net loss arising on disposal of intangible assets
and property, plant and equipment
Net increase/(decrease) in provisions and write offs
Reversal of unclaimed liabilities written back
Liabilities written back
Profit/(loss) on realisation of equity investments
Net reversal of impairment loss on equity investments
Increase in fair value to investment property
Reversal of fair value on investment property
and property, plant and equipment
Reversal of impairment loss on investment property
Impairment loss on investment property
Working capital changes:
Inventories
Movement in group undertakings’ balances
Cash generated from operations
Interest received (net of withholding tax)
Interest paid on bank overdrafts
Net taxation (paid)/refunded
Payments on voluntary retirement scheme
Net cash from operating activities
Cash flows from investing activities
Payments to acquire property, plant and equipment and
investment property
Payments to acquire property held for sale
Payments to acquire investments
Payment to acquire intangible assets
Receipts from disposal of property, plant and equipment
Receipts from disposal and realisation of investments
Amounts advanced to subsidiaries and associate
Repayments of loan advanced to subsidiaries and associate
Dividends received
Investment income received
Net cash used in investing activities
carried forward
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
8,142
11,225
7,317
10,986
3,934
8,898
(444)
43
4,831
8,753
(363)
(71)
3,417
3,739
(10,327)
-
4,952
3,453
(8,071)
-
161
311
(221)
3,155
-
336
(776)
8
325
(372)
-
163
161
(221)
(36)
(4)
3,155
(175)
306
(838)
8
570
(608)
(558)
-------23,979
-------23,896
1,330
(170)
-------8,349
182
-------10,382
(217)
1,125
1,360
14
-------26,261
250
(12)
(3,999)
(2,679)
-------19,821
--------
199
8,560
(3,317)
(77)
-------29,261
288
(14)
(4,163)
-------25,372
--------
(31)
1,878
1,734
3,848
-------15,778
240
165
(2,679)
-------13,504
--------
189
9,820
(3,978)
5,332
-------21,745
235
(2)
(3,217)
-------18,761
--------
(7,164)
(22)
7
448
(37)
362
-------(6,406)
(4,902)
(12,045)
(2,501)
239
3,325
(29)
7
247
-------(15,659)
(3,763)
(22)
7
448
(3,333)
3,500
263
-------(2,900)
(2,593)
(11,885)
281
3,325
(4,847)
110
864
238
-------(14,507)
--------
--------
--------
--------
13,415
9,713
10,604
4,254
18
CASH FLOW STATEMENT
The Group
Note
brought forward
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
13,415
9,713
10,604
4,254
(3,447)
(3,450)
(1,049)
(1,050)
-
-
2,579
81
(6,077)
(4,148)
(6,077)
(4,148)
(308)
(446)
(98)
(139)
--------
--------
--------
--------
(9,832)
(8,044)
(4,645)
(5,256)
--------
--------
--------
--------
Cash flows from financing activities
Repayments of long term borrowings
Advances by subsidiaries
Dividends paid
Loan interest paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
3,583
1,669
5,959
(1,002)
Cash and cash equivalents at 1 January
8,180
6,466
3,649
4,504
-
-
193
110
(58)
27
6
15
28
18
21
22
--------
-------
-------
-------
Cash and cash equivalents acquired through merger
Effect of exchange rate fluctuations on cash held
Movement in cash pledged as guarantees
Cash and cash equivalents at 31 December
19
31
11,733
8,180
9,828
3,649
====
====
====
====
NOTES TO THE FINANCIAL STATEMENTS
1
Reporting company
Maltacom p.l.c. (the “Company”) is a limited liability company domiciled and incorporated in Malta. The consolidated
financial statements of the Company as at and for the year ended 31 December 2006 comprise the Company and its
subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate. The Group primarily is
involved in the provision of telecommunications services (both fixed and mobile) and Internet related services in Malta
(see note 18.4).
2
Basis of preparation
2.1
Statement of compliance
The Company’s financial statements have been prepared in accordance with the Companies Act, 1995 enacted in Malta
(the “Act”) which requires adherence to International Financial Reporting Standards (IFRSs). In the case of the Group,
Article 4 of Regulation 1606/2002/EC (“the Regulation”) requires that, for each financial year starting on or after 1
January 2005, companies governed by the law of an EU Member State shall prepare their consolidated financial
statements in conformity with IFRSs as adopted by the EU if, at their balance sheet date, their securities are admitted to
trading on a regulated market of any EU Member State.
The Regulation overrides the provisions of the Act, relating to the form and content of the financial statements (and in
particular the Third and Fourth Schedules of the Act) of companies as described above.
Notwithstanding the above, there were no incompatibilities between the provision of the Companies Act, 1995 and the
requirements of the Regulation in relation to the preparation of these financial statements.
2.2
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following:
• derivative financial instruments are measured at fair value
• available-for-sale financial assets are measured at fair value
• investment property is measured at fair value
The methods used to measure fair values are discussed further in note 4.
2.3
Functional and presentation currency
These consolidated financial statements are presented in Maltese Lira, which is the Company’s functional currency. All
financial information presented in Maltese Lira has been rounded to the nearest thousand.
2.4
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amount recognised in the financial statements are described in the
following notes:
• Note 15.2 - measurement of the recoverable amounts of cash-generating units
• Note 19.4 - valuation of investment in associate
• Note 23.2 - utilisation of investment tax credits by a subsidiary
20
3
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by Group entities.
Certain comparative amounts have been reclassified to conform with the current year’s presentation (see note 38).
3.1
Basis of consolidation and common-control transactions
3.1.1
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control commences until the date that control ceases.
3.1.2
Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating
policies. Associates are accounted for using the equity method (equity accounted investee). The consolidated financial
statements include the Group’s share of the income and expenses of the equity accounted investee, from the date that
significant influence commences until the date that significant influence ceases. When the Group’s share of losses
exceeds its interest in the equity accounted investee, the Group’s carrying amount of that interest is reduced to nil and
recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the investee.
3.1.3
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in
preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated
to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains,
but only to the extent that there is no evidence of impairment.
3.1.4
Common-control transactions
A common-control transaction is a business combination in which all the combining entities or businesses ultimately
are controlled by the same party or parties both before and after the combination, and that control is not transitory. A
party is considered to have control of combining entities, if it has the power to govern their financial and operating
policies so as to obtain benefits from their activities. At Group level and Company level, a common-control transaction is
an intra-group transaction.
The acquisition of assets and liabilities of a Group’s entity by another Group’s entity as a consequence of a commoncontrol transaction are recorded in the “acquirer’s” financial statements using book values in the financial statements of
the “acquired” entity. The difference between the carrying amount of the net assets acquired, at the date of the
transaction, and the consideration paid, if any, is recognised in the “acquirer’s” equity.
3.2
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet
date are translated to the functional currency at the exchange rate ruling at that date. The foreign currency gain or loss on
monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for
effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate
at the end of the period. Foreign currency differences arising on re-translation are recognised in profit or loss. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value are translated to the functional currency at the exchange rates ruling at the dates the fair value was determined.
21
3
Significant accounting policies (continued)
3.3
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables,
cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through
profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition
non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if
the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of
the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group
commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the
contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change
in value. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Accounting for finance income and costs is disclosed in note 3.18.4.
3.3.1
Held-to-maturity investments
If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-tomaturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any
impairment losses.
3.3.2
Available-for-sale financial assets
The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets.
Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses
(see note 3.12), and foreign exchange gains and losses on available-for-sale monetary items (see note 3.2), are recognised
directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or
loss. When an investment does not have a quoted market price in an active market and its fair value cannot be reliably
measured, that instrument is stated at cost, including transaction costs, less any impairment losses.
3.3.3
Investments at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial
recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such
investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable
transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss
are measured at fair value, and changes therein are recognised in profit or loss.
3.3.4
Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any
impairment losses.
22
3
3.4
Derivative financial instruments
The Group held derivative financial instruments to hedge its exposure to foreign exchange risks arising from investment
activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for
trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in
profit or loss when incurred. Subsequent to initial recognition, derivative financial instruments are stated at fair value, and
changes therein are accounted for as described below.
Cash flow hedge
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in
equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are
recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains
there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in
equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in
equity is transferred to profit or loss in the same period that the hedged item affects profit or loss.
3.5
3.5.1
Recognition and measurement
Items of property, plant and equipment are initially stated at cost and subsequently measured at cost less accumulated
depreciation (see below) and impairment losses (see accounting policy 3.12).
Cost includes expenditures that are directly attributable to the acquisition. The cost of self-constructed assets includes
the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items
and restoring the site on which they are located, and an appropriate proportion of overheads.
3.5.2
Reclassification to investment property
Property that is being constructed or developed for future use as investment property is classified as property, plant and
equipment and stated at cost until construction or development is complete, at which time it is reclassified as investment
property. Any gain or loss arising on remeasurement is recognised in profit or loss.
When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair
value and reclassified as investment property. Any gain arising on remeasurement is recognised directly in equity. Any
loss is recognised immediately in profit or loss.
3.5.3
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of
such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow
to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as an
expense as incurred.
23
3
3.5
Property, plant and equipment (continued)
3.5.4
Depreciation
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. In the case of items of property, plant and equipment taken over from Telemalta
Corporation, a full year’s charge is provided during the year of acquisition and none during the year in which the item is
disposed of or scrapped. In all other cases, a charge equivalent to half a year’s depreciation is provided for during the year
in which the item of property, plant and equipment is first brought into use, and half a year’s depreciation is charged during
the year in which the item is disposed of or scrapped. Land is not depreciated. The rates of depreciation used are as follows:
•
•
•
•
•
•
•
•
•
•
•
•
buildings
improvements to leasehold premises
cable, wireless and mobile networks
subscribers’ equipment and line
exchange and junction equipment
radio plant and equipment
plant, machinery and equipment
office furniture and equipment
motor vehicles
air conditioning equipment
earth station
computer equipment
1
4
8
7
6.7
10
10
20
10
6.7
20
%
to
10
to
to
to
to
to
to
to
to
to
to
2
33.33
20
15
15
30
25
35
20
7
33.33
Depreciation methods, useful life and residual values are reassessed at the reporting date.
3.6
Intangible assets
3.6.1
Indefeasible rights of use
The expenditure incurred in the acquisition of rights in connection with the Indefeasible Right of Use (IRUs) and Droit de
Passage (DDPs) is capitalised by the Group. Capitalised cost of rights is stated at cost less accumulated amortisation (see
below) and impairment losses (see accounting policy 3.12).
3.6.2
Technical knowledge
Technical knowledge acquired or developed for its application to a plan or design for the production of new or
substantially improved products and processes, is capitalised if the product or process is technically and commercially
feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost
of materials, direct labour and an appropriate proportion of overheads. Capitalised expenditure on technical knowledge
is stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy 3.12).
3.6.3
Computer software
The Group’s computer software comprises software generated by Group entities and software acquired by the Group
entities. Expenditure on computer software developed for the Group’s use is capitalised by the Group if the product or
process is technically and commercially feasible and the Group has sufficient resources to complete development. The
expenditure capitalised includes the cost of direct labour and an appropriate proportion of overheads. Capitalised
expenditure on computer software is stated at cost less accumulated amortisation (see below) and any impairment losses
(see accounting policy 3.12).
24
3
3.6
Intangible assets (continued)
3.6.4
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) and
impairment losses (see accounting policy 3.12).
Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred.
3.6.5
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
3.6.6
Borrowing costs
Borrowing costs directly attributable to the acquisition of a qualifying asset are capitalised as part of the cost of that asset.
3.6.7
Amortisation
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested for impairment at
each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated
useful lives are as follows:
•
•
•
•
3.7
patents
technical knowledge
capitalised costs of rights and licence costs
computer software
5
5
15
10
years
years
years
years
Investment property
Investment properties are properties which are held either to earn rental income or for capital appreciation or for both.
Investment properties are stated at fair value with any change therein recognised in profit or loss.
Rental income from investment property is accounted for as described in accounting policy 3.17.2.
If an investment property becomes owner-occupied, it is reclassified as property, fixtures and fittings and its fair value
at the date of reclassification becomes its cost for accounting purposes of subsequent recording. When the Group
begins to redevelop an existing investment property for continued future use as investment property, the property
remains an investment property, which is measured based on fair value model, and is not reclassified as property, plant
and equipment during the redevelopment.
3.8
Investments in subsidiaries and associate
3.8.1
Investments in subsidiaries are shown in the balance sheet of the Company at cost less any impairment losses
(see accounting policy 3.12).
3.8.2
Investment in associate is shown in the balance sheet of the Company at fair value, with any resultant gain or loss recognised
directly in equity, except for impairment losses. When these investments are derecognised, the cumulative gain or loss
previously recognised directly in equity is recognised in profit or loss. The fair value of these investments is their quoted bid
price at the balance sheet date.
25
3
3.9
Loans with no fixed maturity date
Loans receivable by the Company, which do not have a fixed maturity date, but which are repayable after more than
twelve months from the balance sheet date, are measured at the fair value of the consideration given less impairment
losses (see accounting policy 3.12) and are included within non-current assets.
Loans payable by the Group, which do not have a fixed maturity date, but which are repayable after more than twelve
months from the balance sheet date, are measured at the fair value of the consideration received and are included within
non-current liabilities.
Loans receivable and payable by the Group with no fixed maturity date are included within current assets and
current liabilities respectively.
3.10
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated costs of completion and selling expenses.
The cost of inventories is based on the weighted average method and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work
in progress, cost includes an appropriate share of overheads based on normal operating capacity.
3.11
Trade and other receivables are measured at amortised cost less any impairment losses (see accounting policy 3.12).
3.12
Impairment
The carrying amounts of the Group’s assets, other than investment property (see accounting policy 3.7), inventories (see
accounting policy 3.10) and deferred tax assets (see accounting policy 3.19), are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated (see accounting policy 3.12.1).
For assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable
amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in profit or loss.
When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is
objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is
recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative
loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any
impairment loss on that financial asset previously recognised in profit or loss.
3.12.1
Calculation of recoverable amount
The recoverable amount of the Group’s receivables carried at amortised cost and the investment in associate as carried
in the Company’s consolidated financial statements is calculated as the present value of estimated future cash flows,
discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these
financial assets). Receivables with a short duration are not discounted.
The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
26
3
3.12
Impairment (continued)
3.12.2
Reversals of impairment
An impairment loss in respect of a receivable carried at amortised cost and the investment in associate as carried in
the Company’s consolidated financial statements is reversed if the subsequent increase in recoverable amount can be
related objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed
through profit or loss. If the fair value of a debt instrument classified as available-for-sale increases and the increase can
be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss
shall be reversed, with the amount of the reversal recognised in profit or loss.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.13
Dividends
Dividends are recognised as a liability in the period in which they are declared.
3.14
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption
value being recognised in profit or loss over the period of the borrowings on an effective interest basis.
3.15
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Staff restructuring
The provision for staff restructuring is calculated on the basis of the estimated maximum payment. In cases where
savings are attained, any excess amount provided for is reversed to profits when the payment or liability crystallises.
3.16
Trade and other payables are stated at amortised cost.
3.17
Revenue
3.17.1
Services rendered and goods sold
Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction
at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. Revenue
from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been
transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the
consideration due, associated costs or the possible return of goods also continuing management involvement with the goods.
27
3
3.17
Revenue (continued)
3.17.2
Rental income
Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives granted are recognised as an integral part of the total rental income.
3.18
Expenses
3.18.1
Employee benefits
The Group contributes towards the State defined contribution plan in accordance with local legislation and to which it has
no commitment beyond the payment of contribution. Obligations for contributions to the defined contribution plan are
recognised immediately in profit or loss.
3.18.2
Operating lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised in profit or loss as an integral part of the total lease expense.
3.18.3
Purchase of modems
The Group purchases modems and provides them to subscribers either free of charge or against the payment of a
refundable deposit. The cost of modems provided for free is considered as a customer acquisition cost to be
immediately recognised as an expense in profit or loss. The cost of modems provided to subscribers against the
collection of a refundable deposit is deemed as a resource that is under the Group’s control and is hence recognised as
an asset to be depreciated over the period of its use by the subscriber.
3.18.4
Net finance income
Net finance income comprise interest payable on borrowings calculated using the effective interest method, interest
receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging
instruments that are recognised in the income statement (see accounting policy 3.4).
Interest income is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is
recognised in profit or loss on the date the entity’s right to receive payments is established which in the case of quoted
securities is usually the ex-dividend date.
3.19
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised and/or sufficient taxable temporary differences are available. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
28
3
3.20
Non-current assets held for sale
Immediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in a disposal
group) is brought up-to-date in accordance with applicable IFRSs. Then, on initial classification as held for sale, noncurrent assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in profit or loss, even when there is a revaluation.
The same applies to gains and losses on subsequent remeasurement.
3.21
Segment reporting
A segment is a distinguishable component of the Group that is envisaged in providing products or services (business
segment), which is subject to risks and rewards that are different from those of other segments.
3.22
Unrealised profits
Part II of the Third Schedule to the Act requires that only profits realised at the balance sheet date may be included in
retained earnings available for distribution. Any unrealised profits at this date, taken to the credit of the income
statement, are transferred to non-distributable reserves.
3.23
New standards not yet adopted
IFRS 7 Financial Instruments: Disclosures and the Amendment to IAS 1 Presentation of Financial Statements: Capital
Disclosures are not yet effective for the year ended 31 December 2006, and have not been applied in preparing these
financial statements. These standards require extensive disclosures about the significance of financial instruments for a
company’s financial position and performance, and qualitative and quantitative disclosures on the nature and extent of
risks. IFRS 7 and amended IAS 1, are mandatory for the Company’s 2007 financial statements.
4
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods. Where applicable, further information about the assumptions made in determining fair
values is disclosed in the notes specific to that asset or liability.
4.1
Investment property
An external, independent valuer, having appropriate recognised professional qualifications and recent experience in
the location and category of property being valued, values the Group’s investment property portfolio every year. The
fair values are based on market values, being the estimated amounts for which properties could be exchanged on the
date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing,
wherein the parties had each acted knowledgeably, prudently and without compulsion.
4.2
Investments in equity and debt securities
The fair value of available-for-sale investments is determined by reference to their quoted bid price at the reporting date.
The fair value of held-to-maturity investments is determined for disclosure purposes only.
4.3
Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not
available, then fair value is estimated by discounting the difference between the contractual forward price and the current
forward price for the residual maturity of the contract using a risk-free interest rate.
29
5
Revenue
5.1
Revenue represents the value of goods sold and services provided and sundry income receivable, and is made up as follows:
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
37,679
37,020
19,958
22,160
Rentals
8,275
8,673
7,615
8,004
Internet related services
5,947
5,446
687
666
Sale of goods
1,143
1,946
381
935
499
556
409
481
1,167
732
-
-
Retail and wholesale
Installation charges and extra works
Radio-paging and telemarketing services
Sundry income
766
587
452
472
---------
---------
---------
---------
55,476
54,960
29,502
32,718
=====
=====
=====
=====
Substantially all the Group’s turnover is generated within Malta.
5.2
In common with other providers of telecommunications services, the Company and some of its subsidiaries earn a portion
of their revenues from traffic that is subject to interconnection agreements with other providers. The revenue net of
interconnection charges is therefore analysed as follows:
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Gross turnover
55,476
54,960
29,502
32,718
Interconnection charges
(5,394)
(5,020)
(4,285)
(4,627)
---------
---------
----------
---------
Net turnover
50,082
49,940
25,217
28,091
=====
=====
=====
=====
30
6
Other operating income
The Group
Note
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
558
Fair value adjustments of investment property
-
-
175
Maintenance of equipment
-
6
30
36
Lease of motor vehicles
-
-
109
221
22
22
22
22
Rent receivable on immovable property
35
36
367
630
Other rent receivable
83
76
146
174
Profit on disposal of property, plant and equipment
-
26
-
55
Penalties charged to contractors
-
-
54
160
Effect/(reversal) of unclaimed liabilities written back
-
33
-
(8)
Lease of payphone network
-
119
-
119
93
81
93
81
Realised operating exchange gain
122
-
15
-
Subscribers’ deposits written back
-
215
-
215
221
-
221
-
-
-
170
-
145
132
145
132
------
-----
--------
-------
721
746
1,547
2,395
===
===
====
====
Income from USO obligations
Late payment charges
7.2
Other
7
Significant one-off income and expenses
7.1
Write-back of international traffic and leased circuits costs
During the year ended 31 December 2006, the Company agreed upon settlements with some foreign administrations
that reversed the costs of international voice traffic and international leased circuit costs recognised in previous years by
Lm17,002 (2005: Lm587,955) and Lm13,752 (2005: Lm109,871), respectively.
7.2
Write-back of unclaimed liabilities
During the year ended 31 December 2006, the Company wrote back to the income statement, foreign and local payables
amounting to Lm221,377. These balances were prescribed by end of year.
7.3
Contributions for pensions and gratuities
Following a decision taken by the Courts of Justice on 7 October 2004, the Company was deemed liable to pay a service
pension to a number of former employees. This liability was deemed as taken over by Telemalta Corporation and
subsequently by Maltacom p.l.c.
Although the Company appealed against the decision taken, it was considered necessary to provide in the financial
statements for the year ended 31 December 2004 for the liability covering the period up to 31 December 2004 and
increase the liability during the years ended 31 December 2006 and 31 December 2005 with amounts that may be
payable in future years in accordance with the requirements of International Accounting Standard 19, Employee Benefits.
This resulted in an amount of Lm537,980 being accrued. During the years ended 31 December 2006 and 31 December
2005, the Company increased this provision by a further Lm13,048 and Lm19,129 respectively.
7.4
During the year ended 31 December 2006, the Company offered a voluntary retirement scheme to its employees. Over
200 employees have opted for and are in the process of benefiting from this scheme.
31
7
Significant one-off income and expenses (continued)
7.5
Prior year fair value adjustments in investment property
Following the merger of two subsidiaries with effect from 1 July 2006 (see note 18.6), the Company reversed the fair
value adjustments recognised in prior years with respect to investment property that was rented to those subsidiaries.
The Company had revalued each year this investment property according to IAS 40 Investment Property (see note 3.7).
These fair value adjustments were eliminated upon consolidation in prior years and hence did not affect the Group’s results.
8
Other operating expenses
The Group
Realised operating exchange loss
Unrealised operating exchange losses
Loss on disposal of plant and equipment
Write-off of property, plant and equipment
Write-off of intangible assets
Restructuring expenses
Claims made by third parties
Impairment loss on investment property
9
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
5
126
35
87
----253
===
17
42
362
5
----426
===
46
3
126
35
----210
===
8
22
362
5
182
----579
===
Net finance income
The Group
Dividend income
Bank interest receivable
Interest charged to subsidiaries and associate
Finance income from PABX leases
Income from debt securities
Interest from investment in funds
Late payment interest
Non-operating unrealised exchange gains
Other interest receivable
Finance income
Non-operating unrealised exchange loss
Non-operating realised exchange loss
Bank loan interest
Other bank interest
Other interest
Amortisation of debt securities
Other
Provision for diminution in value of investment
Financial expenses
Net finance income
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
336
4
53
64
234
149
39
----879
----119
24
275
9
4
3
1
----435
----444
===
267
3
65
139
122
176
95
4
----871
----14
416
9
7
23
39
----508
----363
===
9,548
219
132
53
54
234
149
11
39
-------10,439
-------21
88
1
2
--------112
--------10,327
=====
7,306
204
150
65
144
110
176
110
------8,265
------131
1
23
39
------194
------8,071
====
32
10
Net reversal of impairment losses and losses realised on investments
During the year ended 31 December 2005, the Company and the Group had disposed of their investment in Intelsat
Limited and reversed the impairment loss that had been recognised in the income statement during the previous year.
In addition, during the comparative year, the Company and the Group had disposed of investments in available-for-sale
debt securities, realising a loss of Lm11,306.
10.1
Net reversal of impairment losses
The Group
Impairment on investment in subsidiary
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
-
-
-
(15)
-
-
4
251
-
372
-
372
-----
-----
-----
-----
-
372
4
608
===
===
===
===
Reversal of impairment loss on investment
in subsidiary
in equity securities
10.2
Profit/(losses) on realisation of investments
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Loss on disposal of debt securities
-
(11)
-
(11)
Loss on disposal of equity securities
-
(314)
-
(314)
Loss on acquisition by merger of subsidiaries
-
-
-
(245)
Profit on acquisition by merger of subsidiaries
-
-
36
-
-----
-----
-----
-----
-
(325)
36
(570)
===
===
===
===
On 1 July 2006, the Company merged by acquisition two of its subsidiaries, Wirenet Limited and Coreswitch Limited. The
Company took over the assets, liabilities and reserves of these subsidiaries realising a profit of Lm16,383 and Lm19,142
respectively, which is equivalent to the difference between the net book value of the subsidiaries and the cost of the
Company in these investments on the date of merger (refer to note 18.6 to the financial statements).
33
11
Share of result of associate
The Group
2006
2005
Lm000
Lm000
Share of:
Turnover
Operating costs
413
342
(456)
(343)
-----
-----
Loss before taxation
(43)
(1)
(Under)/over-provision taken in prior years
(18)
65
18
7
Taxation
(Loss)/profit for the year
-----
-----
(43)
71
===
===
Refer to note 19 to the financial statements.
12
Profit before tax
12.1
The profit before tax is stated after charging/(crediting):
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
31
26
31
25
Directors’ emoluments:
Salaries
Other
Auditors’ remuneration
Amortisation
47
59
40
26
-----
-----
-----
-----
78
85
71
51
===
===
===
===
65
11
25
5
560
165
50
48
Obsolete inventory and inventory written off
14
(340)
1
(337)
Bad debts written off
29
2,493
27
2,491
===
====
===
====
34
12
Profit before tax (continued)
12.2
Personnel expenses incurred by the Group and the Company during the year are analysed as follows:
The Group
Wages and salaries
Social security costs
Capitalised labour costs
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
10,053
12,601
5,406
3,831
725
447
435
208
--------
--------
-------
-------
10,778
13,048
5,841
4,039
754
487
623
359
--------
--------
-------
-------
11,532
13,535
6,464
4,398
====
====
====
====
Wages, salaries and social security costs, other than those relating to capital works, are allocated between operational
expenses (included within cost of sales) and administrative and distribution expenses as follows:
The Group
Operational expenses
Administrative and distribution expenses
The Company
2006
2005
2006
2005
%
%
%
%
48
57
41
23
52
43
59
77
-----
-----
-----
-----
100
100
100
100
===
===
===
===
The weekly average number of persons employed including part-timers, students and secondees during the year is analysed
as follows:
The Group
The Company
2006
2005
2006
2005
No.
No.
No.
No.
Operating
977
971
596
671
Management and administration
607
614
381
395
Capital works
35
83
36
83
36
-------
-------
-------
-------
1,667
1,621
1,060
1,102
====
====
====
====
12
Profit before tax (continued)
12.2
(continued)
The employees at year-end were as follows:
2006
2005
No.
No.
850
453
6
7
47
621
4
7
The Company
Full-time employees
Seconded or on loan to the Company
Seconded or on loan to group companies
Seconded or on loan to other entities
Part-time employees and students
17
8
-----
-------
924
1,096
===
====
465
420
Subsidiaries (excluding employees loaned from parent)
Full-time employees
Part-time employees
13
Income tax expense
13.1
Recognised in the income statement
142
99
-----
-----
607
519
===
===
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
(3,224)
(3,267)
(3,248)
(2,996)
Current tax expense
Current year
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense in income statement
(710)
(1,564)
(169)
(1,956)
-------
-------
-------
-------
(3,934)
(4,831)
(3,417)
(4,952)
====
====
====
====
36
13
Income tax expense (continued)
13.2
The income tax expense for the year and the result of the accounting profit multiplied by the tax rate
applicable in Malta, the Company’s country of incorporation, are reconciled as follows:
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Profit before tax
12,076
16,056
10,734
15,938
--------
--------
--------
--------
Income tax using the domestic income tax rate
(4,227)
(5,620)
(3,757)
(5,578)
(15)
25
-
-
(118)
(98)
(19)
(106)
of capital allowances in determining taxable income
35
(127)
36
(111)
Further allowance on rental income
42
58
26
44
-
105
-
-
Tax effect of:
Associated undertakings’ results
Expenses disallowed for tax purposes
Depreciation charges not deductible by way
Adjustment to previous years’ tax charge
Difference in tax rates charged on investment
376
391
374
473
(152)
244
-
-
-
220
-
206
Realised profit/(loss) on investment in subsidiaries
-
-
12
(86)
-
-
-
88
Consolidation adjustment
99
(87)
-
-
Other non-temporary differences
26
53
(6)
30
at fair value following changes in taxation legislation
-
-
(142)
83
Additional tax benefit on sale of property held for resale
-
5
-
5
-
-
59
-
income and BPA qualifying activities
Investment tax credit
in subsidiaries and associate
Different tax rates on immovable property valued
Income tax expense
37
-------
-------
-------
-------
(3,934)
(4,831)
(3,417)
(4,952)
====
====
====
====
13
Income tax expense (continued)
13.3
Deferred tax recognised directly in equity
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Financial investments available-for-sale
(7)
13
(7)
13
Forward contract
(6)
6
(6)
6
-
-
(325)
325
-----
-----
-----
-----
(13)
19
(338)
344
===
===
===
===
Note
Deferred tax (charge)/income relating to:
Investment property
23.3
14
Earnings per share
14.1
The Group
Profit for the year attributable to shareholders
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
8,142
11,225
7,317
10,986
====
=====
====
=====
Weighted average number of shares in issue
101,310,488
=========
Lm
Earnings per share
14.2
Lm
Lm
Lm
8c0
11c1
7c2
10c8
===
===
===
===
The earnings per share before one-off items described in note 7 which affected the income statement for the years ended
31 December 2006 and 2005, are as follows:
The Group
Earnings per share
The Company
2006
2005
2006
2005
Lm
Lm
Lm
Lm
9c9
10c6
10c1
10c4
===
===
===
===
38
15
15.1
The Group
Total
Land and
buildings
Plant and
equipment
Payments
on account
and assets
in course of
construction
Motor
vehicles
Lm000
Lm000
Lm000
Lm000
115,967
15,897
97,047
7,285
236
4,259
Material
awaiting
installation
Lm000
Lm000
342
1,435
1,246
-
2,420
370
Cost/revalued amount
Acquisitions
Transfers, disposals and write-offs
Balance at 31 December 2005
Acquisitions
Disposals and transfers
(3,735)
(1,106)
(852)
-
(1,777)
-
----------
--------
----------
-----
-------
-------
119,517
15,027
100,454
342
2,078
1,616
=====
====
=====
===
====
====
119,517
15,027
100,454
342
2,078
1,616
6,538
238
4,560
24
1,442
274
(1,350)
193
968
-
(2,138)
(373)
-----------
---------
-----------
-----
-------
-------
124,705
15,458
105,982
366
1,382
1,517
======
=====
======
===
====
====
50,417
723
49,362
332
-
-
7,911
336
7,572
3
-
-
Depreciation and impairment losses
Depreciation charge for the year
Impairment loss for the year
Disposals
Transfers and disposals
386
-
386
-
-
-
(1,017)
(207)
(810)
-
-
-
---------
-----
---------
-----
-----
-----
57,697
852
56,510
335
-
-
=====
===
=====
===
===
===
57,697
852
56,510
335
-
-
7,847
(90)
7,933
4
-
-
420
-
420
-
-
-
(1,114)
-
(1,114)
-
-
-
---------
-----
---------
------
-----
-----
64,850
762
63,749
339
-
-
=====
===
=====
===
===
===
Carrying amounts
At 1 January 2005
At 31 December 2005
At 1 January 2006
At 31 December 2006
39
65,550
15,174
47,685
10
1,435
1,246
=====
=====
=====
===
====
====
61,820
14,175
43,944
7
2,078
1,616
=====
=====
=====
===
====
====
61,820
14,175
43,944
7
2,078
1,616
=====
=====
=====
===
====
====
59,855
14,696
42,233
27
1,382
1,517
=====
=====
=====
===
====
====
15
Property, plant and equipment (continued)
15.2
Recoverability of the Group’s mobile telecommunications infrastructure
At 31 December 2006, the Group’s mobile telecommunications infrastructure was carried at Lm6,909,857. An impairment
test was carried out at the end of 2006, following the grant of a license in August 2005 to the Group for the establishment
and implementation of a 3G network and the management’s decision to invest in such network. On the basis of this
impairment test, management is confident that no impairment loss needs to be recognised.
15.3
The Company
Total
Cost
Acquisitions
Acquisitions
Transfer from investment property
Reversal of fair values
Depreciation and impairment losses
Carrying amounts
At 1 January 2005
At 31 December 2005
At 1 January 2006
At 31 December 2006
Land and
buildings
Plant and
equipment
Motor
vehicles
Payments
on account
and assets
in course of
construction
Material
awaiting
installation
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
78,969
2,998
(3,462)
--------78,505
=====
78,505
3,210
4,487
(405)
(1,218)
--------84,579
=====
10,773
63
(2,163)
-------8,673
====
8,673
24
4,487
(405)
2
--------12,781
=====
66,025
963
(998)
-------65,990
=====
65,990
2,573
534
--------69,097
=====
334
----334
===
334
25
----359
===
591
1,642
(301)
------1,932
====
1,932
442
(1,422)
------952
====
1,246
330
------1,576
====
1,576
146
(332)
------1,390
====
33,966
3,383
22
(754)
-------36,617
=====
36,617
3,313
376
(1,096)
-------39,210
=====
459
316
(207)
----568
===
568
(63)
----505
===
33,183
3,064
22
(547)
-------35,722
=====
35,722
3,371
376
(1,096)
-------38,373
=====
324
3
----327
===
327
5
----332
===
----===
----===
----===
----===
45,003
=====
41,888
=====
41,888
=====
45,369
=====
10,314
=====
8,105
=====
8,105
=====
12,276
=====
32,842
=====
30,268
=====
30,268
=====
30,724
=====
10
===
7
===
7
===
27
===
591
===
1,932
====
1,932
====
952
===
1,246
====
1,576
====
1,576
====
1,390
====
40
16
Intangible assets
16.1
The Group
Internally
generated
computer
Other
software intangibles
IRUs
and
DDPs
Total
Lm000
Lm000
Lm000
Lm000
3,095
938
921
1,236
Acquisitions
3,268
-
-
3,268
388
-
388
-
-------
-----
-------
-------
6,751
938
1,309
4,504
====
===
====
====
6,751
938
1,309
4,504
Acquisitions
192
-
-
192
Development
275
-
275
-
(56)
(56)
-
-
-------
-----
-------
-------
Cost
Development
Write-offs
7,162
882
1,584
4,696
====
===
====
====
758
321
156
281
Amortisation for the year
437
48
116
273
19
-
19
-
-------
-----
-----
-----
1,214
369
291
554
====
===
===
===
1,214
369
291
554
573
50
145
378
58
-
-
58
(21)
(21)
-
-
Amortisation and impairment losses
Write-offs
-------
-----
-----
-----
1,824
398
436
990
====
===
===
===
Carrying amounts
At 1 January 2005
At 31 December 2005
At 1 January 2006
At 31 December 2006
41
2,337
617
765
955
====
===
===
===
5,537
569
1,018
3,950
====
===
====
====
5,537
569
1,018
3,950
====
===
====
====
5,338
484
1,148
3,706
====
===
====
====
16
Intangible assets (continued)
16.1
The Company
IRUs and DDPs
Lm000
Cost
938
-----
938
===
938
Write-offs
(56)
-----
882
===
Amortisation
321
48
-----
369
===
Write-offs
369
50
(21)
-----
398
===
Carrying amounts
At 1 January 2005
At 31 December 2005
617
===
569
===
At 1 January 2006
569
===
At 31 December 2006
16.2
484
===
Amortisation charge
The amortisation charge is recognised within cost of sales in the income statement for the Company and the Group.
42
17
Investment property
17.1
The Company
Balance at 1 January
Acquisitions
Transfers from property, plant and equipment
Transfers to property, plant and equipment
Reversal of fair value
Impairment loss
Reversal of impairment loss
Increase in fair value
Balance at 31 December
2006
2005
Lm000
Lm000
7,594
56
(4,487)
(1,364)
170
175
------2,144
====
5,664
97
2,755
(1,737)
(182)
997
------7,594
====
17.2
The carrying amount of investment property is the fair value of the property as determined by a registered independent
appraiser having an appropriate recognised professional qualification and recent experience in the location and category
of the property being valued. Fair values were determined having regard to recent market transactions for similar
properties in the same location as the Company’s investment property.
17.3
Investment property comprises a number of commercial properties that are leased to Group entities.
18
18.1
The Company
Note
At 1 January as originally stated
Effect of change in accounting policy:
Reversal of share of equity results
Impairment loss on investments in subsidiaries
Restatements
At 1 January as restated
Increase in investment in subsidiary
Merger of subsidiaries with the Company’s operations
Reversal of impairment loss on investments in merged subsidiaries
Impairment loss charged for the year
Reversal of impairment loss for the year
At 31 December
43
18.2
18.2
2006
2005
Lm000
Lm000
7,990
-------
9,997
-------
------7,990
------7,990
(51)
4
------7,943
====
(1,804)
(438)
-------(2,242)
-------7,755
299
(300)
251
(15)
------7,990
====
18
Investments in subsidiaries (continued)
18.2
Change in accounting policy
During the comparative year, the Company ceased to measure its investments in subsidiaries using the equity method
and started to measure these investments at cost less impairment loss, in accordance with the revised IAS 27,
Consolidated and Separate Financial Statements.
In accordance with IAS 8, Changes in Accounting Policies, the Company applied retrospectively these changes in
accounting policies as if the new accounting policy had always been applied. As a result, the Company had restated its
investments in the subsidiaries as at 1 January 2005 from Lm9,997,457 to Lm7,754,910.
18.3
Control of the group
The ultimate parent of the Group is Dubai Holding LLC, the registered office of which is situated at Emirates Towers, Level
43, Office Block, Sheikh Zayed Road, Dubai, UAE.
18.4
Subsidiaries
Registered office
Ownership interest
2006
2005
%
%
Coreswitch Limited
Spencer Hill, Marsa
-
99.99
Innovate Limited
Spencer Hill, Marsa
0.09
0.09
Nature of business
Operation and management of systems for
provision of communication services
Provision of IT-related management and
consultancy services
Innovate Software Limited
Spencer Hill, Marsa
99.99
99.99
Development of software, including
implementation, support and maintenance
Mobisle Communications
Limited
Spencer Hill, Marsa
99.99
99.99
Operation of mobile and wireless
telecommunication systems and networks
Monitoring Services Limited
Spencer Hill, Marsa
99.99
99.99
Provision of advisory and consultancy
services on monitoring and security control
Telepage Limited
Spencer Hill, Marsa
99.99
99.99
Operation of call centre and radio-paging
and voice messaging system
DataStream Limited
(formerly Terranet Limited)
Dolphin Centre
Main Street, Balzan
99.99
99.99
Provision of connections to the Internet,
Internet services, retail and wholesale
broadband services.
Wirenet Limited
Spencer Hill, Marsa
-
99.99
Operation and management of access
network infrastructure
Worldwide Communications
Limited
Spencer Hill, Marsa
99.99
99.99
Operation of an international multilingual
call centre
44
18
18.5
At 31 December 2006, all the above investments were fully paid-up, with the exception of the investment in Worldwide
Communications Limited, which was 75% paid-up (2005: 75%) (see note 35.4).
18.6
Merger of subsidiaries
By virtue of directors’ resolutions dated 12 May 2006 and 30 December 2004, it was resolved that three of the subsidiaries
namely, Wirenet Limited, Coreswitch Limited and Allcom Limited be merged with the Company in terms of the provisions
of Chapter I, Title II, Part VIII of the Companies Act, 1995, whereby, through a merger by acquisition, the Company, as the
acquiring company, acquired the assets, rights, liabilities and obligations of these subsidiaries. The Company had a 99.99%
holding in these subsidiaries.
The merger of both Wirenet Limited and Coreswitch Limited became both effective on 31 August 2006 whereas the
merger of Allcom Limited became effective on 23 July 2005. The transactions of Wirenet Limited and Coreswitch
Limited were treated, for accounting purposes, as being those of the Company, as from 1 July 2006. On the other hand,
the transactions of Allcom Limited were treated for accounting purposes as being those of the Company as from 1
January 2005.
The assets, liabilities and reserves which were taken over by Maltacom p.l.c. as the acquiring company were as follows:
Coreswitch Limited
Wirenet Limited
Allcom Limited
Lm
Lm
Lm
54,780
50,000
73,063
149,688
--------327,531
---------
13,505
16,504
130,813
23,377
61,913
---------246,112
----------
400,130
198,491
137,787
100,267
---------836,675
----------
69,097
128,759
59,384
---------257,240
----------
229,229
---------229,229
----------
63,363
200,000
524,181
---------787,544
----------
20,291
=====
16,383
=====
(250,869)
======
Assets
Investments in debt securities
Other investments
Inventories
Tax recoverable
Liabilities
Bank borrowings
Other interest bearing liabilities
Taxation
Reserves
Retained earnings/(accumulated losses)
On 23 June 2005, the directors had resolved that the subsidiaries, Datastream Limited and Terranet Limited, be merged
by acquisition as described in Section 343(2) of the Companies Act, whereby Terranet Limited acquired the assets, rights
and obligations of Datastream Limited. On 12 August 2005, the directors of Datastream Limited and Terranet Limited
resolved that both entities be merged in terms of the provision of Section 344 of the Companies Act, as drawn up in
the draft terms of merger published by the Registrar of Companies on 18 August 2005. As a result, the Company
increased its shareholding in Terranet Limited through the allotment of a further 650,000 ordinary shares in Terranet
Limited to the Company on the basis of the share exchange ratio set out in the said draft terms of merger (see note 18.7).
On 23 December 2005, the directors of Terranet Limited resolved to change the name of this subsidiary from Terranet
Limited to DataStream Limited.
45
18
18.6
Merger of subsidiaries (continued)
On 5 December 2006, the directors resolved to merge DataStream Limited with the Company in terms of the provision of Title
II, Chapter III of Part VIII of the Companies Act, 1995, whereby through a merger by acquisition, the Company has acquired the
assets, rights, liabilities and obligations of DataStream Limited as at 1 January 2007 in accordance with Section 358 of the
Companies Act, 1995.
18.7
Increase in share capital of subsidiaries
During the year ended 31 December 2005, the Company increased its share capital in Telepage Limited through the
capitalisation of a balance due to it by this subsidiary amounting to Lm299,000. In addition, the Company had increased
its share capital in DataStream Limited (formerly Terranet Limited) through the acquisition of 650,000 ordinary shares of
Lm1 each, fully paid up, issued at a premium of Lm1.08,5 each, according to the share exchange ratio set out in the draft
terms of merger between Datastream Limited and Terranet Limited (see note 18.6).
18.8
Sub-subsidiaries
As at 1 January 2005, Mobisle Communications Limited had a 99.99% holding in Go Mobile Limited. On 4 March
2005, Mobisle Communications Limited increased its share capital in Go Mobile Limited by Lm4,000, representing
4,000 ordinary shares of Lm1 each.
As at 1 January 2005, DataStream Limited (formerly Terranet Limited) had a 99.99% holding in maltaNET Ltd. On 12
August 2005, the directors of maltaNET Ltd and DataStream Limited (formerly Terranet Limited) resolved that both
entities be merged in terms of the provision of Title II, Chapter III of Part VIII of the Companies Act 1995, whereby
through a merger by acquisition, DataStream Limited (formerly Terranet Limited), as the acquiring entity acquired the
assets, rights, liabilities and obligations of maltaNET Ltd in accordance with Section 358 of the Companies Act, 1995.
19
19.1
The Group and the Company have an investment in the following associate:
Ownership interest
Country
Datatrak Holdings p.l.c.
19.2
Malta
2006
2005
%
%
30
==
30
==
Summary financial information on associate - 100 per cent:
2006
2005
Assets
Liabilities
Equity
Revenues
Profit/(loss)
Lm000
Lm000
Lm000
Lm000
Lm000
5,137
====
1,781
====
3,356
====
1,377
====
126
===
4,948
====
1,651
====
3,297
====
1,408
====
3
===
The financial information for 2006 was extracted from unaudited consolidated financial statements of Datatrak Holdings
p.l.c. for the year ended 31 December 2006.
46
19
Investment in associate (continued)
19.3
At 31 December 2006, the market value of the Company’s investment in Datatrak Holdings p.l.c. amounted to
Lm1,200,997 (2005: Lm1,483,303).
19.4
The investment in associate is carried by the Company at fair value, which is equivalent to market value. On the other
hand, the investment in associate is carried by the Group at its equity value (see note 3.1.2). It appears that this associate
is still seeking to break into its intended key markets and has a history of losses. Furthermore, its listed share price has
followed a declining trend during the accounting period. In spite of these factors, the associate’s management, which
includes a member of Maltacom p.l.c.’s board of directors, a senior executive and the company secretary of Maltacom
p.l.c. appears confident that the Company will recover and achieve its objective in the short-term. Based on this
respresentation, the directors have concluded that no impairment has resulted on this investment.
20
Other investments
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
1,296
1,763
1,166
1,575
Non-current investments
Listed debt securities
Units in listed funds
12,406
12,364
12,234
12,196
----------
---------
----------
---------
13,702
14,127
13,400
13,771
=====
=====
=====
=====
-
50
-
-
===
===
===
===
Current investment
Term deposit held to maturity
21
21.1
Lm000
At 1 January 2005
Advances
Elimination of loan advanced upon merger
Settlement by set-off
2,546
959
(200)
(260)
-------
At 31 December 2005
3,045
====
At 1 January 2006
Advances
3,045
275
-------
At 31 December 2006
3,320
====
47
21
Loans receivable from subsidiaries (continued)
21.2
Terms and repayment schedule by subsidiaries
Interest
Lm
Repayment
_________________________________________
Within Between
After
By
1 year 2-5 years
5 years
%
Lm
Lm
Loan 1 to Innovate Group
2,653,840
5.5
2011
1,248,575
1,344,152
61,113
None
Loan 2 to Innovate Group
428,495
5.5
2014
135,807
153,739
138,949
None
Loan to Telepage Limited
221,934
3.75
After 31.12.07
-
221,934
-
None
Loan to Worldwide
Communications Limited
16,034
Free
On demand
16,034
-
-
None
------------- -------------
-----------
------------3,320,303
1,400,416
=======
22
Lm
Security
1,719,825
200,062
======= ======= ======
Finance lease receivables
The finance lease receivables classified as non-current assets are analysed as follows:
Group and Company
Between one and five years
Asset
Interest
Principal
Asset
Interest
Principal
2006
2006
2006
2005
2005
2005
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
262
===
===
262
===
294
===
===
294
===
48
23
Deferred tax assets and liabilities
23.1
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
The Group
Financial investments
Inventories
Provisions
Derivative liability
Other items
Trade receivables
Deferred expenditure
Tax value of losses carried forward
Tax value of capital allowances carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets
Assets
Liabilities
Net
2006
2005
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
20
260
951
1,472
460
452
878
------4,493
(3,919)
-------574
====
12
254
922
8
1,406
433
1,076
------4,111
(2,840)
------1,271
====
(3,749)
(1)
(169)
------(3,919)
3,919
------====
(2,621)
(14)
(6)
(199)
------(2,840)
2,840
------====
(3,749)
20
260
951
(1)
1,472
(169)
460
452
878
------574
-------574
====
(2,621)
12
254
908
(6)
8
1,406
(199)
433
1,076
------1,271
------1,271
====
Provisions include a deductible provision for VAT claims and a taxable provision for exchange fluctuations amounting to
Lm921,553 and Lm13,579 respectively (2005: Lm921,553 and Lm13,579 respectively).
The Company
Investment property
Inventories
Provisions
Trade receivables
Tax value of loss carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets
Assets
Liabilities
Net
2006
2005
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
19
69
131
922
1,319
273
452
------3,185
(3,000)
-------185
====
12
71
130
922
1,278
273
------2,686
(2,670)
-------16
====
(2,535)
(260)
(36)
(169)
------(3,000)
3,000
-------====
(1,570)
(846)
(49)
(6)
(199)
------(2,670)
2,670
------====
(2,535)
(260)
19
69
131
886
1,319
(169)
273
452
------185
-------185
====
(1,570)
(846)
12
71
130
873
(6)
1,278
(199)
273
------16
------16
====
Provisions include a deductible provision for VAT claims and a taxable provision for exchange fluctuations amounting to
Lm921,553 and Lm36,010 respectively (2005: Lm921,553 and Lm48,551 respectively).
49
23
Deferred tax assets and liabilities (continued)
23.2
Recognition of deferred tax asset on investment tax credit by a subsidiary
During the year under review, the Company’s subsidiary, Innovate Software Limited (see note 18.4) continued to generate
taxable profit. As a result, a deferred tax asset representing the tax value of investment tax credits has been recognised
in the Group’s financial statements. The directors have based this estimate on evidence supporting their belief that the
subsidiary will have enough taxable profits in the future against which this deferred tax asset can be utilised.
23.3
Movement in temporary differences during the year
The Group
Balance Recognised Recognised
1 Jan 05
in income
in equity
Lm000
Lm000
Lm000
Balance
31 Dec 05
Lm000
(1,821)
(800)
-
(2,621)
270
(245)
(13)
12
Inventories
391
(137)
-
254
Provisions
902
6
-
908
(4)
12
-
8
Trade receivables
Other items
2,108
(702)
-
1,406
(216)
17
-
(199)
Tax value of loss carry- forwards
254
179
-
433
918
158
-
1,076
52
(52)
-
-
-
-
(6)
(6)
-------
-------
-----
-------
2,854
(1,564)
(19)
1,271
====
====
===
====
Balance Recognised Recognised
1 Jan 06
in income
in equity
Lm000
Lm000
Lm000
Balance
31 Dec 06
Lm000
Unabsorbed research and development allowances
(2,621)
(1,128)
-
(3,749)
12
1
7
20
Inventories
254
6
-
260
Provisions
908
43
-
951
8
(9)
-
(1)
1,406
66
-
1,472
(199)
30
-
(169)
272
1
-
273
161
478
-
639
1,076
(198)
-
878
Other items
Trade receivables
Tax value of loss carry-forwards
(6)
-
6
-
-------
-------
------
------
1,271
(710)
13
574
====
====
===
===
50
23
Deferred tax assets and liabilities (continued)
23.3
Movement in temporary differences during the year (continued)
The Company
Balance
Effect
1 Jan 05 as
of change
originally in accounting
stated
policy
Recognised
in income
Recognised
in equity
Balance
31 Dec 05
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
(611)
-
(611)
(959)
-
(1,570)
Investment property
(409)
-
(409)
(112)
(325)
(846)
148
-
148
(123)
(13)
12
(763)
828
65
6
-
71
Inventories
250
-
250
(120)
-
130
Provisions
904
-
904
(31)
-
873
(4)
-
(4)
4
-
-
Trade receivables
2,016
-
2,016
(738)
-
1,278
(216)
-
(216)
17
-
(199)
173
-
173
100
-
273
------1,488
====
----828
===
------2,316
====
------(1,956)
====
(6)
----(344)
===
(6)
------16
====
Balance
Effect
1 Jan 06 as
of change
originally in accounting
stated
policy
Balance
1 Jan 06
as restated
Recognised
in income
Recognised
in equity
Balance
31 Dec 06
Other items
Tax value of loss carry-forwards
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
(1,570)
-
(1,570)
(965)
-
(2,535)
(846)
-
(846)
261
325
(260)
12
-
12
-
7
19
Investment property
71
-
71
(2)
-
69
Inventories
130
-
130
1
-
131
Provisions
873
-
873
13
-
886
Trade receivables
1,278
-
1,278
41
-
1,319
(199)
-
(199)
30
-
(169)
273
-
273
-
-
273
-
-
-
452
-
452
(6)
------16
====
----===
(6)
------16
====
----(169)
===
6
----338
===
------185
====
Tax value of losses carried forward
51
Balance
1 Jan 05
as restated
24
Inventories
The Group
Operating spares
Work in progress
Consumables and stationery
Goods for resale
25
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
516
478
321
325
4
17
-
-
64
53
46
32
444
271
86
51
-------
-----
-----
-----
1,028
819
453
408
====
===
===
===
25.1
The Group
Trade receivables
Amounts receivable under finance lease
Amounts owed by subsidiaries
Amounts owed by associate
Loan receivable from associate
Other receivables
Prepayments and accrued income
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
7,763
9,150
5,157
6,411
239
355
239
355
-
-
4,241
3,831
17
15
11
12
66
29
66
29
368
244
190
128
5,472
5,606
3,057
3,794
--------
---------
--------
---------
13,925
15,399
12,961
14,560
=====
=====
=====
=====
25.2
Amounts receivable include VAT charged to and recoverable from customers and subscribers.
25.3
The balance of other receivables includes an amount owed by Public Broadcasting Services Limited to the Company and
the Group in respect of the transfer of the assets and liabilities of the Xandir Malta Division. The amount is repayable
on demand.
25.4
The amounts due by subsidiaries and associate are all interest free and repayable on demand. Transactions with related
parties are set out in note 37 to these financial statements.
25.5
The loan receivable from associate amounting to Lm66,237 (2005: Lm28,858) bears interest at 8% and is repayable
on demand.
52
25
Trade and other receivables (continued)
25.6
The amounts receivable under finance lease are as follows:
Group and Company
Asset
25.7
Interest
Principal
Asset
Principal
2006
2006
2006
2005
2005
2005
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
239
===
52
===
186
===
355
===
32
===
323
===
The impairment losses are as follows:
The Group
26
Interest
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
4,166
====
3,975
====
3,768
====
3,652
====
Non-current assets held for sale
The non-current assets held for sale include land at Qawra and improvements to premises at Ricasoli, which until recently
was being utilised by a subsidiary, amounting to Lm1,053,478 (2005: Lm1,053,478) and Lm960,393 (2005: Lm938,542)
respectively. The amounts recognised in the financial statements represent the lower of the carrying amount and the
fair value less costs to sell. During 2003, the Board of Directors decided to dispose of the land at Qawra and embarked
on a plan to sell the land. During the year ended 31 December 2005, the Company and the Group commenced
negotiations with the Government of Malta for the sale of the Ricasoli improvements. Events and circumstances incident
to the local environment surrounding the sale of property have delayed the sale of any or all of these properties.
In the case of the land at Qawra, the Company is committed to a plan to sell, and circumstances extending the period
to complete sale beyond one year are considered to be beyond the Company’s control. In the case of the improvements
to premises at Ricasoli, the Company considers these improvements to be substantially recoverable from their disposal in
view of the negotiations currently undertaken by the Company with the Government of Malta.
27
Capital and reserves
27.1
Share capital
Group and Company
No. of Ordinary Shares
2006
2005
On issue at 1 January
101,310,488
========
101,310,488
========
On issue at 31 December
101,310,488
========
101,310,488
========
At 31 December 2006, the authorised share capital comprised 600,000,000 ordinary shares (2005: 600,000,000) at a
par value of Lm0.25 each. The holders of ordinary shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at shareholders’ meetings of the Company. All shares rank equally with regard
to the Company’s residual assets.
53
27
Capital and reserves (continued)
27.2
Other reserve
The ‘other reserve’ is non-distributable and comprises transfers of amounts equivalent to the following unrealised gains
from retained earnings, in accordance with the requirements of the Companies Act, 1995:
Gain
Deferred
taxation
Net
Lm000
Lm000
Lm000
Exchange gains
103
(36)
67
Tax effect of unabsorbed capital allowances
639
-
639
Tax effect of capital loss on investment
273
-
273
Tax effect of investment tax credit
878
-
878
175
------2,068
====
----(36)
===
175
------2,032
====
Exchange gains
103
(36)
67
Fair value changes of investment property
570
(259)
311
Tax effect of capital allowances carried forward
452
-
452
273
------1,398
====
----(295)
===
273
----1,103
===
The Group
Revaluation to equity of investment in associate
The Company
Tax effect of capital loss on investment
27.3
Hedging reserve
The hedging reserve comprised the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that had not yet occurred. During the current year, the cumulative unrealised
gain recognised in equity was recognised in profit or loss upon occurrence of hedged transactions.
27.4
Fair value reserve
The fair value reserve represents the cumulative net change in fair value of an available-for-sale investment held by the
Company and the Group, net of related deferred tax effects. This reserve is non-distributable.
27.5
Insurance contingency reserve
The insurance contingency reserve represents amounts that are intended to be utilised in the event that adequate coverage
for an incident will not be provided by the current Company’s insurance policies. This reserve is non-distributable.
27.6
Dividend payment reserve
The dividend payment reserve represents the dividend proposed at the end of each financial year. This reserve is realised
on the approval of the dividend at the Annual General Meeting.
54
27
Capital and reserves (continued)
27.7
Revaluation reserve
As at 31 December 2005, the revaluation reserve of the Company related to land and buildings and represents the
cumulative increase in the fair value of such property at the date of its reclassification as investment property in excess of
any related previous impairment losses. This reserve is non-distributable. During the current year, this reserve was
reversed following the merger of subsidiaries (see note 7.5).
The revaluation reserve of the Group related to land and buildings and represented the cumulative increase in the fair
value of such property when transferred by the Company from investment property to land and buildings. This reserve
which was non-distributable was reversed during the current year.
28
28.1
This note provides information about the contractual terms of the Company’s and the Group’s interest-bearing loans and
borrowings. For more information about the Company’s and the Group’s exposure to interest rate and foreign currency
risk, see note 32.
The Group
The Company
Note
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Non-current liabilities
Secured bank loans
1,903
5,267
702
1,667
====
====
===
====
Current liabilities
Current portion of secured bank loans
Bank overdrafts
28.2
28.3
3,367
3,450
966
1,050
4,885
4,082
4,111
3,849
-------
-------
-------
-------
8,252
7,532
5,077
4,899
====
====
====
====
Terms and debt repayment schedule
Interest
Repayable by
%
Balance
Lm000
Company:
Loan A
Loan B
Loan C
4.1 (2005: 4)
4.5 (2005: 4)
4.1 (2005: 4)
July 2007
September 2007
December 2008
175
90
1,403
Subsidiary:
Loan A
4.1 (2005: 4)
June 2008
4,115
During the year ended 31 December 2006, the Company and one of its subsidiaries re-negotiated with the bank the
conversion of their loan facilities from Maltese Lira to Euros.
The Company’s loans are unsecured while the subsidiary’s loan is secured by guarantees provided by the Company. The
interest rate of these loans is 0.75% over the Central Intervention Rate issued by the Central Bank of Malta and the Euro
Base Rate issued by the European Central Bank. As at 31 December 2006, the Central Intervention Rate and the Euro
Base Rate stood at 3.75% (2005: 3.25%) and 3.35% respectively.
55
28
Interest-bearing loans and borrowings (continued)
28.3
Overdraft facilities
The Company enjoys overdraft facilities of Lm13.1 million with various local financial institutions. Overdraft facilities
of Lm2.6 million are also enjoyed by certain subsidiaries. The facilities enjoyed by these subsidiaries are secured by
guarantees provided by Maltacom p.l.c.
As at year-end, these overdraft facilities bore interest at the rates varying between 4.5% and 5% (2005: 4% and 5%).
29
Derivative liability used for hedging
During the year ended 31 December 2005, the Company and the Group entered into forward exchange contracts to cash
flow hedge its available-for-sale investment in Bank Nederlandse Gemeenten 2.5%, denominated in US Dollars. These
forward contracts matured on 3 April 2006. At 31 December 2005, the fair value of these forward contracts amounted
to Lm22,533.
30
30.1
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Trade and capital payables
8,951
9,488
3,859
4,028
Accruals and prepaid income
8,626
6,671
4,709
3,095
-
-
1,428
675
----------
--------
-------
-------
17,577
16,159
9,996
7,798
=====
====
====
====
Amounts owed to subsidiaries
30.2
The amounts owed to subsidiaries are all unsecured, interest free and repayable on demand. Transactions with related
parties including subsidiaries, are set out in note 37 to these financial statements.
31
Cash and cash equivalents
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Bank balances
6,345
9,861
4,188
5,917
Call deposits
9,874
2,390
9,350
1,500
Cash in hand
475
---------
190
--------
469
---------
177
-------
16,694
12,441
14,007
7,594
(4,885)
(4,082)
(4,111)
(3,849)
(76)
(104)
(68)
(89)
Bank overdrafts
Cash pledged as guarantees
Effect of exchange fluctuations
-
(75)
-
(7)
---------
-------
--------
-------
11,733
8,180
9,828
3,649
=====
====
====
====
56
32
Financial instruments
32.1
Exposure to credit, interest rate and currency risks arise in the normal course of the Company’s and the Group’s business.
Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.
32.2
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on all customers requiring credit over a certain amount. The Company and the Group do not
require collateral in respect of financial assets.
Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better
than the Company and the Group. Transactions involving derivative financial instruments are with counterparties with
whom the Company and the Group have a signed netting agreement as well as sound credit ratings. Given their high
credit ratings, management does not expect any counterparty to fail to meet its obligations.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
32.3
Interest rate risk
The Company and the Group adopt a policy of ensuring that its exposure to changes in interest rates on borrowings is on
a fixed rate basis, linked to the Bank’s base rate.
32.4
Effective interest rates and repricing analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, their effective interest rates at the
balance sheet date and the periods in which they reprice, are not different from the interest rates and classifications
disclosed in notes 21 and 28.
32.5
Foreign currency risk
The Company and the Group are exposed to foreign currency risk on sales, purchases and borrowings that are
denominated in a currency other than the Maltese Lira. The currencies giving rise to this risk are primarily Pounds
Sterling, U.S. Dollars, Euro and Special Drawing Rights. As from 2 May 2005, the exchange rate of the Maltese Lira
against the Euro is fixed at Lm0.4293.
The Company and the Group used forward exchange contracts to hedge its foreign currency risk arising upon the
maturity of its investment in Bank Nederlandse Gemeenten 2.5%, which was denominated in U.S. Dollars. These forward
exchange contracts were exercised in April 2006.
No other hedging procedures are in place.
32.5.1
Forecasted transactions
The Company and the Group classified their forward exchange contracts hedging forecasted transactions as cash flow
hedges and stated them at fair value until their utilisation in April 2006.
32.5.2
Recognised assets and liabilities
Changes in the fair value of forward exchange contracts that hedge the investments in foreign currencies and for which
hedge accounting is applied are recognised in equity for the effective portion of the hedge and in the income statement
for the ineffective portion of the hedge. The ineffective portion of the hedge is recognised as part of “net finance
income” (see note 9).
57
32
Financial instruments (continued)
32.6
Sensitivity analysis
In managing interest rate and currency risks the Company and the Group aim to reduce the impact of short-term
fluctuations on the Company’s and the Group’s earnings.
32.7
Fair values
There is no difference between fair values and the carrying amounts of financial instruments shown in the balance sheet.
There are also no unrecognised gains or losses with respect to financial instruments.
32.8
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of the various financial
instruments disclosed in notes 21, 25, 26, 28, 29 and 30.
32.8.1
Securities
Fair value is based on quoted market prices at the balance sheet date without any deduction for transaction costs.
32.8.2
Derivatives
Forward exchange contracts are marked to market by discounting the contractual forward price and deducting the current
spot rate.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates
and the discount rate is a market related rate for a similar instrument at the balance sheet date. Where other pricing
models are used, inputs are based on market related data at the balance sheet date.
32.8.3
Fair value is calculated based on discounted expected future principal and interest cash flows.
32.8.4
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
32.8.5
Rates used for determining fair value of derivatives
The interest rates used by the Company and the Group were 3.185% for domestic derivatives and 4.498% for
foreign derivatives.
58
33
Operating leases
33.1
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Less than one year
197
157
75
45
462
498
172
125
More than five years
147
156
147
155
-----
-----
-----
-----
806
811
394
325
===
===
===
===
The Company and the Group lease various premises under operating leases. The leases run for an initial period of two to
twenty years, with an option to renew the lease after that date. Certain lease agreements provide that the lease
payments increase by a predetermined percentage every year.
During the current year, amounts of Lm497,795 (2005: Lm731,818) for the Group and Lm380,437 (2005: Lm337,880) for
the Company, were recognised as an operating expense in the income statement in respect of operating leases.
33.2
Leases as lessor
The Company and the Group lease out certain premises and plant and equipment under operating leases. The future
minimum lease payments under non-cancellable leases are as follows:
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Less than one year
30
36
30
37
13
46
13
46
-----
-----
-----
-----
43
82
43
83
===
===
===
===
During the current year, an amount of Lm117,705 (2005: Lm111,839) for the Group and Lm513,043 (2005: Lm804,158)
for the Company, were recognised as rental income in the profit and loss account under other operating income. Out of
the Company’s rental income, an amount of Lm395,339 (2005: Lm692,319) was receivable from subsidiaries.
59
34
Capital commitments
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
5,414
2,462
1,061
2,375
-
1,830
-
210
Contracted for:
Authorised but not contracted for:
35
-------
-------
-------
-------
5,414
4,292
1,061
2,585
====
====
====
====
Contingencies
The contingencies of the Company and its subsidiaries are listed below:
35.1
Guarantees and performance bonds arising in the ordinary course of the Company’s business on which no material losses
are anticipated. In addition, the Company has guaranteed banking facilities to Mobisle Communications Limited and
DataStream Limited (formerly known as Terranet Limited) amounting to Lm13,000,000 and Lm650,000 respectively.
Furthermore, the Company has guaranteed banking facilities to Telepage Limited for a maximum amount of Lm200,000.
35.2
Limited cover for risks on property and claims in connection with legal liabilities arising in the course of operations.
35.3
Certain claims that cannot be quantified for damages and other issues, including alleged irregularities in promotions,
submitted by, or on behalf of, certain of the Company’s former and present employees. However, certain claims
amounting to Lm21,791 can be quantified.
35.4
The Company’s investment in Worldwide Communications Limited representing 25% of the share capital not yet called up
amounting to Lm100,000.
35.5
Actual or potential claims and litigation against the Company by certain persons and organisations arising from
acquisitions of goods and services by the Company in the ordinary course of its business. The Company’s possible total
exposure in this regard cannot be quantified. However, an amount of Lm20,655 representing certain capital purchases
and other claims can be quantified.
35.6
Local guarantees by the Company in favour of the third parties amounting to Lm68,000. Three subsidiaries have
guarantees in favour of third parties amounting to Lm130,750.
35.7
Claim for damages against a subsidiary arising out of an alleged breach of contract amounting to USD156,590, equivalent
to Lm50,975. The subsidiary undertaking is disputing this claim. In addition, the same subsidiary may incur further costs
in connection with certain services acquired during prior financial years amounting to Lm18,238.
35.8
The Company and the Group’s cellular provider have, with effect from 1 October 2003, and in compliance with a formal
decision by the Malta Communications Authority, adopted the rates approved by that Authority for Interconnection
Services in the recognition of related revenues and costs in these financial statements. The other local cellular provider,
has however, appealed the Authority’s decision to the Telecommunications Appeals Board.
Should the appeals prove successful, the Company and its cellular provider may be requested to compensate the other
local cellular provider for the difference in rates being charged that would amount to a maximum of Lm825,077.
No provision has been made for these amounts in both the Group and Company’s financial statements.
60
36
Segmental information
The Group
Year ended 31 December 2006
Regulated activities
_________________________________________
Nonregulated
and other
activities
Total
Core
network
Local
access
network
Lm000
Lm000
Lm000
Lm000
Lm000
Lm000
Revenue
55,476
1,723
6,348
22,598
20,927
3,880
---------
-------
-------
---------
--------
-------
Depreciation amortisation and write-downs
(8,898)
(1,731)
(2,282)
(625)
(4,195)
(65)
Voluntary retirement scheme
Remaining costs
Other
business
(3,155)
(749)
(1,676)
(637)
(93)
-
(31,748)
(7,800)
(6,998)
(4,196)
(10,357)
(2,397)
---------
---------
---------
---------
---------
--------
(43,801)
(10,280)
(10,956)
(5,458)
(14,645)
(2,462)
---------
---------
---------
---------
---------
--------
11,675
(8,557)
(4,608)
17,140
6,282
1,418
-
8,760
-
(9,458)
698
-
--------
--------
--------
---------
-------
-------
11,675
203
(4,608)
7,682
6,980
1,418
====
=====
====
====
====
97,006
29,609
35,241
6,988
23,348
1,820
19,635
=====
=====
====
=====
====
Costs transferred to retail business
Segment result: profit/(loss)
Retail
business
Unallocated items:
Finance income
Finance expenses
Taxation
879
(435)
(43)
(3,934)
---------
Profit for the year
8,142
=====
Segment assets
Unallocated assets
---------Group total assets
116,641
=====
Segment liabilities
(17,613)
(3,762)
(4,533)
(1,256)
(6,583)
(1,479)
Unallocated liabilities
(10,135)
====
====
====
====
====
---------Group total liabilities
(27,748)
=====
61
36
Segmental information (continued)
The Group
Year ended 31 December 2005
Regulated activities
_________________________________________
Total
Lm000
Revenue
Depreciation and amortisation charges
Other
business
Nonregulated
and other
activities
Lm000
Lm000
Lm000
Core
network
Local
access
network
Retail
business
Lm000
Lm000
54,960
2,403
6,624
24,596
18,698
2,639
--------
-------
-------
--------
--------
-------
(8,348)
(2,058)
(1,695)
(514)
(3,881)
(200)
Write-back of international traffic and
leased circuit costs
Remaining costs
Costs transferred to retail business
Segment result: profit/(loss)
698
698
-
-
-
-
(31,735)
(8,109)
(7,323)
(4,599)
(9,849)
(1,855)
---------
--------
--------
--------
---------
-------
(39,385)
(9,469)
(9,018)
(5,113)
(13,730)
(2,055)
---------
--------
--------
--------
---------
-------
15,575
(7,066)
(2,394)
19,483
4,968
584
-
7,169
-
(8,018)
849
-
--------
-------
--------
---------
-------
-------
15,575
103
(2,394)
11,465
5,817
584
====
=====
=====
====
====
Unallocated items:
Financial income
Financial expenses
871
(508)
Net reversal of impairment losses on
equity investments
Losses on realisation of equity investments
Taxation
372
(325)
71
(4,831)
---------
Profit for the year
11,225
====
Segment assets
96,164
24,964
32,444
11,737
24,478
2,541
Unallocated assets
20,055
=====
=====
=====
=====
====
Group total assets
116,219
--------=====
Segment liabilities
(16,134)
(3,151)
(4,096)
(1,482)
(6,524)
(881)
Unallocated liabilities
(12,859)
====
====
====
====
===
--------Group total liabilities
(28,993)
=====
62
36
Segmental information (continued)
Regulated activities for the comparative year include those activities of Maltacom p.l.c., Mobisle Communications Limited, Go
Mobile Limited, Coreswitch Limited, Wirenet Limited, DataStream Limited, Innovate Software Limited, Innovate Limited and
Monitoring Services Limited falling to be regulated under the Electronic Communications (Regulation) Act. Regulated
activities for the current year include the activities of all the above entities except for Wirenet Limited and Coreswitch Limited
following their merger with Maltacom p.l.c. on 1 July 2006. Non-regulated activities include all other activities of the
Group. During the current year, the activities formerly carried out by Terranet Limited (see note 18.6), now carried out by
DataStream Limited, have continued to be considered as non-regulated activities. No compensation for cost of capital is
included in this segmental information contrary to what will be the case when Regulatory Accounts are produced in compliance
with the relevant regulations.
37
Related parties
37.1
Identity of related parties
The Company and its subsidiaries have relationships with the Company’s majority shareholder and the entities controlled
by it, subsidiaries (see note 18) associates (see note 19), their directors and executive officers, and with the companies
over which their directors and executive officers exercise significant influence.
37.2
Transactions with majority shareholder and entities controlled by it
Transactions with majority shareholders and entities controlled by it include transactions with the Government of Malta
and its related entities until 19 May 2006 and transactions with entities controlled by Dubai Holding LLC, which is the ultimate
parent company of Emirates International Telecommunications (Malta) Limited, (the “present majority shareholder”) after
19 May 2006, being the acquisition date of the Company by the present majority shareholder.
37.3
Transactions with key management personnel
Directors of the Company and their immediate relatives control less than 0.1 per cent of the voting shares of the
Company. There were no loans to directors during the current and comparative year.
In addition to their salaries, the Group also provides non-cash benefits to directors and executive officers.
37.4
Related party transactions
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Services provided to
2,562
6,362
1,916
4,532
Services provided and goods sold by
1,842
3,560
1,648
3,037
-
11,250
-
11,250
2,735
2,492
2,735
2,492
34
866
34
866
-
590
-
-
101
139
94
123
4
15
4
14
87
174
87
174
-
2
-
-
====
=====
====
=====
Majority shareholder and the entities
controlled by it
Funds invested with
Dividends paid to
Set-offs with
Property acquired from
Finance interest payable by
Finance interest receivable by
Repayment of loans advanced by
Refundable modem deposits received from
63
37.4
Related party transactions (continued)
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
Subsidiaries
3,181
4,471
Services provided by
9,755
14,181
67
5
Goods provided by
Property, plant and equipment sold to
Expenses paid by the Company on behalf of
Repayment of expenses paid by Company to
Advances by
Expenses paid on behalf of Company by
Dividends received from
208
803
3,296
4,818
82
103
2,581
-
719
81
3,860
864
Interim dividends credited to current account
2,610
5,120
Capitalisation of dividends receivable from
-
299
Loan receivable set-off against current account of
-
260
Assignment by Company of balance due by
-
4
of Company by
106
478
Rental income payable by
298
265
Set-offs amongst trade balances payable to and
1,439
1,872
====
====
34
8
19
receiveable from
Associate
28
Services received from
46
-
46
-
Loan advanced to
37
29
37
29
Repayment of advances to
-
7
-
7
4
-
4
-
===
===
===
===
Key management personnel
557
441
257
257
86
220
86
127
===
===
===
===
306
689
46
100
46
-
-
-
===
===
===
===
Other related parties
In addition to those transactions described above, the individual companies comprising the Group may have transacted
with members of key management personnel or other related parties of other companies within the Group. Any such
transactions would have been in the ordinary course of their business and do not include the advance or borrowing of
funds. It is not possible to determine the nature and monetary value of any such transactions.
64
37.5
Related party balances
The Group
The Company
2006
2005
2006
2005
Lm000
Lm000
Lm000
Lm000
1
2,204
1
1,950
Majority shareholders and the entities
controlled by it
Amount receivable from
Amount payable to
118
3,710
114
3,692
===
====
===
====
8
33
8
30
16
25
-
23
===
===
===
Key management personnel
Amount payable to
===
Other related parties
13
12
13
12
===
===
===
===
Information on amounts due from or payable to other related parties are set out in notes 25 and 30 to these
financial statements.
65
38
Change in classification
As
restated
As previously
reported
Change
Lm000
Lm000
Lm000
61,820
64,129
(2,309)
=====
=====
====
The Group
Intangible assets
5,537
3,228
2,309
====
====
====
294
2,425
(2,132)
The Company
Finance lease receivables:
Non-current
Current
355
1,031
(676)
-----
-------
-------
649
3,456
(2,808)
===
====
====
2,354
222
2,132
691
15
676
-------
-----
-------
Loans receivable from subsidiaries:
Non-current
Current
3,045
237
2,808
====
===
====
39
Subsequent events
39.1
In February 2007, the Group entered into the digital TV market through the acquisition of Multiplus Limited.
39.2
On 15 February 2007, the directors of the Company resolved to merge Monitoring Services Limited with the Company
with effect from 1 January 2007.
66
SHARE REGISTER INFORMATION
The following shareholder information is being published in terms of The Malta Financial Services Authority Listing Rule 9.37.
Directors’ interest in the shareholding of the Company
Number of shares
as at 31 December 2006
Mr Sonny Portelli
Mr James Kinsella
Mr Osman Sultan
Mr Deepak Padmanabhan
Mr John Sevasta
Dr Ahmed Mahjoub
nil
nil
1,200
nil
nil
94,944
nil
nil
nil
There were no changes in the directors’ interest in the shareholding of the Company between year-end and 2 March 2007.
Shareholders holding 3% or more of the share capital
Ordinary share of Lm0.25 each
Emirates International Telecommunications (Malta) Limited
Maltacom Employees’ Foundation
Number
of shares
Percentage
holding
60,786,292
3,039,315
60
3
The shareholders’ interest as at 2 March 2007 was same as above.
Number of shareholders
The total number of registered shareholders both at 31 December 2006 and 2 March 2007 was 8,787.
Shareholding details as at 31 December 2006
All shares are of equal class and carry voting rights.
Range
Shareholders
1 - 500
1,680
485,543
500 - 1000
1,767
1,529,749
1001 - 5000
4,517
9,476,046
5001 and over
Totals
67
Shares
823
89,819,150
8,787
101,310,488
SHARE REGISTER INFORMATION
Shareholding details as at 2 March 2007
All shares are of equal class and carry voting rights.
Range
Shareholders
Shares
1 - 500
1,686
487,198
500 - 1000
1,766
1,526,968
1001 - 5000
4,510
9,448,065
825
89,848,257
8,787
101,310,488
5001 and over
Totals
Company Secretary, registered address and contact number
Dr Francis Galea Salomone LL.D.
Maltacom p.l.c.
Spencer Hill
Marsa
Malta
Tel: (+356) 21233168
68
COMPANY INFORMATION
Company secretary
Financial calendar
Dr Francis Galea Salomone L.L.D.
Preliminary Announcement of Results - 3 April 2007
Record date: Final dividend – 30 April 2007
Ex dividend date - 1 May 2007
Annual General Meeting - 30 May 2007
Final dividend payment date - 6 June 2007
Announcement of half yearly results (provisional) September 2007
Auditors
KPMG
Malta
Registrar
Malta Stock Exchange
Malta
Depositary (GDRs)
Bank of New York
United States of America
Legal counsel
Mamo TCV
Malta
Gatt Frendo Tufigno (Advocates)
Malta
Registered office
Spencer Hill
Marsa
Company number
C 22334
69
Shareholder information
Telephone Number - (+356) 21233168
Fax Number (+356) 21233169
E-mail - [email protected]
Website: www.maltacom.com/investor_portal.asp
ADDITIONAL INFORMATION FOR NON-MALTESE INVESTORS
UK listing
The Company’s shares are listed on the London Stock Exchange in the form of Global Depositary Receipts (GDRs). Each GDR
represents six shares. The GDR programme is administered on behalf of the Company by the Depositary, the Bank of New York, 101
Barclay Street, New York, New York 10286, USA. Enquiries relating to the GDRs and dividend payment should be addressed to them.
Other enquiries regarding the Company should be addressed to The Company Secretary, Maltacom p.l.c., Spencer Hill, Marsa HMR
12, Malta.
Dividends to GDR holders
Payment of the final dividend to GDR holders will be made by the Depositary on 6 June 2007 to holders of record on 30 April 2007.
The GDRs are expected to trade ex-dividend on the London Stock Exchange from 1 May 2007.
Basis of preparation of the financial statements
The Company’s financial statements have been prepared in accordance with the Companies Act, 1995 enacted in Malta, which
requires adherence to International Financial Reporting Standards (IFRS). In the case of the Group, Article 4 of Regulation
1606/2002/EC (“the Regulation’’) requires that, for each financial year starting on or after 1 January 2005, companies governed by
the law of an EU Member State shall prepare their consolidated financial statements in conformity with IFRS as adopted by the EU
if, at their balance sheet date, their securities are admitted to trading on a regulated market of any EU Member State.
The Regulation overrides the provisions of the Companies Act, 1995 enacted in Malta, relating to the form and content of the
financial statements (and in particular the Third and Fourth Schedules of the Act) of companies as described above.
Notwithstanding the above, there were no incompatibilities between the provision of the Companies Act, 1995 and the
requirements of the Regulation in relation to the preparation of the financial statements.
This basis differs in certain material respects from generally accepted accounting principles in United States of America (US GAAP).
The principal differences between IFRS and US GAAP applicable to the Company’s financial statements are set out below:
IFRS permit the use of either revalued amount or historical costs, where the revalued amount is the fair value at date of revaluation
less subsequent accumulated depreciation and impairment losses.
Under US GAAP, the basis that is generally required to be used is the historical cost.
Internally generated intangibles - measurement
Under IFRS, the cost of internally generated intangibles comprises all expenditures that can be directly attributed or allocated to
creating, producing and preparing the asset from the date when recognition criteria are met.
Under US GAAP, the costs of internally developing, maintaining or restoring intangible assets that are not specifically identifiable
and that have indeterminable lives, or that are inherent in a continuing business and related to an entity as a whole, are recognised
as an expense when incurred.
Investment property
Under IAS 40 Investment Property, an entity shall choose as its accounting policy either the fair value model or the cost model and
shall apply that policy to all of its investment property. If an entity chooses the fair value model, the value changes are recognised
through the income statement, while if an entity that chooses the cost model shall measure all of its investment property in
accordance with the requirements of IAS 16 Property, Plant and Equipment for this model, that is at cost less any accumulated
depreciation and any accumulated impairment losses.
US GAAP generally require the use of the historical cost model.
70
IFRS permit the use of either cost method or use of IAS 39 Financial Instruments: Recognition and Measurement, where an
application of the financial instrument rules is made. IFRS prohibit the use of the equity method.
The US GAAP require that the accounting for investments in subsidiaries in the parent’s separate financial statements may be
presented either using equity or cost method.
Business combinations involving entities under common control
A common-control transaction is a business combination in which all the combining entities or businesses ultimately are controlled
by the same party or parties both before and after the combination, and that control is not transitory. IFRS do not specifically
address such transactions. Entities should develop and apply consistently an accounting policy; management can elect to apply
purchase accounting or the pooling-of-interests method of a business combination involving entities under common control. The
accounting policy can be changed only when the criteria in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors,
are met.
US GAAP require that common-control transactions are generally recorded at predecessor cost, reflecting the transferor’s
carrying amount of the assets and liabilities transferred. The use of predecessor values or fair values depends on a number of
individual criteria.
Investments in associates
Under IFRS, the accounting for investments in associates in parent’s separate financial statement is either cost method or use of
IAS 39 Financial Instruments: Recognition and Measurement. IFRS prohibit the use of equity method whereas under US GAAP the
equity method is used for accounting for investments in associates.
Deferred taxation
IFRS require that a deferred tax charge or credit is recognised on temporary differences in arriving at the profit or loss for each
financial period. Deferred tax assets, other than those arising from tax losses yet to be recovered, are only recognised if realisation
of tax benefit is probable. Deferred tax assets arising from tax losses yet to be recovered are only carried forward if there is
reasonable assurance that future taxable income will be sufficient to absorb these tax losses, or to the extent of the net credits in
the deferred tax balance.
Under IFRS, deferred tax is always classified as non-current on the balance sheet.
Under US GAAP deferred tax assets are always recognised, but a valuation allowance is provided unless realisation is ‘more
likely than not’. Further, applying the ‘more likely than not’ criterion through use of a valuation allowances results in disclosure
differences between IAS 12 and SFAS 109.
Deferred tax is split into current and non-current components on the balance sheet based on the classification of underlying asset
or liability, or on the expected reversal of items not related to an asset or liability.
Under IFRS, cash and cash equivalents may include bank overdrafts, if these form an integral part of an entity’s cash management.
Under US GAAP, cash and cash equivalents do not include bank overdrafts.
71
Impairment loss
IAS 36 Impairment of Assets permits that an impairment loss recognised in prior periods for an asset other than goodwill be
reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If this is the case, the carrying amount of the asset shall, be increased to its recoverable amount.
That increase is a reversal of an impairment loss.
US GAAP prohibit the reversal of an impairment loss.
Measurement of provisions
Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets the amount recognised as a provision shall be the best
estimate of the expenditure required to settle the present obligation at the balance sheet date, which generally involve the
expected value method and where discounting required.
Under US GAAP, the measurement of provisions is made on the best estimate to settle the obligation. If no one item is more
likely than another, US GAAP permit the use of the low end of the range of possible amounts. Under US GAAP, most provisions
are not discounted.
Earnings per share
IAS 33 Earnings per Share requires the disclosures of basic and diluted income from continuing operations per share and net profit
or loss per share.
Under US GAAP, the required disclosure is that of the basic and diluted income from continuing operations, discontinued
operations, extraordinary items, cumulative effect of a change in accounting policy and net profit or loss per share.
Cash flow statement
IFRS permit the classification of interest received and paid as an operating, investing or financing activity, whereas under US GAAP
these must be classified as an operating activity.
Segmental information
IAS 14 Segmental Reporting gives a definition of segment result as segment revenue less segment expense. Segment result is
determined before any adjustments for minority interest. This is not defined under the US GAAP.
Furthermore, the accounting basis for reportable segments, which is defined under IAS 14 as a business segment or a geographical
segment identified based on the foregoing definitions for which segment information is required to be disclosed by this Standard,
are the amounts which are based on IFRS measures. Under US GAAP, the amounts are based on whatever basis is used for internal
reporting purposes. Then, these amounts are reconciled to the relevant amounts contained in the financial statements.
Note to readers: The foregoing comparison of treatments of selected transactions between IFRS and US GAAP is provided
solely as a high level aid to the understanding of the group’s financial information and is not intended to, and does not, provide
an exhaustive analysis of the different treatments which would have been applied to the group’s financial statements had these
been prepared under US GAAP. Readers requiring a more detailed and exhaustive analysis are encouraged to consult an
appropriate advisor.
72
FIVE YEAR RECORD
2006
2005
2004
2003
2002
LmM
LmM
LmM
LmM
LmM
Turnover
55.5
55.0
54.7
55.1
54.6
Operating profit
11.7
15.6
13.1
11.3
14.3
Profit before taxation
12.1
16.1
12.0
20.6
13.5
8.1
11.2
7.5
13.6
9.6
116.6
116.2
115.6
130.0
126.7
Total liabilities
27.7
29.0
36.2
51.6
58.0
Shareholders’ funds
88.9
87.2
79.4
78.4
68.7
Operating cash flow
19.8
25.4
21.2
17.4
8.8
Investing cash flows
(6.4)
(15.7)
(8.2)
4.6
(13.6)
Financing cash flows
(9.8)
(8.0)
(11.8)
(7.2)
(5.6)
Lm
Lm
Lm
Lm
Lm
Earnings per share
0.080
0.111
0.073
0.134
0.095
Dividends per share
0.065
0.065
0.049
0.037
0.037
Profit for the year
Total assets
73
MALTACOM PLC
HEAD OFFICE SPENCER HILL MARSA HMR 12 MALTA
PHONE: +356 2121 2121
EMAIL: [email protected]
FAX: +356 2124 8925
WWW.MALTACOM.COM

Maltacom Annual Report 2006

Transcription

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