Both these companies recently published preliminary results for their financial year ended December 2002. Compared to the previous year, Maltacom reported marginal improvements and Middle Sea Insurance a marginal set-back but, given the difficult circumstances these companies - like many others - are operating in, keeping up past performance is already something of a feat.
Maltacom
Compared to 2001, total turnover increased by seven per cent but, as reported in the business supplement of this newspaper last week, the increase came from mobile telephony while fixed line telephony actually fell.
This shift in revenue source has long been expected. It would have occurred even if Maltacom had not set up Go Mobile. With the tough competition which Go Mobile injected into the market, which indirectly also lowered the value of Maltacom's 20 per cent stake in Vodafone Malta, this shift was speeded up and came more in line with was is happening in other countries where mobile services are not priced at exorbitant levels.
Voice over IP, whereby a customer makes overseas calls through the internet, rather than over the fixed line provided by Maltacom, is also cutting into revenue.
Maltacom's argument is that if it has to carry the costs of the infrastructure - such as well-maintained fixed lines and international bandwidth - it has to be paid for it. This pushes it head to head against the social good, as represented by the regulator.
The regulator recently refused to allow Maltacom to rebalance its tariffs which would have basically involved a reduction in overseas calls and an increase in local calls.
As noted in a previous article on Maltacom, as long as the company has a heavy social role and is providing infrastructure, it will have to fight tooth and nail for its profit as long as the regulator takes a social - and vote catching - point of view.
One strategy it is following is seeking to develop profit centres which are not socially sensitive. It has been very successful with Terranet and providing internet services. It is now going into providing internet, TV and video on demand services. It will soon launch wireless services for use by Personal Digital Assistant (PDA) equipment.
Most of the increased turnover was absorbed by higher cost of sales so there was little change in operating profit. Debtors, however, increased dramatically, from Lm25.5 million at the end of 2001 to Lm35.1 million at the end of 2002, financed by bank borrowing.
Profit after tax increased from Lm9.3 million in 2001 to Lm9.6 million in 2002. A dividend of 3c7 (2001: 3c2) after tax is being proposed to shareholders on the register at the close of business on April 21, 2003.
Middle Sea Insurance
The group's earnings from insurance showed improvement rising by 34 per cent to Lm1.1 million which was boosted to Lm1.4 million with the group's share of results from Middle Sea Valletta, the life insurance company. As expected, investment income was lower compared to last year, and the costs to achieve it higher.
Profit on ordinary activities before tax (but after a provision for discontinued operations) were down slightly to Lm1.3 million. The group benefits from certain deferred tax benefits. Profit after tax, adjusted for minority interests, was Lm1.1 million, slightly lower from 2001's Lm1.4 million, and this reduced earnings per share from 11c4 in 2001 to 9c1 in 2002. It is being recommended that dividend be maintained.