GlobalCapital records a turnaround to profit despite continuing challenges

For the first time in seven years, GlobalCapital plc is reporting a turnaround to profit making operations for the financial year ending on 31 December 2014. For the year under review, the Group has reported a profit after taxation of €222,671 compared to a prior year loss after taxation of €3,661,194.

The careful implementation of the aggressive transformation strategy launched early June 2014 helped improve the results of all the regulated businesses forming part of the Group. The aim of this plan was to ensure the long-term sustainability and profitability of the Group primarily by reducing overall operational costs and increasing revenues from the Group’s core business activity – Life and Health Insurance.

The adverse impact of one-off restructuring and redundancy costs is reflected in the 2014 financial results but nonetheless, the Group still registered an encouraging profit after taxation for the full year under review.

Core business activity growing stronger  
Throughout 2014, the Group’s life insurance business registered significant growth. The life company reported a turnaround from a loss of €505,614 in 2013 to €3,146,443 in profit for 2014. The profit for the year is inclusive of a gross dividend from the company’s participating holding amounting to €1,086,154. This positive turnaround resulted from the growth in both the interest sensitive and unit-linked business while retaining the prior year’s levels of conventional business.

The health insurance agency’s profit after taxation for 2014 reduced to €574,328 from €930,974 in 2013. The reasons for this reduction are two-fold: an increase in the tax charge over the previous year together with an increase in the level of claims and reduction in premiums which had an adverse impact on the profit commission recognised by the agency.

Satisfactory improvements in the Group’s investment arms
While the aggressive transformation strategy embarked upon during the second half of 2014 has yielded satisfactory improvements in the Group’s investment portfolios, the Board of Directors is aware that more work is required to eliminate the drag of legacy issues on the Group’s bottom line and to increase the Group’s overall liquidity.

The Group’s property portfolio registered substantially smaller impairments in 2014 amounting to €323,090, compared to €3,174,376 in 2013, arising on properties that were sold after year-end and which have adversely impacted profitability.

The Group remains actively engaged in disposing of immoveable assets that are in excess to requirements. Substantial progress has already been registered in this area and a number of promise-of-sale agreements on certain properties have been signed. The Group is currently in advanced negotiations with potential buyers to dispose of other excess property and the aim is to conclude all disposals by end of 2016.

Similarly, the Group’s investment company has recorded a smaller loss of €464,224 in 2014 compared to a loss of €1,109,322 in the previous financial year. While it is encouraging to note that mitigation measures put in place led to a reduction in losses by €645,098 compared to the previous year, the Group’s investment company increased year-on-year revenue by 14%. On the other hand, the increase in revenue was partially offset by an increase in costs, mostly one-off costs incurred to reduce future operational costs, and a change in provisioning policy resulting in a higher provisioning charge to the Company. The full impact of the cost reduction and mitigation measures applied in 2014 will be manifested in their entirety throughout the current financial year.   

Shareholder matters
In the Review of Business published in the Group’s financial statements for 2014, the Directors noted that the 2014 results were affected by events pertaining to GlobalCapital shareholders that occurred subsequent to the year-end, mainly:
 
•    the decision by the Financial Services Commission in Mauritius to appoint Conservators for BAI Co (Mtius) Ltd which holds 48.45% of the Ordinary Shares of GlobalCapital plc; 
•    the announcement in May 2015 of a conditional offer by EIP plc to acquire the entire shareholding held by BAI Co (Mtius) Ltd; and
•    the subsequent announcement in July 2015 of a share purchase agreement (SPA) entered into between EIP plc and the Conservator for the transfer of the 48.45% shareholding subject to certain conditions.

As a result of these developments, the present reconstituted Board has reversed the prior Board decision to divest of the Group’s investment and advisory function, having been informed that it is the intention of the prospective shareholder to expand the investment operation both locally and in other European territories.

This reversal is possibly the only slight deviation encountered during the implementation of the Group’s Strategic Plan embarked upon in June 2014.

Commenting on the results recorded by GlobalCapital plc in 2014, Group Chief Executive Officer Reuben Zammit said: “While it is positive to note the profit registered for 2014, I firmly believe that the entire positive impact of the aggressive restructuring exercise undertaken throughout the second half of 2014 is yet to manifest itself to the full in the financial results of 2015. This turnaround in 2014 will not relax or relent our efforts to continue consolidating the Group’s operations. We remain vigilant for changing market conditions, cost-control and revenue generation. Our work is far from over and more remains to be accomplished across the Group’s core business activities and asset portfolio to ensure the long-term sustainability and profitability of the Group”.

Mr Zammit was appointed Group CEO in June 2014, specifically mandated by the Board of Directors to implement the transformation strategy and to help the Group return to profitability.
 
GlobalCapital has announced that the forthcoming Annual General Meeting will be held on 4 September 2015.