Strong results from GO plc | Calamatta Cuschieri

The COVID-19 pandemic has demonstrated the critical importance that telecommunications infrastructure plays in keeping businesses, governments, and societies across the globe connected and running.

More specifically, the economic and social disruption caused by the pandemic has deepened the reliance on services offered by such telecom-oriented businesses, whereby the security and resilience of electronic communication networks have played a key role in enabling the rapid transition of work from physical offices to digital platforms.

On the local front, GO plc (GO), recently published its 2021 interim results, whereby it generated €93.9m in revenues, reflecting an overall improvement of €2.3m or 2.5% over the comparable period last year.

In terms of the Group’s telecom operation locally, revenue marginally tapered down by 1.6% to €56.3m (H120: €57.2m). Management further explained that the slight drop in revenue is mainly as a result of the implications brought about by the pandemic on GO, specifically in relation to the sustained international travel restrictions on roaming and other international wholesale revenues.

In terms of the Group’s data centre operations, which specifically relates to activities conducted by BMIT Technologies plc (BMIT), revenues amounted to €12.8m during the first six months of the year, illustrating an overall improvement of roughly €1.1m or 9.4% on a comparable basis (H120: €11.7m). Indeed, management reported that the main drivers contributing towards such growth in revenue is attributable to a greater customers’ demand for cloud services, with this being primarily driven by increased customer technology adoption.

Additionally, BMIT further reported that the pandemic has brought about an increased reliance on connectivity services, especially for the Group’s larger clients, with this also being a key determining factor for the aforementioned growth in revenue concerning the Group’s data centre operation.

In Cyprus, Cablenet, which is another subsidiary of the Group, continued gaining momentum on its recent growth trajectory, with total revenues increasing by 10.5% to €25.6m during H1-21 (€23.2m). Additionally, this positive performance predominantly reflects subscriber gains across the company’s main business lines, expansion in the fixed network footprint, and the launch of new mobile services by virtue of a Mobile Network Services Agreement entered into with Cyrus Telecommunications Authority (‘CYTA’) in the second quarter of 2021.

Moving to the expenditure side, total operating expenditure, which is predominantly composed of cost of goods sold and administrative and other relates expenses, collectively amounted to €84.7m, implying an overall increase of increase of 3.4% on a comparative basis (H1-20: €83.9m).

While management reiterated that the aforementioned increase in operating expenditure is mainly attributable to direct costs and ancillary administrative expenses in connection with the setting up, launch, and operation of Cablenet’s new mobile service, management also noted that the Group maintained and continued to drive various cost savings measures adopted throughout the pandemic.

In view of the above-mentioned additional expenses incurred at Cablenet level, consolidated EBITDA tapered down by 1.9% to €34.8m, translating into an EBITDA margin of 37.1% (H1-20 - EBITDA: €35.5m and EBITDA Margin: 38.8%). Meanwhile, the Group’s interest expense amounted higher during H1-21 to €2.3m (H1-20: €1.6m).

In conclusion, GO has a strong cash position and further potential to boost its overall growth and earnings through Cablenet. Provided that the current situation will not deteriorate further, through GO’s defensive business model, the Group might possibly maintain its ability to continue distributing a dividend to its shareholders.
 

This article was issued by Andrew Fenech, Research Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.