GO plc declares €11.4 million gain in Qawra land deal

The former national telephone company GO plc has declared it made a gain of €11.4 million in a deal with the Maltese government, which gave the Dubai-owned telecommunications firm eleven telephone exchanges valued at €13.8 million, in return for its Qawra land valued at €2.4 million.

The exchanges were already part of the company's property portfolio, but these were extracted from GO's balance sheet and included in a special purpose vehicle to manage the property, now valued at €50 million in total. Apart from the one-off €11.4 million, much of the value of the exchanges already existed on the company's balance sheet.

On the other hand, GO's share of subsidiary Forgendo's interim losses amounted to €22.2 million during the period ended 30 June 2011.

GO 
controls 50% of the share capital of its jointly-controlled entity, Forgendo Limited, whose activity is that of holding investments in its associated undertaking, Hellenic Company for Telecommunications and Telematic Applications S.A. (Forthnet), a Greek company listed on the Athens Stock Exchange.

However, since the carrying amount of the equity investment in Forgendo amounted to €3.8 million, GO had to recognise only this amount as GO's share of the results of Forgendo, bringing the carrying amount of the equity investment in Forgendo to nil.

The remaining amount of €18.4 million in substance represented, and has been reflected as, impairment losses on the advances to Forgendo as a result of the value in use estimation process referred to above and of Forgendo's net liability position as at 30 June 2011.

The carrying amount of GO's exposures to Forgendo, at 30 June 2012, amounted to €3.1 million (31 December 2011: €3.6 million), constituting investments originally amounting to €123 million adjusted by GO's share of losses incurred by Forgendo in relation to Forthnet over the years and adjusted by GO's impairment losses on receivables from Forgendo.

The consolidated income statement of GO p.l.c. for the six-month period ended 30 June 2011 reflected GO's 50%share of Forgendo's results, which comprised the effects in its income statement of the share of Forthnet's losses and the impairment charge on the carrying amount of the investment in Forthnet.

During the first six months of the current financial year GO plc as a group registered an operating profit of €11.4 million, an increase of €2.1 million over 2011.

GO is reporting a profit before tax of €20.4 million compared to a loss of €14.1 million in the comparative period.

The results of 2012 and the comparative period were both negatively impacted by voluntary retirement costs and pension obligations, items considered to be of an unusual nature, size or incidence, whilst during the period under review GO secured the recovery of a long outstanding receivable not attributable to the Group's trading activities. The removal of the combined impact of these items of unusual nature, size or incidence show a normalised operating profit of €10.5 million in 2012 compared to €12.4 million registered in the comparative period. The deterioration in the operating performance of the Group is substantially due to lower revenues, which was not compensated for by a decrease in costs.

The Group's revenue amounted to €63.6 million compared to €65.2 million in 2011 representing a decline of 2.4%, which is essentially the result of a combination of lower retail revenues reflecting intense competition across all product lines and lower wholesale revenues attributable to a reduction in mobile termination rates as mandated by the Malta Communications Authority.

Cost of sales and administration costs excluding costs of an unusual nature, size or incidence amounted to €53.6 million, which represents a marginal increase of €0.3 million over the comparative period.

No dividends were declared upon issue of the results for the six-month period ended 30 June 2012.