Investors’ corner - Your weekly guide to investment

Farsons first half profits up 34 per cent

This week the Farsons Group announced an impressive increase of 34 per cent in the Group’s operating profit for the first six months of the year, representing a total operating profit of Lm1,051,000. Emerging from the healthy results, earnings per ordinary share doubled from 1c1 to 2c2 when compared to the same period last year, with profit attributable to shareholders for the period amounting to Lm618,000 compared with Lm361,000 over the corresponding period last year.

The Group also announced turnover for the period of Lm12,358,000 – a five per cent increase when compared to the same period last year.

Group profit after interest and share of losses of associated undertakings had increased from Lm469,000 to Lm581,000 - an increase of 24 per cent.

Group interest has increased due to the consolidation of Galleria Management Limited and the investment by the parent company related to the 7UP franchise.

Commenting on thee results Group Chief Executive Louis A. Farrugia said, "Considering that these results were achieved despite a continuing difficult trading environment particularly in the hotel and catering industries, the Group cannot but feel satisfied that the measures it has taken to minimise the impact of adverse market conditions were bearing positive results.

"The improvement in turnover came from additional sales of carbonated beverages mainly as a direct consequence of the Group’s acquisition of the 7UP franchise and an increase in sales of imported beverages.

Farrugia adds, "The plans on which management has been working over the last months makes us cautiously optimistic about the rest of the financial year."

Money Market Report 9-13 September

Malta government Treasury bills

Last week the Treasury invited tenders for 90-day Treasury bills, to mature on 12 December 2002.

Applications amounted to approximately Lm29.9 million, while the Treasury issued only Lm2.8 million worth of Treasury bills. Since no Treasury bills matured on the same day, the outstanding bills increased to Lm182.8 million.

The weighted average rate resulting from this auction was 3.9629 per cent, which was lower by 0.0362 of one percentage point than last week’s 91-day rate of 3.9991 per cent. This rate corresponds to a price of Lm99.0323 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 20 December 2002. For the following week, the Treasury will receive applications for 91-day bills to mature on 27 December 2002.

During the week under review, turnover in the secondary market amounted to Lm830,000 which was lower than last week’s Lm1.4 million. This turnover consisted of purchases effected by the Central Bank in its role as a market maker. No deals were effected outside the Central Bank.

Central Bank monetary operations

Excess short-term liquidity continued to characterise the banking sector in the week ending 13 September 2002. Last week’s surplus was mainly due to maturing term deposits amounting to Lm52.5 million, the injection by the Central Bank of Lm11.9 million against purchases of foreign currency from banks, Lm2 million worth of deposits in notes and coins with the Central bank and a significant cumulative excess in the reserve deposit accounts which the banks are legally bound to hold with the Central Bank of Malta.

Accordingly an auction was held by the Central Bank on Friday, 13 September 2002, where the Bank invited tenders for 14-day term deposits in order to absorb the surplus liquidity in the market. During this auction Lm54.5 million were absorbed, Lm2 million more than the amount which matured during the same day. As a result, outstanding term deposits increased from Lm95.9 million to Lm97.9 million. The latest auction was carried out at the weighted average rate of 3.95 per cent, being the floor of the interest rate band of 3.95 per cent - 4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.

Inter-bank market

During the week under review, turnover in the inter-bank market amounted to Lm3 million, less than the Lm7.6 million transacted during the previous week. Last week, the only deal was transacted in the overnight tenor at a weighted average rate of 3.97 per cent. This was 0.03 of one percentage point lower than the previous rate of 4 per cent.

A new, four-year term Equity-Linked Deposit Account is being launched by BOVI, Bank of Valletta’s Private Banking arm. With a 100 per cent Capital Guarantee if held until maturity and a 4.5 per cent guaranteed interest paid after the first year, this new product proves to be an ideal investment avenue for all those investors seeking to diversify their portfolio and potentially improve their returns. The Deposit Account is available in both Euro and Pound Sterling.

Investors will benefit from potential annual interest linked to the performance of a basket of 16 international blue-chip stocks. In this regard, the interest on this BOVI Equity Linked Deposit Account will be linked to the stock market performance of major companies such as General Electric, Nike, BMW, Sony, Coca-Cola Company, Royal Bank of Scotland, Toyota Motor Corporation, Enel, Tesco, Microsoft and Lloyds TSB, amongst others.

For the first year interest is guaranteed at 4.5 per cent payable on the amount deposited. From the second year, interest is calculated according to a formula based on the performance of the lowest performing stock within the basket since the start date. As an example, this formula generates an interest rate of 11.2 per cent for an increase of 30 per cent in the value of the lowest performing stock and an interest rate of 1.4 per cent should such stock depreciate by 40 per cent. In years 3 and 4, interest will be calculated on the basis of the same formula used in year 2, and it is guaranteed to be, at least, equal to the interest paid in the previous year.

The minimum deposit is GBP1,000 and EUR2,000 with multiples of 1,000 thereafter. No fees are payable for opening a BOVI Equity–Linked Deposit.

The new product is being offered for a limited period only that will close on 1 November, while the deposit will start operating on 5 November and will mature on 6 November 2006.

The deposit account is governed by the terms and conditions reproduced on the application form, which should be read together with the additional important information included in the brochure, before completing the application form. In accordance with current tax legislation, Maltese resident investors may opt to be taxed at a 15 per cent Final Withholding Tax on any interest received. Investors who are not subject to tax in Malta, will receive interest gross without deduction of Final Withholding Tax. Future changes in tax law or practice may affect the interest payable on maturity.

Bank of Valletta plc is a credit institution licensed by the Central Bank of Malta in terms of the Banking Act 1994. The BOVI Equity-Linked Deposit is regulated as a deposit in terms of the Banking Act, 1994.