GlobalCapital announces preliminary financial results for 2008
Group registers losses against a bleak backdrop in global financial markets 7 per cent drop in value of Group portfolio during period under review
The sustained global financial crisis resulted in a sharp downturn in the bond, equity and property markets which, during the year under review, have significantly impacted on the various areas of the Group’s business.
The Board of Directors of GlobalCapital p.l.c. have declared a loss after tax for the year ended 31 December 2008 of €6,886,162 compared to a profit after tax of €579,935 for the year ended 31 December 2007.
At the end of 2008, the Group’s total assets stood at a total of €99,362,227.
The Board of Directors noted that, in line with its expectations, capital markets have not shown any signs of recovery throughout 2008 and that severe turmoil was registered in most aspects of the financial markets throughout the period.
The Group’s equity and bond investment portfolio has suffered a severe reduction in value with the largest portion of the Group’s 2008 losses relating to non-cash unrealised fair value losses thereon totalling €6,513,318 compared to equivalent write-downs of €1,140,908 in 2007.
Another non-cash item - impairment of goodwill totalling €1,228,715 (compared to €465,875 in 2007) - represents a further significant component of the year’s losses, whilst the remaining minor component of losses are attributable to operating cash deficits for the year, primarily sustained in the Investment Division. This division suffered as a result of a reduction in the sale of investment products due to reduced investor confidence in the capital markets.
Commenting about these results, Mr. Nicholas Ashford-Hodges, Chairman of GlobalCapital p.l.c. said, “the unprecedented and extended disruption in the global financial markets has inevitably impacted negatively on GlobalCapital’s 2008 results. Our portfolio of assets registered an overall 7% drop in value. Whilst significant, this outcome has occurred during a period when the Malta Stock Exchange registered a fall of 35% and the FTSE dropped by 31%.”
The Group’s business of insurance was adversely impacted by the negative performance of the capital markets as well as a decline in premiums resulting in a negative balance on the long term business account of €3,767,833 compared to an equivalent deficit of €467,356 in 2007. The increment in the value of in-force-business totalled €1,271,282 in 2008, compared to €58,234 in 2007 - this item reflects the projection of future shareholder profits expected from insurance policies in force at the year-end appropriately discounted and adjusted for the effect of taxation.
The Group’s Property activities as well as the Agency and Brokerage services registered positive results. Property registered a total pre-tax profit of €303,099 (compared to €3,013,518 in 2007) arising from a combination of profit on disposal of property held for development and fair value gains on investment property, whilst the Group’s Agency and Brokerage services registered a profit before tax of €622,810 compared to €714,307 in 2007.
The prevailing negative sentiment in investors’ confidence has led investors to take a more cautious approach and highly defensive cash positions resulting in a substantial decrease in appetite for purchase of investment products. This negative trend has also had an adverse affect on income generated from performance fees. The Group maintains that, notwithstanding the current turmoil in financial markets, there exist attractive market opportunities which could yield positive results in the medium to long-term.
“Despite the current turmoil in the market GlobalCapital still remains well positioned to enter into new initiatives as and when opportunities arise” said GlobalCapital Chairman Nicholas Ashford-Hodges.
Moreover, the Board of Directors noted that the focus maintained by the Group’s Executive Management throughout the year on operational efficiencies and cost containment has helped in no small measure to register less negative results. These efforts will continue to be maintained throughout 2009.
In addition, the Group has initiated a comprehensive review of its business in order to identify and implement further process efficiencies and business re-alignment. The Board is closely monitoring developments in order to ensure that the Group is well positioned to ride out the downturn and exploit opportunities arising in the markets.
“The Executive Management team embarked on several cost containment measures in anticipation of the turbulent times ahead, as well as other preventive measures such as maintaining a larger than average proportion of assets in cash. On the property front, the Group took strategic measures to dispose of its assets in Dubai at a time when property in Dubai was still much sought after and selling at peak prices. ” said Mr. Nicholas Portelli, Group Chief Executive Officer.
In view of the results for 2008, the directors do not recommend the declaration of a dividend.
GlobalCapital is a diversified financial services Group presently operating in three main areas of business: Investments, Insurance and Property.
For the past 21 years, GlobalCapital has provided a one-stop service point for individual and corporate financial services requirements, with a special focus on financial management, fund advisory, life insurance, private medical insurance, insurance broking and property.