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FARSONS HIGHLIGHTS SERIOUS CONCERN ON GROWING ILLICIT TRADING 27/06/2008


(From left) Mr Louis A. Farrugia and Mr Bryan A Gera, Farsons Group CEO and Chairman respectively, addressing shareholders

Farsons is seriously concerned at the level of imports of beverages that are sold on the market without there being sufficient enforcement in the payment of dues for Eco Contribution and other taxes. Farsons shall continue to press for a fair level playing field to be established. This was stated by Group CEO, Mr Louis A Farrugia, during his address to shareholders at the Annual General Meeting of Simonds Farsons Cisk p.l.c.

“Whilst the company has always believed in the considerable value and importance of competition for a healthy economy, we shall remain vigilant on this issue. We can meet the legitimate challenge with appropriate strategies of low priced beverages but we must expect and insist that all traders should pay their fiscal dues,” said Mr Farrugia.

Major €24 million investment’s outcomes

Referring to the new €24 million investment in a new soft drink packaging hall and logistics centre, completed on time and on budget and officially inaugurated last February, he said that this project have signified a substantial restructuring of operations for Farsons including the centralisation of its distribution system.

Land and buildings revaluation

The Board of Directors has approved a revaluation of its land and buildings, which is being reflected in the consolidated balance sheet. The revaluation amounts to €55.5 million and is based on the independent valuations by two architectural firms commissioned by the Directors. The net surplus after providing for deferred taxation of €11.1 million, amounts to €44.4 million. This has been credited to reserves and so is part of Shareholders equity.

The Board of Directors has explored the best use that should be made of these properties, the long term objective being that of ensuring new income streams to the group with added returns to the shareholders.

Restructuring property portfolio

A Board Committee, under the chairmanship of Mr. Roderick Chalmers, has been appointed for this purpose. Mr Chalmers explained to shareholders the Board’s proposal of transfering these properties to Trident Developments Limited.

Trident Developments already owns various other group properties that are either being used by the subsidiary companies, rented to third parties or retained as investment properties.  The directors are also proposing that Trident Developments Limited will be renamed Trident Properties plc and, as a separate public company, it would be listed on the Malta Stock Exchange. 

Once Trident Properties is set up, all Farsons shareholders will be allotted shares in Trident Properties plc on a pro-rata basis to their shareholding in Simonds Farsons Cisk plc.

The Board believes that this restructuring will benefit the group in a number of ways. Trident Properties plc will be managed by a separate CEO with expertise in the property sector. This will enable the company to attract strategic investors with a view to developing certain properties such as the Wands and Mrieħel sites.

Once segregation of the core food and beverage business and the property business occurs, the market will be in a better position to value the Group’s business. Ultimately the Farsons board believes that this will result in added shareholder value.

Momentous year

2007 has seen Farsons on the move in many aspects: new products, new packaging, a new production line, new centralised warehousing set up, new distribution channels and new export initiatives. It was a year that saw the culmination of the company’s efforts to adjust its operations to meet the challenges arising from the full liberalisation of the soft drinks market. This included the quick replacement of the traditional soft drinks glass bottles by the more convenient PET bottles and cans.

All this was done at the same time as pursuing forward actions started last year and aimed at controlling the company’s cost base and at addressing the losses of certain subsidiary operations.

Referring to the construction of a new brew house as the final capital project of the company’s investment programme, Mr Farrugia informed shareholders that preliminary design works have already been carried out. The Board will be considering commencement of works for 2009 with completion targeted for 2011. Once this is done, Farsons would have undergone a total renewal of its operations for the third time in its 80 year history being celebrated this year. 

Group turnover increases

When Company Chairman Mr Bryan A. Gera addressed the shareholders, he referred to the 6% increase in Group’s turnover from 62.2 million to 66.1 million. Group profit before tax increased from €2.2million to €4.0 million, an impressive 77% increase.

The main reason for these results is that the Group has benefited from a better tourist year and economic climate. Quintano Foods Ltd and Food Chain Ltd performed particularly well.

Dividends

Mr Gera stated that the Board is recommending an improved and record dividend. Apart from the €233,000 interim dividend declared in September 2007, the Board proposed a final dividend of €1,367,000, bringing the total dividend to €1,600,000. This represents an increase of 37% over last year’s dividend. Both payments are payable out of tax-exempt profits. This dividend was subsequently approved by the Annual General Meeting.

Finally, the Chairman thanked all Farsons Group directors, the entire management and staff at the brewery and subsidiaries for their dedication and commitment and all the shareholders for their trust in the Farsons Group.