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By a Special Correspondent
Government is set to continue divesting of its assets with the ministry for investments this week announcing that in the near future, an international call will be issued to find a strategic investor with international experience for Tug Malta Ltd.
It is Government’s intension to retain a minority interest and the ideal partner would have to upgrade the company so that it would be able to offer its services off shore, lead it to participate in salvage operations and have it work in international ports.
The highlights of the financial results ending Sept 05, show that Tug Malta Ltd made a profit before tax of Lm671,217 against a loss before tax of Lm21,467 registered in the previous year. Last year, when the 2004 result were announced, there was talk that a request was to be presented to the Malta Maritime Authority, as the regulatory body to revise the towage tariffs.
There is no indication this year if these changes in tariffs have been approved and whether they have contributed positively to the 2005 results. In any case, it is good to know that a parastatal company is investing around Lm4 million in two new tug boats and without the need of any government guarantees.
This means that financial institutions and suppliers see the Company as unable to give it credit on the strength of its balance sheet. Moreover, in the previous year, the Government had announced that there would be an application before the Malta Maritime Authority as the regulator, to consider Tug Malta’s operations as essential economic services.
Analysing the figures one finds that turnover in financial year 2005 reached Lm3 million against Lm2.3 million registered in 2004. This is a healthy increase of 31.7%. There is no explanation of how much of this increase is a result of any rise in tariffs or whether this was a result of increased demand for Tug Malta’s services.
On the expenses side the operating expenses in 2005 increased marginally by 0.8% to reach Lm1.96 million. From the analysis the major increase was in the fuel costs which offset the savings made in repairs. Other expenses such as payroll and depreciation remained constant.
Administration expenses in 2005 increased by 21% to reach Lm405,000. The increases were mainly related to Human Resources Development and Training – which is an investment to enhance the workers’ skills – and insurance costs.
Savings were registered in finance costs and even though payroll costs increased, other expenses such as professional fees, advertising, travel and entertainment and sundry expenses remained constant.
An interesting slide shown during the presentation of results was a breakdown of the costs showing that the company’s expenses are split into 82% as operational, 17% as administrative and 1% as financial.
During the announcement of results, one could feel that there was enthusiasm by the presenters in showing how the Company was improving its financials. Over a 10 year performance chart there is a sudden surge in revenue in 2005 against 2004 and this reversing the downward trend in revenue that was being experienced in previous years.
Indeed the company looks ripe to be sold. With the delivery of two new tugs expected this month and in October 2006 and the only operational issue which seems a problem is the manning level of the Tugs, management is in discussion with the unions to reduce this from five sailors to four per Tug. However, there will not only be redundancies but this will come about as a result of natural wastage of staff returning of age.
The sound financial performance registered in 2005, according to the minister, is the result of the restructuring process. In fact during 2005, the company continued to improve in its operations, so much so that it is undertaking service level agreements and providing frequency discounts. Last year a lot of training was undertaken by tug markets who, were trained in Holland on simulators in preparation for the new tugs they will work with. Moreover, on the job training was given by an experienced UK Tug Master. These should improve further the Tug moves and overall operations.
Malta has a very high rate of jobs per tug at 1,000 compared to 600 registered by Italy and Ireland; 400 by Belgium and under 200 by Denmark; Lithuania and Spain. Despite these favourable results, the number of ships using tugs at Marsaxlokk and the Grand Harbour decreased when comparing financial year 2005 with 2004. The Tug moves in 2005 increased to 81% at Marsaxlokk from 79% , at Marsa Shipyards it remained 6% as in previous years whilst at the Grand Harbour there was a decrease of 2% from 2004, to reach 13% in 2005.
The issue of manning levels is being discussed with the Unions. In order for the Company to reduce costs the staff levels have to decrease from 5 to 4 per Tug. This is an important consideration, as from the figures given; the current manning levels at Malta are the highest in Europe. As an average Malta has a crew of 10 per tug. Compared to 8 registered by France, UK, Germany and Greece; 6 at Spain; 5 in Sweden and Denmark and a low 3 in Holland.
Tug Malta is committed to continue to invest in tugs and employees to offer an immediate efficient service to its clients. During the presentation of results, no information was provided on the company’s balance sheet.
The strategic investor would definitely analyse the tariffs Tug Malta charges to its clients, review why less ships are calling to whether optimal use is being made of staff including the manning levels, and study the costs. However, finding a fleet of an additional two new tugs is definitely something which is of benefit to the future operations of the company as well as the capabilities of the staff who have had 2005 as a year dedicated to training.
This is the third Government controlled entity which operates in the Maritime Section. Sea Malta ended up in liquidation and its services taken up by a private entity. Gozo Channel is the second entity, which will continue to be Government controlled and dependent on the Public Service Obligation payments, and Tug Malta which is showing good financial results in anticipation for privatisation.
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