Farsons reports subdued profits in a COVID-19 environment

The Board of Directors of the Farsons Group announced the results for the six-month ended 31^st July 2020. The Group’s performance was heavily impacted by the events brought about by the COVID-19 outbreak and the ensuing economic downturn.

Mr Norman Aquilina, CEO of the Group reported that “this financial period got off to a strong start with turnover and profits in the month of February exceeding those of the previous year by 10%. However, the onset of the COVID-19 pandemic and the regulations that ensued were very quickly reflected in the business performance across the Group. Turnover fell precipitously across all business lines as consumer demand for food and beverage products declined.  This decline was particularly acute in the bars and restaurant sectors when these were ordered to close by government regulation. All mass events were also cancelled. The closure of the airport between mid-March and 1 July effectively also shut down the tourist sector over that period, badly impacting the hotels sector. April 2020, the first full month impacted by COVID-19, saw Group turnover fall by 55%. Competitive market pressures also became more pronounced as all businesses strived to retain their market positions and manage inventory levels. Inevitably, these increased market pressures resulted in a further compression in gross margins across the Group.”

Turnover for the six-month period to 31 July 2020 amounted to €36.8 million compared with €53.3 million for the same period last year – a decrease of 31%.

The Chairman, Mr Louis A Farrugia, observed that “the Board and Management’s immediate focus  to curtail certain operational and administrative costs, re-visit ways of working, whilst at the same time re-evaluating planned capital investments programmes were, and continue to be, critical measures for the  protection of employment, commercial viability and safeguarding the financial integrity of the Group.” 

The cost cutting measures implemented across the Group enabled Farsons to register a net profit of €1.6 million for the six month period. The Group and its employees benefitted from the support extended by Government during the period. This result is of course a significant reduction from the profit after tax registered in July 2019 of €6.4 million.  The reduction of 75% in the Group’s profits was experienced across all business lines.

The high level of dislocation and disruption brought about by the unprecedented COVID-19 pandemic are expected to persist over the coming months, as is the uncertainty that has come in its wake. The Board of Directors and Management will remain vigilant and are committed to continuing to implement such further measures as are necessary to safeguard the Group’s presence in the market, to protect the work force and to secure the financial viability and integrity of the business.

Mr Aquilina stated, “the global economic downturn brought about by the onset of the pandemic is evident – yet the future remains uncertain.  The immediate future is far from clear and forward visibility for business planning purposes remains poor. Agility in responding to fast moving events will be key.”

The Board expects a challenging second half of the financial year and believes that further reduction in consumer demand together with potential reduction in spending power will continue to impact negatively the profitability of the Group as reported in the Financial Analysis Summary published today by Rizzo Farrugia Stockbrokers.  The forecast for the second half of the year, based on observed current trends, is anticipated to generate a slight improvement in the profit levels reported for the first half of the year.

Mr Louis A Farrugia concluded that “in the difficult and uncertain environment, the Board of Directors does not feel that it would be appropriate to declare the payment of an interim dividend.”