Highlights from interim reporting season

The earnings season in Malta came to an end earlier this week. All companies whose financial year ends in December have now published their interim financial statements and several companies also declared interim dividends to shareholders.

Overall, it was a positive earnings season with robust financial performances from various companies. The MSE Equity Total Return Index reached a new all-time high this week (+18.9 per cent since the start of the year) as a number of share prices increased with market heavy weight Bank of Valletta plc jumping to €2.33 (highest level in 20 years) and Malta International Airport plc finally rising to a 6-year high.

BOV maintains dominance; KPI’s of APS continue to strengthen

The banking sector is the most important industry to monitor for stakeholders across the Maltese capital market since the four retail banks whose equity is listed on the MSE currently account for over 42 per cent of the total equity market capitalization. The regular announcements by Bank of Valletta plc, HSBC Bank Malta plc and APS Bank plc together with the periodic publications from Lombard Bank Malta plc are therefore always important reading for financial analysts.

The publication of the 2026 interim financial statements of these four banks did not reveal any major surprises. BOV maintains its dominance across the sector at it remains larger than HSBC, APS and Lombard Bank on a combined basis. BOV has the highest net interest income margin at 2.49 per cent and also the highest annualised return on equity (ROE) at 10.5 per cent. Moreover, BOV continues to capture most of the growth in deposits and loans. During the first half of 2026, BOV’s loan book increased by €549 million (6.9 per cent) to €8.5 billion while its deposit base grew by €748 million (5.4 per cent) to €14.5 billion.

However, the positive momentum of APS should be noted with some key performance indicators (KPI’s) continuing to strengthen. APS reported that its profit after tax for the first half of 2026 amounted to €16.1 million, which translates into an annualised ROE of 9.2 per cent. Also very importantly, the net interest income margin strengthened to 2.22 per cent. This was much lower in previous periods and the bank had specifically guided towards a margin above 2 per cent for the year. APS also continued to register gains in market share as its loan book increased by €253 million (7.5 per cent) to €3.6 billion while its deposit base grew by €108 million (2.6 per cent) to €4.2 billion.

MIA share price responds to guidance upgrade

Following the announcement on 31 July that the airport operator updated its traffic and financial guidance for the year, the share price of MIA climbed to a six-year high of €6.70.  The weak share price performance has been a major disappointment in recent years and traded within the €5.80 to €6.20 level for an extended period of time despite the very strong growth in profits of the company since 2023 on the back of the surge in passenger numbers.

Although the company now expects passenger movements to grow by 11.3 per cent over last year to 11.2 million passengers, this still could be considered modest given the double-digit growth in passengers registered in each of the first seven months. In fact, based on the actual figures for the January to July period, the revised guidance guidance implies growth of only 6.2 per cent for the remaining five months of the year.

The upcoming monthly traffic results for August and September would provide the required confirmation whether the double-digit growth also persisted during the remainder of the peak period. If this materialises as one would expect following the 14.7 per cent jump in July to a record of 1.19 million passengers, then a level of 11.4 to 11.5 million passengers would be achievable unless there is a significant decline in the last three months of the year in view of the ongoing geopolitical tension and very high jet fuel prices.

MedservRegis reports surge in revenue

The interim report of MedservRegis plc confirmed its strong financial turnaround with improved revenue and profits and a reduction in its total debt levels. The main upturn came about from the Mediterranean region as the company has been reporting strong activity in its Malta base supporting the business offshore Libya. This is likely to continue in subsequent reporting periods as various international media outlets continue to report on the ongoing progress related to the offshore natural gas development project in Libya led by Eni and the National Oil Corporation (NOC) via their joint venture, Mellitah Oil & Gas.

Following the 18 per cent growth in operating profit in the first half to €7.3 million and the full-year forecast of €11.9 million, it would be interesting to monitor when MedservRegis would feel the need to upgrade its full-year guidance given the positive business momentum.

Meanwhile, shareholders await the quantum of the interim dividend to be declared on 30 September and subsequent announcements related to the progress of the company to generate improved cash flow from the record turnover as well as any initiatives for tax optimisation as the company’s available tax credits in Malta become utilized.

RS2’s processing business achieving scale

RS2 reported a long-awaited return to profitability as the processing solutions business started scaling up. Revenue from the processing solutions segment during the first half of 2026 increased by 55 per cent to €15.9 million driven primarily by one-time implementation revenue together with higher processing revenue. The company reported that subject to successful implementation and client readiness, processing revenue from the newly contracted clients is expected to commence progressively throughout 2027. This should be a key focal point for shareholders to gauge the ongoing annual revenue that could be expected from these new clients.

In recent months, RS2 issued various announcements confirming that it entered into several new agreements, but there is limited visibility with respect to their overall contribution to the company’s financial performance. Some of the more recent ones are (i) a five-year multi-million-euro processing agreement with a major financial services partner in Latin America; (ii) a significant multi-country processing mandate spanning several nations and territories across the Caribbean region; (iii) an acquiring mandate with Inter Pag in Brazil (merchant acquiring arm of Banco Inter) as it selected the ACI Acquiring Platform with back-office card management powered by RS2 as part of the partnership between RS2 and ACI Worldwide; (iv) an agreement with PXP Financial for acquiring across more than 30 European markets which is the first large-scale European managed acquiring deployment for RS2.

It is worth highlighting that the recent interim report noted that the value of ‘contract assets’, representing the group’s right to consideration for work completed but not yet billed, rose from €4.29 million as at 31 December 2025 to €8.54 million as at 30 June 2026. Management attributes this to heightened implementation activity. The timing of the conversion of these into receivables and cash is very important to shareholders as RS2 moves to the billing stage and the client goes live.

Moreover, RS2 made reference to the expansion of its presence in the US. This specific mention can be important since the US subsidiary remains loss-making. RS2 currently services one of the largest banks in the US through a hybrid licensing and processing model, delivering global acquiring and issuing services.

There were several other companies that reported on their financial performance over recent weeks. A number of these companies will next report on their financial performance in seven or eight months’ time as they are obliged to publish their annual financial statements by April 2027. The time lag until the next announcements is far too lengthy for shareholders and for market participants.

A wider group of companies should therefore consider the benefits of reporting on their financial performance on a quarterly basis and also to issue an announcement in the first two months of the new year providing highlights of the 2026 financial year. A similar announcement was published recently by Loqus Holdings plc detailing their unaudited annual financial results as at June 2026. A similar announcement should be replicated by other companies as this is a very important initiative for increased transparency for all stakeholders which could generate improved trading activity.

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