Diversification proving to be beneficial to 1923

Investments plc holds activities engaged in innovation for businesses, retail of Apple products, the mobility of goods and cargo across regions, global ship-to-ship operations and the servicing of major oil companies and their fleets. The Company holds four groups of companies – Harvest Technology, iSpot, Hili Logistics, and STS Marine Solutions.

The Issuer currently has one bond issued on the local exchange, with a nominal value of €36m paying a 5.1 per cent coupon and maturing in 2024. As at the time of writing, the bond is trading marginally above par at €100.50.

Group’s developments

At the end of 2019, 1923 sold 37 per cent of the investment it holds in Harvest through an Initial Public Offer, generating a profit of €5.9m from a total cash sale of €10.7m.

Furthermore, in April 2020, 1923 completed the acquisition from Teekay Tankers Limited of a portion of its oil and gas ship-to-ship transfer support business (STS Marine Solutions), which also provides LNG terminal management and LNG consulting services, for approximately $26m. STS Marine Solutions is a world leading ship-to-ship service provider with over 30 years of experience in transferring crude oil, refined petroleum products, LPG and LNG. Its core activities comprise oil & gas and LNG support operations, LNG terminal management, emergency support services and consultancy. The business owns two brands OILSTS and LNGSTS, and is headquartered in Sunderland, UK. It operates out of 24 bases globally.

COVID-19 impact on the Group’s operations and outlook for FY20

The diversified business of 1923 is proving to be beneficial, whereby the Group recently reported that as a consequence of the outbreak its IT segment registered a surge in demand, as consumers acquired IT products for home entertainment and educational purposes, or to implement remote business operations.

At first, the Group reported that the majority of Apple Premium Resellers operating under the iSpot brand have ceased in-store operations and customers were being directed to the iSpot’s website. However, management has recently reported that the pandemic has positively driven demand for iSpot’s offerings, with this momentum expected to be maintained for at least the remainder of FY20. Management argued that COVID-19 has accelerated the transformation to a digital world which is driving the sale of Apple products – schools are innovating to make remote learning easier for students; businesses are encouraging working from home by providing equipment to enable employees to operate efficiently; and people are spending more time online for entertainment and shopping during lockdowns periods.

As opposed to the other segments, the Group’s logistics operations have not been immune to the pandemic and has been negatively affected by the restrictions imposed by countries on movement and flow of goods causing supply chain disruptions. Furthermore, the loss of demand and consumption of non-essential goods has reduced manufacturing output thereby impacting volumes of cargo.

The newly acquired ship-to-ship service business (STS Marine Solutions), has also been adversely impacted by the confinement measurers implemented worldwide. Management explained that situation was further exacerbated by the sharp fall in the price of oil caused by the imbalance between supply and real demand, with the overall impact depending on the duration of the crisis and on how quickly ship-to-ship (STS) operations can recover.

Additionally, following the COVID-19 outbreak, the Group took the strategic decision to wind down the freight forwarding operations in Malta with effect from August 2020.

Despite the pandemic, the Group expects FY20 to be a good year with an increase in revenue of 18.2 per cent or €24.6m and an EBITDA generation of €6m (FY19: €3m). It is worthy to note that these figures capture the operations of the newly acquired STS business, which is expected to contribute €11.8m in revenue and an EBITDA of €1.8m.

Of note, 1923’s technological arm is well positioned and may present the Group with interesting growth prospects in the technology business, especially during such turbulent times where other sectors are underperforming.