Analysing the profitability of Maltese PLCs and the Covid-19 impact

Abstract

PURPOSE: The main aim behind this research project is that of analysing the profitability of Maltese PLCs, and any impact of the Covid-19 pandemic thereon. This study has been devised to address the significant research gaps in the areas of local company profitability and the Covid-19 impact on local businesses. DESIGN: Following the review of relevant international sources of secondary data, a mixed methods approach was adopted in the generation and analysis of primary data. The qualitative tool took the form of semi-structured interviews conducted with 12 high-level managers, while the quantitative tool was a data collection and content analysis process based on the Annual Reports issued by 43 Maltese PLCs between 2018 and 2021. FINDINGS: In addressing the first objective, the prominent perspective towards profit-making across interviewees was that profit remains a PLC’s main priority, whilst profit is not to be maximised at all costs. With regards to the use and reporting of profit levels and profitability ratios, interviewees prioritised the use of profit at an operating level over profit at a net final level. Paradoxically, profit levels and ratios at an operating level were less commonly reported and less focused on, than those at final net level, in PLCs’ Annual Reports. Addressing the second objective, in terms of the profitability results reported in 2018 and 2019, they were interpreted as significantly stable over both years, and particularly encouraging. Addressing the third and final objective, profit results reported by Maltese PLCs in 2020 were considerably lower than those reported in 2019 across the absolute majority of measures, suggesting a negative impact of the pandemic of local general profitability. CONCLUSION: Moving into a future which is to be expected to give rise to new sources of challenges and potential crises, entrepreneurs and policymakers alike are to ensure that local PLCs, whilst providing financial users with the highest level of reporting, are able to maintain sound and resilient operations. They are to be ready to face the next threat, whilst remaining ambitious to becoming always more efficient, successful, and profitable. VALUE: The findings of this research are useful for policymakers and local businesses to understand the recent performance of some of the most successful enterprises in the island, and the extent of the Covid-19 impact on local businesses. As a result, emanating from this study are a number of recommendations to preparers, policymakers and standard setters.