The challenges brought about by industry-specific conditions impacted the general operating environment of MaltaPost. During this reporting period, the Company was faced with a considerable increase in direct mail costs due to changes in tariffs regulated by the Universal Postal Union ("UPU"). This change in the tariff structure, as regulated by the UPU, also adversely impacted the Company's revenue streams. MaltaPost, being the national regulated postal operator, is mindful of its obligations to provide an affordable universal service albeit extending some of its core services at a loss in the short term as local letter tariffs continue to be the lowest in the EU. The Company is working closely with its regulator, the Malta Communications Authority, to ensure a fair regulatory approach which is appropriate and relevant to the challenging and dynamic competitive market in which it operates.

As announced previously, the Company concluded acquisitions of key properties, including its Head Office in Marsa and other strategically located properties. These were financed by a blend of own funds and bank borrowings which, understandably, impacted the interim results through a decrease in net finance income and an increase in depreciation and amortisation charges.

As a result of the above, for the six months ended 31 March 2012, MaltaPost reported a profit before tax of €796k compared to €1.69 million for the corresponding period last year. Other contributing factors and key indicators underlying these interim financial statements are as follows:

 Turnover increased by 3.1% to €1.0 million (2011: €0.7 million). Traditional mail volumes are still on the decline, in line with worldwide trend. However, this was compensated by an increase in weight of cross-border traffic which registered an increase in revenue despite being negatively impacted by the change in tariff structure as determined by the UPU. Other non postal revenue also contributed positively to the increase in turnover;

 Other expenses increased by 22.6% principally as a result of the increased mail costs explained above and labour cost;

 Total assets increased by 7.9% to €9.6 million;

 Shareholders' funds increased by 1.4% to €4.7 million.

Despite the challenges facing the postal market, the Board of Directors is confident that the Company has the necessary human, technical and financial resources to provide the best possible range of services to the community while continuing to deliver a fair return to its shareholders.

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