Multi-million losses for Maltese retail groups in year of COVID shut-down

Millions were lost in sales by some of Malta’s largest companies and bond issuers, a raft of end-of-year financials posted in the last weeks show.

A selection of some of the more prolific organisations shows the varying fortunes of businesses who suffered the brunt of the COVID-19 pandemic’s lockdown and public health restrictions. Others granted a ‘pass’ to proceed with their economic activity retained positives figures, with dampened sales but never straying away from a minor profit.

An example were mega-property projects which remained largely unaffected by the pandemic: the 31-storey Mercury high-rise in St Julian’s developed by Joseph Portelli signed deeds of sale worth €19.8 million in 2020, well above the €9 million registered in 2019, due to a higher number of floors completed throughout the year. Total investment property is valued at €40 million.

Mercury House high-rise

Company directors said in their annual reports that the project had proceeded without any major interruptions during the most challenging months of the COVID-19 pandemic and is now entering finishing. They said 97% of total units had been sold prior to the approval of additional floors in 2020.

COVID-19’s enforced closures of retail shops certainly affected the fortunes of the retail fashion and food powerhouse Dizz Group, owned by Diane and Karl Izzo, which registered a pre-tax loss of €5.3 million due to a 8% drop in sales - down from €14 million in 2019 to €12.9 million in 2020.

The group obtained €2 million in COVID financing schemes and €3 million in subsidised interest-rate banking finance to pad its cash shortfall, apart from a restructuring of the groups: they incorporated D Foods Finance plc as the holding company of its food companies DK Pascucci, DCaffe, D Kitchen Lab, and Xilema Limited, a concern valued at over €6.1 million in shares. But these outlets also suffered the brunt of of the COVID-19 lockdown on retail outlets. The new company raised €3 million from a €10 million loan note issued by D Foods Finance plc.

Despite the pandemic, the group completed works at D Mall with eight outlets leased out to related or third parties, and one outlet and office space remaining vacant at the end of the year. Dizz has a 15-year lease with Sliema Wanderers FC to develop and sublease the D Mall commercial centre at Tigné Point, as well as a 16-year agreement for the Centerparc mall in Qormi. In 2020, the group registered a €1.15 million profit from leasing of immovable property. Its shopping mall finance vehicle, D Shopping Malls Finance plc, is now expecting to register €1.7 million in revenue from retail outlet leases.

The retail franchise chain Melite, suffered €4.2 million in losses due to the COVID closures of its Italian fashion shops, and saw its projected €6.2 million equity going down to €1.3 milion.

The company, which has been the subject of attempts at securing additional financing, said it will still be convening a bondholders meeting to seek approval to changes in their bond coupon so as to give the company breathing room in meeting its financing obligations. The group was also forced to enter into voluntary administration, and to rescind nine out of 26 stores held by related company Melite Properties. Since then, the company has locked down new agreements for the lease of their shops.

The COVID pandemic impacted the fashion industry hard and the sub-sector related to formal wear within that industry even harder. With offices and shops in most markets being closed for much of the last year, and all events normally connected with formal attire such as weddings, baptisms and corporate events prohibited, demand for formal wear slumped for clothing group Bortex with a pre-tax loss of €1.2 million.

It meant significant reductions for Bortex’s international orders and as a result, losses at its Tunisian manufacturing subsidiary, Bortex Tunisie Sarl forced it into closure as a €400,000 write-off. “Unfortunately, Bortex is no longer in a position to continue with these extraordinary efforts without endangering the overall health of the entire group,” directors said.

Bortext also shifted its production lines in Malta to produce face masks for hospitals and clinics

Bortex also owns the Hotel 1926, TEN Apartments, and the Palazzo Jean Parisot boutique suites as part of its Roosendaal Hotels subsidiary: the sale of TEN apartment units in 2020 netted a €2.7 million profit alone, while its Hotel 1926 managed a €500,000 gross profit. The group said that its project TEN had proved to be vital given that COVID-19 only limitedly impacted real estate. Bortex was granted a €2.8m loan under the Malta Development Bank COVID scheme.

The Tumas Group saw a 42% decrease in sales down to €34 million but still managed a profit of €11 million, just down €1.2m from the previous year – a “commendable result” as remarked by directors. Hospitality revenues, from hotels such as the Portomaso Hilton, were down 68% to €13 million, but property development saved the day with a new office black at the Portomaso Business Tower with €15 million in sales and €6.1 million in rentals.

“What started off as a better performing year in the hospitality segment, was short-lived, as the first two months’ superior performance were abruptly halted as a result of the pandemic,” Tumas directors said. Hotel occupancy in the brief summer of 2020 was at 36% when typically this would be 94%. The directors said revenues were down from both the Portomaso marina and car park, and its iconic tower bar Level 22 “suffered the most as it was and is still closed.”

With total equity of some €137 milion, the organisation availed itself a €4 million COVID facility from the Malta Development Bank.

The developers of Tigné Point, with net asset value of €104 million, registered a pre-tax loss of €2.1 million in 2020, down from an €8.2 million profit the previous year. But the company only had three apartments in its Q2 building in stock, and none were sold due to the subdued activity of the pandemic. Instead, rental income generated a €1.3 million profit, down from €2 million the previous year due to rent concessions to the tenants of its commercial properties and car park operator.

In addition to its Manoel Island project, the company was finalising a 63-apartment Q3 residential block, which was subject to a planning appeal by the Fort Cambridge Residents Association.

Midi is in the main owned by Alf. Mizzi & Sons (17%), MAPFRE MSV Life (12%), Gasan Enterprises (11%), Mark Weingard (8.9%), and Rizzo Farrugia & Co, (6%).

The Eden Leisure Group, owned by the Decesare family, felt the brunt of the COVID pandemic on its entertainment and hospitality empire. The airport closures to International travel forced the company into seeking €4 million in COVID guarantee funds to finance its working capital.

The group’s hotels were forced to close in March 2020 and then reopened in June 2020, with other mandated closures for its cinemas, bowling alley and gym in the St George’s Bay Area. The impact resulted in a net loss of €7.4 million, due to a decrease of 73% in revenues from 2019.

HH Finance, the vehicle for Luke Chetcuti’s Paceville hotel Hugo’s, reported a pre-tax loss of €7 million, down from a €13 million profit the year before, largely reflecting losses from a property revaluation of its Hugo’s Hotel. HH directors said the COVID pandemic’s effects on tourism impacted the hotel business earnings, so it lopped off €9 million from the value of the hotel, which now stands at €36 million. The year earlier, it had revalued the hotel by €12 million, taking its value up to €45 million. HH Finance leases out the hotel to a fellow subsidiary, for €2 million a year.

The Xuereb family’s AX Group, which owns some €330 million in assets through its hotels, elderly homes, and other commercial properties, as well as ownership in various business operations, registered a pre-tax loss of €8.2 million compared to its €6.4m profit in 2019.

The business downturn lopped off 44% of revenue down to €29 million, large on account of the impact on international travel and cruise liner tourism, where the group owns various hotels and is an associate company at Valletta Cruise Port. In contrast, revenue from construction increased 24% to €6 million, while income from healthcare was unchanged at €5.9 million. AX registered meagre profits in construction and real estate divisions. It also procured an €8 million land under the COVID guarantee scheme from the Malta Development Bank.

A positive performance was certainly registered by the food-store chain The Convenience Shop, which reported a “rollercoaster” business year in 2020: with 37 owned shops and 34 franchised shops on the islands, the group reported a decline in revenue in touristic areas in the north, but still expanded footfall in the central and north regions.

“The pandemic induced a change in customer behaviour,” directors said of the less frequent outlet visits but increased average sales. “The group responded to this shift in customer spending patterns by launching an online shopping platform and adjusting opening hours in line wit customer requirements.”

By end-2020, the Convenience Shop group registered a pre-tax profit of €1 million on a turnover of €33 million. Originally, the group was expecting a similar €1.53m profit before COVID struck, so not a bad outcome for the supermarket business. The group, with assets of over €33 million, remains highly liquid (€1.1m in cash and equivalents) thanks to the nature of its business.

The group also paid out a €700,000 divided from prior-year profits. Members of The Convenience Shop are also shareholders in The Shoreline luxury development at Smart City, Xgħajra.