AX Group, a diversified group of companies operating in construction, development, healthcare and hospitality, registered a loss after taxation of €7,889,730 for the year down from a profit of €4,556,741 in 2019.
The loss is in fact in large part due to the COVID-19 pandemic’s impact on tourism, which saw tourist arrivals drop by 76.2 per cent to just 700,000 people. The Group registered a steep decline in revenues from €52 million in 2019 to €29 million last year.
The decline in revenue in the hospitality division also impacted the valuation of the AX Group’s hotel properties, leading to a further €15 million loss. AX group nonetheless reported a positive EBITDA of €2.6 million, confirming that its normal operations still generated cash.
In fact, AX Group’s founder and chairman Angelo Xuereb reflected positively on the financial statement, saying, “I am convinced that the business that I started 45 years ago will be here for many years to come”.
Founded in 1977, AX Group began its existence as a civil engineering firm. In the ensuing decades, the company took steps towards diversification by expanding its business portfolio to include restoration works, hotels, restaurants, care homes, and many other projects.
Mr Xuereb said the Group recognised early on that the pandemic would not be a short one, and would continue to depress the travel and tourism industry for years. “While the Hospitality Division is normally the main generator of cash within the Group, we understood that those profits would not flow at the same level for a few years.”
He said that the Group has, after careful analysis, decided not to redevelop the Suncrest and Sunny Coast hotels and the Luzzu restaurant and lido complex into one development, choosing instead to retain the properties’ current touristic use.
The Group is now at an advanced stage in securing the full development permit to add an additional 160 rooms to Suncrest Hotel, with work epected to commence in the last quarter of 2021.
The Group’s also saw another important milestone in 2020 with the approval of the outline development permit for the Verdala Hotel site, which will include a hotel, serviced apartments and a number of high-end residential units intended for resale.
Rosselli, AX Group’s luxury boutique hotel received the “Hospitality, Tourism Accommodation and Leisure” Award, while Under Grain, a restaurant in Valletta owned by the Group, obtained a Michelin Star rating.
Mr Xuereb said that the Group’s expertise in hotel management can help it expand in the hospitality sector by entering into management contracts with other property owners.
“We have some distinct and unique operating structures that can benefit hotel owners and which can give them advantageous market positioning and financial returns,” he said.
The Group’s construction sector completed the €12 million Targa Gap Complex, which in November became host to the Group’s head office. It also completed the Farsons Brewhouse project as well as 21 other apartments targeted at the mid-tier market, 14 of which have already been sold, along with several other projects for clients.
AX Care meanwhile had to take on new challenges brought on by the pandemic, with employees spending 10 weeks in lockdown during the first wave, not leaving the Simblija care home and Hilltop Gardens.
“These drastic measures ensured that none of our residents were affected in the first wave,” Mr Xuereb said.
He noted however that, “Sadly, the second wave affected our islands much more than the first, and in spite of our employees taking steps to prevent the spread of the virus, we had a number of instances where residents and employees contracted the illness.”
AX Group CEO Michael Warrington discussed the company’s financials, saying that the Group’s gearing remains low even though the Group had raised €25 million through the bond issues in December 2019 and the revaluation loss of €15 million registered during the year.
Total shareholder funds at the end of the financial year 2020 stood at €217 million, down from €239 million reported the previous year.