AX Group has announced a new €40 million issue carrying a 5.85 per cent coupon rate.

The offer period open on 5th October and runs until 23rd October, unless it is fully subscribed earlier.

The entirety of the proceeds of the bond issue will be used to redeem existing bonds maturing in 2024. The maturing bonds carry a six per cent coupon rate. The new bond issue should therefore see a slight decrease in the company’s financing costs for the coming years.

AX Group will settle the difference to maturing bondholders between the interest rate applicable to the 2024 bonds and the interest rate applicable to the new bonds, from 7th November 2023 up to and including 5th March 2024.

The new bonds will first be offered to holders of the maturing bonds, up to the amount held as at close of trading on 19th September 2023.

Any balance not subscribed for will be made available to maturing bondholders wishing to increase their holding, AX Group employees and directors, shareholders of AX Real Estate, and other group bondholders.

All applications are subject to a minimum subscription of €1,000 (nominal) and in multiples of €100 thereafter.

About AX Group

AX Group plc has four main business divisions active in hospitality, healthcare, real estate and development, as well as construction, apart from also being involved in renewable energy and cruise port operations.

Historically, the hospitality division has been the main cash-generating unit of the group, with its share of total revenues and gross operating profit expected to represent circa 72 per cent and 81 per cent respectively of AX Group’s income in the current financial year ending 31th October 2023.

The group’s asset base as at 31th October 2023 is projected to amount to €466 million, compared to €423 million in the prior financial year.

The principal assets of AX Group comprise six hotels located in Qawra (Odycy Hotel and Sunny Coast Resort & Spa), Sliema (The Palace and The Victoria Hotel), and Valletta (The Saint John and Rosselli); and a retirement village complemented by a 24-hour nursing and care home in Naxxar (Hilltop Complex).

In addition, the Group is presently developing a hotel and residential complex located in a Special Designated Area in Tal-Virtù, Rabat (Verdala Project), with completion scheduled for the end of calendar year 2024. The Verdala Project will consist of a 40-room five-star all-suite Verdala Hotel which will incorporate 23 serviced/self-catering units and 19 fully refurbished Virtu Heights apartments annexed to the Verdala Hotel, together with 87 high-end apartments spread over two residential blocks, which are earmarked for sale.

During the COVID-19 pandemic outbreak, the group took the opportunity to close-down Seashells Resort at Suncrest, Qawra, and redevelop the property into a 599-room hotel (previously 452 rooms) at an overall cost of circa €72 million. The soft opening of the renamed hotel – Odycy Hotel – took place in late May 2023.

AX Group’s plans for the medium term include the extension of Hilltop Gardens Retirement Village, the redevelopment of Luzzu Complex and the adjacent Sunny Coast & Spa lido, which will be linked to the lido of the Odycy Hotel to form a series of laguna pools, restaurants, and commercial outlets, and the demolition and rebuilding of the Sunny Coast Resort & Spa. It is estimated that these projects will, in aggregate, entail an investment of close to €80 million.

Financial outlook

AX Group was severely impacted by the COVID-19 pandemic and the temporary closure of the former Seashells Resort, which is by far the largest hotel of the group.

In fact, the group recorded an EBITDA of only €2.62 million in the 2020 financial year, compared to €16.64 million in 2019. This increased to an average of €7 million in the 2021 and 2022 financial years, and is expected to reach close to €10 million in the current financial year ending 31st October 2023, partly reflecting the circa five-month contribution from Odycy Hotel, which reopened for business in late May 2023.

However, the 2024 financial year is projected to be a record year for the group, with EBITDA surging to nearly €30 million on the back of the full twelve-month contribution from Odycy Hotel, the further strengthening of the performance of the group’s other hotels, as well as the income from the sale of the first residential units forming part of the Verdala project.

AX Group has always maintained a sound and prudent approach to its financial position, particularly in view of its relatively conservative net gearing position which is expected to peak at just above 40 per cent by the end of the current financial year ending 31st October 2023, reflecting the significant investments of well over €100 million made by the group to improve and extend its operations as well as pursue the Verdala project.

Furthermore, given the material projected increase in EBITDA in financial year 2024, the group’s net debt-to-EBITDA multiple is anticipated to contract sharply to 5.43 times from a level of 17.17 times in FY2023.