AX Group on Monday shared that it has registered a €1.3 million pre-tax loss during 2022, as it continued its recovery from the COVID-19 pandemic.

This came following the release of the group’s Annual Report for 2022, where it stated that it recorded €38.3 million in revenue for the year, an eight per cent increase from the previous year’s €35.4 million.

Founded in 1975 by Chairman Angelo Xuereb as a civil engineering firm, AX Group has since diversified its operations by expanding its business portfolio to also include restoration works, hotels, restaurants, care homes, and other projects.

Operating costs went down from 2021’s €17.3 million to €14.9 million in 2022, while depreciation charges were relatively stable at €6.9 million. However, the group had a 39 per cent rise in staff costs from the previous year, taking the figure up to €16.3 million. This coincided with the rest of the local economy, as staff shortages continued to trouble companies. Despite this, AX Group recruited more than 500 new staff members required for its ongoing projects and operations, primarily for the opening of the redeveloped Suncrest Hotel.

During 2022, the group also underwent a reorganisation exercise that saw the shares in a number of subsidiaries sold to another subsidiary, AX Real Estates plc, in order to consolidate the main property letting activities of the group into a newly formed subgroup.

AX Group’s hospitality division had its pace of recovery from the pandemic constrained during the first quarter of 2022 due to the spread of the Omicron variant. The lifting of restrictions by local health authorities allowed for normal operations to resume, leading the hospitality division to enjoy a 61 per cent increase in revenue from the previous year’s figures, despite the group’s Seashells Resort at Suncrest Hotel in Qawra being closed for refurbishment and extension.

The healthcare division registered an 8.1 per cent increase in revenue compared to the prior year, with the group’s Hilltop Gardens Retirement Village being fully occupied at the time when the report was being compiled. However, the uncertainty surrounding the pandemic led to Simblija Care Home to enjoy a hindered recovery during the first half of the year, as elderly people remained reluctant about moving into care homes. However, from May onwards, the care home enjoyed a steady recovery in occupancy following the lifting of restrictions.

AX Group’s construction division was primarily involved in two major internal developments, with these being the aforementioned Suncrest Hotel project, and also the redevelopment of the Verdala site in Rabat. The Directors reported that works on the former are “progressing at a steady pace”, with the hotel expected to “reopen to the public by May 2023”. Construction works on the first block at the Verdala site were completed in October, with works on the second block “progressing steadily”, while the foundations of the third one are at an “advanced stage”.

The construction division also continued works on the redevelopment of Palazzio Lucia in Valletta, while a number of external projects, such as the Isla Bastions and the Maria Assumpta Secondary School handball pavilion, were finalised during the year. Other external projects are also ongoing, including the Maritime Museum in Birgu and the restoration of the Jesuits Church in Valletta.

Additionally, the group’s real estate and developments division closed the sale of most of the units at the Targa Gap complex in Mosta and Falcon House Sliema, along with the other remaining apartments from other blocks.

AX Group Chairman Angelo Xuereb

AX Group’s total assets expanded to €422.8 million from the prior year’s €374.1 million. AX Real Estate paid a net interim dividend of €0.0125 per share on 15th July 2022, followed by another net interim dividend of the same amount on 30th January 2023, in line with its semi-annual dividend policy.

Mr Xuereb remarked that 2022 was not only characterised by a “significant level of activity, but also by a great deal of strategic focus”. He stated that he is “confident” that the new Verdala Hotel will be opened in the second quarter of 2024, with its residential apartments being completed before that time.

“I am pleased to state that all our divisions achieved their budgeted revenue targets during 2022. I am also confident that this growth will continue in 2023 and beyond,” he added. However, he also said that despite AX Real Estate’s listing on the Malta Stock Exchange being a “success”, the market has since witnessed “considerable turbulence” due to rising interest rates. This has prompted AX Group to remain “prudent” in its financial management, Mr Xuereb added, knowing that it is increasing its leverage to “finance these significant investments”.

CEO Michael Warrington stated that the war in Ukraine prompted a rise in the prices of the group’s supplies, with costs of most of the group’s business inputs “rising sharply”.

“In the construction and development divisions, the prices of steel, concrete and other building materials rose substantially and remained so for much of the year. In the hospitality and care businesses we saw significant increases in the costs of food and related products. The lockdown in China put further pressure on the timing and cost of deliveries from that part of the world,” he remarked.

However, he noted that the “biggest rise” in its cost base was in the labour market, which “remains very much an employee market”. “The labour shortage prevails at many levels, somewhat restricting operational efficiency and the ability of our businesses to move forward at the pace we wish,” he explained.

AX Group CEO Michael Warrington

Despite the “limitations”, Mr Warrington said that 2022 was a “year of significant change”, and he looks back positively at what AX Group achieved during the year.

“Our biggest achievement during 2022 was the speed at which we undertook the construction of the Verdala site. I had reported in 2021 that the old hotel was demolished in the latter part of that year. Construction work commenced in earnest in early 2022 following a long period of constructing the foundations for this marvellous building. Works are progressing on site very rapidly,” he said.

Mr Warrington added that the year was an “exciting but challenging” one for the group, and he remains grateful to the management who “invariably rise to the challenges” that are put on them.