AX Group recorded a pre-tax loss of €6.8 million at group level during financial year ended 31st October 2023 (FY 2023), a period which saw it make significant progress in major development projects.
The figure was published in the group’s Annual Report for the financial year on Wednesday, where it highlighted the loss, a significant downturn in profitability when compared to the €1.3 million pre-tax loss registered in the corresponding period in 2022.
Despite this, revenue rose sharply during FY 2023, going up by 30.3 per cent from the previous year to €49.9 million. This was driven by the hospitality division, which saw revenues increase by €13.7 million, particularly fuelled by the improved momentum in tourism over recent months. This came despite the AX ODYCY hotel in Qawra, one of the group’s primary projects in 2023, spent most of the year closed, having had a soft opening in May 2023. During the summer, the hotel operated at a reduced capacity due to works on certain parts of the hotel, before it opened all outlets and amenities last December.
In January 2023, Suncrest Hotels plc, a subsidiary of AX Group, secured a loan amounting to €30.5 million, while AX Hotel Operations plc, another subsidiary, also secured an €18 million loan. These were provided to enable AX Group to complete the extension of the AX ODYCY hotel and redevelopment of the Lido in Qawra.
The healthcare division also experienced an increase in revenue, going up by 10.9 per cent when compared to the previous year. AX Group stated that the independent apartments at Hilltop Gardens, a retirement village in Naxxar, were fully occupied throughout the year, with occupancy at the care home exhibiting a steady increase.
AX Group’s construction division continued to make progress on the group’s two main internal developments, that of the extension of the AX ODYCY hotel, as well as the redevelopment of Verdala Terraces in Rabat. In addition to this, AX Construction generated €4.1 million in revenue from third-party works, lower than the €7 million registered in FY 2022.
Operating costs for the year experienced a 13.5 per cent rise when compared to FY 2022, going up to €17 million. Staff costs also surged upwards, going up by a staggering 59 per cent in FY 2023, partly attributable to the hiring of numerous staff members months ahead of the opening of the AX ODYCY. The group stated that this early recruitment “allowed sufficient time for comprehensive training to meet the AX Hotels standards.” This was coupled by retention bonus programmes for staff members satisfying a certain criteria. It also pointed out that during 2022, AX Group had received €1.5 million in COVID-19 wage supplement from Government, which had been extended until May 2022.
Due to the investment in AX ODYCY, depreciation of property, plant, and equipment experienced a €2.4 million increase over FY 2022.
Finance costs were also on the rise, going up by €1.9 million over the previous year, representing additional funding obtained during the year to finance different projects, together with the full year bond interest paid on AX Real Estate plc’s 3.5 per cent bond issued in 2022.
As at the end of FY 2023, AX Group’s total assets stood at €474 million, an expansion of 12.1 per cent from the previous year.
In November 2022, AX Group plc had declared and paid an interim dividend of €0.94 per ordinary share, amounting to €1.1 million. For this financial year, the Board of Directors did not recommend the payment of a final dividend. However, beyond the financial year, in January 2024, subsidiary AX Real Estate plc declared a dividend amounting to €304,208 to non-controlling interest.
Commenting on the performance, AX Group Chairman Angelo Xuereb said that 2023 was “one of the most challenging, yet profoundly rewarding years” of his career, with AX ODYCY and Verdala Terraces standing out as the most important achievements.
AX Group Chairman Angelo Xuereb / AX Group
“The momentum that started in 2022 with two major group projects underway picked up in the early part of 2023 as we were determined to meet our goal of opening the AX ODYCY hotel in time for the Small Nations Games, for which the hotel was contracted to accommodate the athletes, organisers, and dignitaries,” he said.
He remarked that the construction and development teams, along with many contractors and their employees, “worked tirelessly to achieve this goal.” Mr Xuereb commended his daughter Denise Xuereb, AX Group Director of Construction and Development, for leading this “challenging task,” noting that it gives him “great confidence to see the commitment, energy, and dedication she invested into managing this project from start to finish.”
Mr Xuereb was also full of praise for AX ODYCY’s management team, led by his other daughter AX Group Director of Hospitality and Care Claire Zammit Xuereb and Qawra properties General Manager Joseph Vella, who had to recruit close to 400 new employees. He said that he is proud of Ms Zammit Xuereb for also managing all of the other AX Hotels as well as Hilltop Gardens and Simblija Care Home during this time.
“The new ODYCY hotel has, as we envision, set high standards in the local hospitality market. The years of detailed planning, building on four decades of hospitality experience and know-how, are evident in the final product. It is no wonder that the hotel has achieved such high occupancy during the year, with significant rate growth and ratings on key online channels being among the best on the islands,” he affirmed.
Mr Xuereb said that AX Group is confident that in FY 2024, it will be in a “much improved financial position” with the AX ODYCY hotel being fully operational and the sale of a number of residential units in the Verdala Terraces set to be signed during the year. “There is no doubt in my mind that next year will be another busy and eventful year for the group,” he continued.
He stated that the group now employs almost 1,200 people, with this set to increase in the coming months as it prepares for the launch of the Verdala Hotel in 2024. Mr Xuereb also expressed confidence in AX Group’s executive management, led by CEO Michael Warrington.
On his part, Mr Warrington said that FY 2023 commenced with AX Group being “fully aware” that the opening of AX ODYCY was a key priority as it is the “single main revenue generator of the group.” He added that the opening of a hotel, especially on the scale of this one, “requires detailed planning and coordination,” and he is pleased that it opened according to the planned timeline.
AX Group CEO Michael Warrington / AX Group
Mr Warrington also noted that the Verdala Terraces and Verdala Hotel projects were also progressing steadily.
“As one can expect in a period of high investment such as FY 2023, the group registered a loss before taxation of €6.8 million,” he affirmed. Despite the loss, he said that AX Group’s finances “remain strong,” especially since investment has been sustained through successful equity and bond issues, as well as additional bank financing.
Mr Warrington said that the appointments of Nicky Camilleri as Chief Operating Officer (COO) and Marthese Vella as Chief Technology Officer (CTO) have strengthened the executive management team at a time when AX Group felt it “needed to enhance oversight” on its operations and also “drive change through technology.”
“The group acknowledges that the growing workforce needs to be supported by the latest technology to maintain its operational efficiency,” he said.
Mr Warrington added that the group’s Environment, Social and Governance (ESG) committee was particularly active during the year, with there being a number of initiatives aimed at reducing plastic, minimising waste and recycling materials. These are being actively monitored to ensure that the group’s carbon footprint is kept “to the minimum.”
He also said that the human resources (HR) are key to AX Group’s success, as aside from recruiting almost 1,200 employees, it has also continued to “place great importance” to the induction of employees and ongoing training. In fact, 19,504 hours of training was provided to employees during 2023.
Additionally, he also made reference to the AX Investments bond issue, the take-up of which was “positive” so much that the issue had to be closed after just 10 days since it was oversubscribed.
Mr Warrington concluded by expressing gratitude to AX Group’s management and employees for 2023’s achievements, adding that their loyalty and commitment is “truly rewarding.” “Needless to say, I thank the Xuereb family; their inspiration and hands-on management are integral to he success of the group,” he continued. He also thanked the Board of Directors of the whole group, as well as the investors for their support.
