Valletta-focused property owner and investor VBL Group has realised record financial results in year 2022, and reports that preliminary period figures for 2023 are also looking very positive, suggesting further growth in revenues and profitability.
In a status update to financial markets, VBL Group announced that it would be suggesting an increase in its dividend payment by 12.5 per cent over 2022 at its upcoming AGM, adding that “major increases in potential dividend distribution shall be possible after the completion of VBL’s current development cycle, when it is projected that significant free cashflow shall be generated.”
Looking back on 2022, the company noted that although the hospitality market in Malta was severely affected in the first four months of year 2022, its performance quickly recovered, “leading to and surpassing established KPIs by year end, reflecting the strong recovery of the market.”
The Group says that data extracted from Malta Hotels and Restaurants Association (MHRA) surveys, regularly prepared by Deloitte, and other reputable sources, reaffirm the message passed by Andrei Imbroll, Chairman of VBL plc, that “the Valletta hospitality market outperforms most other regions in Malta, while Valletta has seen impressive growth both in tourist related KPIs as well as 9-12 per cent increase in property prices”.
It is reported that VBL Group is currently operating with a mere 25 per cent of its €80m strong property portfolio, which has been re-developed into “market conscious high-quality products”, while much of the remaining 75 per cent of VBL’s owned assets are being regenerated and shall become operational in the mid to long term.
This explains why much emphasis and focus goes into the Group’s currently ongoing development cycle and the preparation of the future property regeneration cycles.
Mr Stephen Clough, the Group’s Head of Development, details further: “with the completion of the current developments, VBL shall add significant growth in revenues, EBITDA and FCF, expected to ramp up to its full commercial potential in 2026”.
Despite residual pandemic restrictions in place during 2022 the Group still managed to deliver record profitability, realising actual profit for the year of €6.6m and an increase at EBITDA level of 48 per cent over 2021 numbers.
Net Asset Value per share has increased by 11 per cent to €0.256 (2021: €0.231), which is reflecting the results from acquisitions and the scheduled delivered development projects.
VBL Group says that its “focused and clear strategy, which has remained constant since VBL’s founding and subsequent IPO”, is behind its success.
The Group’s objective is to continue increasing both revenue and profitability for its shareholders via the ongoing conversion of its undeveloped properties into revenue generating assets.
VBL Group is also well known for its presence on the Valletta commercial rental market, where it has also seen a ramp up in its commercial rental revenues, recording a growth of 74 per cent on the previous year.
VBL plc CFO Julian Tzvetkov explains: “This was mainly driven by phasing out discounts provided to tenants in the pandemic period, and renegotiation of existing rental contracts within the Group’s rental property clusters.
“At the same time, several existing Tenants have expanded their rental operations within VBL owned commercial space by signing new rental agreements, a true testament of the Group’s vision and product quality.
“Further growth in this revenue segment shall be realised on completion of the redevelopment of The Coliseum Shopping Arcade, another Valletta landmark property, earmarked for the next development cycle”.
Looking at 2023
From the operational experience of the first five months of 2023, VBL’s management said it “expects a strong growth in the hospitality segment throughout the year”.
This forecast, it said, is confirmed by the year-to-date KPIs, which have already proven that the market has “not only returned but exceeded the levels of 2019”, the last full ‘normal’ operational year.
The company reports that the increases in hospitality daily rates are outperforming inflation, and VBL forecasts for 2023 suggests that average daily rates shall be at least 20 per cent higher than in the last normal year of operation, with occupancy also growing significantly with 11 per cent over the previous period.
In the first quarter of the year, the average daily rates recorded were circa €83 per unit, it said, for the Group’s portfolio ranging from economy dormitory beds to high-end palazzos.
“Current forecasts also suggest that commercial operators renting shops from VBL, shall be able to stabilise their businesses in 2023 and have the ability to improve quality and consistency of service.”
Regarding the Group’s ambitious development projects, VBL said it is “firmly focusing” its attention on its core product – “high-quality refurbished historic assets in Valletta” - and is currently developing an additional 51 hospitality units.
“Construction industry capacity issues, cost and supply of materials have normalised during the past year; eliminating some major risk factors,” it said. “The Company is confident that based on current assumptions, the key redevelopment projects shall remain on track when considering delivery of the major milestones, with interim delays being absorbed by the end of the development cycle.”
During 2022, VBL’s development team “has delivered on its original projections in terms of completed projects and realised new acquisitions, with long term development plans and overall project CAPEX remaining at previously planned levels. The Group’s steadfast strategy of converting its currently owned, non-operational property into revenue generating assets seems very much on track for all major projects.”
CEO Geza Szephalmi also pointed out that “recent tenders for government owned properties have attracted the interest of a significant number of large local and international businesses proposing large scale investment in Valletta, which will no doubt have a ripple effect on the rest of the City’s property markets. We look at the near future with great optimism.”