Company Registration Number: C34767

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements

31 December 2023

Pages

Chairman’s statement 1

Directors’ report 2 - 9

Income statement, Statement of comprehensive income 28

Statement of changes in equity 29

Statement of cash flows 30

Notes to the financial statements 31 - 50

Independent auditor’s report

I am pleased to be presenting the Main Street Complex p.l.c. annual report for 2023 to shareholders, covering

the fifth full year of operations following the official listing of the company on the Malta Stock Exchange.

The year 2023 was a positive year for Main Street Complex, with revenues increasing by 2.9% from €786,774

in 2022 to €809,580 in 2023. EBITDA increased slightly from €574,404 in 2022 to €580,120 in 2023, while

profits after tax increased from €341,612 in 2022 to €354,272 in 2023, despite an increase in the marketing

budget for the complex. This resulted in occupancy levels remaining stable compared to the previous year

at 98.5%. These results are a testament to our hard-working management team, which obtained positive

results in the face of several challenges encountered during the year, namely inflation and its effect on the

activity, and increasing costs in the face of stable turnover levels.

On a positive note, a number of initiatives being taken in the vicinity will also impact commercial activity in

the area. These include the opening of the new Vincent Moran Regional Health Centre, the continually

growing population at MCAST, and the upgrading of Gnien il-Mediterran. These projects are expected to

inject renewed commercial activity in the locality.

Main Street Complex continues to present an appealing and relevant product conveniently located in the

heart of Paola, the busiest commercial area of the south The Board continues to monitor the situation closely

and after almost 20 years since the complex first opened its doors, have approved a complete overhaul of

the company will be declaring a final net dividend of €214,000, equivalent to €0.011 per share for 2023.

While both local and international events and their effects on the global and local economy continue to be a

cause for concern, we remain confident that Main Street Complex will continue to be a popular shopping

destination for the southern part of the island. While we are conscious of a number of clear emerging

challenges ahead, our dedicated management team remains committed to continue to contribute positively

to the success of our concessionaires and to deliver a convenient customer experience to our clients.

Joseph A. Gasan

The Directors present their annual financial report and the audited financial statements for the year ended

31 December 2023.

Principal activity

The company’s principal activity is the management of and the granting of concessions of outlets and spaces

within Main Street Complex, as a retail and entertainment complex, featuring four floors of retail outlets, a

bar/restaurant and entertainment area, and parking facilities in the heart of Paola, Malta.

Operating and administrative expenses increased by 8% over the previous year, up to €229,460 (€212,370

in 2022). Additional marketing spend contributed to 40% of the increase in this expenditure, with the

remainder represented by inflationary increases in ongoing service and upkeep expenses for the mall.

Administrative expenses registered a nominal decrease of 2.6% as a result of lower listing fees incurred

throughout the year.

As a result, the company’s net profit after tax for the year increased to €354,272 as against €341,612

registered in the previous year. EBITDA amounting to €580,120 (€574,404 in 2022) generated throughout

2023 funded the total net dividends of €351,550 paid during the year, and continued to strengthen the

current tenants have expressed interest to extend, while others remain undecided or intend to honour the

current term of their agreement. Interest from new tenants has been slow on account of various factors cited

by potential tenants, including the emergence of new and larger shopping malls in the south of the island

with sizeable parking availability, intensifying competition from online activity, and increasing operating and

rental costs versus stable turnover levels.

On the other hand, Paola remains the main commercial hub in the south of Malta with imminent plans for the

opening of the new Vincent Moran Regional Health Centre, the ongoing expansions at MCAST and the

eventual plans by the Central Government for the conversion of Paola’s Schriber Ground into an open

community space and the revamping of Gnien il-Mediterran (linked to Pjazza Antoine de Paule by a green

concurrently embarking on a phased refurbishment and unit reconfiguration program aimed at refreshing

Main Street Complex’s image and strengthening its appeal to potential tenants and customers. In this regard,

it is company’s intention is to fund this capital expenditure from cash reserves.

The Directors recommend that at the forthcoming Annual General Meeting, the shareholders approve the

payment of a net final dividend of €214,000.

The statement of comprehensive income is set out on page 28.

Our principal risk and uncertainties

Risks relating to reliance on concession agreements

In its business operations, the company enters into concession agreements with third parties pursuant to

which it grants such third parties the right to use the outlets forming part of Main Street Complex for an

agreed annual rate and, in some cases, a fee payable on the percentage of concession turnover, usually

subject to a minimum annual rent. The concessionaires of Main Street Complex are principally engaged in

costs to grant a concession of the re-possessed space to a new third-party/ies. Any adverse changes in a

concessionaire’s financial condition may negatively affect cash flows and profits generated by the company.

Furthermore, if the company’s concessionaires decide not to renew their respective Concession Agreements

upon expiration, the company may not be able to grant concessions on the same terms, if at all. Any of the

foregoing factors may adversely affect the business, financial condition and results of operations of the

company.

All the above identified risks could be further accentuated by any pandemic, inflation and its impact pricing

and on consumer spending power and the general state of the retail market and local economy. In addition,

the impact of these risks affects the financial standing of concessionaires, the levels of business they are

exchange rates, direct and indirect taxation, the health of the local retail markets, property prices, energy

and fuel costs, unemployment, wage rates, tightening of credit markets, government spending and budget

priorities, pandemics and ensuing government and/or public health authorities legislations and/or

recommendations related to but not limited to restrictions on daily activities, and other general market and

economic conditions. International economic and political factors, as well as turmoil in the financial and/or

banking sectors and any ensuing collapses of operators within those sectors could also lead to direct or

indirect impact on the local market conditions which could in turn effect the company’s business activities.

In the event that the general market or specific sectors within it and economic conditions were to experience

a downturn and/or a complete halt, these weakened conditions may have an adverse impact on the company.

Risks relating to the retail sector

The company grants Concessions to entities engaged principally in the retail sector, including the catering

and gaming sectors. The health of the retail market may have a direct or indirect effect on the ability of the

company to grant Concessions, and for the said concessionaires to continue operations. The health of the

retail market may be affected by a number of factors, including, inter alia, consumer demand, tastes,

shopping preferences, trends, online shopping, inflation, supply chain and/or shipment disruptions,

fluctuation in interest rates, exchange rates, direct and indirect taxation, regulations, mandatory closures,

maximum capacity measures, energy and fuel costs, unemployment, wage rates, availability of credit,

government spending and budget priorities, and other general market and economic conditions.

Risks emanating from the company’s financing strategy

The company may not be able to obtain the capital it requires for development or improvement of existing or

new properties on commercially reasonable terms, or at all. The company may not be able to secure sufficient

financing for its investment requirements. No assurance can be given that sufficient financing will be available

on commercially reasonable terms or within the timeframes required by the company, also taking into account

the need from time to time for the Complex to undergo renovation, refurbishment or other improvements in

the future. Any weakness in the capital markets and, more generally, the inability to raise the necessary

financing from time to time, may limit the company’s ability to raise capital for the execution of future

developments or acquisitions. Failure to obtain, or delays in obtaining, the capital required to complete future

Complex, to refinance indebtedness as well as to fund future growth in terms of acquisition and

developments. There can be no assurance that the company will have access to sufficient capital or access

to capital on terms favourable to the company for future property acquisitions, refinancing its indebtedness,

financing or refinancing of properties, funding operating expenses or other purposes. Moreover, borrowings

may be at variable interest rates, which would render the company vulnerable to increases in interest rates.

The agreements regulating the company’s bank debt may impose, and are likely to impose, significant

operating restrictions and financial covenants on the company. These restrictions and covenants could limit

the company’s ability to obtain future financing, make capital expenditure, withstand a future downturn in

business or economic conditions generally or otherwise inhibit the ability to conduct necessary corporate

activities.

would need to seek a new management support services provider or individuals to occupy the executive

management roles of the company. The company may be unable to replace the services provided by

Embassy Limited within the short term and/or on the same or similar terms. This could have a material

adverse effect on the company’s business and results of its operations.

The company’s insurance policies

The company maintains insurance at levels determined by the company to be appropriate in light of the cost

of cover and the risk profile of the business in which the company operates. With respect to losses for which

the company is covered by its policies, it may be difficult and may take time to recover such losses from

insurers. In addition, the company may not be able to recover the full loss incurred from the insurer. No

assurance can be given that the company’s current insurance coverage would be sufficient to cover all

potential losses, regardless of the cause, nor can any assurance be given that an appropriate coverage

would always be available at acceptable commercial rates.

the company.

Reputational risk

Reputational risk is the risk that negative publicity regarding the company’s business practices, whether true

or not, may cause a decline in the customer base, costly litigation, or revenue reductions. Reputational risk

could be particularly damaging for the company since the nature of its business requires maintaining the

confidence of clients and of the general marketplace.

Health and safety

The nature of the company’s business necessitates that adequate importance is given to maintaining

Complex. Defence and settlement costs can be substantial, even with respect to claims that have no merit.

Due to the inherent uncertainty of the litigation and dispute resolution process, there can be no assurance

that the resolution of any particular legal proceeding or dispute will not have a material adverse effect on the

company’s future cash flow, results of operations or financial condition.

Competitiveness in the commercial property market

The real estate market in Malta is very competitive in nature. The emergence of new shopping malls and/or

shopping districts, an increase in supply and/or a reduction in demand in the commercial property segments

in which the company targets to grant Concessions, may cause the Concessions to be granted at lower rates

than is being anticipated by the company or may cause the concession of the Main Street Complex spaces

Material risks relating to the potential future development of real estate

The company may from time to time develop Main Street Complex further or develop other properties it may

acquire. Risks relating to real estate development may affect the economic performance and value of the

property under development. There are a number of factors that commonly affect the real estate development

industry, many of which are beyond the company’s control, and which could adversely affect the economic

performance and value of the company’s real estate property and any developments that the company may

seek to implement.

Such factors include: changes in general economic conditions in Malta; general industry trends, including

in which the company is undertaking the real estate development may lead to an oversupply of commercial

properties in such markets, which could lead to a lowering of concession payments and a corresponding

reduction in revenue of the company from Main Street Complex; the incurrence of cost overruns; delays in

the processing of permits for the development and construction of real estate property; and the dependence

of the company on third party contractors and the availability of same to carry out construction and structural

works at the times scheduled by, and costs agreed with, the company. In the event of real estate

developments being carried out by the company, any of the factors described above could have an adverse

effect on the company’s business, its respective financial condition and prospects and accordingly on the

ability of the company to distribute dividends.

materials or substances or the release of certain materials or substances into the air, land or water or the

migration of certain materials or substances from a real estate investment, and such presence, release or

migration could form the basis for liability to third parties for personal injury or other damages. These

environmental liabilities, if realised, could have a material adverse effect on its business, financial condition

and results of operations.

Risks inherent in property valuations

The valuation of the Complex is based on certain assumptions, which ultimately may cause the actual values

to be materially different from any future values that may be expressed or implied by such forward-looking

statements or anticipated on the basis of historical trends, as reality may not match the assumptions. There

Financial risk management

The company’s activities potentially expose it to a variety of financial risks: market risk (including foreign

exchange risk, cash flow and fair value interest rate risk), inflation risk, credit risk, and liquidity risk. The

company’s overall risk management, covering risk exposures for all subsidiaries, focuses on the

unpredictability of financial markets and seeks to minimise potential adverse effects on the respective

company’s financial performance. The Board of Directors has overall responsibility for the establishment

and oversight of the company’s risk management framework. Accordingly, the company’s Board of Directors

provides principles for overall risk management, as well as risk management policies covering risks referred

to above and specific areas such as investment of excess liquidity. A detailed review of the financial risk

The Directors who served on the Board during the year under review and up to the date of this report are

listed hereunder.

Joseph A. Gasan Non-Executive Director & Chairman

Mario Camilleri Non-Executive Director

Etienne Borg Cardona Independent Non-Executive Director

The Directors have a service contract with the company.

Statement of Directors’ responsibilities for the financial statements

The Directors are required by the Companies Act (Cap. 386) to prepare financial statements that give a true

and fair view of the state of affairs of the company as at the end of each reporting period and of the profit or

loss for that period.

In preparing the financial statements, the Directors are responsible for:

to presume that the company will continue in business as a going concern.