SP FINANCE P.L.C.
REPORT OF THE DIRECTORS
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Financial position
As at 31 December 2023 the Group’s total asset base stood at €43,257,858 (2022: €36,791,985). The Group’s current assets amounted to €3,242,917 (2022: €959,815) while current liabilities amounted to €6,556,989 (2022: €3,705,836). The Group’s non-current liabilities stood at €18,793,695 (2022: €19,660,166) which mainly consist of bond borrowings amounting to €12,000,000 and lease liabilities of €4,279,307 (2022: €4,418,892).
Business Update
The Pebbles Boutique Aparthotel in Sliema continued to benefit from excellent customer reviews as a value-for-money hotel located in a prime location on the Sliema – Gzira seafront. This ensured a high occupancy rate throughout the year at decent daily rates. Its revenue increased from €1,251,833 in 2022 to €1,454,966 in 2023 (+16%), while its profit before tax, excluding dividends received from its subsidiary acquired in 2023, increased from €104,979 in 2022 to €190,094 in 2023 (+81%).
The Pebbles Resort in St. Paul’s Bay, which during the summer months operates as a music hotel under the ‘Bora Bora Ibiza Malta’ franchise had its best year since it opened in 2019. Its revenue increased from €2,373,697 in 2022 to €3,912,192 in 2023 (+65%) while its loss before tax which in 2022 stood at €2,656,560 decreased to €411,050 in 2023 (-85%). It must be noted that in 2022 the company’s financial results were negatively impacted by one-time impairments of €1,500,000 on the carrying value of the right of use asset and property, plant and equipment. When excluding this one-time impairment, the loss in 2022 amounted to €1,156,560 compared to €411,050 in 2023 (-64%).
As stated above, in early 2023 the Group acquired a number of well-established catering outlets from related companies outside the Group and started operating them as from 1 April 2023. The newly acquired businesses contributed to the Group additional revenue and profit before tax of €5,448,205 and €422,741 respectively and served to diversify the Group’s activities beyond the tourist accommodation sector.
The catering outlets operated by the Group from 1 April 2023 performed slightly below projections mostly due to some weekends of lost business in MedAsia Playa due to bad weather. In addition, profit margins were less than forecast due to continuing inflationary pressures on inputs, mainly wages and food items.
Events after the Reporting Period
In early January 2024 the Group embarked on a project to transform the Pebbles Boutique Aparthotel in Sliema from a 54-room 3-star hotel to a 110 units / 300-bed 3-star hotel and self-catering apartments. The project is expected to be completed in the third quarter of 2025 and will permit the Group to fully exploit the business potential of this prime site on the Sliema – Gzira seafront.
Acquisition of business and intellectual property
On 1 April 2023 the Group, through its subsidiary Med Asia Operations Ltd. acquired various established catering businesses, already referred to in the 'Principal Activities' paragraph above, from commonly controlled companies outside the Group, for a consideration of €3,480,000, including goodwill calculated at €2,317,829. The balance of the consideration as yet unpaid, amounting to €2,830,000 is classified in the Statement of Financial Position as a Capitalisation Reserve and will be satisfied through the allotment of additional shares to the Company’s current shareholders.
On 1 April 2023 the Group, through its subsidiary Med Asia Branding Ltd. acquired various trademarks from commonly controlled companies outside the Group, for a consideration of €1,784,815 which is as yet unpaid. It is classified as a Capitalisation Reserve and will be satisfied through the allotment of additional shares to the Company’s current shareholders.
Key Risks – General
The Group’s business activities consist of the provision of tourist accommodation and the operation of catering establishments. Such hospitality operations are subject to external factors, many of which are common to the hospitality industry, and beyond the Group’s control, including: (i) market and economic conditions generally; (ii) susceptibility to local competition; (iii) impact of geo-political instability due to ongoing armed conflicts in Eastern Europe and the Middle East; (iv) outbreaks of pandemics that may restrict international travel; and (v) increases in operating costs.