Company Registration Number: C34767

MAIN STREET COMPLEX p.l.c.

Annual Financial Report and Financial Statements

31 December 2021

Pages

Chairman’s statement 1

Directors’ report 2 - 9

Income statement, Statement of comprehensive income 26

Statement of changes in equity 27

Statement of cash flows 28

Notes to the financial statements 29 - 47

Independent auditor’s report

I am pleased to be presenting the Main Street Complex p.l.c. annual financial report for 2021 to shareholders,

covering the third full year of operations following the official listing of the company on the Malta Stock

Exchange.

The year 2021 was another year of challenges for Main Street Complex and for business generally, as the

COVID-19 pandemic continued to severely impact the local and global economy. During 2021, the company

was also faced with the closure of the anchor Debenhams franchise outlet. Notwithstanding these difficulties, I

am proud to report that Main Street Complex continued to show remarkable resilience, with our Board and

management team stepping up to these challenges, mitigating their impact on the company, our

business recovered positively when the complex was re-opened at the beginning of May 2021 and, with the

exception of the Debenhams franchise, all retail outlets remained open for business for the remainder of the

year. When comparing the period from the re-opening of the complex to the same period in 2020, footfall

increased by 12%, despite the absence of the above-mentioned anchor store during the second half of 2021

and delayed opening of the entertainment and catering outlets.

The resulting upturn in business has had a direct impact on revenues. Revenues for 2021 reached €637K

compared to €517K in 2020, while profit before tax rose from €224K in 2020 to €335K in 2021. At the same

time, our management team worked hard to keep operating costs at the levels of the previous year and

continued to invest in energy-saving measures. The positive results achieved reflect the company’s

Debenhams franchisee have been leased out to two new brands. One of these opened for business in March

2022, while the larger one is expected to open in the second quarter of 2022 following extensive investment

on the part of the franchisee. We are confident that their stores will consolidate the present product offering

and enhance customer experience at Main Street Complex.

Just as we were hoping that life in general and business operations would begin to return to normality, the

unfortunate events that have unfolded in Ukraine are deeply distressing and of concern. Although the

company is not directly exposed to such events, their outcome at this time remains uncertain. The company’s

strong financial position and absence of debt has this far enabled us to manage the adverse situations the

company has faced, and, while remaining vigilant and prudent, we are encouraged by the levels of business

determination and optimism.

Signed by Joseph A. Gasan (Chairman) on 25 April 2022

The Directors present their annual financial report and the audited financial statements for the year ended 31

December 2021.

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.

weeks for non-essential retail business and extended to 3 months for leisure and gaming operators), together

with the continued mitigation and capacity limitation measures, all of which had a repressive impact on

business and the social community, the general public is slowly and cautiously easing back to its “normal’

routine. This gradual return to normality was reflected in a partial recovery in footfall figures, with the post lock

down period of 2021 registering a growth of 12% over the same period of 2020. This recovery in visitor

numbers to Main Street is encouraging when one takes to account that the Debenhams franchise closed its

doors for business at the end of June 2021 and remained vacant for the rest of the year. The positive

business sentiment also appears to be gaining momentum as the vacant Debenham’s space was leased out

in full to two separate operators – IM Home and Lindex – both of which opened for business in April 2022.

year, and operating costs of €192,737 represent a 1% increase over the same costs in 2020. The increase in

revenues, stable cost base and negligible finance costs resulted in the company’s net profits before tax for the

year increasing to €335,416 from the €224,102 in 2020. The healthy EBITDA of €444,780 generated during

the year, tight control on debt collection, absence of loan repayment commitments and the prudent decision

not to pay dividends during 2021, together comfortably absorbed total capital expenditure amounting to

€64,065. Most of this capital expense was directed towards replacing one of the Complex’s chillers for

improved efficiency. This resulted in an increase in the company’s cash balances to €579,408 from €255,228

at the end of the previous financial reporting period. The company’s balance sheet remains strong with total

equity amounting to €11,459,041 financing 88% of the company’s total assets of €13,042,745.

position and the Board is confident that as profitability returns to normal levels the company will return to

payment of dividends to its Shareholders.

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

payment of a net final dividend of €241,000.

The statement of comprehensive income is set out on page 26.

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 retail, catering

and entertainment. The company, therefore, relies on the revenues it expects to generate from the

possessed space to a new third-party/ies. Any adverse changes in a concessionaire’s financial condition may

negatively affect cash flows 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 are further accentuated by the impact that the COVID-19 and/or any other similar

pandemic will have on consumer spending 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 able to generate, and where applicable, on their principals’ ability to continue supporting the underlying

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 such as COVID-19 and ensuing government and/or public health authorities legislations

and/or recommendations related to but not limited to restrictions on daily activities, social distancing,

quarantine, lock-down imposition on specific or wide-spread industries and members of the society and other

general market and economic conditions. International economic and political factors, such as the Russia –

Ukraine conflict 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

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

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 developments

and acquisitions on commercially reasonable terms, including increases in borrowing costs or decreases in

loan availability, may limit the company’s growth and materially and adversely affect its business, financial

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 under bank credit facilities

are or 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 laws and regulations, to which the company is subject, including changes in the interpretation thereof,

cannot be predicted and could have an adverse effect on the business, financial condition and profitability of

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 company is susceptible to legal claims, with or without merit, by concessionaires and/or patrons of the

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. An increase in supply and/or a reduction in

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.

may damage the property or delay its development; increased competition in the market segment 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.

substances that it causes or knowingly permits at any property that it owns or may in future own. Laws and

regulations, which may be amended over time, may also impose liability for the presence of certain 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

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), 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

indicators relevant to the company, including information relating to environmental and employee matters.

Directors

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 Executive Director and Chairman

Mario Camilleri Executive Director

Etienne Borg Cardona Independent Non-Executive Director

Christopher Mifsud Independent Non-Executive Director

Isabella Vella Independent Non-Executive Director

Statement of Directors’ responsibilities for the financial statements

• ensuring that the financial statements have been drawn up in accordance with International Financial

Reporting Standards as adopted by the EU;

• selecting and applying appropriate accounting policies;

• making accounting estimates that are reasonable in the circumstances;

• ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate

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