In last week’s article, I made reference to the faster-than-expected return to ‘normality’ across many sectors, including the retail industry. PG plc is the company that is mostly exposed to the retail industry. However, since the large majority of PG’s revenue is derived from the supermarkets business, the financial performance of the companies owning three of the shopping malls also provide a good indication of the health of the overall retail sector.

All three companies owning the shopping malls, namely Tigné Mall plc, Plaza Centres plc and Main Street Complex plc, have a December financial year-end and, therefore, the recent publication of their annual reports can be used as a good comparison against the performance prior to the major disruptions to their operations in 2020 and 2021 due to the COVID-19 restrictions.

Tigné Mall plc is the owner and operator of The Point shopping mall in Sliema. During 2022, the company generated record revenues of €8.17 million, which represents an increase of 16.9% from the previous record revenue figure of just under €7 million in 2019. The company’s operating profit also surpassed the previous all-time high in 2019. In fact, the operating profit of €5.25 million was 19.6% above the previous record of €4.4 million in 2019.

Despite the COVID-19 restrictions during 2020 and 2021 which nega­tively impacted footfall to the complex, Tigné Mall remained a profitable company and continued to reduce its bank borrowings, which helped to ease the annual burden of finance costs over the years.

In fact, in 2021, although the company’s revenue was still below the 2019 level, Tigné Mall generated record pre-tax profits. As such, the profit before tax of €4.78 million in 2022 was 33.4% above the 2021 record level. In view of the healthy cash flow and the reduction in bank borrowings to just below €9 million, the company maintained its semi-annual dividend policy for FY2022, which had been briefly interrupted during 2020 and early 2021 due to the pandemic.

The total dividend in respect of the 2022 financial year translates into a dividend payout ratio of 40.3% and represents the highest dividend payment by the company since its IPO in 2013. The Point shopping complex remains entirely leased out to a mix of tenants. The strong demand for space within this complex was evident when the previous anchor tenant vacated in June 2021 and was immediately replaced within a new tenant concurrently.

Since Plaza Centres plc disposed of its commercial property Tigné Place towards the end of 2020, a comparison of the financial performance of the company over recent years needs to take this property disposal into consideration. In fact, the ‘company’ results, as opposed to the ‘group’ results for 2019 should be used for such a comparison.

In 2022, Plaza generated revenues of €2.87 million, which exceeds the ‘company’ revenue of €2.76 million in 2019.

However, the operating profit of €1.43 million in 2022 is well below the figure of €1.73 million in 2019 (at ‘company’ level) as a result of the higher level of operating costs. Plaza maintained regular dividends to shareholders over the years despite the pandemic. As opposed to Tigné Mall, Plaza also distributed dividends in 2020 on the strength of the sizeable inflow from the sale of Tigné Place. Plaza Centres is a mixed-use destination with both offices as well as retail areas for rent. The company recently reported it has vacant spaces available in both office and retail areas.

More detailed and regular updates from all companies is necessary

Main Street Complex plc owns a much smaller complex compared to the other two companies. In fact, the revenue in 2022 amounted to €0.78 million, compared to much higher levels for Plaza at €2.87 million and Tigné Mall at €8.17 million. While Tigné Mall had a record revenue in 2022, Plaza and also Main Street fell short of their previous record level reached in 2019. Main Street resumed its semi-annual dividend policy during the 2022 financial year and the dividend for FY2022 represents a record dividend for the company. The company reported that the complex remains fully leased out.

In the case of PG plc, the company’s financial year-end is April and the latest results cover the six-month period until October 2022. In the interim results published in December 2022, PG reported record revenue of €13.6 million (+9%) from the Zara and Zara Home franchise operations for the first half of their financial year, confirming the continued success of the Zara brand.

The strength in consumption patterns among the local community, coupled with the continued recovery across the tourism sector, augurs well for retail operators and the companies operating the shopping malls. It would be interesting to monitor any further improvements registered in recent months once the interim financial statements are published in August. Meanwhile, it would also be interesting to gauge the occupancy levels and footfall across all three locations as well as the Zara flagship store in Sliema in the months and years ahead in view of the opening of new large shopping malls in different locations across the Maltese islands.

In view of the increased competition on the horizon, more detailed and regular updates from all companies is necessary to keep the market abreast with any important changes that may be impacting the overall financial performance and outlook of these companies.

 

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

© 2023 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

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