Tumas Group declares €35m dividend on positive 2019

The Tumas Group’s main subsidiary Spinola Developments, has declared a net dividend of €35 million for the year ended 2019, up from €22 million in 2018.

The company runs the St Julian’s Portomaso complex that includes the Hilton and its convention centre, the Portomaso Business Tower, residential apartments, a car park and commercial outlets.

The year’s review came with a note on the resignation of scion Yorgen Fenech, accused of having masterminded the assassination of journalist Daphne Caruana Galizia over investigations into his secret offshore holdings.

“[Yorgen Fenech’s] resignation has not impacted management continuity at the company…. the events unfolding in late 2019 caused concern and dismay to the Board of the company, which supported the Tumas Group’s statement disassociating itself from the alleged actions,” the group said.

Executive chairman Raymond Fenech, uncle to Yorgen Fenech, is now CEO.

In 2019, the company registered turnover of €59.71million, a drop of over half of what it was last year, due to the exceptional and one-time sale of a number of real estate units which, coincidentally, all occurred in 2018.

Gross profit for the year totalled €27.65 million, to make up a gross profit margin of 46.3%, a drop of 7.1 percentage points when compared to the 2018 margin.

Administrative expenses, partly offset by other income reached €9.4 million, against last year’s €8.97 million. Net finance costs amounted to €1.95 million, a first increase following a number of years which saw this expense item regularly decreasing. The rise over last year, was however, only marginal.

Profit for the year after taxation amounted to €12.28 million, a hefty drop from 2018.

“If one were to compare to years prior to 2018, the overall result was in line with a normalized performance at Portomaso. During the course of 2019, as opposed to 2018, the larger part of the revenues emanated from the hospitality and ancillary services segment, following the pattern of previous years. In fact, if one were to compare the divisional results for the year under review against 2017, the segment percentages are broadly in line,” the Tumas Group said.

Reviewing the total revenue makeup, income from hospitality and ancillary services accounted for 69.7% of the total, underlining an overall performance which was only marginally below that of 2018 in absolute terms. The latter witnessed a peak in revenue from this segment.

Once again, this performance can be attributed to both strong ‘room occupancy’ and ‘average room rates’ however, these plateaued when compared to 2018.

Revenue from property development at €11.73 million represented 19.6% of the total for the group, very much in line with years prior to 2018. Rental operations and complex management accounted for the rest of turnover and stood at €6.39 million, up by 7.7% over the previous year.

As expected the profit margin on real estate sales surpassed that of the hotel and ancillary operations by 1.6% as the latter returned a gross profit margin of 44.6%.

The hospitality segment’s stellar performance was a direct result of yet another bumper tourism inflow to the island with once again record-breaking numbers being welcomed over the whole year. This progressively enabled the local industry to shorten the traditionally low-performing shoulder and winter months.

Property development turnover at €11.73 million accounted for 19.6% of total turnover, against last year’s 61.8%. In 2018 the group managed to conclude deliveries with respect to the bulk of the Laguna Apartments, and the transfer of title and partial delivery of the office block next to the Portomaso Business Tower. On the other hand, during 2019, property sales were only made up of another portion of the office block being handed over when a number of floors were delivered and a few other sales, namely garage spaces and a small area of land transferred out of the complex which was relatively not of a significant value. The group currently has a minimal stock of apartments for sale.

The gross profit margin recorded on these sales amounted to 46.2% compared to 57.3% in previous year. The gross profit margin of 2018 was higher bearing in mind that the property turnover emanated from the sale of the prestigious Laguna Apartments.

Spinola Development Company Limited’s total assets at €244.63 million recorded a drop of €22.28 million from the 2018 levels mainly due to a decrease of €3.41 million in property, plant and equipment as newly commissioned assets of €2.68 million were totally offset by disposals and the annual depreciation charge.

This was the first year following the hotel’s revaluation exercise carried out in 2018 which had followed the refurbishment carried out at the hotel over the last few years which project cumulatively exceeded the €23 million mark, this project was funded partly through external borrowing but mainly via internally generated profits being ploughed back into the property.

Investment property at €13.38 million, dropped by 3.1% due to lower additions when compared to 2018. Fair open market value attributed by the directors to the investment property category is estimated at €40.60 million.

Inventories at €19.96 million increased by €2.57million over the previous year, as further works were undertaken on a new block of apartments currently being constructed within the Portomaso complex and some additional property annexed to Portomaso which was purchased in 2019. But a fully owned subsidiary of the group has embarked on the demolition and excavation of the ex-Halland Aparthotel site which represents the group’s next upmarket real estate residential development.

Group borrowings at €54.65 million dropped by €1.26 million, a further decline from previous years, as short-term bank loans were paid off. No new bank facilities were entered into during 2019 and all capital expenditure was undertaken from internally generated resources.

The group’s equity position stood at €131.55 million, a drop of €22.94 million, while retained earnings amounted to €28.36 million, a direct result of a consistent positive operational performance and arguably, an overall successful Portomaso project.

Following the outbreak of the COVID 19 pandemic and the health authorities’ directions, the Tumas Group ran down operations at the hotel and its amenities to minimal levels as from the third week of March. The largest segment of operations within Portomaso was dramatically brought to a practical standstill.

“It is appropriate to point out that in the current scenario, the likelihood of having any material revenue from this segment in the imminent future looks bleak. Obviously, this is a scenario which is daily evolving, hence directors and management are continuously monitoring the situation and following up with Hilton’s management to assess matters and take appropriate action.”

The other relatively speaking minor operations associated with the hospitality segment, namely the marina, car park and tower bar operations are being impacted to different degrees. “We envisage that the marina will operate on the same basis as budgeted, however, we recognise that the use of the car park will decrease and the tower bar has been closed off indefinitely, until such time that we are allowed to reopen and even then, business would need to factor in social distancing with the ensuing implications both financial and otherwise.

“Of course, this represents the ‘new norm’ with the other business segments also. Although it is still early to make any predictions, our revised forecast for these three units factors a significant degree of subdued performance.”

As with the hotel operations, management is vigilantly following this state of affairs and constantly tracking the health authorities’ directives in order to operate safely vis-à-vis both clients and employees. Other segments of operation at Portomaso, namely property development and rentals, have been impacted to a lesser extent.

The Tumas Group said it had applied for the government wage supplement assistance through the Malta Enterprise scheme for payroll costs, by far the largest single portion of its annual expenditure.

“We are also in discussions with our bankers to make use of the moratorium recently announced by the Central Bank of Malta in order to shift this year’s loan repayments into the future. It is however worthwhile underlining that Spinola Development Company itself is adequately capitalized and liquid, and it can additionally make use of backstop facilities with related group entities in case of a cashflow shortfall particularly should this current situation prolong.”