DB Group's holding company has €350 million in assets

SD Holdings, the holding company for the db Group and its ancillary companies, held total assets of €349.96 million as at 31 March 2022, up from €328.46 million in 2022. This was revealed in a financial analysis summary of the group's finacial year ended 31 March 2023, published on Wednesday by SD Finance plc, the group's financial arm.

SD Holdings is the parent and holding company of the Group which is a family-owned business engaged in activities related to the hospitality, leisure, catering, and entertainment industries.

In June 2023, the Group’s Chairman Silvio Debono distributed part of his shareholding in SD Holdings Limited to his wife (Veronica Debono) and four children (Robert Debono, Victoria Debono, David Debono and Alan Debono) and effectively concluding the family succession planning process.

The Group owns and operates three hotels, namely the db Seabank Resort & Spa (“Seabank”) situated at Għadira Bay, Mellieħa, the db San Antonio Hotel & Spa (“San Antonio”) situated in Buġibba, and the Melior Boutique Hotel located in Valletta.

SD Holdings also operates the Adeera Complex in Mellieħa Bay (which comprises three restaurants – Westreme, Amami, and Blu Beach), PickNGo convenience store in Mellieħa, as well as other restaurants located in Valletta (AKI) and Buġibba (Nine Lives).

In FY2023, the Group opened LOA and Sonora restaurants in St. Paul’s Bay, and Amami Food Bar situated in the University Campus Hub.

The Group also operates several outlets via franchise agreements with Hard Rock Café and Starbucks. In FY2023, the Group rolled out six new Starbucks outlets, bringing the total to 14 outlets.

The average number of persons employed by the Group during FY2023 stood at 931 (FY2022: 660). The full head count including subsidiaries and associated companies amounted to 5,782 employees as at the end of March 2023. This includes the operations of MHC which had a staff complement of 3,482 employees within its healthcare division as at the end of March 2023 (31 March 2022: 3,143 employees), comprising 455 professional nurses, 394 staff members providing domiciliary care for the elderly, and 2,633 care assistants.

Since the end of FY2023 to date, the Group opened Espiral Restaurant in Mellieha, which features a variety of traditional Spanish dishes; Tora, a contemporary oriental style restaurant in Sliema; and Manta, a lido situated in Tigne, Sliema. The Group also commenced operations of a catering outlet – Verani – situated in the Departures Hall of the Malta International Airport.

Revenues increased in FY2023 to €70.80 million (+75.42%) reflecting the strong underlying dynamics of the post- COVID-19 pandemic recovery. Hotel occupancy increased to 85% (FY2022: 54%) which was higher than the pre COVID-19 level of 81% recorded in FY2020. Moreover, the Group’s food and beverage division recorded robust growth partly on the back of the opening of two new restaurants (LOA and Sonora) in St. Paul’s Bay and six additional Starbucks outlets to a total of 14 across Malta.

EBITDA grew at a slower pace than revenues and reached €24.75 million. As a result, the EBITDA margin contracted to 34.96% in view of the negative impact of high inflation, an increase in payroll costs and other operational and administrative expenses in anticipation of the planned growth in the Group’s operational activities both locally and abroad, and a lower amount of COVID-19 Wage Supplement when compared to the prior year (FY2023: €0.95 million, FY2022: €4.74 million).

Net finance costs increased by 21.82% to €5.29 million, but the interest cover still improved, albeit marginally, to 4.68 times. Meanwhile, the higher level of depreciation and amortisation charges (+6.17% to €9.56 million) was offset by the superior performance of the Group’s associates which in FY2023 contributed €5.65 million to the Group’s profitability.

Overall, SD Holdings reported a net profit of €12.37 million (+17.13%) which resulted into improved returns on equity (8.41% compared to 7.72% in FY2022) and assets (3.41% compared to 3.11% in FY2022). The return on invested capital also increased year-on-year to 7.78% despite the contraction in the operating profit margin to 21.46%.

For the current financial year ending 31 March 2024, the Group is forecasting a 13.27% increase in revenues to €80.19 million. The estimated growth is driven by the ongoing recovery in tourism, the continued expansion of catering establishments referred to section 3 of this report and 4 additional Starbucks outlets in Malta. Meanwhile, SD Holdings is also looking at establishing a presence in London through the opening of a new restaurant.

FY2024

Total assets in FY2024 are projected to increase by 10.88% (or +€40.93 million) to €417.03 million mainly reflecting the higher levels of PPE (+€21.20 million to €205.55 million), right-of-use assets (+€9.00 million to €24.37 million), investments in associates (+€5.65 million to €24.70 million), and current assets (+€6.49 million to €77.98 million). The notable forecasted increase in PPE is on account of civil works appertaining to the City Centre project and to a lesser extent, fitout works in relation to the Group’s new catering and Starbucks outlets.

Total liabilities are estimated to increase by 13.54% to €254.25 million mainly on account of an increase in total debt of €29.56 million to €127.11 million. Long-term bank borrowings are projected to increase by €22.09 million and shall be applied for the purposes of the City Centre project. Lease liabilities are expected to increase by €8.24 million to €24.37 million, reflecting the terms of lease obligations of the Group as lessee.

Despite the further strengthening of the Group’s equity base to €162.77 million (+6.97% to €162.77 million), the net debt-to-equity and net gearing ratios are projected to moved higher to 0.43 times and 29.84% respectively. Likewise, the net debt-to-EBITDA multiple and the debt-to-asset ratio are anticipated to trend higher to 2.73 times and 0.30 times respectively.

From a revenue perspective, the Group exceeded forecasts by 14.23% reflecting the better-than-expected recovery in tourism and leisure activities. On the other hand, net operating costs came in higher than anticipated on account of the increased volume of business as well as the negative impact of high inflation. As a result, EBITDA only exceeded projections by 1.15%.

Depreciation and amortisation charges were lower than estimated by 9.26% amid a lower level of capital expenditure pursued throughout the year. Equally positive was the share of results of associates which exceeded forecasts by 25.83% largely in view of the stronger performance of MHC as well as the effect of the Group’s increased shareholding in Kore Air Services Limited and Kore Inflight Services Ltd to 40% from 30% as at the end of 31 March 2023. On the other hand, net finance costs exceeded projections by 15.06% on account of the higher level of interest incurred on floating rate loans in line with movements across international financial markets.

Overall, the net profit of €12.37 million registered by the Group during FY2023 was only 0.10% lower than the forecasted figure of €12.39 million.

Principal investment in associate

MHC is a joint venture between SD Holdings and James Caterers Limited and is engaged in the provision of healthcare catering services, together with the provision of nursing, medical, and clinical services, through three main subsidiaries: Healthmark Care Services Ltd, Health Services Group Limited, and Support Services Limited.

The major sources of income in relation to healthcare services derive from the following key agreements: (i) the provision of nursing and care services under the Active Ageing and Community Care Directorate; (ii) the provision of care worker services at Mater Dei Hospital and other entities within the Health Department; (iii) the provision of care worker services at St Vincent de Paul Residence (“SVPR”) and Homes for the Elderly Community Care; and (iv) the provision of home help services. With respect to catering and ancillary operations, MHC serves over 6,000 cook-chill meals a day to in-patients and staff at Gozo General Hospital (since 2013) and SVPR (since 2014).

In the historical financial years under review, MHC reported an increase in revenue from €78.75 million in FY2021 to €90.43 million and €103.94 million in FY2022 and FY2023 respectively, mostly driven by growth recorded by the healthcare division which, in FY2023 represented circa 70% of MHC’s total income.

Likewise, net profit increased each year and exceeded the €10 million mark in FY2023 (FY2022: €8.73 million), while maintaining a profit margin of almost 10% (FY2023: 9.77%, FY2022: 9.65%). The performance achieved by MHC in FY2023 was better than previously anticipated, with revenues exceeding forecasts by 6.80% and the actual net profit figure at 13.10% above expectations.

For FY2024, MHC is expecting a further increase of 11.33% in revenues to €115.72 million, as it anticipates a higher level of business across all three operational segments. Net profit is projected to amount to €11.21 million which would translate into a margin of 9.69%.