MIDI returns to profit as residential property sales rocket

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http://maltawinds.com/2016/07/29/midi-returns-profit-residential-property-sales-rocket/

Maltese property agent MIDI returned to profit in 2015 after registering a €2.2m loss in the previous year.

The estate agent reported a profit for the year of €9.9m for the 12 months to 31 December 2015, after group revenue soared by more than 200% to €41m, up from just €13.3m in 2014.

The group also benefitted from gains from changes in the fair value of investment property, which increased operating profits by €4.9m, up from nothing in 2014.

This increase in revenue and asset gains was partially offset by a rise in the cost of sales of 156.9% to €31.1m for 2015 (2014: €12.1m), while administrative expenses rose slightly to €1.9m for the year (2014: €1.8m).

Property sales drive growth

During the year, MIDI completed the sale of all but one of the Q1 Block of apartments at Tigné Point, bringing in revenues of €38.8m with an operating profit of €5.2m, compared to a loss of €1.9m for 2014.

Revenues from the sale of residential property also rose dramatically for MIDI in 2015, totalling €11.8m for the year after the transfer of the T14 site to Benny Holdings Limited, meaning residential property sales were up more than 8,500% from just €136k for 2014.

The MIDI Group has continued to invest in its property portfolio, although this has dropped off over the last 12 months. The company spent €15.5m on development projects during 2015, down almost a third (31%) on 2014’s €22.4m investment for the year.

Development of the Q2 Block of apartments at Tigné Point continues, however, with civil works nearing completion and finishing works having commenced during the first quarter of 2016.

Investment in the Tigné Point also saw MIDI complete the purchase of the remaining 50% stake in Solutions & Infrastructure Services Limited (SIS) from Siemens Italia for €1 in September 2015, making it a wholly owned subsidiary of the company.

SIS was expected to make a loss of €600,000 for its financial year ending 30 September 2015 and controlled gross assets of €5.6m.

The newly acquired company is responsible for the management of the public carpark at Tigné Point as well as access control, fire detection, CCTV, heating and cooling systems and IT related services for the building.

Manoel Island saga drags on

MIDI is also in ongoing talks to secure a partner for the Manoel Island projects as costs rise to €500m.

Group chief executive Luke Coppini told The Business Insider that an increase in demand for high-end property was a major factor in the spiralling costs of the development project and said the range of investors showing an interest meant it was vital that a strategic partner was brought on board to help facilitate the process.

“We need to create something which is unique – not just for Malta but even internationally – putting it on the world map,” he said. “This is why MIDI cannot do it on its own and why the board took a conscious decision to seek a strategic partner.

“The quality of some of the investors was not exactly what we had in mind… There were a number of serious investors – but also some, let us say, less serious ones. When you do due diligence, there are a number of question marks and the offers do not always turn into anything tangible.

“It has been an expensive exercise, but the approach is much more structured and we are convinced that we will have the right product, the right masterplan, the right master planners, a sustainable business model and, hopefully, the right strategic partner.”

Coppini added that MIDI had not ruled out involving a majority shareholder in the project, something that would require parliamentary approval, but said such a move would have to be in the best interests of all parties involved.

“Our intention and desire is obviously to be part of the Manoel Island development,” he said. “But it is not entirely up to us. If we find the right investor, with the right investor profile, who insists on a majority shareholding, we would have to discuss this with government.

“It would all be in the interest of the development and also of the 750 shareholders.”

Rental income falls, but promise of sale agreements are on the rise

MIDI’s group rental and management operation income dropped over the last year, falling by almost 75% to €1.7m for the year (2014: €6.6m). While rental income has decreased, revenue from promise of sale agreements has fared better, climbing by almost 55% to €25.7m for 2015, up from €16.6m for the previous year.

MIDI has also announced a successful bond issuance in July, which was oversubscribed by more than 100% when it came to market.

The company announced it was releasing €50m worth of 4% secured bonds falling due in 2026, with applications exceeding €100m shortly after the bonds opened on 18 July.

Coppini said of the bond issue: “We are very satisfied with the response received and with the exceptional market take-up and would like to thank MIDI shareholders and bondholders, financial intermediaries and the general public for their support in the bond issue and the confidence shown in the Company’s future prospects.”