High-potential SMEs

Egm in the X-ray: Emma Villas and the acquisition campaign in high-end tourism

The Tuscan company is active in the tourist rental of villas and prestigious residences. It has made acquisitions in the Marche region. Ebitda 2023 up 47%.

by Valeria Novellini

8 August 2024

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6' min read

6' min read

Tourism is Italy's 'gold', and in 2024, according to Intesa Sanpaolo's Srm study centre, the sector is expected to record a 4.6% increase in presences compared to 3.6% (mostly driven by international tourism), generating a GDP of 104.5 billion, exceeding pre-pandemic levels for the first time. At this point the question arises as to why Emma Villas, a Tuscan company active in the tourist rental of villas and luxury residences in Italy, so far shows quotations below the EUR 3.3 per share corresponding to the IPO price at Euronext Growth Milan, where the company debuted on 27 September 2023.

It should also be taken into account that due to the type of services offered (aimed at satisfying a high-end segment of tourism mostly from outside Europe), Emma Villas should not be affected by the current phenomenon of 'overtourism', i.e. disaffection on the part of tourists towards resorts that are overcrowded and therefore offer a quality of holiday perceived as inferior.

The effects of tourism

In reality, the answer to the question of share performance almost certainly lies in the simplest reason for Euronext Growth Milan companies, namely a very low free float and in this case 13.91% of the share capital.

Then there is a seasonal factor: Emma Villas will release the results for the first half of 2024 on 30 September next, but these figures for obvious reasons will only partially include the results of the 'climax' period of tourism in Italy, that is from June to August, a period in which, according to the most recent indications of Fipe-Confcommercio, overall tourist spending is estimated at 62 billion, with over 84 million presences expected in August and a tourist expenditure of 24 billion. The incidence of summer travel on the annual total has reached 45% and that of overnight stays 61%. All this is driven by foreign tourism with an expected increase of 4% (-0.8% for domestic tourism). CNA Tourism and Trade estimates for the month of August alone an expenditure of 6.5 billion for incoming foreign tourists (mainly from the USA, Brazil, Canada, Australia, Japan, China and South Korea), with 39 million overnight stays.

The numbers

In the meantime, Emma Villas closed 2023, its first post-listing financial year (but, as mentioned, largely still as an unlisted company), with an increase in revenues of 14.6% to €32.5 million (of which only 15% referred to Italian clients), an ebitda jumped 47% to €1.9 million, an ebit almost doubled (+91.2% to €1.26 million) and a net profit that, thanks to net financial income of €55.000 (net expenses of EUR 183,000 in 2022) and a tax rate that went from 64.9% to 28.9%, rose from EUR 168,000 to EUR 937,000.

The company also posted an adjusted ebitda, which would have increased from EUR 2.9 million to EUR 3.9 million (+32.7%); these figures exclude net non-recurring charges, which increased from EUR 1.6 million to just under EUR 2 million, of which EUR 1.3 million referred to reimbursements for high energy prices granted to support the owners of rented villas, EUR 761,000 in listing charges and EUR 159,000 in penalties on late VAT payments referring to previous years, as well as EUR 176,500 in contingent liabilities. 2023 also benefited from non-recurring income of €472,000, of which €431,000 related to the IPO tax credit.

The company has net cash

At the end of 2023 Emma Villas had net liquidity of 3.2 million, which certainly benefited from the IPO proceeds (about 2.3 million net of total listing expenses of 900,000 euro), but already before the listing the net financial position was positive (for 1.8 million at the end of 2022). Prudently, no dividends were distributed for the financial year 2023.

So what to do with the available liquidity? On the occasion of the listing, the company stated its intention (as is natural) to further expand the portfolio of villas under management also by strengthening the sales network (to which, among other things, is dedicated the specific training programme "Emma Villas Academy", which in 2023 will reach its second edition and which in 2024 aims to train 170 figures in the hospitality sector), as well as developing the "Chiara Travels" platform launched in November with the aim of extending the portfolio of villas abroad (in particular Spain, France and Corsica, Greece, Croatia) and to grow by external lines through strategic and commercial partnerships and targeted acquisitions. Of course, for a company such as Emma Villas it is also strategic to strengthen marketing activities on both traditional and digital channels and social media, as well as to participate in events such as the festival with contemporary art auction 'HyperMaremma'.

And indeed, in May 2024, the company launched the 'Ev Icon Italy' communication project, which proposes a virtual journey among Italy's most beautiful tourist destinations declined in the press, social channels, Emma Villas The Magazine (on the company's website), on television channels and on a new blog.

The Acquisitions

There was no shortage of acquisitions either. At the beginning of April, Marche Holiday Villas was taken over, a newco into which 24 villas under exclusive management located in the Marche region with an average annual occupancy of 8.2 weeks were merged; with this transaction, Emma Villas has reached 58 properties under management in the Marche region. In 2023, the villas under the 'Marche Holiday' brand generated revenues of almost EUR 538,000. At the end of July, on the other hand, Domus Rental Srl was taken over, a company that has had 72 properties under exclusive management since 2013, including villas and flats in Verona and on Lake Garda, and generated revenues of 2.05 million in 2023. With this transaction Emma Villas is close to 700 properties under management in Italy; neither acquisition is significant from a financial point of view.

Delivery of properties under management

Here, however, it must be underlined that since the properties under management are not owned by Emma Villas, the retention capacity of the properties themselves and consequently the "loyalty" of their owners becomes crucial (the contracts stipulated are usually for two or three years and the collaborations last on average 6 years). To this end, it has already been mentioned that Emma Villas has recognised them in 2023 a "relief" from the extra energy expenses; on request it offers accessory services for the fulfilment of the bureaucratic formalities inherent to the activity of short term rental for tourism purposes, and has launched the "ReHome" project in order to support the owners in the execution of extraordinary maintenance, renovation, energy efficiency and interior and exterior design works.

In February 2024, a partnership was specifically signed with the German energy giant E.On for energy efficiency activities (and in particular the construction of small and medium-sized photovoltaic plants allowing self-production of energy). In May, the 'Ev Owners Club' was founded, which offers property owners dedicated experiences (art, nature, wellness, food), privileged rates to stay in the other Emma Villas and Chiara Travels structures, and dedicated offers on tableware and lifestyle products under the Pozzi Milano brand, another Euronext Growth Milan company.

Emma Villas, therefore, will be able to benefit from the emerging trend of luxury tourism in our country, especially in the 'minor' villages (the phenomenon of overtourism has already led to limitations on short tourist rentals in some important Italian and foreign cities, and from 2025 the new system of identification codes to combat the phenomenon of abusive tourism in the sector should come into full swing). But, in addition to facing competition (which is also numerous in high-end tourism), it will have to succeed in being better known than the important Siena volleyball club that it has long sponsored and which attracts more attention from the press than the listed company. Another important aspect will be the possibility of greater 'deseasonalisation' of tourist presences at the managed properties (thanks to its presence in various climate zones in Italy and abroad). And it is understood that an enlargement of the free float would not hurt either, in order to perhaps allow the entry of investors and qualified partners into the capital.