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1923 Investments p.l.c.

Report & Consolidated Financial Statements

31 December 2021

 

 

 

 

Company Registration Number: C 63261


 

 

Contents

 

 

Directors’ report

Statement of responsibility pursuant to the Capital Markets Rules

Corporate governance – Statement of compliance

Other disclosures in terms of capital markets rules

Statements of profit or loss and other comprehensive income

Statements of financial position

Statement of changes in equity – the group

Statement of changes in equity – the company

Statements of cash flows

Notes to the financial statements

Independent auditor’s report


Directors’ report

 

The directors present their report together with the audited financial statements of 1923 Investments p.l.c. (the Company) and the consolidated financial statements of the Group of which it is the parent, for the year ended 31 December 2021.

Principal activities

The Company acts as an investment company and service provider to its subsidiary undertakings.

The group is engaged in (i) the sale and distribution of Apple Products and third party electronic products as an Apple Premium Reseller, (ii) the sale, maintenance and servicing of information technology solutions, security systems and provides electronic payment solutions, (iii) providing road, sea and air logistics services including the provision of ship-to-ship transfer services and LNG terminal management.

Performance review – The Group

During the year under review, the consolidated revenue increased by 14.97% to € 172,154,948 (2020: € 149,734,105). The increase in revenue was driven by (i) organic revenue growth of 15.8%, amounting to € 16,708,607 primarily due to strong performance at iSpot, (ii) an increase in revenue amounting to € 7,072,321 in the Logistics sector, € 6,204,130 of which arising from a whole year contribution by STS Marine Solutions compared to an eight month revenue contribution in 2020 being the  year of acquisition. This has been compensated by a decrease in revenue at Harvest Technology p.l.c. (‘Harvest’) from €19,217,368 registered in 2020 which included a one-off sale of hardware in Mauritius, against €15,747,511 generated in 2021.

In 2021, the Group registered an operating profit of € 10,483,284 (2020: € 7,610,929) on revenue of € 172,154,948 (2020: € 149,734,105), resulting in an increase in the operating profit margin from 5.1% in 2020 to 6.1%. The Group registered a profit before tax of € 8,316,511 (2020: € €4,301,840). During 2020, 1923 Investments incurred a one-off restructuring cost of € 607,707, mainly incurred in relation to the termination of the freight forwarding operations at Carmelo Caruana Company Limited.

The Group’s net assets at the end of 2021 amounted to € 52,831,260 (2020: € 45,574,056). In 2021, the increase in Net Asset Value is mainly attributable to the increase in profitability amounting to € 4,840,636 (2020: € 2,292,695), equivalent to the profit after tax for the year attributable to the owners of the company. It is pertinent to note that as a result of a weaker Polish Zloty (PLN) against the Euro closing at PLN 4.5969 at 31 December 2021 (2020: PLN 4.5597) and a weaker US Dollar (USD) against the Euro of USD 1.1326 at 31 December 2021 (2020: USD 1.2271), the translation reserve had a positive impact of € 1,641,334 (2020: negative impact amounting to € 4,978,238). While this movement arises since the reporting currency is different from the functional currency, all efforts are made by management to mitigate against adverse foreign currency variances arising from exposure to different currencies. Non-controlling interest increased from € 4,472,723 to €4,964,072 being the share of profitability of Harvest not owned by the Company.

The Group measures the achievement of its objectives through the use of the following other key performance indicators.

Financial

The Group’s current ratio (“current assets divided by current liabilities) currently stands at 1.04:1 (2020: 1.17:1). The Group uses this indicator as a measure of liquidity.

The Group measures its performance based on EBITDA. EBITDA is defined as the Group’s profit before depreciation, amortisation, net finance expense and taxes. During the year under review, EBITDA increased by € 4,596,725 to € 17,766,873 from € 13,170,148 in 2020. 

The Group’s EBITDA margin increased to 10.3% (2020: 8.8%).

The return on average capital employed represents the profit on ordinary activities before finance costs and exceptional items but including share of results of joint ventures, divided by the average of opening and closing tangible net worth. The Company ensures that this capital is used as effectively as possible. The return on average capital employed increased from 8.2% to 11.2% during the year under review due to an increase in profitability.

The Group’s gearing ratio has decreased to 40% (2020: 48%). Interest cover improved to 5.1 times compared to 3.3 times in 2020, a direct result of better performance and cheaper financing.

Performance review – The Company as a stand-alone entity

The Company earned revenue and investment income of € 1,010,000 and € 5,427,126 respectively (2020: revenue of € 725,000 and investment income of € 1,956,794). The Company registered a profit before tax of € 1,714,710 (2020: loss before tax of € 2,366,750). The net assets of the Company at the end of 2021 amounted to € 51,437,979 (2020: € 49,718,592).

Group performance review – non-financial

iSpot

iSpot reported a strong year, both financially but also through improved customer engagement. During 2021, iSpot reported a 19% (2020: 10%) increase in organic revenue and € 2,774,313 (2020: € 1,317,201) increase in pre-tax profit. Footfall traffic within the stores increased by 18.7% over 2020 due to strong marketing campaigns and lower contingency measures regarding the pandemic situation in Poland. Furthermore, iSpot experienced (i) increased e-commerce sales, and (ii)significantly higher conversion rate and basket spend. The conversion rate, which measures the percentage of actual purchases compared to customers entering the store, amounted to 13% in 2021 versus 12.3% in 2020. 2021 also saw an increase in the average basket spend by 2.1% to €274 compared to €269 in 2020.

In 2021, iSpot saw a significant increase in its e-commerce business. Through effective marketing communication and dedicated offering, traffic to the website iSpot.pl increased by 12% compared to 2020 while Net Sales Value growth in e-commerce increased by 15.8% compared to 2020. In 2020, the management team had focused on providing online customers with all the services offered in iSpot brick and mortar stores and had managed to accelerate growth in e-commerce business by 175% over the previous year.  

Increased traffic and number of completed orders did not affect the quality of service delivery resulting in a high Net Promoter Score of 81. Observing the performance of brick and mortar stores in Poland, iSpot management have decided to continue growing this channel with the opening of two additional stores, one in Szczecin and one in Warsaw. Furthermore, iSpot management are upscaling their effort in the service provision channel and have decided to open one additional service hub in the North of Poland, resulting in a strengthened market position.

Since March 2020, iSpot is one of the two Polish market official Apple Authorised Education Specialists. This unique Apple certificate is granted to selected Apple partners who can offer high quality solutions based on the individual needs of leaders, teachers and students. This title further strengthens iSpot’s mission to become a unique place for educational customers, where one can find innovative products, educated sales expertise and personalized customer care.

Harvest Technology plc

Harvest Technology registered an operating profit of € 4,007,506 which is a decrease of 13.7% over 2020 which amounted to € 4,643,232. Revenue during the year amounted to € 15,747,511 while that for 2020 which included a significant one-off sale of hardware mainly relating to the Maritius project amounted to € 19,217,368. The delivery of the Mauritius Police Advanced Passenger Analysis border security project was completed and  commissioned into production in April 2021, hence the lower value in sales and operating profit during 2021 compard to 2020. After accounting for net finance costs and taxation, the Group registered a profit for the year of € 2,693,519 (2020: € 3,040,659).

APCO Systems through the brandname of APCOPAY is Harvest Technology’s payment gateway service offering, connects merchants to over 200+ payment methods and 40+ financial institutions globally. The Payment Gateway is at the core of APCO Systems, and the team continues to invest heavily to offer the latest payment trends in the market. During 2021, APCOPAY implemented 3DS 2.0 to meet the changing requirement on the market. Furthermore, APCOPAY  announced a new partnership with Rakuten Viber, in Greece, the instant messaging software platform to enhance the consumers experience in the payments sector.

Following the delivery of the Mauritius Police Advanced Passenger Analysis border security project, PTL has also been awarded a new project in Mauritius, within the country’s Ministry of Finance, Economic Planning and Development. 2021 was also successful as other major projects were awarded in Malta providing a healthy pipeline for 2022.

APCO Limited which is Harvest Technology’s security and automation business successfully implemented a core access control project for a large client. Based on our strong relationship we have with the key local banks, the company has also implemented several leading-edge security solutions. The team has successfully continued to roll out its Fuel Management Software with the intent to explore internationalization opportunities. APCO management continues to focus in the Electric Vehicle and Unmanned Aerial Vehicle space engaging with key partners and vendors.

Hili Logistics

In the Logistics industry, the market is still challenging and highly competitive.

 

2021 was a positive year in terms of the operations across the agency and local STS business.  Agency business volumes increased by 26% in 2021 over prior year while the STS team at Carmelo Caruana completed more STS operations in 2021 compared to 2020. During the year under review, the warehouse business operated at over 90% utilisation but more efficiently than 2020 with revenues increasing by 62% over the previous year. The management team at Carmelo Caruana remains committed to sustainably grow the business further in line with 1923 Investments’s strategy. 

 

CMA-CGM Malta Agency Ltd experienced better performance in 2021 through an increase in revenue of 17% reaching € 7,694,580 (2020: € 6,594,987). Profit after tax amounted to € 1,396,580 (2020: € 860,230). The outlook for 2022 for this company remains positive.

 

The acquisition of STS Marine Solutions which took place in April 2020 enabled the Logistics sector to reap the synergies between Carmelo Caruana Co. Limited and STS Marine Solutions Limited and to provide a marine service offering despite operating in difficult economic circumstances.

 

The demand for the STS services is predominately driven by the volume of oil traded between oil majors and independent traders, and also by production where local port infrastructure is unable to accommodate large tankers. As a result of Covid-19, the industry has suffered lower demand for OilSTS services since most countries in the world have imposed restrictions including lockdowns, restricted air travel and closed non-essential outlets. Although certain countries have lifted some of the COVID-19 restrictions, the uncertainty surrounding the geopolitical situation in Russia and Ukraine is delaying the economic activity recovery. A full recovery to pre-pandemic levels may take a longer period than originally envisaged as a result of these circumstances. The management team remains focussed on submitting competitive tender  bids, concluding long term contracts and securing new STS operations in the Oil and LNG space in the US, Asia, North Africa and Europe. 

 

Furthermore, STS Marine Solutions continues to actively seek to secure new terminal management contracts similar to the LNG Terminal in Jordan.

 

ALLcom, a freight forwarding company and provider of warehousing in Poland, saw better performance due to higher freight rates in 2021 compared to 2020. The profit before tax increased by 37% to reach € 325,226 in 2021 (2020: €236,843). The results of the first quarter of 2022 are also encouraging. The management team continued to focus its sales effort on increasing services to clients in the food and pharmaceuticals sector. Management has also took advantage of the complete service which ALLcom can offer in particular through the storage of goods at company’s managed warehouse in Bolszewo. In 2022, we are focussing on getting new clients through the expansion of the sales team as well as getting specialisation on new sectors other than the traditional food and pharmateutical sectors

The Group partners with suppliers who place great focus on minimising their carbon footprint and consequentially their environmental impact. The directors believe that good internal environmental practices support the board’s strategy by enhancing the reputation of the Group and the quality and efficiency of products and services offered. Consequently, the Group continues to put environmental responsibilities high on the agenda.

Principal risks and uncertainties

The Board as a whole, including the Audit Committee members, consider the nature and extent of the risk management framework and risk profile that is acceptable to the Board. The Audit Committee regularly reviews the work carried out by Internal Audit, and ensure any weaknesses identified are remedied so as not to pose a risk to the Group.

1923 Investments has established strategic relationships with its key suppliers. These relationships support 1923 Investments’ product and service offerings, and sales activities generally. There is no guarantee that 1923 Investments will be able to maintain these alliances, enter into further alliances or that existing suppliers will not enter into relationships with 1923 Investments’ competitors. The loss of any of these relationships, in particular, the agreement with Apple that authorises iSpot Poland Sp z.o.o to engage in the sale and distribution of Apple products as an Apple Premium Reseller in Poland, could have a material adverse effect on 1923 Investments’ business, results of operations and financial condition. Additionally, the Group has alliances with shipping companies which will expire in the coming years. The expiry of these alliances and agreements, if not renegotiated, may have a significant impact on the results of the logistics and transport business.

The developments pertaining to the Covid-19 pandemic that occurred during 2020 and 2021 as well as geopolitical conflicts which recently took place are discussed in the Effects of Covid-19 pandemic section and Post Balance Sheet events below.

Financial risk management

Note 42 to the financial statements provides details in connection with the Group’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.

Non-financial statement

Environmental matters

The Group is committed to environmental responsibility, and all subsidiaries within the Group have a role to play in living up to that commitment. Efforts are being made on areas where the Group can have significant impact on critical environmental issues, including climate change, natural resource conservation and waste management. The Group invests in innovations that can improve our environmental footprint, besides collaborating with other organizations to raise environmental awareness and work with key suppliers to promote environmentally responsible practices in their operations.

The Group feels that it is its duty to operate as part of the local community in order to keep the countries, where we operate, tidy. Subsidiaries within the Group are enrolled in local programmes for waste collection, separation and recycling of waste.

In terms of energy efficiency, the Group implements modern technology throughout its business divisions, with the installation of energy management systems and the use of energy efficient equipment and LED lighting.

Employee matters

The Group provides opportunity, nurtures talent, provides support to develop leaders and rewards achievement. The Group believes that a team of individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to its continuing business success. Performance evaluation systems are employed across the Group by applying career progression mechanisms and by rewarding achievements.

Each of the Group’s employees deserves to be treated with fairness, respect and dignity, providing equal opportunity for employees and applicants. All of the Group’s employees have the right to work in a place that is free from harassment, intimidation or abuse, sexual or otherwise, or acts or threats of physical violence. It is committed to diversity and equal opportunities for everyone, respecting the unique attributes and perspectives of every employee, and rely on these diverse perspectives to help the Group build and improve the relationships with customers and business partners. The Group embraces the diversity of its employees, customers and business partners, and work hard to make sure everyone within the Group feels welcome.

The Group provides equal treatment and equal employment opportunity without regard to race, colour, religion, sex, age, national origin, disability, sexual orientation, gender identity or any other basis protected by law. In addition, it is committed to providing a safe and healthy working environment for its employees, requiring all employees to abide by safety rules and practices and to take the necessary precautions to protect themselves and their fellow employees. For everyone’s safety, employees must immediately report accidents and unsafe practices or conditions to their immediate supervisors.

Social matters

The Group takes its corporate social responsibility very seriously and engages with its social partners and the community in general to give back through community involvement and the protection of the environment through the creation and realisation of advanced technology systems. The Group’s history has shown a proven contribution towards society by enhancing the quality of life of its customers and the general public alike.

Respect for human rights

The Group conducts its activities in a manner that respects human rights, taking the responsibility seriously to act with due diligence to avoid infringing on the human rights of others and addressing any impact on human rights if they occur. The Group’s commitment to respect human rights is defined in the code of business conduct, which applies to all employees of the Group.

The Group is committed to provide a safe work environment that fosters respect, fairness and dignity. Group employees are trained annually on the standard of business conduct.

Anti-corruption and bribery matters

The Group’s employees must comply with the Group Code of Conduct and Whistle-blower Policy to ensure that all employees are discouraged from any corrupt practices or bribery as well as are incentivized to report any such activities in a direct line with the responsible Group supervisor, without fearing reprisals. Every employee is introduced to these policies upon employment and are mandatory to be adhered to it.

The Group prohibits all forms of bribery or kickbacks as detailed in the Code of Conduct. All employees, representatives and business partners must fully comply with anti-bribery legislation. To comply with the Group policy and anti-bribery laws, no employee should ever offer, directly or indirectly, any form of gift, entertainment or anything of value to any government official or his or her representatives.

The Group is committed to complying with the applicable laws in all countries where it does business. It adopts an anti-corruption policy which sets forth its commitment to ensuring that it carries out business in an ethical manner and abides by all applicable anti-bribery and anti-corruption laws in the countries in which it operates by, among other things, prohibiting the giving or receiving of improper payments in the conduct of its business, and by discouraging such behaviour by its business partners.

Business model

The Group operates four main business activities which are (i) the sale of retail and IT solutions in Poland predominately as an Apple Premium Reseller, (ii) the sale of payment processing services, the provision of IT solutions and security systems, (iii) the provision of road, sea and air logistics services; and (iv) provision of Ship to Ship Transfers of oil and LNG, Terminal Management and consultancy services.

The Group’s iSpot retail business in Poland offers an extensive range of Apple products and other software in Poland. Harvest Technology’s business line in Malta is a multi-brand information technology solutions provider to businesses and the public sector.

In addition, Harvest is a payments solutions provider offering e-commerce processing services for retailers and internet-based merchants together with the provision of a wide range of automation and security solutions catering to the banking, retail, fuel and other sectors. During 2021 and beyond, Harvest is seeking to internationalise its services even further in Europe and other continents where it already has a connection. Through its wide range of services and experience in technology, the Group is positioned to continue to develop and offer a wide range of solutions to its customers and to assure a high quality of services to its customers.

The logistics division continues to provide its transport and logistics services through its long-standing experience in the sector and its continued support and excellent relationship with its business partners. STS Marine Solutions is a world leading ship-to-ship service provider with over 30 years of experience in transferring crude oil, refined petroleum products, LPG and LNG, the Group’s core activities comprise oil, gas and LNG support operations, LNG terminal management, emergency support services and consultancy.

Significant judgements and estimates

Note 4 to the financial statements provides details in connection with the inherent uncertainties that surround the preparation of the financial statements which require significant estimates and judgements.

Results and dividends

The results for the year ended 31 December 2021 are shown in the statements of profit or loss and other comprehensive income. The Group’s profit after tax was € 5,838,440 (2020: € 3,419,170), whilst the Company’s profit after tax was € 1,719,387 (2020 loss after tax of € 1,546,365). During 2021, a management fee amounting to € 600,000 was charged by the parent company (2020: € 600,000).

No dividend was declared and paid during the year (2020: Nil).

Likely future business developments

The directors of 1923 Investments p.l.c. are of the view that there are a number of investment opportunities in the retail sector, technology sector and logistics sector. iSpot has already opened 2 new outlets in Poland to speed up its organic growth initiatives. During the second half of 2022, 1923 Investments plc is also planning to expand its retail sector in other countries in Europe, beyond Poland. Each investment opportunity that will arise during the course of the year will be thoroughly explored and evaluated with a view to continue to grow its business portfolio in line with the Company’s strategy.

Whilst the situation remains fluid and future events may have an adverse effect on the Group’s future profitability, liquidity and financial position, the medium-term outlook remains cautiously optimistic.

In June 2021, the intergovernmental Financial Action Task Force (FATF) placed Malta on its so-called grey list of jurisdictions under increased monitoring. Though this has not led to any immediate and direct impact on the Group, the directors keep monitoring the situation to be able to act expediently as necessary to safeguard the interest of the Group and its stakeholders.

The directors consider that the year-end financial position of the Group was satisfactory however future performance might be negatively affected due to Covid-19 pandemic or possibly the geopolitical situation in Europe, especially if this spreads beyond Ukraine.

Effects of Covid-19 pandemic

Since the outbreak of the Covid-19 pandemic, the directors have continued to actively monitor all developments taking place both locally and internationally in order to take any appropriate action to safeguard the interest of the Company and its subsidiaries. Although the Group managed to improve on actual results of the previous year, such events might still have an impact on the performance and financial position of the Group in the future due to any unforeseen effects that such pandemic might have on the economies and industries to which the Group is exposed.

The results for year ended 31 December 2021 show that the Company has well exceeded the projections set out in our Financial Analysis Summary published in June 2021. Whilst the situation remains fluid and future events may have an adverse effect on the Group’s future profitability, liquidity and financial position, the outlook remains cautiously optimistic.

During the year, the Group has, wherever possible, also continued to implement a work-from-home approach in order to limit unnecessary commuting and enforced the use of protective equipment in line with guidelines issued by the public health authorities for essential visits to the Group offices or on-site visits to customers due to the nature of its operations. This strategy proved to be successful with minimal disruptions to clients and other business partners. At iSpot, e-commerce was actively promoted and most of the sales were being carried out through this channel during periods of lock down in Poland. The Group has availed itself of and utilised the Government’s Covid assistance measures in Malta and Poland which has assisted in creating stability and peace of mind to its employees while at the same time giving management the ability to further invest in a safer work environment that will be beneficial to its workforce in the longer term.

Post balance sheet events

The Board of Directors is actively following the conflict and the resulting humanitarian crisis in Ukraine. While the group has no direct interest vested in the country, it is monitoring the effects of the situation on its operations especially those in Poland. Inflationary pressures, supply chain disruption and heightened wage costs are presently being experienced by certain operations within the group. It is challenging to quantify and differentiate what extent of such pressures emanate from the unrest in Ukraine and the concurrent Covid-induced events but while the compounded effect on the sectors mentioned may be potentially significant, management is taking all steps necessary to mitigate any expected decline in revenue and to implement any further course of action as deemed applicable in the circumstances.

 

The directors continue to monitor the process of conducting further in-depth assessments in this regard in due course. The group’s projections continue to show stable performance despite the uncertainty of the current state of affairs on its operations and it remains vigilant in monitoring restrictions on the conduct of business with sanctioned entities and individuals.

 

There were no other adjusting or significant non-adjusting events that have occurred between the end of the reporting period and the date of authorisation by the board.

 

Directors

The following have served as directors of the Company during the period under review:

                        Mr Charles Borg – Chairman

                        Mr Carmelo sive Melo Hili

                        Mr Geoffrey Camilleri (resigned on 4 January 2021)

                        Mr Dorian Desira (appointed on 4 January 2021)

                        Mr Karl Fritz

                        Ms Therese Calleja (resigned on 30 March 2021)

                        Dr Ann Fenech

 

In accordance with the Company’s Articles of Association, the present directors remain in office.

Going concern

After making due enquiry and using the best judgment available at the time of approving these financial statements, an impact assessment has been carried out by the Board, including a review of different service level and cash flow scenarios. Based on this review and the measures taken as indicated above, the Board expects that the Group will be able to sustain its operations over the next twelve months, and to meet its obligations as and when they fall due.

Accordingly, for these reasons the Board is of the opinion that it remains appropriate to adopt the going concern basis in the preparation of these financial statements.

Disclosure of information to the auditor

At the date of making this report the directors confirm the following:

-        As far as each director is aware, there is no relevant information needed by the independent auditor in connection with preparing the audit report of which the independent auditor is unaware, and

-        Each director has taken all steps that they ought to have taken as a director in order to make themselves aware of any relevant information needed by the independent auditor in connection with preparing the report and to establish that the independent auditor is aware of that information.

Statement of directors’ responsibilities

The Companies Act, Cap 386 requires the directors to prepare financial statements for each financial period which give a true and fair view of their state of affairs of the Group and the Company as at the end of the reporting period and of the profit or loss of their operations for that period.  In preparing those financial statements, the directors are required to:

-         adopt the going concern basis unless it is inappropriate to presume that the Company will continue in business;

-         select suitable accounting policies and then apply them consistently;

-         make judgements and estimates that are reasonable and prudent;

-         account for income and charges relating to the accounting period on the accruals basis; and

-         value separately the components of asset and liability items.

 

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, and to enable them to ensure that the financial statements have been properly prepared in accordance with the Companies Act, Cap 386.  This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. They are also responsible for safeguarding the assets of the Group, and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Auditor

Grant Thornton have intimated their willingness to continue in office.

A resolution to reappoint Grant Thornton as auditor of the Company will be proposed at the forthcoming annual general meeting.

Signed on behalf of the Board of Directors on 27 April 2022 by Mr. Charles Borg (Chairman and Director) and Mr. Dorian Desira (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Registered address:

Nineteen Twenty-Three

Valletta Road

Marsa MRS 3000

Malta

27 April 2022

 

Statement of responsibility pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority

 

We confirm that to the best of our knowledge:

  1. In accordance with the Capital Markets Rule 5.68, the financial statements give a true and fair view of the financial position of the Company and its Group as at 31 December 2021 and of their financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU; and
  2. In accordance with the Capital Markets Rules, the Directors’ report includes a fair review of the performance of the business and the position of the Issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

Signed on behalf of the Board of Directors on 27 April 2022 by Mr. Charles Borg (Chairman and Director) and Mr. Dorian Desira (Director).

 

 

Corporate governance – Statement of compliance

Introduction

Pursuant to the Capital Markets Rules as issued by the Malta Financial Services Authority, 1923 Investments p.l.c. (the ‘company’) is hereby reporting on the extent of its adoption of the Code of Principles of Good Corporate Governance (the ‘Principles’) contained in Appendix 5.1 of the Capital Markets Rules.

The Board acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice. Nonetheless, the Board strongly believes that the Principles are in the best interest of the shareholders and other stakeholders since they ensure that the Directors, Management and employees of the Group adhere to internationally recognised high standards of Corporate Governance.

The Group currently has a corporate decision-making and supervisory structure that is tailored to suit the Group’s requirements and designed to ensure the existence of adequate checks and balances within the Group, whilst retaining an element of flexibility, particularly in view of the size of the Group and the nature of its business. The Group adheres to the Principles, except for those instances where there exist particular circumstances that warrant non-adherence thereto, or at least postponement for the time being.

Additionally, the Board recognises that, by virtue of Capital Markets Rule 5.101, the Company is exempt from making available the information required in terms of Capital Markets Rules 5.97.1 to 5.97.3; 5.97.6 and 5.97.8.

 

The Board of Directors

The Board of Directors of the Company is responsible for the overall long-term direction of the Group, in particular in being actively involved in overseeing the systems of control and financial reporting and that the Group communicates effectively with the market.

The Board of Directors meets regularly, with a minimum of four times annually, and is currently composed of five Members, three of which are completely independent from the Company or any other related companies.

For the purpose of the Capital Markets rules, Mr Charles Borg, Dr Anne Fenech and Mr Karl Fritz are independent non-executive directors of the Company. Furthermore, Ms Therese Calleja resigned on 30 March 2021 and Mr Geoffrey Camilleri resigned on 4 January 2021. Mr Dorian Desira was appointed in his stead on 4 January 2021.

 

Non-Executive Directors

Mr Carmelo sive Melo Hili

Mr Dorian Desira (appointed on 4 January 2021)

Ms Therese Calleja (resigned on 30 March 2021)

Mr Geoffrey Camilleri (resigned on 4 January 2021)

 

Independent Non-Executive Directors      

Mr Charles Borg (Chairman)

Dr Anne Fenech

Mr Karl Fritz

 

The Board Meetings are attended by the Chief Executive Officer of the group in order for the Board to understand the operations of the group. The Chief Executive Officer is joined by the Chief Financial Officer of the Group in order for the Board to have direct access to the financial operation of the Group. This is intended to, inter alia, ensure that the policies and strategies adopted by the Board are effectively implemented.

The remuneration of the board is reviewed periodically by the shareholders of the Company.

The Company ensures that it provides directors with relevant information to enable them to effectively contribute to board decisions.

The directors are fully aware of their duties and obligations, and whenever a conflict of interest in decision making arises, they refrain from participating in such decisions.

 

Audit Committee

The Terms of Reference of the Audit Committee are modelled on the principles set out in the Capital Markets Rules. The Audit Committee assists the Board in fulfilling its supervisory and monitoring responsibility by reviewing the Group financial statements and disclosures, monitoring the system of internal control established by management as well as the audit processes.

The Board of Directors established the Audit Committee, which meets regularly, with a minimum of four times annually, and is currently composed of the following individuals:

Mr Karl Fritz (Chairman)

Dr Ann Fenech

Mr Dorian Desira (appointed on 4 January 2021)

Mr Geoffrey Camilleri (resigned on 4 January 2021)

 

To satisfy the requirement established by the Capital Markets Rules, the Audit Committee is composed of non-executive directors, the majority of which being independent. Mr Dorian Desira is a non-executive director and holds the position of Chief Financial Officer of the parent company.

The Board considers Mr Karl Fritz to be competent in accounting and/or auditing in terms of the Capital Markets Rules. Furthermore, the Board considers that the Audit Committee, as a whole, to have relevant competence in the sector the Company is operating.

The Audit Committee met four times during 2020 and four times during 2021. Communication with and between the Secretary, top level management and the Committee is ongoing and considerations that required the Committee’s attention were acted upon between meetings and decided by the Members (where necessary) through electronic circulation and correspondence.

 

Internal Control

While the Board is ultimately responsible for the Group’s internal controls as well as their effectiveness, authority to operate the Group is delegated to the Chief Executive Officer.

The Group’s system of internal controls is designed to manage all the risks in the most appropriate manner. However, such controls cannot provide an absolute elimination of all business risks or losses. Therefore, the Board, inter alia, reviews the effectiveness of the Group’s system of internal controls in the following manner:

 

1.

Reviewing the Group’s strategy on an on-going basis as well as setting the appropriate business objectives in order to enhance value for all stakeholders;

2.

Implementing an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Group objectives;

3.

Appointing and monitoring the Chief Executive Officer whose function is to manage the operations of the Group;

4.

Identifying and ensuring that significant risks are managed satisfactorily; and

5.

Company policies are being observed.

 

Corporate Social Responsibility

The Board is mindful of and seeks to adhere to sound principles of Corporate Social Responsibility in their daily management practices, which is also extended throughout the Company’s subsidiary companies. There is continuing commitment to operate the business ethically at all times, at the same time as contributing to economic development whilst improving the quality of life of its employees and their families together with the local community and society at large.

In carrying on its business, the Group is fully aware of its obligation to preserving the environment and has, in fact, put in place a number of policies aimed at respecting the environment and reducing waste.

 

Relations with the market

The market is kept up to date with all relevant information, and the Company regularly publishes such information on its website to ensure consistent relations with the market.

 

Non-compliance with the code

Principle 7: Evaluation of the board’s performance

Under the present circumstances, the Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role as the Board’s performance is always under scrutiny of the shareholders of the Company.

Principle 8: Committees

Under the present circumstances the Board does not consider it necessary to appoint a remuneration committee and a nomination committee as decisions on these matters are taken at shareholder level.

Principle 10: Institutional shareholders

This principle is not applicable since the Company has no institutional shareholders.

 

Signed on behalf of the Board of Directors on 27 April 2022 by Mr. Charles Borg (Chairman and Director) and Mr. Dorian Desira (Director).

 

Other disclosures in terms of Capital Markets Rules

Statement by the directors pursuant to Capital Markets Rule 5.70.1

Contracts of significance

Loan agreements with subsidiaries and related parties

The Company has loans payable and receivable to/from subsidiaries and related parties, which are disclosed in the financial statements.

Rental agreements with related parties

The subsidiaries of 1923 Investments p.l.c. have entered into rental agreements with a related party. The agreed rates have been set on an arms’ length basis.

Pursuant to Capital Markets Rule 5.70.2

Company secretary and registered office

Rudolph Mifsud Saydon (appointed on 31 st January 2022)

Nineteen Twenty-Three

Valletta Road

Marsa MRS 3000

Malta

Signed on behalf of the Board of Directors on 27 April 2022 by Mr. Charles Borg (Chairman and Director) and Mr. Dorian Desira (Director).

 

 

Statements of profit or loss and other comprehensive income

 

Notes

The group

The group

The company

The company

 

 

2021

2020

2021

2020

 

 

 

 

 

 

 

 

Revenue

6

172,154,948

149,734,105

1,010,000

725,000

Cost of sales

 

(144,995,947)

(126,323,059)

-

-

Gross profit

 

27,159,001

23,411,046

1,010,000

725,000

Other operating income

7

94,471

261,323

-

-

Administrative expenses

 

(16,770,188)

(16,061,440)

(1,830,422)

(1,335,841)

Operating profit (loss)

 

10,483,284

7,610,929

(820,422)

(610,841)

Investment income

8

73,141

116,429

5,427,126

1,956,794

Finance costs

9

(3,585,314)

(4,062,008)

(2,891,994)

(3,712,703)

Other income

 

430

157,142

-

-

Gain on termination of leases

 

521,088

-

-

-

Share of profit in associates

21

684,324

421,513

-

-

Share of results in joint ventures

21

139,558

57,835

-

-

Profit (loss) before tax

10

8,316,511

4,301,840

1,714,710

(2,366,750)

Tax (expense) credit

13

(2,478,071)

(882,670)

4,677

820,385

Profit (loss) for the year

 

5,838,440

3,419,170

1,719,387

(1,546,365)

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

Exchange differences on translating foreign operations

 

1,641,334

(4,978,238)

-

-

Total comprehensive income (loss)

 

 

7,479,774

 

(1,559,068)

 

1,719,387

 

(1,546,365)

 

 

 

 

 

 

Profit (loss) attributable to:

 

 

 

 

 

Owners of the company

 

4,840,636

2,292,695

1,719,387

(1,546,365)

Non-controlling interest

 

997,804

1,126,475

-

-

 

 

5,838,440

3,419,170

1,719,387

(1,546,365)

 

 

 

 

 

 

Total comprehensive income (loss) attributable to:

 

 

 

 

 

Owners of the company

 

6,481,970

(2,685,543)

1,719,387

(1,546,365)

Non-controlling interest

 

997,804

1,126,475

-

-

 

 

7,479,774

(1,559,068)

1,719,387

(1,546,365)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statements of financial position

Notes

The group

The group

The company

The company

2021

2020

2021

2020

Assets

Non-current

Goodwill

15

62,888,958

61,690,558

 -

 -

Intangible assets

16

12,062,520

11,689,473

 -

 -

Plant and equipment

17

11,370,166

10,056,907

               3,721

               3,960

Right-of-use assets

18

11,499,407

8,554,777

 -

 -

Investment in subsidiaries

20

 -

 -

      66,832,577

      66,832,577

Investment in associates

21

715,015

496,191

 -

 -

Investment in joint ventures

21

1,053,642

965,831

           682,375

           682,375

Other investment

22

1,149,977

50,000

 -

 -

Loans and receivables

23

1,744,946

1,846,537

      23,828,586

      26,091,177

Deferred tax assets

36

1,560,180

1,607,884

           305,939

           301,262

104,044,811

96,958,158

      91,653,198

      93,911,351

Current

Inventories

24

11,094,070

9,692,000

 -

 -

Loans and receivables

23

3,027,735

531,667

        9,801,147

        4,512,200

Contract assets

6

662,843

1,749,577

 -

 -

Other assets

25

2,288,380

1,013,114

           160,779

             25,868

Trade and other receivables

26

17,097,854

12,616,602

             86,609

           371,380

Cash and cash equivalents

27

9,666,172

11,380,270

        1,297,371

           416,990

Current tax assets

1,805,232

1,550,171

        1,056,908

           958,322

45,642,286

38,533,401

      12,402,814

        6,284,760

 

 

Total assets

149,687,097

135,491,559

    104,056,012

    100,196,111

Equity

Share capital

28

52,135,000

49,575,000

      52,135,000

      49,575,000

Other equity

29

(4,741,736)

(2,181,736)

           154,629

        2,714,629

(Accumulated losses) retained earnings

4,556,155

(568,366)

         (851,650)

      (2,571,037)

Translation reserve

30

(4,082,231)

(5,723,565)

 -

 -

Attributable to equity holders of the parent

47,867,188

41,101,333

      51,437,979

      49,718,592

Non-controlling interest

4,964,072

4,472,723

 -

 -

Total equity

52,831,260

45,574,056

      51,437,979

      49,718,592

Liabilities

Non-current

Debt securities in issue

31

35,758,272

35,677,368

      35,758,272

      35,677,368

Borrowings

32

6,748,228

1,811,780

        6,748,228

        1,811,780

Lease liabilities

19

8,882,191

6,536,682

 -

 -

Trade and other payables

33

239,197

185,927

 -

 -

Other financial liabilities

35

211,779

11,402,552

        2,282,655

      11,983,385

Deferred tax liabilities

36

1,263,011

1,249,565

 -

 -

53,102,678

56,863,874

      44,789,155

      49,472,533

Current

Borrowings

32

1,476,571

5,306,037

        1,476,571

           294,593

Lease liabilities

19

3,034,583

2,302,930

 -

 -

Trade and other payables

33

30,572,267

22,602,848

           701,377

           710,393

Contract liabilities

34

4,110,716

1,315,246

 -

 -

Other financial liabilities

35

3,572,545

239,536

        5,650,930

 -

Current tax liability

986,477

1,287,032

 -

 -

43,753,159

33,053,629

        7,828,878

        1,004,986

 

 

 

 

Total liabilities

96,855,837

89,917,503

      52,618,033

      50,477,519

 

 

 

 

Total equity and liabilities

149,687,097

135,491,559

    104,056,012

    100,196,111

 

 

The financial statements were approved and authorised for issue by the Board of Directors on 27 April 2022. The financial statements were signed on behalf of the Board of Directors by Mr. Charles Borg (Chairman and Director ) and Mr. Dorian Desira (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

 

 

Statement of changes in equity – the group

Share capital

Other equity

Retained earnings (accumulated losses)

Translation reserve

Attributable to equity holders of the parent

Non-controlling interest

Total equity

At 1 January 2020

49,575,000

(4,741,736)

(2,861,061)

(745,327)

41,226,876

3,835,897

45,062,773

Transactions with owners:

  - 

Dividend paid to minority interest

  - 

  - 

 

  - 

  - 

(489,649)

(489,649)

  - 

  - 

  - 

  - 

  - 

     (489,649)

     (489,649)

Profit for the year

  - 

  - 

2,292,695

  - 

2,292,695

1,126,475

3,419,170

Other comprehensive income for the year

  - 

  - 

  - 

(4,978,238)

(4,978,238)

  - 

(4,978,238)

Total comprehensive income

  - 

  - 

2,292,695

(4,978,238)

(2,685,543)

1,126,475

(1,559,068)

 

 

 

 

 

 

 

Loan from parent

  - 

2,560,000

  - 

  - 

2,560,000

  - 

2,560,000

 

 

 

 

 

 

 

At 31 December 2020

49,575,000

(2,181,736)

(568,366)

(5,723,565)

41,101,333

4,472,723

45,574,056

 

 

 

 

 

 

 

At 1 January 2021

49,575,000

(2,181,736)

(568,366)

(5,723,565)

41,101,333

4,472,723

45,574,056

Transactions with owners:

Dividend paid to minority interest

  - 

  - 

  - 

  - 

  - 

(506,455)

(506,455)

  - 

  - 

  - 

  - 

  - 

     (506,455)

     (506,455)

Profit for the year

  - 

  - 

4,840,636

  - 

4,840,636

997,804

5,838,440

Other comprehensive income for the year

  - 

  - 

  - 

1,641,334

1,641,334

  - 

1,641,334

Total comprehensive income

  - 

  - 

4,840,636

1,641,334

6,481,970

997,804

7,479,774

Other Movements

  - 

  - 

283,885

  - 

283,885

  - 

283,885

Capitalisation of loan from parent

2,560,000

(2,560,000)

  - 

  - 

  - 

  - 

  - 

 

 

 

 

 

 

 

At 31 December 2021

52,135,000

(4,741,736)

4,556,155

(4,082,231)

47,867,188

4,964,072

52,831,260

Accumulated losses include current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

 

Accumulated losses include an amount of € 1,560,180 (2020: € 1,607,884) relating to deferred tax assets which are undistributable in terms of the Companies Act, Cap 386.

 

Statement of changes in equity – the company

 

Share capital

Other equity

Retained earnings (accumulated losses)

Total

At 1 January 2020

       49,575,000

            154,629

        (1,024,672)

       48,704,957

 

Loss for the year

  - 

  - 

        (1,546,365)

        (1,546,365)

Total comprehensive loss

  - 

  - 

        (1,546,365)

        (1,546,365)

 

 

 

 

Loan from parent

  - 

         2,560,000

  - 

         2,560,000

 

 

 

 

At 31 December 2020

       49,575,000

         2,714,629

        (2,571,037)

       49,718,592

 

At 1 January 2021

       49,575,000

         2,714,629

        (2,571,037)

       49,718,592

 

Profit for the year

  - 

  - 

         1,719,387

         1,719,387

Total comprehensive loss

  - 

  - 

         1,719,387

         1,719,387

 

 

 

 

Capitalisation of loan from parent

         2,560,000

        (2,560,000)

  - 

  - 

 

 

 

 

At 31 December 2021

       52,135,000

            154,629

           (851,650)

       51,437,979

 

Retained earnings (accumulated losses) include current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

 

 


Statements of cash flows

 

 

 

 

 

 

 

 

Notes

The group

The group

The company

The company

 

 

2021

2020

2021

2020

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Profit before tax

 

8,316,511

4,301,840

 1,714,710

 (2,366,750)

Adjustments

37

8,291,752

8,724,903

(2,532,385)

1,757,969

Net changes in working capital

37

5,302,210

(743,675)

(251,052)

(937,276)

Interest paid

 

(3,110,700)

(2,716,095)

 (2,373,871)

 (2,239,170)

Tax paid

 

(3,482,218)

(1,920,059)

-

-

Tax refunded

 

509,681

450,003

509,680

 260,926

Net cash generated from (used in) operating activities

 

15,827,236

8,096,917

 

(2,932,918)

 

(3,524,301)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Payments to acquire plant and equipment

17

(3,603,029)

(1,020,616)

(2,508)

(1,490)

Payments to acquire intangible assets

16

(772,951)

(630,097)

-

-

Proceeds from disposal of plant and equipment

 

66,232

469,688

-

-

Interest received

 

-

2,005

98,169.

44,447

Cash taken over upon acquisition of a subsidiary

 

-

1,509,407

-

-

Cash disposed upon sale of a subsidiary

 

-

-

-

-

Investment in subsidiary undertakings

 

(1,099,977)

-

-

(11,500,000)

Net advances to subsidiaries

 

-

-

2,953,308

(14,527,114)

Acquisition of subsidiary undertaking

 

-

(24,784,537)

-

-

Financing costs incurred to acquire subsidiary

 

-

(268,120)

-

(299,644)

Repayment to joint venture

 

-

-

(155,717)

-

Advances to/Payments from parent company

 

-

-

(3,000,000)

6,000,000

Repayment to parent company

 

-

-

(24,172)

(333,428)

Movement in loans and receivables

 

(3,000,000)

5,528,997

-

-

Payments from (to) related companies

 

-

-

113,178

(4,997)

Dividends received from subsidiaries

 

-

-

3,212,615

832,161

Dividends received from associates

 

465,500

196,000

-

-

Dividend received from joint ventures

 

51,747

-

-

-

Net cash (used in) generated from investing activities

 

(7,892,478)

(18,997,273)

3,194,873

(19,790,065)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Dividends paid

 

(506,455)

(489,649)

-

-

Loans advanced by related parties

 

-

11,000,000

-

11,000,000

Repayment of loan to related parties

 

(7,500,000)

-

(7,500,000)

-

Loan advanced by subsidiary

 

-

-

2,000,000

-

Payments to third parties

 

-

(6,000,000)

-

-

Proceeds from bank loan

32

6,430,000

2,989,456

6,430,000

2,250,000

Repayments of bank loans

 

(603,771)

(790,886)

(311,574)

(143,627)

Payments for lease obligations to third parties

 

(2,181,147)

(2,898,982)

-

-

Payments for lease obligations to related companies

 

 

(247,071)

 

(252,028)

 

-

 

-

Interest paid on leasing arrangements with third parties

 

 

(271,670)

 

(312,987)

 

-

 

-

Interest paid on leasing arrangements related company

 

 

(49,495)

 

(62,933)

 

-

 

-

Net cash generated from (used in) financing activities

 

(4,929,609)

3,181,991

618,426

13,106,373

 

 

 

 

 

 

Net change in cash and cash equivalents

 

3,005,149

(7,718,365)

880,381

(10,207,993)

Cash and cash equivalents, beginning of year

 

6,661,023

14,379,388

416,990

10,624,983

Cash and cash equivalents, end of year

27

9,666,172

6,661,023

1,297,371

416,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Notes to the financial statements

1       Nature of operations

The principal activities of the group are the sale and distribution of Apple Products as an Apple Premium Reseller, as well as the sale, maintenance and servicing of information technology solutions, security systems and provides electronic payment solutions. As from 1 January 2018, the group was also engaged in providing road, sea and air logistics services in Malta and in Poland. On 30 April 2020, the company purchased a Ship to Ship business from Teekay Tankers Limited to strengthen its presence in the logistics sector. The company acts as an investment company and service provider to its subsidiary undertakings.

 

2      General information, statement of compliance with IFRS and going concern assumption

The company was incorporated on 23 December 2013 as a holding company. The registered address and principal place of business of the company is Nineteen Twenty-Three, Valletta Road, Marsa MRS 3000, Malta.

The company is a public company whose bonds are publicly listed and traded on the Malta Stock Exchange.

The financial statements of the company and the consolidated financial statements of the group have been prepared in accor­dance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU), and in accordance with the Companies Act, Cap 386.

The financial statements are presented in euro (€), which is also the functional currency of the company and the group.

 

3       New or revised Standards or Interpretations

3.1

New standards adopted as at 1 January 2021

Some accounting pronouncements which have become effective from 1 January 2021 and have therefore been adopted do not have a significant impact on the group and the company’s financial results or position. Accordingly, the group and the company have made no changes to the accounting policies in 2021.

Other Standards and amendments that are effective for the first time in 2021 and could be applicable to the group and the company are:

• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16)

• Covid-19 Rent Related Concessions (Amendments to IFRS 16)

 

These amendments do not have a significant impact on these financial statements and therefore no additional disclosures have been made.

3.2

Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the group

At the date of authorisation of these financial statements, several new, but not yet effective, Standards, amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards, amendments or Interpretations have been adopted early by the group and the company.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations neither adopted nor listed by the group and the company have not been disclosed as they are not expected to have a material impact on the group and the company’s financial statements.

 

4         Summary of accounting policies

4.1      Overall considerations

The consolidated financial statements have been prepared using the significant accounting policies and measurement bases summarised below.

The consolidated financial statements have been prepared from the financial statements of the companies comprising the group as detailed in notes to the consolidated financial statements.

4.2      Presentation of financial statements

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (IAS 1).

4.3      Basis of consolidation

The group financial statements consolidate those of the parent company and all of its subsidiaries as of 31 December 2021. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The subsidiaries have a reporting date of 31 December .

All transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions between group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment losses from the group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

4.4      Business combinations

The group applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

 

4.5      Investment in subsidiaries

Investment in subsidiaries is included in the company’s statement of financial position at cost less any impairment loss that may have arisen. Income from investment is recognised only to the extent of distributions received by the company from post-acquisition profits. Distributions received in excess of such profits are regarded as a recovery of the investment and are recognised as a reduction of the cost of the investment.

At the end of each reporting period, the company reviews the carrying amount of its investment in subsidiaries to determine whether there is any indication of impairment and, if any such indication exists, the recoverable amount of the investment is estimated. An impairment loss is the amount by which the carrying amount of an investment exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. An impairment loss that has been previously recognised is reversed if the carrying amount of the investment exceeds its recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the investment does not exceed the carrying amount that would have been determined if no impairment loss had been previously recognised. Impairment losses and reversals are recognised immediately in profit or loss.

4.6      Investment in associates and joint ventures

An associate is an entity over which the company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The results and assets and liabilities of associates/joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates/joint ventures are initially recognised at cost and adjusted thereafter for the post-acquisition change in the group’s share of net assets of the associates/joint ventures, less any impairment in the value of individual investments.

When the group’s share of losses of an associate/joint venture exceeds the group’s interest in that associate/joint venture (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate/joint venture), the group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

Any excess of the cost of acquisition over the group’s share of the net fair value of the identifiable assets and liabilities of an associate/joint venture recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

 

4.7      Acquisition of entities and businesses under common control

The acquisition of subsidiaries under common control is accounted for under the principles of predecessor accounting as from the date these subsidiaries are acquired by the holding company’s parent at their previous carrying amounts of assets and liabilities included in the consolidated financial statements of the company’s parent.  Differences on acquisition between the consideration given in exchange for the acquired entities and the amounts at which the assets and liabilities of the acquired are initially recognised are included within equity.

4.8      Acquisition of subsidiaries

The acquisition of subsidiaries that are not under common control is accounted for by applying the acquisition method. The consideration is measured as the aggregate of the fair values, at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred, except for costs to issue debt or equity securities.

The acquiree’s identifiable assets and liabilities that meet the conditions for recognition are recognised at their fair values at the acquisition date, except as specifically required by other IFRS as adopted by the EU. A contingent liability assumed in a business combination is recognised at the acquisition date if there is a present obligation that arises from past events and its fair value can be measured reliably.

The results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where necessary, in preparing these consolidated financial statements, appropriate adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by group entities.  Intra-group balances, transactions, income and expenses are eliminated on consolidation.

4.9      Goodwill

Goodwill arising in a business combination that is accounted for using the acquisition method is recognised as an asset at the date that control is acquired. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred; (ii) the amount of any non-controlling interests in the acquiree; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

The goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Any gain on a bargain purchase, after reassessment, is recognised immediately in profit or loss.

4.10      Non-controlling interest

Non-controlling interests in the acquiree that are present ownership interests and entitle their shareholders to a proportionate share of the entity’s net assets in the event of liquidation, may be initially measured either at the present ownership interests proportionate share in the recognised amounts of the acquiree’s identifiable net assets or at fair value. The choice of measurement basis is made on an acquisition-by-acquisition basis. After initial recognition, non-controlling interests in the net assets consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of changes in equity since the date of the combination. Non-controlling interests in the net assets of consolidated subsidiaries are presented separately from the holding company’s owners’ equity therein. Non-controlling interests in the profit or loss and other comprehensive income of consolidated subsidiaries are also disclosed separately.  Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

4.11      Revenue recognition

Revenue for the group arises mainly from the sale and distribution of Apple Products as an Apple Premium Reseller, as well as from the sale, maintenance and servicing of information technology solutions, security systems and providing electronic payment solutions. The group is also engaged in providing road, sea and air logistics services in Malta and in Poland.

To determine whether to recognise revenue, the group follows a 5-step process:

 

1.       Identifying the contract with a customer

2.       Identifying the performance obligations

3.       Determining the transaction price

4.       Allocating the transaction price to the performance obligations

5.       Recognising revenue when/as performance obligation(s) are satisfied.

The group often enters into transactions involving a range products and services, as described above. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract  excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the group satisfies performance obligations by transferring the promised goods or services to its customers.

The group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position
(see note 34). Similarly, if the group satisfies a performance obligation before it receives the consideration, the group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

Sale and distribution of Apple products

Revenue from the sale of Apple products for a fixed fee is recognised when or as the group transfers control of the assets to the customer. Amounts receivable for products transferred are due upon receipt by the customer, which is usually immediately upon the sale of the product to the customer. Control for these products is transferred at the point in time and occurs when the customer takes undisputed delivery of the goods.

The group provides a basic one year product warranty on its Apple products sold to customers. Under the terms of this warranty, customers can return the product for repair or replacement if it fails to perform in accordance with published specifications. The standard warranty does not provide a service which enhances, or is in any way or manner an addition to the standard assurance to the product performance. These warranties are accounted for under IAS 37.

Sale of information technology solutions, security systems and other machinery

Revenue from the sale of information technology solutions, security systems and other machinery for a fixed fee is recognised when or as the group transfers control of the assets to the customer. Invoices for products and services transferred are due upon receipt by the customer, which is usually upon the sale of the product to the customer and installation of the items or products sold. Control for these products is usually transferred at the point in time and occurs when the customer takes undisputed delivery of the goods.

 

When such items are either customised or sold together with significant integration services, the goods and services represent a single combined performance obligation over which control is considered to transfer over time. This is because the combined product is unique to each customer (has no alternative use) and the group has an enforceable right to payment for the work completed to date. Revenue for these performance obligations is recognised over time as the customisation or integration work is performed, using the cost-to-cost method to estimate progress towards completion. As costs are generally incurred uniformly as the work progresses and are considered to be proportionate to the entity’s performance, the cost-to-cost method provides a faithful depiction of the transfer of goods and services to the customer.

Each major contract is nevertheless evaluated for revenue recognition on its own and the group determines when control is effectively transferred depending on the specific circumstances.

For sales of software that are neither customised by the group nor subject to significant integration services, the licence period commences upon delivery. For sales of software subject to significant customisation or integration services, the licence period begins upon commencement of the related services.

Maintenance and servicing

The group enters into fixed price maintenance contracts with its customers for terms between one and three years in length. Customers are required to pay either quarterly or yearly in advance for each respective service period and the relevant payment due dates are specified in each contract.

The group enters into agreements with its customers to perform regularly scheduled maintenance services on the various goods purchased from the group. Revenue is recognised over time based on the ratio between the number of hours of maintenance services provided in the current period and the total number of such hours expected to be provided under each contract. This method best depicts the transfer of services to the customer because: (a) details of the services to be provided are specified as part of the agreed maintenance program relative to the maintenance requirements of the items sold, and (b) the group has a long history of providing these services to its customers, allowing it to make reliable estimates of the total number of hours involved in providing the service.

Consulting and development of IT systems

The group enters into contracts for the design, development and installation of IT systems in exchange for a fixed fee and recognises the related revenue over time. Due to the high degree of interdependence between the various elements of these projects, they are accounted for as a single performance obligation. When a contract also includes promises to perform after-sales services, the total transaction price is allocated to each of the distinct performance obligations identifiable under the contract on the basis of its relative stand-alone selling price.

To depict the progress by which the group transfers control of the systems to the customer, and to establish when and to what extent revenue can be recognised, the group measures its progress towards complete satisfaction of the performance obligation by comparing actual hours spent to date with the total estimated hours required to design, develop, and install each system. The hours-to-hours basis provides the most faithful depiction of the transfer of goods and services to each customer due to the group’s ability to make reliable estimates of the total number of hours required to perform, arising from its significant historical experience constructing similar systems.

Most such arrangements include detailed customer payment schedules. When payments received from customers exceed revenue recognised to date on a particular contract, any excess (a contract liability) is reported in the statement of financial position (see note 34).

 

The construction of IT systems normally takes 10 – 12 months from commencement of design through to completion of installation. As the period of time between customer payment and performance will always be one year or less, the group applies the practical expedient in IFRS 15.63 and does not adjust the promised amount of consideration for the effects of financing.

In obtaining these contracts, the group incurs some incremental costs. As the amortisation period of these costs, if capitalised, would be less than one year, the group makes use of the practical expedient in IFRS 15.94 and expenses them as they incur. Such incremental costs are not considered to be material.

Payment gateway

The group enters into transactions with parties for the access to a payment gateway. The group’s revenue is mainly derived from the actual volume of traffic on the payment gateway and on other fixed charges. The price is agreed and established with the customer in written contracts and is allocated to the performance obligation accordingly. Prices are based on established amounts for such services. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Road, sea and air logistics services

Revenue from the provision of road, sea and air logistics services for an agreed price is recognised when or as the group completes delivery to the customer. Invoices for services rendered are due upon completion of the contracted service, which is usually immediately upon delivery to the customer. Control for these products is transferred at the point in time and occurs when the customer takes undisputed delivery of the goods on which the transportation service has been provided.

Ship-to-ship services

Revenue is recognised from the provision of support services for Ship-to-Ship (STS) cargo transfer operations, mainly oil and gas. In most instances, an STS operation takes between 24 and 48 hours to be completed, revenue is recognised upon completion of the operation.

Terminal management and consultancy services

Revenue arises from Liquefied Natural Gas (LNG) terminal management, emergency support services and consultancy. The performance obligations within these contracts typically consist of technical management and provision of consultancy. The performance obligations are satisfied concurrently, and consecutively rendered over the duration of the management contract over time. These are measured using the time elapsed from commencement of the contract. Consideration generally consists of fixed monthly management fees. Any costs incurred on behalf of the client are reimbursed. Management fees are invoiced monthly.

4.12       Interest and dividends

Interest income and expenses are reported on an accrual basis using the effective interest method. These are reported within ‘investment income’ and ‘finance costs’.

Dividends are recognised at the time the right to receive payment is established.

4.13       Operating expenses

Operating expenses are recognised in profit or loss upon utilisation of the service as incurred .

 

4.14      Borrowing costs

Borrowing costs include the costs incurred in obtaining external financing. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised from the time that expenditure for these assets and borrowing costs are being incurred and activities that are necessary to prepare these assets for their intended use or sale are in progress.  Borrowing costs are capitalised until such time as the assets are substantially ready for their intended use or sale. Borrowing costs are suspended during extended periods in which active development is interrupted. All other borrowing costs are recognised as an expense in profit or loss in the period in which they are incurred.

4.15      Employee benefits

The group contributes towards the state pension in accordance with local legislation. The only obligation of the group is to make the required contributions.  Costs are expensed in the period in which they are incurred.

4.16    Foreign currency translation

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the respective group entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate).  Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in the profit or loss.

Non-monetary items are not retranslated at the year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

In the group’s financial statements, all assets, liabilities and transactions of group entities with a functional currency other than the Euro are translated into Euro upon consolidation.  The functional currency of the entities in the group has remained unchanged during the reporting period.

On consolidation, assets and liabilities have been translated into Euro at the closing rate at the reporting date.  Income and expenses have been translated into Euro at the average rate over the reporting period.  Exchange differences are charged or credited to other comprehensive income and recognised in the translation reserve in equity.  On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

 

4.17    Intangible assets

An intangible asset is recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the company and the cost of the asset can be measured reliably. 

Intangible assets are initially measured at cost, being the fair value at the acquisition date for intangible assets acquired in a business combination. Expenditure on an intangible asset is recognised as an expense in the period when it is incurred unless it forms part of the cost of the asset that meets the recognition criteria or the item is acquired in a business combination and cannot be recognised as an intangible asset, in which case it forms part of goodwill at the acquisition date. 

The useful life of intangible assets is assessed to determine whether it is finite or indefinite. Intangible assets with a finite useful life are amortised. Amortisation is charged to profit or loss so as to write off the cost of intangible assets less any estimated residual value, over their estimated useful lives. The amortisation method applied, the residual value and the useful life are reviewed, and adjusted if appropriate, at the end of each reporting period.

Intangible assets are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are included in profit or loss in the period of derecognition.

Patents and trademarks

Patents and trademarks are classified as intangible assets. After initial recognition, patents and trademarks are carried at cost less any accumulated amortisation and any accumulated impairment losses. Patents and trademarks are amortised on a straight-line basis over ten years.

Internally developed software and acquired licences

Expenditure on the research phase of projects to develop new customised software is recognised as an expense as incurred.

Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements:

• the development costs can be measured reliably

• the project is technically and commercially feasible

• the group intends to and has sufficient resources to complete the project

• the group has the ability to use or sell the software

• the software will generate probable future economic benefits.

Development costs not meeting these criteria for capitalisation are expensed as incurred.

Directly attributable costs include employee costs incurred on software development along with an appropriate portion of relevant overheads and borrowing costs.

 

All finite-lived intangible assets, including capitalised internally developed software, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described in note 4.21. The following useful lives are applied:

 

 

Years

 

Internally developed software and acquired licences

3 – 10

 

Patents and trademarks

7 – 10

 

 

 

 

 

 

Any capitalised internally developed software that is not yet complete is not amortised but is subject to impairment testing as described in note 4.21.

 

Amortisation is included within depreciation, amortisation and impairment of non-financial assets.

 

Subsequent expenditures on the maintenance of computer software and brand names are expensed as incurred.

 

4.18    Plant and equipment

 


The group’s plant and equipment are classified into the following classes – improvements to premises, equipment, motor vehicles and furniture, fixtures and fittings.

 

Plant and equipment are initially measured at cost.  Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.  Expenditure on repairs and maintenance of plant and equipment is recognised as an expense when incurred.

 

Plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses.

 

Plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are included in profit or loss in the period of derecognition.

 

Depreciation

Depreciation commences when the depreciable assets are available for use and is charged to profit or loss so as to write off the cost, less any estimated residual value, over its estimated useful lives, using the straight-line method, on the following bases:

 

 

Years

 

Improvements to premises

2.5 – 5

 

Equipment

10 – 33

 

Motor vehicles

10 – 25

 

Furniture, fixtures and fittings

10 – 25

 

 

 

 

The depreciation method applied, the residual value and the useful life are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

4.19    Right-of-use assets

 

In the case of right-of-use assets, expected useful lives are determined by reference to comparable owned assets or the lease term, if shorter. Material residual value estimates and estimates of useful life are updated as required, but at least annually.  For leases on buildings, the right-of-use assets are being amortised over the lease term.

 

4.20    Leases

 

Measurement and recognition of leases

At lease commencement date, the group recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

The group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The group also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed) and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The group has elected to account for short-term leases using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

On the consolidated statement of financial position, the group has opted to disclose right-of-use assets and lease liabilities as separate financial statement line items.

 

4.21    Impairment testing of intangible assets and plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount.  The recoverable amount is the greater of its fair value less costs to sell and its value in use. To determine the value in use, the group’s management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows.  Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by the group’s management.

 

Impairment losses are recognised immediately in profit or loss. Impairment losses for cash-gener­ating units are charged pro rata to the assets in the cash-generating unit.  All assets are subsequently re­ass­essed for indications that an impairment loss previously recognised may no longer exist.  An impairment charge that has been recognised is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

4.22    Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when the group and the company become a party to the contractual provisions of the financial instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

 

• amortised cost

• fair value through profit or loss (FVTPL)

• fair value through other comprehensive income (FVOCI).

In the periods presented, the group and the company do not have any financial assets categorised as FVTPL and FVOCI.

The classification is determined by both:

 

• the entity’s business model for managing the financial asset

• the contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs or investment income, except for impairment of trade receivables which is presented within administrative expenses.

Subsequent measurement of financial assets

Financial assets at amortised cost

Financial assets are measured at amortised cost if the assets meet the following conditions (and

are not designated as FVTPL):

 

• they are held within a business model whose objective is to hold the financial assets and collect

its contractual cash flows

• the contractual terms of the financial assets give rise to cash flows that are solely payments of

principal and interest on the principal amount outstanding

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The group’s cash and cash equivalents, loans and receivables, contract assets and trade and most other receivables fall into this category of financial instruments.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply.

Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

As already indicated above, the group held no financial assets at fair value through profit or loss.

Financial assets at fair value through other comprehensive income (FVOCI)

Financial assets at FVOCI are classified accordingly if the assets meet the following conditions:

 

• they are held under a business model whose objective it is “hold to collect” the associated cash

flows and sell, and

• the contractual terms of the financial assets give rise to cash flows that are solely payments of

principal and interest on the principal amount outstanding.

Any gains or losses recognised in other comprehensive income will be recycled upon derecognition of the asset.

As already indicated above, the group held no financial assets at fair value through other comprehensive income.

Impairment of financial assets

IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI (the group had no debt-type financial assets at FVOCI), trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss (the group had no financial guarantee contracts).

The group considers a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

In applying this forward-looking approach, a distinction is made between:

 

• financial instruments that have not deteriorated significantly in credit quality since initial

recognition or that have low credit risk (‘Stage 1’) and

• financial instruments that have deteriorated significantly in credit quality since initial recognition

and whose credit risk is not low (‘Stage 2’).

‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.

’12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category.

Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.

Trade and other receivables and contract assets

The group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Refer to note 42.2 for a detailed analysis of how the impairment requirements of IFRS 9 are applied.

Classification and measurement of financial liabilities

The group’s financial liabilities include debt securities in issue, borrowings, lease liabilities and trade and other payables and other financial liabilities.

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the group designates a financial liability at fair value through profit or loss.

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). The group does not hold derivatives and financial liabilities designated at FVTPL.

All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or investment income.

4.23    Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method for the retail and IT solutions in Poland and the first in first out method for the technology division in Malta, and comprises expenditure incurred in acquiring the inventories and other costs incurred in bringing the inventories to their present location and condition. The cost of finished goods and work in progress comprises direct materials and, where applicable, direct labour costs and an appropriate proportion of production overheads based on the normal level of activity.  Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the costs to be incurred in marketing, selling and distribution.

4.24    Income taxes

Current and deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also dealt with in other comprehensive income or in equity, as appropriate.

Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items that are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets, including deferred tax assets for the carry forward of unused tax losses and unused tax credits, are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither accounting profit nor taxable profit.

Deferred tax liabilities are not recognised for taxable temporary differences arising on investments in subsidiaries/associates/interests in joint arrangements where the company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences arising on investments in subsidiaries/associates/interests in joint arrangements where it is probable that taxable profit will be available against which the temporary difference can be utilised and it is probable that the temporary difference will reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be utilised.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Current tax assets and liabilities are offset when the group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities are offset when the group entities have a legally enforceable right to set off its current tax assets and liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

4.25    Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows and are presented as borrowings in current liabilities in the statement of financial position.

 

4.26    Equity and reserves

Share capital represents the nominal value of shares that have been issued.

Retained earnings (accumulated losses) include all current and prior period results as disclosed in the consolidated statement of profit or loss and other comprehensive income less dividend distributions.

Translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the group’s entities denominated in foreign currencies.

Dividend distributions payable to equity shareholders are included with short-term financial liabilities when the dividends are approved in general meeting prior to the end of the reporting period.

4.27    Provisions and contingent liabilities

Provisions for legal disputes, onerous contracts or other claims are recognised when the group and the company have a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the group and the company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.

Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised.

4.28    Significant management judgement in applying accounting policies and estimation uncertainty

When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

Significant management judgements

The following are the judgements made by management in applying the accounting policies of the group that have the most significant effect on the financial statements.

Recognition of service and contract revenues

As revenue from after-sales maintenance agreements and consulting and development of systems contracts is recognised over time, the amount of revenue recognised in a reporting period depends on the extent to which the performance obligation has been satisfied. For after-sales maintenance agreements this requires an estimate of the quantity of the services to be provided, based on historical experience with similar contracts. In a similar way, recognising revenue for consulting and development of systems contracts also requires significant judgment in determining the estimated number of hours required to complete the promised work when applying the hours-to-hours method described in note 4.11. Management however considers that any variance in estimates on ongoing contracts would be insignificant to the group.

Capitalisation of internally developed software

Distinguishing the research and development phases of a new customised software project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired (see note 4.17).

Recognition of deferred tax assets

The extent to which deferred tax assets can be recognised is based on an assessment of the probability that future taxable income will be available against which the deductible temporary differences and tax loss carry-forwards can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions (see note 4.24).

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Impairment of intangible assets including goodwill and tangible assets

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount.  To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows (see note 4.21).  In the process of measuring expected future cash flows management makes assumptions about future operating results.  These assumptions relate to future events and circumstances.  The actual results may vary, and may cause significant adjustments to the group’s assets within the next financial year.

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

The group tests goodwill and intangible assets with an indefinite useful life annually for impairment or more frequently if there are indications that goodwill or intangibles might be impaired. Determining whether the carrying amounts of these assets can be realised requires an estimation of the recoverable amount of the cash generating units. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

Goodwill arising on a business combination is allocated, to the cash-generating units (“CGUs”) that are expected to benefit from that business combination.

The projections used in this year’s impairment review took into consideration the impact of Covid-19 and the projected gradual recovery from the pandemic. These projections were based on the actual performance of the group in 2021 and 2020, on our knowledge and understanding of Covid-19’s impact on the industries in which the group operates in, and our repositioning in the market.

Furthermore, following an in-depth review of the projections, management opted to include an execution risk premium (based on their professional judgement) to mitigate the current forecasting uncertainty and to obtain added comfort that the carrying value of the intangible assets is indeed recoverable.

 

At 31 December 2021, goodwill of the group was allocated as follows:

·     € 21,529,049 (2020:  € 21,368,026) to the polish subsidiary iSpot Poland Sp. Z.o.o. which operates the Apple Premium Reseller Business.

·     € 3,860,898 (2020: € 3,860,898) to APCO Systems Limited which operates the electronic payment gateway.

·     € 2,168,112 (2020: € 2,168,112) to APCO Limited which operates in the business of selling and   maintenance of IT solutions and security systems.

·     € 1,464,476 (2020: € 1,464,476) to PTL Limited which operates in the business of selling and   maintenance of IT solutions and security systems.

·     € 33,866,423 (2020: € 32,829,046) to Hili Logistics group which operates in the business of providing road, sea and air logistics services.

 

For further analysis of the movement within goodwill, refer to note 15 of these financial statements.

 

The goodwill relating to APCO Systems Limited and to APCO Limited arose in 2014 when the Harvest Technology p.l.c. acquired those two companies for a combined consideration of € 7.06 million. Since APCO Limited and APCO Systems Limited are two separately identifiable Cash Generating Units (‘CGUs’), Harvest was required to allocate the combined consideration of € 7.06 million between the two CGUs. At the time of the acquisition, management opted to allocate the € 7.06 million combined consideration on the basis of the average Earnings Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’) of APCO Limited and APCO Systems Limited.

 

Based on the Harvest’s internal records, the EBITDAs used to split this combined consideration were € 451,000 and € 760,000 for APCO Limited and APCO Systems Limited respectively. Thus, based on this allocation mechanism, the combined consideration of € 7.06 million was split as follows: €2.63 million for APCO Limited and € 4.43 million for APCO Systems Limited. Subsequent to this, a share price agreement reflecting the consideration determined for each company was entered into separately between the buyer and the seller. The consideration paid for each company acquired was then compared to the net assets acquired to arrive at the goodwill of each CGU.

 

During 2020, management conducted an exercise which was aimed at determining whether certain changes that have taken place since the acquisition of the two CGUs effect the allocation of goodwill that was conducted at the time of acquisition. Whilst noting that that there were no changes in the operations of both APCO Limited and APCO Systems Limited, pre-and post-acquisition, management noted that certain administrative recharges that used to be made from APCO Limited to APCO Systems Limited up to the date of acquisition were no longer being recharged post-acquisition. These recharges of administrative expenses, on average, amounted to € 86,400 per annum.

 

Although the total cash generation capabilities of both CGUs together remained unchanged, the termination of this recharge mechanism resulted in a change in the individual cash generation capabilities of the two CGUs. APCO Limited’s cash generating capability from operations (or its EBITDA) is reduced by € 86,400 per annum whereas the EBITDA of APCO Systems is increased by the same amount.

Taking the above into consideration it has been determined that goodwill amounting to € 503,650 should be reallocated between the two CGUs, that is APCO Limited’s goodwill should decrease by € 503,650 and conversely, APCO Systems’ goodwill should increase by the same amount, as shown below:

 

 

APCO Limited

APCO Systems Limited

Total

 

 

Goodwill recognised up to 31 December 2019

 

2,671,762

3,357,248

6,029,010

Reallocation

 

(503,650)

503,650

-

Goodwill at 31 December 2020

 

2,168,112

3,860,898

6,029,010

 

 

 

 

 

Consequently, at 31 December 2020, goodwill was allocated as follows:

€ 3,860,898 to APCO Systems Limited which operates the electronic payment gateway.

€ 2,168,112 to APCO Limited which operates in the business of selling and   maintenance of IT solutions and security systems.

€ 1,464,477 to PTL Limited business.

 

CGU – Retail and IT Solutions (Poland)

 

The recoverable amount of the CGUs is determined from the value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

 

The assessment of recoverability of the carrying amount of goodwill and intangible assets with indefinite useful life includes:

forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method;

growth rates to perpetuity of 2.1%; and

use of 13.1% (pre-tax) (2020: 14.2%) to discount the projected cash flows to net present values

 

 

Based on the above assessment, the directors expect the carrying amount of goodwill and intangible assets with an indefinite useful life to be recoverable.

 

CGU – Payment Processing Services

The recoverable amount of the CGUs is determined from the value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

 

The assessment of recoverability of the carrying amount of goodwill and intangible assets with indefinite useful life includes:

forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method;

growth rates to perpetuity of 0.2% (2020: 0.1%); and

use of 13.1 - 15.0% (pre-tax) (2020: 17.9%) to discount the projected cash flows to net present values

 

Based on the above assessment, the directors expect the carrying amount of goodwill and intangible assets with an indefinite useful life to be recoverable.

CGU – IT Solutions and Security Systems

The recoverable amount of the CGUs is determined from the value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

The assessment of recoverability of the carrying amount of goodwill and intangible assets with indefinite useful life includes:

forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method;

growth rates to perpetuity of 0.2% (2020: 0.1%); and

use of 14.4% - 19.3% (pre-tax) (2020: 14.8% - 25.6%) to discount the projected cash flows to net present values

 

 

Based on the above assessment, the directors expect the carrying amount of goodwill and intangible assets with an indefinite useful life to be recoverable.

CGU – Hili Logistics group

The directors of Hili Logistics group consider that the logistics business represents one single, consistent and homogenous operating segment. In defining this assumption for the purpose of testing goodwill for impairment, the directors consider that although the entity has essentially three operating interests, each component on its own is not representative of a separate component of the group’s operations. Moreover decisions about resource allocation are made for the logistics operations of Malta, Poland and the UK as a whole.  Furthermore the directors consider that the acquired STS business is closely linked to the STS operations in Malta and taking advantage of a number of synergies which are being experienced around the following areas:

Package offering where Carmelo Caruana Company Limited and STS Marine Solutions Ltd are in a better position to offer a single package to STS clients acting as one stop shop. This also brings a number of opportunities to cross-sell other services for vessel owners;

Carmelo Caruana Company Limited through its STS function and agency can work closely and share market intelligence with STS Marine Solutions Ltd leading to the introduction of new contacts thereby increasing market share;

Pricing and joint marketing can target a wider spectrum of clients; and

Sharing of market intelligence as well as resources will automatically bring along opportunities for cost savings and avoidance of being out-priced in a particular territory.

 

Through the group’s long standing relationship and the joint venture with CMA CGM Malta agency, the Hili Logistics group can now look into other areas for collaboration, complimentary to the current services including services relating to ship spares, customs clearance and other ancillary husbandary services.

In view of the above, the directors consider the logistics business to be one cash-generating unit (CGU).

The recoverable amount of the CGUs is determined from the value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

The assessment of recoverability of the carrying amount of goodwill and the investments held by the company includes:

forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method;

growth rates of 2.1%; and

use of 11.4% - 15.5% (pre-tax) (2020: 10.4% - 12.7%) to discount the projected cash flows to net present values

 

Following a review of the carrying amount of this CGU by the directors during 2021, the directors have concluded that no impairment is necessary.

Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the group. Actual results, however, may vary due to technical obsolescence.

Inventories

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.

Business combinations

Management uses valuation techniques when determining the fair values of certain assets and liabilities acquired in a business combination (see note 4.4).

 

5        Segment reporting

The group operates four (2020: four) business activities which are the sale of retail and IT solutions in Poland predominately as an Apple Premium Reseller, the sale of payment processing services, the provision of IT solutions and security systems and the provision of road, sea and air logistics services.

Each of these operating segments is managed separately as each of these lines requires local resources.  All inter segment transfers for management services are carried out on a cost basis.

The accounting policy for identifying segments is based on internal management reporting information that is regularly reviewed by the chief operating decision maker.

Revenue reported below represents revenue generated from external customers. There were no intersegment sales in the year.  The group’s reportable segments under IFRS 8 are direct sales attributable to each line of business.

The group operated in three principal geographical areas – Malta (country of domicile), UK and Poland. The sale of payment processing services and the provision of IT solutions and security systems are derived mainly from Malta whilst the sale of Apple products is derived from Poland. The provision of road, sea and air logistics services is carried out in Malta, UK and in Poland.

The revenue generated from implementation of the border security software solutions in Mauritius amounting to € 1,178,108 (2020: € 4,119,615) is reported in the ‘Retail and IT Solutions’ segment of the Group (refer to the table below).

In 2021 and 2020, the group did not have any clients which individually represented 10% or more of the total revenue of the group.

As at the end of the reporting period the total amount of intangible assets and plant and equipment amounted to € 12,062,520 (2020: € 11,689,473) and € 11,370,166 (2020:  € 10,056,907), respectively.

Measurement of operating segment profit or loss, assets and liabilities

Segment profit represents the profit earned by each segment after allocation of central administration costs and finance costs based on services and finance provided.  This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

The accounting policies of the reportable segments are the same as the group’s accounting policies described in note 4.

 

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities to consolidated totals are reported below:

Profit and loss before tax

 

2021

2020

 

 

 

 

Total profit for reportable segments

12,567,258

7,472,416

 

 

 

Unallocated amounts:

 

 

Interest expense

(1,303,212)

(2,185,489)

Other unallocated amounts

(2,947,535)

(985,087)

 

8,316,511

4,301,840

 

 

 

Assets

 

2021

2020

 

 

 

 

Total assets for reportable segments

102,050,640

93,721,442

Elimination of receivables

(69,873,110)

(69,008,703)

 

 

 

Unallocated amounts:

 

 

Goodwill

62,888,956

61,690,558

Intangible assets

10,218,294

10,140,355

Plant and equipment

1,966,991

1,968,093

Right-of-use assets

686,089

208,944

Loans and receivables

33,771,206

31,309,188

Deferred tax assets

420,692

410,470

Trade and other receivables

1,882,031

1,881,222

Cash and cash equivalents

2,406,555

661,779

Current tax assets

1,560,607

1,253,782

Other unallocated amounts

1,708,146

1,254,429

 

149,687,097

135,491,559

 

 

 

Liabilities

 

2021

2020

 

 

 

 

Total liabilities for reportable segments

78,444,200

71,806,127

Elimination of liabilities

(39,030,763)

(38,899,233)

 

 

 

Unallocated amounts:

 

 

Debt securities in issue

35,758,272

35,677,368

Other financial liabilities

10,916,585

20,017,785

Bank Loans

8,224,799

-

Lease liabilities

688,760

193,096

Deferred tax liabilities

371,910

371,910

Current tax liabilities

2,374

-

Trade and other payables

1,383,232

750,450

Other unallocated amounts

96,468

-

 

96,855,837

89,917,503

 

 

 

 


The group’s revenue and results from continuing operations from external customers and information about it assets and liabilities by reportable segment are detailed below:

 

 

 

Retail and IT solutions (Poland and Romania)

Payment processing services

IT Solutions and security systems

 

Land, sea and air logistics services

 

 

 

Total

 

 

 

Unallocated

 

Eliminations and adjustments

 

 

 

Consolidated

 

2021

 

 

 

 

 

 

 

 

Revenue

133,128,371

7,392,971

9,653,463

30,891,215

181,066,020

1,735,498

(10,646,570)

172,154,948

 

 

 

 

 

 

 

 

 

Profit before tax

4,661,916

3,681,137

1,235,369

2,988,836

12,567,258

5,883,694

(10,134,441)

8,316,511

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

3,959,504

415,595

257,720

1,181,786

5,814,605

179,742

(56,449)

5,937,898

 

 

 

 

 

 

 

 

 

Segment assets

70,967,272

4,029,437

9,891,162

17,162,769

102,050,640

144,076,943

(96,440,486)

149,687,097

 

 

 

 

 

 

 

 

 

Capital expenditure

2,176,551

285,553

18,557

1,887,801

4,368,462

7,516

(24,523)

4,351,455

 

 

 

 

 

 

 

 

 

Segment liabilities

48,528,449

2,054,220

7,765,122

20,096,413

78,444,204

56,974,022

(38,562,389)

96,855,837

 

 

 

 

 

 

 

 

 

Income tax expense

1,020,154

1,293,895

342,870

760,552

3,417,471

1,758,682

(2,698,082)

2,478,071

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

Revenue

111,033,408

7,796,063

12,987,177

23,818,894

155,635,542

899,186

(6,800,623)

149,734,105

 

 

 

 

 

 

 

 

 

Profit before tax

1,819,008

4,014,045

977,378

661,985

7,472,416

744,033

(3,914,609)

4,301,840

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

3,975,940

402,436

391,435

149,610

4,919,421

39,640

(36,332)

4,922,729

 

 

 

 

 

 

 

 

 

Segment assets

63,704,393

4,911,707

8,081,387

17,023,955

93,721,442

141,586,985

(99,816,868)

135,491,559

 

 

 

 

 

 

 

 

 

Capital expenditure

1,084,173

360,060

73,230

6,973,432

8,490,895

17,578

-

8,508,473

 

 

 

 

 

 

 

 

 

Segment liabilities

44,121,370

2,723,732

6,547,846

18,413,179

71,806,127

56,542,231

(38,430,855)

89,917,503

 

 

 

 

 

 

 

 

 

Income tax expense

559,410

1,404,915

233,024

120,084

2,317,433

246,442

(1,681,205)

882,670

 

 

 

 

 

 

 

 

 

 

 


6        Revenue

Revenue represents the amount receivable for goods sold and services rendered during the period from continuing operations, net of any indirect taxes as follows:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Sale and distribution of Apple products

122,579,592

105,870,985

-

-

Sale of IT related products

3,535,325

6,387,691

-

-

Logistics and transport services

30,891,215

23,818,894

-

-

Rendering of services and development

5,608,400

4,168,186

-

-

Maintenance, support and servicing

3,327,688

3,143,946

-

-

Payment gateway services

6,092,728

6,224,403

-

-

Management fees

120,000

120,000

1,010,000

725,000

 

172,154,948

149,734,105

1,010,000

725,000

 

 

 

 

 

Assets related to contracts with customers include amounts that the group expects to receive from performance obligations that have been satisfied before it receives the consideration and has not invoiced such amounts by the end of the year.

In 2021, sale and distribution of Apple products occurred in Poland. IT related products comprises the sale of information technology systems, security systems and other sale of products related to the technology business and is generated mainly from the Maltese operations of the group, with some projects being executed internationally. Logistics and transport services income is generated from Malta, UK and Poland with each contributing to the extent of 6%, 42% and 52% respectively (2020: Malta, UK and Poland, 13%, 41% and 46% respectively). All other revenue included in the above analysis is generated from the Maltese operations.

Other information concerning the types of contracts and contract durations, as relevant, are provided in notes 4.11 and 34.

Revenue from sales under the above activities are direct sales to customers with only a very insignificant amount being generated through intermediaries.

The following are the amounts recognised as contract assets at the end of the reporting periods presented:

 

 

 

The group

The group

 

 

 

2021

2020

 

 

 

 

 

 

 

 

Contract assets relating to rendering of services and development

 

 

457,912

1,523,001

Contract assets relating to commission income accrued on gateway

 

 

204,931

226,576

 

 

 

662,843

1,749,577

 

 

 

 

 

During 2020, one of the Group’s subsidiary had completed further project milestones in relation to a significant contract in Mauritius for the implementation of border security software solutions. This gave rise to significant contract assets amounting to € 1,460,982 on work which was completed and still not invoiced by 31 December 2020 and subsequently invoiced during 2021.

No single contract asset at 31 December 2021 exceeded 10% of the total contract asset at that date.

The assessment of credit losses on balances of contract assets at 31 December 2021 and 2020 did not result in any material amount and considered by management to be insignificant. 

Since the start of the conflict in Ukraine, management has suspended certain business transactions to abide by US and European sanctions. Though this will have a temporary financial impact, management is taking appropriate measures to mitigate any loss in business with new contracts in the US, Europe, Asia and North Africa.

 

Unsatisfied long-term performance obligations

The following aggregated amounts of transaction prices relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 31 December 2021:

 

2022

2023

2024

Later

 

 

 

 

 

 

Sale of goods

3,629,901

416,927

517,979

-

Consulting services and development

612,528

-

-

-

Maintenance and servicing

2,603,094

2,231,747

2,068,431

222,372

Logistics and transport services

2,377,915

2,377,915

2,377,915

2,377,915

Total revenue expected to be recognised

9,223,438

5,026,589

4,964,325

2,600,287

 

 

 

 

 

The comparative information as at the end of the previous reporting period ending 31 December 2020 was as follows:

 

2021

2022

2023

Later

 

 

 

 

 

 

Sale of goods

427,057

168,057

-

-

Consulting services and development

1,298,773

-

-

-

Maintenance and servicing

1,759,445

1,423,036

1,189,175

29,384

Logistics and transport services

2,194,789

2,194,789

2,194,789

4,389,578

Total revenue expected to be recognised

5,680,064

3,785,882

3,383,964

4,418,962

 

 

 

 

 

All long-term performance obligations that were expected to materialise in 2021 were completed and invoiced in full during the year under review. As at 31 December 2021, the movement in each respective year, mainly pertains to two new major contracts awarded to one of the Group’s subsidiaries in quarter four of 2021 which are expected to be completed over the next five years.

 

7        Other operating income

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Other operating income

94,471

261,323

-

-

 

 

 

 

 

 

 

8       Investment income

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Interest income from ultimate parent

51,822

99,996

51,821

-

Interest income from other related parties

21,319

16,433

1,554,423

676,544

Dividends from subsidiaries

-

-

3,820,882

1,280,250

 

73,141

116,429

5,427,126

1,956,794

 

 

 

 

 

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

Comprising:

 

 

 

 

Investment and other income

73,141

116,429

5,427,126

1,956,794

 

73,141

116,429

5,427,126

1,956,794

 

 

 

 

 

 

9       Finance costs

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Interest on bank borrowings

150,106

164,690

94,456

56,994

Interest on bonds

1,836,000

1,836,000

1,836,000

1,836,000

Interest expense for leasing arrangements

321,165

375,920

-

-

Other interest payable

277,514

222,990

-

-

Intra-group interest payable

677,068

533,710

747,549

780,874

Other finance costs

242,557

268,120

64,219

299,644

Unrealised exchange losses

-

579,671

68,866

658,284

Amortisation of bond issue costs

80,904

80,907

80,904

80,907

 

3,585,314

4,062,008

2,891,994

3,712,703

 

 

 

 

 

The unrealised exchange losses of the company in 2020 related to unrealised exchange differences on intercompany loans receivable from iSpot and denominated in Polish Zloty. There were no significant unrealised differences on such loan during 2021.

 

10       Profit (loss) before tax

The profit (loss) before tax is stated after charging/(crediting):

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Depreciation and amortisation (notes 16 and 17)

2,856,614

2,016,834

2,747

2,060

Depreciation on right-of-use assets (note 18)

3,081,284

2,905,895

-

-

Decrease in Provision for bad debts

(282,861)

-

-

-

Increase in Provision for Inventories

121,300

-

-

-

Net exchange differences

50,118

(484,685)

133,084

(658,284)

 

 

 

 

 

The analysis of the amounts that are payable to the auditors and that are required to be disclosed, are as follows:

Group

Total remuneration payable to the parent company’s auditors in respect of the audit of the financial statements and the undertakings included in the consolidated financial statements amounted to  € 78,132 (2020: € 74,885) and the remuneration payable to the other auditors in respect of the audits of the undertakings included in the consolidated financial statements amounted to  € 62,796 (2020: € 40,351). Other fees payable to the parent company’s auditors for non-audit services, namely the review of interim financial information performed at one of the subsidiaries within the group, tax services and other fees, amounted to € 22,333 (2020: € 36,150).

Holding company

Total remuneration payable to the parent company’s auditors for the audit of the company’s financial statements amounted to € 8,700 (2020: € 8,300). There are no other fees payable to the parent company’s auditors for non-audit services other than other assurance services and tax advisory services.

 

11        Key management personnel compensation

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Directors’ compensations

 

 

 

 

Short term benefits:

 

 

 

 

Fees

392,470

22,095

109,227

75,000

Management remuneration

2,208,740

1,861,245

-

-

 

2,601,210

1,883,340

109,227

75,000

 

 

 

 

 

Directors’ compensations

 

 

 

 

Short term benefits:

 

 

 

 

Salaries and social security contributions

489,445

354,708

-

-

 

 

 

 

 

Total key management personnel compensation

 

 

 

 

Short term benefits

3,090,655

2,238,048

109,227

75,000

 

 

 

 

 

 

12        Employee remuneration

Expenses recognised for staff costs are analysed below:

 

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Wages and salaries

16,860,559

13,090,904

718,227

487,273

Social security costs

1,435,560

1,564,071

14,925

9,706

Maternity fund contributions

8,907

8,281

449

301

 

18,305,026

14,663,256

733,601

497,280

Capitalised wages

(411,653)

(336,536)

-

-

Recharges to related parties

30,145

(10,670)

(4,500)

-

 

17,923,518

14,316,050

729,101

497,280

 

 

 

 

 

The average number of persons employed during the year by the group excluding executive directors, was made up of:

 

 

 

 

The group

 

 

 

2021

2020

 

 

 

 

 

Operations

 

 

457

443

Administration

 

 

148

124

 

 

 

605

567

 

 

 

 

 

 

13        Tax expense

The major components of tax expense and the reconciliation of the expected tax expense (income) based on the effective tax rate of the group and the company at 35% (2020: 35%) and the reported tax expense (income) in the statements of profit or loss and other comprehensive income are as follows:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Profit before tax

8,316,511

4,301,840

1,714,710

(2,366,750)

Tax rate

35%

35%

35%

35%

Expected tax expense (income)

2,910,77 9

1,505,644

600,149

(828,363)

 

 

 

 

 

Tax effect of:

 

 

 

 

Different tax rates of subsidiaries operating in other jurisdictions

 

(1,041,801)

 

(442,124)

 

-

 

-

Adjustment for local tax credits

-

(13,903)

-

-

Over provision of tax in prior year

-

(509,680)

-

(509,680)

Deferred tax not recognised

(7,778)

(117,143)

-

-

Non-taxable income

336,484

(476,026)

-

-

Disallowed expenses

(327,804)

918,231

(604,826)

517,658

Loss on foreign investment

379,105

-

-

-

Unabsorbed tax losses

(26,292)

11,178

-

-

Permanent differences

255,378

6,493

-

-

Actual tax expense (income), net

2,478,071

882,670

(4,677)

(820,385)

 

 

 

 

 

 

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Comprising:

 

 

 

 

Current tax expense

1,846,961

1,605,592

-

-

Foreign tax expense

81,953

88,806

-

-

Deferred tax expense (income)

61,150

(302,048)

(4,677)

(310,705)

Investment tax credit

488,007

-

-

-

Over provision of tax in prior year

-

(509,680)

-

(509,680)

 

2,478,071

882,670

(4,677)

(820,385)

 

 

 

 

 

Refer to note 36 for information on the deferred tax movements of the group and the company.

 

14      Dividends

No dividend was declared and paid by the company during the year.

 

15       Goodwill

The movements in the carrying amount of goodwill are as follows:

 

 

 

 

The group

 

 

 

 

 

 

 

 

 

At 1 January 2020

 

 

 

50,977,993

Effect of exchange differences on retranslation of goodwill on foreign subsidiaries

 

 

 

(3,641,494)

Amounts recognised on acquisition of a subsidiary within the group

 

 

 

14,354,059

At 31 December 2020

 

 

 

61,690,558

 

 

 

 

 

At 1 January 2021

 

 

 

61,690,558

Effect of exchange differences on retranslation of goodwill on foreign subsidiaries

 

 

 

1,198,400

At 31 December 2021

 

 

 

62,888,958

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 December 2020

 

 

 

61,690,558

At 31 December 2021

 

 

 

62,888,958

 

 

 

 

 

 

16       Intangible assets – The group

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

 

 

 

At 1 January 2020

 

 

 

13,096,576

Additions

 

 

 

630,097

Disposals

 

 

 

(868)

Effect of foreign exchange differences

 

 

 

(731,311)

At 31 December 2020

 

 

 

12,994,494

 

 

 

 

 

At 1 January 2021

 

 

 

12,994,494

Additions

 

 

 

772,951

Disposals

 

 

 

(545)

Effect of foreign exchange differences

 

 

 

73,408

At 31 December 2021

 

 

 

13,840,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

At 1 January 2020

 

 

 

919,527

Provision for the year

 

 

 

384,648

Released on disposal

 

 

 

(868)

Effect of foreign exchange differences

 

 

 

1,714

At 31 December 2020

 

 

 

1,305,021

 

 

 

 

 

At 1 January 2021

 

 

 

1,305,021

Provision for the year

 

 

 

470,094

Released on disposal

 

 

 

(545)

Effect of foreign exchange differences

 

 

 

3,218 

At 31 December 2021

 

 

 

1,777,788

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 December 2020

 

 

 

11,689,473

At 31 December 2021

 

 

 

12,062,520

 

 

 

 

 

The amortisation charge was included in administrative expenses.

Intangible assets include separately identified intangible assets acquired during 2014 as part of the business combinations amounting to € 12,000,000 which have been recognised separately from goodwill. Intangible assets were adjusted upwards by € 70,190 (2020: downwards by € 733,025) following the fluctuations of the Polish Zloty from the date of acquisition to the balance sheet date.

 

These intangible assets relate to:

·         Apple Premium Reseller operations operating under the brand iSpot together with related contracts – € 10,214,239 (2020: € 10,132,245). The useful life of this asset is considered to be indefinite as there was no foreseeable limit to the period over which the asset is expected to generate net cash inflows.  In arriving at this conclusion management considered such factors as the stability of the industry and changes in the demand for such products. This assessment is reassessed periodically.

·         APCO’s payment gateway system – € 1,000,000. The useful life of this asset was considered to be finite due to possible technological obsolescence and is being amortised on a straight line basis.  Until 31 December 2014, the group was amortising the intangible asset over 3 years.  Following the knowledge generated, the group re-assessed the remaining useful life of the asset to be 10 years.  Had the group not re-assessed the remaining useful life, the additional amortisation for the years 2015, 2016 and 2017 would have amounted to € 233,000 annually more. This asset would have been fully amortised by 31 December 2017 had the group not re-assessed the remaining useful life. As from 2018, the yearly amortisation on this asset amounts to € 89,855. The amortisation charge for the year is included within administrative expenses.

 

17       Plant and equipment – The group

 

Improvements to premises

Equipment

Motor vehicles

Furniture, fixtures and fittings

Total

Cost

At 1 January 2020

6,252,966

4,351,615

243,068

5,580,375

16,428,024

Additions

88,920

614,818

57,067

259,811

1,020,616

Taken over upon acquisition of subsidiary

 -

6,857,760

 -

 -

6,857,760

Disposals for the year

 (117,753)

 (630,430)

(17,742)

(1,121,460)

(1,887,385)

Effect of foreign currency exchange differences

            (230,605)

         (1,143,590)

              (17,549)

            (214,044)

         (1,605,788)

At 31 December 2020

5,993,528

10,050,173

264,844

4,504,682

20,813,227

 

 

 

 

 

At 1 January 2021

5,993,528

10,050,173

264,844

4,504,682

20,813,227

Additions

321,294

2,606,682

11,439

663,614

3,603,029

Taken over upon acquisition of subsidiary

 -

 -

 -

 -

 -

Disposals for the year

 (175,152)

 (781,179)

 -

 (119,780)

(1,076,111)

Effect of foreign currency exchange differences

              (18,491)

             380,283

                (1,084)

              (26,573)

             334,135

At 31 December 2021

6,121,179

12,255,959

275,199

5,021,943

23,674,280

 

 

 

 

 

Depreciation

At 1 January 2020

3,179,542

3,158,951

211,986

4,266,760

10,817,239

Charge for the year

430,555

610,792

38,104

552,735

1,632,186

Released on disposal

 (95,145)

 (464,568)

(17,742)

 (996,281)

(1,573,736)

Taken over upon acquisition of subsidiary

 -

322,398

 -

 -

322,398

Effect of foreign currency exchange differences

            (149,702)

              (92,765)

              (12,439)

            (186,861)

            (441,767)

At 31 December 2020

3,365,250

3,534,808

219,909

3,636,353

10,756,320

 

 

 

 

 

At 1 January 2021

3,365,250

3,534,808

219,909

3,636,353

10,756,320

Charge for the year

317,158

1,576,670

22,914

469,778

2,386,520

Released on disposal

 (166,472)

 (696,547)

 -

 (90,625)

 (953,644)

Taken over upon acquisition of subsidiary

 -

 -

 -

 -

 -

Effect of foreign currency exchange differences

                 9,090

               99,172

                   (535)

                 7,191

             114,918

At 31 December 2021

3,525,026

4,514,103

242,288

4,022,697

12,304,114

 

 

 

 

 

Carrying amount

 

 

 

 

 

At 31 December 2020

2,628,278

6,515,365

44,935

868,329

10,056,907

At 31 December 2021

2,596,153

7,741,856

32,911

999,246

11,370,166

 


Plant and equipment – The company

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

 

 

 

At 1 January 2020

 

 

 

7,376

Additions

 

 

 

1,490

At 31 December 2020

 

 

 

8,866

 

 

 

 

 

At 1 January 2021

 

 

 

8,866

Additions

 

 

 

2,508

At 31 December 2021

 

 

 

11,374

 

 

 

 

 

Depreciation

 

 

 

 

At 1 January 2020

 

 

 

2,846

Provision for the year

 

 

 

2,060

At 31 December 2020

 

 

 

4,906

 

 

 

 

 

At 1 January 2021

 

 

 

4,906

Provision for the year

 

 

 

2,747

At 31 December 2021

 

 

 

7,653

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 December 2020

 

 

 

3,960

At 31 December 2021

 

 

 

3,721

 

 

 

 

 

The depreciation charge was included in administrative expenses.

 


18       Right-of-use assets – The group

The following assets have been recognised as right-of-use assets of the group:

 

 

Buildings

Motor    vehicles

 

IT equipment

 

      

Total

 

 

 

 

 

 

Gross carrying amount

 

 

 

 

At 1 January 2020

12,960,802

526,997

48,110

13,535,909

Additions

1,888,266

23,691

-

1,911,957

Termination of leases

(208,323)

(10,013)

-

(218,336)

Foreign currency exchange differences

(715,091)

(643)

-

(715,734)

At 31 December 2020

13,925,654

540,032

48,110

14,513,796

 

 

 

 

 

At 1 January 2021

13,925,654

540,032

48,110

14,513,796

Additions

6,832,959

494,171

-

7,327,130

Disposals

-

(8,968)

-

(8,968)

Termination of leases

(3,592,688)

(183,696)

(48,110)

(3,824,494)

Foreign Currency Exchange differences

(1,302)

(73)

-

(1,375)

At 31 December 2021

17,164,623

841,466

-

18,006,089

 

 

 

 

 

Depreciation

 

 

 

 

At 1 January 2020

3,079,535

127,038

34,839

3,241,412

Provision for the year

2,787,133

108,198

10,564

2,905,895

Foreign currency exchange differences

(185,717)

(257)

(2,314)

(188,288)

At 31 December 2020

5,680,951

234,979

43,089

5,959,019

 

 

 

 

 

At 1 January 2021

5,680,951

234,979

43,089

5,959,019

Provision for the year

2,828,650

252,634

-

3,081,284

Termination of leases

(2,339,173)

(150,538)

(43,089)

(2,532,800)

Foreign currency exchange differences

(762)

(59)

-

(821)

At 31 December 2021

6,169,666

337,016

-

6,506,682

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 December 2020

8,244,703

305,053

5,021

8,554,777

At 31 December 2021

10,994,957

504,450

-

11,499,407

 

 

 

 

 

The depreciation charge on right-of use assets was included in administrative expenses.

The group has elected to disclose right-of-use assets separately in these financial statements. The information pertaining to the gross carrying amount, depreciation recognised during the year and other movements in right-of-use assets is included in the above table. Information pertaining to lease liabilities and their corresponding maturities are disclosed separately in note 19. Information about the accounting policy for the measurement and recognition of leases is disclosed in note 4.20.

The weighted average incremental borrowing rates applied to lease liabilities recognised under IFRS 16 was 3% on leases in Poland for the retail and IT solutions and 3.93% on leases in Malta and Poland for all other operations. Additions to right-of-use assets for buildings during the current reporting period amounting to € 648,765 (2020:  € 135,422) have been recognised using the rate of 3.93% as these were additions for leases in Malta and there were no changes in such rate on the date when the new leases came into effect. Additions of buildings amounting to € 6,149,945 (2020: € 1,752,844) made during the year comprise of additions in the Apple retail business in Poland at a rate of 3.93%. These additions include the singing of new contracts for the lease of outlets at iSpot.. The incremental borrowing rate will be re-assessed every time a new lease is entered into by the group and the corresponding right-of-use asset recognised. New leases are assessed on a case-by-case basis.

Most of the buildings leased by the group in Malta and the logistics business in Poland had similar remaining lease terms and utilised in a similar economic and commercial environment. For leases of the outlets pertaining to the retail and IT solutions in Poland, the group has applied the discount rate of 3.93% applicable for each lease agreement and according to the lease duration due to the number of outlets occupied by this division in that country.

 

In addition, the group has financed all of its obligations internally and has therefore not been subject to market fluctuations in the interest rate from its borrowings with third-parties.  The group does not expect these rates to vary significantly in the foreseeable future. Motor vehicles and IT equipment classified under right-of-use assets, are not considered by the group to be significant and therefore their initial measurement was not subject to a high degree of uncertainty.

 

19     Leases – The group

 

Lease liabilities are presented in the statement of financial position as follows:

2021

2020

Current:

Lease liability

3,034,583

2,302,930

Non-current:

Lease liability

8,882,191

6,536,682

11,916,774

8,839,612

The group has leases for its buildings, motor vehicles and IT equipment. With the exception of short-term leases and variable lease payments, each lease is included in the statement of financial position as a right-of-use asset and a lease liability. The group does not have any leases of low-value underlying assets which do not depend on an index or a rate (such as lease payments based on a percentage of group sales). The company classifies its right-of-use assets in a consistent manner to its plant and equipment as applicable.

 

Each lease generally imposes a restriction that, unless there is a contractual right for the group to sublet the asset to another party, the right-of-use asset can only be used by the group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. The group is prohibited from selling or pledging the underlying leased assets as security. For leases over buildings, the group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the group must insure items under lease and incur maintenance fees on such items in accordance with the lease contracts.

 

The range of the remaining lease term of the group’s buildings is 1 – 9 years, whilst the range of the remaining lease term of both motor vehicles and IT equipment is 1 - 4 years.

 

The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 31 December 2021 were as follows:

 

Minimum lease payments

 

Later than one year

Not later than one

but not later than

Later than

 year

five years

five years

Total

31 December 2021

Lease payments

3,678,636

9,569,282

345,832

13,593,750

Finance charges

 (644,053)

 (1,011,093)

 (21,830)

 (1,676,976)

Net present values (note 38)

3,034,583

8,558,189

324,002

11,916,774

 

Further to the above, note 38 details changes in the company’s and the group’s liabilities arising from financing activities including both cash and non-cash changes.

 

Future minimum lease payments at 31 December 2020 were as follows:

 

Minimum lease payments

Not later than one year

Later than one year but not later than five years

Later than five years

Total

31 December 2020

Lease payments

  3,042,924

   6,323,508

     831,307

 10,197,739

Finance charges

   (739,994)

    (572,095)

     (46,038)

  (1,358,127)

Net present values (note 38)

  2,302,930

   5,751,413

     785,269

   8,839,612

 

Lease payments not recognised as liabilities

 

One of the Maltese subsidiaries has a short-term lease with a third party for the use of warehousing space in Malta. The contract is renewable every year and can be terminated by either of the parties with a short period of notice. As a result, management considers this lease to be a short-term lease for the purposes of IFRS 16. Payments made under short term leases are expensed on a straight-line basis.

 

The group also leases certain properties in Poland whereby it is committed to pay monthly payments to lessors based on the sales of each particular shop.  This is considered as variable lease payments and therefore not permitted to be recognised a lease liability and is expensed as incurred.

 

The lease expense recognised in the consolidated statement of profit or loss and other comprehensive income of the group for the year is as follows:

 

2021

2020

Short-term leases of warehouse

240,142

219,901

Variable lease payments

402,270

265,978

642,412

485,879

 

 

20      Investment in subsidiaries

20.1   The company

 

2021

2020

 

 

 

 

At 1 January

66,832,577

55,332,577

Additions through the setting up of new companies

-

11,500,000

Transfer through non-cash consideration

-

(11,500,000)

Additions as a result of increase in share capital of subsidiary

-

11,500,000

At 31 December

66,832,577

66,832,577

 

 

 

On 30 April 2020, the company acquired the STS Marine Solutions business from Teekay Tankers Limited.

During 2020, the company constituted two subsidiaries, STS Marine Solutions Limited and Carmelo Caruana Marine Solutions Limited with an initial investment of € 11,000,000 and € 500,000 respectively. The purpose of these companies was for the acquisition of the STS business by the group.

On 20 November 2020, the company transferred its investment in STS Marine Solutions Limited and Carmelo Caruana Marine Solutions Limited to Hili Logistics Limited, one of the direct subsidiaries of the group.

The transfer of € 11,500,000 as disclosed above was effected through a non-cash consideration transfer of investments which was also reflected as a corresponding increase in the share capital of Hili Logistics Limited.

 

20.2   The group

1923 Investments p.l.c. has investments in the following subsidiaries:

Name of subsidiary

Place of incorporation

Proportion ownership interest

Holding

Portion voting power held

Principal activity

2021

2020

2021

2020

%

%

%

%

Harvest Technology p.l.c

Malta

62.95

62.95

Direct

62.95

62.95

Holding company

iSpot Poland Sp. z o.o

Poland

100

100

Direct

100

100

Sale of retail and IT solutions

Hili Logistics Limited

Malta

100

100

Direct

100

100

Holding company

PTL Limited

Malta

100

100

Indirect

100

100

Sale of IT solutions and security systems

APCO Limited

Malta

100

100

Indirect

100

100

Sale of IT solutions and security systems

APCO Systems Limited

Malta

100

100

Indirect

100

100

Payment processing services

SAD Sp. z o.o

Poland

100

100

Indirect

100

100

Sale of retail and IT solutions

iSpot Premium Romania

Romania

100

100

Indirect

100

100

Sale of retail and IT solutions

Ipsyon Ltd

Malta

100

100

Indirect

100

100

Holding of intellectual property

Carmelo Caruana Company Limited

Malta

100

100

Indirect

100

100

Warehousing and ship-to-ship operations

STS Marine Solutions Limited

Jersey

100

100

Indirect

100

100

Holding company

Carmelo Caruana Marine Solutions Limited

UK

100

100

Indirect

100

100

Holding company

STS Marine Solutions (UK) Limited

UK

100

100

Indirect

100

100

Backoffice services

STS Marine Solutions (Bermuda) Limited

Bermuda

100

100

Indirect

100

100

Ship-to ship operations

SPT Marine Transfer Services Limited

Bermuda

100

100

Indirect

100

100

Terminal management

Guardian L.L.C.

Marshall Islands

100

100

Indirect

100

100

Operation of vessel

Allcom Sp. z.o.o.

Poland

100

100

Indirect

100

100

Shipping and freight forwarding

 

Information about direct subsidiaries of the company is as follows:

Name of company

Registered office

Capital and reserves at 31 December

Profit/(loss) for the year ended 31 December

2021

2020

2021

2020

   €

   €

Harvest Technology p.l.c

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

 12,992,832

 12,073,378

  2,286,300

  1,809,807

iSpot Poland Sp. z o.o

UL. Pulawska 2, 02-566 Warsaw, Poland

 21,574,000

 19,842,912

  3,516,000

  1,137,979

iSpot Premium Romania

1st District, 246 B Floreasca street, Shopping Centre Promenada, first floor Unit no. 1F-055, Bucharest, Romania

(335,510)

(335,510)

 -

 -

Hili Logistics Limited

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

 33,791,833

 34,372,508

     119,325

     234,146

The company also has indirect investments in subsidiaries as follows:

Name of company

Registered office

PTL Limited

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

APCO Limited

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

APCO Systems  Limited

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

Ipsyon Ltd

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

Carmelo Caruana Company Limited

Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000 Malta

Allcom Sp. z o.o.

ul. Mariacka 9, 81-383 Gdynia, Poland

STS Marine Solutions (UK) Limited

1, The Cloisters, Sunderland, Tyne & Wear, United Kingdom, SR2 7BD

Carmelo Caruana Marine Solutions Limited

c/o Squire Patton Boggs (UK) LLP (Ref: CSu), Rutland House, 148 Edmund Street, Birmingham B3 2JR

STS Marine Solutions Limited

PO Box 536, 13-14, Esplanade, St. Helier, Jersey JE4 5UR

STS Marine Solutions (Bermuda) Limited

Appleby, Canon’s Court , 22 Victoria Street, Hamilton, Bermuda, HM 12

SPT Marine Transfer Services Limited

Appleby, Canon’s Court , 22 Victoria Street, Hamilton, Bermuda, HM 12

Guardian L.L.C.

Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands

 

 

 

21        Investments accounted for using the equity method

The group’s investments accounted for using the equity method comprise:

 

The group

The group

 

2021

2020

 

 

 

 

Investment in associates

715,015

496,191

Investment in joint ventures

1,053,642

965,831

 

1,768,657

1,462,022

 

 

 

21.1    Investment in associates

The group’s investment in associate undertakings is analysed below:

 

The group

The group

 

2021

2020

 

 

 

 

At 1 January

496,191

270,678

Share of profits and losses

684,324

421,513

Dividends from associate

(465,500)

(196,000)

At 31 December

715,015

496,191

 

 

 

The group has investment in associates through Hili Logistics Limited as follows:

 

Name of company

Proportion of ownership interest

Capital and reserves at 31 December

Profit/(loss) for the year ended 31 December

2021

2020

2021

2020

2021

2020

%

%

CMA CGM Agency Malta Ltd

49

49

1,473,796

1,017,538

1,396,580

860,230

 

The net accumulated interest in the net assets of CMA CGM Agency Malta Limited amount to € 715,015 as at 31 December 2021 (2020: € 496,191).

The registered office of the above associates is Nineteen Twenty-Three, Valletta Road, Marsa, Malta.

 

21.2     Investment in joint ventures

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

At 1 January

            965,831

            907,996

            682,375

            682,375

Share of profits and losses

            139,558

              57,835

 -

 -

Dividends from joint ventures

            (51,747)

 -

 -

 -

At 31 December

         1,053,642

            965,831

            682,375

            682,375

 

The group has joint venture investments in iCentre Hungary Kft and Hili Salomone Company Limited through Harvest Technology p.l.c. as follows:

Name of company

Proportion of ownership interest

Capital and reserves at 31 December

Profit/(loss) for the year ended 31 December

 

2021

2020

2021

2020

2021

2020

 

%

%

 

 

 

 

 

 

 

Hili Salomone Company Limited

 

N/A

 

50

N/A

(3,200)

N/A

N/A

 

 

 

 

 

 

 

iCentre Hungary Kft

50

50

1,070,006

904,974

279,117

115,670

 

 

 

 

 

 

 

The registered office of Hili Salomone Company Limited was Nineteen Twenty-Three, Valletta Road, Marsa, Malta. The company was struck off on 10 December 2021.

The company holds 50% directly in iCentre Hungary Kft. The registered office of iCentre Hungary Kft is Bécsi út 77-79, 1036 Budapest, Hungary.

Summarised financial information in respect of joint ventures is set out below:

 

The group

The group

 

2021

2020

 

 

 

 

Carrying asset amount

1,053,642

965,831

 

 

 

Group’s share of total profit / total comprehensive income

139,558

57,835

 

 

 

Included in the investment in joint ventures, is an investment of € 1,053,642 (2020: € 965,831) pertaining to the investment in iCentre Hungary Kft. A summary of the financial information of this joint venture is set out below:

 

The group

The group

 

2021

2020

 

 

 

 

Current assets

3,737,258

3,387,094

Non-current assets

471,312

620,243

Current liabilities

(3,171,687)

(3,102,035)

Net assets

1,036,883

905,302

 

 

 

Revenue

14,258,023

11,611,346

Expenses

(13,978,906)

(11,495,676)

 

 

 

Profit for the year (net of tax)

279,117

115,670

 

 

 

Group’s share of total profit / total comprehensive income

139,558

57,835

 

 

 

 

 

22      Other investment

 

The group

The group

 

2021

2020

 

 

 

 

As at 1 January

50,000

50,000

Additions

1,099,977

-

Ast at 31 December

1,149,977

50,000

 

 

 

During 2021, Harvest Technology p.l.c. made an additional investment in Thought3D Limited amounting to € 99,977.  Additionally, during 2021, one of the subsidiaries of 1923 Investments Plc has invested an amount of € 1,000,000 in shares issued by Hili Properties p.l.c., a public listed company on the Malta Stock Exchange and a related company within the Hili Ventures Limited group.

 

 

23      Loans and receivables

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Loans receivable from ultimate parent

3,021,075

411,832

3,016,562

210

Loans receivable from subsidiaries

-

-

30,609,375

30,486,193

Loans receivable from other related parties

137,792

246,577

3,796

116,974

Other receivables

1,613,814

1,719,795

-

-

 

4,772,681

2,378,204

33,629,733

30,603,377

 

 

 

 

 

Comprising:

 

 

 

 

Non-current

 

 

 

 

Loans receivable from subsidiaries

-

-

23,828,586

26,091,177

Loans receivable from other related parties

131,132

126,742

-

-

Other receivables

1,613,814

1,719,795

-

-

 

1,744,946

1,846,537

23,828,586

26,091,177

 

 

 

 

 

Current

 

 

 

 

Loans receivable from ultimate parent

3,021,075

411,832

3,016,562

210

Loans receivable from subsidiaries

-

-

6,780,789

4,395,016

Loans receivable from other related parties

6,660

119,835

3,796

116,974

 

3,027,735

531,667

9,801,147

4,512,200

 

 

 

 

 

Loans issued to ultimate parent, subsidiaries, other related parties and associate bear an interest of 4.5% (2020: 4.5%) per annum. Though these loans have no fixed date for repayment, they are not expected to be realised within 12 months of the end of the reporting year.

 

 

24      Inventories

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Contracts in progress

852,112

821,626

-

-

Finished goods and goods held for resale

10,157,295

8,870,374

-

-

Fuel

84,663

-

-

-

 

11,094,070

9,692,000

-

-

 

 

 

 

 

 

The amount of inventories recognised as an expense during the year amounted to € 109,019,332 (2020: € 96,845,677).

 

 

Write-downs of inventories recognised in the consolidated statement of profit or loss and other comprehensive income during the year amounted to (€ 99,881) (2020:  € 275,187) and are included with cost of sales.

 

 

25      Other assets

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Prepayments

2,288,380

1,013,114

160,779

25,868

 

2,288,380

1,013,114

160,779

25,868

 

 

 

 

 

 

 

26      Trade and other receivables

Trade and other receivables consist of the following:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Trade receivables – gross

13,603,885

8,671,624

-

-

Allowance for expected losses

(254,591)

(537,452)

-

-

Trade receivables – net

13,349,294

8,134,172

-

-

Amount owed by ultimate parent

53,764

16,025

-

-

Amounts owed by associates

306,716

383,250

-

-

Amounts owed by other related parties

1,431,424

1,428,486

-

-

Other receivables

259,352

436,065

-

21,380

Accrued income

365,974

400,144

-

150,000

Financial assets

15,766,524

10,798,142

-

171,380

Other receivables

1,331,330

1,818,460

86,609

200,000

Trade and other receivables – current

17,097,854

12,616,602

86,609

371,380

 

 

 

 

 

The carrying value of financial assets is considered a reasonable approximation of fair value.

No interest is charged on trade and other receivables.

Amounts owed by ultimate parent, associates and other related parties are unsecured, interest free and repayable on demand.

Note 42.2 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses.

 

 

27      Cash and cash equivalents

Cash and cash equivalents include the following component:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Cash and bank balances

9,666,172

11,380,270

1,297,371

416,990

Cash and cash equivalents in the statements of financial position

 

9,666,172

 

11,380,270

 

1,297,371

 

416,990

 

 

 

 

 

Bank overdrafts

-

(4,719,247)

-

-

Cash and cash equivalents in the statements of cash flows

 

9,666,172

 

6,661,023

 

1,297,371

 

416,990

 

 

 

 

 

The group and the company did not have any restrictions on its cash at bank as at the end of the reporting period. Any interest earned on cash at bank is based on market rates.

 

 

28      Share capital

The share capital of 1923 Investments p.l.c. consists only of ordinary shares with a par value of € 1. All shares are equally eligible to receive dividends and repayment of capital and represent one vote at the shareholders’ meeting of the company.

 

2021

2020

Shares issued and fully paid at 31 December

52,135,000 (2020: 49,575,000) ordinary shares of € 1 each

52,135,000

49,575,000

52,135,000

49,575,000

 

 

Shares authorised at 31 December

70,000,000 ordinary shares of € 1 each

70,000,000

70,000,000

 

During 2021, an amount of € 2,560,000, which was advanced by Hili Ventures Limited and which was included with equity (refer to note 29), was capitalised through the issue of € 2,560,000 ordinary shares of € 1 each on 27 April 2021.

 

 

29      Other equity

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Loan from parent company

-

(2,560,000)

-

(2,560,000)

Other equity

4,741,736

4,741,736

(154,629)

(154,629)

Total other equity

4,741,736

2,181,736

(154,629)

(2,714,629)

 

 

 

 

 

On 30 December 2013, the company, through its direct subsidiary, Harvest Technology p.l.c., acquired 100% interest in PTL Limited, 50% interest in Hili Salomone Company Limited and 33% interest in Smart Technologies Limited from a related party, Hili Company Limited. Both Hili Company Limited and 1923 Investments p.l.c. have the same parent company, Hili Ventures Limited.

The acquisition of the subsidiary, PTL Limited, and its underlying subsidiaries by the company falls outside the scope of International Financial Reporting Standard 3 – Business Combinations (“IFRS 3”) because the transaction merely represents a group reorganisation and because in terms of paragraph 2(c) of IFRS 3, the acquisition of these entities by the company is a combination of businesses under common control in which all the combining entities are ultimately controlled by the same party, Hili Ventures Limited, both before and after the business combination and that control is not transitory.

The difference of € 1,367,314 between consideration for the acquired entities of € 3,551,791 and the amounts at which the assets and liabilities of the acquired entities were recognised of € 2,184,477 are included in equity in terms of predecessor accounting.

On 22 December 2016, Harvest Technology p.l.c. eliminated € 1,754,051 of its accumulated losses through a reduction of its share premium account of the same amount. At consolidated level, this is included in equity.  During 2017, the € 1,754,051 reduction in share premium took effect and was eliminated against losses.

During 2017, the interest in Smart Technologies Limited was disposed of by the group and an amount of € 300,000 previously recognized in other equity was eliminated.

On 2 December 2017, Hili Logistics Limited eliminated € 2,075,000 of its accumulated losses through a reduction of its share premium account of the same amount. At consolidation level, this is included in equity.

The group and the company also recognised a total amount of € 154,629 with other equity representing the value of services provided by an officer of the group during 2018 and 2017.

An amount of €2,560,000 was was part of the other equity of the group and which related to an advancement by the parent company was capitalised during 2021 (refer to note 28).

In connection with such loan, on 15 December 2020, the shareholders approved the issue and allotment of two million and five hundred and sixty thousand (2,560,000) Ordinary shares of one € 1 each, fully paid up, through the capitalization of a loan payable by the company for the same amount. This process was concluded during 2021.

 

 

30      Translation reserve

The group’s foreign operations expose the group to exchange movements in other comprehensive income.

The movement for the year was mainly attributable to a weaker Polish Zloty (PLN) against the euro closing at PLN 4.5969 at 31 December 2021 (2020: PLN 4.5597) and the US Dollar (USD) against the euro of USD 1.1326 at 31 December 2021 (2020: USD 1.2271). This resulted in a positive impact of € 1,641,334 (2020: negative impact of € 4,978,238).

 

 

31      Debt securities in issue

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

5.1% unsecured bonds redeemable 2024

35,758,272

35,677,368

35,758,272

35,677,368

 

35,758,272

35,677,368

35,758,272

35,677,368

 

 

 

 

 

In December 2014, the company issued 360,000 5.1% unsecured bonds of a nominal value of € 100 per bond.  The bonds are redeemable at their nominal value on 4 December 2024.

Interest on the bonds is due and payable annually on 4 December of each year.

The bonds are listed on the Official List of the Malta Stock Exchange.  The carrying amount of the bonds is net of direct issue costs of € 241,725 (2020: € 322,629) which are being amortised over the life of the bonds.  The market value of debt securities on the last trading day before the statement of financial position date was € 36,720,000 (2020: € 36,536,400).

 

 

32

Borrowings

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Bank overdrafts

-

4,719,247

-

-

Bank loans

8,224,799

2,398,570

8,224,799

2,106,373

 

8,224,799

7,117,817

8,224,799

2,106,373

 

 

 

 

 

Comprising:

 

 

 

 

Non-current liabilities

 

 

 

 

Bank loans

6,748,228

1,811,780

6,748,228

1,811,780

 

6,748,228

1,811,780

6,748,228

1,811,780

 

 

 

 

 

Current liabilities

 

 

 

 

Bank overdrafts

-

4,719,247

-

-

Bank loans

1,476,571

586,790

1,476,571

294,593

 

1,476,571

5,306,037

1,476,571

294,593

 

 

 

 

 

 

Bank overdrafts and loans are repayable as follows:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

On demand or within one year

1,476,571

5,306,037

1,476,571

294,593

Second to fifth year

6,473,408

1,285,714

6,473,408

1,285,714

More than five years

274,820

526,066

274,820

526,066

 

8,224,799

7,117,817

8,224,799

2,106,373

 

 

 

 

 

At the end of the previous period, one of the subsidiaries of Harvest Technology p.l.c, had a facility of USD 1,000,000. The Group had utilised € 739,456. At 31 December 2020, the outstanding loan from this facility amounted to € 292,197 as shown above. The loan bore interest of 2.5% per annum over 3-month LIBOR and was secured by a first general hypothec over the subsidiary’s  assets and a guarantee by the parent Company. The loan was fully repaid by the end of January 2021.

Harvest Technology p.l.c. has three overdraft facilities in two of its subsidiaries amounting to €1,070,000 secured by general hyotechs over present and future assets of the Harvest group and bear interest between 3.5% and 5.5%.

During 2020, 1923 Investments p.l.c. obtained a loan with a local bank for € 2,250,000. Another loan was obtained with this same bank during 2021 for € 430,000. This loan is unsecured and ranks with priority to all other general creditors of the company. At 31 December 2021, the balance of the loans amounted to € 1,807,129 (2020: € 2,106,373) and € 417,670 respectively, included with the balance of bank loans above. The loans are payable by quarterly installments of € 91,045 and  € 17,208 respectively, bear interest at 3.75% plus 3 month Euribor per annum and repayable in full within 7 years of drawdown. This loan is unsecured and ranks with priority to all other general creditors of the company.

In December 2021, 1923 Investments plc obtained a loan from another local bank for € 6,000,000. The loan is payable by quarterly instalments of € 330,860 and bears interest at 3.75% per annum plus 3 month Euribor per annum and repayable in full within 5 years from drawdown. At 31 December 2021, the balance of the loans amounted to € 6,000,000. This loan was granted under a first General Hypotech of 6,000,000 over all assets present and future, whilst ranking with priority to all other general creditors of the company.

The group’s other overdraft facilities in Malta bear effective interest at a floating rate of 5.09% (2020: 5.09%) per annum. These are secured by first and second general and special hypothecary guarantees over the assets of Carmelo Caruana Company Limited.

The group’s overdraft facility in Poland for Allcom Sp. z.o.o. bears variable interest rate of 1.4% (2020: 1.7%) per annum. It is secured on the bank guarantee issued by Bank Gospodarstwa Krajowego from de minimis support.

The group’s banking facilities for iSpot Poland Sp. z.o.o. includes an overdraft facility of PLN 8,000,000 (€1,740,303) and Import Loan facilities of PLN 25,000,000 (€5,438,448) and a receivable financing of PLN 3,000,000 (€652,614).

The above facilities are secured by corporate guarantees provided in favour of the suppliers of Apple products for an amount of PLN 72,000,000 (€15,662,729). Included within the PLN 72,000,000 there is  PLN 6,000,000 guarantee line for rental payment of store outlets up to one year.

 

 

33

Trade and other payables

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Trade payables

18,404,342

13,064,770

42,039

54,637

Amounts payable to parent company

1,276

-

-

-

Amounts payable to related parties

53

400,074

-

-

Other payables

1,429,754

952,885

184,503

172,797

Accrued expenses

5,645,103

2,623,755

474,835

482,959

Financial liabilities

25,480,528

17,041,484

701,377

710,393

Other creditors

4,308,377

4,971,790

-

-

Deferred income

1,022,559

775,501

-

-

Trade and other payables

30,881,464

22,788,775

701,377

710,393

 

 

 

 

 

Comprising:

 

 

 

 

Non-current payables

 

 

 

 

Trade and other payables

239,197

185,927

-

-

 

 

 

 

 

Current payables

 

 

 

 

Trade and other payables

30,572,267

22,602,848

701,377

710,393

 

 

 

 

 

The carrying values of financial liabilities are considered to be a reasonable approximation of fair value.

No interest is charged on trade and other payables.

 

 

34      Contract liabilities

 

The group

The group

 

2021

2020

 

 

 

 

Deferred service income on rendering of services and development

314,046

83,641

Deferred service income on maintenance, support and servicing

2,154,388

1,071,381

Deferred service income on other gateway income and access fees

95,356

88,518

Deferred service income on licences

80,428

71,706

Deferred income on sale of information technology solutions

1,466,498

-

 

4,110,716

1,315,246

 

 

 

Deferred service income represents customer payments received or due in advance of performance (contract liabilities) that are expected to be recognised as revenue in the future. As described in note 4.11, maintenance, servicing and support contracts are entered into for periods between 1 and 5 years. On the other hand, consultancy and development of IT systems are usually completed within 12 months. Nevertheless, the Group may occasionally have projects for consultancy and development of IT systems that span over more than 12 months.

As explained in note 6, two new major contracts were awarded to one of the Group’s subsidiaries in quarter four of 2021 which are expected to be completed over the next five years.  The movement in Contract liabilities illustrated above, substantially pertains to invoices raised before the year-end for works to be carried out in the future, in relation to these contracts.

 

 

35

Other financial liabilities

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

 

 

 

 

 

Amounts owed to ultimate parent

239,026

957,853

27,213

35,033

Amounts owed to joint venture

-

-

-

155,717

Amounts owed to other related parties

3,545,298

10,684,235

3,545,322

11,000,000

Amounts owed to subsidiaries

-

-

-

792,635

Amounts owed to group companies

-

-

4,361,050

-

 

3,784,324

11,642,088

7,933,585

11,983,385

 

 

 

 

 

Comprising:

 

 

 

 

Non-current liabilities

 

 

 

 

Other financial liabilities

211,779

11,402,552

2,282,655

11,983,385

 

 

 

 

 

Current liabilities

 

 

 

 

Other financial liabilities

3,572,545

239,536

5,650,930

-

 

 

 

 

 

The terms and conditions of amounts owed to the parent and other related parties are disclosed in note 40.

 

 

36      Deferred tax assets and liabilities

 

Deferred tax arising from temporary differences are summarised as follows:

 

The group

 

1 Jan 2021

Recognised in profit or loss

31 Dec 2021

 

 

 

 

 

 

 

Deferred tax assets arising on:

 

 

 

 

Plant and equipment

 

204,124

15,436

219,560

Unabsorbed capital allowances

 

125,467

(6,993)

118,474

Unabsorbed tax losses

 

137,837

(50,815)

87,022

Provisions

 

803,616

(41,509)

762,107

Other temporary differences

 

336,840

36,177

373,017

Total

 

1,607,884

(47,704)

1,560,180

 

 

 

 

 

Deferred tax liabilities arising on:

 

 

 

 

Intangible assets

 

(292,351)

10,757

(281,594)

Plant and equipment

 

(446,858)

21,870

(424,988)

Provisions

 

(130,910)

(37,835)

(168,745)

Other temporary differences

 

(379,446)

(8,238)

(387,684)

Total

 

(1,249,565)

(13,446)

(1,263,011)

 

 

 

 

 

 

At 31 December 2021, the deferred tax asset recognised amounting to € 1.6 million (2020: € 1.6 million), comprises of an amount of € 0.4 million (2020: € 0.4 million) arising in the Harvest Technology division, € 0.8 million (2020: € 0.8 million) in the iSpot division, € 0.1 million (2020: € 0.1 million) in the Hili Logistics division and € 0.3 million (2020: € 0.3 million) in the 1923 Investments Plc

With respect to the deferred tax asset balance arising in the Harvest Technology division, the group has sufficient information to conclude that this division has, or will be recovering most if not all, of the asset in the very near future as profitability remains strong.

With respect to the iSpot division, the results continue to show significant growth in profitability which re-assures the directors of the company that the deferred tax asset balance will be recovered in the foreseeable future.  The directors also believe that the growth trajectory at iSpot will continue in the foreseeable future.

 

Deferred taxes for the comparative period 2020 can be summarised as follows:

 

The group

 

1 Jan 2021

Recognised in profit or loss

31 Dec 2021

 

 

 

 

 

 

 

Deferred tax assets arising on:

 

 

 

 

Plant and equipment

 

221,168

(17,044)

204,124

Unabsorbed capital allowances

 

114,900

10,567

125,467

Unabsorbed tax losses

 

92,103

45,734

137,837

Provisions

 

534,829

268,787

803,616

Other temporary differences

 

499,908

(163,068)

336,840

Total

 

1,462,908

144,976

1,607,884

 

 

 

 

 

Deferred tax liabilities arising on:

 

 

 

 

Intangible assets

 

(273,072)

(19,279)

(292,351)

Plant and equipment

 

(436,098)

(10,760)

(446,858)

Provisions

 

(75,377)

(55,533)

(130,910)

Other temporary differences

 

(622,090)

242,644

(379,446)

Total

 

(1,406,637)

157,072

(1,249,565)

 

 

 

 

 

 

 

 

 

 

The company

 

1 Jan 2021

Recognised in profit or loss

31 Dec 2021

 

 

 

 

 

 

 

Deferred tax assets arising on:

 

 

 

 

Unabsorbed capital allowances

 

1,421

996

2,417

Provisions

 

197,601

24,104

221,705

Plant and equipment

 

295

(34)

261

Unabsorbed tax losses

 

101,945

(20,389)

81,556

Total

 

301,262

4,677

305,939

 

 

 

 

 

Deferred taxes for the comparative period 2020 can be summarised as follows:

 

 

 

 

 

 

 

1 Jan 2020

Recognised in profit or loss

31 Dec 2020

 

 

Deferred tax assets arising on:

 

 

 

 

Unabsorbed capital allowances

 

645

776

1,421

Provisions

 

(32,799)

230,400

197,601

Plant and equipment

 

351

(56)

295

Unabsorbed tax losses

 

22,360

79,585

101,945

Total

 

(9,443)

310,705

301,262

 

 

 

 

 

See note 13 for information on the group’s and company’s tax expense.

 

 

 

37

Cash flow adjustments and changes in working capital

The following non-cash flow adjustments and adjustments for changes in working capital have been made to profit (loss) before tax to arrive at operating cash flow:

 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

Adjustments:

 

 

 

 

Depreciation and amortisation

2,856,614

2,016,834

2,747

2,060

Depreciation on right-of-use assets

3,081,284

2,905,895

-

-

Exchange differences

-

579,671

68,866

658,284

Bad debts written off

192,096

412,367

-

-

Bond amortisation costs

80,904

80,907

80,904

80,907

Movement in provision for doubtful debts

(282,861)

45,692

-

-

Related party interest income

(73,141)

(116,429)

-

-

Share of profit of associated undertakings

(684,324)

(421,513)

-

-

(Gain)/Loss on termination of leases

(521,088)

30,048

-

-

(Profit) loss on disposal of intangibles and property, plant and equipment

56,235

 

(156,039)

 

-

 

-

Share of profits in joint ventures

(139,558)

(57,835)

 

 

Impairment of investment in subsidiaries

-

-

-

-

Inventory writeoffs and provision movements

221,181

424,955

-

-

Interest on leasing arrangements         

321,165

375,920

-

-

Interest payable

3,183,245

2,757,390

2,678,005

2,673,868

Lease payments waived by lessors

-

(421,080)

-

-

Other finance costs

-

268,120

64,219

299,644

Dividends receivable

-

-

(3,820,882)

(1,280,250)

Interest income

-

-

(1,606,244)

(676,544)

 

8,291,752

8,724,903

(2,532,385)

1,757,969

 

 

 

 

 

Working capital:

 

 

 

 

Change in inventories

  (1,623,251)

1,359,482

-

-

Change in trade and other receivables

(5,559,772)

2,955,806

149,861

(39,345)

Change in trade and other payables

8,603,029

(2,538,009)

(400,913)

(897,931)

Change in contract assets

1,086,734

(1,533,579)

-

-

Changes in contract liabilities

2,795,470

(987,375)

-

-

 

5,302,210

(743,675)

(251,052)

(937,276)

 

 

 

 

 

 

38

Reconciliation of liabilities arising from financing activities

The table below details changes in the company’s and the group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated Statement of Cash Flows as cash from financing activities.

The group

Notes

Balance at 31 December 2020

Cash flows

Other non-cash changes

Balance at 31 December 2021

 

 

 

 

 

 

 

 

Leases

19

8,839,612

(2,749,383)

5,826,545

11,916,774

Bank loans

32

2,398,570

5,826,229

-

8,224,799

Amounts owed to other related parties

35

11,000,000

(7,500,000)

-

3,500,000

 

 

22,238,182

(4,423,154)

5,826,545

23,641,573

 

 

 

 

 

 

 

During 2021, the group recognised additional lease liabilities amounting to € 7,327,130. Total cash payments made on leases during the year amounted to € 2,749,383 (inclusive of interest). The interest expense during the year amounted to € 321,165. In addition, the group had other non-cash movements amounting to € 1,821,750 relating to the termination of leases as disclosed in note 18. The interest, together with the additions and termination of leases recognised during the year, represent the non-cash movements of € 5,826,545 presented above for leases.

The table below details changes in the group’s liabilities arising from financing activities for the preceding accounting period:

 

The group

Notes

Balance at 31 December 2019

Cash flows

Other non-cash changes

Balance at 31 December 2020

 

 

 

 

 

 

 

 

Leases

19

10,499,745

(3,526,930)

1,866,797

8,839,612

Bank loans

32

200,000

2,198,570

-

2,398,570

Amounts owed to other related parties

35

-

11,000,000

-

11,000,000

Amounts owed to a third party

35

6,000,000

(6,000,000)

-

-

 

 

16,699,745

3,671,640

1,866,797

22,238,182

 

During 2020, the group recognised additional lease liabilities amounting to € 1,911,957. Total cash payments made on leases during the year amounted to € 3,526,930 (inclusive of interest). The interest expense during the year amounted to € 375,920. In addition, during 2020, the group obtained rent concessions from the landlords of its Apple retail stores in Poland amounting to € 421,080. In terms of the practical expedient allowed by the International Accounting Standards Board (IASB) to provide relief for lessees from lease modification accounting for rent concessions related to Covid-19, the group has recognised such concessions as a deduction against the net operating costs of the stores and included with cost of sales in the statement of profit or loss and other comprehensive income. The interest, together with the additions to leases recognised during the year, less the rent concessions allowed to the group, represent the non-cash movements of € 1,866,797 presented above for leases.

 

 

The company

Notes

Balance at 31 December 2020

Cash flows

Other non-cash changes

Balance at 31 December 2021

 

 

 

 

 

 

 

 

Bank loans

32

2,106,373

6,118,426

-

8,224,799

Amounts owed to other related parties

35

11,000,000

(7,500,000)

-

3,500,000

 

 

13,106,373

(1,381,574)

-

11,724,799

 

The table below details changes in the company’s liabilities arising from financing activities for the preceeding accounting period:

 

The company

Notes

Balance at 31 December 2019

Cash flows

Other non-cash changes

Balance at 31 December 2019

 

 

 

 

 

 

 

 

Bank loans

32

 -

         2,106,373

 -

         2,106,373

Amounts owed to other related parties

35

 -

       11,000,000

 -

       11,000,000

 

 

 -

       13,106,373

 -

       13,106,373

 

 

39      Business combinations

On 30 April 2020, the group acquired 100% interest in the ship-to-ship (STS) operations through the incorporation of two companies as disclosed in note 20.1. The 2020 consolidated financial statements include the combined results of the subsidiaries within the STS group from the date of acquisition.

The fair value of identifiable assets acquired and liabilities assumed at the date of acquisition of STS Marine Solutions Limited was:

 

 

 

 

Cash and cash equivalents

1,509,407

Property, plant and equipment

6,535,362

Trade and other receivables

3,155,765

Other non-current assets

929,347

Trade and other payables

(1,555,995)

Tax liabilities

(143,408)

Fair value of assets and liabilities acquired

10,430,478

 

 

Goodwill arising on acquisition:

 

Fair value of identifiable assets and liabilities acquired

10,430,478

Consideration transferred

24,784,537

14,354,059

 

 

40

Related party transactions

1923 Investments p.l.c. is the parent company of the subsidiary undertakings highlighted in note 20. The parent company of 1923 Investments p.l.c. is Hili Ventures Limited which is incorporated in Malta. The registered office of Hili Ventures Limited, being the undertaking which draws up the consolidated financial statements of the smallest body of undertakings of which 1923 Investments p.l.c. forms part as a subsidiary undertaking, is Nineteen Twenty-Three, Valletta Road, Marsa, MRS 3000, Malta, from where the above consolidated financial statements may be obtained.

During the year under review, the group entered into transactions with related parties as set out below:

 

2021

2020

The group

Related party activity

Total activity

 

Related party activity

Total activity

 

 

%

%

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate  parent company

92,310

 

 

57,069

 

 

Group Companies

100,364

 

 

-

 

 

Other related parties

376,188

 

 

925,141

 

 

 

568,862

172,154,948

1

982,210

149,734,105

1

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate  parent company

1,210

 

 

17,711

 

 

Group Companies

110

 

 

-

 

 

Other related parties

(4,380)

 

 

980,743

 

 

 

(3,060)

145,812,002

1

998,454

126,323,059

1

 

 

 

 

 

 

 

Administrative expenses:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate  parent company

613,623

 

 

608,024

 

 

Group Companies

319,981

 

 

-

 

 

Other related parties

-

 

 

317,711

 

 

 

933,604

16,770,188

6

925,735

16,061,440

6

 

 

 

 

 

 

 

Investment income:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Parent company

51,822

 

 

-

 

 

Other related parties

21,319

 

 

20,619

 

 

 

73,141

73,141

100

20,619

116,429

18

 

 

 

 

 

 

 

Finance cost:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Parent company

-

 

 

14,484

 

 

Group Companies

40,963

 

 

-

 

 

Other related party

-

 

 

481,442

 

 

 

40,963

3,585,337

1

495,926

4,062,008

12

 

 

 

 

 

 

 

The company

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Other related parties

1,010,000

 

 

725,000

 

 

 

1,010,000

1,010,000

100

725,000

725,000

100

 

 

 

 

 

 

 

Investment income:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate parent

51,821

 

 

-

 

 

Subsidiaries

1,554,423

 

 

676,544

 

 

Subsidiaries (dividends)

3,820,882

 

 

1,280,250

 

 

 

5,427,126

5,427,126

100

1,956,794

1,956,794

100

 

 

 

 

 

 

 

Administrative expenses:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate  parent company

600,000

 

 

600,000

 

 

 

600,000

1,830,422

33

600,000

1,335,841

45

 

 

 

 

 

 

 

Finance cost:

 

 

 

 

 

 

Related party transactions with:

 

 

 

 

 

Ultimate  parent company

-

 

 

16,666

 

 

Subsidiaries

70,169

 

 

-

 

 

Other related parties

677,380

 

 

764,208

 

 

 

747,549

2,891,994

26

780,874

3,712,703

21

 

 

 

 

 

 

 

 

41      Contingent liabilities

During the year, one of the Group’s subsidiaries under the Harvest Technology division had issued special guarantees totalling € 146,189 (2020: € 1,394,000) in favour of third parties in relation to the major overseas technology implementation project carried out in collaboration with IBM in Mauritius. The same subsidiary also had guarantees amounting to € 1,216,289 (2020: € 225,300) to third parties in Malta as collateral for liabilities.

 

SAD sp. z o.o. (“SAD”), a Polish subsidiary of iSpot sp. z o.o. (“iSpot”), is subject to tax proceedings regarding the correctness of its VAT settlements for February 2015 and for March to July 2015. In the statement of grounds, the Polish tax authorities (“TA”) invoked SAD’s alleged failure to exercise due diligence in verifying its contractors.

 

Regarding the tax proceedings for February 2015, on 25 April 2019, the TA issued a decision in which it denied SAD the right to deduct VAT in the amount of PLN 6,031,627 (equivalent to €1,312,108) and determined an additional amount of VAT liability of PLN 2,604,732 (equivalent to €566,628). The value of default interest, if any, is estimated to amount to PLN 1,411,836 (equivalent to €307,128) as at the balance sheet date. The value of assets subject to proceedings in the SAD’s books is PLN 6,037,392 (equivalent to €1,313,361).

 

With respect to the tax proceedings for March to July 2015, on 17 November 2021, the TA issued a decision in which it determined SAD’s VAT liability of PLN 16,874,871 (equivalent to €3,670,924). The value of default interest, if any, is estimated to amount to PLN 8,975,945 (equivalent to €1,952,608) as at the balance sheet date.

 

For both proceedings, SAD disagrees with the position of the TA and appealed the decisions. Counterparty verification procedures applied by SAD in 2015 were not less strict than those used in 2012-2013 and it worth noting that, following tax proceedings for Q4 2012 and for May to June 2013, the TA stated that SAD exercised due diligence in verifying its contractors.

 

In the opinion of SAD and its advisers, and based on the evidence currently included by the TA in the case file, it is more likely than not that the tax disputes will be settled in favour of SAD. Therefore, SAD did not write off the amount included in ‘Other Assets’ and did not create provisions for any potential additional VAT liability. Consequently,  SAD’s financial statements have been prepared on the going concern principle and the Board of iSpot decided not to impair the investment in SAD and intercompany loans receivable.

One of the group’s subsidiaries under the Apple retail business division in Poland signed an agreement with mBank on line guarantees and letters of credit in the amount of € 15,662,729. This superseded an agreement which iSpot Poland had with HSBC which at the end of 2020 amounted to € 26,646,490.

At the end of the reporting period, one of the group’s subsidiaries under the Hili Logistics division, together with other related parties provided guarantees in the amount of € 3,184,666 (2020: € 3,184,666) in relation to bank facilities granted to related undertakings. In the directors’ opinion no provision is required against such amounts as the principal borrowers are either not expected to default or such facilities are secured by property, plant and equipment or other guarantors.

At 31 December 2021, the group had an overdraft facility through Allcom, one of its subsidiaries in Poland, as disclosed in note 33 which was secured with a statement on the de minimis aid issued by BGK Bank (Bank Gospodarstwa Krajowego) that amounts to 80% of the facility limit amounting to PLN 1,600,000, equivalent to € 348,061 (2020: PLN 1,600,000, equivalent to € 350,900) and a blank promissory note in favour of Santander Bank Polska S.A.

Allcom has also provided a guarantee for a total of PLN 1,800,000, equivalent to € 391,568 (2020: PLN 1,800,000, equivalent to € 394,763) to the customs office in Poland, through a financial institution in the same country, to secure customs payments realised on behalf of its clients. The guarantee is secured on the company’s property in Bolszewo as contractual mortgage on perpetual usufruct of land and buildings for a total of PLN 2,340,000 (€ 509,039). There was no utilisation of the guarantee as at the end of the reporting periods.

No further material claims are to date known to exist against the company.

 

 

42

Financial instrument risk

Risk management objectives and policies

The group is exposed to various risks in relation to financial instruments. The group’s financial assets and financial liabilities by category are summarised in note 42.4. The main types of risks are market risk, credit risk and liquidity risk.

The group’s risk management is coordinated by the directors and focuses on actively securing the group's short to medium term cash flows by minimising the exposure to financial risks. 

The objectives, policies and processes for managing financial risks and the methods used to measure such risks are subject to continual improvement and development. Where applicable, any significant changes in the group’s exposure to financial risks or the manner in which the group manages and measures these risks are disclosed below.

Where possible, the group aims to reduce and control risk concentrations.  Concentration of financial risk areas when financial instruments with similar characteristics are influenced in the same way by changes in economic or other factors. The amount of the risk exposure associated with financial instruments sharing similar characteristics is disclosed in more detail in the notes to the consolidated financial statements.

The group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the group is exposed are described below.

42.1

Market risk analysis

Foreign currency risk

Foreign currency transactions arise when the group buys or sells goods or services whose price is denominated in a foreign currency, borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency or acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency. Foreign currency transactions comprise mainly transactions in PLN, USD, GBP and RON .

The risk arising from foreign currency transactions is managed by regular monitoring of the relevant exchange rates and management’s reaction to material movements thereto.

Interest rate risk

The group and the company have debt securities in issue with a fixed coupon as disclosed in note 31, loans and receivables with a fixed coupon as disclosed in note 23, and cash at bank with a floating coupon as disclosed in note 27. The group has taken out interest bearing loans as disclosed in notes 32 and 35. The interest rates thereon and the terms of such borrowings and loans are disclosed accordingly.

The company and the group are exposed to cash flow interest rate risk on borrowings and debt instruments carrying a floating interest.

Management monitors the movement in interest rates and, where possible, reacts to material movements in such rates by adjusting its selling prices or by restructuring its financing structure.

The carrying amounts of the group’s and company’s financial instruments carrying a rate of interest at the end of the reporting period are disclosed in the notes to the financial statements.

 

42.2

Credit risk analysis

Credit risk is the risk that a counterparty fails to discharge an obligation to the group. The group is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables and loans and receivables. The group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:

 

Notes

The group

The group

The company

The company

 

 

2021

2020

2021

2020

 

 

 

 

 

 

 

 

Classes of financial assets - carrying amounts:

 

 

 

 

 

Financial assets measured at amortised cost:

 

 

 

 

 

Loans and receivables

23

4,772,681

2,378,204

33,629,733

30,603,377

Trade and other receivables

26

15,766,524

10,798,142

86,609

171,380

Cash and cash equivalents

27

9,666,172

11,380,270

1,297,371

416,990

 

 

30,205,377

24,556,616

35,013,713

31,191,747

 

 

 

 

 

 

Credit risk management

The credit risk is managed both at the level of each individual subsidiary as well as on a group basis, based on the group’s credit risk management policies and procedures.

Loans and receivables and certain trade receivables comprise amounts due from related parties. The group and company’s concentration to credit risk arising from these receivables are considered limited as there were no indications that these counterparties are unable to meet their obligations. Management considers these to be of good credit quality. Management does not consider loans and receivables to have deteriorated in credit quality and the effect of management’s estimate of the 12-month credit loss has been determined to be insignificant to the results of the group and the company.

The group and the company hold money exclusively with institutions having high quality external credit ratings. The cash and cash equivalents held with such banks at 31 December 2021 and 2020 are callable on demand. The banks with whom cash and cash equivalents are held form part of two international groups with an A credit rating by Standard and Poor’s and similar high ratings by other agencies. The group also holds cash with a local bank having a credit rating of BBB- by Standard and Poor’s. Cash held by the group with other local banks for which no credit rating is available are not significant. Management considers the probability of default from such banks to be close to zero and the amount calculated using the 12-month expected credit loss model to be very insignificant. Therefore, based on the above, no loss allowance has been recognised by the group and the company.

The group assesses the credit quality of its customers by taking into account their financial standing, past experience and other factors, such as bank references and the customers’ financial position.

Management is responsible for the quality of the group’s credit portfolios and has established credit processes involving delegated approval authorities and credit procedures, the objective of which is to build and maintain assets of high quality.

Individual risk limits are set in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Each new individual customer is analysed individually for creditworthiness before the company’s standard payment and delivery terms and conditions are offered. Purchase limits are established for each customer, which represents the maximum open amount without requiring approval from management. Customers that fail to meet the group’s benchmark creditworthiness may transact with the group only on a prepayment basis.

 

The group’s policy is to deal only with credit worthy counterparties. The credit terms is generally between 30 and 90 days. The credit terms for customers as negotiated with customers are subject to an internal approval process as abovementioned. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer.

Trade receivables consist of a large number of customers in various industries and mainly in three geographical areas, namely in Malta, U.K. and Poland.

The Expected Credit Loss (ECL) at 31 December 2021 and 2020 was estimated based on a range of forecast economic scenarios as at that date.

Security

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the group’s and the company’s maximum exposure to credit risk, without taking account of the value of the collateral obtained. Guarantees are disclosed in notes 32 and contingent liabilities are disclosed in note 41.

In addition, the group does not hold collateral relating to other financial assets (eg derivative assets, cash and cash equivalents held with banks).

Trade receivables

The group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.

In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers.

The expected loss rates are based on the payment profile for sales over the past 36 months before 31 December 2021 and 2020 respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. The group has identified gross domestic product (GDP) and unemployment rates of the countries in which the customers are domiciled to be the most relevant factors and accordingly adjusts historical loss rates for expected changes in these factors. However given the short period exposed to credit risk, the impact of these macroeconomic factors has not been considered significant within the reporting period.

In addition to the above assessments on the recoverability and expected credit loss provisions on trade and other financial assets, the group has considered the effects of Covid-19 on the economies in which its customers are based, comprising mainly Malta, Poland and the UK, where significant business is being conducted. It has also taken into consideration the financial position of, and risk exposure to, large customers in order to determine whether the group’s credit risk has increased as a result of the pandemic. There are no particular indicators that suggest that the assessment of the expected credit risk model adopted by the group materially varies from expectations of collectability and previous patterns of payments from such customers. Furthermore, management has assessed the probability of default of significant amounts due from large customers individually, and consider such risk to be low in view of the creditworthiness of such customers. While the group continues to closely monitor all of its financial assets at more frequent intervals as a result of such events, management considers that the level of ECL provisions at period end remains adequate.

 

Trade receivables are written off (ie derecognised) when there is no reasonable expectation of recovery. Failure to make payments within 365 days from the invoice date and failure to engage with the group on alternative payment arrangement amongst others is considered indicators of no reasonable expectation of recovery.

On the above basis the expected credit loss for trade receivables as at 31 December 2021 and 31 December 2020 was determined as follows:

 

Current

More than 30 days

More than 60 days

More than 90 days

Total

31 December 2021

Expected credit loss rate (%)

0.18%

1.39%

3.58%

11.26%

-

Gross carrying amount (€)

9,814,478

1,577,539

441,093

1,770,774

13,603,884

Lifetime expected credit loss (€)

17,551

21,925

15,798

199,317

254,591

31 December 2021

Expected credit loss rate (%)

0.80%

1.50%

4.50%

20.30%

-

Gross carrying amount (€)

4,413,729

1,568,608

433,527

2,255,760

8,671,624

Lifetime expected credit loss (€)

36,003

23,402

19,446

458,601

537,452

 

Changes in expected credit loss rates between reporting periods is attributable to change in circumstances, past ageing information, revised history of loss occurrences and actual losses recognised in the current year. The group however experiences very low levels of actual impairments arising from non-performing trade receivables and consequently management considers the lifetime expected credit losses to be adequate to the business of the group.

 

The closing balance of the trade receivables loss allowance as at 31 December 2021 and 2020 reconciles with the trade receivables loss allowance opening balance as follows:

The group

The group

2021

2020

Opening loss allowance as at 1 January

     537,452

      491,760

Taken over upon merger

 -

      183,887

Loss allowance recognised during the year

     (65,973)

        27,196

Reversal of loss allowance on impaired receivables written off

   (192,096)

      (68,182)

Reversal of allowance for credit losses no longer required

     (24,792)

      (97,209)

Loss allowance as at 31 December

     254,591

      537,452

 

42.3 Liquidity risk

The group and company’s exposure to liquidity risk arises from its obligations to meet its financial liabilities, which comprise debt securities in issue, borrowings, trade and other payables and other financial liabilities (see notes 31, 32, 33 and 35). Prudent liquidity risk management includes maintaining sufficient cash to ensure the availability of an adequate amount of funding to meet the group’s and company’s obligations when they become due.

Liquidity risk is that the group and the company might be unable to meet its obligations. The group and the company manage their liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.

The group’s and company’s objective is to maintain cash to meet their liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting period. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

The following maturity analysis for financial liabilities shows the remaining contractual maturities using the contractual undiscounted cash flows on the basis of the earliest date on which the group and the company can be required to pay.  The analysis includes both interest and principal cash flows:

The group

31 December 2021

On demand or within 1 year

1 - 2 years

2 - 5 years

More than  5 years

Total

 

 

 

 

 

 

Non-derivative financial liabilities

 

 

 

 

 

Non-interest bearing

25,313,875

239,197

-

-

25,553,072

Fixed rate instruments

6,812,571

3,577,642

42,779,569

274,820

53,444,602

Variable-rate instruments

-

-

-

-

-

 

32,126,446

3,816,839

42,779,569

274,820

78,997,648

 

 

 

 

 

 

31 December 2020

 

 

 

 

 

 

 

 

 

 

 

Non-derivative financial liabilities

 

 

 

 

 

Non-interest bearing

22,602,850

185,927

-

-

22,788,777

Fixed rate instruments

3,377,326

12,959,627

40,636,286

1,483,919

58,457,158

Variable-rate instruments

4,719,247

-

-

-

4,719,247

 

30,699,423

13,145,554

40,636,286

1,483,919

85,965,182

 

 

 

 

 

 

The company

31 December 2021

 

 

 

 

 

 

 

 

 

 

 

Non-derivative financial liabilities

 

 

 

 

 

Non-interest bearing

773,921

-

-

-

773,921

Fixed rate instruments

8,812,571

3,365,839

42,779,569

2,557,475

57,515,454

 

9,586,492

3,365,839

42,779,569

2,557,475

58,289,375

 

 

 

 

 

 

31 December 2020

 

 

 

 

 

 

 

 

 

 

 

Non-derivative financial liabilities

 

 

 

 

 

Non-interest bearing

710,393

-

-

-

710,393

Fixed rate instruments

2,845,593

13,514,929

40,636,286

1,509,451

58,506,259

 

3,555,986

13,514,929

40,636,286

1,509,451

59,216,652

 

 

 

 

 

 

 

42.4   Summary of financial assets and financial liabilities by category

The carrying amounts of the group’s financial assets and financial liabilities as recognised at the end of the reporting period may also be categorised as follows.  See note 4.22 for explanations about how the category of financial instruments affects their subsequent measurement.


 

The group

The group

The company

The company

 

2021

2020

2021

2020

 

Non-current assets

 

 

 

 

Loans and receivables

1,744,946

1,846,537

23,828,586

26,091,177

 

 

 

 

 

Current assets

 

 

 

 

Loans and receivables

3,027,735

531,667

9,801,147

4,512,200

Trade and other receivables

15,766,524

10,798,142

-

171,380

Cash and cash equivalents

9,666,172

11,380,270

1,297,371

416,990

 

28,460,431

22,710,079

11,098,518

5,100,570

 

 

 

 

 

Non-current liabilities

 

 

 

 

Debt securities in issue

35,758,272

35,677,368

35,758,272

35,677,368

Borrowings

6,748,228

1,811,780

6,748,228

 1,811,780  

Trade and other payables

239,197

185,927

 -  

 -  

Other financial liabilities

211,779

11,402,552

2,282,655

11,983,385

 

42,957,476

49,077,627

44,789,155

49,472,533

Current liabilities

 

 

 

 

Borrowings

1,476,571

5,306,037

1,476,571

 294,593  

Trade and other payables

25,480,527

16,855,557

701,377

710,393

Other financial liabilities

3,572,545

239,536

5,650,930

-

 

30,529,643

22,401,130

7,828,878

1,004,986

 

 

 

 

 

42.5   Financial instruments measured at fair value

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3: unobservable inputs for the asset or liability.

At 31 December 2021 and 2020, except for debt securities in issue as disclosed in note 31, the carrying amounts of financial assets and financial liabilities classified with current assets and current liabilities respectively approximated their fair values due to the short-term maturities of these assets and liabilities.

The fair values of the debt securities in issue is as disclosed in note 31.  The fair values of other non-current financial liabilities and the non-current loans and receivables are not materially different from their carrying amounts due to the fact that the interest rates are considered to represent market rates at the year-end or because they are repayable on demand. The fair values of the financial assets and financial liabilities included in the level 2 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the company determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.

The following table provides an analysis of financial instruments that are not measured subsequent to initial recognition at fair value, other than those with carrying amounts that are reasonable approximations of fair value, and other than investments in subsidiaries, associates and joint ventures, grouped into Levels 1 to 3.

The group

31 December 2021

Level 1

Level 2

Level 3

Total

Carrying amount

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

Loans and receivables

 

 

 

 

 

Receivables from related parties

 -  

4,772,681

 -  

4,772,681

4,772,781

 

 -  

4,772,681

 -  

4,772,681

4,772,681

 

 

 

 

 

 

Financial liabilities at amortised cost

 

 

 

 

 

Related party loans

 -  

3,784,348

 -  

3,784,348

3,784,348

Bank overdrafts and loans

 -  

8,224,799

 -  

8,224,799

8,224,799

Debt securities in issue

36,720,000

 -  

 -  

36,720,000

35,758,272

 

36,720,000

12,009,147

-

48,729,147

47,767,395

 

 

 

 

 

 

31 December 2020

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

Loans and receivables

 

 

 

 

 

Receivables from related parties

 -  

2,378,204

 -  

2,378,204

2,378,204

 

 -  

2,378,204

 -  

2,378,204

2,378,204

 

 

 

 

 

 

Financial liabilities at amortised cost

 

 

 

 

 

Related party loans

 -  

11,642,088

 -  

11,642,088

11,642,088

Bank overdrafts and loans

 -  

7,117,817

 -  

7,117,817

7,117,817

Debt securities in issue

36,536,400

 -  

 -  

36,536,400

35,677,368

 

36,536,400

18,759,905

-

55,296,305

54,437,273

 

 

 

 

 

 

 

The company

31 December 2021

Level 1

Level 2

Level 3

Total

Carrying amount

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

Loans and receivables

 

 

 

 

 

Receivables from related parties

 -  

33,629,733

 -  

33,629,733

33,629,733

 

 -  

33,629,733

 -  

33,629,733

33,629,733

 

 

 

 

 

 

Financial liabilities at amortised cost

 

 

 

 

 

Related party loans

 -  

7,933,585

 -  

7,933,585

7,933,585

Debt securities in issue

36,720,000

 -  

-

36,720,000

35,758,272

 

36,720,000

7,933,585

 -  

44,653,585

43,691,857

 

 

 

 

 

 

31 December 2020

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

Loans and receivables

 

 

 

 

 

Receivables from related parties

 -  

30,603,377

 -  

30,603,377

30,603,377

 

 -  

30,603,377

 -  

30,603,377

30,603,377

 

 

 

 

 

 

Financial liabilities at amortised cost

 

 

 

 

 

Related party loans

 -  

11,983,385

 -  

11,983,385

11,983,385

Debt securities in issue

36,536,400

 -  

-

36,536,400

35,677,368

 

36,536,400

11,983,385

 -  

48,519,785

47,660,753

 

 

 

 

 

 

 

43

Capital risk management

The group’s and the company’s objectives when managing capital are to safeguard its ability to continue as a going concern and to maximise the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the group and the company consists of debt, which includes the debt securities in issue, borrowings and other financial liabilities disclosed in notes 31, 32 and 35, cash and cash equivalents as disclosed in note 27 and of items presented within equity in the statement of financial position.

The group’s directors manage the capital structure and make adjustments to it, in light of changes in economic conditions. The capital structure is reviewed on an ongoing basis.  Based on recommendations of the directors, the group balances its overall capital structure through the payments of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

 

44

Post reporting date events

The Board of Directors is actively following the conflict and the resulting humanitarian crisis in Ukraine. While the group has no direct interest vested in the country, it is monitoring the effects of the situation on its operations especially those in the logistics sector and the Apple Premium reseller in Poland. Inflationary pressures, supply chain disruption and heightened utility costs are presently being experienced by certain operations within the group. It is challenging to quantify and differentiate what extent of such pressures emanate from the unrest in Ukraine and the concurrent Covid-induced events but while the compounded effect on the sectors mentioned may be potentially significant, management is taking all steps necessary to mitigate any expected decline in revenue and to implement any further course of action as deemed applicable in the circumstances.

 

The directors continue to monitor the process of conducting further in-depth assessments in this regard in due course. The group’s projections continue to show stable performance despite the uncertainty of the current state of affairs on its operations and it remains vigilant in monitoring restrictions on the conduct of business with sanctioned entities and individuals.

 

There were no other adjusting or significant non-adjusting events that have occurred between the end of the reporting period and the date of authorisation by the board.

 

There were no other significant adjusting or non-adjusting events that have occurred between the end of the reporting period and the date of authorisation by the board.

 

45      Immediate and ultimate parent company and controlling party

The immediate and ultimate parent company of 1923 Investments p.l.c. is Hili Ventures Limited. The registered office of Hili Ventures Limited is Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000, Malta.

The directors consider the ultimate controlling party to be Mr Carmelo (sive Melo) Hili, who, through his interest in Hili Ventures Limited, as of 31 December 2021 holds 100% (2020: 77.58%) of the voting rights in 1923 Investments p.l.c.

 


 

GTlogo-RGB-135

 

Independent auditor’s report

To the shareholders of 1923 Investments p.l.c.

 

Report on the audit of the financial statements

 

Opinion

We have audited the financial statements of 1923 Investments p .l.c. (the “Company”) and of the Group of which it is the parent, which comprise the statements of financial position as at 31 December 2021, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

 

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 December 2021, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) , and have been properly prepared in accordance with the requirements of the Companies Act, Cap. 386 (the “Act”).

 

Our opinion is consistent with our additional report to the audit committee.

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In conducting our audit we have remained independent of the Company and the Group and have not provided any of the non-audit services prohibited by article 18A of the Accountancy Profession Act, Cap. 281. The non-audit services that we have provided to the Company and the Group during the year ended 31 December 2021 are disclosed in note 10 to the financial statements.

 

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Impairment testing of goodwill and intangible assets in the consolidated financial statements

Key audit matter

Goodwill with a carrying amount of € 62.9 million and intangible assets having a carrying amount of € 12.1 million as at 31 December 2021 are included on the Group’s Statement of Financial Position as at that date.

 

Management is required to perform an assessment at least annually to establish whether goodwill and intangible assets that have an indefinite useful life should continue to be recognised, or if any impairment is required. The assessment was performed at the lowest level at which the Group could allocate and assess goodwill, which is referred to as a cash generating unit (‘CGU’).

 

The impairment assessment was based on the calculation of a value-in-use for each of the CGUs. This calculation was based on estimated future cash flows for each CGU, including assumptions concerning revenue growth, profit margins, weighted average cost of capital and effective tax rates.

 

Estimating future profitability requires the directors to apply significant judgements which include estimating future taxable profits, long term growth and discount rates. The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires judgement.

 

We focussed on this area because of the significance of the amounts of goodwill and intangible assets with indefinite useful life acquired in business combinations made by the Group up to 31 December 2021 which are recognised at balance sheet date. Moreover, the directors’ assessment process is complex and highly judgmental and is based on assumptions which are affected by expected future market or economic conditions.

 

How the key audit matter was addressed in our audit  

We evaluated the suitability and appropriateness of the impairment methodology applied by management and engaged our internal valuation specialist resources to assess the reliability of the directors’ forecasts and to challenge the methodology used and the underlying assumptions. We concluded that the parameters utilised were reasonable.

 

We communicated with management and those charged with governance and noted that they were able to provide satisfactory responses to our questions. We also assessed the adequacy of the disclosures made in notes 4.28 of the financial statements relating to goodwill including those regarding the key assumptions used in assessing its carrying amount. Those disclosures specifically explain that the directors have assessed the carrying amount of goodwill and intangible assets with an indefinite useful life as at 31 December 2021 and concluded that no impairment charge in the value of the goodwill was required. The directors concluded that the carrying amount of intangible assets with an indefinite useful life is recoverable and consequently no impairment charge is required.

 

Assessment of carrying amount of investments in subsidiaries and other investments in the Company’s financial statements

Key audit matter

During the year ended 31 December 2021 management carried out an assessment to establish whether the carrying amount of investments in subsidiaries and other investments in the financial statements of the Company at 31 December 2021 should continue to be recognised, or if any impairment is required.

We focussed on this area because of the significance of the investments in subsidiaries which at 31 December 2021, amounted € 66.8 million. Moreover, the directors’ assessment process is complex and highly judgmental and is based on assumptions, such as forecast growth rates, profit margins, weighted average cost of capital and effective tax rate, which are affected by expected future market or economic conditions.

 

How the key audit matter was addressed in our audit      

We evaluated the suitability and appropriateness of the impairment methodology applied by management and engaged our internal valuation specialist resources to assess the reliability of the directors’ forecasts and to challenge the methodology used and the underlying assumptions. We concluded that the parameters utilised were reasonable.

 

We communicated with management and those charged with governance and noted that they were able to provide satisfactory responses to our questions. We also assessed the adequacy of the disclosures made in note 4.28 of the financial statements relating to investments including those regarding the key assumptions used in assessing its carrying amount. Those disclosures specifically explain that the directors have assessed the carrying amount of investments as at 31 December 2021 and concluded that no impairment charge in the company’s investments in subsidiaries was required.

 

Other information

The directors are responsible for the other information. The other information comprises (i) the Directors’ report, (ii) the Statement of responsibility pursuant to the Capital Market Rules issued by the Malta Financial Services Authority, (iii) the Corporate Governance statement and (iv) the Other Disclosures in terms of the Capital Market Rules which we obtained prior to the date of this auditor’s report, but does not include the financial statements and our auditor’s report thereon.

 

Our opinion on the financial statements does not cover the other information, including the Directors’ report.

 

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

 

With respect to the Directors’ report, we also considered whether the Directors’ report includes the disclosures required by Article 177 of the Act.

 

Based on the work we have performed, in our opinion t he information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements, and the Directors’ report has been prepared in accordance with the Act.

 

In addition, in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report and other information that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard.

 

Responsibilities of the directors those charged with governance for the financial statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS as adopted by the EU and are properly prepared in accordance with the provisions of the Act, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

 

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with the ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

 

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Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and Group’s internal control.

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Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s or the Group’s ability to continue as a going concern. In particular, it is difficult to evaluate all the potential implications that the current conflict in Ukraine may have on the Group’s business.

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Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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Obtain sufficient appropriate evidence regarding the financial information of the entities or business activities within the Group to express and opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication.

 

Reports on other legal and regulatory requirements

Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6

 

We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Report and Consolidated Financial Statements of 1923 Investments p.l.c. for the year ended 31 December 2021, entirely prepared in a single electronic reporting format.

 

Responsibilities of the directors

The directors are responsible for the preparation of the Report and Consolidated Financial Statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.

 

Our responsibilities

Our responsibility is to obtain reasonable assurance about whether the Report and Consolidated Financial Statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

 

Our procedures included:

 

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Obtaining an understanding of the entity's financial reporting process, including the preparation of the Report and Consolidated Financial Statements, in accordance with the requirements of the ESEF RTS.

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Obtaining the Report and Consolidated Financial Statements and performing validations to determine whether the Report and Consolidated Financial Statements have been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.

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Examining the information in the Report and Consolidated Financial Statements to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.

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We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Opinion

In our opinion, the Report and Consolidated Financial Statements for the year ended 31 December 2021 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.

 

Report on the Statement of Compliance with the Principles of Good Corporate Governance

 

The Capital Market Rules require the directors to prepare and include in their Annual Report a Statement of Compliance providing an explanation of the extent to which they have adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure compliance throughout the accounting period with those Principles.

 

The Capital Market Rules also require us, as the auditor of the Company, to include a report on the Statement of Compliance prepared by the directors.

 

We read the Statement of Compliance with the Code of Principles of Good Corporate Governance and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements included in the Annual Report. Our responsibilities do not extend to considering whether this statement is consistent with any other information included in the Annual Report.

 

We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance with the Code of Principles of Good Corporate Governance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.

 

In our opinion, the Corporate governance statement has been properly prepared in accordance with the requirements of the Capital Market Rules.

 

Other matters on which we are required to report by exception

We also have responsibilities

under the Companies Act, Cap 386 to report to you if, in our opinion:

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adequate accounting records have not been kept, or that returns adequate for our audit have not been received from branches not visited by us

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the financial statements are not in agreement with the accounting records and returns

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we have not received all the information and explanations we require for our audit

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certain disclosures of directors’ remuneration specified by law are not made in the financial statements, giving the required particulars in our report.

in terms of Capital Market Rules to review the statement made by the Directors that the business is a going concern together with supporting assumptions or qualifications as necessary.

 

We have nothing to report to you in respect of these responsibilities.

 

Auditor tenure

We were first appointed as auditors of the Company and the Group on 14 November 2017. Our appointment has been renewed annually by a shareholders’ resolution representing a total period of uninterrupted engagement appointment of five years.

The engagement partner on the audit resulting in this independent auditor’s report is Mark Bugeja.

 

Grant Thornton

Fort Business Centre

Triq L-Intornjatur, Zone 1

Central Business District

Birkirkara CBD 1050

Malta

 

 

 

 

Mark Bugeja

Partner

 

27 April 2022