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Hal Mann Vella Group p.l.c.

 

 

Annual Report and Consolidated Financial Statements

for the year ended

31 December 2021

 

 

 

Contents

 

Chairman’s Statement

 

Directors’ report

 

 Corporate Governance - Statement of Compliance

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

Consolidated Statement of Financial Position

 

Consolidated Statement of Changes in Equity

 

Consolidated Statement of Cash Flows

 

Notes to the Consolidated Financial Statements

 

Independent Auditors' Report

 

 

 

Chairman’s Statement

for the year ended 31 December 2021

 

 

The Coronavirus pandemic carried on longer than we imagined and continued to dominate the year 2021. Economic events were largely influenced in some way by the pandemic.  Other than waves of Covid-19, businesses had to deal with disruptions to supply chains, skills shortages and inflationary pressures. With the arrival of Covid-19 vaccines, and Malta’s ability to vaccinate almost the entire population in a short period of time, enabled the country to start returning to close to normal. I would like to reiterate my appreciation and thanks to all our employees who have responded with great dedication that enabled Halmann Vella to retain business continuity in a safe environment for themselves, their colleagues and our customers.

 

Our performance

 

Despite the challenges, the business has shown resilience and agility delivering a good financial performance in 2021.  We have strengthened our relationship with customers and consolidated the business for our shareholders.  The business pillars of the Group, manufacturing, property development and property letting, have all recorded an improved performance year-on-year, our diversified and balanced business model is a key strength.

 

Once again, Halmann Vella worked a number of major projects during the year, notably of which Trident Park and Project House.  Even though there remains a degree of uncertainty within the economy we maintain a stable pipeline of work.

 

Our property development projects progressed well during the years with projected sales reached and contracts signed.  We have meanwhile commenced a number of new projects. The property letting business has continued to be the hardest hit from the pandemic where a number of lease agreements had to be discounted, reduced, or deferred as tenants could not meet their contractual obligations.

 

We have continued to invest in our business and have plans for further investment. A new warehouse was completed in 2021 and now fully operational and we will shortly commence expanding our manufacturing facilities.

 

Corporate Social Sustainability

 

Hal Mann Vella Group is a socially and environmentally responsible business.  We have a responsibility to operate in a responsible and ethical manner, while remaining profitable and competitive. Our activities have an impact on the environment, our people, our customers and the communities in which we operate.

 

We currently generate circa 2 million kilowatt hours of clean, renewable energy per year from solar panels on our factories. We will continue to invest in this space on rooftops which will become available to the Group.  Water is also an important factor in the production process. The systems installed in both our factories make it possible to filter and reuse at least 200,000 litres of water per day. Additionally, we utilise marble trimmings and waste to produce recycled marble aggregates.  These are used in the flooring products that we produce.

 

Health and safety is a key priority for our business and we are committed to maintaining and improve standards in our industry for our employees, subcontractors and those affected by our activities. 

 

We are committed towards providing an inclusive working environment where all employees are treated equally irrespective of gender, ethnicity, sexual orientation, disability or age. 

 

Innovation is essential for the development of our business and for creating sustainable solutions in the built environment.  We continue to invest in product development to stimulate sustainable solutions.

 

Looking Forward

 

Some uncertainty remains and a lag impact of the pandemic on the economy cannot be excluded. The effects of the coronavirus pandemic will continue to be felt for some time to come. In the coming months it is crucial that economic activity transits from fire-fighting to more sustainable long term planning. The uncertain job market is a key risk to the economy.

 

We remain vigilant but optimistic that Halmann Vella is well positioned to deliver on its goals. The Group has significant opportunities ahead of it and I look forward to the future with confidence.

 

I would like to take this opportunity to thank all our employees, business partners, shareholders, our Board of Directors and other stakeholders for their continued support of our Group.

 

 

 

 

Mr. Martin Vella

Chairman

 

 

Directors' Report

for the year ended 31 December 2021

 

The Board of Directors are hereby presenting their annual report together with the audited financial statements of the Group and the Company for the year ended 31 December 2021.

 

Principal activities

 

The principal activity of the Company is to hold assets for the Group and also acts as the financing arm of the Group.

 

The principal activities of the Group relate to the manufacture and business of stone, marble and granite as well as the manufacture of terrazzo and pre-cast elements. The Group owns and leases a number of commercial properties and is also involved in property development and resale.

 

Review of business

 

The Group generated a turnover of €25,259,819 (2020: €23,462,069) and an operating profit of €4,795,577 (2020: €3,707,100).

 

The Group registered a consolidated profit before tax of €2,012,815 during the year ended 31 December 2021 (2020: €2,314,761).

 

The Company registered a profit before tax of €587,522 during the year ended 31 December 2021 (2020: €1,522,128).

 

Given the Group’s and Company’s financing structure and the positive net assets position of the Group and the Company at the end of the financial year, the Directors consider the Group’s and Company’s state of affairs as at the close of the financial year to be satisfactory.

 

Performance

 

The Group continued to achieve satisfactory results showing resilience and agility. Group sales have increased by 7.12%, improving both gross profit margins and operating profits.  All segments reported a year-on-year improved operational performance closing the year in line with our projections. Contracting business drove higher turnover in the manufacturing segment with improved operational efficiencies driving an improved financial performance.

 

The higher turnover was contracting business benefitted from large scale projects as manufacturing efficiencies improved. Revenue generated from property development increased from €3,138,500 in 2020 to €3,750,500 during the year under review.

 

An additional property has been added to the property letting portfolio which has contributed to balancing the impact of lower revenue from a selective number of tenants which have experienced difficulties to meet their commitments due to Covid-19 disruption to their respective business activity.

 

The Group EBITDA margin decreased to 22.49% (2020: 25.24%).

 

The Bond Issue

 

In November 2014, the Company issued a Bond for €30,000,000. Out of the funds received, €12,000,000 were intended for two specific projects namely: the development of a 19,000 sqm property intended to be leased and the extension, deployment and commissioning of new equipment for its stone core business.

 

Principal risks and uncertainties

 

The Directors are aware of the various risks faced by the Group as a result of its well diversified business lines primarily on manufacturing and property development. A number of measures are in place to ensure that such risks and uncertainties are maintained at acceptable levels and are in line with the Group’s risk strategy of sustainable, long-term growth and profitability. Our principal risks have not changed this year.

 

The key risks faced by the Group include credit risk, strategic risk, operational risk, liquidity risk, and reputational risk. Together with other risks and uncertainties inherent in the business, these require strong capital management as safeguard against competent authority requirements and unfavourable events. Given such, the Group regularly reviews operational and capital targets against actual and forecast business levels to minimise such risks if necessary, to the most considerable level possible in the interest of institutional stakeholders.

 

The main types of risk types are outlined hereunder:

 

Credit risk

 

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.  The Group is exposed to credit risk from its operating activities and from its financing activities including deposits with banks.

 

Customer credit risk is managed by the Group's management subject to the Group's established policy, procedures and control relating to customer credit risk management.  Credit quality of a customer is assessed based on each customer's credit limits.  Outstanding customer receivables are regularly monitored.  An impairment analysis is performed on each reporting date in accordance with the guidelines set in IFRS 9 Financial Instruments Standard. The Group exercises a prudent credit control policy, and accordingly, it is not subject to any significant exposure or concentration of credit risk. The Group banks only with local financial institutions with high quality standard or rating. The Group's operations are principally carried out in Malta and most of the Group's revenue originates from clients based in Malta.

 

Strategic risk

 

This risk relates to the value of Group's assets and local property market in general.

 

The Group has strict guidelines and engages competent professionals on quality and valuation of its investment properties. The Group's properties are rented out to various tenants, except for those sites where development is in progress. The Group currently has long term lease agreements with in-substance fixed rental receivables in place, which will protect the Group from unforeseen circumstances and inflation.

 

Operational risk

 

Operational risk maybe defined as the risk of losses arising from defects or failures in its internal processes, people, systems or external events including risks related to fraud, technological and conduct risk.

 

Operational risk is inherent in all processes, systems and activities of the Group. As such, all employees are responsible for managing and controlling operational risks associated with their own activities and business processes where they are involved. Project management is carried out by competent professionals and surveyors in the field for each site with ongoing projects. The Group, in terms of operational risk management and control, continues to identify, evaluate and mitigate such risks, regardless if these actually occurred or not. The Group also assesses at each reporting date (unless immediate evaluation is necessary) areas of concern for improvement to minimise such operational risks, arising due to the volatile results of each year's operations.

 

Liquidity risk

 

The Group is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities.  Prudent liquidity risk management includes maintaining sufficient cash and committed credit lines to ensure the availability of an adequate amount of funding to meet the Group's obligations.

 

Reputational risk

 

Malta has over the years successfully attracted a number of industries as a result of its ability to develop a fiscal and regulatory framework specifically targeted at customers and service providers alike. The island's success in this respect, coupled with political stability and strong economic growth were all key to Malta's reputation as a leading business destination over the past years. Any adverse impact on Malta's reputation would result in a negative outlook and possibly reduce Malta's attractiveness for existing operators and new ones alike. The Group may suffer as a result of any adverse impact on Malta's reputation. Aware of this risk, the Group continuously seeks to diversify its product and service portfolio, whilst also seeking to enter new markets both in Malta and internationally. The Board exercises high ethical behaviour through a number of policies, procedures and controls implemented in its day to day operations.

 

Pandemics

 

The outbreak of nation or world-wide pandemics such as Covid-19 may hinder occupational health and safety of the employees and heavily disrupt normal business operations. Such risks are additional to the potential economic impact on customers and the extent of recovery following a possible outbreak. Taking advantage of the lessons learnt from Covid-19 during this past two years, by quickly reacting to health authorities advice and constantly implementing additional measures, the Group managed to maintain operations. The Group's constant proactive approach to such adversity, will ensure that such risk is mitigated.

 

Financial risk management and exposures

 

Note 34 Financial Risk Management to these financial statements provide details in connection with the Company’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.

 

Events after the financial reporting date

 

All events occurring after the balance sheet date until the date of authorisation for issue of these financial statements and that are relevant for valuation and measurement as at 31 December 2021 for the Group and the Company are included in these consolidated financial statements.

 

The effects of Russia's invasion of Ukraine on 24 February 2022 are higlighted in Note 38. The Directors are closely monitoring the possible impact on its operations and financial performance and is committed to take all necessary steps to mitigate the impact. Management has assessed that there is no impact on the Group and Company's financial statements as at date of approval.

 

Future Developments

 

Political, economic and public health developments worldwide remain difficult to predict in 2022. The outcome of the tragic Russia/Ukraine conflict and its ramifications are highly uncertain. The expectations of a strong economic recovery are clouded by various downside risks, not least with the disruption of an election in Q1, supply chain bottlenecks and risking logistics and commodity costs.

 

Despite these headwinds, the Group has entered 2022 with a good momentum where our customers continue to place their trust in us and entrust us with their projects.  The Board retains a cautiously optimistic outlook for the Group for 2022 in view of the stable order book and the balanced and diversification of the business.

 

Dividends and Reserves

 

The results for the year are set in the Consolidated Statement of Comprehensive Income

 

The Board of Directors does not propose the payment of a dividend in order to further strengthen the financial position of the Group. Retained profits carried forward at the reporting date amounted to €11,770,328 (2020: €10,579,635) for the Group and €3,486,812 (2020: €3,261,095) for the Company.

 

Directors

 

The Directors of the Company since the beginning of the year up to the date of this report were:

 

Mr. Martin Vella - Chairman

Mr. Mark Vella - Director

Mr. Joseph Vella - Director

Dr. Arthur Galea Salomone - Non-Executive Director

Ms. Miriam Schembri - Non-Executive Director

Mr. Mario Galea - Non-Executive Director (appointed on 27 April 2021)

Mr. William Van Buren - Non-Executive Director (resigned on 27 April 2021)

 

Company Secretary

 

Dr. Louis de Gabriele

 

Remuneration committee and corporate governance

 

During the period under review, the functions of the Remuneration Committee were carried out by the Board of Directors in view of the fact that the remuneration of Directors is not performance related.

 

Statement of Directors’ Responsibilities for the financial statements

 

The Directors are required by the Maltese Companies Act, 1995 (Cap.386) to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the EU which give a true and fair view of the state of affairs of the Group and the Company as at the end of each reporting period and of the profit or loss for that period.

 

In preparing such financial statements, the Directors are responsible for:

 

-

ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU;

-

selecting and applying consistently appropriate accounting policies;

-

making accounting estimates that are reasonable in the circumstances; and

-

ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Company will continue in business as a going concern.

 

The Directors are also responsible for designing, implementing and maintaining internal control as necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Maltese Companies Act, 1995 (Cap. 386). They are also responsible for safeguarding the assets of the Group and the parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The financial statements of Hal Mann Vella Group p.l.c. for the year ended 31 December 2021 are included in the Annual Report 2021, which is published in hard-copy printed form and is available on the Company’s website. The Directors are responsible for the maintenance and integrity of the Annual Report on the website in view of their responsibility for the controls over, and the security of, the website. Access to information published on the Company’s website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta.

 

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

 

The Directors confirm that, to the best of their knowledge:

 

the financial statements give a true and fair view of the financial position of the Group and the Company as at 31 December 2021, and of the financial performance and the cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union; and

in accordance with the Capital Markets Rules, the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that the Group and the Company face.

 

Going Concern

 

The Directors, as required by the Capital Markets Rule 5.62, have considered the Company’s operating performance, the balance sheet at year-end, as well as the business plan for the coming year, and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, in preparing the financial statements, they continue to adopt the going concern basis in preparing the financial statements.

 

Shareholder register information pursuant with Capital Markets Rule 5.64

 

-    Structure of Capital

 

The Company has an authorised share capital of €5,000,000 Ordinary Shares of €1 each and issued and fully paid up share capital of €4,999,820 with a nominal value of €1 each.  Each Ordinary Share is entitled to one vote.  The Ordinary Shares in the Company shall rank pari passu for all intents and purposes at law.  There are currently no different classes of Ordinary Shares in the Company and accordingly all Ordinary Shares have the same rights, voting rights and entitlements in connection with any distribution whether of dividends or capital.

 

-    Appointment and removal of Directors

 

Article 55.1 of the Company’s Memorandum and Articles of Association states that the Directors of the Company shall be appointed by the Members in the annual general meeting (AGM) of the Company.  An election of the Directors shall take place every year.  All Directors, except a managing director (if any), shall retire from office every 3 years, but shall be eligible for re-election.  The Directors shall be elected as provided in Article 55.1.1 & 55.1.2 of the Memorandum and Articles of Association, that any Member or number of Members who in the aggregate hold not less than 200,000 shares having voting rights in the Company shall be entitled to nominate a fit and proper person for appointment as director of the Company.  In addition to the nominations that may be made by Members pursuant to the provisions of Article 55.1.1, the Directors themselves or a committee appointed for the purpose by the Directors, may make recommendation and nominations to the Members for the appointment of Directors at the next following AGM.

 

-    Powers of Directors

 

The powers and duties of Directors are outlined in the Company’s Articles of Association.

 

-    General Meetings

 

The Company shall in each year hold a General Meeting as its AGM in addition to any other meetings in that year.  All general meetings other than annual general meetings shall be called extraordinary general meetings.  The Directors may convene an extraordinary general meeting whenever they think fit.  If at any time there are not sufficient Directors capable of acting to form a quorum for a meeting of the Directors, any Director, or any two Members of the Company holding at least 10% of the Equity Securities conferring a right to attend and vote at general meetings of the Company, may convene an extraordinary general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Directors and shall give notice thereof.

 

A General Meeting of the Company shall be called by not less than 14 days notice in writing.  The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it was given and shall specify the place, the day and the hour of the meeting, and in case of special business, the general nature of that business, and shall be accompanied by a statement regarding the effect and scope of any proposed resolution in respect of such special business.

 

-    Auditors

 

Pursuant to the Company’s statutory obligations in terms of Companies Act and Capital Markets Rules, the appointment of the auditors and the authorisation of the Directors to set their remuneration will be proposed and approved at the Company’s AGM. HLB CA Falzon have expressed their willingness to continue in office.

 

These financial statements were approved for issue by the Board and signed on its behalf on 26 April 2022 by:

 

 

 

Mr. Martin Vella - Chairman

Mr. Mark Vella - Director

 

 

Registered Office

The Factory,

Mosta Road,

Lija

Malta

 

 

 

Corporate Governance Statement

for the year ended 31 December 2021

 

Introduction

 

Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority (the “Rules“), Hal Mann Vella Group p.l.c. (“the Company”) should endeavour to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Rules (“the Principles”) and accordingly, in terms of Rule 5.94, the Company is hereby reporting on the extent of its adoption of the Code, with respect to the financial year under review.

 

The Company became subject to the Rules when its bonds were admitted to listing and subsequent trading on the Malta Stock Exchange.

 

The Company acknowledges that although the Code does not dictate or prescribe mandatory rules, compliance with the principles of good corporate governance recommended in the Code is in the best interests of the Company, its shareholders, bondholders and other stakeholders, and that compliance with the Code, is not only expected by investors but also evidences the directors' and the Company's commitment to maintaining a high standard of good governance.

 

The Company has only issued debt securities which have been admitted to trading on the Malta Stock Exchange, and accordingly, in terms of Rule 5.101, is exempt from reporting on the matters prescribed in Rules 5.97.1 to 5.97.3, 5.97.6 and 5.97.7 in this corporate governance statement (the "Statement”).  It is in the light of this exemption afforded to the Company by virtue of Rule 5.101, that the directors of the Company are herein reporting on the corporate governance of the Company.

 

General

 

Good corporate governance is the responsibility of the Board of Directors of the Company (“the Board”) as a whole, and has been and remains a priority for the Company. In deciding on the most appropriate manner in which to implement the Code, the Board took cognisance of the Company’s size, nature and operations, and formulated the view that the adoption of certain mechanisms and structures which may be suitable for companies with extensive operations may not be appropriate for the Company.  The limitations of size and scope of operations inevitably impact on the structures required to implement the Code, without however diluting the effectiveness thereof.

 

The Board considers that, to the extent otherwise disclosed herein, the Company has generally been in compliance with the Principles set out in the Code throughout the year under review.

 

This Statement shall now set out the structures and processes in place within the Company and how these effectively achieve the Principles set out in the Code for the year under review.  For this purpose, this Statement will make reference to the pertinent principles of the Code and then set out the manner in which the Board considers that these have been adhered to.

 

For the avoidance of doubt, reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles and the Code provisions.

 

Compliance with the Code

 

The Directors believe that for the financial year under review the Company has generally complied with the requirements for each of the following principles. Further information in this respect is provided hereunder.

 

Principle One - The Board

 

The Directors report that for the financial year under review, the directors of the Company have provided the necessary leadership in the overall direction of the Company and have performed their responsibilities for the efficient and smooth running of the Company with honesty, competence and integrity. The Board has adopted prudent and effective systems which ensure an open dialogue between the Board and Senior Management. The Board is composed of fit and proper members who are competent and proper to direct the business of the Company with honesty, competence and integrity. All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board is accountable for its performance and that of its delegates to shareholders and other relevant stakeholders.

 

The Board has a structure that ensures a mix of Executive and Non-Executive Directors and that enables the Board to have direct information about the Company’s performance and business activities.

 

Principle Two - Chairman and CEO

 

The position of the Chairman and that of the CEO are occupied by different individuals. There is a clear division of responsibilities between the running of the Board and the CEO's responsibility in managing the Company's business. This separation of roles of the Chairman and CEO avoids concentration of authority and power in one individual, and differentiates leadership of the Board, from the running of the business.

 

The Chairman exercises independent judgement and is responsible to lead the Board and set its agenda, whilst also ensuring that the Directors receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the Company. The Chairman is also responsible for ensuring effective communication with shareholders and encouraging active engagement by all members of the Board for discussion of complex or contentious issues. The Board believes that these functions have been conducted in compliance with the dictates of Code provision 2.2. The CEO is then accountable to the Board for all business operations of the Company.

 

Principle Three - Composition of the Board

 

The Board is composed, in line with the requirements of Code provision 3, of a mix of executive and non-executive directors, including independent non-executives. During 2021, the Board was composed of 6 members, with 3 executive and 3 non-executive directors,  2 of whom are independent from the Company.  It is responsible for the overall long-term strategy and general policies of the Company, of monitoring the Company’s systems of internal control, managing the Company's exposure to financial risk, financial reporting, and ensuring effective communication with the market, as and when necessary.

 

The CEO provides the rest of the directors with access to the information on the Company’s financial position and systems.  He acts as the main point of communication between the Board and overall corporate operations as he is responsible for proper implementation of sustainable business solutions, effective framework of internal controls over risk in relation to the business and strategic  goals devised by the Board.

 

The Board of Directors consists of the following:

 

Mr. Martin Vella - Director and Chairman

 

Mr. Mark Vella - Executive Director

 

Mr. Joseph Vella - Executive Director

 

 

Dr. Arthur Galea Salomone - Non-Executive Director

 

Ms. Miriam Schembri - Non-Executive Director

 

Mr. Mario Galea - Non-Executive Director (appointed on 27 April 2022)

 

Mr. William Van Buren - Non-Executive Director (resigned on 27 April 2022)

 

 

In accordance with the provisions of the Company’s Articles of Association, the appointment of directors to the Board is exclusively reserved to the Company’s shareholders, except in so far as appointment is made by the Board to fill a casual vacancy, which appointment would be valid until the conclusion of the next annual general meeting ("AGM") of the Company, following such an appointment.  In terms of the Company's Articles of Association a director shall hold office for a period of three years from the date of his appointment.  Dr. Arthur Galea Salomone and Mr. Mario Galea are considered by the Board to be independent non-executive members of the Board. Ms. Miriam Schembri on the other hand, is also a non-executive member of the Board, however, is not independent.

 

None of the independent non-executive directors:

 

a)
b)
c)

d)
e)
f) 

are or have been employed in any capacity with the Company and/or the Group;
have or had a significant business relationship with the Company and/or the Group;
has received or receives significant additional remuneration from the Company and/or the Group;
has close family ties with any of the Company’s executive Directors or senior employees;
has served on the board for more than twelve consecutive years; or
is or has been within the last three years an engagement partner or a member of the audit team of the present or former external auditor of the Company and/or the Group.

 

In terms of Code provision 3.4, each non-executive director of the Board has declared in writing to the Board that he/she undertakes:

 

a)
b)

c)

to maintain in all circumstances his independence of analysis, decision and action;
not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
to clearly express his/her opposition in the event that he finds that a decision of the Board may harm the Company.

 

Principle Four - The Responsibilities of the Board

 

The Board acknowledges its statutory mandate to conduct the administration and management of the Company.  The Board, in fulfilling this mandate and discharging its duty of stewardship of the Company, meets on a regular basis, with such meetings usually focusing on business strategy, operational and financial performance, and assumes responsibility for the Company’s strategy and decisions with respect to the issue, servicing and redemption of its bonds in issue, and for monitoring that its operations are in conformity with its commitments towards bondholders, shareholders, and all relevant laws and regulations.  The Board is also responsible for ensuring that the Company establishes and operates effective internal control and management information systems and that it communicates effectively with the market.

 

The Executive Officers of the Company may be asked to attend board meetings or general meetings of the Company, although they do not have the right to vote thereat until such time as they are also appointed to the Board.  The rest of the Directors may entrust to and confer upon the CEO any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

 

In fulfilling its mandate, the Board:

 

a)

has a clearly-defined Company strategy, policies, management performance criteria and business policies which can be measured in a precise and tangible manner;

b)

has established a clear internal and external reporting system so that the Board has access to accurate, relevant and timely information such that the Board can discharge its duties, exercise objective judgment on corporate affairs and take pertinent decisions to ensure that an informed assessment can be made of all issues facing the board;

c)

establishes an Audit Committee in terms of Rules 5.117 – 5.134;

d)

continuously assesses and monitors the Company`s present and future operations, opportunities, threats and risks in the external environment and current and future strengths and weaknesses;

e)

evaluates management’s implementation of the Company's policies, corporate strategy and financial objectives, and regularly reviews the strategy, processes and policies adopted for implementation using key performance indicators so that corrective measures can be taken to address any deficiencies and ensure the future sustainability of the Company; and

f)

ensures that the Company has appropriate policies and procedures in place to assure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards.

 

As part of succession planning, the Board ensures that the Company implements appropriate schemes to recruit, retain and motivate employees and senior management. Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at the Company’s expense.

 

The Audit Committee

 

The Company has established an Audit Committee in line with the requirements of the Rules. The Audit Committee’s primary objective is to assist the Board in fulfilling its responsibilities: in dealing with issues of risk, control and governance; and to monitor and review the financial reporting processes, financial policies and internal control structure of the Company. During the financial year under review, the Audit Committee met four times.

 

Although the Audit Committee is set up at the level of the Company its main tasks are also related to the activities of the subsidiaries and operational companies.

 

The Board has set formal terms of establishment and reference of the Audit Committee that establish its composition, role and function, the parameters of its remit as well as the basis for the processes that it is required to comply with. The Audit Committee is a sub-committee of the Board and is directly responsible and accountable to the Board. The Board reserves the right to change these terms of reference from time to time.

 

Furthermore, the Audit Committee has the role and function of scrutinising and evaluating any proposed transaction to be entered into by the Company and a related party, to ensure that the execution of any such transaction was at arm’s length and on a commercial basis and ultimately in the best interests of the Company. 

 

The Audit Committee is composed of 3 Non-Executive Directors, 2 of whom are also independent:

 

•    Dr. Arthur Galea Salomone – Member

•    Mr. Mario Galea – Member

•    Ms. Miriam Schembri – Member

 

Mr. Mario Galea is a Non-Executive Director and a qualified accountant, who the Board considers as independent and competent in accounting as required in terms of the Capital Markets Rules.

 

Principle Five - Board meetings

 

The Directors meet regularly to dispatch the business of the Company.  The Directors are notified in advance of forthcoming meetings so as to provide adequate time to Directors to prepare themselves for such meetings. Notification thereof, together with the issue of an agenda and supporting board papers, which are circulated in advance of the meeting, is carried out by the company secretary of the Company. Minutes are prepared during Board meetings recording faithfully attendance, and resolutions taken at the meeting. These minutes are subsequently circulated to all Directors as soon as practicable after the meeting.  The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda on the Board seeks to achieve a balance between long-term strategic and short-term performance issues.

 

The Board meets as often and as frequently required in line with the nature and demands of the business of the Company. Directors attend meetings on a frequent and regular basis and dedicate the necessary time and attention to their duties as directors of the Company.  The Board met 4 times during the financial year under review. The following Directors attended meetings as follows:

 

Mr. Martin Vella – Chairman - 4 meetings
Mr. Mark Vella – Director - 4 meetings
Mr. Joseph Vella – Director - 4 meetings
Mr. Mario Galea - Non-Executive Director - 2 meetings
Dr. Arthur Galea Salomone - Non-Executive Director - 4 meetings
Ms. Miriam Schembri - Non-Executive Director - 4 meetings
Mr. William Van Buren - Non-Executive Director - 2 meetings

 

Shareholders’ influence is exercised at the AGM of the Company, which is the highest decision-making body. All shareholders have the right to participate and to vote in the meeting. Shareholders who cannot participate in the meeting can be represented by a proxy.

 

Business at the Company’s AGM will cover the Annual Report and Financial Statements, the declaration of dividends if any, election of directors and the approval of their remuneration, appointment of the auditors and the authorisation of the directors to set the auditors’ fees. Shareholders’ meetings are called with enough notice to enable the use of proxies to attend, vote and abstain. The Company recognises the importance of maintaining dialogue with its shareholders to ensure its strategies and performance.

 

Principle Six - Information and Professional Development

 

The directors believe that for the financial year under review they conducted sufficient professional development for its directors and officers, and the Company will continue with this commendable practice. In this respect, during the course of the year under review, the Board has held one extended training session on the legal responsibilities of directors as part of on-going training and professional development with respect to the proper discharge of their duties as directors.

 

Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at the Company’s expense, and have access to the advice and services of the company secretary of the Company.

 

As part of succession planning and employee retention, the Board ensure that the Company implements appropriate schemes to recruit, retain and motivate employees and Senior Management and keep a high morale amongst employees.  

 

Principle Seven - Evaluation of the Board's performance

 

The current composition of the Board allows for a cross-section of skills and experience and achieves the appropriate balance required for it to function effectively. During the year, the Directors carried out a self-evaluation performance analysis, including the Chairman and the CEO. The results of this analysis did not require any material changes in the Company’s corporate governance structure.

 

Principle Eight - Committees

 

Principle Eight A of the Code deals with the establishment of a remuneration committee for the Company aimed at developing policies on remuneration for directors and Senior Executives and devising appropriate remuneration packages.

 

In view of the size and type of operation of the Company, the Board does not consider the Company to require the setting up of a remuneration committee, and, in accordance with Code principle 8.A.2, the Board itself carries out the functions of the remuneration committee specified in, and in accordance with, Principle Eight A of the Code, given that the remuneration of Directors is not performance-related.

 

The Board has established a remuneration policy for directors and senior executives of the Company, underpinned by formal and transparent procedures for the development of such a policy and the establishment of the remuneration packages of individual Directors.

 

The Board confirms that there have been no changes in the Company’s remuneration policy during the year under review and the Company does not intend to effect any changes in its remuneration policy for the following financial year.

 

The maximum annual aggregate emoluments that may be paid to the directors of the Company is, pursuant to the Company’s Memorandum and Articles of Association, approved by the shareholders in general meeting. The Board is composed exclusively of executive and non-executive Directors. The determination of remuneration arrangements for board members is a reserved matter for the Board as a whole.

 

During the financial year under review, Mr. Martin Vella, Mr. Mark Vella and Mr. Joseph Vella each held an indefinite full-time contract of service with Sudvel Limited and Hal Mann Vella Limited.

 

The remuneration policy for Directors has been consistent since inception; no Director (including the Chairman) is entitled to profit sharing, share options or pension benefits.  There is no linkage between the remuneration and the performance of Directors.  A fixed honorarium is payable at each financial year to the non-executive directors of the Company.

 

For the financial year under review the aggregate remuneration of the Directors of the Company was as follows:

 

Fixed remuneration from Company                           €22,651

Fixed remuneration from Subsidiaries                       €241,809

 

Principle Eight B of the Code deals with the formal and transparent procedure for the appointment of Directors.

 

In view of the size and type of operation of the Company, the Board does not consider the Company to require the setting up of a nomination committee. Reference is also made to the information provided under the subheading ‘Principle Three’ above, which provides for a formal and transparent procedure for the appointment of new directors to the Board.

 

Principle Nine - Relations with shareholders and with the market

 

Pursuant to the Company’s statutory obligations in terms of the Companies Act (Cap. 386 of the Laws of Malta) and the Capital Markets Rules issued by the Malta Financial Services Authority, the Annual Report and Financial Statements, the election of Directors and approval of Directors’ fees, the appointment of the auditors and the authorisation of the Directors to set the auditors’ fees, and other special business, are proposed and approved at the Company’s AGM. 

 

With respect to the Company’s bondholders and the market in general, during the financial year under review, there was no need to issue any Company announcements to the market.

 

The Company’s Articles of Association allow minority shareholders to call special meetings on matters of importance to the Company, provided that the minimum threshold of ownership established in the Articles of Association is met.

 

Principle Ten - Relations with Institutional shareholders

 

The Directors are of the view that this Principle is not applicable to the Company.

 

Principle Eleven - Conflicts of Interest

 

Principle Eleven of the Code deals with conflicts of interest and the principle that Directors should always act in the best interests of the Company

 

All of the Directors of the Company, except for Ms. Miriam Schembri, Dr. Arthur Galea Salomone and Mr. Mario Galea are Executive Officers of the Company. The executive directors have a direct beneficial interest in the share capital of the Company, and as such are susceptible to conflicts arising between the potentially diverging interests of the shareholders and the Company.  During the financial year under review, no private interests or duties unrelated to the Company were disclosed by the Directors which were or could have been likely to place any of them in conflict with any interests in, or duties towards, the Company.

 

The Audit Committee has the task to ensure that any potential conflicts of interest are resolved in the best interests of the Company. Furthermore, in accordance with the provisions of article 145 of the Companies Act (Cap. 386 of the Laws of Malta), every Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company is under the duty to fully declare his interest in the relevant transaction to the Board at the first possible opportunity and he will not be entitled to vote on matters relating to the proposed transaction and only parties who do not have any conflict in considering the matter will participate in the consideration of the proposed transaction.

 

Principle Twelve - Corporate Social Responsibility

 

Principle Twelve of the Code encourages Directors of listed companies to adhere to accepted principles of corporate social responsibility

 

The Company seeks to adhere to sound principles of Corporate Social Responsibility in its management practices, and is committed to high standards of ethical conduct and to contribute to the development of the well-being of employees and their families as well as the local community and society at large.

 

The Board is mindful of the environment and its responsibility within the community in which it operates. To this end the Company, and other companies within its group structure (the “Group”), have taken initiatives such as; investment in renewable energy; implementation of water management systems within its operations and manufacturing companies to curtail waste and better manage the use of water.

 

Furthermore, the Group also seeks to minimise waste by seeking to deploy what are by products of its manufacturing, in its terrazzo line ensuring a cheaper product complimentary to its social policy of reducing waste.

 

In carrying on its business the Group is fully aware and at the forefront to preserving the environment and continuously review its policies aimed at respecting the environment and encouraging social responsibility and accountability.

 

Internal Control

 

The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The directors of the Company are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives of the Company, and can only provide reasonable, and not absolute, assurance against normal business risks.

 

During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.

 

Other key features of the system of internal control adopted by the Company in respect of its own internal control as well as the control of its subsidiaries and affiliates are as follows:

 

Risk identification

 

The Board, with the assistance of the management team of the Company, is responsible for the identification and evaluation of key risks applicable to the areas of business in which the Company and its subsidiaries are involved.  These risks are assessed on a continual basis.

 

Information and communication

 

Periodic strategic reviews which include consideration of long-term financial projections and the evaluation of business alternatives are regularly convened by the Board. Regular budgets are prepared and performance against these plans is actively monitored and reported to the Board.

 

In conclusion, the Board considers that the Company has generally been in compliance with the principles of the Code throughout the period under review as befits a company of this size and nature. 

 

Non-compliance with the principles of the Code and the reasons therefor have been identified below.

 

Code Provision

Explanation

4.2.7

The Board has not formally developed a succession policy for the future composition of the Board as recommended by Code provision 4.2.7. In practice, however, the Board are actively engaged in succession planning and involved in ensuring that appropriate schemes to recruit, retain and motivate employees and senior management are in place.

7.1

The Board has not appointed a committee for the purpose of undertaking an evaluation of the Board’s performance. The Board believes that the size of the Company and the Board itself does not warrant the establishment of a committee specifically for the purpose of carrying out a performance evaluation of its role. The size of the Board is such that it should enable it to evaluate its own performance without the requirement of setting up an ad-hoc committee for this purpose. The Board shall retain this matter under review over the coming year.

8B

The Board has not appointed a Nominations Committee, particularly of the appointment process being specifically set out in the Articles of Association. The Board, however, intends to keep under review the utility and possible advantages of having a Nominations Committee and following an evaluation may, if the need arises, make recommendations to the shareholders for a change to the Articles of Association.

 

Approved by the Board on 26 April 2022 and signed on its behalf by:

 

Mr. Martin Vella - Chairman

Mr. Mark Vella - Director

 

 

 

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2021

 The Group

 The Company

 

 

 

 

 

 

2021

2020

2021

2020

Note

 €

 €

 €

 €

 Revenue from contracts with customers

6

23,071,255

21,335,174

-

-

 Rental income

17,24

2,188,564

2,126,895

        847,156

860,147

 Revenue  

25,259,819

23,462,069

        847,156

860,147

 Cost of sales and services

7

(17,021,875)

(15,754,890)

-

-

 Gross profit

8,237,944

7,707,179

        847,156

860,147

 Distribution and selling costs            

7

(213,923)

(224,101)

-

-

 Administrative expenses                    

7

(4,116,935)

(4,164,736)

 (238,353)

 (225,183)

 Other operating income

8

888,491

388,758

          19,219

9,004

 Operating profit

4,795,577

3,707,100

        628,022

643,968

Change in fair value of investment properties

17

-

1,506,227

-

1,142,984

 Share in profit of joint ventures

15

14,561

40,576

-

-

 Dividends income

-

-

274,731

-

 Loss on derecognition of lease

24

(443,847)

(729,051)

-

-

 Finance and similar income

9

627

194,645

     1,403,597

1,450,617

 Finance costs 

10

(2,354,103)

(2,404,736)

 (1,718,828)

 (1,715,441)

 Profit before tax

2,012,815

2,314,761

        587,522

1,522,128

 Income tax expense

12

(822,122)

(879,025)

 (361,805)

 (276,268)

 Profit for the year

1,190,693

1,435,736

        225,717

1,245,860

 Other comprehensive income

 Items that will not be reclassified to profit and loss:

 Revaluation surplus on property, plant and equipment, net of deferred tax

28

                      -

734,303

                    -

                    -

 Items that may be reclassified subsequently to
   profit or loss:

 Equity-accounted investees - share of OCI

15,29

157

149

-

-

 Debt instruments at fair value through
   other comprehensive income:

   - change in fair value,  net of deferred tax

29

2,559

3,004

            2,559

3,004

Total comprehensive income for the year

1,193,409

2,173,192

        228,276

1,248,864

 

 

 

 

 Earnings per share (cents)

 - Basic profit for year attributable to
        ordinary equity holders of the parent

27

0.24

0.29

              0.05

              0.25

 

The notes on page – form part of these financial statements.

 

 

 

 

Consolidated Statement of Financial Position

as at 31 December 2021

 The Group

 The Company

Note

2021

 

2020

2021

2020

 €

 €

 €

 €

 ASSETS

 Non-current assets

 Property, plant & equipment

13

33,133,600

33,844,960

             25,035

-

 Investment in subsidiaries

14

-

                       -

        8,256,343

8,256,343

 Investment in joint ventures

15

1,721,867

1,917,224

           165,720

165,720

 Other non-current financial assets

16

755,963

837,857

     18,153,072

17,244,341

 Investment property

17

50,174,457

49,291,304

     32,373,877

32,361,465

 Right-of-use assets

24

7,725,277

7,489,724

                        -

-

 Deferred taxation

25

1,619,261

1,609,041

           790,544

843,088

 Goodwill

18

62,888

62,888

                        -

-

 Total non-current assets

95,193,313

95,052,998

     59,764,591

58,870,957

 Current assets

 Inventories

19

4,354,663

3,785,745

                        -

-

 Property held-for-sale 

20

6,307,487

6,391,935

                        -

-

 Trade and other receivables 

21

14,211,205

12,715,909

        4,606,712

112,951

 Contract assets

22

1,774,950

1,473,454

                        -

-

 Current tax recoverable

12

-

                       -

                        -

241

 Other current financial assets

16

91,000

91,000

                        -

-

 Cash and cash equivalents

33

1,819,027

2,884,668

           549,302

1,649,045

 Total current assets

28,558,332

27,342,711

        5,156,014

5,762,237

 Total assets

123,751,645

122,395,709

     64,920,605

64,633,194

 EQUITY AND LIABILITIES 

 Equity

 Issued capital 

26

4,999,820

4,999,820

        4,999,820

4,999,820

 Revaluation reserve on
   property, plant and equipment

28

24,778,131

24,778,131

                        -

-

 Fair value reserve

29

62,629

59,913

             61,536

58,977

 Revaluation reserve on
   investment property

30

6,249,374

6,249,374

     17,011,883

17,011,883

 Capital redemption reserve

31

47,852

47,852

                        -

-

 Incentives and benefits reserves

32

604,060

604,060

                        -

-

 Retained earnings

11,770,328

10,579,635

        3,486,812

3,261,095

 Total equity

48,512,194

47,318,785

     25,560,051

25,331,775

 Non-current liabilities

 

 Interest bearing loans
   and borrowings

16

41,201,845

40,657,964

     32,006,948

31,939,712

 Finance lease liability

16,24

8,292,602

7,762,145

           798,644

797,446

 Trade and other payables

23

-

9,621

                        -

-

 Deferred taxation

25

4,717,885

4,589,705

        2,588,146

2,573,706

 Total non-current liabilities

54,212,332

53,019,435

     35,393,738

35,310,864

 

 Current liabilities

 

 Current borrowings

16

7,147,502

7,465,815

        2,637,915

2,603,942

 Finance lease liability

16,24

-

52,064

             39,500

39,500

 Trade and other payables

23

13,698,524

13,591,134

        1,249,055

1,347,113

 Current tax due

12

181,093

948,476

             40,346

-

 Total current liabilities

21,027,119

22,057,489

        3,966,816

3,990,555

 Total liabilities

75,239,451

75,076,924

     39,360,554

39,301,419

 Total equity and liabilities

123,751,645

122,395,709

     64,920,605

64,633,194

 The notes on page – form part of these financial statements.

 The financial statements set out on pages  to  were approved and authorized for issue by the Board of Directors and signed on its behalf by: 

_______________________________

_______________________________

Mr. Martin Vella - Chairman

Mr. Mark Vella - Director

26 April 2022

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

for the year ended 31 December 2021

 The Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued capital

Revaluation reserve on
   property, plant and equipment

Revaluation reserve on investment property

 Revaluation reserve on financial assets

Retained
earnings

Incentives and benefits reserves

Capital redemption reserve

Total
Equity

Balance as at 1 January 2020

4,999,820

24,043,828

4,912,271

56,760

10,481,002

604,060

47,852

45,145,593

Profit for the year

-

-

-

-

1,435,736

-

                    -

1,435,736

Other comprehensive income (notes 28 and 29)

-

734,303

-

3,153

-

-

                    -

737,456

Total comprehensive income for the year

-

734,303

-

3,153

1,435,736

-

                    -

2,173,192

Transfer of fair value gain on investment property, net of deferred tax (note 30)

 -

                      -

1,337,103

                       -

(1,337,103)

 -

 -

                       -

Balance as at 31 December 2020

4,999,820

24,778,131

6,249,374

59,913

10,579,635

604,060

47,852

47,318,785

Balance as at 1 January 2021

4,999,820

24,778,131

6,249,374

59,913

10,579,635

604,060

47,852

47,318,785

Profit for the year

-

-

                    -

-

1,190,693

-

                    -

1,190,693

Other comprehensive income (notes 28 and 29)

-

-

-

2,716

-

-

                    -

2,716

Total comprehensive income for the year

-

-

-

2,716

1,190,693

-

                    -

1,193,409

Transfer of fair value gain on investment property, net of deferred tax (note 30)

-

-

-

-

 -

-

                    -

-

 Balance as at 31 December 2021

4,999,820

24,778,131

6,249,374

62,629

11,770,328

604,060

47,852

48,512,194

 The notes on page – form part of these financial statements.

 

 

 

 

Statement of Changes in Equity

for the year ended 31 December 2021

The Company

 

 

 

 

Issued capital

Revaluation reserve on financial assets

Revaluation reserve on investment property

Retained earnings

Total
Equity

Balance as at 1 January 2020

           4,999,820

                      55,973

        15,960,338

           3,066,780

        24,082,911

Profit for the year

                           -

                                -

                           -

           1,245,860

           1,245,860

Other comprehensive income

                           -

                        3,004

                           -

-

                  3,004

Total comprehensive income for the year

                           -

                        3,004

                           -

           1,245,860

           1,248,864

Transfer of fair value gain on investment property, net of deferred tax (note 30)

                           -

                                -

           1,051,545

         (1,051,545)

                           -

Balance as at 31 December 2020

           4,999,820

                      58,977

        17,011,883

           3,261,095

        25,331,775

Balance as at 1 January 2021

           4,999,820

                      58,977

        17,011,883

           3,261,095

        25,331,775

Profit for the year

                           -

                                -

                           -

              225,717

              225,717

Other comprehensive income

                           -

                        2,559

                           -

-

                  2,559

Total comprehensive income for the year

                           -

                        2,559

                           -

              225,717

              228,276

Balance as at 31 December 2021

           4,999,820

                      61,536

        17,011,883

           3,486,812

        25,560,051

The notes on page 37–108 form part of these financial statements.

 

 

 

 

Consolidated Statement of Cash Flows

for the year ended 31 December 2021

 The Group

 The Company

 

 

 Note

2021

2020

2021

2020

 €

 €

 €

 €

 Cash flows from operating activities

 Profit before tax

2,012,815

2,314,761

       587,522

   1,522,128

 Adjustments for:

 

 Change in fair value of investment
properties

17

                   -

(1,506,227)

                  -

  (1,051,545)

 Share in profit of joint ventures

15

(14,561)

(40,576)

                  -

                 -

 Depreciation of right-of-use assets and
  property, plant and equipment

13, 24

1,312,883

1,201,754

                  -

                  -

 Provision for expected credit losses (ECL)

34

(56,499)

151,974

         16,768

 (45,868)

 Income from government grants

23

(16,576)

(16,576)

                  -

                 -

 Loss on reclassification of property, plant and equipment

                   -

11,896

                  -

                  -

 Dividends income

                   -

                     -

     (274,731)

-

 Finance and similar income

9

(627)

(194,645)

  (1,403,597)

(1,450,617)

 Finance costs

10

2,354,103

2,404,736

    1,718,828

1,715,441

 Working capital changes:

 

 (Increase)/decrease in inventories

      19

(568,918)

307,506

                  -

-

 Decrease/(increase)  in property held-for-sale

      20

84,448

(165,784)

                  -

-

 (Increase)/decrease in contract assets

      22

(312,612)

1,446,872

                  -

-

 (Increase)/decrease in receivables

      21

(834,545)

3,512,126

       (41,839)

(961,102)

 Increase/(decrease) in payables

      23

122,330

(2,873,381)

         (9,896)

 (70,204)

 (Advances to)/receipts from related undertakings

(3,900)

53,739

                  -

-

 Interest received from banks

9

627

690

                  -

-

 Interest paid on overdraft

10

(47,723)

(50,724)

                  -

 (16)

 Taxation paid

12

(1,472,922)

(185,437)

       (88,936)

-

 Net cash generated from operating activities

2,558,323

6,372,704

       504,119

 (341,783)

 Cash flows from investing activities

 Payments to acquire property, plant and
   equipment

13

(990,672)

(2,525,364)

       (25,035)

                  -

 Payments to acquire investment property

17

(883,153)

(2,780,734)

       (12,412)

(1,372,208)

 Payments to acquire investment in subsidiary

14

                   -

                     -

     (700,000)

 (1,200)

 Dividends received

210,075

                     -

       274,731

-

 (Advances to)/receipts from group companies

                   -

                     -

     (298,218)

 2,688,961

 Receipts from/(advances to) joint venture

94,400

(94,400)

         86,063

-

 Finance income 

9

                   -

                     -

    1,403,597

1,450,617

 Net cash used in investing activities

(1,569,350)

(5,400,498)

       728,726

2,766,170

 Cash flows from financing activities 

 (Repayment to)/advances from banks loans

(442,650)

694,416

                  -

-

 Repayment to group companies

                   -

                     -

     (553,924)

 (192,721)

 Advances from related companies

46,082

73,676

                  -

-

 Advances from joint ventures

89,161

3,689

                  -

-

 Repayment of principal portion of lease liability

(358,927)

(362,863)

       (39,500)

 (29,869)

 Receipt of principal portion of finance lease
   receivable

                   -

267,531

                  -

-

 Interest paid on bonds

(1,567,239)

(1,618,933)

  (1,620,853)

(1,618,933)

 Interest paid on bank loans

(372,332)

(443,370)

     (118,790)

 (5,015)

 Net cash used in financing activities

(2,605,905)

(1,385,854)

  (2,333,067)

(1,846,538)

 Effect of ECL on cash in banks

(511)

(229)

              479

 (229)

 Net movement in cash and cash equivalents

(1,616,932)

(413,648)

  (1,100,222)

577,849

 Cash and cash equivalents at beginning of year

1,588,369

2,002,246

    1,649,045

1,071,425

 Cash and cash equivalents at end of year

33

(29,074)

1,588,369

       549,302

1,649,045

 

 

 

 

Notes to the Consolidated Financial Statements

for the year ended 31 December 2021

 

1.       Corporate information

 

The consolidated financial statements of Hal Mann Vella Group p.l.c. and its subsidiaries (“the Group”) for the year ended 31 December 2021 were authorized for issue in accordance with a resolution of the Directors on 26 April 2022.

 

Hal Mann Vella Group p.l.c. (“the Company”) is a public limited liability company incorporated in Malta, under the Companies Act, Cap. 386 of the Laws of Malta. The Company is principally a finance and investment company in connection with the ownership, development, operation and financing of the business activities of Hal Mann Vella Group of companies. Its registered office is at The Factory, Mosta Road, Lija, Malta.

 

2.       Significant accounting policies

 

2.1 Basis of preparation and consolidation

 

Basis of preparation

 

These financial statements are prepared under the historical cost convention, as modified by the measurement of investment property, land and buildings classified as property, plant and equipment and financial assets at fair value and are in accordance with the requirements of the International Financial Reporting Standards (IFRS) as adopted by the European Union and comply with the Companies Act, Cap. 386 of the Laws of Malta.  The consolidated financial statements are presented in Euro (€), which is the functional currency of the Group.

 

Consolidation

 

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021.  Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

 

- Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

- Exposure, or rights, to variable returns from its involvement with the investee

- The ability to use its power over the investee to affect its returns

 

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

 

- The contractual arrangement(s) with the other vote holders of the investee

- Rights arising from other contractual arrangements

- The Group’s voting rights and potential voting rights

 

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If this aggregate is less than the fair value of the identifiable net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

 

Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the CGU retained.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

 

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

 

2.2 Current versus non-current classification

 

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

- Expected to be realised or intended to be sold or consumed in the normal operating cycle;

- Held primarily for the purpose of trading;

- Expected to be realised within twelve months after the reporting date; or

- Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

 

All other assets are classified as non-current.

 

A liability is current when:

- It is expected to be settled in the normal operating cycle;

- It is held primarily for the purpose of trading;

- It is due to be settled within twelve months after the reporting date; or

- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.

 

The Group classifies all other liabilities as non-current.

 

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

 

2.3 Investment in joint venture

 

The Group has an interest in joint ventures.  A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.  Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The Group recognises its interest in the joint-venture using the equity method. Investments in joint ventures are included in the Group’s statement of financial position at cost and adjusted thereafter for the post-acquisition change in the share of net assets. The statement of profit or loss and other comprehensive income includes the share of profit or loss in joint venture.

 

2.4 Financial instruments

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

Financial assets

 

Initial recognition and measurement

 

Financial assets are classified, at initial recognition, as financial assets measured at amortized cost, fair value through profit or loss (FVTPL) and fair value through other comprehensive income (FVTOCI). All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at FVTPL, transaction costs that are attributable to the acquisition of the financial asset.

 

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Refer to the accounting policies in section 2.16 (Revenue from contracts with customers).

 

In order for a financial asset to be classified and measured at amortised cost or FVTOCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at FVTPL, irrespective of the business model.

 

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

 

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

 

Subsequent measurement

 

For purposes of subsequent measurement, financial assets in these financial statements are classified  in four categories:

 

- financial assets at amortised cost (debt instruments)

- financial assets at FVTOCI with recycling of cumulative gains and losses (debt instruments)

- financial assets designated at FVTOCI with no recycling of cumulative gains and losses upon
      derecognition (equity instruments)

- financial assets at FVTPL

 

Financial assets at amortised cost (debt instruments)

 

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

 

The Group’s financial assets at amortised cost include bank term deposits, trade receivables, and receivables from joint  ventures and other related undertakings which are included both under current and non-current financial assets.

 

Financial assets at FVTOCI (debt instruments)

 

For debt instruments at FVTOCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.

 

As at 31 December 2021 and 2020, the Group has no debt instruments at FVTOCI.

 

Financial assets designated at FVTOCI (equity instruments)

 

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at FVTOCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

 

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at FVTOCI are not subject to impairment assessment.

 

The Group elected to classify irrevocably its equity investments under this category.

 

Financial assets at FVTPL

 

Financial assets at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

 

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at FVTOCI. Dividends on listed equity investments are recognised as other income in the statement of profit or loss when the right of payment has been established.

 

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

 

As at 31 December 2021 and 2020, the Group has no financial assets at FVTPL.

 

Derecognition

 

A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s statement of financial position) when:

 

-

the rights to receive cash flows from the asset have expired; or

-

the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks  and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

 

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

 

Impairment

 

Further disclosures relating to impairment of financial assets are also provided in notes 3 and 34 to the consolidated financial statements.

 

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at FVTPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate.

 

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For lease receivables and majority of trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

 

For cash in bank, contract assets and amounts due from joint ventures and other related undertakings, the Group applies a general approach in calculating ECLs. Therefore, the Group tracks changes in credit risk, and recognises a loss allowance based on either 12-month ECLs or lifetime ECLs, depending on whether there has been a significant increase in credit risk on the financial instrument since initial recognition. This is being done by considering the change in the risk of default occurring over the remaining life of the financial instrument.

 

The following are the key elements in the calculation of ECLs:

 

a. Probability of Default (PD)

The PD is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the financial asset has not been previously derecognised.

b. Exposure at Default (EAD)

The EAD is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date.

c. Loss Given Default (LGD)

The LGD is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive.

 

The mechanics of the ECL method are summarised below:

 

Stage 1:

The 12-month ECL is calculated as the portion of lifetime ECL that represent the ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Group calculates the 12-month ECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD.

Stage 2:

When a financial asset has shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECL. The mechanics are similar to those explained above, but PDs and LGDs are estimated over the lifetime of the instrument.

Stage 3:

For financial asset considered as credit-impaired, the Group recognises the lifetime ECL. The method is similar to that for Stage 2 financial assets, with the PD set at 100%.

 

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

Financial liabilities

 

Initial recognition and measurement

 

Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

 

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.

 

Subsequent measurement

 

For purposes of subsequent measurement, financial liabilities are classified in two categories:

 

- financial liabilities at FVTPL

- financial liabilities at amortised cost (loans and borrowings)

 

Financial liabilities at FVTPL

 

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL.

 

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

 

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.

 

Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability at FVTPL as at 31 December 2021 and 2020.

 

Financial liabilities at amortised cost (loans and borrowings)

 

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

 

This category generally applies to interest-bearing loans and borrowings. For more information, refer to notes 16 and 34 to the consolidated financial statements.

 

Derecognition

 

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

 

Offsetting of financial instruments

 

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

 

2.5 Property, plant and equipment

 

Land and buildings are stated in the statement of financial position at its revalued amount, being the fair value at the date of revaluation.  Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from those that would be determined using fair values at each reporting date.

 

An increase in the carrying amount arising on the revaluation of such land and buildings is recognised in the consolidated statement of profit or loss and other comprehensive income and afterwards held in the revaluation reserve on property, plant and equipment relating to a previous revaluation of that asset.

 

Freehold land is not depreciated as it deemed to have an indefinite life.

 

Property, plant and equipment, except for revalued land and buildings, are stated at cost less accumulated depreciation.  Depreciation charge is provided from the month of acquisition until the month in which the asset is disposed of or scrapped.

 

Depreciation is calculated using the reducing balance method to allocate the cost of the assets to their residual values over their estimated useful lives, as follows:

 

Buildings

2%

Electrical installations and fittings

6.67% and 20%

Renewable energy equipment

6.67%

Plant and machinery

10%

Furniture and fittings

10%

Improvements to premises

10%

Air-conditioning equipment

16.67%

Tools

20%

Exhibits

20%

Exhibition stand and site offices

20% and 25%

Motor vehicles

20%

Computer equipment and software

25%

Office equipment

25%

Telecommunications equipment

25%

 

Depreciation methods, useful life and residual values are reassessed at each reporting date.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.  Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss and other comprehensive income when the asset is derecognised.

 

2.6 Intangible assets

 

Intangible assets acquired separately are measured on initial recognition at cost. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the profit or loss in the expense category that is consistent with the function of the intangible assets.

 

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in statement of profit or loss and other comprehensive income when the asset is derecognised.

 

2.7 Investment property

 

Property that is held for long-term rental yields or for capital appreciation or both, and is not occupied by the Group, is classified as investment property.  Investment property comprises freehold and leasehold land and buildings held under long-term operating leases.

 

Investment property is measured initially at its historical cost, including related transaction costs and borrowing costs.  Historical cost includes expenditure that is directly attributable to the acquisition of the items.  Borrowing costs which are incurred for the purpose of acquiring or constructing a qualifying investment property are capitalised as part of its cost.  Borrowing costs are capitalised while acquisition or construction is actively underway.  Capitalisation of borrowing costs is ceased once the asset is substantially complete and is suspended if the development of the asset is suspended.  After initial recognition, investment property is carried at fair value representing open market value determined periodically.  Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset.  If the information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections.

 

These valuations are reviewed on a regular basis (usually every two years).  Investment property that is being redeveloped for continuing use as investment property or for which the market has become less active continues to be measured at fair value.  Fair value measurement on property under construction is only applied if the fair value is considered to be reliably measurable.  The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.  The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.

 

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably.  All other repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.  When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

 

The fair value of investment property does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from its future expenditure other than those a rational market participant would take into account when determining the value of the property.

 

Changes in fair value are recognised in profit or loss and transferred to "Revaluation reserve on investment property" under equity.  Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.

 

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment.  Its fair value at the date of the reclassification becomes its cost for subsequent accounting purposes.  When the Group decides to dispose of an investment property without development, the Group continues to treat the property as an investment property.  Similarly, if the Group begins to redevelop an existing investment property for continued future use as investment property, it remains an investment property during the redevelopment.

 

If an item of property, plant and equipment and property held-for-sale becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is treated in the same way as revaluation under IAS 16.  Any resulting increase in the carrying amount of the property is recognised in statement of comprehensive income to the extent that it reverses a previous impairment loss; with any remaining increase recognised in other comprehensive income, directly to revaluation surplus with equity.  Any resulting decrease in the carrying amount of the property is initially charged to other comprehensive income against any previously recognised revaluation surplus, with any remaining decrease charged to the profit or loss.  Upon the disposal of such investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through statement of comprehensive income.

 

2.8  Inventories

 

Inventories are valued at the lower of cost and net realisable value.

 

Cost is determined on the weighted average cost method.  The cost of finished goods comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity).  It excludes borrowing costs.

 

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

 

2.9  Property held-for-sale

 

Property held-for-sale is included in the financial statements at the lower of cost and net realisable value.  Cost comprises the purchase price of acquiring the property and other costs incurred to develop the property.  Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

 

2.10  Cash and cash equivalents

 

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand, which are subject to an insignificant risk of changes in value.

 

For the purpose of the statement of cashflows, cash and cash equivalents consist of cash on hand and bank as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.

 

2.11  Share capital

 

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

 

2.12  Dividend distribution

 

Dividend distribution to the Group's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Group's shareholders.

 

2.13  Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

 

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

2.14  Provisions

 

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

 

2.15  Foreign currencies

 

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in euro, which is the Company's functional and presentation currency.

 

Foreign currency translations are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. All foreign exchange gains and losses are presented in the income statement within 'Other income' or 'Other expenses'.

 

2.16  Revenue recognition

 

Revenue from contracts with customers (under IFRS 15)

 

The Group's principal activities relate to the manufacture and business of stones, marbles, granites, patterned tiles, terrazzo and precast related products, as well as supply, installation, operation and maintenance of photovoltaic (PV) systems. The Group is also involved in property development and resale. Revenue from contracts is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer. Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Group and these can be measured reliably.

 

The Group's revenue recognition is straight-forward, hence no significant accounting judgement, estimates and assumptions (i.e., in terms of estimating variable considerations and stand-alone selling price) are involved.

 

Sale of stones, marbles, granites, patterned tiles, terrazzo and precast related products

 

Revenue from sale of manufactured construction materials is recognised at the point in time when control of asset is transferred to the customer, generally on delivery of products at the customer's location. The normal credit term is 30 to 90 days upon delivery.

 

Sale of electricity generated from PV panels

 

Revenue from sale of electricity is recognised at the point in time when control of the asset is transferred to the sole customer (i.e., Enemalta p.l.c.), generally upon exportation of the generated electricity to the solar grid. Enemalta p.l.c. pays the Group feed-in tariff (i.e., a tariff which is paid to a producer of electricity for the amount of electricity generated and exported to the electricity grid) based on the actual meter readings.  In the case where the amount due to the Group from the electricity exported by the PV system exceeds the invoiced amount  for the consumption of electricity for a particular billing period that is due to Enemalta p.l.c.,  such amount will be carried forward in the form of a credit note.  When two consecutive scheduled bills based on actual meter readings are shown to be in credit, Enemalta p.l.c. is obliged to pay the Group the credit within 60 days of the date of the second scheduled bill.

 

Sale of properties

 

Revenue from sale of real properties is recognised at the point in time when control of asset is transferred to the customer, generally upon signing of deed of sale where the customer obtains legal title to the property. Total fund is paid in full on date of deed.

 

Rendering of general construction and other services

 

The Group recognises revenue from construction and other services over time because the Group's  performance creates or enhances an asset that the customer controls as the asset is enhanced or created. In some cases, the customer simultaneously receives and consumes the benefits provided to them as the Group performs. The Group uses an input method in measuring progress of the services since there is a direct relationship between the Group’s effort (i.e., based on the costs incurred to date) and the transfer of service to the customer. The input method is implemented by first estimating the inputs required such as labor and other overheads, etc. to complete the service. The Group recognises revenue on the basis of the efforts expended to date relative to the total expected inputs to complete the service. The normal credit term is 30 to 90 days upon issuance of invoice.

 

Further, the Group provides services that are either sold separately or bundled together with the sale of tiles, marble stones and granites to a customer. Contracts for bundled sales of tiles, marble stones, granites and services are comprised of two performance obligations because the promise to transfer tiles, marbles, granites and provide services are capable of being distinct and separately identifiable. Accordingly, the Group allocates the transcation price based on the relative stand-alone selling prices of tiles, marbles, granites and services.

 

In determining the transaction price, the Group considers  the effects of variable consideration, existence of significant financing component, non-cash consideration, and consideration payable to the customer.

 

i) Variable consideration

 

'If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. In general, contracts for the sale of tiles, marble stones and granites do not provide customers with a right to return the goods; hence, no refund liability is recognised. In cases of discounts and/or price concessions for good and services, such are already established with the customer at the inception of the contract, thus, are not considered contingents as the amounts agreed are fixed and unavoidable. As at and for the years ended 31 December 2021 and 2020, there are no known factors or events which could make the consideration to be variable. The validity of this assessment is reassessed at each reporting date.

 

ii) Significant financing component

 

In most cases, the Group has contract assets wherein payment for goods and services rendered is not due from the customer until the full services agreed upon are completed. A contract asset is recognised over the period in which the services are performed to represent the Company's right to consideration for the services performed to date. Generally, it is the customer's preference to withhold payments to ensure that all performance obligations are performed as specified in the contract. This falls under one of the exemptions of 'significant financing component' - i.e., the difference between the promised consideration and the cash selling price of the goods or services is due to something other than financing.

 

Further, the Group applies the practical expedient for short-term advances received from customers - i.e., the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised goods or service and the payment is one year or less. As at and for the years ended 31 December 2021 and 2020, the contract liabilities are subsequently recognised as revenue within one year.

 

iii) Non-cash consideration

 

The Group does not receive non-cash considerations from customers for the sale of goods and services.

 

iv) Consideration payable to customer

 

The Group exports solar energy generated from PV panels to a customer who also supplies electricity to the Group for consumption. The consideration payable to a customer is accounted for as a reduction of the transaction price unless the payment to the customer is in exchange for a distint good or service that the customer transfers to the Group.

 

Contract balances

 

Contract assets

 

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.

 

Trade receivables

 

A receivable represents the company’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).

 

Contract liabilities

 

A contract liability is the obligation to transfer goods or services to a customer for which the company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the company performs under the contract (i.e., transfers control of the related goods or services to the customer).

 

Cost to obtain a contract

 

The Group applies the optional practical expedient to immediately expense costs to obtain a contract if the amortisation period of the asset that would have been recognised is one year or less. As such, payments for designers which constitute a relatively small amounts are immediately recognised as an expense in the consolidated statement of profit or loss and other comprehensive income.

 

Other revenue sources (not within the scope of IFRS 15)

 

The following recognition criteria must also be met before revenue is recognised:

 

Rental income

 

This relates to the rental income from the rental of immovable property in the ordinary couse of the Group's activities. For operating leases, it is recognised at profit or loss on a straight-line basis over the term of the lease and is stated net of value added tax. For finance leases, it is recognised at balance sheet as a lease receivable and amortised using effective interest method over the lease term.

 

Dividend income

 

Revenue from dividend income is recognised on the date the Group's right to receive payment is established.

 

Interest income

 

Interest income is accounted for when it is probable that the economic benefits associated with the transaction will flow to the Group and these can be measured reliably. Interest income is recognised on an accrual or time proportion basis.

 

Other operating income

 

Other operating income are accounted for when it is probable that the economic benefits associated with the transaction will flow to the Group and these can be measured reliably.

 

2.17  Leases

 

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

The Group as a lessee

 

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

 

i) Right-of-use assets

 

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

 

Hotel 

15 years

Industrial buildings

15 to 65 years

Offices

3 to 15 years

 

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

 

The right-of-use assets are also subject to impairment. Refer to the accounting policies in section 2.21 (Impairment of non-financial assets).

 

ii) Lease Liabilities

 

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

 

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

 

The Group’s lease liabilities are included in Interest-bearing loans and borrowings (see note 16).

 

iii) Short-term leases and leases of low-value assets

 

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of assets that are considered to be low value. Lease payments on short-term leases and leases of lowvalue assets are recognised as expense on a straight-line basis over the lease term.

 

The Group as a lessor

 

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss and other comprehensive income due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

 

2.18  Government grants

 

Government grants are recognised where there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

 

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.  Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

 

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in their period in which they become receivable.

 

2.19  Taxation

 

The tax expense for the year comprises current and deferred tax.  Tax is recognized in profit or loss, except when it relates to items recognized in other comprehensive income or directly in equity, in which case it is also dealt with in other comprehensive income or in equity, as appropriate.

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss.

 

Deferred income tax

 

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax liabilities are recongised for all temporary differences, except when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

 

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

 

Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at each reporting date.

 

Value Added Tax

Revenue, expenses and assets are recognised net of Value Added Tax, except:

 

- where the Value Added Tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case Value Added Tax is recognised as part of the acquisition of the asset or as part of the expense item, as applicable;

- where receivables and payables that are stated with the amount of Value Added Tax included.

 

The net amount of Value Added Tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

 

2.20  Borrowing cost

 

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs which are incurred for the purpose of acquiring or constructing qualifying property, plant and equipment or investment property, are capitalised as part of its cost. Borrowing costs are capitalised while acquisition or construction is actively underway, during the period of time that is required to complete and prepare the asset for its intended use. Capitalisation of borrowing costs is ceased once the asset is substantially complete and is suspended if the development of the asset is suspended. All other borrowing costs are expensed. Borrowing costs are recognised for all interest-bearing instruments on an accrual basis using the effective interest method. Interest costs include the effect of amortising any difference between the initial net proceeds and redemption value in respect of interest-bearing borrowings.

 

2.21  Fair value measurements and valuation processes

 

The Group measures non-financial assets such as land and buildings and investment property at fair value at each reporting date. 

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the market participants at the measurement date.  The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either (a) in the principal market for the asset or liability or (b) in the absence of a principal market, in the most advantageous market for the asset or liability.

 

The principal or the most advantageous market must be accessible by the Group.

 

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

A fair value measurement of non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure at fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

Information about the valuation techniques and inputs used in determining the fair value of the equity at FVTOCI, land and building and investment property is disclosed in notes 13, 16 and 17, respectively.

 

2.22  Impairment of non-financial assets

 

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

 

The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

 

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

 

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

 

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.

 

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

 

Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

 

3.       Critical accounting estimates and judgements

 

In preparing the financial statements, the Directors are required to make judgments, estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements. These estimates are reviewed on a regular basis and if a change is needed, it is accounted in the period the changes become known. The most significant judgment and estimates are as follows:

 

Judgments

 

In the process of applying the Group’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements:

 

Determining the lease term of contracts with renewal and termination options – Group as lessee

 

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

 

The Group has several lease contracts that include extension and termination options. The Group applies judgment in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate.

 

The Group includes the renewal period as part of the lease term for leases of assets with shorter non-cancellable period (i.e., three to five years). The Group typically exercises its option to renew for these leases because there will be a significant negative effect on production if a replacement asset is not readily available. The renewal periods for leases of assets with longer non-cancellable periods (i.e., 10 to 15 years) are not included as part of the lease term as these are not reasonably certain to be exercised. Furthermore, the periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised.

 

Property lease classification – Group as lessor

 

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains substantially all the risks and rewards incidental to ownership of these properties and accounts for the contracts as operating leases.

 

Property lease classification – Group as intermediate lessor

 

The Group has entered into property leases on its right of use asset meeting the definition of investment property. Based on an evaluation of the terms and conditions of the arrangements, the Group has determined that it has the right to use the underlying asset for a period of time which is long term, and the sublease is not for all of the remaining term of the head lease. Then, the intermediate lessor, in effect has not transferred that right to another party and accounts for the contracts as operating leases. During the term of the sublease, the intermediate lessor recognises a depreciation charge for the right-of-use asset, interest on the lease liability and lease income from the sublease.

 

Fair value of investment property

 

The Group carries its investment property at fair value, with changes being recognised in profit or loss.  This is based on market valuations performed by independent professional architect at least every two years.  In a year when market valuations are not performed by the independent professional architect, an internal assessment of the fair value of investment property is performed to reflect market conditions at the year-end date.

 

The last market valuations were performed in October and December 2020 and the Group recognized fair values of investment property in  note 17 to the financial statements.

 

Fair value of equity instruments designated at FVTOCI

 

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using other valuation techniques including the net value asset method. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments. See note 34 for further disclosures.

 

Recognition of deferred tax assets

 

The extent to which deferred tax assets can be recognized 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-forward can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

 

Estimates and assumptions

 

Impairment of non-financial assets

 

Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognised by the Group.

 

Provision for ECL on trade receivables and lease receivables

 

The Group uses a provision matrix to calculate ECLs for trade receivables and lease receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product type, customer type and rating).

 

The provision matrix is initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over  the next year which can lead to an increased number of defaults in the manufacturing sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

 

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.

 

Provision for ECL on other financial assets

 

The measurement of the Group's ECL on cash in banks, contracts assets, and amounts due from joint ventures and other related undertakings is a function of the PD, LGD and the EAD. These financial assets are measured under Stage 1 of the impairment model, and therefore ECLs are calculated on 12-month basis.

 

Elements of the ECL model which are considered accounting judgments and estimates include:

 

- The Group's internal credit grading model, which assigns PDs to the individual grades

- The Group’s criteria for assessing if there has been a significant increase in credit risk and so allowances should be measured on a liftetime ECL basis and the qualitative assessment

- Development of ECL models, including the various formulas and the choice of inputs

- Determination of associations between macroeconomic scenarios and, economic inputs, and the effect on PDs, EADs and LGDs

- Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models

 

It is the Group’s policy to regularly review its model in the context of actual loss experience and adjust when necessary.

 

Leases - Estimating the incremental borrowing rate

 

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

 

Assessing whether a change in payments is a lease modification

 

IFRS 16 defines a lease modification as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease. In assessing whether there has been a change in the scope of the lease, an entity considers whether there has been a change in the right of use conveyed to the lessee by the contract. A rent holiday or rent reduction alone is not a change in the scope of a lease. In assessing whether there has been a change in the consideration for a lease, an entity considers the overall effect of any change in the lease payments.  If there is no change in either the scope of the lease or the consideration for the lease, then there is no lease modification.

 

During the year, the Group benefited from reduced lease payments from its lease of plant and machinery and leasehold improvements as relief for the consequences of the Covid-19 pandemic.  Per assessment, the change in consideration from the rent holidays and reduced lease payments do not constitute a lease modification since the revised consideration for the lease is substantially the same as, or less than, the consideration from the original lease.  In addition, the reduction in lease payments would only be until January 2021. Lastly, there are no substantive change to other terms and conditions of the lease. 

 

As a result of these assessments, the Group has applied the amendment to IFRS 16. Lease liability amounted to €8,292,602 (2020: €7,814,209) as at 31 December 2021 and 2020, respectively (see notes 16 and 24).

 

In the opinion of the management, except for the above, the accounting estimates, assumptions and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as significant in terms of the requirements of IAS 1 (revised) – ‘Presentation of Financial Statements’.

 

4.       Application of New and Revised IFRS

 

4.1  New and Revised IFRS effective for current year

 

The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2021.

 

Several other amendments and interpretations apply for the first time in 2021 but do not have an impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

 

The nature and the impact of each new standard and amendment is described below:

 

Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

 

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:

 

-

A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest

-

Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued

-

Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component

-

Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component

 

These amendments had no impact on the financial statements of the Group. The Group intends to use the practical expedients in future periods if they become applicable.

 

Covid-19-Related Rent Concessions beyond 30 June 2021 Amendments to IFRS 16

 

On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification.

 

The amendment was intended to apply until 30 June 2021, but as the impact of the Covid-19 pandemic is continuing, on 31 March 2021, the IASB extended the period of application of the practical expedient to 30 June 2022. The amendment applies to annual reporting periods beginning on or after 1 April 2021. However, the Company has not received Covid-19-related rent concessions, but plans to apply the practical expedient if it becomes applicable within allowed period of application.

 

4.2  New and Revised IFRS in issue but not effective

 

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

 

Description

Effective for annual periods beginning on or after

Reference to the Conceptual Framework – Amendments to IFRS 3

1 January 2022

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16

1 January 2022

Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37

1 January 2022

IFRS 1 First-time Adoption of International Financial Reporting Standards –Subsidiary as a first-time adopter

1 January 2022

IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities

1 January 2022

IAS 41 Agriculture – Taxation in fair value measurements

1 January 2022

IFRS 17 Insurance Contracts

1 January 2023

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

1 January 2023

Definition of Accounting Estimates - Amendments to IAS 8

1 January 2023

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

1 January 2023

 

5.       Segment information

 

For management purposes, the Group is organised into business units based on its products and services and has two reportable segments, as follows:

 

Property Development and Letting

This  segment carries works in the building industry, including construction works, plumbing and electrical and to operate as turnkey contractors.  Also in this segment, the Group leases out offices and residential building to third parties. The Group owns two hotels namely the Mavina Holiday Complex and the Huli Hotel with an underlying Bistro Restaurant. Both hotels as well as the restaurant are leased out to thirds parties.

Manufacturing, Products and General Contracting Services

This segment includes the companies responsible for manufacturing and exports.  This segment includes specialising in the manufacture of stone elements, arranging logistics, plant hire, deliveries, and supplies and subcontracting work.  Also, coordination of orders for customers for products and services is done.

 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.  Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.

 

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

 

Inter-segment transactions, assets and liabilites are eliminated upon consolidation and reflected in the ‘eliminations’ column.

 

Year ended 31 December 2021

Property development and Letting

Manufacturing and general contracting services

Total segments

 Eliminations

Consolidated

 

 

 

External customers

5,939,064

19,320,755

25,259,819

-

25,259,819

 

Inter-segment

674,351

7,462,326

8,136,677

(8,136,677)

-

 

Total revenue

6,613,415

26,783,081

33,396,496

(8,136,677)

25,259,819

 

Income/(expenses)

 

Finance and similar income

1,404,224

53,222

1,457,446

(1,456,819)

627

 

Finance cost

(2,709,444)

(1,360,467)

(4,069,911)

1,715,808

(2,354,103)

 

Depreciation and amortisation

(800)

(1,017,874)

(1,018,674)

-

(1,018,674)

 

Share in profit of joint ventures

14,561

-

14,561

-

14,561

 

Income tax expense

(975,966)

162,160

(813,806)

(8,316)

(822,122)

 

Segment profit before tax

2,303,573

(59,948)

2,243,625

(230,810)

2,012,815

 

Total assets

119,967,394

42,693,022

162,660,416

(38,908,771)

123,751,645

 

Total liabilities

68,421,067

38,452,175

106,873,242

(31,633,791)

75,239,451

 

 

Other disclosures

 

Interest in joint ventures

165,720

-

165,720

1,556,147

1,721,867

 

Capital expenditure

-

990,672

990,672

-

990,672

 

 

Year ended 31 December 2020

Property development and Letting

Manufacturing and general contracting services

Total segments

 Eliminations

Consolidated

External customers

5,265,395

18,196,674

23,462,069

-

23,462,069

Inter-segment

639,980

5,590,448

6,230,428

(6,230,428)

-

Total revenue

5,905,375

23,787,122

29,692,497

(6,230,428)

23,462,069

Income/(expenses)

Finance and similar income

1,627,799

74,474

1,702,273

(1,507,628)

194,645

Finance cost

(2,696,313)

(1,487,740)

(4,184,053)

1,779,317

(2,404,736)

Depreciation and amortisation

(889)

(942,249)

(943,138)

-

(943,138)

Share in profit of joint ventures

40,576

-

40,576

-

40,576

Income tax expense

(1,141,859)

211,333

(930,526)

51,501

(879,025)

Segment profit before tax

3,529,624

(267,044)

3,262,580

(947,819)

2,314,761

Total assets

121,610,564

36,050,117

157,660,681

(35,264,972)

122,395,709

Total liabilities

72,079,843

31,892,272

103,972,115

(28,895,191)

75,076,924

Other disclosures

Interest in joint ventures

165,720

-

165,720

1,751,504

1,917,224

Capital expenditure

-

2,525,364

2,525,364

-

2,525,364

 

Capital expenditure consists of additions of property, plant and equipment, and investment properties.

 

6.       Revenue from contracts with customers

 

Disaggregated revenue information

Set out below is the disaggregation of the Group's revenue from contracts with customers:

For the year ended 31 December 2021

 

 

Manufacturing and general contracting services

Property development and Letting

Total

 

 €

 €

 €

 

Type of goods or service

 

Sale of stones, marbles, granites, patterned tiles, terrazzo and precast related products

      1,979,710

                     -  

       1,979,710

 

Sale of electricity generated from PV panels

         286,265

                     -  

          286,265

 

Rendering of general construction and other services

    17,054,780

                     -  

     17,054,780

 

Sale of properties

                    -  

      3,750,500

       3,750,500

 

    19,320,755

      3,750,500

     23,071,255

 

 

Geographical markets

 

Local

    19,315,380

      3,750,500

     23,065,880

 

Foreign

              5,375

                     -  

               5,375

 

    19,320,755

      3,750,500

     23,071,255

 

 

Timing of revenue recognition

 

Goods transferred at a point in time

      2,265,975

      3,750,500

       6,016,475

 

Services transferred over time

    17,054,780

                     -  

     17,054,780

 

    19,320,755

      3,750,500

     23,071,255

 

 

For the year ended 31 December 2020

 

Manufacturing and general contracting services

Property development

Total

 €

 €

 €

Type of goods or service

Sale of stones, marbles, granites, patterned tiles, terrazzo and precast related products

      1,656,732

                     -  

       1,656,732

Sale of electricity generated from PV panels

         295,110

                     -  

          295,110

Rendering of general construction and other services

    16,244,832

                     -  

     16,244,832

Sale of properties

                    -  

      3,138,500

       3,138,500

    18,196,674

      3,138,500

     21,335,174

Geographical markets

Local

    18,170,241

      3,138,500

     21,308,741

Foreign

           26,433

                     -  

             26,433

    18,196,674

      3,138,500

     21,335,174

Timing of revenue recognition

Goods transferred at a point in time

      1,951,842

      3,138,500

       5,090,342

Services transferred over time

    16,244,832

                     -  

     16,244,832

    18,196,674

      3,138,500

     21,335,174

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information (see note 5):

For the years ended 31 December

2021

2021

2020

2020

Manufacturing and general contracting services

Property development

Manufacturing and general contracting services

Property development

 €

 €

 €

 €

Revenue

External customer

     19,320,755

      3,750,500

    18,196,674

       3,138,500

Inter-segment

       7,462,326

                    -  

      5,590,448

                     -  

     26,783,081

      3,750,500

    23,787,122

       3,138,500

Inter-segment adjustments and eliminations

     (7,462,326)

 

                      -

    (5,590,448)

                       -

Total revenue from contracts with customers

     19,320,755

      3,750,500

    18,196,674

       3,138,500

 

Contract balances

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Trade receivables - net of ECL (note 21)

       9,568,769

      7,756,613

                       -

                       -

 Contract assets - net of ECL (note 22)

       1,774,950

      1,473,454

                       -

                       -

 

In 2021, €67,588 was recognised as reversal of excess provision for ECL on trade receivables (2020: provision expense of €183,941), see notes 21 and 34.

 

Contract assets relate to revenue earned from ongoing construction services and finishing works. As such, the balances of this account vary and depend on the number of ongoing construction services at the end of the year. In 2021, allowance for ECL on contract assets increased by €11,116 (2020: decreased by €33,870).

 

Contract liabilities include short term advances received under construction contracts. The balance was nil in 2021 (2020: decrease by €95,000) since the related performance obligations of which have already been satisfied.

 

Performance obligations

 

Information about the Group’s performance obligations are summarised below:

 

Stones, marbles, granites, patterned tiles, terrazzo and precast related products

 

The performance obligation is satisfied upon delivery of stones, marbles, granites, patterned tiles, terrazzo and precast related products; and payment is generally due within 30 to 90 days from delivery.

 

The performance obligation to deliver stones, marbles, granites, patterned tiles, terrazzo and precast related products with a manufacturing lead time of one month has only one payment option. The customer pays the transaction price equal to the cash selling price within 30 to days upon delivery of the goods. This results to no significant financing component for those contracts.

 

The Group assesses that there are no other promises in the contract of sale of stones, marbles, granites, patterned tiles, terrazzo and precast related products that are separate performance obligations to which a portion of the transaction price needs to be allocated, such as warranties and customer loyalty points. The transaction price, which is equal to the selling price indicated in the sales invoices issued, is therefore allocated to only one performance obligation. The Group assesses that  there exist no variable considerations, non-cash consideration and consideration payable to the customer relating to the sale of stones, marbles, granites, patterned tiles, terrazzo and precast related products.

 

Electricity generated from PV panels

 

The performance obligation is satisfied upon exportation of the generated electricity to the solar grid.

 

In the case where the amount due to the Group from the electricity exported by the PV system exceeds the invoiced amount  for the consumption of electricity for a particular billing period that is due to the customer,  such amount will be carried forward in the form of a credit note.  When two consecutive scheduled bills based on actual meter readings are shown to be in credit, Enemalta plc is obliged to pay the Group the credit within 60 days of the date of the second scheduled bill.

 

The Group assesses that there are no other promises in the contract of sale of electricity that are separate performance obligations to which a portion of the transaction price needs to be allocated. The transaction price, which is equal to the selling price indicated in the sales invoices issued, is therefore allocated to only one performance obligation. The Group assesses that  there exist no variable considerations, and non-cash consideration payable to the customer relating to the sale of electricity. The consideration payable to a customer who also supplies electricity to the Group for consumption is accounted for as a reduction of the transaction price unless the payment to the customer is in exchange for a distint good or service that the customer transfers to the Group.

 

General construction and other services

 

The performance obligation is satisfied over-time and payment is generally due upon completion of projects and acceptance of the customer. In some contracts, short-term advances are required before the construction is provided.

 

The Group uses an input method in measuring progress of the services since there is a direct relationship between the Group’s effort (i.e., based on the costs incurred to date) and the transfer of service to the customer. The input method is implemented by first estimating the inputs required such as labor and other overheads, etc. to complete the service. The Group recognises revenue on the basis of the efforts expended to date relative to the total expected inputs to complete the service. The normal credit term is 30 to 90 days upon issuance of invoice.

 

Further, the Group provides services that are either sold separately or bundled together with the sale of tiles, marble stones and granites to a customer. Contracts for bundled sales of tiles, marble stones, granites and services are comprised of two performance obligations because the promise to transfer tiles, marbles, granites and provide services are capable of being distinct and separately identifiable. Accordingly, the Group allocates the transcation price based on the relative stand-alone selling prices of tiles, marbles, granites and services.

 

Properties held-for-sale

 

The performance obligation is satisfied at the point in time when control of the asset is transferred to the customer, generally upon signing of deed of sale where the customer obtains legal title to the property. The normal credit term is 30 to 90 days from date of deed.

 

The Group assesses that there are no other promises in the contract of sale of properties held-for-sale that are separate performance obligations to which a portion of the transaction price needs to be allocated. The transaction price, which is equal to the selling price indicated in the deed of sale signed by both parties, is therefore allocated to only one performance obligation. The Group assesses that there exist no variable considerations, noncash consideration and consideration payable to the customer relating to the sale of properties held-for-sale.

 

As at 31 December 2021 and 2020, the transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) amounted to nil.

 

7.       Expenses by nature

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Cost of sales

 

 Depreciation (note 13)

           301,447

         317,742

                       -

                       -

 Direct wages (note 11)

       3,109,067

      3,285,625

                       -

                       -

 Social security contributions (note 11)

           239,212

         244,747

                       -

                       -

 Cost of property sold (note 20)

       2,402,636

      2,068,097

                       -

                       -

 Cost of rent 

                        -

                      -

                       -

                       -

 Onsite expenditure

             62,514

           47,150

                       -

                       -

 Cost of goods sold (note 19)

     10,413,779

      9,554,381

                       -

                       -

 Other direct costs

           493,220

         237,148

                       -

                       -

     17,021,875

    15,754,890

                       -

                       -

 Distribution and selling costs

 Depreciation (note 13)

           140,890

         142,600

                       -

                       -

 Advertising and promotions

             64,190

           77,398

                       -

                       -

 Other distribution costs

               8,843

              4,103

                       -

                       -

           213,923

         224,101

                       -

                       -

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Administrative expenses

 Depreciation (notes 13 and 24)

           870,546

         741,412

                       -

                       -

 Directors' remuneration (note 11)

           264,460

         226,894

            22,651

             14,068

 Office salaries (note 11)

       1,049,498

         824,465

                       -

                       -

  Social security contributions and
   maternity (note 11)

             91,999

           80,333

                    32

                    56

 Auditors' remuneration

             37,923

           37,034

              3,000

               3,000

 Provision for ECL (notes 16, 21, 22
   and 33)

           (56,499)

         143,188

            16,768

           (45,868)

 Legal and professional fees

           393,778

         512,016

          174,166

          173,411

 Repairs and maintenance

           386,915

         291,356

              1,025

                  995

 Rent (note 24)

             (7,919)

           67,187

              2,452

             57,403

 Utilities

             40,272

           49,003

              4,048

             12,933

 Information and communication
   technology fees

           220,213

         380,613

                       -

                       -

 Insurance

           218,618

         202,573

              9,651

                       -

 Motor vehicle expenses

           104,745

           71,489

                       -

                       -

 Other administrative expenses

           502,386

         537,173

              4,560

               9,185

       4,116,935

      4,164,736

          238,353

          225,183

 

Auditors' fees

 

Fees charged by the auditors for services rendered during the financial years ended 31 December 2021 and 2020 relate to the following:

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Annual statutory audit 

 

             37,923

 

           37,034

 

              3,000

 

               3,000

 

Other non-audit fees

 

Fees charged by the auditor for non-audit services rendered are included in Legal and Professional fees, and are the following:

 

 

 

 The Group

 

 The Company

 

 

2021

 

2020

 

2021

 

2020

 

 

 €

 

 €

 

 €

 

 €

 Tax advisory and compliance 

 

               1,800

 

              1,800

 

                 200

 

                  200

 Other non-assurance services

 

             15,240

 

           15,240

 

            15,240

 

             15,240

             17,040

           17,040

            15,440

             15,440

 

8.       Other operating income

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Other income from construction works

             33,945

 

           33,227

 

            19,219

               9,004

 Income from government grants

           113,705

 

         113,744

 

                       -

                       -

 Exchange fluctuation

               7,954

 

           24,640

 

                       -

                       -

 Income from insurance claims received 

             16,793

 

                 726

 

                       -

                       -

 Works and installations

             74,527

 

                      -

 

                       -

                       -

 Property management fee

             33,635

 

                      -

 

                       -

                       -

 Key money

             30,000

 

                      -

 

                       -

                       -

 Gain on rent concessions

                        -

 

         205,303

 

                       -

                       -

 Gain on assignment of property

           566,050

 

                      -

 

                       -

                       -

 Others

             11,882

 

           11,118

 

                       -

                       -

           888,491

         388,758

            19,219

               9,004

 

9.       Finance and similar income

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

Interest from banks

627

 

690

 

-

-

Interest on finance lease receivables
   (note 24)

-

 

193,955

 

-

-

Interest from related and subsidiary
   undertakings

-

 

-

 

1,403,597

1,450,617

                  627

 

         194,645

 

      1,403,597

       1,450,617

 

10.   Finance costs

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Bank overdraft interest

             47,723

           29,747

                       -

                  (16)

 Interest on bonds and amortisation
   of bond issue cost

       1,567,239

      1,563,876

      1,567,239

       1,563,876

 Bank loan interest

           372,332

         443,370

          110,891

          111,021

 Interest on finance lease liability
   (note 24)

           361,085

         367,324

            40,698

             40,560

 Other interest

               5,724

                 419

                      -

                       -

       2,354,103

      2,404,736

      1,718,828

       1,715,441

 

11.   Staff costs and employee information

 

Staff costs for the year comprised the following:

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Wages and salaries (including
 Directors’ remuneration) (note 7)

       4,423,025

      4,336,984

            22,651

             14,068

 Social security contributions (note 7)

           331,211

         325,080

                    32

                    56

       4,754,236

      4,662,064

            22,683

             14,124

 

The average number of persons (including Directors) employed by the company during the year was as follows:

 

 The Group

 The Company

2021

2020

2021

2020

No.

No.

No.

No.

 Operational

                  110

                 121

                      -

                       -

 Administration

                     64

                   69

                     2

2

 Distribution

                     10

                   11

-

                       -

                  184

                 201

2

2

 

12.   Income tax

 

Tax expense on profit on ordinary activities

 

Provision for income tax has been made at the rate of 35% on the chargeable income for the year except for investment income which is charged at the rates of 15% and 35% and for proceeds from sale of property taxable at 8% and 5% final withholding tax.

 

 The Group

 The Company

2021

2020

2021

2020

 €

 €

 €

 €

 Income tax expense:

 Tax at source

-

                      -

          (64,656)

-

 Current tax charge

           (75,222)

       (509,527)

          (40,587)

-

 Final withholding tax at 15%

         (430,363)

         (28,786)

          (24,280)

-

 Final withholding tax at 8%

           (49,040)

            (1,200)

-

-

 Final withholding tax at 5%

         (150,914)

       (146,500)

-

-

 Underprovision of tax in prior years

-

                     7

-

-

 Total current tax expense

 

         (705,539)

 

       (686,006)

 

        (129,523)

 

-

 Consideration payable by the company
 in  respect of the tax benefit, attaching to
 tax losses surrendered by a subsidiary
 company under the Group Relief
 provision of the Income Tax Act

                        -

 

                      -

 

        (166,676)

 

                       -

 Deferred taxation (note 25):

 

 

 

 

 

 

 

 

 Charge for the year

 

         (116,583)

 

       (193,019)

 

          (65,606)

 

        (276,268)

 Income tax expense for the year

         (822,122)

 

       (879,025)

 

        (361,805)

 

        (276,268)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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