xbrli:sharesiso4217:EURxbrli:pureiso4217:EURxbrli:shares485100HPFI9Y5INXA1932023-01-012023-12-31485100HPFI9Y5INXA1932022-01-012022-12-31485100HPFI9Y5INXA1932023-12-31485100HPFI9Y5INXA1932022-12-31485100HPFI9Y5INXA1932022-01-01ifrs-full:IssuedCapitalMember485100HPFI9Y5INXA1932022-01-01ifrs-full:OtherReservesMember485100HPFI9Y5INXA1932022-01-01ifrs-full:RetainedEarningsMember485100HPFI9Y5INXA1932022-01-01485100HPFI9Y5INXA1932022-01-012022-12-31ifrs-full:RetainedEarningsMember485100HPFI9Y5INXA1932022-01-012022-12-31ifrs-full:OtherReservesMember485100HPFI9Y5INXA1932022-12-31ifrs-full:IssuedCapitalMember485100HPFI9Y5INXA1932022-12-31ifrs-full:OtherReservesMember485100HPFI9Y5INXA1932022-12-31ifrs-full:RetainedEarningsMember485100HPFI9Y5INXA1932023-01-01ifrs-full:IssuedCapitalMember485100HPFI9Y5INXA1932023-01-01ifrs-full:OtherReservesMember485100HPFI9Y5INXA1932023-01-01ifrs-full:RetainedEarningsMember485100HPFI9Y5INXA1932023-01-01485100HPFI9Y5INXA1932023-01-012023-12-31ifrs-full:RetainedEarningsMember485100HPFI9Y5INXA1932023-12-31ifrs-full:IssuedCapitalMember485100HPFI9Y5INXA1932023-12-31ifrs-full:OtherReservesMember485100HPFI9Y5INXA1932023-12-31ifrs-full:RetainedEarningsMember

 

 

 

Harvest Technology p.l.c.

Report & Consolidated Financial Statements

31 December 2023

 

  

Company Registration Number: C 63276

 

 

Contents

Chairman’s message  

Chief Financial Officer’s overview   

Directors’ report

Corporate Governance - Statement of compliance  

Statements of profit or loss and other comprehensive income  

Statements of financial position  

Statement of changes in equity – the Group  

Statement of changes in equity – the Company  

Statements of cash flows  

Notes to the financial statements  

Independent auditor’s report

 

 

 

 

 

 

Chairman’s message

 

In the financial year under review, Harvest Technology p.l.c. saw a continuation of the transition plan that was presented in 2022 in which management continued to develop the businesses despite the various challenges on all fronts. The technology businesses we operate were also impacted by adverse macro-economic headwinds and also delays in the timing of key contracts which were subsequently awarded in 2024. On a positive note, during the year, we reached a significant milestone following the launch of Apcopay’s payment orchestration platform, Synthesis, which was a key focus and investment for several years.

On a consolidated basis, Harvest reported a drop in turnover of 10% when compared to 2022, however the gross profit achieved was similar to the previous year at € 6.2 million. The profit before tax for the year ended 31 December 2023 amounted to €0.8 million (2022: €2.1 million) after accounting for a provision of €0.5 million in respect of a project that Apco Limited was not successful in completing due to a failure to deliver by its subcontractor.

I am pleased to report that the Board of Directors and its various sub-committees continued to function properly and provided the appropriate level of challenge and support to the senior management of each of the subsidiaries. During the year, the board embarked on a restructuring plan to focus more management resources and responsibilities at the subsidiary level. These changes were necessary to expand the range and quality of our services, but also to ensure successful completion of new projects and business development. This approach enabled the board of Harvest to get closer to the operations of the subsidiaries as they continued to develop new growth initiatives. I would also take the opportunity to thank Mr. Chris Fenech, who served as CFO between 2019 and 2024 and welcome Mr. Rudolph Mifsud Saydon to the role.

In 2022, the Group embarked on key projects to drive future sustainable growth and this continued throughout 2023. One of the key milestones in 2023 was the completion of the payment orchestration platform, Synthesis at Apcopay. The new cloud-enabled platform was launched in September 2023 and offers significant additional features for our global customers. During the year, Apcopay reached another milestone as it processed over €1 billion in payments, an increase of 51% versus 2022. We are pleased that this strong growth momentum has continued to develop in the first quarter of 2024. I would like to take the opportunity to thank the team at Apcopay who worked tirelessly to develop the new Synthesis platform.

Apco Limited saw another year of transition as it evolves and broadens its product offering. In 2023, Apco Limited entered into a new collaboration with Cashmatic, a leader in self-pay and automated cash machines and has started to successfully role out these machines across retail and hospitality customers. Apco Limited is currently in discussions with several other international companies to develop new partnerships.

PTL continued to focus on expanding the service offering both locally and internationally. During 2023, the management team developed new relationships with prospective partners, in various countries, where PTL’s expertise in Health, Border Security and Financial Services is attracting interest from various stakeholders. In 2023, PTL continued to grow new verticals, particularly its ERP offering and also launched a new cybersecurity product for both domestic and international clients.

In conclusion, 2023 was another year of considerable change and we expect further changes in 2024 as we continue to position the businesses to develop new growth opportunities in an ever-changing technology landscape. Our key goal is to create sustainable value for our shareholders, evaluate strategic investments and partnerships that will strengthen the position of each subsidiary and monetise asset divestments.

I would like to thank the Board of Directors for their continuous contribution and support during the year under review.

Mr Keith Busuttil

Chairman

 

18 April 2024

 

Chief Financial Officer’s overview

 

It is a pleasure to present the annual report of Harvest Technology and its subsidiaries. Although I joined the Harvest Technology team earlier this year, I had served as Chief Financial Officer and subsequently as Chief Executive Officer between 2016 and 2018. I was appointed to the office of Chief Financial Officer of 1923 Investments plc, in June 2018, a role that I continue to serve.

Harvest Technology achieved a consolidated turnover of € 14.6 million which is € 1.7 million lower than the 2022 level which amounted to € 16.3 million. However, gross profit amounted to € 6.2 million in 2023 which is in line with that achieved in the previous year which reached € 6.3 million. Profit before tax amounted to €0.8 million compared to €2.1 million in 2022. During the year, the board deemed appropriate to take a provision of € 0.5 million on the undelivered project , adjusting for this provision, the Company would have achieved a profit before tax of € 1.3 million which is in line with the target profit before tax of € 1.4 million that was communicated to the market on 27 th June 2023. It is also worth noting that during the year, the Company was expecting to deliver a key contract but this was awarded in 2024.

Liquidity

Despite a business environment characterised by inflation, interest rate challenges and geo-political concerns, Harvest Technology and its subsidiaries maintained a healthy cashflow through-out the year. Closing cash and cash equivalents at end of year amounted to €2.6 million which is at the same level of the previous year. During the year, management invested excess cash in short term Government treasury bills as part of its treasury management initiatives. The Group’s current ratio at end of 2023 amounted to 1.68, an improvement over the prior year which stood at 1.60.

Apcopay Limited

At Apcopay, revenue reached €3.9 million which represents a 4% increase over prior year. Apcopay is currently powering 3,800 e-commerce websites, and over 84% of revenues in 2023 relate to services provided to customers with international operations. During 2023, Apcopay processed over €1 billion in payments, which represents a 51% increase versus 2022. The increase in volumes processed was driven by increased processing both from existing customers and also from new customers that were on-boarded during the year. Over the past year, the management team continued to diversify its customer base by focusing on the airline, hospitality and transportation verticals.

As noted above, in 2022 Apcopay started to develop a more powerful technology orchestration platform. Over the last 18 months, significant investment was undertaken to build a cloud-based platform which was launched in September 2023. At Apcopay, we see a strong upside potential given high customer retention rates and its ability to provide services internationally. The new platform is leveraged to process more than 100 currencies across various markets and jurisdictions. In 2023, the investment in the new platform amounted to € 0.7 million. Apcopay reported a profit before tax of €1.1 million in 2023 compared to €1.6 million in 2022.

Apco Limited

Revenue in 2023 reached €1.8 million compared to €2.3 million in 2022. Apco Limited’s business model is the sale of hardware and in the provision of maintenance and support services to the IT infrastructure market. During the last couple of years, Apco Limited has continued to develop its relationship with new partners to diversify and increase its product portfolio in the automation and physical security solutions sectors. During 2023, Apco Limited deployed cash management machines and self-checkout kiosks in a number of outlets.

During 2022, Apco Limited was awarded a contract through a tender process. A subcontractor that was selected by the Company at tender stage for the implementation of the complete solution, failed to deliver the final user acceptance testing requirements set out in the tender. The Company is now seeking to recover all dues in relation to this project through appropriate legal channels. The board of Directors took a prudent approach and has provided for the estimated exposure amounting to € 0.5 million.

PTL Limited

During 2023, PTL generated revenue amounting to €8.9 million compared to €10.2 million in 2022. In the first quarter of 2024, PTL secured multiple banking hardware projects which were expected in 2023 and will be delivered during 2024.

PTL successfully continued to meet its contractual obligations related to the IT services project at the Ministry of Finance, Economic Planning and Development in Mauritius. During the year, PTL also generated additional revenue from products and services from IT infrastructure projects secured with public sector and banking clients, as well as new projects initiated within the private sector in Malta.

As a result of lower revenue generated, profit before tax amounted to € 0.6 million compared to €1.0 million in 2022. In 2024, PTL aims to further expand its key industry verticals solution offerings by further developing its existing IP which is currently offered in the public and private sector. In 2024, PTL will further strengthen its dedicated teams to scale both the operations and business development of its proprietary software. PTL is currently evaluating several tenders and it expects the outcome of these tenders in the current year. 

I would like to thank our customers, shareholders, banks, business partners and key advisors for their continued support in Harvest Technology and its subsidiaries.

 

Mr Rudolph Mifsud Saydon

 

Chief Financial Officer

 

18 April 2024

 

 

Directors’ report

 

The Directors present their report together with the audited financial statements of Harvest Technology p.l.c. and the consolidated financial statements of the Group of which it is the parent, for the year ended 31 December 2023.

Principal activities

The principal activity of the Company is that of acting as a holding company.

The Group is mainly involved in the sale, maintenance and servicing of information technology solutions, security systems, and to provide electronic payments solutions.

Performance review

During the year under review, the Group generated revenue of € 14,646,656 (2022: € 16,275,659) which led to gross profit of €6,192,237 (2022: € 6,278,601). After accounting for the provision of €534,473 for the undelivered project, operating profit amounted to € 837,947 (2022: € 2,089,978). After accounting for net finance costs and taxation, the Group registered a profit for the year of € 588,804 (2022: € 1,341,370).

The Group’s net assets at the end of 2023 amounted to € 14,075,526 (2022: € 13,600,797).

The Company earned management fees and investment income of € 472,017 and € 1,768,966 respectively (2022: € 467,820 and € 1,999,691 respectively). After accounting for finance income, finance costs and administrative expenditure, the Company registered a profit after tax of € 783,989 (2022: € 893,616). The net assets of the Company at the end of 2023 amounted to € 13,417,499 (2022: € 12,747,416).

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

Financial

The Group’s current ratio (“current assets divided by current liabilities”) currently stands at 1.68:1 (2022: 1.60:1).

The Group measures its performance based on EBITDA. EBITDA is defined as the Group profit before depreciation, amortisation, net finance expense and taxation. During the year under review, EBITDA amounted to € 1,691,718 (2022: € 2,883,178) after accounting for the provision of € 534,473 mentioned above.

The Group aims to deliver a return on average capital employed above the level of its cost of funding. The return on average capital employed represents the profit on ordinary activities before finance costs and exceptional items, divided by the average of opening and closing tangible net worth. The Company ensures that this capital is used as effectively as possible. The return on capital employed amounted to 10% (before the provision mentioned above) (2022: 15%).

Non-financial

The Directors note that the transaction value in Euros processed by the payment gateway, which remained the most important segment to the Group’s result, increased by 51% from € 783 million in 2022 to over € 1 billion in 2023.

Principal risks and uncertainties

The successful management of risk is essential to enable the Group to achieve its objectives. The ultimate responsibility for risk management rests with the Company’s Directors, who evaluate the Group’s risk appetite and formulate policies for identifying and managing such risks. The principal risks and uncertainties facing the Group are included below:

Market and competition

The Group operates in a highly competitive environment and faces competition from various other entities. Technological developments also can create new forms of quickly evolving competition. An effective, coherent and consistent strategy to respond to competitors and changing markets has enabled the Group to sustain its market share and its profitability. The Group continues to focus on service quality and performance in managing this risk. Related to this is the growing pressure on commissions that Apcopay Limited generates through its partnerships with various banks.

Talent and skills

Failure to engage and develop the Group’s existing employees or to attract and retain talented employees could hamper the Group’s ability to deliver in the future. Regular reviews are undertaken of the Group’s resource requirements.

Economic and market environment

A significant economic decline in any of the markets that the Group operates in, could impact the Group’s ability to continue to attract and retain customers. Demand for the Group’s products and services can be adversely affected by weakness in the wider economy which are beyond the Group’s control. This risk is evaluated as part of the Group’s annual strategy process covering the key areas of investment and development and updated regularly throughout the year. The Group continues to make investment in innovation. The Group regularly reviews its pricing structures to ensure that its products and services are appropriately placed within the markets in which it operates.

Brand and reputation risk

Damage to the Group’s reputation could ultimately impede the Group’s ability to execute its corporate strategy. To mitigate this risk, the Group strives continually to build its reputation through a commitment to sustainability, transparency, effective communication and best practices. The Group works to develop and maintain its brand value.

Technology and business interruption

The Group relies on information technology in all aspects of its business. In addition, the services that the Group offers to its customers are reliant on complex technical infrastructure. A failure in the operation of the Group’s key systems or infrastructure could cause a failure of service to its customers, thus negatively impacting its brand, and increased costs. The Group invests in technology infrastructure to enable it to continue to support the growth of its business and has a robust selection and monitoring process of third-party providers. The Group also organises regular business continuity exercises to ensure ongoing readiness of key systems and sites.

Customer service

The Group’s revenues are at risk if it does not continue to provide the level of service expected by its customers. The Group’s commitment to customers is embedded in its values. The relevant employees undertake appropriate training programmes to ensure that they are aware of, and abide by, the levels of service that are required by the Group’s customers.

Financial instruments risks

Note 38 to the financial statements provides details in connection with the Company’s financial risk management objectives and policies and the financial risks to which it is exposed.

Non-financial statement matters

Environmental matters

The Group is committed to environmental responsibility and feels that it is its duty to operate as part of the local community in order to keep the environment in which it operates tidy. Subsidiaries within the Group are enrolled in local programmes for waste collection, separation and recycling of waste.

Employee matters

The Group provides opportunities to individuals with diverse backgrounds and experiences, to work in its environment and provide the necessary training programs to its staff members to ensure high levels of engagement which is essential to its continuing business success, whilst making sure that it provides career progression mechanisms and rewarding achievements. All this is provided in an environment which fosters diversity and equal opportunities for everyone, respecting the unique attributes and perspectives of every employee.

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

Social matters

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

Obligations

The Group conducts its activities by taking positive actions respect human rights, as defined in the code of business conduct, which applies to all employees of the Group. All Group employees are trained annually on the standard of business conduct.

The Group makes sure that it respects all its obligations regarding fraud, bribery and corruption. The Group prohibits all forms of bribery and corruption in accordance with the Group Code of Conduct and Whistle-blower Policy to ensure that all employees are deterred from any corrupt practices or bribery as well as are incentivized to report any such activities in a direct line with the responsible Group supervisor, without fearing reprisals.

Accordingly, all employees, representatives and business partners must fully comply with anti-bribery legislation.

Meanwhile, the Group is committed to complying with the applicable laws in all countries where it does business. It adopts an anti-corruption policy which sets forth its commitment to ensuring that it carries out business in an ethical manner.

Business model

The Group is technology focused and currently consists of three key subsidiaries: (i) PTL Limited is a multi-brand information technology solutions provider for businesses and the public sector; (ii) Apcopay Limited operates a payments solutions platform offering e-commerce processing services for retailers and internet-based merchants; (iii) Apco Limited provides a wide range of automation and security solutions catering to the banking, retail and other sectors.

Significant judgements and estimates

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

Results and dividends

The results for the year ended 31 December 2023 are shown in the statements of profit or loss and other comprehensive income. The Group’s profit for the year after taxation was € 588,804 (2022: € 1,341,370), whilst the Company’s profit for the year after taxation was € 783,989 (2022: € 893,616).

A dividend of €113,906 (equivalent to €0.005 per share) was paid by the Company on 5 May 2023 on account of financial year ended 31 December 2022. During the course of 2023, no interim dividend was declared by the Company. On 18 April 2024, the Board of Directors resolved to distribute a final dividend for the financial year ended 31 December 2023 amounting to € 113,906 (equivalent to €0.005 per share).

 

Likely future business developments

The Directors consider that the year-end financial position was satisfactory and that the Group is well placed to sustain the present level of activity in the foreseeable future.

 

Hardware business

On 7 February 2024, two subsidiaries entered into an intragroup agreement for the transfer of certain hardware business including the associated maintenance and ancillary services. The transaction is expected to be completed in the second quarter of 2024.

Post balance sheet events

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

 

Directors

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

 

The Directors are eligible for re-appointment in the manner specified in the corporate governance statement.

Remuneration statement

In terms of Rule 8A.4 of the Code, the Company is to include a remuneration statement in its annual report which shall include details of the remuneration policy of the Company in respect of the financial packages of members of the Board of Directors and, to the extent applicable, the Chief Executive Officer ( “CEO” ) of the Company.

The Company’s remuneration of its Directors and CEO (as applicable) is based on the remuneration policy adopted and approved by the shareholders of the Company at the annual general meeting held on 30 July 2020 (the “Remuneration Policy” ) which is subject to a vote by the general meeting at the forthcoming annual general meeting to be held in 2024 as per Capital Markets Rules requirements. The Remuneration Policy of the Company is available for inspection on the Company’s website on https://harvest.tech/wp-content/uploads/2020/07/Harvest-Renumeration-Policy.pdf

Remuneration Policy

The Remuneration Policy of the Company is intended to provide an over-arching framework that establishes the principles and parameters to be applied in determining the remuneration to be paid to any member of the Board of Directors, and the CEO, as applicable. The Remuneration Policy is also intended to demonstrate how the remuneration that may be paid to Directors and the CEO, as applicable, contributes to the development and attainment of the Company’s corporate strategy and its long-term success, development and sustainability, and is aimed at attracting and retaining suitable candidates with the appropriate skills, technical knowledge experience and expertise.

Remuneration payable to Directors

Fixed remuneration

The remuneration payable to Directors shall be fixed and shall not include any variable element based on performance indicators or the right to purchase shares in the Company by virtue of share options, or any other deferred compensation, or pension benefits.

In addition to fixed remuneration in respect of their position as members of the Board of Directors of the Company, individual Directors who are also appointed to chair, or to sit as members of, one or more committees or sub-committees of the Company, or who are appointed to serve as Directors and, or Chair of the board of subsidiaries of the Company, are entitled to receive additional remuneration as may be determined by the Board of Directors from time to time. Any such additional/ remuneration shall, however, form part of the aggregate emoluments of the Directors as approved by the general meeting of the Company. The basis upon which such additional remuneration is paid shall take into account the skills, competencies and technical knowledge that members of such committees require and the respective functions, duties and responsibilities attaching to membership of such committees.

Other entitlements

The Company may also pay out fringe benefits, comprising of medical and life insurance (subject, however, to a commercially reasonable capping on the premium payable), as well as mobile and internet connectivity data, at the expense of the Company.

Director service contracts

As at the date hereof, the independent non-executive Directors are party to a Director services contract with the Company, pursuant to which their respective role, responsibilities, duties and the applicable remuneration is set out.

The term of such service contracts commences from the date of entry into the said contract and continues in force thereafter until the next annual general meeting of the Company at which the Directors shall be eligible for re-election, or until such time as the Director resigns or until such time as such Director is removed from office.

Mr. Keith Busuttil

Non-executive (Chairman)

Ms. Jacqueline Camilleri

Independent non-executive Director

Mr. Peter Hili

Non-executive Director

Mr. Stephen Paris

Independent non-executive Director

Mr. Georgios T. Kakouras

Non-executive Director (resigned 27 June 2023)

Dr Yasmine Aquilina

Non-executive Director (appointed 27 June 2023)

 

 

None of the service contracts contain provisions for termination payments and other payments linked to early termination.

Remuneration payable to CEO

Fixed and Variable Remuneration

During his tenure as CEO, Mr Ekmark was entitled to a fixed-based salary together with a variable discretionary performance bonus, based on a pre-defined percentage of the audited consolidated net profit before taxation of the Company.

The fixed remuneration component payable to the CEO was, until the year under review, reviewed annually by the Board of Directors to ensure that such remuneration is commensurate with the roles, duties and responsibilities of the CEO, as well as the individual skills, knowledge, expertise, experience and performance thereof. In establishing the remuneration payable to the CEO, the Board of Directors was guided by the recommendations of the RemNom Committee, including any recommendations intended to ensure that remuneration payable would be in line with market standards and be well suited to retain and motivate the CEO of the Company to contribute to the long-term success and development of the Group. The CEO resigned on 1 June 2023.

Other entitlements

In addition to his fixed and variable remuneration, the CEO was also entitled to a fully expensed mobile phone and laptop, as well as other fringe benefits comprising medical insurance and life insurance (subject to a commercially reasonable capping on the premium payable).

CEO Service Contract

The CEO’s contract of service wa s of an indefinite duration and is subject to the termination notice periods prescribed by law.

Remuneration Report

In terms of Capital Markets Rule 12.26K, the Company is also required to draw up an annual remuneration report (the “Remuneration Report” ), which report is to:

i.

provide an overview of the remuneration, including benefits in whatever form, awarded or due to members of the Board of Directors and the CEO during the financial year under review; and

ii.

explain whether any deviations have been made from the Remuneration Policy of the Company.

 

In this respect, the Company is hereby producing its fourth Remuneration Report since the approval and entry into effectiveness, in July 2020 of the Remuneration Policy described in the preceding sections.

 

Remuneration paid to Directors

The remuneration paid to individual Directors during the year under review was as follows:

 

Position

Remuneration paid

 

 

 

 

 

 

Ms. Jacqueline Camilleri

Independent Non-executive Director

€ 20,000;

Mr. Stephen Paris

Independent Non-executive Director

€ 20,000;

Mr. Keith Busuttil

Non-executive Director

€ nil;

Mr. Georgios T. Kakouras

Non-executive Director*

€ nil;

Mr. Peter Hili

Non-executive Director

€ nil

Dr. Yasmine Aquilina

Non-executive Director**

€ nil

 

* Resigned on 27 June 2023.

** Appointed on 27 June 2023.

 

The remuneration paid to the independent non-executive Directors covers both their role as Directors of the Company and their role as members or chairpersons of sub-committees of the Company, as well as their position as Directors of subsidiaries forming part of the Group.

 

The aggregate emoluments that may be paid to Directors in any one financial year shall be as determined by the Company in the general meeting in accordance with Article 21.1 of the Articles of Association of the Company. In this respect, the shareholders of the Company approved, as part of the ordinary business at the last annual general meeting of the Company held on 27 June 2023, that the aggregate remuneration that may be paid to the Directors of the Company for the financial year ending 31 December 2023 was fixed at € 150,000.

 

The aggregate emoluments of the Directors in respect of their role as Directors of the Company and, where applicable, as members of sub-committees of the Board of Directors of the Company and non-executive Directors of subsidiaries forming part of the Group, amounted to €40,000.

 

In view of the management structure of the Group, and the fact that the main assets of the Company are its investments in its operating subsidiaries (PTL Limited, APCO Limited, Apcopay Limited and Ipsyon Limited), the Board considers a fixed remuneration to Directors as an appropriate and suitable remuneration package for the Board in the performance of their duties. Furthermore, the Remuneration Committee is satisfied that the fixed remuneration for the year under review is in line with the core principles of the Remuneration Policy applicable during the year under review, including giving due regard to market conditions and remuneration rates offered by comparable organisations for comparable roles.

 

Remuneration paid to CEO

Emoluments paid and accrued to the person occupying the post of CEO, for the period under review amounted to €83,580, as follows:

 

Peter Ekmark

CEO until 1 st June 2023

€ 83,580

In addition to the emoluments paid until 1 June 2023, the CEO was paid an additional €45,000 as compensation upon termination.

 

The contents of the remuneration report have been checked by the auditors of the Company.

Decision-making with respect to the Remuneration Policy

Whereas the Board of Directors is responsible for determining the Remuneration Policy of the Company, the RemNom Committee, acting in its function as the Remuneration Committee, is, in turn, responsible for overseeing and monitoring its implementation and ongoing review thereof.

The Remuneration Policy shall be reviewed regularly, and any material amendments thereto shall be submitted to a vote by the annual general meeting of the Company before adoption, and in any case at least every four (4) years. As required in terms of the Capital Markets Rule12.26I, the Remuneration Policy shall be submitted to a vote by the general meeting of the company at the 2024 annual general meeting, being the fourth annual general meeting to be held since the original approval and inception of the Remuneration Policy.

In evaluating whether it is necessary or beneficial to supplement or otherwise alter the Remuneration Policy of the Company, the RemNom Committee shall have regard to, inter alia , best industry and market practice on remuneration, the remuneration policies adopted by companies operating in the same industry sectors, as well as legal and, or statutory rules, recommendations or guidelines on remuneration, including but not limited to the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital Markets Rules issued by the MFSA.

Members of the RemNom Committee are not present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed at a meeting of such Committee, and any decision taken by the Committee in this respect shall be subject to the approval of the Board of Directors. At a meeting of the Board of Directors, no Director may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed.

Going concern

The Directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

Disclosure of information to the auditor

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

-

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

-

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

 

Statement of Directors’ responsibilities

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

-

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

-

select suitable accounting policies and then apply them consistently;

-

make judgements and estimates that are reasonable and prudent;

-

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

-

value separately the components of asset and liability items.

 

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

The financial statements of the Company for the year ended 31 December 2023 are included in the Annual Report 2023, which is published in hard-copy printed form and is made 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.

Auditor

Grant Thornton have intimated their willingness to continue in office.

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

Signed on behalf of the Board of Directors on 18 April 2024 by Mr. Keith Busuttil (Chairman and Director) and Mr. Stephen Paris (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

Registered address:

Nineteen Twenty-Three

Valletta Road

Marsa MRS 3000

Malta

18 April 2024

 

 

 

Corporate Governance - Statement of Compliance

 

A.      Introduction

 

Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority (MFSA), Harvest Technology 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 Capital Markets Rules (the “ Code ”). As at the date of this Report, the Board of Directors of the Company (the “ Board ” or the “ Directors ”) considers the Company to be generally compliant with the Code. In those instances where the Company’s organisation and practices deviate from the Code, the Board is of the view that there are cogent justifications for such divergences, taking into account the size, complexity and nature of operations of the Company, as explained in further detail in section B of this Corporate Governance Statement.

The Company acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice. However, the Directors strongly believe that such practices are generally in the best interests of the Company and its shareholders and that compliance with the Code is not only expected by investors but also evidences the Directors’ and the Company’s commitment to a high standard of good governance.

The Company’s governance lies principally with its Board, which is responsible for the overall determination of the Company’s policies and business strategies. The Company has adopted a corporate decision-making and supervisory structure that is tailored to suit its requirements and designed to ensure the existence of adequate controls and procedures within the Company, whilst retaining an element of flexibility essential to allow the Company to react promptly and efficiently to circumstances arising in respect of its business, taking into account its size and the economic conditions in which it operates. The Directors are of the view that it has employed structures, which are most suitable and complementary for the size, nature and operations of the Company. Accordingly, in general, the Directors believe that the Company has adopted appropriate and suitable structures to achieve an adequate level of good corporate governance, together with an adequate system of control in line with the Company’s requirements.

This Corporate Governance Statement (the “ Statement ”) sets out the organisational structures, internal controls, practices and processes in place within the Company and explains how these effectively achieve the provisions and principles set out in the Code. For this purpose, the Statement will make reference to the pertinent provisions and principles of the Code and set out the manner in which the Directors believe these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement provides an explanation for such non-compliance. Reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles and provisions.

The Board has carried out a review of the Company’s compliance with the Code during the period under review and is hereby reporting on the extent of its adoption of the provisions and principles of the Code for the financial year being reported, as required in terms of Capital Markets Rule 5.97.

The Code is accessible via the website of the MFSA on https://www.mfsa.mt/wp-content/uploads/2023/01/Full-Capital-Markets-Rules-as-amended-on-23-January-2023.pdf.

 

 

B.      Compliance

 

 Principle 1: The Board

 

The Directors believe that for the period under review, the Company has generally complied with the requirements of this principle and the relative Code provisions.

The Board is composed of members who are fit and proper to direct and manage 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 and its status as a listed company and the Board is cognisant of its accountability for its own performance and that of its delegates.

The Board is primarily responsible for determining the Company’s strategic direction and organisational requirements, whilst ensuring that the Company has the appropriate mix of financial, human and operational resources to meet its objectives and improve its performance. Throughout the period under review, the Board provided the necessary leadership in the overall direction of the Company and has adopted prudent and effective systems whereby it obtained timely information from the Chief Financial Officer (the “CFO” ) and, for as long as he was in office, the Chief Executive Officer (the “CEO” ).

During his tenure, the CEO, with the support of the CFO, acted as a channel of communication between the rest of the senior management team, the managing Directors of the Company’s operating subsidiaries, and the Board of Directors of the Company, ensuring an effective contribution to the decision-making process, whilst at the same time exercising prudent and effective controls. The CFO leads the finance function of the Company and plays a central role in the preparation of the Company’s consolidated financial statements, the appraisal of investment opportunities, as well as the monitoring of the operational performance of the Company’s business, cash flow and capital requirements. The CFO is also generally responsible for ensuring that the Company complies with its statutory financial and fiscal reporting obligations.

The Board delegates specific responsibilities to a number of committees, most notably the Audit Committee (the “Audit Committee” ), and the Remuneration and Nominations Committee (the “RemNom Committee” ), each of which operate/d under formal terms of reference approved by the Board. Further detail in relation to the Committees and the responsibilities of the Board is found in paragraph ‘ Principles 4 and 5 ’ of this Statement.

Principle 2: Chairman and Chief Executive Officer

 

During the period under review, the roles of the Chairman and the CEO were occupied by separate individuals. Mr. Keith Busuttil occupied the post of Chairman; the post of CEO was occupied by Mr Peter Gunnarsson Ekmark, until his resignation on 1 June 2023. 

Mr. Keith Busuttil is not an independent Director as recommended by the Code. The Board considers that notwithstanding that the Chairman is not an independent Director as recommended by the Code, the means for addressing potential conflicts of interest are suitably addressed in the Articles of Association of the Company and terms of reference of the Audit Committee of the Company. Furthermore, the Board considers its present Chairman to be fit and proper to occupy the role, having the relevant and necessary experience and expertise to fulfil the role.

The responsibilities and roles of the Chairman and the CEO are clearly established and agreed to by the Board of Directors, with the Chairman generally responsible for leading the Board. During his tenure, the CEO was generally responsible for the ­ day-to-day management of the Company. Since the former CEO’s resignation, the role of ensuring effective checks and balances on the exercise of the management and conduct of affairs of the Company is assumed by the Board.

The separation of roles of Chairman and CEO is also entrenched in the Articles of Association of the Company, whereby in terms of Article 13.2 of the Articles of Association, where a CEO is appointed to form part of the senior management team of the Company, the CEO may not also simultaneously form part of the Board of Directors.

The Chairman is responsible for:

leading the Board and setting its agenda;

ensuring that the Board is in receipt of precise, timely and objective information to enable the Board to take sound and commercially reasonable decisions and effectively monitor the performance of the Company;

encourages and supports active engagement by all Directors for discussion of complex and contentious issues and ensuring that all Directors are afforded ample opportunity to contribute to the issues on the agenda and present their views; and

ensuring effective communication and relationship management with the Company’s shareholders.

 

Principle 3: Composition of the Board

 

In terms of Clause 5 of the Memorandum of Association of the Company and Article 12.3 of the Articles of Association of the Company, the board of Directors shall consist of a minimum of five (5) and maximum of seven (7) Directors, one of whom may include the CEO provided that said CEO does not form part of the senior management of the Company in accordance with Article 13.2 of the Articles of Association.

The Articles of Association of the Company distinguish between the process for the appointment of executive Directors and non-executive Directors.

Appointment of executive Directors

Non-executive Directors of the Company are entitled to appoint executive Directors to the Board of Directors of the Company from amongst the most senior executive positions of the Company. An executive Director appointed in such manner will have a term of office of three (3) years and will thereafter be eligible for re-appointment and may not be removed from office by the non-executive Directors: (i) unless his office as a senior executive has also been terminated; or (ii) with just cause being shown to the satisfaction of the Nominations Committee.

As indicated hereunder, none of the Directors of the Company are executive Directors.

Appointment of non-executive Directors

Non-executive Directors of the Company shall be appointed by the shareholders in the annual general meeting of the Company. The Articles of Association of the Company provide for two mechanisms by which non-executive Directors may be nominated for appointment by the shareholders at the annual general meeting, as follows: (i) any member or number of members who in the aggregate hold not less than 10% of the total number of equity securities having voting rights in the Company shall be entitled to nominate a fit and proper person for appointment as a Director of the Company; and (ii) in addition to the aforementioned nominations, the Directors themselves, or the Nominations  Committee, may make  recommendations and nominations for the appointment of Directors at the next following annual general meeting. In either case, no person will be entitled to take office as a Director unless approved by the Nominations Committee, which is empowered to reject any recommendation if in its considered opinion, such appointment could be detrimental to the Company’s interests or if such person is not considered fit and proper to occupy that position.

Removal of Directors

Any Director may be removed at any time by the ordinary resolution of the shareholders of the Company in accordance with the Companies Act (Cap. 386 of the laws of Malta), or in accordance with any other applicable law, or in the specific cases set out in the Articles of Association of the Company. Once appointed to office in accordance with the provisions of the Articles of Association of the Company, a Director shall hold office for a minimum period of three (3) years and a maximum period of five (5) years, unless he/she resigns or is earlier removed or is due to retire by rotation in accordance with the Articles of Association of the Company. A Director whose term of office expires will be eligible for re-appointment.

 

 

The Board of Directors is currently chaired by Mr. Keith Busuttil and comprises five (5) non-executive Directors. As at the date of this Statement, the Directors of the Company are:

 

Name

Capacity

Date of appointment

Mr. Keith Busuttil

Non-executive (Chairperson)

30 July 2020 (Director);

28 February 2022 (Chairman)

Ms. Jacqueline Camilleri

Independent non-executive Director

3 September 2019

Mr. Stephen Paris

Independent non-executive Director

14 October 2019

Mr. Peter Hili

Non-executive Director

14 March 2022

Dr. Yasmine Aquilina

Non-executive Director

27 June 2023

 

Ms Jacqueline Camilleri and Mr Peter Hili will be obliged to retire from office at the next annual general meeting but will be eligible for re-appointment thereat.

 

For the purpose of Code provision 3.2, two of the Directors are considered by the Board to be independent within the meaning of the Capital Markets Rules, such independent Directors being Ms. Jacqueline Camilleri and Mr. Stephen Paris. In making this determination in respect of the former, the Board of Directors considered the following principal determining factors: (i) with reference to her position as a member of the Board of Directors of Hili Finance Company p.l.c. (C 85692), the Board noted that Ms. Camilleri sits as an independent non-executive Director and is, therefore, not involved in the day-to-day operations; and (ii) none of the circumstances set out in Code provision 3.2 that would be indicative of a Director’s non-independence, are satisfied.

The Board of Directors considers that notwithstanding that Mr. Keith Busuttil is the CEO of 1923 Investments p.l.c., and Mr. Peter Hili is Director of Hili Properties p.l.c. (C 57954), an associate company of 1923 Investments p.l.c., such person is mindful of maintaining the necessary professionalism and integrity to duly fulfil their roles and responsibilities as non-executive Directors of the Company.

The Board of Directors maintained the view that notwithstanding that while occupying the role of non-executive Director of the Company Dr. Yasmine Aquilina was employed by Hili Ventures Limited (C 57902), the parent company of the majority and controlling shareholder of the Company, there were cogent reasons to believe that the independence of the said Director is not compromised by the services rendered by the said Director under his contract of employment, mindful of maintaining professionalism and integrity in carrying out her duties, responsibilities and providing judgement as a non-executive Director of the Company.

The non-executive Directors contribute to the strategic development of the Company and the creation of its long-term growth and are responsible for:

constructively challenging and developing strategy;

monitoring reporting of performance;

scrutinising performance of management; and

ensuring the integrity of financial information, financial controls and risk management systems.

 

Save as disclosed above, none of the non-executive Directors of the Company:

(a)

are or have been employed in any capacity by the Company

(b)

receive significant additional remuneration from the Company

(c)

have close family ties with any of the executive members of the Board;

(d)

have been within the last three years an engagement partner or a member of the audit team of the present or past external auditor of the Company; and

(e)

have a significant business relationship with the Company.

 

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

to maintain in all circumstances his/her 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/she finds that a decision of the Board may harm the Company.

 

Each non-executive Director has complied with such an undertaking for the period under review.

 

Principles 4 and 5: The Responsibilities of the Board and Board Meetings

 

The Board of Directors is entrusted with the overall direction, administration and management of the Company and meets on a regular basis to discuss and take decisions on matters concerning the strategy, operational performance and financial performance of the Company.

In fulfilling its mandate, the Board assumes responsibility to:

a

establish appropriate corporate governance standards

b

review, evaluate and approve, on a regular basis, long-term plans for the Company;

c

review, evaluate and approve the Company’s budgets and forecasts;

d

review, evaluate and approve major resource allocations and capital investments;

e

review the financial and operating results of the Company;

f

ensure appropriate policies and procedures are in place to manage risks and internal control;

g

review, evaluate and approve the overall corporate organisation structure, the assignment of management responsibilities and plans for senior management development including succession;

h

review, evaluate and approve compensation of senior management;

I

review periodically the Company’s objectives and policies relating to social, health and safety and environmental responsibilities; and

J

ensuring effective communication with shareholders, stakeholders and the market.

 

In fulfilling its responsibilities, the Board continuously assesses and monitors the Company’s present and future operations, opportunities, threats, and risks in the external environment, and its current and future strengths and weaknesses in its internal environment.

The Board delegates specific responsibilities to the Audit Committee and the RemNom Committee.

The Board believes that it complies fully with the requirements of Principle 5 and the relative Code provisions, in that it has systems in place to ensure reasonable notice of meetings of the Board and ensuring that the Directors receive discussion papers in advance of meetings so as to provide adequate time for Directors to adequately and suitably prepare themselves and enable them to make an informed decision during meetings of the Board.

The Directors are assisted by the company secretary, who is consulted to ensure compliance with statutory requirements and with continuing listing obligations. The company secretary keeps detailed minutes of all meetings of the Board and of its committees, which minutes are subsequently circulated to the Board as soon as practicable after the meeting.

The company secretary also maintains detailed records of all dealings by Directors and senior executives of the Company and its subsidiaries in the Company’s shares, and assists the Board and senior management in being duly informed of, and conversant with, their obligations emanating from the Market Abuse Regulation (EU Regulation 596/2014) (“ MAR ”) and ensuring compliance therewith, to ensure the prevention and detection of insider dealing, unlawful disclosure of inside information and, or market abuse. In particular, cognisant of the material consequences of non-compliance with MAR and the effects thereof on investor confidence and market integrity, the Board has in place written policies and procedures relating to the keeping of permanent and temporary insiders lists, dealing in shares of the Company, and procedures for persons in possession of inside information.

In addition, the Directors may, in the course of their duties, seek independent professional advice on any aspect of their duties and responsibilities or the business and activities of the Company, at the Company’s expense.

During the period under review, the Board met twenty-one (21) times. As a matter of policy, the Board seeks to meet at least twice every quarter, and a policy was established whereby early in the calendar year, meetings are scheduled for the full year, to allow adequate planning and time commitment, subject to the addition of ad hoc meetings as and when considered necessary.

 

The following reports the attendance at Board meetings of each of the Directors during the period under
review:

Name

Capacity

Meetings attended while in office

 

 

 

Mr. Keith Busuttil

Non-executive (Chairman)

[21] / [21]

Ms. Jacqueline Camilleri

Independent non-executive Director

[18] / [21]

Mr. Stephen Paris

Independent non-executive Director

[21] / [21]

Mr. Peter Hili

Non-executive Director

[19] / [21]

Dr. Yasmine Aquilina

Non-executive Director (effective 27 June 2023)

[15] / [15]

Mr. Georgios T. Kakouras

Non-executive Director (until 27 June 2023)

[6] / [6]

 

Principle 6: Information and Professional Development

 

On joining the Board, Board members undergo a formal induction programme, whereby the company secretary informs the incoming members of their statutory Director duties and obligations, the requirements and implications of relevant legislation, as well as their rights, duties, and obligations under the Company’s Articles of Association and internal policies and procedures. Directors are also provided with a presentation on the activities of the Company and subsidiaries.

On a regular basis, the Directors also receive periodic information on the Group’s financial performance and position. The company secretary ensures effective information flows within the Board, committees and between senior management and Directors, as well as facilitating professional development. The company secretary advises the Board on governance matters.  Directors may, in the course of their duties, seek independent professional advice on any matter at the Company’s expense. In addition, the Board and its committees are given adequate and suitable resources to duly discharge their functions in a proper and effective manner.

 

Since the former CEO’s resignation, The Board has assumed the responsibility for ensuring that management and employees have access to development and training opportunities to retain and enhance the Group’s competitive positioning, to safeguard and augment staff morale, and to ensure effective continuity and succession planning. The Company will provide for additional individual Directors' training on an as required basis. The responsibility for recruitment and appointment of senior management remains the responsibility of the Board of Directors, on the recommendation of the RemNom Committee.

 

Principle 7: Evaluation of the Board’s Performance

 

The Board is of the view that over the period under review, all members of the Board, individually and collectively, have contributed to proceedings in line with the required levels of diligence and skill. In addition, the Board believes that its current composition endows the Board with a cross-section of skills and experience and achieves the appropriate balance required for it to function effectively.

 

The Board considers its own performance, and that of its committees as described in Principle 8 hereunder, as satisfactory and not meriting a revision to the Company’s corporate governance structures. The Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the Board’s performance is evaluated on an ongoing basis by, and is subject to the constant scrutiny of, the Board itself, the Company’s shareholders, the market and the rules by which the Company is regulated as a listed company.

 

Principle 8: Committees

 

Audit Committee

 

The Audit Committee’s primary objective is to assist the Board in fulfilling its oversight responsibilities over the financial reporting processes, and the system of internal controls, the audit process and the process for monitoring compliance with applicable laws and regulations. The Audit Committee oversees the conduct of the internal and external audit and acts to facilitate communication between the Board, management and the internal and external auditors. The external auditors are invited to attend the Audit Committee meetings. The Audit Committee reports directly to the Board.

The Board has set formal terms of reference of the Audit Committee, which set out its composition, role, function, and the parameters of its remit, as well as the procedures and processes to be complied with in its activities.

The Audit Committee is expected to deal with and advise the Board on issues of financial risk, control and compliance, and associated assurance of the Company, including:

i.

ensuring that the Company adopts, maintains and, at all times, applies appropriate accounting and financial reporting processes and procedures;

ii.

monitoring of the audit of the Company’s management and annual accounts;

iii.

facilitating the independence of the external audit process and addressing issues arising from the audit process and ensuring good communication between internal and external audit activities, as applicable;

iv.

reviewing of the systems and procedures of internal control implemented by management and of the financial statements, disclosures and adequacy of financial reporting;

v.

making of recommendations to the Board in relation to the appointment of the external auditors and the approval of the remuneration and terms of engagement of the external auditors, following the relative appointment by the shareholders in the annual general meeting;

vi.

monitoring and reviewing of the external auditors’ independence and, in particular, the provision of additional services to the Company;

vii.

ensuring that the Company, at all times, maintains effective financial risk management and internal financial and auditing control systems, including compliance functions.

 

Furthermore, the Audit Committee has the role of assessing any potential conflicts of interest between the duties of the Directors and their respective private interests or duties unrelated to the Company.

In addition, the Audit Committee has the role and function of evaluating any proposed transaction to be entered into by the Company and a related party (which term shall have the same meaning as in the international accounting standards adopted in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council) to ensure that the execution of any such transaction is at arm’s length, on a commercial basis and ultimately in the best interests of the Company.

Any proposed transaction which the Company wishes to enter into and which satisfies either of the following conditions shall be referred to the Audit Committee for its consideration and approval:

 

(i)

transactions which clearly fall within the ambit of the Capital Markets Rules as ‘related party transactions’ and which are not the subject of an exemption therefrom;

(ii)

transactions in respect of which management is not certain as to whether they fall within the ambits of the Capital Markets Rules as related party transactions or in respect of which there is uncertainty as to whether any one or more exemptions should apply to the proposed transactions.

 

At the meeting convened for this purpose, the Audit Committee shall consider the proposed transaction and first determine whether it is a transaction that falls within the ambit of the applicable Capital Markets Rules and, if it so determines, shall then consider the merits of the proposed transaction.

In its evaluation of the proposed transaction, the Audit Committee is at all times guided by the best interests of the Company and its general body of shareholders taken as a whole. The Audit Committee reports to the Board on its findings and makes its recommendations to the Board as to whether the transaction should be entered into in the first place and to make such further recommendations as to any matters that, in the opinion of the Audit Committee, need to be reviewed or improved in the proposed transaction or any of its terms so as to ensure that the best interests of the Company are properly safeguarded.

The Audit Committee is made up entirely of non-executive Directors, the majority of whom are independent of the Company. Audit Committee members are appointed for a one (1) year term of office, automatically renewed for further periods of one (1) year each unless otherwise determined by the Board of Directors of the Company, or unless removed and replaced by another member by the Board of Directors in accordance with the Capital Markets Rules. During the period under review, the Audit Committee was composed of Ms. Jacqueline Camilleri (independent and non-executive Director), Mr. Stephen Paris (independent and non-executive Director) and Mr. Peter Hili (non-executive Director). Following his resignation from his position as non-executive Director of the Board, Mr Georgios Kakouras was replaced by Mr. Peter Hili (non- e xecutive Director) as Audit Committee Member.

The Chairperson of the Audit Committee, appointed by the Board, is entrusted with reporting to the Board on the workings and findings of the Audit Committee. Ms. Jacqueline Camilleri occupied the post of Chairperson of the Audit Committee during the period under review.

The independent non-executive Directors forming part of the Audit Committee are considered by the Board to be competent in accounting and/or auditing in terms of the Capital Markets Rules, based on their respective extensive experience occupying financial management and auditing roles within various private and public entities, as well as their respective skills and competencies in financial reporting, financial management, financial auditing and general financial advisory.

The Audit Committee met six (6) times during the year under review. Save for two meetings which were attended by two of the three members of the Audit Committee, the meetings of the Audit Committee were attended by all its members during the period under review. The Audit Committee is scheduled to meet at least four times in 2024.

 

 

RemNom Committee

 

In view of its size, the Company is of the view that whilst it considers the role and function of each of the remuneration committee and the nomination committee as important, it would be more efficient for these committees to be merged into one committee (the “RemNom Committee” ) that would serve a dual role. During the period under review the RemNom Committee was composed of Mr. Keith Busuttil (who also acted as its Chairman), Ms. Jacqueline Camilleri and Mr . Stephen Paris.

In its function as remuneration committee, the RemNom Committee is delegated with the oversight of the remuneration policies implemented by the Company with respect to the Board of Directors, the CEO (as applicable) and individuals who report directly to the Board of Directors. In assisting and making recommendations to the Board of Directors in setting out the Company’s remuneration policy, the RemNom Committee seeks to formulate remuneration policies aimed at attracting, retaining and motivating Directors, whether executive or non-executive, as well as senior management with the right qualities and skills for the benefit of the Company. In turn, it is responsible for making proposals to the Board on the individual remuneration packages of Directors and senior executives and is entrusted with monitoring the level and structure of remuneration of the non-executive Directors. In addition, the RemNom Committee is responsible for reviewing the performance-based remuneration incentives that may be adopted by the Company from time to time and is authorised to determine whether a performance-based bonus or other incentive should be paid out or otherwise.

In its function as nomination committee, the RemNom Committee’s task is to propose to the Board candidates for the position of Director, including persons considered to be independent in terms of the Capital Markets Rules, whilst also considering any recommendations from or nominations made by the shareholders in accordance with the Articles of Association of the Company.

The nominations committee also periodically assesses the structure, size, composition and performance of the Board and make recommendations to the Board regarding any changes, as well as consider issues related to succession planning. When fulfilling this function, the committee assesses the individual skills, knowledge and experience of the Directors, in order to ensure that that these endow the Board with the requisite collective skills, knowledge and experience for the proper functioning of the Company and its oversight by the Board. It is also entrusted with reviewing the Board’s policy for selection and appointment of senior management.

The nominations committee is empowered by the Articles of Association of the Company to reject any recommendation made to it if, in its considered opinion, the appointment of the person so recommended as a Director could be detrimental to the Company’s interests, or if such person is not considered fit and proper to occupy that position. The committee and the existing Board members themselves may also make recommendations for the appointment of new Directors at the annual general meeting. Where the number of candidates approved by the nominations committee is greater than the number of vacancies on the Board, an election would take place in accordance with the provisions of the Articles of Association of the Company.

In this respect, it is pertinent to note that, in advance of the 2023 annual general meeting, the Nominations Committee received three (3) valid nominations for the appointment of incumbent non-executive Directors, Mr. Stephen Parnis, Mr. Keith Busuttil and Dr. Yasmine Aquilina, which nominations were approved by the Nominations Committee and all approved candidates were automatically appointed, without requiring a resolution to be voted upon in view of the fact that the number of approved candidates did not exceed the number of vacancies and that no shareholder holding not less than ten per cent (10%) in nominal value of the shares having voting rights demanded that a vote be taken in respect of all or any one or more of the approved candidates.

The RemNom Committee met twice during the period under review and is scheduled to meet in advance of and following the Company’s next annual general meeting, in addition to meetings which may be held from time to time and as may be required.

Governance and Risk Committee

As from January 2023, the functions of the governance and risk committee (the “Governance and Risk Committee” or the “GRC”) were absorbed by the Audit Committee.

 

As a result, in addition to the functions carried by it in terms of its terms of reference, the Audit Committee was also entrusted with:

i.

assisting management of each business component with the identification of risks to which the Group and its business and operations are, or may be, exposed to including, but not limited to, client risk, transaction risk, enterprise and business risk, jurisdictional risk, product risk, and delivery risk, among others;

ii.

risk quantification to assess the potential likelihood of the occurrence of the risks identified and the potential impact of such occurrence;

iii.

oversight of screening of existing and potential customers and suppliers, including know-your-customer and due diligence verifications, and ongoing due diligence thereinafter;

iv.

the design, implementation, and oversight of risk management internal policies, procedures, processes, controls, systems and governance structures;

v.

the ongoing monitoring and evaluation of risks;

vi.

reporting on findings of evaluations undertaken and recommendations to address weaknesses or deficiencies in the processes and procedures of the Group; and

vii.

effective and timely implementation of remedial actions to address governance and risk management deficiencies.

 

 

 

 

Principles 9 and 10: Relations with Shareholders and with the Market, and Institutional Shareholders

 

The Company recognises the importance of maintaining a dialogue with its shareholders and of keeping the market informed to ensure that its strategies and performance are well understood. The Company is highly committed to having an open channel of communication and effective relationship with its shareholders and the wider market.

The Company communicates with its shareholders principally through the Company’s Annual General Meeting (the “AGM” ). The Chairman of the Board ensures that all Directors attend the AGM and that both the Chairman of the Board and committee chairpersons are available to answer questions. Individual shareholders can raise matters relating to their shareholdings and the business of the Group at any time throughout the year and are given the opportunity to ask questions at the AGM or to submit written questions in advance.

The Chairman also ensures that sufficient contact is maintained with major shareholders to understand issues and concerns.

Apart from the AGM, the Company communicates with its shareholders by way of the Annual Report and Financial Statements and through the Company’s website ( https://harvest.tech/ ) which also contains information about the Company and its business, including an ‘Investor Relations’ section.

The office of the company secretary also assists the Board in maintaining regular communication between the Company and its investors through the publication of company announcements.

 

The Company ensures that the market is provided with regular, timely, accurate, comprehensive, and comparable information to enable existing and prospective investors to make informed investment decisions. In this respect, over and above its statutory and regulatory requirements relating to the AGM, the publication of annual and interim financial statements, interim Directors’ statements and Company announcements, the Company seeks to engage with investors and the market on a regular basis, and the Company holds meetings with major stockbrokers and financial intermediaries.

 

Principle 11: Conflicts of Interest

 

The Directors are fully aware of their responsibility to always act in the best interests of the Company and its shareholders irrespective of whoever appointed or elected them to serve on the Board.  

On joining the Board and regularly thereafter, the Directors are informed of their obligations on dealing in securities of the Company within the parameters of law, including the Capital Markets Rules, and Directors follow the required notification procedures.

It is the practice of the Board that when a potential conflict of interest arises in connection with any transaction or other matter, the potential conflict of interest is declared, so that steps may be taken to ensure that such items are appropriately addressed. By virtue of the Memorandum and Articles of Association, the Directors are obliged to keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with that of the Company. The Board member concerned shall not take part in the assessment by the Board as to whether a conflict of interest exists. A Director shall not vote in respect of any contract, arrangement, transaction or proposal in which he/she has a material interest in accordance with the Memorandum and Articles of Association of the Company. The Board believes that this is a procedure that achieves compliance with both the letter and rationale of Principle 11 of the Code.

In situations giving rise to potential conflicts of interest, the conflicted Directors are to act in accordance with the majority decision of those Directors who are not conflicted in the proposed contract, transaction, or arrangement, and in line with the advice of independent legal advice, where required.

During the period under review, the Company did not enter into any material agreements in which any one of the Directors was, directly or indirectly, interested.

Any material transactions with related parties, which pose intrinsic potential conflicts of interests, require the approval of the Audit Committee, which is charged with ensuring that such transactions are necessary for the conduct of the Company’s business and are transacted on an arm’s length basis. Furthermore, such material transactions with related party transactions are subject to the Capital Markets Rules regulating the approval process for transactions of such nature, including disclosure and shareholder approval requirements that may apply if certain conditions are met.

Save as stated below, the Directors are not aware of any potential conflicts of interest which could relate to their roles within the Company:

 

i.

Ms. Jacqueline Camilleri sits on the Board of Directors of other companies forming part of the group of companies of which the majority shareholder of the Company (1923 Investments p.l.c.) (C 63261) forms part, namely Hili Finance Company p.l.c. (C 85692);

ii.

Mr. Peter Hili sits on the Board of Directors of Hili Properties p.l.c.

iii.

Mr. Keith Busuttil occupies the position of CEO of 1923 Investments p.l.c.;

iv.

Dr. Yasmine Aquilina is employed by Hili Ventures Limited (C 57902), the parent company of 1923 Investments p.l.c.

 

None of the Directors held any disclosable interest in any contracts or arrangements either subsisting at the end of the last financial year or entered during this financial year.

 

Principle 12: Corporate Social Responsibility

 

The Directors also seek to adhere to accepted principles of corporate social responsibility in their management practices of the Company in relation to the Group’s workforce and the community in general.

Over the period under review, the Group has supported several organisations engaged in charitable and philanthropic work.

The Group recognises that its workforce is one of its main assets, essential for achieving its objectives and sustained growth. The Group recognises the need to embed good governance in its day-to-day operations and, for this purpose, has introduced a Code of Conduct that establishes the general guidelines governing the conduct of all of its employees in fulfilling their functions and their commercial and professional relations.

C.      Non-compliance with the Code

 

The Directors believe that good corporate governance is a function of a mix of checks and balances that best suit the Company and its business. Accordingly, whilst there are best practices that can be of general application, the structures that may be required within the context of larger companies are not necessarily and objectively the structures for companies whose size and/or business dictate otherwise. It is in this context that the Directors have adopted a corporate governance framework within the Company that is designed to better suit the Company, its business, scale, and complexity, whilst ensuring proper checks and balances.

Taking the above into account and considering that the Code is not mandatory and that the provisions thereof may be departed from provided that reasonable and justifiable circumstances exist and are adequately explained, the Directors set out below the Code Provisions with which the Company does not comply and what are, in its view, a reasonable and justifiable basis for such departure from the recommendations set out in the Code relating to the composition of the Board.

 

Code Provision                                Explanation

 

Principle 2: Chairman and Chief Executive (Code provision 2.3)

During the year under review, the post of Chairman of the Board of Directors of the Company was occupied by Mr. Keith Busuttil, a non-executive Director. Although Code provision 2.3 provides that the Chairman should meet the independence criteria set out in the Code, the Board of Directors was of the view that Mr. Keith Busuttil is well-placed to lead the Board, having the relevant and necessary experience and expertise to fulfil the role, particularly in light of the Board’s strategy to maximize opportunities for growth and secure acquisitions suitable to the Company.

Principle 3: Executive and Non-Executive Directors on the Board

 

As explained in Principle 3 in Section B, the Board is composed entirely of non-executive Directors.

The Company is of the view that the composition of the Board of Directors is suitable when taking into account the following considerations: (i) ultimately, the Company acts as the holding company of the Group, with no day-to-day operational activities of its own. Rather, the day-to-day activities of the Company are the setting of the strategic direction and overall oversight thereof, being an activity that non-executive Directors are well suited to be entrusted with; (ii) the CFO is, and the CEO formerly was, invited as observer at the meetings of the Board of Directors of the Company, acting as the liaison between the senior management of the Company and the Board of Directors; and (iii) the managing Directors of each operating subsidiary of the Company (that is, of PTL Limited, Apco Limited, Apcopay Limited, and Ipsyon Limited) report directly to the CEO and, since the latter’s resignation in June 2023, the Board of Directors of the Company, ensuring a regular and open communication channel among members of the senior management team.

Principle 4: Succession Policy for the Board (Code provision 4.2.7 )

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

Principle 7: Evaluation of the Board’s Performance (Code provision 7.1)

The Board has not appointed a committee for the purpose of undertaking an evaluation of the Board’s performance in accordance with the requirements of Code provision 7.1. However, the Board is of the view that all members of the Board, individually and collectively, have contributed in line with the required levels of diligence and skill. In addition, the Board believes that its current composition endows the Board with a cross-section of skills and experience, not only with respect to the specific business of the Company, but also in a wider range of business areas and skills.

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. Whilst the requirement under Code provision 7.1 might be useful in the context of larger companies having a more complex set-up and a larger Board, the size of the Company’s 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.

Principle 8: Committees

(Code provision 8.A – Remuneration Committee)

During the year under review, the post of Chairman of the RemNom Committee of the Company was occupied by Mr. Keith Busuttil (non-executive Director). Although Code provision 8.A.1 requires that the Chairman of the remuneration committee be an independent non-executive Director, the Board of Directors considers Mr. Busuttil, to be well-placed to chair such committee. The Board considers that the terms of reference of the RemNom Committee are such as to ensure that the proper and impartial functioning of the RemNom Committee are not impacted, in any manner, by the status of the particular Director holding the post of Chairman of the RemNom Committee.

Principle 9: Relations with shareholders and the market (Code provision 9.3)

There are no formal procedures in place within the Company for the resolution of conflicts between minority and controlling shareholders, nor do the Memorandum and Articles of Association of the Company contemplate any mechanism for arbitration in these instances.

Principle 9: Relations with shareholders and the market (Code provision 9.4)

The Company does not have a formal policy in place to allow minority shareholders to present an issue to the Board. In practice, however, the open channel of communication between the Company and minority shareholders via the office of the Company Secretary and the Chairman is such that any issue that may merit bringing to the attention of the Board may be transmitted via the Company Secretary or the Chairman, who is in attendance at all meetings of the Board of Directors. Furthermore, the Company is in contact with the Malta Association of Small Shareholders (MASS) which may, from time to time, bring matters of interest to private investors to the attention of the Board, for its consideration.

 

D.      Internal controls

 

The key features of the Group’s system of internal controls are as follows:

 

Organisation

 

The boards of Directors of the Company’s subsidiaries (that is, of PTL Limited, APCO Limited, APCOPAY Limited, and Ipsyon Limited) are subject to clear reporting lines and delegation of powers.

 

During the period under review, as the Company’s Chairman Mr. Keith Busuttil occupied the post of Chairman of the board of Directors of the Company’s subsidiary companies.

 

The Chief Financial Officer (CFO) and, formerly, the CEO, are invited as observers at the meetings of the Board of Directors of the Company, acting as the liaison between the senior management of the Company and the Board of Directors; and (iii) the managing Director or general manager (as applicable) of each operating subsidiary report directly to the Board of Directors of the Company, ensuring a regular and open communication channel among members of the senior management team.

 

Control environment

 

The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all its operations. Although the Company has not appointed an internal auditor, the Board of Directors believes that the combination of checks and balances on the finance function of the Company, including the remit and responsibilities of the Audit Committee, the Company’s finance policies and procedures, as well as the Company’s statutory and legal obligations as a listed entity, provide adequate and suitable controls that are commensurate with the size and complexity of its business and operations. The Board of Directors will retain this matter under review in the coming year.

As part of the good governance best practices adopted by the Group, the Group implements various policies, procedures, systems and controls, designed to detect, prevent, and properly and effectively mitigate and manage legal, regulatory, business and commercial risks to which the Group is or may become exposed to.  In this respect, the Group has also adopted the following policies:

-

Code of Conduct and Whistle-blower Policy: this policy sets out the Group’s approach to the prevention and detection of corrupt practices or bribery, as well as setting adequate deterrents and punitive measures to discourage such conduct and to promote employees to blow the whistle on such conduct.

-

Health and Safety Policy: this policy sets out the Group’s approach to ensuring a safe and secure work environment, providing employees with guidance as to the pre-emptive or resolutive measures to be implemented when dealing with unsafe or hazardous conditions, injuries or accidents arising in the course of the activities of the Group. In turn this policy is supplemented by a comprehensive Health and Safety Manual, providing a detailed instructions and guidance manual on the processes and procedures to be followed. In this respect, the Group has appointed a dedicated Health & Safety Officer, responsible for overseeing compliance with the Group’s policy and for handling incidents that may arise from time to time. The Group undertakes a periodic risk assessment, with the objective of identifying any weaknesses in the Group’s property, plant and equipment, or in its internal systems and controls and so assess how this may impact the Group’s exposure to risks associated with health and safety and what rectifying measures ought to be implemented.

-

Information Security Policies: this set of policies sets out the Group’s approach towards ensuring that all users and networks within the Group meet minimum Information Technology (IT) security and data protection security requirements.

 

Each policy sets out clear reporting lines, to enable employees to disclose incidents to their superiors in a confidential and secure manner, without fear of reprisal. Policies are periodically reviewed and updated.

The Group has an appropriate organisational structure for financial planning, executing, controlling and monitoring business operations in order to achieve Group objectives. Measures taken include physical controls, segregation of duties and reviews by management and the external auditors. Lines of responsibility and delegation of authority are documented.

The Group and the subsidiary companies comprising it have implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. In particular, the Group adopts:

-

Finance Policies and Procedures: designed to ensure best practices in internal controls by management and members of staff. These policies and procedures cover procurement, credit control, travel policies, credit card payments, bank reconciliations among others; and

-

HR policies and procedures: which govern best practices in employee recruiting, career development, training, performance management, termination of contract, among others.

 

These policies, procedures, controls and systems are reviewed from time to time in order to reflect new operational and market realities, ensuring that the Group evolves in tandem with the latest developments in a timely manner, seeking pre-empting challenges and maximising potential.

The Group is committed to legal and regulatory compliance and devotes significant attention to promoting and ensuring acquiescence with the legal and regulatory framework affecting its various operations. Throughout the period under review, the Group had its own inhouse legal counsel. In addition the Company is able to engage third party legal experts where necessary through ongoing and, or ad-hoc arrangements, in order to provide sector-specific legal and advice and the necessary support and assistance, with the objective of properly mitigating the business and legal risks of undertaking its activities.

Risk identification and assessment

 

Group management is responsible together with each of the subsidiary companies’ management, for the identification and evaluation of key risks applicable to their areas of business. These risks are assessed on a continual basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements. The Audit Committee, the setting up of which transcends the principles set out in the Code, plays a central role in this risk assessment, monitoring and control process.

Information and communication

 

Group companies participate in periodic strategic reviews, which include consideration of long-term financial projections and the evaluation of business alternatives. 

Monitoring and corrective action

 

There are clear and consistent procedures in place for monitoring the system of internal financial controls. The Audit Committee plans to meet regularly during the year and, within its terms of reference as approved by the MFSA, reviews the effectiveness of the Group’s systems of internal financial controls. The Audit Committee receives reports from management and the external auditors.

 

E.      General meetings

 

Annual General Meeting (AGM)

 

The AGM is the highest decision-making body of the Company.

All shareholders registered in the shareholders’ register at the relevant registration record date, have the right to participate in the AGM and to vote thereat. A shareholder who cannot participate in at the AGM can be represented by proxy.

A general meeting is deemed to have been duly convened if at least twenty-one (21) days’ notice is given in writing to all persons entitled to receive such notice, which must 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. The notice period may be reduced to fourteen (14) days if certain conditions are satisfied. The quorum of Shareholders required is not less than fifty-one per cent (51%) of the nominal value of the issued Shares entitled to attend and vote at the meeting.

The agenda of the AGM will comprise of the ordinary business of the AGM, covering the presentation and approval of the Annual Report and Financial Statements, the declaration of dividends, election of Directors and the approval of their remuneration, the appointment of the auditors and the authorisation of the Directors to set the auditors’ fees, together with any special business specified in the notice calling the AGM.

 

 

Extraordinary general meetings (EGMs)

The Directors may convene an extraordinary general meeting whenever they think fit. In addition, any two members or more of the Company holding at least ten per cent (10%) of the shares conferring a right to attend and vote at general meetings of the Company, may convene an extraordinary general meeting.

 

 

Statements of profit or loss and other comprehensive income

 

 

Notes

The Group

The Group

The Company

The Company

 

 

2023

2022

2023

2022

 

 

 

 

 

 

 

 

Revenue

6

14,646,656

16,275,659

482,166

477,720

Cost of sales

 

(8,454,419)

(9,997,058)

-

-

Gross profit

 

6,192,237

6,278,601

482,166

477,720

Other operating income

7

72,440

24,921

14,804

-

Administrative expenses

 

(5,426,730)

(4,213,544)

(1,013,759)

(1,091,242)

Operating profit / (loss)

 

837,947

2,089,978

(516,789)

(613,522)

Investment income

8

-

-

1,768,966

1,999,691

Finance income

9

17,561

1,151

4,867

7,470

Finance costs

10

(35,598)

(27,961)

(24,604)

(17,715)

Profit before tax

11

819,910

2,063,168

1,232,440

1,375,924

Tax expense

14

(231,106)

(721,798)

(448,451)

(482,308)

Profit for the year

 

588,804

1,341,370

783,989

893,616

 

 

 

 

 

 

Earnings per share

16

0.03

0.06

-

-

 

 

 

Statements of financial position  

 

Notes

The Group

The Group

The Company

The Company

 

 

2023

2022

2023

2022

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Non-current

 

 

 

 

 

Goodwill

17

7,493,487

7,493,487

-

-

Intangible assets

18

1,311,256

1,120,625

5,905

-

Plant and equipment

19

182,629

128,555

104,876

4,627

Right-of-use assets

20

740,999

555,875

480,865

322,107

Investment in subsidiaries

22

-

-

11,119,723

11,119,723

Other investments

23

349,977

149,977

349,977

149,977

Deferred tax assets

33

759,632

475,515

127,889

113,574

Total non-current assets

 

10,837,980

9,924,034

12,189,235

11,710,008

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

Inventories

24

1,618,841

2,558,962

-

-

Contract assets

6

1,114,392

483,471

-

-

Other assets

25

743,878

86,219

6,719

6,072

Trade and other receivables

26

3,330,219

4,671,093

1,353,611

197,479

Current tax assets

 

385,859

801,021

156,947

536,785

Cash and cash equivalents

27

2,614,268

2,716,977

314,638

726,830

Total current assets

 

9,807,457

11,317,743

1,831,915

1,467,166

 

 

 

 

 

 

Total assets

 

20,645,437

21,241,777

14,021,150

13,177,174

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

28

11,390,318

11,390,318

11,390,318

11,390,318

Other equity

29

(2,821,165)

(2,821,165)

-

-

Retained earnings

 

5,506,373

5,031,644

2,027,181

1,357,098

Total equity

 

14,075,526

13,600,797

13,417,499

12,747,416

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Non-current

 

 

 

 

 

Lease liabilities

21

489,727

267,208

309,043

116,933

Deferred tax liabilities

33

255,784

292,601

-

-

Total non-current liabilities

 

745,511

559,809

309,043

116,933

 

 

 

 

 

 

Current

 

 

 

 

 

Lease liabilities

21

271,662

313,980

183,175

221,067

Trade and other payables

31

3,734,433

2,998,460

111,433

91,758

Contract liabilities

32

1,813,447

3,716,777

-

-

Current tax liabilities

 

4,858

51,954

-

-

Total current liabilities

 

5,824,400

7,081,171

294,608

312,825

 

 

 

 

 

 

Total liabilities

 

6,569,911

7,640,980

603,651

429,758

 

 

 

 

 

 

Total equity and liabilities

 

20,645,437

21,241,777

14,021,150

13,177,174

 

The financial statements were approved and authorised for issue by the Board of Directors on 18 April 2024. The financial statements were signed on behalf of the Board of Directors by Mr. Keith Busuttil (Chairman and Director) and Mr. Stephen Paris (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

Statement of changes in equity – the Group

                         

Share capital

Other equity

Retained earnings

Total equity

 

 

 

 

 

 

At 1 January 2022

11,390,318

(2,821,365)

4,829,506

13,398,459

 

 

 

 

 

Dividends

 -

 -

(1,139,232)

(1,139,232)

 

 

 

 

 

Other transfer

-

200

-

200

 

 

 

 

 

Transactions with owners

-

200

(1,139,232)

(1,139,032)

 

 

 

 

 

Profit for the year

 

 

1,341,370

1,341,370

 

 

 

 

 

Total comprehensive income

-

-

1,341,370

1,341,370

 

 

 

 

 

At 31 December 2022

11,390,318

(2,821,165)

5,031,644

13,600,797

 

 

 

 

 

At 1 January 2023

11,390,318

(2,821,165)

5,031,644

13,600,797

 

 

 

 

 

Dividends

 -

-

(114,075)

(114,075)

 

 

 

 

 

Transactions with owners

-

-

(114,075)

(114,075)

 

 

 

 

 

Profit for the year

 

-

588,804

588,804

 

 

 

 

 

Total comprehensive income

-

-

588,804

588,804

 

 

 

 

 

At 31 December 2023

11,390,318

(2,821,165)

5,506,373

14,075,526

 

Retained earnings comprise current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

 

Retained earnings include an amount of € 759,632 (2022: € 475,515) relating to deferred tax assets which are undistributable in terms of the Companies Act, Cap. 386.

 

Statement of changes in equity – the Company

 

 

 

Share capital

Retained earnings

Total equity

 

 

 

 

 

 

 

At 1 January 2022

 

           11,390,318

1,602,514

12,992,832

 

 

 

 

 

Dividends

 

-

(1,139,032)

(1,139,032)

 

 

 

 

 

Transactions with owners

 

-

(1,139,032)

           (1,139,032)

 

 

 

 

 

Profit for the year

 

-

893,616

893,616

 

 

 

 

 

Total comprehensive income

 

-

893,616

893,616

 

 

 

 

 

At 31 December 2022

 

11,390,318

1,357,098

12,747,416

 

 

 

 

 

At 1 January 2023

 

           11,390,318

1,357,098

12,747,416

 

 

 

 

 

Dividends

 

-

(113,906)

(113,906)

 

 

 

 

 

Transactions with owners

 

-

(113,906)

(113,906)

 

 

 

 

 

Profit for the year

 

-

783,989

783,989

 

 

 

 

 

Total comprehensive income

 

-

783,989

783,989

 

 

 

 

 

At 31 December 2023

 

11,390,318

2,027,181

13,417,499

 

 

 

 

 

 

Retained earnings comprise current and prior period results as disclosed in the statements of profit or loss and other comprehensive income.

 

Retained earnings include an amount of € 127,889 (2022: € 113,574) relating to deferred tax assets which are undistributable in terms of the Companies Act, Cap. 386.

 

 

Statements of cash flows

 

 

Notes

The Group

The Group

The Company

The Company

 

 

2023

2022

2023

2022

 

 

 €

 €

 €

 €

Operating activities

 

 

 

 

 

Profit before tax

 

819,910

2,063,168

1,232,440

1,375,924

Adjustments

34

1,628,810

993,656

(1,509,602)

(1,766,778)

Net changes in working capital

34

(887,762)

93,768

(1,176,815)

(272,187)

Tax paid

 

(867,532)

(1,732,575)

-

-

Tax refunded

 

683,558

180,558

536,210

180,558

Net cash generated from (used in) operating activities

 

1,376,984

1,598,575

(917,767)

(482,483)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Payments to acquire plant and equipment

 

(160,523)

(71,336)

(108,477)

(4,970)

Payments to acquire intangible assets

 

(690,458)

(345,010)

(8,857)

-

Payment to acquire other investments

 

(200,000)

-

(200,000)

-

Proceeds from disposal of intangible assets

 

9,500

-

-

-

Dividends received from subsidiaries

 

-

-

1,149,829

1,299,800

Net cash (used in) generated from investing activities

 

(1,041,481)

(416,346)

832,495

1,294,830

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Payments for lease obligations to third parties

 

(107,960)

(91,459)

-

-

Payments for lease obligations to related Company

 

(193,277)

(207,356)

(193,277)

(207,356)

Interest paid on leasing arrangements with third parties

 

(10,994)

(9,589)

-

-

Interest paid on leasing arrangements with a related Company

 

(24,604)

(17,715)

(24,604)

(17,715)

Movement in loans and receivables

 

-

-

-

200,000

Repayment of bank loans

 

-

-

-

-

Interest received

 

12,698

1,151

4,867

7,470

Interest paid on overdraft and other financial liabilities

 

-

(657)

-

-

Dividends paid

 

(114,075)

(1,139,032)

(113,906)

(1,139,032)

Net cash used in financing activities

 

(438,212)

(1,464,657)

(326,920)

(1,156,633)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(102,709)

(282,428)

(412,192)

(344,286)

Cash and cash equivalents, beginning of year

 

2,716,977

2,999,405

726,830

1,071,116

Cash and cash equivalents, end of year

27

2,614,268

2,716,977

314,638

726,830

 

 

Notes to the financial statements

1       Nature of operations

The principal activities of the Group are the sale, maintenance and servicing of information technology solutions, security systems and operates an electronic payment gateway. The Company acts as a holding Company.

 

2      General information and statement of compliance with IFRS

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

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

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

 

3       New or revised Standards or Interpretations

3.1

New standards adopted as at 1 January 2023

Some accounting pronouncements which have become effective from 1 January 2023 and have therefore been adopted do not have a significant impact on the Group’s financial results or position.

Other Standards and amendments that are effective for the first time in 2023 and could be applicable to the Group are:

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

• Definition of Accounting Estimates (Amendments to IAS 8)

• International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12)

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

3.2

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

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

Other Standards and amendments that are not yet effective and have not been adopted early by the Group include:

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

• Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

• Non-current Liabilities with Covenants (Amendments to IAS 1)

• Lack of Exchangeability (Amendments to IAS 21)

 

These amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore no disclosures have been made.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New standards, amendments and interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group’s financial statements.

 

4        Material accounting policies

4.1      Overall considerations

The Group should disclose its material accounting policies. Accounting policies are material and must be disclosed if they can be reasonably expected to influence the decisions of users of the financial statements.

Management has concluded that the disclosure of the Group’s material accounting policies below is appropriate.

 

4.2      Presentation of financial statements

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

4.3      Basis of consolidation

The Group financial statements consolidate those of the parent Company and all of its subsidiaries as of 31 December 2023. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The subsidiaries have a reporting date of 31 December.

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

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

4.4      Business combinations

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

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

 

4.5      Investment in subsidiaries

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

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

4.6      Acquisition of entities and businesses under common control

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

  4.7      Acquisition of subsidiaries

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

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

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

4.8      Goodwill

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

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

4.9      Non-controlling interest

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

 

4.10      Revenue recognition

Revenue for the Group arises mainly from the sale, maintenance and servicing of information technology solutions, security systems and operates an electronic payment gateway.

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

 

1.       Identifying the contract with a customer

2.       Identifying the performance obligations

3.       Determining the transaction price

4.       Allocating the transaction price to the performance obligations

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

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

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

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position (see note 32). Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

Sale of information technology solutions, security systems and other machinery

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

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

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

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

Maintenance and servicing

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

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

Consulting and development of IT systems

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

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

Most such arrangements include detailed customer payment schedules. When payments received from customers exceed revenue recognised to date on a particular contract, any excess (a contract liability) is reported in the statement of financial position (see note 32).

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

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

Payment gateway

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

4.11       Interest and dividends

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

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

4.12       Operating expenses

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

4.13      Employee benefits

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

4.14    Foreign currency translation

Foreign currency transactions and balances

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

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

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

 

4.15    Intangible assets

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

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

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

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

Internally developed software and acquired licences

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

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

• the development costs can be measured reliably

• the project is technically and commercially feasible

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

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

• the software will generate probable future economic benefits.

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

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

All finite-lived intangible assets, including capitalised internally developed software, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described in note 4.19. The following useful lives are applied:

 

Years

Internally developed software and acquired licences

3 – 10

 

 

 

Any capitalised internally developed software that is not yet complete is not amortised but is subject to impairment testing as described in note 4.19.

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

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

 

 

 

 

4.16    Plant and equipment

The Group’s plant and equipment are classified into the following classes – motor vehicles, furniture, fixtures and fittings and office and computer equipment.

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

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

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

Depreciation

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

 

%

Furniture, fixtures and fittings

10

Office and computer equipment

20 – 33

 

 

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

4.17    Right-of-use assets

In the case of right-of-use assets, expected useful lives are determined by reference to comparable owned assets or the lease term, if shorter. Material residual value estimates and estimates of useful life are updated as required, but at least annually. For leases on buildings and motor vehicles, the right-of-use assets are being amortised over the lease term as disclosed in note 21.

4.18    Leases

Measurement and recognition of leases

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

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

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

Lease payments included in the measurement of the lease liability are made up of fixed payments.

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

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

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

4.19   Impairment testing of intangible assets and plant and equipment

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

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

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

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

4.20    Financial instruments

Recognition, initial measurement and derecognition

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

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

Classification and initial measurement of financial assets

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

 

 

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

• amortised cost

• fair value through profit or loss (FVTPL)

• fair value through other comprehensive income (FVOCI).

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

The classification is determined by both:

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

• the contractual cash flow characteristics of the financial asset.

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

Subsequent measurement of financial assets

Financial assets at amortised cost

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

are not designated as FVTPL):

 

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

• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

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

Impairment of financial assets

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

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

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

 

• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and

• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’).

 

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

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

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

Trade and other receivables and contract assets

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

The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been Grouped based on the days past due. Refer to note 38.2 for a detailed analysis of how the impairment requirements of IFRS 9 are applied.

Classification and measurement of financial liabilities

The Group’s financial liabilities include bank borrowings, lease liabilities and trade and other payables and other financial liabilities.

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

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

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

4.21    Inventories

 

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

 

4.22    Income taxes

 

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

 

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

 

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

 

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

 

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

 

 

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

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

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

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

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

4.23    Cash and cash equivalents

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

4.24    Equity

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

Retained earnings include current period results as disclosed in the statement of profit or loss and other comprehensive income less dividend distributions.

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

4.25    Provisions and contingent liabilities

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

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

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

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

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

4.26    Significant management judgement in applying accounting policies and estimation uncertainty

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

Significant management judgements

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

Recognition of service and contract revenues

As revenue from after-sales maintenance agreements and consulting and development of systems contracts is recognised over time, the amount of revenue recognised in a reporting period depends on the extent to which the performance obligation has been satisfied. For after-sales maintenance agreements this requires an estimate of the quantity of the services to be provided, based on historical experience with similar contracts. In a similar way, recognising revenue for consulting and development of systems contracts also requires significant judgment in determining the estimated number of hours required to complete the promised work when applying the hours-to-hours method described in note 4.10. Management however considers that any variance in estimates on ongoing contracts would be insignificant to the Group.

Capitalisation of internally developed software

Distinguishing the research and development phases of a new customised software project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired (see note 4.15).

Recognition of deferred tax assets

The extent to which deferred tax assets can be recognised is based on an assessment of the probability that future taxable income will be available against which the deductible temporary differences and tax loss carry-forwards can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions (see note 4.22).

Estimation uncertainty

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

Impairment of intangible assets including goodwill and tangible assets

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit's carrying amount exceeds its recoverable amount.  To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows (see note 4.19). In the process of measuring expected future cash flows management makes assumptions about future operating results.  These assumptions relate to future events and circumstances.  The actual results may vary, and may cause significant adjustments to the Group's assets within the next financial year.

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

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

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

At 31 December 2023, goodwill was allocated as follows:

·     € 3,860,898 to Apcopay Limited.

·     € 2,168,112 to Apco Limited.

·     € 1,464,477 to PTL Limited.

CGU – Payment Processing Services

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

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

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

·     terminal growth rates of 2% (2022: 2%); and

·     use of 23.3% (pre-tax) (2022: 26.8%) to discount the projected cash flows to net present values

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

 

CGU – IT Solutions and Security Systems

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

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

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

·     terminal growth rates of 2% (2022: 2%); and

·     use of 21.4% – 24.4% (pre-tax) (2022: 18.6% - 20.5%) to discount the projected cash flows to net present values

 

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

 

Useful lives of depreciable assets

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

Inventories

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

 

5       Segment reporting

The Group operates two business activities which are the sale of payment processing services and the provision of IT solutions and security systems. Each of these operating segments is managed separately as each of these lines requires local resources. All inter segment transfers for management services are carried out on a cost basis.

The accounting policy for identifying segments is based on internal management reporting information that is regularly reviewed by the senior management of the Group.

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

The sale of payment processing services and the provision of IT solutions and security systems are derived from Malta , EU and non-EU countries.

In 2023 and 2022, the Group did not have any clients which individually represented 10% or more of the total revenue of the Group.

The Group reports its revenue by geographical area in the following table and is divided between revenue generated in Malta , from EU countries and from non-EU countries.

Revenue by geographical area

2023

2022

 

 

 

 

Malta

10,727,448

12,161,004

EU countries

1,922,617

1,926,158

Non-EU countries

1,996,591

2,188,497

 

14,646,656

16,275,659

 

 

 

The revenue generated from implementation of the border security software solutions in Mauritius amounting to € 834,793 (2022: € 924,158) and which represented 6% (2022: 6%) of the Group’s total revenue, is reported in the ‘Retail and IT Solutions’ segment of the Group (refer to the table below). In addition, at the end of the current reporting period, assets and liabilities pertaining to this project include inventories amounting to € 155,865 (2022: € 214,238) (note 24), as well as liabilities amounting to € Nil (2022: € 231,493) (note 31).

As at the end of the reporting period the total amount of intangible assets (including goodwill) and plant and equipment amounted to € 8,804,743 (2022: € 8,614,112) and € 182,629 (2022: € 128,555) respectively.

Measurement of operating segment profit or loss, assets and liabilities

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

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

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

 

Profit and loss before tax

 

 

 

2023

2022

 

Total pre-tax profit for reportable segments

1,304,440

2,659,939

 

 

 

Unallocated amounts:

 

 

Holding company costs plus consolidation adjustment

(484,530)

(596,771)

Group pre-tax profit

819,910

2,063,168

 

 

 

Assets

 

 

 

2023

2022

 

Total assets for reportable segments

12,543,007

               13,164,734

Elimination of receivables

(2,277,078)

(1,431,494)

 

 

 

Unallocated amounts (as per Holding company):

 

 

Plant and equipment

104,876

4,627

Goodwill

7,493,487

7,493,487

Intangible assets

5,905

-

Other investments

349,977

149,977

Trade and other receivables

1,344,924

161,150

Cash and cash equivalents

314,638

726,830

Deferred tax

127,889

113,574

Current tax asset

156,947

536,785

Right-of-use-asset

480,865

322,107

 

20,645,437

21,241,777

 

 

 

Liabilities

 

 

 

2023

2022

 

Total liabilities for reportable segments

8,243,347

8,642,716

Elimination of liabilities

(2,277,086)

(1,431,494)

 

 

 

Unallocated amounts (as per Holding Company):

 

 

Trade and other payables

111,433

91,758

Lease liability

492,218

338,000

 

6,569,912

7,640,980

 

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

 

Payment processing services

Retail and IT solutions

Total

Unallocated

Eliminations and adjustments

Consolidated

 

2023

 

 

 

 

 

 

Revenue

4,772,328

10,714,164

15,486,492

482,166

(1,322,002)

14,646,656

 

 

 

 

 

 

 

Profit before tax

1,191,457

105,025

1,296,482

1,240,398

(1,716,970)

819,910

 

 

 

 

 

 

 

Depreciation and amortisation

465,265

162,620

627,885

252,882

(26,996)

853,771

 

 

 

 

 

 

 

Income tax expense

408,574

(6,781)

401,793

448,451

(619,138)

231,106

 

 

 

 

 

 

 

Segment assets

3,525,789

9,017,218

12,543,007

2,901,426

5,201,004

20,645,437

 

 

 

 

 

 

 

Capital expenditure

577,247

156,402

733,649

458,103

(340,771)

850,981

 

 

 

 

 

 

 

Segment liabilities

1,625,413

6,617,933

8,243,347

603,651

(2,277,086)

6,569,912

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

Revenue

4,604,475

12,491,266

17,095,741

477,720

(1,297,802)

16,275,659

 

 

 

 

 

 

 

Profit before tax

1,519,983

1,139,956

2,659,939

1,375,924

(1,972,695)

2,063,168

 

 

 

 

 

 

 

Depreciation and amortisation

430,667

166,861

597,528

222,668

(26,996)

793,200

 

 

 

 

 

 

 

Income tax expense

560,865

378,517

939,382

482,308

(699,892)

721,798

 

 

 

 

 

 

 

Segment assets

3,580,622

9,584,112

13,164,734

2,057,450

6,019,593

21,241,777

 

 

 

 

 

 

 

Capital expenditure

349,698

62,196

411,894

4,451

-

416,345

 

 

 

 

 

 

 

Segment liabilities

1,638,130

6,996,586

8,634,716

437,758

(1,431,494)

7,640,980

 

6       Revenue

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

 

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Sale of goods

4,749,664

6,433,480

-

-

Consulting services and development

2,102,995

2,007,892

-

-

Maintenance, support and servicing

3,862,306

4,053,595

-

-

Payment gateway services

3,496,243

3,485,916

-

-

Other revenue

435,448

294,776

10,149

9,900

Management fees

-

-

472,017

467,820

 

14,646,656

16,275,659

482,166

477,720

 

As disclosed in note 5, the revenue of the Group is derived from Malta, EU and non-EU countries.

During 2023, included in payment gateway services is an amount of € 1,380,356 derived from EU countries (excluding Malta) and represents 9% of the Group’s total revenue (2022: € 1,489,617; 9%).

The Group’s revenue generated from a significant contract (non-EU) for the implementation of border security software solutions amounted to € 834,793 and represents 6% of total revenue (2022: € 924,158; 6%). Refer to further information provided in this note below on the ongoing services provided on the Mauritius contract.

The total Group revenue from non-EU countries amounted to approximately 14% of total Group revenue (2022: 13%). This is based on the contractual agreements with clients.

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

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

 

 

The Group

The Group

 

2023

2022

 

 

 

 

Contract assets relating to rendering of services and development

851,420

363,758

Contract assets relating to commission income accrued on gateway

262,972

119,713

 

1,114,392

483,471

 

 

 

No single contract asset at 31 December 2022 exceeded 10% of the total contract assets at that date. At 31 December 2023, three projects exceeded 10% of the total contract assets in one of the subsidiaries. These amounted to € 507,413 which represent 46% of total contract asset value of the Group.

The assessment of credit losses on balances of contract assets at 31 December 2023 and 2022 did not result in any material amount and considered by management to be insignificant. 

Unsatisfied long-term performance obligations

The following aggregated amounts of transaction prices relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 31 December 2023:

 

 

2024

2025

2026

Later

 

 

 

 

 

 

Sale of goods

4,380,192

776,478

86,107

-

Consulting services and development

739,170

-

-

-

Maintenance and servicing

2,784,524

2,296,860

1,431,905

28,351

Total revenue expected to be recognised

7,903,886

3,073,338

1,518,012

28,351

 

The following aggregated amounts of transaction prices relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 31 December 2022:

 

 

2023

2024

2025

Later

 

 

 

 

 

 

Sale of goods

2,748,438

1,055,459

1,057,638

-

Consulting services and development

589,521

120,000

-

-

Maintenance and servicing

2,330,053

2,167,819

2,197,320

          343,357

Total revenue expected to be recognised

5,668,012

3,343,278

3,254,958

343,357

 

One of the subsidiaries experienced a decrease in unsatisfied long term contracts for 2024 as a result of a major contract which was not delivered in 2023, after the main subcontractor failed to deliver in accordance with the specifications laid down in the contract (refer also to notes 25, 31 and 32). The unsatisfied long term contracts from 2024 onwards has been compensated due to two major contracts won by another subsidiary at the end of 2023, where revenue will be recognized in the subsequent years.

 

7       Other operating income

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Miscellaneous revenue

72,440

24,921

14,804

-

 

72,440

24,921

14,804

-

 

 

 

 

 

 

8       Investment income

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Dividends from subsidiaries

-

-

1,768,966

1,999,691

 

-

-

1,768,966

1,999,691

 

 

 

 

 

 

9       Finance income

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Other income

6,092

1,151

2,025

-

Interest income from subsidiaries

-

-

2,842

7,470

Interest income from related parties

4,863

-

-

-

Other interest income

6,606

-

-

-

 

17,561

1,151

4,867

7,470

 

 

 

 

 

 

10       Finance costs

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Interest on bank overdraft

-

657

-

-

Interest expense for leasing arrangements payable to third parties

10,994

9,589

-

-

Interest expense for leasing arrangements payable to related parties

24,604

17,715

24,604

17,715

 

35,598

27,961

24,604

17,715

 

 

 

 

 

 

11      Profit before tax

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

 

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Depreciation and amortisation (notes 18 and 19)

545,596

486,442

49,342

7,930

Depreciation on right-of-use assets (note 20)

308,175

306,758

203,541

214,738

Auditor’s remuneration

43,000

39,500

16,455

13,350

Loss allowance on receivables (note 38.2)

100,518

109,432

-

  - 

Provision on undelivered project

534,473

-

-

-

Provision for inventories (note 24)

58,911

63,559

-

  - 

Inventories written-off (note 24)

3,334

6,643

-

  - 

Net exchange differences

212

(92,687)

-

  - 

 

 

 

 

 

Total remuneration payable to the parent Company’s auditors in respect of the audit of the financial statements and the undertakings included in the consolidated financial statements amounted to € 16,455 (2022: € 13,350) and the remuneration payable in respect of the audits of the undertakings included in the consolidated financial statements amounted to € 26,545 (2022: € 26,150). Other fees payable to the parent Company’s auditors for non-audit services, namely for tax services and other fees, amounted to € 8,735 (2022: € 24,450). During 2022, other fees payable also comprised the review of the interim financial information.

 

 

12       Key management personnel compensation

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Directors’ compensation

 

 

 

 

Short term benefits:

 

 

 

 

Fees

 

 

 

 

Directors’ fees

40,000

56,688

40,000

56,688

 

 

 

 

 

 

 

 

 

 

Other key management personnel

 

 

 

 

Short term benefits:

 

 

 

 

Salaries and social security contributions

197,239

217,149

197,239

217,149

 

 

 

 

 

Total key management personnel compensation

 

 

 

 

Short term benefits

237,239

273,837

237,239

273,837

 

13          Employee remuneration

Expenses recognised for staff costs are analysed below:

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Wages and salaries

4,935,170

5,061,579

489,566

594,736

Social security costs

303,843

297,952

27,761

23,583

Maternity fund contributions

9,644

9,063

954

827

 

5,248,657

5,368,594

518,281

619,146

Covid-19 wage supplement

-

(7,105)

-

-

Capitalised wages

(441,118)

(333,504)

-

-

 

4,807,539

5,027,985

518,281

619,146

 

 

 

 

 

During 2022, the Group received a total of € 7,105 as COVID-19 wage supplement. An amount of € 2,030 was deducted in administrative expenses and € 5,075 was deducted in cost of sales.

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

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

No.

No.

No.

No.

 

 

 

 

 

Operations

77

89

-

-

Administration

50

39

13

14

 

127

128

13

  14

 

14       Tax expense

The major components of tax expense and the reconciliation of the expected tax expense based on the effective tax rate of the Group and the Company at 35% (2022: 35%) and the reported tax expense in the statement of profit or loss and other comprehensive income are as follows:

 

 

The Group

The Group

The Company

The Company

 

2023

2022

2023

2022

 

 

 

 

 

 

Profit before tax

819,910

2,063,168

1,232,440

1,375,924

Tax rate

35%

35%

35%

35%

Expected tax expense

(286,969)

(722,109)

(431,354)

(481,573)

 

 

 

 

 

Adjustment for other permanent difference

(77)

-

-

-

Adjustment for foreign income charged different rates

62,048

29,915

-

-

Adjustment for disallowable expenses

(5,657)

(29,604)

(16,646)

(735)

Loss on disposal of fixed assets

(451)

-

(451)

-

Actual tax expense, net

(231,106)

(721,798)

(448,451)

(482,308)

 

Comprising:

 

 

 

 

Current tax expense

(463,415)

(798,189)

(462,760)

(486,247)

Foreign tax expense

(88,625)

(24,231)

-

-

Deferred tax credit

320,934

100,622

14,309

3,939

 

(231,106)

(721,798)

(448,451)

(482,308)

 

 

 

 

 

Refer to note 33 for information on the deferred tax movements of the Group and the Company.

 

15      Dividends

On 13 April 2023, the Company had declared a final dividend of € 113,906 - € 0.005 per share, for the year ended 31 December 2022. This was paid on 5 May 2023. During the course of 2023, no interim dividend was declared by the Company. On 18 April 2024, the Board of Directors resolved to distribute a final dividend for the financial year ended 31 December 2023 amounting to € 113,906 (equivalent to €0.005 per share).

 

16      Earnings per share

The earnings per share have been calculated using the profit after tax attributable to shareholders as the numerator. No adjustments to profit were necessary during the current and preceding accounting periods.

In addition, there are no other instruments which could give rise to potential ordinary shares and to a dilutive effect and therefore, only the basic earnings per share has been presented.

The weighted average number of shares for the period has been computed as the total number of shares at the end of the current year.

 

 

The Group

The Group

 

2023

2022

 

 

 

Post-tax profit attributable to ordinary shareholders

588,804

1,341,370

Weighted average number of shares in issue

22,780,636

22,780,636

Earnings per share (in cents)

2.58c

5.89c

 

17       Goodwill

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

 

 

 

 

The Group

 

 

 

 

 

 

 

 

 

At 1 January 2022

 

 

 

7,493,487

At 31 December 2022

 

 

 

7,493,487

 

 

 

 

 

At 1 January 2023

 

 

 

7,493,487

At 31 December 2023

 

 

 

7,493,487

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 December 2022

 

 

 

7,493,487

At 31 December 2023

 

 

 

7,493,487

 

 

 

 

 

Amounts recognised as goodwill were based on predecessor accounting principles.

 

 

18       Intangible assets

 

 

 

Intellectual property

Internal-generated software

Licenses

Total

The Group

 

 

 

 

 

 

 

Gross carrying amount

 

 

 

 

 

At 1 January 2022

 

1,000,000

1,406,253

457,676

2,863,929

Additions

 

-

345,010

-

345,010

At 31 December 2022

 

1,000,000

1,751,263

457,676

3,208,939

 

 

 

 

 

 

At 1 January 2023

 

1,000,000

1,751,263

457,676

3,208,939

Additions

 

-

676,681

13,777

690,458

Disposals

 

-

(261,967)

-

(261,967)

At 31 December 2023

 

1,000,000

2,165,977

471,453

3,637,430

 

 

 

 

 

 

Amortisation

 

 

 

 

 

At 1 January 2022

 

767,884

665,396

253,754

1,687,034

Provision for the year

 

89,861

253,882

57,537

401,280

At 31 December 2022

 

857,745

919,278

311,291

2,088,314

 

 

 

 

 

 

At 1 January 2023

 

857,745

919,278

311,291

2,088,314

Provision for the year

 

-

435,196

4,592

439,788

Disposal

 

-

(201,928)

-

(201,928)

  At 31 December 2023

 

857,745

1,152,546

315,883

2,326,174 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

At 31 December 2022

 

142,255

831,985

146,385

1,120,625

At 31 December 2023

 

142,255

1,013,431

155,570

1,311,256

 

 

 

 

 

 

 

Intangible assets

 

Software

Licenses

Total

The Company

 

 

 

 

 

 

Gross carrying amount

 

 

 

At 1 January 2022

29,385

12,165

41,550

Additions

-

-

-

At 31 December 2022

29,385

12,165

41,550

 

 

 

 

At 1 January 2023

29,385

12,165

41,550

Additions

-

8,857

8,857

At 31 December 2023

29,385

21,022

50,407

 

 

 

 

Amortisation

 

 

 

At 1 January 2022

29,385

8,110

37,495

Provision for the year

-

4,055

4,055

At 31 December 2022

29,385

12,165

41,550

 

 

 

 

At 1 January 2023

29,385

12,165

41,550

Provision for the year

-

2,952

2,952

At 31 December 2023

29,385

15,117

44,502

 

 

 

 

Carrying amount

 

 

 

At 31 December 2022

-

-

-

At 31 December 2023

-

5,905

5,905

 

 

19      Plant and equipment

 

 

 

 

The Group

Office and computer equipment

Furniture, fixtures and fittings