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Directors: |
Pier Luca Demajo Georgios Kakouras David Aquilina Peter Hili Eddy Vermeir Laragh Cassar |
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Secretary: |
Adrian Mercieca |
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Bankers: |
Bank of Valletta p.l.c., BOV Centre, St. Venera, Malta
HSBC Bank Malta p.l.c., HSBC Head Office, Mill Street, Qormi, Malta
Swedbank AS, Balasta dambis 15, LV-1048 Riga, Latvia
Luminor Bank AS, Skanstes iela 12, Vidzemes priekšpilsēta, LV-1013 Riga, Latvia
MeDirect Bank (Malta) p.l.c. The Centre, Tigné Point, Sliema, Malta
Banca Comerciala Romana Calea Plevnei nr.159, Business Garden Bucharest Building A, floor 6, District 6 060013, Bucharest Romania
BRD – Groupe Société Générale S.A. Bdul Ion Mihalache nr. 1-7, 0111171, Bucharest Romania
Erste Group Bank AG Am Belvedere 1 1100 Vienna, Austria
SEB banka AS, Meistaru iela 1, Vadlauči, Ķekava parish, Ķekava district, LV-1076, Latvia
OTP BANK Romania SA, Bucuresti Ploiesti Street no 18-22 building XIII/2, 01394 District 1, Bucharest Romania |
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Legal advisor: |
GVZH Advocates, 192, Old Bakery Street, Valletta, Malta |
For the year ended 31 December 2023
Dear Shareholders, Partners, and Stakeholders,
I am pleased to present the annual financial report for Hili Properties p.l.c. for the fiscal year 2023. Amidst a dynamic economic landscape, the company remained resilient and focused on delivering sustainable growth and value to its stakeholders.
Following the substantial acquisitions closed in 2022, the Hili Properties team focused its efforts on management and revenue optimization over the last year. The culmination of these efforts was the successful integration of all acquired assets into the portfolio, contributing to a robust financial performance and enhanced shareholder returns, in the year under review. With a diversified real estate portfolio which includes shopping centers, office buildings and restaurants across borders in Europe, stable revenues were maintained, resulting from long-term contracts securing cash flows and prudent asset management practices.
It is important to acknowledge the challenges posed by adverse market conditions in 2023. Inflation and interest rates rising to unprecedented levels impacted all industries as well as the property market, having presented hurdles such as increased borrowing costs and financial pressure on our tenants, which fall on property managers in turn. Despite these challenges, proactive management strategies and strong stakeholder relationships ensured stability, when faced with uncertainties throughout the year.
Central to the operation is our shared commitment to tenant satisfaction and sustainability, across our portfolio. In 2023, we sharpened our focus on the efficient management of our flagship investment, MIRO Offices in Romania, while also investing in property renovations and green technologies, to enhance asset value and align with environmental best practices.
At Hili Properties, we uphold the highest standards of corporate governance, ensuring transparency and accountability in all our activities. Regular meetings of the Board of Directors and the Audit Committee facilitated robust oversight and informed decision-making, reinforcing our commitment to good governance practices.
Looking ahead to 2024, our strategy remains unchanged as we continue to prioritize sustainable growth and value creation for all stakeholders. I would like to take this opportunity to extend my sincere appreciation to our shareholders for their continued trust and support, our esteemed partners and tenants for their collaboration and our employees for their hard work and dedication. Together, we will navigate the challenges and opportunities ahead, positioning Hili Properties for continued success in the years to come.
Pier Luca Demajo
Chairman, Hili Properties p.l.c.
29 th April 2024
For the year ended 31 December 2023
Hili Properties plc had a record performance in 2023, having generated Eur15.7 million in revenues – compared to Eur12.2million the previous year, an increase of 29%. This was primarily the result of realizing income from two recently acquired properties, Stirnu Shopping Center in Latvia and MIRO Office in Romania, for a full reporting period.
2023 saw the team elevate its expertise in property management in order to deliver our mission: to invest in high-quality assets which generate attractive, growing returns for shareholders over the long term. In line with this, we were able to deliver a worthy experience at our properties, for customers and employees, through optimized tenant services, while leaving a positive impact on our neighbouring communities. We believe that this trifecta, positions us as a strong player and enhances our reputation as a trustworthy and reliable commercial real estate owner and partner in Europe.
The challenges faced by the commercial real estate market globally over the last year were significant, due to rising interest rates and lingering fears of a recession, impacting property valuations due to increased loan repayments. Faced with this new reality, our strategy was to optimize our portfolio’s capital structure to build resilience against market shocks and futureproof the company.
Portfolio performance was very strong with EBITDA reaching Eur12.1 million – compared with Eur8.4 million in 2022 and profit before tax totalling Eur7.6 million – compared with Eur6.8 million in 2022.
As at 31 December 2023, 99% of our available-for-lease properties were fully occupied and the weighted average lease term for our total portfolio was 8.3 years. Our occupancy ratio is exceptional compared with the average occupancy rate across all commercial real estate types worldwide that falls within the range of 80% to 85%.
In terms of tenant mix, our property managers on the ground continued to develop our client-base for the two newer additions to the portfolio, Stirnu shopping centre in Riga, Latvia and our most valuable asset to date, the MIRO Offices in Bucharest, Romania. In fact, we closed the year with three new diverse international office tenants from the pharmaceutical, energy and construction industries.
Taking a look at our investments in other properties, the reconstruction of the second floor at the DOLE Shopping Center in Riga, Latvia was completed and has attracted top-tier retailers which has contributed to increased footfall.
I am proud that we continued to make headway on our sustainability plan which centres on supporting and investing in renewable energy, being an active player in our communities and maintaining efficiency standards in our buildings. Last year, solar panel installations at MIRO, Romania and DOLE, Latvia were concluded – adding 650,000 KWH of clean energy to the grid. Office buildings across key markets provide electric vehicle charging stations for users and efficient building management systems are in place in most of our properties.
Moreover, the industrial property REHAU in Lithuania maintained its BREEAM certification underlining its sustainability features, while MIRO in Romania holds BREEAM “Excellent” and WELL “Platinum” certifications. Only 468 Platinum certifications have been issued worldwide so far and MIRO is one of the first in Romania, which endorses the high standards set for employee health and well-being, job satisfaction and engagement, as well as environmental credentials.
These efforts augured well and at the end of 2023 our portfolio value stood at Eur229million for our 22 investment properties.
Looking ahead, we will build on our successes with an aim to deliver additional value to our shareholders. We will continue to navigate the challenges that commercial real estate currently faces, safe in the knowledge that we own a solid portfolio of property assets, which provide a steady revenue stream. With interest rates now stabilized, we expect renewed interest in real estate transactions and will continue to monitor the market to identify opportunities for sales or potential acquisitions of assets in an agile manner.
I would like to thank our shareholders and partners for their ongoing support and confidence in Hili Properties and to our dedicated team for their hard work and commitment, which has enabled this positive performance.
Georgios Kakouras
29 th April 2024
Year ended 31 December 2023
The directors present their report and the audited financial statements of the Hili Properties p.l.c. group and holding company for the year ended 31 December 2023.
Principal activities
The principal activity of the Hili Properties p.l.c. group is to hold and rent immovable property. Hili Properties p.l.c. also acts as a holding company. The details of subsidiaries of the holding company are listed in note 20.
Performance review
Across Hili Properties p.l.c.'s footprint, the Group and its subsidiaries were effective in responding to various adverse business conditions in the markets in which the Group operates, such that during 2023 a positive performance was registered, with operating profits reaching Eur12,068,001 as compared to Eur8,399,022 in the preceding year.
2023 is the first year that the group held, for a full year, the assets acquired following its initial public offering. The current year therefore marks the consolidated results for a 12-calendar month profits for all the subsidiaries within the group, explaining the higher results reported in the current year over the preceding year.
Net investment income registered by the group amounted to Eur2,457,303 (2022: Eur3,041,205 ), whereby the majority of the uplifts are being derived from the Romanian segment according to the internal valuations made, along with valuations undertaken by external independent valuators.
The group registered a
profit before tax of Eur7,594,525 (2022: Eur6,798,302
). The net assets of the group at the end of 2023 amounted to
Eur127,144,950 (2022: Eur124,929,650 ).
During 2023, the company registered a profit before tax of Eur11,962,404 (2022: loss before tax of Eur2,369,104 ). Dividend income recognised during the year to the company amounted to Eur13,721,543 justifying the significant movement in results.
The net assets of the company at the end of the year amounted to Eur99,197,956 (2022: Eur91,845,835 ).
Financial performance
The group measures the achievement of its objectives using the following additional key performance indicators.
The group measures its performance based on EBITDA, which is defined as the group’s profit before depreciation and amortisation, finance income/costs, net investment income/losses and taxation.
The EBITDA for the year under review was Eur12,068,001 (representing 77% of revenues) as compared to Eur8,399,022 (representing 69% of revenues) in the previous year. The step-up in EBITDA is a natural by-product of the full year operations of the entities, but also reflects the nature of the lease agreements entered into by the group, being mostly on triple net basis.
Interest cover for the group is at 1.6 times in 2023 (2022: 1.8 times).
The gearing ratio of the group is monitored on an ongoing basis. The group’s gearing ratio, defined as total debt less cash divided by total equity, stands stable at 46%, consistent with last year’s percentage.
Non-financial performance
With reference to our properties held for rental, occupancy was at 99% as of 31 December 2023 (2022: 99%). This refers to the ratio of leased investment properties in square meters to the total owned rental properties in square meters. The WALT (Weighted Average Lease Term) for the whole portfolio stands at 8.3 years (2022: 9.6 years).
Result and dividends
The result for the year ended 31 December 2023 is shown in the statement of profit or loss and other comprehensive income on page 29. The group registered a profit after tax of Eur6,427,075 (2022: Eur5,972,270 ). The holding company registered a profit after tax of Eur11,681,762 (2022: loss after tax Eur2,416,005 ).
During the year, the company has declared and paid dividends amounting to Eur4,329,641 to its shareholders (2022: nil)
The Market Environment
2023 was a year marked by high inflation and high interest rates across the world, which negatively impacted the Company’s and the Group’s profitability but also key growth levers such as the ability to raise cost-effective financing, as experienced by the Real Estate sector globally.
The current situation in Ukraine, Israel and Palestine effects European economies and the geopolitical unrest came at a time when the Covid-19 pandemic impact had still not recovered. Based on available insights to date, the Company and the Group are not expected to be negatively impacted by the continued conflicts directly.
Management together with the directors, continue to actively monitor international developments in order to take any necessary actions, to pre-empt any potential impacts on the company’s turnover and business activity.
Likely future business developments
Notwithstanding the current economic conditions, the directors consider that the year-end financial position was satisfactory and that the group is well placed to continue operating sustainably.
Principal risks and uncertainties.
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, identify and manage such risks. The principal risks and uncertainties facing the group and the mitigating factors are included below:
Dependence on tenants
The Group is dependent
on tenants fulfilling their obligations under their lease
agreements. The business, revenue and projected profits of the
Group would be negatively impacted if tenants failed to honour
their respective lease obligations. There can be no assurance that
the tenants will honour their obligations, for different reasons
such as insolvency, market or economic downturns, operational
failure or other reasons which are beyond the Group’s
control. Such failure may negatively affect the financial condition
of the Group.
The Group is subject to risk of termination of lease
agreements.
The Group is subject to the risk that tenants may terminate or elect not to renew their respective lease, either due to the expiration of the lease term or due to an early termination of the lease. In cases of early termination by tenants prior to the expiration of the lease term there is a risk of loss of rental income if the tenant is not replaced in a timely manner and/or on similar conditions which in turn could have a material negative effect on the Group’s operational results.
The Group is subject to increases in operating and other
expenses.
At present, operating expenses incurred by the Group are partially recharged to the tenants occupying the Group’s properties. Nonetheless, in future, the Group’s operating and other expenses could increase without a corresponding increase in revenue, particularly given the current inflationary environment surrounding the operations of the group.
The factors which could materially increase operating and other expenses include: (i) unforeseen increases in the costs of maintaining the properties; and (ii) material increases in operating costs driven by inflation or other parameters that may not be fully recoverable from tenants.
The Group may be impacted by changes in laws and regulations.
Changes in laws and regulations relevant to the Group’s business and operations could have an adverse impact on the Group’s business and results of operations.
Market and competition
The Group is exposed to risks inherent to the commercial real estate market and particularly to changes in market conditions in the commercial real estate market in the Baltics, Romania, Malta and any other market where the Group might invest going forward. Such risks may lead to an oversupply of space or a reduction in tenant demand for a particular type of property. Risks inherent to the commercial real estate market may also have an impact on the quality of property available; the ability of the Group to maintain its service charges and other expenditure and to control the cost of these items; the Company being able to buy, sell, operate or lease existing or new properties on favourable terms; and/or the potential illiquidity of property investments, particularly in times of economic downturn. All aforesaid risks may have a material adverse impact on the revenues of the Company, its financial performance and its overall financial condition.
Cybersecurity risk
Failures or breaches of the electronic systems of the Company, its advisers and other service providers could cause disruptions, negatively impact the Company’s business operations and/or potentially result in financial losses to the Company. Irrespective of the business continuity plans and risk management systems in place that address system breaches or failures, there are inherent limitations in such plans and systems. Furthermore, the Company cannot control the cybersecurity plans and systems of any of the Company’s advisers and other service providers.
Fluctuations in property values
The Group is involved in the acquisition and disposal of immovable property. Property values are affected by and may fluctuate, inter alia, because of changing demand, changes in general economic conditions, high interest rates, changing supply within a particular area of competing space and attractiveness of real estate relative to other investment choices. The value of the Group’s property portfolios may also fluctuate as a result of other factors outside the Group’s control, such as changes in regulatory requirements and applicable laws (including those in relation to taxation and planning), political conditions, the condition of financial markets, potentially adverse tax consequences, interest and inflation rate fluctuations and higher accounting and control expenses. The Group’s operating performance could be adversely affected by a downturn in the property market in terms of capital values.
The valuation of property and property-related assets is inherently subjective. Moreover, all property valuations are made on the basis of assumptions which may not prove to reflect the true position. There is no assurance that the valuations of the properties and property-related assets will reflect actual market process.
International exposure risk
The group operates in many countries with differing economic, social and political conditions. Changes in current conditions may adversely affect the tenant’s business performance, portfolio fair value, results of operations, financial conditions, or prospects. The group manages such risks by incorporating this risk into its business strategy, i.e. diversification in terms of geography as well as type of industries/sectors.
Real estate investments are illiquid.
As property is a relatively illiquid asset, such illiquidity may affect the Group’s ability to vary its portfolio or dispose of or liquidate part thereof in a timely manner and at satisfactory prices in response to changes in economic, banking, real estate market or other conditions or the exercise by tenants of their contractual rights, such as those which enable them to vacate properties occupied by them prior to, or at, the expiration of the lease term. These factors could have an adverse effect on the Group’s financial condition and results.
Risks relating to the potential inability to conclude real estate investments, and/or sales.
The Group operates in a
competitive environment and therefore the Company’s financial
performance and future growth is partly dependent on the
Group’s ability to acquire, sell and operate its assets on
attractive and sustainable commercial terms. There can be no
assurance that the Group will continue to be able to identify and
acquire target assets on attractive commercial terms or even at
all. Timing of deals is also critical, together with the ability to
secure attractive financing. The above may have a material adverse
impact on the Company’s future growth and prospects, as well
as on its financial performance and its overall financial
condition.
The Group’s level of debt
The Group’s ability to implement its respective business strategies is dependent upon, amongst other things, their ability to generate sufficient funds internally and to access continued financing at acceptable costs.
Issuer’s dependence on payments due from Subsidiaries may be affected by factors beyond the Issuer’s control
The Issuer is primarily a holding company and, as such, its assets consist primarily of loans granted to and investments held in Subsidiaries. Consequently, the Issuer is largely dependent on income derived from dividends from Subsidiaries and the receipt of interest and loan repayments from Subsidiaries. In this respect, the operating results of the Subsidiaries have a direct effect on the Issuer’s financial position and therefore the risks intrinsic to the business and operations of the Subsidiaries have a direct effect on the financial prospects of the Issuer.
The dividends, interest
payments and loan repayments to be affected by Subsidiaries are
subject to certain risks. More specifically, the ability of
Subsidiaries to effect payments to the Issuer will depend on the
cash flows and earnings of the Subsidiaries, which may be
restricted by changes in applicable laws and regulations, by the
terms of agreements to which they are or may become party,
including the indenture governing their existing indebtedness, if
any, or by other factors beyond the control of the Issuer
Significant judgement and estimates
Note 3 to the financial statements provides details in connection with the inherent uncertainties that surround the preparation of the financial statements which requires significant estimates and judgements.
Non-Financial Statement
Environmental matters
The group is committed to environmental responsibility, and all subsidiaries within the group have a role to play in living up to that commitment. Efforts are made in areas where the group can have significant impact on critical environmental issues, including climate change, natural resource conservation and waste management. The group invests in innovations that can improve our environmental footprint, besides collaborating with other organizations to raise environmental awareness and work with key suppliers to promote environmentally responsible practices in their operations.
Employee matters
The group provides opportunity, nurtures talent, develops leaders and rewards achievement. The group believes that a team of individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to its continuing business success. Performance evaluation systems are employed across the group, using multistage training systems to monitor individual’s development, and set training requirements.
Each of the group’s employees deserves to be treated with fairness, respect, and dignity, providing equal opportunity for employees and applicants. All the group’s employees have the right to work in a place that is free from harassment, intimidation, or abuse, sexual or otherwise, or acts or threats of physical violence. It is committed to diversity and equal opportunities for everyone, respecting the unique attributes and perspectives of every employee, and rely on these diverse perspectives to help the group build and improve the relationships with customers and business partners. The group embraces the diversity of its employees, customers and business partners, and works hard to make sure everyone within the group feels welcome.
The group provides equal treatment and equal employment opportunity without regard to race, colour, religion, sex, age, national origin, disability, sexual orientation, gender identity or any other basis protected by law. In addition, it is committed to providing a safe and healthful working environment for its employees, requiring all employees to abide by safety rules and practices and to take the necessary precautions to protect themselves and their fellow employees. For everyone’s safety, employees must immediately report accidents and unsafe practices or conditions to their immediate supervisors.
Respect for human rights
The group conducts its activities in a manner that respects human rights, taking the responsibility seriously to act with due diligence to avoid infringing on the human rights of others and addressing any impact on human rights if they occur. The group’s commitment to respect human rights is defined in the code of business conduct, which applies to all employees of the group.
The group is committed to provide a safe work environment that fosters respect, fairness, and dignity. Group employees are trained annually on the standard of business conduct.
Anti-corruption and bribery matters
The group’s employees must comply with the group Code of Conduct and Whistle-blower Policy to ensure that all employees are discouraged from any corrupt practices or bribery as well as are incentivized to report any such activities in a direct line with the responsible group supervisor, without fearing reprisals. Every employee is introduced to these policies upon employment and are mandatory to be adhered to it.
The group prohibits all forms of bribery or kickbacks as detailed in the Code of Conduct. All employees, representatives and business partners must fully comply with anti-bribery legislation. To comply with the group policy and anti-bribery laws, no employee should ever offer, directly or indirectly, any form of gift, entertainment, or anything of value to any government official or his or her representatives.
The group is committed to complying with the applicable laws in all countries where it does business. It adopts a Global Anti-Corruption Policy which sets forth its commitment to ensuring that it carries out business in an ethical manner and abides by all applicable anti-bribery and anti-corruption laws in the countries in which it operates by, among other things, prohibiting the giving or receiving of improper payments in the conduct of the business, and by discouraging such behaviour by its business partners.
Post balance sheet events.
Following the issue of these financial statements, a retail complex in Dzelzavas Street, Riga, Latvia, was disposed of by the group for a total consideration received of Eur7,000,000 .
Grant Thornton Malta have expressed their willingness to continue in office and a resolution for their reappointment will be proposed at the Annual General Meeting.
Directors
The directors that served during the period were
Pier Luca Demajo (Chairman)
Georgios Kakouras
David Aquilina
Peter Hili
Laragh Cassar
Eddy Vermeir
In accordance with the
holding company’ articles of association, all directors are
to remain at office.
As required by rule 5.62 upon reviewing the Group’s and Company’s performance and statement of financial position post to year end and also by reviewing in detail the Group’s and the Company’s budgets and forecasts, the directors confirm the Group’s and the Company’s ability to continue operating as a going concern in the foreseeable future.
The Directors declare that to the best of their knowledge, the financial statements included in the Annual Report are prepared in accordance with the requirements of International Financial Reporting Standards as adopted by the European Union and as amended from time to time and these statements give in all material aspects a true and fair view of the assets, liabilities, financial position and results of the Group and that this report includes a fair review of the development and performance of the business and position of the Group, together with a description of the principal risks and uncertainties that it faces.
Approved by the board of directors and signed on its behalf on 29 th April 2024 by:
_______________________________ _________________________
Pier Luca Demajo Georgios Kakouras
Chairman Director
Year ended 31 December 2023
The directors are required by the Companies Act, (Cap. 386) to prepare financial statements in accordance with generally accepted accounting principles and practices which give a true and fair view of the state of affairs of the company and its group at the end of each financial year and of the profit or loss of the company and its group for the year then ended.
In preparing the financial statements, the directors should:
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adopt the going concern basis unless it is inappropriate to presume that the company and the group will continue in business; |
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select suitable accounting policies and then apply them consistently; |
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make judgements and estimates that are reasonable and prudent; |
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account for income and charges relating to the accounting period on the accruals basis; |
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value separately the components of asset and liability items; and |
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report comparative figures corresponding to those of the preceding accounting period. |
The directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the company and the group and which enable the directors to ensure that the financial statements comply with the Companies Act, (Cap. 386). This responsibility includes designing, implementing and maintaining such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Approved by the board of directors and signed on its behalf on 29 th April 2024 by Pier Luca Demajo (Chairman) and Georgios Kakouras (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Introduction
Pursuant to the Capital Market Rules as issued by the Malta Financial Services Authority, Hili Properties p.l.c. (the ‘ Company’ ) is hereby reporting on the extent of its adoption of the Code of Principles of Good Corporate Governance (the ‘Code’ or the ‘ Principles’ ) contained in Appendix 5.1 of the Capital Market Rules.
The adoption of the Code is not mandatory in nature. Notwithstanding this, the Directors are strongly of the opinion that the adoption of the Code is in the best interest of the Company, its shareholders and other stakeholders since it provides the necessary framework to ensure that the directors, management, and employees of the company work towards the right set of principles and ethical standards.
The Company currently has a corporate decision-making and supervisory structure that is tailored to suit the Company’s requirements and designed to ensure the existence of adequate checks and balances, whilst retaining an element of flexibility, particularly in view of the size and nature of its business. Generally speaking, the Company adheres to the Code, except for those identified instances where there exist particular circumstances that, in the view of the Directors are excessive to the nature and size of the Company.
Principle 1: The Board
Principle 3: Composition of the Board
The Board of Directors
The Board of Directors is responsible for the overall long-term direction of the Company, in particular being actively involved in overseeing the systems of control and financial reporting and that the Company communicates effectively with the market.
The Board of Directors meets regularly, with a minimum of four times annually, and is currently composed of six members. Three of the members, being Mr Pier Luca Demajo, Mr David Aquilina and Dr Laragh Cassar are independent from the Company or any other related companies.
The members of the board are the following:
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Pier Luca Demajo |
Independent Non-Executive Director |
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David Aquilina |
Independent Non-Executive Director |
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Laragh Cassar |
Independent Non-Executive Director |
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Peter Hili |
Non-Executive Director |
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Eddy Vermeir |
Non-Executive Director |
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Georgios Kakouras |
Executive Director |
The Board considers that its size is appropriate, taking into account the size of the Company and its operations. Furthermore, the Board is of the view that it has the required diversity of knowledge, judgment and experience to properly complete its tasks. The competencies of the Directors ranges from industry, financial and legal expertise.
As above set out, the Board is composed of a mix of executive and non-executive directors. The presence of Non-Executive Directors on the Board serves to, inter alia, constructively challenge the Executive Directors and management of the Company, and particular focus is made on strategy and the integrity of financial performance and management.
Each presently appointed non-executive director has declared to the Board as stipulated under the Code Provision 3.4 undertaking:
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to maintain in all circumstances his/her independence of analysis, decision and action; |
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(b) |
not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and |
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(c) |
to clearly express his/her opposition in the event that he/she finds that a decision of the board may harm the Company. |
Principle 2: Chairman and Managing Director
The Chairman of the Company (presently, Mr Pier Luca Demajo) leads the Board and sets its agenda and works closely with the Company Secretary. In addition, the Chairman ensures that the directors receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the Company and that effective communication with shareholders is maintained. The Chairman also encourages active engagement by all directors for discussion of complex or contentious issues. Working hand in hand with the Chairman is the Managing Director, (Mr Georgios Kakouras) who leads the executive management of the Company.
Principle 4: The Responsibilities of the Board
The Board has the first level responsibility for executing the four basic roles of Corporate Governance: accountability, monitoring, strategy formulation and policy development. The Board has established a clear internal and external reporting system so that it has access to accurate, relevant and timely information and ensures that management constantly monitor performance and report to its satisfaction. The Board, at least on a quarterly basis, evaluates management’s implementation of corporate strategy and financial objectives by reference to a number of criteria, including projected earnings and other anticipated criteria.
The Board has not developed a formal succession plan for its Managing Director and the directors themselves however is in the process of discussing a manner in which a succession planning process can be implemented.
Principle 5: Board Meetings
Each of the directors has applied the necessary time and attention for the performance of his/her duties to the Company. During 2023, the Board met on thirteen (13) occasions:
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Director |
Attendance |
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Pier Luca Demajo |
13 out of 13 meetings |
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David Aquilina |
12 out of 13 meetings |
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Laragh Cassar |
10 out of 13 meetings |
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Eddy Vermeir |
12 out of 13 meetings |
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Peter Hili |
12 out of 13 meetings |
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Georgios Kakouras |
13 out of 13 meetings |
As a matter of practice, each Board meeting to be held throughout the year is scheduled well in advance of their due date and each director is provided with detailed Board papers relating to each agenda item in good time prior to the actual meetings. Board meetings concentrate mainly on strategy, operational performance and financial performance of the Company. After each Board meeting and before the next, Board minutes that faithfully record attendance, key issues and decisions are sent to the directors.
Audit Committee
The Terms of Reference of the Audit Committee are modelled on the principles set out in the Capital Market Rules, including the roles set out in Capital Market Rules 5.127 to 5.130. In addition, unless otherwise dealt with in any other manner prescribed by the Capital Market Rules, the Audit Committee has the responsibility to, inter alia, monitor and scrutinise, and, if required, approve Related Party Transactions, if any, falling within the ambits of the Capital Market Rules and to make its recommendations to the Board of any such proposed Related Party Transactions. The Audit Committee establishes internal procedures and monitors these on a regular basis. The Committee also has the authority to summon any person to assist it in the performance of its duties, including the Company’s external auditors.
Whilst the Company does not have a permanent internal auditor function within its organisational structure, the Audit Committee has engaged the services of external audit firms to carry out specific internal audit checks.
The Audit Committee, is currently composed of the following individuals:
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David Aquilina |
Chair & Independent Non-Executive Director |
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Laragh Cassar |
Independent Non-Executive Director |
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Peter Hili |
Non-Executive Director |
This satisfies the requirement established by the Capital Market Rules that the Audit Committee is composed of non-executive directors, the majority of which being independent.
The Board of Directors assessed the independence of these members and unanimously agreed that in line with good corporate governance, David Aquilina, Peter Hili and Laragh Cassar conduct themselves in an independent and professional manner satisfying the Capital Market Rules.
Furthermore, the Board of Directors considers the Audit Committee, as a whole, to have the relevant experience in the real estate sector, David Aquilina being considered to be an expert in the real estate business and competent in accounting and/or auditing in terms of the Capital Market Rules. The Chief Financial Officer of the Company and the Managing Director is also present during the Audit Committee meetings.
The Audit Committee met six (6) times during 2023.
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David Aquilina |
6 out of 6 meetings |
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Laragh Cassar |
3 out of 6 meetings |
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Peter Hili |
6 out of 6 meetings |
Communication with and between the Company Secretary, top level management and the Committee is ongoing and considerations that required the Committee’s attention were acted upon between meetings and decided by the Members (where necessary) through electronic circulation and correspondence.
Principle 6: Information and Professional Development
Appointments and changes to senior management are the responsibility of the Managing Director and are approved by the Board. The Board actively considers the professional and technical development of the Board itself, all senior management and staff members. The Managing Director also has systems in place to monitor management and staff morale. Management prepares detailed reviews for each Board meeting covering all aspects of the Company’s business.
On joining the Board, a new director is provided with the opportunity to consult with the executive directors and senior management of the Company in respect of the operations of the Group. Each director is made aware of the Company’s on-going obligations in terms of the Companies Act, the Capital Market Rules and other relevant legislation. Directors have access to the advice and services of the Company Secretary and to the legal counsel of the Company.
The Company is also prepared to bear the expense incurred by the directors requiring independent professional advice should they deem it necessary to discharge their responsibilities as directors.
Principle 7: Evaluation of the Board’s Performance
With respect to the year under review, the Board undertook an evaluation of its own performance, the Chairman’s performance and that of its Committees. The Board did not per se appoint a Committee to carry out this performance evaluation but the evaluation exercise was conducted through a questionnaire, copies of which were sent to the Chairman of the Audit Committee and the results were reported to the Chairman of the Board. No material changes were made to the Company’s structures as a result of the Board evaluation.
Principle 8: Committees
The required disclosures on the remuneration structure of the Company are found in the annual report under ‘Remuneration Statement’.
Furthermore, reference is made to the Non-Compliance section hereunder where disclosure of the non-compliance with the appointment of a remuneration committee and a nomination committee is made.
Principle 9: Relations with Shareholders and with the Market & Principle 10: Institutional Investors
The Company engages in dialogue with the market through a number of measures, including the issuance of timely and information announcements to the market, the holding of meetings with the local stockbroking community and the issuance of press releases. Until the initial public offering of the Company in the 4 th quarter of 2022, the Company’s share capital was held privately and therefore it is only after its successful listing of its equity securities, that communication with its shareholders took place in a more formal manner. The Company intends to ensure that all communications are effectively and through additional channels, such as through its annual general meetings, where shareholders will be given the opportunity to have their questions raised and answered.
Principle 11: Conflicts of Interest
The directors are aware that their primary responsibility is always to act in the interest of the Company and its shareholders as a whole, irrespective of who appointed them to the Board. Acting in the interest of the Company includes an obligation to avoid conflicts of interest. In such instances, the Company has strict policies in place which allow it to manage such conflicts, actual or potential, in the best interest of the Company. Each director’s service contract contains provisions which require the director to:
|
(a) |
ensure that his/her personal interests do not conflict with the interests of the Company; |
|
(b) |
not carry on, directly or indirectly, business in competition with the Company; |
|
(c) |
not make personal gains or profits from his post without the consent of the Company, or from confidential information; |
|
(d) |
not use any property, information or opportunity of the Company for his own benefit or for the benefit of any third party; and |
|
(e) |
not obtain any benefit in connection with the exercise of his powers, except with the consent of the Company in general meeting. |
Furthermore, any director that has a conflict (actual or potential) is required to disclose and record the conflict in full and in time to the Board and is also precluded from participating in a discussion concerning matters in such conflicted matters. Under no circumstance is the conflicted director, permitted to vote on the matter. This requirement is reflected in Article 87.3 of the Company’s Articles of Association. Subject to the provisions of the law, the company may in general meeting, by ordinary resolution, suspend or relax the said provisions of the Articles of Association to any extent or ratify any transaction not duly authorised by reason of a contravention of the said provision.
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.
Environmental, Social and Governance Standards Commitment
Hili Properties p.l.c. is committed to environmental, social and governance principles and is actively working to optimize its portfolio’s performance, reduce energy consumption and carbon emissions. Its strategy is focused on the acquisition and development of sustainable buildings. The company is dedicated to supporting the communities in which it operates as it believes that this increases stakeholder value in its pursuit for long-term success. Therefore, a range of ESG initiatives are implemented which benefit tenants and the broader community. Considerable efforts are made to reduce energy consumption, carbon emissions, improve sustainability and promote social responsibility:
Reaching out to the community, tenants support
In 2022, Hili Properties plc supported the opening of Pusaudzu Resursu Centrs, a non-profit organization helping children and families by providing support through therapy. The group provided the necessary space for the activities of this organization to be set up, in one of the shopping centres in Riga. The facilities provided included specially designed spaces for therapists to conduct their sessions. Ongoing support to the organization continued to be provided over the course of 2023.
Caring for the Environment
In its commitment to sustainability, Hili Properties p.l.c. has launched a series of initiatives.
An electric vehicle charging project was implemented at the Nineteen Twenty-Three office building in Malta which includes 16 electric vehicle charging stations made available for employees’ use.
Hili Properties p.l.c. has already been recognised for efforts made in acquiring sustainable buildings, as in the case of the Rehau industrial plant in Lithuania and the MIRO offices in Romania.
The MIRO office building in Bucharest, Romania - Hili Properties p.l.c. largest asset - has 400 kWp photovoltaic panels where were installed in 2023. This project not only contributes to a reduction in the buildings’ carbon footprint but also provides cost savings to tenants. MIRO has also received the highest level of WELL certification – the Platinum certificate. It is the first property in Romania to earn this prestigious rating, with only 248 Platinum certificates issued worldwide. This positions the MIRO office building at the forefront of sustainable design and commitment and in promoting the health and well-being of users.
Photovoltaic panels were also installed at shopping center DOLE in Latvia, with a total investment of around Eur150,000 .
Non-compliance with the Code
Principle 4 Responsibilities of the Board: Succession Planning
The Board has not developed a formal succession plan for its Managing Director and the directors themselves however is in the process of discussing a manner in which a formal succession plan can be implemented.
Principle 7: Evaluation of the board’s performance
With respect to the year under review, the Board undertook an evaluation of its own performance, the Chairman’s performance and that of its committees. The Board did not per se appoint a committee to carry out this performance evaluation, but the evaluation exercise was conducted through a questionnaire, copies of which were sent to the Chairman of the Audit Committee and the results were reported to the Chairman of the Board. No material changes were made to the Company’s structures as a result of the Board evaluation.
Principle 8: Committees
Under the present circumstances the Board does not consider it necessary to appoint a remuneration committee and a nomination committee as decisions on these matters are taken at shareholder level.
Internal Control
Organisation
The Company operates through the Board of directors with clear reporting lines and delegation of powers. The Board is responsible for the company’s internal controls as well as their effectiveness and the authority to operate such controls are delegated to the Managing Director.
Control environment
The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all its subsidiaries.
The Company has an appropriate organisational structure for planning, executing, and controlling and monitoring business operations to achieve objectives. Lines of responsibility and delegation of authority are documented.
The Group and the individual 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. Measures taken include physical control, segregation of duties and reviews by management and external auditors.
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 together of the engagement of independent external auditors, 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.
Risk identification and assessment
Group management and the Board of Directors are responsible 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.
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 in advance and meets 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 independent external auditors.
General Meetings and Shareholders’ Rights
Conduct of general meetings
It is only shareholders whose details are entered into the register of members on the record date that are entitled to participate in the general meeting and to exercise their voting rights. In terms of the Capital Market Rules, the record date falls 30 days immediately preceding the date set for the general meeting to which it relates. The establishment of a record date and the entitlement to attend and vote at general meeting does not, however, prevent trading in the shares after the said date.
In order for business to be transacted at a general meeting, a quorum must be present. In terms of the Articles of Association, 50% of the total voting rights constitutes a quorum. If within half an hour, a quorum is not present, if convened by or upon requisition of the shareholders, the meeting will be dissolved. In any other case, it shall be adjourned to such time and place as determined by the Chairman (not being less than 14 days nor more than 28 days). If at the adjourned meeting, a quorum is not present within thirty minutes, the members present (being not less than two persons) shall constitute quorum. The company is required to give not less than ten (10) clear days’ notice and the notice is required to specify that the Members present as aforesaid shall form a quorum. At any general meeting, a resolution put to a vote shall be determined and decided by a show of hands, unless a poll is demanded before or on the declaration of the result of a show of hands by;
|
(i) |
the Chairman of the meeting; or |
|
(ii) |
by at least three (3) members present in person or by proxy; or |
|
(iii) |
any member or members present in person or by proxy and representing not less than one tenth of the total voting power of all members having the right to vote at that meeting; or |
|
(iv) |
a member or members present in person or by proxy holding equity securities conferring a right to vote at the meeting, being equity securities on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the equity securities conferring that right. |
Unless a poll be so demanded, a declaration by the Chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution: PROVIDED that where a resolution requires a particular majority in value, the resolution shall not be deemed to have been carried on a show of hands by the required majority unless there be present at that meeting, whether in person or by proxy, a number of members holding in the aggregate the required majority as aforesaid. A demand for a poll may be withdrawn.
A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.
A poll demanded on any question shall be taken either immediately, at any time during the meeting, or at such subsequent time (not being more than thirty days after the date of the Meeting or adjourned Meeting at which the poll is demanded) and place as the Chairman may direct. No notice need be given of a poll not taken immediately. Any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll. The demand for a poll may be withdrawn. If a poll is duly demanded it shall be taken in such manner (including the use of ballot or voting papers or ticket) as the Chairman of the Meeting directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the Meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote.
Where a poll is taken at a general meeting of the Company and a request is made by a Shareholder for a full account of the poll, the Company is required to publish the following information on its website by not later than fifteen (15) days after the day of the general meeting at which the voting result was obtained:
|
a. |
the date of the meeting; |
|
b. |
the text of the resolution or, as the case may be, a description of the subject matter of the poll; |
|
c. |
the number of shares for which votes have been validly cast; |
|
d. |
the proportion of the Company’s issued share capital at close of business on the day before the meeting represented by those votes; |
|
e. |
the total number of votes validly cast; and |
|
f. |
the number of votes cast in favour of and against each resolution and, if counted, the number of abstentions. |
Where no Shareholder requests a full account of the voting at a general meeting, it shall be sufficient for the Company to establish the voting results only to the extent necessary to ensure that the required majority is reached for each resolution.
Where voting on a particular item or resolution is conducted by a show of hands rather than by a poll, it shall not be necessary in the case where a Shareholder requests a full account of the voting at a general meeting for the Company to publish the information required by the Capital Markets Rules and it shall be sufficient for the chairman of the meeting to publish a statement indicating:
|
a. |
the total number of Shareholders entitled to vote present at the meeting; |
|
b. |
that upon a show of hands at the meeting it appeared that the resolution had either been carried or rejected. |
Proxy
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a person other than a natural person, the hand of an officer or attorney duly authorised. The signature on such instrument need not be witnessed nor must a proxy be a Member of the Company. A Member may not appoint more than one proxy to attend on the same occasion unless such Member is holding shares for and on behalf of third parties in which case he shall be entitled to grant a proxy to each of his clients or to any third party designated by a client. Such Member shall be entitled to cast votes attaching to some of the Shares differently from the others. Proxy forms shall be designed by the Company to allow such split voting.
Deposit of an instrument of proxy shall not preclude a Member from attending and voting in person at the Meeting or any adjournment thereof.
An instrument appointing or revoking a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority shall either (i) be deposited at the Office or at such other place (if any) in Malta as is specified for that purpose in or by way of note to the notice convening the Meeting, or (ii) be transmitted electronically to an electronic address as is specified for that purpose in or by way of note to the notice convening the Meeting, in each case not less than forty-eight hours before the time for holding the Meeting or, if the Meeting be adjourned, not less than forty-eight hours (or such lesser period as the Chairman who adjourned the Meeting may in his discretion determine) before the time for holding the adjourned Meeting, at which the person named in the instrument proposes to vote, or, in the case of a poll taken otherwise than at or on the same day as the Meeting or adjourned Meeting, not less than twenty-four hours before the time appointed for the taking of the poll at which it is to be used, and in default the instrument of proxy shall not be treated as valid.
An instrument appointing a proxy shall, unless the contrary is stated thereon, be valid as well for any adjournment of the Meeting to which it relates. No instrument of proxy shall be valid after the expiration of twelve months from the date of its execution except at an adjourned Meeting or on a poll demanded at a Meeting or adjourned Meeting in cases where the Meeting was originally held within twelve months from that date.
The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or interdiction of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given, provided that no intimation in writing of such death, interdiction, revocation or transfer shall have been received by the Company at the Office or such other place (if any) as is specified for depositing the instrument of proxy an hour at least before the commencement of the Meeting or adjourned Meeting or the holding of a poll subsequently thereto at which such vote is given.
Any person which is not a natural person and is a Member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any Meeting of the Company or of any class of Members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the Member which he represents as that Member could exercise if it were an individual Member of the Company.
Including items on the agenda
A shareholder or shareholders holding not less than 5% of the issued share capital may include items on the agenda of the general meeting and table draft resolutions for items included on the agenda of a general meeting. Such right must be exercised by the shareholder at least 46 days before the date set for the general meeting to which it relates.
Questions
Shareholders have the right to ask questions which are pertinent and related to the items on the agenda. The Company may provide one overall answer to questions having the same content. An answer to a question is not required where:
|
a. |
to give an answer would interfere unduly with the preparation for the meeting, involve the disclosure of confidential information or cause prejudice to the business interests of the Company; |
|
b. |
the answer has already been given on the Company’s website in the form of an answer to a question; |
|
c. |
it is not in the interests of good order of the meeting that the question be answered; or |
|
d. |
the Company is unable to provide an immediate reply, provided that such reply is subsequently posted on the website of the Company. |
Electronic voting
In terms of the Articles of Association of the Company, a ll General Meetings of the Company may be held virtually in accordance with applicable law and, where applicable, the Capital Markets Rules. The means used for the virtual meeting and the procedure of how Members shall be entitled to attend and vote, and participate in the discussion shall be determined prior to every General Meeting and shall be communicated to all Members in the relevant notice convening such General Meeting.
Further details on the conduct of a general meeting and shareholders’ rights are contained in the Memorandum and Articles of Association of the Company and in line with chapter 12 of the Capital Market Rules.
Signed on behalf of the Board of Directors on the 29th April 2024 by:
_______________________________
David Aquilina
Director and Chairman of Audit Committee
In accordance with Capital Market Rule 12.26A, the Company is required to establish a ‘remuneration policy in respect of its directors’ and to grant the right to shareholders to vote on the remuneration policy at the Annual General Meeting (AGM). The Capital Market Rules also require the Company to draw up a remuneration report in accordance with the ‘remuneration policy in respect of its directors’ and with the criteria in Appendix 12.1 ‘Information to be provided in the Remuneration Report’ of the said Capital Market Rules.
Remuneration Policy - Directors
In the absence of a remuneration committee, the Board determines the framework of the remuneration policy for the members of the Board as a whole. The Board is composed of Executive and Non-Executive Directors.
As at the date hereof, the 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.
None of the service contracts contain provisions for termination payments and other payments linked to early termination.
The maximum annual aggregate emoluments that may be paid to the directors is approved by the shareholders in General Meeting. The Board may approve changes to the fees within the aggregate amount approved by Shareholders at the Annual General Meeting. The total fees paid to non-executive directors (in their role as director) is to be entirely represented by a fixed remuneration.
Directors’ emoluments are designed to reflect the directors’ knowledge of the business and time committed as directors to the Company’s affairs.
None of the Non-Executive Directors in their capacity as Non-Executive Directors of the Company shall be entitled to profit sharing, share options, pension benefits, variable remuneration or any other remuneration or related payments from the Company.
Remuneration Policy – Senior Executives
For the purposes of this policy, the senior executives of the Company shall refer to the Managing Director, the Chief Finance Officer (CFO) and the Head of Properties (HOP).
The Board shall determine the framework of the overall remuneration policy and individual remuneration arrangements for its senior executives. The Board considers that these remuneration packages, inclusive of a variable and non-variable payment, should be designed to reflect market conditions and to attract appropriate quality executives to ensure the efficient management of the Company. The Board acknowledges that the payment of a variable remuneration has become increasingly important in attracting and maintaining quality staff.
The terms and conditions of employment of each individual within the senior executive team are set out in their respective contracts of employment with the Company. The contracts of employment of the senior executive are made on an indefinite basis. The Managing Director is entitled to a 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. Such bonus scheme is driven by the crucial role of the Managing Director in the oversight of the day-to-day business, and the growth of the Company and its underlying business clusters.
In the case of the CFO and the HOP, additional performance criteria are considered in the entitlement to a bonus. Additionally, the senior executives are entitled to medical insurance cover, an expensed mobile phone and laptop. Moreover, share options are currently not part of the Company’s remuneration package available to employees of the Company.
During the year, the Directors received the following fees:
|
Director |
Fixed Remuneration |
Variable Remuneration |
Other |
||||
|
Pier Luca Demajo |
€40,000 |
None |
None |
||||
|
David Aquilina |
€18,245 |
None |
None |
||||
|
Laragh Cassar |
€12,173 |
None |
None |
||||
|
Eddy Vermeir |
€12,000 |
None |
None |
||||
|
*Peter Hili |
None |
None |
None |
||||
|
Georgios Kakouras (Managing Director)
|
€1,175 €150,000 |
None €204,761 |
None None |
||||
|
Total |
€233,593 |
€204,761 |
None |
*Peter Hili did not receive any remuneration in respect of their office of director of the Company.
2023 Senior Executives Remuneration
During the course of 2023, the total remuneration paid to the members of the executive management team was €193,888 (excluding the above referred salary paid to the Managing Director).
_________________________
Pier Luca Demajo
Chairman
29 th April 2024
Share capital structure
The Company’s authorised share capital is Eur120,000,000 divided into one 600,000,000 ordinary shares of Eur0.20 per share. The Company’s issued share capital is Eur80,178,540 divided into 400,892,700 ordinary shares of Eur0.20 per share. All of the issued shares of the Company form part of one class of ordinary shares in the Company, which shares are listed on the Malta Stock Exchange. All shares in the Company have the same rights and entitlements and rank pari passu between themselves.
The following are highlights of the rights attaching to the shares:
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Dividends: |
The shares carry the right to participate in any distribution of dividend declared by the Company; |
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Voting rights: |
Each share shall be entitled to one vote at meetings of shareholders; |
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|
Pre-emption rights: |
In accordance with Article 88 of the Act, should shares of the Company be proposed for allotment for consideration in cash, those shares must be offered on a pre-emptive basis to shareholders in proportion to the share capital held by them immediately prior to the new issue of shares. A copy of any offer of subscription on a pre-emptive basis indicating the period within which this right must be exercised must be delivered to the Registrar of Companies for registration. Provided that such registration shall not be required as long as all the Shareholders of the Company are informed in writing of the offer of subscription on a pre-emptive basis and of the period within which this right shall be exercised. The right of pre-emption may be withdrawn by an extraordinary resolution of the general meeting, in which case, the directors will be required to present to that general meeting a written report indicating the reasons for restriction/withdrawal of the said right and justifying the issue price; |
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Capital distributions: |
The shares carry the right for the holders thereof to participate in any distribution of capital made whether on a winding up or otherwise; |
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Transferability: |
The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange, applicable from time to time; |
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Other: |
The shares are not redeemable and not convertible into any other form of security; |
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Mandatory takeover bids: |
Chapter 11 of the Capital Market Rules, implementing the relevant Squeeze-Out and Sell-Out Rules provisions of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004, regulates the acquisition by a person or persons acting in concert of the control of a company and provides specific rules on takeover bids, squeeze-out rules and sell-out rules. The shareholders of the Company may be protected by the said Capital Market Rules in the event that the Company is subject to a Takeover Bid (as defined therein). The Capital Market Rules may be viewed on the official website of the Malta Financial Services Authority - www.mfsa.com.mt ; |
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Holdings in excess of 5% of the share capital |
On the basis of the information available to the Company as at the 31 December 2023, the following persons hold 5% or more of its issued share capital:
As far as the Company is aware, no other person holds any direct or indirect shareholding in excess of 5% of its total issued share capital. |
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Appointment/Replacement of Directors |
In terms of the memorandum and articles of association of the Company, the directors of the Company shall be appointed by the shareholders in the annual general meeting as follows: (a) Shareholders are granted a period of at least fourteen (14) days to nominate candidates for appointment as Directors. Such notice may be given by the publication of an advertisement in at least two (2) daily newspapers. All such nominations, including the candidate’s acceptance to be nominated as director, shall on pain of disqualification be made on the form to be prescribed by the Directors from time to time. (b) In the event that there are either less nominations than there are vacancies on the board or if there are as many nominations made as there are vacancies on the Board, then each person so nominated shall be automatically appointed a director. (c) The chairman of the Company is appointed by the single largest shareholder (provided such member holds not less than 50% of the issued share capital having voting rights in the Company) (d) Any member holding separately not less than 15% of the total voting rights of the Company shall be entitled to appoint a director for each 15% of the voting rights held by such shareholder; Where the chairman has been appointed by such member, 15% of the member’s voting rights shall be deducted and the balance can be utilised by the member for the purposes of appointing directors on the board; (e) Any remaining vacancies on the board (after the appointment of the directors set out above) shall be elected a general meeting. Voting shall take place on the basis that one share entitles the holder to vote for only one candidate for election. The Chairman of the Company shall declare elected those candidates who obtained the highest number of votes. (f) Subject to the above, any vacancy among the directors may be filled by the co-option of another person to fill such vacancy at an extraordinary general meeting and the same procedure for the appointment of directors shall apply. Additionally, if the director causing the causal vacancy was appointed pursuant to para (d) above, the vacancy shall be filled in the same manner (provided the shareholder still holds the required number of voting rights). (g) A casual vacancy may also be filled by the board of directors and the said director will hold office under the next annual general meeting and will be eligible for re-election. (h) Any director may be removed, at any time, by the Member or Members by whom he was appointed. The removal may be made in the same manner as the appointment. (i) Any director may be removed at any time by the Company in general meeting pursuant to the provisions of section 140 of the Act provided that if the director so removed was appointed pursuant to para (d) above, the process set out in para (f) shall apply. |
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Amendment to the Memorandum and Articles of Association |
In terms of the Companies Act, Cap 386 of the laws of Malta, the Company may by extraordinary resolution at a general meeting alter or add to its memorandum or articles of association. An extraordinary resolution is one where: (a) it has been taken at a general meeting of which notice specifying the intention to propose the text of the resolution as an extraordinary resolution and the principle purpose thereof has been duly given; (b) it has been passed by a shareholder or shareholders having the right to attend and vote at the meeting holding in the aggregate not less than seventy-five per cent (75%) in nominal value of the shares issued by the Company represented and entitled to vote at the meeting and at least fifty-one per cent (51%) in nominal value of all the shares issued by the Company and entitled to vote at the meeting. If one of the aforesaid majorities is obtained but not both, another meeting shall be duly convened within 30 days to take a fresh vote on the proposed resolution. At the second meeting the resolution may be passed by a shareholder or shareholders having the right to attend and vote at the meeting holding in the aggregate not less than 75% in nominal value of the shares issued by the Company represented and entitled to vote at the meeting. However, if more than half in nominal value of all the shares issued by the Company having the right to vote at the meeting is represented at that meeting, a simple majority in nominal value of such shares so represented shall suffice. |
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Board Members’ Powers |
The Directors are vested with the management of the Company, and their powers of management and administration emanate directly from the memorandum and articles of association and the law. The Directors are empowered to act on behalf of the Company and in this respect have the authority to enter into contracts, sue and be sued in representation of the Company. In terms of the memorandum and articles of association they may do all such things that are not by the memorandum and articles of association reserved for the Company in general meeting. In particular, the Directors are authorised to issue shares in the Company with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Directors may from time to time determine, as long as such issue of Equity Securities falls within the authorised share capital of the Company. Any increase in the issued share capital of the Company shall be decided upon an Ordinary Resolution of the Company. This notwithstanding, the board of directors is authorised to issue shares up to the authorised capital of the Company, subject to the aforementioned pre-emption rights where shares are to be allotted for consideration in cash. |
Save as otherwise disclosed herein, the provisions of Capital Market Rules 5.64.2, 5.64.4 to 5.64.7 and 5.64.11 are not applicable to the Company. There are no disclosures to be made in terms of Capital Market Rule 5.64.10.
Pursuant to Capital Market Rule 5.70.1
Pursuant to an agreement entered into on the 1 January 2014, the Company entered into a management consultancy agreement with Hili Ventures Limited, the major shareholder in the Company. Pursuant to this agreement, Hili Ventures Limited provides consultancy, legal, GDPR, marketing and PR, administrative, IT, HR and other services to the Company. Peter Hili, is a director of the Company and is an indirect shareholder of Hili Ventures Limited. During the year ended 31 December 2023, Hili Ventures Limited received Eur700,000 in fees as compensation for services rendered.
Pursuant to Capital Market Rule 5.70.2
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Company Secretary: |
Mr Adrian Mercieca |
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Registered Office of Company: |
Nineteen Twenty Three Valletta Road Marsa MRS 3000 Malta |
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Registration No of Company: |
C 57954 |
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Telephone: |
(+356) 2568 1200 |
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Email Address : |
info@hiliproperties.com |
Approved by the board of directors and signed on its behalf on 29 th April 2024 by Pier Luca Demajo (Chairman) and Georgios Kakouras (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
To the best of the knowledge of the directors:
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(i) |
the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Issuer and the undertakings included in the consolidation taken as a whole; and |
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(ii) |
the Directors’ report includes a fair review of the performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. |
Signed on its behalf on 29 th April 2024 by Pier Luca Demajo (Chairman) and Georgios Kakouras (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
The financial statements were approved and authorised for issue by the Board of Directors on 29 th April 2024 . The financial statements were signed on behalf of the Board of Directors by Pier Luca Demajo (Chairman) and Georgios Kakouras (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
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Independent auditor’s report
To the shareholders of Hili Properties p.l.c.
Report on the audit of the financial statements Opinion We have audited the financial statements of Hili Properties p.l.c. (the “Company”) and of the Group of which it is the parent, which comprise the statements of financial position as at 31 December 2023, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of material accounting policies and other explanatory information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 December 2023, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU), and have been properly prepared in accordance with the requirements of the Companies Act, Cap. 386 (the “Act”).
Our opinion is consistent with our additional report to the audit committee.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In conducting our audit, we have remained independent of the Company and the Group and have not provided any of the non-audit services prohibited by article 18A of the Accountancy Profession Act, Cap. 281. The non-audit services that we have provided to the Company and the Group during the year ended 31 December 2023 are disclosed in note 12 to the financial statements.
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Fair value of investment properties and properties held for sale Key audit matter The carrying amounts of the Group’s and the Company’s investment properties carried at fair value as at 31 December 2023 amount to € 228.8 million and € 2.5 million respectively, and the carrying amount of the Group’s and the Company’s properties held for sale also carried at fair value at the end of the reporting period amount to €10.7 million and € 3.7 million, respectively. Management determined the fair values through internal assessment made by the directors by reference to external independent valuations made during the period or other information.
The fair value of investment properties and properties held for sale were significant in our audit because the amounts are material to the consolidated financial statements of the Group and financial statements of the Company and that the processes of determining the fair values involve significant judgement and estimates.
The method and assumptions used in determining the fair value of investment properties is fully described in notes 3 and 19 of the financial statements.
How the key audit matter was addressed in our audit Our valuation specialists evaluated the suitability and appropriateness of the valuation methodology applied by management and reviewed and challenged the methodology applied and the underlying assumptions. We tested the integrity of inputs of the projected cash flows used in the valuation by examining supporting lease agreements and other relevant documents. We challenged the discount rate used in the valuation by comparing with industry data, taking into consideration comparability and market factors. We also assessed the competency and objectivity of the independent valuation experts appointed by the directors. We also communicated with management and those charged with governance and noted that they were able to provide satisfactory responses to our questions.
On the basis of our work, we determined that management’s assessment on the fair values of investment properties and properties held for sale are reasonable.
Other information The directors are responsible for the other information. The other information comprises (i) the Chairman’s Statement, (ii) the CEO Statement, (iii) the Directors’ report, (iv) the Statement of directors’ responsibilities, (v) the Corporate Governance Statement, (vi) the Remuneration Policies, (vii) the Disclosure in terms of the Capital Market Rules, and (viii) the Statement of Directors pursuant to Capital Market Rule 5.68 which we obtained prior to the date of this auditor’s report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information, including the Directors’ report.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
With respect to the Directors’ report, we also considered whether the Directors’ report includes the disclosures required by Article 177 of the Act, and in the case of the Remuneration report included in the Remuneration Policies, whether this has been prepared in accordance with Chapter 12 of the Capital Market Rules issued by the Malta Financial Services Authority (the “Capital Market Rules”).
Based on the work we have performed, in our opinion:
In addition, in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report and other information that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard.
Responsibilities of those charged with governance for the financial statements The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS as adopted by the EU and are properly prepared in accordance with the provisions of the Act, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with the ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication.
Reports on other legal and regulatory requirements Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6
We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Report and Consolidated Financial Statements of Hili properties p.l.c. for the year ended 31 December 2023, entirely prepared in a single electronic reporting format.
Responsibilities of the directors The directors are responsible for the preparation of the Report and Consolidated Financial Statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.
Our responsibilities Our responsibility is to obtain reasonable assurance about whether the Report and Consolidated Financial Statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.
Our procedures included:
Opinion In our opinion, the Report and Consolidated Financial Statements for the year ended 31 December 2023 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
Report on the Statement of Compliance with the Principles of Good Corporate Governance
The Capital Market Rules require the directors to prepare and include in their Annual Report a Statement of Compliance providing an explanation of the extent to which they have adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure compliance throughout the accounting period with those Principles.
The Capital Market Rules also require us, as the auditor of the Company, to include a report on the Statement of Compliance prepared by the directors.
We read the Corporate Governance Statement and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements included in the Annual Report. Our responsibilities do not extend to considering whether this statement is consistent with any other information included in the Annual Report.
We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Corporate Governance Statement cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.
In our opinion, the Corporate Governance Statement has been properly prepared in accordance with the requirements of the Capital Market Rules.
Other matters on which we are required to report by exception We also have responsibilities
We have nothing to report to you in respect of these responsibilities. We have nothing to report to you in respect of these responsibilities.
Auditor tenure
We were first appointed as auditors of the Company and the Group on 9 October 2018. Our appointment has been renewed annually by a shareholders’ resolution representing a total period of uninterrupted engagement appointment of six years.
The engagement partner on the audit resulting in this independent auditor’s report is Mark Bugeja.
GRANT THORNTON Fort Business Centre Triq L-Intornjatur, Zone 1 Central Business District Birkirkara CBD 1050a Malta
Mark Bugeja Partner
29 April 2024 |
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