Chairman’s
message
In the financial year
under review, Harvest Technology p.l.c. saw a continuation of the
transition plan that was presented in 2022 in which management
continued to develop the businesses despite the various challenges
on all fronts. The technology businesses we operate were also
impacted by adverse macro-economic headwinds and also delays in the
timing of key contracts which were subsequently awarded in 2024. On
a positive note, during the year, we reached a
significant milestone following the launch of Apcopay’s
payment orchestration platform, Synthesis, which was a key focus
and investment for several years.
On a consolidated basis, Harvest
reported a drop in turnover of 10% when compared to 2022, however
the gross profit achieved was similar to the previous year at
€ 6.2 million. The profit before tax for the year ended 31
December 2023 amounted to €0.8 million (2022: €2.1
million) after accounting for a provision of €0.5 million in
respect of a project that Apco Limited was not successful in
completing due to a failure to deliver by its
subcontractor.
I am pleased to report
that the Board of Directors and its various sub-committees
continued to function properly and provided the appropriate level
of challenge and support to the senior management of each of the
subsidiaries. During the year, the board embarked on a
restructuring plan to focus more management resources and
responsibilities at the subsidiary level. These changes were
necessary to expand the range and quality of our services, but also
to ensure successful completion of new projects and business
development. This approach enabled the board of Harvest to get
closer to the operations of the subsidiaries as they continued to
develop new growth initiatives. I would also take the opportunity
to thank Mr. Chris Fenech, who served as CFO between 2019 and 2024
and welcome Mr. Rudolph Mifsud Saydon to the role.
In 2022, the Group
embarked on key projects to drive future sustainable growth and
this continued throughout 2023. One of the key milestones in 2023
was the completion of the payment orchestration platform, Synthesis
at Apcopay. The new cloud-enabled platform was launched in
September 2023 and offers significant additional features for our
global customers. During the year, Apcopay reached another
milestone as it processed over €1 billion in payments, an
increase of 51% versus 2022. We are pleased that this strong growth
momentum has continued to develop in the first quarter of 2024. I
would like to take the opportunity to thank the team at Apcopay who
worked tirelessly to develop the new Synthesis platform.
Apco Limited saw another
year of transition as it evolves and broadens its product offering.
In 2023, Apco Limited entered into a new collaboration with
Cashmatic, a leader in self-pay and automated cash machines and has
started to successfully role out these machines across retail and
hospitality customers. Apco Limited is currently in discussions
with several other international companies to develop new
partnerships.
PTL continued to focus on
expanding the service offering both locally and internationally.
During 2023, the management team developed new relationships with
prospective partners, in various countries, where PTL’s
expertise in Health, Border Security and Financial Services is
attracting interest from various stakeholders. In 2023, PTL
continued to grow new verticals, particularly its ERP offering and
also launched a new cybersecurity product for both domestic and
international clients.
In conclusion, 2023 was
another year of considerable change and we expect further changes
in 2024 as we continue to position the businesses to develop new
growth opportunities in an ever-changing technology landscape. Our
key goal is to create sustainable value for our shareholders,
evaluate strategic investments and partnerships that will
strengthen the position of each subsidiary and monetise asset
divestments.
I would like to thank the
Board of Directors for their continuous contribution and support
during the year under review.
Mr Keith Busuttil
Chairman
18 April 2024
Chief Financial Officer’s
overview
It is a pleasure to
present the annual report of Harvest Technology and its
subsidiaries. Although I joined the Harvest Technology team earlier
this year, I had served as Chief Financial Officer and subsequently
as Chief Executive Officer between 2016 and 2018. I was appointed
to the office of Chief Financial Officer of 1923 Investments plc,
in June 2018, a role that I continue to serve.
Harvest Technology
achieved a consolidated turnover of € 14.6 million which is
€ 1.7 million lower than the 2022 level which amounted to
€ 16.3 million. However, gross profit amounted to € 6.2
million in 2023 which is in line with that achieved in the previous
year which reached € 6.3 million. Profit before tax amounted
to €0.8 million compared to €2.1 million in 2022. During
the year, the board deemed appropriate to take a
provision of € 0.5 million on the undelivered project
, adjusting for this provision, the Company would
have achieved a profit before tax of € 1.3 million which is in
line with the target profit before tax of € 1.4 million that
was communicated to the market on 27 th June 2023. It is
also worth noting that during the year, the Company was expecting
to deliver a key contract but this was awarded in
2024.
Liquidity
Despite a business
environment characterised by inflation, interest rate challenges
and geo-political concerns, Harvest Technology and its subsidiaries
maintained a healthy cashflow through-out the year. Closing cash
and cash equivalents at end of year amounted to €2.6 million
which is at the same level of the previous year. During the year,
management invested excess cash in short term Government treasury
bills as part of its treasury management initiatives. The
Group’s current ratio at end of 2023 amounted to 1.68, an
improvement over the prior year which stood at 1.60.
Apcopay
Limited
At Apcopay, revenue
reached €3.9 million which represents a 4% increase over prior
year. Apcopay is currently powering 3,800 e-commerce websites, and
over 84% of revenues in 2023 relate to services provided to
customers with international operations. During 2023, Apcopay
processed over €1 billion in payments, which represents a 51%
increase versus 2022. The increase in volumes processed was driven
by increased processing both from existing customers and also from
new customers that were on-boarded during the year. Over the past
year, the management team continued to diversify its customer base
by focusing on the airline, hospitality and transportation
verticals.
As noted above, in 2022
Apcopay started to develop a more powerful technology orchestration
platform. Over the last 18 months, significant investment was
undertaken to build a cloud-based platform which was launched in
September 2023. At Apcopay, we see a strong upside potential given
high customer retention rates and its ability to provide services
internationally. The new platform is leveraged to process more than
100 currencies across various markets and jurisdictions. In 2023,
the investment in the new platform amounted to € 0.7 million.
Apcopay reported a profit before tax of €1.1 million in 2023
compared to €1.6 million in 2022.
Apco
Limited
Revenue in 2023 reached
€1.8 million compared to €2.3 million in 2022. Apco
Limited’s business model is the sale of hardware and in the
provision of maintenance and support services to the IT
infrastructure market. During the last couple of years, Apco
Limited has continued to develop its relationship with new partners
to diversify and increase its product portfolio in the automation
and physical security solutions sectors. During 2023, Apco Limited
deployed cash management machines and self-checkout kiosks in a
number of outlets.
During 2022, Apco Limited
was awarded a contract through a tender process. A
subcontractor that was selected by the Company at
tender stage for the implementation of the complete solution,
failed to deliver the final user acceptance testing requirements
set out in the tender. The Company is now seeking to recover all
dues in relation to this project through appropriate legal
channels. The board of Directors took a prudent approach and has
provided for the estimated exposure amounting to € 0.5
million.
PTL
Limited
During 2023, PTL
generated revenue amounting to €8.9 million compared to
€10.2 million in 2022. In the first quarter of 2024, PTL
secured multiple banking hardware projects which were expected in
2023 and will be delivered during 2024.
PTL successfully
continued to meet its contractual obligations related to the IT
services project at the Ministry of Finance, Economic Planning and
Development in Mauritius. During the year, PTL also generated
additional revenue from products and services from IT
infrastructure projects secured with public sector and banking
clients, as well as new projects initiated within the private
sector in Malta.
As a result of lower
revenue generated, profit before tax amounted to € 0.6 million
compared to €1.0 million in 2022. In 2024, PTL aims to further
expand its key industry verticals solution offerings by further
developing its existing IP which is currently offered in the public
and private sector. In 2024, PTL will further strengthen its
dedicated teams to scale both the operations and business
development of its proprietary software. PTL is currently
evaluating several tenders and it expects the outcome of these
tenders in the current year.
I would like to thank our
customers, shareholders, banks, business partners and key advisors
for their continued support in Harvest Technology and its
subsidiaries.
Mr Rudolph Mifsud
Saydon
Chief Financial
Officer
18 April 2024
Directors’ report
The Directors present
their report together with the audited financial statements of
Harvest Technology p.l.c. and the consolidated financial statements
of the Group of which it is the parent, for the year ended 31
December 2023.
Principal
activities
The principal activity of
the Company is that of acting as a holding company.
The Group is mainly
involved in the sale, maintenance and servicing of information
technology solutions, security systems, and to provide electronic
payments solutions.
Performance
review
During the year under
review, the Group generated revenue of €
14,646,656 (2022: € 16,275,659) which led to gross
profit of €6,192,237 (2022: € 6,278,601). After
accounting for the provision of €534,473 for the undelivered
project, operating profit amounted to € 837,947 (2022: €
2,089,978). After accounting for net finance costs and taxation,
the Group registered a profit for the year of € 588,804 (2022: € 1,341,370).
The Group’s net
assets at the end of 2023 amounted to € 14,075,526 (2022:
€ 13,600,797).
The Company earned
management fees and investment income of € 472,017 and €
1,768,966 respectively (2022: € 467,820 and € 1,999,691
respectively). After accounting for finance income, finance costs
and administrative expenditure, the Company registered a profit
after tax of € 783,989 (2022: € 893,616). The net assets
of the Company at the end of 2023 amounted to € 13,417,499
(2022: € 12,747,416).
The Group measures the
achievement of its objectives using the following other key
performance indicators.
Financial
The Group’s current
ratio (“current assets divided by current liabilities”)
currently stands at 1.68:1 (2022: 1.60:1).
The Group measures its
performance based on EBITDA. EBITDA is defined as the Group profit
before depreciation, amortisation, net finance expense and
taxation. During the year under review, EBITDA amounted to €
1,691,718 (2022: € 2,883,178) after accounting for the
provision of € 534,473 mentioned above.
The Group aims to deliver
a return on average capital employed above the level of its cost of
funding. The return on average capital employed represents the
profit on ordinary activities before finance costs and exceptional
items, divided by the average of opening and closing tangible net
worth. The Company ensures that this capital is used as effectively
as possible. The return on capital employed amounted to 10% (before
the provision mentioned above) (2022: 15%).
Non-financial
The Directors note that
the transaction value in Euros processed by the payment gateway,
which remained the most important segment to the Group’s
result, increased by 51% from € 783 million in 2022 to over
€ 1 billion in 2023.
Principal risks and
uncertainties
The successful management
of risk is essential to enable the Group to achieve its objectives.
The ultimate responsibility for risk management rests with the
Company’s Directors, who evaluate the Group’s risk
appetite and formulate policies for identifying and managing such
risks. The principal risks and uncertainties facing the Group are
included below:
Market and
competition
The Group operates in a
highly competitive environment and faces competition from various
other entities. Technological developments also can create new
forms of quickly evolving competition. An effective, coherent and
consistent strategy to respond to competitors and changing markets
has enabled the Group to sustain its market share and its
profitability. The Group continues to focus on service quality and
performance in managing this risk. Related to this is the growing
pressure on commissions that Apcopay Limited generates through its
partnerships with various banks.
Talent and
skills
Failure to engage and
develop the Group’s existing employees or to attract and
retain talented employees could hamper the Group’s ability to
deliver in the future. Regular reviews are undertaken of the
Group’s resource requirements.
Economic and market
environment
A significant economic
decline in any of the markets that the Group operates in, could
impact the Group’s ability to continue to attract and retain
customers. Demand for the Group’s products and services can
be adversely affected by weakness in the wider economy which are
beyond the Group’s control. This risk is evaluated as part of
the Group’s annual strategy process covering the key areas of
investment and development and updated regularly throughout the
year. The Group continues to make investment in innovation. The
Group regularly reviews its pricing structures to ensure that its
products and services are appropriately placed within the markets
in which it operates.
Brand and reputation
risk
Damage to the
Group’s reputation could ultimately impede the Group’s
ability to execute its corporate strategy. To mitigate this risk,
the Group strives continually to build its reputation through a
commitment to sustainability, transparency, effective communication
and best practices. The Group works to develop and maintain its
brand value.
Technology and
business interruption
The Group relies on
information technology in all aspects of its business. In addition,
the services that the Group offers to its customers are reliant on
complex technical infrastructure. A failure in the operation of the
Group’s key systems or infrastructure could cause a failure
of service to its customers, thus negatively impacting its brand,
and increased costs. The Group invests in technology infrastructure
to enable it to continue to support the growth of its business and
has a robust selection and monitoring process of third-party
providers. The Group also organises regular business continuity
exercises to ensure ongoing readiness of key systems and
sites.
Customer
service
The Group’s
revenues are at risk if it does not continue to provide the level
of service expected by its customers. The Group’s commitment
to customers is embedded in its values. The relevant employees
undertake appropriate training programmes to ensure that they are
aware of, and abide by, the levels of service that are required by
the Group’s customers.
Financial instruments
risks
Note 38 to the financial
statements provides details in connection with the Company’s
financial risk management objectives and policies and the financial
risks to which it is exposed.
Non-financial statement
matters
Environmental
matters
The Group is committed to
environmental responsibility and feels that it is its duty to
operate as part of the local community in order to keep the
environment in which it operates tidy. Subsidiaries within the
Group are enrolled in local programmes for waste collection,
separation and recycling of waste.
Employee
matters
The Group provides
opportunities to individuals with diverse backgrounds and
experiences, to work in its environment and provide the necessary
training programs to its staff members to ensure high levels of
engagement which is essential to its continuing business success,
whilst making sure that it provides career progression mechanisms
and rewarding achievements. All this is provided in an environment
which fosters diversity and equal opportunities for everyone,
respecting the unique attributes and perspectives of every
employee.
The Group provides equal
treatment and equal employment opportunity without regard to race,
colour, religion, sex, age, national origin, disability, sexual
orientation, gender identity or any other basis protected by law.
In addition, it is committed to providing a safe and healthy
working environment for its employees. For everyone’s safety,
employees must immediately report accidents and unsafe practices or
conditions to their immediate supervisors.
Social
matters
The Group engages with
its social partners and the community in general to give back
through community involvement and the protection of the environment
through the creation and realisation of advanced technology
systems. The Group’s history has shown a proven contribution
towards society by enhancing the quality of life of its customers
and the general public alike.
Obligations
The Group conducts its
activities by taking positive actions respect human rights, as
defined in the code of business conduct, which applies to all
employees of the Group. All Group employees are trained annually on
the standard of business conduct.
The Group makes sure that
it respects all its obligations regarding fraud, bribery and
corruption. The Group prohibits all forms of bribery and corruption
in accordance with the Group Code of Conduct and Whistle-blower
Policy to ensure that all employees are deterred from any corrupt
practices or bribery as well as are incentivized to report any such
activities in a direct line with the responsible Group supervisor,
without fearing reprisals.
Accordingly, all
employees, representatives and business partners must fully comply
with anti-bribery legislation.
Meanwhile, the Group is
committed to complying with the applicable laws in all countries
where it does business. It adopts an anti-corruption policy which
sets forth its commitment to ensuring that it carries out business
in an ethical manner.
Business
model
The Group
is technology focused and currently
consists of three key subsidiaries: (i) PTL Limited is a
multi-brand information technology solutions provider for
businesses and the public sector; (ii) Apcopay Limited operates a
payments solutions platform offering e-commerce processing services
for retailers and internet-based merchants; (iii) Apco Limited
provides a wide range of automation and security solutions catering
to the banking, retail and other sectors.
Significant judgements
and estimates
Note 4 to the financial
statements provides details in connection with the inherent
uncertainties that surround the preparation of the financial
statements which require significant estimates and
judgements.
Results and
dividends
The results for the year
ended 31 December 2023 are shown in the statements of profit or
loss and other comprehensive income. The Group’s profit for
the year after taxation was € 588,804 (2022: €
1,341,370), whilst the Company’s profit for the
year after taxation was € 783,989 (2022: €
893,616).
A dividend of €113,906
(equivalent to €0.005 per share) was paid by the Company on 5
May 2023 on account of financial year ended 31 December 2022.
During the course of 2023, no interim dividend was declared by the
Company. On 18 April 2024, the Board of Directors resolved to
distribute a final dividend for the financial year ended 31
December 2023 amounting to € 113,906 (equivalent
to €0.005 per share).
Likely future business
developments
The Directors consider
that the year-end financial position was satisfactory and that the
Group is well placed to sustain the present level of activity in
the foreseeable future.
Hardware
business
On 7 February 2024, two
subsidiaries entered into an intragroup agreement for
the transfer of certain hardware business including the associated
maintenance and ancillary services. The transaction is expected to
be completed in the second quarter of
2024.
Post balance sheet
events
There were no adjusting
or significant non-adjusting events that have occurred between the
end of the reporting period and the date of authorisation by the
board.
Directors
The following have served
as Directors of the Company during the period under
review:
The Directors are
eligible for re-appointment in the manner specified in the
corporate governance statement.
Remuneration
statement
In terms of Rule 8A.4 of
the Code, the Company is to include a remuneration statement in its
annual report which shall include details of the remuneration
policy of the Company in respect of the financial packages of
members of the Board of Directors and, to the extent applicable,
the Chief Executive Officer ( “CEO” ) of the
Company.
The
Company’s remuneration of its Directors and CEO
(as applicable) is based on the remuneration policy adopted and
approved by the shareholders of the Company at the annual general
meeting held on 30 July 2020 (the “Remuneration
Policy” ) which is subject to a vote by the general
meeting at the forthcoming annual general meeting to be held in
2024 as per Capital Markets Rules requirements. The Remuneration
Policy of the Company is available for inspection on the
Company’s website on https://harvest.tech/wp-content/uploads/2020/07/Harvest-Renumeration-Policy.pdf
Remuneration Policy
The Remuneration Policy
of the Company is intended to provide an over-arching framework
that establishes
the principles and parameters to be applied in determining the
remuneration to be paid to any member of the Board of Directors,
and the CEO, as applicable. The Remuneration Policy is also
intended to demonstrate how the remuneration that may be paid to
Directors and the CEO, as applicable, contributes to the
development and attainment of the Company’s corporate
strategy and its long-term success, development and sustainability,
and is aimed at attracting and retaining suitable candidates with
the appropriate skills, technical knowledge experience and
expertise.
Remuneration payable to Directors
Fixed
remuneration
The remuneration payable
to Directors shall be fixed and shall not include any variable
element based on performance indicators or the right to purchase
shares in the Company by virtue of share options, or any other
deferred compensation, or pension benefits.
In addition to fixed
remuneration in respect of their position as members of the Board
of Directors of the Company, individual Directors who are also
appointed to chair, or to sit as members of, one or more committees
or sub-committees of the Company, or who are appointed to serve as
Directors and, or Chair of the board of subsidiaries of the
Company, are entitled to receive additional remuneration as may be
determined by the Board of Directors from time to time. Any such
additional/ remuneration shall, however, form part of the aggregate
emoluments of the Directors as approved by the general meeting of
the Company. The basis upon which such additional remuneration is
paid shall take into account the skills, competencies and technical
knowledge that members of such committees require and the
respective functions, duties and responsibilities attaching to
membership of such committees.
Other
entitlements
The Company may also pay
out fringe benefits, comprising of medical and life insurance
(subject, however, to a commercially reasonable capping on the
premium payable), as well as mobile and internet connectivity data,
at the expense of the Company.
Director
service contracts
As at the date hereof,
the independent non-executive Directors are party to a Director
services contract with the Company, pursuant to which their
respective role, responsibilities, duties and the applicable
remuneration is set out.
The term of such service
contracts commences from the date of entry into the said contract
and continues in force thereafter until the next annual general
meeting of the Company at which the Directors shall be eligible for
re-election, or until such time as the Director resigns or until
such time as such Director is removed from office.
|
Mr. Keith
Busuttil
|
Non-executive
(Chairman)
|
|
Ms. Jacqueline
Camilleri
|
Independent non-executive
Director
|
|
Mr. Peter Hili
|
Non-executive
Director
|
|
Mr. Stephen
Paris
|
Independent non-executive
Director
|
|
Mr. Georgios T.
Kakouras
|
Non-executive Director
(resigned 27 June 2023)
|
|
Dr Yasmine
Aquilina
|
Non-executive Director
(appointed 27 June 2023)
|
|
|
|
None of the service
contracts contain provisions for termination payments and other
payments linked to early termination.
Remuneration payable to CEO
Fixed and
Variable Remuneration
During his tenure as CEO,
Mr Ekmark was entitled to a fixed-based salary together with a
variable discretionary performance bonus, based on a pre-defined
percentage of the audited consolidated net profit before taxation
of the Company.
The fixed remuneration
component payable to the CEO was, until the year under review,
reviewed annually by the Board of Directors to ensure that such
remuneration is commensurate with the roles, duties and
responsibilities of the CEO, as well as the individual skills,
knowledge, expertise, experience and performance thereof. In
establishing the remuneration payable to the CEO, the Board of
Directors was guided by the recommendations of the RemNom
Committee, including any recommendations intended to ensure that
remuneration payable would be in line with market standards and be
well suited to retain and motivate the CEO of the Company to
contribute to the long-term success and development of the Group.
The CEO resigned on 1 June 2023.
Other
entitlements
In addition to his fixed
and variable remuneration, the CEO was also entitled to a fully
expensed mobile phone and laptop, as well as other fringe benefits
comprising medical insurance and life insurance (subject to a
commercially reasonable capping on the premium payable).
CEO
Service Contract
The CEO’s contract
of service wa s of
an indefinite duration and is subject to the termination notice
periods prescribed by law.
Remuneration Report
In terms of Capital
Markets Rule 12.26K, the Company is also required to draw up an
annual remuneration report (the “Remuneration
Report” ), which report is to:
|
i.
|
provide an overview of
the remuneration, including benefits in whatever form, awarded or
due to members of the Board of Directors and the CEO during the
financial year under review; and
|
|
ii.
|
explain whether any
deviations have been made from the Remuneration Policy of the
Company.
|
In this respect, the
Company is hereby producing its fourth Remuneration Report since
the approval and entry into effectiveness, in July 2020 of the
Remuneration Policy described in the preceding sections.
Remuneration paid to Directors
The remuneration paid to
individual Directors during the year under review was as
follows:
|
|
Position
|
Remuneration
paid
|
|
|
|
|
|
|
|
|
|
Ms. Jacqueline
Camilleri
|
Independent Non-executive
Director
|
€ 20,000;
|
|
Mr. Stephen
Paris
|
Independent Non-executive
Director
|
€ 20,000;
|
|
Mr. Keith
Busuttil
|
Non-executive
Director
|
€ nil;
|
|
Mr. Georgios T.
Kakouras
|
Non-executive
Director*
|
€ nil;
|
|
Mr. Peter Hili
|
Non-executive
Director
|
€ nil
|
|
Dr. Yasmine
Aquilina
|
Non-executive
Director**
|
€ nil
|
* Resigned on 27 June
2023.
** Appointed on 27 June
2023.
The remuneration paid to
the independent non-executive Directors covers both their role as
Directors of the Company and their role as members or chairpersons
of sub-committees of the Company, as well as their position as
Directors of subsidiaries forming part of the Group.
The aggregate emoluments
that may be paid to Directors in any one financial year shall be as
determined by the Company in the general meeting in accordance with
Article 21.1 of the Articles of Association of the Company. In this
respect, the shareholders of the Company approved, as part of the
ordinary business at the last annual general meeting of the Company
held on 27 June 2023, that the aggregate remuneration that may be
paid to the Directors of the Company for the financial year ending
31 December 2023 was fixed at € 150,000.
The aggregate emoluments
of the Directors in respect of their role as Directors of the
Company and, where applicable, as members of sub-committees of the
Board of Directors of the Company and non-executive Directors of
subsidiaries forming part of the Group, amounted to
€40,000.
In view of the management
structure of the Group, and the fact that the main assets of the
Company are its investments in its operating subsidiaries (PTL
Limited, APCO Limited, Apcopay Limited and Ipsyon Limited), the
Board considers a fixed remuneration to Directors as an appropriate
and suitable remuneration package for the Board in the performance
of their duties. Furthermore, the Remuneration Committee is
satisfied that the fixed remuneration for the year under review is
in line with the core principles of the Remuneration Policy
applicable during the year under review, including giving due
regard to market conditions and remuneration rates offered by
comparable organisations for comparable roles.
Remuneration paid to CEO
Emoluments paid and
accrued to the person occupying the post of CEO, for the period
under review amounted to €83,580, as follows:
|
Peter Ekmark
|
CEO until 1 st
June 2023
|
€ 83,580
|
In addition to the emoluments paid
until 1 June 2023, the CEO was paid an additional €45,000 as
compensation upon termination.
The contents of the
remuneration report have been checked by the auditors of the
Company.
Decision-making with respect to the Remuneration
Policy
Whereas the Board of
Directors is responsible for determining the Remuneration Policy of
the Company, the RemNom Committee, acting in its function as the
Remuneration Committee, is, in turn, responsible for overseeing and
monitoring its implementation and ongoing review
thereof.
The Remuneration Policy
shall be reviewed regularly, and any material amendments thereto
shall be submitted to a vote by the annual general meeting of the
Company before adoption, and in any case at least every four (4)
years. As required in terms of the Capital Markets
Rule12.26I, the Remuneration Policy shall be submitted
to a vote by the general meeting of the company at the 2024
annual general meeting, being the fourth annual general meeting to
be held since the original approval and inception of the
Remuneration Policy.
In evaluating whether it
is necessary or beneficial to supplement or otherwise alter the
Remuneration Policy of the Company, the RemNom Committee shall have
regard to, inter alia , best industry and market practice on
remuneration, the remuneration policies adopted by companies
operating in the same industry sectors, as well as legal and, or
statutory rules, recommendations or guidelines on remuneration,
including but not limited to the Code of Principles of Good
Corporate Governance contained in Appendix 5.1 of the Capital
Markets Rules issued by the MFSA.
Members of the RemNom
Committee are not present while his/her remuneration as a Director
or other officer of the Company and, or of any other company
forming part of the Group, is being discussed at a meeting of such
Committee, and any decision taken by the Committee in this respect
shall be subject to the approval of the Board of Directors. At a
meeting of the Board of Directors, no Director may be present
while his/her remuneration as a Director or other officer of
the Company and, or of any other company forming part of the Group,
is being discussed.
Going concern
The Directors are
satisfied that, at the time of approving the financial statements,
it is appropriate to adopt the going concern basis in preparing the
financial statements.
Disclosure of
information to the auditor
At the date of making
this report the Directors confirm the following:
|
-
|
As far as each Director
is aware, there is no relevant information needed by the
independent auditor in connection with preparing the audit report
of which the independent auditor is unaware; and
|
|
-
|
Each Director has taken
all steps that they ought to have taken as a Director in order to
make themselves aware of any relevant information needed by the
independent auditor in connection with preparing the report and to
establish that the independent auditor is aware of that
information.
|
Statement of
Directors’ responsibilities
The Companies Act, Cap
386 requires the Directors to prepare financial statements for each
financial period which give a true and fair view of their state of
affairs of the Group and the Company as at the end of the reporting
period and of the profit or loss of their operations for that
period. In preparing those financial statements, the
Directors are required to:
|
-
|
adopt the going concern
basis unless it is inappropriate to presume that the Company will
continue in business;
|
|
-
|
select suitable
accounting policies and then apply them consistently;
|
|
-
|
make judgements and
estimates that are reasonable and prudent;
|
|
-
|
account for income and
charges relating to the accounting period on the accruals basis;
and
|
|
-
|
value separately the
components of asset and liability items.
|
The Directors are
responsible for keeping proper accounting records which disclose
with reasonable accuracy at any time the financial position of the
Company, and to enable them to ensure that the financial statements
have been properly prepared in accordance with the Companies Act,
Cap 386. This responsibility includes designing, implementing
and maintaining internal controls relevant to the preparation and
fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error. They are also
responsible for safeguarding the assets of the Group, and for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The financial statements
of the Company for the year ended 31 December 2023 are included in
the Annual Report 2023, which is published in hard-copy printed
form and is made available on the Company’s website.
The Directors are responsible for the maintenance and integrity of
the Annual Report on the website in view of their responsibility
for the controls over, and the security of, the website.
Access to information published on the Company’s website is
available in other countries and jurisdictions, where legislation
governing the preparation and dissemination of financial statements
may differ from requirements or practice in Malta.
Auditor
Grant Thornton have
intimated their willingness to continue in office.
A resolution to reappoint
Grant Thornton as auditor of the Company will be proposed at the
forthcoming annual general meeting.
Signed on behalf of the
Board of Directors on 18 April 2024 by Mr. Keith Busuttil (Chairman
and Director) and Mr. Stephen Paris (Director) as per the
Directors' Declaration on ESEF Annual Financial Report submitted in
conjunction with the Annual Financial Report.
Registered
address:
Nineteen
Twenty-Three
Valletta Road
Marsa MRS 3000
Malta
18 April 2024
Corporate Governance - Statement of Compliance
A.
Introduction
Pursuant to the Capital
Markets Rules issued by the Malta Financial Services Authority
(MFSA), Harvest Technology p.l.c. (the “ Company
”) should endeavour to adopt the Code of Principles of Good
Corporate Governance contained in Appendix 5.1 to Chapter 5 of the
Capital Markets Rules (the “ Code ”). As at the
date of this Report, the Board of Directors of the Company (the
“ Board ” or the “ Directors
”) considers the Company to be generally compliant with the
Code. In those instances where the Company’s organisation and
practices deviate from the Code, the Board is of the view that
there are cogent justifications for such divergences, taking into
account the size, complexity and nature of operations of the
Company, as explained in further detail in section B of this
Corporate Governance Statement.
The Company acknowledges
that the Code does not dictate or prescribe mandatory rules but
recommends principles of good practice. However, the Directors
strongly believe that such practices are generally in the best
interests of the Company and its shareholders and that compliance
with the Code is not only expected by investors but also evidences
the Directors’ and the Company’s commitment to a high
standard of good governance.
The Company’s
governance lies principally with its Board, which is responsible
for the overall determination of the Company’s policies and
business strategies. The Company has adopted a corporate
decision-making and supervisory structure that is tailored to suit
its requirements and designed to ensure the existence of adequate
controls and procedures within the Company, whilst retaining an
element of flexibility essential to allow the Company to react
promptly and efficiently to circumstances arising in respect of its
business, taking into account its size and the economic conditions
in which it operates. The Directors are of the view that it has
employed structures, which are most suitable and complementary for
the size, nature and operations of the Company. Accordingly, in
general, the Directors believe that the Company has adopted
appropriate and suitable structures to achieve an adequate level of
good corporate governance, together with an adequate system of
control in line with the Company’s requirements.
This Corporate Governance
Statement (the “ Statement ”) sets out the
organisational structures, internal controls, practices and
processes in place within the Company and explains how these
effectively achieve the provisions and principles set out in the
Code. For this purpose, the Statement will make reference to the
pertinent provisions and principles of the Code and set out the
manner in which the Directors believe these have been adhered to.
Where the Company has not complied with any of the principles of
the Code, this Statement provides an explanation for such
non-compliance. Reference in this Statement to compliance with the
principles of the Code means compliance with the Code’s main
principles and provisions.
The Board has carried out
a review of the Company’s compliance with the Code during the
period under review and is hereby reporting on the extent of its
adoption of the provisions and principles of the Code for the
financial year being reported, as required in terms of Capital
Markets Rule 5.97.
The Code is accessible
via the website of the MFSA on
https://www.mfsa.mt/wp-content/uploads/2023/01/Full-Capital-Markets-Rules-as-amended-on-23-January-2023.pdf.
B.
Compliance
Principle 1: The
Board
The Directors believe
that for the period under review, the Company has generally
complied with the requirements of this principle and the relative
Code provisions.
The Board is composed of
members who are fit and proper to direct and manage the business of
the Company with honesty, competence and integrity. All the members
of the Board are fully aware of, and conversant with, the statutory
and regulatory requirements connected to the business of the
Company and its status as a listed company and the Board is
cognisant of its accountability for its own performance and that of
its delegates.
The Board is primarily
responsible for determining the Company’s strategic direction
and organisational requirements, whilst ensuring that the Company
has the appropriate mix of financial, human and operational
resources to meet its objectives and improve its performance.
Throughout the period under review, the Board provided the
necessary leadership in the overall direction of the Company and
has adopted prudent and effective systems whereby it obtained
timely information from the Chief Financial Officer (the
“CFO” ) and, for as long as he was in office,
the Chief Executive Officer (the “CEO”
).
During his tenure, the
CEO, with the support of the CFO, acted as a channel of
communication between the rest of the senior management team, the
managing Directors of the Company’s operating subsidiaries,
and the Board of Directors of the Company, ensuring an effective
contribution to the decision-making process, whilst at the same
time exercising prudent and effective controls. The CFO leads the
finance function of the Company and plays a central role in the
preparation of the Company’s consolidated financial
statements, the appraisal of investment opportunities, as well as
the monitoring of the operational performance of the
Company’s business, cash flow and capital requirements. The
CFO is also generally responsible for ensuring that the Company
complies with its statutory financial and fiscal reporting
obligations.
The Board delegates
specific responsibilities to a number of committees, most notably
the Audit Committee (the “Audit Committee” ),
and the Remuneration and Nominations Committee (the
“RemNom Committee” ), each of which operate/d
under formal terms of reference approved by the Board. Further
detail in relation to the Committees and the responsibilities of
the Board is found in paragraph ‘ Principles 4 and 5
’ of this Statement.
Principle 2: Chairman
and Chief Executive Officer
During the period under
review, the roles of the Chairman and the CEO were occupied by
separate individuals. Mr. Keith Busuttil occupied the post of
Chairman; the post of CEO was occupied by Mr Peter Gunnarsson
Ekmark, until his resignation on 1 June 2023.
Mr. Keith Busuttil is not
an independent Director as recommended by the Code. The Board
considers that notwithstanding that the Chairman is not an
independent Director as recommended by the Code, the means for
addressing potential conflicts of interest are suitably addressed
in the Articles of Association of the Company and terms of
reference of the Audit Committee of the Company. Furthermore, the
Board considers its present Chairman to be fit and proper to occupy
the role, having the relevant and necessary experience and
expertise to fulfil the role.
The responsibilities and
roles of the Chairman and the CEO are clearly established and
agreed to by the Board of Directors, with the Chairman generally
responsible for leading the Board. During his tenure, the CEO was
generally responsible for the day-to-day management of
the Company. Since the former CEO’s resignation,
the role of ensuring effective checks and balances on the exercise
of the management and conduct of affairs of the Company is assumed
by the Board.
The separation of roles of Chairman
and CEO is also entrenched in the Articles of Association of the
Company, whereby in terms of Article 13.2 of the Articles of
Association, where a CEO is appointed to form part of the senior
management team of the Company, the CEO may not also simultaneously
form part of the Board of Directors.
The Chairman is
responsible for:
|
•
|
leading the Board and
setting its agenda;
|
|
•
|
ensuring that the Board
is in receipt of precise, timely and objective information to
enable the Board to take sound and commercially reasonable
decisions and effectively monitor the performance of the
Company;
|
|
•
|
encourages and supports
active engagement by all Directors for discussion of complex and
contentious issues and ensuring that all Directors are afforded
ample opportunity to contribute to the issues on the agenda and
present their views; and
|
|
•
|
ensuring effective
communication and relationship management with the Company’s
shareholders.
|
Principle 3:
Composition of the Board
In terms of Clause 5 of
the Memorandum of Association of the Company and Article 12.3 of
the Articles of Association of the Company, the board of Directors
shall consist of a minimum of five (5) and maximum of seven (7)
Directors, one of whom may include the CEO provided that said CEO
does not form part of the senior management of the Company in
accordance with Article 13.2 of the Articles of
Association.
The Articles of
Association of the Company distinguish between the process for the
appointment of executive Directors and non-executive
Directors.
Appointment of executive Directors
Non-executive Directors
of the Company are entitled to appoint executive Directors to the
Board of Directors of the Company from amongst the most senior
executive positions of the Company. An executive Director appointed
in such manner will have a term of office of three (3) years and
will thereafter be eligible for re-appointment and may not be
removed from office by the non-executive Directors: (i) unless his
office as a senior executive has also been terminated; or (ii) with
just cause being shown to the satisfaction of the Nominations
Committee.
As indicated hereunder,
none of the Directors of the Company are executive
Directors.
Appointment of non-executive Directors
Non-executive Directors
of the Company shall be appointed by the shareholders in the annual
general meeting of the Company. The Articles of Association of the
Company provide for two mechanisms by which non-executive Directors
may be nominated for appointment by the shareholders at the annual
general meeting, as follows: (i) any member or number of members
who in the aggregate hold not less than 10% of the total number of
equity securities having voting rights in the Company shall be
entitled to nominate a fit and proper person for appointment as a
Director of the Company; and (ii) in addition to the aforementioned
nominations, the Directors themselves, or the Nominations
Committee, may make recommendations and nominations for the
appointment of Directors at the next following annual general
meeting. In either case, no person will be entitled to take office
as a Director unless approved by the Nominations Committee, which
is empowered to reject any recommendation if in its considered
opinion, such appointment could be detrimental to the
Company’s interests or if such person is not considered fit
and proper to occupy that position.
Removal of
Directors
Any Director may be
removed at any time by the ordinary resolution of the shareholders
of the Company in accordance with the Companies Act (Cap. 386 of
the laws of Malta), or in accordance with any other applicable law,
or in the specific cases set out in the Articles of Association of
the Company. Once appointed to office in accordance with the
provisions of the Articles of Association of the Company, a
Director shall hold office for a minimum period of three (3) years
and a maximum period of five (5) years, unless he/she resigns or is
earlier removed or is due to retire by rotation in accordance with
the Articles of Association of the Company. A Director whose term
of office expires will be eligible for re-appointment.
The Board of Directors is
currently chaired by Mr. Keith Busuttil and comprises five (5)
non-executive Directors. As at the date of this Statement, the
Directors of the Company are:
|
Name
|
Capacity
|
Date of
appointment
|
|
Mr. Keith
Busuttil
|
Non-executive
(Chairperson)
|
30 July 2020
(Director);
28 February 2022
(Chairman)
|
|
Ms. Jacqueline
Camilleri
|
Independent non-executive
Director
|
3 September
2019
|
|
Mr. Stephen
Paris
|
Independent non-executive
Director
|
14 October
2019
|
|
Mr. Peter Hili
|
Non-executive
Director
|
14 March 2022
|
|
Dr. Yasmine Aquilina
|
Non-executive
Director
|
27 June 2023
|
Ms Jacqueline Camilleri
and Mr Peter Hili will be obliged to retire from office at the next
annual general meeting but will be eligible for re-appointment
thereat.
For the purpose of Code
provision 3.2, two of the Directors are considered by the Board to
be independent within the meaning of the Capital Markets Rules,
such independent Directors being Ms. Jacqueline Camilleri and Mr.
Stephen Paris. In making this determination in respect of the
former, the Board of Directors considered the following principal
determining factors: (i) with reference to her position as a member
of the Board of Directors of Hili Finance Company p.l.c. (C
85692), the Board noted
that Ms. Camilleri sits as an independent non-executive Director
and is, therefore, not involved in the day-to-day
operations; and (ii) none of the circumstances set out in Code
provision 3.2 that would be indicative of a Director’s
non-independence, are satisfied.
The Board of Directors
considers that notwithstanding that Mr. Keith Busuttil is the CEO
of 1923 Investments p.l.c., and Mr. Peter Hili is Director of Hili
Properties p.l.c. (C 57954), an associate company of 1923 Investments p.l.c., such
person is mindful of maintaining the necessary professionalism and
integrity to duly fulfil their roles and responsibilities as
non-executive Directors of the Company.
The Board of Directors
maintained the view that notwithstanding that while occupying the
role of non-executive Director of the Company Dr.
Yasmine Aquilina was employed by Hili Ventures
Limited (C 57902), the parent company of the majority and controlling shareholder
of the Company, there were cogent reasons to believe that the
independence of the said Director is not compromised by the
services rendered by the said Director under his contract of
employment, mindful of maintaining professionalism and integrity in
carrying out her duties, responsibilities and providing judgement
as a non-executive Director of the Company.
The non-executive
Directors contribute to the strategic development of the Company
and the creation of its long-term growth and are responsible
for:
|
•
|
constructively
challenging and developing strategy;
|
|
•
|
monitoring reporting of
performance;
|
|
•
|
scrutinising performance
of management; and
|
|
•
|
ensuring the integrity of
financial information, financial controls and risk management
systems.
|
Save as disclosed above,
none of the non-executive Directors of the Company:
|
(a)
|
are or have been employed
in any capacity by the Company
|
|
(b)
|
receive significant
additional remuneration from the Company
|
|
(c)
|
have close family ties
with any of the executive members of the Board;
|
|
(d)
|
have been within the last
three years an engagement partner or a member of the audit team of
the present or past external auditor of the Company; and
|
|
(e)
|
have a significant
business relationship with the Company.
|
In terms of Code
provision 3.4, each non-executive Director has declared in writing
to the Board that he/she undertakes:
|
•
|
to maintain in all
circumstances his/her independence of analysis, decision and
action;
|
|
•
|
not to seek or accept any
unreasonable advantages that could be considered as compromising
his/her
|
|
•
|
independence;
and
|
|
•
|
to clearly express
his/her opposition in the event that he/she finds that a decision
of the Board may harm the Company.
|
Each non-executive
Director has complied with such an undertaking for the period under
review.
Principles 4 and 5:
The Responsibilities of the Board and Board Meetings
The Board of Directors is
entrusted with the overall direction, administration and management
of the Company and meets on a regular basis to discuss and take
decisions on matters concerning the strategy, operational
performance and financial performance of the Company.
In fulfilling its
mandate, the Board assumes responsibility to:
|
a
|
establish appropriate
corporate governance standards
|
|
b
|
review, evaluate and
approve, on a regular basis, long-term plans for the
Company;
|
|
c
|
review, evaluate and
approve the Company’s budgets and forecasts;
|
|
d
|
review, evaluate and
approve major resource allocations and capital
investments;
|
|
e
|
review the financial and
operating results of the Company;
|
|
f
|
ensure appropriate
policies and procedures are in place to manage risks and internal
control;
|
|
g
|
review, evaluate and approve
the overall corporate organisation structure, the assignment of
management responsibilities and plans for senior management
development including succession;
|
|
h
|
review, evaluate and
approve compensation of senior management;
|
|
I
|
review periodically the
Company’s objectives and policies relating to social, health
and safety and environmental responsibilities; and
|
|
J
|
ensuring effective
communication with shareholders, stakeholders and the
market.
|
In fulfilling its
responsibilities, the Board continuously assesses and monitors the
Company’s present and future operations, opportunities,
threats, and risks in the external environment, and its current and
future strengths and weaknesses in its internal
environment.
The Board delegates
specific responsibilities to the Audit Committee and the RemNom
Committee.
The Board believes that
it complies fully with the requirements of Principle 5 and the
relative Code provisions, in that it has systems in place to ensure
reasonable notice of meetings of the Board and ensuring that the
Directors receive discussion papers in advance of meetings so as to
provide adequate time for Directors to adequately and suitably
prepare themselves and enable them to make an informed decision
during meetings of the Board.
The Directors are
assisted by the company secretary, who is consulted to ensure
compliance with statutory requirements and with continuing listing
obligations. The company secretary keeps detailed minutes of all
meetings of the Board and of its committees, which minutes are
subsequently circulated to the Board as soon as practicable after
the meeting.
The company secretary
also maintains detailed records of all dealings by Directors and
senior executives of the Company and its subsidiaries in the
Company’s shares, and assists the Board and senior management
in being duly informed of, and conversant with, their obligations
emanating from the Market Abuse Regulation (EU Regulation 596/2014)
(“ MAR ”) and ensuring compliance therewith, to
ensure the prevention and detection of insider dealing, unlawful
disclosure of inside information and, or market abuse. In
particular, cognisant of the material consequences of
non-compliance with MAR and the effects thereof on investor
confidence and market integrity, the Board has in place written
policies and procedures relating to the keeping of permanent and
temporary insiders lists, dealing in shares of the Company, and
procedures for persons in possession of inside
information.
In addition, the
Directors may, in the course of their duties, seek independent
professional advice on any aspect of their duties and
responsibilities or the business and activities of the Company, at
the Company’s expense.
During the period under
review, the Board met twenty-one (21) times. As a matter of policy,
the Board seeks to meet at least twice every quarter, and a policy
was established whereby early in the calendar year, meetings are
scheduled for the full year, to allow adequate planning and time
commitment, subject to the addition of ad hoc meetings as and when
considered necessary.
The following reports the
attendance at Board meetings of each of the Directors during the
period under
review:
|
Name
|
Capacity
|
Meetings attended while in
office
|
|
|
|
|
|
Mr. Keith
Busuttil
|
Non-executive
(Chairman)
|
[21] / [21]
|
|
Ms. Jacqueline
Camilleri
|
Independent non-executive
Director
|
[18] / [21]
|
|
Mr. Stephen
Paris
|
Independent non-executive
Director
|
[21] / [21]
|
|
Mr. Peter Hili
|
Non-executive
Director
|
[19] / [21]
|
|
Dr. Yasmine
Aquilina
|
Non-executive Director
(effective 27 June 2023)
|
[15] / [15]
|
|
Mr. Georgios T.
Kakouras
|
Non-executive Director
(until 27 June 2023)
|
[6] / [6]
|
Principle 6:
Information and Professional Development
On joining the Board,
Board members undergo a formal induction programme, whereby the
company secretary informs the incoming members of their statutory
Director duties and obligations, the requirements and implications
of relevant legislation, as well as their rights, duties, and
obligations under the Company’s Articles of Association and
internal policies and procedures. Directors are also provided with
a presentation on the activities of the Company and
subsidiaries.
On a regular basis, the
Directors also receive periodic information on the Group’s
financial performance and position. The company secretary ensures
effective information flows within the Board, committees and
between senior management and Directors, as well as facilitating
professional development. The company secretary advises the Board
on governance matters. Directors may, in the course of their
duties, seek independent professional advice on any matter at the
Company’s expense. In addition, the Board and its committees
are given adequate and suitable resources to duly discharge their
functions in a proper and effective manner.
Since the former CEO’s
resignation, The Board has assumed the responsibility for ensuring
that management and employees have access to development and
training opportunities to retain and enhance the Group’s
competitive positioning, to safeguard and augment staff morale, and
to ensure effective continuity and succession planning. The Company
will provide for additional individual Directors' training on an as
required basis. The responsibility for recruitment and appointment
of senior management remains the responsibility of the Board of
Directors, on the recommendation of the RemNom
Committee.
Principle 7:
Evaluation of the Board’s Performance
The Board is of the view
that over the period under review, all members of the Board,
individually and collectively, have contributed to proceedings in
line with the required levels of diligence and skill. In addition,
the Board believes that its current composition endows the Board
with a cross-section of skills and experience and achieves the
appropriate balance required for it to function
effectively.
The Board considers its
own performance, and that of its committees as described in
Principle 8 hereunder, as satisfactory and not meriting a revision
to the Company’s corporate governance structures. The Board
does not consider it necessary to appoint a committee to carry out
a performance evaluation of its role, as the Board’s
performance is evaluated on an ongoing basis by, and is subject to
the constant scrutiny of, the Board itself, the Company’s
shareholders, the market and the rules by which the Company is
regulated as a listed company.
Principle 8:
Committees
Audit
Committee
The Audit
Committee’s primary objective is to assist the Board in
fulfilling its oversight responsibilities over the financial
reporting processes, and the system of internal controls, the audit
process and the process for monitoring compliance with applicable
laws and regulations. The Audit Committee oversees the conduct of
the internal and external audit and acts to facilitate
communication between the Board, management and the internal and
external auditors. The external auditors are invited to attend the
Audit Committee meetings. The Audit Committee reports directly to
the Board.
The Board has set formal
terms of reference of the Audit Committee, which set out its
composition, role, function, and the parameters of its remit, as
well as the procedures and processes to be complied with in its
activities.
The Audit Committee is
expected to deal with and advise the Board on issues of financial
risk, control and compliance, and associated assurance of the
Company, including:
|
i.
|
ensuring that the Company
adopts, maintains and, at all times, applies appropriate accounting
and financial reporting processes and procedures;
|
|
ii.
|
monitoring of the audit
of the Company’s management and annual accounts;
|
|
iii.
|
facilitating the
independence of the external audit process and addressing issues
arising from the audit process and ensuring good communication
between internal and external audit activities, as
applicable;
|
|
iv.
|
reviewing of the systems
and procedures of internal control implemented by management and of
the financial statements, disclosures and adequacy of financial
reporting;
|
|
v.
|
making of recommendations
to the Board in relation to the appointment of the external
auditors and the approval of the remuneration and terms of
engagement of the external auditors, following the relative
appointment by the shareholders in the annual general
meeting;
|
|
vi.
|
monitoring and reviewing
of the external auditors’ independence and, in particular,
the provision of additional services to the Company;
|
|
vii.
|
ensuring that the
Company, at all times, maintains effective financial risk
management and internal financial and auditing control systems,
including compliance functions.
|
Furthermore, the Audit
Committee has the role of assessing any potential conflicts of
interest between the duties of the Directors and their respective
private interests or duties unrelated to the Company.
In addition, the Audit
Committee has the role and function of evaluating any proposed
transaction to be entered into by the Company and a related party
(which term shall have the same meaning as in the international
accounting standards adopted in accordance with Regulation (EC) No.
1606/2002 of the European Parliament and of the Council) to ensure
that the execution of any such transaction is at arm’s
length, on a commercial basis and ultimately in the best interests
of the Company.
Any proposed transaction
which the Company wishes to enter into and which satisfies either
of the following conditions shall be referred to the Audit
Committee for its consideration and approval:
|
(i)
|
transactions which
clearly fall within the ambit of the Capital Markets Rules as
‘related party transactions’ and which are not the
subject of an exemption therefrom;
|
|
(ii)
|
transactions in respect
of which management is not certain as to whether they fall within
the ambits of the Capital Markets Rules as related party
transactions or in respect of which there is uncertainty as to
whether any one or more exemptions should apply to the proposed
transactions.
|
At the meeting convened
for this purpose, the Audit Committee shall consider the proposed
transaction and first determine whether it is a transaction that
falls within the ambit of the applicable Capital Markets Rules and,
if it so determines, shall then consider the merits of the proposed
transaction.
In its evaluation of the
proposed transaction, the Audit Committee is at all times guided by
the best interests of the Company and its general body of
shareholders taken as a whole. The Audit Committee reports to the
Board on its findings and makes its recommendations to the Board as
to whether the transaction should be entered into in the first
place and to make such further recommendations as to any matters
that, in the opinion of the Audit Committee, need to be reviewed or
improved in the proposed transaction or any of its terms so as to
ensure that the best interests of the Company are properly
safeguarded.
The Audit Committee is
made up entirely of non-executive Directors, the majority of whom
are independent of the Company. Audit Committee members are
appointed for a one (1) year term of office, automatically renewed
for further periods of one (1) year each unless otherwise
determined by the Board of Directors of the Company, or unless
removed and replaced by another member by the Board of Directors in
accordance with the Capital Markets Rules. During the period under
review, the Audit Committee was composed of Ms. Jacqueline
Camilleri (independent and non-executive Director), Mr. Stephen
Paris (independent and non-executive Director) and Mr. Peter Hili
(non-executive Director). Following his resignation from his
position as non-executive Director of the Board, Mr Georgios
Kakouras was replaced by Mr. Peter Hili (non- e xecutive Director) as Audit
Committee Member.
The Chairperson of the
Audit Committee, appointed by the Board, is entrusted with
reporting to the Board on the workings and findings of the Audit
Committee. Ms. Jacqueline Camilleri occupied the post of
Chairperson of the Audit Committee during the period under
review.
The independent
non-executive Directors forming part of the Audit Committee are
considered by the Board to be competent in accounting and/or
auditing in terms of the Capital Markets Rules, based on their
respective extensive experience occupying financial management and
auditing roles within various private and public entities, as well
as their respective skills and competencies in financial reporting,
financial management, financial auditing and general financial
advisory.
The Audit Committee met
six (6) times during the year under review. Save for two meetings
which were attended by two of the three members of the Audit
Committee, the meetings of the Audit Committee were attended by all
its members during the period under review. The Audit Committee is
scheduled to meet at least four times in 2024.
RemNom
Committee
In view of its size, the
Company is of the view that whilst it considers the role and
function of each of the remuneration committee and the nomination
committee as important, it would be more efficient for these
committees to be merged into one committee (the “RemNom
Committee” ) that would serve a dual role. During the
period under review the RemNom Committee was composed of Mr. Keith
Busuttil (who also acted as its Chairman), Ms. Jacqueline Camilleri
and Mr . Stephen
Paris.
In its function as
remuneration committee, the RemNom Committee is delegated with the
oversight of the remuneration policies implemented by the Company
with respect to the Board of Directors, the CEO (as applicable) and
individuals who report directly to the Board of Directors. In
assisting and making recommendations to the Board of Directors in
setting out the Company’s remuneration policy, the RemNom
Committee seeks to formulate remuneration policies aimed at
attracting, retaining and motivating Directors, whether executive
or non-executive, as well as senior management with the right
qualities and skills for the benefit of the Company. In turn, it is
responsible for making proposals to the Board on the individual
remuneration packages of Directors and senior executives and is
entrusted with monitoring the level and structure of remuneration
of the non-executive Directors. In addition, the RemNom Committee
is responsible for reviewing the performance-based remuneration
incentives that may be adopted by the Company from time to time and
is authorised to determine whether a performance-based bonus or
other incentive should be paid out or otherwise.
In its function as
nomination committee, the RemNom Committee’s task is to
propose to the Board candidates for the position of Director,
including persons considered to be independent in terms of the
Capital Markets Rules, whilst also considering any recommendations
from or nominations made by the shareholders in accordance with the
Articles of Association of the Company.
The nominations committee
also periodically assesses the structure, size, composition and
performance of the Board and make recommendations to the Board
regarding any changes, as well as consider issues related to
succession planning. When fulfilling this function, the committee
assesses the individual skills, knowledge and experience of the
Directors, in order to ensure that that these endow the Board with
the requisite collective skills, knowledge and experience for the
proper functioning of the Company and its oversight by the Board.
It is also entrusted with reviewing the Board’s policy for
selection and appointment of senior management.
The nominations committee
is empowered by the Articles of Association of the Company to
reject any recommendation made to it if, in its considered opinion,
the appointment of the person so recommended as a Director could be
detrimental to the Company’s interests, or if such person is
not considered fit and proper to occupy that position. The
committee and the existing Board members themselves may also make
recommendations for the appointment of new Directors at the annual
general meeting. Where the number of candidates approved by the
nominations committee is greater than the number of vacancies on
the Board, an election would take place in accordance with the
provisions of the Articles of Association of the
Company.
In this respect, it is
pertinent to note that, in advance of the 2023 annual general
meeting, the Nominations Committee received three (3) valid
nominations for the appointment of incumbent non-executive
Directors, Mr. Stephen Parnis, Mr. Keith Busuttil and Dr. Yasmine
Aquilina, which nominations were approved by the Nominations
Committee and all approved candidates were
automatically appointed, without requiring a resolution to be voted
upon in view of the fact that the number of approved candidates did
not exceed the number of vacancies and that no shareholder holding
not less than ten per cent (10%) in nominal value of the shares
having voting rights demanded that a vote be taken in respect of
all or any one or more of the approved
candidates.
The RemNom Committee met
twice during the period under review and is scheduled to meet in
advance of and following the Company’s next annual general
meeting, in addition to meetings which may be held from time to
time and as may be required.
Governance and Risk
Committee
As from January 2023, the
functions of the governance and risk committee (the
“Governance and Risk Committee” or the
“GRC”) were absorbed by the Audit Committee.
As a result, in addition to the
functions carried by it in terms of its terms of reference, the
Audit Committee was also entrusted
with:
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i.
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assisting management of
each business component with the identification of risks to which
the Group and its business and operations are, or may be, exposed
to including, but not limited to, client risk, transaction risk,
enterprise and business risk, jurisdictional risk, product risk,
and delivery risk, among others;
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ii.
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risk quantification to
assess the potential likelihood of the occurrence of the risks
identified and the potential impact of such occurrence;
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iii.
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oversight of screening of
existing and potential customers and suppliers, including
know-your-customer and due diligence verifications, and ongoing due
diligence thereinafter;
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iv.
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the design,
implementation, and oversight of risk management internal policies,
procedures, processes, controls, systems and governance
structures;
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v.
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the ongoing monitoring
and evaluation of risks;
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vi.
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reporting on findings of
evaluations undertaken and recommendations to address weaknesses or
deficiencies in the processes and procedures of the Group;
and
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vii.
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effective and timely
implementation of remedial actions to address governance and risk
management deficiencies.
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Principles 9 and 10:
Relations with Shareholders and with the Market, and Institutional
Shareholders
The Company recognises
the importance of maintaining a dialogue with its shareholders and
of keeping the market informed to ensure that its strategies and
performance are well understood. The Company is highly committed to
having an open channel of communication and effective relationship
with its shareholders and the wider market.
The Company communicates
with its shareholders principally through the Company’s
Annual General Meeting (the “AGM” ). The
Chairman of the Board ensures that all Directors attend the AGM and
that both the Chairman of the Board and committee chairpersons are
available to answer questions. Individual shareholders can raise
matters relating to their shareholdings and the business of the
Group at any time throughout the year and are given the opportunity
to ask questions at the AGM or to submit written questions in
advance.
The Chairman also ensures
that sufficient contact is maintained with major shareholders to
understand issues and concerns.
Apart from the AGM, the
Company communicates with its shareholders by way of the Annual
Report and Financial Statements and through the Company’s
website ( https://harvest.tech/ ) which
also contains information about the Company and its business,
including an ‘Investor Relations’
section.
The office of the company
secretary also assists the Board in maintaining regular
communication between the Company and its investors through the
publication of company announcements.
The Company ensures that
the market is provided with regular, timely, accurate,
comprehensive, and comparable information to enable existing and
prospective investors to make informed investment decisions. In
this respect, over and above its statutory and regulatory
requirements relating to the AGM, the publication of annual and
interim financial statements, interim Directors’ statements
and Company announcements, the Company seeks to engage with
investors and the market on a regular basis, and the Company holds
meetings with major stockbrokers and financial
intermediaries.
Principle 11:
Conflicts of Interest
The Directors are fully
aware of their responsibility to always act in the best interests
of the Company and its shareholders irrespective of whoever
appointed or elected them to serve on the
Board.
On joining the Board and
regularly thereafter, the Directors are informed of their
obligations on dealing in securities of the Company within the
parameters of law, including the Capital Markets Rules, and
Directors follow the required notification procedures.
It is the practice of the
Board that when a potential conflict of interest arises in
connection with any transaction or other matter, the potential
conflict of interest is declared, so that steps may be taken to
ensure that such items are appropriately addressed. By virtue of
the Memorandum and Articles of Association, the Directors are
obliged to keep the Board advised, on an ongoing basis, of any
interest that could potentially conflict with that of the Company.
The Board member concerned shall not take part in the assessment by
the Board as to whether a conflict of interest exists. A Director
shall not vote in respect of any contract, arrangement, transaction
or proposal in which he/she has a material interest in accordance
with the Memorandum and Articles of Association of the Company. The
Board believes that this is a procedure that achieves compliance
with both the letter and rationale of Principle 11 of the
Code.
In situations giving rise
to potential conflicts of interest, the conflicted Directors are to
act in accordance with the majority decision of those Directors who
are not conflicted in the proposed contract, transaction, or
arrangement, and in line with the advice of independent legal
advice, where required.
During the period under
review, the Company did not enter into any material agreements in
which any one of the Directors was, directly or indirectly,
interested.
Any material transactions
with related parties, which pose intrinsic potential conflicts of
interests, require the approval of the Audit Committee, which is
charged with ensuring that such transactions are necessary for the
conduct of the Company’s business and are transacted on an
arm’s length basis. Furthermore, such material transactions
with related party transactions are subject to the
Capital Markets Rules regulating the approval process for
transactions of such nature, including disclosure and shareholder
approval requirements that may apply if certain
conditions are met.
Save as stated below, the
Directors are not aware of any potential conflicts of interest
which could relate to their roles within the Company:
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i.
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Ms. Jacqueline Camilleri
sits on the Board of Directors of other companies forming part of
the group of companies of which the majority shareholder of the
Company (1923 Investments p.l.c.) (C 63261) forms part, namely Hili
Finance Company p.l.c. (C 85692);
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ii.
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Mr. Peter Hili sits on
the Board of Directors of Hili Properties p.l.c.
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iii.
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Mr. Keith Busuttil
occupies the position of CEO of 1923 Investments p.l.c.;
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iv.
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Dr. Yasmine Aquilina is
employed by Hili Ventures Limited (C 57902), the parent company of
1923 Investments p.l.c.
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None of the Directors
held any disclosable interest in any contracts or arrangements
either subsisting at the end of the last financial year or entered
during this financial year.
Principle 12:
Corporate Social Responsibility
The Directors also seek
to adhere to accepted principles of corporate social responsibility
in their management practices of the Company in relation to the
Group’s workforce and the community in general.
Over the period under
review, the Group has supported several organisations engaged in
charitable and philanthropic work.
The Group recognises that
its workforce is one of its main assets, essential for achieving
its objectives and sustained growth. The Group recognises the need
to embed good governance in its day-to-day operations and, for this
purpose, has introduced a Code of Conduct that establishes the
general guidelines governing the conduct of all of its employees in
fulfilling their functions and their commercial and professional
relations.
C.
Non-compliance with the Code
The Directors believe
that good corporate governance is a function of a mix of checks and
balances that best suit the Company and its business. Accordingly,
whilst there are best practices that can be of general application,
the structures that may be required within the context of larger
companies are not necessarily and objectively the structures for
companies whose size and/or business dictate otherwise. It is in
this context that the Directors have adopted a corporate governance
framework within the Company that is designed to better suit the
Company, its business, scale, and complexity, whilst ensuring
proper checks and balances.
Taking the above into
account and considering that the Code is not mandatory and that the
provisions thereof may be departed from provided that reasonable
and justifiable circumstances exist and are adequately explained,
the Directors set out below the Code Provisions with which the
Company does not comply and what are, in its view, a reasonable and
justifiable basis for such departure from the recommendations set
out in the Code relating to the composition of the Board.
Code
Provision
Explanation
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Principle 2: Chairman and Chief Executive (Code provision
2.3)
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During the year under
review, the post of Chairman of the Board of Directors of the
Company was occupied by Mr. Keith Busuttil, a non-executive
Director. Although Code provision 2.3 provides that the Chairman
should meet the independence criteria set out in the Code, the
Board of Directors was of the view that Mr. Keith Busuttil is
well-placed to lead the Board, having the relevant and necessary
experience and expertise to fulfil the role, particularly in light
of the Board’s strategy to maximize opportunities for growth
and secure acquisitions suitable to the Company.
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Principle 3: Executive and Non-Executive Directors on the
Board
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As explained in Principle
3 in Section B, the Board is composed entirely of non-executive
Directors.
The Company is of the
view that the composition of the Board of Directors is suitable
when taking into account the following considerations: (i)
ultimately, the Company acts as the holding company of the Group,
with no day-to-day operational activities of its own.
Rather, the day-to-day activities of the Company are the
setting of the strategic direction and overall oversight thereof,
being an activity that non-executive Directors are well suited to
be entrusted with; (ii) the CFO is, and the CEO formerly was,
invited as observer at the meetings of the Board of Directors of
the Company, acting as the liaison between the senior management of
the Company and the Board of Directors; and (iii) the managing
Directors of each operating subsidiary of the Company (that is, of
PTL Limited, Apco Limited, Apcopay Limited, and Ipsyon Limited)
report directly to the CEO and, since the latter’s
resignation in June 2023, the Board of Directors of the Company,
ensuring a regular and open communication channel among members of
the senior management team.
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Principle 4: Succession Policy for the Board (Code provision
4.2.7 )
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The Company has not
established a formal succession plan policy for the future
composition of the Board of Directors as recommended by Code
provision 4.2.7. In practice, however, the Board is actively
engaged in succession planning and in ensuring that appropriate
schemes to recruit, retain and motivate employees and senior
management are in place.
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Principle 7: Evaluation of the Board’s Performance
(Code provision 7.1)
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The Board has not
appointed a committee for the purpose of undertaking an evaluation
of the Board’s performance in accordance with the
requirements of Code provision 7.1. However, the Board is of the
view that all members of the Board, individually and collectively,
have contributed in line with the required levels of diligence and
skill. In addition, the Board believes that its current composition
endows the Board with a cross-section of skills and experience, not
only with respect to the specific business of the Company, but also
in a wider range of business areas and skills.
The Board believes that
the size of the Company and the Board itself does not warrant the
establishment of a committee specifically for the purpose of
carrying out a performance evaluation of its role. Whilst the
requirement under Code provision 7.1 might be useful in the context
of larger companies having a more complex set-up and a larger
Board, the size of the Company’s Board is such that it should
enable it to evaluate its own performance without the requirement
of setting up an ad-hoc committee for this purpose. The
Board shall retain this matter under review over the coming
year.
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Principle 8: Committees
(Code
provision 8.A – Remuneration Committee)
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During the year under
review, the post of Chairman of the RemNom Committee of the Company
was occupied by Mr. Keith Busuttil (non-executive Director).
Although Code provision 8.A.1 requires that the Chairman of the
remuneration committee be an independent non-executive Director,
the Board of Directors considers Mr. Busuttil, to be well-placed to
chair such committee. The Board considers that the terms of
reference of the RemNom Committee are such as to ensure that the
proper and impartial functioning of the RemNom Committee are not
impacted, in any manner, by the status of the particular Director
holding the post of Chairman of the RemNom Committee.
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Principle 9: Relations with shareholders and the market
(Code provision 9.3)
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There are no formal
procedures in place within the Company for the resolution of
conflicts between minority and controlling shareholders, nor do the
Memorandum and Articles of Association of the Company contemplate
any mechanism for arbitration in these instances.
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Principle 9: Relations with shareholders and the market
(Code provision 9.4)
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The Company does not have
a formal policy in place to allow minority shareholders to present
an issue to the Board. In practice, however, the open channel of
communication between the Company and minority shareholders via the
office of the Company Secretary and the Chairman is such that any
issue that may merit bringing to the attention of the Board may be
transmitted via the Company Secretary or the Chairman, who is in
attendance at all meetings of the Board of Directors. Furthermore,
the Company is in contact with the Malta Association of Small
Shareholders (MASS) which may, from time to time, bring matters of
interest to private investors to the attention of the Board, for
its consideration.
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