CLEARFLOWPLUS P.L.C. (formerly ClearFlowPlus Limited)
Annual Report and Financial Statements 31 December 2023
Contents
Company information
Chairman’s statement
This year marks a significant milestone in our journey, as we have undertaken a strategic transformation that positions us not just as a leader in our industry, but also as a pioneer in the realm of sustainable finance.
Strategic transformation towards sustainability and financeNotwithstanding the Water Services Corporation’s (also referred to as “WSC Group” or “the Group”) initial intention to restrict ClearFlowPlus p.l.c.’s (also referred to as “the Company” or “CFP”) activities to those of a finance company and transferring its operations to another subsidiary, as previously laid out in the Green Bonds Prospectus, CFP’s strategic direction evolved to embrace a dual role – continuing our legacy as a premier provider in our field, while expanding our horizons to become a financing vehicle for the WSC group. This shift is rooted in our unwavering commitment to sustainability, which now stands at the core of all our operations. By streamlining our activities, we ensure that every aspect of our business is aligned with the principles of environmental stewardship and sustainability. This strategic pivot is not merely a response to the growing demand for green practices; it is a forward-looking move to place ourselves at the forefront of a sustainable future. To this effect, one of ClearFlowPlus p.l.c.’s main focus is the provision of water through industrial reverse osmosis systems for the hospitality sector. During the year under review, its operations saw the construction of the new reverse osmosis builds which will be fully completed and commissioned in the hospitality industry during 2024. In addition, it also provides private and public water dispensers to make clean, safe drinking water more accessible to the general public, while reducing the number of plastic water bottles that end up in landfills or otherwise in the environment. In fact, in line with the newly launched business plan, twenty (20) new dispensers were installed during the year under review bringing the total number of installations up to three hundred twenty-seven (327). Moreover, these dispensers are being continually serviced by a third-party contractor so as to ensure the best possible service. During the year under review, such dispensers have serviced approximately 30,135 litres, translating into the elimination of 60,270 bottles of single use plastic. In addition to focusing on sustainable products and responsible business practices, ClearFlowPlus p.l.c. also aims to commercialize the knowledge-based and operational expertise of its parent, Water Services Corporation (also referred to as “WSC”). With years of experience in the water industry, WSC has developed a wealth of knowledge and technologies related to water treatment, conservation, and management. By commercializing this knowledge, ClearFlowPlus p.l.c. aims to generate revenue and advance the industry as a whole and contribute to solving the world’s water-related challenges. Furthermore, through partnerships with other companies and organizations, it aims to leverage its expertise to impact the environment and society while growing its business positively. Green Bonds issuance
A pivotal element of this transformation has been the issuance of the first local Green Bonds. The Bonds were issued in an aggregate amount of Euro 25 million with a nominal value of Euro 100 per Bond issued at par and redeemable on 25 August 2033. In addition, the Bonds bear interest at the rate of 4.25% per annum on the nominal value of the Bond, payable on 25 August of each year. This venture into the green finance arena is a testament to our innovative spirit and our dedication to sustainability. The proceeds from this bond were advanced to our parent company, Water Services Corporation, to fund projects that are green at their core, thereby directly contributing to environmental sustainability. It is with pride to report that the Bond issue was fully subscribed in a matter of hours, showing an astounding investor confidence from 1,600 retail investors. The Green Bond issuance has necessitated the implementation of robust governance initiatives, including the setup of a Sustainability Committee so as to ensure that we adhere to the highest standards of transparency, accountability, and ethical conduct. These initiatives are designed not just to meet the expectations of our stakeholders, but to exceed them, setting new benchmarks in good governance within the context of sustainable finance. Transition to a public listed company
The journey towards sustainability and financial innovation has also led us to a significant structural change – the conversion from a private limited liability company to a public listed entity. This transition, facilitated by our Green Bonds listing, is a strategic move that reflects our growth ambitions and our commitment to embracing wider stakeholder engagement. As a public listed company, we are poised to leverage new opportunities for growth, while being held to the highest standards of corporate governance and stakeholder transparency. As we embark on this new chapter, I am filled with optimism about the future of ClearFlowPlus p.l.c. Our transformation into a finance vehicle dedicated to sustainability, underscored by our successful Green Bonds issuance and our transition to a public listed company, marks the beginning of an exciting phase in our journey. We are not just responding to the call for sustainability; we are leading the charge, demonstrating that financial success and environmental stewardship can go hand in hand. Sincerely,
Dr. Vincent Micallef Chairman and non-executive Director
24 April 2024
Directors’ report
The Directors present their report and the audited financial statements of ClearFlowPlus p.l.c. for the year ended 31 December 2023.
Principal activities and future developments
The Company’s revenue is derived from consultancy services and supplies, laboratory analysis and information technology services in connection with water production, filtration and/or treatment and/or sewage treatment products or facilities.
Review of the business
Financial performance
ClearFlowPlus p.l.c. underwent significant changes during the financial year ended 31 December 2023. These changes were mainly focused on the repositioning of ClearFlowPlus p.l.c. as a finance company whilst at the same time streamlining its revenue streams to its core operations revolving around sustainability. To this effect, the Company’s revenue decreased to €1,983,403 during the year ended 31 December 2023 (2022 (restated): €2,096,606) in line with a more streamlined portfolio of products focused mainly on sustainable business activity.
Revenue was primarily derived from consultancy services, supplies in connection with reverse osmosis plants, related after-sales services, desalination, sewage treatment facilities, laboratory analysis, information technology and sale of parts. Waste management services were the biggest revenue contributor, representing 42% of ClearFlowPlus p.l.c.’s revenue during the year under review (2022 (restated): 39%). Cost of sales primarily consist of direct costs related to consultancy and other services provided by the Issuer. In line with the lower revenue generated during the year, cost of sales decreased to €979,797 (2022: (restated): €1,055,067). Gross profit for the Company amounted to €1,003,606 in the financial year under review (2022 (restated): €1,041,539) with a corresponding gross profit margin of 50.6% (2022 (restated): 49.7%). In the provision of its services and carrying out of its operations, the Company continues to rely substantially on the resources available to WSC. In view of this, administrative expenses increased significantly to €425,269 during the year ended 31 December 2023 (2022: €165,761). This was partially driven by the renegotiation and increase of the management fee charged by WSC to ClearFlowPlus p.l.c. to better reflect the increased usage of operational and administrative resources in line with the Company’s economic activities. In addition, consultancy expenses incurred by the Company as part of its conversion to a public listed company, contributed further to the increase in administrative expenses. Notwithstanding these increases, the Company sustained its profitability, with profit before tax standing at €945,487 within the current financial year (2022 (restated): €1,116,293). The Company’s total assets stood at €28.7 million as at 31 December 2023 (2022 (restated): €3.7 million). Non-current assets comprised 10.02% of total assets, primarily consisting of finance lease receivables totalling €0.84 million (2022: €0.86 million) and loans receivable from related companies amounting to €2 million (2022: € 0.49 million).
Current assets primarily consisted of cash and cash equivalents amounting to €24.1 million (2022: €0.93 million) and trade and other receivables totalling €1.09 million (2022 (restated): €0.86 million). Total assets increased by 7.76 times (2022 (restated): 0.77 times) compared to the levels reported as of 31 December 2022, largely due to the unutilized Green Bond proceeds as at year end which increased the Company’s cash and cash equivalents.
Financial position
Total equity amounted to €2.6 million as of 31 December 2023 (2022 (restated): €1.96 million), mainly composed of retained earnings. During the year under review, ClearFlowPlus p.l.c. increased its share capital to €250,002 by capitalising a portion of its retained earnings. In terms of liabilities, as of 31 December 2023, the predominant share (95%) comprised of non-current liabilities. The total liabilities as at year-end surged by €24.35 million compared to the preceding financial year, reaching €26.1 million (2022 (restated): €1.74 million). This notable increase can be primarily attributed to the bond issuance of an aggregate amount of Euro 25 million with a nominal value of Euro 100 per Bond issued at par and redeemable on 25 August 2033.
Risk analysis
With respect to the sourcing of engagements for, and the actual performance of, a material part of its services, ClearFlowPlus p.l.c. is dependent on its parent, its business contacts and operations, as well as on the know-how and expertise developed by WSC. It is also dependent on the human resources of the parent, since the operations of CFP are conducted through employees of WSC. A negative impact on WSC’s resources through the materialization of reputation or competition risks, risks of outdating through technological and operational advancements or other operational, market or financial risks, may therefore negatively affect the service engagements and business of ClearFlowPlus p.l.c. and its financial condition.
Furthermore, following the bond issue, CFP and WSC entered into a loan agreement whereby the net bond proceeds will be advanced to the WSC. With respect to its payment obligations under the bonds, CFP’s profits generated from its business operations as aforesaid will not be sufficient to finance such payments due to bondholders. In this respect the Issuer is principally dependent, including for the purpose of servicing interest payments on the bonds and the repayment of the Redemption Value on redemption, on the receipt of interest payments and loan repayment from WSC under the Issuer-Guarantor Loan. In this respect, therefore, CFP is dependent on the business prospects and operating results of Water Services Corporation.
Therefore, the risks intrinsic in the business and operations of the WSC influence the ability of ClearFlowPlus p.l.c. and the Corporation to meet their respective obligations in connection with the payment of interest on the bonds and repayment of the redemption value when due including, in the case of the WSC, any payments that it may be required to make under the guarantee.
Directors
The Directors of the Company who held office during the year were:
Dr. Vincent Micallef (Chairman) (appointed on 17 July 2023) Mr. Karl Cilia Mr. Matthew Costa Ing. David Sacco (appointed on 17 July 2023) Ms. Angela Azzopardi (appointed on 17 July 2023) Mr. Luke Cann (appointed on 17 July 2023) Ing. Abigail Cutajar (appointed on 17 July 2023) Ms. Katrina Cuschieri (appointed on 17 July 2023)
The Company’s Articles of Association requires all Directors to retire from office at each Annual General Meeting of the Company. A Director retiring from office shall retain office until the dissolution of such meeting and shall then be eligible for re-election or re-appointment.
Results and dividends
The results of the Company are set out in the statement of comprehensive income on page 18. The Directors do not recommend the payment of a dividend.
Retained earnings, amounting to €2,349,861 (2022 (restated): €1,954,216) for the Company are being carried forward to the next financial year.
Statement of Directors’ responsibilities
Company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of the affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
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 comply with the Companies Act (Cap. 386) enacted in Malta. 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Information provided in accordance with Capital Markets Rule 5.70.1
There were no material contracts to which the Company and in which anyone of the Company’s Directors was directly or indirectly interested.Going concernThe Directors, as required by Capital Markets Rule 5.62, have considered the Company’s operating performance, the statement of financial position at year end, as well as the business plan for the coming year, and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
AuditorsPursuant to the Company’s statutory obligations in terms of the Companies Act and the MFSA Capital Markets Rules, the appointment of the auditors and the authorisation of the Directors to set their remuneration will be proposed and approved at the Company’s AGM. Information provided in accordance with Capital Markets Rule 5.64The authorised share capital of the Company is two hundred fifty thousand and two euro and twenty-nine cents (€250,002.29) divided into one hundred and seven thousand three hundred twenty-six (107,326) shares of two point three two nine three seven three Euro (€2.329373) each share. The issued share capital of the Company is two hundred fifty thousand and two Euro and twenty-nine cents (€250,002.29) divided into one hundred and seven thousand three hundred twenty-six (107,326) ordinary shares of two point three two nine three seven three Euro (€2.329373) each share, which have been subscribed for and fully paid-up.
The issued shares of the Company consist of one class of ordinary shares which, save as may be otherwise expressly provided in the Memorandum and Articles of Association of the Company or by the respective terms of issue, shall rank ‘Pari passu’ for all intents and purposes of law and shall entitle the holder to one vote in respect of each share. The Directors confirm that as at 31 December 2023, only Water Services Corporation held a shareholding in excess of 5% of the total issued share capital.
In line with clause 6 of the Memorandum of Association, the Board of Directors shall consist of a minimum of 3 and a maximum of 8 Directors, one of whom shall be the Chairman. The Chairman shall resign at each Annual General Meeting (AGM), following which the Directors shall appoint the Chairman at the first Board meeting thereafter. The Chairman may also be removed and replaced or re-elected by the Directors before the aforementioned Board meeting.
Under any circumstance, the Chairman shall be elected, removed, replaced and re-elected through a simple majority amongst the Directors.
Should a Chairman cease to be a Director of the Company, this shall automatically trigger removal from the position of Chairman however, removal from the latter position shall not bring about removal from the Board of Directors.
The rules governing the appointment of Board members are contained in Clause 13 of the Company’s Articles of Association as follows:
“The Directors of the Company shall be elected as provided in the following provision of this Article:
Directors shall be elected at each Annual General Meeting (or at an Extraordinary General Meeting convened for the purpose of electing directors). Voting shall take place on the basis that every Member shall have one (1) vote in respect of each voting Equity Security held by him. A Member may use all his votes in favour of one candidate or may split his votes in any manner he chooses amongst any two or more candidates, but so that voting rights attaching to a single Equity Security are indivisible and accordingly a member may cast the vote attaching to an Equity Security for one nominee only. The Chairman of the Meeting shall declare elected those candidates who obtain the greater number of votes on that basis.”
Any amendment to the Company’s Memorandum and Articles of Association has to be made in accordance with the Companies Act (Cap. 386).
Without prejudice to any special rights or restrictions previously conferred or imposed on the holders of any of the existing Equity Securities or class thereof, any Equity Security in the Company may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Board of Directors may, subject to the sanction of an extraordinary resolution of the Company, from time to time determine, as provided for in Clause 3 of the Articles of Association.
The Company may, subject to the applicable restrictions, limitations and conditions contained in the Companies Act (Cap. 386), acquire its own shares and other Equity Securities.
Pursuant to Capital Markets Rules 5.64.2, 5.64.4, 5.64.5, 5.64.6, 5.64.7 and 5.64.10 it is hereby declared that, as at 31 December 2023, none of the requirements apply to the Company.
Statement of the Directors pursuant to Capital Markets Rule 5.68
We, the undersigned , declare that to the best of our knowledge, the financial statements are prepared in accordance with the requirements of International Financial Reporting Standards as adopted by the European Union (“IFRSs as adopted by the EU”), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and that the Directors’ Report includes a fair view of the performance of the b usiness and the position of the Compan y , together with a description of the principal risks and uncertainties that they face.
Signed on behalf of the Board of Directors on 24 April 2024 by Dr. Vincent Micallef ( Chairman and non-executive Director ) and Mr. Karl Cilia (Vice-Chairman and executive Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Registered office of the Company: Water Services Corporation Triq Hal-Qormi Luqa LQA 9043 Malta
Corporate governance - Statement of compliance
Introduction Pursuant to the Capital Markets Rules as issued by the Malta Financial Services Authority, ClearFlowPlus p.l.c. (“the Company”) (a subsidiary of Water Services Corporation – the ‘Guarantor’) (together referred to as “the Group”) is hereby reporting on the extent of its adoption of the Code of Principles of Good Corporate Governance (the “Principles”) contained in Appendix 5.1 of the Capital Markets Rules as well as the measures adopted to ensure compliance with these same Principles.
The Board of Directors of the Company (“the Board”) acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice. Nonetheless, the Board supports the Code and its adoption as it strongly believes that the Principles are in the best interest of all stakeholders involved since they ensure that the Directors, management and employees of the Group adhere to internationally recognised high standards of corporate governance.
The Group currently has a corporate decision-making and supervisory structure that is tailored to suit the Group’s requirements and designed to ensure the existence of adequate checks and balances within the Group, whilst retaining an element of flexibility, particularly in view of the size of the Group and the nature of its business. The Group adheres to the Principles except for those instances where there exist particular circumstances that warrant non-adherence thereto, or at least postponement for the time being (as detailed in the respective Section hereunder).
Additionally, the Board recognises that, by virtue of Capital Markets Rule 5.101, ClearFlowPlus p.l.c. is exempt from making available the information required in terms of Capital Markets Rules 5.97.1 to 5.97.3; 5.97.6 and 5.97.8.
Roles and responsibilities of the Board
The Board acknowledges its statutory mandate to conduct the administration and management of the Company. The Board in fulfilling this mandate and discharging its duty of stewardship of the Company, assumes responsibility for:
The Board is also responsible for ensuring that the Company installs and operates effective internal control and management information systems and that it communicates effectively with the market.
The Board of Directors
The Board of Directors of ClearFlowPlus p.l.c., is entrusted with its overall direction and management.
The Board of Directors meets regularly and is currently composed of eight (8) Members.
Executive Directors
Non-executive Directors
For the financial year ended 31 December 2023, three (3) of the Directors, Mr. Karl Cilia, Mr. Matthew Costa and Ing. David Sacco occupied senior executive positions within the Group. In fact, Mr. Karl Cilia, Mr Matthew Costa and Ing. David Sacco occupy the role of Chief Executive Officer, Chief Officer – Finance and Administration and Chief Officer – Production and Treatment within the Group, respectively.
For the purpose of the Capital Markets rules, Ms. Angela Azzopardi, Mr. Luke Cann, Ing. Abigail Cutajar and Ms. Katrina Cuschieri are independent non-executive Directors of the Company. Furthermore, Ing. David Sacco, Dr. Vincent Micallef, Ms. Angela Azzopardi, Ing. Abigail Cutajar, Mr. Luke Cann and Ms. Katrina Cuschieri were appointed Directors on 17 July 2023, whilst Dr. Vincent Micallef was appointed as Chairman of the Board on 17 July 2023.
In the opinion of the Board, the independent non-executive Directors are free from significant business, family or other relationship with the Group, its shareholders or its management that would create a conflict of interest such as to impair their judgement.
During the year ending 31 December 2023, the Board of Directors met twice. The Board members are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting documents as necessary which are then discussed during the Board meetings.
Whilst the Directors are all experts in their respective fields, the Company will ensure that all resources possible are made available to its Directors to keep abreast with the changing regulatory landscape.
The Company ensures that it provides Directors with relevant information to enable them to effectively contribute to board decisions. In addition, Directors are allowed to seek independent professional advice on any matter related to the Company’s business at the latter’s expense.
The Directors are fully aware of their duties and obligations, and whenever a conflict of interest in decision making arises, the Directors shall act in accordance with the majority decision of the Directors who would not have a conflict in the situation and in line with the advice of legal counsel. Furthermore, the Board’s Chairman always addresses the Board at the inception of every board meeting to ask whether any conflicts of interests have arisen.
Directors’ remuneration
The remuneration of the Board is reviewed periodically subject to the respective appointment letters. Non-executive Directors are paid a fixed remuneration, and there were no variable remunerations paid to them during 2023.
During the year under review, the Directors received emoluments amounting in total to €7,500 (2022: €Nil). These emoluments consist of remuneration paid to the Company's non-executive Directors as Executive Directors carried out their roles ex-officio (i.e. no emoluments were paid for the directorships in place since these Directors also hold an executive position within the Guarantor).
Audit Committee
The Terms of Reference of the Audit Committee are modelled on the principles set out in the Capital Markets Rules. The Audit Committee assists the Board in fulfilling its supervisory and monitoring responsibility by reviewing the Group financial statements and disclosures, monitoring the system of internal control established by management as well as the audit processes.
The Board of Directors established the Audit Committee, which meets regularly, with a minimum of four (4) times annually, and is currently composed of the following individuals:
To satisfy the requirement established by the Capital Markets Rules, all of the Directors sitting on the Audit Committee are non-executives and the majority thereof are also independent.
The Board considers Mr. Luke Cann to be competent in accounting and/or auditing in terms of the Capital Markets Rules. Furthermore, the Board considers the Audit Committee, as a whole, to have relevant competence in the sector the Group is operating.
The Audit Committee met once during 2023, as it was established towards the end of the year as part of the Green Bond Listing process and the requirements emanating therefrom, and it kept meeting regularly throughout 2024. Communication with and between the Secretary, management of Water Services Corporation and the Audit Committee is ongoing and Audit Committee minutes are taken accordingly, detailing considerations that required the Committee’s attention, as well as those that were acted upon between meetings and decided by the Members. Such minutes are signed by the Committee’s Chairman and Secretary before being circulated electronically.
The Company has formal mechanisms to monitor dealings by Directors and senior officials in the bonds of the Company and has also put in place the appropriate mechanisms for the advance notification of such dealings.
Sustainability Committee
In carrying on its business, the Group is fully aware of its obligation to preserving the environment and is committed to do so. This is evident through the various investments made towards improving operational efficiency and maintaining a sustainable water cycle. Further testament to this commitment is ClearFlowPlus p.l.c.’s Green Bond Issue on 21 August 2023 - the first of its kind for Malta - which allowed for €25 million to be invested in green projects. In fact, during 2023, the first disbursement from these proceeds took place in relation to Hondoq’s Reverse Osmosis Plant, WSC’s most efficient plant to date, which renders Gozo virtually self-sufficient. More information on the Green Bonds Issue and the respective eligible projects and disbursements may be found in the Impact and Allocation Report, as published on CFP’s website.
A Sustainability Committee was established to assist the Group with achieving alignment with the Green Bond Principles and other relevant and applicable sustainability standards. It is a committee of the Board, is directly responsible and accountable to the Board and reports directly to it.
The terms of reference of the Sustainability Committee, as adopted by the Board, establish its composition, role and functions, the parameters of its remit, and also basic rules of procedure that are to be followed by it. These mainly revolve around giving full support, and making recommendations to, the Board in respect of the following matters:
The Board reserves the right to change the terms of reference from time to time.
The Committee is currently composed of six (6) members as follows:
The members of the Sustainability Committee are appointed for a term of one (1) year but are eligible for reappointment.
The Sustainability Committee meets at least once every month and met three (3) times during the year under review.
Internal controls
While the Board is ultimately responsible
for the Group’s internal controls as well as their
effectiveness, authority to manage the Group is delegated to the
Corporation’s Chief Executive Officer.
The Board recognises that the Group must manage a range of risks in the course of activities and the failure to adequately manage these risks could adversely impact the business. Whilst no system can provide absolute guarantees and protection against material loss, the Board maintains sound risk management and internal controls systems which are designed to give the Directors reasonable assurance that problems can be identified promptly and remedial action can be taken as appropriate.
Systems and procedures are in place for the Group to control, report, monitor and assess risks and their financial implications, and to take timely corrective actions where necessary. Regular financial budgets and strategic plans are prepared, and performance against these plans is actively monitored and reported to the Directors on a regular basis.
Corporate social responsibility
The Board is mindful of and seeks to adhere to sound principles Corporate Social Responsibility, in their daily management practices, which is also extended throughout the Group. There is continuing commitment to operate the business ethically at all times, at the same time as contributing to economic development whilst improving the quality of life of its employees and their families together with the local community and society at large.
A key aspect of the Group’s efforts is through empowering customers to actively manage and monitor their water consumption by encouraging them to take a proactive stance in monitoring their water usage. This is done via a dedicated online portal - www.wsc.com.mt - and by navigating to the ‘View Live Map’ section, users gain access to a comprehensive overview of their water consumption patterns. This tool offers insights into monthly, weekly, and even hourly usage statistics. A particularly noteworthy feature is the ability to detect constant levels of water consumption, an anomaly that often signals unnoticed leakages within private premises. This function serves as a critical first step in identifying and addressing water leaks, thereby preventing wastage and promoting more efficient water use.
In addition to self-monitoring tools, WSC employs an intelligent system designed to identify abnormal and continuous water consumption patterns that could indicate leaks in private networks. Upon detection, WSC takes a proactive approach in notifying customers through targeted letters and SMS messages. These alerts inform customers of potential issues, urging them to investigate and rectify any leakages in their premises. By providing such tools and alerts, WSC plays a pivotal role in promoting responsible water use and conservation across the community. These efforts align with the Group’s broader CSR objectives, demonstrating commitment to environmental stewardship and the well-being of customers.
Relations with the market
The market is kept up to date with all relevant information, and the Group regularly publishes such information on its website to ensure consistent relations with the market. Furthermore, the Group is also currently developing additional software to increase its transparency and maintain such relations with the market.
Non-compliance with the Code
Principle 4: The Responsibilities of the Board
ClearFlowPlus p.l.c.’s Board Members are appointed directly by the Company’s shareholder, which is Water Services Corporation, and thus, CFP does not have a board succession policy in place.
Principle 7: Evaluation of the Board’s performance
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 majority of which is composed by non-executive Directors of which a majority are independent, the Audit Committee in so far as conflicting situations are concerned, ClearFlowPlus p.l.c.’s shareholders, the market and the rules by which ClearFlowPlus p.l.c. is regulated as a listed company.
Principle 8: Remuneration and Nomination Committee
The Group does not have a Remuneration Committee, nor a Nomination Committee, as recommended in Principle 8.
The Board considers that the size and operations of ClearFlowPlus p.l.c. do not warrant the setting up of such committees. In particular:
Principle 9: Relations with Shareholders and with the Market
There is currently no established mechanism disclosed in the Memorandum and Articles of Association of ClearFlowPlus p.l.c. to trigger arbitration in the case of conflict between the minority shareholders and the controlling shareholders. ClearFlowPlus p.l.c.’s shares are all held by Water Services Corporation, except for one share which is held by Malta Government Investments Limited, a company beneficially owned by the Government of Malta. ClearFlowPlus p.l.c. is thus of the view that there is currently no need to establish such mechanism.
Signed on behalf of the Board of Directors on 24 April 2024 by Dr. Vincent Micallef (Chairman and non-executive Director) and Mr. Karl Cilia (Vice-Chairman and executive Director).
Statement of financial position
The accompanying notes are an integral part of these financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 24 April 2024. The financial statements were signed on behalf of the Board of Directors by Dr. Vincent Micallef (Chairman and non-executive Director) and Mr. Karl Cilia (Vice-Chairman and executive Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Statement of comprehensive income
The accompanying notes are an integral part of these financial statements.
Statement of changes in equity
The accompanying notes are an integral part of these financial statements.
Statement of cash flows
The accompanying notes are an integral part of these financial statements.
Notes to the financial statements
1. Principal activities of the Company
Incorporated in 2006 under the name of Desalination Services Marketing Ltd, and initially incorporated as a private limited liability company, its name was changed to ClearFlowPlus Limited in 2018. In anticipation of the Bond Issue, ClearFlowPlus Limited was then converted into a public limited liability company in 2023, becoming ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited). ClearFlowPlus p.l.c.’s (formerly ClearFlowPlus Limited) operational activities essentially consist of consultancy services and supplies, laboratory analysis and information technology services in connection with water production, filtration and/or treatment and/or sewage treatment products or facilities.
2. Basis of preparationThe financial statements have been prepared in accordance with IFRSs as adopted by the EU and the requirements of the Companies Act (Cap. 386). They have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates. It also requires Directors to exercise their judgement in the process of applying the Company’s accounting policies (see Note 6 - Critical accounting estimates and judgements).
These financial statements are presented in Euro (€) which is the Company’s functional currency. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Appropriateness of the going concern assumption
The financial statements have been prepared on a going concern basis which assumes that the Company will continue in existence in the foreseeable future.
Standards, interpretations and amendments to published standards effective in 2023 In 2023, the Company adopted new standards, amendments and interpretations to existing standards that are mandatory for the Company’s accounting period beginning on 1 January 2023. The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the Company’s accounting policies impacting the Group and Company’s financial performance and position.
Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements, that are mandatory for the Group’s and Company’s accounting periods beginning after 1 January 2023. The Company has not early adopted these revisions to the requirements of IFRSs as adopted by the EU and the Company’s Directors are of the opinion that there are no requirements that will have possible significant impact on the Company’s financial statements in the period of initial application.
3. Correction of prior period errors During the year under review, adjustments were made for errors identified in the prior period, where retained earnings, trade and other payables, trade and other receivables and current tax liabilities were materially misstated in the Company’s statement of financial position as at 31 December 2022 as a result of cut-off issues identified. Additionally, revenue, cost of sales and tax expense were materially misstated in the Company’s statement of comprehensive income for the year ended 31 December 2022.
The necessary adjustments were made in accordance with the relevant standards by restating each of the affected line items for prior periods. The following tables summarise the impact on the Company’s financial statements.
i. Statement of financial position
ii. Statement of comprehensive income
4. Summary of significant accounting policies
4.1 Property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that the future economic benefits that are associated with the asset will flow to the entity and the cost can be measured reliably.
All property, plant and equipment is initially recorded at historical cost. All property, plant and equipment is stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 4.2).
Gains and losses on disposals are determined by comparing the proceeds with carrying amount and are recognised in profit or loss.
4.2 Impairment of non-financial assets
An entity shall assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount of an asset (or a group of assets) is the higher of its fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. Value in use is the present value of the future cash flows expected to be derived from an asset.
4.3 Finance lease receivables
The Company leases out its property, plant and equipment in the statement of financial position and are accounted for in accordance with accounting policy 4.1. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset, and classified as an operating lease if it does not.
All leases are classified as finance leases from a lessor perspective.
The lessor derecognises such property, plant and equipment being leased to the lessee as an asset and recognises the lease receivable at the commencement date of the lease.
Where the lease payments have already been fully received prior to the commencement of the lease, the lease receivable is recognised at the original purchase price of the asset.
Conversely, where the lease payments are expected to be received over the lifetime of the lease, the lease receivable is deemed to be the present value of the lease receipts expected during the lease term.
The lease receivable will be derecognised over the lifetime of the lease.
4.4 Financial assets
4.4.1 Classification
All recognised financial assets that are within the scope of IFRS 9 are required to be measured subsequently at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
The Company classifies its financial assets are amortised cost.
4.4.2 Recognition and measurement
The Company recognises a financial asset in its statement of financial position when it becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on settlement date, which is the date on which an asset is delivered to or by the Company. Any change in fair value for the asset to be received is recognised between the trade date and settlement date in respect of assets which are carried at fair value in accordance with the measurement rules applicable to the respective financial assets.
Financial assets are initially recognised at fair value plus transaction costs. Subsequently, they are measured according to their classification as detailed in Note 4.4.1. Amortised cost is the initial measurement amount adjusted for the amortisation of any difference between the initial and maturity amounts using the effective interest method.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership or has not retained control of the asset.
4.4.3 Impairment
In relation to the impairment of financial assets, IFRS 9 requires an expected-credit loss (“ECL”) model. The Company assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost. The ECL model requires the Company to account for ECL and changes in those ECL at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
Specifically, IFRS 9 requires the Company to recognise a loss allowance for ECL on:
In particular, IFRS 9 requires the Company to measure the loss allowance for a financial instrument at an amount equal to the lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit- impaired financial asset. However, if the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), the Company is required to measure the loss allowance for that financial instrument at an amount equal to 12-months ECL. IFRS 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data such as significant financial difficulty of the borrower or issuer, or a breach of contract. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
4.5 Inventories
Goods held for resale
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of inventories comprises the invoiced value of goods and, in general, includes transport and handling costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
4.6 Trade and other receivables
Trade receivables comprise amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less expected credit loss allowance (Note 4.4.3).
4.7 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at face value. In the statement of cash flows, cash and cash equivalents include cash at bank, term deposits and deposits held at call with banks.
4.8 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
4.9 Financial liabilities
The Company recognises a financial liability in its statement of financial position when it becomes a party to the contractual provisions of the instrument. The Company’s financial liabilities are classified as financial liabilities which are not at fair value through profit or loss (classified as ‘Other liabilities’) under IFRS 9. Financial liabilities not at fair value through profit or loss are recognised initially at fair value, being the fair value of consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of the financial liability. These liabilities are subsequently measured at amortised cost. The Company derecognises a financial liability from its statement of financial position when the obligation specified in the contract or arrangement is discharged, is cancelled or expires.
4.10 Trade and other payables
Trade payables comprise obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
4.11 Borrowings
Borrowings are recognised initially at the fair value of proceeds received; net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period.
4.12 Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.4.13 Current and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date.
Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Under this method, the Company is required to make a provision for deferred taxes on the fair valuation of certain non-current assets. Such deferred tax is charged or credited directly to profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
4.14 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable.
The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Company ’s activities as described below. (a) Sales of goods
Sales of goods are recognised when the Company has delivered products to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery does not occur until the risks of obsolescence and loss have been transferred to the customer, and the customer has accepted the products.
Revenue from services is generally recognised in the period the services are provided, based on the services performed to date as a percentage of the total services to be performed. Accordingly, revenue is recognised by reference to the stage of completion of the transaction under the percentage of completion method.
(c) Interest income
Interest income is recognised for all interest-bearing instruments using the effective interest method.
(d) The Company is the lessor
Rental income from the finance lease is recognised in profit or loss on a pattern reflecting a constant periodic rate of return on investment.
5. Financial risk management
5.1 Financial risk factors
The Company’s activities potentially expose it to a variety of financial risks: market risk (including cash flow and fair value interest rate risk and foreign exchange risk), credit risk and liquidity risk. The Company ’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. The Company’s Board of Directors provides principles for overall Company risk management, as well as policies covering risks referred to above and specific areas such as investment of excess liquidity. The Company did not make use of derivative financial instruments to hedge certain risk exposures during the current and preceding financial years.
The Company’s risk policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.
(a) Market risk
(i) Cash flow and fair value interest rate risk
The Company is not exposed to cash flow risk arising from fluctuations in variable interest rates. Given that the Company does not hold any borrowings with variable interest rates, changes in interest rates do not impact our cash flows directly. Despite the absence of variable interest rate exposure, the Company recognises the importance of maintaining robust financial management practices to safeguard its cash flows and ensure long-term stability and growth.
(ii) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities which are denominated in a currency that is not the entity’s functional currency. The transactions are mainly affected in euro, the functional and presentation currency of the Company.
Accordingly, the Company is not significantly exposed to foreign exchange risk and a sensitivity analysis for foreign exchange risk disclosing how profit or loss and equity would have been affected by changes in foreign exchange rates that were reasonably possible at the end of the reporting period is not deemed necessary.
(b) Credit risk Credit risk arises from loans receivable, cash and cash equivalents and credit exposures to customers, including outstanding receivables and committed transactions. The Company’s exposures to credit risk as at the end of the reporting years are analysed as follows:
The maximum exposure to credit risk at the end of the reporting period in respect of the financial assets mentioned above is equivalent to their carrying amount as disclosed in the respective notes to the financial statements. The Company does not hold any collateral as security in this respect.
The Company banks only with local financial institutions with high quality standing or rating.
The Company assesses the credit quality of these receivables taking into account the financial position, performance and other factors. The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
The table below show the reconciliation of the Company’s opening allowance to the closing loss allowance as at 31 December 2023 and 31 December 2022:
Note i: The Company has advanced one (1) loan to its parent company during the current financial reporting year, whereas two (2) loans to sister companies within the preceding financial reporting years. As of the reporting date, the Company has assessed the credit risk associated with these loans receivable and has determined that no provision for ECL is necessary. In considering the advance made to the parent company, the determination is based on the Company’s assessment of the creditworthiness of the parent company, considering factors such as its financial strength, credit history, and ability to fulfil its repayment obligations.
The sister companies to whom the Company has also advanced loans in the preceding years are supported by the same parent company, which has demonstrated strong financial performance and stability. Furthermore, the parent company maintains a robust capital structure and liquidity position, which enhances its ability to support its subsidiaries, including the sister companies receiving loans from the Company. On this basis, no provision for ECL was recognised.
Note ii: The Company’s finance lease receivables consist of three (3) finance lease arrangements, two (2) of which were paid in advance of the lease agreement. Any considerations for ECL were made on the third finance lease arrangements for which no payment in advance had taken place.
Based on the Company's assessment which includes consideration of historical repayment patterns and current economic conditions, it was concluded that there is no objective evidence of impairment requiring the recognition of ECL provisions for the Company’s remaining finance lease arrangement.
The Company is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which comprise trade and other payables (Note 15). Prudent liquidity risk management includes maintaining sufficient cash and committed credit lines to ensure the availability of an adequate amount of funding to meet the Company’s obligations.
Management monitors liquidity risk by reviewing expected cash flows and ensures that no additional financing facilities are expected to be required over the coming year. The Company’s liquidity risk is not deemed material in view of the matching of cash inflows and outflows arising from expected maturities of financial instruments, coupled with the Company’s committed bank borrowing facilities and other intra-Company financing that it can access to meet liquidity needs.
The table below analyses the Company’s borrowings into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, which include interest:
5.2 Capital risk management
Capital is managed at Group level by reference to the level of Company equity and borrowings or debt as disclosed in the consolidated financial statements of the Company’s parent. The Group’s objectives when managing capital at subsidiary level are to safeguard the respective Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors the level of capital on the basis of the ratio of aggregated debt to total equity. Aggregated debt is calculated as total borrowings (as shown in the statement of financial position).
The Group manages the relationship between equity injections and borrowings, being the constituent elements of capital as reflected above, with a view to managing the cost of capital. The level of capital, as reflected in the consolidated statement of financial position, is maintained by reference to the Group’s respective financial obligations and commitments arising from operational requirements. In view of the nature of the Group’s activities and the extent of borrowings or debt, the capital level at the end of the reporting period determined by reference to the consolidated financial statements is deemed adequate by the Directors.
5.3 Fair values of financial instruments
Fair values of financial instruments not carried at fair value
At 31 December 2023 and 2022, the carrying amounts of cash at bank, receivables, payables, and accrued expenses reflected in the financial statements are reasonable estimates of fair value in view of the nature of these instruments or the relatively short period of time between the origination of the instruments and their expected realisation. The fair value of advances to related parties and other balances with related parties is equivalent to their carrying amount.
Information on the fair value of the bonds issued to the public is disclosed in Note 14 to the financial statements. The fair value estimate in this respect is deemed Level 1 as it constitutes a quoted price in active market.
6. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
In the opinion of the Directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1.
7. Property, plant and equipment
8. Finance lease receivables
The Company acts as a lessor in finance lease arrangements, leasing out water dispensers. The average term of finance leases entered into is 10 years. The lease agreements will be automatically renewed for other periods of 1 year each until either party decides to terminate the agreement by giving prior notice.
The Company is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are denominated in ‘Euro’. Residual value risk on water dispensers under lease is not significant, because of the existence of a secondary market with respect to these dispensers.
The following table presents the amounts included in profit or loss:
The Company’s finance lease arrangements do not include variable payments.
The finance lease receivables are initially measured at the present value of lease payments receivable over the lease term, discounted using the interest rate implicit in the lease or, if not determinable, the lessor’s incremental borrowing rate. The effective interest rate contracted approximates 24.9% (2022: 24.9%) per annum. None of the finance lease receivables at the end of the reporting year are past due, and taking into account the historical default experience, repayment patterns and the future prospects of the industries in which the lessees operate, the Directors of the Company consider that no finance lease receivable is impaired. There has been no change in the estimation techniques or significant assumptions made during the current reporting year in assessing the loss allowance for finance lease receivables.
9. Inventories
10. Trade and other receivables
Note i: Accrued interest income receivable represents accrued interest from loans advanced to related companies (Note 11).
Note ii: Interest receivable represents interest due as at year-end to the Company in respect of the fixed term deposit held.
The Company assessed the impairment for all classes of assets under IFRS 9 and the loss allowance of €81,566 (2022: €88,118) represents the amount that the Company recognised as an expected loss provided under IFRS 9.
Information about the Company’s exposure to credit risk is disclosed in Note 5.
11. Loans receivable from related companies
The loan receivable balance is represented by three (3) loans advanced to the two (2) of the Company’s sister companies and its parent company. Information on how the loans receivable balance above is split is provided below.
The loans receivable balance is partially represented by €305,283 (2022: €336,855) (exclusive of accrued interest income receivable disclosed as part of Note 10) which was advanced to a related entity by way of a loan during the year ended 31 December 2021. The loan is unsecured, bears interest of 4.5% per annum and is to be paid in full, including the agreed interest, by the year 2028. The loan receivable balance is also represented by €63,593 (2022: €150,000) (exclusive of accrued interest receivable disclosed as part of Note 10) which was advanced to a related entity by way of a loan during the prior reporting period. The loan is unsecured, bears interest of 4.5% per annum and is to be paid in full, including the agreed interest, by the year 2029. In the current year under review, the Company advanced an additional loan to its parent company which represents the remaining balance of €1,680,558 (2022: €Nil) (exclusive of accrued interest receivable disclosed as part of Note 10). This loan was financed from the proceeds of the bond issue which the Company issued during the financial reporting year review. The loan will be used by the parent company, the ‘Guarantor’, in a number of Eligible Green Projects (as detailed in Note 14). The loan is unsecured, bears interest at 4.75% per annum and is to be paid in full, including the agreed interest by the year 2033.
12. Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:
As at 31 December 2023, €21 million (2022: €Nil) of the cash and cash equivalents were held in a fixed-term deposit account with a local bank, with an interest rate of 2.62%, maturing on 19 April 2024.
13. Share capital
Note i: During the year, the Company increased its paid-up share capital from 20% to 100%, making it fully paid-up.
14. BorrowingsBonds By virtue of a Prospectus dated 20 July 2023, ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited) (the Issuer) issued 250,000 bonds with a face value of €100 each. The bonds have a coupon interest of 4.25% which is payable annually on 25 August. The bonds are guaranteed through the joint and several guarantee of the Guarantor (being, the parent company, Water Services Corporation) in terms of the guarantee dated 20 July 2023. The bonds were admitted on the Official List of the Malta Stock Exchange on 21 August 2023. The quoted market price as at year end for the bonds was €101 which in the opinion of the Directors fairly represents the fair value of these financial liabilities.
In accordance with the provisions of the Prospectus, the proceeds from the bond issue are to be used by the Company to provide a loan facility to the Guarantor (as stated in Note 11) in order to carry out a number of Eligible Green Projects, as described in detail within the Prospectus.
The bonds are measured at the amount of the net proceeds adjusted for the amortisation of the difference between the net proceeds and the redemption value of such bonds, using the effective yield method as follows:
This note provides information about the contractual terms of the Company’s borrowings. For more information about the Company’s exposure to liquidity and interest rate risk see Note 5.
15. Trade and other payables
Note i: Amounts owed to parent company are unsecured, interest free and repayable on demand.
The Company’s exposure to liquidity risk relating to trade and other payables is disclosed in Note 5.
16. Revenue
All the Company’s revenue was derived from consultancy services and supplies, laboratory analysis and information technology services in connection with water production, filtration and/or treatment and/or sewage treatment products or facilities.
17. Expenses by nature
During the year under review, the Company did not employ any employees (2022: Nil).
Auditors’ fees Fees charged by the auditor for services rendered during the financial years ended 31 December 2023 and 2022 relate to the following:
Other non-assurance services amounting to €Nil (2022: €2,500) have been charged to the Company by connected undertakings of the audit firm.
18. Finance income
19. Finance costs
20. Tax expense
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate applicable as follows:
21. Earnings per share
Earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year.
22. Cash generated from/(used in) operations
Reconciliation of operating profit to cash generated from/(used in) operations:
23. Related party transactions
Water Services Corporation is the Company’s immediate parent whereas its ultimate controlling party is the Government of Malta. The Company makes supplies in the ordinary course of business to its parent company, the Government of Malta, its departments and agencies, public sector corporations, local councils and other entities owned and/or controlled by Government.
Trading transactions between these companies would typically include management fees and other such items which are normally encountered in a Group context.
In the ordinary course of its operations, the Company sells goods and services to the parent company for trading purposes and also purchases goods and services from the parent company.
In the opinion of the Directors, disclosure of related party transactions, which are generally carried out on commercial terms and conditions, is only necessary when the transactions effected have a material impact on the operating results and financial position of the Company. The aggregate invoiced amounts in respect of a considerable number of transaction types carried out with related parties are not considered material and accordingly they do not have a significant effect on these financial statements.
Except for transactions disclosed or referred to previously, the following significant operating transactions, which were carried out principally with related parties forming part of the have a material effect on the operating results and financial position of the Company.
The Directors consider that the following significant transactions with related parties should be disclosed.
The transactions disclosed above were carried out on commercial terms. Year end balances with related parties, arising principally from the transactions referred to previously, are disclosed in Notes 8, 10, 11 and 15 to these financial statements.
Amounts owed by related entities as at 31 December 2023 were €472,394 (2022: €559,997). Amounts owed to related entities as at 31 December 2023 were €20,137 (2022: €Nil). These amounts are unsecured, interest free and repayable on demand.
Purchase of property, plant, and equipment from the parent company during the year
During the year under review, the Company entered into a related party transaction with its parent company. The transaction involved the purchase of machinery (as disclosed in Note 7) with a market value of €56,640, which had a depreciated value at the time of acquisition of €42,480.
24. Comparative information
Comparative figures disclosed in the main components of these financial statements have been reclassified to conform with the current year’s disclosure format for the purpose of compliance with the IFRSs as adopted by the EU and the requirements of the Companies Act (Cap. 386).
25. Statutory information
ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited) is a limited liability company and is incorporated in Malta.
The immediate and ultimate parent company of ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited) is Water Services Corporation, a corporation registered in Malta, with its registered address at Triq Hal Qormi, Luqa, LQA 9043, Malta
To the Shareholders of ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited)
Report on the audit of the financial statements
Our Opinion
In our opinion:
What we have audited
ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited)’s financial statements, set out on pages 16 to 43, comprise:
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company 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 the IESBA Code.
To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Company are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).
The non-audit services that we have provided to the Company, in the year from 1 January 2022 to 31 December 2022, are disclosed in Note 17 to the financial statements. No non-audit services were provided during the current reporting period.
Our audit approach
Overview
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates. Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole. 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. 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.
Other information The Directors are responsible for the other information. The other information comprises Company information on page 2, the Chairman’s statement on pages 3 to 4, the Directors’ report on pages 5 to 9 and the Corporate governance - Statement of compliance on pages 10 to 15 (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 and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.
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.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirement of the Maltese Companies Act (Cap. 386), 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 ability to continue as a going concern, disclosing, as applicable, matters related 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 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 ISAs, we exercise professional judgment 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 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, actions taken to eliminate threats or safeguards applied.
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 benefits of such communication.
Report on any 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 Annual Financial Report of ClearFlowPlus p.l.c. (formerly ClearFlowPlus Limited) 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 Annual Financial Report, including the financial statements, 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 Annual Financial Report, including the financial statements, 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:
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the Annual Financial Report for the year ended 31 December 2023 has been prepared in XHTML format in all material respects.
Other reporting requirements
The Annual Financial Report and Financial Statements for the year ended 31 December 2023 contains other areas required by legislation or regulation on which we are required to report. The Directors are responsible for these other areas.
The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.
Other matter - use of this report
Our report, including the opinions, has been prepared for and only for the Company’s shareholder as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.
Appointment
We were first appointed as auditors of the Company on 28 April 2021. Our appointment in line with the tender awarded was for 4 years, with an extension of 1 year, representing a total period of uninterrupted engagement appointment of 5 years. The Company’s securities were granted admission on the Malta Stock Exchange on 21 August 2023.
Christian Gravina Director For and on behalf of GCS Assurance Malta Limited Registered auditor
Agora Business Centre, Level 2 Valley Road Msida, MSD 9020 Malta
24 April 2024
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