Independent auditor’s report
To the Shareholders of Hudson Malta P.L.C.
Report on the audit of the financial statements
Our opinion
In our opinion:
● The Group financial statements and Parent Company financial statements (the “financial statements”) give a true and fair view of the Group and the Parent Company’s financial position of Hudson Malta P.L.C. as at 31 December 2021, and of the Group’s and the Parent Company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and
● The financial statements have been prepared in accordance with the requirements of the Maltese Companies Act (Cap. 386).
Our opinion is consistent with our additional report to the Audit Committee.
What we have audited
Hudson Malta P.L.C.’s financial statements comprise:
● the Consolidated and Parent Company statements of financial position as at 31 December 2021;
● the Consolidated and Parent Company statements of comprehensive income for the year then ended;
● the Consolidated and Parent Company statements of changes in equity for the year then ended;
● the Consolidated and Parent Company statements of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies and other explanatory information.
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 Group and the Parent Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.
To the best of our knowledge and belief, we declare that non-audit services that we have provided to the parent company and its subsidiaries 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 parent company and its subsidiaries, in the period from 1 January 2021 to 31 December 2021, are disclosed in note 20 to the financial statements.
Our audit approach
Overview
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● Overall group materiality: €430,000, which represents 1% of total consolidated revenue |
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● The audit carried out by the group engagement team covered the parent and its two subsidiaries.
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● Recoverability of group balances for the Group and Parent Company ● Accounting implications of the Trilogy Limited acquisition for the Group
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As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated 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.
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 consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. 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.
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Overall group materiality |
€430,000 |
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How we determined it |
1% of total consolidated revenue |
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Rationale for the materiality benchmark applied |
We chose total consolidated revenue as the benchmark because, in our view, it is the appropriate measure for this type of entity. We chose 1% which is within the range of materiality thresholds that we consider appropriate. |
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €43,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
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.
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Key audit matter |
How our audit addressed the Key audit matter |
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Recoverability of group balances for the Group and Parent Company
As at 31 December 2021, loans and receivables with related party undertakings amounted to €6.2m for the Group and €10.5m at Parent Company level, as disclosed in Note 9. In addition, as disclosed in Note 11, further current receivables with related party undertakings amounted to €6m for the Group.
As explained in accounting policy 1.8.4 and note 2.1(b), Hudson Malta P.L.C. assesses its expected credit losses on a forward looking basis in accordance with IFRS 9. The loss allowances for these financial assets are based on assumptions about risk of default and expected loss rates. The Group’s management uses judgement in making these assumptions, based on the counterparty’s history, existing market conditions, as well as forward looking estimates at the end of each reporting period.
We have given additional attention to this area because of the nature and magnitude of these balances.
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We agreed the terms of the loans to supporting loan agreements.
We assessed the financial soundness of the subsidiary guarantor (being the guarantor of the bond) and Hudson Holdings Limited, the ultimate parent. In doing this, we made reference to the latest audited financial statements, management accounts, and other relevant information made available to us.
In addition, we understood and evaluated the workings and assumptions underlying the assessment for the loss allowances under IFRS 9.
Based on evidence and explanations obtained, we concur with management’s view with respect to the recoverability of these balances.
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Accounting implications of the Trilogy Limited acquisition for the Group
As disclosed in Note 31, Hudson Holdings Limited acquired Trilogy Limited in exchange for 15% of shares in Hudson Holdings Limited and a contingent consideration based on targeted equity value of Hudson Holdings Limited for the five years subsequent to effective acquisition date. As at the date of acquisition, the value of the 15% equity stake in Hudson Holdings Limited was determined to be fair valued at €6m, whilst management has determined that the fair value of the contingent consideration as at date of acquisition is €Nil.
Subsequent to the legal acquisition on 30 December 2021 mentioned above, Hudson Holdings Limited transferred its equity stake in Trilogy Limited, to Hudson Malta p.l.c. for a consideration of €6m which will be settled by way of an issue of shares to Hudson Holdings Limited.
The effective date of acquisition was deemed to be 1 July 2021 and consequently the results of Trilogy Limited for the period 1 July 2021 to 31 December 2021 were included in the consolidated statement of comprehensive income.
As part of the purchase price allocation, supplier relationships amounting to €3.2m were recognised in the Group’s statement of financial position.
Group’s management used judgement in making these assumptions, including the valuation of the consideration, the effective acquisition date and the purchase price allocation. We have given additional attention to this area because of the nature and magnitude of these balances.
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We obtained a copy of the signed share purchase agreement entered into by Hudson Holdings Limited and the agreement for the subsequent transfer of shares from Hudson Holdings Limited to Hudson Malta P.L.C. and understood the terms of the acquisition and subsequent transfer.
We reviewed workings prepared by management and documentation to support the value allocated to the 15% shareholding in Hudson Holdings Limited. We also performed an independent assessment to obtain comfort on the fair value of the contingent consideration. We also applied an element of stress-testing to the calculations supporting the valuation of the contingent consideration.
We held discussions with management to understand the rationale for the determination of the effective acquisition date and reviewed documentation supporting key judgements used in determining the effective acquisition date.
We reviewed the purchase price allocation report . For the purposes of the consolidated financial statements we understood and challenged the rationale for the allocation of the intangible assets identified in the exercise as well as the rationale for the useful life allocated to the asset.
Based on evidence and explanations obtained, we concur with management’s view with respect to the accounting implications of the Trilogy Limited acquisition. |
How we tailored our group audit scope
The Group is composed of 3 components: Hudson Malta P.L.C. (the parent company) and its two wholly owned subsidiaries. We tailored the scope of our audit in order to perform sufficient work on all components to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
The group audit team performed all of this work by applying the overall Group materiality, together with additional procedures performed on the consolidation. This gave us sufficient appropriate audit evidence for our opinion on the Group financial statements as a whole.
Other information
The directors are responsible for the other information. The other information comprises the Directors’ report and Corporate Governance – Statement of Compliance (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 and those charged with governance for the financial statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements 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 Group’s and the Parent 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 Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control.
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
● Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s or the Parent company’s ability to continue as a going concern. In particular, it is difficult to evaluate all of the potential implications that COVID-19 will have on the Group’s and the Parent company’s trade, customers and suppliers, and the disruption to their business and the overall economy.
● Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
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 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 Hudson Malta P.L.C. for the year ended 31 December 2021, 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 consolidated financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.
Our responsibilities
Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report, including the consolidated financial statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.
Our procedures included:
● Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report, in accordance with the requirements of the ESEF RTS.
● Obtaining the Annual Financial Report and performing validations to determine whether the Annual Financial Report has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.
● Examining the information in the Annual Financial Report to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.
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 2021 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
Other reporting requirements
The Annual Financial Report 2021 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.
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Area of the Annual Financial Report 2021 and the related Directors’ responsibilities |
Our responsibilities |
Our reporting |
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Directors’ report The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act. |
We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.
We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements.
In addition, we are required to state whether, in the light of the knowledge and understanding of the Company and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements. |
In our opinion: ● the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ● the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386).
We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
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Corporate Governance – Statement of Compliance The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Code of Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97. The Statement provides explanations as to how the Company has complied with the provisions of the Code, presenting the extent to which the Company has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles.
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We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements.
We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97.
We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures. |
In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.
We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section. |
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Other matters on which we are required to report by exception We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion: ● adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us. ● the financial statements are not in agreement with the accounting records and returns. ● we have not received all the information and explanations which, to the best of our knowledge and belief, we require for our audit. We also have responsibilities under the Capital Markets Rules to review the statement made by the directors that the business is a going concern together with supporting assumptions or qualifications as necessary. |
We have nothing to report to you in respect of these responsibilities. |
Other matter – use of this report
Our report, including the opinions, has been prepared for and only for the Parent Company’s shareholders 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 upon incorporation on 10 November 2017 for the financial period ended 31 December 2018. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 4 years. The parent company became listed on a regulated market on 2 May 2018.
PricewaterhouseCoopers
78, Mill Street
Zone 5, Central Business District
Qormi
Malta
Lucienne Pace Ross
Partner
28 April 2022