Hili Properties p.l.c.
Report & Financial
Statements
31 December
2022
1
Directors, officer and
other information
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Directors:
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Pier Luca Demajo
Georgios Kakouras
David Aquilina
Peter Hili
Eddy Vermeir
Laragh Cassar
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Secretary:
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Melanie Miceli Demajo
(resigned on 31 January 2022)
Laragh Cassar (appointed 31
January 2022, resigned 25 July 2022)
Adrian Mercieca (appointed
25 July 2022)
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Registered
office:
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Nineteen Twenty
-Three,
Valletta Road,
Marsa MRS 3000
Malta.
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Country of
incorporation:
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Malta
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Company
registration
number:
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C 57954
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Auditor:
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Grant Thornton,
Fort Business
Centre
Triq L-Intornjatur, Zone
1,
Central Business
District,
Birkirkara CBD
1050,
Malta
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Bankers:
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Bank of Valletta
p.l.c.,
BOV Centre,
St. Venera,
Malta
HSBC Bank Malta
p.l.c.,
HSBC Head Office,
Mill Street,
Qormi,
Malta
Swedbank AB,
Balasta dambis
1A,
LV-1048 Riga,
Latvia
Luminor Bank AS,
Skanstes iela 12,
Vidzemes
priekšpilsēta,
LV-1013 Riga,
Latvia
MeDirect Bank (Malta)
p.l.c.
The Centre, Tigné
Point,
Sliema,
Malta
Banca Comerciala
Romana
Calea Plevnei
nr.159,
Business Garden
Bucharest
Building A, floor 6,
District 6
060013, Bucharest
Romania
BRD – Groupe
Société Générale S.A.
Bdul Ion Mihalache nr.
1-7,
0111171,
Bucharest
Romania
Erste Group Bank
AG
Am Belvedere 1
1100
Vienna, Austria
SEB banka AS,
Meistaru iela 1,
Vadlauči,
Ķekava parish,
Ķekava district,
LV-1076, Latvia
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Legal
advisor:
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GVZH Advocates,
192, Old Bakery
Street,
Valletta,
Malta
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2
Chairman’s
Statement
For the year ended 31
December 2022
It gives me great
pleasure to report that 2022 was another successful year for Hili
Properties p.l.c.
After the Initial Public
Offering of November 2021, the Company focussed its efforts on the
acquisition of new assets, the improvement of our existing ones,
and the maximization of existing and new revenues. This was done
whilst delivering real value to our tenants, thus ensuring
long-term stability.
As planned, we have
continued to progress in our strategic objective which remains the
acquisition and management of diversified low-risk real-estate
assets, to provide stable returns to shareholders through long-term
contracted cash flows and asset appreciation.
During 2022, we have
increased diversification by completing acquisitions across various
asset classes. We have expanded our footprint in our existing
markets, by investing in 2 high-quality properties which now
generate strong returns for the company. This was achieved in a
shorter timeframe than expected, allowing us to surpass the targets
published in our IPO Forecast.
The year also presented several challenges. The
initial 6 months were marked by the tail end of COVID, which
continued to concern our tenants. We mitigated this through
individual constant attention, and a strong focus on the long-term
value of our customers. February was then marked by the invasion of
Ukraine which prompted the subsequent growth of financial markets
throughout the region. By the end of 2022, a high inflation
was witnessed, and major central banks have increased interest
rates as a countermeasure for inflation, consequently this
adversely influenced the cost of borrowing to the group.
Again, a close
relationship with all stakeholders allowed us to maintain stable
revenues and will prove of great value in 2023.
During 2022 the
company’s portfolio grew from Eur124,627,723 to
Eur232,298,000 – a growth of 86%. In order to provide
timely and efficient decision making, frequent meetings as well as
meeting of the Audit committee were required. Due importance was
given to ensure that proper Governance was applied
throughout.
Our strategic objectives
remain unchanged as we navigate the challenges and opportunities
that 2023 has brought. We recognize that sustainability as well as
social responsibility is a critical component of our business, and
we remain committed to promoting sustainable practices in all our
operations.
I would like to take
this opportunity to thank our shareholders for their continued
support, our employees for their dedication and contribution, and
our partners for their trust in our capabilities.
Pier Luca
Demajo
26 th April
2023
3
Statement by the
Managing Director
For the year ended 31
December 2022
Overview
I am pleased to report
that our company had a record performance in 2022, the first full
year following our Initial Public Offering. We remained committed
to our mission of investing in high-quality assets to generate
attractive returns for our shareholders over the long
term.
Throughout the year, we
continued to focus on expanding our reach in key cities in
Europe’s most exciting markets while maintaining our
commitment to exceptional property management and customer service
to all our tenants operating from our properties. Our teams worked
tirelessly to ensure that we leave a positive impact on the
communities in which our properties are based, and we were able to
enhance our reputation as a trustworthy and reliable commercial
real estate owner in the industry.
Financial
Performance
In 2022, we generated a
record Eur12.2 million in revenues – compared with
around Eur8.2million over the previous year. The performance
of our portfolio was very strong, resulting in EBITDA of around
Eur8.4 million – compared with Eur4.8 million
in 2021, while profit before tax reached to Eur6.8 million
– compared with Eur3.7 million in 2021.
Portfolio
In the past year, we
have seen steady growth in our portfolio of properties, with new
acquisitions driving our overall success.
In January, we undertook
the management of 19,000 square metres of industrial property in
Lithuania that was acquired in end of 2021. It is developed in a
50,000 square metres land plot in Lithuania’s largest free
economic zone and the property is leased to REHAU, a leading
international provider of solutions to the construction, automotive
and industrial industries and a member of the 50 Sustainability and
Climate Leaders.
In March, a 7,863 square
metres shopping centre was acquired in Riga, Latvia, built on
21,580 square metres of land. The property is situated in one of
Riga’s most densely populated residential areas. A top-brand
RIMI hypermarket as well as other successful retail operators
operate from the shopping centre.
In April, we concluded
the full 100% acquisition of 92,000 squares meters parcel of land
comprising a number of sites at Benghajsa next to Malta
Freeport.
In August, we acquired
in Bucharest, Romania, our biggest asset to date, 75% of the MIRO,
a newly built A Class mixed-use property developed in the Baneasa
area, with approx. 23,000 square metre of leasable area spread out
over 5 levels and with a 1,700 square metre outdoor plaza. The
remaining 25% has been agreed to be acquired in 2024. MIRO hosts
extensive list of reputable companies, such as KPMG Romania,
Rovere, COS, Cegeka, Eaton, Neoclinique, Speedwell, Stradale/Mitzu,
Jura and Hisky.
In parallel in 2022 we
sold three of our real estate shopping centres in Riga, Latvia, in
line with our strategy to optimise our portfolio, and introduce
more sustainable properties.
For another consecutive
year all our properties have been revalued by independent valuators
recording a portfolio value of around Eur232million for our
22 investment properties.
Our ESG
journey
We also made significant
progress in our sustainability efforts, implementing new green
technologies and initiatives that helped us contribute to a more
sustainable future. Our company offices across the countries in
which we operate are housed in sustainable buildings. Electric
vehicle charging stations have been installed in our Malta
head-office, while recycling stations were installed in our RIMI
shopping centres in Latvia. Solar panel installations are currently
underway in MIRO, Romania and our shopping centre DOLE in Latvia.
In DOLE shopping centre we also developed and granted facilities to
Youth Centre, a non-profit organisation providing emotional support
to children aged up to 18 through individual, family, and group
sessions with therapists, mentors, clinical psychologists and other
specialists.
Our industrial property
REHAU in Lithuania holds a BREEAM certification for its
sustainability features while MIRO in Romania has achieved both
BREEAM “Excellent” and WELL “Platinum”
certifications. MIRO is one of the only 248 Platinum certifications
issued worldwide and one of the first in Romania, verifying its
high standards in employee health, well-being, job satisfaction,
and engagement, as well as environmental protections.
Looking
ahead
Looking ahead, we will
put everything in place to continue building on our success and
deliver value to our shareholders. Irrespective of the challenges
that commercial real estate currently faces with rising interest
rates that result in increased financing costs and affect value of
the properties, we own a solid portfolio of property assets which
provide strong cash flows.
Committed to our core
values of integrity, care, ambition, innovation, and impact for
good, we will continue to monitor market conditions and identify
sales or acquisitions of assets that will build further resilience
for our company, with a long-term view of delivering sustainable
value to our shareholders.
I would like to thank
our dedicated team of employees, whose hard work and commitment
have been instrumental in our success. I would also like to express
my gratitude to our shareholders and partners for their ongoing
support and confidence in our company.
Georgios
Kakouras
26 th April
2023
4
Directors'
report
Year ended 31 December
2022
The directors present
their report and the audited financial statements of the Hili
Properties p.l.c. group and holding company for the year ended 31
December 2022.
Principal
activities
The principal activity
of the Hili Properties plc. group is to hold and rent immovable
property. Hili Properties p.l.c. also acts as a holding company.
The details of subsidiaries of the holding company are listed in
note 20.
Performance
review
2022 is the first full
year for the group following the successful IPO issue in October
2021. As already stated in the Chairman’s and Statement by
the Managing Director, the current year has significantly surpassed
all expectations both in terms of results and also in terms of
acquisitions made.
As a result, the current
year group results significantly exceed the reported figures in the
previous year. In fact, operating profit for the year ended
December 2022 is almost double that reported in the previous year,
reaching Eur8,399,022 as compared to Eur4,856,825 in
the preceding year. The increase in profitability is attributable
to the full year of operations of subsidiaries acquired in 2021
together with the results of our newly acquired subsidiaries in
2022.
In connection with the
IPO listing of the group towards the end of 2021, the group has
once again engaged external independent valuators for the
assessment of all the investment properties in its portfolio.
Following this valuation, the group registered net investment
income of Eur3,041,205 (2021: Eur2,124,055)
.
The group registered a
profit before tax from continuing operations of Eur6,798,302
(2021: Eur3,759,648 ). The net assets of the group at the
end of 2022 amounted to Eur124,929,650 (2021:
Eur110,880,921 ).
During 2022, the company
registered a loss before tax of Eur2,369,104 (2021: profit
before tax of Eur9,081,823 ). No dividends were paid
in the current year by the subsidiaries to the company, explaining
the significant movement in results.
The net assets of the
company at the end of the year amounted to Eur91,845,836
(2021: Eur94,261,840 ).
Financial
performance
The group measures the
achievement of its objectives through the use of the following
other key performance indicators:
The group measures its
performance based on EBITDA, which is defined as the group’s
profit before depreciation and amortisation, finance income/costs,
net investment income/losses and taxation. The EBITDA for the year
under review was Eur8,447,778 (representing 69% of
revenues) as compared to Eur4,903,707(representing 60% of
revenues) in the previous year. The increase in EBITDA in the
current year arises primarily from EBITDA generated through the
full year operation of the Lithuanian subsidiary acquired in
December last year, together with acquisitions made in
2022.
Interest cover for the
group is at 1.8 times in 2022 (2021: 1.4 times).
The gearing ratio of the
group is monitored on an ongoing basis. The group’s gearing
ratio, defined as total debt less cash divided by total equity,
stands at 46% compared to 31% in the previous year.
Non-financial
performance
With reference to our
properties held for rental, occupancy was at 99% as of 31 December
2022 (2021: 99%). This refers to the ratio of leased investment
properties in square meters to the total owned rental properties in
square meters. The WALT (Weighted Average Lease Term) for the whole
portfolio stands at 9.6 years (2021: 8.9 years).
Listing and IPO Issue
in 2021
Hili Properties plc, as
the parent company of the Hili Properties plc group, was
successfully listed on the Malta Stock Exchange on the 26th of
October 2021, with the first trading day of its ordinary shares
being on 22 December 2021 (“IPO”).
The IPO has resulted in
the listing of the Company’s equity and an increase of the
issued share capital, with the total number of shares issued of
100,892,700. All shares of the Company are ordinary shares, with a
nominal value of Eur0.20 each, and all have the same
shareholders’ rights.
The authorised share
capital of the Company was increased from Eur60,000,000
to Eur120,000,000 and the issued and called up share capital
of the Company was increased from Eur40,400,000 to
Eur60,000,000.
Result and
dividends
The result for the year
ended 31 December 2022 is shown in the statement of profit or loss
and other comprehensive income on page 37. The group registered a
profit after tax of Eur5,972,270 (2021: Eur3,169,199
). The holding company registered a loss after tax of
Eur2,416,005 (2021: profit after tax Eur8,371,462 ).
No dividends were declared by the Company during the years ended 31
December 2022 and 2021.
Effects of Ukraine
Conflict
The invasion of Ukraine
by the Russian Federation just over a year ago has undermined the
stability of Europe whilst adversely impacting food and energy
security throughout the world. These stresses come just as
economies are navigating their way out of the fiscal and
demographic issues endemic to the Covid-19 pandemic. Although based
on available insights to date, the Company and the Group are not
expected to be directly negatively impacted by the ongoing
invasion, the global inflation and interest rate risks associated
with the conflict are liable to negatively impact the Company and
the Group’s profitability and ability to finance.
Based on the available
insights to date, the Company and the Group are not expected to be
directly negatively impacted by the ongoing conflict in Ukraine,
considering that the Company and the Group hold a portfolio of
prime real estate assets.
The fact that all assets
reside in NATO countries provides extra safeguards, however,
management together with the directors, continue to actively
monitor all developments taking place internationally in order to
take any action that might be necessary in the eventuality that
developments in the conflict, start to impact the company’s
turnover and business activity.
Likely future
business developments
The directors consider
that the year-end financial position was satisfactory and that the
group and the holding company are well placed to sustain the
present level of activity in the foreseeable future.
Principal risks and
uncertainties
Successful management of
risk is essential to enable the group to achieve its objectives.
The ultimate responsibility for risk management rests with the
company’s directors, who evaluate the group’s risks on
a regular basis and identify actions to prevent the risk or
remediate the impact. The principal risks and uncertainties facing
the group and the mitigating factors are included below:
Dependence on
tenants
The Group is dependent
on tenants fulfilling their obligations under their lease
agreements. The business, revenue and projected profits of the
Group would be negatively impacted if tenants failed to honour
their respective lease obligations. There can be no assurance that
the tenants will honour their obligations, for different reasons
such as insolvency, market or economic downturns, operational
failure or other reasons which are beyond the Group’s
control. Such failure may negatively affect the financial condition
of the Group.
The Group is subject
to termination of lease agreements.
The Group is subject to
the risk that tenants may terminate or elect not to renew their
respective lease, either due to the expiration of the lease term or
due to an early termination of the lease. In cases of early
termination by tenants prior to the expiration of the lease term
there is a risk of loss of rental income if the tenant is not
replaced in a timely manner and/or on similar conditions which in
turn could have a material negative effect on the Group’s
results of operations.
The Group is subject
to increases in operating and other expenses.
At present, operating
expenses incurred by the Group are partially recharged to the
tenants occupying the Group’s properties. Nonetheless, in
future, the Group’s operating and other expenses could
increase without a corresponding increase in revenue, especially
provided the current inflationary environment surrounding the
operations of the group.
The factors which could
materially increase operating and other expenses include: (i)
unforeseen increases in the costs of maintaining the property; and
(ii) material increases in operating costs driven by inflation or
other parameters that may not be fully recoverable from
tenants.
The Group may be
impacted by changes in laws and regulations.
Changes in laws and
regulations relevant to the Group’s business and operations
could have an adverse impact on the Group’s business and
results of operations.
Market and
competition
The Group is exposed to
risks inherent in the commercial real estate market and
particularly to changes in market conditions in the commercial real
estate market in the Baltics, Romania, Malta and any other market
where the Group might invest going forward. Such risks may lead to
an oversupply of space or a reduction in tenant demand for a
particular type of property. Risks inherent in the commercial real
estate market may also have an impact on the quality of property
available; the ability of the Group to maintain its service charges
and other expenditure and to control the cost of these items; the
Company being able to buy, sell, operate or lease existing or new
properties on favourable terms; and/or the potential illiquidity of
property investments, particularly in times of economic downturn.
All of the aforesaid risks may have a material adverse impact on
the revenues of the Company, its financial performance and its
overall financial condition.
Cybersecurity
risk
Failures or breaches of
the electronic systems of the Company, its advisers and other
service providers have the ability to cause disruptions, negatively
impact the Company’s business operations and/or potentially
result in financial losses to the Company. Irrespective of the
business continuity plans and risk management systems in place that
address system breaches or failures, there are inherent limitations
in such plans and systems. Furthermore, the Company cannot control
the cybersecurity plans and systems of any of the Company’s
advisers and other service providers.
Fluctuations in
property values
The Group is involved in
the acquisition and disposal of immovable property. Property values
are affected by and may fluctuate, inter alia, as a result of
changing demand, changes in general economic conditions, changing
supply within a particular area of competing space and
attractiveness of real estate relative to other investment choices.
The value of the Group’s property portfolios may also
fluctuate as a result of other factors outside the Group’s
control, such as changes in regulatory requirements and applicable
laws (including in relation to taxation and planning), political
conditions, the condition of financial markets, potentially adverse
tax consequences, interest and inflation rate fluctuations and
higher accounting and control expenses. The Group’s operating
performance could be adversely affected by a downturn in the
property market in terms of capital values.
The valuation of
property and property-related assets is inherently subjective.
Moreover, all property valuations are made on the basis of
assumptions which may not prove to reflect the true position. There
is no assurance that the valuations of the properties and
property-related assets will reflect actual market
process.
International
exposure risk
The group operates in
many countries with differing economic, social and political
conditions. Changes in current conditions may adversely affect the
tenant’s business performance, portfolio fair value, results
of operations, financial conditions, or prospects. The group
manages such risks by incorporating this risk into its business
strategy, i.e., diversification in terms of geography as well as
type of industries/sectors.
Real estate
investments are illiquid.
As property is a
relatively illiquid asset, such illiquidity may affect the
Group’s ability to vary its portfolio or dispose of or
liquidate part thereof in a timely manner and at satisfactory
prices in response to changes in economic, banking, real estate
market or other conditions or the exercise by tenants of their
contractual rights such as those which enable them to vacate
properties occupied by them prior to, or at, the expiration of the
lease term. These factors could have an adverse effect on the
Group’s financial condition and results.
Risks relating to the
potential inability to conclude real estate investments, and/or
sales.
The Group operates in a
competitive environment and therefore the Company’s financial
performance and future growth is partly dependent on the
Group’s ability to acquire, sell and operate its assets on
attractive and sustainable commercial terms. There can be no
assurance that the Group will continue to be able to identify and
acquire target assets on attractive commercial terms or even at
all. Timing of deals is also critical, together with the ability to
secure attractive financing. The above may have a material adverse
impact on the Company’s future growth and prospects, as well
as on its financial performance and its overall financial
condition.
The Group’s
level of debt
The Group’s
ability to implement its respective business strategies is
dependent upon, amongst other things, their ability to generate
sufficient funds internally and to access continued financing at
acceptable costs.
Issuer’s
dependence on payments due from Subsidiaries may be affected by
factors beyond the Issuer’s control
The Issuer is primarily
a holding company and, as such, its assets consist primarily of
loans granted to and investments held in Subsidiaries.
Consequently, the Issuer is largely dependent on income derived
from dividends from Subsidiaries and the receipt of interest and
loan repayments from Subsidiaries. In this respect, the operating
results of the Subsidiaries have a direct effect on the
Issuer’s financial position and therefore the risks intrinsic
in the business and operations of the Subsidiaries have a direct
effect on the financial prospects of the Issuer.
The dividends, interest
payments and loan repayments to be affected by Subsidiaries are
subject to certain risks. More specifically, the ability of
Subsidiaries to effect payments to the Issuer will depend on the
cash flows and earnings of the Subsidiaries, which may be
restricted by changes in applicable laws and regulations, by the
terms of agreements to which they are or may become party,
including the indenture governing their existing indebtedness, if
any, or by other factors beyond the control of the
Issuer
Significant judgement
and estimates
Note 3 to the financial
statements provides details in connection with the inherent
uncertainties that surround the preparation of the financial
statements which requires significant estimates and
judgements.
Non-Financial
Statement
Environmental
matters
The group is committed
to environmental responsibility, and all subsidiaries within the
group has a role to play in living up to that commitment. Efforts
are made in areas where the group can have significant impact on
critical environmental issues, including climate change, natural
resource conservation and waste management. The group invests in
innovations that can improve our environmental footprint, besides
collaborating with other organizations to raise environmental
awareness and work with key suppliers to promote environmentally
responsible practices in their operations.
Employee
matters
The group provides
opportunity, nurtures talent, develops leaders and rewards
achievement. The group believes that a team of individuals with
diverse backgrounds and experiences, working together in an
environment that fosters respect and drives high levels of
engagement, is essential to its continuing business success.
Performance evaluation systems are employed across the group, using
multistage training systems to monitor individual’s
development, and set training requirements.
Each of the
group’s employees deserves to be treated with fairness,
respect, and dignity, providing equal opportunity for employees and
applicants. All the group’s employees have the right to work
in a place that is free from harassment, intimidation, or abuse,
sexual or otherwise, or acts or threats of physical violence. It is
committed to diversity and equal opportunities for everyone,
respecting the unique attributes and perspectives of every
employee, and rely on these diverse perspectives to help the group
build and improve the relationships with customers and business
partners. The group embraces the diversity of its employees,
customers and business partners, and works hard to make sure
everyone within the group feels welcome.
The group provides equal
treatment and equal employment opportunity without regard to race,
colour, religion, sex, age, national origin, disability, sexual
orientation, gender identity or any other basis protected by law.
In addition, it is committed to providing a safe and healthful
working environment for its employees, requiring all employees to
abide by safety rules and practices and to take the necessary
precautions to protect themselves and their fellow employees. For
everyone’s safety, employees must immediately report
accidents and unsafe practices or conditions to their immediate
supervisors.
Respect for human
rights
The group conducts its
activities in a manner that respects human rights, taking the
responsibility seriously to act with due diligence to avoid
infringing on the human rights of others and addressing any impact
on human rights if they occur. The group’s commitment to
respect human rights is defined in the code of business conduct,
which applies to all employees of the group.
The group is committed
to provide a safe work environment that fosters respect, fairness,
and dignity. Group employees are trained annually on the
standard of business conduct.
Anti-corruption and
bribery matters
The group’s
employees must comply with the group Code of Conduct and
Whistle-blower Policy to ensure that all employees are discouraged
from any corrupt practices or bribery as well as are incentivized
to report any such activities in a direct line with the responsible
group supervisor, without fearing reprisals. Every employee
is introduced to these policies upon employment and are mandatory
to be adhered to it.
The group prohibits all
forms of bribery or kickbacks as detailed in the Code of Conduct.
All employees, representatives and business partners must fully
comply with anti-bribery legislation. To comply with the group
policy and anti-bribery laws, no employee should ever offer,
directly or indirectly, any form of gift, entertainment, or
anything of value to any government official or his or her
representatives.
The group is committed
to complying with the applicable laws in all countries where it
does business. It adopts a Global Anti-Corruption Policy which sets
forth its commitment to ensuring that it carries out business in an
ethical manner and abides by all applicable anti-bribery and
anti-corruption laws in the countries in which it operates by,
among other things, prohibiting the giving or receiving of improper
payments in the conduct of the business, and by discouraging such
behaviour by its business partners.
Post balance sheet
events.
There were no post
balance sheet events which merit mention in the directors’
report.
Auditors
Grant Thornton Malta
have expressed their willingness to continue in office and a
resolution for their reappointment will be proposed at the Annual
General Meeting.
Directors
The directors that
served during the period were
Pier Luca Demajo
(Chairman)
Georgios
Kakouras
David
Aquilina
Peter Hili
Laragh Cassar
Eddy Vermeir
In accordance with the
holding company’ articles of association, all directors are
to remain at office.
Going Concern Statement Pursuant
to Capital Markets Rule 5.62
As required by rule 5.62
upon reviewing the Group’s and Company’s performance
and statement of financial position post to year end and also by
reviewing in detail the Group’s and the Company’s
budgets and forecasts, the directors confirm the Group’s and
the Company’s ability to continue operating as a going
concern in the foreseeable future.
Statement of Responsibility
Pursuant to Capital Markets Rules5.68
The Directors declare
that to the best of their knowledge, the financial statements
included in the Annual Report are prepared in accordance with the
requirements of International Financial Reporting Standards as
adopted by the European Union and as amended from time to time and
these statements give in all material aspects a true and fair view
of the assets, liabilities, financial position and results of the
Group and that this report includes a fair review of the
development and performance of the business and position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
Approved by the board
of directors and signed on its behalf on 26 th April
2023 by Pier Luca Demajo (Chairman) and Georgios Kakouras
(Director) as per the Directors' Declaration on ESEF Annual
Financial Report submitted in conjunction with the Annual Financial
Report.
5
Statement of
directors' responsibilities
Year ended 31 December
2022
The directors are
required by the Companies Act (Cap. 386) to prepare financial
statements in accordance with generally accepted accounting
principles and practices which give a true and fair view of the
state of affairs of the company and its group at the end of each
financial year and of the profit or loss of the company and its
group for the year then ended.
In preparing the
financial statements, the directors should:
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adopt the going concern
basis unless it is inappropriate to presume that the company and
the group will continue in business;
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select suitable
accounting policies and then apply them consistently;
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make judgements and
estimates that are reasonable and prudent;
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account for income and
charges relating to the accounting period on the accruals
basis;
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value separately the
components of asset and liability items; and
|
|
•
|
report comparative
figures corresponding to those of the preceding accounting
period.
|
The directors are
responsible for ensuring that proper accounting records are kept
which disclose with reasonable accuracy at any time the financial
position of the company and the group and which enable the
directors to ensure that the financial statements comply with the
Companies Act (Cap. 386). This responsibility includes designing,
implementing and maintaining such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error. The directors are also responsible for safeguarding
the assets of the company and the group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Approved by the board
of directors and signed on its behalf on 26 th April
2023 by Pier Luca Demajo (Chairman) and Georgios Kakouras
(Director) as per the Directors' Declaration on ESEF Annual
Financial Report submitted in conjunction with the Annual Financial
Report.
Corporate Governance
Statement
Introduction
Pursuant to the Capital
Market Rules as issued by the Malta Financial Services Authority,
Hili Properties p.l.c. (the ‘ Company’ ) is
hereby reporting on the extent of its adoption of the Code of
Principles of Good Corporate Governance (the ‘Code’ or
the ‘ Principles’ ) contained in Appendix 5.1 of
the Capital Market Rules.
The adoption of the Code
is not mandatory in nature. This notwithstanding, the Directors are
strongly of the opinion that the adoption of the Code is in the
best interest of the Company, its shareholders and other
stakeholders since it provides the necessary framework to ensure
that the directors, management, and employees of the company work
towards the right set of principles and ethical
standards.
The Company currently
has a corporate decision-making and supervisory structure that is
tailored to suit the Company’s requirements and designed to
ensure the existence of adequate checks and balances, whilst
retaining an element of flexibility, particularly in view of the
size and nature of its business. Generally speaking, the Company
adheres to the Code, except for those identified instances where
there exist particular circumstances that, in the view of the
Directors are excessive to the nature and size of the
Company.
Principle 1: The
Board
Principle 3:
Composition of the Board
The Board of
Directors
The Board of Directors
is responsible for the overall long-term direction of the Company,
in particular being actively involved in overseeing the systems of
control and financial reporting and that the Company communicates
effectively with the market.
The Board of Directors
meets regularly, with a minimum of four times annually, and is
currently composed of six members. Three of the members, being Mr
Pier Luca Demajo, Mr David Aquilina and Dr Laragh Cassar are
independent from the Company or any other related
companies.
The members of the board
are the following:
|
Pier Luca
Demajo
|
Independent
Non-Executive Director
|
|
David
Aquilina
|
Independent
Non-Executive Director
|
|
Laragh Cassar
|
Independent
Non-Executive Director
|
|
Peter
Hili
|
Non-Executive
Director
|
|
Eddy Vermeir
|
Non-Executive
Director
|
|
Georgios
Kakouras
|
Executive
Director
|
The Board considers that
its size is appropriate, taking into account the size of the
Company and its operations. Furthermore, the Board is of the view
that it has the required diversity of knowledge, judgment and
experience to properly complete its tasks. The competencies of the
Directors ranges from industry, financial and legal
expertise.
As above set out, the
Board is composed of a mix of executive and non-executive
directors. The presence of Non-Executive Directors on the Board
serves to, inter alia, constructively challenge the
Executive Directors and management of the Company, and particular
focus is made on strategy and the integrity of financial
performance and management.
Each presently appointed
non-executive director has declared to the Board as stipulated
under the Code Provision 3.4 undertaking:
|
(a)
|
to maintain in all
circumstances his/her independence of analysis, decision and
action;
|
|
(b)
|
not to seek or accept
any unreasonable advantages that could be considered as
compromising his/her independence; and
|
|
(c)
|
to clearly express
his/her opposition in the event that he/she finds that a decision
of the board may harm the Company.
|
Principle 2: Chairman
and Managing Director
The Chairman of the
Company (presently, Mr Pier Luca Demajo) leads the Board and sets
its agenda and works closely with the Company Secretary. In
addition, the Chairman ensures that the directors receive precise,
timely and objective information so that they can take sound
decisions and effectively monitor the performance of the Company
and that effective communication with shareholders is maintained.
The Chairman also encourages active engagement by all directors for
discussion of complex or contentious issues. Working hand in hand
with the Chairman is the Managing Director, (Mr Georgios Kakouras)
who leads the executive management of the Company.
Principle 4: The
Responsibilities of the Board
The Board has the first
level responsibility for executing the four basic roles of
Corporate Governance, namely accountability, monitoring, strategy
formulation and policy development. The Board has established a
clear internal and external reporting system so that it has access
to accurate, relevant and timely information and ensures that
management constantly monitor performance and report to its
satisfaction. The Board, at least on a quarterly basis, evaluates
management’s implementation of corporate strategy and
financial objectives by reference to a number of criteria,
including projected earnings and other anticipated
criteria.
The Board has not
developed a formal succession plan for its Managing Director and
the directors themselves however is in the process of discussing a
manner in which a succession planning process can be
implemented.
Principle 5: Board
Meetings
Each of the directors
has applied the necessary time and attention for the performance of
his/her duties to the Company. During 2022, the Board met on six
(6) occasions:
|
Director
|
Attendance
|
|
Pier Luca Demajo
|
6 out of 6
meetings
|
|
David Aquilina
|
6 out of 6
meetings
|
|
Laragh Cassar
|
2 out of 6
meetings
|
|
Eddy Vermeir
|
6 out of 6
meetings
|
|
Peter Hili
|
6 out of 6
meetings
|
|
Georgios Kakouras
|
6 out of 6
meetings
|
As a matter of practice,
each Board meeting to be held throughout the year is scheduled well
in advance of their due date and each director is provided with
detailed Board papers relating to each agenda item in good time
prior to the actual meetings. Board meetings concentrate mainly on
strategy, operational performance and financial performance of the
Company. After each Board meeting and before the next, Board
minutes that faithfully record attendance, key issues and decisions
are sent to the directors.
Audit
Committee
The Terms of Reference
of the Audit Committee are modelled on the principles set out in
the Capital Market Rules, including the roles set out in Capital
Market Rules 5.127 to 5.130. In addition, unless otherwise dealt
with in any other manner prescribed by the Capital Market Rules,
the Audit Committee has the responsibility to, inter alia,
monitor and scrutinise, and, if required, approve Related Party
Transactions, if any, falling within the ambits of the Capital
Market Rules and to make its recommendations to the Board of any
such proposed Related Party Transactions. The Audit Committee
establishes internal procedures and monitors these on a regular
basis. The Committee also has the authority to summon any
person to assist it in the performance of its duties, including the
Company’s external auditors.
Whilst the Company does
not have a permanent internal auditor function within its
organisational structure, the Audit Committee has engaged the
services of external audit firms to carry out specific internal
audit checks.
The Audit Committee, is
currently composed of the following individuals:
|
David Aquilina
|
Chair & Independent
Non-Executive Director
|
|
Laragh Cassar
|
Independent Non-Executive
Director
|
|
Peter Hili
|
Non-Executive
Director
|
This satisfies the
requirement established by the Capital Market Rules that the Audit
Committee is composed of non-executive directors, the majority of
which being independent.
The Board of Directors
assessed the independence of these members and unanimously agreed
that in line with good corporate governance, David Aquilina, Peter
Hili and Laragh Cassar conduct themselves in an independent and
professional manner satisfying the Capital Market Rules.
Furthermore, the Board
of Directors considers the Audit Committee, as a whole, to have the
relevant experience in the real estate sector, David Aquilina being
considered to be an expert in the real estate business and
competent in accounting and/or auditing in terms of the Capital
Market Rules. The Chief Financial Officer of the Company and the
Managing Director is also present during the Audit Committee
meetings.
The Audit Committee met
four (4) times during 2022.
|
David
Aquilina
|
4 out of 4
meetings
|
|
Laragh Cassar
|
1 out of 4
meetings
|
|
Peter
Hili
|
4 out of 4
meetings
|
Communication with and
between the Company Secretary, top level management and the
Committee is ongoing and considerations that required the
Committee’s attention were acted upon between meetings and
decided by the Members (where necessary) through electronic
circulation and correspondence.
Principle 6:
Information and Professional Development
Appointments and changes
to senior management are the responsibility of the Managing
Director and are approved by the Board. The Board actively
considers the professional and technical development of the Board
itself, all senior management and staff members. The Managing
Director also has systems in place to monitor management and staff
morale. Management prepares detailed reviews for each Board
meeting covering all aspects of the Company’s
business.
On joining the Board, a
new director is provided with the opportunity to consult with the
executive directors and senior management of the Company in respect
of the operations of the Group. Each director is made aware of the
Company’s on-going obligations in terms of the Companies Act,
the Capital Market Rules and other relevant legislation. Directors
have access to the advice and services of the Company Secretary and
to the legal counsel of the Company.
The Company is also
prepared to bear the expense incurred by the directors requiring
independent professional advice should they deem it necessary to
discharge their responsibilities as directors.
Principle 7:
Evaluation of the Board’s Performance
With respect to the year
under review, the Board undertook an evaluation of its own
performance, the Chairman’s performance and that of its
Committees. The Board did not per se appoint a Committee to
carry out this performance evaluation but the evaluation exercise
was conducted through a questionnaire, copies of which were sent to
the Chairman of the Audit Committee and the results were reported
to the Chairman of the Board. [No material changes were made to the
Company’s structures as a result of the Board
evaluation.]
Principle 8:
Committees
The required disclosures
on the remuneration structure of the Company are found in the
annual report under ‘Remuneration
Statement’.
Furthermore, reference
is made to the Non-Compliance section hereunder where disclosure of
the non-compliance with the appointment of a remuneration committee
and a nomination committee is made.
Principle 9:
Relations with Shareholders and with the Market & Principle 10:
Institutional Investors
The Company engages in
dialogue with the market through a number of measures, including
the issuance of timely and information announcements to the market,
the holding of meetings with the local stockbroking community and
the issuance of press releases. Until the initial public offering
of the Company in Q4 of 2021, the Company’s share capital was
held privately and therefore it is only after its successful
listing of its equity securities, that communication with its
shareholders took place in a more formal manner. The Company
intends to ensure that all communications are effectively and
through additional channels, such as through its annual general
meetings, where shareholders will be given the opportunity to have
their questions raised and answered.
Principle 11:
Conflicts of Interest
The directors are aware
that their primary responsibility is always to act in the interest
of the Company and its shareholders as a whole irrespective of who
appointed them to the Board. Acting in the interest of the Company
includes an obligation to avoid conflicts of interest. In such
instances, the Company has strict policies in place which allow it
to manage such conflicts, actual or potential, in the best interest
of the Company. Each director’s service contract contains
provisions which require the director to:
|
(a)
|
ensure that his/her
personal interests do not conflict with the interests of the
Company;
|
|
(b)
|
not carry on, directly
or indirectly, business in competition with the Company;
|
|
(c)
|
not make personal gains
or profits from his post without the consent of the Company, or
from confidential information;
|
|
(d)
|
not use any property,
information or opportunity of the Company for his own benefit or
for the benefit of any third party,
|
|
(e)
|
not obtain any benefit
in connection with the exercise of his powers, except with the
consent of the Company in general meeting.
|
Furthermore, any
director that has a conflict (actual or potential) is required to
disclose and record the conflict in full and in time to the Board
and is also precluded from participating in a discussion concerning
matters in such conflicted matters. Under no circumstance is the
conflicted director, permitted to vote on the matter. This
requirement is reflected in Article 87.3 of the Company’s
Articles of Association. Subject to the provisions of the law, the
company may in general meeting, by ordinary resolution, suspend or
relax the said provisions of the Articles of Association to any
extent or ratify any transaction not duly authorised by reason of a
contravention of the said provision.
Principle 12:
Corporate Social Responsibility
The Directors also seek
to adhere to accepted principles of corporate social responsibility
in their management practices of the Company in relation to the
Group’s workforce and the community in general.
Environmental, Social
and Governance Standards Commitment
Hili Properties plc is
committed to environmental, social and governance principles and is
actively working to optimize its portfolio’s performance,
reduce energy consumption and carbon emissions. Its strategy
is focused on the acquisition and development of sustainable
buildings. The company is dedicated to supporting and enhancing
communities in which it operates as it increases shareholder value
and pursue long-term success. Therefore, a range of ESG
initiatives are implemented to benefit tenants and the broader
community. Considerable efforts are made to reduce energy
consumption, carbon emissions, improve sustainability and promote
social responsibility:
Reaching out to the
community, tenants support
Hili Properties plc has
supported the opening of Pusaudzu Resursu Centrs: a non-profit
organization helping children and families by providing support
through therapy. The group provided the necessary space for the
activities of this organization to be set up, in one of the
shopping centres in Riga. The facilities provided include floor
space of 95 square metres, with reception area, two rooms for
individual therapist consultations and a third room for
sessions.
Caring for the
Environment
In its commitment to
sustainability, Hili Properties plc has launched an electric
vehicle charging project for their office building in Malta. In
September 2022, the supply, assembly, and installation of an
electrical infrastructure system for electric vehicle charging was
completed. The result of such installation, there are now 16
electric vehicle charging stations available for employee’s
use. These charging stations will help the company reduce carbon
emissions, improve public health, and minimise ecological damage,
while maintaining a low carbon footprint.
As the continuation of
its commitment, Hili Properties plc has already been recognised for
efforts made towards acquisitions targeted for properties holding a
sustainable footprint, as in the case of the Rehau
industrial plant in Lithuania and the most recent acquisition being our MIRO offices in
Romania.
Hili Properties’
Rehau industrial plant, located in Lithuania was granted a BREEAM
certification for its sustainability features and it has also won a
gold medal at the Lithuanian Product of the Year 2022 event
organised by the Lithuanian Confederation of Industrialists (LPK).
The award, received by YIT Lietuva, the Finnish urban developer
responsible for the design and construction of the plant,
recognises its commitment to safety, innovation and sustainability.
Our tenant Rehau is also a member of the 50 Sustainability and
Climate Leaders.
On MIRO office building
in Bucharest, Romania - the most recent acquisition of Hili
Properties plc - the installation of 400
kWp photovoltaic panels is in progress which not only contributes
to reduction of the carbon footprint but also serves as cost saving
solution for the tenants. MIRO office building has also received
the highest level of WELL certificate – the Platinum
certificate. The first property in Romania to earn this prestigious
rating with only 248 Platinum certificates issued worldwide, MIRO
office building is at the forefront of sustainable design and
commitment to promoting health and well-being.
Non-compliance with
the Code
Principle 4
Responsibilities of the Board: Succession Planning
The Board has not
developed a formal succession plan for its Managing Director and
the directors themselves however is in the process of discussing a
manner in which a formal succession plan can be
implemented.
Principle 7:
Evaluation of the board’s performance
With respect to the year
under review, the Board undertook an evaluation of its own
performance, the Chairman’s performance and that of its
committees. The Board did not per se appoint a committee to
carry out this performance evaluation, but the evaluation exercise
was conducted through a questionnaire, copies of which were sent to
the Chairman of the Audit Committee and the results were reported
to the Chairman of the Board. No material changes were made to the
Company’s structures as a result of the Board
evaluation.
Principle 8:
Committees
Under the present
circumstances the Board does not consider it necessary to appoint a
remuneration committee and a nomination committee as decisions on
these matters are taken at shareholder level.
Internal
Control
Organisation
The Company operates
through the Board of directors with clear reporting lines and
delegation of powers. The Board is responsible for the
company’s internal controls as well as their effectiveness
and the authority to operate such controls are delegated to the
Managing Director.
Control
environment
The Company is committed
to the highest standards of business conduct and seeks to maintain
these standards across all its subsidiaries.
The Company has an
appropriate organisational structure for planning, executing, and
controlling and monitoring business operations to achieve
objectives. Lines of responsibility and delegation of authority are
documented.
The Group and the
individual companies comprising it have implemented control
procedures designed to ensure complete and accurate accounting for
financial transactions and to limit the potential exposure to loss
of assets or fraud. Measures taken include physical control,
segregation of duties and reviews by management and external
auditors.
Although the Company has
not appointed an internal auditor, the Board of Directors
believes that the combination of checks and balances on the finance
function of the Company, including the remit and responsibilities
of the Audit Committee the Company’s finance policies and
procedures, as well as the Company’s statutory and legal
obligations as a listed entity together of the engagement of
independent external auditors, provide adequate and suitable
controls that are commensurate with the size and complexity of its
business and operations. The Board of Directors will retain this
matter under review in the coming year.
Risk
identification and assessment
Group management and the
Board of Directors are responsible for the identification and
evaluation of key risks applicable to their areas of business.
These risks are assessed on a continual basis and may be associated
with a variety of internal or external sources including control
breakdowns, disruption in
information systems, competition, natural
catastrophe, and regulatory requirements.
Information and communication
Group companies
participate in periodic strategic reviews, which include
consideration of long-term financial projections and the evaluation
of business alternatives.
Monitoring and corrective action
There are clear and
consistent procedures in place for monitoring the system of
internal financial controls. The Audit Committee plans in advance
and meets regularly during the year and, within its terms of
reference as approved by the MFSA, reviews the effectiveness of the
Group’s systems of internal financial controls. The Audit
Committee receives reports from management and the independent
external auditors.
General Meetings and
Shareholders’ Rights
Conduct of general
meetings
It is only shareholders
whose details are entered into the register of members on the
record date that are entitled to participate in the general meeting
and to exercise their voting rights. In terms of the Capital Market
Rules, the record date falls 30 days immediately preceding the date
set for the general meeting to which it relates. The establishment
of a record date and the entitlement to attend and vote at general
meeting does not, however, prevent trading in the shares after the
said date.
In order for business to
be transacted at a general meeting, a quorum must be present. In
terms of the Articles of Association, 50% of the total voting
rights constitutes a quorum. If within half an hour, a quorum is
not present, if convened by or upon requisition of the
shareholders, the meeting will be dissolved. In any other case, it
shall be adjourned to such time and place as determined by the
Chairman (not being less than 14 days nor more than 28 days). If at
the adjourned meeting, a quorum is not present within thirty
minutes, the members present (being not less than two persons)
shall constitute quorum. The company is required to give not less
than ten (10) clear days’ notice and the notice is required
to specify that the Members present as aforesaid shall form a
quorum. At any general meeting, a resolution put to a vote shall be
determined and decided by a show of hands, unless a poll is
demanded before or on the declaration of the result of a show of
hands by;
|
(i)
|
the Chairman of the
meeting; or
|
|
(ii)
|
by at least three (3)
members present in person or by proxy; or
|
|
(iii)
|
any member or members
present in person or by proxy and representing not less than one
tenth of the total voting power of all members having the right to
vote at that meeting; or
|
|
(iv)
|
a member or members
present in person or by proxy holding equity securities conferring
a right to vote at the meeting, being equity securities on which an
aggregate sum has been paid up equal to not less than one-tenth of
the total sum paid up on all the equity securities conferring that
right.
|
Unless a poll be so
demanded, a declaration by the Chairman that a resolution has on a
show of hands been carried or carried unanimously, or by a
particular majority, or lost and an entry to that effect in the
book containing the minutes of the proceedings of the Company shall
be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against such
resolution: PROVIDED that where a resolution requires a particular
majority in value, the resolution shall not be deemed to have been
carried on a show of hands by the required majority unless there be
present at that meeting, whether in person or by proxy, a number of
members holding in the aggregate the required majority as
aforesaid. A demand for a poll may be withdrawn.
A poll demanded on the
election of a chairman or on a question of adjournment shall be
taken forthwith.
A poll demanded on any
question shall be taken either immediately, at any time during the
meeting, or at such subsequent time (not being more than thirty
days after the date of the Meeting or adjourned Meeting at which
the poll is demanded) and place as the Chairman may direct.
No notice need be given of a poll not taken immediately. Any
business other than that upon which a poll has been demanded may be
proceeded with pending the taking of the poll. The demand for
a poll may be withdrawn. If a poll is duly demanded it shall
be taken in such manner (including the use of ballot or voting
papers or ticket) as the Chairman of the Meeting directs, and the
result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
In the case of an
equality of votes, whether on a show of hands or on a poll, the
Chairman of the Meeting at which the show of hands takes place or
at which the poll is demanded, shall be entitled to a second or
casting vote.
Where a poll is taken at
a general meeting of the Company and a request is made by a
Shareholder for a full account of the poll, the Company is required
to publish the following information on its website by not later
than fifteen (15) days after the day of the general meeting at
which the voting result was obtained:
|
a.
|
the date of the
meeting;
|
|
b.
|
the text of the
resolution or, as the case may be, a description of the subject
matter of the poll;
|
|
c.
|
the number of shares for
which votes have been validly cast;
|
|
d.
|
the proportion of the
Company’s issued share capital at close of business on the
day before the meeting represented by those votes;
|
|
e.
|
the total number of
votes validly cast; and
|
|
f.
|
the number of votes cast
in favour of and against each resolution and, if counted, the
number of abstentions.
|
Where no Shareholder
requests a full account of the voting at a general meeting, it
shall be sufficient for the Company to establish the voting results
only to the extent necessary to ensure that the required majority
is reached for each resolution.
Where voting on a
particular item or resolution is conducted by a show of hands
rather than by a poll, it shall not be necessary in the case where
a Shareholder requests a full account of the voting at a general
meeting for the Company to publish the information required by the
Capital Markets Rules and it shall be sufficient for the chairman
of the meeting to publish a statement indicating:
|
a.
|
the total number of
Shareholders entitled to vote present at the
meeting;
|
|
b.
|
that upon a show of
hands at the meeting it appeared that the resolution had either
been carried or rejected.
|
Proxy
The instrument
appointing a proxy shall be in writing under the hand of the
appointor or of his attorney duly authorised in writing, or if the
appointor is a person other than a natural person, the hand of an
officer or attorney duly authorised. The signature on such
instrument need not be witnessed nor must a proxy be a Member of
the Company. A Member may not appoint more than one proxy to
attend on the same occasion unless such Member is holding shares
for and on behalf of third parties in which case he shall be
entitled to grant a proxy to each of his clients or to any third
party designated by a client. Such Member shall be entitled to cast
votes attaching to some of the Shares differently from the others.
Proxy forms shall be designed by the Company to allow such split
voting.
Deposit of an instrument of proxy shall not preclude a Member from
attending and voting in person at the Meeting or any adjournment
thereof.
An instrument
appointing or revoking a proxy and the power of attorney or other
authority, if any, under which it is signed, or a notarially
certified copy of that power or authority shall either (i) be
deposited at the Office or at such other place (if any) in Malta as
is specified for that purpose in or by way of note to the notice
convening the Meeting, or (ii) be transmitted electronically to an
electronic address as is specified for that purpose in or by way of
note to the notice convening the Meeting, in each case not less
than forty-eight hours before the time for holding the Meeting or,
if the Meeting be adjourned, not less than forty-eight hours (or
such lesser period as the Chairman who adjourned the Meeting may in
his discretion determine) before the time for holding the adjourned
Meeting, at which the person named in the instrument proposes to
vote, or, in the case of a poll taken otherwise than at or on the
same day as the Meeting or adjourned Meeting, not less than
twenty-four hours before the time appointed for the taking of the
poll at which it is to be used, and in default the instrument of
proxy shall not be treated as valid.
An instrument
appointing a proxy shall, unless the contrary is stated thereon, be
valid as well for any adjournment of the Meeting to which it
relates. No instrument of proxy shall be valid after the
expiration of twelve months from the date of its execution except
at an adjourned Meeting or on a poll demanded at a Meeting or
adjourned Meeting in cases where the Meeting was originally held
within twelve months from that date.
The instrument
appointing a proxy shall be deemed to confer authority to demand or
join in demanding a poll.
A vote given in
accordance with the terms of an instrument of proxy shall be valid
notwithstanding the previous death or interdiction of the principal
or revocation of the proxy or of the authority under which the
proxy was executed, or the transfer of the share in respect of
which the proxy is given, provided that no intimation in writing of
such death, interdiction, revocation or transfer shall have been
received by the Company at the Office or such other place (if any)
as is specified for depositing the instrument of proxy an hour at
least before the commencement of the Meeting or adjourned Meeting
or the holding of a poll subsequently thereto at which such vote is
given.
Any person which is not
a natural person and is a Member of the Company may by resolution
of its directors or other governing body
authorise such person as it thinks fit to act as its representative
at any Meeting of the Company or of any class of Members of the
Company, and the person so authorised shall be entitled to exercise
the same powers on behalf of the Member which he represents as that
Member could exercise if it were an individual Member of the
Company.
Including items on
the agenda
A shareholder or
shareholders holding not less than 5% of the issued share capital
may include items on the agenda of the general meeting and table
draft resolutions for items included on the agenda of a general
meeting. Such right must be exercised by the shareholder at least
46 days before the date set for the general meeting to which it
relates.
Questions
Shareholders have the
right to ask questions which are pertinent and related to the items
on the agenda. The Company may provide one overall answer to
questions having the same content. An answer to a question is
not required where:
|
a.
|
to give an answer would
interfere unduly with the preparation for the meeting, involve the
disclosure of confidential information or cause prejudice to the
business interests of the Company;
|
|
b.
|
the answer has already
been given on the Company’s website in the form of an answer
to a question;
|
|
c.
|
it is not in the
interests of good order of the meeting that the question be
answered; or
|
|
d.
|
the Company is unable to
provide an immediate reply, provided that such reply is
subsequently posted on the website of the Company.
|
Electronic
voting
In terms of the Articles
of Association of the Company, a ll General
Meetings of the Company may be held virtually in accordance with
applicable law and, where applicable, the Capital Markets Rules.
The means used for the virtual meeting and the procedure of how
Members shall be entitled to attend and vote, and participate in
the discussion shall be determined prior to every General Meeting
and shall be communicated to all Members in the relevant notice
convening such General Meeting.
Further details on the
conduct of a general meeting and shareholders’ rights are
contained in the Memorandum and Articles of Association of the
Company and in line with chapter 12 of the Capital Market
Rules.
Signed on behalf of the
Board of Directors on the 26 th April 2023
by:
_______________________________
David
Aquilina
Director and Chairman of
Audit Committee
7
In accordance with
Capital Market Rule 12.26A, the Company is required to establish a
‘remuneration policy in respect of its directors’ and
to grant the right to shareholders to vote on the remuneration
policy at the Annual General Meeting (AGM). The Capital Market
Rules also require the Company to draw up a remuneration report in
accordance with the ‘remuneration policy in respect of its
directors’ and with the criteria in Appendix 12.1
‘Information to be provided in the Remuneration Report’
of the said Capital Market Rules.
Remuneration Policy -
Directors
In the absence of a
remuneration committee, the Board determines the framework of the
remuneration policy for the members of the Board as a whole. The
Board is composed of Executive and Non-Executive
Directors.
As at the date hereof,
the non-executive Directors are party to a director services
contract with the Company, pursuant to which their respective role,
responsibilities, duties and the applicable remuneration is set
out.
The term of such
service contracts commences from the date of entry into the said
contract and continues in force thereafter until the next annual
general meeting of the Company at which the Directors shall be
eligible for re-election, or until such time as the Director
resigns or until such time as such Director is removed from
office.
None of the service
contracts contain provisions for termination payments and other
payments linked to early termination.
The maximum annual
aggregate emoluments that may be paid to the directors is approved
by the shareholders in General Meeting. The Board may approve
changes to the fees within the aggregate amount approved by
Shareholders at the Annual General Meeting. The total fees paid to
non-executive directors (in their role as director) is to be
entirely represented by a fixed remuneration.
Directors’
emoluments are designed to reflect the directors’ knowledge
of the business and time committed as directors to the
Company’s affairs.
None of the
Non-Executive Directors in their capacity as Non-Executive
Directors of the Company shall be entitled to profit sharing, share
options, pension benefits, variable remuneration or any other
remuneration or related payments from the Company.
Remuneration Policy
– Senior Executives
For the purposes of this
policy, the senior executives of the Company shall refer to the
Managing Director, the Chief Finance Officer (CFO) and the
Properties Project Manager (PPM).
The Board shall
determine the framework of the overall remuneration policy and
individual remuneration arrangements for its senior executives. The
Board considers that these remuneration packages, inclusive of a
variable and non-variable payment, should be designed to reflect
market conditions and to attract appropriate quality executives to
ensure the efficient management of the Company. The Board
acknowledges that the payment of a variable remuneration has become
increasingly important in attracting and maintaining quality
staff.
The terms and conditions
of employment of each individual within the senior executive team
are set out in their respective contracts of employment with the
Company. The contracts of employment of the senior executive
are made on an indefinite basis. The Managing Director is entitled
to a to a fixed-based salary together with a variable discretionary
performance bonus, based on a pre-defined percentage of the audited
consolidated net profit before taxation of the Company. Such bonus
scheme is driven by the crucial role of the Managing Director in
the oversight of the day-to-day business, and the growth of the
Company and its underlying business clusters.
In the case of the CFO
and the PPM, additional performance criteria are considered in the
entitlement to a bonus. Additionally, the senior executives are
entitled to medical insurance cover, an expensed mobile phone and
laptop. Moreover, share options are currently not part of the
Company’s remuneration package available to employees of the
Company.
During the year, the
Directors received the following fees:
|
Director
|
Fixed
Remuneration
|
Variable
Remuneration
|
Other
|
|
Pier Luca Demajo
|
€40,000
|
None
|
None
|
|
David Aquilina
|
€18,245
|
None
|
None
|
|
Laragh Cassar
|
€12,173
|
None
|
None
|
|
Eddy Vermeir
|
€12,000
|
None
|
None
|
|
*Peter Hili
|
None
|
None
|
None
|
|
Georgios Kakouras (Managing
Director)
b. salary as Managing Director
|
€2,796
€150,000
|
None
€115,324
|
None
€1,135
|
|
Total
|
€ [235,214]
|
€ [115,324]
|
€ [1,135]
|
The amount paid as
directors’ fees is within the limit of €112,000 approved
by the Annual General Meeting of the 28 th June
2022.
*Mr Peter Hili did not
receive any remuneration in respect of their office of director of
the Company.
2022 Senior
Executives Remuneration
During the course of
2022, the total remuneration paid to the members of the executive
management team was €188,089 (excluding the above
referred salary paid to the Managing Director).
_________________________
Pier Luca
Demajo
Chairman
26 th April
2023
8
Disclosure in terms of
the Capital Market Rules
Share capital
structure.
The Company’s
authorised share capital is Eur120,000,000 divided into one
600,000,000 ordinary shares of Eur0.20 per share. The
Company’s issued share capital is Eur80,178,540
divided into 400,892,700 ordinary shares of Eur0.20 per
share. All of the issued shares of the Company form part of
one class of ordinary shares in the Company, which shares are
listed on the Malta Stock Exchange. All shares in the Company
have the same rights and entitlements and rank pari passu
between themselves.
The following are
highlights of the rights attaching to the shares:
|
Dividends:
|
The shares carry the
right to participate in any distribution of dividend declared by
the Company;
|
|
Voting
rights:
|
Each share shall be
entitled to one vote at meetings of shareholders;
|
|
Pre-emption
rights:
|
In accordance with
Article 88 of the Act, should shares of the Company be proposed for
allotment for consideration in cash, those shares must be offered
on a pre-emptive basis to shareholders in proportion to the share
capital held by them immediately prior to the new issue of shares.
A copy of any offer of subscription on a pre-emptive basis
indicating the period within which this right must be exercised
must be delivered to the Registrar of Companies for registration.
Provided that such registration shall not be required as long as
all the Shareholders of the Company are informed in writing of the
offer of subscription on a pre-emptive basis and of the period
within which this right shall be exercised. The right of
pre-emption may be withdrawn by an extraordinary resolution of the
general meeting, in which case, the directors will be required to
present to that general meeting a written report indicating the
reasons for restriction/withdrawal of the said right and justifying
the issue price;
|
|
Capital
distributions:
|
The shares carry the
right for the holders thereof to participate in any distribution of
capital made whether on a winding up or otherwise;
|
|
Transferability:
|
The shares are freely
transferable in accordance with the rules and regulations of the
Malta Stock Exchange, applicable from time to time;
|
|
Other:
|
The shares are not
redeemable and not convertible into any other form of
security;
|
|
Mandatory takeover
bids:
|
Chapter 11 of the
Capital Market Rules, implementing the relevant Squeeze-Out and
Sell-Out Rules provisions of Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004, regulates the
acquisition by a person or persons acting in concert of the control
of a company and provides specific rules on takeover bids,
squeeze-out rules and sell-out rules. The shareholders of the
Company may be protected by the said Capital Market Rules in the
event that the Company is subject to a Takeover Bid (as defined
therein). The Capital Market Rules may be viewed on the
official website of the Malta Financial Services Authority -
www.mfsa.com.mt ;
|
|
Holdings in excess of
5% of the share capital
|
On the basis of the
information available to the Company as at the 31 December 2022,
the following persons hold 5% or more of its issued share
capital:
|
Shareholder
|
%
|
No of Ordinary
Shares
|
|
Hili Ventures
Limited
|
74.83%
|
299,999,990
|
|
Calamatta Cuschieri
Investment Services Limited (in its own name and/or for the benefit
of its clients)
|
7.03%
|
28,173,308
|
As far as the Company is
aware, no other person holds any direct or indirect shareholding in
excess of 5% of its total issued share capital.
|
|
Appointment/Replacement of Directors
|
In terms of the
memorandum and articles of association of the Company, the
directors of the Company shall be appointed by the shareholders in
the annual general meeting as follows:
(a)
Shareholders are granted a period of at least
fourteen (14) days to nominate candidates for appointment as
Directors. Such notice may be given by the publication of an
advertisement in at least two (2) daily newspapers. All such
nominations, including the candidate’s acceptance to be
nominated as director, shall on pain of disqualification be made on
the form to be prescribed by the Directors from time to
time.
(b)
In the event that there are either less
nominations than there are vacancies on the board or if there are
as many nominations made as there are vacancies on the Board, then
each person so nominated shall be automatically appointed a
director.
(c)
The chairman of the Company is appointed by the
single largest shareholder (provided such member holds not less
than 50% of the issued share capital having voting rights in the
Company)
(d)
Any member holding separately not less than 15%
of the total voting rights of the Company shall be entitled to
appoint a director for each 15% of the voting rights held by such
shareholder; Where the chairman has been appointed by such member,
15% of the member’s voting rights shall be deducted and the
balance can be utilised by the member for the purposes of
appointing directors on the board;
(e)
Any remaining vacancies on the board (after the
appointment of the directors set out above) shall be elected a
general meeting. Voting shall take place on the basis that one
share entitles the holder to vote for only one candidate for
election. The Chairman of the Company shall declare elected those
candidates who obtained the highest number of votes.
(f)
Subject to the above, any vacancy among the
directors may be filled by the co-option of another person to fill
such vacancy at an extraordinary general meeting and the same
procedure for the appointment of directors shall apply.
Additionally, if the director causing the causal vacancy was
appointed pursuant to para (d) above, the vacancy shall be filled
in the same manner (provided the shareholder still holds the
required number of voting rights).
(g)
A casual vacancy may also be filled by the board
of directors and the said director will hold office under the next
annual general meeting and will be eligible for
re-election.
(h)
Any director may be removed, at any time, by the
Member or Members by whom he was appointed. The removal may be made
in the same manner as the appointment.
(i)
Any director may be removed at any time by the
Company in general meeting pursuant to the provisions of section
140 of the Act provided that if the director so removed was
appointed pursuant to para (d) above, the process set out in para
(f) shall apply.
|
|
Amendment to the
Memorandum and Articles of Association
|
In terms of the
Companies Act, Cap 386 of the laws of Malta, the Company may by
extraordinary resolution at a general meeting alter or add to its
memorandum or articles of association. An extraordinary
resolution is one where:
(a)
it has been taken at a general meeting of which
notice specifying the intention to propose the text of the
resolution as an extraordinary resolution and the principle purpose
thereof has been duly given;
(b)
it has been passed by a shareholder or
shareholders having the right to attend and vote at the meeting
holding in the aggregate not less than seventy-five per cent (75%)
in nominal value of the shares issued by the Company represented
and entitled to vote at the meeting and at least fifty-one per cent
(51%) in nominal value of all the shares issued by the Company and
entitled to vote at the meeting.
If one of the aforesaid
majorities is obtained but not both, another meeting shall be duly
convened within 30 days to take a fresh vote on the proposed
resolution. At the second meeting the resolution may be
passed by a shareholder or shareholders having the right to attend
and vote at the meeting holding in the aggregate not less than 75%
in nominal value of the shares issued by the Company represented
and entitled to vote at the meeting. However, if more than
half in nominal value of all the shares issued by the Company
having the right to vote at the meeting is represented at that
meeting, a simple majority in nominal value of such shares so
represented shall suffice.
|
|
Board Members’
Powers
|
The Directors are vested
with the management of the Company, and their powers of management
and administration emanate directly from the memorandum and
articles of association and the law. The Directors are
empowered to act on behalf of the Company and in this respect have
the authority to enter into contracts, sue and be sued in
representation of the Company. In terms of the memorandum and
articles of association they may do all such things that are not by
the memorandum and articles of association reserved for the Company
in general meeting.
In particular, the
Directors are authorised to issue shares in the Company with such
preferred, deferred or other special rights or such restrictions,
whether in regard to dividend, voting, return of capital or
otherwise as the Directors may from time to time determine, as long
as such issue of Equity Securities falls within the authorised
share capital of the Company.
Any increase in the
issued share capital of the Company shall be decided upon an
Ordinary Resolution of the Company. This notwithstanding, the board
of directors is authorised to issue shares up to the authorised
capital of the Company, subject to the aforementioned pre-emption
rights where shares are to be allotted for consideration in
cash.
|
Save as otherwise
disclosed herein, the provisions of Capital Market Rules 5.64.2,
5.64.4 to 5.64.7 and 5.64.11 are not applicable to the Company.
There are no disclosures to be made in terms of Capital Market Rule
5.64.10.
Pursuant to Capital
Market Rule 5.70.1
Pursuant to an agreement
entered into on the 1 January 2014, the Company entered into a
management consultancy agreement with Hili Ventures Limited, the
major shareholder in the Company. Pursuant to this agreement, Hili
Ventures Limited provides consultancy, legal, GDPR, marketing and
PR, administrative, IT, HR and other services to the Company. Mr
Peter Hili, is a director of the Company and is an indirect
shareholder of Hili Ventures Limited. During the year ended 31
December 2022, Hili Ventures Limited received Eur700,000 in
fees as compensation for the services rendered.
Pursuant to Capital
Market Rule 5.70.2
|
Company
Secretary:
|
Mr. Adrian
Mercieca
|
|
Registered Office of
Company:
|
Nineteen Twenty
Three
Valletta Road
Marsa MRS 3000
Malta
|
|
Registration No of
Company:
|
C 57954
|
|
Telephone:
|
(+356) 2568 1200
|
|
Email Address
:
|
info@hiliproperties.com
|
Approved by the board of
directors and signed on its behalf on 26 th April 2023
by Pier Luca Demajo (Chairman) and Georgios Kakouras (Director) as
per the Directors' Declaration on ESEF Annual Financial Report
submitted in conjunction with the Annual Financial
Report.
9
Statement of Directors
pursuant to Capital Market Rule 5.68
To the best of the
knowledge of the directors:
|
(i)
|
the financial
statements, prepared in accordance with the applicable accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Issuer and the
undertakings included in the consolidation taken as a whole;
and
|
|
(ii)
|
the Directors’
report includes a fair review of the performance of the business
and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
|
Signed on its behalf on
26 th April 2023 by Pier Luca Demajo (Chairman) and
Georgios Kakouras (Director) as per the Directors' Declaration on
ESEF Annual Financial Report submitted in conjunction with the
Annual Financial Report.
10
Statements of profit or loss and other comprehensive
income
Year ended 31 December
2022
|
|
|
|
Group
|
Holding
company
|
|
|
|
2022
|
2021
|
2022
|
2021
|
|
|
Notes
|
Eur
|
Eur
|
Eur
|
Eur
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
Revenue
|
6
|
12 249 138
|
8 240 539
|
159
500
|
159 500
|
|
Cost of
sales
|
|
(674 038)
|
(484 370)
|
-
|
-
|
|
Other operating
income
|
7
|
276 877
|
209 957
|
-
|
-
|
|
Other operating
expenses
|
|
(161 516)
|
(128 045)
|
-
|
-
|
|
Administrative
expenses
|
|
(3 291 439)
|
(2 981 256)
|
(1 897
076)
|
(1 856 964)
|
|
Operating
profit/(loss)
|
|
8 399 022
|
4 856 825
|
(1
737 576)
|
(1 697 464)
|
|
|
|
|
|
|
|
|
Investment
income
|
8
|
4 975 612
|
2 918 725
|
25
000
|
11 911 059
|
|
Investment
losses
|
9
|
(1 934 407)
|
(794 670)
|
(184 371)
|
-
|
|
Net investment
income/(loss)
|
|
3 041 205
|
2 124 055
|
(159 371)
|
11 911 059
|
|
Finance
income
|
10
|
107 633
|
313 654
|
1 568
381
|
961 050
|
|
Finance
costs
|
11
|
(4 749 558)
|
(3 534 886)
|
(2 040
538)
|
(2 092 821)
|
|
Profit/(loss) before
tax
|
12
|
6 798 302
|
3 759 648
|
(2 369 104)
|
9 081 824
|
|
Income tax
expense
|
15
|
(826 032)
|
(590 449)
|
(
46 901 )
|
(710 362)
|
|
Profit/(loss) for the
year from continuing operations
|
|
5 972 270
|
3 169 199
|
(2 416
005)
|
8 371 462
|
|
Other comprehensive
income/(expense)
|
|
|
|
|
|
|
Exchange differences on
translation of foreign operations
|
|
15 847
|
(25 859)
|
-
|
-
|
|
|
|
|
|
|
|
|
Total comprehensive
income/(expense) for the year
|
|
5 988 117
|
3 143 340
|
(2 416
005)
|
8 371 462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
2021
|
|
|
|
|
|
Eur
|
Eur
|
|
|
|
Profit attributable
to:
|
|
|
|
|
|
|
Owners of the
company
|
|
5 322 508
|
3 169 199
|
|
|
|
Non-controlling
interests
|
|
649 762
|
-
|
|
|
|
|
|
5 972
270
|
3 169 199
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income attributable to
|
|
|
|
|
|
|
Owners of the
company
|
|
5 335 750
|
3 143 340
|
|
|
|
Non-controlling
interests
|
|
652 367
|
-
|
|
|
|
|
|
5 988
117
|
3 143 340
|
|
|
Statements of financial position
|
|
|
|
Group
|
Holding
company
|
|
|
|
2022
|
2021
|
2022
|
2021
|
|
|
Notes
|
Eur
|
Eur
|
Eur
|
Eur
|
|
|
|
|
|
|
|
|
ASSETS AND
LIABILITIES
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
Intangible
assets
|
16
|
15 673
|
15 688
|
15
665
|
15 665
|
|
Property, plant, and
equipment
|
17
|
109 588
|
75 392
|
1
535
|
2 415
|
|
Investment
property
|
19
|
232 298 000
|
124 625 723
|
2 525
000
|
2 500 000
|
|
Property held for
sale
|
23
|
3 700 000
|
11 970 000
|
3 700
000
|
3 700
000
|
|
Investment in
subsidiaries
|
20
|
-
|
-
|
79 096
407
|
29 979 939
|
|
Deposit on acquisition
of investments
|
21
|
-
|
24 500 000
|
-
|
24 500 000
|
|
Loans and
receivables
|
22
|
547 413
|
1 225 136
|
22 073
795
|
34 919 408
|
|
Trade and other
receivables
|
24
|
2 037 978
|
127 254
|
-
|
-
|
|
Derivative financial
instruments
|
22
|
862 586
|
-
|
-
|
-
|
|
Deferred tax
assets
|
30
|
563 808
|
295 687
|
-
|
-
|
|
Right-of-use
asset
|
18
|
275 103
|
114 312
|
-
|
-
|
|
Restricted
cash
|
32
|
1 971 836
|
1 803 507
|
-
|
-
|
|
|
|
242 381 985
|
164 752 699
|
107 412
402
|
95 617 427
|
|
Current
assets
|
|
|
|
|
|
|
Loans and
receivables
|
22
|
27 778
|
3 089 432
|
36 656
611
|
21 794 056
|
|
Trade and other
receivables
|
24
|
2 786 276
|
3 439 797
|
372
934
|
2 385 730
|
|
Current tax
assets
|
|
190 302
|
220 655
|
174
733
|
219
940
|
|
Cash in bank and on
hand
|
32
|
10 982 981
|
37 193 295
|
2 033
896
|
26 714 686
|
|
|
|
13 987 337
|
43 943 179
|
39 238
174
|
51 114 412
|
|
Total
assets
|
|
256 369 322
|
208 695 878
|
146 650
576
|
146 731 839
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Trade and other
payables
|
25
|
4 143 003
|
3 299 242
|
1 557
644
|
1 921 507
|
|
Other financial
liabilities
|
26
|
36 533
|
721 802
|
2 522
299
|
2 706 106
|
|
Lease
liability
|
28
|
35 523
|
32 864
|
-
|
-
|
|
Bank loans
|
27
|
14 834 335
|
4 796 331
|
-
|
-
|
|
Current tax
liability
|
|
624 660
|
481 809
|
-
|
-
|
|
|
|
19 674 054
|
9 332 048
|
4 079
943
|
4 627
613
|
|
Non-current
liabilities
|
|
|
|
|
|
|
Other financial
liabilities
|
26
|
14 114
|
62 682
|
13 374
276
|
10 570 184
|
|
Bank loans
|
27
|
66 847 513
|
47 703 593
|
-
|
-
|
|
Other
payables
|
25
|
2 213 241
|
509 929
|
-
|
-
|
|
Debt securities in
issue
|
29
|
36 786 082
|
36 709 455
|
36 786
082
|
36 709 455
|
|
Lease
liability
|
28
|
245 452
|
84 945
|
-
|
-
|
|
Deferred tax
liabilities
|
30
|
5 659 216
|
3 412 305
|
564
440
|
562 747
|
|
|
|
111 765 618
|
88 482 909
|
50 724
798
|
47 842 386
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
131 439 672
|
97 814 957
|
54 804
741
|
52 469
999
|
|
|
|
|
|
|
|
|
Net
assets
|
|
124 929 650
|
110 880 921
|
91 845
835
|
94 261
840
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share
capital
|
31
|
80 178 540
|
80 178 540
|
80 178
540
|
80 178 540
|
|
Legal
reserve
|
|
173 174
|
151 385
|
-
|
-
|
|
Other
reserves
|
|
(496 331)
|
(496 331)
|
(496
331)
|
(496
331)
|
|
Share
premium
|
|
6 973 027
|
6 973 027
|
6 973
027
|
6 973 027
|
|
Loss offset
reserve
|
|
748 427
|
748 427
|
748
427
|
748 427
|
|
Foreign exchange
reserve
|
|
(273 000)
|
(286 242)
|
-
|
-
|
|
Retained
earnings
|
|
28 934 623
|
23 612 115
|
4 442
172
|
6 858 177
|
|
Equity attributable
to owners of the company
|
|
116 238 460
|
110 880 921
|
91 845
835
|
94 261
840
|
|
Non-controlling
interests
|
|
8 691 190
|
-
|
-
|
-
|
|
Total
equity
|
|
124 929 650
|
110 880 921
|
91 845
835
|
94 261 840
|
The financial statements
were approved and authorised for issue by the Board of Directors on
26 April 2023. The financial statements were signed on behalf of
the Board of Directors by Pier Luca Demajo (Chairman) and Georgios
Kakouras (Director) as per the Directors’ Declaration on ESEF
Annual Financial Report submitted in conjunction with the Annual
Financial Report.
|