MEDITERRANEAN MARITIME HUB FINANCE p.l.c.

Annual Financial Report and Financial Statements

31 December 2023

Directors' report

The directors have prepared this report in accordance with Article 177 of the Companies Act (Chapter 386 of the Laws of Malta) ('the Act') including the further provisions as set out in the Sixth Schedule to the Act together with the financial statements of the Company for the year ended 31 December 20 2 3.

Directors, Officers & Other Information

Principal Activities

The Company's business is that of raising funds to support and finance the operations and capital projects of the MMH Group of Companies (hereinafter the 'Group'), which provides offshore and shore-based logistics to the marine and oil and gas industries, as well as technical services, supply chain management and human resources to support the same industries

Review of the Business

The Company issued bonds to the public in October 2016 for the total amount of €15million (the 'Bonds'). The Company advanced the proceeds of the Bonds to two companies within the Group to finance the development of a site measuring almost 170,000m ² in Malta's Grand Harbour, today known and established as the Mediterranean Maritime Hub, to serve as a regional hub for the provision of the Group's shore-based services and facilities (hereinafter the 'Mediterranean Maritime Hub' or the 'Site' or' Hub'). Following a public deed published on the 1 August, 2016, the Guarantor (MMH Holdings Limited) took full possession of the Site which is partly operational and partly under development.

The Company recognises that the key risk of its business is that of the potential non-fulfilment by the borrowers (that is, the two Group members – MMH Malta Limited and MMH Holdings Limited) of their obligations under the relative loan agreements ; a nd due to the borrowers' operations, this risk is impacted by developments in the different marine sectors in which the Group operates.

MMH Holdings Limited is the guarantor of the Bonds and is also the parent company of the Group. As such, its performance is dependent on the performance of the Group as a whole.

Group’s Performance for 202 3 and Outlook for 202 4

Financial

The Group's recorded turnover for the end of 2023 was €20,332,882 (2022: €17,165,643). During the year under review, the Group's gross profit was €3,886,294 (2022: €2,324,994) with an operating profit of €952,424 (2022: profit of €19,490)

The Group's net assets at the end of 2023 amounted to €1,968,076 (2022: €2,291,053).

The Group measures the achievement of its objectives using the following other key performance indicators.

The Group's current ratio ("current assets divided by current liabilities") stands at 0.58:1 (2022: 0.85:1).

The Group measures its performance based on EBITDA. EBITDA is defined as the Group profit before depreciation, amortisation, net finance expense and taxation. During the year under review, EBITDA amounted to €2,305,747 (2022: €1,080,846).

After accounting for investment income and finance costs, the Group registered a pre-tax loss of €205,229 (2022: loss of €1,649,039).

During the year under review, the Group slowed down its development of the Site, preferring to focus on consolidating its position and concentrating on the Site’s essential areas. Nonetheless, the investment within the Site continued during the year with a total investment of €5,141,610. This consisted mainly of investment in plant and machinery and improvements to the Site. The total investment by the Group in the Site at cost at the end of 2023 reached €41 million

Group Operations

The Group's current revenue streams can be segmented as follows:

Oil & Gas Operations

The average price of crude oil for 2023 was $83 per barrel compared to $94 for 2022. During 2023 the oil and gas market experienced a positive trend, resulting in an increased interest in exploration and production projects in the Mediterranean region and beyond. In fact, previously shelved projects for new onshore and subsea facilities, requiring fabrication and installation works, as well as substantial logistical support, were once again considered, and remain active into the current period. Whilst these projects are projected to materialise in full during the second half of 2024 and into 2025, the Group is still following up on requests for facility support services from leading oil and gas contractors and service companies.  The Group has good reason to believe that the positive trend the market is experiencing, coupled with the sanctions imposed on Russian fuels due to the Ukraine conflict, and the current situation in the Middle East will result in an increase in the resolve of the major oil companies to resume exploration and increased production in the Mediterranean and North African regions.

Following the increase in personnel recruitment during 2022, the same steady trend was observed in the year under review, and an increase in revenue of €3.4m was registered at the end of 2023,compared to an increase of €400K in 2022.  In revenue terms this represented a jump to €8.3m in 2023 from €3.0m in 2022. The Group’s incessant pursuing of every possible opportunity remains a top priority to ensure growth for the coming year. This increase in revenue is also a self-evident  indicator that there is increased activity in the oil and gas industry.

Commercial Marine Support Activities

The commercial marine support activities in the Site have, as their primary target, the berthing of vessels within the Site, which in turn require other support services. This activity has been made possible through the initial multi-million investment carried out by the Group to dredge the seabed for the fairway and the berths.

During the year under review, revenue derived from the berthing of vessels within the Site remained in line with that of 2022. The current levels of occupancy may be attributed to the increased activity in the energy sector, which has resulted in an increased demand for offshore supply vessels, which were scarce on the market. This has meant that practically all offshore supply vessels were being engaged for offshore contracts.  While this is positive for the industry generally, it has had the direct effect of reducing port service calls in Malta drastically, affecting the overall berthing occupancy rate and hence the related revenues.

The Group anticipates that the revenues from berthing shall start recovering as from 2024, by improving the mix of vessels calling in port. Notwithstanding this, as with the provision of offshore personnel, the Group plans to follow up on all opportunities to continue attracting vessels and maximising its revenues.  

Vessel Hoisting, hard standing and maintenance facilities – Vessel Care

VesselCare is now in its fifth full year of operation and notwithstanding the entire period of the COVID-19 pandemic, the war in Ukraine, and the conflict in the Middle East, activity has experienced growth year-on-year against 2023, and resulting in an increase of approximately €800,000 in revenue over 2022. The forecasts indicate that 2024 will experience further growth in revenue as a result of the increase in more services provided through the Group directly, and increased focus on long-term technical value-added projects. Growth is also spurred through the positive response and satisfaction rate of the Facility within the industry.

This activity has an increased seasonality factor which sees activity slowing down over the summer period. To counterbalance this seasonality slow-down, the Group has approved a further investment of €1.3million during 2024, for the provision of a dry marina, a service offering which will contribute to the Group’s revenue in the shoulder months, June to October. This project will be commissioned before the start of Summer 2024.

Group’s likely future business developments

The Directors consider that, taking all into consideration, the Site is still a project-in-the-making, and is not yet fully utilised for revenue generation. The Directors therefore understand that the Group requires additional investment in order to achieve its full potential in terms of the utilisation of the Site and business streams arising therefrom. In view of this, the Group has embarked on negotiations with third party investors, with the aim of these investors acquiring a majority shareholding in the Guarantor (or in any restructured corporate structure having a similar net effect).  As at the date of this report, negotiations are well underway to achieving this target subject to the conditions better described in Note 1.1 in the Basis of Preparation Statement to these Financial Statements.  Notwithstanding these latest developments, the Group remains focused on pursuing new opportunities and business development in the Mediterranean region – especially in the oil and gas, and maritime sectors.

Group’s Cash flow projections

The Group has prepared cash flow forecasts for the year ending 31 December 2024. This forms part of the Group’s business plan for the years ending 31 December 2024-28 (FY24-28).

The Business Plan sets out a number of strategic measures which Management is proposing in order to optimise Site utilisation and increase profitability, as well as measures to improve the Group’s management structure, controls, and other internal processes over both the short and medium-term.

Cash flow forecasts for the period were based on several assumptions, which were deemed by management to be as realistic as possible with the information and data in hand at the time of approving these financial statements.

The cash flow forecast presented by the Group indicates that sufficient cash will be generated throughout the year to enable the Group to meet its financial commitments.

Financial risk management and Going Concern statement

The Company's financial risk management objectives and policies, and the exposure to market risk, credit risk and liquidity risk have been disclosed in Note 2 of these financial statements.

As reported in a company announcement for Mediterranean Maritime Hub Finance plc dated 3 July 2023, the beneficial owners of the MMH Group entered into a conditional Share Purchase Agreement dated 30 June 2023 by means of which the new investors have agreed to purchase a 70% shareholding in the Group following completion of a number of conditions precedent, which conditions were expected to be fulfilled by the 31 December 2023. These conditions included the issuing of all necessary authorisations for the transaction to proceed from the local competent authorities, in line with the guarantor’s obligations arising from a public deed dated 1 August, 2016 concerning the transfer by temporary emphyteusis of the land in Marsa. The transaction between MMH Holdings Limited and the new investors has to date not been finalised. Despite that the Group is in advanced discussions, it is difficult to predict when this transaction will be concluded consequently projections have been prepared by management factor no financing from the investors for the next 12 months. Projected cash flows expected to be generated from operations of the MMH Group indicate that adequate financing, despite with a slim headroom, will be available to honour the Group’s commitments as and when they fall due for the next 12 months. Such projections for the Group assume; (a) revenue and costs in line with recent trends, factoring seasonality; (b) exclude any investment in fixed assets and any new related revenue generating operations; and (c) the landlord will continue to apply credit terms allowed by the concession agreement and in line with the practice applied in the past years.

The board of directors of the MMH Holdings Limited and the board of directors of Mediterranean Maritime Hub Finance plc recognise that taking cognisance of the equity position of Group as at 31 December 2023 there remains significant uncertainty should (a) the parties not reach an agreement on the final definitive contract; or (b) local competent authorities not agree with introduction of the new investors to the business; or (c) the required financing not materialise within a reasonable timeframe; or (d) any of the terms and conditions related to the said definitive contracts between the present shareholders and the new investors not be satisfied. These events and conditions indicate that a material uncertainty exists that may cast significant doubt on the MMH Group’s ability to continue as a going concern.

Notwithstanding this, the board of directors, at the time of approving these financial statements, and after having considered the above, have determined that the adoption of the going concern basis in preparing the financial statements is appropriate. Refer to Note 1.1 for detail covering the Basis of Preparation Statement to these Financial Statements.

Results and Dividends

The results for the year ended 31 December 2023 are shown in the Statement of Comprehensive Income hereof. No interim dividend was declared or paid out during the year. No final dividend is being recommended.

Statement of Directors' Responsibilities for the Financial Statements

The directors are required by the Act to prepare financial statements that give a true and fair view of the state of affairs of the Company as at the end of each reporting period and of the profit or loss for that period.

In preparing the financial statements, the directors are responsible for:

The Directors are also responsible for designing, implementing and maintaining internal control relevant to the preparation and the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Maltese Companies Act, (Cap. 386). The Directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements of MMH Holdings Limited for the year ended 31 December 2023 are included in the Annual Report 2023, which is to be made available on the Company's website. The directors are responsible for the maintenance and integrity of the Annual Report on the website in view of their responsibility for the controls over, and the security of, the website. Access to information published on the Company's website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta.

Auditors

PricewaterhouseCoopers have indicated their willingness to continue in office and a resolution for their re-appointment will be proposed at the Annual General Meeting.

Signed on behalf of the Board of Directors on 26 April 2024 by Angelique Abela (Director) and Paul Abela (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Registered office:

Mediterranean Maritime Hub

Xatt il-Mollijiet

Marsa

Malta

26 April 2024

Corporate governance – Statement of compliance

Introduction

Pursuant to the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority, Mediterranean Maritime Hub Finance p.l.c. (the 'Issuer' or the 'Company') (a subsidiary of MMH Holdings Limited – the 'Guarantor') hereby reports on the extent to which the Company has adopted the "Code of Principles of Good Corporate Governance" (the "Code") appended to Chapter 5 of the Capital Markets Rules, as well as the measures adopted to ensure compliance with these same Principles.

The Board of Directors of the Company (the 'Board') notes that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice. Nonetheless, the Board strongly maintains that the Principles are in the best interest of both shareholders as well as investors, since they ensure that the Directors adhere to internationally recognised high standards of corporate governance.

The Board recognises that in line with Capital Markets Rule 5.101, the Company is exempt from making available the information set out in Capital Markets Rules 5.97.1 to 5.97.3, 5.97.6 and 5.97.8 .

Roles and responsibilities

The Board acknowledges its statutory mandate to conduct the administration and management of the Company. The Board, in fulfilling this mandate and discharging its duty of stewardship of the Company, assumes responsibility for:

The Board is also responsible for ensuring that the Company installs and operates effective internal control and management information systems and that it communicates effectively with the market.

Board of Directors

The Company has six Directors who are appointed by its ultimate principal shareholder, MMH Holdings Limited.

For the financial year ended 31 December 2023, one of the Directors, Ms Angelique Abela, occupied a senior executive position within the Group, whilst two other Directors, Mr Paul Abela and Mr Raymond Ciantar are non-executive directors who remain active in the Group as directors on the Boards of Directors of some of its subsidiary companies.  The remaining Directors, Mr Anthony Bonnici, Dr Michael Borg Costanzi, and Mr Lino Casapinta serve, or have served, as non-executive and independent Directors. These Directors are each free of any business, family or other relationship with the Issuer, its controlling shareholder or the management of either.

In assessing the independence of Mr Bonnici, Dr Borg Costanzi, and Mr Casapinta, due notice has been taken of Section 5.117 of the Capital Markets Rules.

The exercise of the role of the Board

The activities of the Board are exercised in a manner designed to ensure that it can effectively supervise the operations of the Company and protect the interests of bondholders, external borrowers and the shareholders.

Meetings of the Board were held as frequently as considered necessary. Individual Directors, apart from attendance at formal Board meetings, participate in other informal meetings during the year as may be required, either to assure good corporate governance, or to contribute more effectively to the decision-making process.

The Board members are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting documents as necessary. All agenda items were then discussed during the Board meetings held during 2023.

Apart from setting the strategy and direction of the Company, the Board retains direct responsibility for approving and monitoring:

The Board does not consider necessary to institute separate committees such as the remuneration and the nomination committees, as would be appropriate in an operating company. This is largely due to the fact that the Company does not have any employees.

Risk Management and Internal Control

The Board recognises that the Company must manage a range of risks in the course of its activities and the failure to adequately manage these risks could adversely impact the business. Whilst no system can provide absolute guarantees and protection against material loss, the risk management systems are designed to give the Directors reasonable assurance that problems can be identified promptly and remedial action can be taken as appropriate.

The Board maintains sound risk management and internal control systems. It is responsible for determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. The Board establishes formal and transparent arrangements to apply risk management and internal control principles, as well as maintaining an appropriate relationship with the Company's auditors.

Audit Committee

The Terms of Reference of the Audit Committee, which were approved by the Malta Financial Services Authority, are modelled on the principles set out in the Capital Markets Rules themselves. The Audit Committee assists the Board in fulfilling its supervisory and monitoring responsibility by reviewing the Group financial statements and disclosures, and monitoring the system of internal control established by management, as well as the audit process.

The Audit Committee, established by the Board, meets regularly, with a minimum of four times annually, and is currently composed of the following individuals:

·         Mr Lino Casapinta (Chairman)

·         Mr Anthony Bonnici

·         Dr Michael Borg Costanzi

All three members are non-executive Directors. Furthermore, Mr Lino Casapinta is an independent non-executive Director of the Company who the Board considers to be competent in accounting and/or auditing in terms of the Capital Markets Rules.

The Chief Financial Officer and the Senior Executive of the Finance Function are regularly invited to attend Audit Committee meetings.

The Audit Committee held four meetings throughout 2023. Communication with and between the Company Secretary, top level management and the Committee is ongoing and considerations that required the Committee's attention are acted upon between meetings and decided by the Members (where necessary) through electronic circulation and correspondence. 

As required by the Companies Act (Chapter 386 of the Laws of Malta) and the Malta Financial Services Authority Capital Markets Rules, the financial statements of the Company are subject to annual audit by its external auditors. In addition, the non-executive Directors have direct access to the external auditors of the Company, who attend the Board meetings at which the Company's financial statements are approved. Moreover, in ensuring compliance with other statutory requirements and with continuing listing obligations, the Board is advised directly, as appropriate, by its appointed broker, legal advisor and the external auditors. Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at the Company's expense.

The Company has formal mechanisms to monitor dealings by Directors and senior officials in the Bonds of the Company and has also put in place the appropriate mechanisms for the advance notification of such dealings.

Relations with the Market

The market is kept up to date with all relevant information, and the Company regularly publishes such information on its website to ensure consistent relations with the market.

Remuneration Statement

Pursuant to the Company's Memorandum and Articles of Association, the maximum annual aggregate emoluments that may be paid to the Directors is approved by the shareholders in General Meeting. Furthermore, the remuneration of Directors is a fixed amount per annum and does not include any variable component relating to profit sharing, share options or pension benefits.

During the year under review, the Directors received emoluments amounting in total to €50,000.

Approved by the Board.

Statement of financial position

The accompanying notes are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors 26 April 2024. The financial statements were signed on behalf of the Board of Directors by Paul Abela (Director) and Angelique Abela (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

Statement of comprehensive income

The accompanying notes are an integral part of these financial statements.

Statement of changes in equity

The accompanying notes are an integral part of these financial statements. 

Statement of cash flows

The accompanying notes are an integral part of these financial statements.

Notes to the financial statements

1.      Material accounting policy information

The principal accounting policies applied in the preparation of these financial statements are set out below.  These policies have been consistently applied to all the periods presented, unless otherwise stated.

1.1   Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the requirements of the Maltese Companies Act, 1995.  They have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates.  It also requires directors to exercise their judgement in the process of applying the company’s accounting policies (Note 3 - Critical accounting estimates and judgements).

Going concern assessment

Mediterranean Maritime Hub Finance plc forms part of the MMH Holdings Limited group. The Group reported EBITDA for the financial year ending 31 December 2023 amounting to €2.3million, an improvement of €1.1million over that recorded in 2022. The Group reported losses amounting to €0.3million (2022: loss of €1.8million) and these results are included in the Group’s retained earnings which as at 31 December 2023 amounted to accumulated losses of €0.2million. Net current liabilities at Group level amount to €4.1million (2022: €1.0million). These results and financial position demonstrate that the MMH Group, the guarantor of the bond, continues to require financial support from shareholders, bond holders and financial institutions.

During the financial year the MMH Group’s management continued pursuing discussions with potential investors with a view to secure further financing which is deemed fundamental for the Group to continue to operate on a going concern basis for the next twelve months and beyond.

As reported in a company announcement for Mediterranean Maritime Hub Finance plc dated 3 July 2023, the beneficial owners of the MMH Group entered into a conditional Share Purchase Agreement dated 30 June 2023 by means of which the new investors have agreed to purchase a 70% shareholding in the Group following completion of a number of conditions precedent, which conditions were expected to be fulfilled by the 31 December 2023. These conditions included the issuing of all necessary authorisations for the transaction to proceed from the local competent authorities, in line with the guarantor’s obligations arising from a public deed dated 1 August, 2016 concerning the transfer by temporary emphyteusis of the land in Marsa. The transaction between MMH Holdings Limited and the new investors has to date not been finalised. Despite that the Group is in advanced discussions, it is difficult to predict when this transaction will be concluded consequently projections have been prepared by management factor no financing from the investors for the next 12 months. Projected cash flows expected to be generated from operations of the MMH Group indicate that adequate financing, despite with a slim headroom, will be available to honour the Group’s commitments as and when they fall due for the next 12 months. Such projections for the Group assume; (a) revenue and costs in line with recent trends, factoring seasonality; (b) exclude any investment in fixed assets and any new related revenue generating operations; and (c) the landlord will continue to apply credit terms allowed by the concession agreement and in line with the practice applied in the past years.

The Group is optimistic that agreement on a final definitive contract between MMH Holdings Limited and the new investors will  be concluded subject to the approval by Government, regulatory and local competent authorities. The Group is confident that approval by the local competent authorities to introduce the new shareholders to the Group should be cleared given the calibre and reputation of the said investors. The plan with the new investors, subject to the conditions that need to be fulfilled before the deal is finalised, is to provide advanced financing to an amount of up to €7.0million.

Beyond the initial 12 month period, the business plan prepared by management indicates that the Group will be required to obtain alternative financing for the redemption of the Bond amounting to €15.0 million which is due for repayment in 2026. Such financing is not yet contracted and concluded.

The board of directors of the MMH Holdings Limited and the board of directors of Mediterranean Maritime Hub Finance plc recognise that taking cognisance of the equity position of Group as at 31 December 2023 there remains significant uncertainty should (a) the parties not reach an agreement on the final definitive contract; or (b) local competent authorities not agreeing with introduction of the new investors to the business; or (c) the required financing not materialise within a reasonable timeframe; or (d) any of the terms and conditions related to the said definitive contracts between the present shareholders and the new investors not be satisfied. These events and conditions indicate that a material uncertainty exists that may cast significant doubt on the MMH Group’s ability to continue as a going concern.

Notwithstanding this, the board of directors, at the time of approving these financial statements, and after having considered the above, have determined that the adoption of the going concern basis in preparing the financial statements is appropriate.

Standards, interpretations and amendments to published standards effective in 2023

In 2023, the company adopted new standards, amendments and interpretations to existing standards that are mandatory for the company’s accounting period beginning on 1 January 2023.  The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the company’s accounting policies. 

Standards, interpretations and amendments to published standards that are not yet effective

Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements that are mandatory for the Company's accounting periods beginning after 1 January 2023. The Company has not early adopted these revisions to the requirements of IFRSs as adopted by the EU.

The directors are of the opinion that there are no requirements that will have a significant impact on the financial statements of the company in the period of initial application.

1.2   Foreign currency translation

Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).  The financial statements are presented in euro, which is the company’s functional and presentation currency.

1.3   Financial assets

Classification

The company classifies its financial assets as financial assets measured at amortised costs. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The company classifies its financial assets as at amortised cost only if both the following criteria are met:

Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition.  ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument.  This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. 

Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade date, which is the date on which the company commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership.

At initial recognition, the company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Interest income on debt instruments measured at amortised cost from these financial assets is included in finance income using the effective interest rate method (see note 1.6). Any gain or loss arising on derecognition of these instruments is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.

(a)   Trade and other receivables

Trade receivables comprise amounts due from parent and fellow subsidiary for services performed in the ordinary course of business.  If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets.  If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. 

(b)   Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term which are subject to an insignificant risk of changes in value.

Impairment

The company assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The company’s financial assets are subject to the expected credit loss model.

Expected credit loss model

The company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the company considers reasonable and supportable information that is relevant and available without undue cost or effort.  The company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due, and it considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the company in full, without recourse by the company to actions such as realising security (if any is held); or the financial asset is more than 90 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.  12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the company is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses.  Credit losses are measured as the present value of all cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the company assesses whether financial assets carried at amortised cost are credit-impaired.  A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data such as significant financial difficulty of the borrower or issuer, or a breach of contract such as a default or being more than 90 days past due.

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

1.4   Financial liabilities

The company recognises a financial liability in its statement of financial position when it becomes a party to the contractual provisions of the instrument.  The company’s financial liabilities are classified as financial liabilities which are not at fair value through profit or loss (classified as ‘Other liabilities’).  These financial liabilities are recognised initially at fair value, being the fair value of consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of the financial liability.  These liabilities are subsequently measured at amortised cost.  The company derecognises a financial liability from its statement of financial position when the obligation specified in the contract or arrangement is discharged, is cancelled or expires.

(a) Borrowings

Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred.  Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Issue costs incurred in connection with the issue of the bonds include professional fees, publicity, printing, listing, registration, underwriting, management fees, selling costs and other miscellaneous costs.

Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

(b) Trade and other payables

Trade payables comprise obligations to pay for services that have been acquired in the ordinary course of business from suppliers.  Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).  If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

The company recognises a financial liability in its statement of financial position when it becomes a party to the contractual provisions of the instrument.  The company’s financial liabilities are classified as financial liabilities which are not at fair value through profit or loss (classified as ‘Other liabilities’).  These financial liabilities are recognised initially at fair value, being the fair value of consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of the financial liability.  These liabilities are subsequently measured at amortised cost.  The company derecognises a financial liability from its statement of financial position when the obligation specified in the contract or arrangement is discharged, is cancelled or expires.

(a) Borrowings

Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred.  Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Issue costs incurred in connection with the issue of the bonds include professional fees, publicity, printing, listing, registration, underwriting, management fees, selling costs and other miscellaneous costs.

Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

(b) Trade and other payables

Trade payables comprise obligations to pay for services that have been acquired in the ordinary course of business from suppliers.  Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).  If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.5   Current and deferred tax

The tax expense for the period comprises current and deferred tax.  Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.  In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.  However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.  Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

1.6   Finance income and costs

Finance income and costs are recognised in profit or loss for all interest-bearing instruments on a time-proportion basis using the effective interest method.  Finance costs include the effect of amortising any difference between net proceeds and redemption value in respect of the company’s borrowings. Finance income and costs are recognised as they accrue, unless collectability is in doubt.

2.       Financial risk management

2.1   Financial risk factors

The company constitutes a financing special purpose vehicle whose bonds are matched by equivalent amounts due from loans receivable from related parties and guaranteed by MMH Holdings Limited.  The company’s principal risk exposures relate to credit risk and liquidity risk. The company is not exposed to currency risk and the directors deem interest rate risk exposure to be minimal due to matching of its interest costs on borrowings with finance income from its loans receivable from related parties referred to above.

(a) Credit risk

The company measures credit risk and expected credit losses using probability of default, exposure at default and loss given default. Management consider both historical analysis and forward-looking information in determining any expected credit loss.

The company’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below. The company’s exposures to credit risk as at the end of the reporting period are analysed as follows : 

The company does not hold collateral as security on its loans receivable. As disclosed in note 8, MMH Holdings Limited has issued corporate guarantees with respect to the company’s bonds. These borrowings have been loaned to MMH Holdings Limited and MMH Malta Limited through the issue of the company’s loans receivable.

The company assess on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost. Management consider ‘low credit risk’ for instruments, which have a low risk of default, and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.  In case of the loans issued and related advances, the assessment takes into consideration the financial position, performance and other factors of the related parties. Management monitors intra-group credit exposures on a regular basis and ensures timely performance of these assets in the context of overall group liquidity management. The company takes cognisance of the related party relationship with these entities and management does not expect any losses from non-performance or default.

Projections have been prepared by management of the MMH Holdings Limited Group factoring no further external financing for the next 12 months. Projected cash flows expected to be generated from operations of the MMH Group indicate that adequate liquidity, despite with a slim headroom, will be available to honour commitments as and when they fall due for the next 12 months. Such projections assume; (a) revenue and costs in line with recent trends, factoring seasonality; (b) exclude any investment in fixed assets and any new related revenue generating operations; and (c) the landlord will continue to apply credit terms allowed by the concession agreement and in line with the practice applied in the past years. Beyond the initial 12 month period, the business plan prepared by management of the MMH Holdings Limited Group indicates that the Group will be required to obtain alternative financing for repaying debts with the Company which are required for the redemption of the Bond amounting to €15.0 million which is due for repayment in 2026. Such financing is not yet contracted and concluded.

The application of the expected credit risk model of IFRS 9, resulted in an immaterial loss allowance on the issuance of the loans receivable and related amounts due, and was therefore not reflected in the financial statements.

At 31 December 2023 and 2022, cash in bank are held with counterparty with a good credit rating and are due to be settled within a short period of time. Management consider the probability of default to be close to zero as the counterparty have a strong capacity to meet their contractual obligations in the near term. As a result, no loss allowance has been recognised based on 12-month expected credit losses, as any such impairment would be wholly insignificant to the company.

(b) Liquidity risk

The company is exposed to liquidity risk arising primarily from its ability to satisfy liability commitments depending on cash inflows receivable in turn from MMH Holdings Limited and MMH Malta Limited.

Management monitors liquidity risk by means of cash flow forecasts on the basis of expected cash flows over a twelve month period to ensure that no additional financing facilities are expected to be required over the coming period.  This process is performed through a rigorous assessment of detailed cash flow projections of the Group headed by its parent company where matching of cash inflows and outflows arising from expected maturities of financial instruments are assessed on an annual basis.

The carrying amounts of the company’s assets and liabilities are analysed into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date in the respective notes to the financial statements.

The following tables analyse the company’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying balances, as the impact of discounting is not significant.

Projections have been prepared by management of the MMH Holdings Limited Group factoring no further external financing for the next 12 months. Projected cash flows expected to be generated from operations of the MMH Group indicate that adequate liquidity, despite with a slim headroom, will be available to honour commitments as and when they fall due for the next 12 months. Such projections assume; (a) revenue and costs in line with recent trends, factoring seasonality; (b) exclude any investment in fixed assets and any related new revenue generating operations; and (c) the landlord will continue to apply credit terms allowed by the concession agreement and in line with the practice applied in the past years. Beyond the initial 12 month period, the business plan prepared by management of the MMH Holdings Limited Group indicates that the Group will be required to obtain alternative financing for repaying debts with the Company which are required for the redemption of the Bond amounting to €15.0 million which is due for repayment in 2026. Such financing is not yet contracted and concluded.

2.2   Capital risk management

The company’s bonds are guaranteed by MMH Holdings Limited. Related finance costs are also guaranteed by this company. The capital management of the company therefore consists of a process of regularly monitoring the financial position of the guarantor.

2.3   Fair values of financial instruments

At 31 December 2023 and 2022, the carrying amounts of receivables (net of loss allowance, if any) and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments.

As at the end of the reporting period, the fair values of financial assets and liabilities, approximate the carrying amounts shown in the statement of financial position.

The fair value of non-current financial instruments for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. 

3.       Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

In the opinion of the company directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1. 

4.       Loans receivable from related parties

Loans receivable reflect the transfer of funds to MMH Holdings Limited and MMH Malta Limited generated by the company from its bond.  These loans are repayable in 2026.

Weighted average effective interest rate as at 31 December:

5.       Trade and other receivables

Amounts due from parent and fellow subsidiary are unsecured, interest-free and repayable on demand.

6.      Cash at bank

For the purposes of the statement of cash flows, cash at bank comprise the following:

7.       Share capital

8.      Borrowings

The unsecured bonds are measured at the amount of the net proceeds adjusted for the amortisation of the difference between the net proceeds and the redemption value of such bonds, using the effective yield method as follows:

The interest rate exposure of the borrowings of the company was as follows:

The effective interest rates as at the end of the reporting period were as follows:

This note provides information about the contractual terms of the company’s borrowings. For more information about the company’s exposure to interest rate and liquidity risk, refer to note 2.

By virtue of an offering memorandum dated 16 September 2016, the company issued €15,000,000 bonds with a face value of €1,000 each.  The bond’s interest is payable annually in arrears on 14 October.  The bonds are redeemable at par and are due for redemption on 14 October 2026 but the issuer may at any time purchase Bonds in the open market or otherwise at any price.  The bonds are guaranteed by MMH Holdings Limited, which has bound itself jointly and severally liable for the payment of the bonds and interest thereon, pursuant to and subject to the terms and conditions in the offering memorandum. The bonds have been admitted on the Official List of the Malta Stock Exchange on 19 October 2016.  The quoted market price as at 31 December 2023 for the bonds was €95 (2022: €99). In the opinion of the directors these market prices fairly represent the fair value of these financial liabilities.

9.      Trade and other payables

10.    Finance income

11.    Finance costs

12.    Expenses by nature

Administrative expenses are classified by their nature as follows:

Auditor’s fees

Fees charged by the auditor for services rendered during the financial periods ended 31 December 2023 and 2022 relate to the following:

13.     Tax expense

The tax on the company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

14.     Directors’ emoluments

15.    Cash generated from operations

Reconciliation of profit before tax to cash generated from operations:

16.    Related party transactions

The company forms part of the MMH Group of Companies.  All companies forming part of the MMH Group are related parties since these companies are all ultimately owned by MMH Holdings Limited. Trading transactions between these companies include items which are normally encountered in a group context. The group is ultimately fully owned by Paul Abela. Companies owned directly by Paul Abela are also considered to be related parties. The main related parties with whom transactions are entered into by the Company are MMH Malta Limited and MMH Holdings Limited, the guarantor of the borrowings (Note 8).

The following are the transactions that were carried out with related parties:

Key management personnel compensation, consisting of directors’ remuneration, has been disclosed in Note 14 to the financial statements. 

Year end balances arising from related party transactions are disclosed in notes 4 and 5 to the financial statements.

17.     Statutory information

Mediterranean Maritime Hub Finance p.l.c. is a limited liability company and is incorporated in Malta.

The ultimate and immediate parent company of Mediterranean Maritime Hub Finance p.l.c. is MMH Holdings Limited, a company registered in Malta, with its registered address at Head Office Building, Mediterranean Maritime Hub, Xatt il-Mollijiet, Marsa.

The ultimate controlling party of MMH Holdings Limited is Mr. Paul Abela.