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Contents
Directors’
report
Corporate governance -
statement of compliance
Income statement
Statement of financial
position
Statement of changes in
equity
Statement of cash
flows
Notes to the financial
statements
Independent
auditor’s report
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Directors’ report
The directors present their report and
audited financial statements of Smartcare Finance p.l.c. (the
“Company”), for the year ended 31 December 2021.
Principal
activity
The principal activity of the Company is
to act as a finance and investment company. The Company is
essentially a special purpose vehicle set up for financing
transactions of the Smartcare Group. It raised such finance mainly
through the issue of bonds, which are quoted on the Malta Stock
Exchange and guaranteed by Smartcare Holdings Limited, in
particular to finance or re-finance the funding requirements of
related companies within the Smartcare Group.
Review of
business
The Company made a profit before tax of
€47,319 (2020: €57,658) for the year ended 31 December
2021.
The Company generated revenue from
interest income on related party loans of €298,277 (2020:
€384,000) and dividends received from subsidiary of
€358,960. It paid interest on debt securities in issue of
€471,749 (2020: €250,000). During the year under
review, the Company registered a net profit after taxation of
€2,694 (2020: €31,332). The resulting earnings per share
for the year under review amount to €0.01 (2020: €0.13)
per share.
The Company’s financial position as
at 31 December 2021 is set out in the statement of financial
position.
Results and
dividends
The results for the year are set out in
the income statement page. Dividends amounting to €16,510 were
declared during the year.
Directors
The following have
served as directors of the Company during the year under
review:
Mr Andrew Debattista Segond
Mr William Wait
Mr Ian Joseph Stafrace
Mr Sandro Grech
Mr Arthur Gauci (appointed on 18 January 2021)
Mr Norval Desira (resigned on 18 January 2021)
In accordance with the Company’s
Articles of Association, the present directors remain in
office.
Events after the end of
the reporting period
No adjusting or significant non-adjusting
events have occurred between the reporting date and the date of
authorisation.
Future
developments
The Company intends to continue acting as
a finance company on behalf of the Smartcare Group.
Principal risks and
uncertainties
During 2021, Smartcare Finance plc raised
a €13 million bond, which bonds are quoted on the Malta Stock
Exchange. Although the proceeds were ultimately used to finance or
re-finance the funding requirements of related companies within the
Smartcare Group, the proceeds were initially advanced to Smartcare
Group Investments Limited as preference shares. Consequently, the
main risk of Smarcare Finance plc is that Smartcare Group
Investments Limited, does not repay the preference shares and
distribute dividends. The Directors of Smartcare Finance plc are
provided with oversight of Smartcare Group’s cash flow
forecasts on a regular basis enabling them to monitor the evolution
of these cash flows.
Going concern
As required by Capital
Markets Rule 5.62 issued by MFSA, upon due consideration of the
Company’s state-of- affairs, capital
adequacy and solvency, the directors confirm the Company’s
ability to continue in operational existence for the foreseeable
future. For this reason, in preparing the financial
statements, they continue to adopt the going concern basis. Refer
to Note 2, for the Directors’ assessment of the
going concern assumption.
Disclosure of
information to the auditor
At the date of making
this report, the directors confirm the following:
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As far as each
director is aware, there is no relevant information needed by the
independent auditor in connection with preparing the audit report
of which the independent auditor is unaware, and
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Each director has
taken all steps that he ought to have taken as a director in order
to make himself aware of any relevant information needed by the
independent auditor in connection with preparing the audit report
and to establish that the independent auditor is aware of that
information.
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Statement of
directors’ responsibilities
The Companies Act, Cap 386 requires the
directors to prepare financial statements for each financial year
which give a true and fair view of the state of affairs of the
Company as at the end of the financial year and of the profit or
loss of the Company for that year. In preparing these
financial statements, the directors are required to:
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adopt the going concern basis unless it is
inappropriate to presume that the Company 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
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report comparative figures corresponding
to those of the preceding accounting period.
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The directors are responsible for keeping
proper accounting records which disclose with reasonable accuracy
at any time the financial position of the Company and to enable
them to ensure that the financial statements have been properly
prepared in accordance with the Companies Act, Cap 386. This
responsibility includes designing, implementing and maintaining
internal controls relevant to the preparation and fair presentation
of financial statements that are free from material misstatement,
whether due to fraud or error. They are also responsible for
safeguarding the assets of the Company and for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Auditor
The auditor Grant Thornton has intimated
its willingness to continue in office and a resolution proposing
its reappointment will be put to the Annual General Meeting.
Information pursuant to
Capital Markets Rule 5.70.1
As at 31 December 2020, the Company
entered into a loan agreement with Smartcare Holdings Ltd,
Smartcare Properties Limited and Smartcare Pinto Limited, the funds
of which were obtained through bonds admitted on Prospects MTF.
These loans were repaid in full during FY2021. During FY2021, the
Company acquired €13 million preference shares in Smartcare
Group Investments Limited. Other than this, there were no material
contracts to which the Company, or its subsidiary was a party, and
in which anyone of the Company’s Directors was directly or
indirectly interested.
Information pursuant to
Capital Markets Rule 5.70.2
The Company Secretary is Dr Katia Cachia
and the registered office is 326, Mdina Road, Qormi, Malta.
Signed on behalf of the Board of Directors
on 25 April 2022 by Andrew Debattista Segond (Director) and Ian
Joseph Stafrace (Director) as per the Directors’ Declaration
on ESEF Annual Financial Report submitted in conjunction with the
Annual Financial Report.
Statement by the directors on the financial
statements and other information included in the annual
report
Pursuant to Capital Markets Rule 5.68, we,
the undersigned, declare that to the best of our knowledge, the
financial statements included in the Annual Report, and prepared in
accordance with the requirements of International Financial
Reporting Standards as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit of the
Company, and that this report includes a fair review of the
development and performance of the business and position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Signed on behalf of the Board of Directors
on 25 April 2022 by Andrew Debattista Segond (Director) and Ian
Joseph Stafrace (Director) as per the Directors’ Declaration
on ESEF Annual Financial Report submitted in conjunction with the
Annual Financial Report.
Directors’ statement of compliance with the
Code of Principles of Good Corporate Governance
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Listed companies are subject to The Code
of Principles of Good Corporate Governance (the
“Code”). The adoption of the Code is not mandatory, but
listed companies are required under the Capital Markets Rules
issued by MFSA to include a Statement of Compliance with the Code
in their Annual Report, accompanied by a report of the independent
auditor
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The Board of Directors (the
“directors” or the “board”) of Smartcare
Finance p.l.c. (the “Company”) restate their support
for the Code and note that the adoption of the Code has resulted in
positive effects to the Company.
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The board considers that during the
reporting period, the Company has been in compliance with the Code
to the extent that was considered adequate with the size and
operations of the Company. Instances of divergence from the Code
are disclosed and explained below.
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Compliance with the
Code
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Principle 1 and 4:
The board
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The board of directors of the company is
responsible for the overall long-term direction and management of
the Company, assessing and evaluating the performance of the
company’s executive functionaries, ascertaining that control
systems suitable to the company are implemented, that financial
reporting is carried out to the highest attainable standards and to
ascertain that the company maintains open communication channels
with the market and stakeholders.
Its responsibilities also involve the
oversight of the Company’s internal control procedures and
financial performance, and the review of business risks facing the
Company, ensuring that these are adequately identified, evaluated,
managed and minimised. All the directors have access to independent
professional advice at the expense of the Company, should they so
require.
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Further to the relevant section in
Appendix 5.1 to the Capital Markets Rules, the board of directors
acknowledge that they are stewards of the Company’s assets
and their behaviour is focused on working with management to
enhance value to the shareholders.
The directors individually and
collectively are of the appropriate calibre, with the necessary
skills and experience to contribute effectively to the decision
making process. The directors have determined the company’s
strategic aims and organisational structure and always ensure that
the company has the appropriate mix of financial and human
resources to meet its objectives.
All directors are required to:
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Exercise prudent and effective controls
which enable risk to be assessed and managed to achieve continued
prosperity to the Company;
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Be accountable for all actions or
non-actions arising from discussion and actions taken by them or
their delegates;
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Determine the Company’s strategic
aims and the organizational structure;
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Regularly review management performance
and ensure that the Company has the appropriate mix of financial
and human resources to meet its objectives and improve the economic
and commercial prosperity of the Company;
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Acquire a broad knowledge of the business
of the Company;
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Be aware of and be conversant with the
statutory and regulatory requirements connected to the business of
the Company;
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Allocate sufficient time to perform their
responsibilities; and
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Regularly attend meetings of the
board.
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In terms of Capital Markets Rules 5.117
– 5.134 the board has established an Audit committee to
monitor the Company’s present and future operations, threats
and risks in the external environment and current and future
strengths and weaknesses. The Audit committee ensures that the
Company has the appropriate policies and procedures in place to
ensure that the Company and its employees maintain the highest
standards of corporate conduct, including compliance with
applicable laws, regulations, business and ethical standards. The
Audit committee has a direct link to the board and is represented
by the Chairman of the Audit committee in all board meetings.
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Principle 2: The
Company’s chairman and chief executive
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Due to its lean operating structure and
the nature of its current business, the Company does not employ a
Chief Executive Officer (CEO). This function is undertaken by the
executive directors of the Company.
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The day-to-day management of the Company
is vested with the executive directors of the Company.
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The Chairman is responsible to:
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Lead the Board and set its agenda;
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Ensure that the directors of the board
receive precise, timely and objective information so that they can
take sound decisions and effectively monitor the performance of the
Company;
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Ensure effective communication with
shareholders; and
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Encourage active engagement by all members
of the board for discussion of complex or contentious issues.
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Principle 3: Composition
of the board
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The board considers that the size of the
board, whilst not being too large as to be unwieldy, is
appropriate, considering the size of the Company, its operations,
its business risks and key performance indicators. The board of
directors consists of two executive directors and three
non-executive directors. The present mix of executive and
non-executive directors is considered to create a healthy balance
and serves to unite all shareholders’ interest, whilst
providing direction to the Company’s management to help
maintain a sustainable organisation.
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The non-executive directors constitute a
majority on the board and their main functions are to monitor the
operations of the executive directors and their performance as well
as to analyse any investment opportunities that are proposed by the
executive directors.
For the purpose of Capital Markets Rules
5.118 and 5.119, the non-executive directors are deemed
independent. Each director is mindful of maintaining independence,
professionalism and integrity in carrying out his duties,
responsibilities and providing judgement as a director of the
Company.
The board considers that Dr Ian Joseph
Stafrace, Mr Sandro Grech and Mr Arthur Gauci are the three
independent Directors of the Company and hereby reports that
neither of them:
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are or have been employed in any capacity
by the Company;
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b)
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have, or had within the last three years,
a significant business relationship with the Company;
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c)
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have received or receive significant
additional remuneration from the Company;
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d)
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have close family ties with any of the
executive members of the board;
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e)
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have served on the board for more than
twelve consecutive years; or
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f)
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have been within the last three years an
engagement partner or a member of the audit team of the present or
past external auditors of the Company.
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Each of the Directors hereby declares that
he undertakes to:
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maintain in all circumstances his
independence of analysis, decision and action;
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b)
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not to seek or accept any unreasonable
advantages that could be considered as compromising his
independence; and
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c)
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clearly express his opposition in the
event that he finds that a decision of the Board may harm the
Company.
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The board is made up as follows:
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Executive
Directors
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Mr Andrew Debattista Segond
Mr William Wait (Chairman)
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Independent
Non-Executive Directors
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Dr Ian Joseph Strafrace
Mr Sandro Grech
Mr Arthur Gauci
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Dr Katia Cachia acts as secretary to the
Board of Directors.
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The board aims to meet a minimum of four
times every calendar year. The Company ensures that sufficient
information is provided to the attendees to effectively contribute
during meetings of the board, and to take informed decisions on the
manner in which the Company’s affairs are being
administered.
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Board members are notified of forthcoming
meetings by the company secretary with the issue of an agenda and
supporting reading materials, which are circulated well in advance
of the meeting.
The process of appointment of directors is
transparent, is set out in the company’s Articles of
Association and it is conducted during the company’s AGM,
where all the shareholders of the company are entitled to
participate in the voting process to elect the board of directors.
Furthermore, in terms of the company’s Memorandum and
Articles of Association, a director is prohibited from voting on
any contract or arrangement or any other proposal in which he has a
material interest.
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Principle 5: Board
meetings
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The board met four times during the period
under review. The number of board meetings attended by directors
for the period under review is as follows:
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Mr Andrew Debattista
Segond
5 times
Mr William Wait
(Chairman)
5 times
Dr Ian Joseph
Strafrace
5 times
Mr Sandro
Grech
5 times
Mr Arthur
Gauci
5 times
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Principle 6: Information
and professional development
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On joining the board, a director is
provided with briefings by the executive director on the activities
of the Company. From time to time, the executive directors may meet
other board members or organise information briefing sessions to
ensure that the directors are made aware of the general business
environment and the board’s expectations.
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Directors may, where they judge it
necessary to discharge their duties as directors, consult the
corporate advisors at the expense of the Company.
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Principle 8:
Committees
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Remuneration
committee
The Code recommends that “the board
should establish a remuneration policy for Directors and senior
executives. It should also set up formal and transparent procedures
for developing such a policy and for establishing the remuneration
packages of individual Directors.” In view of the size and
type of operation of the Company, the Board does not believe that
the Company requires a remuneration committee, and the Board
itself carries out the functions of the remuneration committee
specified in, and in accordance with, Principle Eight A of the
Code, given that the remuneration of the Directors is not
performance-related.
The maximum annual aggregate emoluments
that may be paid to the Directors is, pursuant to the
Company’s Memorandum and Articles of Association, approved by
the shareholders in general meeting.
Remuneration statement
The remuneration policy for directors has
been consistent since inception; no Director (including the
Chairman) is entitled to profit sharing, share options or pension
benefits. There is no linkage between the remuneration and the
performance of Directors. A fixed honorarium is payable at each
financial year to the non-executive Directors.
For the financial year under review the
aggregate remuneration of the Directors of the Group was as
follows: Fixed remuneration €23,305. Going forward, it is the shareholders of the Company in General
Meeting who shall determine the maximum annual aggregate
remuneration of the directors.
None of the directors are employed with
the Company and have a service contract with the Company.
Audit committee
The audit committee’s primary
objective is to assist the board in fulfilling its oversight
responsibilities over the financial reporting processes, financial
policies and internal control structure. The committee is made up
of a majority of non-executive directors and reports directly to
the board of directors. The committee oversees the conduct of the
internal and external audits and acts to facilitate communication
between the board, management and, upon the direct request of the
audit committee, the internal audit team and the external
auditor.
Dr Ian Joseph Stafrace, a non-executive
director, acts as Chairman, whilst Mr Arthur Gauci, Mr Sandro Grech
act as members. The Company Secretary, Dr Katia Cachia acts as
secretary to the committee. During the period under review, the
committee met 5 times.
The board of directors, in terms of
Capital Markets Rule 5.118, has indicated Mr Arthur Gauci as the
independent non-executive member of the audit committee who is
considered to be competent in accounting and/or auditing in view of
his considerable experience at a senior level in the banking
field.
The members of the committee have
discussed various matters during the meetings held in 2021 and have
formally set out the Terms of Reference of the committee which were
recently updated on 29 January 2021. The purpose of the committee
is to protect the interest of the Company’s share and bond
holders and assist the directors in conducting their role
effectively. The audit committee also monitors the financial
reporting process, the effectiveness of internal control and the
audit of the annual financial statements. Additionally, it is
responsible for monitoring the performance of the trade debtors of
the Company, to ensure that budgets are achieved, and if not, that
corrective action is taken as necessary. It also scrutinises and
supervises related party transactions for materiality and ensures
that these are carried out on an arm’s length basis.
The directors are fully aware that the
close association of the Company with Smartcare Group Investments
Limited and its other subsidiaries is central to the attainment by
the Company of its investment objectives and implementation of its
strategies. The Audit committee ensures that transactions entered
into with related parties are carried out on an arm’s length
basis and are for the benefit of the Company, and that the Company
and its subsidiaries accurately report all related party
transactions in the notes to the financial statements.
Pursuant to Articles 16 and 17 of Title
III of the provisions of the Statutory Audit Regulations, the Audit
committee has been entrusted with overseeing the process of
appointment of the statutory auditors or audit firms.
Internal control
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While the Board is ultimately responsible
for the Company’s system of internal controls and for
reviewing its effectiveness, the authority to determine day-to-day,
non-material operational aspects that fall within the ordinary
course are delegated to the executive directors.
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Controls are designed to manage risk to
achieve business objectives and to provide reasonable assurance
against normal business risks.
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Through the audit committee, the board
reviews the effectiveness of the Company’s system of internal
controls.
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The key features of the Company’s
system of internal control are as follows:
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Organisation
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The Company operates through the executive
director with clear reporting lines and delegation of powers.
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Control
environment
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The Company is committed to strong
standards of business conduct and seeks to maintain these across
all of its operations.
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Risk
identification
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The executive director and company
management are responsible for the identification and evaluation of
key risks applicable to their respective areas of business –
this is sufficient, given the nature and scale of the
Company’s operations.
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The Company has an appropriate
organisational structure for planning, executing, controlling and
monitoring business operations in order to achieve its objectives,
given its size and nature of its activities to date.
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Principle 9: Relations
with shareholders and with the market
The Company is highly committed to having
an open and communicative relationship with its bondholders and
investors. In this respect, over and above the statutory and
regulatory requirements relating to the Annual General Meeting, the
publication of interim and annual financial statements, the Company
seeks to address the diverse information needs of its bondholders
and investors by providing the market with regular, timely,
accurate, comparable and comprehensive information.
Principle 10:
Institutional shareholders
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The Company ensures that it is constantly
in close touch with its principal institutional investors. The
Company is aware that institutional investors who are mainly
bondholders have the knowledge and expertise to analyse market
information and make their independent and objective conclusions of
the information available.
Institutional investors are expected to
give due weight to relevant factors drawn to their attention when
evaluating the Company’s governance arrangements in
particular those relating to board structure and composition and
departure from the Code of Corporate Governance.
Principle 11: Conflicts
of interest
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The directors are fully aware of their
obligations regarding dealings in securities of the Company as
required by the Capital Market Rules in force during the
year. Moreover, they are notified of blackout periods, prior
to the issue of the Company’s interim and annual financial
information, during which they may not trade in the Company’s
bonds.
The directors of the Company recognise
their responsibility to act in the interest of the Company and its
shareholders as a whole, irrespective of who appointed them to
serve on the Board. It is the practice of the Board that when a
potential conflict of interest arises in connection with any
transaction or other matter, the potential conflict of interest is
declared so that steps may be taken to ensure that such items are
appropriately dealt with. Directors who have a conflict of interest
do not participate in discussions concerning such matters unless
the Board finds no objection to the presence of such directors. The
directors are obliged to keep the Board advised on an ongoing
basis, of any interest that could potentially conflict with that of
the Company. In any event, directors refrain from voting on the
matters where conflicts of interest arise.
During the financial year under review, no
private interests or duties unrelated to the Company were disclosed
by the Directors which were or could have been likely to place any
of them in conflict with any interests in, or duties towards, the
Company. Mr. Andrew Debattista, has a direct beneficial interest in
the share capital of the Company, and as such is susceptible to
conflicts arising between the potentially diverging interests of
the shareholders and the Company.
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Principle 12: Corporate
social responsibility
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The directors are committed to high
standards of ethical conduct and to contribute to the development
of the well-being of employees and their families as well as the
local community and society at large.
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Non-Compliance with the
code
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Principle 7: Evaluation
of the board’s performance
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Under the present circumstances, the board
does not consider it necessary to appoint a committee to carry out
a performance evaluation of its role, as the board’s
performance is always under the scrutiny of the shareholders.
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Income statement
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Notes
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2021
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2020
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€
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€
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Revenue
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5
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657,237
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384,000
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Administrative
expenses
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(71,378)
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(58,784)
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Income before finance
charges
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585,859
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325,216
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Finance costs
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6
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(527,667)
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(265,012)
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Impairment loss on
financial assets
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12
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(10,873)
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(2,546)
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Profit before
tax
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7
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47,319
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57,658
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Income tax
expense
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8
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(44,625)
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(26,326)
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Profit for the
year
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2,694
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31,332
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The notes to the financial statements are an
integral part of these financial statements.
Statement of Financial
Position
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Notes
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2021
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2020
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€
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€
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Assets
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Non-current
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Investment in
subsidiary
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9
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13,001,200
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1,200
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Loan
receivable
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10
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-
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4,800,000
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Deferred
expenditure
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11
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-
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157,209
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13,001,200
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4,958,409
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Current
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Receivables
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12
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1,736,676
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547,196
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Current tax
asset
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72,758
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-
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Cash and cash
equivalents
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13
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1,381
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874
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1,810,815
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548,070
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Total
assets
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14,812,015
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5,506,479
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Equity
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Share
capital
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14
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250,000
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250,000
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Retained
earnings
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20,996
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34,812
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Total
equity
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270,996
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284,812
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Liabilities
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Non-current
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Debt securities in
issue
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15
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12,423,994
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4,873,490
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12,423,994
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4,873,490
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Current
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Trade and other
payables
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16
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2,117,025
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321,851
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Current tax
payable
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-
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26,326
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2,117,025
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348,177
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Total
liabilities
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14,541,019
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5,221,667
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Total equity and
liabilities
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14,812,015
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5,506,479
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The notes to the financial statements are
an integral part of these financial statements.
The financial statements were approved
and authorised for issue by the Board of Directors on 25 April
2022. The financial statements were signed on behalf of the Board
of Directors by Andrew Debattista Segond (Director) and Ian Joseph
Stafrace (Director) as per the Directors’ Declaration on ESEF
Annual Financial Report submitted in conjunction with the Annual
Financial Report.
Statement of changes in equity
|
|
|
Share
|
Retained
|
Total
|
|
|
capital
|
earnings
|
equity
|
|
|
€
|
€
|
€
|
|
At 1 January
2020
|
48,000
|
23,480
|
71,480
|
|
|
|
|
|
|
Transaction with
owners:
|
|
|
|
|
Issue of share
capital
|
202,000
|
-
|
202,000
|
|
Dividends
declared
|
-
|
(20,000)
|
(20,000)
|
|
|
|
|
|
|
Profit for the
year
|
-
|
31,332
|
31,332
|
|
At 31 December
2020
|
250,000
|
34,812
|
284,812
|
|
|
|
|
|
|
At 1 January
2021
|
250,000
|
34,812
|
284,812
|
|
|
|
|
|
|
Transaction with
owners:
|
|
|
|
|
Dividends
declared
|
-
|
(16,510)
|
(16,510)
|
|
|
|
|
|
|
Profit for the
year
|
-
|
2,694
|
2,694
|
|
At 31 December
2021
|
250,000
|
20,996
|
270,996
|
|
|
|
|
|
The notes to the financial statements are
an integral part of these financial statements.
Statement of cash flows
|
|
|
|
|
|
Notes
|
2021
|
2020
|
|
|
€
|
€
|
|
Operating
activities
|
|
|
|
|
Profit before
tax
|
|
47,319
|
57,658
|
|
Adjustments
|
17
|
(118,697)
|
(116,442)
|
|
Net changes in working
capital
|
17
|
552,934
|
(312,309)
|
|
Tax paid
|
|
(26,326)
|
-
|
|
Net cash generated
from/ (used in) operating activities
|
|
455,230
|
(371,093)
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Repayment of loan
receivable from related parties
|
|
4,800,000
|
-
|
|
Payment to acquire
subsidiary
|
|
(13,000,000)
|
(1,200)
|
|
Interest
received
|
|
298,277
|
617,556
|
|
Net cash (used in)/
generated from investing activities
|
|
(7,901,723)
|
616,356
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Proceeds from issue of
bond
|
|
13,000,000
|
-
|
|
Redemption of
bonds
|
|
(5,000,000)
|
-
|
|
Bond issue
costs
|
|
(348,205)
|
-
|
|
Interest paid
|
|
(204,795)
|
(250,000)
|
|
Net cash generated
from/ (used in) financing activities
|
|
7,447,000
|
(250,000)
|
|
|
|
|
|
Net increase in cash and
cash equivalents
|
|
507
|
(4,737)
|
|
Cash and cash
equivalents, beginning of year
|
|
874
|
5,611
|
|
Cash and cash
equivalents, end of year
|
13
|
1,381
|
874
|
The notes to the financial statements are
an integral part of these financial statements.
Notes to the financial
statements
|
|
1 Nature of
operations
|
|
Smartcare Finance p.l.c. (the
‘Company’) was incorporated on 7 January 2019. The
Company was formed principally to act as a financing and investment
company, in particular the financing of companies within Smartcare
Group of Companies.
|
|
2 Basis of
preparation
|
|
2.1 General
information and statement of compliance with International
Financial Reporting Standards (IFRS)
|
|
Smartcare Finance p.l.c. is a public
listed company registered on 7 January 2019 incorporated and
domiciled in Malta. The registered office is located at 326, Mdina
Road, Qormi, Malta.
|
|
The Company’s parent company is
Smartcare Holdings Ltd with the same place of incorporation and
registered address as the Company. The ultimate beneficial owner of
Smartcare Finance p.l.c. is Mr Andrew Debattista Segond.
|
|
Consolidated financial statements have not
been drawn up, since the Company has taken advantage of the
exemption from so doing conferred to it by article 174 of the
Companies Act, Cap 386. Accordingly, these separate financial
statements present information about the Company as an individual
undertaking and not about its group. The parent company is
responsible for the preparation of the consolidated financial
statements for the whole group.
|
|
The financial statements have been
prepared in accordance with the requirements of IFRS, as issued by
the International Accounting Standards Board (IASB) and as adopted by the European Union (EU) , and in
accordance with the Companies Act, Cap 386.
|
|
The financial statements
are presented in euro (€), which is also the Company’s
functional currency.
|
|
2.2
Consideration of the effects of COVID-19
|
|
The Company’s principal activity is
to act as a holding and finance company. The Company was set up as
a special purpose vehicle to hold investments and raise finance for
the business of the Smartcare Group. The Group operates various
income streams, including an elderly home in Qormi, a hotel in
Xaghra and various developments across Malta and Gozo.
|
|
In preparing these financial statements,
the directors of the Company assessed the implications of the
COVID-19 pandemic on the performance of the Company, its
subsidiaries and the Smartcare Group as a whole. Such assessment
was performed through the anticipated revenue streams which are
expected to be generated from: (1) the elderly home whereby all the
beds are contracted to the Government of Malta; (2) the operation
of the hotel (3) the sale of apartments being developed, some of
which are subject to a promise of sale agreement; and the actual
revenue received since the pandemic commenced in March 2020. The
directors note that the Smartcare Group was not materially impacted
by the pandemic, given that all the beds operated by Dar Pino are
contracted to the Government, and no defaults on its commitments
resulted from the commencement of the pandemic. Therefore, the
directors believe that it remains appropriate to prepare these
financial statements on a going concern basis.
|
|
3 New or revised
standards or interpretations
|
|
3.1
New standards adopted as at 1 January 2021
|
|
Some accounting pronouncements which have
become effective from 1 January 2021 and have therefore been
adopted do not have a significant impact on the company’s
financial results or position.
|
|
3.2
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been adopted early by the
Company
|
|
At the date of authorisation of these
financial statements, certain new standards, amendments, and
interpretations to existing standards have been published by the
IASB but are not yet effective and have not been adopted early by
the Company.
|
|
Management anticipates that all relevant
pronouncements will be adopted in the Company’s accounting
policies for the first period beginning after the effective date of
the pronouncement. No new standards, amendments and interpretations
are expected to have a material impact on the Company’s
financial statements.
|
|
4 Summary of accounting
policies
|
|
4.1
Overall considerations and presentation of financial
statements
|
|
The financial statements have been
prepared using the significant accounting policies and measurement
bases summarised below.
|
|
The accounting policies are consistent
with those applied in previous years.
|
|
The financial statements are presented in
accordance with IAS 1 ‘Presentation of Financial
Statements’ (Revised 2007). The Company did not have any
items classified as ‘other comprehensive income’ and
consequently, management have elected to present only an income
statement.
|
|
4.2
Revenue
|
|
Revenue is recognised to the extent that
it is probable that future economic benefits will flow to the
Company and these can be measured reliably. The following specific,
recognition criteria must also be met before revenue is recognised.
|
|
Interest
income
|
|
Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate applicable.
|
|
Dividend
income
|
|
Dividend income is recognised in the
income statement when the right to receive payment is
established.
|
|
4.3
Expenses
|
|
Expenses are recognised in the income
statement upon utilisation of the service or at the date of their
origin.
|
|
4.4
Borrowing costs
|
|
Borrowing costs primarily comprise
interest on the Company’s borrowings. Borrowing costs are
expensed in the period in which they are incurred and reported
within ‘finance costs’.
|
|
4.5
Foreign currency translation
|
|
Foreign currency transactions are
translated into the functional currency of the Company, using the
exchange rates prevailing at the
dates of the transactions (spot exchange rate). Foreign exchange
gains and losses resulting from
the settlement of such transactions and from the remeasurement of
monetary items denominated in foreign currency at year-end exchange
rates are recognised in the income statement.
|
|
4.6
Investment in subsidiary
|
|
Investment in subsidiary is included in
the Company’s statement of financial position at cost less
any impairment loss that may have arisen. Income from investment is
recognised only to the extent of distributions received by the
Company from post-acquisition profits. Distributions received in
excess of such profits are regarded as a recovery of the investment
and are recognised as a reduction of the cost of the
investment.
|
|
At the end of each reporting period, the
Company reviews the carrying amount of its investments in
subsidiary to determine whether there is any indication of
impairment and, if any such indication exists, the recoverable
amount of the investment is estimated. An impairment loss is the
amount by which the carrying amount of an investment exceeds its
recoverable amount. The recoverable amount is the higher of fair
value less costs to sell and value in use. An impairment loss that
has been previously recognised is reversed if the carrying amount
of the investment exceeds its recoverable amount.
|
|
An impairment loss is reversed only to the
extent that the carrying amount of the investment does not exceed
the carrying amount that would have been determined if no
impairment loss had been previously recognised. Impairment losses
and reversals are recognised immediately in the income
statement.
|
|
4.7
Financial instruments
|
|
Recognition and
derecognition
|
|
Financial assets and financial liabilities
are recognised when the Company becomes a party to the contractual
provisions of the instrument.
|
|
Financial assets are derecognised when the
contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognised when
it is extinguished, discharged, cancelled or expires.
|
|
Classification and
initial measurement of financial assets
|
|
Except for those trade receivables that do
not contain a significant financing component and are measured at
the transaction price in accordance with IFRS 15, all financial
assets are initially measured at fair value adjusted for
transaction costs (where applicable).
|
|
Financial assets are classified into the
following categories:
|
|
• amortised cost;
• fair value through profit or loss
(FVTPL); or
• fair value through other
comprehensive income (FVOCI).
|
|
In the periods presented, the Company does
not have any financial assets categorised at FVTPL and FVOCI.
|
|
The classification is determined by
both:
|
|
• the entity’s business model
for managing the financial asset; and
• the contractual cash flow
characteristics of the financial asset.
|
|
All income and expenses relating to
financial assets that are recognised in the income statement are
presented within ‘finance income’ and ‘finance
costs’, except for impairment of receivables which is
presented within ‘credit impairment loss’.
|
|
Subsequent
measurement of financial assets
|
|
Financial assets at amortised cost
|
|
Financial assets are measured at amortised
cost if the assets meet the following conditions (and are not
designated as FVTPL):
|
|
• they are held within a business
model whose objective is to hold the financial assets and collect
its
contractual cash flows
• the contractual terms of the
financial assets give rise to cash flows that are solely payments
of
principal and interest on the principal
amount outstanding
|
|
After initial recognition, these are
measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is
immaterial.
|
|
Impairment of
financial assets
|
|
IFRS 9’s impairment requirements
use forward-looking information to recognise expected credit losses
– the ‘expected credit loss model’. Instruments
within the scope of the requirements include most receivables.
|
|
The Company considers a broad range of
information when assessing credit risk and measuring expected
credit losses, including past events, current conditions and
reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
|
|
In applying this forward-looking
approach, a distinction is made between:
|
|
• financial instruments that have
not deteriorated significantly in credit quality since initial
recognition or that have low credit risk (‘Stage 1’)
and
• financial instruments that have
deteriorated significantly in credit quality since initial
recognition and whose credit risk is not low (‘Stage
2’).
|
|
‘Stage 3’ would cover
financial assets that have objective evidence of impairment at the
reporting date.
|
|
‘12-month expected credit
losses’ are recognised for the first category while
‘lifetime expected credit losses’ are recognised for
the second category.
|
|
Measurement of the expected credit losses
is determined by a probability-weighted estimate of credit losses
over the expected life of the financial instrument.
|
|
Receivables
|
|
The Company makes use of a simplified
approach in accounting for receivables and records the loss
allowance as expected credit losses. These are the expected
shortfalls in contractual cash flows, considering the potential for
default at any point during the life of the financial instrument.
In calculating, the Company uses historical experience, external
indicators and forward-looking information to calculate the
expected credit losses using a provision matrix.
|
|
The Company assesses impairment of trade
receivables on a collective basis as they possess shared credit
risk characteristics. Refer to note 19.1 for a detailed analysis of
how the impairment requirements of IFRS 9 are applied.
|
|
Classification and
measurement of financial liabilities
|
|
The Company’s financial liabilities
include trade and other payables and debt securities in issue.
|
|
Financial liabilities are initially
measured at fair value, and, where applicable, adjusted for
transaction costs unless the Company designates a financial
liability at fair value through profit or loss.
|
|
Subsequently, financial liabilities are
measured at amortised cost using the effective interest method
except for derivatives and financial liabilities designated at
FVTPL, which are carried subsequently at fair value with gains or
losses recognised in profit or loss (other than derivative
financial instruments that are designated and effective as hedging
instruments).
|
|
All interest-related charges and, if
applicable, changes in an instrument’s fair value that are
reported in profit or loss are included within ‘finance
costs’ or ‘finance income’.
|
|
4.8
Income taxes
|
|
Tax expense recognised in profit or loss
comprises the sum of deferred tax and current tax not recognised in
other comprehensive income or directly in equity.
|
|
Current income tax assets and/or
liabilities comprise those obligations to, or claims from, fiscal
authorities relating to the current or prior reporting periods,
that are unpaid at the reporting date. Current tax is payable on
taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and
tax laws that have been enacted or substantively enacted by the end
of the reporting period.
|
|
Deferred income taxes are calculated using
the liability method on temporary differences between the carrying
amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of an asset
or liability unless the related transaction is a business
combination or affects tax or accounting profit.
|
|
Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to
apply to their respective period of realisation, provided they are
enacted or substantively enacted by the end of the reporting
period. Deferred tax liabilities are always provided for in
full.
|
|
Deferred tax assets are recognised to the
extent that it is probable that they will be able to be utilised
against future taxable income.
|
|
Changes in deferred tax assets or
liabilities are recognised as a component of tax income or expense
in the income statement, except where they relate to items that are
recognised in other comprehensive income or directly in equity, in
which case the related deferred tax is also recognised in other
comprehensive income or equity, respectively.
|
|
4.9
Cash and cash equivalents
|
|
Cash and cash equivalents comprise demand
deposits with bank.
|
|
4.10 Equity
and dividend distributions
|
|
Share capital is determined using the
nominal value of shares that have been issued.
|
|
Retained earnings include all current and
prior period results as disclosed in the income statement less
dividend distributions.
|
|
Dividend distributions payable to equity
shareholders are included with short-term financial liabilities
when the dividends are approved in the general meeting prior to the
end of the reporting period.
|
|
4.11
Provisions
|
|
Provisions are recognised when present
obligations as a result of a past event will probably lead to an
outflow of economic resources from the Company and amounts can be
estimated reliably. Timing or amount of the outflow may still be
uncertain. A present obligation arises from the presence of a legal
or constructive commitment that has resulted from past events; for
example, product warranties granted, legal disputes or onerous
contracts. Restructuring provisions are recognised only if a
detailed formal plan for the restructuring has been developed and
implemented, or management has at least announced the plan’s
main features to those affected by it. Provisions are not
recognised for future operating losses.
|
|
Provisions are measured at the estimated
expenditure required to settle the present obligation, based on the
most reliable evidence available at the reporting date, including
the risks and uncertainties associated with the present obligation.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money
is material.
|
|
All provisions are reviewed at each
reporting date and adjusted to reflect the current best
estimate.
|
|
In those cases where the possible outflow
of economic resources as a result of present obligations is
considered improbable or remote, no liability is recognised.
|
|
4.12
Significant management judgement in applying accounting policies
and estimation uncertainty
|
|
When preparing the financial statements,
management makes a number of judgements, estimates and assumptions
about the recognition and measurement of assets, liabilities,
income and expenses.
|
|
Except as disclosed below, in the opinion
of the directors, the accounting estimates and judgements made in
the course of preparing these financial statements are not
difficult, subjective or complex to a degree which would warrant
their description as critical in terms of the requirements of IAS 1
(revised).
|
|
Significant
management judgement
Measurement of the
expected credit losses
|
|
The measurement of the expected credit
loss allowance for financial assets measured at amortised cost is
an area that requires the use of complex models and significant
assumptions about future economic conditions and credit
behaviours.
|
|
A number of significant judgements are
required when measuring the expected credit loss, such as:
|
|
-
determining criteria for significant increase in credit risk;
- choosing
appropriate models and assumptions for the measurement of ECL;
and
-
establishing the number and relative weightings of forward-looking
scenarios and associated ECL.
|
|
5 Revenue
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Dividend income from
subsidiary
|
|
358,960
|
-
|
|
Interest income from
group companies
|
|
298,277
|
384,000
|
|
|
|
657,237
|
384,000
|
|
6 Finance
costs
|
|
Finance costs may be
analysed as follows:
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Interest on debt
securities in issue
|
|
471,749
|
250,000
|
|
Amortisation of bond
issue costs
|
|
55,918
|
15,012
|
|
|
|
527,667
|
265,012
|
|
|
|
|
|
|
7 Profit before
tax
|
|
Profit before tax is
stated after charging:
|
|
|
|
2021
|
2020
|
|
|
|
|
€
|
€
|
|
|
|
|
|
|
|
|
Auditor’s
remuneration
|
|
6,100
|
6,000
|
|
|
Directors’
fees
|
|
23,305
|
21,240
|
|
|
|
|
|
|
|
8 Income tax
expense
|
|
|
|
|
|
|
|
|
|
The relationship between
the expected tax expense based on the effective tax rate of the
Company at 35% (2020: 35%) and the actual tax expense recognised in
the income statement can be reconciled as follows:
|
|
2021
|
2020
|
|
€
|
€
|
|
|
|
|
|
Profit before
tax
|
47,319
|
57,658
|
|
Tax rate
|
35%
|
35%
|
|
Expected tax
expense
|
(16,562)
|
(20,180)
|
|
|
|
|
|
Disallowed
expenses
|
(36,316)
|
(6,146)
|
|
Non-taxable
income
|
8,293
|
-
|
|
Actual tax expense,
net
|
(44,625)
|
(26,326)
|
|
|
|
|
|
9 Investment in
subsidiary
|
|
|
|
|
|
|
|
|
2021
|
2020
|
|
|
€
|
€
|
|
|
|
|
|
At 1 January
Additions
|
1,200
13,000,000
|
1,200
-
|
|
At 31
December
|
13,001,200
|
1,200
|
|
|
|
|
|
The Company has an
unquoted investment in the following subsidiary:
|
|
|
|
Name of
company
|
Nature of
business
|
%
ownership
|
|
|
|
|
|
Smartcare Group
Investments Ltd
|
Holding
company
|
100
|
|
|
|
|
|
On 16 October 2020, the
Company acquired 1,200 shares at € 1 each in Smartcare Group
Investments Ltd. These represent 100% of the total issued shares of
the investee. In 2021, the Company increased its investment through
an additional 13,000,000 preference shares, with a nominal value of
€1.
|
|
In 2020 and 2021, the
Company had indirect investments in the companies mentioned below
through its investment in Smartcare Group Investments
Ltd.
|
|
|
|
|
|
Name of
company
|
Nature of
business
|
%
ownership
|
|
|
|
|
|
Smartcare Developments
Limited
|
Non-trading
|
100
|
|
Segond Boutique Hotels
Limited
|
Non-trading
|
100
|
|
Smarcare Pinto
Limited
|
Care home
service
|
100
|
|
Smartcare Properties
Limited
|
Develop and sell
property
|
100
|
|
|
|
|
|
The registered office of
all the above-mentioned companies is situated at 326 Mdina Road
Qormi, Malta.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 Loan
receivable
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Loan to parent
company
|
|
-
|
780,000
|
|
Loans to group
companies
|
|
-
|
4,020,000
|
|
|
|
-
|
4,800,000
|
|
|
|
|
|
|
As at 31 December 2020 the loans were
unsecured, bore interest at the rate of 8% per annum and were
repayable by 2029. The loans were repaid during 2021.
11 Deferred
expenditure
Deferred expenditure pertains to the
costs incurred on the bond issued in 2021. These costs formed
part of the bond issue costs, and will be amortised over the
lifetime of the bond starting from financial year ending 31
December 2021 as set out in Note 15.
|
|
12 Receivables
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Other
debtors
|
|
1,253
|
-
|
|
Amount due from
subsidiary
|
|
1,745,229
|
275
|
|
Amounts due from
parent company
|
|
-
|
100,007
|
|
Amounts due from group
companies
|
|
-
|
444,926
|
|
Estimated credit
loss
|
|
(16,663)
|
(5,790)
|
|
Financial assets at
amortised cost – net
|
|
1,729,819
|
539,418
|
|
Prepayments
|
|
6,857
|
7,778
|
|
Total
receivables
|
|
1,736,676
|
547,196
|
|
|
|
|
|
|
All amounts are short-term. The carrying
value of financial assets is considered a reasonable approximation
of fair value.
|
|
Amounts due from related parties are
unsecured, interest-free and are repayable upon demand.
|
|
All of the Company’s receivables
have been reviewed for indicators of impairment. The impaired
receivables were with respect to amounts due from related
parties.
|
|
The movement in the expected credit
losses is presented below:
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
At 1
January
|
|
5,790
|
3,244
|
|
Provision for expected
credit loss
|
|
10,873
|
2,546
|
|
At 31
December
|
|
16,663
|
5,790
|
|
|
|
|
|
The Company’s management
considers that all the above financial assets that are not impaired
or past due are of good credit quality.
|
|
|
|
|
|
|
|
|
13 Cash and cash
equivalents
|
|
Cash and cash equivalents consist of
balances with banks. Cash and cash equivalents included in the
statement of cash flows reconcile to the amounts shown in the
statement of financial position as follows:
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Cash at
bank
|
|
1,381
|
874
|
|
|
|
1,381
|
874
|
|
|
|
|
|
The Company did not have any
restrictions on its bank balances at year-end.
|
14 Share capital
|
The share capital of Smartcare
Finance p.l.c. consists of only ordinary shares with a par value of
€1 each. All shares are equally eligible to receive dividends
and repayment of capital and represent one vote at the
shareholder’s meeting of the Company.
|
|
2021
|
2020
|
|
€
|
€
|
|
|
|
Shares issued and fully paid at
31 December
|
|
|
250,000 Ordinary shares at € 1
each
|
250,000
|
250,000
|
|
|
|
Shares authorised at 31
December
|
|
|
250,000 Ordinary shares at € 1
each
|
250,000
|
250,000
|
|
|
|
On 18 August 2020, the
shareholder of the Company approved the increase in authorised
share capital from 48,000 to 250,000 ordinary shares with a nominal
value of € 1 each. On the same date, the Company issued
202,000 ordinary shares at € 1 each to Smartcare Holdings Ltd,
its parent company.
|
|
|
|
|
|
|
15 Debt securities in
issue
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Opening
balance
|
|
5,000,000
|
-
|
|
Bond issue during the
year
|
|
13,000,000
|
5,000,000
|
|
Redemption of
bond
|
|
(5,000,000)
|
-
|
|
Bond issue
costs
|
|
(655,531)
|
(150,117)
|
|
Amortisation of bond
issue costs
|
|
79,525
|
23,607
|
|
|
|
12,423,994
|
4,873,490
|
|
|
|
|
|
|
At year end, the Company had a balance of
€12,423,994 (2020: € 4,873,491) from the bond issue of
€13 million 4.65% bonds of €100 nominal value each,
redeemable at par in 2031. During 2021, the €5 million bonds
on Prospects MTF were redeemed and €13 million bonds was
raised. Consequently, the amount as at 31 December 2021 is
made up of the bond issue of €13 million net of the bond issue
costs which are being amortised over the lifetime of the bonds.
Interest on the bonds is due and payable annually in arrears on 22
April of each year at the above-mentioned rate. The bonds are
listed on the Official Companies List of the Malta Stock Exchange
and are jointly guaranteed by Smartcare Pinto Ltd and Smartcare
Holdings Ltd. ’
At the end of the current reporting
period, bonds with a face value of €25,500 were held by a
company director.
|
16 Trade and other
payables
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Trade
payables
|
|
64,848
|
144,623
|
|
Amount due to parent
company
|
|
1,421,550
|
-
|
|
Amount due to company
under common control
|
|
12,393
|
15,398
|
|
Amount due to group
company
|
|
189,947
|
-
|
|
Accruals
|
|
428,287
|
161,830
|
|
Total trade and
other payables
|
|
2,117,025
|
321,851
|
|
|
|
|
|
The carrying value of financial
liabilities is considered a reasonable approximation of fair
value.
|
Amounts due to parent company
and company under common control are unsecured, interest free and
are repayable on demand.
|
|
17 Cash flow adjustments and
changes in working capital
|
The following non-cash flow
adjustments and adjustments for changes in working capital have
been made to profit before tax to arrive at operating cash
flow:
|
|
|
|
2021
|
2020
|
|
|
|
€
|
€
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Amortisation of bond
issue costs
|
|
55,918
|
15,012
|
|
Impairment loss on
financial assets
|
|
10,873
|
2,546
|
|
Dividends from
subsidiary
|
|
( 358,960 )
|
-
|
|
Interest on debt
securities in issue
|
|
471,749
|
250,000
|
|
Interest income on
loans receivable
|
|
(298,277)
|
(384,000)
|
|
|
|
(
118,697 )
|
(11
6,442 )
|
|
|
|
|
|
|
Net changes in
working capital:
|
|
|
|
|
Receivables
|
|
( 958,776 )
|
(448,762)
|
|
Trade and other
payables
|
|
1,511,710
|
136,453
|
|
|
|
552,934
|
(312,309)
|
|
|
|
|
|
|
18
Related party transactions
|
Smartcare Finance p.l.c. forms
part of the Smartcare Group of Companies.
|
The Company’s parent
company is Smartcare Holdings Ltd. The ultimate beneficial owner of
Smartcare Finance p.l.c is Mr Andrew Debattista Segond.
|
All companies forming part of
Smartcare Group of Companies, entities ultimately owned by Andrew
Debattista Segond and key management personnel are considered by
the director to be related parties.
|
Unless otherwise stated, none
of the transactions incorporates special terms and conditions and
no guarantee was given or received. Outstanding balances are
usually settled in cash. Amounts due from/to related parties are
disclosed in notes 10, 12 and 16, respectively.
Directors’ fees are disclosed in note 7.
|
|
18.1 Transactions
with related parties
|
|
2021
|
2020
|
|
|
€
|
€
|
|
|
|
|
|
Interest income from
parent company
|
15,600
|
62,400
|
|
Interest income from
group companies
|
282,677
|
321,600
|
|
Re-charges from group
company
|
21,650
|
21,063
|
|
|
19 Risk management objectives
and policies
|
The Company is exposed to
various risks in relation to financial instruments. The
Company’s financial assets and liabilities by category are
summarised in note 19.4. The main types of risks are credit risk,
liquidity risk and market risk.
|
The Company’s business
involves taking on risks in a targeted manner and managing them
professionally. The cost functions of the Company’s risk
management are to identify all key risks for the Company, measure
these risks, manage the risk positions and determine capital
allocations. Management regularly reviews the policies and
systems in place to reflect changes in markets, products and best
market practice. The Company’s aim is to achieve an
appropriate balance between risk and return and minimise potential
adverse effects on the Company’s financial performance. The
Company defines risk as the possibility of losses or profits
forgone, which may be caused by internal or external
factors.
|
The most significant risks to
which the Company is exposed to are described below.
|
|
19.1 Credit
risk
|
Credit risk is the risk that a
counterparty fails to discharge an obligation to the
Company.
|
The Company’s exposure to
credit risk is limited to the carrying amount of financial assets
recognised at the reporting date, as summarised below:
|
|
Notes
|
2021
|
2020
|
|
|
€
|
€
|
|
|
|
|
|
Classes of financial
assets – carrying amounts
|
|
|
|
|
Financial assets at
amortised cost:
|
|
|
|
|
Loans
receivable
|
10
|
-
|
4,800,000
|
|
Trade and other
receivables
|
12
|
1,729,819
|
539,418
|
|
Cash and cash
equivalents
|
13
|
1,381
|
874
|
|
|
1,731,200
|
5,340,292
|
Credit risk
management
|
The credit risk is managed
based on the Company’s credit risk management policies and
procedures.
|
Bank balances at year end are
held with a reputable local financial institution. Management
considers that expected credit loss on bank balances is not
significant.
|
The Company applies IFRS 9
simplified model of recognising expected credit losses for all
receivables as these items do not have significant financing
component.
|
In measuring expected credit
losses, the amounts due from related parties have been assessed on
a collective basis as they possess shared credit risk
characteristics. They have been grouped based on the days past
due.
|
Based on the length of time a
receivable is outstanding, the debtor’s payment history as
well as current and forward-looking information on macroeconomic
factors affecting the debtor’s ability to pay, management
concluded that the credit quality of receivables including those
that are past due but not impaired to be good. The Company provided
for an expected credit loss on its related party balances amounting
to €16,663 (2020: €5,790).
|
|
19.2 Liquidity
risk
|
As at 31 December 2021 and
2020, the Company's financial liabilities have contractual
maturities (including interest payments where applicable) as
summarised below:
|
|
|
Current
|
Non-current
|
|
|
within
1
year
|
2 to
5
years
|
later
than
5
years
|
|
31 December
2020
|
€
|
€
|
€
|
|
|
|
|
|
|
Debt securities in
issue
|
-
|
-
|
5,000,000
|
|
Interest on debt
securities in issue
|
250,000
|
1,000,000
|
847,976
|
|
Trade and other
payables
|
321,851
|
-
|
-
|
|
|
571,851
|
1,000,000
|
5,847,976
|
|
|
|
|
|
|
|
Current
|
Non-current
|
|
|
within
1
year
|
2 to
5
years
|
later
than
5
years
|
|
31 December
2021
|
€
|
€
|
€
|
|
|
|
|
|
|
Debt securities in
issue
|
-
|
-
|
13,000,000
|
|
Interest on debt
securities in issue
|
604,500
|
1,813,500
|
3,627,000
|
|
Trade and other
payables
|
2,117,025
|
-
|
-
|
|
|
2,721,525
|
1,813,500
|
16,627,000
|
|
19.3 Market risk
|
Foreign currency
risk
|
The Company transacts business
mainly in euro and had no foreign currency denominated financial
assets and liabilities at the end of the financial reporting period
under review. Consequently, the Company is not exposed to foreign
currency risk.
|
Interest rate
risk
|
|
The Company does not have any significant
banking or other variable interest-bearing facilities and therefore
is not subject to interest rate fluctuations.
|
|
19.4 Summary of
financial assts and liabilities by category
|
The carrying amounts of the
Company’s financial assets and liabilities are recognised at
the end of the reporting periods may also be categorised as
follows. See note 4.7 for explanations about how the category of
financial instruments affects subsequent measurement.
|
|
Notes
|
2021
|
2020
|
|
|
€
|
€
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Financial assets at
amortised cost:
|
|
|
|
|
- Loans
receivable
|
10
|
-
|
4,800,000
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Financial assets at
amortised cost:
|
|
|
|
|
- Trade and
other receivables
|
12
|
1,729,819
|
539,418
|
|
- Cash and
cash equivalents
|
13
|
1,381
|
874
|
|
|
1,731,200
|
540,292
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
Financial liabilities at
amortised cost:
|
|
|
|
|
- Debt
securities in issue
|
15
|
12,423,994
|
4,873,490
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Financial liabilities at
amortised cost:
|
|
|
|
|
- Trade and
other payables
|
16
|
2,117,025
|
321,851
|
|
20 Capital management policies
and procedures
|
The Company’s objectives
when managing capital, which is a broader concept than the
‘equity’ on the statement of financial position,
are:
|
•
|
to safeguard the
Company’s ability to continue as going concern so that it can
continue to provide returns for shareholders and benefits to other
stakeholders; and
|
|
•
|
to maintain a strong capital base to
support the development of its business.
|
|
Accordingly, the purpose of the
Company’s capital management is essentially that of ensuring
efficient use of capital taking cognisance of the Company’s
risk appetite and profile as well as its objectives for business
development.
|
|
21 Post-reporting date
events
|
|
No adjusting or
significant non-adjusting events have occurred between the end of
the reporting period and the date of authorisation.
|
|
|
|
|
|
Independent auditor’s report
To the shareholders of Smartcare Finance
p.l.c.
Report on the audit
of the financial statements
Opinion
We have audited the financial statements
of Smartcare Finance p.l.c. which comprise the statement of
financial position as at 31 December 2021, and the income
statement, statement of changes in equity and statement of cash
flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting
policies.
In our opinion, the accompanying financial
statements give a true and fair view of the financial position of
the Company as at 31 December 2021, and of its financial
performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union (EU), and have been properly
prepared in accordance with the requirements of the Companies Act,
Cap. 386 (the “Act”).
Basis for
opinion
We conducted our audit in accordance with
International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section
of our report. We are independent of the Company in accordance with
the International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants (IESBA Code) together
with the ethical requirements of the Accountancy Profession (Code
of Ethics for Warrant Holders) Directive issued in terms of the
Accountancy Profession Act, Cap. 281 that are relevant to our audit
of the financial statements in Malta. We have fulfilled our other
ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. In conducting our
audit, we have remained independent of the Company have not
provided any of the non-audit services prohibited by article 18A of
the Accountancy Profession Act, Cap. 281. Total remuneration
payable to the Company’s auditors in respect of the audit of
the Company’s financial statements amounted to
€6,100.
Key audit
matters
Key audit matters are those matters that,
in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Financial assets at
amortised cost
Key audit matter
The Company acts as the main finance
vehicle of the Smartcare Group. Financial assets at amortised cost,
are comprised of loans due to related parties.
How the key audit matter was addressed
in our audit
Financial assets at amortised cost were
checked and confirmed with the financial information of the
respective related parties and related agreements. We also checked
the financial situation of the related parties to ensure that there
are no recoverability issues.
Debt securities in
issue
Key audit matter
The Company’s main liability is with
respect to the payment of interest and repayment of debt securities
in issue.
How the key audit matter was addressed
in our audit
We ensured that the debt securities issued
during the year were used according to the terms of the Prospectus.
We also ensured that that capitalisation of bond issue costs and
amortisation of debt securities in issue was in accordance with the
Company’s accounting policies. We also considered the
Company’s liquidity risk, to ensure that the Company can meet
these obligations as they fall due.
Other
information
The directors are responsible for the
other information. The other information comprises the
Directors’ report which we obtained prior to the date of this
auditor’s report, but does not include the financial
statements and our auditor’s report thereon.
Our opinion on the financial statements
does not cover the other information.
In connection with our audit of the
financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
With respect to the directors’
report, we also considered whether the directors’ report
includes the disclosures required by Article 177 of the Act.
Based on the work we have performed, in
our opinion:
|
•
|
the information given in the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial
statements; and
|
|
•
|
the directors’ report has been
prepared in accordance with the Act.
|
In addition, in light of the knowledge and
understanding of the Company and its environment obtained in the
course of the audit, we are required to report if we have
identified material misstatements in the directors’ report
and other information that we obtained prior to the date of this
auditor’s report. We have nothing to report in this
regard.
Responsibilities of
those charged with governance for the financial
statements
The directors are responsible for the
preparation of financial statements that give a true and fair view
in accordance with IFRS as adopted by the EU and are properly
prepared in accordance with the provisions of the Act, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters
relating to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative
but to do so.
The directors are responsible for
overseeing the Company’s financial reporting process.
Auditor’s
responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
In terms of article 179A(4) of the Act,
the scope of our audit does not include assurance on the future
viability if the audited entity or on the efficiency or
effectiveness with which the directors have conducted or will
conduct the affairs of the entity.
As part of an audit in accordance with the
ISAs, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
|
-
|
Identify and assess the risks of material
misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal control.
|
|
-
|
Obtain an understanding of internal
control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the
Company’s internal control.
|
|
-
|
Evaluate the appropriateness of accounting
policies used and the reasonableness of accounting estimates and
related disclosures made by management.
|
|
-
|
Conclude on the appropriateness of
management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
|
|
-
|
Evaluate the overall presentation,
structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
|
We communicate with those charged with
governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with
governance with a statement that we have complied with the relevant
ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those
charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefit of such communication.
Report on other
legal and regulatory requirements
Report
on compliance with the requirements of the European Single
Electronic Format Regulatory Technical Standard (the “ESEF
RTS”), by reference to Capital Markets Rule
5.55.6
We have undertaken a reasonable assurance
engagement in accordance with the requirements of Directive 6
issued by the Accountancy Board in terms of the Accountancy
Profession Act (Cap. 281) - the Accountancy Profession (European
Single Electronic Format) Assurance Directive (the “ESEF
Directive 6”) on the Report and Financial Statements of
Smartcare Finance p.l.c. for the year ended 31 December 2021,
entirely prepared in a single electronic reporting format.
Responsibilities of the
directors
The directors are responsible for the
preparation of the Report and Financial Statements and the relevant
mark-up requirements therein, by reference to Capital Markets Rule
5.56A, in accordance with the requirements of the ESEF RTS.
Our
responsibilities
Our responsibility is to obtain reasonable
assurance about whether the Report and Financial Statements,
complies in all material respects with the ESEF RTS based on the
evidence we have obtained. We conducted our reasonable assurance
engagement in accordance with the requirements of ESEF Directive
6.
Our procedures
included:
- Obtaining
an understanding of the entity's financial reporting process,
including the preparation of the Report and Financial Statements,
in accordance with the requirements of the ESEF RTS.
- Obtaining
the Report and Financial Statements and performing validations to
determine whether the Report and Financial Statements have been
prepared in accordance with the requirements of the technical
specifications of the ESEF RTS.
- We believe
that the evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Opinion
In our opinion, the Report and Financial
Statements for the year ended 31 December 2021 has been prepared,
in all material respects, in accordance with the requirements of
the ESEF RTS.
Report
on the statement of compliance with the Principles of Good
Corporate Governance
The Capital Markets Rules issued by the
Malta Financial Services Authority require the directors to prepare
and include in their Annual Report a corporate governance statement
providing an explanation of the extent to which they have adopted
the Code of Principles of Good Corporate Governance and the
effective measures that they have taken to ensure compliance
throughout the accounting period with those Principles.
The Capital Markets Rules also require us,
as the auditor of the Company, to include a report on the Statement
of Compliance prepared by the directors.
We read the Statement of Compliance with
the Code of Principles of Good Corporate Governance and consider
the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial
statements included in the Annual Report. Our responsibilities do
not extend to considering whether this statement is consistent with
any other information included in the Annual Report.
We are not required to, and we do not,
consider whether the Board’s statements on internal control
included in the Statement of Compliance with the Code of Principles
of Good Corporate Governance cover all risks and controls, or form
an opinion on the effectiveness of the Company’s corporate
governance procedures or its risk and control procedures.
In our opinion, the Corporate governance
statement has been properly prepared in accordance with the
requirements of the Capital Markets Rules.
Other
matters on which we are required to report by
exception
We also have responsibilities under the
Companies Act, Cap 386 to report to you if, in our opinion:
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adequate accounting records have not been
kept, or that returns adequate for our audit have not been received
from branches not visited by us;
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the financial statements are not in
agreement with the accounting records and returns;
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we have not received all the information
and explanations we require for our audit; or
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certain disclosures of directors’
remuneration specified by law are not made in the financial
statements, giving the required particulars in our report.
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In terms of the Capital Markets Rules to
review the statement made by the directors that the business is a
going concern together with supporting assumptions or
qualifications as necessary.
We have nothing to report to you in
respect of these responsibilities.
Auditor
tenure
This is the second year wherein we are
acting as auditors. Our appointment will be renewed annually
by shareholder’s resolution.
The engagement partner on the audit
resulting in this independent auditor’s report is Sharon
Causon.
Grant
Thornton
Certified Public Accountants
Fort Business Centre
Triq L-Intornjatur, Zone 1
Central Business District
Birkirkara CBD 1050
Malta
25 April 2022
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