Consolidated Statement of Financial Position
For the year ended 31 December 2021
MedservRegis p.l.c.
Annual Report
1
Contents
Page
Directors’ and Other Statutory Reports i
Financial Statements1
Independent Auditors’ Report
MedservRegis p.l.c.
Directors’ and
Other Statutory Reports
2021
MedservRegis p.l.c.
Directors’ and other Statutory Reports
Page
Chairman’s Statementi
CEO’s Statementii
Statement on Corporate Social Responsibilityiv
Directors’ Report vi
Statement of the Directors pursuant to Capital Markets Rule 5.68 xiii
Directors’ Statement of Compliance with the Code of Principles
of Good Corporate Governance xiv
Remuneration Statement and Report xxv
MedservRegis p.l.c.
Chairman’s Statement
For the Year Ended 31 December 2021
i
This is the first end of year statement I have the honour to make for the newly formed Group of Companies, MedservRegis Plc. The coming together of two likeminded groups of companies in June of 2021 has created a financially and operationally stronger organization as well as giving the new group a global reach not available in the past to facilitate growth.
On the back of the crippling pandemic and its disastrous effect on the global economy the shareholders and directors of both Regis and Medserv acted to ensure they protect their investment and market position. This action created a strong Group able to meet the expected upturn in business. As anticipated the economic activity in the second half of 2021 was stronger than the first six months of the same year, and this growth is expected to accelerate during 2022.
The integration process of the two Groups is ongoing and should deliver not only a more cost-effective operation but also enhance the service product offered to our client base across the Globe. This process has brought about some significant changes at board of directors and senior management level. The new board of directors of MedservRegis is made up of a mix of individuals with a long track record serving both companies as well as the addition of new blood to help implement change. It would be amiss of me not to take this opportunity to thank all outgoing directors of both Regis and Medserv for their stellar service over the years.
The changes put in place at executive management levels are also designed to reflect the change in ownership as well as to meet the demands of the global markets MedservRegis is competing in. David O’Connor has assumed the responsibility as Group CEO assisted by two deputy CEOs, Karl Bartolo and Olivier Bernard. All senior management has been retained and the few members of management that were due to retire have not been replaced as their duties were absorbed by the integration process.
Our industry and indeed our Group is conscious of our responsibility towards reaching a carbon neutral economy. MedservRegis invested directly in solar farm activity and is introducing other measures to reduce our carbon footprint. Our main clients, the Oil and Gas Majors, are investing heavily in alternative and renewable energy. MedservRegis has already secured business supporting new investment made by International Energy Companies in renewable energy projects. The transition from fossil fuel to alternate fuels is an ongoing process that needs both time and paradoxically the very same fossil fuel to make this change happen. MedservRegis is well positioned to support this transition and beyond.
I am confident that the global economy is on an upward trajectory and the changes at MedservRegis have made it possible for my board and I to see our group returning to profitability and deliver value to our shareholders. This is possible not only due to the strategic developments implemented by the Directors but also due to the professionalism and dedication shown by the Group’s management and staff in the four corners of the world.
Anthony S. Diacono
Chairman
16 June 2022
MedservRegis p.l.c.
CEO’s Statement
For the Year Ended 31 December 2021
ii
“Joining Forces and Transforming into a Global Player “
With the ongoing Covid pandemic, 2021 continued to be a year of tough challenges. This, together with the insurgency in northern Mozambique which forced the suspension of all works at the Total LNG facility, added pressure to business operations. Notwithstanding these challenges, business has stabilised from the downturns of 2019 and 2020 and is registering signs of growth.
Management successfully completed the share for share transaction with Mauritius based Regis Holdings Ltd at the end of June 2021. The listed entity, now known as MedservRegis plc., has an expanded base of operations in Sub-Sahara Africa most notably Mozambique, Uganda and Angola.
The economic environment in 2021 remained slow and uncertain as a result of the continued suspension of projects due to the pandemic, the fragmented political situation in Libya resulting in the postponement of the start of new drilling activity and most notably the force-majeure announced by Total Energies at their LNG facility situated in northern Mozambique. On the positive side our Egypt operations were awarded two substantial projects which commenced mid-year. This is expected to improve operations and contribute significantly to the Group’s results and we expect Egypt to register improved revenues and profits over the next three years. Our operations in the Middle East continue to generate profits with further expected growth for 2022 and 2023 as a result of an increase in the number of onshore wells being drilled.
The Group’s total revenues for year 2021 amounted to €29.9 million. Earnings, before interest, tax, depreciation and amortisation (EBITDA) amounted to €5.3 million. A detailed analysis of the Company’s financial performance for the reporting year can be found in the Directors’ report.
One of the prime objectives of the Company this year was to conclude the share for share transaction with Regis Holdings Ltd and to commence with the integration of business units into one management mindset. Following the successful conclusion of the share for share transaction, the Regis business infused significant cash reserves into the Group, which has significantly strengthened the combined financial structure of the Company. On the back of this strengthened financial position the Group, together with its strong business pipeline, is now in a better position to approach the financial markets and restructure its debt.
The Group today is represented on four continents, present in twelve countries and operating twelve bases, transforming the Company into a global player. The Group is adapting to the market changes as integration of supply chain management and the increase of resource sharing is the driver to remain sustainable and continue to be of value to our international energy clients. With the increase in the energy prices, we are experiencing a surge in invitations to tenders and requests for proposals across all our operating entities. The driver for this growth is the significant economic development of the countries in which MedservRegis operates in today. Of particular importance for the Company will be the Uganda business unit which is expected to achieve double digit growth in 2022 following the Final Investment Decision (FID) taken by the project's joint venture partners and Uganda National Oil Company for Uganda's Lake Albert development project in February 2022.
MedservRegis p.l.c.
CEO’s Statement (continued)
For the Year Ended 31 December 2021
iii
Our strategic targets for 2022 are for the Company to return to pre-Covid19 growth levels and to register profits for shareholders and at the same time, continue to instil across all operating jurisdictions a work culture consistent to the shareholders’ values: being health, safety, security, environment and integrity.
In closing, we thank our customers for their business, our shareholders for their support and our loyal and hardworking team for their invaluable contribution in these trying times.
David S. O’Connor
CEO
16 June 2022
MedservRegis p.l.c.
Statement of Corporate Social Responsibility
For the Year Ended 31 December 2021
iv
As the Company grows, from the Mediterranean and the Middle East, to now spanning the African continent, MedservRegis recognises the impact of its global reach and scale. As the Company broadens its geographic footprint, it does so with increased recognition of the responsibility to its network of stakeholders including partners, regulators, employees and the broader communities in which we all live and work.
COVID-19 response
MedservRegis renewed its focus on doing what was necessary, and more importantly what was right. Throughout the life-altering pandemic, it prioritised the safety and well-being of its employees and their families, customers, and partners. At the onset of the COVID-19 pandemic, the Company quickly developed robust health and safety protocols and aligned with the government directives and public health authorities’ guidance. At various MedservRegis bases, the Company offered reimbursement for COVID-19 testing for team members, including free rapid testing. The measured and methodical response to the pandemic, provided a good ground to the Company to safely bring employees back to the workplace.
Corporate governance
Maintaining integrity, ethical responsibility and reputation is a top priority at MedservRegis, one that is reliant on sound corporate governance. The Board of Directors sets high standards for the Company’s employees, officers and directors. In addition, it serves as the prudent fiduciary for the Company’s shareholders and is responsible for overseeing the management of the Company’s business. At MedservRegis, management ensures strict adherence to all applicable laws and practices fundamental to the business in every country it operates. As part of the Company’s risk framework, MedservRegis’ Financial Risk Committee reports quarterly to the Audit Committee and has oversight over risk management governance, risk management procedures and risk control infrastructure for the Company’s business and operations.
Environmental impact
Climate change is one of the defining issues of the time. MedservRegis strives for continual improvement of the environmental management system and conserve water and other natural resources, eliminate toxic and hazardous materials, prevent pollution, recover, reuse, and recycle materials. It addresses climate change by reducing the carbon footprint of its operations and services. The Company will continue to invest in conservation and work to reduce environmental footprint through renewable energy of photovoltaic panels, use water efficiently and responsible handling and disposal of hazardous waste.
Philanthropy
MedservRegis has engaged in a variety of philanthropic efforts to improve the local communities. The Company supports several global charitable organisations and have participated in volunteer opportunities related to environmental stewardship, reducing global hunger, promoting education and supporting equality.
In August 2021, Medserv (Cyprus) Ltd supported the wildfire victims in Greece by contributing and collecting money, food, medicine and other supplies to hundreds of homeless families, following the extensive destruction caused by the large-scale fires in Greece. Other donations were made towards voluntary, non-profit, charitable organisations who offer services and programs to cancer patients and their families including the Association of Cancer Patients and Friends (PASYKAF) in Cyprus and the Action for Breast Cancer Foundation in Malta.
MedservRegis p.l.c.
Statement on Corporate Social Responsibility (continued)
For the Year Ended 31 December 2021
v
During 2021, the promotion towards community development and contribution towards poverty alleviation was also present across the MedservRegis group. To mention a few, several non-profit organisations in Mauritius, including Ti Rayons Soleil, Livina Foundation and I61 Foundation, were supported and allocated Corporate Social Responsibility funding to uplift those oppressed of poverty and social injustice.
Looking ahead
The Company’s approach to Corporate Social Responsibility is rooted in its core values and is applicable to the planet, people, and communities. MedservRegis considers each a key stakeholder to its business and remains focused on embedding sustainability throughout the organisation and beyond. Whether it’s reducing the carbon footprint of customers, supporting the development and inclusion of the global workforce, or giving back to the communities, the Company continues to believe that long-term sustainability is not simply held responsible or good for the business, but is required.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
vi
The directors have prepared this directors’ report for MedservRegis p.l.c . (”the Company”) in accordance with Article 177 of the Companies Act, 1995 (Chapter 386, 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 2021.
Board of directors
Anthony S. Diacono
Carmelo (a.k.a. Karl) Bartolo
Joseph Zammit Tabona
Laragh Cassar
David S. O’Connor (appointed on 25 June 2021)
Olivier N. Bernard (appointed on 25 June 2021)
Keith N. Grunow (appointed on 25 June 2021)
Monica De Oliveira Vilabril (appointed on 25 October 2021)
Anthony J. Duncan (resigned on 25 June 2021)
Etienne Borg Cardona (resigned on 25 June 2021)
Kevin Rapinett (resigned on 25 June 2021)
Principal activities
The Group’s principal activities, through its subsidiaries, consist of providing shore base logistics and engineering services to the offshore oil and gas industry and supply chain management for Oil Country Tubular Goods (OCTG) to support the onshore oil and gas industry. It also provides equipment, procurement, and specialised services to a wide range of customers, including national and international energy companies, drilling and mining companies, as well as product and equipment manufacturers and other heavy industry-related contractors across the globe, reaching the Mediterranean countries, Middle East, South America, South Africa and a number of emerging markets such as Mozambique, Uganda, and Angola.
The Group operates under three trading names, namely ‘Medserv’ in the Mediterranean basin, ‘METS’ being Middle East Tubular Services in the Middle East region and ‘Regis’ in sub-Saharan market.
Reverse acquisition
On 25 June 2021, Medserv p.l.c. completed a share for share exchange with Regis Holdings Ltd (Regis) that resulted in Regis controlling the Medserv plc group of companies. Following the transaction, the combined group changed its name to MedservRegis p.l.c. (hereafter the ‘Company’). From a legal and taxation perspective, the Company is considered the acquiring entity. However for accounting purposes the transaction has been accounted for as a reverse acquisition in the consolidated financial statements, where Regis is the accounting acquirer, and the Company is the legal acquirer. As a result, these financial statements represent a continuation of Regis’ financial statements except for the capital structure.
As a result of the reverse acquisition:
a)the Consolidated Statement of Financial Position as at 31 December 2021 represents the consolidated financial position of the combined Medserv and Regis group of companies; whereas
b)the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 includes the financial results of the continued operations of Regis group of companies for the entire year and financial results of the formerly Medserv group of companies from 1 July 2021 until year-ended 31 December 2021.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
vii
The comparative information of the Group presented in these financial statements is the last annual consolidated financial statements of Regis as at and for the year ended 31 December 2020, re-presented and restated due to a discontinued operation and other restatements, see notes 8 and 41, respectively.
This acquisition brings together the complementary strengths of both Medserv and Regis group of companies and allows the Group to successfully respond to the fundamental changes taking place in the energy market. The global reach of the Company now spans across four continents, comprising a presence in twelve countries and operations out of twelve bases. This is expected to strengthen the Company’s market position and broaden its geographic footprint in strategic locations around the Mediterranean region (Libya, Malta, Cyprus & Egypt), in the Middle East (UAE, Oman and Iraq), Sub-Saharan Africa (Mozambique, Uganda, Angola and South Africa) and South America (Suriname). The board of directors of the Company is confident that the synergies created by this transaction will strengthen the Company’s financial position and improve its capability of delivering value to all stakeholders.
Review of business development
During year 2021 the global economy continued to be impacted by the COVID-19 pandemic outbreak. The pandemic resulted in most of the offshore drilling and mining activities being suspended from the second quarter of 2020 to fourth quarter of 2021, due to the inability to provide a safe working environment. The economic shocks caused by the pandemic, the conflict in North Mozambique and political instability in Libya impacted the Company’s business during year 2021.
During the year 2021 the COVID-19 vaccine started being rolled out, allowing for nations to begin to emerge from national lockdowns. This started to provide improved economic stability in the second half of the year and oil and gas projects to resume. The Company’s business activities improved steadily, albeit slowly, resulting in securing two new contracts with new clients being BP Egypt and Dubai Petroleum.
The EBITDA performance of MedservRegis improved in the second half of the year compared to the previous six months even after taking into consideration the financial performance of the formerly Medserv p.l.c Group during the first six months ended 30 June 2021, prior to the reverse acquisition accounting. This is underpinned by the contract award in Egypt and the upturn in supply chain logistics activity in the Middle East in the second half of the year.
During the year under review, the largest contributor to EBITDA remains the Oman division. MedservRegis started implementing its integration plan following the share for share exchange with Regis. This resulted in a number of cross-selling opportunities within the core competencies of the Company. Furthermore, the Company is in discussions to restructure its debt. The Company’s strategy remains that of sustainable growth and returning to profitability. The transaction with Regis has significantly improved both the net cash and equity to debt position of the Company.
Business Model
The Company’s objectives are that of sustainable growth and registering profits. The strategy being adopted by the Company to achieve these objectives is a combination of securing growth opportunities in its core business, unlocking value with other key players in the supply chain as well as streamlining the business by increasing automation within its operations.
This operating culture is implemented through board of directors’oversight of management’s implementation of corporate strategy and financial objectives by reference to several criteria, including revenue, Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA), projected earnings, country by country analysis and other anticipated criteria.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
viii
The Board of Directors sets the policy which then defines the requirement of the corporate management standards. Presently the Company’s corporate management system consists of fourteen key standards which are to be followed by its employees in their day-to-day operations.
The Board of Directors continues to instil a drive for growth within a business environment where our employees need to act in an exemplary manner in the following areas: health, safety, security, environment, social and governance in all their forms. It is through strict adherence to these values and to this course of action that the Company intends to build strong and sustainable growth for itself and for all its stakeholders.
Additionally, the Board sets non-financial smart objectives and targets on an annual basis to support continue improvement of its Business Model. Progress and oversight of these non-financial smart objectives and targets is carried out through an internal audit programme and a reporting environment.
In order to evaluate the business management system, the Company is certified to international standards including ISO9001 Quality Management System, IS014001 Environmental Management Systems, ISO28001 Security Management System, ISO45001 Health Safety Management System, and which are part of a surveillance audit plan by an external accredited body.
Principal risks and uncertainties
The Board considers the nature and the extent of the risk profile that is acceptable to the Board and the impact these risks pose to the Group. The most important strategic, corporate and operational risks, as well as uncertainties identified together with the actions taken by the Group to reduce these risks, are listed below:
Concentration risk: The Group’s business is heavily dependent on a relatively few customers both in the shore base logistics and OCTG. The Group’s objective continues to be to increase client spread within the oil and gas industry. The strategic development team is continuously working to secure business with new Integrated Energy Companies (IECs) and in new countries. The acquisition of METS by Medserv in 2016 and the share for share exchange transaction with Regis during the year were both significant measures taken to reduce client concentration risk. The Company is also marketing its services to various energy industries and using its key assets to service non-oil and gas business in order to reduce its concentration on the oil and gas industry.
Political risk: The Group’s results may be significantly impacted positively or negatively as a result of political decisions. Regulatory and environmental decisions, as well as political instability can delay, disrupt or cancel projects. The fiscal and economic conditions in Libya remained fragile during the year, characterised by inflation and a persistent political strife. In Iraq, the political and security situation has been improving but the political impasse impacts the commencement of projects. Cabo Delgado province in Mozambique had by early 2021 spiralled into a jihadist insurgency threatening regional security. The Group now operates in twelve jurisdictions, mainly in Africa and the Middle East, with the intention of increasing its operational footprint in these regions and others to continue to minimise this risk.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
ix
Regulatory and environmental risk: The Group operates in twelve jurisdictions which are highly regulated, and all have their own unique compliance frameworks. Environmental risks arise from exposures to activities that may cause or be affected by environmental degradation, such as pollution. An infringement in any of these laws and regulations may have significant liabilities and tarnish the Group’s brands, being Medserv, Regis and METS.
Oil price: Oil service companies tend to have greater volatility of earnings than oil majors, given their sensitivity to the capital spending plans of oil explorers, which wax and wane with oil prices. Similar to other players in the industry, an increase in oil prices would directly benefit the Company from increased services required by oil companies in preparation of the oil exploration, development and production. On the other hand, as oil prices decline, energy production companies focus their efforts on increasing operating efficiencies, these actions apply downward pressure on the rates charged by drillers, oilfield services companies, and other suppliers such as the Company. Accordingly, the Company’s profit margins may be tightened due to such weakened demand for the services offered and heightened industry competition to maintain market share. The Group is always striving to reduce this risk by investing in countries where cost of oil production is low, primarily in the Middle East and Africa. Also, the Group’s strategy is to increase the number of services offered.
Financial performance
The Group’s turnover for the year amounted to €29,924,554. The Adjusted Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) of the Group amounted to €5,304,677. After recognising depreciation amounting to €4,327,724 and net provision for impairment losses on property, plant and equipment amounting to €5,158,514, the Group sustained an operating loss amounting to €7,426,064. After adding the net finance income amounting to €36,265, and the share of profit of equity-accounted investees of €29,101, the Group registered a loss before tax of €7,360,698. Loss for the year after accounting for taxation and profit from discontinued operation, net of tax, amounted to €7,202,667.
Cash generation from operations remained stable across the entire Group and during the year amounted to €6,579,652.
The Group’s EBITDA performance improved in the second half of the year compared to the first half particularly due to a general improvement in the business environment as the COVID19 pandemic began to wind down and demand for energy increased. Additionally, the award of new contracts in Egypt contributed further to this improved performance.
Revenue
The Group’s revenue was generated as follows:
Operating Segment
%
Integrated Logistics Support Services (ILSS)
68%
Oil Country Tubular Goods (OCTG)
27%
Trading Activity
4%
Photovoltaic income
1%
Cost of sales and administrative expenses
The cost of sales of the Group for the year amounted to €22,526,528. Cost of sales also include the amortisation of the intangible assets amounting to €1,145,241 which consist mainly of customer relationships.
Other income amounting to €2,286,320 is mainly made up of the foreign exchange differences during the year. Other expenses mainly include the impairment losses on property, plant and equipment, goodwill and intangible assets totalling to €7,228,675 and loss on disposal of property, plant and equipment of €388,933. The increase in administrative expenses over last year is mainly due to the professional fees in relation to the acquisition. In addition,
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
x
during the year, the Group continued its investment in its business development with the objective of participating in new tenders as opportunities presented themselves.
The Group - Financial key performance indicators from continuing operations
Year
2021
Year
2020
€ Million
€ Million
Total turnover
29.92
11.29
- Integrated Logistics Support Services (ILSS)
20.23
9.66
- Oil Country Tubular Goods (OCTG)
8.18
-
- Photovoltaic Farm
0.22
-
- Trading Activity
1.29
1.63
Adjusted EBITDA
5.30
(4.01)
Loss from continuing operations
(7.20)
(12.68)
Net cash generated from operating activities
6.58
6.47
Cash and cash equivalents
9.11
8.64
Equity
62.82
41.96
Balance sheet total
150.79
44.94
Capital expenditure
(2.02)
(1.98)
EBITDA margin in %
17.73%
(35.55%)
Net debt to EBITDA
10.35
N/a
Debt to Equity ratio*
0.87
0.03
EPS
(13c7)
(€11c30)
Average number of employees for the year
609
101
* debt to equity is worked out by dividing loans and borrowings by total equity
Financial position
The consolidated equity attributable to the owners of the Company as at 31 December 2021 amounted to €60 million. The equity attributable to the owners of the Company as at 31 December 2021 amounted to €18.6 million.
Dividends
No reserves are available for distribution.
Reserves
Retained earnings (accumulated losses) amounting to €23.15 million and (€31.35 million) for the Group and the Company, respectively, are being carried forward.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
xi
Future developments
In line with the Group’s strategy for diversification in geographic markets, client base and product services, the Group is actively positioning itself for growth in various new significant developing energy markets, particularly in Africa and Caribbean region. The Group is awaiting adjudication on tenders relating to ILLS in Trinidad & Tobago, Suriname, Mauritania and Uganda.
The Company is experiencing an increasing number of opportunities within its core ILSS and OCTG competencies for organic growth as well as opportunities of a strategic nature allowing the Company to unlock value in the supply chain and be part of the industry transition.
Events occurring after the end of the accounting period
The war in Ukraine to date had no material impact on the Company’s operational capacity, financial performance and financial position. Nor has it sustained any threats of any nature on the Company’s modus operandi. The Company’s geographical position is mainly in the Mediterranean, Sub-Saharan Africa, Middle East and the Caribbean region. The directors do not foresee any direct or indirect impact on its business arising from the war in Ukraine.
Additionally, the Company has shut down its shipping unit. Regis shipping was the owner and operator of two vessels, a bulk vessel named MV Baltic Trader, and a landing craft named MV Regis Kaskazi. MV Baltic trader was disposed during year 2021 and the MV Regis Kaskazi was disposed in March 2022. Management did not consider such an activity to form a core competency of the MedservRegis plc .
Outlook
The energy sector in 2022 will be one of growth, as consumption looks set to exceed 2019. The oil price upward trend during the past six months as well as the recent tensions in the gas market is expected to foster additional investments by the IECs in countries the Company operates in. New projects have the potential to translate into significant commercial opportunities for the Company. With contracts, a good track record and resources in place, the Company is well placed to benefit from the rebound of the Exploration and Production activities in all markets where it operates.
With the increase in both demand for gas and energy prices, the Company is experiencing an upturn in invitations to tender and requests for proposals across the majority of its operating entities. The Company’s geographical reach in the Mediterranean basin, Sub-Saharan Africa and the Middle East allows the Company to provide solutions to its client base. MedservRegis continues to participate in international tenders to secure new work within its global reach. The Company has maintained a presence in the Guyana-Suriname and Trinidad basin and is negotiating strategic alliances with developers of port facilities to act as the operator of the logistics shore bases which will be required by the IECs and service contractors. Additionally, the Company is supporting non-oil & gas logistics work across its operating regions, including logistics for the graphite mining industry in Mozambique and other industries. This current environment demands a new operating model of better collaboration across the people and material supply chains. The Company, whilst focusing on the continued integration of operations, will continue to seek and work with other strategic players within its supply chain in order to provide fully integrated solutions to customers. Despite the political risks and at times unrest in the countries the Company operates in, the Company is poised for growth. The drivers for this increase in demand for the Company’s services are the significant economic development of the countries in which it operates today, as well as the change in Europe’s energy policy and the current energy prices.
Our strategic targets for 2022 remains for the Company to return to pre-Covid19 trading levels and register profitability in the short to medium term.
Going concern
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
xii
As required by Capital Markets Rule 5.62, upon due consideration of the Group’s and Company’s performance and statement of financial position, capital adequacy and solvency, the directors confirm the Group’s and Company’s ability to continue operating as a going concern for the foreseeable future.
Auditors
The Company completed a tendering process for the provision of independent external audit services. The audit tender process was overseen by the Company’s Audit Committee with a resolution by the board of directors proposing the appointment of PricewaterhouseCoopers as the selected firm being put to shareholders at the 2022 Annual General Meeting.
DISCLOSURE IN TERMS OF THE LISTING RULES
PURSUANT TO CAPITAL MARKETS RULE 5.64
Company Secretary:Dr Laragh Cassar LL.D.
Registered Office of Company:Port of Marsaxlokk
Birzebbugia
Malta
C28847
Telephone:(+356) 2220 2000
Approved by the Board of Directors on 16 June 2022 and signed on its behalf by:
Anthony S. DiaconoDavid S. O’Connor
ChairmanDirector & CEO
Statement of the Directors pursuant to Capital Markets Rule 5.68
To the best of the knowledge of the directors:
(i)the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
(ii)the Directors’ report includes a fair review of the performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Signed on behalf of the Board of Directors on 16 June 2022 by Anthony S. Diacono and David S. O’Connor as per Directors’ Declaration on ESEF Annual Report submitted in conjunction with the Annual Report 2021.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance
xiii
Introduction
Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority, MedservRegis p.l.c. (the “Company”) as a company whose equity securities are listed on a regulated market, should endeavour to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital Markets Rules (the “Code”). In terms of Capital Market Rule 5.94, the Company is obliged to prepare a report explaining how it has complied with the Code. For the purposes of the Capital Markets Rules, the Company is hereby reporting on the extent of its adoption of the recommended Code.
The directors all share the conviction that the practices recommended by the Code are in the best interests of the MedservRegis plc group of companies (the “Group”) and its shareholders generally and that compliance therewith is not only expected by investors but also evidences the directors’ and the Company’s commitment to a high standard of governance.
Good corporate governance is the collective responsibility of the board of directors of the Company (the “Board”). As demonstrated by the information set out in this statement, the Company believes that it has, save as indicated in the section entitled “Non-Compliance with the Code”, throughout the accounting period under review, applied the principles and complied with the provisions of the Code. In the Non-Compliance section, the Board indicates and explains the instances where it has departed from or where it has not applied the Code, as allowed by the Code.
Part 1: Compliance with the Code
Principle 1: The Board
The Board’s principal purpose is to provide the required leadership of the Company, to set the present and future strategy of the Company and to ensure proper oversight and accountability.
During 2021, the Board was composed of the following directors:
Name
Position
Anthony S. Diacono (Chairman)
Executive Director
Carmelo (a.k.a Karl) Bartolo
Executive Director
Joseph Zammit Tabona
Non-Executive Independent Director
Laragh Cassar
Non-Executive Director
David O’Connor (appointed on 25 June 2021)
Executive Director
Olivier Bernard (appointed on 25 June 2021)
Executive Director
Keith Grunow (appointed on 25 June 2021)
Non-Executive Independent Director
Monica Vilabril (appointed on 25 October 2021)
Non-Executive Independent Director
Anthony J. Duncan (resigned on 25 June 2021)
Executive Director
Kevin Rapinett (resigned on 25 June 2021)
Non-Executive Independent Director
Etienne Borg Cardona (resigned on 25 June 2021)
Non-Executive Independent Director
Anthony S. Diacono, Joseph Zammit Tabona, Laragh Cassar and Karl Bartolo were nominated by the shareholders and appointed automatically with effect from the annual general meeting held on the 6 June 2021. David O’Connor, Olivier Bernard and Keith Grunow were co-opted by the Board on the 25 June 2021 and Monica Vilabril was co-opted by the Board on the 25 October 2021.
The Board is composed of persons who have the necessary characteristics and experience to render them fit and proper to direct the business of the Company.
The Board is of view that the directors have the requisite elements of honesty, competence and integrity to qualify as fit and proper persons. The presence of the executive directors on the Board is designed to ensure that the Board
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance
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has direct access to the individuals having the prime responsibility for the executive management of the Company and the implementation of approved policies. Each director is provided with the information and explanations as may be required by any particular agenda item.
The Board delegates specific responsibilities to an Audit Committee, to a Remuneration Committee and to a Financial Risk Committee. Further details in relation to the said committees and the responsibilities of the Board are found in Principles 4 and 5 of this Statement.
The directors and Restricted Persons (as defined in the Capital Markets Rules) are informed and are aware of their obligations on dealings in securities of the Company within the established parameters of the law and the Capital Markets Rules. Each such Director and Senior Officer has been provided with the Market Abuse Procedure policy required in terms of Capital Markets Rule 5.106. During 2022, the Company shall provide training on the obligations arising thereunder to all Directors and Senior Officers, in particular for those directors that joined the board in the second half of 2021.
Principle 2: Chairman and Chief Executive
The Chairman of the Company (which position is occupied by Anthony S. Diacono) leads the Board and sets its agenda. In addition, the Chairman ensures that the directors receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the Company and that effective communication with shareholders is maintained. The Chairman also encourages active engagement by all directors for discussion of complex or contentious issues. Working hand in hand with the Chairman is the Chief Executive Officer (CEO), who leads the executive management of the Group. The CEO is assisted by two Deputy CEOs – Deputy CEO for Business occupied by Karl Bartolo and Deputy CEO for Finance, Administration, Investment and Trade, occupied by Olivier Bernard.
The CEO has the primarily task of leading the development and execution of the Company’s long-term strategy as well as providing direction and leadership toward the achievement of the Company’s philosophy, mission, strategy and its annual goals and objectives.
As set out in Part 2: Non-Compliance with the Code, Principle 2 - Code Provision 2.3, whilst considering Anthony S. Diacono as duly fulfilling the role required of a Chairman in terms of the Capital Markets Rules, Anthony S. Diacono is not considered to meet the independence criteria set out in the Capital Markets Rules.
Principle 3: Composition of the Board
The Board considers that the size of the Board, whilst not being large as to be unwieldy, is appropriate, taking into account the size of the Company and its operations. The combined and varied knowledge, experience and skills of the Board members provides the balance of competences that are required, adds value to the functioning of the Board and gives direction to the Company. The competencies of the Directors ranges from industry, financial and legal expertise. Each of the directors has applied the necessary time and attention for the performance of his/her duties to the Company.
As set out above, the board is composed of a mix of executive and non-executive directors. The presence of Non-Executive Directors on the Board serves to, inter alia, constructively challenge the Executive Directors and management of the Company, and particular focus is made on strategy and the integrity of financial performance and management.
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Joseph Zammit Tabona (Non-Executive Director), Keith Grunow (Non-Executive Director) and Monica Vilabril (Non-Executive Director) are all considered to be independent within the meaning provided by the Code. Additionally, for the period of their tenure Etienne Borg Cardona and Kevin Rapinett were considered to be independent. Laragh Cassar acts as the Company Secretary and legal counsel of the Company and is therefore not considered as independent.
Each presently appointed non-executive director has declared to the Board as stipulated under the Code Provision 3.4 undertaking:
a)to maintain in all circumstances his/her independence of analysis, decision and action;
b)not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
c)to clearly express his/her opposition in the event that he/she finds that a decision of the board may harm the Company.
Principle 4: The Responsibilities of the Board
The Board has the first level responsibility for executing the four basic roles of Corporate Governance, namely accountability, monitoring, strategy formulation and policy development. The four basic corporate governance principles, regulatory obligations and general ethical market practices are implemented and exercised through the internal Company policies such as its Company Code of Conduct policy, Anti-Bribery policy and Anti-Money laundering Policy. Moreover, in order to avoid implications of regulatory arbitrage when dealing with third party market participants, the Company requires reciprocity in terms of level of standards. The Board has established a clear internal and external reporting system so that it has access to accurate, relevant and timely information and ensures that management constantly monitor performance and report to its satisfaction. The Board, at least on a quarterly basis, evaluates management’s implementation of corporate strategy and financial objectives by reference to a number of criteria, including Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA), revenue, projected earnings, country by country analysis and other anticipated criteria.
The Board has an active succession plan in place in respect of the responsibilities assumed by the Executive Directors for which the Chairman holds key responsibility. – the Company has implemented a number of measures aimed at strengthening the Company’s management structure. In addition, the Board organises information sessions including statutory and fiduciary duties, the Company’s operations and prospects, the skills and competence of senior management, the general business environment and the board’s expectations for Directors from time to time. In 2020 the Company focused its training session on the Company's and the Board’s obligations in terms of the market abuse policy. In 2021, pursuant to the share-for-share exchange transaction, the Company centred its attention on the on-going integration exercise between both the Medserv and Regis group companies ensuring the information and professional development of the Company’s management, staff and employees. The Company ensured that all incoming Directors of the Company were provided with the necessary information and explanations on the corporate and regulatory aspect of their roles, individually as part of their induction (upon the on-boarding and appointment process) and collectively during Board and Audit Committee meetings wherein the legal advisor of the Company provided explanations and updates on legal and regulatory matters. The Company recognises that the integration process will culminate in further training sessions, at all levels of the Company, towards the third quarter of 2022 in anticipation of numerous changes to the Company’s logistics, governance and operations to establish the Company’s efficiency and competitiveness.
The Board of Directors and the Audit Committee met regularly during 2022 with a view to publishing the financial statements of the Company by the 30th April 2022. However, for the reasons set out in the company announcement issued on the 13th April 2022, the Company faced a number of delays in publishing the annual consolidated and audited financial statements for the year ended 31 December 2021. The required disclosure of non-compliance in this regard is being set out under Part 2: ‘Non-Compliance with the Code’.
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Principle 5: Board Meetings
For the period under review the Board met eleven (11) times. As a matter of practice, each board meeting to be held throughout the year is scheduled well in advance of their due date and each director is provided with detailed Board papers relating to each agenda item in good time prior to the actual meetings. Board meetings concentrate mainly on strategy, operational performance and financial performance of the Company. After each Board meeting and before the next, Board minutes that faithfully record attendance, key issues and decisions are sent to the directors.
During 2021, meetings were attended as follows:
Name
Attendance during tenure
Anthony S. Diacono (Chairman)
8 of 111
Anthony J. Duncan
8 of 112
Joseph Zammit Tabona
11 of 11
Laragh Cassar
11 of 11
Karl Bartolo
11 of 11
Kevin Rapinett (resigned on 25 June 2021)
7 of 7
Etienne Borg Cardona (resigned on 25 June 2021)
7 of 7
David O’Connor (appointed 25 June 2021)
4 of 4
Olivier Bernard
4 of 4
Keith Grunow (appointed 25 June 2021)
4 of 4
Monica Vilabril3 (appointed 25 October 2021)
-
The Board also delegates specific responsibilities to the management team of the Company, the Audit Committee, the Remuneration Committee and the Financial Risk Committee, which Committees operate under their formal terms of reference.
Audit Committee
The Board delegates certain responsibilities to the Audit Committee, the terms of reference of which, reflect the requirements stipulated in the Capital Markets Rules and under applicable law, including the roles set out in Capital Markets Rules 5.127 to 5.130. In addition, unless otherwise dealt with in any other manner prescribed by the Capital Markets Rules, the Audit Committee has the responsibility to, inter alia, monitor and scrutinise, and, if required, approve Related Party Transactions, if any, falling within the ambits of the Capital Markets Rules and to make its recommendations to the Board of any such proposed Related Party Transactions. The Audit Committee establishes internal procedures and monitors these on a regular basis. The terms of reference for the Audit Committee are designed both to strengthen this function within the Company and to widen the scope of the duties and responsibilities of this Committee. The Committee also has the authority to summon any person to assist it in the performance of its duties, including the Company’s external auditors. KPMG, as external auditors of the Company, were invited to attend each of the Company’s audit committee meetings. During 2020, the internal audit function within the Company was made redundant. The Company continues to keep the matter under observance with a view to resuming internal audit functions within the Group at the earliest opportunity.
1 Anthony S. Diacono was absent from three (3) of the 2021 Board meetings due to a declared conflict, in line with the Company’s Articles of Association.
2 Anthony J. Duncan was absent from three (3) of the 2021 Board meetings due to a declared conflict, in line with the Company’s Articles of Association.
3 There were no further board meetings in 2021 following Monica Vilabril’s co-option by the Board on the 25th October 2021.
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The appointment of the auditors of the Company was made in line with the Statutory Audit Regulation (Regulation (EU) No 537/2014), in particular in compliance with Articles 16 and 17 of Title III of the said Regulation. During 2022, the Audit Committee issued a tender in respect of the appointment of an external auditor of the Company for the forthcoming financial year, in line with the requirements of the said Statutory Audit Regulation.
The Chairman of the Audit Committee was appointed by the Board of Directors.
During 2021, the Audit Committee met twelve (12) times.
Name
Attendance during tenure
Joseph Zammit Tabona (Chairman)
11 of 12
Laragh Cassar
12 of 12
Kevin Rapinett (resigned on 25 June 2021)
7 of 7
Etienne Borg Cardona (resigned on 25 June 2021)
7 of 7
Keith Grunow (appointed on 25 June 2021)
5 of 5
Monica Vilabril (appointed on 25 October 2021)
3 of 3
The Board appointed Joseph Zammit Tabona as Chairman of the Audit Committee who is considered to be independent of the Company, its management and controlling shareholder and competent in accounting and/or auditing (in each case, for the period of his respective tenure). Such determination was based on his substantial experience in various audit, accounting and risk management roles throughout his career.
When examining the independence criteria of an Audit Committee member, the Board assesses whether an individual has any business, family or other relationships, including with any of the controlling shareholder or management of the Company which may give rise to a conflict of interest. Moreover, and in line with the Capital Markets Rules, the Board also determines whether an Audit Committee member has been an executive officer of employee of the company, has had a significant business relationship with the Company, received any additional remuneration from the Company apart from the engaged director’s fees and whether the individual has been within the last three years an engagement partner or a member of the external audit team of the Company.
The Board is confident that the Audit Committee Members, as a whole, have competence relevant to the sector in which the Issuer is operating, which competence was garnered over the years as a result of their involvement with the MedservRegis Group.
Financial Risk Committee
The Board has set up a Financial Risk Committee with a view to manage the Group’s currency, interest rates, liquidity and foreign exchange risks and to manage the Group’s own financial investments. The Committee operates under specific terms of reference approved by the Board. The financial controllers within the MedservRegis Group are invited to attend each meeting of the Financial Risk Committee.
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During 2021, the Financial Risk Committee met four (4) times.
Name
Attendance during tenure
Anthony J. Duncan (resigned on 25 June 2021)
-
Kevin Rapinett (resigned on 25 June 2021)
3
Karl Bartolo
4
Silvio Camilleri
4
Colin Galea (replaced on 30 August 2021)
3
Olivier Bernard (appointed on 30 August 2021)
1
Salman Manjoo (appointed on 30 August 2021)
1
Remuneration Committee - This is considered under Principle 8.
Principle 6: Information and Professional Development
The Board appoints the Chief Executive Officer. Appointments and changes to senior management are the responsibility of the CEO and Executive Directors and are approved by the Board. The Board actively considers the professional and technical development of the Board itself, all senior management and staff members. The CEO also has systems in place to monitor management and staff morale. Management prepares detailed reviews for each Board meeting covering all aspects of the Company’s business.
On joining the Board, a new director is provided with the opportunity to consult with the executive directors and senior management of the Company in respect of the operations of the Group. Each director is made aware of the Company’s on-going obligations in terms of the Companies Act, the Capital Markets Rules and other relevant legislation. Directors have access to the advice and services of the Company Secretary and to the legal counsel of the Company. The Company is also prepared to bear the expense incurred by the directors requiring independent professional advice should they judge it necessary to discharge their responsibilities as directors.
Principle 7: Evaluation of the Board’s Performance
With respect to the year under review, the Board undertook an evaluation of its own performance, the Chairman’s performance and that of its committees. The Board did not per se appoint a committee to carry out this performance evaluation but the evaluation exercise was conducted through a questionnaire, copies of which were sent to the Chairman of the Audit Committee and the results were reported to the Chairman of the Board. No material changes were made to the Company’s structures as a result of the Board evaluation.
Principle 8: Remuneration Committee
The Board has set up a Remuneration Committee commissioned with overseeing the development and implementation of the remuneration and related policies of the MedservRegis Group.
During the year under review, the Committee was composed of Joseph Zammit Tabona (Chairman), Laragh Cassar, Etienne Borg Cardona (up to 25 June 2021) and Kevin Rapinett (up to 25 June 2021) all of whom are non-executive directors. Etienne Borg Cardona and Kevin Rapinett were succeeded by Keith Grunow and Monica Vilabril upon their appointment on 25 June 2021 and 25 October 2021 respectively. All of the said members (other than Laragh Cassar) are considered to be independent directors.
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The Remuneration Committee convened met once during FY 2021
Principle 9: Relations with Shareholders and with the Market & Principle 10: Institutional Investors
The Board is of the view that over the period under review, notwithstanding the difficulties posed by the COVID19 pandemic, the Company has communicated effectively with the market through a number of company announcements that it published informing the market of significant events happening within the Company.
The Company also communicates with its shareholders through its Annual General Meeting (further detail is provided under the section entitled General Meetings). The Chairman arranges for all directors to attend the annual general meeting and for the Chairmen of the Audit Committee and Remuneration Committee to be available to answer questions, if necessary. During 2021, due to the COVID19 restrictions, it was not possible for the Company’s annual general meeting to be held in person and therefore, the Company availed itself of the possibility to hold a remote general meeting. The Board ensures that sufficient contact is maintained with major shareholders to understand issues and concerns.
Apart from the annual general meeting, the Company intends to continue with its active communication strategy in the market and shall accordingly continue to communicate with its shareholders and the market by way of the Annual Report and Financial Statements, by publishing its results on a six-monthly basis during the year and through the directors’ statements published on a six-monthly basis, and by company announcements to the market in general. During 2021, the Company also communicated to the market through brokers on two occasions. The Company recognises the importance of maintaining a dialogue with the market to ensure that its strategies and performance are well understood and disclosed to the market in a timely manner.
The Company's website (http://www.medservenergy.com) also contains information about the Company and its business which is a source of further information to the market.
In terms of the Companies Act, Cap 386 of the laws of Malta, any shareholder/s having 10% or more of the issued share capital of the Company can call a general meeting. This is also reflected in Article 34 of the Company’s Articles of Association.
Principle 11: Conflicts of Interest
The directors are aware that their primary responsibility is always to act in the interest of the Company and its shareholders as a whole irrespective of who appointed them to the Board. Acting in the interest of the Company includes an obligation to avoid conflicts of interest. In such instances, the Company has strict policies in place which allow it to manage such conflicts, actual or potential, in the best interest of the Company. Each director’s service contract contains provisions which require the director to:
a)ensure that his/her personal interests do not conflict with the interests of the Company;
b)not carry on, directly or indirectly, business in competition with the Company;
c)not make personal gains or profits from his post without the consent of the Company, or from confidential information;
d)not use any property, information or opportunity of the Company for his own benefit or for the benefit of any third party,
e)not obtain any benefit in connection with the exercise of his powers, except with the consent of the Company in general meeting.
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Furthermore, any director that has a conflict (actual or potential) is required to disclose and record the conflict in full and in time to the Board and is also precluded from participating in a discussion concerning matters in such conflicted matters (unless the Board finds no objection to the presence of such Director). Moreover, each director must disclose his or her beneficial or non-beneficial interest in the share capital of the Company and is only permitted to deal in such shares as allowed by law. Under no circumstance is the conflicted director, permitted to vote on the matter. This requirement is reflected in Article 68.2 of the Company’s Articles of Association.
Principle 12: Corporate Social Responsibility
The Company places substantial importance on its corporate social responsibility to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as of the local community and society at large.
The Company is fully aware of its obligation to preserving the environment and continues to implement policies aimed at respecting the natural environment and to avoiding/minimising pollution. During the year, the Company’s Solar Farm generated 3,023,867 kwh and avoided 1,959,466 kg of CO2 emissions over the year.
The Company promotes open communication with its workforce, responsibility and personal development.
The Company maintains a staff development programme aimed at providing training to staff to assist their development with an aim to improve the Company’s competitiveness.
The Company’s Health, Safety, Security, Environment & Quality (HSSEQ) team as well as our HR and management teams were essential in supporting the staff and ensuring operations were carried out in strict adherence to the HSSEQ processes in place whilst maintaining social distancing and in line with additional COVID-19 measures.
Part 2: Non-Compliance with the Code
Principle 2 - Code Provision 2.3
Whilst steps have been taken by the Company to segregate the office of Chairman and Chief Executive Officer through the appointment of a Chief Executive Officer of the Group, the Chairman of the Company is not considered to meet the independence criteria set out in the Capital Markets Rules largely due to his executive role within the Group (being responsible for strategy) and also being one of the major shareholders of the Company. The Board considers that Anthony S. Diacono duly fulfils the role required of a Chairman in terms of the Capital Markets Rules, notwithstanding his lack of formal independence.
Principle 4: The Responsibilities of the Board
Provision 4.7 of the Code requires the Board to “ensure that the financial statements of the Company and the annual audit thereof are completed within the stipulated time periods”. As set out in the company announcement issued on the 13th April 2022, the annual consolidated financial statements of the Company were not published by the 30th April 2022, as statutorily required. The reasons for this include the increased complexity in the financial statements resulting from the share for share exchange announced on the 25th June 2021, disruptions caused by the COVID-19 pandemic and an unfortunate incident relating to the Deputy CEO for Finance, Administration, Investment and Trading of the Company, Olivier Bernard.
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Principle 6: Information and Professional Development
Code Provision 6.4.4 recommends that the CEO establishes a succession plan for senior management. The Company identified its successors for existing senior management within the existing staff and a formal succession plan, in coordination with the Company’s on-going integration exercise, will be formulated and implemented.
Principle 7 – Code Provision 7.1 Evaluation Committee
The Board has not appointed an ad hoc committee to evaluate its own performance. As set out above, the evaluation was conducted through a questionnaire and considers this to be a process sufficient to evaluate the performance of the board.
Principle 8B (Nomination Committee)
Pursuant to the Company’s Articles of Association, the appointment of directors to the Board is reserved exclusively to the Company’s shareholders (in line also with general and commonly accepted practice in Malta). Any shareholder/s who in the aggregate hold not less than 0.5% of the total number of issued shares having voting rights in the Company is entitled to nominate a fit and proper person for appointment as a director of the Company. Furthermore, in terms of the memorandum and articles of association of the Company, the directors themselves are entitled to make recommendations and nominations to the shareholders for the appointment of directors at the following annual general meeting.
Within this context, the Board believes that the setting up of a Nomination Committee is not required since the Board itself has the authority to recommend and nominate directors. Notwithstanding this, the Board will retain the matter under review.
Code Provision 9.3
The Company does not have a formal mechanism in place as required by Code provision 9.3 to resolve conflicts between minority shareholders and controlling shareholders. No such conflicts have arisen to date and in view of the relatively small shareholder base of the Company, the Board does not consider it necessary to establish a formal mechanism for this process.
Internal Control
The Board is ultimately responsible for the Company's system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk to achieve business objectives, and can provide only reasonable, and not absolute, assurance against normal business risks or loss. Included with the Company’s internal control system are procedures to identify, control and report major risks within a relevant timeframe. Financial reporting is prepared monthly and consolidated quarterly which performance is analysed against budgets and shared with senior management and directors. The Board reviews the effectiveness of the Company's system of internal controls. The Company strengthens this function through the Audit Committee that has initiated a business risk monitoring plan, the implementation of which is regularly monitored.
The key features of the Company’s system of internal control are as follows:
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Organisation
The Company operates through the Chief Executive Officer with clear reporting lines and delegation of powers. Whilst members of the senior management of the Group are in constant contact, formal management meetings are scheduled on a monthly basis. They are attended by the Chief Executive Officer, their deputies and senior executive management and other members of staff, upon invitation.
Control environment
The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations. Company policies and employee procedures are in place for the reporting and resolution of improper activities.
The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Company objectives.
Company executives participate in periodic strategic reviews, which include consideration of long-term projections and the evaluation of business alternatives. Annual budgets and strategic plans are prepared. Performance against these plans is actively monitored and reported to the Board, at minimum on a quarterly basis.
Risk identification
Company management is responsible for the identification and evaluation of key risks applicable to their respective areas of business. The mandate of the Audit Committee and the Financial Risk Committee also includes the continuous assessment and oversight of such key risks.
General Meetings and Shareholders’ Rights
Conduct of general meetings
It is only shareholders whose details are entered into the register of members on the record date that are entitled to participate in the general meeting and to exercise their voting rights. In terms of the Capital Markets Rules, the record date falls 30 days immediately preceding the date set for the general meeting to which it relates. The establishment of a record date and the entitlement to attend and vote at general meeting does not, however, prevent trading in the shares after the said date.
In order for business to be transacted at a general meeting, a quorum must be present. In terms of the Articles of Association, 51% of the nominal value of the issued equity securities entitled to attend and vote at the meeting constitutes a quorum. If within half an hour, a quorum is not present, the meeting shall stand adjourned to the same day the next week, at the same time and place or to such other day and at such other time and place as the directors may determine. In any event, the adjourned meeting must be held at least ten days after the final convocation is issued and no new item must be put on the agenda of such adjourned meeting. If at the adjourned meeting a quorum is not yet present within half an hour from the time appointed for the meeting, the member or members present shall constitute a quorum. Generally, the Chairman of the Board presides as Chairman at every general meeting of the Company. At the commencement of any general meeting, the Chairman may, subject to applicable law, set the procedure which shall be adopted for the proceedings of that meeting. Such procedure is binding on the members.
If the meeting consents or requires, the Chairman shall adjourn a quorate meeting to discuss the business left unattended or unfinished. If a meeting is adjourned for 30 days or more, notice of the quorate meeting must be
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given as in the case of an original meeting. Otherwise, it is not necessary to give any notice of an adjourned meeting or of the business to be transacted at such quorate meeting.
At any general meeting, a resolution put to a vote shall be determined and decided by a show of hands, unless a poll is demanded before or on the declaration of the result of a show of hands by:
(i)the Chairman of the meeting; or
(ii)by at least three (3) members present in person or by proxy; or
(iii)any member or members present in person or by proxy and representing not less than one tenth of the total voting power of all members having the right to vote at that meeting; or
(iv)a member or members present in person or by proxy holding equity securities conferring a right to vote at the meeting, being equity securities on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the equity securities conferring that right.
Unless a poll is so demanded, a declaration by the Chairman that a resolution has, on a show of hands, been carried or carried unanimously, or by a particular majority, or lost together with an entry to that effect in the minute book, shall constitute conclusive evidence of the fact without need for further proof. If a resolution requires a particular majority in value, in order for the resolution to pass by a show of hands, there must be present at that meeting a member or members holding in the aggregate at least the required majority. A poll demanded on the election of the Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at the discretion of the Chairman. In the case of equality of votes, whether on a show of hands or on a poll, the chairman has a second or casting vote. On a show of hands every member present in person or by proxy shall have one vote for each equity security carrying voting rights of which he is the holder, provided that all calls or other sums presently payable by him in respect of equity securities have been paid.
Proxy
Every member is entitled to appoint one person to act as proxy holder to attend and vote at a general meeting instead of him. The proxy holder shall enjoy the same rights to participate in the general meeting as those to which the member thus represented would be entitled. If a member is holding shares for and on behalf of third parties, such member shall be entitled to grant a proxy to each of his clients or to any third party designated by a client and the said member is entitled to cast votes attaching to some of the shares differently from the others. In the case of voting by a show of hands, a proxy who has been mandated by several members and instructed to vote by some shareholders in favour of a resolution and by others against the same resolution shall have one vote for and one vote against the resolution.
The instrument appointing a proxy must be deposited at the office or by electronic mail at the address specified in the notice convening the meeting not less than forty-eight (48) hours before the time for holding the meeting or, in the case of a poll, not less than forty-eight (48) hours before the time appointed for the taking of the poll. The same applies to the revocation of the appointment of a proxy.
A form of instrument of proxy shall be in such form as may be determined by the directors and which would allow a member appointing a proxy to indicate how he would like his proxy to vote in relation to each resolution.
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Including items on the agenda
A shareholder or shareholders holding not less than 5% of the issued share capital may include items on the agenda of the general meeting and table draft resolutions for items included on the agenda of a general meeting. Such right must be exercised by the shareholder at least 46 days before the date set for the general meeting to which it relates.
Questions
Shareholders have the right to ask questions which are pertinent and related to the items on the agenda.
Electronic voting
In terms of the Articles of Association of the Company, the directors may establish systems to:
a)allow persons entitled to attend and vote at general meetings of the Company to do so by electronic means in accordance with the relevant provisions of the Capital Markets Rules; and
b)allow for votes on a resolution on a poll to be cast in advance.
Where a shareholder requests the Company to publish a full account of a poll, the Company is required to publish the information on its website not later than 15 days after the general meeting at which the result was obtained.
Further details on the conduct of a general meeting and shareholders’ rights are contained in the Memorandum and Articles of Association of the Company and in line with chapter 12 of the Capital Markets Rules.
Signed on behalf of the Board of Directors on 16 June 2022 by:
Joseph Zammit Tabona Director and Chairman of Audit Committee
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Remuneration Statement and Report
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THIS STATEMENT AND REPORT ON THE REMUNERATION OF MEDSERVREGIS PLC’S (THE “COMPANY”) BOARD OF DIRECTORS, INCLUDING THE EXECUTIVE DIRECTORS, HAS BEEN DRAWN UP IN COMPLIANCE WITH THE REQUIREMENTS OF CHAPTER 5 AND 12 OF THE CAPITAL MARKETS RULES AND CONTAINS INFORMATION REQUIRED BY THE PROVISIONS OF APPENDIX 12.1 OF THE CAPITAL MARKETS RULES.
1.The Remuneration Committee
The Remuneration Committee (RemCom) is required to devise the appropriate packages needed to attract, retain and motivate Directors, whether executive or not, as well as senior executives with the right qualities and skills for the proper management of the Company. The RemCom issues recommendations to the Board for its consideration.
The Committee’s terms of reference establish the composition, role and function of the Committee, the parameters of its remit as well as the basis for the processes that it is required to comply with. The Committee is a sub-committee of the Board and directly responsible and accountable to the Board. The Board reserves the right to change these terms of reference from time to time subject to the requirements of the Maltese law.
2.RemCom Membership & Meetings
The members of the Committee are appointed by the Board and comprise of the three non-executive directors with no personal financial interest other than as shareholders in the Company. One of these members shall be an independent director who chairs the Committee.. The Committee may co-opt additional members as they think fit to provide specialist advice, provided that any member so co-opted must also be fully independent of management. The Committee may ask the members of senior management to attend meetings either regularly or by invitation, but the invitees have no right of attendance and no vote. The Company Secretary or their nominee acts as the Secretary of the Committee.
As at 31 December 2021, the Committee was composed of Joseph Zammit Tabona (Chairman), Laragh Cassar, Keith Grunow and Monica Vilabril4. During 2021, the RemCom met once.
3.Remuneration Policy
The Company’s remuneration of its Board of Directors and executive management is based on the Remuneration Policy adopted and approved by shareholders at the annual general meeting of 31 July 2020. This policy may be viewed on the Company’s website at http://www.medservenergy.com/remuneration-policy.
The Remuneration Policy is designed to ensure that the Company can attract, motivate and retain the right individuals to implement the Company’s strategy. The main parameters and rationale for any annual bonus scheme and any other non-cash benefits are the discretion of the Company with the exception of the bonus payable to the CEO and the Deputy CEO for Finance, Administration, Investment and Trading as further detailed in section 5. During 2021, there were no changes implemented to the Remuneration Policy. The Policy is applicable for a period of four years. The Company’s Remuneration Policy is in line with the policy for the remuneration paid to Directors and senior executives in the preceding financial period.
No changes to the Remuneration Policy are being proposed for the approval of the shareholders at the Company’s next Annual General Meeting. The Company has complied with the procedure for the implementation of the Remuneration Policy as set out in Chapter 12 of the Capital Markets Rules issued by the Malta Financial Services Authority.
4 Etienne Borg Cardona and Kevin Rapinett resigned on 25 June 2021 and were succeeded by Keith Grunow and Monica Vilabril.
MedservRegis p.l.c.
Remuneration Statement and Report
xxvi
4.Non-Executive Directors’ Remuneration
The Board believes that, in line with local practice, the fixed honorarium for non-executive directors is the principal component that compensates directors for their contribution as members of the Board. None of the non-executive directors have employment contracts with the Company and each non-executive director serves from one annual general meeting to the next, when the appointment of directors is conducted at the annual general meeting.
Accordingly, none of the non-executive directors are entitled to any compensation if they are removed from office. Such removal would require an ordinary resolution of the shareholders at a general meeting. The directors are entitled to be paid travelling and other reasonable expenses incurred by them in the performance of their duties as directors. Other than the payment for legal and company secretarial services rendered by Dr Laragh Cassar, the Company does not remunerate the non-executive directors in any other manner, nor does it provide any loans or other guarantees to them. In this regard, the non-executive directors’ remuneration are all fixed in nature and the ratio of the fixed and variable remuneration was 100%-0% in 2021. Exceptionally during 2020, the ratio of the fixed and variable remuneration for Joseph Zammit Tabona and Joseph FX Zahra was 66%-34% and 60%-40% respectively due to a one-time bonus paid during the year for their additional efforts during the year. There were no other variable payments made to the other non-executive directors during 2020 and no variable payments were made to the non-executive directors during 2021.
The actual directors’ fees paid to the non-executive directors during the financial year ended 31 December 2021 was €99,994 (2020: €92,999).
The table below shows the total annual remuneration applicable to the non-executive directors during the financial year ended 31 December 2021. The year-on-year percentage increase arises as a result of the remuneration for the additional committee and group directorships undertaken by the non-executive directors during the year compared to the previous year.
Non-Executive Directors
Fixed Remuneration
Remuneration
For Committee/
Group Directorships
Total Remuneration 2021
Total Remuneration 2020
YoY Percentage Difference
€
€
€
€
%
Joseph Zammit Tabona
20,000
10,000
30,000
35,000**
(14.3%)
Laragh Cassar
20,000
5,000
25,000
18,833
32.7%
Etienne Borg Cardona5
10,000
5,000
15,000
8,333
50.0% *
Kevin Rapinett6
10,000
2,500
12,500
8,333
25.0% *
Keith Grunow7
12,847
NIL
12,847
n/a
n/a
Monica Vilabril8
4,647
NIL
4,647
n/a
n/a
Joseph FX Zahra9
NIL
NIL
NIL
22,500**
n/a
Total
77,494
22,500
99,994
92,999
* For calculating the annual change of remuneration for a director (“YoY Percentage Difference”) whose mandate began or ended during the reported financial year, the respective remuneration has been annualised to allow a meaningful comparison.
** This figure includes a one-time bonus of €12,000 paid during 2020 as described above.
5 Resigned on 25 June 2021
6 Resigned on 25 June 2021
7 Appointed on 25 June 2021
8 Appointed on 25 October 2021
9 Resigned on 31 July 2020
MedservRegis p.l.c.
Remuneration Statement and Report
xxvii
5.Senior Management
The Company has four senior executives (as per the definition in the Code of Principles of Good Corporate Governance) at year end, all of which are also appointed members of the Board.
The executive directors are:
a.Anthony S. Diacono (the Chairman),
b.Anthony J. Duncan (Finance Director)10,
c.David O’Connor (CEO),
d.Carmelo Bartolo (Deputy CEO for Business and Operations) and
e.Olivier Bernard (Deputy CEO for Finance, Administration, Investment and Trading),
each of whom have service contracts with the Group entitling them to a fixed salary. The CEO and the Deputy CEOs are employed on an indefinite basis whereas the Chairman is employed on a definite contract. None of the said service contracts include provisions for termination payments and other payments linked to early termination or supplementary pensions/retirement schemes.
Fixed Remuneration – Salary
The executive directors of the Company are entitled to receive directors’ fees for the remuneration as directors and a salary for their executive role within the Group. The total directors’ fees paid to the executive directors during the year was €70,556 (2020: €45,999).
The following table shows the overall annual remuneration of executive directors of the Company and its subsidiary companies for the financial year ended 31 December 2021 (and includes comparative information for 2020, where relevant):
Executive Director
Directors’ Fee
Gross Salary
Fringe Benefits
Total Fixed Remuneration
YoY Percentage Difference
2021
2020
2021
2020
2021
2020
2021
2020
€
€
€
€
€
€
€
€
%
Anthony S. Diacono
20,000
18,833
234,987
235,614
NIL
NIL
254,987
254,447
0.2%
Anthony J. Duncan11
10,000
18,833
83,940
176,942
NIL
NIL
93,940
195,775
(4%)*
David O’Connor12
10,278
n/a
88,757
n/a
23,943
n/a
122,979
n/a
n/a
Olivier Bernard13
10,278
n/a
88,757
n/a
25,352
n/a
124,387
n/a
n/a
Carmelo Bartolo
20,000
8,333
240,639
238,016
3,744
1,976
264,383
248,325
1.7%*
Total
70,556
45,999
737,081
650,572
53,039
1,976
860,676
698,547
10 Resigned on 25 June 2021
11 Retired on 25 June 2021
12 Appointed on 25 June 2021
13 Appointed on 25 June 2021
MedservRegis p.l.c.
Remuneration Statement and Report
xxviii
* For calculating the annual change of remuneration (“YoY Percentage Difference”) for a director whose mandate began or ended during the reported financial year, the respective remuneration has been annualised to allow a meaningful comparison.
The CEO and the Deputy CEO for Finance, Administration, Investment and Trade are entitled to a car cash allowance and the use of a company car respectively. They are also entitled to health insurance for themselves and their spouses and children and life insurance equivalent to four years’ basic salary.
Variable remuneration
Any bonus payable to the Chairman, and the Finance Director, is payable entirely at the discretion of the Company and based on personal and company results achieved. No bonuses were paid to both the Chairman, and the Finance Director during 2021. The Deputy CEO for Business and Operations is entitled to a bonus which is calculated by reference to the Company’s earnings over a specified threshold. The CEO and the Deputy CEO for Finance, Administration, Investment and Trading were entitled to a bonus equivalent to one months’ salary (mandatory in terms of the laws of Mauritius, which is the law regulating their employment).
The present variable remuneration payable by the Company does not contemplate the possibility of it being reclaimed. Moreover, share options are currently not part of the Company’s remuneration policy.
During the 2021 financial year, the following bonuses were paid to the members of the executive management:
Executive Director
Variable Remuneration
Variable Remuneration
Total Remuneration
Total Remuneration
YoY Percentage
Difference
Proportion of fixed to variable remuneration 2021
Proportion of fixed to variable remuneration 2020
2021
2020
2021
2020
€
€
€
€
%
%
%
Anthony S Diacono
NIL
NIL
254,987
254,447
0.2%
100 / 0
100 / 0
Anthony J Duncan14
NIL
NIL
93,940
195,775
(4%)*
100 / 0
100 / 0
David O’Connor15
6,620
NIL
129,598
n/a
n/a
95 / 5
n/a
Olivier Bernard16
6,620
NIL
131,007
n/a
n/a
95 / 5
n/a
Carmelo Bartolo
29,622
30,000
294,005
278,325
1.4%*
90 / 10
89 / 11
Total
42,862
30,000
903,537
728,547
14 Retired on 25 June 2021
15 Appointed on 25 June 2021
16 Appointed on 25 June 2021
MedservRegis p.l.c.
Remuneration Statement and Report
xxix
* For calculating the annual change of remuneration (“YoY Percentage Difference”) for a director whose mandate began or ended during the reported financial year, the respective remuneration has been annualised to allow a meaningful comparison.
The total remuneration package complies with the adopted remuneration policy, which has been designed to ensure that the Company can attract, motivate and retain the right individuals to contribute to the long-term performance of the Company by implementing the Company’s strategy. The performance criteria applied includes the use of the Company’s financial metrics such as revenue and Adjusted Earnings Before Interest, Tax, Depreciation & Amortization (adjusted EBITDA) as well as the individual’s performance against set targets.
During the year, there were no deviations from the procedure for the implementation of the remuneration policy.
The total actual directors’ fees paid to the executive and non-executive directors during the financial year ended 31 December 2021 was €170,550 (2020: €138,998), falling within the amount approved by the shareholders in general meeting in 2014, that is €450,000.
6.Company’s Performance
Performance Indicators:
2021*
€
2020**
€
Percentage Difference
Adjusted Earnings Before Interest, Tax, Depreciation & Amortization (adjusted EBITDA)
5,304,677
5,565,272
(4.7%)
Turnover
29,924,554
32,411,788
(7.7%)
No of Operating Countries / No. of Exposed Countries
10
7
42.9%
Average remuneration on full-time equivalent basis of employee:
2021*
2020**
% Difference
Employees of the Group
€18,343
€23,065
(20.5%)
* the figures for 2021 represent the reverse acquisition accounting as per Group’s consolidated financial statements for the year ended 31 December 2021 as described in detail in note 1 to the financial statements. The decrease in the average remuneration on full-time equivalent basis of employee over the previous year is mainly resulting due to the inclusion of the operating bases in Sub-Saharan Africa.
** the comparative figures were extracted from the 2020 Annual Report of Medserv plc prior to the reverse acquisition for comparison purposes. This differs from the comparative information as presented under the reverse acquisition accounting in the Group’s consolidated financial statements for the year ended 31 December 2021 as described in detail in note 1 to the financial statements.
MedservRegis p.l.c.
Remuneration Statement and Report
xxx
The year-on-year percentage difference of the directors’ remuneration is disclosed in the tables under sections 4 and 5 of this report which can allow a meaningful comparison against the Company’s performance as disclosed in the table above.
The Company does not have any employees. All employees are employed and remunerated by the main operating subsidiaries, including the executive and non-executive directors of the Company.
The foregoing Remuneration Report is being put forward to an advisory vote of the 2022 AGM in accordance with the requirements of the MFSA Capital Markets Rule 12.26L.
This remuneration report has been prepared by the directors and is signed by the Chairman of the RemCom, as authorised by the board.
The contents of this remuneration report have been checked by the auditors as required by Capital Markets Rule 12.26N and their report is appended herewith.
Joseph Zammit Tabona
Chairman, Remuneration Committee
16 June 2022
MedservRegis p.l.c.
Financial Statements
2021
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2021
Page
Financial Statements:
Statements of Financial Position 1
Statements of Profit or Loss and Other Comprehensive Income 3
Statements of Changes in Equity 4
Statements of Cash Flows 7
Notes to the Financial Statements9
Independent Auditors’ Report
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2021
11
The Group
The Company
2021
2020
2021
2020
Restated*
Note
€
€
€
€
ASSETS
Property, plant and equipment
16
-
-
Investment property
17.1
-
-
Intangible assets and goodwill
18
-
-
Loan receivable from related companies
22
-
-
Loan receivable from subsidiaries
23
-
-
25,348,176
39,516,253
Investment in subsidiaries
24
-
-
49,140,053
17,786,446
Equity-accounted investees
25
-
300
Right-of-use assets
38
-
-
Investments at FVTPL
26
-
-
Other investments at FVTPL
27
-
-
Total non-current assets
74,488,229
57,302,999
Inventories
20
-
-
Current tax assets
805
399
Loans receivable from subsidiaries
23
-
-
910,164
-
Trade and other receivables
21
32,841
71,216
Contract assets
9
-
-
Cash at bank and in hand
29
-
1,035,682
Assets held for sale
17.2
-
-
Total current assets
943,810
1,107,297
Total assets
75,432,039
58,410,296
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2021
2
The Group
The Company
2021
2020
2021
2020
Restated*
Note
€
€
€
€
EQUITY
Share capital
30.1
10,163,764
5,374,441
Share premium
30.2
39,781,902
12,003,829
Retained earnings / (accumulated
losses)
(31,351,333)
(11,944,440)
Translation reserve
30.3
-
-
Hedging reserve
30.5
(412,381 )
-
-
Reverse acquisition reserve
30.4
(1,394,906 )
(5,373,706 )
-
-
Equity attributable to owners of the
Company
18,594,333
5,433,830
Non-controlling interest
32
-
-
Total equity
18,594,333
5,433,830
LIABILITIES
Loans and borrowings
33
50,563,570
49,799,298
Employee benefits
34
-
-
Lease liabilities
38
-
-
Trade and other payables
35
-
-
Deferred tax liabilities
19
-
-
Total non-current liabilities
50,563,570
49,799,298
Bank overdraft
29, 33
68,442
-
Employee benefits
34
-
-
Current tax liabilities
-
-
Loans and borrowings
33
-
-
Trade and other payables
35
6,205,694
3,177,168
Lease liabilities
38
-
-
Deferred income
28
-
-
Total current liabilities
6,274,136
3,177,168
Total liabilities
56,837,706
52,976,466
Total equity and liabilities
75,432,039
58,410,296
*The comparative information is restated on account of correction of errors. See note 41.
The notes on pages 10 to 133 are an integral part of these financial statements.
These financial statements on pages 1 to 133 were approved by the Board of Directors and authorised for issue on 16 June 2022 and signed on its behalf by Anthony S. Diacono (Chairman) and David S. O’Connor (Chief Executive Officer) as per Directors’ declaration on ESEF Annual Report submitted in conjunction with Annual Report 2021.
MedservRegis p.l.c.
Statements of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2021
3
The Group
The Company
2021
2020
2021
2020
Restated*
Note
€
€
€
€
Continuing operations
Revenue
9
-
-
Cost of sales
11
(22,526,528 )
(8,394,408 )
-
-
Gross profit
-
-
Other income
10
-
-
Administrative expenses
11
(8,897,762 )
(5,589,628 )
(5,635,038)
(4,742,781)
Net impairment loss on financial assets
37.4
(440,368 )
(2,103,562 )
(12,967,353)
(2,286,661)
Other expenses
10
(7,772,280 )
(4,907,216 )
-
-
Results from operating activities
(7,426,064 )
(9,121,827 )
(18,602,391)
(7,029,442)
Finance income
13
2,691,461
3,147,878
Finance costs
13
(2,390,076 )
(2,906,687 )
(3,495,816)
(3,605,357)
Net finance costs
(2,901,610 )
(804,355)
(457,479)
Share of profit of equity-accounted investees
25
-
-
Loss before income tax
(7,360,698 )
(11,522,414 )
(19,406,746)
(7,486,921)
Tax income (expense)
14
(734,414 )
(147)
(147)
Loss from continued operations
(7,303,136 )
(12,256,828 )
(19,406,893)
(7,487,068)
Discontinued operation
Profit (loss) from discontinued operation, net of tax
8
(419,568 )
-
-
Loss for the year
(7,202,667 )
(12,676,396 )
(19,406,893)
(7,487,068)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Net loss on hedge of net investment in a foreign operation
30
(412,381 )
-
-
Defined benefit plan actuarial losses
34
(190,788 )
-
-
Re-measurement of retirement benefit obligations
(14,364 )
-
-
Foreign currency translation differences –
foreign operations
-
-
Other comprehensive loss for the year
-
-
Total comprehensive loss for the year
(7,087,315 )
(12,314,485 )
(19,406,893)
(7,487,068)
Loss attributable to:
Owners of the Company
(7,512,179 )
(12,676,396 )
(19,406,893)
(7,487,068)
Non-controlling interests
32
-
-
Loss for the year
(7,202,667 )
(12,676,396 )
(19,406,893)
(7,487,068)
Total comprehensive income attributable to:
Owners of the Company
(7,068,684 )
(12,314,485 )
(19,406,893)
(7,487,068)
Non-controlling interests 32
(18,631 )
-
-
Total comprehensive loss for the year
(7,087,315 )
(12,314,485 )
(19,406,893)
(7,487,068)
Earnings per share
Basic earnings per share
31
(24c7)
(13c9)
Earnings per share – Continuing operations
Basic earnings per share
31
(13c9 )
(€10c92 )
(24c7)
(13c9)
Adjusted earnings before interest, tax,
depreciation and amortisation (adjusted EBITDA) 15
(4,012,109 )
-
-
*Group comparative information has been restated due to prior period errors (see Note 41). Group comparative information has also been re-presented due to a discontinued operation (see Note 8).
The notes on pages 10 to 133 are an integral part of these financial statements.
MedservRegis p.l.c.
Statement of Changes in Equity – The Group
For the year ended 31 December 2021
4
Share
capital
Share
premium
Translation
reserve
Reverse acquisition reserve
Hedging
reserve
Retained
earnings
Total
Non-controlling
interest
Total
equity
€
€
€
€
€
€
€
€
€
Balance at 1 January 2020,
as previously reported
(5,373,706 )
Translation adjustment
(113,909 )
Impact of correction of errors
(1,724,136 )
(1,724,136 )
(1,724,136 )
Restated balance at 1 January 2020 (note 41)
(5,373,706 )
Total comprehensive income for the year (restated)
Loss for the year
(12,676,396 )
(12,676,396 )
(12,676,396 )
Other comprehensive income for the year
(14,364 )
Total comprehensive income for the year (restated)
(12,690,760 )
(12,314,485 )
(12,314,485 )
Transactions with owners of the Company
Reversal of dividends
Other adjustments
(444,369 )
(444,369 )
(444,369 )
Total transactions with owners of the Company
Restated balance at 31 December 2020
(5,373,706 )
MedservRegis p.l.c.
Statement of Changes in Equity – The Group
For the year ended 31 December 2021
5
Share capital
Share premium
Translation reserve
Reverse acquisition
Hedging reserve
Retained earnings
Total
Non-controlling interest
Total
€
€
€
€
€
€
€
€
€
Balance at 1 January 2021
(5,373,706 )
Total comprehensive income
Loss for the year
(7,512,179 )
(7,512,179 )
(7,202,667 )
Other comprehensive income
(412,381 )
(172,157 )
(18,631 )
Total comprehensive income
(412,381 )
(7,684,336 )
(7,378,196 )
(7,087,315 )
Transactions with owners of the Company Contributions and distributions
Issue of ordinary shares related to business combination (see note 6.5)
Transfers
(2,753,155 )
Distribution pre-business combination (see note 8)
(8,149,287 )
(8,009,316 )
(8,009,316 )
Dividends
(3,088,654 )
(3,088,654 )
(3,088,654 )
Total contributions and distributions
(2,613,184 )
(8,484,786 )
Changes in ownership interests
Acquisition of NCI on business combination
Total charges in ownership interests
Total transactions with owners of the Company
(2,613,184 )
(8,484,786 )
Balance at 31 December 2021
(1,394,906 )
(412,381 )
MedservRegis p.l.c.
Statements of Changes in Equity – The Company
For the year ended 31 December 2021
6
Share
capital
Share
premium
Retained
earnings
Total
equity
€
€
€
€
Balance at 1 January 2020
5,374,441
12,003,829
(4,457,372)
12,920,898
Total comprehensive income
Loss for the year
-
-
(7,487,068)
(7,487,068)
Balance at 31 December 2020
5,374,441
12,003,829
(11,944,440)
5,433,830
Balance at 1 January 2021
5,374,441
12,003,829
(11,944,440)
5,433,830
Total comprehensive income
Loss for the year
-
-
(19,406,893)
(19,406,893)
Total comprehensive income for the period
-
-
(19,406,893)
(19,406,893)
Transactions with owners of the Company
Contributions and distributions
Issue of ordinary shares
4,789,323
27,778,073
-
32,567,396
Total contributions and distributions
4,789,323
27,778,073
-
32,567,396
Balance at 31 December 2021
10,163,764
39,781,902
(31,351,333)
18,594,333
The notes on pages 10 to 133 are an integral part of these financial statements.
MedservRegis p.l.c.
Statements of Cash Flows
For the year ended 31 December 2021
7
The Group
The Company
2021
2020
2021
2020
Note
€
€
€
€
Cash flows from operating activities
Loss for the year
(7,202,667 )
(12,676,396 )
(19,406,893)
(7,487,068)
Adjustments for:
Depreciation
16, 37
-
-
Amortisation of intangible assets
18.1
-
-
Impairment losses on trade receivables,
contract assets and related party receivables
37.4
-
-
Impairment losses on property, plant and
equipment
10.2
-
-
Impairment loss on intangible assets
18
-
-
Reversal of impairment losses on property, plant and equipment
16
(128,688 )
-
-
Loss/(gain) on disposal of property, plant and
equipment
10.2
(16,971 )
-
-
Net finance costs (income)
13
(36,265 )
804,355
457,479
Net increase in fair value of financial assets at FVTPL
10
(309,087 )
(986,975 )
-
-
Share of profit of equity-accounted
investees, net of tax
25
(29,101 )
(501,023 )
-
-
Write-down of inventory
10.2
-
-
Write-off of property, plant and equipment
16
-
-
Impairment of goodwill
18.3
-
-
Exchange differences
10.2
(1,519,373 )
-
-
Gain on disposal of assets
-
-
-
Retirement benefit obligation
34
-
-
Tax expense
(57,562 )
147
147
Impairment loss on amounts
owed by subsidiaries
-
12,967,353
2,371,152
Impairment losses on investments in
subsidiaries
24.1
-
4,351,654
3,487,810
Impairment loss on receivables from
joint venture
-
7,075
67,179
(1,530,006 )
(1,276,309)
(1,103,301)
Changes in:
Inventories
-
-
Trade and other receivables
(1,228,782 )
(10,150)
(160,824)
Contract assets
(154,262 )
-
-
Trade and other payables
(444,216 )
134,220
102,421
Related party balances
2,667,507
4,835,822
Provisions and employee benefits
-
-
Cash generated from operating activities
1,515,268
3,674,118
Bank interest paid
(44,529 )
(40,762 )
-
-
Bank interest received
-
-
Taxation paid
(204,720 )
(378,415 )
(253)
(1,045)
Net cash from operating activities
carried forward
1,515,015
3,673,073
MedservRegis p.l.c.
Statements of Cash Flows (continued)
For the year ended 31 December 2021
8
The Group
The Company
2021
2020
2021
2020
Note
€
€
Net cash from operating activities b/f
1,515,015
3,673,073
Cash flows from investing activities
Acquisition of other investments and properties
(1,845,716 )
-
-
Acquisition of property, plant and equipment
(1,977,229 )
(3,148,297 )
-
-
Addition to investment property
17
(408,461 )
-
-
Investment in associate
(400 )
-
-
Proceeds from disposal of property, plant and equipment
16
-
-
Disposal of discontinued operation, net of cash disposed of
8
(2,737,031 )
-
-
Net cash acquired following reverse acquisition
6.3
-
-
Interest received from subsidiaries
-
-
Net cash used in investing activities
(1,893,008 )
(5,362,403 )
-
-
Cash flows from financing activities
Loan received from related companies
22
-
-
Repayments of bank loans
(1,857,973 )
-
-
Interest paid on bank loans
(50,546 )
-
-
Interest paid on notes
(1,315,331 )
(2,630,663)
(2,651,616)
Retirement benefits paid
34
(5,270 )
(7,294 )
-
-
Advances to associates
25
(8,283 )
-
-
Dividends paid
(3,088,654 )
-
-
Payment of lease liabilities
38
(1,099,146 )
-
-
Net cash used in financing activities
(5,290,404 )
(7,294 )
(2,630,663)
(2,651,616)
Effect of exchange rate fluctuations on cash held
(954,264 )
11,524
-
ECL allowance on cash at bank
37.4
(79,802 )
-
-
Net (decrease) increase in cash and cash equivalents
(1,104,124)
1,021,457
Cash and cash equivalents at beginning of year
1,035,682
14,225
Cash and cash equivalents at end of year*
29
(68,442)
1,035,682
Cash at bank and in hand
29
-
1,035,682
Bank overdraft
29, 33
(2,876,904 )
(68,442)
-
Cash and cash equivalents at end of year
29
(68,442)
1,035,682
* Cash and cash equivalents include bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.
The notes on pages 10 to 134 are an integral part of these financial statements.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
9
1Reporting companyThe consolidated financial statements of the Company as at and for the year ended 31 December 2021 comprise the Company and its subsidiaries (together referred to as ‘the Group’ and individually ‘Group entities’). The Group is primarily involved in providing shore base logistics and engineering services to the offshore oil and gas industry and supply chain management for Oil Country Tubular Goods (OCTG) to support the onshore oil and gas industry. It also provides equipment, procurement, and specialised services to a wide range of customers, including national and international energy companies, drilling and mining companies, as well as product and equipment manufacturers and other heavy industry-related contractors across the globe, reaching the Mediterranean countries, Middle East, South America, South Africa and a number of emerging markets such as Mozambique, Uganda, and Angola. On 25 June 2021, Medserv p.l.c. completed a share for share exchange with Regis Holdings Limited (Regis) that resulted in Regis controlling Medserv plc group of companies. Following the transaction, the combined group changed its name to MedservRegis p.l.c. (hereafter the ‘Company’). From a legal and taxation perspective, the Company is considered the acquiring entity. For accounting purposes the transaction been accounted for as a reverse acquisition (see Note 6) in the consolidated financial statements, where Regis is the accounting acquirer and legal acquiree, whereas, the Company (formerly Medserv p.l.c.) is the legal acquirer and accounting acquiree. As a result, the consolidated financial statements represent a continuation of Regis’ financial statements except for the capital structure for current year as described in note 6 .
MedservRegis p.l.c. (formerly Medserv p.l.c.) (the “Company”) is a public liability company domiciled and incorporated in Malta . The principal activity of the Company is that of a holding company (see note 24).
As a result of the reverse acquisition:
a)the Consolidated Statement of Financial Position as at 31 December 2021 represents the consolidated financial position of the combined Medserv and Regis group of companies; whereas
b)the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 includes the financial results of the continued operations of Regis group of companies for the entire year and financial results of the formerly Medserv group of companies from 1 July 2021 until year-ended 31 December 2021.
The comparative information of the Group presented in these financial statements is the last annual consolidated financial statements of Regis as at and for the year ended 31 December 2020, re-presented due to a discontinued operation and prior period errors, see notes 8 and 41, respectively.
The financial statements of Medserv p.l.c. as at and for the year ended 31 December 2020 is available to the public through the Malta Business Registry.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
10
2Basis of preparation
2.1Statement of compliance
These consolidated and separate financial statements as at and for the year ended 31 December 2021 have been prepared in accordance with International Reporting Standards (IFRS) as adopted by the EU. All references in these financial statements to IAS, IFRS or SIC / IFRIC interpretations refer to those adopted by the EU. These financial statements have also been drawn up in accordance with the provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta) (the “Act”).
Article 4 of Regulation 1606/2002/EC requires that, for each financial year starting on or after 1 January 2005, companies governed by the law of an EU Member State shall prepare their consolidated financial statements in conformity with IFRS as adopted by the EU if, at their reporting date, their securities are admitted to trading on a regulated market of any EU Member State.
Details of the Group’s accounting policies are included in Note 4.
2.2Going concern
The Group sustained a loss after tax for the year amounting to €7.2 million (2020: €12.68 million), it reported a positive adjusted EBITDA (note 15) of €5.3 million (2020: negative EBITDA €4 million) and generated operating cash inflows of €6.58 million (2020: €6.47 million). The Group’s net asset value amounted to €60 million (2020: €41.96 million) and it had positive working capital amounting to €20.4 million (2020: €21.29 million).
The Company, which primarily acts as a funding vehicle for the Group, sustained a loss for the year amounting to €19.4 million (2020: €7.5 million), had a net asset value of €18.6 million (2020: €5.4 million) and had a negative working capital of €5.3 million (2020: negative working capital of €2.1 million). The Group has €11.8 million of resources comprising cash and cash equivalents, unused credit lines and investments at FVTPL as at reporting date.
The reverse acquisition between the Company and Regis Holdings Limited in June 2021 further strengthened the Group’s financial and liquidity position and improved its capability of delivering value to all stakeholders. The recovery in oil and gas pricing is encouraging the major international energy companies to start revisiting their drilling programmes and future investment projects. As global oil markets progressively recover from the effects of the pandemic and the related unprecedented declines in demand, the Group and the Company are well positioned to pursue growth opportunities in both existing and new markets and participate in many of the largest energy projects scheduled over the next five years.
Considering the factors and circumstances as described above, the directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
11
2Basis of preparation (continued)
2.3Basis of measurement
The financial statements have been prepared on the historical cost basis, except for investments at FVTPL.
2.4Functional and presentation currency
These financial statements are presented in euro (€), which is the Company’s functional currency.
3Use of judgements and estimates
In preparing these financial statements, management has made judgements and estimates that affect the application of Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements and information about assumptions and estimation uncertainties at 31 December 2021 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:
-Note 16 and 38 – impairment test of property, plant and equipment and right-of-use assets of Company’s subsidiaries: key assumptions underlying recoverable amounts;
-Note 23 and Note 24 – impairment test of loans receivable from, and investments in, subsidiaries: key assumptions underlying recoverable amounts;
-Note 18 – impairment test of goodwill and intangible assets: key assumptions underlying recoverable amount;
-Note 19 – recognition of deferred tax assets: availability of future taxable profit against which investment tax credits can be utilised; and
-Note 37.4 – measurement of ECL allowance for trade receivables: key assumptions in determining the loss given default and macro-economic adjustments.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
12
4Significant accounting policies
4.1Basis of consolidation
4.1.1Business combinations
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group (see note 4.1.2). The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (see note 4.11). Any gain on a bargain purchase is recognised in profit or loss immediately. Transactions costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
4.1.2Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
4.1.3Non-controlling interests
NCI are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
4.1.4Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity.
Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
4.1.5Interests in equity-accounted investees
The Group’s interests in equity-accounted investees comprise interests in associates and a joint venture.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
13
4Significant accounting policies
4.1Basis of consolidation (continued)
4.1.5Interests in equity-accounted investees (continued)
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and the joint venture are accounted for using the equity method. They are initially recognised at cost, which includes transactions costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence or joint control ceases.
4.1.6Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
4.2Foreign currency
4.2.1Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date.
The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
14
4 Significant accounting policies (continued)
4.2Foreign currency
4.2.2Foreign operations
Foreign currency differences are generally recognised in profit or loss. However, foreign currency differences arising from the translation of the following items are recognised in OCI:
•financial liabilities denominated in USD and designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective (see note 4.2.4); and
•qualifying cash flow hedges to the extent the hedges are effective (see note 4.2.4).
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates at the reporting date. The income
and expenses of foreign operations are translated to the functional currency at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in OCI and presented within equity in the translation reserve, except to the extent that the translation difference is allocated to NCI. However, if the operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
4.2.3Hedge accounting
The Group designates certain non-derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objective and strategy in undertaking the hedge, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.
If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve remains in equity until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-financial item's cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
15
4Significant accounting policies (continued)
4.2Foreign currency (continued)
4.2.4Hedge of a net investment in foreign operation
When a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of changes in the fair value of the hedging instrument is recognised in OCI and presented in the translation reserve within equity. Any ineffective portion of the changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign operation.
Net investment hedges
When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of, for a derivative, changes in the fair value of the hedging instrument or, for a non-derivative, foreign exchange gains and losses is recognised in OCI and presented in the translation reserve within equity. Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non-derivative are recognised immediately in profit or loss.
The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign operation.
4.2.5Foreign currency gains and losses
Foreign currency gains and losses relating to operating activities are recognised in profit or loss and reported on a net basis as either “other income” or “other expenses” depending on whether foreign currency movement is in a net gain or net loss position. Other non-operating foreign currency gains and losses are recognised in profit or loss are reported on a net basis as either “finance income” or “finance costs” depending on whether foreign currency movement is in a net gain or net loss position.
4.3Financial instruments
4.3.1 Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
16
4Significant accounting policies (continued)
4.3Financial instruments (continued)
4.3.2 Classification and subsequent measurement
4.3.2.1Financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
•it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
•its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
•it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
•its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
17
4Significant accounting policies (continued)
4.3Financial instruments (continued)
4.3.2 Classification and subsequent measurement (continued)
4.3.2.2Financial assets – Business model assessment
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
•the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;
•how the performance of the portfolio is evaluated and reported to the Group’s management;
•the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and
•the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
4.3.2.3Financial assets – 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 Group 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. In making this assessment, the Group considers:
•contingent events that would change the amount or timing of cash flows;
•terms that may adjust the contractual coupon rate, including variable-rate features;
•prepayment and extension features; and
•terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
18
4Significant accounting policies (continued)
4.3Financial instruments (continued)
4.3.2 Classification and subsequent measurement (continued)
4.3.2.3Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract.
Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.
4.3.2.4Financial assets – Subsequent measurement and gains and losses
The Company’s financial assets comprise loans to subsidiaries, cash and cash equivalents and trade and other receivables. The Group’s financial assets comprise loans to related companies, cash and cash equivalents, trade and other receivables, contract assets and investments in equity and debt instruments.
For financial assets at amortised cost, these assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
For financial assets at FVTPL, these are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
4.3.2.5Financial liabilities – Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. The Group's financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
4.3.3Derecognition
4.3.3.1Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
19
4Significant accounting policies (continued)
4.3Financial instruments (continued)
4.3.3Derecognition (continued)
4.3.3.2 Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
4.3.4Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a current legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
4.4Share capital
Share capital consists of ordinary shares that are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
4.5Property, plant and equipment
4.5.1Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
20
4Significant accounting policies (continued)
4.5Property, plant and equipment (continued)
Any gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and is recognised net within “other income” or “other expenses” in profit or loss.
4.5.2Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item, if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
4.5.3Depreciation
Deprecation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Property developed and related improvements made on leased land are depreciated over the shorter of the land’s lease term and the useful lives of the building and improvements unless it is reasonably certain that the Group will obtain ownership of the land by the end of the lease term. Depreciation commences when the item is available for use.
The estimated useful lives for the current and comparative periods are as follows:
2021
Years
2020
Years
•Buildings and base improvements*
20 – 50
20
•Furniture and fittings
10
10
•Office equipment
4-5
4
•Computer equipment
5
5
•Plant and equipment
10-15
10
•Motor vehicles
4-10
5 - 10
•Cargo carrying units
10
-
•Photovoltaic farm
20
-
*The useful life of buildings and base improvements on leased property is based on the lower of the useful life of the asset and lease term.
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
21
4Significant accounting policies (continued)
4.6Intangible assets and goodwill
4.6.1Recognition and measurement
Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. Goodwill that arises upon the acquisition of subsidiaries represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative, it is recognised immediately in profit or loss. Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.
Intangible assets include the trade names, trademarks and related assets, customer contracts and non-contractual customer relationships. Intangible assets acquired as part of a business combination are measured at fair value at the date of acquisition less accumulated amortisation and any accumulated impairment losses. Subsequent to initial recognition, these intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
The tradenames, trademarks and related assets comprise the “Medserv” and the “METS” brands. These are regarded as having an indefinite life, since based on all relevant factors, there is no foreseeable limit to the period over which the assets are expected to generate cash inflows. The “Medserv” and “METS” brands have existed for over 40 and 15 years respectively which is comparable to other brands in the oil and gas industry.
The customer contracts and non-contractual customer relationships acquired by the Group have finite useful lives.
4.6.2Subsequent costs
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.
4.6.3Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill and the brands and trademarks are not amortised.
The estimated useful lives for the current period are as follows:
•customer contracts and non-contractual relationships2-9 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
4.7 Investment Property
Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit or loss.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
22
4Significant accounting policies (continued)
4.7 Investment Property (continued)
Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.
Rental income from investment property is recognised as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
4.8 Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefits assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.
4.9Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
4.9.1As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
23
4Significant accounting policies (continued)
4.9Leases (continued)
4.9.1As a lessee (continued)
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of the right-of–use assets vary between 1 and 39 years. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
•fixed payments, including in-substance fixed payments;
•variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
•amounts expected to be payable under a residual value guarantee; and
•the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
From 1 January 2021, where the basis for determining future lease payments changes as required by interest rate benchmark reform, the Group remeasures the lease liability by discounting the revised lease payments using the revised discount rate that reflects the change to an alternative benchmark interest rate.
The Group presents right-of-use assets that do not meet the definition of investment property, and lease liabilities, separately in the statement of financial position.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
24
4Significant accounting policies (continued)
4.9Leases (continued)
4.9.1As a lessee (continued)
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these lease as an expense on a straight-line basis over the lease term.
4.10Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle, and includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale.
4.11Impairment
4.11.1Financial assets
4.11.1.1 Financial instruments and contract assets
The Group recognises loss allowances for Expected Credit Losses (ECLs) on financial assets at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following which are measured at 12-month ECLs:
•bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition,
The Group measures loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
The Group considers a financial asset to be in default when:
•the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or
•the financial asset is more than 90 days past due.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2021
25
4Significant accounting policies (continued)
4.11.1Financial assets (continued)
4.11.1.2 Measurement of ECLs
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 Group 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 (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
4.11.1.3 Credit-impaired financial assets
At each reporting date, the Group 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 the following observable data:
•significant financial difficulty of the borrower or issuer;
•a breach of contract such as a default or being more than 90 days past due;
•the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
•it is probable that the borrower will enter bankruptcy or other financial reorganisation;
4.11.1.4 Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Impairment losses related to trade and other receivables, including contract assets, are presented separately in the Statement of Profit or loss and OCI.
4.11.1.5 Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off on its financial assets based on whether there is a reasonable expectation of recovery and with reference to its historical experience of