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Consolidated Statement of Financial Position
For the year ended 31 December 2022
MedservRegis p.l.c.Annual Report 2022
MedservRegis p.l.c.
Annual Report
1
Contents
Page
Directors’ and Other Statutory Reports i
Financial Statements 1
Independent Auditors’ Report
MedservRegis p.l.c.
Directors’ and
Other Statutory Reports
2022
MedservRegis p.l.c.
Directors’ and other Statutory Reports
Page
Chairman’s Statement i
CEO’s Statement ii
Statement on Corporate Social Responsibility iv
Directors’ Report vi
Statement of the Directors pursuant to Capital Markets Rule 5.68 xvii
Statement by the Directors on non-financial information xviii
Directors’ Statement of Compliance with the Code of Principles
of Good Corporate Governance xlv
Remuneration Statement and Report lvi
MedservRegis p.l.c.
Chairman’s Statement
For the Year Ended 31 December 2022
i
The year under review, 2022, can be described as a year of two ‘parts’. The two ‘part’ scenario was both anticipated and planned for. The first six months was a period of consolidation. The Group successfully completed the integration of the two companies, Medserv and Regis, restructured the management team as well as put in place new financing arrangements, creating a dynamic and financially sound Group with an extended geographically reach especially in the emerging markets. At the same time new operational plans were introduced to maximise our preparedness for the anticipated business growth in the second half of 2022.
The Financial Statements being reviewed in this report reflect the improved performance achieved during 2022. The recovery registered post the pandemic also reflects the new conditions being experienced in the Energy sector. The return to business of the global economy has created a sustained increase in demand for energy needed to fuel the increase in economic activity. The plans put in place by management have made it possible for our Group to react in a timely manner to offer our clients the urgent support needed in their renewed operations.
The disruption of flow from traditional suppliers of gas to the western markets has increased the necessity for International Energy Companies (IEC) to resume production more rapidly as well as increase their investments in exploration activity. This development further increased the demand for our services.
Our Group has responded well to this new demand. Stalled operations were reactivated through existing contracts and completely new business has been secured. This upturn in demand for fossil fuel, especially gas, is expected to continue in the medium to long term as it is by far the most reliable energy source needed to drive the economy. We are also excited about the increased investment being made by our core clients in alternate sustainable sources of energy. Our group is well placed to service these new operations going forward.
The improved results being reported for 2022 is a clear sign that the strategic decisions taken by the Board of Directors and executive management team have made it possible for our Group to return to financial positive territory. I would be amiss if I do not take this opportunity to thank the Executive Team led by our CEO, Dave O’Connor, for the extraordinary effort put in. I must also thank my colleagues the directors of the Board as well as all employees, contractors and all stakeholders for their contribution. Last and not least I would like to thank our shareholders and bond holders for their continued support.
Anthony S. Diacono
Chairman
28 April 2023
MedservRegis p.l.c.
CEO’s Statement
For the Year Ended 31 December 2022
ii
“Driving Growth and Profitability “
The past year has seen a major shift in the fortunes of the international energy companies registering record profits which we believe will provide substantial cashflow to continue to fund further investments in 2023 and beyond.
The outbreak of the war between Russia and the Ukraine in February 2022 created a scenario where we saw oil & gas prices rise dramatically at first and then to finally average at around the $100 per barrel mark for the year. Russia’s invasion of Ukraine created serious concern for European governments, due to their reliance on imports from Russia. This increase in the prices and the energy insecurity saw a rapid move to seek alternative sources away from Russia. Europe’s efforts to wean itself off supplies of Russian gas are already leading to action in Africa. Projects that had stalled are now being speeded up. More than 40% of all the natural gas discovered worldwide was found in Africa between 2010 and 2020. The African continent now holds 13% of world’s natural gas reserves.
Our Group Performance in 2022 has seen an increase in revenue in our Eastern Mediterranean and Middle East operations and small yet noticeable improvement in our Uganda operations with the start-up of activity by Total and CNOOC towards the end of 2022. Our Mozambique and Malta operations continued to be under pressure particularly Mozambique due to the continued force-majeure by TotalEnergies in the north of the country. Due to the ongoing political instability in Libya, our Malta business unit experienced very low level of Oil and Gas activity, however through their commitment and ability, managed to secure further non-oil and gas activity. Medserv Egypt‘s contract with IEOC (ENI) for the operations in Damietta were extended to the end of 2022 and a tender was issued for a new one-year contract commencing in January 2023 which was awarded to the Company. Operations were successful and IEOC also sub-contracted these facilities to Chevron for their one well campaign from this facility creating further operations for our team there.
The Company’s total revenues for year 2022 amounted to € 66.9 million. 2021 total revenues amounted to €29.9 million (due to mid-year merge with the Regis Group, only 6 months of Medserv revenues have been accounted in 2021 consolidated revenues).
Adjusted Earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) amounted to €11.4 million (2021: €5.3 million, same perimeter as above stated). A detailed analysis of the Company’s financial performance for the reporting year can be found in the Directors’ report.
As planned in 2021, the Group successfully reduced both the total debt and reduced the cost of borrowing. This was concluded in two steps, firstly in September 2022 with the early redemption of €7 million from the €20 million bonds maturing in 2023. This repayment was funded both with Group’s own cash and with a new lower interest rate facility negotiated with a Maltese bank. In December 2022, a new bond of €13 million was issued at a coupon of 5% per annum to permit the repayment of the remaining €13 million of the 2023 bond (at a coupon of 6% per annum).
Due to the need for governments to ensure their energy security we expect to see more projects reaching final investment decisions (FID) in 2023 particularly and in our opinion the development of natural gas infrastructure. It is our belief that the Mediterranean basin will be a very active area in the next three to five years with European markets seeking to replace Russian pipeline imports. The growing activity in that region bodes well for the continuation of operations at our facility in Cyprus and should also see further growth and activity in our operations in Egypt noting recent tenders submitted to Shell and Chevron.
MedservRegis p.l.c.
CEO’s Statement (continued)
For the Year Ended 31 December 2022
iii
Following the recent announcement by ENI of an $8 billion investment into Libya, we are forecasting that our Malta base will register a substantial upswing of activities supporting this five year mega offshore project in Libya. Likewise, we predict continued improvement of revenues in Uganda as TotalEnergies moves forward with their drilling operations and the development of the East Africa Pipeline. Unfortunately, and at the time of writing, TotalEnergies has yet to make a definitive announcement regarding the resumption of their projects in Mozambique. However, it is to be noted that recent small contracts have been awarded to civil contractors to commence with reparations and rebuilding of infrastructure at the Afunghi base, damaged during the insurgency in 2021. In Mozambique the Group together with a joint venture partner participated in a substantial multi-year tender issued by ENI Mozambique for provision of Logistics Shore Base & Integrated Logistics Services. Adjudication is expected by mid-year 2023 which if awarded to the Group will strategically improve its position in the country.
The Group is also pleased to report that in the first quarter of 2023 it was awarded a contract to provide shore base logistical services to ENI for their drilling campaign offshore Morocco. The shore base services will be performed from Agadir port, with hopefully further opportunities in that country moving forward.
Our Middle East operations through METS as noted in the above report had a successful year in 2022 and our goal is to consolidate this improvement and to move forward to seek further opportunities and grow the revenues in this region during the next two to three years. This will be achieved by investing in the expansion of our footprint into Abu Dhabi and other GCC states over this period, requiring capital and human resources investment.
We remain fairly confident of the Group’s prospects for the year ahead. The Group’s strategy is to continue its growth trajectory and increase market share and profitability. This is achievable based on the significant energy projects scheduled to be developed in the Group’s core geographical markets in the next five years.
The Group’s short to medium term earnings is expected to be derived from logistics and support services to the Oil & Gas industry. Medium to long term the Group is pursuing provision of its logistics services to green energy projects being developed onshore and offshore by both existing and new clients.
We believe that with strategic partnerships, government incentives, and the requirement to access to new markets, together with the continued importance of oil and gas in the global energy mix, the logistics activity to support these projects is poised for growth in the coming years, resulting in profits and resumption of dividend payments.
We thank our customers for their business and trust, our employees for their hard work and dedication, and our shareholders for their support.
David S. O’Connor
CEO
28 April 2023
MedservRegis p.l.c.
Statement of Corporate Social Responsibility
For the Year Ended 31 December 2022
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 to 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 2022, 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 2022
v
During 2022, 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.
Directors’ Report
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 2022.
Board of directors
Anthony S. Diacono
Carmelo (a.k.a. Karl) Bartolo
Joseph Zammit Tabona 1
Laragh Cassar
David S. O’Connor
Olivier N. Bernard
Keith Grunow
Monica De Oliveira Vilabril
Jean Pierre Lhote 2
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.
1 Resigned on the 29 July 2022
2 Appointed on the 29 July 2022
MedservRegis p.l.c.
Directors’ Report (continued)
vii
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 ten 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 and Egypt), in the Middle East (UAE, Oman and Iraq), Sub-Saharan Africa (Mozambique, Uganda, Angola and South Africa) and South America. 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
The war between Russia and Ukraine has seen a spike in the oil and gas price globally, reaching heights last seen in 2013. Equally noticeable is that the war resulted in a shift in Europe, which included sourcing energy from other countries and not Russia. Neighbouring European countries in Mediterranean rim countries increased in prominence as a long-term source of energy.
The Group’s performance has improved significantly in the second half of 2022. Turnover in the second half of 2022 increased from €26.1 million generated in the first half to €40.8 million (+57%) generated in the second half.
The Group generated a profit after tax for the year amounting to €0.54million (2021 loss: €7.2 million), it reported a positive adjusted EBITDA of €11.4 million (2021: positive adjusted EBITDA €5.3 million) and generated operating cash inflows of €20 million (2021: €3.5 million). Adjusted EBITDA increased from €4.8 million in the first half to €6.6 million (+39%) in the second half of the year. The main drivers for this turnaround were a strong performance in the Middle East and Eastern Mediterranean regions and a moderate improvement in other operating jurisdictions.
The Company, which primarily acts as a funding vehicle for the Group, sustained a profit for the year amounting to €2.72million (2021 loss: €19.4million).
The core business has significantly improved and the start of 2023 has further confirmed the positive trend. The OCTG business segment in the Middle East had a successful year in 2022 and the Group’s objective is to consolidate this improvement. OCTG tons managed, and machine shop orders were the largest ever handled by the OCTG business segment since 2016.
The Group’s business in Uganda for the reporting year was a start-up for most of the year and has started to gain momentum in December 2022.
The Integrated Logistics Support Services (ILSS) business segment of the Group in the Eastern Mediterranean region provided services to four international energy companies, compared to a maximum of two clients in previous years. This segment continued to grow after the reporting year as the Group was awarded two ILSS contracts, one of which was by a new international energy client and another in a new market. Business development is expected to continue to increase for the ILSS segment as the business pipeline of new tender participation remains strong.
The Group’s ILSS segments in Malta/Libya, Mozambique and Caribbean region remained subdued during the reporting year. The Group continued experiencing a slowdown in activity in Mozambique due to the force majeure imposed by TotalEnergies in northern Mozambique. Likewise, Libya continues to experience very low activity due to the unresolved political situation in the country which has caused further delays in announcing expected mega offshore energy projects. The Group expects significant turnaround to be registered in the short to medium term from both Mozambique and Libya. Mega project activity in both countries are poised to resume and the Group is well positioned to secure business from these markets.
MedservRegis p.l.c.
Directors’ Report (continued)
viii
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, Adjusted EBITDA, projected earnings, country by country analysis and other anticipated criteria.
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 International 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 previous 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. Mozambique continues to remain a major security risk. The Group now operates in ten jurisdictions, mainly in Europe, 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.
Directors’ Report (continued)
ix
Regulatory and environmental risk: The Group operates in ten 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 risk management: The Group has exposure to a variety of financial risks, namely credit risk, liquidity risk, market risk (including changes in foreign exchange rates, interest rates and market prices) and operational risk arising from the Group’s international operations. The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. A detailed review of the risk management policies employed by the Group is included in Note 35 to the financial statements.
Financial performance
The Group’s turnover for the year amounted to €66,939,160. The Adjusted EBITDA of the Group amounted to €11,404,765. After recognising depreciation amounting to €7,627,211, amortisation of intangible assets of €2,056,371, impairment loss on intangible assets of €1,774,446, impairment loss on goodwill of €372,295 and net impairment loss on property, plant and equipment amounting to €515,210, the Group sustained an operating loss amounting to €940,768. After adding the net finance income amounting to €964,139, the Group registered a profit before tax of €23,371. Profit for the year after accounting for taxation €544,876.
Cash generation from operations remained stable across the entire Group and during the year amounted to €20,015,919.
The Group’s Adjusted 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 COVID-19 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)
64%
Oil Country Tubular Goods (OCTG)
35%
Photovoltaic income
1%
MedservRegis p.l.c.
Directors’ Report (continued)
x
Cost of sales and administrative expenses
The cost of sales of the Group for the year amounted to €56,108,752. Cost of sales also include amortisation of intangible assets of €2,056,371, impairment loss on intangible assets of €1,774,446, impairment loss on goodwill of €372,295 and net impairment loss on property, plant and equipment amounting to €515,210.
Other income amounting to €1,095,755 is mainly made up of the foreign exchange differences during the year. Other expenses mainly include the loss on disposal of property, plant and equipment of €325,303. The increase in administrative expenses over last year is mainly due to last year's accounting for the reverse acquisition (refer to “Reverse acquisition” section in the first part of the directors’ report). In addition, 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
2022
Year
2021
€ Million
€ Million
Total turnover
66.94
29.92
- Integrated Logistics Support Services (ILSS)
42.99
20.23
- Oil Country Tubular Goods (OCTG)
23.42
8.18
- Photovoltaic Farm
0.53
0.22
- Trading Activity
-
1.29
Adjusted EBITDA
11.4
5.36
Profit/(Loss) from continuing operations
0.54
(7.30)
Net cash generated from operating activities
20.01
3.54
Cash and cash equivalents
18.66
9.11
Total Equity
60.36
62.82
Balance sheet total
151.73
150.79
Capital expenditure
(2.65)
(1.98)
Adjusted EBITDA margin in %
17.04%
17.91%
Net debt to Adjusted EBITDA
4.69
11.25
Debt to total Equity ratio*
1.21
1.15
EPS
0c57
(13c7)
Average number of employees for the year
716
609
* 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 2022 amounted to €57.63 million. The equity attributable to the owners of the Company as at 31 December 2022 amounted to €21.3 million.
Dividends
No reserves are available for distribution.
Reserves
Retained earnings/(accumulated losses) amounting to €23.9 million and (€28.63 million) for the Group and the Company, respectively, are being carried forward.
MedservRegis p.l.c.
Directors’ Report (continued)
xi
Future developments
The Group’s strategy remains to continue with its growth trajectory in geographic markets, client base and product offering. Particular emphasis and investments will be made in the METS operations by way of increasing capacity in the UAE by installing a third machine in Sharjah and opening a new facility in Abu Dhabi.
The Group is participating in several tenders and evaluating projects in both existing and new markets, particularly in Africa and the Middle East, most of which are being driven by the Group’s existing clients.
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.
Subsequent to year end, the Company has redeemed the 2023 6% Secured Notes bearing ISIN MT0000311218 on 7 January 2023 using the proceeds from the newly issued 5% 2029 Secured Bonds to settle the outstanding payments. The proceeds from the new note issue were held by the security trustee as at 31 December 2022 and utilised for this redemption.
On 15 January 2023, Medserv Cyprus Limited, has been awarded a new contract with Chevron Cyprus Limited for the provision of operational base support services from our facilities in the port of Limassol, Cyprus. The award of this contract is another example of the trust that major industry players place in the Company and improves the continuity of its business in Cyprus. Additionally, Medserv International Limited has been awarded a new contract by a major international energy company for the provision of integrated logistics services in Morocco. This contract is for a period of 9 months and may be extended for another 3 additional months.
On 22 February 2023, Middle East Comprehensive Tubular Services LLC has been awarded a new contract by a major international oil company for the provision of logistics bases and associated services in Duqm, Oman. The contract is for a period of two years and may be extended for an additional two periods of twelve months each. On 2 April 2023, Middle East Comprehensive Tubular Services LLC has signed an additional site of 25,060 sq. meters in the Port of Duqm for a period of five years renewable for a further period of five years.
In April 2023, Middle East Tubular Services (Iraq) Ltd has signed a five-year framework agreement with a lead contractor responsible for the operation and development of MISSAN oilfields for the provision of tubular services and inspection.
Outlook
The Group’s performance in year 2023 is expected to remain broadly in line with that in 2022 with improved results in some regions. Despite the recent reduction in energy commodity prices, levels continue to be higher than previous years and they are expected to remain at the current prices. This results in significant profits being registered by the International Energy Companies and will potentially provide the necessary stimulus for a major increase in new projects in the sector, particularly in the geographical areas of operations of the Company, being Mediterranean, Africa and the Middle East regions.
With the need for governments to ensure their energy security the Group expects more projects to reach final investment decision (FID) in 2023 particularly the development of natural gas infrastructure. The Group anticipates that the Mediterranean basin will be a very active area in the next three to five years with European markets seeking to replace Russian pipeline imports. The growing activity in that region bodes well for the continuation of operations in one of the Group’s strongest positioned regions.
MedservRegis p.l.c.
Directors’ Report (continued)
xii
The Group forecasts another year of growth and margin expansion. Turnover and profitability are expected to continue to improve over that registered in 2022. Inflation will impact the Group’s cost structures and where possible the Group is hedging against this impact.
The Group remains poised for achieving further profitability without the need of significant additional capital expenditure. The Group’s operational reach in Africa, Europe, Middle East and South America is presenting unprecedented opportunities for both ILSS and OCTG business segments.
Going concern
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
PricewaterhouseCoopers expressed their willingness to continue in office. A resolution proposing the reappointment of PricewaterhouseCoopers as auditors of the Company will be submitted at the forthcoming annual general meeting.
DISCLOSURE IN TERMS OF THE CAPITAL MARKETS RULES
The Company’s authorised share capital amounts to 120,000,000 shares of €0.10 each (2021: 120,000,000 ordinary shares of €0.10 each). The Company’s issued share capital amounts to 101,637,634 shares of €0.10 each (2021: 101,637,634 ordinary shares of €0.10 each), which have been subscribed for and fully paid up. All of the issued shares of the Company form part of one class of ordinary shares in the Company, which shares are listed on the Malta Stock Exchange. All shares in the Company have the same rights and entitlements and rank pari passu between themselves.
The Company did not modify in any way the structure of its share capital during the year. No further issues were made and neither did the Company acquire ownership of or any rights over any portion of its issued share capital.
Following the share for share exchange with Regis which was completed on 25 June 2021 (see note 6), 49.995% of the issued share capital of the Company were acquired by DOCOB Limited, a company incorporated in Mauritius with company registration number 178883 and registered office at C/o ICECAP (Mauritius) Limited, Block 1C Uniciti Business Park, Cascavelle, Mauritius. DOCOB Limited is ultimately owned by David S. O’Connor and Olivier Bernard. Three of the Company’s directors, namely David S. O’Connor, Olivier Bernard and Anthony S. Diacono hold 27.99% (2021: 27.99%), 21.99% (2021: 21.99%) and 13.23% (2021: 14.2%) respectively of the issued share capital of the Company either directly or indirectly. In addition, Anthony J. Duncan, who was formerly a director until his retirement on 25 June 2021 still holds 16.73% (2021: 16.73%) of the issued share capital of the Company.
MedservRegis p.l.c.
Directors’ Report (continued)
xiii
The following are highlights of the rights attaching to the shares:
Dividends:
The shares carry the right to participate in any distribution of dividend declared by the Company.
Voting rights:
Each share shall be entitled to one vote at meetings of shareholders.
Pre-emption rights:
Subject to the limitations contained in the memorandum and articles of association, shareholders in the Company shall be entitled, in accordance with the provisions of the Company’s memorandum and articles of association, to be offered any new shares to be issued by the Company a right to subscribe for such shares in proportion to their then current shareholding, before such shares are offered to the public or to any person not being a shareholder.
Capital distributions:
The shares carry the right for the holders thereof to participate in any distribution of capital made whether on a winding up or otherwise.
Transferability:
The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange, applicable from time to time.
Other:
The shares are not redeemable and not convertible into any other form of security.
Mandatory takeover bids:
Chapter 11 of the Capital Market Rules, implementing the relevant Squeeze-Out and Sell-Out Rules provisions of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004, regulates the acquisition by a person or persons acting in concert of the control of a company and provides specific rules on takeover bids, squeeze-out rules and sell-out rules. The shareholders of the Company may be protected by the said Capital Market Rules in the event that the Company is subject to a Takeover Bid (as defined therein). The Capital Market Rules may be viewed on the official website of the Malta Financial Services Authority – www.mfsa.com.mt.
Holdings in excess of 5% of the share capital:
On the basis of the information available to the Company as at the 31 December 2022, the following persons hold 5% or more of its issued share capital:
Shareholder
%
No of Ordinary Shares
DOCOB Limited
49.995%
50,813,817
Anthony J. Duncan
16.726%
17,000,000
Anthony S Diacono
13.227%
13,443,654
Rizzo Farrugia & Co (Stockbrokers) Limited obo clients
5.461%
5,550,775
As far as the Company is aware, no other person holds any direct or indirect shareholding in excess of 5% of its total issued share capital.
On the basis of the information available to the Company as at the 31 December 2021, the following persons hold 5% or more of its issued share capital:
Shareholder
%
No of Ordinary Shares
DOCOB Limited
49.995%
50,813,817
Anthony J. Duncan
16.726%
17,000,000
Anthony S Diacono
14.211%
14,443,654
Rizzo Farrugia & Co (Stockbrokers) Limited obo clients
5.765%
5,859,810
As far as the Company is aware, no other person holds any direct or indirect shareholding in excess of 5% of its total issued share capital.
MedservRegis p.l.c.
Directors’ Report (continued)
xiv
Appointment/Replacement of Directors:
In terms of the memorandum and articles of association of the Company, the directors of the Company shall be appointed by the shareholders in the annual general meeting as follows:
(a)Any shareholder/s who, in the aggregate, holds not less than 0.5% of the total shares having voting rights in the Company shall be entitled to nominate a fit and proper person for appointment as a director of the Company. The directors themselves or a committee thereof may make recommendations and nominations to the shareholders for the appointment of directors at the next following annual general meeting.
(b)Shareholders are granted a period of at least fourteen (14) days to nominate candidates for appointment as Directors. Such notice may be given by the publication of an advertisement in at least two (2) daily newspapers. All such nominations, including the candidate’s acceptance to be nominated as director, shall on pain of disqualification be made on the form to be prescribed by the Directors from time to time and shall reach the Office not later than fourteen (14) days after the publication of the said notice (the “Submission Date”); PROVIDED THAT the Submission Date shall not be less than fourteen (14) days prior to the date of the meeting appointed for such election. Nominations to be made by the Directors or any sub-committee of the Directors appointed for that purpose shall also be made by not later than the date established for the closure of nominations to shareholders.
(c)In the event that there are either less nominations than there are vacancies on the board or if there are as many nominations made as there are vacancies on the Board, then each person so nominated shall be automatically appointed a director.
(d)In the event that there are more nominations made, then an election shall take place. After the date established as the closing date for nominations to be received by the Company for persons to be appointed directors, the directors shall draw the names of each candidate by lot and place each name in a list in the order in which they were drawn. The list shall be signed by the Chairman and the Company Secretary for verification purposes.
(e)On the notice calling the annual general meeting at which an election of directors is to take place there shall be proposed one resolution for the appointment of each candidate in the order in which the names were drawn, so that there shall be as many resolutions as there are candidates. The Directors shall further ensure that any Member may vote for each candidate by proxy.
(f)At the general meeting at which the election of directors is to take place the Chairman shall propose the name of each candidate as a separate resolution and the shareholders shall take a separate vote for each candidate (either by a show of hands or through a poll). Each shareholder shall be entitled, in the event of a poll, to use all or part only of his votes on a particular candidate.
(g)Upon a resolution being carried, the candidate proposed by virtue of that resolution shall be considered elected and appointed a Director. No further voting shall take place once enough resolutions have been passed to ensure that all
MedservRegis p.l.c.
Directors’ Report (continued)
xv
vacancies on the Board have been filled, even if there are still candidates with respect to whom a resolution has not yet been called.
(h)Shareholders may vote in favour or against the resolution for the appointment of a director in any election, and a resolution shall be considered carried if it receives the assent of more than 50% of the shareholders present and voting at the meeting.
(i)Unless a shareholder demands that a vote be taken in respect of all or any one or more of the nominees, in the event that there are as many nominations as there are vacancies or less, no voting will take place and the nominees will be deemed appointed directors.
(j)Subject to the above, any vacancy among the directors may be filled by the co-option of another person to fill such vacancy. Such co-option shall be made by the board of directors and shall be valid until the conclusion of the next annual general meeting.
(k)Any director may be removed, at any time, by the Member or Members by whom he was appointed. The removal may be made in the same manner as the appointment.
(l)Any director may be removed at any time by the Company in general meeting pursuant to the provisions of section 140 of the Act.
Amendment to the Memorandum and Articles of Association:
In terms of the Companies Act, Cap 386 of the laws of Malta, the Company may by extraordinary resolution at a general meeting alter or add to its memorandum or articles of association. An extraordinary resolution is one where:
(a)it has been taken at a general meeting of which notice specifying the intention to propose the text of the resolution as an extraordinary resolution and the principle purpose thereof has been duly given;
(b)it has been passed by a shareholder or shareholders having the right to attend and vote at the meeting holding in the aggregate not less than seventy-five per cent (75%) in nominal value of the shares issued by the Company represented and entitled to vote at the meeting and at least fifty-one per cent (51%) in nominal value of all the shares issued by the Company and entitled to vote at the meeting.
If one of the aforesaid majorities is obtained but not both, another meeting shall be duly convened within 30 days to take a fresh vote on the proposed resolution. At the second meeting the resolution may be passed by a shareholder or shareholders having the right to attend and vote at the meeting holding in the aggregate not less than 75% in nominal value of the shares issued by the Company represented and entitled to vote at the meeting. However, if more than half in nominal value of all the shares issued by the Company having the right to vote at the meeting is represented at that meeting, a simple majority in nominal value of such shares so represented shall suffice.
Board Members’ Powers:
The Directors are vested with the management of the Company, and their powers of management and administration emanate directly from the memorandum and articles of association and the law. The Directors are empowered to act on behalf of the Company and in this respect have the authority to enter into contracts, sue and be sued in representation of the Company. In terms of the memorandum and articles of association they may do all such things that are not by the memorandum and articles of association reserved for the Company in general meeting.
MedservRegis p.l.c.
Directors’ Report (continued)
xvi
In particular, the Directors are authorised to issue shares in the Company with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Directors may from time to time determine, as long as such issue of Equity Securities falls within the authorised share capital of the Company. Unless the shareholders otherwise approve in a general meeting, the Company shall not in issuing and allotting new shares:
(a)allot any of them on any terms to any person unless an offer has first been made to each existing shareholder to allot to him at least on the same terms, a proportion of the new shares which is as nearly as practicable equal to the proportion in nominal value held by him of the aggregate shares in issue in the Company immediately prior to the new issue of shares; and
(b)allot any of them to any person upon the expiration of any offer made to existing shareholders in terms of a) above. Any such shares not subscribed for by the existing shareholders may be offered for subscription to the general public under the same or other conditions which however cannot be more favourable to the public than offer made under (a).
Furthermore, the Company may, subject to such restrictions, limitations and conditions contained in the Companies Act, acquire its own shares.
Pursuant to Capital Markets Rules 5.64.2, 5.64.4, 5.64.5, 5.64.7, 5.64.10 and 5.64.11 it is hereby declared that, as at 31 December 2022, none of the requirements apply to the Company.
Pursuant to Capital Market Rule 5.64.6
The MedservRegis Group is required to obtain the consent of its bankers prior to any declaration of dividends.
Pursuant to Capital Market Rule 5.70.1
There were no material contracts to which the Company, or any of its subsidiaries was a party, and in which anyone of the Company’s Directors was directly or indirectly interested.
Pursuant to Capital Market Rule 5.70.2
Company Secretary:Dr Laragh Cassar LL.D.
Registered Office of Company:Port of Marsaxlokk
Birzebbugia
Malta
Company Registration Number:C28847
Telephone:(+356) 2220 2000
Approved by the Board of Directors on 28 April 2023.
MedservRegis p.l.c.
Statement of the Directors pursuant to Capital Markets Rule 5.68
xvii
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 28 April 2023 by Anthony S. Diacono (Chairman) and David S. O’Connor (Director and CEO) as per Directors’ Declaration on ESEF Annual Report submitted in conjunction with the Annual Report 2022.
MedservRegis p.l.c.
Statement by the Directors on non-financial information
xviii
Non-financial disclosures in terms of the requirements of the Sixth Schedule to the Maltese Companies Act (Cap. 386)
Introduction
This report details the various actions taken by MedservRegis p.l.c. (the ‘Company’) as the parent company, and its subsidiaries (the ‘Group’) to enhance sustainability in terms of its operations and its activities related to corporate responsibility.
As described in more detail in the annual report, the Group provides offshore logistics services and engineering for Oil and Gas under ILSS and supply chain management for Oil Country Tubular Goods (OCTG).
The Group strives to integrate all aspects of sustainability into its operations, considering:
1.Environmental impacts, and the actions that can be taken to reduce them.
2.Social responsibility; and
3.Governance to oversee the implementation of practices in relation to the above.
The Group aims and strives to achieve the highest sustainability standards in the best way possible. It ensures that the resulting benefits are shared by its shareholders, clients and the community at large.
This report will delve into the ways the Group implements policies related to environmental protection, social responsibility, treatment of employees, respect for human rights, anti-corruption and bribery.
Sustainability
The Group considers value creation beyond its shareholders, capturing also its customers and the community at large, with the intention of delivering the highest standards to all stakeholders.
The Group is working to progressively enhance both its sustainability practices, and its continued awareness about the importance of such matters throughout its operations worldwide.
The concept of sustainability is firmly becoming a key part of the business, fully understood by its employees.
Governance
In order to successfully implement the designed sustainability practices across the Group and achieve the desired goals, the Group believes that strong governance processes are necessary. Appropriate governance oversight ensures that sustainability topics are fully integrated into the manner in which the Group conducts its business; as opposed to being seen as a separate matter.
The Board is responsible for determining the strategic priorities of the Group and considers sustainability issues as an integral part of the business review.
The Audit Committee assists the Board in providing focused oversight for the Group’s policies and related risks.
The Audit Committee met 16 times during 2022 with detailed minutes being kept of all proceedings and decisions taken.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xix
Risk Management
The Group is committed to conducting business in a safe and responsible manner, whilst achieving customer, stakeholder and interested party feedback and satisfaction.
To ensure this, the Group implemented its Corporate Health, Safety, Security, Environment and Quality (‘HSSEQ’) Management System which outlines the required performance standards for the systems, processes, and procedures to effectively manage and implement HSSEQ within the Group. These HSSEQ standards also establish the required performance objectives which enable the Group to achieve this commitment and to ensure that all activities are conducted consistently. The HSSEQ standards also define our risk management processes and responsible people.
Business risk mitigation
The Group’s business model is based on the International Oil and Gas Producers Operating Management System Standards (‘IOGP’). This operating system is an industry specific Global Oil and Gas Operating System that is adopted by many industry majors and other suppliers and contractors that are part of the supply chain. Due to the nature of our services and risks associated with our operating activities, the focus is on health, safety, environmental, security and quality standards.
Throughout the various continents on which the Group operates, it provides hazardous and high-risk services such as lifting operations and movement and handling of dangerous substances. The business risk focus area is on our high-risk areas of operations and is what drives our management system standards.
The current management system is considered an integrated operating management system. This means it has many management systems within an integrated framework. These include occupational health system, environmental system, security system, quality system, competency system and all feed our ESG reporting requirements.
The management system is also implemented at each of the Group’s operating entities. This provides standardization across the entire portfolio of operations which also brings efficiencies across the whole Group. It also supports collaborative planning and the sharing of positive and negative business failures and supports continual improvement by providing results of performance across the whole Group. This allows for review of the decisions to be taken in respect of improvements and SMART objectives.
The below list provides the corporate management standards for HSSEQ within the Group.
STANDARD 1 – LEADERSHIP & COMMITMENT
STANDARD 2 – POLICY & STRATEGIC OBJECTIVES
STANDARD 3 – ORGANISATION & COMMUNICATION
STANDARD 4 – HAZARDS & EFFECTS MANAGEMENT
STANDARD 5 – PURCHASING & CONTRACTOR MANAGEMENT
STANDARD 6 – DESIGN, OPERATIONS & MAINTENANCE
STANDARD 7 – INCIDENT INVESTIGATION & REPORTING
STANDARD 8 – EMERGENCY MANAGEMENT
STANDARD 9 – OCCUPATIONAL HEALTH & SAFETY
STANDARD 10 – ENVIRONMENTAL MANAGEMENT
STANDARD 11 – SECURITY MANAGEMENT
STANDARD 12 – DOCUMENT CONTROL & LEGAL REQUIREMENTS
STANDARD 13 – CHANGE MANAGEMENT
STANDARD 14 – PERFORMANCE MONITORING ASSESSMENT & REVIEW
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xx
The purpose of these standards is to:
-Implement the HSSEQ Policy,
-Formalise the expectations for the development and implementation of a specific and detailed HSSEQ management system,
-Provide a risk based HSSEQ framework consistent with ISO 9001, ISO 14001, ISO 45001 and IOGP HSE System Guidelines.
-Provide auditable criteria against which the HSSEQ Management System across MedservRegis can be measured.
-Drive continual improvement of the HSSEQ Management System.
Risk Management responsibilities are as follows:
Executive Officers:
-Ensure MedservRegis HSSEQ Policy is followed.
-Provide the required infrastructure and commitment for resourcing to effectively manage HSSEQ throughout the MedservRegis Group
MedservRegis HSSEQ Executive Committee, Group HSSEQ Manager:
-Approve MedservRegis Group HSSEQ organization chart and Group level HSSEQ resourcing strategies
-Develop and organize the MedservRegis HSSEQ Group HSSEQ Roles and Responsibilities
-Develop and approve the RACI Chart
-Overview of the MedservRegis HSSEQ Group Roles and Responsibilities
MedservRegis Managers:
-Identify resource staffing strategies and requirements
-Approve personal HSSEQ requirements
-Approve staffing plans, organisational charts and position profiles
-Ensure organisational charts are developed and maintained current.
-Monitor and ensure customer and interested party satisfaction.
HSSEQ Managers/Coordinators, Leaders and Specialists:
-Review and audit position profiles and changes of HSSEQ requirements.
Human Resources Department:
-Ensure that position profiles are prepared and maintained
-Provide recruitment and qualified candidates
-Communicating the position profiles to employees.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxi
Ethical Conduct
Whistleblower policy
The Group’s set of values underpins its high standards of ethical conduct. It respects human rights, embraces diversity and stands firm against corruption. The Group’s Whistleblower Policy was prepared during 2022 and will be in place from January 2023, across all jurisdictions in which the Group operates. The Whistleblower Policy defines what is considered improper practice, procedures for employees to submit a disclosure, and other considerations including anonymity, confidentiality, protection provided by the policy and under the law. The Whistleblower Policy outlines a Whistleblowing Reporting Officer and their specific responsibilities under the Whistleblower Policy.
The primary objective of the policy is to establish procedures and protection which allows employees of the Group and members of the public to act on suspected fraud or corruption, which is also considered to comprise any instances of bribery, with potentially adverse ramifications and to achieve the legitimate business objectives of the Group for the benefit of its shareholders.
The Policy also outlines the systems that facilitate reporting of misconduct and the procedures to investigate and resolve malpractices. As a Group which values good governance, it remains committed to ensuring that its staff act with utmost integrity through training and well-defined guidelines and procedures.
GDPR Policy
The Group’s GDPR policy extends the scope of EU data protection law to all foreign companies processing data of EU residents. It provides for a harmonization of the data protection regulations throughout the EU, thereby making it easier for non-European companies to comply with these regulations.
The Group considers personal data as any information relating to an individual, whether it relates to the individual’s private, professional or public life. It can be anything from a name, a home address, a photo, an email address, bank details, posts on social networking websites, medical information, or a computer’s IP address.
The Group’s GDPR policy outlines key responsibilities for individuals throughout the Group, principally lying with the data protection officer but also extending to all employees across various teams. The GDPR policy is based on key data protection principles which govern the collection, use, retention, transfer, disclosure, and destruction of personal data. The policy further comprises a GDPR compliance framework with procedures for notifying data subjects with information on the processing of their personal data, the processing of special categories of data, data retention, and data subject requests transfers between Group entities, amongst others.
The governance around data privacy is expected to be strengthened with Board reporting on data protection responsibilities, risks and issues, and the consolidation of control structures established to ensure that the Group, its employees and third parties are aware of their respective obligations under the GDPR and other data protection legislation.
The conditions for consent have been expanded in terms of GDPR. In particular, the Group needs to be able to demonstrate clearly how the individual provided consent to data processing. Mechanisms for obtaining and documenting consent are thoroughly reviewed and amended as appropriate to reflect the additional requirements of GDPR.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxii
The information disclosure requirements have expanded considerably, and in particular, individuals need to be informed of the legal basis for processing their data, their rights as data subjects, data retention periods and that they have a right to complain to The Office of the Information and Data Protection Commissioner if they believe there is a problem with the way their data is being handled. Privacy notices are reviewed and amended to reflect the additional requirements of the GDPR.
Social and Employee matters:
Employees
In 2022, the Group employed 716 (2021: 609) people, split between full time employees (‘FTE’) and temporary employees (‘PTE’), excluding the Board of Directors. In 2022, FTE amounted to 710 people (2021: 596), with PTEs amounting to 6 people (2021: 19). Furthermore, male staff for 2022 amounted to 661 (2021: 560) which represents 92% (2021: 91%) of the FTE workforce for the year.
Maltese nationals employed during 2022 across, both FTE and PTE, and the various jurisdictions in which the Group operates in, amounted to 68 people (2021: 72), of which 53 (2021: 64) were male, amounting to 78% (2021: 88%) of the Maltese national workforce. Foreign national employees employed during the year amounted to 648 people (2021: 543) of which 608 (2021: 496) were male, representing 94% (2021: 91%) of the foreign national workforce.
Employees – Training and competency
The Group values all of its employees’ contribution to the services provided and fully embraces and values the growth of skills, knowledge, training, and experience.
The Group’s Competency Management System consists of the following pillars:
•Recruitment Process to engage the best candidates for the role
•Detailed Job Descriptions providing the essential competencies required for the position
•Site specific training matrices identifying the competency requirements at each site
•Onboarding and Induction to the Group
•Personal development plans (annual appraisal) for each employee
•Competency Standards (on job training and assessment) for ensuring safety or process competency through various means such as skill checks are achieved.
By investing in our employees and being a firm believer in developing and promoting within, this encourages longevity of employees within the Group through job satisfaction.
This is achieved by ensuring employees are mentored, valued, rewarded with career progression, well-paid and challenged. Employee retention in the oil and gas industry will be an issue in the future as there is already evidence of a global reduction in the amount of young people joining the industry, shifting towards the renewable energy sector instead.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxiii
This is an area where the Group will be looking to strengthen by ensuring the work environment meets expectations and remains appealing. The Group strives to remain an exemplary and leading employer by providing its employees with the right development opportunities to cultivate their abilities and enable them to grow within the Group.
Being operational in over 10 countries, employees are able to gain valuable experience by means of cross-cultural programs and job rotations in different aspects of the Group’s business. Training programs are being implemented in various departments which further enhance employees’ skills and expertise.
Equal opportunity is given to all employees through continuous staff training & development and benchmarking techniques at all levels, including operational staff, heads of department, managers, and senior personnel.
2022
2021
Average hours of training that the organisation’s employees have undertaken during the reporting period
Total no. of hours of training
7,764
5,593
Total no. of labour hours
1,541,954
1,019,102
Total no. of hours of training vs. total number of hours
0.5%
0.5%
Percentage of employees receiving regular performance and career development reviews
Number of employees receiving regular performance and career development reviews
582
465
% employees receiving regular performance and career development reviews
81%
76%
Diversity
The Group is committed to providing an inclusive and harmonious workplace to its employees regardless of gender, age, nationality, religion, sexual orientation, disability, or other aspects of diversity.
The Group supports parents by facilitating parenting through family-friendly measures, including parental leave to both males and females.
Health and Safety
The Group continues to improve its health and safety performance year-on-year which is measured through the Group HSSEQ reporting system. The reporting system measures data, including leading and lagging indicators, which provide analysis of trends and improvements and allow for programs to be developed for required focus areas.
Lagging indicators (reactive) include areas such as incidents and their types and risk severity such as vehicle incidents, quality incidents, security incidents, environmental incidents, asset damage incidents, medical treatment cases, first aid cases, lost time incidents, and fatalities.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxiv
Leading indicators (proactive) provide important information on how the Group is improving on areas of HSSEQ by reviewing performance against previous years. Leading indicators include corrective actions raised versus closed, safety observations raised, audits undertaken, leadership tours completed, near misses recorded, and HSSEQ meetings completed. MedservRegis Data Bank HSSEQ for previous 5 years.
Leading Indicators
2018
2019
2020
2021
2022
Total
HSE Action Items Opened
121
513
504
872
441
2,451
HSE Action Items Closed
416
839
423
1,028
366
3,072
HSE Meetings
816
1,202
1,341
233
188
3,780
Leadership Tours
42
99
65
233
251
690
HSE Audit per Schedule
4
11
5
13
9
42
Safety Observations
1,133
2,421
119
5,676
5,200
14,549
Near Miss Incidents
2
23
3
4
4
36
Lagging Indicators
2018
2019
2020
2021
2022
Total
Fatalities
0
0
0
0
0
0
Lost Time Injury (LTIF)
1
4
3
0
0
8
Medical Treatment Case
0
1
1
2
4
8
First Aid Cases
2
2
4
6
1
15
Security Incidents
1
4
1
5
4
15
Environmental Accidents
4
1
2
3
3
13
Assets Damage
5
20
5
15
9
54
Vehicle Incidents
1
9
4
15
13
42
Non-Tab
0
0
0
3
2
5
Quality
0
0
1
0
3
4
Man-Hours Worked
2018
2019
2020
2021
2022
Total
Medserv man hours worked
441,385
680,266
752,571
1,235,506
1,529,363
4,639,091
Medserv Contractors manhours worked
310,602
862,944
194,715
158,758
221,364
1,748,383
Total manhours worked
751,987
1,543,210
947,286
1,394,264
1,750,727
6,387,474
Frequency & Rates
2018
2019
2020
2021
2022
Total
Quantity LTIF
1
4
3
0
0
8
LTIF Rate
1.33
2.59
3.17
0.00
0.00
1.45
Quantity of total recordable incident (TRI)
1
6
4
0
0
11
TRI Rate
1.33
3.89
4.22
0.00
0.00
1.99
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxv
Environment
When it comes to environmental issues and practices, the oil and gas service industry is continuously looking at ways to improve its environmental impacts and aspects. Within MedservRegis this is managed within the Group’s Environmental Management System. This consists of procedures that are in place within each operating site to ensure at a local level environmental programs are in place to support consumption and waste reduction and good sustainability practices.
The Group also provides environmental awareness to all employees and contractors to ensure all are aware of the environmental responsibilities required to support consumption reduction strategies as well as waste reduction strategies.
MedservRegis Environmental Management Procedures are as follows:
-Environmental Management Planning
-Pollution Waste Management
-Environmental Implementation and Operational Requirements
-Environmental Monitoring Requirements
The following are some examples of previous local and Group environmental programs including some added during 2022.
-2022 - Mud Plant catchment pit added to Malta Operations
-2022 - Business case completed for moving to a fleet of electric vehicles charged from the Malta PV farm
-2022 - Malta Oil response equipment including davit, 220-meter spill boom and launch boat fitted to quayside.
-2014 - 2 megawatt (8000 PV panels) Solar farm commissioned in the Malta Operating base.
-2022 - Uganda camp fitted with solar lighting, solar water heating system, bio waste pit and trees planted around the perimeter.
-2022 - Group online EHS system procured and planned to be rolled out during 2023 to allow for a substantial reduction in paper use (near paper free)
-2022 - planting of olive trees within Medserv Hal far storage area in Malta
The following are the environmental statistics currently being measured and monitored by the Group:
Spills
Year
Water Usage
(m3)
Ltrs
Kg
2021
6,495
1,378
129
2022
11,164
230
83
Water Usage relates to metered water used by all MedservRegis operational sites across the whole group.
Spills relates to the estimated loss of fluids or materials that have happened during operational activities. Each spill has an investigation completed to identify the root cause and put in place correctives actions.
The increase in water usage in comparison to the previous year for water usage is, during 2021 the data collected related solely to Medserv sites. In 2022, as the company grew with the addition of METS and Regis sites, data for water usage and spill totals began to be collected for such additional sites halfway during the year. This has created an increase in the figures due to the addition of Oman, UAE, Iraq, Mozambique and Uganda operating sites from July 2012 onwards.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxvi
On the other hand, the reduction of spills in 2022 in comparison to 2021 is attributed to increased Environmental Controls being put in place, included within the added business units due to alignment with the MedservRegis HSSEQ Management System.
Waste Data (m3)
Year
Landfill
Hazardous
Recycled
2021
872
2,335
345
2022
1,971
4,245
6,388
Landfill, hazardous and recycled waste have all increased in the current year in comparison to 2021 due to the integration of reporting of Regis and METS sites into a single HSSEQ Management System. A review at the end of 2023 will provide an accurate picture of any improvement as a full year of data has now been captured during 2022 which then 2023 can be compared against.
Year
Electricity
(kWh)
Fuel
(litres)
2021
435,123
413,701
2022
681,200
690,603
Electricity and fuel usage, as with the water usage and waste generation, have increased due to the integration of reporting of Regis and METS sites into a single HSSEQ Management System. A review at the end of 2023 will provide an accurate picture of fuel consumption as a full year of data has now been captured during 2022.
Furthermore, a new HSSEQ Reporting System has also been planned for 2023 where more complete data in relation to greenhouse gas emissions will be collected across the group as listed below.
Business Travel Flying
SCOPE 3
Diesel Fuel
SCOPE 1
Electricity (Meter Readings)
SCOPE 2
Hazardous Waste
SCOPE 3
Landfill Waste
SCOPE 3
Paper Usage
SCOPE 3
PV farm (reduction)
SCOPE 2
Recycling per ton (reduction)
SCOPE 3
Quality
MedservRegis places a lot of focus on the quality aspects of our business. To ensure the quality of our processes and services there are a number of areas within the Group that are considered the main factors for ensuring the Plan, Do, Check, Act cycle of continual improvement is a constant part of our business practices. Quality aspects are managed and implemented upon the business management system or referred to as the MedservRegis Intranet. The following are areas where quality process is managed within the Group.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxvii
Document Management
Control of records and documents - MedservRegis has two document registers that host all controlled documents. The two registers are the corporate document register and the local document register. The corporate document register is where all corporate procedures and associated documents are available to view, download and use if required. This ensures employees are using or referring to approved documents, which is vital for ensuring process safety is adhered to. The local document register is where all country specific procedures and documents are hosted. This also allows other business units to access similar procedures that may be required and aids efficiency as it prevents document owners creating procedures from scratch.
Internal Audit Program
Annual corporate full system HSSEQ audits are carried out in each operation and results reported to the executive team during annual review meetings. The audit ensures compliance with the Group standards and creates scorecards and action plans agreed with Country Managers. These are then measured against previous year’s results to check for continual improvement and ensure corrective action is taken where there are shortfalls.
Action Management
MedservRegis Corrective and Preventive Action Management System (CAPA) is implemented in each operating site and is the local tool used for managing continual improvement. This system is where all actions resulting from areas such as audits, investigations, observation cards, meetings, leadership tours and customer feedback are captured. The system is designed to manage the action process by ensuring custodians close out actions in specified timelines and check that they have been effective, and the issue should not happen again (close the loop). This is a valuable tool to the Group as it shows commitment to ensuring quality is maintained and improved.
Quality Certification
MedservRegis also places importance on international certification of the management system. Currently, most sites are ISO certified at minimum, whilst there is a commitment to have all sites fall under a multisite ISO certificate to the three ISO standards of 9001, 14001 and 45001. The Corporate management system, Malta and Cyprus operating sites currently have the three standards under a multisite certificate. Some other sites also have API certification due to the type of services they provide such as threading and inspection services of OCTG.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxviii
Safety awards
In order to enhance MedservRegis’ commitment to quality and health and safety, a corporate membership has been purchased during 2022 to a safety awarding body. It is planned to be an objective for all MedservRegis sites to provide applications to the safety awarding body, with an aim to achieve recognition through being awarded an internationally recognised safety award. There are other benefits to this membership package, such as access to discounts for certified industry training and also free certified training for employees.
MedservRegis has also received safety award recognition from clients after successful operational campaigns.
Customer Feedback
The management system customer feedback system allows for clients receiving services from MedservRegis to provide feedback on our performance. Feedback areas include emails received, phone calls taken, and feedback forms completed. Each local operation continually reviews the feedback to check for areas of corrective action. The feedback progress is provided to the client to ensure they are happy with our outcome and feel their contribution added value to our business. Overall customer satisfaction is reviewed by the executive team during the annual review to analyze if there are any areas of improvement required and recognize positive feedback.
Management of Change 2022
MedservRegis Board approved the purchase of an online HSSEQ/training & Competency/Environmental, Social and Governance reporting tool mid-year 2022. Currently, this new system is in the early stages of roll-out and requires a management change plan covering the whole Group. The main parts of the change plan including the reasons are provided below.
Rational for the Change
-Efficiency savings: Reduce HSSEQ Dept time (and other contributors to the HSSEQ-MS) spent across the Group on admin and reporting duties to allow more time to focus on operational oversight such as process and human factor safety.
-Environmental Impact: Reduce carbon footprint across the Group by assisting with reduction of paper and printer usage and monitoring of Env KPI and Objectives in an easier way
-Communication: Support the integration of the three sub-Groups within the Group of Medserv, Regis and METS making sharing and communication easier as well as ensuring efficiency through standardized processes.
-Reporting: Allow for easier review of reports to identify areas for improvement and highlight areas of strength allowing efficient management of resources and expenditure.
-Manage risk: Highlight areas where employees are performing well or not performing well and allow for early intervention to mitigate bigger issues taking place and ensure recognition is provided to top performing business units.
-Continual Improvement: Keep the Group competitive in our industry by moving forward with new technology, increasing our employees’ ICT skills, and ensuring corrective actions are managed to support our continual improvement objectives.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxix
Risk of not managing this change:
-Increased costs
-Loss of tenders and work
-Reduced staff motivation due to excessive admin duties
Main Change Elements:
-Moving away from a paper-based HSSEQ-MS System as much as possible, thereby enhancing the Group’s modus operandi in this respect.
-Building and creating the online system to fit in with current HSSEQ processes of the Group.
-Providing training to all users of the system.
-Supporting business units with managing the change with current clients and contracts locally.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxx
Consolidated disclosures pursuant to Article 8 of the Taxonomy Regulation
Introduction
In order to achieve the targets established by the European Union of reaching net zero greenhouse gas (‘GHG’) emissions by 2050, with an interim target of reducing GHG emissions by 55%, compared to 1990 levels, by 2030, the European Commission (‘EC’) has developed a taxonomy classification system, by virtue of EU Regulation 2020/852, (‘the Taxonomy Regulation’ or ‘the EU Taxonomy’), which establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable.
The EU Taxonomy establishes criteria in terms of six environmental objectives, against which entities will be able to assess whether economic activities qualify as environmentally sustainable. In order to qualify as such, an economic activity must be assessed to substantially contribute to at least one of these environmental objectives, whilst doing no significant harm (‘DNSH’) to the remaining objectives. This is achieved by reference to technical screening criteria established in delegated acts to the EU Taxonomy. The economic activity is also required to meet minimum safeguards established in the EU Taxonomy.
The six environmental objectives considered by the EU Taxonomy are the following:
i.Climate change mitigation;
ii.Climate change adaptation;
iii.Sustainable use and protection of water and marine resources;
iv.Transition to a circular economy;
v.Pollution prevention and control; and
vi.Protection and restoration of biodiversity and ecosystems.
The EC subsequently adopted a Delegated Act supplementing Article 8 of the Taxonomy Regulation (‘the Disclosures Delegated Act’) in 2021, which establishes the disclosure requirements of entities within the scope of the Taxonomy Regulation. At this stage, this solely comprises entities subject to an obligation to publish non-financial information pursuant to Article 19a or Article 29a of Directive 2013/34/EU (being those entities subject to the Non-Financial Reporting Directive, ‘NFRD’).
In the following section, the Group, as a non-financial parent undertaking, presents the share of its turnover, capital expenditure (CapEx) and operating expenditure (OpEx) for the reporting period ended 31 December 2022, which are associated with taxonomy-eligible and taxonomy-aligned economic activities related to the first two environmental objectives (climate change mitigation and climate change adaptation) in accordance with Article 8 of the Taxonomy Regulation.
The remaining four environmental objectives are expected to be captured as from 1 January 2024, in accordance with the draft Environmental Delegated Act (‘EDA’) which was published on 5th April 2023 and is subject to a feedback period until expected adoption by EC by June 2023. The Group will therefore continue to monitor market regulation and guidance in respect of this aspect of its Taxonomy reporting, given the imminent nature of such reporting requirements.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxi
Our Activities
Overview
Proportion of taxonomy-eligible and taxonomy-aligned economic activities in total turnover, CapEx and OpEx in FY 2022
FY 2022
Total
€000
Proportion of taxonomy-eligible (non-aligned) economic activities
Proportion of taxonomy-aligned economic activities
Proportion of taxonomy non-eligible economic activities
Turnover
66,939
1.7%
0%
98.3%
CapEx
5,028
28.5%
0%
71.5%
OpEx
1,744
56.5%
0%
43.5%
On a voluntary basis, the Group also provides comparatives for the financial year ended 31 December 2021. A comparative in relation to the proportion of taxonomy-aligned economic activities is not provided given that the requirement to report taxonomy-alignment became applicable as from 1 January 2023.
Proportion of taxonomy-eligible and taxonomy non-eligible economic activities in total turnover, CapEx and OpEx in FY 2021
FY 2021
Total
€000
Proportion of taxonomy-eligible economic activities
Proportion of taxonomy non-eligible economic activities
Turnover
29,925
3.8%
97.2%
CapEx
109,393
15.3%
84.7%
OpEx
1,309
5.1%
94.9%
Definitions
‘Taxonomy-eligible economic activity’ means an economic activity that is described in the delegated acts supplementing the Taxonomy Regulation (that is, the Climate Delegated Act as of now), irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts.
The Climate Delegated Act is structured such that Annex I contains a list of activities and the respective technical screening criteria in relation to the Climate Change Mitigation objective, whereas Annex II relates to the Climate Change Adaptation objective, with potentially different activities being considered in both annexes.
A ‘taxonomy-aligned economic activity’ refers to a taxonomy-eligible activity which:
i.complies with the technical screening criteria as defined in the Climate Delegated Act, where such criteria comprise:
a)substantial contribution to one or more environmental objectives; and also
b)‘do no significant harm’ to any of the remaining environmental objectives;
ii.is carried out in compliance with minimum safeguards regarding human and consumer rights, anti-corruption and bribery, taxation, and fair competition.
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Statement by the Directors on non-financial information (continued)
xxxii
‘Taxonomy-non-eligible economic activity’ means any economic activity that is not described in the delegated acts supplementing the Taxonomy Regulation.
Taxonomy-eligible and Taxonomy-aligned economic activities
The Group have examined all economic activities carried out to determine which of these are taxonomy-eligible and also taxonomy-aligned in accordance with Annexes I and II to the Climate Delegated Act. The table below indicates the activities performed by the Group which have been identified as taxonomy-eligible and the environmental objective to which the activity may be associated with. Information on the extent to which the economic activities are also taxonomy-aligned is provided in the KPI templates further below.
Taxonomy-eligible activities were identified by extracting the total turnover, CapEx and OpEx required to be captured in the denominators of the respective KPIs and assessing the NACE code of the activities to which the amounts relate. The Group then assessed which of the identified NACE codes relate to activities included within the annexes to the Climate Delegated Act. In the case of the identified eligible activities, the Group then began the process of assessing them against the technical screening criteria. However, this process is still currently ongoing (no activities presently being classified as taxonomy-aligned).
Through the activities highlighted in the table below, the Group generates turnover, and may incur both CapEx and OpEx for these activities.
Taxonomy-eligible economic activities
Economic activity as per Climate Delegated Act
Description
Turnover
(%)*
CapEx
(%)*
OpEx
(%)*
Climate change mitigation
Climate change adaptation
NACE code
4.1 Electricity generation using solar photovoltaic technology
The generation and sale of electricity through PV panels installed by the Group
0.8
-
0.8


D35
6.10 Sea and Coastal freight water transport, vessels for port operations and auxiliary activities
Freight forwarding services performed by the Group
0.8
-
-


H52
7.7 Acquisition and ownership of buildings
Rental income generated from office premises owned by the Group
0.1
-
-


L68
*% of the total turnover, CapEx and OpEx included in the denominator of the respective KPI
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxiii
Taxonomy eligibility
Economic activities classified under activity 4.1 ‘Electricity generation using solar photovoltaic technology’ relates to the generation of electricity through solar photovoltaic (‘PV’) panels which is fed into the public electrical grid. Amounts in this respect have been allocated to activity 4.1 due to the electricity generated from the panels being fed into the public electrical grid, as opposed to being used exclusively for internal consumption within the Group’s premises. Had the latter been the case, the Group would have classified such activities under 7.6 ‘Installation, maintenance and repair of renewable energy technologies’.
Economic activities classified under activity 6.10 ‘Sea and Coastal freight water transport, vessels for port operations and auxiliary activities’ relates to turnover generated from freight forwarding services that the Group performs on behalf of its customers. Despite the Group not performing the freight activity itself, revenues from such an activity have been considered as taxonomy-eligible in accordance with the ‘Draft Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (second Commission Notice)’, particularly FAQ 20 ‘When should an undertaking be required to report under the Disclosures Delegated Act an economic activity that has not been performed by the reporting entity itself but by a subcontractor’.
The Draft Commission Notice states that “Reporting entities must report turnover from the activities performed by a subcontractor in accordance with the accounting treatment referred to in Section 1.1.1. of Annex I of the Disclosures Delegated Act. Therefore, the reporting entity should determine whether it recognises revenue arising from that activity as its own revenue under the principles set out in the applicable IFRS 15. Where revenue generated by a subcontractor is recognised as the revenue of the reporting entity, it must be included in the calculation of the turnover KPI”. Accordingly, the Group has included such revenue in the calculation of the turnover KPI.
Economic activities classified under activity 7.7 ‘Acquisition and ownership of buildings’ relates to turnover generated from office space that is owned by the Group and is rented out to third parties.
In the current year, no capital investments which relate to necessary components to execute the respective turnover-generating economic activity were incurred by the Group. Furthermore, in the case of repairs and maintenance costs incurred in relation to the Group’s buildings, given the lack of granularity in the data available, the Group have allocated the full amount to investment activities not directly related to turnover-generating activities (presented further below) given that the Group is not able to identify the costs which relate to the part of a building which is being rented out to third parties.
Other turnover-generating activities performed by the Group classified as taxonomy non-eligible
The Group’s taxonomy non-eligible economic activities largely relate to:
-The provision of warehousing and handling services for client’s equipment,
-Waste treatment and disposal,
-Facility management services and
-The provision of cargo handling operation
The Group’s cargo handling services relate to the loading and offloading of cargo from vessels through the operation of mobile cranes. Whilst the Climate Delegated Act does not establish technical screening criteria in relation to such an activity, and therefore the revenue generated would not be considered as taxonomy-eligible, the technical screening criteria established under activity 6.6 ‘Freight transport services by road’ may be viewed as a manner in which to assess the sustainability of the Group’s cargo handling services.
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Statement by the Directors on non-financial information (continued)
xxxiv
This view is predicated on the fact that the technical screening criteria established for the activity pertain to specifications of the vehicle utilised to perform the operation, and not the transportation of goods themselves. Therefore, whilst the Company’s vehicles are not utilised for the purposes of ‘freight transport services by road’, the technical screening criteria (as well as the ‘do no significant harm’ criteria) may be used to assess the sustainability of the vehicles operated by the Group in performing cargo handling operations.
Due to the lack of clear guidance on how such a situation should be treated, the Group has opted to classify the revenue generated from the provision of such services as taxonomy non-eligible. However, going forward, as further clarity may be provided on such circumstances by the EC, the view adopted by the Group may change, resulting in such activities being considered as taxonomy-eligible. The view adopted by the Group also applies to any CapEx and OpEx associated with the activity.
Other taxonomy non-eligible activities also include:
-Identification of suppliers that may provide clients with services/goods they require, and
-Repairs and maintenance of machinery (the machinery of which does not relate to taxonomy-eligible activities).
Taxonomy eligibility of investment activities not directly related to turnover-generating activities
Further to the activities from which the Group generates turnover, and generally incurs both CapEx and OpEx, the Group also engages in investment activities not directly related to its turnover-generating activities as highlighted below.
Individually taxonomy-eligible CapEx/OpEx and the corresponding economic activities
Economic
activity
Description of the taxonomy-eligible purchased output or individual measure
CapEx
(%)*
OpEx
(%)*
Climate change mitigation
Climate change adaptation
NACE code
6.5 Transport by motorbikes, passenger cars and light commercial vehicles
The acquisition of motor vehicles designated as category M1
2.1
10.9


N77
6.6 Freight transport services by road
The acquisition of vehicles designated as category NI, N2 and N3
18.3
43.5


H49
7.1 Construction of new buildings
Development of new premises by the Group
8.1
-


F41
7.7 Acquisition and ownership of buildings
General repairs and maintenance of buildings utilised by the Group for its own activities
-
1.3


L68
*% of the total CapEx and OpEx included in the denominator of the respective KPI
Included in the above are amounts that relate to the acquisition of vehicles utilised by the Group to perform its cargo handling operations, classified under activity 6.6 ‘Freight transport services by road’. Such CapEx is classified under investment activities not directly related to its turnover-generating activities given that the Group is currently considering the cargo-handling operation as taxonomy non-eligible.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxv
However, as previously stated, should such activities be considered as taxonomy-eligible in the future, then the CapEx in this respect will be associated with turnover-generating activities of the Group.
CapEx relating to activities 6.5 ‘Transport by motorbikes, passenger cars and light commercial vehicles’ and 7.1 ‘Construction of new buildings’ relates to the acquisition of motor vehicles utilised in the ordinary course of business by Group employees and the development of new office premises respectively.
Taxonomy alignment
Determining whether an activity meets the requirements to be classified as taxonomy-aligned requires considerable detailed information about the activity to properly assess it against the established technical screening criteria.
The Group is currently in the process of gathering the necessary information to conclude that activities may be considered as taxonomy-aligned and verifying its accuracy. As a result of the ongoing process, the Group has not been able to substantiate the alignment of any of its activities in the current year.
Despite not being able to fully substantiate the alignment of any of its activities, the Group has identified an instance of partial alignment in the current year.
Economic activities classified as 4.1 ‘Electricity generation using solar photovoltaic technology’ have been assessed to meet the substantial contribution criteria under the climate change mitigation objective, being that the activity generates electricity using solar PV technology. However, the Group is still in the process of assessing certain elements of the DNSH criteria. In relation to climate change adaptation, the Group is yet to undertake a physical climate risk assessment on the location in which the PV panels are installed and is still to assess the durability and recyclability of the components utilised by the manufacture of the PV panels to ensure no significant harm towards the transition to a circular economy. With respect to the protection and restoration of biodiversity and ecosystems, the Group is confident that the DNSH criteria have been met, given the approvals obtained surrounding the project location.
As further progress is made in the Group’s internal assessment process, certain activities may be identified as taxonomy-aligned without the need for further capital investments.
However, as a result of no activities being considered as taxonomy-aligned in the current year, disclosure requirements surrounding the assessment of taxonomy-alignment in accordance with section 1.2.2.1 of the Disclosures Delegated Act are not deemed to be applicable to the Group.
Our KPIs and accounting policies
The key performance indicators (‘KPIs’) comprise the turnover KPI, the CapEx KPI and the OpEx KPI. In presenting the Taxonomy KPIs, the Group uses the templates provided in Annex II to the Disclosures Delegated Act. Since the KPIs need to include an assessment of taxonomy-alignment for the first time for the reporting period 2022, the Group does not present comparative figures on taxonomy-alignment. Moreover, since the Group itself is not performing any of the activities related to natural gas and nuclear energy (activities 4.26-4.31), the Group is not using the dedicated templates introduced by the Complementary Delegated Act as regards activities in certain energy sectors.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxvi
Turnover KPI template for financial year 2022
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxvii
CapEx KPI template for financial year 2022
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Statement by the Directors on non-financial information (continued)
xxxviii
OpEx KPI template for financial year 2022
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xxxix
The specification of the KPIs is determined in accordance with Annex I to the Disclosures Delegated Act. The Group adopts the methodology to determine taxonomy-alignment in accordance with the legal requirements and describes its policies in this regard as follows:
Turnover KPI
Definition
The proportion of taxonomy-aligned economic activities of the total turnover has been calculated as the part of net turnover derived from products and services associated with taxonomy-aligned economic activities (numerator) divided by the net turnover (denominator), in each case for the financial year from 1 January 2022 to 31 December 2022. Given that the Group has not identified any taxonomy-aligned economic activities, the current proportion of alignment is 0%.
The denominator of the turnover KPI is based on the consolidated net turnover in accordance with paragraph 82(a) of IAS 1. For further details on our accounting policies regarding the Group’s consolidated net turnover, refer to disclosure note 4.15 ‘Revenue’ in the Group’s consolidated financial statements included in this Annual Report.
Reconciliation
The Group’s consolidated net turnover captured in the denominator of the KPI of €66,939,160 reconciles with the amount disclosed in the ‘Revenue’ financial statement line item included in the statement of profit or loss and other comprehensive income in the consolidated financial statements included in this annual report. Additionally, the amount also reconciles to the revenue disclosure note 10.
Revenue reconciliation
Amount (€000)
Amount (€000)
Turnover as per KPI denominator
66,939
Turnover as per the consolidated financial statements relating to:
Integrated logistics support services
42,990
Oil country tubular goods
23,425
Photovoltaic farm
524
66,939
Disclosure note 10
Difference
-
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xl
The following is a detailed breakdown of the turnover generated by the Group in accordance with the 3 categories of revenue disclosed in the consolidated financial statements in Note 10, amongst the different activities disclosed in the Turnover KPI.
Detailed breakdown of ‘Integrated logistics support services’
Amount (€000)
Amount (€000)
Integrated logistics support services turnover as per the consolidated financial statements
42,990
Allocation of services in the turnover KPI
6.10 Sea and coastal freight water transport, vessels for port operations
and auxiliary activities
532
7.7 Acquisition and ownership of buildings
76
Taxonomy non-eligible
42,382
42,990
Difference
-
Detailed breakdown of ‘Oil country tubular goods’
Amount (€000)
Amount (€000)
Oil country tubular goods turnover as per the consolidated financial statements
23,425
Allocation of services in the turnover KPI
-
Taxonomy non-eligible
23,425
23,425
Difference
-
Detailed breakdown of ‘Photovoltaic farm’
Amount (€000)
Amount (€000)
Photovoltaic farm turnover as per the consolidated financial statements
524
Allocation of services in the turnover KPI
4.1 Electricity generation using solar photovoltaic technology
524
Taxonomy non-eligible
-
524
Difference
-
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xli
CapEx KPI
Definition
The CapEx KPI is defined as taxonomy-aligned CapEx (numerator) divided by the Group’s total CapEx (denominator).
Total CapEx consists of additions to tangible and intangible fixed assets during the financial year, before depreciation, amortisation, and any remeasurements, including those resulting from revaluations and impairments, as well as excluding changes in fair value. It includes acquisitions of tangible fixed assets (IAS 16), intangible fixed assets (IAS 38) and right-of-use assets (IFRS 16). Acquisitions of investment properties (IAS 40) and additions as a result of business combinations would also be captured, however, the Group had no such CapEx in the current year. For further details on our accounting policies regarding the Group’s CapEx, refer to disclosure notes 4.5 ‘Property plant and equipment’, 4.6 ‘Intangible assets and goodwill’ and 4.9 ‘Leases’, in the Group’s consolidated financial statements included within this annual report.
The Disclosures Delegated Act established three categories under which to classify CapEx:
The Disclosures Delegated Act established three categories under which to classify CapEx:
a.CapEx related to assets or processes that are associated with Taxonomy-aligned economic activities (“category a”). In this case, the Group considers that assets and processes are associated with Taxonomy-aligned economic activities where they are essential components necessary to execute an economic activity.
The Group follows the generation of external revenues as a guiding principle to identify economic activities that are associated with CapEx under this category (a).
No eligible CapEx has been identified by the Group under this category in the current year.
b.CapEx that is part of a plan to upgrade a Taxonomy-eligible economic activity to become Taxonomy-aligned or to expand a Taxonomy-aligned economic activity (“category b”).
The Group has currently not developed such a plan, and therefore, no CapEx is considered to be eligible under this category.
c.CapEx related to the purchase of output from Taxonomy-aligned economic activities and individual measures enabling certain target activities to become low-carbon or to lead to GHG reductions (“category c”).
The Group distinguishes between the purchase of output and individual measures as follows:
•‘Purchase of output’ relates to when the Group just acquires the product or service that is mentioned in the activity description
•‘Individual measure’ refers to when the Group acquires a product through an activity that is regularly performed by the supplier, but where the Group controls the content and design of the product in detail.
Eligible CapEx under this category has been disclosed in the table named ‘Individually taxonomy-eligible CapEx/OpEx and the corresponding economic activities’ in the ‘Taxonomy eligibility of investment activities not directly related to runover generating activities’ section above. The full amount of CapEx considered under this category relates purely to ‘purchase of output’.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xlii
Purchases of output qualify as taxonomy-aligned CapEx in cases where it can be verified that the respective supplier performed a taxonomy-aligned activity to produce the output that the Group acquired. Since taxonomy-alignment also includes DNSH criteria and minimum safeguards, the Group is not able to assess the Taxonomy-alignment on its own. For the purchased output in 2022, we were not able to obtain any conclusive confirmation of taxonomy-alignment.
Given that no CapEx was incurred by the Group in the current year in relation to “category a”, which relates to turnover-generating activities, the Group considers there to be no risk of double counting in the CapEx KPI between categories “a” and “c” with the amount being allocated in full to “category c”.
Reconciliation
The Group’s total CapEx captured in the denominator of the KPI can be reconciled to the consolidated financial statements of the Group included in this annual report, by reference to the respective disclosures capturing the additions for intangible assets, right-of-use assets and property, plant and equipment.
CapEx Reconciliation
Amount (€000)
Amount (€000)
CapEx as per KPI denominator
5,028
Additions as per the consolidated financial statements relating to:
Property, plant and equipment
2,647
Disclosure note 16
Intangible assets
-
Disclosure note 18
Right-of-use assets
2,381
5,028
Disclosure note 36
Difference
-
The following is a detailed breakdown of the property, plant and equipment, intangible assets and right of use assets amongst the different activities disclosed in the CapEx KPI.
Detailed breakdown of property, plant and equipment additions
Amount
(€000)
Amount
(€000)
PPE additions as per the consolidated financial statements
2,647
Allocation of PPE in the CapEx KPI
6.5 Transport by motorbikes, passenger cars and light commercial vehicles
106
6.6 Freight transport services by road
919
7.1 Construction of new buildings
406
Taxonomy non-eligible
1,216
2,647
Difference
-
Detailed breakdown of right of use asset additions
Amount (€000)
Amount (€000)
Right of use asset additions as per the consolidated financial statements
2,381
Allocation of ROU in the CapEx KPI
Taxonomy non-eligible
2,381
2,381
Difference
-
No detailed breakdown in relation to intangible assets is deemed necessary given that no additions occurred during the year.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xliii
OpEx KPI
Definition
The OpEx KPI is defined as taxonomy-aligned OpEx (numerator) divided by the Group’s total OpEx (denominator).
Total OpEx consists of direct non-capitalised costs that relate to building renovation measures, short-term leases as well as all forms of maintenance and repair. In general this includes staff costs, costs for services and material costs for daily servicing and well as for regular and unplanned maintenance and repair measures.
The OpEx considered by the Group does not include expenses relating to the day-to-day operation of PPE, such as raw materials, cost of employees operating any equipment and electricity or fluids that are necessary to operate the PPE. Amortisation and depreciation are also not included in the OpEx KPI.
The Group also excludes direct costs for training and other human resources adaptation needs from the denominator and the numerator. This is because Annex I to the Disclosures Delegated Act lists these costs only for the numerator, which does not allow a mathematically meaningful calculation of the OpEx KPI.
The OpEx of the Group recognised during the financial year ended December 2022 is disclosed further in the Group’s consolidated financial statements included within this annual report in disclosure note 12 ‘Expenses by nature’.
Given that the Group has not identified any CapEx as being taxonomy-aligned, naturally, no OpEx is able to be considered as taxonomy-aligned.
Social and Community Activities
MedservRegis Plc continued to support the non-profit organizations which we have supported in the past, as well as to support new initiatives as driven and supported by the staff and management alike.
MALTA
In Malta, Medserv Operations Limited arranged, in collaboration with the Malta Foodbank Lifeline Foundation, the reverse advent calendar in which a very generous number of daily necessities were donated by staff members.
Medserv Operations Ltd also supported ‘Fondazzjoni Sebh’, a caring foundation that offers residential services to children and female survivors of violence, by donating a TV set which was installed at St. Theresa Home, Zurrieq Malta, and brought great joy to the vulnerable living there.
Pink October fund raising activity in support of breast cancer was organised by HR department with a fun event for a serious cause – car washing by staff members was held in the Freeport at Medserv Malta and monies raised for Breast Cancer.
MedservRegis p.l.c.
Statement by the Directors on non-financial information (continued)
xliv
MAURITIUS
In Mauritius, Regis Holdings Ltd continued to support PAWS, an animal welfare NGO in Mauritius with two shelters and clinics who focus on sterilization, education and rehoming of dogs and cats.
Regis Holdings also continued to support the Sun Kids Education aftercare facilities in Riviere Noire, where our offices are based. The Sun Kids Education programme supports 85 children between the ages of 4 and 13 years of age from vulnerable families who have learning difficulties, are school dropouts, slow learners or simply vulnerable children. Over and above this, donations were made for metal sheeting, mattresses and clean water supply to some families affected by the cyclone in Petite Riviere Noire during the floods earlier in the year.
EGYPT and CYPRUS
Several CSR events were held throughout the year, for example Medserv Egypt employees supported Ramadan Bags to the needy, and Medserv Cyprus visited a local orphanage, providing Easter Eggs to the children.
OVERALL
The year 2022 was a true reflection of a strong mutual support amongst our employees. This positive spirit has strongly emerged together and is now reflected in the whole MedservRegis Group.
Approved by the Board of Directors on 28 April 2023.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance
xlv
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 2022, 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 (resigned on 29 July 2022)
Non-Executive Independent Director
Laragh Cassar
Non-Executive Director
David S. O’Connor
Executive Director
Olivier N. Bernard
Executive Director
Keith Grunow
Non-Executive Independent Director
Monica Vilabril
Non-Executive Independent Director
Jean Pierre Lhote (appointed on 29 July 2022)
Non-Executive Independent Director
All the directors were nominated by the shareholders and appointed automatically with effect from the annual general meeting held on the 29 July 2022.
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 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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
xlvi
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 provided training on the obligations arising thereunder to all Directors and Senior Officers in terms of their obligations under the Capital Markets Rules and other relevant legislation.
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 Carmelo (a.k.a 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.
Keith Grunow (Non-Executive Director) and Monica Vilabril (Non-Executive Director) are considered to be independent within the meaning provided by the Code. Additionally, for his period of tenure Joseph Zammit Tabona was also considered to be independent. Laragh Cassar acts as the Company Secretary and legal counsel of the Company and is therefore not considered as independent.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
xlvii
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 Adjusted 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. The Company ensures that all incoming Directors of the Company are 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 Board of Directors and the Audit Committee met regularly during 2022 with a view to publishing the financial statements of the Company by the 30 th April 2022. However, for the reasons set out in the company announcement issued on the 13 th 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’.
Principle 5: Board Meetings
For the period under review the Board met five (5) 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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
xlviii
During 2022, the Board of Directors met five (5) times.
Name
Attendance during 2022
Anthony S. Diacono (Chairman)
5
Joseph Zammit Tabona (resigned on 29 July 2022)
3
Laragh Cassar
1
Carmelo (a.k.a Karl) Bartolo
5
David S. O’Connor
5
Olivier Bernard
5
Keith Grunow
3
Monica Vilabril
4
Jean Pierre Lhote (appointed on 29 July 2022)
1 (as director) & 1 (as invitee prior to appointment)
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. PWC, as external auditors of the Company, were invited to attend each of the Company’s audit committee meetings. During 2021, 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.
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 2022, the Audit Committee met sixteen (16) times.
Name
Attendance during 2022
Joseph Zammit Tabona (Chairman until resignation on 29 July 2022)
14
Laragh Cassar
10
Keith Grunow (Chairman from 30 July 2022)
14
Monica Vilabril
16
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
xlix
The Board appointed Joseph Zammit Tabona as Chairman of the Audit Committee. Following his resignation, Mr Keith Grunow was appointed Chairman in his stead. The board considers them 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 their careers.
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.
During 2022, the Financial Risk Committee met twice (2).
Name
Attendance during 2022
Carmelo (a.k.a Karl) Bartolo
2
Silvio Camilleri
2
Olivier Bernard
2
Salman Manjoo
2
Alessandro Roca (appointed as a member on the 2 December 2022)
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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
l
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) (up until 29 July 2022), Keith Grunow (Chairman with effect from 29 July 2022) Laragh Cassar and Monica Vilabril. All of the said members (other than Laragh Cassar) are considered to be independent directors. The Remuneration Committee met twice (2) during FY 2022.
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, 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.
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 2022, the Company also communicated to the market through brokers on one occasion. 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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
li
Principle 11: Conflicts of Interest
The directors are aware that their primary responsibility is always to act in the interest of the Company and its shareholders as a whole irrespective of who appointed them to the Board. Acting in the interest of the Company includes an obligation to avoid conflicts of interest. In such instances, the Company has strict policies in place which allow it to manage such conflicts, actual or potential, in the best interest of the Company. Each director’s service contract contains provisions which require the director to:
a)ensure that his/her personal interests do not conflict with the interests of the Company;
b)not carry on, directly or indirectly, business in competition with the Company;
c)not make personal gains or profits from his post without the consent of the Company, or from confidential information;
d)not use any property, information or opportunity of the Company for his own benefit or for the benefit of any third party,
e)not obtain any benefit in connection with the exercise of his powers, except with the consent of the Company in general meeting.
Furthermore, any director that has a conflict (actual or potential) is required to disclose and record the conflict in full and in time to the Board and is also precluded from participating in a discussion concerning matters in such conflicted matters (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 3,222,609 kwh and avoided 2,088,251 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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
lii
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 13 th April 2022, the annual consolidated financial statements of the Company were not published by the 30 th 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 25 th 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.
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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
liii
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:
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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
liv
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 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.
MedservRegis p.l.c.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance (continued)
lv
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.
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.
Approved by the Board of Directors on 28 April 2023.
MedservRegis p.l.c.
Remuneration Statement and Report
lvi
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 2022, the Committee was composed of Keith Grunow (Chairman), Laragh Cassar, and Monica Vilabril. The RemCom met twice (2) during 2022 (2021: 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 11 June 2021. 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 2022, 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.
MedservRegis p.l.c.
Remuneration Statement and Report (continued)
lvii
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 2022 (2021: 100%-0%).
The actual directors’ fees paid to the non-executive directors during the financial year ended 31 December 2022 was €111,722 (2021: €104,727).
The table below shows the total annual remuneration applicable to the non-executive directors during the financial year ended 31 December 2022. The year-on-year percentage increase for Keith Grunow is due to the new responsibility as the new Chairman of the Audit and Remuneration Committee following the resignation of Joseph Zammit Tabona. The year-on-year percentage decrease for Monica Vilabril is due to her resignation as director in Regis Holdings Limited in July 2022 for which she was earning a separate director’s fee.
Non-Executive Directors
Fixed Remuneration
Remuneration
For Committee/
Group Directorships
Total Remuneration 2022
Total Remuneration 2021
YoY Percentage Difference*
€
€
€
€
%
Joseph Zammit Tabona 1
11,667
5,833
17,500
30,000
0.0%
Laragh Cassar
25,000
-
25,000
25,000
0.0%
Keith Grunow 2
32,608
-
32,608
15,214
7.6%
Monica Vilabril 3
28,065
-
28,065
7,013
(7.4%)
Jean Pierre Lhote 4
8,549
-
8,549
n/a
n/a
Etienne Borg Cardona 5
n/a
n/a
n/a
15,000
n/a
Kevin Rapinett 6
n/a
n/a
n/a
12,500
n/a
Total
105,889
5,833
111,722
104,727
* 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.
1 Resigned on 29 July 2022
2 Appointed on 25 June 2021
3 Appointed on 25 October 2021
4 Appointed on 29 July 2022
5 Resigned on 25 June 2021
6 Resigned on 25 June 2021
MedservRegis p.l.c.
Remuneration Statement and Report (continued)
lviii
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.David S. O’Connor (CEO),
c.Carmelo (a.k.a Karl) Bartolo (Deputy CEO for Business and Operations) and
d.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 €80,000 (2021: €70,556).
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 2022 (and includes comparative information for 2021, where relevant):
Executive Director
Directors’ Fee
Gross Salary
Fringe Benefits
Total Fixed
Remuneration
YoY Percentage Difference*
2022
2021
2022
2021
2022
2021
2022
2021
€
€
€
€
€
€
€
€
%
Anthony S. Diacono
20,000
20,000
235,059
234,987
n/a
n/a
255,059
254,978
0.0%
Anthony J. Duncan 1
n/a
10,000
n/a
83,940
n/a
n/a
n/a
93,940
n/a
David S. O’Connor
20,000
10,278
199,245
88,757
54,838
23,943
274,083
122,979
8.9%
Olivier Bernard
20,000
10,278
199,245
88,757
50,679
25,352
269,924
124,387
5.7%
Carmelo (a.k.a Karl) Bartolo
20,000
20,000
242,283
240,640
2,856
3,744
265,139
264,392
(0.6%)
Total
80,000
70,556
875,832
737,081
108,373
53,039
1,064,205
860,676
* 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.
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.
1 Retired on 25 June 2021
MedservRegis p.l.c.
Remuneration Statement and Report (continued)
lix
Variable remuneration
Any bonus payable to the Chairman is payable entirely at the discretion of the Company and based on personal and company results achieved. No bonus was paid to the Chairman during 2022. 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 2022 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 2022
Proportion of fixed to variable remuneration 2021
2022
2021
2022
2021
€
€
€
€
%
%
%
Anthony S Diacono
NIL
NIL
255,059
254,987
0.0%
100 / 0
100 / 0
Anthony J. Duncan
NIL
NIL
n/a
93,940
n/a
n/a
100 / 0
David O’Connor
7,032
6,620
281,115
129,598
8.8%
97 / 3
95 / 5
Olivier Bernard
7,032
6,620
276,956
131,007
5.7%
97 / 3
95 / 5
Carmelo (a.k.a Karl) Bartolo
NIL
29,621
265,139
294,005
-10.6%
100 / 0
90 / 10
Total
14,064
42,861
1,078,269
903,537
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 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 2022 was €191,722 (2021: €175,283), falling within the amount approved by the shareholders in general meeting in 2014, that is €450,000.
MedservRegis p.l.c.
Remuneration Statement and Report (continued)
lx
6.Company’s Performance
Performance Indicators:
2022*
€
2021*
€
2020**
€
2022 vs 2021
Change
%
2021 vs 2020
Change
%
Adjusted EBITDA
11,404,765
5,359,013
5,565,272
112.8%
(3.7%)
Turnover
66,939,160
29,924,554
32,411,788
123.7%
(7.7%)
No of Operating Countries / No. of Exposed Countries
10
10
7
0%
42.9%
Average remuneration on full-time equivalent basis of employee:
2022
2021*
2020**
2022 vs 2021
Change
%
2021 vs 2020
Change
%
Employees of the Group
17,949
18,343
23,065
(2.2%)
(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.
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.
MedservRegis p.l.c.
Remuneration Statement and Report (continued)
lxi
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 2023 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.
Approved by the Board of Directors on 28 April 2023.
MedservRegis p.l.c.
Financial Statements
2022
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2022
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 Statements 9
Independent Auditors’ Report
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2022
1 1
The Group
The Company
2022
2021
2022
2021
Notes
€
€
€
€
ASSETS
Property, plant and equipment
16
33,334,709
36,051,726
-
-
Right-of-use assets
36.1.1
48,506,978
50,014,250
-
-
Intangible assets and goodwill
18
16,904,983
21,108,095
-
-
Investment in subsidiaries
24
-
-
47,622,803
49,140,053
Loan receivable from related companies
22
-
4,147,488
-
-
Loan receivable from subsidiaries
23
-
-
15,585,529
25,348,176
Financial assets at fair value through profit
or loss
26
2,759,727
4,006,665
-
-
Total non-current assets
101,506,397
115,328,224
63,208,332
74,488,229
Inventories
20
731,316
1,066,568
-
-
Contract assets
10.2
183,335
202,286
-
-
Loans receivable from subsidiaries
23
-
-
10,446,257
910,164
Current tax assets
429,563
306,243
78
805
Trade and other receivables
21
29,424,076
21,881,604
7,558,842
32,841
Cash at bank and in hand
27
19,454,683
11,984,028
170,729
-
50,222,973
35,440,729
18,175,906
943,810
Assets classified as held for sale
17.2
-
17,186
-
-
Total current assets
50,222,973
35,457,915
18,175,906
943,810
Total assets
151,729,370
150,786,139
81,384,238
75,432,039
MedservRegis p.l.c.
Statements of Financial Position
As at 31 December 2022
2
The Group
The Company
2022
2021
2022
2021
Notes
€
€
€
€
EQUITY
Share capital
28.1
10,163,764
10,163,764
10,163,764
10,163,764
Share premium
28.2
27,778,073
27,778,073
39,781,902
39,781,902
Reverse acquisition reserve
28.4
(1,394,906)
(1,394,906)
-
-
Translation reserve
28.3
(2,821,838)
331,789
-
-
Retained earnings/(accumulated losses)
23,904,158
23,150,848
(28,634,512)
(31,351,333)
Equity attributable to owners of the Company
57,629,251
60,029,568
21,311,154
18,594,333
Non-controlling interest
30
2,727,252
2,788,916
-
-
Total equity
60,356,503
62,818,484
21,311,154
18,594,333
LIABILITIES
Trade and other payables
33
-
71,482
-
-
Loans and borrowings
31
48,624,669
53,402,760
46,768,855
50,563,570
Lease liabilities
36.1.2
12,431,270
12,720,183
-
-
Deferred tax liabilities
19
4,627,880
5,317,833
-
-
Employee benefits obligations
32
1,400,299
1,427,395
-
-
Total non-current liabilities
67,084,118
72,939,653
46,768,855
50,563,570
Bank overdraft
27, 31
792,534
2,876,904
-
68,442
Trade and other payables
33
12,304,336
8,626,734
5,232,985
6,205,694
Contract liabilities
10.2
90,267
193,853
-
-
Current tax liabilities
10,829
6,694
-
-
Loans and borrowings
31
9,171,917
1,537,711
8,071,244
-
Lease liabilities
36.1.2
1,876,675
1,721,604
-
-
Employee benefits obligations
32
42,191
64,502
-
-
Total current liabilities
24,288,749
15,028,002
13,304,229
6,274,136
Total liabilities
91,372,867
87,967,655
60,073,084
56,837,706
Total equity and liabilities
151,729,370
150,786,139
81,384,238
75,432,039
The notes on pages 9 to 147 are an integral part of these financial statements.
These financial statements on pages 1 to 147 were approved by the Board of Directors and authorised for issue on 28 April 2023 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 2022.
MedservRegis p.l.c.
Statements of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2022
3
The Group
The Company
2022
2021
2022
2021
Notes
€
€
€
€
Continuing operations
Revenue
10
66,939,160
29,924,554
6,863,500
-
Cost of sales
12
(56,108,752)
(29,781,188)
-
-
Gross profit
10,830,408
143,366
6,863,500
-
Other income/(expense)
11
1,095,755
1,768,700
-
-
Administrative expenses
12
(12,403,839)
(8,897,762)
(2,509,268)
(5,635,038)
Net impairment loss on financial and contract assets
35.4
(463,092)
(440,368)
-
(12,967,353)
Results from operating activities
(940,768)
(7,426,064)
4,354,232
(18,602,391)
Finance income
14
4,979,509
2,426,341
1,476,763
2,691,461
Finance costs
14
(4,015,370)
(2,390,076)
(3,114,027)
(3,495,816)
Net finance income/(cost)
964,139
36,265
(1,637,264)
(804,355)
Share of profit of equity-accounted investees
25
-
29,101
-
-
Profit/(loss) before income tax
23,371
(7,360,698)
2,716,968
(19,406,746)
Tax credit/(expense)
15
521,505
57,562
(147)
(147)
Profit/(loss) from continued operations
544,876
(7,303,136)
2,716,821
(19,406,893)
Discontinued operation
Profit from discontinued operation, net of tax
9
-
100,469
-
-
Profit/(loss) for the year
544,876
(7,202,667)
2,716,821
(19,406,893)
Other comprehensive income
Items that will not be reclassified to profit or loss:
Re-measurement of post-employment benefit obligations
32
175,927
(190,788)
-
-
Items that may be reclassified subsequently to profit or loss:
Reclassification of foreign currency differences on
liquidation of subsidiary
11
(513,479)
-
-
-
Loss on net investment hedge
35.6
(496,651)
(412,381)
-
-
Exchange differences on translating foreign operations
(2,172,654)
718,521
-
-
Other comprehensive income for the year, net of tax
(3,006,857)
115,352
-
-
Total comprehensive income for the year
(2,461,981)
(7,087,315)
2,716,821
(19,406,893)
Profit/(loss) attributable to:
Owners of the Company
577,383
(7,512,179)
2,716,821
(19,406,893)
Non-controlling interests
30
(32,507)
309,512
-
-
Profit/(loss) for the year
544,876
(7,202,667)
2,716,821
(19,406,893)
Total comprehensive income attributable to:
Owners of the Company
(2,400,317)
(7,378,196)
2,716,821
(19,406,893)
Non-controlling interests 30
(61,664)
290,881
-
-
Total comprehensive income for the year
(2,461,981)
(7,087,315)
2,716,821
(19,406,893)
Total comprehensive income for the year attributable to owners of the Company arises from:
Continuing operations
(2,400,317)
(7,478,665)
2,716,821
(19,406,893)
Discontinued operations
-
100,469
-
-
(2,400,317)
(7,378,196)
2,716,821
(19,406,893)
Earnings per share
Basic earnings per share
29
0c57
(13c7)
Earnings per share – Continuing operations
Basic earnings per share
29
0c57
(13c9)
Adjusted earnings before interest, tax,
depreciation and amortisation (adjusted EBITDA)
7
11,404,765
5,359,013
The notes on pages 9 to 147 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 2022
4
Share capital
Share premium
Translation reserve
Reverse acquisition reserves
Retained earnings
Total attributable to owners of the Company
Non-controlling interest
Total
€
€
€
€
€
€
€
€
Balance at 1 January 2021
5,374,441
-
2,638,833
(5,373,706)
39,319,970
41,959,538
-
41,959,538
Total comprehensive income
Loss for the year
-
-
-
-
(7,512,179)
(7,512,179)
309,512
(7,202,667)
Other comprehensive income
-
-
306,140
-
(172,157)
133,983
(18,631)
115,352
Total comprehensive income
-
-
306,140
-
(7,684,336)
(7,378,196)
290,881
(7,087,315)
Transactions with owners of the Company Contributions and distributions
Issue of ordinary shares related to business combination (see note 6.1)
4,789,323
27,778,073
-
3,978,800
-
36,546,196
-
36,546,196
Transfers
-
-
(2,753,155)
-
2,753,155
-
-
-
Distribution pre-business combination (see note 9)
-
-
139,971
-
(8,149,287)
(8,009,316)
-
(8,009,316)
Dividends (see note 28.5)
-
-
-
-
(3,088,654)
(3,088,654)
-
(3,088,654)
Total contributions and distributions
4,789,323
27,778,073
(2,613,184)
3,978,800
(8,484,786)
25,448,226
-
25,448,226
Changes in ownership interests
Acquisition of NCI on business combination (see note 30)
-
-
-
-
-
-
2,498,035
2,498,035
Total charges in ownership interests
-
-
-
-
-
-
2,498,035
2,498,035
Total transactions with owners
4,789,323
27,778,073
(2,613,184)
3,978,800
(8,484,786)
25,448,226
2,498,035
27,946,261
Balance at 31 December 2021
10,163,764
27,778,073
331,789
(1,394,906)
23,150,848
60,029,568
2,788,916
62,818,484
MedservRegis p.l.c.
Statement of Changes in Equity – The Group
For the year ended 31 December 2022
5
Share
capital
Share premium
Translation reserve
Reverse acquisition reserves
Retained earnings
Total attributable to owners of the Company
Non-controlling interest
Total
€
€
€
€
€
€
€
€
Balance at 1 January 2022
10,163,764
27,778,073
331,789
(1,394,906)
23,150,848
60,029,568
2,788,916
62,818,484
Total comprehensive income
Profit for the year
-
-
-
-
577,383
577,383
(32,507)
544,876
Other comprehensive income
-
-
(3,153,627)
-
175,927
(2,977,700)
(29,157)
(3,006,857)
Total comprehensive income
-
-
(3,153,627)
-
753,310
(2,400,317)
(61,664)
(2,461,981)
Balance at 31 December 2022
10,163,764
27,778,073
(2,821,838)
(1,394,906)
23,904,158
57,629,251
2,727,252
60,356,503
MedservRegis p.l.c.
Statements of Changes in Equity – The Company
For the year ended 31 December 2022
6
Share
capital
Share
premium
Retained
earnings / (accumulated losses)
Total
equity
€
€
€
€
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 year
-
-
(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
Balance at 1 January 2022
10,163,764
39,781,902
(31,351,333)
18,594,333
Total comprehensive income
Profit for the year
-
-
2,716,821
2,716,821
Total comprehensive income for the year
-
-
2,716,821
2,716,821
Balance at 31 December 2022
10,163,764
39,781,902
(28,634,512)
21,311,154
The notes on pages 9 to 147 are an integral part of these financial statements.
MedservRegis p.l.c.
Statements of Cash Flows
For the year ended 31 December 2022
7
The Group
The Company
2022
2021
2022
2021
Notes
€
€
€
€
Cash flows from operating activities
Profit/(loss) for the year
544,876
(7,202,667)
2,716,821
(19,406,893)
Adjustments for:
Depreciation and amortisation
16, 36, 18.1
9,683,582
5,527,301
-
-
Net impairment on goodwill and intangible asset
18
2,146,741
1,941,473
-
-
Net impairment and other write off on property, plant
and equipment
16
515,210
5,287,202
-
-
Net impairment on investment in subsidiaries, joint
venture and associates
24
-
-
1,521,666
4,351,654
Net movements in expected credit losses
35.4
463,092
440,368
-
12,974,428
Loss on disposal of property, plant and equipment
16
325,303
388,933
-
-
Decrease/(increase) in fair value of financial assets at
FVTPL
26
1,105,875
(309,087)
-
-
Interest income
14
(343,864)
(56,508)
(1,476,763)
(2,072,516)
Interest expense
14
4,015,370
2,141,201
2,832,342
2,776,928
Dividend income
10
-
-
(6,863,500)
-
Share of profit of equity-accounted
25
-
(29,101)
-
-
Loss on lease modification
36
141,784
-
-
-
Exchange differences and release of translation
differences to profit and loss
11
(7,304,362)
(3,640,331)
281,685
99,943
Tax (credit)/expense
15
(521,505)
(57,562)
147
147
10,772,102
4,431,222
(987,602)
(1,276,309)
Changes in:
Inventories
20
495,496
481,742
-
-
Trade and other receivables and contract assets
21
2,821,478
(1,383,044)
(17,401)
(10,150)
Trade and other payables and contract liabilities
33
5,832,380
177,679
(459,498)
134,220
Related party balances
37
-
-
(1,039,072)
2,667,507
Cash generated from/(used in) operating activities
19,921,456
3,707,599
(2,503,573)
1,515,268
-
-
Bank interest received
14
343,864
56,334
-
-
Interest on bank overdraft
14
(90,944)
(44,529)
-
-
Taxation (paid)/received
15
(158,457)
(204,720)
280
(253)
Net cash from/(used in) operating activities carried forward
20,015,919
3,514,684
(2,503,293)
1,515,015
MedservRegis p.l.c.
Statements of Cash Flows (continued)
For the year ended 31 December 2022
8
The Group
The Company
2022
2021
2022
2021
Notes
€
€
€
€
Net cash from/(used in) operating activities b/f
20,015,919
3,514,684
(2,503,293)
1,515,015
Cash flows from investing activities
Payments for FVTPL financial assets
26
(843,995)
(1,713,089)
-
-
Payments for property, plant and equipment
16
(2,647,142)
(1,977,229)
-
-
Advance payments for capital expenditure
21
(332,696)
-
-
-
Net proceeds from disposal of FVTPL financial assets
26
1,253,152
1,458,150
-
-
Net proceeds from disposal of property, plant and equipment
16
1,649,710
169,620
-
-
Proceeds received and repayments of loans from related parties
22
4,376,803
2,429,362
-
-
Cash acquired in business combination under reverse acquisition
6.3
-
2,651,632
-
-
Dividend received
10
-
-
6,863,500
-
Interest received
-
-
2,095,051
-
Net cash from investing activities
3,455,832
3,018,446
8,958,551
-
-
Cash flows from financing activities
Proceeds from loans and borrowings
31
3,600,000
-
3,600,000
-
Net proceeds from loans received from related parties
-
4,555,878
-
-
Repayment of bonds
31
(6,999,400)
-
(6,999,400)
-
Repayment of bank loans
31
(1,625,345)
(1,857,973)
-
-
Repayment of capital portion of lease liabilities
36
(2,324,651)
(1,099,146)
-
-
Dividend and other distributions paid to shareholders
-
(5,825,685)
-
-
Interest paid
31,36
(3,887,411)
(1,365,877)
(2,816,687)
(2,630,663)
Net cash used in financing activities
(11,236,807)
(5,592,803)
(6,216,087)
(2,630,663)
Net increase/(decrease) in cash and cash
equivalents
12,234,944
940,327
239,171
(1,115,648)
Cash and cash equivalents at beginning of year
9,107,124
8,637,631
(68,442)
1,035,682
Effect of exchange rate fluctuations on cash held
(2,679,919)
(470,834)
-
11,524
Cash and cash equivalents at end of year*
27
18,662,149
9,107,124
170,729
(68,442)
Cash at bank and in hand
27
19,454,683
11,984,028
170,729
-
Bank overdraft
27, 31
(792,534)
(2,876,904)
-
(68,442)
Cash and cash equivalents at end of year
27
18,662,149
9,107,124
170,729
(68,442)
* 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 9 to 147 are an integral part of these financial statements.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
9
1 Reporting company
MedservRegis 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).
The consolidated financial statements of the Company as at and for the year ended 31 December 2022 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 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, Medserv p.l.c was considered the acquiring entity. For accounting purposes, the transaction has 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 Medserv p.l.c. was the legal acquirer and accounting acquiree. As a result, the consolidated financial statements of the Group for the year ended 31 December 2021, represent a continuation of Regis’ financial statements except for the capital structure which was adjusted to reflect the capital of Medserv p.l.c as described in note 6.
As a result of the reverse acquisition, the comparative figures in these consolidated financial statements represents:
a)the Consolidated Statement of Financial Position as at 31 December 2021 of 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 (date control was obtained) until year-ended 31 December 2021.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
10
2 Basis of preparation
2.1 Statement of compliance
These consolidated and separate financial statements as at and for the year ended 31 December 2022 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.
2.2 Going concern
The Group generated a profit after tax for the year amounting to €0.54 million (2021 loss: €7.2 million), it reported a positive adjusted EBITDA (note 7) of €11.4 million (2021: positive adjusted EBITDA €5.3 million) and generated operating cash inflows of €20 million (2021: €3.5 million). The Group’s net asset value amounted to €57.6 million (2021: €60 million) and it had positive working capital amounting to €25.9 million (2021: €20.4 million).
The Company, which primarily acts as a funding vehicle for the Group, generated a profit for the year amounting to €2.72million (2021 loss: €19.4million), had a net asset value of €21.3 million (2021: €18.6 million) and had a positive working capital of €4.87 million (2021: negative working capital of €5.3 million). The Group has €25.7 million of resources comprising cash and cash equivalents, unused credit lines and investments at FVTPL as at reporting date. The Group’s cash and cash equivalents include an amount of €8.9 million held by a subsidiary and which are subject to exchange controls on remittance outside of the jurisdiction in which it operates (note 27).
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 2022
11
2 Basis of preparation (continued)
2.3 Basis of measurement
The financial statements have been prepared on the historical cost basis, except for investments at FVTPL.
2.4 Functional and presentation currency
These financial statements are presented in euro (€), which is the Company’s functional currency and the Group’s presentation currency.
3 Use 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 and the Group based its assumptions and estimates on parameters available at the reporting date. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising that are beyond the control of the Group. Revisions to accounting estimates are recognised prospectively.
Information about areas involving a higher degree of judgements or complexity 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 2022 and 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 36 – impairment test of property, plant and equipment and right-of-use assets of the Group: 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;
-Note 35.4 – measurement of ECL allowance for trade receivables: key assumptions in determining the loss given default and macro-economic adjustments; and
-Note 36 – determining the lease term and the discount rate: Key assumptions in determining extension option and estimating the incremental borrowing rate.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
12
4 Significant accounting policies
4.1 Basis of consolidation
4.1.1 Business 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.
4.1.2 Subsidiaries
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.
4.1.3 Non-controlling interests (NCI)
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.
4.1.4 Loss 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.
4.1.5 Interests 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 2022
13
4 Significant accounting policies (continued)
4.1 Basis of consolidation (continued)
4.1.5 Interests 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 joint ventures 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.
Dividend received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. Where the Group’s share of loss in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.
4.1.6 Transactions 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.
4.2 Foreign currency
4.2.1 Foreign 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 2022
14
4 Significant accounting policies (continued)
4.2 Foreign currency (continued)
4.2.1 Foreign currency transactions (continued)
Foreign currency differences are generally recognised in profit or loss. However, foreign currency differences arising from the translation of financial liabilities denominated in a foreign currency and designated as a hedge of the net investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective and is accumulated in the translation reserve (see note 4.2.4).
4.2.2 Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s presentation currency at average exchange rates ( unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the translations).
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.
4.2.3 Hedge accounting – Net investment hedge
For the purpose of hedge accounting, hedges are classified as:
-Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
-Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
-Hedges of a net investment in a foreign operation.
The Group’s hedging activities consist of hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedge item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined).
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
15
4 Significant accounting policies (continued)
4.2 Foreign currency (continued)
4.2.3 Hedge accounting – Net investment hedge (continued)
The Group uses a loan as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries, including a hedge of a monetary item that is accounted for as part of the net investment. Any gain or loss on the hedging instrument relating to the effective portion is recognised in other comprehensive income and accumulated in the translation reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within finance cost.
On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the statement of profit or loss.
4.2.4 Foreign 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 within “Other income (expenses)”. Foreign currency gains and losses relating to investing activities and financing activities are recognised in profit or loss and are reported on a net basis within “finance income” or “finance costs” respectively.
4.3 Financial 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 with an insignificant 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 with an insignificant financing component is initially measured at the transaction price. Transaction costs of financial assets carried at FVTPL are expensed in profit and loss.
4.3.2 Classification and subsequent measurement
4.3.2.1 Financial assets
On initial recognition, the Group’s financial asset is classified as measured at: amortised cost; or at Fair Value Through Profit or Loss (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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
16
4 Significant accounting policies (continued)
4.3 Financial instruments (continued)
4.3.2 Classification and subsequent measurement (continued)
4.3.2.1 Financial assets (continued)
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.
4.3.2.2 Financial 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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
17
4 Significant accounting policies (continued)
4.3 Financial instruments (continued)
4.3.2 Classification and subsequent measurement (continued)
4.3.2.3 Financial 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 that is consistent with a basic lending arrangement.
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).
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.
4.3.2.4 Financial 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 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 expected credit losses. Interest income, foreign exchange gains and losses and expected credit losses are 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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
18
4 Significant accounting policies (continued)
4.3 Financial instruments (continued)
4.3.2 Classification and subsequent measurement (continued)
4.3.2.5 Financial 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. Where the Group designate a financial liability such as a loan in a hedging relationship for a net investment in a foreign operation, the effective portion of the exchange gains or losses are recognised in other comprehensive income (see note 4.2.3).
4.3.3 Derecognition
4.3.3.1 Financial 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.
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.
4.3.4 Offsetting
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.
4.4 Share 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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
19
4 Significant accounting policies (continued)
4.5 Property, plant and equipment
4.5.1 Recognition 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.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (significant components) of property, plant and equipment.
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(expenses)” in profit or loss.
4.5.2 Subsequent 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.
4.5.3 Depreciation
Deprecation is based on the cost of an asset less its residual value. Significant components of individual assets having a useful life that is different from the remainder of that asset, are 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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
20
4 Significant accounting policies (continued)
4.5 Property, plant and equipment (continued)
4.5.3 Depreciation (continued)
The estimated useful lives for the current and comparative periods are as follows:
2022
Years
2021
Years
•Buildings and base improvements*
20 – 50
20 – 50
•Furniture and fittings
10
10
•Office equipment
4-5
4-5
•Computer equipment
5
5
•Plant and equipment
10-15
10-15
•Motor vehicles
4-10
4-10
•Cargo carrying units
10
10
•Photovoltaic farm
20
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.
4.6 Intangible assets and goodwill
4.6.1 Recognition 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 acquired by the Group have finite useful lives.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
21
4 Significant accounting policies (continued)
4.6 Intangible assets and goodwill (continued)
4.6.2 Subsequent 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.
4.6.3 Amortisation
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 having indefinite life are not amortised and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired.
The estimated useful lives for the current period are as follows:
•customer contracts 2-9 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.
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 Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets or disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Non-current asset (or disposal group) is also classified as held for sale they are held for distribution to owners when the Group is committed to distribute the asset (or disposal group) to the owners and the asset is available for immediate distribution in their present condition and the distribution is highly probable.
Such assets, or disposal groups, are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
22
4 Significant accounting policies (continued)
4.8 Non-current assets (or disposal groups) held for sale and discontinued operations (continued)
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell for an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale or held for distribution to owners. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discounted from the start of the comparative year.
4.9 Leases
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.
4.9.1 As 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 2022
23
4 Significant accounting policies (continued)
4.9 Leases (continued)
4.9.1 As 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.
The Group presents right-of-use assets and lease liabilities separately in the statement of financial position.
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 leases as an expense on a straight-line basis over the lease term.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
24
4 Significant accounting policies (continued)
4.10 Inventories
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.
4.11 Impairment
4.11.1 Financial 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 realizing security (if any is held); or
•the financial asset is more than 90 days past due.
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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
25
4 Significant accounting policies (continued)
4.11 Impairment (continued)
4.11.1 Financial assets (continued)
4.11.1.2 Measurement of ECLs (continued)
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).
The mechanics of the ECL calculations are outlined below and the key elements are, as follows:
-PD: The Probability of Default is an estimate of the likelihood of default over a given time horizon, A default may only happen at a certain time over the assessed period, if the financial asset has not been previously derecognized.
-EAD: The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest.
-LGD: The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the Group would expect to receive.
In the ECL models, the Group relies on a broad range of forward-looking information as economic inputs such as annual speculative-grade corporate default rates by geographic region, inflation (average consumer prices), price index of crude oil, gross domestic product (GDP), growth rate and unemployment rate.
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; or
•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.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
26
4 Significant accounting policies (continued)
4.11 Impairment (continued)
4.11.1 Financial assets (continued)
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 recoveries. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.
4.11.2 Non-financial assets
Goodwill and intangible assets having indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. The carrying amounts of the Group’s other non-financial assets, with exceptions to deferred tax assets, inventories, contract assets and investment properties, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets in which case the assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. 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.
The recoverable amount of an asset or a cash-generating units (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.
In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by fair value indicators such as replacement cost.
The Group’s corporate assets such as office building and computer equipment do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
27
4 Significant accounting policies (continued)
4.11 Impairment (continued)
4.11.2 Non-financial assets (continued)
An impairment loss is recognised if the carrying amount of an asset or its related CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment loss recognised on a CGU or group of CGUs is first allocated to reduce the carrying amount of any goodwill allocated to the CGU or group of CGUs and then to the other assets of the CGU or group of CGUs pro rata on the basis of the carrying amount of each asset in the CGU or group of CGUs.
Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill is not reversed.
4.12 Investments in subsidiaries
Investments in subsidiaries are shown in the statement of financial position of the Company at cost less any accumulated impairment losses. Cost includes directly attributable costs of the investment. Provisions are recorded when, in the opinion of the directors, there is an impairment in value. Where there has been an impairment in the value of an investment, it is recognised as an expense in the period in which the diminution is identified. The results of subsidiaries are reflected in the Company’s separate financial statements only to the extent of dividends receivables. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss.
4.13 Employee benefits
4.13.1 Defined contribution plans
The Group contributes towards the State defined contribution plan in accordance with local legislation and to which it has no commitment beyond the payment of fixed contributions. Obligations for contributions to the defined contribution plan are recognised in profit or loss as incurred.
4.13.2 Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on German Government Bonds that have maturity dates approximating the terms of the Group’s obligations.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
28
4 Significant accounting policies (continued)
4.13 Employee benefits (continued)
4.13.3 Severance payments
Pursuant to United Arab Emirates (U.A.E.) and Sultanate of Oman labour regulations, severance payments have to be paid on termination of employment by the employer. The Group’s net obligation in respect of this defined benefit obligation is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods and discounting that amount. The calculation of the liability is performed annually at each reporting date using the projected unit credit method. Re-measurement of the liability, which comprise actuarial gains and losses, are recognised immediately in OCI. The Group determines the interest expense on the liability for the period by applying the discount rate used to measure the obligation at the beginning of the annual period to the then-net liability, taking into account any changes in the liability during the period as a result of payments. Interest expense is recognised in profit or loss. The Group recognises gains and losses on the settlement of a liability when the settlement occurs.
4.13.4 Retirement benefit obligations
The Group operated a fixed contribution plan which required contributions to be made to a separately administered fund namely ‘Regis staff Welfare’. The cost of providing benefits under this plan was based on a fixed percentage of salaries depending on seniority level of entitled employees. The Group has ceased to contribute in this fund as from January 2022.
4.14 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of discount is recognised as finance cost.
4.15 Revenue
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a product or service to a customer.
4.15.1 Performance obligations and revenue recognition policies
The following is a description of the principal activities – separated by reportable segments – from which the Group generates its revenue. For more detailed information about reportable segments, see note 8. The Group is engaged in providing integrated logistics support services (ILSS) to the offshore oil and gas industry and OCTG services to the onshore oil and gas market and as such is involved in providing support services that span over a term. Services and support provided to the offshore oil and gas industry consists of integrated offshore logistics, engineering and technical services, supply of goods and management services. OCTG services to the onshore oil and gas market consist of handling and storage, and machine shop services for premium threading, inspection and repair services for OCTG and other ancillary services. The Group also produce and supply electricity through its photovoltaic plant.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
29
4 Significant accounting policies (continued)
4.15 Revenue(continued)
4.15.1 Performance obligations and revenue recognition policies (continued)
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.
4.15.1.1 Integrated Logistics Support Services (ILSS)
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Logistic support services
The Group performs and provides logistics services to international oil companies carrying out offshore drilling campaigns. The Group delivers fully integrated supply base services which connect all the elements of the clients’ logistics and materials management activities. Logistics support services include provision of equipment, personnel, warehousing, quays and land in a certified facility aimed at supporting offshore oil and gas drilling activities.
Invoices are issued on a monthly basis and are usually payable within 30 to 90 days. Uninvoiced amounts are presented as contract assets.
Logistic support services provided are routine or recurring in nature and span over a period of time. These services have been identified as a series of distinct services transferred to the customer in the same pattern. The customer simultaneously receives the benefits provided as the services are being rendered. Revenue is recognised over time as the services are provided.
Engineering and technical services
The Group through its engineering division carries out a full range of essential, non-critical engineering and technical services for the offshore platforms and drilling rigs. Services range from fabric maintenance, corrosion protection, riser inspection services, rig repair, technical services and general fabrication and maintenance.
Invoices are issued according to contractual terms and are usually payable within 30 to 60 days. Uninvoiced amounts are presented as contract assets.
Engineering services have been identified as a bundle of distinct goods or services that form one single obligation.
As the Group’s performance creates or enhances an asset controlled by the customer in terms of repairs and maintenance.
Revenue is recognised over time as the services are provided. The stage of completion for determining the amount of revenue is assessed based on surveys of work performed.
If the services are rendered in different reporting periods, then the consideration is allocated based on their relative stand-alone selling prices. The stand-alone selling price is determined based on customer-specific contract or based on the list prices at which the Group sells the services in separate transactions.
.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
30
4 Significant accounting policies (continued)
4.15 Revenue (continued)
4.15.1 Performance obligations and revenue recognition policies (continued)
4.15.1.1 Integrated Logistics Support Services (ILSS) (continued)
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Supply of goods
The Group is involved in procuring various goods and supplies to its customers for use on the offshore rigs and their supply vessels.
Clients obtain control of goods when the goods are delivered to and have been accepted at their specified location. Invoices are generated at that point in time. Invoices are usually payable within 30 - 90 days.
Revenue from supply of goods is recognised when the goods are delivered as this is the point in time that the consideration is unconditional since only the passage of time is required before payment is due.
Delivery occurs when the goods have been shipped to the specific location or loaded onto the client’s vessel, the risks and rewards have been transferred to the customer, and either the customer has accepted the goods in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied. Generally, for such goods, the customer has no right of return.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
31
4 Significant accounting policies (continued)
4.15 Revenue (continued)
4.15.1 Performance obligations and revenue recognition policies (continued)
4.15.1.2 Oil country tubular goods (OCTG)
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Storage and handling
This includes the provision of yard storage and handling of OCTG.
Invoices for storage and handling are issued on a monthly basis and are usually payable within 30 days.
.
Revenue is recognised over time as the services are provided.
If the services are rendered in different reporting periods, then the consideration is allocated based on their relative standalone selling prices.
The standalone selling prices are determined based on the agreed selling prices as per customer-specific contract or based on the list prices at which the Group sells the services in separate transactions.
Inspection
This includes the provision of inspection services of OCTG.
Invoices for inspection are issued on a monthly basis and are usually payable within 30 days.
Revenue is recognised over time as the services are provided.
If the services under a single arrangement which include both inspection and handling charges for inspection are rendered in different reporting periods, then the consideration is allocated based on their relative standalone selling prices. The standalone selling prices are determined based on the agreed selling prices as per customer-specific contract or based on the list prices at which the Group sells the services in separate transactions.
Repairs of pipes
This involves the provision of repairs of pipes using the Group’s machine shops in UAE and Iraq.
Invoices for repair of pipes are issued on a monthly basis and are usually payable within 30 days.
Revenue is recognised over time as the services are provided.
If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated based on their relative standalone selling prices. The standalone selling prices are determined based on the agreed selling prices as per customer-specific contract or based on the list prices at which the group sells the services in separate transactions.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
32
4 Significant accounting policies (continued)
4.15 Revenue (continued)
4.15.1 Performance obligations and revenue recognition policies (continued)
4.15.1.3 Photovoltaic income
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Supply of electricity
Revenue from the supply of electricity is generated from the Group’s investment in the Photovoltaic farm. Invoices are issued on a monthly basis. Prices are based on the published Feed-in-Tariffs.
Invoices are issued on receipt of the monthly statement issued by the counterparty and are payable within 15 days.
Revenue is recognised over time based on the monthly readings of kWh of energy supplied as per monthly statements issued by the counterparty.
4.15.1.4 Trading activity
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Supply of goods
The Group used to be involved in procuring agricultural commodities and supplies to its customers.
Clients would obtain control of goods when the goods are delivered to and have been accepted at their specified location. Invoices were generated at that point in time. Invoices were usually payable within 30 days.
Revenue from the supply of goods is recognised when the goods are delivered as this is the point in time that the consideration is unconditional since only the passage of time is required before payment is due.
Delivery occurs when the goods have been delivered to the client’s location or loaded onto the client’s vessel, the risks and rewards have been transferred to the customer, and either the customer has accepted the goods in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied. Generally, for such goods, the customer has no right of return.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
33
4 Significant accounting policies (continued)
4.15 Revenue (continued)
4.15.1.5 Chartering of vessels
Type of product/service
Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition policies
Charter of vessels
The Group is involved in chartering of its owned vessels. Billing is based on agreed rates per charter agreement. Invoices are usually payable within 30 days. During the year, the Group has ceased providing this service.
Revenue is recognised over time as the charter services are provided in line with the charter agreement. Charter rates, duration of charter and other performance obligations are specific to each client and documented in the charter agreement.
4.15.2 Determining transaction price and allocation to performance obligations
The Group’s amount of consideration which it expects to be entitled to in exchange for transferring of services to a customer is determined on a per-service usage basis and is payable in accordance with customary payment terms. Accordingly, a transaction price is determined separately for each performance obligation.
4.15.3 Dividend income
Dividend income is recognised in profit or loss on the date on which the Company’s right to receive payment is established.
4.16 Finance income and finance costs
The Group’s finance income and finance costs include:
-interest income recognised on financial assets;
-interest expense on borrowings; and
-exchange gains or losses arising from the Group’s investing and financing activities.
Interest income or expense is recognised as it accrues in profit or loss, using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
-The gross carrying amount of the financial asset; or
-The amortised cost of the financial liability.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
34
4 Significant accounting policies (continued)
4.16 Finance income and finance costs (continued)
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Borrowing costs that are not attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
4.17 Government grants
The Group recognises government grants that are related to assets as deferred income at fair value if there is reasonable assurance that they will be received, and the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset.
Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In that case, the grant is recognised when it becomes receivable.
Government assistance in the form of a guarantee from the government for loans from financial institutions is considered part of the unit of account in determining the fair value of the loan. The loan is recognised and measured in accordance with IFRS 9 Financial Instruments (see note 4.3). The benefit of the below-market rate of interest as a result of the guarantee from the government is measured as the difference between the initial carrying value of the loan determined in accordance with IFRS 9 and the proceeds received. The Group considers the conditions and obligations that have been, or must be, met when identifying the costs for which the benefit of the loan is intended to compensate.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
35
4 Significant accounting policies (continued)
4.18 Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
•temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
•temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
•taxable temporary differences arising on the initial recognition of goodwill.
Temporary differences in relation to a right-of-use asset and a lease liability for a specific lease are regarded as a net package (the lease) for the purpose of recognising deferred tax. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
36
4 Significant accounting policies (continued)
4.19 Earnings per share
The Group presents basic earnings per share (EPS) data for its ordinary shares. This EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, the calculation of EPS for all periods presented shall be adjusted retrospectively.
4.20 Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Board of Directors, the chief operating decision maker, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly the Company’s assets and liabilities.
Segment capital expenditure is the total cost incurred during the year to acquire non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising under insurance contracts.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
37
5 New standards, amended standards and interpretations
5.1 New and amended standards and interpretations adopted by the Group
The Group has applied the following amendments for the first time for their annual reporting period commencing 1 January 2022:
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
Onerous Contracts – Cost of Fulfilling a Contract – Amendments to IAS 37
Annual Improvements to IFRS Standards 2018-2020, and
Reference to the Conceptual Framework – Amendments to IFRS 3
The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in changes to the Group’s accounting policies impacting the financial performance and position.
5.2 Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2022 and earlier application is permitted. However, the Group has not early adopted any of the forthcoming new or amended standards in preparing these financial statements. The following sets out the effective date and impact of forthcoming amendments to standards and new standards on the Group’s financial statements:
EU effective date
(financial period on or after)
Impact assessment
Standards available for early adoption
IFRS 17 Insurance Contracts
1 January 2023
Not applicable
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
1 January 2023
No significant impact
Definition of Accounting Estimate (Amendments to IAS 8)
1 January 2023
No significant impact
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes)
1 January 2023
No significant impact
Standards not / not yet endorsed by the EU
Amendments to IAS 1: Classification of liabilities as current or non-current (effective 1 January 2023)
Not yet endorsed
No significant impact
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
Not yet endorsed
No significant impact
Non-current Liabilities with Covenants (Amendments to IAS 1)
Not yet endorsed
No significant impact
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
Not endorsed
No significant impact
The Group is of the opinion that there are no requirements that will have a possible significant impact on the Group’s financial statements in the period of initial application.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
38
6 Reverse acquisition
On 25 June 2021, MedservRegis plc (formerly Medserv p.l.c.) acquired 100% of the share capital and voting rights in Regis Holdings Limited (“Regis”), a limited liability company registered under the laws of Mauritius with company registration number 120300. Under the reverse acquisition, Regis acquired 49.99% of the share capital and voting rights in the former Medserv p.l.c and resulted in Regis obtaining control over Medserv p.l.c.
Regis is a holding company whose subsidiaries provide logistics, 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 in South Africa, Mozambique, Uganda, and Angola. 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.
During the six-month period ended 30 June 2021 and prior to the reverse acquisition, the formerly Medserv p.l.c. group of companies generated a revenue of €12,711,387 and the consolidated loss for the period and adjusted negative adjusted EBITDA amounted to €4,856,274 and €1,264,527 respectively. If the acquisition had occurred on 1 January 2021, management estimates that total consolidated revenue would have been €42,635,941 and consolidated loss for the period and adjusted EBITDA would have been €16,327,711 and €3,938,913 respectively. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2021.
For the six months period from 1 July to 31 December 2021, Medserv p.l.c. group of companies contributed revenue of €18,625,176 and a loss of €6,584,317 to the group results.
6.1 Consideration transferred
The purchase price of the acquisition was the issuance by Medserv of 47,893,229 ordinary shares of a nominal value of €0.10c per share (€4,789,323) and a share premium of €0.58c per share (€27,778,073) totalling to €32,567,396 in favour of DOCOB Limited (the “former Regis shareholder”).
Under the reverse acquisition principles, since the shares of Regis were not traded in an active market, the acquisition-date fair value of the consideration transferred by Regis (legal acquiree) for its interest in the Company (the legal acquirer) were based on the market price of the shares of Medserv p.l.c. of €36,546,196 as at 1 July 2021, which was prior to the acquisition-date.
The difference between the notional consideration of €36,546,196 and the shares issued by the Company at a total of €32,567,396 inclusive of the share premium amounting to €3,978,800 has been transferred to the reverse acquisition reserve.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
39
6 Reverse acquisition (continued)
6.2 Acquisition-related costs
The Company incurred acquisition-related costs of €147,714 relating to external legal fees and compliance costs. These costs have been incurred by the Company prior to the acquisition-date and are thus not included in the consolidated statement of profit or loss and OCI in view of the reverse acquisition accounting principles.
6.3 Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed by the Company (being the accounting acquiree) at the date of acquisition.
1 July 2021
€
Property, plant and equipment
31,782,880
Intangible assets
13,954,468
Equity-accounted investees
300
Right-of-use assets
51,438,794
Inventories
732,271
Current tax assets
217,633
Trade and other receivables
10,353,102
Contract assets
48,024
Cash at bank and in hand
5,265,514
Deferred income
(29,252)
Loans and borrowings
(55,371,472)
Employee benefits
(1,039,225)
Lease liabilities
(14,783,667)
Trade and other payables
(7,830,276)
Deferred tax liabilities
(5,446,525)
Bank overdraft
(2,613,882)
Current tax liabilities
(5,464)
Total identifiable net assets acquired
26,673,225
Less: Non-controlling interests acquired (see note 6.6)
(2,865,406)
Add: Goodwill (see note 6.5)
10,240,342
Net assets acquired
34,048,161
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
40
6 Reverse acquisition (continued)
6.4 Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Assets acquired
Valuation technique
Property, plant and equipment
Market comparison technique and cost technique: The valuation model considers market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
Intangible assets
Relief-from-royalty-method and multi-period excess earnings method: The relief-from-royalty method considers the discounted estimated royalty payments that are expected to be avoided as a result of the patents being owned. The multi-period excess earnings method considers the present value of net cash flow expected to be generated by the intangible assets by excluding any cash flows related to contributory assets.
Inventories
Market comparison technique: the fair value is determined based on the estimated selling price in the ordinary course of business less estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
Favourable leases
The fair value of off-market terms was measured using the discounted cash flow method (income approach), by projecting the estimated off-market terms net of tax shield and discounting them to present value at an appropriate market discount rate.
Trade and other receivables comprised gross contractual amounts due of €11,023,281 of which €670,179 was expected to be uncollectable at the date of acquisition.
6.5 Goodwill
Goodwill arising from the acquisition has been recognised as follows:
€
Consideration transferred
36,546,196
NCI, based on their proportionate interest in the recognised amounts of assets and liabilities
367,371
36,913,567
Fair value of identifiable net assets of the legal acquirer
6.3
(26,673,225)
Goodwill
10,240,342
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
41
6 Reverse acquisition (continued)
6.5 Goodwill (continued)
The goodwill is attributable mainly to the skills and technical talent of the Medserv’s sub-group work force, Medserv’s geographical reach and the synergies expected to be achieved from integrating the Medserv group into the combined MedservRegis group. None of the goodwill recognised is expected to be deductible for tax purposes. Taking control of Medserv p.l.c. group of companies will enable the MedservRegis group, market entry into critical growing markets and strengthen the Company’s equity base and liquidity position. Following the acquisition, the global reach of the Company spans across four continents, comprising a presence in twelve countries and operations out of ten 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 and Egypt), in the Middle East (UAE, Oman and Iraq), Sub-Saharan Africa (Mozambique, Uganda, Angola and South Africa) and South America.
6.6 Non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in Medserv p.l.c group of companies, the Group had elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets.
€
NCI - acquired as part of reverse acquisition
2,865,406
Adjustments based on their proportionate interest in the recognised amounts of assets and liabilities
(367,371)
NCI acquired on business combination
2,498,035
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
42
7 Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA)
The Directors have presented the performance measure adjusted EBITDA because they monitor this performance measure at a consolidated level and they believe this measure is relevant to an understanding of the Group’s financial performance. Adjusted EBITDA is calculated by adjusting profit from continuing operations to exclude the impact of taxation, net finance income (costs), depreciation, amortisation and impairment losses related to goodwill, intangible assets, and property, plant and equipment.
Adjusted EBITDA is not a defined performance measure in IFRS Standard and as a result, the Group’s definition of adjusted EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities.
Reconciliation of adjusted EBITDA to profit/(loss) from continuing operations
The Group
2022
2021
Notes
€
€
Profit/(Loss) for the year from continuing operations
544,876
(7,303,136)
Tax credit
15
(521,505)
(57,562)
Profit/(Loss) before tax
23,371
(7,360,698)
Adjustments for:
- Net finance income
14
(964,139)
(36,265)
- Depreciation
16, 36
7,627,211
4,382,060
- Amortisation of intangible assets
18
2,056,371
1,145,241
- Net Impairment loss on property, plant and equipment
16
515,210
5,287,202
- Impairment loss on intangible assets
18
1,774,446
910,193
- Impairment loss on goodwill
18
372,295
1,031,280
Adjusted EBITDA
11,404,765
5,359,013
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
43
8 Operating segments
8.1 The Group has three (2021: five) reportable operating segments, as described below, which represent the Group’s strategic divisions. These divisions offer different products and services and are managed separately because they require different resources and marketing strategies. For each of the strategic divisions, the Board of Directors, which is the chief operating decision maker, reviews internal management reports on a monthly basis.
The following summary describes the operations in each of the Group’s reportable segments:
Integrated logistics support services Includes the provision of comprehensive logistical support services to the offshore oil and gas industry from the Group’s bases in Malta, Cyprus, Egypt, South America and Africa.
Oil country tubular goods Includes the provision of an integrated approach to OCTG handling, inspection, repairs and other ancillary services based in three Middle East locations, namely U.A.E., Southern Iraq and Sultanate of Oman.
Trading activity*Involves the trading and exportation of locally produced goods and operates principally in South Africa. The Group ceased this activity during 2022.
Photovoltaic farm Involves the generation of electricity which is sold into the national grid for a twenty-year period at a price secured under the tariff scheme regulated by subsidiary legislation S.L. 423.46 in Malta.
Property segment (discontinued)Involves income generated from the investment properties, which was discontinued and classified as discontinued operation in 2021.
*The trading activity was ceased during the first quarter of 2022 and since the segment did not represent a major line of business for the Group, the result from this segment was not classified as a discontinued operation.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment adjusted EBITDA as included in the internal management reports that are reviewed by the Board of Directors. Segment adjusted EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
44
8 Operating segments (continued)
8.2 Information about reportable segments
2022
Integrated logistics support services
Oil country tubular goods
Photovoltaic farm
Total
€
€
€
€
External revenue
42,990,491
23,425,191
523,478
66,939,160
Segment revenue
42,990,491
23,425,191
523,478
66,939,160
Reportable segment profit (loss) before tax
2,372,837
(2,565,427)
215,961
23,371
Net finance costs/(income)
(4,653,119)
3,579,175
109,805
(964,139)
Depreciation on property, plant and equipment
2,307,684
1,468,754
197,712
3,974,150
Depreciation on right-of-use assets
2,537,309
1,115,752
-
3,653,061
Other material non-cash items:
Amortisation of intangible assets
-
2,056,371
-
2,056,371
Net impairment on property, plant and equipment
515,210
-
-
515,210
Impairment loss on intangible assets
-
1,774,446
-
1,774,446
Impairment loss on goodwill
372,295
-
-
372,295
Adjusted EBITDA
3,452,216
7,429,071
523,478
11,404,765
Reportable segment assets
117,836,126
31,617,381
2,275,863
151,729,370
Capital expenditure during 2022
1,490,702
1,156,439
-
2,647,141
Reportable segment liabilities
76,661,682
8,297,697
6,413,488
91,372,867
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
45
8 Operating segments (continued)
8.2 Information about reportable segments (continued)
2021
Integrated logistics support services
Oil country tubular goods
Trading activity
Photovoltaic farm
Total
Property Segment (discontinued)*
Total
€
€
€
€
€
€
€
External revenue
20,232,791
8,177,183
1,290,368
224,212
29,924,554
367,926
30,292,480
Inter-segment revenue
-
-
-
-
-
(201,606)
(201,606)
Segment revenue
20,232,791
8,177,183
1,290,368
224,212
29,924,554
166,320
30,090,874
Reportable segment profit (loss) before tax
(5,555,520)
(1,034,452)
(865,715)
94,989
(7,360,698)
100,469
(7,260,229)
Net finance costs
(408,014)
102,224
192,612
76,913
(36,265)
(100,469)
(136,734)
Depreciation on property, plant and equipment
1,942,557
643,121
15,180
52,310
2,653,168
-
2,653,168
Depreciation on right-of-use assets
1,195,356
533,536
-
-
1,728,892
-
1,728,892
Other material non-cash items:
Amortisation of intangible assets
404,422
740,819
-
-
1,145,241
-
1,145,241
Net impairment on property, plant and
equipment
4,419,197
868,005
-
-
5,287,202
-
5,287,202
Impairment loss on intangible assets
-
910,193
-
-
910,193
-
910,193
Impairment loss on goodwill
1,031,280
-
-
-
1,031,280
-
1,031,280
Adjusted EBITDA
3,029,278
2,763,446
(657,923)
224,212
5,359,013
-
5,359,013
Reportable segment assets
125,127,150
21,751,909
1,433,505
2,473,575
150,786,139
-
150,786,139
Capital expenditure during 2021
1,951,774
25,455
-
-
1,977,229
-
1,977,229
Reportable segment liabilities
69,080,365
13,547,087
1,501,999
3,838,204
87,967,655
-
87,967,655
* Property segment is a discontinued operation (see Note 9)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
46
8 Operating segments (continued)
8.3 Reconciliation of information on reportable segments to the amounts reported in the financial statements
2022
2021
€
€
Revenues
Total revenues for reportable segments
66,939,160
30,090,873
Elimination of discontinued operation
-
(166,319)
Consolidated revenues
66,939,160
29,924,554
Profit or loss
Profit/(Loss) before income tax for reportable segments
23,371
(7,360,698)
Elimination of discontinued operation
-
100,469
Consolidated profit /(loss) before income tax
23,371
(7,260,229)
Assets
Total assets for reportable segments
151,729,370
150,786,139
Consolidated total assets
151,729,370
150,786,139
Liabilities
Total liabilities for reportable segments
91,372,867
87,967,655
Consolidated total liabilities
91,372,867
87,967,655
Adjusted EBITDA
Total adjusted EBITDA for reportable segments
11,404,765
5,229,443
Share of profit of equity-accounted investee
-
29,101
Elimination of discontinued operation
-
100,469
Consolidated adjusted EBITDA
11,404,765
5,359,013
8.4 Geographical information
8.4.1 The ILSS segment is managed from Malta with a satellite office in Mauritius and operates base facilities and/or offices in Malta, Cyprus, Egypt, Suriname, Libya, Mozambique and Uganda. The OCTG segment is managed from U.A.E. and operates base facilities in U.A.E., Southern Iraq and Sultanate of Oman. The trading activity segment was managed and operated from Mauritius. The photovoltaic farm is managed and operated in Malta.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
47
8 Operating segments (continued)
8.4.1 Geographical information (continued)
Revenues
Non-current assets
€
€
2022
Cyprus
19,690,007
2,261,286
Malta
7,351,916
65,664,479
Egypt
7,975,728
4,254,231
Middle East
23,425,191
19,061,332
South America
28,286
-
Sub-Saharan Africa
8,468,032
10,265,069
66,939,160
101,506,397
2021
Cyprus
2,951,553
4,949,165
Malta
3,523,287
60,939,854
Egypt
3,909,127
14,744,602
Middle East
8,179,247
22,225,061
South America
61,962
-
Sub-Saharan Africa
11,299,378
12,469,542
29,924,554
115,328,224
With the exception to the Sub-Saharan Africa, revenues from the other geographical areas for the year ended 31 December 2021 represents revenue for the six months period starting from 1 July 2021, date of the reserve acquisition as explained in note 6.
8.4.2 Major customers
Revenues from two (2021: four) major external customers during the year amounted to approximately €28.55 million (2021: €13.6million) of the Group’s total revenues.
8.4.3 Situation in Libya and Mozambique
Despite the political instability in Libya, the Group’s operations in Libya were minimally impacted as the Group continues servicing normally the clients’ operations offshore Libya, which are located 120 kilometres north of the Libyan coast.
A major insurgent attack took place in Palma (Cabo Delgado), Mozambique in the first quarter of 2021, which drastically paralyzed the operations in northern Mozambique. This led to TotalEnergies withdrawing all personnel from the Afungi site and declared Force Majeure on the LNG project. TotalEnergies remain committed to the project and plans to restart the project once the Force Majeure is lifted.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
48
9 Discontinued operations
9.1 As part of the business combination with Regis in 2021, the Group carved out the following entities:
i.Worx Developments Limited;
ii.Bel Ombre Investments Ltd;
iii.Regis Property Holdings (Australia) Pty Ltd;
iv.Thomson and Van Eck International Proprietary Limited;
v.Drill Stem Testing International Ltd;
vi.DST Australia (PTY) Limited;
vii.International Assurance Limited PCC;
viii.PSV Holdings Limited;
ix.Capital Mineral Resource Investments Limited;
x.units held by Regis in OzProp Investment Trust;
xi.Regis Tanzania Limited;
The Group transferred out its entire Property segment (see note 8). The segment covers various geographical markets such as Australia, Mauritius and South Africa. The segment’s primary activities include investment, lease, development and sale of real properties, field service provision and well-evaluation, and drill stem testing. Management committed to a plan in transferring out this division, following a strategic decision to put greater focus on the Group’s key competencies, being the rendering of Integrated Logistics Support Services and providing Oil Country Tubular Goods to the oil and gas industry. The assets of the Property segment accounted for 46% of total assets of Regis Group as at 30 June 2021.
9.2
2021
€
Results from discontinued operation
Revenue
367,926
Elimination of inter-segment revenue
(201,606)
External revenue
166,320
Income
1,863,894
Elimination of inter-segment revenue
(1,761,858)
External income
102,036
Results from operating activities
268,356
Income tax
(167,887)
Profit from discontinued operation, net of tax
100,469
Basic earnings per share (euro)
0c1
The profit from the discontinued operation of €100,469 was attributable entirely to the owners of the Company.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
49
9 Discontinued operations (continued)
9.3 Cash flows from discontinued operation
2021
€
Net cash from operating activities
22,740
Net cash from investing activities
2,652,563
Net cash from financing activities
61,728
Net cash flow for the year
2,737,031
9.4 Distribution of assets and liabilities to shareholders pre-business combination
€
Goodwill
(287,688)
Property, plant and equipment
(2,236,241)
Investment property
(592,797)
Investment in associates
(612,423)
Inventories
(73,249)
Other investments
(4,261,423)
Trade and other receivables
(1,371,383)
Cash and cash equivalents
(2,994,154)
Assets held for sale
(3,128,135)
Bank borrowings
1,483,112
Trade and other payables
6,065,065
Net assets and liabilities
(8,009,316)
Consideration received*
-
Cash and cash equivalents disposed of
(2,994,154)
Net cash outflow
(2,994,154)
*Prior to the business combinations with Regis Holdings Limited, the Regis group of companies was restructured to carve out the property segment and other non-core assets though the transfer of the subsidiary entities listed in note 9.1 to Drill Stem Testing International Limited (“DSTI”). Following the restructuring, DSTI was transferred for no consideration to DOCOB Limited, an entity owned and controlled by the same ultimate beneficiary owners. This transfer has been treated in these financial statements as a distribution in kind to the owners of the Company. In accordance with the Group’s policy, the value of the net assets and liabilities distributed was determined based on the book values at transaction date on 24 June 2021 and was recognised as distributions in kind under transactions with owners directly in equity. As a result of this distribution, an amount of €139,971 representing cumulative translation differences of foreign subsidiaries distributed to owners was transferred from the translation reserves to retained earnings.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
50
10 Revenue
10.1 Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by primary geographical market, major service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see note 8).
2022
Integrated logistics support services
Oil country tubular goods
Photovoltaic farm
Total
€
€
€
€
Malta
6,828,438
-
523,478
7,351,916
Middle East
-
23,425,191
-
23,425,191
Cyprus
19,690,007
-
-
19,690,007
Egypt
7,975,728
-
-
7,975,728
Sub-Saharan Africa
8,468,032
-
-
8,468,032
South America
28,286
-
-
28,286
42,990,491
23,425,191
523,478
66,939,160
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
51
10 Revenue (continued)
10.1 Disaggregation of revenue from contracts with customers (continued)
2022
Integrated logistics support services
Oil country tubular goods
Photovoltaic farm
Total
€
€
€
€
Major service lines
Logistic support services
36,234,896
-
-
36,234,896
Supply of goods
3,500,618
-
-
3,500,618
Engineering and technical services
354,178
-
-
354,178
Storage and handling
2,900,799
16,115,381
-
19,016,180
Inspection
-
1,760,382
-
1,760,382
Repairs of pipes
-
5,549,428
-
5,549,428
Supply of electricity
-
-
523,478
523,478
42,990,491
23,425,191
523,478
66,939,160
Timing of revenue recognition
Transferred over time
39,489,873
23,425,191
523,478
63,438,542
Point in time
3,500,618
-
-
3,500,618
42,990,491
23,425,191
523,478
66,939,160
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
52
10 Revenue (continued)
10.1 Disaggregation of revenue from contracts with customers (continued)
Continuing operations
Discontinued operation
2021
Integrated logistics support services
Oil country tubular goods
Trading activity
Photovoltaic farm
Total
Property Segment*
€
€
€
€
€
€
Malta
3,299,075
-
-
224,212
3,523,287
-
Middle East
2,064
8,177,183
-
-
8,179,247
-
Cyprus
2,951,553
-
-
-
2,951,553
-
Egypt
3,909,127
-
-
-
3,909,127
-
Sub-Saharan Africa
10,009,010
-
1,290,368
-
11,299,378
76,657
South America
61,962
-
-
-
61,962
-
Australia
-
-
-
-
-
89,663
20,232,791
8,177,183
1,290,368
224,212
29,924,554
166,320
*See note 9
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
53
10 Revenue (continued)
10.1 Disaggregation of revenue from contracts with customers (continued)
Continuing operations
Discontinued
2021
Integrated logistics support services
Oil country tubular goods
Trading activity
Photovoltaic farm
Total
Property Segment*
€
€
€
€
€
€
Major service lines
Logistic support services
16,346,907
-
-
-
16,346,907
-
Supply of goods
2,010,384
-
1,290,368
-
3,300,752
-
Engineering and technical services
397,088
-
-
-
397,088
-
Storage and handling
1,478,412
6,089,172
-
-
7,567,584
-
Inspection
-
606,570
-
-
606,570
-
Repairs of pipes
-
1,481,441
-
-
1,481,441
-
Supply of electricity
-
-
-
224,212
224,212
-
Others
-
-
-
-
-
166,320
20,232,791
8,177,183
1,290,368
224,212
29,924,554
166,320
Timing of revenue recognition
Transferred over time
18,222,407
8,177,183
-
224,212
26,623,802
166,320
Point in time
2,010,384
-
1,290,368
-
3,300,752
-
20,232,791
8,177,183
1,290,368
224,212
29,924,554
166,320
*See note 9
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
54
10 Revenue (continued)
10.2 Contract balances
The following table provides information about assets and liabilities from contracts with customers.
31 December 2022
31 December 2021
€
€
Current contract assets relating to unbilled revenue, net of loss allowances
183,335
202,286
Current contract liabilities relating to payment made in advance by customers
90,267
193,853
The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional.
10.3 Revenue recognized in relation to contract liabilities
The table below shows how much revenue recognized in the reporting period relates to carried-forward contract liabilities.
2022
2021
€
€
Revenue recognized that was included in the contract liability balance at the beginning of the period
193,853
209,349
10.4 Revenue recognised in the Company comprise of dividend income amounting to €6,863,500 (note 24.4).
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
55
11 Other income and other expenses
The Group
2022
2021**
Notes
€
€
Income from investments at FVTPL
-
8,257
Release of translation reserve to profit and loss*
513,479
-
Exchange differences arising from operating activities
2,155,238
1,840,289
Net change in fair value of financial assets at fair value
through profit or loss
26
(1,105,875)
309,087
Loss on disposal of property, plant and
equipment
16
(325,303)
(388,933)
Loss on lease modification
36
(141,784)
-
1,095,755
1,768,700
*
* During the year the subsidiary Regis Shipping Limited having a USD functional currency was liquidated and an amount of €513,479 relating to the cumulative translation reserves relating to the subsidiary was released to profit and loss.
** The Group previously presented impairment and reversal of impairment on intangible assets and goodwill and property, plant and equipment in other income and other expenses. However, management has considered the nature of these impairments and concluded that it is more relevant to present them within cost of sales since these assets are directly linked to the generation of income of the Group. A net total amount of €7,099,987 relating to impairment and reversal of impairment of intangible assets, goodwill and property, plant and equipment for the year ended 31 December 2021, has been reclassified from other income and other expense to cost of sales.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
56
12 Expenses by nature
12.1
The Group
The Company
Notes
2022
2021
2022
2021
€
€
€
€
Direct cost of services
31,566,216
11,379,357
-
-
Consumables
34,313
92,091
-
-
Employee benefits
13
13,901,480
7,707,219
443,727
366,364
Depreciation
16, 36
7,627,211
4,382,060
-
-
Amortisation of intangible assets
18
2,056,371
1,145,241
-
-
Administration fees
503,435
-
9,236
3,404
Professional fees
2,616,652
1,349,664
377,985
777,942
Listing expenses
89,533
75,043
89,533
94,701
Rental expense
36
430,451
244,606
-
-
Travelling and telecommunications
537,574
337,622
12,562
1,630
Impairment loss on intangible assets
18
1,774,446
910,193
-
-
Impairment loss on goodwill
18
372,295
1,031,280
-
-
Impairment losses on investments in subsidiaries
-
-
1,521,666
4,351,654
Net impairment loss on PPE
16
515,210
5,415,890
-
-
Reversal of impairment loss on property, plant and
equipment
16
-
(128,688)
-
-
Write-down of value of PPE transferred to assets held for
sale
16
-
154,672
-
-
(Reversal)/Impairment losses on amounts due by joint venture
-
-
(378)
7,075
Repairs and maintenance
1,757,202
1,139,841
-
-
Insurance
1,111,740
808,571
30,866
12,951
Security services
360,873
185,689
-
-
Staff welfare
1,453,558
941,341
-
-
Other
1,804,031
1,507,258
24,071
19,317
Total cost of sales and
administrative expenses
68,512,591
38,678,950
2,509,268
5,635,038
Categorised as follows:
Cost of sales
56,108,752
29,781,188
-
-
Administrative expenses
12,403,839
8,897,762
2,509,268
5,635,038
Total cost of sales and
administrative expenses
68,512,591
38,678,950
2,509,268
5,635,038
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
57
12 Expenses by nature (continued)
12.2 The total fees charged to the Group and the Company by the independent auditors during 2022 and connected network firms can be analysed as follows:
2022
The Group
The Company
€
€
Auditors’ remuneration
359,000
130,000
Tax advisory services
-
-
Other non-audit services
-
-
359,000
130,000
2021
The Group
The Company
€
€
Auditors’ remuneration
561,000
130,000
Tax advisory services
-
-
Other non-audit services
-
-
561,000
130,000
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
58
13 Personnel expenses
Personnel expenses incurred by the Group during the year are analysed as follows:
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Wages and salaries
12,246,182
6,950,909
233,426
195,045
Social security contributions
366,033
238,467
-
-
Maternity fund
4,867
-
-
-
Government grant - COVID-19
employment aid
-
(8,050)
-
-
Other statutory contributions
94,407
40,232
-
-
12,711,489
7,221,558
233,426
195,045
Directors’ emoluments:
Salaries
998,269
400,111
24,710
-
Fees
191,722
85,550
185,591
171,319
1,189,991
485,661
210,301
171,319
835,986
485,661
105,591
171,319
13,901,480
7,707,219
443,727
366,364
The weekly average number of persons employed by the Group during the year was as follows:
2022
2021
No.
No.
Operating
660
561
Management and administration
56
48
716
609
The Company had no employees during the current and comparative year. Employee benefits in note 12.1 represent salaries recharged to the Company by one of its subsidiaries.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
59
14 Finance income and finance costs
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Interest receivable from banks
343,864
56,508
-
-
Interest receivable from subsidiaries
-
-
1,476,763
2,072,516
Foreign exchange gain on non-operating activities
4,635,645
2,369,833
-
618,945
Finance income
4,979,509
2,426,341
1,476,763
2,691,461
Interest payable on bank loans
(105,781)
(109,672)
-
-
Other bank interest payable
(90,944)
(42,886)
-
-
Interest payable to note holders
(2,853,702)
(1,521,817)
(2,763,524)
(2,776,928)
Interest payable to subsidiaries
-
-
(68,818)
-
Interest on leases
(964,943)
(466,826)
-
-
Foreign exchange loss on non-operating activities
-
(248,875)
(281,685)
(718,888)
Finance costs
(4,015,370)
(2,390,076)
(3,114,027)
(3,495,816)
Net finance income / (costs)
964,139
36,265
(1,637,264)
(804,355)
The Group previously presented net changes in fair value of financial assets at FVTPL as finance income. However, management considered it to be more relevant to present any gain or loss on fair value of these investments as ‘other income and other expenses’ since these investments are held for trading purposes and consist mainly of listed equity securities. Prior year comparative for the year ended 31 December 2021 has been restated by reclassifying fair value gain on FVTPL amounted to €309,087 from finance income to other income and other expense.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
60
15 Tax expense
15.1 Recognised in the statement of profit or loss
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Current tax expense
Current year
(168,446)
(110,630)
(147)
(147)
(168,446)
(110,630)
(147)
(147)
Deferred tax movement
Movement in temporary differences
689,951
168,192
-
-
Tax credit/ (expense)
521,505
57,562
(147)
(147)
15.2 The tax expense for the year and the result of the accounting loss multiplied by the tax rate applicable in Malta, the Company’s country of incorporation, are reconciled as follows:
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Profit/(Loss) before tax
23,371
(7,360,698)
2,716,968
(19,406,746)
Tax using the domestic tax rate
(8,180)
2,576,244
(950,939)
6,792,361
Tax effect of:
Disallowed expenses
2,517,937
(3,583,767)
(1,451,975)
(6,793,049)
Difference in tax rates
4,897,736
351,119
541
541
Exempt income
(6,146,017)
713,966
2,402,226
-
Tax effect of unrecognised deferred
tax asset
(739,971)
-
-
-
Tax credit/(expense)
521,505
57,562
(147)
(147)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
61
15 Tax expense (continued)
15.3 Recognised in the income statement
The applicable tax rate during the current year is the statutory local income tax rate of 35% for income generated in Malta.
The tax expense on continuing operations excludes the tax income/(expense) from the discontinued operation of €Nil (2021: €167,886).
The results from operations in Cyprus and Egypt are subject to the statutory local income tax of 12.5% and 22.5% respectively. The Company’s subsidiary in the Sohar Free Zone in the Sultanate of Oman is exempt from income tax for a period of 5 years starting from 15 January 2022 and it is permissible to extend the exemption for consecutive periods of five years up to a maximum of twenty-five years until 2037 according to the procedures set in the concession agreement and subject to achieving the required Omanisation levels. Management is confident that it will be able to obtain and claim tax exemption for the aforementioned and following tax periods. Hence, no provision for income tax has been made in these financial statements.
The Company’s subsidiary in the Special Economic Zone in Duqm in the Sultanate of Oman is exempt from income tax for a period of 30 years starting from 1 November 2017. The Company’s subsidiaries in the U.A.E. and Southern Iraq are exempt from income tax.
The Company’s subsidiary, Medserv Operations Limited is eligible to the incentives provided by regulations 5, 31 and 32 of the Business Promotion Regulations, 2001 (“BPRs”) and regulation 4 of the Investment Aid Regulations (“IARs”) in Malta (see note 19.4).
The results from operations in Mauritius, Mozambique, Uganda, Angola and South Africa are subject to income tax at the rate of 15%, 32%, 30% 25%and 27% respectively. The Company is not subject to tax as per the tax regime in Seychelles applicable to international businesses incorporated in Seychelles. It is only subject to tax on incomes derived in Seychelles.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
62
16 Property, plant and equipment – The Group
16.1 Reconciliation of carrying amount
Total
Land and buildings
Base improvements
Plant and equipment
Photovoltaic
farm
Cargo carrying units
Furniture
and fittings
Office and computer equipment
Motor vehicles
Assets under construction
€
€
€
€
€
€
€
€
€
€
Cost
Balance at 1 January 2021
18,607,407
2,282,324
-
14,795,495
-
-
126,469
131,525
1,271,594
-
Acquisitions through business combinations (see note 6.3)
31,782,880
10,334,310
3,244,800
14,691,734
2,525,884
683,349
198,348
42,463
61,992
-
Additions
1,977,229
266,622
183
1,623,162
-
-
61,603
25,659
-
-
Assets classified as held for sale
(30,248)
-
-
(30,248)
-
-
-
-
-
-
Write-offs
(571,974)
-
-
(564,717)
-
-
-
-
(7,257)
-
Disposals
(855,970)
-
-
(855,323)
-
-
-
(647)
-
-
Adjustments for assets distributed to owners (see note 8.4)
(5,400,832)
(555,732)
-
(4,344,442)
-
-
(82,709)
(45,533)
(372,416)
-
Exchange difference
3,631,081
749,791
58,781
2,563,171
-
-
12,865
14,623
231,850
-
Balance at 31 December 2021
49,139,573
13,077,315
3,303,764
27,878,832
2,525,884
683,349
316,576
168,090
1,185,763
-
Balance at 1 January 2022
49,139,573
13,077,315
3,303,764
27,878,832
2,525,884
683,349
316,576
168,090
1,185,763
-
Additions
2,647,142
221,847
33,559
1,456,882
-
-
56,098
33,762
106,285
738,709
Disposals
(3,200,997)
-
(3,500)
(3,177,290)
-
-
-
-
(20,207)
-
Exchange difference
1,632,316
229,817
87,265
1,244,318
-
-
3,723
3,611
63,582
-
Balance at 31 December 2022
50,218,034
13,528,979
3,421,088
27,402,742
2,525,884
683,349
376,397
205,463
1,335,423
738,709
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
63
16 Property, plant and equipment – The Group (continued)
16.1 Reconciliation of carrying amount (continued)
Total
Land and buildings
Base improvements
Plant and equipment
Photovoltaic
farm
Cargo carrying units
Furniture
and fittings
Office and computer equipment
Motor vehicles
€
€
€
€
€
€
€
€
€
Depreciation and impairment losses
Balance at 1 January 2021
7,657,729
66,622
-
6,391,211
-
-
76,513
104,601
1,018,782
Charge for the year
2,653,168
304,013
233,113
1,658,388
52,310
108,051
57,925
27,305
212,063
Adjustments for assets classified as held for sale
(13,062)
-
-
(13,062)
-
-
-
-
-
Impairment loss
5,287,202
1,483,844
418,216
3,370,818
-
-
5,601
1,461
7,262
Adjustments for assets distributed to owners (see note 8.4)
(3,164,591)
-
-
(2,711,300)
-
-
(69,919)
(45,533)
(337,839)
Disposals adjustments
(297,417)
-
-
(297,298)
-
-
-
(119)
-
Write-offs
(219,146)
-
-
(211,889)
-
-
-
(7,257)
-
Exchange differences
1,183,964
25,089
4,297
948,537
-
-
10,929
17,612
177,500
Balance at 31 December 2021
13,087,847
1,879,568
655,626
9,135,405
52,310
108,051
81,049
98,070
1,077,768
Balance at 1 January 2022
13,087,847
1,879,568
655,626
9,135,405
52,310
108,051
81,049
98,070
1,077,768
Charge for the year
3,974,151
607,215
478,315
2,341,573
197,712
193,614
30,757
33,242
91,723
Impairment loss
986,695
358,015
-
628,680
-
-
-
-
-
Reversal of impairment loss
(471,485)
-
-
(471,485)
-
-
-
-
Disposals adjustments
(1,225,984)
-
(3,194)
(1,212,777)
-
-
-
-
(10,013)
Exchange difference
532,101
60,337
15,593
414,542
-
-
(1,973)
(13,940)
57,542
Balance at 31 December 2022
16,883,325
2,905,135
1,146,340
10,835,938
250,022
301,665
109,833
117,372
1,217,020
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
64
16 Property, plant and equipment – The Group (continued)
16.1 Reconciliation of carrying amount (continued)
Total
Land and buildings
Base improvements
Plant and equipment
Photovoltaic
farm
Cargo carrying units
Furniture
and fittings
Office and computer equipment
Motor vehicles
Assets under construction
€
€
€
€
€
€
€
€
€
€
Carrying amounts
At 1 January 2021
10,949,678
2,215,702
-
8,404,284
-
-
49,956
26,924
252,812
-
At 31 December 2021
36,051,726
11,197,747
2,648,138
18,743,427
2,473,574
575,298
235,527
70,020
107,995
-
At 31 December 2022
33,334,709
10,623,844
2,274,748
16,566,804
2,275,862
381,684
266,564
88,091
118,403
738,709
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
65
16 Property, plant and equipment – The Group (continued)
16.2 Certain Group’s buildings and base improvements having a carrying amount of €8,446,649 (2021: €8,711,036) are situated on land held under title of temporary emphyteusis (see note 36.1.1).
16.3 Commitments
At 31 December 2022, the Group had no contractual commitments (2021: €nil).
16.4 Security
At 31 December 2021, the Group’s emphyteutical rights on the Medserv site at the Malta Freeport at the Port of Marsaxlokk (refer to note 36) were subject to a general hypothec and a special hypothec in relation to the Secured Notes issued by the Company and bank borrowings by the Group (refer to note 31.3).
16.5 Reversal of previously recognised impairment loss and disposal of property, plant and equipment
In 2022, the Group sold plant and equipment, including its vessel which was part of the Chartering of Vessels segment which was discontinued during the year. An amount of €471,485 relating to previously recognised impairment loss on the vessel was reversed and recognised in cost of sales prior to the disposal. Property, plant and equipment with a carrying value of €1,975,013 (2021: €558,553) was disposed of for a cash consideration of € 1,649,710 (2021: €169,620). The net loss on these disposals were recognised in other income and other expense in profit or loss.
During 2021 the Group recognised a reversal of previously recognised impairment loss of €128,688 following an impairment assessment of certain assets. The reversal of previously recognised impairment was recorded in profit or loss under ‘cost of sales’.
16.6 Impairment test
At reporting date, as a result of the losses sustained in the current and/or comparative years and in consideration of the following risk factors:
•global and regional political and economic uncertainties, particularly with the current geopolitical situation in Europe which resulted to an increasing inflationary environment;
•concentration risk due to the dependency on a few customers; and
•increased volatility in oil and gas prices and related demand for oil and gas and their impact on the customers’ business activity
Indicators of impairment were identified on the property, plant and equipment pertaining to the operations of the following subsidiaries:
(i)Medserv Operations Limited (“Medserv Operations”)
(ii)Regis Mozambique Limitada (“Regis Mozambique”)
(iii)Regis Uganda Limited (“Regis Uganda”)
(iv)Medserv Egypt Oil and Gas Services J.S.C. (“Medserv Egypt”)
(v)Middle East Tubular Services (Iraq) Limited ("METS Iraq")
(vi)Middle East Tubular Services Limited ("METS UAE")
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
66
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
In 2021, property, plant and equipment pertaining to the operations of the following subsidiaries were subject to impairment assessment as indicators of impairment were identified:
(i)Middle East Tubular Services Limited ("METS UAE")
(ii)Middle East Tubular Services LLC (FZC) (“METS Oman”)
(iii)Middle East Tubular Services (Iraq) Limited ("METS Iraq")
(iv)Medserv Operations Limited (“Medserv Operations”)
(v)Medserv Egypt Oil and Gas Services J.S.C. (“Medserv Egypt”)
(vi)Medserv (Cyprus) Limited (“Medserv Cyprus”)
(vii)Regis Mozambique Limitada (“Regis Mozambique”)
(viii)Regis Uganda Limited (“Regis Uganda”)
The recoverable amounts of individual assets tested for impairment are determined using fair value less costs of disposal (FVLCD) or value in use (depending on which assessment resulted in a higher recoverable amount) and are allocated to the Cash Generating Units (CGU) or groups of CGUs to which they form part. The table below provides information about the CGUs and the subsidiaries to which the individual assets are allocated in determining the recoverable amounts.
Subsidiaries
CGU
Descriptions
Regis Mozambique
Mozambique Logistics
Plant and equipment comprising heavy lifting equipment and transport vehicles for ILSS in Mozambique
Regis Uganda
Uganda Logistics
Plant and equipment comprising heavy lifting equipment and transport vehicles for ILSS in Uganda
Medserv Operations
Logistics Hub
Building and property improvements, plant and equipment comprising heavy lifting equipment and transport vehicles for ILSS in Malta
UAE Materials Management
Plant and equipment comprising heavy lifting equipment in UAE
METS UAE
Machine shop
Building and property improvements, plant and equipment comprising machine shop and lifting equipment and transport vehicles in UAE
METS Iraq
Iraq Yard Hub
Property improvements
Egypt logistics
Plant and equipment comprising heavy lifting equipment and transport vehicles in Egypt
Medserv Egypt
Egypt Materials management
Plant and equipment comprising heavy lifting equipment in Egypt
Medserv Cyprus
Cyprus Logistics
Property improvements, plant and equipment comprising heavy lifting equipment and transport vehicles for ILSS in Cyprus
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
67
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
As a result of the impairment assessments carried out by management on the respective CGU at a subsidiary level, the following impairment losses were recognised during 2022. The table below provide information on CGUs where the recoverable amount approximates the carrying amount of the CGU at the reporting date.
Base
Assets class impaired
Operating segment
CGU
Carrying amount (gross of impairment)
Impairment
Carrying amount
(net of impairment)
Recoverable
amount
Methodology
€
€
€
€
Medserv Operations Ltd
Buildings and property improvements
ILSS
Logistics hub
12,272,072
339,981
11,932,091
11,932,091
FVLCD
Regis Mozambique
Buildings and plant and equipment
ILSS
Mozambique Logistics
5,765,927
337,529
5,428,398
5,428,398
FVLCD
Regis Uganda
Plant and equipment
ILSS
Uganda Logistics
1,293,128
309,185
983,943
983,943
FVLCD
ILSS
Egypt logistics
4,033,443
-
4,033,443
4,033,443
VIU
Medserv Egypt
Buildings, base improvements, plant and equipment, motor vehicles
ILSS
Egypt materials management
852,108
-
852,108
852,108
VIU
METS Iraq
Buildings, base improvements, plant and equipment, motor vehicles
OCTG
Iraq Yard Hub
527,050
-
527,050
527,050
VIU
OCTG
UAE machine shop
1,892,187
-
1,892,187
1,892,187
VIU
METS UAE
Buildings, base improvements, plant and equipment, motor vehicles
OCTG
UAE materials management
1,727,100
-
1,727,100
1,727,100
VIU
Total
28,363,015
986,695
27,376,320
27,376,320
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
68
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
Consequently, these assets were tested for impairment. The following impairment losses were recognised in 2021:
Base
Assets class impaired
Operating segment
CGU
Carrying amount (gross of impairment)
Impairment
Carrying amount
(net of impairment)
Recoverable amount
Methodology
€
€
€
€
Medserv Operations
Buildings, base improvements, plant and equipment, motor vehicles
ILSS
Logistics hub
14,344,248
1,394,211
12,950,037
12,968,985
FVLCD
METS UAE
Buildings, base improvements, plant and equipment, furniture and fittings, motor vehicles, office & computer equipment
OCTG
UAE CGU
2,571,644
412,510
2,159,134
2,159,134
FVLCD
METS Iraq
Buildings, base improvements, plant and equipment, furniture and fittings, office & computer equipment
OCTG
IRAQ CGU
2,863,180
430,409
2,432,771
2,432,771
FVLCD
METS Oman
Buildings, base improvements, plant and equipment, furniture and fittings, office & computer equipment
OCTG
OMAN CGU
167,240
25,086
142,154
142,154
FVLCD
Medserv Cyprus
Base improvements, plant and equipment, furniture and fittings, office & computer equipment
ILSS
Cyprus CGU
1,791,810
143,458
1,648,352
1,648,352
FVLCD
Medserv Egypt
Plant and equipment, furniture and fittings, motor vehicles
ILSS
Egypt CGU
5,365,757
1,078,014
4,287,743
4,287,743
FVLCD
Regis Mozambique
Buildings, plant and equipment, and motor vehicles
ILSS
Mozambique Logistics
6,852,583
1,154,144
5,698,439
5,698,439
FVLCD
Regis Uganda
Plant and equipment
ILSS
Uganda Logistics
1,657,166
229,977
1,427,189
1,564,033
FVLCD
Regis Shipping
Plant and equipment
ILSS
Shipping Logistics
1,720,960
419,393
1,301,567
1,301,567
FVLCD
Total
37,334,588
5,287,202
32,047,386
32,203,178
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
69
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
A total impairment loss of €986,695 (2021: €5,287,202) was recognised as per above table and recorded in ‘cost of sales’.
Fair value less cost of disposal (FVLCD)
In determining the FVLCD, the fair value of the individual assets was categorised as Level 2 for plant and equipment and Level 3 for land and buildings in the fair value hierarchy. For plant, equipment and buildings, management estimated recoverable amount of these assets by using the Depreciated Replacement Cost (DRC) valuation model. With respect to land, the fair value was determined with reference to market price for comparable assets. The valuation model considers market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
The key inputs used by management in determining the recoverable amounts using FVLCD were:
-the economic useful life of the non-current assets;
-the inflation rate; and
-market prices for comparable assets.
The table below sets out the key assumptions used by management in determining the recoverable amount of the CGU to which the assets were allocated where significant impairment was recognised or indicators of impairment were identified during 2022.
Key Inputs
CGU
Recoverable amounts
€
Economic Useful life
Average Inflation rate
Logistics hub
11,932,091
6-50 years
1.2%
Mozambique Logistics
5,428,398
5 years
N/A
Uganda Logistics
983,943
10 years
N/A
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
70
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
The table below provide information about the key inputs and assumptions used by management in determining the recoverable amount of the CGUs or group of CGUs to which the assets were allocated during 2021.
Key Inputs
CGU
Recoverable amounts
€
Economic Useful life
Inflation rate
Logistics hub
12,968,985
8 to 50 years
2.50%
UAE Machine shop
2,159,134
15 to 25 years
1.01%
Iraq Yard Hub
2,432,771
10 to 20 years
3.22%
Oman Sohar Hub
142,154
10 years
5.9%
Cyprus Logistics Hub
1,648,352
15 years
0%
Egypt Logistics
4,287,743
5 to 15 years
5%
Mozambique Logistics
5,698,439
5 to 50 years
5.69%
Uganda Logistics
1,564,033
10 years
2.20%
Shipping Logistics
1,301,567
10 years
n/a
The table below provides a sensitivity of the recoverable amounts of the CGU using the FVLCD to possible shifts in key assumptions as at 31 December 2022 and 31 December 2021 for those CGU where an impairment was recognised or indicators of impairment was identified.
Key Inputs
CGU
Depreciation rate
(+/- 10 %)
Inflation rate
(+/- 0.5%)
€
€
31 December 2022
Logistics hub
- / + 1.19 mil
+ / - 4.0 mil
Mozambique Logistics
- / + 0.55 mil
N/A
Uganda Logistics
- / + 0.10 mil
N/A
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
71
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
Key Inputs
CGU
Depreciation rate
(+/- 10%)
Inflation rate
(+/- 0.5%)
€
€
31 December 2021
Logistics Hub
- / + 1.30 mil
+ / - 19k
UAE Machine shop
- / + 0.22 mil
+ / - 2k
Iraq Yard Hub
- / + 0.24 mil
n/a
Oman Sohar Hub
- / + 0.01 mil
n/a
Cyprus Logistics Hub
- / + 0.16 mil
n/a
Egypt Logistics
- / + 0.43 mil
n/a
Mozambique Logistics
- / + 0.57 mil
n/a
Uganda Logistics
- / + 0.16 mil
n/a
Shipping Logistics
- / + 0.13 mil
n/a
Value in use (VIU)
The key inputs under the VIU assessment comprise future cash flows, growth rates and discount rates. The client has developed models which estimate the recoverable amount for each asset factoring these inputs. The resulting fair values are also challenged and approved by the Board before being reflected in the Group consolidated financial statements. The valuation models and related inputs are complex, unobservable and subject to inherent estimation uncertainty and therefore, require significant judgement.
The projected free cash flows are based on budget approved by the directors and are based on a period which is determined in reference to the term of the underlying direct contract with specific customer. The free cash flows have been projected for a period ranging between 3 to 7 years based on contracts’ terms. Management have determined that the inclusion of the terminal value is not relevant as the free cash flows are determined based on the contract term with the customers.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
72
16 Property, plant and equipment – The Group (continued)
16.6 Impairment test (continued)
The following table sets out the key assumptions used in determining the recoverable amount of the CGUs which was subject to an impairment assessment during the year 2022.
Key Assumptions
CGU
Recoverable amounts
EBITDA Margin
Discount rate
€
%
%
Egypt Logistics
4,033,443
30%
26.5%
Egypt Materials Management
852,108
10%
26.5%
Iraq Yard Hub
527,050
30%
24%
UAE Machine Shop
1,892,187
22%
12%
UAE Materials Management
1,727,100
23%
12%
Management has determined the values assigned to each of the above key assumptions as follows:
EBITDA Margins – Based on past performance and management’s expectations for the future;
Discount rates – Reflect specific risks relating to the relevant CGU, the industry and the countries in which they operate;
The table below provides a sensitivity of the recoverable amounts of the CGU using the VIU to possible shifts in key assumptions as at 31 December 2022 for those CGU where an impairment was recognised or indicators of impairment were identified.
Key Inputs
CGU
EBITDA Margin
+/- 3 %
Discount rate
+/- 1 %
€
€
31 December 2022
Egypt Logistics
- / + 71k
-15k / +16k
Egypt Materials Management
- / + 62k
-19k / +11k
Iraq Yard Hub
- / + 91k
-10k / +11k
UAE Machine shop
- / + 488k
-75k / +78k
UAE Materials management
- / + 157k
-34k / +35k
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
73
17 Other properties – The Group
17.1 Investment property
17.1.1 Reconciliation of carrying amount
Buildings and related costs
€
At 1 January 2021
619,043
Distribution to owners (see note 8.4)
(592,797)
Exchange differences
(26,246)
At 31 December 2021
-
During 2021, following the carved out as part of the business combination with Regis, all investment properties held by the Group were classified as a discontinued operation and were subsequently distributed to the owners (see note 9.4).
17.1.2 Rental income recognised by the Group during 2021 was €73,750 and was included in ‘Discontinued Operations’ (note 9). Maintenance expense, included in ‘Discontinued Operations’ (note 9) in 2021 amounted €6,656.
17.2 Assets held for sale
Assets held for sale amounting to €17,186 as at 31 December 2021 comprise various elements of plant and equipment with a cost of €171,857. These have been transferred from property, plant and equipment and written down to their scrap value in 2021. These assets were disposed during 2022.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
74
18 Intangible assets and goodwill - The Group
18.1 Reconciliation of carrying amount
Total
Goodwill
Trademarks, Tradenames and related assets
Customer
contracts
Notes
€
€
€
€
Cost
Balance at 1 January 2021
2,681,846
2,681,846
-
-
Acquisition through business combination
6.3
24,194,809
10,240,341
1,138,936
12,815,532
Distribution to owners
9.4
(2,681,846)
(2,681,846)
-
-
Balance at 31 December 2021
24,194,809
10,240,341
1,138,936
12,815,532
Balance at 1 January 2022
24,194,809
10,240,341
1,138,936
12,815,532
Balance at 31 December 2022
24,194,809
10,240,341
1,138,936
12,815,532
Amortisation and impairment losses
Balance at 1 January 2021
18.3
2,403,394
2,403,394
-
-
Impairment
12
1,941,473
1,031,280
-
910,193
Amortisation
12
1,145,241
-
-
1,145,241
Distribution to owners
9.4
(2,403,394)
(2,403,394)
-
-
Balance at 31 December 2021
3,086,714
1,031,280
-
2,055,434
Balance at 1 January 2022
3,086,714
1,031,280
-
2,055,434
Impairment
12
2,146,741
372,295
201,934
1,572,512
Amortisation
12
2,056,371
-
-
2,056,371
Balance at 31 December 2022
7,289,826
1,403,575
201,934
5,684,317
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
75
18 Intangible assets and goodwill - The Group (continued)
18.1 Reconciliation of carrying amount (continued)
Total
Goodwill
Trademarks, Tradenames and related assets
Customer
contracts
€
€
€
€
Carrying amounts
Balance at 1 January 2021
278,452
278,452
-
-
Balance at 31 December 2021
21,108,095
9,209,061
1,138,936
10,760,098
Balance at 31 December 2022
16,904,983
8,836,766
937,002
7,131,215
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
76
18 Intangible assets and goodwill – The Group (continued)
18.2 Amortisation
The amortisation and impairment of intangible assets are included in ‘cost of sales’ in the statement of profit or loss and other comprehensive income.
18.3 Distribution to owners
In the comparative year, and as part of the business combination with Regis, the Group distributed the property segment to the previous owners of Regis. Goodwill with carrying amount of €278,452 allocated to the property segment was derecognised as part of this curved out and was distributed together with the property segment (see note 9.4).
18.4 Impairment test
18.4.1 Impairment test for goodwill and intangible assets arising from business combination
Goodwill and intangible assets allocated to CGUs within the Group’s operating segments
Goodwill arising from the reverse acquisition (see note 6) of the Medserv group of companies (‘the Medserv subgroup’) is mainly attributable to future customer contracts, the synergies expected to be achieved from combining the operations of the Medserv subgroup with the Regis group and the skills and technical talent of the Medserv subgroup’s work force. Identifiable intangible assets also arising from the reverse acquisition comprise the Medserv and METS trademarks, tradenames and related assets with an indefinite useful life initially measured at a fair value of €1,138,936 and customer contracts initially measured at a fair value of €12,815,532 relating to the OCTG and ILSS segments of the Medserv subgroup. Management has determined that the trademarks, tradenames and related assets to have an indefinite useful life since based on all relevant factors, there is no foreseeable limit to period over which the assets are expected to generate cash flows. The customer contracts have finite useful lives and are amortised on a straight-line based on the timing of projected cash flows of the contracts over their estimated useful lives.
On the date of the reverse acquisition, the gross carrying amount of goodwill of €10,240,341 has been allocated to the group of CGUs making up the OCTG and ILSS segments based on the fair value of the identified assets and liabilities on business combination since goodwill is monitored by management at the level of the operating segments. For the purposes of testing the impairment of goodwill and intangible assets, CGUs are grouped based on geographic area. Malta, Cyprus, Egypt and Morocco are grouped under the ‘ILSS segment’. Oman, Iraq and UAE are grouped under the ‘OCTG segment’.
Goodwill has been capitalised as an intangible asset, and an impairment assessment is carried out at least annually for the goodwill and the trademarks, tradenames and related assets with an indefinite useful life, and whenever there is an indicator of impairment on all intangibles including the customer contracts. For the purposes of impairment testing, a segment-level summary of the goodwill and the intangible assets allocation before any impairment during the year is presented as follows.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
77
18 Intangible assets and goodwill (continued)
18.4 Impairment test for goodwill and intangible assets arising from business combination (continued)
Goodwill and intangible assets allocated to CGUs within the Group’s operating segments (continued)
Goodwill and intangible assets subject to impairment testing in 2022:
ILSS segment
OCTG segment
Total
€
€
€
Goodwill
7,326,613
1,882,449
9,209,062
Trademarks, tradenames and related assets
791,568
347,368
1,138,936
Customer contracts
1,906,462
6,797,264
8,703,726
11,509,570
10,508,718
22,018,288
Goodwill and intangible assets subject to impairment testing in 2021:
ILSS segment
OCTG segment
Total
€
€
€
Goodwill
8,357,892
1,882,449
10,240,341
Trademarks, tradenames and related assets
791,568
347,368
1,138,936
Customer contracts
2,481,196
8,278,901
10,760,097
12,540,849
10,508,718
23,049,567
18.4.2 Valuation approaches
Value in use (‘VIU’)
The Group tests whether goodwill has suffered any impairment on an annual basis. For the 2022 reporting period, the recoverable amount of the ILSS and OCTG segments was determined based on value in use calculations which require the use of assumptions. The calculations use cash flow projections that are based on financial budgets and business plans prepared by management and approved by the Board of Directors. The budgets and business plans are updated to reflect the most recent developments as at the reporting date. Management’s expectations reflect performance to date and are based on its experience and consistent with the assumptions that a market participant would make.
The VIU is determined by discounting the expected future cash flows to be generated from the continuing use of the individual CGUs within the ILSS and OCTG segments.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
78
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.2 Valuation approaches (continued)
Value in use (‘VIU’) (continued)
Key assumptions and inputs
The businesses of the CGUs underlying the ILSS and OCTG segments are subject to the following risks:
▪global and regional political and economic uncertainties, the current geopolitical situation in Europe, inflationary pressure, currency and interest rate volatility;
▪the concentration risk due to dependency on a few customers; and
▪the volatility in oil and gas prices and related demand for oil and gas and their impact on the customers business activity.
Due to the increase in the level of uncertainty, the VIU was estimated using a discounted cash flow (DCF) analysis applying the expected cash flow approach. This approach uses multiple cash flow projections taking into consideration assumed probabilities of future events and/or scenarios instead of a single cash flow scenario.
While many scenarios and probabilities may exist, management believes that three scenarios (base case, upside and downside) generally reflect a representative sample of possible outcomes under the VIU approach.
For each scenario, management has assigned probability weights. The recoverable amount was estimated by calculating the present value of the probability-weighted expected cash flows.
For the base case, the cash flow projections for projects-related CGUs considered specific estimates for the expected duration of the projects. The other CGUs’ cash flow projections included specific estimates up to 2060.
-Scenarios and probability weights: Management has subjectively assigned probability weights to each scenario based on its experience and its expectations for the economy following the COVID-19 pandemic. Management believes that the probability weight assignment presents a reasonable assessment of the likelihood of the scenarios, taking into account the potential of improved market conditions on the upside and an extended inflationary pressure, currency and interest rate volatility and reduced level of business activity assuming volatility in oil and gas prices and related demand for oil and gas, on the downside.
-Discount rates: The discount rates used are the weighted-average cost of capital (WACC). The discount rate does not reflect risks for which the estimated cashflow have been adjusted. The discount rate under the VIU is a pre-tax measure based on the CGU-specific, adjusted for currency and country risk relevant to the individual CGU. The discount rate under the FVLCD was a post-tax measure estimated based on the weighted-average cost of capital.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
79
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.2 Valuation approaches (continued)
Value in use (‘VIU’) (continued)
-Revenue growth rate: This was projected taking into account estimates of sales volumes and price growth for the duration of the projections including probability-weighted expectations for large accounts and uncontracted business.
-EBITDA margin: EBITDA margin was based on management’s expectations of market developments and future outcomes, taking into account past performance. It was assumed that sales prices would increase in line with forecast inflation over the projected period.
Fair Value Less Costs of Disposal (‘FVLCD’)
In the prior year, the recoverable amount for the Malta-based CGUs within the ILSS segment was based on the Fair Value Less Costs of Disposal (‘FVLCD’).
The FVLCD in the prior year for the Malta-based CGU was determined by discounting to present value the future cash flows expected to be derived from the CGU by a market participant from both the continuing use and ultimate disposal of the CGU. Costs of disposal are incremental costs directly attributable to the disposal of the CGU.
Under the FVLCD approach in the prior year, the fair value element is measured under the income approach, which converts future amounts, such as cash flows or income streams which reflect current market expectations about those future amounts, to a current amount discounted to present value on the measurement date. The costs of disposal were assumed to be 3%. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the valuation technique used.
18.4.3 Goodwill
The key assumptions used in the estimation of VIU are as follows.
2022
Goodwill
ILSS
segment
VIU
OCTG segment
VIU
Discount rates, range
Weighted average discount rates
16.0% - 34.8%
26.0%
12.0% - 24.0%
16.1%
Weighted average EBITDA margin
31.4%
41.9%
Extrapolation growth rate
2.0%
2.0%
Weighted average annual revenue growth rate
10.5%
1.5%
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
80
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.3 Goodwill
The probability weights for the applied scenarios are as follows:
2022
Goodwill
ILSS
segment
VIU
OCTG
segment
VIU
Base case scenarios range
Base case scenarios average
50%-80%
60.4%
60%
60.0%
Upside scenarios range
Upside scenarios average
10% - 25%
19.8%
20%
20.0%
Downside scenarios range
Downside scenarios average
10% - 25%
19.8%
20%
20.0%
Impairment losses
The recoverable amount of the group of CGUs under the ILSS segment was lower than their carrying amount by approximately €372,295 and therefore an impairment loss was recognised in profit or loss during 2022. In prior year, the recoverable amount of the group of CGUs under the ILSS segment was lower than their carrying amount by approximately €1,031,280 and an impairment loss was recognised in profit or loss during 2021. The impairment loss of €372,295 (2021: €1,031,280) was fully allocated to goodwill and is included in ‘cost of sales’.
The estimated recoverable amount of the group of CGUs under the OCTG segment exceeded their carrying amount by approximately €12.4 million (2021: €1.04 million) and thus no impairment loss was recognised.
Sensitivity analysis
The following table shows the amount by which these assumptions would need to change individually across the CGUs within the OCTG segment for the estimated recoverable amount of those CGUs to be equal to the carrying amount.
31 December 2022
Change required
CGUs under
OCTG segment
Goodwill
Discount rate
+12.00%
EBITDA margin
-9.13%
Pessimistic scenario increase/ base scenario decrease
+127.4%/-127.4%
Therefore, any further adverse movement in the above key assumptions would lead to impairment on the goodwill allocated to the CGUs under the OCTG.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
81
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.4 Trademarks, tradenames and other related assets
The key assumptions used in the estimation of VIU are as follows.
2022
Trademark and Tradenames and other related assets
ILSS
segment
VIU
OCTG segment
VIU
Discount rates, range
Weighted average discount rates
14.0% - 28.5%
16.9%
14.0% - 26.0%
18.0%
Extrapolation growth rate
2.0%
2.0%
The probability weights for the applied scenarios are as follows:
2022
Trademark and Tradenames and other related assets
ILSS
segment
VIU
OCTG
segment
VIU
Base case scenarios range
Base case scenarios average
50%-80%
60.4%
60%
60.0%
Upside scenarios range
Upside scenarios average
10% - 25%
19.8%
20%
20.0%
Downside scenarios range
Downside scenarios average
10% - 25%
19.8%
20%
20.0%
Impairment losses
The recoverable amount of the group of CGUs under the ILSS segment with respect to the trademark and tradenames and other related assets was lower than their carrying amount by approximately €201,934 and therefore an impairment loss was recognised in profit or loss during 2022. The impairment loss of €201,934 (2021: €nil) is included in ‘cost of sales’.
The estimated recoverable amount of the group of CGUs under the OCTG segment with respect to the trademark and tradenames and other related assets was equal to their carrying amount and thus no impairment loss was recognised.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
82
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.5 Customer contracts
Customer contracts was assessed by determining the recoverable amount of the CGUs to which it was allocated. The Cyprus Logistics CGU comprises offshore logistics support services contract in Cyprus with a major international energy company while Egypt Facilities Management CGU comprises integrated facilities management service contract in Egypt with a major international energy company. Both CGUs form part of the ILSS segment.
The key assumptions used in the estimation of VIU are as follows.
Key assumptions and inputs
2022
Customer contracts
Cyprus Logistics
CGU
VIU
Egypt Facilities Management CGU
VIU
Discount rates
16.8%
34.8%
Weighted average EBITDA margin
88.0%
30.0%
Extrapolation growth rate
2.0%
0.0%
Weighted average annual revenue growth rate
(45.4%)
1.1%
The probability weights for the applied scenarios are as follows:
2022
Customer contracts
Cyprus Logistics
CGU
VIU
Egypt Facilities Management CGU
VIU
Base case scenarios
60.4%
60.0%
Upside scenarios
19.8%
20.0%
Downside scenarios
19.8%
20.0%
Impairment losses
The recoverable amount of the customer contracts allocated to Cyprus Logistics CGU and Egypt Facilities Management CGU was lower than their carrying amount by approximately €48,337 and €1,524,175, and therefore an impairment loss was recognised in profit or loss during 2022. The impairment loss of €1,572,511 (2021: €910,193) is included in ‘cost of sales’.
The estimated recoverable amount of the customer contracts allocated to the group of CGUs under the OCTG segment was not subject to impairment assessment as there were no indicators of impairment.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
83
18 Intangible assets and goodwill (continued)
18.4 Impairment test (continued)
18.4.5 Comparative disclosures
In the prior year, the recoverable amount of the goodwill, trademark and tradenames and other related assets and customer contracts were assessed for impairment using both the VIU and FVLCD as follows.
Key assumptions and inputs
2021
Goodwill and Trademarks, Tradenames and related assets
ILSS
segment
FVLCD
ILSS
segment
VIU
OCTG segment
VIU
Discount rates, range
Weighted average discount rates
8.0% - 9.5%
8.1%
11.5% - 23.4%
18.2%
10.0% - 18.0% 12.4%
Weighted average EBITDA margin
38.6%
34.0%
36.8%
Extrapolation growth rate
2.0%
2.0%
2.0%
Weighted average annual revenue growth rate
31.1%
2.1%
1.3%
2021
Customer contracts
ILSS
segment
FVLCD
ILSS
segment
VIU
OCTG segment
VIU
Discount rates, range
7.5%
13.5%
11.5%
Weighted average EBITDA margin
35.0%
28.8%
47.7%
Weighted average annual revenue growth rate
32.6%
20.9%
2.4%
2021
Goodwill and Trademarks, Tradenames and related assets and customer contracts
ILSS
segment
FVLCD
ILSS
segment
VIU
OCTG
segment
VIU
Base case scenarios range
Base case scenarios average
60%
60.0%
50%-80%
54.1%
50%
50.0%
Upside scenarios range
Upside scenarios average
20%
19.2%
10%-25%
23.3%
25%
25.0%
Downside scenarios range
Downside scenarios average
10% to 20%
19.2%
10% to 25%
22.6%
25%
25.0%
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
84
19 Deferred tax assets and liabilities
19.1 Deferred tax assets and liabilities are attributable to the following:
The Group
Assets
Liabilities
Net
2022
2021
2022
2021
2022
2021
€
€
€
€
€
€
Property, plant and equipment
-
-
(2,220,955)
(2,028,759)
(2,220,955)
(2,028,759)
Employee benefits
101,082
92,798
-
-
101,082
92,798
Provision for exchange
fluctuations
-
-
(850,424)
(920,165)
(850,424)
(920,165)
Impairment loss on receivables
313,156
326,599
-
-
313,156
326,599
Investment tax credits
9,066,217
9,066,217
-
-
9,066,217
9,066,217
Unabsorbed capital allowances and unutilised tax losses
1,350,575
1,491,887
-
-
1,350,575
1,491,887
Right-of-use assets
-
-
(14,779,530)
(15,149,443)
(14,779,530)
(15,149,443)
Lease liabilities
2,704,246
2,659,908
-
-
2,704,246
2,659,908
Intangible assets
-
-
(323,255)
(867,883)
(323,255)
(867,883)
Others
11,008
11,008
-
-
11,008
11,008
Tax assets/(liabilities)
13,546,284
13,648,417
(18,174,164)
(18,966,250)
(4,627,880)
(5,317,833)
Set-off of tax
(13,546,284)
(13,648,417)
13,546,284
13,648,417
-
-
Net tax liabilities
-
-
(4,627,880)
(5,317,833)
(4,627,880)
(5,317,833)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
85
19 Deferred tax assets and liabilities (continued)
19.2 Movement in temporary differences during the year - The Group
Balance
01.01.22
Acquired through business combination
Recognised in profit and loss
Balance
31.12.22
€
€
€
€
Property, plant and equipment
(2,028,759)
-
(192,196)
(2,220,955)
Employee benefits
92,798
-
8,284
101,082
Provision for exchange fluctuations
(920,165)
-
69,741
(850,424)
Impairment loss on receivables
326,599
-
(13,443)
313,156
Investment tax credits
9,066,217
-
-
9,066,217
Unabsorbed capital allowances and unutilised tax losses
1,491,887
-
(141,312)
1,350,575
Right-of-use assets
(15,149,443)
-
369,913
(14,779,530)
Lease liabilities
2,659,909
-
44,337
2,704,246
Intangible assets
(867,884)
-
544,629
(323,255)
Other
11,008
-
-
11,008
(5,317,833)
-
689,953
(4,627,880)
Balance
01.01.21
Acquired through business combination
Recognised in profit and loss
Balance
31.12.21
€
€
€
€
Property, plant and equipment
-
(2,644,976)
616,217
(2,028,759)
Employee benefits
-
70,512
22,287
92,798
Provision for exchange fluctuations
-
(3,466)
(916,699)
(920,165)
Impairment loss on receivables
-
234,563
92,036
326,599
Investment tax credits
-
9,066,217
-
9,066,217
Unabsorbed capital allowances and unutilised tax losses
-
1,731,935
(240,048)
1,491,887
Right-of-use assets
-
(15,425,573)
276,130
(15,149,443)
Lease liabilities
-
2,730,185
(70,276)
2,659,909
Intangible assets
-
(1,256,430)
388,545
(867,884)
Other
-
11,008
-
11,008
-
(5,486,025)
168,192
(5,317,833)
19.3 Set-off
In accordance with accounting policy 4.19, deferred tax assets and liabilities are offset only if certain criteria are met. The Group offsets deferred tax assets and deferred tax liabilities if, and only if, it has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
As a result, the tax effect of taxable temporary differences in the current year are being offset against deferred tax assets in the statement of financial position.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
86
19 Deferred tax assets and liabilities (continued)
19.4 Recognition of deferred tax asset on investment tax credits
As at 31 December 2022, the Company’s subsidiary, Medserv Operations Limited recognised a deferred tax asset of €9,066,217 to the extent of investment tax credits expected to be utilised in the future. Based on the subsidiary’s profit forecasts for the foreseeable period, and with reference to historical taxable profits and trading levels registered in the past years, the Directors believe that the subsidiary will have sufficient taxable profits in the future against which this deferred tax asset can be utilised. These profit forecasts were based on reasonable assumptions of business growth, including the expected volume of business arising from maintenance projects and the provision of logistic support services to the offshore oil and gas industry during the forecast period. Historic values of similar projects were used to support and quantify the net result of the future projects and services. The extent of utilization of the investment tax credits was based on the assumption that the profit forecasts will be subject to the current tax rate of 35%. The investment tax credits are available in terms of regulation 5 of the BPRs and regulation 4 of the IARs in Malta. None of these investment tax credits, unutilised tax losses and unabsorbed capital allowance are subject to an expiration date.
19.5 Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of:
-Unutilised carry forward tax losses amounting to €10,348,189 (2021: €12,955,487) generated during prior years available to the Group subsidiaries. Certain countries allow tax losses to be carried forward for a maximum period of five years. The tax losses carried forward are available for offset against future tax profits as follows:
Financial year ending
Tax year ending
2022
€
2021
€
31 December 2022
2022/2023
-
981,448
31 December 2023
2023/2024
-
2,066,168
31 December 2024
2024/2025
243,252
562,503
31 December 2025
2025/2026
811,798
1,844,572
31 December 2026
2026/2027
110,608
504,633
31 December 2027
2027/2028
640,001
-
No expiry
8,542,530
6,996,162
10,348,189
12,955,486
No deferred tax asset has been recognized with respect to these tax losses since management are of the opinion that these subsidiaries will not be able to generate sufficient taxable profit against which these losses can be utilized.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
87
20 Inventories
2022
2021
€
€
Goods for resale
49,017
29,159
Spares and accessories
311,180
497,665
Work in progress
189,398
12,975
Raw materials
181,721
526,769
Inventories
731,316
1,066,568
In 2022, inventories amounting to €3,314,562 (2021: €1,707,356) relating mainly to goods for resale and raw materials were recognised as an expense and included in ‘cost of sales’.
21 Trade and other receivables
21.1
The Group
The Company
Notes
2022
2021
2022
2021
€
€
€
€
Current assets
Trade receivables
17,422,498
16,305,959
-
-
Amounts due by subsidiaries
21.2
-
-
40,133
19,558
Other receivables
21.3
9,498,489
2,767,627
7,489,215
240
Prepayments
1,386,040
1,687,792
29,494
13,043
VAT and other tax assets
1,117,049
1,120,226
-
-
Total trade and other receivables
29,424,076
21,881,604
7,558,842
32,841
21.2 The amounts due by subsidiaries at reporting date are unsecured, interest-free and repayable on demand. Transactions with related parties are set out in note 37 to these financial statements.
21.3 Other receivables comprise mainly of an amount of €7.5million receivable from security trustee in respect of the issue of the €13 million, 5% secured bonds 2029 (2021: €Nil) an amount of €1.5 million (2021: €1.5 million) in respect of cash collateral held with reputable bank.
21.4 The Group’s and the Company’s exposure to credit and currency risks and impairment losses relating to trade and other receivables are disclosed in note 35.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
88
22 Loans receivable from related companies
On 25 June 2021, Regis Holdings Limited entered into a loan agreement with Drill Stem Testing International Limited (‘DSTI’) whereby the latter assumed the obligation to settle outstanding loans, totalling $ 6.265 million, that were issued by Regis Holdings Limited to its former subsidiaries and that were subsequently carved out from the combined MedservRegis Group as a result of the business combination which occurred in 2021. The carrying amount of the loan as at 31 December 2021 amounted to € 3,679,558. In addition, the Group had an outstanding loan due by a related company, Thomson and Van Eck International Proprietary Limited ("TVEI") amounting to €467,930 at 31 December 2021. These loans, which were subject to an interest rate based on the United States Federal Funds Rate plus 3% and were fully repaid to the Group during 2022, ahead of the scheduled repayment date of 31 December 2023.
The Group’s exposure to credit risk and the expected credit losses relating to the loan receivables from related companies are disclosed in note 35.
23 Loans receivable from subsidiaries
23.1 The Company
Loans receivables from subsidiaries have the following terms and conditions:
Currency
Nominal interest rate
Year of maturity
2022
€
2021
€
Unsecured loan
EUR
4.50%
2026
20,839,337
21,434,705
Unsecured loan
USD
5.75%
2026
8,562,087
8,244,682
Unsecured loan
EUR
6.00%
2023
9,536,093
9,484,140
Unsecured loan
EUR
6.25%
2023
910,164
910,164
Unsecured loan
EUR
6.00%
2024
1,627,590
1,628,134
41,475,271
41,701,825
Recognition of expected credit losses under IFRS 9 (see note 35.4)
(15,443,485)
(15,443,485)
26,031,786
26,258,340
Non-current
15,585,529
25,348,176
Current
10,446,257
910,164
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
89
23 Loans receivable from subsidiaries (continued)
23.2 In 2021, the loan receivables from subsidiaries were set off against amounts due to subsidiaries amounting to €951,501. The following table presents the recognised financial instruments that are offset as at 31 December 2022 and 31 December 2021. The column ‘net amount’ shows the impact on the Company’s balance sheet.
Effect of offsetting on the balance sheet
Gross amounts
Gross amounts set off in the balance sheet
Net amounts presented in the balance sheet
€
€
€
2021
Financial assets
Loans receivable from subsidiaries
27,209,841
(951,501)
26,258,340
Total
27,209,841
(951,501)
26,258,340
Financial liabilities
Amounts due to subsidiaries (Note 33.1)
6,692,837
(951,501)
5,741,336
Total
6,692,837
(951,501)
5,741,336
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
90
23 Loans receivable from subsidiaries (continued)
23.3 The Company’s exposure to credit and currency risks are disclosed in note 35.
23.4 The two loans with a gross carrying value of €29,401,424 (2021: €29,180,610) and maturing in 2026 were considered to be credit impaired and classified as stage 3. The expected credit losses on these loans amounted to €15,443,485 (2021: €15,443,485) and the net carrying value amounted to €13,957,939 (2021: €13,737,125)
During the year, intercompany balances between the subsidiaries amounting to €405,632 (2021: €1,348,015) were assigned to the Company by way of assignment agreements entered into between the Company and its subsidiaries. A total of €28,364 (2021: €3,150,542) were capitalized during the year.
Loans receivable which are in default, are considered to be credit impaired and are classified as Stage 3 for impairment assessment purposes in accordance with IFRS 9. Any credit losses are measured at the present value of all cash shortfalls. In estimating any shortfalls (and therefore any expected credit loss) on these loans receivable, the Company applied the same projections used in value-in-use analysis prepared in estimating the recoverable amount of the related Company’s investments in subsidiaries as the recoverability of these loans receivable is supported by the same projections and subject to the same risks factors and key assumptions as those underlying the calculation of the recoverable amount of the related investments in subsidiaries. The key assumptions used in assessing the recoverability of these loans receivables and the expected credit losses at the reporting date are disclosed in note 24.4
During 2021, the expected credit loss on the loan receivable from Medserv ME was of €15,443,485, which resulted in an impairment of €13,074,353 being recorded in “Net impairment loss on financial assets” in the statement of profit and loss and other comprehensive income.
During 2021, the expected credit loss on the loans receivable from MEM decreased and as a result an impairment loss reversal of €107,000.
Movements in the Company’s credit loss allowances with respect to loans receivables from subsidiaries are provided in Note 35.
24 Investment in subsidiaries
24.1
Capital subscribed
Capital Contributions
Total
€
€
€
At 1 January 2021
344,333
17,442,113
17,786,446
Acquisition
32,567,396
-
32,567,396
Capitalisation of loans to subsidiaries
-
3,150,542
3,150,542
Return of capital from subsidiaries
-
(12,677)
(12,677)
Impairment losses
-
(4,351,654)
(4,351,654)
At 31 December 2021
32,911,729
16,228,324
49,140,053
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
91
24 Investment in subsidiaries (continued)
24.1(continued)
Capital subscribed
Capital Contributions
Total
€
€
€
At 1 January 2022
32,911,729
16,228,324
49,140,053
Write-off
-
(68,378)
(68,378)
Capitalisation of loans to subsidiaries
-
28,364
28,364
Reversal of Impairment loss
-
68,379
68,379
Impairment losses
(1,517,251)
(28,364)
(1,545,615)
At 31 December 2022
31,394,478
16,228,325
47,622,803
24.2 Capital contributions to subsidiaries relate to loans which were subsequently treated as part of the subsidiaries’ equity by way of support to the subsidiaries. These amounts are unsecured, interest free, with no fixed date of repayment and are repayable at the option of the counterparty. The loans represent the net investments made by the Company in the subsidiaries and are considered equity investments.
24.3 List of subsidiaries and sub-subsidiaries
The subsidiaries and sub-subsidiaries consist of the following:
Ownership interest
Registered office
31.12.22
31.12.21
Nature of business
Paid up
%
%
%
Subsidiaries
Medserv International Limited
Port of Marsaxlokk Birzebbugia
Malta
100.00
100.00
Holding company
25
Medserv Eastern Mediterranean Limited
Port of Marsaxlokk Birzebbugia
Malta
100.00
100.00
Holding company
20
Medserv Africa Limited*
Port of Marsaxlokk Birzebbugia
Malta
-
100.00
Holding company
20
Medserv Libya Limited
Port of Marsaxlokk Birzebbugia
Malta
100.00
100.00
Logistical support and other services
20
* Entity was liquidated during the year.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
92
24 Investment in subsidiaries (continued)
24.3 List of subsidiaries and sub-subsidiaries (continued)
Ownership interest
Registered office
31.12.22
31.12.21
Nature of business
Paid up
%
%
%
Sub-subsidiaries (continued)
Medserv M.E. Limited
Port of Marsaxlokk Birzebbugia
Malta
100.00
100.00
Holding company
100
Medserv
Operations
Limited
Port of Marsaxlokk Birzebbugia
Malta
100.00
100.00
Logistical support and other services
100
Regis Holdings Limited
C/o ICECAP (Mauritius) Limited, Block 1C Uniciti Business Park, Cascavelle, Mauritius.
100.00
100.00
Holding company
100
Medserv (Cyprus) Limited
Karaiskakis Street
Limassol, Cyprus
80.00
80.00
Logistical support and other services
100
Medserv Energy TT Limited
18, Scott Bushe Street Port of Spain
Trinidad & Tobago, W.I.
100.00
100.00
Logistical support and other services
100
Medserv Egypt
Oil & Gas
Services J.S.C
51, Tanta Street
Cairo, Egypt
60.00
60.00
Logistical support and other services
100
Middle East Tubular Services Holdings Limited
Belmont Chambers
Road Town
Tortola, British Virgin
Islands
100.00
100.00
Holding company
100
Middle East Tubular Services Limited
Belmont Chambers
Road Town
Tortola, British Virgin
Islands
100.00
100.00
OCTG services in U.A.E.
100
Middle East Tubular Services LLC (FZC)
PO Box 561
PC322
Al Falaj-Al Qabail
Sohar
Sultanate of Oman
100.00
100.00
OCTG services in Sultanate of Oman
100
Middle East Tubular Services (Iraq) Limited
Belmont Chambers
Road Town
Tortola, British Virgin
Islands
100.00
100.00
OCTG services in Southern Iraq
100
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
93
24 Investment in subsidiaries (continued)
24.3 List of subsidiaries and sub-subsidiaries (continued)
Ownership interest
Registered office
31.12.22
31.12.21
Nature of business
Paid up
%
%
%
Sub-subsidiaries (continued)
Middle East Comprehensive Tubular Services (Duqm) L.L.C.
PO Box 45
PC102
The Special Economic Zone of Duqm
Al Duqm, Al Wusta
Sultanate of Oman
100.00
100.00
OCTG services in Sultanate of Oman
100
Middle East Tubular Services (Gulf) Limited
Belmont Chambers
Road Town
Tortola, British Virgin
Islands
100.00
100.00
Holding company
100
Middle East Tubular Services Uganda SMC Limited
BMK House
4th Floor RM 402
Plot 4-5 Nyabong Road,
Kololo Kampala
P.O. Box 27689, Kampala
100.00
100.00
OCTG services in Uganda
100
Medserv Mozambique Limitada
Mozambique, Cidade de
Maputo Distrito
Kampfumo Bairro da
Sommesrchield, Rua
Frente de libertacao de
Mozambique, n. 224
100.00
100.00
Logistical support and other services
100
Regis Shipping Limited*
c/o Abacus (Seychelles)
Limited, Suite 3,
Global Village,
Jivan’s Complex,
Mont Fleuri,
Mahe Seychelles
-
100.00
Vessel operator
100
Regis Shipping
Lda**
Estrada Nacional EN106,
Muxara
Pemba, Cabo Delgado
Mozambique
65.00
-
Logistical support and other services
100
Regis Management Services Limited
C/o ICECAP (Mauritius)
Limited, Block 1C Uniciti
Business Park, Cascavelle,
Mauritius.
100.00
100.00
Logistical support and other services
100
Regis Export
Trading International Proprietary
Limited
343 Kent Avenue,
Ranburg,
Garden Mall, Ferndale,
Randburg, Gauteng 2194
100.00
100.00
Trading and Exportation activities
100
* Entity was liquidated during the year.
** Entity was incorporated during the year.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
94
24 Investment in subsidiaries (continued)
24.3 List of subsidiaries and sub-subsidiaries (continued)
Ownership interest
Registered office
31.12.22
31.12.21
Nature of business
Paid up
%
%
%
Sub-subsidiaries (continued)
Thomson &
Van Eck Limited
Oak Management (Mauritius) Ltd
1st Floor, Block B
Ruisseau Creole Complex
Black River 90625
Mauritius
100.00
100.00
Holding company
100
Thomson &
Van Eck Proprietary Limited
343 Kent Avenue, Ranburg,
Garden Mall, Ferndale,
Randburg, Gauteng 2194
100.00
100.00
Engineering services
100
Verger Investimentos, Lda
Rua Joaquim Kapango, Edifício Kimpa Vita Atrium, 1º andar, escritório 103,
Distrito Urbano de Ingombota, Município de Luanda, Angola
100.00
-
Logistical support and other services
100
Regis Mozambique Limitada
Rua da Porto Nr. 94/4,
Pemba, Cabo Delagado,
Mozambique
100.00
100.00
Logistical support and other services
100
Regis Uganda Limited
7 th Floor,
Course view towers,
Plot 21, Yususf Lule Road, Nakasero,
P.O. Box 7166, Kampala,
Uganda
100.00
100.00
Logistical support and other services
100
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
95
24 Investment in subsidiaries (continued)
24.4 Impairment test
During the year, Regis Holdings Limited has paid a dividend to the Company amounting to €6.8 million (see note 10). As the dividend exceeded the total comprehensive income of the Regis sub-group, the carrying amount of the investment in Regis Holdings Limited in the separate financial statements of the Company exceeded the net asset value of the sub-group which give rise to indication of impairment.
In determining the recoverable amount of the investment in the subsidiary, management has adjusted the net asset value of the sub-group by projecting future cash flows expected to arise from the sub-group’s main operating activities in Mozambique and Angola (operated from Mauritius). As part of adjusting the net asset value, management has applied the following key assumptions:
Discount rates, range: 28.19% to 29%
Growth rate: management has adopted a prudent approach and applied an inflationary increase ranging from 3% to 5% on projected costs
Period, range: 5 to 10 years
Management has adopted a base case, upside and downside case scenarios in arriving at the adjusted net asset value. Management believes that the probability weight assignment presents a reasonable assessment of the likelihood of the scenarios, taking into account the potential of improved market conditions on the upside and reduced level of business activity assuming volatility in the oil and gas industry on the downside. The probability weights for the applied scenarios are as follows:
Base: 50% to 60%
Upside:20% to 25%
Downside: 15%
As a result, an impairment loss of €1,517,251 has been recognised in the statement of profit and loss in ‘cost of sales’.
Management has assessed the sensitivity of the recoverable amount of the investment in the subsidiary by assigning a 100% weighting to the baseline, downside and upside scenario respectively. The Company's impairment loss would increase by €63,278 if the provisions had to be calculated solely on the baseline scenario; Impairment loss would increase by €1,304,548 if these had to be estimated using only the downside scenario and would reduce by €1,494,383 if the upside scenario only were to be taken into consideration.
As at the year ended 31 December 2022, the investments in Medserv ME and Libya remain fully impaired while the investment in MEM stood at €3,155,355.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
96
24 Investment in subsidiaries (continued)
24.4 Impairment test (continued)
In 2021, the Company tested the investment in Medserv M.E. Limited (“Medserv ME”), Medserv Eastern Mediterranean Limited (“MEM”) and Medserv Libya Limited (“Medserv Libya”) for impairment as a result of the losses sustained in the current and/or comparative years and in consideration of the following risk factors:
•global and regional political and economic uncertainties, particularly in an extended COVID-19 scenario;
•the concentration risk due to the dependency on a few customers; and
•the volatility in oil and gas prices and related demand for oil and gas and their impact on the customers’ business activity.
In estimating the recoverable amount of the investment in Medserv ME, the Company applied the same value-in-use analysis prepared in estimating the recoverable amount of goodwill allocated to OCTG CGU (see note 18) as the recoverability of the net investment in Medserv ME is supported by the same projections and subject to the same risk factors and key assumptions as those underlying the calculation of the recoverable amount of the OCTG CGU. The recoverable amount was determined by discounting the future cash flows to be generated from its continuing use. The carrying amount of Medserv ME exceeded the recoverable amount of the investment and thus an impairment loss of €1,335,067 (2021: €1,335,067) was recognised. The discount rate used in the estimation of value-in-use calculation of Medserv ME ranged 11.50% - 18%.
Due to the increase in the level of uncertainty, the VIU of these investments was estimated using a discounted cash flow (DCF) analysis applying the expected cash flow approach. This approach uses multiple cash flow projections taking into consideration assumed probabilities of future events and/or scenarios instead of a single cash flow scenario. While many scenarios and probabilities may exist, management ultimately believes that the three scenarios (base case, upside and downside) reflected a representative sample of possible outcomes. The calculations use cash flow projections that are based on financial budgets and business plans prepared by management and approved by the Board of Directors. The budgets and business plans was updated to reflect the most recent developments as at th31 December 2021.
Management’s expectations reflect performance to date and were based on its experience in times of recession and consistent with the assumptions that a market participant would make. For each scenario, management has assigned probability weights. The recoverable amount was estimated by calculating the present value of the probability-weighted expected cash flows.
The estimated recoverable amount of the investment in MEM, was arrived at by reference to the value-in-use of its subsidiaries, Medserv Egypt Oil & Gas Services J.S.C. (“Medserv Egypt”) and Medserv (Cyprus) Limited, determined by discounting the future cash flows using value-in-use analysis. An impairment loss of €3,005,445 was determined on the investment in MEM. The impairment loss was mainly the result of the expenses incurred by MEM on behalf of its subsidiaries. The recoverable amount of this investment was determined with reference to the net asset value adjusted with fair value changes of the assets held by the underlying subsidiaries.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
97
25 Equity-accounted investees
25.1 Associates
25.1.1 The Company
Investment in FES Libya Limited (hereafter “FES”)
The Company has a 25% interest in FES, a Maltese incorporated company which was registered on 28 August 2019 to act as a distributor of downhole tools and services in Libya. FES Libya Limited has not yet started operating.
Summary of financial information for the associated entity is as follows:
2022
2021
€
€
Non-current assets
552,889
507,662
Current assets
68,068
64,068
Current liabilities
(892,096)
(699,150)
Net liabilities assets
(271,139)
(127,420)
Company’s share of net liabilities (25%)
(67,785)
(31,855)
Revenue
-
60,285
Loss for the period (100%)
(142,170)
(118,642)
Company’s share of loss (25%)
-
(300)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
98
25 Equity-accounted investees (continued)
25.1 Associates (continued)
25.1.1 The Company (continued)
The Company’s share of losses of the associate exceeds its interest in the associate and as a result, the Company has discontinued recognizing its share of further losses. As a result, the carrying amount of the associate amounting to €300 has been written down to €Nil in 2021.
25.1.2 The Group
The Group has a number of investments in associates with shareholding interest ranging from 30% to 49%.
Investment in Avhold Limited (hereafter “Avhold”)
The Group has a 49% interest in Avhold, a company incorporated in Mauritius which holds an investment in a licensed domestic flight operator in Mozambique which started operating during the year. Summary of financial information for the associated entity as at 31 December 2022 and 31 December 2021 is as follows:
2022
2021
€
€
Non-current assets
201,575
214,109
Current assets
318,350
275,678
Current liabilities
(291,518)
(138,047)
Non-current liabilities
(693,654)
(380,231)
Net liabilities (100%)
(465,247)
(28,491)
Company’s share of net liabilities (49%)
(227,971)
(13,961)
Revenue
-
-
Loss from continuing operations (100%)
(79,400)
(13,491)
Total comprehensive income (100%)
(79,400)
(13,491)
Company’s share of loss (49%)
-
-
Investment in Enermech (Mauritius) Limited (hereafter “Enermech”)
The Group’s share of losses of the associate exceeds its interest in the associate and as a result, the Company has discontinued recognizing its share of further losses. Assets and liabilities of the entity amount to Nil (2021:Nil). The Company is dormant and has no income and expenses in current year.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
99
25 Equity-accounted investees (continued)
25.1 Associates (continued)
25.1.2 The Group (continued)
Investment in International Assurance Limited (hereafter “IAL”)
The Group’s 40% stake in IAL was transferred out to a related company during 2021, as part of the reorganization of the Regis Group prior to the share for share exchange transaction. Consequently, the comparative information for 2021 included the results of IAL only for the period from 1 January to 30 June 2021. Management considers the associates to be immaterial for the Group and as a result, the financial information of the associate has not been provided in the financial statements.
26 Investments at fair value through profit or loss
Financial assets mandatorily measured at FVTPL include the following:
The Group
2022
2021
€
€
Investment in:
Listed bonds
438,698
610,166
Listed equity securities
1,821,686
2,544,137
Alternative products
499,343
852,362
Balance at 31 December
2,759,727
4,006,665
Income from investments at FVTPL and fair value gain and losses recognised during the year are disclosed in note 11.
Information about the Group’s exposure to price risk and the methods and assumptions used in determining fair value are disclosed in note 35.
The Group
2022
2021
€
€
Balance at 1 January
4,006,665
3,442,639
Additions
843,995
1,713,089
Disposals
(1,253,152)
(1,458,150)
Fair value (losses)/ gains (see note 11)
(1,105,875)
309,087
Effect of movements in exchange rates
268,094
-
Balance at 31 December
2,759,727
4,006,665
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
100
26 Investments at fair value through profit or loss (continued)
The Group holds a portfolio of equity shares, bonds and other securities classified as financial assets at fair value through profit and loss as these are held for trading purposes. These investments represent marketable and listed instruments which are highly liquid, and the Group uses the market closing rates for the fair valuation of these instruments at each reporting date. The investments are classified under Level 1 as per the classification of IFRS 13 Fair Value Measurements (see note 35.2).
27 Cash and cash equivalents
The Group
The Company
Note
2022
2021
2022
2021
€
€
€
€
Cash in hand
129,789
190,973
-
-
Bank balances
19,324,894
11,793,055
170,729
-
19,454,683
11,984,028
170,729
-
Bank overdraft used for cash management purposes
31
(792,534)
(2,876,904)
-
(68,442)
Cash and cash equivalents as
presented in cashflow statement
18,662,149
9,107,124
170,729
(68,442)
As of 31 December 2022, the Group’s subsidiary, Verger Investimentos Lda, holds cash at bank amounting to €8,926,815 (2021: €nil) that are subject to exchange controls on remittance outside of the jurisdiction in which it operates, and thus may limit the Group’s ability to access the cash for operations, investments or distributions. The Group performed an ECL test for the cash at bank balances which resulted in a provision for expected credit loss (see note 35).
28 Capital and reserves
28.1 Share capital
Ordinary shares
No.
In issue at 1 January 2021 with a nominal value of €0.10 each
53,744,405
Issued in business combination (see note 6.1) with a nominal value of €0.10 each
47,893,229
In issue at 31 December 2021 – fully paid with a nominal value of €0.10 each
101,637,634
In issue at 1 January 2022 with a nominal value of €0.10 each
101,637,634
In issue at 31 December 2022 – fully paid with a nominal value of €0.10 each
101,637,634
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
101
28 Capital and reserves (continued)
28.1 Share capital (continued)
The Company’s authorised share capital amounts to 120,000,000 shares of €0.10 each (2021: 120,000,000 ordinary shares of €0.10 each). The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
On 25 June 2021, the Company issued 47,893,229 ordinary shares of a nominal value of €0.10c per share and a share premium of €0.58c per share in favour of DOCOB Limited as a result of the share for share exchange detailed in note 6.
28.2 Share premium
The Company’s share premium amounting to €39,781,902 (2021: €39,781,902) represents:
•premium on issue of 8,744,399 ordinary shares of a nominal value of €0.10 each at a share price of €1.50, net of transaction costs of €238,330 directly attributable to the issue of ordinary shares; and
•premium on issue of 47,893,229 ordinary shares of a nominal value of €0.10 each at a share price of €0.68 each relating to the share for share exchange with Regis in the current year (see note 6.1).
The Group
As a result of the reverse acquisition by Regis during 2021, the directors have determined that the Company’s legal capital constitutes of its share capital only and does not include the share premium. As a result, the existing share premium on the 8,744,399 shares were eliminated on business combination with Regis and the share premium in the consolidated financial statements amounting to €27,778,073 (2021: €27,778,073) relates only to the share-for-share exchange with Regis as a result of the reverse acquisition. The Group’s share premium represents the premium on issue of 47,893,229 ordinary shares of a nominal value of €0.10 each at a share price of €0.68 each (see note 6.1).
28.3 Translation reserve
Translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a foreign operation.
28.4 Reverse acquisition reserve
The reverse acquisition reserve was created in accordance with IFRS 3 Business Combinations. Since the shareholders of Regis became the majority shareholders of the enlarged group, the acquisition is accounted for as though there is a continuation of the Regis financial statements in these consolidated financial statements. As a result, this reserve movement arises as the difference between the nominal value of the shares issued by the legal acquirer amounting to €32,567,396 and the consideration effectively transferred of €36,546,196 by the accounting acquirer.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
102
28 Capital and reserves (continued)
28.5 Dividends
No reserves were available for distribution by the Company in the current and comparative year. Prior to the reverse acquisition on 25 June 2021, Regis Holdings Limited declared and paid an interim dividend amounting to €3,088,654 to its shareholders as per agreement for the share for share exchange. The dividend per qualifying ordinary share amounted to €0.04 based on 77,090,000 ordinary shares in Regis Holdings Limited.
As disclosed in note 9, the Regis group of companies was restructured prior to the business combination in 2021 to carve out the property segment and other non-core assets. As a result, the curve out segment and non-core assets were distributed to the owners prior to the business combination. The net assets and liabilities distributed included an amount of €2,994,154 relating to cash and cash equivalent.
29 Earnings per share
29.1 Basic earnings per share
The calculation of basic EPS of the Group has been based on the following loss attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding.
There were no dilutive potential ordinary shares during the current and comparative year.
Loss attributable to ordinary shareholders (basic)
The Group
2022
2021
€
€
Continuing operations
577,383
(7,612,648)
Discontinued operations
-
100,469
Profit/ (Loss) for the year attributable to ordinary
shareholders
577,383
(7,512,179)
* See Note 9
Weighted-average no of ordinary shares (basic)
The Group
2022
2021
Note
No.
No.
Issued ordinary shares at 1 January
101,637,634
53,744,405
Effect of shares issued related to a business combination
6
-
(299,116)
Weighted-average number of ordinary shares at 31 December
101,637,634
53,445,289
Earnings per share of the Group for the year ended 31 December 2022 amounted to a positive €0.0057 (2021: negative €0.137).
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
103
30 Non-controlling interest
The following table summarises the information relating to each of the Group’s subsidiaries that has material NCI.
Medserv (Cyprus)
Limited
Medserv Egypt Oil &
Gas Services JSC
Country of registration
Cyprus
Egypt
Principal activity
ILSS*
ILSS*
2022
2021
2022
2021
NCI Percentage
20%
20%
40%
40%
€
€
€
€
Non-current assets
2,514,679
2,784,174
3,942,457
6,247,396
Current assets
8,444,487
2,611,726
4,827,519
2,978,707
Non-current liabilities
(812,552)
(2,282,509)
(2,117,466)
(809,626)
Current liabilities
(8,266,079)
(1,896,617)
(774,648)
(2,052,573)
Net assets
1,880,535
1,216,774
5,877,862
6,363,904
Net assets attributable to NCI
376,107
243,355
2,351,145
2,545,562
*Integrated Logistics Support Services
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
104
30 Non-controlling interest (continued)
Medserv (Cyprus) Limited
Medserv Egypt Oil & Gas Services JSC
2022
2021
2022
2021
€
€
€
€
Revenue
19,801,550
2,951,553
8,081,673
3,909,127
Profit
1,061,758
1,068,725
(612,147)
239,418
OCI
-
-
(72,891)
(46,577)
Total comprehensive income
1,061,758
1,068,725
(685,038)
192,841
Profit/(loss) allocated to NCI
212,352
213,745
(244,859)
95,767
OCI allocated to NCI
-
-
(29,157)
(18,631)
Total comprehensive income allocated to NCI
212,352
213,745
(274,016)
77,136
Cash flows attributable to NCI
Cash flows from operating activities
375,605
148,027
1,424,524
868,906
Cash flows used in investing activities
(9,270)
(2,407)
(26,156)
(77,929)
Cash flows used in financing activities
(460,646)
(14,541)
-
(499,318)
Net movement in cash and cash equivalents
(94,311)
131,079
1,398,368
291,659
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
105
31 Loans and borrowings
31.1 This note provides information about the contractual terms of the Group’s and Company’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, see note 35.
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Non-current liabilities
Secured bank loans
6,013,127
3,912,052
-
-
Loan from subsidiary
-
-
3,206,250
-
Secured notes
12,610,550
20,310,098
12,610,550
20,185,335
Unsecured notes
30,000,992
29,180,610
30,952,055
30,378,235
48,624,669
53,402,760
46,768,855
50,563,570
Current liabilities
Secured bank loans
1,430,916
1,537,711
-
-
Loan from subsidiary
-
-
315,000
-
Secured notes
7,741,001
-
7,756,244
-
Bank overdrafts
792,534
2,876,904
-
68,442
9,964,451
4,414,615
8,071,244
68,442
31.2 Terms and debt repayment schedule
The terms and conditions of outstanding loans are as follows:
The Group
Carrying amount
2022
2021
Original currency
€
€
Nominal interest rate
Year of
maturity
Bank loan
EUR
-
281,696
Bank’s base rate +
3.00%
2022
Bank loan
EUR
3,521,250
-
EURIBOR 3-month + 3.75%
2034
Bank loan
EUR
3,842,520
4,790,238
Fixed rate of 2.5% for first 2 years and variable thereafter at Bank’s base rate + 3%
2026
Bank loan
OMR
80,273
377,829
5.50%
2023
Secured notes
EUR
7,741,001
20,310,098
6.00%
2023
Unsecured notes
EUR
21,530,312
21,287,860
4.50%
2026
Unsecured notes
USD
8,470,679
7,892,750
5.75%
2026
Secured notes
EUR
12,610,550
-
5%
2029
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
106
31 Loans and borrowings (continued)
31.2 Terms and debt repayment schedule (continued)
The Company
Carrying amount
Original currency
2022
2021
Nominal interest rate
Year of
maturity
€
€
Loan from subsidiary
EUR
3,521,250
-
EURIBOR 3-month
+ 3.75%
2034
Secured notes (see note 31.4)
EUR
7,756,244
20,185,335
6.00%
2023
Unsecured notes
EUR
22,241,707
22,198,365
4.50%
2026
Unsecured notes
USD
8,710,348
8,179,870
5.75%
2026
Secured notes
EUR
12,610,550
-
5.00%
2029
In 2022, Medserv Operations Limited, the operating subsidiary in Malta was granted a bank loan of €3.6 million from a local bank. The loan was advanced to the Company for the purpose of early redemption of part of the 6% €20 million Secured Notes on 30 September 2022. As a result, a loan agreement was entered into between Medserv Operations Limited and the Company during the year under the same terms and conditions of the original loan with the local bank.
The USD denominated debt are designated as hedging instruments in a net investment hedge Information on the Group’s hedging activities are provided in Note 35.6.
31.3 Security on bank loans and overdraft facilities
The bank loans and overdraft facilities are secured by:
a.second general hypothec for €7,500,000 on overdraft basis over all present and future assets of Medserv Operations Limited;
b.second special hypothec for €7,500,000 on overdraft basis over temporary utile dominium of Medserv site and property of Malta Freeport;
c.fourth special hypothec on bank loan for €3,600,000 over temporary utile dominium of Medserv site and property of Malta Freeport
d.fourth general hypothec on bank loan for €3,600,000 over temporary utile dominium of Medserv site and property of Malta Freeport
e.Company guarantee for €12,270,000 given by the Company to secure all liabilities of the subsidiary, Medserv Operations Limited;
f.Company guarantees for €3,600,000 and €2,438,962 given to Medserv Operations Ltd and Oman in favor to the bankers.
g.The Company acts as a guarantor to a bank in respect of credit facilities granted to one of its subsidiary for €5,092,637;
h.first pledge, second and third pledge over a combined business policy for €8,568,381 and pledge of insurance cover over purchased equipment €1,334,000;
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
107
31 Loans and borrowings (continued)
31.3 Security on bank loans and overdraft facilities (continued)
i.a letter of undertaking by the Company whereby it undertakes not to declare dividends or pay shareholders’ loans without the bank’s written consent and to maintain the present level control and interest in the subsidiary, Medserv Operations Limited;
j.First and third general hypothec for MDB loan of €3,824,566 over all present and future assets of the subsidiary, Medserv Operations Limited.
k.A pledge of receivables agreement in relation to all and any rights pertaining to the subsidiary, Medserv Operations Limited under the agreement with Enemalta p.l.c. and Automated Revenue Management Services Limited (ARMS) in relation to the payment for units of electricity generated by the photovoltaic farm situated at the Malta Freeport.
l.A letter of undertaking by the subsidiary, Medserv Operations Limited to ensure and procure that all and any payments received from Enemalta and/or ARMS in relation to the generation of electricity units by the photovoltaic farm are at all times paid into and/or directly credited in the pledged bank account.
31.4 Issue of new €13 million 5% 2029 Secured Notes
The carrying amount of the new note issue of €13 million 5% 2029 Secured Notes (“New Notes”) during the year in the Group and the Company is made up as follows:
€
Proceeds receivable from issue of notes (see note 21.3)
7,648,200
Rollover amount from €20 6% Secured Notes maturity 2023
5,351,800
Total
13,000,000
Transaction costs
(406,897)
Net proceeds
12,593,103
Accreted interest
17,447
Carrying amount of liability at 31 December 2022
12,610,550
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
108
31 Loans and borrowings (continued)
31.5 Reconciliation of movements of loans and borrowings to cash flows arising from financing activities
The Group
The Company
Bank overdrafts used for cash management purposes
Secured and unsecured notes
Bank
loans
Loan from subsidiary
Secured and unsecured notes
31 December 2022
€
€
€
€
€
Balance at 1 January
2,876,904
49,490,708
5,449,763
-
50,563,570
Changes from financing cash flows
Proceeds from loans and borrowings
-
-
3,600,000
3,600,000
-
Transaction costs (note 31.4)
-
(406,897)
-
-
(406,897)
Repayment of borrowings
-
(6,999,400)
(1,625,345)
(78,750)
(6,999,400)
Total changes from financing cash flows
-
(7,406,297)
1,974,655
3,521,250
(7,406,297)
Effect of changes in foreign
exchange rates
-
582,917
19,625
-
566,539
Proceeds from issue of
notes
-
7,648,200
-
-
7,648,200
Total non-cash items
-
8,231,117
19,625
-
8,214,739
Liability-related changes
Change in bank overdrafts
(1,993,426)
-
-
-
-
Interest expense (note 14)
-
2,853,702
105,781
46,799
2,763,524
Interest paid (note 14)
(90,944)
(2,816,687)
(105,781)
(46,799)
(2,816,687)
Total liability–related changes
(2,084,370)
37,015
-
-
(53,163)
Balance at 31 December
792,534
50,352,543
7,444,043
3,521,250
51,318,849
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
109
31 Loans and borrowings (continued)
31.5 Reconciliation of movements of loans and borrowings to cash flows arising from financing activities (continued)
The Group
The Company
Bank overdrafts used for cash management purposes
Secured and unsecured notes
Bank
loans
Loan from subsidiary
Secured and unsecured notes
31 December 2021
€
€
€
€
€
Balance at 1 January
-
-
1,426,972
-
49,799,298
Changes from financing cash flows
Repayment of borrowings
-
-
(1,857,973)
-
-
Total changes from financing cash flows
-
-
(1,857,973)
-
-
Effect of changes in foreign exchange rates
-
408,277
29,981
-
618,007
Total non-cash items
-
408,277
29,981
-
618,007
Liability-related changes
Acquisition through business combinations
2,613,882
48,872,233
5,791,657
-
-
Change in bank overdrafts
307,551
-
-
-
-
Interest expense
-
1,548,399
109,672
-
2,776,928
Interest paid
(44,529)
(1,338,201)
(50,546)
-
(2,630,663)
Total liability–related changes
2,876,904
49,082,431
5,850,783
-
146,265
Balance at 31 December
2,876,904
49,490,708
5,449,763
-
50,563,570
On 30 September 2022, the Company has effected a pro-rata early redemption payment of approximately €7 million (subject to rounding) to the holders of the €20 million Secured and Guaranteed Notes bearing ISIN MT0000311218 (the “Callable Notes”). The redemption was financed by a bank loan obtained from a local bank through Medserv Operations Limited (see note 31.2) and own cash reserves. The Callable Notes were fully redeemed subsequent to year end (see note 38) through the funds held by the security trustee (see note 21.3).
In November 2022, the Company issued New Notes for the purpose of redeeming the remaining outstanding amount of €13 million of the Callable Notes after the partial redemption in September 2022 (see note 38). In terms of the Prospectus dated 9 November 2022, the New Notes were available for subscription by the holders of the Callable Notes (the “Callable Noteholders”). The Callable Noteholders were given preference to subscribe for the New Notes by surrendering their respective Callable Notes, subject to a minimum application of €2,000. Callable Noteholders were also given the opportunity to apply for additional notes in the new issue.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
110
31 Loans and borrowings (continued)
31.5 Reconciliation of movements of loans and borrowings to cash flows arising from financing activities (continued)
Total Callable Notes transferred to the Company in exchange for the New Notes amounted to €5,351,800 representing circa 41% of the total Callable Notes. This amount was allocated in full. Furthermore, the Company allocated in full applications totalling to €1,148,500 by Callable Noteholders whose holding in the Callable Notes was less than the minimum subscription of €2,000 and were required to pay the difference between their current holding in the Callable Notes and the minimum application amount of €2,000 in terms of the New Notes issue to enable them to apply for the New Notes. The remaining balance of €6,499,700 was allocated to the Callable Noteholders who have applied for additional notes based on the allocation policy in terms of the New Notes issue. These amounts were received and held by the security trustee as at year end and included in other receivables (see note 21.3).
The New Notes were admitted to listing on the Official List of the Malta Stock Exchange on 22 December 2022 with the interest starting to accrue as from this date.
The notes issued in 2016 with a carrying amount as at 31 December 2022 of €30,952,055 (2021: €30,378,235) are unsecured. The Callable Notes and the new note issue during 2022 are secured by the Company’s subsidiary, Medserv Operations Limited, through a general hypothec and a special hypothec over its emphyteutical rights on the Medserv site at the Malta Freeport at the Port of Marsaxlokk (refer to note 16.4).
31.6 Furthermore, as at 31 December 2022, the Group enjoyed general overdraft facilities of €3,000,000 (2021: €3,000,000) at the following terms and conditions:
Bank overdraft Nominal Interest rate
2022:
€2,500,000 5.15% (bank base rate + 3%)
€500,000 5.15% (bank base rate + 3%)
At 31 December 2022, the Group had unutilised bank overdraft facilities of €2,346,903 (2021: €705,240) and unutilised foreign exchange facility of €300,000 (2021: €300,000) out of the overdraft facilities listed above.
At 31 December 2022, the Group availed of credit card facilities amounting to approximately €2,019,002 (2021: €1,951,544) for OCTG customs clearance purposes.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
111
32 Employee benefits obligation – The Group
32.1
2022
2021
Notes
€
€
Liability for severance payments
32.2.1
1,413,239
1,208,247
Liability for retirement gratuities
32.2.1
29,251
283,650
1,442,490
1,491,897
Non-current
1,400,299
1,427,395
Current
42,191
64,502
1,442,490
1,491,897
32.2 Severance payments
The Group’s operates defined benefit pension plans through its subsidiaries in Egypt, Sultanate of Oman, Mauritius and UAE. In most case, the benefit valued are set out in the labour regulations in the jurisdictions in which the subsidiary operates. In each case, a lump sum benefit for eligible employees based on specific requirements in the country in which the subsidiary operates is payable to the employee on termination or retirements. The subsidiaries recognise a liability for any projected shortfalls of benefits based on actuarial assumptions.
Benefit payments are generally from trustee-administrated funds and for unfunded plans the subsidiary meets the benefit payment obligation as it falls due.
32.2.1 The following table shows a reconciliation for the liability for severance payments.
2022
2021
€
€
Balance at 1 January
1,491,897
45,294
Defined benefit obligation plan acquired as result of merger
-
1,039,225
Included in profit or loss:
Current service cost
399,595
64,158
Benefits paid
(187,168)
(5,270)
Interest cost
83,765
19,641
Past service cost
-
118,445
Included in OCI:
Actuarial gains on economic assumptions
(109,664)
(6,835)
Actuarial (gains) / losses on experience
(121,110)
196,127
Translation reserve
(114,825)
21,112
Balance at 31 December
1,442,490
1,491,897
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
112
32 Employee benefits obligation – The Group (continued)
32.2 Severance payments (continued)
32.2.1(continued)
2022
2021
€
€
Non-current
1,400,299
1,427,395
Current
42,191
64,502
1,442,490
1,491,897
The components of the movement in employee benefits recognised in profit or loss is as follows:
2022
2021
€
€
Current Service cost
399,595
64,158
Interest cost
83,765
19,641
Past service cost
-
118,445
483,360
202,244
The components of the movement in employee benefits recognised in other comprehensive income is as
follows:
2022
2021
€
€
Actuarial gains on economic assumptions
(109,664)
(6,835)
Actuarial (gains)/ losses on experience
(121,110)
196,127
(230,774)
189,292
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
113
32 Employee benefits – The Group (continued)
32.2 Severance payments (continued)
32.2.2 Actuarial assumptions
The main actuarial assumptions used for accounting purposes are as follows:
2022
2021
Discount rate
7.54%
5.74%
Inflation rate
3.17%
2.55%
Future salary growth rate
7.93%
6.63%
Net pre-retirement rate
2.08%
(0.94%)
32.2.3 Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
2022
2021
Movement
Revised
Impact
Movement
Revised
Impact
€
€
€
€
€
€
Discount rate: +1%
102,042
1,340,448
7.07%
82,185
1,409,712
5.51%
Discount rate: -1%
(111,167)
1,553,657
(7.71%)
(90,013)
1,581,910
(6.03%)
Salary increase: +1%
(251,273)
1,693,763
(17.42%)
(174,655)
1,666,552
(11.71%)
Salary decrease: -1%
244,347
1,198,143
16.94%
169,710
1,322,187
11.38%
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
114
33 Trade and other payables
33.1
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Trade payables
8,440,068
4,417,279
108,323
24,692
Amounts due to shareholders
61,014
61,014
61,014
61,014
Amounts due to note holders
96,454
19,171
96,454
19,171
Amounts due to subsidiaries
-
-
4,902,501
5,741,336
Amounts due to non-
controlling interest
214,249
379,644
-
-
Amounts due to other related parties
-
71,482
-
-
Indirect taxes payable
621,229
517,554
-
-
Accrued expenses
2,263,874
2,151,220
64,693
359,481
Other payables
607,448
1,080,852
-
-
12,304,336
8,698,216
5,232,985
6,205,694
Current
12,304,336
8,626,734
5,232,985
6,205,694
Non-current
-
71,482
-
-
12,304,336
.0
8,698,216
5,232,985
6,205,694
33.2 Amounts due to subsidiaries and shareholders are unsecured, interest free and repayable on demand. Transactions with related parties are set out in note 37 to these financial statements.
33.3 An amount of €214,249 (2021: €214,185) included in the amounts due to non-controlling interest is unsecured, bears an interest at a rate of 6.25% and repayable by 30 June 2023. In 2021 the amounts due to the non-controlling interest included an amount of €160,978 which was unsecured, bearing an interest at a rate of 5.50% and repayable by 30 April 2022. This amount was fully repaid by 30 April 2022.
33.4 The Group’s and Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 35.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
115
34 Contingencies and commitments
34.1 At reporting date, the Group had the following contingent liabilities:
•Letter of guarantees issued by Group’s bankers in favour of third parties amounting to €1,620,289 (2021: €2,096,904);
The Company acts as a guarantor to certain banks in respect of credit facilities granted to two of its subsidiaries up to a limit of €5,092,637 and €12,270,000 respectively (2021: €503,309 and €12,270,000 respectively).
34.2 The Company has uncalled share capital on its investments in subsidiaries, namely Medserv International Limited, Medserv Libya Limited and Medserv Eastern Mediterranean Limited amounting to €36,861 (2021: €37,821) (see note 24).
35 Financial instruments – Fair values and risk management
35.1 Accounting classifications
The Group classifies non-derivative financial assets into the categories of ‘amortised cost or ‘fair value through profit or loss (FVTPL)’. The Group classifies non-derivative financial liabilities into the category of ‘other financial liabilities’. At reporting date, the Group’s financial assets at amortised cost comprised cash and cash equivalents and trade and other receivables, and the Group’s financial assets at FVTPL comprised equity and debt investments. The Company’s financial assets at amortised cost comprised loans receivable from subsidiaries, cash and cash equivalents and trade and other receivables. At reporting date, the Group’s non-derivative financial liabilities comprised secured and unsecured notes, loans and borrowings, bank overdrafts and trade and other payables whereas the Company’s non-derivative financial liabilities comprised secured and unsecured notes and trade and other payables.
35.2 Measurement of fair values
The Group is required to provide information about the fair value of its financial instruments at the report date. The fair values of financial assets, that are traded in active markets and financial liabilities are based on quoted market price or dealer price quotations. For all other financial instruments, the Group determines fair value using other valuation techniques.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
116
35 Financial instruments – Fair values and risk management
35.2.1 Valuation techniques and significant unobservable inputs
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuations techniques as follows:
•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
The key financial instruments measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:
The Group
31 December 2022
31 December 2021
Carrying amount
Fair Value
Level
Carrying amount
Fair Value
Level
€
€
€
€
Assets
Financial assets measured at FVTPL
Investments in listed bonds
438,698
438,698
1
610,166
610,166
1
Investments in listed equity securities
1,821,686
1,821,686
1
2,544,137
2,544,137
1
Investments in alternative products
499,343
499,343
1
852,362
852,362
1
The table below provides information about fair values of the Group’s financial instruments which are not measured at fair value and for which the fair values are significantly different from their carrying values. Management is of the opinion that the fair value of the Group’s cash and cash equivalents and trade and other receivables are not significantly different from their carrying amounts in view of the relatively short periods of maturity from the end of the reporting periods.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
117
35 Financial instruments – Fair values and risk management (continued)
35.2 Measurement of fair values (continued)
35.2.1 Valuation techniques and significant unobservable inputs (continued)
31 December 2022
31 December 2021
Carrying amount
Fair Value
Level
Carrying amount
Fair Value
Level
€
€
€
€
Liabilities
Financial liabilities measured
at amortised cost
Secured notes
(20,351,551)
(20,648,000)
2
(20,310,098)
(20,398,000)
2
Unsecured notes
(30,000,992)
(28,508,042)
2
(29,180,610)
(29,435,801)
2
The Company
As at the reporting date, the Company has no financial instruments which are carried at fair value in the statement of financial position.
The table below provides information of the fair value of the Company’s financial assets and liabilities which are significantly different from their carrying values at the reporting date. Management is of the opinion that the fair values of the Company’s current portion of loan receivables from subsidiaries, trade and other receivables, cash and cash equivalents and trade and other payables are not significantly different from their carrying values in view of the relatively short periods of maturity from the end of the reporting periods.
31 December 2022
31 December 2021
Carrying amount
Fair Value
Level
Carrying amount
Fair Value
Level
€
€
€
€
Assets
Financial assets measured at amortised cost
Non-current Loans receivable from subsidiaries
15,585,529
14,867,911
3
25,348,176
25,3481,176
3
Liabilities
Financial instruments measured at amortised cost
Secured notes
(20,366,794)
(20,648,800)
2
(20,185,334)
(20,398,000)
2
Unsecured notes
(30,952,055)
(28,508,042)
2
(30,378,235)
(29,435,801)
2
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
118
35 Financial instruments – Fair values and risk management (continued)
35.2 Measurement of fair values (continued)
35.2.1 Valuation techniques and significant unobservable inputs (continued)
The fair value of financial instruments not measured at fair value was determined as follows:
Secured and unsecured notes issued
This category of liabilities is carried at amortised cost. Its fair value has been determined by reference to the market price as at 31 December 2022 and classified as Level 2 in view of the infrequent activity in the market.
Non-current loans receivables from subsidiaries
The fair value of the non-current loans receivables from subsidiaries classified as level 3 hierarchy during 2022 were calculated based on a cash flow discounted using the current lending rate for similar instruments at the reporting date. They are classified as level 3 hierarchy due to the use of unrecoverable inputs including counterparty risk. Management considers the carrying amounts of those instruments for the comparable period presented to be a reasonable estimate of their fair value due to insignificant changes in the interest rates and counterparty risks.
35.2.2 Transfers between Level 2 and 3
There were no transfers from Level 2 to Level 3 and vice-versa in 2022 and no transfers in either direction in 2021.
35.3 Financial risk management
35.3.1 The Group has exposure to the following risks arising from financial instruments:
•credit risk
•liquidity risk
•market risk
•operational risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s capital management. The information presented in this note should be read in conjunction with the commentary in the Directors’ Report under “Principal risks and uncertainties”.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
119
35 Financial instruments – Fair values and risk management (continued)
35.3 Financial risk management (continued)
35.3.2 Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors has established the Financial Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
35.4 Credit risk
35.4.1 Credit risk is the risk of financial loss to the Group and Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s and Company’s bank balances, trade and other receivables and contract assets. Credit risk for the Company also include loans receivable from subsidiaries.
The carrying amounts of financial assets represent the maximum credit exposure as follows:
35
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Financial assets at fair value through profit and loss
Investments in debt instruments
438,699
651,169
-
-
Financial assets at amortised cost
Trade receivables and contract assets
20,107,545
20,029,285
40,133
19,558
Loan receivables from related companies
-
4,147,488
-
-
Loans receivable from subsidiaries
-
-
41,475,271
41,701,825
Other receivables
9,498,489
2,767,627
7,489,215
240
Cash at bank
20,887,116
11,872,857
170,729
-
Gross exposure
50,931,849
39,468,426
49,175,348
41,721,623
Credit loss allowances
(4,063,934)
(3,600,842)
(15,443,485)
(15,443,485)
Net exposure
46,867,915
35,867,584
33,731,863
26,278,138
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
120
Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
Credit loss allowances on financial assets were as follows:
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Impairment loss on:
- Trade receivables and contract assets
(2,501,712)
(3,521,040)
-
-
- Loan receivables from subsidiaries
-
-
(15,443,485)
(15,443,485)
- Cash at bank
(1,562,222)
(79,802)
-
-
(4,063,934)
(3,600,842)
(15,443,485)
(15,443,485)
Impairment losses on financial assets recognised in the profit and loss were as follows:
The Group
2022
2021
€
€
Reversal of impairment loss on trade receivables
1,142,943
(359,294)
Impairment loss on cash at bank
(1,482,420)
-
Amounts written off
(123,615)
(81,074)
(463,092)
(440,368)
35.4.2 Trade receivables and contract assets
The Group offers logistical and OCTG services to National and International Energy Companies (IECs), their subcontractors and other companies operating in the oil and gas industry. These customers operate huge budgets and historically have sufficient funds to meet their obligations towards the Group. The Group also services mining companies as well as product and equipment manufacturers and other heavy industry-related contractors. The Group’s services include the provision of heavy machinery and lifting equipment, management services as well as contracting staff to clients and provide Technical Services Agreement (TSA) facilities.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Details of concentration of revenue are included in note 8.4.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
121
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.2 Trade receivables and contract assets (continued)
Through the Financial Risk Management Committee, the Group has an internal control system which identifies at an early stage any events of default. The Group’s review includes external ratings, if they are available, financial statements, credit agency information and industry information. Most of the Group’s customers have been transacting with the Group for a number of years, and losses rarely occur. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including geographic location, aging profile, maturity, trade history with the Group and existence of previous financial difficulties.
The Group does not require collateral in respect of trade and other receivables. The Group does not have trade receivable and contract assets for which no loss allowance is recognised because of collateral.
As at 31 December 2022, the Group’s one (2021: two) most significant customer/s accounted for €9.1 million (2021: €8.3 million) of the trade receivables net of Expected Credit Loss.
Movements in the allowance for impairment in respect of trade receivables and contract assets
The movement in the allowance for impairment in respect of trade receivables and contract assets during the year was as follows.
The Group
2022
2021
€
€
Balance at 1 January
3,521,040
2,443,653
Net remeasurement of loss allowance
(1,014,390)
360,566
Acquired on reverse acquisition
-
670,179
Amounts written off
(123,615)
(81,074)
Effect of movement in foreign exchange rate
118,677
127,716
Balance at 31 December
2,501,712
3,521,040
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
122
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.2 Trade receivables and contract assets (continued)
The exposure to credit risk for trade receivables and contract assets by geographic region was as follows:
The Group
2022
2021
€
€
Gross carrying amount
Domestic
595,274
574,683
Eurozone countries
8,294,489
1,849,219
Libya
1,673,843
2,813,817
Middle East
6,208,358
5,250,398
Angola
1,484,022
7,686,786
South Africa
77,381
131,221
Mozambique
483,025
954,724
Uganda
735,475
221,720
Other regions
555,678
546,717
20,107,545
20,029,285
The summary quantitative data about the Group’s exposure to credit risk for trade receivables and contract assets is as follows.
The Group
2022
2021
€
€
Not-credit impaired
External credit ratings at least Baa3 from Moody’s
or BBB- from Standard & Poor’s
12,296,594
5,688,982
Other customers:
- Four or more years’ trading history with the Group
3,357,385
4,461,816
- Less than four years’ trading history with the Group
2,029,448
1,591,296
- Higher risk
273,953
5,549,188
Credit impaired
- Past due > 90 days
1,674,971
2,141,737
- Fully impaired
475,194
596,266
Total gross carrying amount
20,107,545
20,029,285
Credit loss allowances
(2,501,712)
(3,521,040)
Carrying amount
17,605,833
16,508,245
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
123
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.2 Trade receivables and contract assets (continued)
Other customers comprise reputable international energy companies and their subcontractors who have trading history with the Group.
Expected credit loss assessment for corporate customers
The Group uses different provisioning matrices to measure the ECLs of trade receivables:
•Loss rates calculated using a ‘roll rate’ method is based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures by different type of customer.
•Specific provisions for externally rated customers
Loss rates are based on actual credit loss experience over the past three to eight years. These rates are multiplied by scalar factors such as GDP, growth rate, unemployment rates, inflation rates and price index of crude Oil, to reflect differences between economic conditions during the period over which the historical data has been collected to adapt to current conditions and the Group’s view of economic conditions over the expected lives of the receivables.
The following tables provide information about the exposure to credit risk and ECLs for trade receivables and contract assets for corporate customers as at 31 December 2022.
The Group
31 December 2022
Weighted-average
loss rate
Gross
carrying amount
Impairment loss allowance
Credit-impaired
Ageing
€
€
Current (not past due)
and <30 days past due
6.77%
5,234,200
353,372
No
Past due 31 to 60 days
41.49%
263,178
109,203
No
Past due 61 to 90 days
61.69%
123,324
76,077
No
Past due > 90 days
86.57%
1,706,423
1,477,190
Yes
7,327,125
2,015,842
Rating
Externally rated
A
0.00%
633,647
-
No
BBB
0.01%
11,404,108
727
No
BB
0.05%
223,919
105
No
B
0.24%
32,028
76
No
Fully impaired
99.64%
486,718
484,962
Yes
12,780,420
485,870
20,107,545
2,501,712
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
124
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.2 Trade receivables and contract assets (continued)
Expected credit loss assessment for corporate customers (continued)
The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets for corporate customers as at 31 December 2021.
The Group
31 December 2021
Weighted-average
loss rate
Gross
carrying amount
Impairment loss allowance
Credit-impaired
Ageing
€
€
Current (not past due)
and <30 days past due
5.59%
3,512,943
192,406
No
Past due 31 to 60 days
17.75%
717,136
127,318
No
Past due 61 to 90 days
23.45%
439,132
102,964
No
Past due > 90 days
70.53%
2,100,429
1,481,427
Yes
6,769,640
1,904,115
Rating
Externally rated
AA
0.00%
1,010,652
-
A
0.16%
593,873
926
BBB
0.00%
3,733,071
107
BB
0.00%
328,554
-
B
2.12%
337,204
7,142
CCC
14.26%
6,586,460
938,919
Fully impaired
100.00%
669,831
669,831
13,259,645
1,616,925
20,029,285
3,521,040
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
125
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.3 Cash at bank
As at 31 December 2022, the Group held cash at bank gross of ECL of €20,887,116 (2021: €11,872,857) while the Company had a bank balance of €170,729 (2021: overdraft €68,442). The Group cash deposits are held with bank and financial institution which are rated A+ to B-, based on Standards & Poor’s ratings.
Impairment on cash at bank has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash at bank have low credit risk based on the external credit ratings of the counterparties.
The Group
Gross carrying amount
Loss allowance
Gross carrying amount
Loss allowance
2022
2022
2021
2021
Rating
€
€
€
€
Externally rated
A
430,649
-
618,344
-
A-
4,208,310
-
468,834
-
AA-
22,573
-
-
-
BBB
832
-
105,630
-
BBB-
11,339,589
(1,482,420)
245,007
-
BB+
1,011,312
-
6,758,536
-
BB
674,811
-
234,749
-
BB-
720,503
-
1,001,643
-
B+
45,606
-
1,240,120
-
B
2,430,528
(79,802)
1,112,101
(79,802)
B-
2,403
-
87,893
-
Total
20,887,116
(1,562,222)
11,872,857
(79,802)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
126
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.3 Cash at bank (continued)
The Company
Gross carrying amount
Loss allowance
Gross carrying amount
Loss allowance
2022
2022
2021
2021
€
€
€
€
At amortised cost
A
170,729
-
-
-
Total
170,729
-
-
-
35.4.4 Investment in debt instruments
The Group’s investments in debt instruments are not subject to IFRS 9 expected credit loss allowances since these are held for trading and are measured at fair values.
35.4.5 Other receivables
Other receivables include an amount of €7.5 million receivable from security trustee in respect of the issue of the €13 million, 5% secured bonds 2029 (note 21) and an amount of €1.5 million in respect of cash collateral held with a reputable bank. Management concludes internally that the expected credit loss on the amount is insignificant at the reporting date.
35.4.6 Amounts due by subsidiaries
During 2022, a net impairment loss of €Nil (2021: €13,156,824) on the amounts owed by subsidiaries was recognised during the year.
Detailed Impairment methodology on the loan receivable from subsidiaries is provided in note 23.4.
The Company
2022
2021
€
€
Balance at 1 January
15,443,485
2,286,661
Impairment loss during the year
-
13,156,824
Balance at 31 December
15,443,485
15,443,485
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
127
35 Financial instruments – Fair values and risk management (continued)
35.4 Credit risk (continued)
35.4.7 Loan receivable from related companies
Management has assessed the expected credit loss on the loans receivables from related companies and considering that the loans were secured by a pledge over all the shares held by DSTI in Worx Development Ltd, a company holding properties and was part of the carved-out entity (note 8) and concluded that the expected credit loss was insignificant. These amounts were fully repaid in 2022.
35.5 Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group regularly reviews the expected cashflow through cash flow forecasts in its effort to monitor its cash flow requirements. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows to meet expected operational expenses over the next 60 days, including the servicing of financing and borrowing obligations. The Group also monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted.
At 31 December 2022, the expected cash inflows from trade and other receivables maturing within three months were €17.4 million and € 7.5 remaining balance receivable for the 5% Bond. The expected cash outflows due within three months were €21.14 million comprising trade and other payables of €12.2 million, redemption of the remaining 6% secured notes € 7.6 million interest on the notes of €0.87 million and loan and interest repayments of €0.47 million.
The Group’s liquidity risk is accordingly actively managed taking cognisance of the matching of operational cash inflows and outflows arising from expected maturities of financial instruments, attributable to the Group’s different operations, together with the Group’s committed bank borrowing facilities and other financing that it can access to meet liquidity needs.
In addition, the Group maintains the following other lines of credit, which remain undrawn at 31 December 2022:
-€2,346,903 bank overdraft facilities which bears interest at the Bank’s Base Rate plus 3 per cent;
-Untilised foreign exchange facility of €300,000;
-€1,934,104 unutilized credit card facilities used for OCTG customs clearance purposes;
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
128
35 Financial instruments – Fair values and risk management (continued)
35.5 Liquidity risk (continued)
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments and exclude the impact of netting agreements. Trade and other payables and bank overdraft which are due within 12 months equal their carrying balances at the impact of discounting is not significant.
The Group
Carrying amount
Contractual cash flows
Less than 1 year
1 – 2 years
2 – 5 years
5 – 10 years
More than 10 years
€
€
€
€
€
€
€
31 December 2022
Financial liabilities
Secured notes
20,351,551
(25,318,408)
(8,418,408)
(650,000)
(1,950,000)
(14,300,000)
-
Unsecured notes
30,000,992
(35,747,819)
(1,487,810)
(1,478,064)
(32,781,945)
-
-
Secured bank loans
7,444,043
(8,855,414)
(1,672,792)
(1,573,264)
(3,244,676)
(2,364,682)
-
Bank overdraft
792,534
(792,534)
(792,534)
-
-
-
-
Lease liabilities
14,307,945
(31,912,307)
(2,654,557)
(2,200,274)
(4,867,370)
(3,453,851)
(18,736,255)
Trade and other payables
12,304,336
(12,304,336)
(12,304,336)
-
-
-
-
85,201,401
(114,930,818)
(27,330,437)
(5,901,602)
(42,843,991)
(20,118,533)
(18,736,255)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
129
35 Financial instruments – Fair values and risk management (continued)
35.5 Liquidity risk (continued)
The Group
Carrying amount
Contractual cash flows
Less than 1 year
1 – 2 years
2 – 5 years
5 – 10 years
More than 10 years
€
€
€
€
€
€
€
31 December 2021
Financial liabilities
Secured notes
20,310,098
(22,400,000)
(1,200,000)
(21,200,000)
-
-
-
Unsecured notes
29,180,611
(36,595,611)
(1,453,400)
(1,453,400)
(33,688,811)
-
-
Secured bank loans
5,449,763
(5,771,180)
(1,664,498)
(1,198,492)
(2,908,190)
-
-
Bank overdraft
2,876,904
(2,876,904)
(2,876,904)
-
-
-
-
Lease liabilities
14,441,789
(33,035,864)
(2,585,561)
(2,533,339)
(5,128,184)
(4,052,525)
(18,736,255)
Trade and other payables
8,698,216
(8,698,216)
(8,698,216)
-
-
-
-
80,957,381
(109,377,775)
(18,478,579)
(26,385,231)
(41,725,185)
(4,052,525)
(18,736,255)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
130
35 Financial instruments – Fair values and risk management (continued)
35.5 Liquidity risk (continued)
The Company
Carrying amount
Contractual cash flows
Less than 1 year
1 – 2 years
2 – 5 years
5 – 10 years
More than 10 years
€
€
€
€
€
€
€
31 December 2022
Financial liabilities
Secured notes
20,366,794
(25,302,633)
(8,402,633)
(650,000)
(1,950,000)
(14,300,000)
-
Unsecured notes
30,952,055
(35,747,819)
(1,487,810)
(1,478,064)
(32,781,945)
-
-
Trade and other payables
5,232,988
(5,232,988)
(5,232,988)
-
-
-
-
56,551,837
(66,283,440)
(15,123,431)
(2,128,064)
(34,731,945)
(14,300,000)
-
31 December 2021
Financial liabilities
Secured notes
20,185,335
(22,400,000)
(1,200,000)
(21,200,000)
-
-
-
Unsecured notes
30,378,235
(36,595,611)
(1,453,400)
(1,453,400)
(33,688,811)
-
-
Trade and other payables
6,205,694
(6,205,694)
(6,205,694)
-
-
-
-
56,769,264
(65,201,305)
(8,859,094)
(22,653,400)
(33,688,811)
-
-
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
131
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
35.6.1 Currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of the Group companies. The functional currencies of Group companies are primarily the Euro and US Dollar (USD). The currencies in which these transactions are primarily denominated are Euro, US Dollar (USD), Omani Rial (OMR), Egyptian Pounds (EGP), British Pounds (GBP), United Arab Emirates Dirham (AED), Mozambique New Metical (MZN), Mauritian Rupee (MUR), Australian Dollar (AUD), South African Rand (ZAR) and Ugandan Shilling (UGX).Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities which are denominated in a currency that is not the respective entity’s functional currency which would be considered a foreign currency from the entity’s perspective.
Exposure to currency risk
The Group’s main currency note exposure reflecting the carrying amount of assets and liabilities denominated in foreign currencies at the end of the reporting period, analysed by the functional currency of the respective entity or entities, was as follows:
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
132
35 Financial instruments – Fair values and risk management (continued)
35 Market risk (continued)
35.6.1 Currency risk (continued)
Functional Currency
EUR
AED
OMR
USD
UGX
MZN
31 December 2022
USD
USD
USD
EGP
EUR
USD
USD
€
€
€
€
€
€
€
Trade receivables
16,134
1,578,125
2,329,127
558,921
1,815,716
756,371
-
Trade payables
(9,684)
-
-
(399,812)
(682)
-
(251,730)
Unsecured notes
(8,470,679)
-
-
-
-
-
-
Available funds in foreign currency
19,738
3,963,676
540,569
1,973,021
1,673,747
28,618
5,836
Net statement of financial position exposure Assets/(Liabilities)
(8,444,491)
5,541,801
2,869,696
2,132,130
3,488,782
784,989
(245,894)
Functional Currency
EUR
AED
OMR
USD
ZAR
UGX
MZN
31 December 2021
USD
USD
USD
EGP
USD
USD
USD
€
€
€
€
€
€
€
Trade receivables
1,987,808
812,560
2,851,555
500,971
62,973
227,150
1,446,338
Trade payables
(415,685)
(257,605)
(332,883)
(312,970)
(133,088)
(1,059)
(406,083)
Unsecured notes
(8,179,919)
-
-
-
-
-
-
Available funds in foreign currency
169,774
261,775
477,205
995,979
233,127
34,741
537,427
Net statement of financial position exposure Assets/(Liabilities)
(6,438,022)
816,730
2,995,877
1,183,980
163,012
260,832
1,577,682
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
133
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.1 Currency risk (continued)
The Company’s exposure to foreign currency risk was as follows based on notional amounts in foreign currency:
31 December
2022
31 December
2021
Denominated in USD
€
€
Loan receivable from subsidiary
Assets
Loan receivable from a subsidiary
8,562,087
8,244,682
Available funds in foreign currency
145,347
4,717
Liabilities
Unsecured notes
(8,710,348)
(8,179,870)
Net statement of financial position exposure (liabilities)/assets
(2,914)
69,529
The following significant exchange rates applied during the year:
Average rate
Reporting date
spot rate
2022
2021
2022
2021
USD
1.0540
1.1831
1.0667
1.13318
GBP
0.8528
0.859
0.8695
0.8391
OMR
0.40576
0.449
0.4100
0.436
AED
3.89611
4.340
3.9165
4.161
EGP
26.749
18.569
26.5144
17.864
MZN
67.6104
77.822
68.2393
72.339
AUD
1.5168
1.5749
1.57105
1.561
ZAR
17.2094
17.483
18.0955
18.057
MUR
46.6287
49.285
46.4378
49.285
UGX
3887.020
4249.30
3958.569
3997.16
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
134
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.1 Currency risk (continued)
The table below provides as sensitivity analysis of a 10% weakening or strengthened on the Group’s results and equity of the respective group entities functional currency against the currencies in which their financial assets and/or financial liabilities are denominated at the reporting date. The analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible the end of the reporting period. This analysis assumes that all variables remain constant. Currencies AED and OMR is pegged against USD therefore, not exposed to foreign currency risk arising from financial assets and liabilities denominated in USD.
A sensitivity analysis of the impact on the Company’s profit and total equity has not been provided since the Company was not significantly exposed to foreign currency risk at the reporting date as a result of the natural hedge of its financial assets and financial liabilities denominated in USD.
In addition, the Group also has significant amount of intra-group balances denominated in currencies other than the group entities functional currencies. Although these balances are eliminated on consolidation, the effect of movements in exchange rates are still recognised in the individual Company’s and in the consolidated income statement. When the balances are considered to be part of the Group’s net investment in the foreign operation, the foreign exchange differences arising on these balances are reclassified to other comprehensive income on consolidation as part of exchange differences on translating foreign operations. During the year an amount of €3,980,158 (2021: €186,996) relating to exchange differences on intra-group balances was recognised in the Group’s finance income and finance cost and an amount of €2,609,469 (2021: €695,596) was reclassified to other comprehensive income.
Results and Equity
The Group
31 December 2022
€
€
EUR against USD
789,469
(789,469)
USD against EGP
(170,387)
170,387
USD against EUR
(317,162)
317,162
UGX against USD
(70,073)
70,073
MZN against USD
22,354
(22,354)
31 December 2021
Euro against USD
(651,944)
651,944
USD against EGP
90,986
(90,986)
MZN against USD
11,481
(11,481)
UGX against USD
5,898
(5,898)
ZAR against USD
28,306
(28,306)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
135
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.2 Hedge of net investment in foreign entity
A foreign currency exposure arises from the Group’s net investment in METS that has a USD functional currency. The risk arises from the fluctuation in spot exchange rates between the USD and the Euro, which causes the amount of the net investment to vary.
The hedged risk in the net investment hedge is the risk of a weakening USD against the Euro that will result in a reduction in the carrying amount of the Group’s net investment in METS.
Part of the Group’s net investment in METS is hedged by a USD denominated bond of €8,470,679 (2021: €7,892,750) which mitigates the foreign currency risk arising from the sub-Group’s net assets. The bond is designated as hedging instrument for the changes in the value of the net investment that is attributable to changes in the EUR/USD spot rate.
To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the hedged item by comparing changes in the carrying amount of the debts that is attributable to a change in the spot rate with changes in the investment in the foreign operation due to movements in the spot rate (the offset method). The Group’s policy is to hedge the net investment only to the extent of the debt principal, denominated in USD and designated as hedging instrument.
There was no ineffectiveness to be recorded from net investment in foreign entity hedges.
The amounts related to items designated as hedging instruments were as follows:
The Group
Net investment in foreign operation
2022
2021
Carrying amount (non- current borrowings)
€ 8,470,679
€ 7,892,750
USD carrying amount
$9,034,639
$8,943,946
Hedge ratio
1:1
1:1
Change in carrying amount of USD denominated bond as a resort of foreign currency movements since 1 January, recognised in OCI
€ 496,651
€ 412,381
Change in value of hedged item used to the extent of the debt principal to determine hedge effectiveness
€ (496,651)
€ (412,381)
Weighted average hedged rate for the year
USD 1.05 : EUR 1
USD 1.18 : EUR 1
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
136
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.3 Interest rate risk
Interest rate risk is the risk that the value or cash flows of a financial instrument will fluctuate due to changes in market interest rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to cash flow interest rates principally through bank loans which bear variable interest rate. The Group’s secured and unsecured notes as well as its investment in debt instruments classified as financial assets at fair value through profit or loss bear interest at fixed rate and expose the Group to fair value interest rate risk.
Profile
At the reporting date the interest rate profile of the Group’s and the Company’s interest-bearing financial instruments was:
Carrying amount
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Variable-rate instruments
Financial assets:
-Cash at bank
19,454,683
11,793,055
170,729
-
-Loans receivable from related companies
-
4,147,488
-
-
Financial liabilities:
-Bank loans
(7,444,042)
(5,071,934)
-
-
-Loan from subsidiary
-
-
(3,521,250)
-
-Bank overdraft
(792,534)
(2,876,904)
-
(68,442)
Net exposure to cash flows interest rate risk
11,218,107
7,991,705
(3,350,521)
(68,442)
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
137
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.3 Interest rate risk (continued)
Carrying amount
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Fixed-rate instruments
Financial assets:
-Investment in debt instruments at FVTPL
438,698
610,166
-
-
-Loans receivable from subsidiaries
-
-
26,031,785
26,258,340
Financial liabilities:
-Bank loan
(80,273)
(377,829)
-
-
-Secured notes
(20,351,551)
(20,310,098)
(20,366,794)
(20,185,335)
-Unsecured notes
(30,000,992)
(29,180,610)
(30,952,055)
(30,378,235)
(49,994,118)
(49,258,371)
(25,287,064)
(24,305,230)
The Group manages its exposure to changes in cash flows in relation to interest rates on interest-bearing by entering into financial arrangements that are based on fixed rates on interest whenever practicable. The Group is exposed to fair value interest rate risk on its financial assets and liabilities bearing fixed rates of interest, but with the exception to the investments in bond securities which are measured at fair value, all the other instruments are measured at amortised cost and accordingly a shift in interest rates would not have an impact on profit or loss or total comprehensive income. Management does not consider a reasonable shift in interest to have a significant impact on the Group’s equity and post-tax profit as a result of a change in the fair value of its investments in bond securities.
Cash flow sensitivity analysis for variable-rate instruments
The Group’s interest rate risk principally arises from bank loans, bank overdraft and loan from related parties issued at variable rates which expose the Group to cash flow interest rate risk while the Company’s interest rate risk principally arise on loans to subsidiaries. Floating interest rates on these instruments are linked to reference rates such as Euribor or the respective banker’s base rate. While the cash at bank are also subject to interest rates which are linked to the risk-free rates, the interest on these balances are considered insignificant.
A reasonably possible change of 250 basis points (2021: 50 basis points) in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
138
35 Financial instruments – Fair values and risk management (continued)
35.6 Market risk (continued)
35.6.3 Interest rate risk (continued)
Impact on Profit and loss and Equity
The Group
The Company
€
€
31 December 2022
(+) 250 basis points
205,914
88,031
(-) 250 basis points
(205,914)
(88,031)
31 December 2021
(+) 50 basis points
19,007
342
(-) 50 basis points
(19,007)
(342)
35.6.4 Other market price risk
The primary goal of the Group’s investment in equity securities is to hold the investments for the long term for strategic purposes. Management is assisted by external advisers in this regard. Certain investments are designated at FVTPL because their performance is actively monitored and they are managed on a fair value basis. The Group’s equity investments are marketable or listed securities classified as at FVTPL. The impact of a 5% (2021: 1%) increase in the market price at the reporting date on profit or loss would have been an increase of €137,868 (2021: €40,067). An equal change in the opposite direction would have decreased profit or loss by an equal but opposite effect.
35.7 Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations.
The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative.
The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
139
35 Financial instruments – Fair values and risk management (continued)
35.7 Operational risk (continued)
This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas:
•requirements for appropriate segregation of duties, including the independent authorisation of transactions
•requirements for the reconciliation and monitoring of transactions
•compliance with regulatory and other legal requirements
•documentation of controls and procedures
•requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified
•requirements for the reporting of operational losses and proposed remedial action
•development of contingency plans
•training and professional development
•ethical and business standards
•risk mitigation, including insurance where this is effective.
The management team is taking actions to ensure that its Group entities’ operations remain ongoing, with the lowest possible disruptions, through its business continuity plan across all the jurisdictions in which the Group is present.
35.8 Capital management
The Group defines capital as paid-in capital stock, additional paid-in capital and retained earnings, both appropriated and unappropriated. Other components of equity such as cumulative translation adjustments are excluded from capital for the purposes of capital management.
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The board of directors monitors the return on capital, which the Group defines as the result from operating activities divided by total shareholders’ equity.
The table below provides information on the Group’s equity and borrowings at the reporting date. The Group monitors the level of capital on the basis of the ratio of aggregated net debt to total capital. Net debt is calculated as total borrowings (as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as equity, as shown in the respective statement of financial position, plus net debt.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
140
35 Financial instruments – Fair values and risk management (continued)
35.8 Capital management (continued)
The Group
The Company
2022
2021
2022
2021
€
€
€
€
Bank loans
7,444,043
5,449,763
-
-
Secured notes
20,351,551
20,310,098
20,366,794
20,185,335
Unsecured notes
30,000,992
29,180,610
30,952,055
30,378,235
Lease liabilities
14,307,945
14,441,787
-
-
Loan from subsidiary
-
-
3,521,250
-
Less:
Cash and cash equivalents (Note 27)
(18,662,149)
(9,107,124)
(170,729)
68,442
Net debt
53,442,382
60,275,134
54,669,370
50,632,012
Total equity
60,356,503
62,818,484
21,311,154
18,594,333
Total capital
113,798,885
123,093,618
75,980,524
69,226,345
Net debt ratio
47%
49%
72%
73%
The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. In view of the nature of the Group’s activities and the extent of borrowings or debt, the capital level as at the end of the reporting period is deemed adequate by the Board of Directors. There were no changes in the Group’s approach to capital management during the year.
36 Leases
36.1 As a lessee
The Group has several parcels of leased land and buildings in Malta, Cyprus, UAE, Oman, Iraq and Uganda. For certain leases, the Group is restricted from entering into any sub-lease arrangements.
Information about leases for which the Group is a lessee is presented below.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
141
36 Leases (continued)
36.1 As a lessee (continued)
36.1.1 Right-of-use assets
Property
2022
2021
€
€
Balance at 1 January
50,014,250
-
Acquired in business combination (see Note 6)
-
51,438,794
Additions
2,380,624
-
Depreciation
(3,653,060)
(1,728,892)
Modifications
(605,158)
2,490
Effect of movement in exchange rates
370,322
301,858
Balance at 31 December
48,506,978
50,014,250
The Group’s right-of-use assets were acquired in a reverse acquisition during 2021 (Note 6). As part of the measuring the fair values of identifiable assets acquired in the business combination, the fair value of the right-of-use assets acquired was determined to be €51,438,794 which was based on a discounted cash flow method (income approach), by projecting the estimated off-market terms net of tax shield and discounting them to present value at an appropriate market discount rate.
The Group’s leasing activities
Medserv Operations Limited, the Company’s operating subsidiary in Malta, leases a quay, premises and ancillary facilities at Malta Freeport, Kalafrana and premises at Hal Far Industrial Estate under separate lease arrangements. The lease at Malta Freeport, Kalafrana runs for a period of 48 years from 5 December 2012. This lease has been granted to the subsidiary under title of temporary emphyteusis. The leases at Hal Far Industrial Estate runs for a period of thirteen years from 20 October 2014 with the option exercisable by the subsidiary to extend the lease for three further periods of 10 years each.
Medserv (Cyprus) Limited, the Company’s subsidiary in Cyprus leases various yard facilities at Port of Limassol in Cyprus under different agreements as follows:
•Open yard area for 21,900 sqm and a warehouse running since 2018 until 18 June 2023;
•Open yard area for 5,000 sqm running for a period of 3 years until 14 July 2025*;
•Land of 1,250 sqm running for a period of 3 years until 14 July 2025;
* The previous lease arrangement for 13,000 sqm has been early terminated during the year and replaced with a smaller size yard area for a period of 3 years until 14 July 2025. The lease liability and right-of-use asset was derocognised and a modification gain was recognised during the year amounting to €7,823.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
142
36 Leases (continued)
36.1 As a lessee (continued)
36.1.1 Right-of-use assets (continued)
These agreements can be renewed depending on the clients’ requirements.
In the Middle East, the Company’s subsidiaries have the following lease arrangements at the reporting date:
•UAE: Middle East Tubular Services Limited (Sharjah branch) leases a plot of land of 43,196 sqm until 31 December 2025 in Hamriyah Freezone.
•Sohar: Middle East Tubular Services LLC (FZC) leases a plot of land of 49,442 sqm in the Sohar Freezone until 31 August 2029.
•Duqm: Middle East Comprehensive Tubular Services Limited leases two plots of lands of 57,500 sqm and 62,122 sqm for a period until 31 July 2027 in the Port of Duqm. The initial term may be extended or renewed for 3 further periods of 5 years by mutual agreement between the subsidiary and the lessor.
•Iraq: Middle East Tubular Services (Iraq) Limited, the right-of-use asset comprises the following facilities in Khor Al Zubair Freezone:
-A warehouse with an area of 6,000 sq m for a period of 15 years until 22 June 2026, renewable at the request of the subsidiary and consent of the lessor; and
-Plots of land with an area of 49,698 sqm for a period of 15 years until 22 December 2025, renewable at the request of the subsidiary and consent of the lessor. During the year, the lease arrangement was modified with a different term and rental payments.
In Uganda, the Company’s subsidiary Regis Uganda Limited has the following lease arrangements at the reporting date:
•A 99-year lease of a plot of land measuring 24,000 sqm for the Group’s new base for the upcoming projects in Buliisa, Uganda. The lease is renewable for another 99 years;
•A property of 4,047 sqm that is being used as the main office of the subsidiary in Uganda; and
•A residential property of 8,094 sqm being used as accommodation for the staff.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
143
36 Leases (continued)
36.1 As a lessee (continued)
36.1.2 Lease liabilities
2022
2021
€
€
Maturity analysis - contractual undiscounted cash flows
Less than one year
(2,654,557)
(2,585,561)
One to five years
(7,067,644)
(7,661,523)
Five years to ten years
(3,453,851)
(4,052,525)
More than ten years
(18,736,255)
(18,736,255)
Total undiscounted lease liabilities
at 31 December
(31,912,307)
(33,035,864)
Current
1,876,675
1,721,604
Non-current
12,431,270
12,720,183
Lease liabilities included in the statement of financial position at 31 December
14,307,945
14,441,787
The table below provide a reconciliation of the Group’s lease liabilities:
2022
2021
€
€
Balance at 1 January
14,441,790
-
Acquired in business combination (Note 6)
-
14,789,789
Modifications
(463,370)
2,490
New leases
2,256,735
-
Payments during the year
(3,289,594)
(1,099,146)
Interest charges during the year
964,943
466,826
Effect of movement in exchange rates
397,441
281,828
Balance at 31 December
14,307,945
14,441,787
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
144
36 Leases (continued)
36.1 As a lessee (continued)
36.1.2 Lease liabilities (continued)
Amounts recognised in profit or loss
2022
2021
€
€
Interest on lease liabilities (included in finance cost)
964,943
466,826
Depreciation charge (included in cost of sales)
3,653,060
1,728,892
Loss on lease modification (included in other expense)
141,784
-
Low value and short-term lease (included in cost of sales)
430,451
244,606
Amounts recognised in the statement of cash flows
2022
2021
€
€
Total cash outflow for leases
3,720,045
1,343,752
36.1.3 Critical judgements, estimates and assumptions with respect to lease
Some leases contain extension options exercisable by the Group up to one year before the end of the contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable by the Group and not by the lessors. The Group assesses at the lease commencement whether it is reasonably certain to exercise the extension options and subsequently reassess whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. The extension options provided to the Group were assessed by management and any extension options exercisable by the Group that were considered to be reasonably certain to be exercised were recognised.
The Group has estimated that the potential future cash outflows (undiscounted), should it exercise the extension options which have not been recognised would amount to approximately €12.8 million (2021: €12.1 million).
Incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
145
36 Leases (continued)
36.1 As a lessee (continued)
36.1.3 Critical judgements, estimates and assumptions with respect to lease (continue)
The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
37 Related parties
37.1 Significant shareholders
The Company is a subsidiary of MedservRegis p.l.c. (the “parent company”), the registered office of which is situated at Port of Marsaxlokk, Birzebbugia, Malta. The parent company is a public limited liability company incorporated in Malta and listed on the Malta Stock Exchange. Following the share for share exchange between the parent company and Regis Holdings Limited, which was completed on 25 June 2021, 49.995% of the issued share capital of the parent company were acquired by DOCOB Limited with registered office at C/o ICAECAP (Mauritius) Limited, Block 1C, Uniciti Business Park, Cascavelle, Mauritius. DOCOB Limited is ultimately owned by David S. O’Connor and his close family members (56%) and Olivier Bernard (44%). Three of the parent company’s directors, namely David S. O’Connor, Olivier Bernard and Anthony S. Diacono hold 27.99% (2021: 27.99%), 21.99% (2021: 21.99%) and 13.23% (2021: 14.2%) respectively of the issued share capital of the Company either directly or indirectly.
37.2 Identity of related parties
The Group has a related party relationship with its directors (“key management personnel”), shareholders and an immediate relative of a directors (“other related parties”). All transactions entered into with group companies have been eliminated in the preparation of these financial statements.
The Company has a related party relationship with its subsidiaries (see note 24), its directors and companies controlled by subsidiaries (“other related companies”).
37.3 Transactions with key management personnel
There were no loans to directors during the current and comparative year. Compensation for services provided to the Group by key management personnel during the year amounted to €1,990,228 (2021: €1,809,885). The total remuneration paid to directors during the year amounted to €1,189,991 (2021: €1,008,264). In addition to their salaries, the Company also provides non-cash benefits to directors and executive officers. Directors’ remuneration is included in note 13.
A number of key management personnel, or their related parties, hold positions in other companies that result in them having control or significant influence over the financial or operating policies of these companies.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
146
37 Related parties (continued)
37.4 Other related party transactions
In addition to the transactions disclosed in the statements of changes in equity and cash flows and notes 20,21, 22, 23 and 33 to these financial statements, there were the following related party transactions:
The Company
2022
2021
€
€
Subsidiaries
Interest charged to
1,476,763
2,072,516
Interest charged by
68,818
-
The Group
2022
2021
€
€
Other related parties
Services provided by
110,376
138,285
Associates and Joint ventures
Services provided by
111,618
177,553
Recharges to
128,797
79,519
Loans advanced by
37,192
8,910
Other related companies
Services provided to
21,619
-
Loan repayment from
3,953,954
-
Services provided by
479,271
911,738
Directors
Services provided to
23,223
-
37.5 Related party balances
Information on amounts due from or payable to related parties are set out in notes 20, 21, 22, 23, and 33 to these financial statements.
MedservRegis p.l.c.
Notes to the Financial Statements (continued)
For the year ended 31 December 2022
147
38 Subsequent events
Subsequent to year end, the Company has redeemed the 2023 6% Secured Notes bearing ISIN MT0000311218 on 7 January 2023 using the proceeds from the newly issued 5% 2029 Secured Bonds to settle the outstanding payments. The proceeds from the new note issue were held by the security trustee as at 31 December 2022 and utilised for this redemption (see note 21.3 and 31.4).
On 4 January 2023, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) approved in its extraordinary meeting a flexible exchange rate which reflects the change of Egyptian pound value against foreign currencies based on the supply and demand which resulted in devaluation in the exchange rate of the Egyptian pound. The USD is being exchanged for EGP 30.9 in local banks at the issuance date of these financial statements. The potential impact of the devaluation in the exchange rate of the Egyptian pound on the Group’s performance remains uncertain as of the date of this report. However, management continues to monitor the situation closely.
On 15 January 2023, Medserv (Cyprus) Limited has been awarded a new contract with Chevron Cyprus Limited for the provision of operational base support services from its facilities in the port of Limassol, Cyprus.
On 16 January 2023, Medserv International Limited has been awarded a new contract by a major international oil company to provide integrated logistics services for its exploration activities taking place offshore Morocco. The contract duration is nine months and may be extended for another three months.
On 22 February 2023, Middle East Comprehensive Tubular Services LLC has been awarded a new contract by a major international oil company for the provision of logistics bases and associated services in Duqm, Oman. The contract is for a period of two years and may be extended for an additional two periods of twelve months each.
On 2 April 2023, Middle East Comprehensive Tubular Services LLC has signed an additional site of 25,060 sq. meters in the Port of Duqm for a period of five years renewable for a further period of five years.
In April 2023, Middle East Tubular Services (Iraq) Ltd has signed a five-year framework agreement with a lead contractor responsible for the operation and development of MISSAN oilfields for the provision of tubular services and inspection.

Independent auditor’s report

To the Shareholders of MedservRegis p.l.c.

Report on the audit of the financial statements

Our opinion

In our opinion:

· The Group financial statements and the Parent Company financial statements (the “financial statements”) of MedservRegis p.l.c. give a true and fair view of the Group and the Parent Company’s financial position as at 31 December 2022, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and

· The financial statements have been prepared in accordance with the requirements of the Maltese Companies Act (Cap. 386).

##### Our opinion is consistent with our additional report to the Audit Committee.

##### What we have audited

MedservRegis p.l.c.’s financial statements comprise:

· the Consolidated and Parent Company statements of financial position as at 31 December 2022;

· the Consolidated and Parent Company statements of profit or loss and other comprehensive income for the year then ended;

· the Consolidated and Parent Company statements of changes in equity for the year then ended;

· the Consolidated and Parent Company statements of cash flows for the year then ended; and

· the notes to the financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

#####

##### Independence

We are independent of the Group and the Parent Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.

To the best of our knowledge and belief, we declare that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

We did not provide any non-audit services to the company during the year ended 31 December 2022.

Our audit approach

#####

##### Overview

| · Overall group materiality: €669,000, which represents 1% of revenues
· We conducted a full scope audit of the significant components and performed specified audit procedures on certain account balances in other components. · The group engagement team performed oversight procedures on the work of component teams for all significant locations.
· Impairment assessment of goodwill, intangible assets, right-of-use assets and property plant and equipment at Group level · Recoverability of deferred tax assets at Group level · Impairment assessments of investments in subsidiaries and loans receivable from subsidiaries at Company level

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

#####

##### Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality | €669,000
How we determined it | 1% of revenues
Rationale for the materiality benchmark applied | We chose revenue as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark. We chose 1% which is within the range of quantitative materiality thresholds that we consider acceptable.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €66,900 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

#### Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter | How our audit addressed the Key audit matter
Impairment assessment of goodwill, intangible assets, right-of-use assets and property, plant and equipment at Group level The Group’s assets include goodwill and intangible assets amounting to €16,904,983 right-of-use assets amounting to €48,506,978 and property, plant and equipment amounting to €33,334,709 relating to businesses operating in the Oil Country Tubular Goods (“OCTG”) segment (collectively referred to as “METS sub-group”) and businesses operating in Integrated Logistics Support Services (“ILSS segment”) (Notes 16, 18 and 36). Each of those businesses is considered by the Group to be a separate cash generating unit (“CGU” or “CGUs”). Goodwill arising from the reverse acquisition of the Medserv group of companies has been allocated to a collection of CGUs (i) the OCTG segment as a whole (“OCTG CGU”) and (ii) ILSS segment as a whole (“ILSS CGU”). At each reporting date, the Company is required to determine whether there are any indications of impairment in relation to goodwill, intangible assets, right-of-use assets and property, plant and equipment. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. If such indicators exist (at the asset or separate CGU level), the Company is required to estimate the recoverable amount of that asset or that CGU of which the asset forms part. The OCTG CGU and ILSS CGU, to which the goodwill relates to, are separately tested for impairment annually. The key risk factors identified by the Group for the businesses to which the separate CGUs, OCTG CGU and ILSS CGU relate are: (i) the global, country and macroeconomic risks; (ii) customer concentration risk and (iii) Market volatility in oil and gas prices driven by the related demand and their impact on the customers business activity in the context of geopolitical tensions and trends in the energy generation markets. The recoverable amount for each asset (tested individually) and each separate CGU, the OCTG CGU and ILSS CGU was estimated using either the Fair Value Less Costs of Disposal (‘FVLCD’) or Value in Use (‘VIU’) as per the applicable financial reporting framework. The key inputs, specific to the Group, comprise future cash flows, growth rates and discount rates for VIU assessments and market prices and rates for comparable assets under the FVLCD assessments. The client has developed models which estimate the recoverable amount for each asset factoring the above inputs as applicable to the respective method which are approved by the board of directors. The resulting fair values are also challenged and approved by the Board before being reflected in the Group consolidated financial statements. The valuation models and related inputs are complex, unobservable and subject to inherent estimation uncertainty and therefore, require significant judgement. Hence, we have identified this area as a key audit matter. | We involved our valuation experts, as appropriate, in performing our procedures. As part of those procedures, for each individual asset, separate CGUs, the OCTG CGU and the ILSS CGU identified in this key audit matter: - we compared the Group’s 2022 budgets with the actual performance of each relevant business unit for the reporting period and made enquiries as to the reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these against supporting documentation and our knowledge of the Group; - we assessed the impact of the underlying business risk factors and the assumptions applied in the value-in-use analysis, at reporting date, including projected revenue growth and EBITDA margins with reference to our understanding of the Group, historical trends, available industry information, available market data and relevant documentation on contracted and current business pipeline; - we assessed whether the discount rates applied in the discounted cash flow forecasts under the VIU model were within an appropriate range by reference to comparable market data; - through sensitivity analysis, we assessed the impact on the impairment assessment of reasonable possible changes in the key assumptions in the value-in-use analysis including discount rate, annual revenue growth rate and EBITDA margins used for estimating the recoverable amount; - we sourced independent market values and rates for comparable assets in the respective markets and compared them to the client’s assessed values which in many instances were based on third party valuations; - We tested the key assumptions applied in the valuation of the right-of-use asset, including selling price per square meter (by independently sourcing property listings in the respective locations), areas, capitalization rate, inflation rate, discount rate, number of years and leasehold factor; - through sensitivity analysis, we assessed the impact on the value to reasonable possible changes in the key assumptions in the valuation, including selling rates per square meter, leasehold factor and discount rates used for estimating the recoverable amount of the right-of-use asset; - we tested the mathematical accuracy of the valuation models prepared by management to assess the recoverable amount of goodwill, intangible assets, right-of-use assets and property, plant and equipment, and; - we evaluated the adequacy of disclosures made in Notes 3, 4.5, 4.6, 4.9, 6.5, 16, 18 and 36 to the financial statements, including those regarding the key assumptions. Based on the work performed, we found the value of goodwill, intangible assets, right-of-use assets and property, plant and equipment, as well as the related disclosures required by IAS 36 and IFRS 16, to be consistent with the explanations and evidence obtained.
Recoverability of deferred tax assets at Group level At 31 December 2022, one of the Group’s subsidiaries, Medserv Operations Limited, has deferred tax assets recognized on unutilized investment tax credits amounting to €9,066,217 (Note 19). In accordance with the applicable financial reporting framework, deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available, against which these tax benefits can be utilised. The recognition of deferred tax assets, therefore, requires significant judgement in estimating future taxable profits based on profit forecasts drawn up by management at the reporting date. The amount of deferred tax assets recognised in the financial statements are expected to be recovered within the foreseeable future. Such estimation uncertainty might lead to material differences between the projected period for utilization of tax credits compared with actual timing of utilization and hence we have selected this area as a key audit matter. | As part of our audit procedures: - we compared the budget prepared for 2022 with the actual performance for the reporting period for Medserv Operations Limited and enquired about any significant variations identified. We assessed and verified the reasonableness of the explanations provided, by corroborating these against supporting documentation and our knowledge of Medserv Operations Limited; - we reviewed the profitability projections prepared by management and evaluated the assumptions adopted in the preparation of taxable profit forecasts at the reporting date with reference to our understanding of Medserv Operations Limited’s business, historical trends, available industry information and available market data and relevant documentation on its contracted and current business pipeline; - we recomputed the utilisation of tax credits in line with the taxable profit projections and assessed whether these tax credits are expected to be utilised within a reasonable timeframe and; - we evaluated the adequacy of disclosures made in Notes 3, 4.18 and 19 to the financial statements, including those regarding the key assumptions. Based on the work performed, we found the value of deferred tax assets, as well as the related disclosures to be consistent with the explanations and evidence obtained.
Impairment assessments of investments in subsidiaries and loans receivable from subsidiaries at parent company level The Company’s assets include, amongst others, investments in subsidiaries and loans receivable from subsidiaries amounting to €47,622,803 and €26,031,786 (Notes 24 and 23). Each subsidiary comprises a separate cash generating unit. At each reporting date, the Company is required to determine whether there is any indication of impairment on the investments in subsidiaries. If such indicators exist (at separate CGU level), the Company is required to estimate the recoverable amount of that CGU. The key risk factors identified by the Company for the businesses to which the separate CGUs relate are: (i) the global, country and macroeconomic risks; (ii) customer concentration risk and (iii) market volatility in oil and gas prices driven by the related demand and their impact on the customers business activity in the context of geopolitical tensions and trends in the energy generation markets. For loans receivable from the subsidiaries which are in default, the Company assesses whether those receivables are credit impaired. Any credit losses are measured at the present value of all cash shortfalls. In estimating any shortfalls, the Company applied the same projections used for the value-in-use analysis prepared in estimating the recoverable amount of investments in these subsidiaries. The recoverability of those receivables is supported by the same projections, and subject to the same risks factors and key assumptions as those underlying the calculation of the recoverable amount of the related investments. In estimating the recoverable amount, as per the applicable financial reporting framework, the directors prepare a value-in-use analysis for each separate CGU. The key inputs, specific to the Company, comprise future cash flows, growth rates and discount rates. Those inputs are subject to inherent estimation uncertainty and therefore, significant judgement. Hence, we have identified this area as a key audit matter. | We involved our valuation experts, as appropriate, in performing our procedures in relation to the ‘investment in subsidiaries’. As part of those procedures, for each separate CGU: - we compared the Group’s 2022 budgets with the actual performance of each relevant business unit for the reporting period and made enquiries as to the reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these against supporting documentation and our knowledge of the Group; - we assessed the impact of the underlying business risk factors and the assumptions applied in the value-in-use analysis, at reporting date, including projected revenue growth and EBITDA margins with reference to our understanding of the Group, historical trends, available industry information, available market data and relevant documentation on contracted and current business pipeline; - we assessed whether the discount rates applied in the discounted cash flow forecasts under the VIU model were within an appropriate range by reference to comparable market data; - through sensitivity analysis, we assessed the impact on the impairment assessment of reasonable possible changes in the key assumptions in the value-in-use analysis including discount rate, annual revenue growth rate and EBITDA margins used for estimating the recoverable amount, and; - we tested the mathematical accuracy of the valuation models prepared by management to assess the recoverable amount of the investment in subsidiaries. Our procedures, noted above in relation to the 'investment in subsidiaries’ were also used to evaluate the Company’s assessment of the expected credit loss of the past due loans receivable from subsidiaries. - We evaluated the adequacy of disclosures made in Notes 3, 4.1, 4.3, 23 and 24 to the financial statements, including those regarding the key assumptions. Based on the work performed, we found the value of investments in subsidiaries and loans receivable from subsidiaries, as well as the related disclosures to be consistent with the explanations and evidence obtained.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group includes a number of subsidiaries, mainly operating in Malta, Cyprus, Egypt, Oman, Iraq, Uganda, Mozambique and Mauritius. It also holds a number of investments in associates. The financial statements are a consolidation of all of these components.

We therefore assessed what audit work was necessary in each of these components, based on their financial significance to the financial statements and our assessment of risk and Group materiality. At the component level, we performed full scope audits in order to achieve the desired level of audit evidence on all the significant components and performed specified audit procedures on certain account balances in other components.

In establishing the overall audit approach to the Group audit, we determined the type of work that needed to be performed by us, as the Group engagement team, or by component auditors. For the work performed by component auditors operating under our instructions, we determined the level of involvement we needed to have in the audit work at those locations to be satisfied that sufficient audit evidence had been obtained for the purposes of our opinion. We kept in regular communication with audit teams throughout the year with phone calls, discussions and written instructions and review of working papers where appropriate.

We ensured that our involvement in the work of our component auditors, together with the additional procedures performed at the Group level, were sufficient to allow us to conclude on our opinion on the Group financial statements as a whole.

The Group audit team performed all of this work by applying the overall Group materiality, together with additional procedures performed on the consolidation. This gave us sufficient appropriate audit evidence for our opinion on the Group financial statements as a whole.

####

Other information

The directors are responsible for the other information. The other information comprises all of the information in the annual financial report (but does not include the financial statements and our auditor’s report thereon).

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

#### Responsibilities of the directors and those charged with governance for the financial statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements of the Maltese Companies Act (Cap. 386), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

· Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6

We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Annual Financial Report of MedservRegis p.l.c. for the year ended 31 December 2022, entirely prepared in a single electronic reporting format.

Responsibilities of the directors

The directors are responsible for the preparation of the Annual Financial Report, including the consolidated financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.

Our responsibilities

Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report, including the consolidated financial statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

Our procedures included:

· Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report, in accordance with the requirements of the ESEF RTS.

· Obtaining the Annual Financial Report and performing validations to determine whether the Annual Financial Report has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.

· Examining the information in the Annual Financial Report to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Annual Financial Report for the year ended 31 December 2022 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.

Other reporting requirements

The Annual Report 2022 contains other areas required by legislation or regulation on which we are required to report. The Directors are responsible for these other areas.

The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.

Area of the Annual Report 2022 and the related Directors’ responsibilities | Our responsibilities | Our reporting
Directors’ report and Statement by the Directors on non-financial information The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act. | We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements. In addition, we are required to state whether, in the light of the knowledge and understanding of the Company and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements. With respect to the information required by paragraphs 8 and 11 of the Sixth Schedule to the Act, our responsibility is limited to ensuring that such information has been provided. | In our opinion: · the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and · the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386). We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Code of Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97. The Statement provides explanations as to how the Company has complied with the provisions of the Code, presenting the extent to which the Company has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles. | We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements. We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97. We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures. | In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority. We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Remuneration Statement and Report The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare a Remuneration report, including the contents listed in Appendix 12.1 to Chapter 12 of the Capital Markets Rules. | We are required to consider whether the information that should be provided within the Remuneration report, as required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules, has been included. | In our opinion, the Remuneration report has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.
| Other matters on which we are required to report by exception We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion: · adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us. · the financial statements are not in agreement with the accounting records and returns. · we have not received all the information and explanations which, to the best of our knowledge and belief, we require for our audit. We also have responsibilities under the Capital Markets Rules to review the statement made by the directors that the business is a going concern together with supporting assumptions or qualifications as necessary. | We have nothing to report to you in respect of these responsibilities.

Other matter – use of this report

Our report, including the opinions, has been prepared for and only for the Parent Company’s shareholders as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.

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Appointment

We were first appointed as auditors of the Company by directors resolution on 29 July 2022 for the period ended 31 December 2022.

PricewaterhouseCoopers

78, Mill Street

Zone 5, Central Business District

Qormi

Malta

Stephen Mamo

Partner

28 April 2023