Company Registration Number: C 94829 G3 FINANCE p.l.c. Annual Report and Financial Statements 31 December 2022
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 Pages Directors’ report 1-4 Corporate governance – Statement of compliance 5-9 Statement of financial position 10 Statement of comprehensive income 11 Statement of changes in equity 12 Statement of cash flows 13 Notes to the financial statements 14 - 27
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 1 Directors’ report The directors present their report and the audited financial statements for the year ended 31 December 2022. Principal activities The company is principally involved to act as a financing company, serving as a vehicle through which the G3 Group will continue to finance its future projects. Review of business During the year under review, finance income on loans from fellow subsidiary, G3 Hospitality Limited, amounted to 581,795, whilst interest payable on bonds totalled 413,014. The company registered a profit after tax of 88,928 (2021: loss of 10,090) after incurring administrative expenses, mainly relating to listing and compliance costs, together with directors’ emoluments and professional fees, amounting to 79,853. The company’s balance sheet is primarily made up of the bond issue of 12.5 million (classified as non- current liabilities) and the loan receivable from G3 Hospitality Limited (classified as non-current assets) amounting to 12,124,472. G3 Finance p.l.c. equity as at year end is stated at 248,388, primarily made up of the share capital funds. The company recognises that the key risk and uncertainty of its business is that of the potential non- fulfilment by the borrower (noted above) of its obligations. Bond issue and outlook for the guarantor On 23 March 2022 G3 Finance Limited changed its name to G3 Finance p.l.c. and converted its status from a private to a public limited liability company. On 25 March 2022, G3 Finance p.l.c. issued an aggregate of 12,500,000 in bonds having a face value of 100 per bond, subject to minimum holding of 2,000 and in multiples of 100 thereafter. The bonds have a coupon interest rate of 4.50% per annum payable on a yearly basis on 6 April each year. The bonds are guaranteed by G3 Holdings Limited, which has bound itself jointly and severally liable with the issuer, for the repayment of the bonds and interest thereon, pursuant to and subject to the terms and conditions in the offering memorandum. These bonds were admitted for listing on the Malta Stock Exchange on 6 April 2022. In accordance with the provisions of the prospectus, the proceeds from the bond issue have been advanced by the issuer to undertakings forming part of the G3 Group for the purpose of re-financing existing bank facilities within the group and to finance future growth in operations. During the year, a restructuring process was undertaken, whereby G3 Hospitality Limited and G3 Properties Limited (both related parties of G3 Finance p.l.c.) became subsidiaries of G3 Holdings Limited. G3 Holdings Limited is the Guarantor of the above-mentioned bonds. For the year ending 31 December 2022, G3 Holdings Limited registered a profit after tax of 1,617,122 (2021: 873,208) after incurring administrative expenses. At 31 December 2022, the group’s net asset value was 20,110,577 (2021: 17,695,812) whilst total assets were 42,110,189 (2021: 34,599,822).
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 2 Directors’ report - continued Results and dividends The income statement is set out on page 11. The directors do not recommend the payment of a dividend and propose that the balance of accumulated losses amounting to 3,612 (2021: 92,540) be carried forward to the next financial year. Financial risk management The company's activities potentially expose it to a variety of financial risks, including liquidity risk. The company's overall risk management program focuses on the unpredictability of markets and seeks to minimise potential adverse effects on the company's financial performance. Risk management is carried out within the company where applicable under policies approved by the management of the company. The company does not use derivative financial instruments to hedge risk exposures. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Refer to Note 2 to the financial statements. Principal risks and uncertainties faced by the Company The successful management of risk is essential to enable the company to achieve its objectives. The ultimate responsibility for risk management rests with the company’s directors, who evaluate the company’s risk appetite and formulate policies for identifying and managing such risks. Given the simple structure of the company as at 31 December 2021, no specific risks have been identified. The nature of the entity changed in 2022 (Note 1.1). Directors The directors of the company who held office during the year were: Alexander Grima Daniel Grima John Grima Jonathan Grima Albert Grech – appointed 10 March 2022 Juanita Bencini – appointed 10 March 2022 Michael Lewis Macelli – appointed 10 March 2022 The company’s Articles of Association do not require any directors to retire.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 3 Directors’ report - continued Statement of directors’ responsibilities for the financial statements The directors are required by the Maltese Companies Act (Cap. 386) to prepare financial statements which give a true and fair view of the state of affairs of the company as at the end of each reporting period and of the profit or loss for that period. In preparing the financial statements, the directors are responsible for:  ensuring that the financial statements have been drawn up in accordance with the International Financial Reporting Standards as adopted by the EU;  selecting and applying appropriate accounting policies;  making accounting estimates that are reasonable in the circumstances;  ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the company will continue in business as a going concern. The directors are also responsible for designing, implementing and maintaining 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, and that comply with the Maltese Companies Act (Cap. 386). They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The financial statements of G3 Finance plc for the year ended 31 December 2022 are included in the Annual Financial Report 2022, which is made available on the G3 Group website. The directors are responsible for the maintenance and integrity of the Annual Financial Report on the website in view of their responsibility for the controls over, and the security of, the website. Access to information published on the group’s website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta. The directors confirm that, to the best of their knowledge: the financial statements give a true and fair view of the financial position of the company as at 31 December 2022, and of the financial performance and the cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU; and the Annual Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that the company and the guarantor face. Going concern statement pursuant to Capital Markets rule 5.62 After making enquiries, the directors, at the time of approving the financial statements, have determined that it is reasonable to assume that the company has adequate resources to continue operating for the foreseeable future. For this reason, the directors have adopted the going concern basis in preparing the financial statements.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 4 Directors’ report - continued Auditors PricewaterhouseCoopers have indicated their willingness to continue in office and a resolution for their re- appointment will be proposed at the Annual General Meeting. Signed on behalf of the Board of Directors on 27 April 2023 by Daniel Grima (Executive Director) and Juanita Bencini (Independent, Non-Executive Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report. Registered office: The Pergola, Adenau Street Mellieha MLH 2014 Malta Telephone (+356) 21523912 Company secretary Dr Luca Vella
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 5 Corporate Governance – Statement of Compliance Introduction G3 Finance p.l.c. (the “Company”) and the G3 group of companies (the “G3 Group”) is committed to observing the principles of transparency and responsible corporate governance. The Board considers compliance and corporate governance principles to constitute an important means of maintaining the confidence of present and future shareholders, bondholders, creditors, employees, business partners and the general public, amongst other stakeholders. Pursuant to the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority, the Company hereby reports on how it has complied with the Code of Principles of Good Corporate Governance (the “Code’’) contained in Appendix 5.1 of the Capital Markets Rules for the financial period ended 31 December 2022, which report details the extent to which the Code has been adopted, as well as the effective measures taken by the Company to ensure compliance with said Code. The Board recognises that, in virtue of Capital Markets Rule 5.101, the Company is exempt from the requirement to disclose the information prescribed by Capital Markets Rules 5.97.1 to 5.97.3, 5.97.6 and 5.97.8. Compliance with the Code Principles 1 and 4 - The Board of Directors and its Responsibilities The Board is responsible for overseeing the Company’s strategic planning process, as well as reviewing and monitoring management’s execution of the corporate and business plans. The Board delegates certain powers, authorities and discretions to the Audit Committee, as duly constituted in terms of the Capital Markets Rules, the role and competence of which committee are regulated in furtherance of Terms of Reference duly implemented for the purpose and as further described hereunder. The Board of Directors has a composition that ensures that the Company is led by individuals who have the necessary skills and diversity of knowledge relative to the Company’s and the G3 Group’s respective businesses. It considers strategic issues, key projects and regularly monitors performance against delivery of the key targets of the annual strategic plans and forecasts. In fulfilling its mandate, the Board assumes responsibility for: - reviewing the Company’s strategy on an on-going basis, as well as setting the appropriate business objectives; - reviewing the effectiveness of the Company’s system of internal controls; - implementing an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve the Company’s objectives; - identifying and ensuring that significant risks are managed satisfactorily; and - ensuring that Company policies are being rigorously observed. Principle 2 - Chairman and Managing Director The roles of Chairman and Managing Director are occupied by separate individuals, whereby the G3 Group Managing Director, Mr Daniel Grima, carries out the role of Managing Director overseeing the overall management of the G3 Group, while Mr John Grima continued to act as Chairman of the Board during the period under review. The Chairman is responsible to lead the Board and set its agenda. The Chairman ensures that the Board is in receipt of precise, timely and objective information, encourages active engagement by all members of the Board for discussion and ensures effective communication with shareholders.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 6 Corporate Governance – Statement of Compliance - continued Principle 3 – Composition of the Board The Company’s Memorandum of Association provides that the Board of Directors shall consist of not less than four (4) and not more than eight (8) Directors. Each Director has one (1) vote. All Directors are appointed by means of an ordinary resolution of the shareholders of the Company in general meeting. Accordingly, G3 Holdings Limited, the parent company of the G3 Group, is empowered to appoint the Directors of the Company, thereby putting it in a position to appoint an absolute majority of the Directors and, accordingly, have control over the management and operations of the Company. All Directors are to retire from office at least once every three (3) years but shall be eligible for re-election. As at the date of this statement and during the reporting period under review, the Board of the Company is composed of the seven (7) individuals listed below, who are collectively responsible for the overall direction and management of the Company. The Board currently consists of three (3) executive Directors, who are entrusted with the Company’s day-to-day management, and four (4) non-executive Directors, two (2) of whom are also independent of the Company, whose main functions are to monitor the operations of the executive Directors and their performance, as well as to review any proposals tabled by the executive Directors. No Directors have been removed since the Company’s inception. Executive Directors: John Grima – Chairman Daniel Grima Jonathan Grima Non-executive Directors: Alexander Grima Albert Grech Independent, non-executive Directors: Juanita Bencini Michael Lewis Macelli Luca Vella acts as company secretary to the Board of Directors, as well as secretary to the Audit Committee. In compliance with the Capital Markets Rules, the Board considers that the independent, non-executive Directors are independent of management and free from any significant business, family or other relationship with the Company, its controlling shareholder or its management that could materially interfere with the exercise of their independent judgment. In assessing the independence of the independent, non- executive Directors, due notice has been taken of Capital Markets Rule 5.119. The composition of the Board has a balance of knowledge and experience, as well as a strong non-executive presence, to allow continued scrutiny of performance, strategy and governance. Principle 5 – Board Meetings Meetings of the Board are held as frequently as considered necessary, with a minimum of four (4) meetings being held annually – the Board met six (6) times during 2022. The Board members are notified of forthcoming meetings at least seven (7) days before the said meeting. In addition, the notification includes the issue of an agenda and any supporting documentation as necessary, in order to ensure that all meetings are of a highly effective nature and all participants are well informed and able to effectively contribute to Board decisions. Attendance with regards to Board meetings is recorded in the minutes of the meetings. Minutes of all Board and Audit Committee meetings are circulated to all members and kept on file by the Company Secretary.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 7 Corporate Governance – Statement of Compliance - continued Board and Audit Committee meetings are attended by the Financial Controller of the G3 Group, Mr Matthew Fenech, in order for the Board of the Company to have direct access to the financial operation and results of the G3 Group. This is also intended to ensure that the policies and strategies adopted by the Board are effectively implemented by the finance team and senior management. The Board is headed by the Chairman, Mr John Grima. All executive Directors have more than 15 years’ work experience at the G3 Group, whereas the non- executive Directors and the independent, non-executive Directors have relevant experience related to the business in which the Group operates. The remuneration of the Directors is reviewed periodically by the shareholders of the Company. All Directors of the Company, including, therefore, the non-executive Directors and the independent, non- executive Directors, have access to the G3 Group’s in-house and external legal and financial advisors who keep said Directors adequately informed of all statutory and regulatory requirements connected to the business of the Company and the G3 Group generally on an on-going basis. Principle 6 – Information and Professional Development The Company firmly believes in the professional development of all the members in the G3 Group. The Managing Director is responsible for establishing and implementing incentives which are aimed to maintain and recruit employees and management personnel. Furthermore, regular training exercises are held for the G3 Group’s employees to keep abreast of current technological and hospitality standards and other relevant subject matter trends and practices. Directors are encouraged to talk directly to any member of management regarding any questions or concerns the Directors may have. Senior management are invited to attend Board meetings from time to time when and as appropriate. Principle 8 – Committees The Board delegates certain powers, authorities and discretions to the Audit Committee. The Company’s Board has established an Audit Committee for the purposes of inter alia: a) monitoring the financial reporting process and submitting recommendations or proposals to ensure its integrity; b) monitoring of the effectiveness of the Company’s internal quality control and risk management system; c) making recommendations to the Board in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditor, following appointment by the shareholders during the Company’s annual general meeting; d) reviewing and monitoring the external auditor’s independence; e) evaluating the arm’s length nature of any proposed transactions to be entered into by the Company and a related party, to ensure that the execution of such transaction is at arm’s length, conducted on a sound commercial basis and in the best interests of the Company; and f) assessing any potential conflicts of interest between the duties of the Directors and their respective private interests or duties unrelated to the Company, to ensure that any potential abuse is managed, controlled and resolved in the best interests of the Company and according to law. As indicated above, the Company adopts measures in line with the Code with a view to ensuring that the relationship with its major shareholder is retained at arm’s length, including adherence to rules on related party transactions set out in Chapter 5 of the Capital Markets Rules. Said rules require the vetting and approval of any related party transaction by the Audit Committee, which is constituted in its entirety by non- executive Directors, two (2) of whom are independent, and of which one, in the person of Juanita Bencini, acts as Chair.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 8 Corporate Governance – Statement of Compliance - continued The Audit Committee has, pursuant to the relative terms of reference, been granted express powers to be given access to the financial position of the Company and all other entities comprising the G3 Group on a quarterly basis. The Board has formally appointed the following three (3) individuals as the members of the Audit Committee: Juanita Bencini – Chairperson and independent, non-executive Director Michael Lewis Macelli – independent, non-executive Director Alexander Grima – non-executive Director Audit Committee members are appointed for a one (1) year term of office. Such term is automatically renewed for further periods of one (1) year each unless otherwise determined by the Board of Directors of the Company. The Audit Committee meets at least four (4) times a year, with additional meetings to be called at the discretion of the Chairperson of the Audit Committee, presently Juanita Bencini. The Audit Committee met four (4) times during 2022. The Chairperson will also call a meeting of the Audit Committee if required by any Committee member, by senior management or by the external auditors of the Company. In compliance with the Capital Markets Rules, Juanita Bencini and Michael Lewis Macelli are considered to be independent and all members competent in accounting and/or auditing matters. The Company considers that the members of the Audit Committee have the necessary experience, independence and standing to hold office as members thereof. Principle 9 - Relations with shareholders and with the Market The Company is committed to having an open and communicative relationship with its shareholders and bondholders. The market is kept updated with all relevant information concerning the Company via the publication of Company Announcements in terms of the Capital Markets Rules and, furthermore, the Company regularly publishes such information on its website to ensure continuous relations with the market, including but not limited to, the Interim and Annual Financial Statements. Principle 11 - Conflicts of Interest Directors are expected to always act in the best interests of the Company and its shareholders and investors. In accordance with the provisions of the Articles of Association of the Company, any actual, potential or perceived conflict of interest must be immediately declared by a Director to the other members of the Board, who then decide on whether such a conflict exists, also possibly through a referral to the Audit Committee. In the event that the Board perceives such interest to be conflicting with the relative Director’s duties, said Director shall not vote at a meeting of Directors in respect of any contract, arrangement or proposal in which he/she has a material interest, whether direct or indirect. Principle 12 - Corporate Social Responsibility The Board is mindful of and seeks to adhere to sound principles of corporate social responsibility in its management practices. This helps the G3 Group develop strong relationships with its stakeholders and create long-term value for society and its business. The G3 Group is committed to play an effective role in society’s sustainable development, whilst tangibly proving itself to be a responsible and caring citizen of the community in which it operates. The G3 Group continues to support a number of different local initiatives aimed at improving the quality of life of the local communities it supports.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 9 Corporate Governance – Statement of Compliance - continued Remuneration Statement In terms of the Memorandum and Articles of Association of the Company, the aggregate emoluments of all Directors in any one financial year, and any increases thereto, shall be such amount as may, from time to time, be determined by the shareholders in general meeting. The remuneration of Directors is a fixed amount per annum and does not include any variable component relating to profit sharing, share options or pension benefits. For the financial year ended on 31 December 2022 the Company paid an aggregate of 34,793 to its Directors. Non-compliance with the Code Other than as stated below, the Company has fully implemented the principles set out in the Code. Principle 7 Evaluation of the Board’s Performance Under the present circumstances, the Board of the Company does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the Board’s performance is evaluated on an on-going basis by, and is subject to the constant scrutiny of, the Company’s shareholders and the rules by which the Company is regulated as a listed company. Principle 8 - Nomination Committee and Remuneration Committee The Board of Directors considers that the size and operation of the Company does not warrant the setting up of nomination and remuneration committees. Given that the Company does not have any employees other than the Directors and the company secretary it is not considered necessary for the Company to maintain a remuneration committee. Similarly, the Company has not incorporated a nomination committee. Appointments to the Board of Directors are determined by the shareholders of the Company in accordance with the Company’s Memorandum and Articles of Association. The Company considers that the members of the Board possess the level of skill, knowledge and experience expected in terms of the Code. Principle 10 – Institutional Shareholders The Company is ultimately privately held and has no institutional shareholders, therefore, Principle 10 does not, at present, apply to the Company. Approved by the Board of Directors on 27 April 2023.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 10 Statement of financial position As at 31 December 2022 2021 Notes ASSETS Non-current assets Loans receivable 4 12,124,472 - Current assets Trade and other receivables 5 835,711 2,000 Cash and cash equivalents 6 2,000 - Total current assets 837,711 2,000 Total assets 12,962,183 2,000 EQUITY AND LIABILITIES Equity Share capital 7 252,000 2,000 Accumulated losses (3,612) (92,540) Total equity 248,388 (90,540) LIABILITIES Non-current liabilities Borrowings 8 12,224,967 - Current liabilities Trade and other payables 9 488,828 92,540 Total current liabilities 488,828 92,540 Total liabilities 12,713,795 92,540 Total equity and liabilities 12,962,183 2,000 The accompanying notes are an integral part of these financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 27 April 2023. The financial statements were signed on behalf of the Board of Directors by Daniel Grima (Executive Director) and Juanita Bencini (Independent, Non-Executive Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 11 Statement of comprehensive income Year ended 31 December 2022 2021 Note Finance income 10 581,795 - Finance costs 11 (413,014) - Net interest income 168,781 - Administrative expenses 12 (79,853) (10,090) Profit/(loss) for the year – total comprehensive income/(expense) 88,928 (10,090) The accompanying notes are an integral part of these financial statements.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 12 Statement of changes in equity Share Accumulated capital losses Total Note Balance at 1 January 2021 2,000 (82,450) (80,450) Comprehensive expense Loss for the year - (10,090) (10,090) Balance at 31 December 2021 2,000 (92,540) (90,540) Transactions with owners Issue of ordinary share capital 7 250,000 - 250,000 Total transactions with owners 250,000 - 250,000 Comprehensive income Profit for the year - 88,928 88,928 Balance at 31 December 2022 252,000 (3,612) 248,388 The accompanying notes are an integral part of these financial statements.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 13 Statement of cash flows Year ended 31 December Note 2022 2021 Cash flows used in operating activities Cash used in operations 15 (98,495) - Net cash used in operating activities (98,495) - Cash flows used in investing activities Loans to fellow subsidiary 4 (12,124,472) - Net cash used in investing activities (12,124,472) - Cash flows from financing activities Net proceeds from bond issue 8 12,224,967 Net cash from financing activities 12,224,967 - Net movement in cash and cash equivalents 2,000 - Cash and cash equivalents at beginning of year - - Cash and cash equivalents at end of year 2,000 - No cashflow movements are presented for the year ended 31 December 2021 in the statement of cashflows as the company did not hold and operate a bank account until the end of 2021. The accompanying notes are an integral part of these financial statements.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 14 Notes to the financial statements 1. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. 1.1 Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the requirements of the Maltese Companies Act (Cap. 386). These financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates. It also requires the directors to exercise their judgement in the process of applying the company’s accounting policies (see note 3 – Critical accounting estimates and judgements). Standards, interpretations and amendments to published standards effective in 2022 In 2022, the company has adopted new standards, amendments and interpretations to existing standards that are mandatory for the company’s accounting period beginning on 1 January 2022. The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the company’s accounting policies impacting financial performance and position. Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are mandatory for the Company’s accounting periods beginning after 1 January 2022. The Company has not early adopted these revisions to the requirements of IFRSs as adopted by the EU, and the Company’s management are of the opinion that, there are no requirements that will have a possible significant impact on the Company’s financial statements in the period of initial application. 1.2 Foreign currency translation (a) Functional and presentation currency The company’s financial results and financial position are measured in the functional currency, i.e. euro (“”), which is the currency of the primary economic environment in which the company operates. These financial statements are presented in euro (“”), i.e. the presentation currency, which is the currency in which the company’s share capital is denominated. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 15 1. Summary of significant accounting policies - continued Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the income statement within ‘other income/(expense)’. 1.3 Financial assets 1.3.1 Classification The company classifies its financial assets as financial assets measured at amortised costs. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The company classifies its financial assets as at amortised cost only if both the following criteria are met: - The asset is held within a business model whose objective is to collect the contractual cash flows, and - The contractual terms give rise to cash flows that are solely payments of principal and interest. Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. 1.3.2 Recognition and measurement Regular way purchases and sales of financial assets are recognised on the trade date, which is the date on which the company commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership. At initial recognition, the company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Interest income on debt instruments measured at amortised cost from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition of these instruments is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated statement of profit or loss.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 16 1. Summary of significant accounting policies – continued 1.3 Financial assets – continued 1.3.3 Impairment The company assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The company’s financial assets are subject to the expected credit loss model. Expected credit loss model The company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs: debt securities that are determined to have low credit risk at the reporting date; and other debt securities and bank balances for which credit risk has not increased significantly since initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the company considers reasonable and supportable information that is relevant and available without undue cost or effort. The company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due, and it considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the company in full, without recourse by the company to actions such as realising security (if any is held); or the financial asset is more than 90 days past due. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the company is exposed to credit risk. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset. At each reporting date, the company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data such as significant financial difficulty of the borrower or issuer, or a breach of contract such as a default or being more than 90 days past due. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For the loans receivable from related parties and cash and cash equivalents, the expected credit losses are immaterial.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 17 1. Summary of significant accounting policies – continued 1.4 Trade and other receivables Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less expected credit loss allowances. Other receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The company holds the other receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. 1.5 Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at face value. In the statement of cash flows, cash and cash equivalents include deposits held at call with bank. 1.6 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. 1.7 Financial liabilities The company recognises a financial liability in its statement of financial position when it becomes a party to the contractual provisions of the instrument. The company’s financial liabilities, other than derivative contracts, are classified as financial liabilities measured at amortised cost, i.e. not at fair value through profit or loss under IFRS 9. Financial liabilities not at fair value through profit or loss are recognised initially at fair value, being the fair value of consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of the financial liability. These liabilities are subsequently measured at amortised cost. The company derecognises a financial liability from its statement of financial position when the obligation specified in the contract or arrangement is discharged, is cancelled or expires. 1.8 Borrowings Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Issue cost incurred in connection with the issue of the bonds include professional fees, printing, listing, registration, underwriting, selling costs and other miscellaneous costs. 1.9 Trade and other payables Trade payables comprise obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 18 1. Summary of significant accounting policies – continued 1.9 Trade and other payables – continued Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 1.10 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 1.11 Current and deferred tax The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised directly in equity. Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 1.12 Interest income and expense Interest income and expense are recognised in profit or loss for all interest-bearing financial instruments using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. 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 net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the company estimates future cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all the other premiums or discounts. Accordingly, interest expense includes the effect of amortising any difference between net proceeds and redemption value in respect of the company’s interest-bearing borrowings.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 19 1. Summary of significant accounting policies – continued 1.13 Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements in the period in which the dividends are approved by the company’s shareholders. 2. Financial risk management 2.1 Financial risk factors The company constitutes a financing special purpose vehicle whose bonds will be matched by equivalent amounts due from, and guaranteed by, G3 Holdings Limited (a related party). The company’s principal risk exposures relate to credit risk and liquidity risk. The company is not exposed to currency risk and the directors deem interest rate risk exposure to be minimal due to matching of its interest costs on borrowings with finance income from its loans and receivables referred to above. (a) Credit risk Credit risk primarily arises from loans receivable from G3 Hospitality Limited (note 4), amounts due from parent company, receivables (note 5) and cash and cash equivalents (note 6). The company’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below. The company’s exposures to credit risk as at the end of the reporting periods are analysed as follows: The maximum exposure to credit risk at the end of the reporting period in respect of the financial assets mentioned above is equivalent to their carrying amount as disclosed in the respective notes to the financial statements. The company does not hold any collateral as security in this respect. 2022 2021 Financial assets measured at amortised cost Loans receivable from related undertaking (note 4) 12,124,472 - Trade and other receivables (note 5) 833,792 2,000 Cash and cash equivalents (note 6) 2,000 - 12,960,264 2,000
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 20 2. Financial risk management – continued 2.1 Financial risk factors – continued (a) Credit risk - continued Cash and cash equivalents The company’s cash and cash equivalents are held with local financial institutions with high quality standing or rating and are due to be settled on demand. Management considers the probability of default to be close to zero as the financial institutions have a strong capacity to meet their contractual obligations in the near term. The identified impairment loss subject to the impairment requirements of IFRS 9 on cash and cash equivalents is insignificant. Loans receivable and other amounts owed by related parties The company’s loans receivable consists of advances to related entities forming part of the G3 Group (Note 4), which advances have been affected out of the company’s bond issue proceeds. The company monitors intra-group credit exposures on a regular basis and ensures timely performance of these assets in the context of overall group liquidity management. The guarantor in relation to the bond issue (G3 Holdings Limited) is the parent of the group. The company assesses the credit quality of the G3 Group taking into account financial position, performance and other factors including profitability and cashflow forecasts that are reviewed and approved at regular intervals by the Board of directors. The company takes cognisance of the related party relationship with these entities and management does not expect any losses from non-performance or default. Loans receivable from related parties are categorised as Stage 1 for IFRS 9 purposes (i.e. performing) in view of the factors highlighted above. The expected credit loss allowances on such loans are based on the 12-month probability of default, capturing 12-month expected losses. On 31 December 2022, the company’s directors reviewed the company’s financial assets in particular the loans advance to related parties (Note 4). In view of the respective entity’s history, results to date, gearing ratios and reserves, as well as forward looking estimates, the directors applied judgement in determining the appropriate expected credit loss provisions as a result of adopting the expected future loss framework under IFRS 9. The company monitors the performance of its receivables on a regular basis to identify incurred collection losses, which are inherent in the company’s receivables, taking into account historical experience. Other receivables, representing amounts due from the parent company and from fellow subsidiaries (Note 5), are subjected to the expected future credit loss framework required under IFRS 9 and the resulting expected credit loss allowance is considered immaterial. Following the assessment of the directors, all of the company’s financial assets are considered to have low credit risk and a low risk of default. The loss allowance subject to the impairment requirements of IFRS 9 is deemed immaterial to be recognised in the balance sheet as at 31 December 2022.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 21 2. Financial risk management – continued 2.1 Financial risk factors – continued (b) Liquidity risk Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which comprise principally the bonds issued to the general public (note 8) and trade and other payables (note 9). Prudent liquidity risk management includes maintaining sufficient cash and committed credit lines to ensure the availability of an adequate amount of funding to meet the company’s obligations. The company’s liquidity risk is managed actively by ensuring that cash inflows arising from expected maturities of the company’s advances to the related entity effected out of the bond issue proceeds, together with any related interest receivable, match the cash outflows in respect of the company’s bond borrowings, covering principal and interest payments, as referred to in note 8 and reflected in the table below. The following table analyses the company’s financial liabilities into relevant maturity based on the remaining period as at 31 December 2022 to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying balances, as the impact of discounting is not significant. Carrying Contractual Within Between 1 Between 2 Over 5 Amount cash flows one year and 2 years and 5 years years 31 December 2022 Trade and other payables 488,828 488,828 488,828 - - - Borrowings 12,224,967 18,125,000 562,500 562,500 1,687,500 15,312,500 12,713,795 18,613,828 1,051,328 562,500 1,687,500 15,312,500 31 December 2021 Trade and other payables 92,540 92,540 92,540 - - - 92,540 92,540 92,540 - - - 2.2 Capital risk management The company’s objectives when managing capital are to safeguard the respective company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the company may issue new shares or adjust the amount of dividends paid to shareholders.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 22 2. Financial risk management – continued 2.2 Capital risk management – continued The company’s equity, as disclosed in the statement of financial position, constitutes its capital. The company maintains its level of capital by reference to its financial obligations and commitments arising from operational requirements. Taking cognisance of the nature of the company’s assets, together with collateral held as security, backing the company’s principal borrowings, the capital level at the end of the reporting period is deemed adequate by the directors. 2.3 Fair values of financial instruments At 31 December 2022 and 2021 the carrying amounts of cash at bank, trade and other receivables and trade and other payables reflected in the financial statements are reasonable estimates of fair value in view of the nature of these instruments or the relatively short period of time between the origination of the instruments and their expected realisation. The fair values of the interest-bearing loans receivable were not significantly different from their carrying amounts at the end of the reporting period. 3. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. In the opinion of the directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1. 4. Loans receivable 2022 2021 Non-current Loan to fellow subsidiary 12,124,472 - The loan receivable represents the proceeds from the bond issue (Note 8) which have been advanced by the company to G3 Hospitality Limited (the company’s fellow subsidiary). The principal purposes for these advances were the re-financing of existing banking facilities of the borrower, to finance future growth in operations and for the general corporate funding purposes of the G3 Group as the need arises in the ordinary course of business. Credit risk is assessed in Note 2. This loan is subject to interest at a fixed interest rate of 6.5%. the loan is unsecured and repayable by not later than 6 April 2032.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 23 5. Trade and other receivables 2022 2021 Current Amounts due from parent 251,997 2,000 Amounts due from fellow subsidiary 581,795 - Prepayments and accrued income 1,919 - 835,711 2,000 Amounts due from parent and shareholders are unsecured, interest-free and repayable on demand. The company’s exposure to credit and currency risks and impairment losses relating to trade receivables are disclosed in Note 2. 6. Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise the following: 2022 2021 Cash at bank 2,000 - 7. Share capital 2022 2021 Authorised 252,000 ordinary shares of 1 each (2021 – 2,000 ordinary shares of 1 each) 252,000 2,000 Issued and fully paid up 252,000 ordinary shares of 1 each (2021 – 2,000 ordinary shares of 1 each) 252,000 2,000 Increase in share capital During 10 March 2022, the authorised and issued share capital of the company was increased from 2,000 to 252,000 following the capitalisation of shareholder loans. 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.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 24 8. Borrowings 2022 2021 Non-current 125,000 4.5% bonds 2032 12,224,967 - The bonds are measured at the amount of the net proceeds adjusted for the amortisation of the difference between the net proceeds and the redemption value of such bonds, using the effective yield method as follows: 2022 2021 Original face value of bonds issued 12,500,000 - Gross amount of bond issue costs (296,827) - Accumulated amortisation 21,794 - Unamortised bond issue costs (275,033) - Amortised cost and closing carrying amount of the bonds 12,224,967 - By virtue of an offering memorandum dated 25 March 2022, G3 Finance p.l.c. (the Issuer) issued an aggregate of 12,500,000 in bonds having a face value of 100 per bond, subject to minimum holding of 2,000 and in multiples of 100 thereafter. The bonds have a coupon interest rate of 4.50% per annum payable on a yearly basis on 6 April each year. The bonds are guaranteed by G3 Holdings Limited, which has bound itself jointly and severally liable with the issuer, for the repayment of the bonds and interest thereon, pursuant to and subject to the terms and conditions in the offering memorandum. These bonds were eventually admitted for listing on the Malta Stock Exchange on 6 April 2022. The quoted market price as at 31 December 2022 for the bonds was 100.50, which in the opinion of the directors fairly represents the fair value of these financial liabilities. In accordance with the provisions of the prospectus, the proceeds from the bond issue have been advanced by the issuer to undertakings forming part of the G3 Group for the purpose of re-financing existing bank facilities within the group and to finance future growth in operations.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 25 9. Trade and other payables 2022 2021 Current Amounts due to fellow subsidiary 59,200 81,040 Interest accrued on bonds in issue 413,014 - Accruals 16,614 11,500 488,828 92,540 Amounts due to fellow subsidiary and related parties are unsecured, interest-free and repayable on demand. The company’s exposure to liquidity risks related to trade and other payables is disclosed in Note 2. 10. Finance income 2022 2021 Interest income on loan advance to fellow subsidiary 581,795 - 11. Finance costs 2022 2021 Bond interest expense 413,014 - 12. Expenses by nature 2022 2021 Directors’ fees (note 13) 34,793 - Listing and related compliance costs 28,052 - Legal and professional fees 16,777 9,950 Other expenses 231 140 79,853 10,090
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 26 12. Expenses by nature - continued Auditor’s fees Fees charged by the auditor for services rendered during the financial periods ended 31 December 2022 and 2021 relate to the following: 2022 2021 Annual statutory audit 10,000 9,500 Tax advisory and compliance services 250 150 10,250 9,650 13. Directors’ emoluments 2022 2021 Directors’ fees 34,793 - 14. Tax expense 2022 2021 Current tax expense: on taxable profit subject to tax at 35% - - - - The tax on the company’s results before tax differs from the theoretical amount that would arise using the basic tax rate as follows: 2022 2021 Profit/(loss) before tax 88,929 (10,090) Tax on profit at 35% 31,125 (3,532) Tax effect of: Unrecognised deferred tax movement (31,125) 3,532 Tax expense - - As at year end the company had unrecognised deferred tax assets amounting to 1,264 (2021: 32,390) in relation to unutilised tax losses.
G3 FINANCE p.l.c. Annual Report and Financial Statements - 31 December 2022 27 15. Cash used in operations Reconciliation of operating loss to cash used in operations: 2022 2021 Profit/(loss) before tax 88,928 (10,090) Changes in working capital: Trade and other receivables (583,711) - Trade and other payables 396,288 10,090 Cash used in operations (98,495) - 16. Related party transactions G3 Finance p.l.c. forms part of the G3 Group. All companies forming part of the G3 Group are related parties since these companies all have common ultimate controllers. Trading transactions between these companies typically include company interest charges, management fees and other such items which are normally encountered in a group context. Key management personnel comprises the directors of the company. Key management personnel compensation, consisting of remuneration to the company’s directors, has been disclosed in Note 13. 17. Statutory information G3 Finance p.l.c. is a limited liability company and is incorporated in Malta. The registered office is ‘The Pergola’, Adenau Street, Mellieha, Malta. The immediate and ultimate parent company of G3 Finance p.l.c. is G3 Holdings Limited, a company registered in Malta, with its registered address at ‘The Pergola’, Adenau Street, Mellieha, Malta. The ultimate beneficial owner of G3 Holdings Limited is Mr. John Grima.

diagram

Independent auditor’s report

To the Shareholders of G3 Finance p.l.c.

 

Report on the audit of the financial statements

Our opinion

 

In our opinion:

 

·     The financial statements give a true and fair view of the financial position of G3 Finance p.l.c. (the Company) as at 31 December 2022, and of the company’s 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

 

G3 Finance p.l.c.’s financial statements comprise:

 

·       the statement of financial position as at 31 December 2022;

·       the statement of comprehensive income for the year then ended;

·       the statement of changes in equity for the year then ended;

·       the statement 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 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 non-audit services that we have provided to the company are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

 

The non-audit services that we have provided to the company, in the period from 1 January 2022 to 31 December 2022, are disclosed in Note 12 to the financial statements.

 

 

Our audit approach

 
Overview

 

diagram

 

 

Overall materiality: €129,000, which represents 1% of total assets.

 

 

 

Recoverability of loans issued to fellow subsidiary

 
 
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the 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.

 

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 company, the accounting processes and controls, and the industry in which the company operates.

 

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 financial statements.

 

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the 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 materiality

€129,000

How we determined it

1% of total assets

Rationale for the materiality benchmark applied

We chose total assets as the benchmark because, in our view, it is an appropriate measure for this type of entity.

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 €13,000 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

Recoverability of loans issued to fellow subsidiaries

 

Loans receivable include funds advanced to G3 Hospitality Limited for the re-financing of existing banking facilities of the borrower, to finance future growth in operations and for the general corporate funding purposes of the G3 Group as the need arises in the ordinary course of business. The loan bears interest at 6.5% and is repayable in 2032. Loan balances due to the company from G3 Hospitality Limited as at 31 December 2022 amounted to €12.1m.

 

Management assesses recoverability of the loan by reference to the expected future cash flows of the G3 Group for the period 2023 to 2032.

 

The loans are the principal asset of the company and the recoverability of the loan relies on the profitability of the fellow subsidiary, which is why we have given additional attention to this area.

 

Refer to Note 4 in the financial statements for further details covering the loan recoverable from the fellow subsidiary.

 

 

 

We have agreed the terms surrounding the loan to the supporting loan agreement.

 

We evaluated the appropriateness of the cash flow model of the G3 Group to assess the recoverability of the loan by reviewing projected cashflows for the period 2023 to 2032.

 

We checked the calculations used in the model for accuracy and the key inputs in the model were agreed to supporting evidence. In the case of certain assumptions and judgements, we obtained explanations from management and the Board.

 

Management’s cash flow forecasts used in the model were assessed by considering the Group’s current year’s performance against the budget and the reasons for any deviation, also through discussion with management and the Board.

 

We also challenged the revenue growth assumptions, factoring market developments.

 

Based on evidence and explanations obtained, we concur with management’s view with respect to the reasonability of conclusions surrounding recoverability of this balance.

 

The appropriateness of disclosures made in the financial statements in relation to loans and receivables from fellow subsidiary was also reviewed.

 

 

 

Other information

 

The directors are responsible for the other information. The other information comprises the Directors’ report and the Corporate Governance – Statement of Compliance (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 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 company or to cease operations, or have no realistic alternative but to do so.

 

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

 

Auditor’s responsibilities for the audit of the financial statements

 

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

 

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 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

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

 

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

 

We also provide those charged with governance with a statement that we have complied with 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 G3 Finance 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 financial statements, 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 financial statements, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

Our procedures included:

·   Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report in XHTML format.

·       Examining whether the Annual Financial Report has been prepared in XHTML format.

 

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 XHTML format in all material respects.

 

Other reporting requirements

 

The Annual Report and Financial Statements 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 and Financial Statements 2022 and the related Directors’ responsibilities

Our responsibilities

Our reporting

Directors’ report

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.

 

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.

 

Corporate Governance – Statement of Compliance

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.

 

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.

 

 

 

Our report, including the opinions, has been prepared for and only for the 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.

 

Appointment

 

We were first appointed as auditors of the Company on 28 October 2021 for the period ended 31 December 2020.  Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 3 years. The company became listed on a regulated market on 6 April 2022

 

 

PricewaterhouseCoopers

78, Mill Street

Zone 5, Central Business District

Qormi

Malta

 

 

Stephen Mamo

Partner

 

27 April 2023