Premier Capital Plc

Report and financial statements

31 December 2022

Directors, officer and other information

Directors’ report

Statements of directors’ responsibilities

Corporate governance statement

Statements of profit or loss and other comprehensive income

Statements of financial position

Statements of changes in equity

Statements of cash flows

Notes to the financial statements

Independent auditor’s report

Directors, officer and other information

Directors’ report

The directors present their report and the audited financial statements of Premier Capital plc (the “Holding Company”) and its subsidiaries (collectively “the Group”) for the year ended 31 December 2022. 

Principal activities

The Group is engaged in the operations of McDonald’s restaurants in Estonia, Greece, Latvia, Lithuania, Malta and Romania. 

The Holding Company acts as an investment company and service provider to its subsidiary undertakings. 

Performance review

The Group registered an increase in revenue from Eur 405,408,430 in 2021 to Eur 533,604,955 or an increase of 31.6% over prior year.  While 2022 started with a recovery trend from Covid-19 disruption, it then proceeded with the volatility, uncertainty, complexity and ambiguity that the war in Ukraine.  All markets, to different extents, experienced spiralling increases in food costs and in operating and development costs.  Despite this, the Group maintained a commitment towards its investment strategy and along the year increased its footprint by 8 restaurants.

During the year under review, the Group registered an operating profit of Eur 51,380,961 increasing from Eur 44,402,748 in 2021.  After accounting for investment income and finance costs, the Group registered a pre-tax profit of Eur 44,480,142 compared to Eur 38,509,633 in the prior year. 

The Group’s net assets as at 31 December 2022 amounted to Eur 100,773,153 (2021 – Eur 68,709,889 ) . 

As outlined in note 17 of the financial statements, Premier Capital B.V. (a subsidiary of the Group) was merged into Premier Capital p.l.c. effective from 1 January 2022.  As a consequence of this merger, the Holding Company succeeded to all the assets, rights, liabilities and obligations of Premier Capital B.V. and in line with technical requirements, comparatives were re-presented to allow comparability.

During the year under review, the Holding Company registered an operating loss of Eur 6,845,631 ( 2021 (re-presented) – Eur 5,453,982 ).  After accounting for investment income and finance costs, the Holding Company registered a pre-tax profit of Eur 11,211,966 (2021 (re-presented) – Eur 15,397,825 ). 

The net assets of the Holding Company at the end of the year under review amounted to Eur 37,277,626 ( 2021 (re-presented) – Eur 45,276,046 ). 

The Group measures the achievement of its objectives through the use of the following other key performance indicators:

Financial Performance

The Group’s current ratio (current assets divided by current liabilities), has decreased from 108.4% at the end of 2021 to 84.6% at the end of 2022 as a result of liquidity being used in financing and investing activities that are classified as Non-Current.  The Group uses this indicator as a measure of liquidity and while this ratio has decreased significantly from the prior year, the directors remain confident that the Group has sufficient resources to meet its ongoing commitments. 

The Group calculates the level of its free cash flow by reference to the net cash generated from operating activities less capital expenditure.  The Group’s free cash flow at year end amounted to Eur 51,737,841 compared to a free cash flow of Eur 49,487,478 at the end of the preceding year.  This indicator measures how well the Group turns profit into cash through the management of working capital and a disciplined approach to capital expenditure. 

The Group measures its performance based on EBITDA.  EBITDA is defined as the Group profit before net investment income and finance costs, taxation, depreciation and amortisation.  During the year under review, EBITDA increased by 12.6% to Eur 77,621,550 from Eur 68,954,183 , whereas the Group’s EBITDA margin (EBITDA divided by turnover)  decreased from 17.0% to 14.5% .

During the year under review, the interest cover of the Group increased from  9.00 times to  9.47 times.  The interest cover represents the EBITDA divided by the net interest costs. 

The debt to equity ratio of the Group is monitored on a continuous basis.  This ratio decreased to  0.78 times at the end of the year as opposed to  1.30 times in 2021.  The decrease is attributable to same rationale that led to the deterioration in the current ratio.  This indicator is computed by dividing the total interest-bearing debt excluding bank overdrafts by the total equity of the Group. 

The gearing ratio of the Group decreased to 44.3% at the end of the year as opposed to 56.6% in 2021. 

Non-financial Performance

Customer satisfaction is monitored throughout the year via customer feedback portal that the Group operates in all the markets, whereby results are available online and reviewed regularly by management at the market level. 

The average number of employees increased from  9,211 to  10,043 during the year.  The Group runs a number of employee surveys to monitor employee satisfaction and commitment.  Having high quality teams in place is essential to attain the Holding Company’s business objectives. 

Market Performance

Overall Group revenue increased by 31.6% compared to 2021.  Despite the pressure brought about by inflationary spirals, the group maintained and increased the guest counts in every market and also embarked on structured and formal price-studies to increase prices in a balanced and structured approach.  

Review of the Business and Outlook

Restaurants Portfolio

During the year under review, the Group continued to grow its portfolio, bringing up the total number of restaurants it operates to 174 by the end of the year (2021 – 166 ).  Of these restaurants, 96 are operated in Romania, 41 in the Baltic States, 28 in Greece and 9 in Malta.

Future Outlook

The Group is planning to continue the expansion of its restaurants in all its markets in the short to medium-term and aims to open an average of 12 restaurants per annum over the course of the next 5 years.  This target is dependent on the performance of the Group in the coming years and specifically its resilience to the ongoing impacts of the war in Ukraine as well as other macroeconomic issues that may impact its supply chain; the impact of increasing interest rates on real estate in the various markets in which the Group operates; and the ability to attract and retain the right talent to sustain this growth.  Over the course of the next twelve months, the Group will remain committed to invest in the customer experience, in technology and in the development of its people, as key enablers and drivers to the business.  It shall embark on a process to define its ESG strategy and define its targets across a number of ongoing actions described in the Non-Financial Statement section below.

Principal risks and uncertainties

The successful management of risk is essential to enable the Group to achieve its objectives. The ultimate responsibility for risk management rests with the Group’s directors, who evaluate the Group’s risk appetite and formulate policies for identifying and managing such risks.  The principal risks and uncertainties facing the Group are included below:

(a) Market and competition        

The Group operates in a highly competitive environment and faces competition from various other entities.  Technological developments also have the ability to create new forms of quickly evolving competition. An effective, coherent and consistent strategy to respond to competitors and changing market enables the Group to sustain its market share and its profitability.  The Group continues to focus on service quality and performance in managing this risk. 

(b) Legislative risks         

The Group is subject to numerous laws and regulations covering a wide range of matters.  Failure to comply could have financial or reputational implications and could materially affect the Group’s ability to operate.  The Group has embedded operating policies and procedures to ensure compliance with existing legislation.           

(c) Talent and skills         

Failure to engage and develop the Group’s existing employees or to attract and retain talented employees could hamper the Group’s ability to deliver in the future.  The Group invests continuously in training its employees and undertakes regular reviews of the Group’s resource requirements.               

(d) Economic and market environment    

Economic conditions have been, and still remain, challenging in recent years across the markets in which the Group operates.  A significant economic decline in the informal eating out segment could impact the Group’s ability to continue to attract and retain customers.  Demand for the Group’s products can be adversely affected by weakness in the wider economy which are beyond the Group’s control.  This risk is evaluated as part of the Group’s annual strategy process covering the key areas of investment and development and updated regularly throughout the year.  The Group continues to make significant investment in innovation. The Group regularly reviews its pricing structures to ensure that its products are appropriately placed within the markets in which it operates.           

(e) Brand and reputation risk      

Damage to the Group’s reputation could ultimately impede the Group’s ability to execute its corporate strategy.  To mitigate this risk, the Group strives continually to build its reputation through a commitment to sustainability, transparency, effective communication and best practices.  The Group works to develop and maintain its brand value.    

(f) Technology and business interruption

The Group relies on information technology in all aspects of its business. In addition, the services that the Group offers to its customers are reliant on complex technical infrastructure.  A failure in the operation of the Group’s key systems or infrastructure could cause a failure of service to its customers, thus negatively impacting its brand, and increased costs.  The Group makes significant investment in technology infrastructure to enable it to continue to support the growth of its business and has a robust selection and monitoring process of third-party providers.              

(g) Supply chain

Supply chain relies on a number of McDonald’s approved suppliers for the provision of its supplies.  A significant disruption in terms of timing and/or pricing within the supply chain could adversely affect the Group’s ability to deliver products and services to its customers.  A robust supplier selection process is in place and operated by McDonald’s globally, with appropriate ongoing management and monitoring of key suppliers.       

(h) Customer service      

The Group’s revenues are at risk if it does not continue to provide the level of service expected by its customers.  The Group’s commitment to customers is embedded in its values.  The relevant employees undertake intensive training programmes to ensure that they are aware of, and abide by, the levels of service that are required by the Group’s customers. 

(i) Political risk

The Group operates in many countries with differing economic, social and political conditions, which could include political unrest, strikes and other forms of instability.  Changes in these conditions may adversely affect the Group’s business, results of operations, financial conditions or prospects.  The Group adapts to such risks by incorporating this risk into its business strategy. 

(j) Significant judgements and estimates

Note 3 to the financial statements provides details in connection with the inherent uncertainties that surround the preparation of the financial statements and which require significant estimates and judgements. 

(k) Contingent liabilities 

Note 34 to the financial statements provides details in connection with the Group’s contingent liabilities. 

Financial risk management

Note 36 to the financial statements provides details in connection with the Group’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.            

Non-Financial Statement

Environmental matters

The Group is committed to environmental responsibility, and all subsidiaries within the Group has a role to play in living up to that commitment.  Efforts are put on areas where the Group can have significant impact on critical environmental issues, including climate change, natural resource conservation and waste management.  The Group invests in innovations that can improve our environmental footprint, besides collaborating with other organizations to raise environmental awareness and work with key suppliers to promote environmentally responsible practices in their operations. 

The Group feels that it is its duty to operate as part of the local community in order to keep the countries, where we operate, tidy.  Initiatives taken up by the Group companies include placing bins outside all of our restaurants and encourage customers to use them, and collaboration with local communities in taking part in various cleaning activities in the cities and towns we are located.  Subsidiaries within the Group are enrolled in local programmes for waste collection, separation and recycling of waste and also collection of used oil which is then recycled into biodiesel. 

In terms of energy efficiency, the Group’s strategy is to implement innovative solutions while driving improvements on a continuous basis. This involves implementing modern technology in most of the Group’s new and remodelled restaurants, with the installation of energy management systems and the use of energy efficient equipment and LED lighting.

McDonald’s suppliers are also responsible for managing, measuring and minimizing the environmental impact of their facilities, with specific focus on air emissions, waste reduction, recovery and management, water use and disposal, and greenhouse gas emissions.  By the year 2025, McDonald’s is committed that all of its restaurants will provide options for recycling or sorting of guest packaging and 100% of consumer packaging will come from renewable, recycled, and certified sources. 

Employee matters

The Group provides opportunity, nurtures talent, develops leaders and rewards achievement.  The Group believes that a team of individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to its continuing business success.  Performance evaluation systems are employed across the Group, using multistage training systems to monitor individual’s development and set training requirements. 

Each of the Group’s employees deserves to be treated with fairness, respect and dignity, providing equal opportunity for employees and applicants.  All of the Group’s employees have the right to work in a place that is free from harassment, intimidation or abuse, sexual or otherwise, or acts or threats of physical violence.  It is committed to diversity and equal opportunities for everyone, respecting the unique attributes and perspectives of every employee, and rely on these diverse perspectives to help the Group build and improve the relationships with customers and business partners.  The Group embraces the diversity of its employees, customers and business partners, and work hard to make sure everyone within the Group feels welcome. 

The Group provides equal treatment and equal employment opportunity without regard to race, colour, religion, sex, age, national origin, disability, sexual orientation, gender identity or any other basis protected by law.  In addition, it is committed to providing a safe and healthful working environment for its employees, requiring all employees to abide by safety rules and practices and to take the necessary precautions to protect themselves and their fellow employees.  For everyone’s safety, employees must immediately report accidents and unsafe practices or conditions to their immediate supervisors. 

Social Matters

McDonald’s has a long, proud tradition of giving back to local communities.  As one of the leaders in social responsibility, the Group has a positive influence on its neighbourhoods, people and environment.  The Group donate thousands of euros to charitable organizations in the markets it operates, particularly those that address the needs of children.  The local chapters of the Ronald McDonald House Charities (RMHC) have a special place in the Group’s philanthropy.  Each year, the restaurants within the Group raise thousands of euros for RMHC and other children’s causes to help defray RMHC’s general and administrative costs and certain other costs it would otherwise incur to raise funds and deliver program services. 

Respect for human rights

The Group conducts its activities in a manner that respects human rights, taking the responsibility seriously to act with due diligence to avoid infringing on the human rights of others and addressing any impact on human rights if they occur.  The Group’s commitment to respect human rights is defined in the code of business conduct, which applies to all employees of the Group, and within the McDonald’s supplier code of conduct applying to all McDonald’s suppliers globally. 

The Group is committed to provide a safe work environment that fosters respect, fairness and dignity.  Group employees are trained annually on the standard of business conduct. 

Within the McDonald’s system, suppliers are expected to conduct their activities in a manner that respects fundamental rights for all people.  They should employ workers who are legally authorized to work in their location and facility.  Suppliers do not use any form of slave, forced, bonded, indentured or involuntary prison labour, do not engage in human trafficking or exploitation, nor import goods tainted by slavery or human trafficking. 

Anti-corruption and bribery matters

The Group’s employees must comply with the Group Code of Conduct and Whistle-blower Policy to ensure that all employees are discouraged from any corrupt practices or bribery as well as are incentivized to report any such activities in a direct line with the responsible Group supervisor, without fearing reprisals.  Every employee is introduced to these policies upon employment and are mandatory to be adhered to it.

The Group prohibits all forms of bribery or kickbacks as detailed in the Code of Conduct.  All employees, representatives and business partners must fully comply with anti-bribery legislation.  To comply with the Group policy and anti-bribery laws, no employee should ever offer, directly or indirectly, any form of gift, entertainment or anything of value to any government official or his or her representatives. 

The Group is committed to complying with the applicable laws in all countries where it does business.  It adopts a Global Anti-Corruption Policy which sets forth its commitment to ensuring that it carries out business in an ethical manner and abides by all applicable anti-bribery and anti-corruption laws in the countries in which it operates by, among other things, prohibiting the giving or receiving of improper payments in the conduct of McDonald’s business, and by discouraging such behaviour by its business partners. 

EU Taxonomy

The EU Commission’s “Action Plan on Financing Sustainable Growth” aims to provide the economic and financial system in the EU with a more sustainable strategy to achieve climate neutrality by 2050.  As part of its action plan, the EU’s Taxonomy Regulation 2020/852 (“EU Taxonomy” or “the Regulation”) establishes a standardised classification system for sustainable economic activities and provides guidance on those activities which qualify as contributing to the Taxonomy’s environmental objectives.

In accordance with Article 8 of the EU Taxonomy, the Group is required to disclose information about how and to what extent the Group’s activities qualify as environmentally sustainable.  Furthermore, the regulation requires the disclosure of Key Performance Indicators (KPIs), namely, the proportion of revenue (“Turnover”), capital expenditures (“CapEx”) and operating expenditure (“OpEx”) which are considered as eligible and/or aligned in terms of the EU Taxonomy.

The EU Taxonomy is supplemented by delegated acts which establish ‘technical screening criteria’.  These criteria define the specific requirements and thresholds for an activity to be considered as “significantly contributing” to a sustainability objective and “does not significantly harm” the other objectives.  At present, the EU regulation is effective for objectives related to climate change mitigation and climate change adaptation, with further delegated acts to be published at a later stage to cover the remaining four objectives.

Accounting Policy for Taxonomy Disclosures – Eligibility

In order to identify the business activities covered by the EU Taxonomy, the Group relied on the Climate Delegated Act 2021/2139, specifically, Annex I and II to this Act.  In light of the fact that the Group is a non-diversified group operating restaurants in 6 different markets, the entire Group’s activity is classified under one NACE code (56.10: Restaurants and mobile food service).  According to the EU Taxonomy, this is a ‘non-eligible activity’ in terms of the EU Climate Delegated Act.  The evaluation of the eligibility of the Group’s economic activities has been conducted on the basis of the EU Taxonomy and Disclosure Delegated Act (Annex I – KPIs of non-financial undertakings) and its definition of the denominator and nominator of the three required KPIs (turnover, CapEx and OpEx).  It was furthermore assessed whether any goods or services linked to eligible or aligned activities were purchased.  For the 2022 reporting period, spend on qualifying areas was immaterial in relation to the total Turnover, OpEx and CapEx, therefore these were not taken into account for eligibility purposes.

Key Performance Indicators

The Group is required to report on three KPIs: Turnover, CapEx and OpEx.  KPIs are provided at the level of the Group based on consolidated financial statements.

•          Turnover considered for this analysis covers all business activities of the Group, net of intra- group adjustments to take into account consolidated figures.

•          CapEx consists of additions to property, plant and equipment considered before depreciation, amortisation and any re-measurements recognised by the Group.

•          OpEx consists of all operating expenditures relating to the day- to-day running of the operations, and is calculated on a net basis at consolidated level.

Based on the above considerations and methodology, the tables below show the actual KPIs related to the EU Taxonomy, including comparatives.

In addition, in relation to Art. 10.2 of EU 2021/2178 on disclosing of qualitative information referred to in Section 1.2 of Annex I, such disclosures are not applicable to the Group because:

a)        Accounting policy (1.2.1) points (a) and (b) were considered as non-applicable as 100% of the economic activities are non-eligible, resulting in the numerator to be “zero” rendering the denominator being irrelevant in such cases.  Along the above rationale, it was also concluded that there is limited reporting benefit of potential changes to the CapEx plan, as those would not result in changes in the taxonomy reporting outcomes given all economic activity falls under the same NACE code, which is non-eligible.

b)       Assessment of compliance with Regulation (EU) 2020/85 (1.2.2): Given the screening according to NACE code and considerations/thresholds applied above resulted in 0% eligible activities, no further qualitative assessment with regard to alignment (DNSH & TSC criteria), double counting, contribution to multiple objectives or disaggregation of KPIs was deemed necessary in most cases.

c)        Contextual information (1.2.3): As the Group only operated under one NACE code, which is non-eligible, no changes of the KPIs were observed over the reporting period (KPIs remained constant at 0% eligible and 100% non-eligible throughout the reporting period).

Accounting Policy for Taxonomy Disclosures – Alignment

For the 2022 reporting period, as the economic activities of the Group have been considered to be not eligible, and spend on qualifying areas where immaterial in relation to the total Turnover, OpEx and CapEx, no further alignment assessment has been performed.

Business Model

The Group operates the McDonald’s brand, which is considered as the largest quick-service-restaurant chain in the world.  The business model, depicted in the “three-legged stool” of operators, suppliers and employees, is its foundations, and the balance of interest among the three groups is essential to the Group’s success.  The strength of the alignment among the companies within the Group, its suppliers, and employees has been key to the Group’s success.  This business model enables the Group to consistently deliver locally relevant restaurant experiences to customers and be an integral part of the communities it serves.  In addition, it facilitates its ability to identify, implement and scale innovative ideas that meet customer’s changing needs and preferences.  The Group adopts McDonald’s operations principles, which are designed to assure consistency and high quality at every restaurant. 

Results and dividends

The results for the year ended 31 December 2022 are shown in the statements of comprehensive income.  The Group’s profit for the year after taxation was Eur 40,786,617 (2021 – Eur 34,303,476 ), whilst the Holding Company’s profit for the year after taxation was Eur 11,373,133 (2021 (re-presented) – Eur 15,482,131 ).  During the year, the directors declared an interim dividend of Eur19,000,000.  The directors do not recommend the payment of a final dividend. 

Events after the end of the reporting period

No material events occurred after reporting date.

Likely future business developments

The directors consider the Group is well placed to sustain a satisfactory level of activity in the foreseeable future . 

Directors

The directors who served during the period were:

Carmelo ( sive ) Melo Hili (Chairman)

Dorian Desira

Claudine Cassar

Massimiliano Eugenio Lupica

Karen Pace

Victor Tedesco

Valentin-Alexandru Truta

In accordance with the Holding Company’s articles of association all the directors are to remain in office. 

Going Concern

After reviewing the Group’s and Holding Company’s budget for the next financial year, and other longer term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. 

Auditors

A resolution to reappoint Grant Thornton as auditor of the company will be proposed at the forthcoming Annual General Meeting. 

Signed on behalf of the Group's Board of Directors on 18 April 2023 by Carmelo (sive) Melo Hili (Chairman) and Victor Tedesco (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Group Financial Statements 2022. 

Statement of directors’ responsibilities

The directors are required by the Companies Act (Cap. 386) to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU), which give a true and fair view of the state of affairs of the Holding Company and its Group at the end of each financial year and of the profit or loss of the Holding Company and its Group for the year then ended.  In preparing the financial statements, the directors should:

§   adopt the going concern basis unless it is inappropriate to presume that the Holding Company and the Group will continue in business;

§   select suitable accounting policies and then apply them consistently;

§   make judgements and estimates that are reasonable and prudent;

§   account for income and charges relating to the accounting period on the accruals basis;

§   value separately the components of asset and liability items; and

§   report comparative figures corresponding to those of the preceding accounting period. 

The directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Holding Company and the Group and which enable the directors to ensure that the financial statements comply with the Companies Act (Cap.386).  This responsibility includes designing, implementing and maintaining 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.  The directors are also responsible for safeguarding the assets of the Holding Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 

Statement of responsibility pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority (MFSA)

We confirm that to the best of our knowledge:

a.             In accordance with the Capital Markets Rules, the financial statements give a true and fair view of the financial position of the Holding Company and its Group 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 as adopted by the EU; and

b.            In accordance with the Capital Markets Rules, the Directors’ report includes a fair review of the performance of the business and the position of the Issuer 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 Group's Board of Directors on 18 April 2023 by Carmelo (sive) Melo Hili (Chairman) and Victor Tedesco (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Group Financial Statements 2022. 

Introduction

Pursuant to the Capital Markets Rules as issued by the Malta Financial Services Authority (MFSA), Premier Capital p.l.c (the ‘Company’) is hereby reporting on the extent of its adoption of the Code of Principles of Good Corporate Governance (the ‘Code’) contained in Appendix 5.1 of the Capital Markets Rules. 

The Board acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice.  Nonetheless, the Board strongly believes that the Code is in the best interest of the shareholders and other stakeholders since it ensures that the Directors, Management and employees of the Group adhere to internationally recognised high standards of corporate governance.

The Group currently has a corporate decision-making and supervisory structure that is tailored to suit the Group’s requirements and designed to ensure the existence of adequate checks and balances within the Group, whilst retaining an element of flexibility, particularly in view of the size of the Group and the nature of the its business.  The Group adheres to the Code, except for those instances where there exist particular circumstances that warrant non-adherence thereto, or at least postponement for the time being.

Additionally, the Board recognises that, by virtue of Listing Rule 5.101, the Company is exempt from making available the information required in terms of Capital Markets Rules 5.97.1 to 5.97.3; 5.97.6 and 5.97.8. 

The Board of Directors

The Board of Directors of the Company is responsible for the overall long-term direction of the Group, in particular in being actively involved in overseeing the systems of control and financial reporting and that the Group communicates effectively with the market. 

The Board of Directors meets regularly and is currently composed of six members, two of which are completely independent from the Company or any other related companies. 

Executive Directors

Mr Victor Tedesco

Non-Executive Directors

Mr Carmelo ( sive ) Melo Hili (Chairman)

Ms Karen Pace

Mr Valentin - Alexandru Truta

Mr Dorian Desira

Independent Non-Executive Directors

Ms Claudine Cassar

Mr Massimiliano Eugenio Lupica

The Board Meetings are attended by the Chief Financial Officer of the Group in order for the Board to have direct access to the financial operation of the Group.  This is intended to, inter alia, ensure that the policies and strategies adopted by the Board are effectively implemented. 

The remuneration of the Board is reviewed periodically by the shareholders of the Company. 

The Company ensures that it provides directors with relevant information to enable them to effectively contribute to board decisions.

The directors are fully aware of their duties and obligations, and whenever a conflict of interest in decision making arises, they refrain from participating in such decisions. 

Audit Committee

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

The Board of Directors established the Audit Committee, which meets regularly and is currently composed of the following individuals:

Mr Massimiliano Lupica (Chairman)

Ms Claudine Cassar

Ms Karen Pace

This satisfies the requirement established by the Capital Markets Rules that the Audit Committee is composed of non-executive directors, the majority of which being independent. 

The Board considers Ms Karen Pace, to be competent in accounting and/or auditing in terms of the Capital Markets Rules.  Furthermore, the Board considers that the Audit Committee, as a whole, to have relevant competence in the sector the Company is operating. 

The Audit Committee met five times during the year 2022.  Communication with and between the company secretary, top level management and the Committee is ongoing and considerations that required the Committee’s attention are acted upon between meetings and decided by the members (where necessary) through electronic circulation and correspondence. 

Internal Control

While the Board is ultimately responsible for the Group’s internal controls as well as their effectiveness, the executive responsibility for the running of the Company’s business is vested in the Chief Executive Officer who reports directly to the Board. 

The Group’s system of internal controls is designed to manage all the risks in the most appropriate manner.  However, such controls cannot provide an absolute elimination of all business risks or losses.  Therefore, the Board, inter alia, reviews the effectiveness of the Group’s system of internal controls in the following manner:

• Reviewing the Group’s strategy on an on-going basis as well as setting the appropriate business objectives in order to enhance value for all stakeholders;

• Implementing an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Group objectives;

• Appointing and monitoring the Chief Executive Officer whose function is to manage the operations of the Group;

• Identifying and ensuring that significant risks are managed satisfactorily; and

• Company policies are being observed. 

Corporate Social Responsibility

The Board is mindful of and seeks to adhere to sound principles of Corporate Social Responsibility in daily management practices, which is also extended throughout the Company’s subsidiaries.  There is continuing and consistent commitment to operate the business ethically at all times, while contributing to economic development and improving the quality of life of staff and their families within the local community and society at large.

The subsidiary companies in Estonia, Latvia, Lithuania, Malta and Romania organise an annual ‘McHappy Day’ programme of events to fundraise for charity.  In Latvia, Malta and Romania, proceeds from McHappy Day go to the Ronald McDonald House Charities Chapters (of which the subsidiaries are founding mission partners).  In Estonia and Lithuania, funds are donated to children’s and family charities.  Throughout the year, a nominal amount is also donated from every ‘Happy’ meal to the same causes.  The total proceeds collected in 2022 in the five markets during McHappy Day was Eur489,499 .

In Greece, a number of corporate responsibility and charitable initiatives take place each year, including donations to children’s residential homes and support of environmental projects.  A Ronald McDonald House Charities Chapter will be established in Greece in 2023.  Funds raised by the McDonald’s operation in Greece will go towards the charity’s first project – the refurbishment of a property adjacent to the Aghia Sofia Children’s Hospital in Athens which will feature 3 Family Rooms where relatives of hospitalised children will be able to make use of shared amenities.

The Latvia chapter of RMHC operates a state-of-the-art Mobile Care clinic which tours the country providing medical services to children in poorly served areas.  It provides a range of medical services including ophthalmology, treatment for asthma and neurology in partnership with a team of more than 30 medical professionals.  Working closely with the Children’s Clinical University Hospital of Latvia, the Ministry of Health and the Latvian Union of Municipalities, the mobile clinic travels the Latvian countryside daily.  In total, 5,364 medical consultations were carried out in 2022 in 125 rural locations and since 2010, the charity has provided free medical exams to more than 52,562 Latvian children. The Care Mobile also facilitated more than 5,000 medical consultations in Ukraine.

In Malta, RMHC operates a 360-square metre Learning Centre with a mission to safeguard the well-being of children or young people in need of educational support.  The centre features training rooms, activity areas and a learning kitchen for children and teens with learning or social challenges, as well as their families.  More than 280 children and young people benefitted from programmes while 408 sessions and activities were held at the premises in 2022, for a total of 1,197 session hours.  RMHC has made the Learning Centre available to 26 partner charities and NGOs which do not operate premises of their own.  RMHC’s partners include the Autism Parents Association, ADHD Malta, anti-bullying charity bBrave, the Service Dogs Foundation, Caritas Malta, mental health charity Richmond Foundation, Smiling with Jerome (a cancer patient support organisation), the National Literacy Agency, the University of Malta’s Department of Counselling, Prisms Malta, MOAS and many others.

RMHC in Romania operates three Ronald McDonald Houses offering free accommodation to families of children receiving hospital treatment.  The 16-room RMHC House in Bucharest accommodates the families of young patients treated at the Grigore Alexandrescu Hospital.  The RMHC House in Timisoara has the capacity to host 26 families of children hospitalised at the Louis Turcanu Hospital.  RMHC Romania’s third house, located on the grounds of the St Mary’s Emergency Clinical Hospital in Iasi, was inaugurated in 2022 and features 19 rooms, kitchen, living room and other spaces, including a playground, where families can socialize and receive support and counselling.  It accommodates parents living outside the city and nursing mothers. In 2022, the RMHC Houses hosted 738 people with more than 8,123 nights of free accommodation.  RMHC also supports children’s hospitals with the purchase of much needed equipment for paediatric wards.

The group leveraged its close relationship with the Ronald McDonald House Charities to support the humanitarian effort in Ukraine and extended financial support to RMHC Romania to deploy a truck with 10 tonnes of sanitary products, essentials and disinfectant from Bucharest to the border in April.  The aid was distributed by other organisations on the ground to around 10,000 people.  In Romania, the RMHC House in Timisoara hosted families whose children are being treated at the Louis Turcanu Hospital.  RMHC Latvia, in co-ordination with other RMHC Chapters in Ukraine and Poland and RMHC Global, deployed its Care Mobile to Przemysl in Poland, the city receiving refugees from the Medyka-Shehyni border crossing point.

The RMHC Chapters supported by the subsidiaries of Premier Capital are part of the Ronald McDonald House Charities global non-profit network.  The network delivers programmes and services in more than 60 countries and regions, benefitting the lives of millions of children and their families.  McDonald’s has been the RMHC’s mission partner since the first RMHC House was established in the US in 1974.

In carrying on its business, the Group is fully aware of its obligation to preserving the environment and has put in place a number of policies aimed at respecting the environment and reducing waste.

Relations with the market

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

Non-compliance with the Code

Principle 7: Evaluation of the board’s performance

Under the present circumstances, the board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role as the board’s performance is always under scrutiny of the shareholders of the Company. 

Principle 8: Committees

Under the present circumstances the board does not consider it necessary to appoint a remuneration committee and a nomination committee as decisions on these matters are taken at shareholder level. 

Principle 10: Institutional shareholders ,

This principle is not applicable since the Company has no institutional shareholders. 

Signed on behalf of the Group's Board of Directors on 18 April 2023 by Carmelo (sive) Melo Hili (Chairman) and Victor Tedesco (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Group Financial Statements 2022. 

Signed on behalf of the Group's Board of Directors on 18 April 2023 by Carmelo (sive) Melo Hili (Chairman) and Victor Tedesco (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Group Financial Statements 2022. 

1.            Company information and basis of preparation

Premier Capital plc is a public limited company incorporated in Malta with registration number C36522.  The registered address of the Holding Company is Nineteen Twenty Three, Valletta Road, Marsa, MRS 3000.  As disclosed in note 26, it has issued bonds which are listed on the Malta Stock Exchange. 

The financial statements of the Holding Company and consolidated financial statements of the Group have been prepared on the historical cost basis except for certain property, plant and equipment and financial assets at fair value through other comprehensive income which are stated at their fair values and in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU).  They have been prepared under the assumption that the Group operates on a going concern basis. 

The significant accounting policies adopted are set out below. 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability. 

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Holding Company determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.

2.        Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Holding Company and entities controlled by the Holding Company (its subsidiaries).  A subsidiary is an entity that is controlled by the Holding Company.  The Holding Company controls an investee when the Holding Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.  Where necessary, in preparing these consolidated financial statements, appropriate adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the group entities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. 

Non-controlling interests in the net assets or liabilities of consolidated subsidiaries are identified separately from the Group’s equity therein.  Non-controlling interests consists of the amount of those interests at the date of the original business combination and the non-controlling interests share of changes in equity since the date of the combination.  Total comprehensive income is attributable to non-controlling interests even if this results in the non-controlling interests having a deficit balance. 

Business combinations

Acquisitions of businesses are accounted for using the acquisition method.  The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.  Acquisition-related costs are generally recognised in profit or loss as incurred. 

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except where the exceptions to the recognition or measurement principles apply. 

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.  If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. 

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets.  The choice of measurement basis is made on a transaction-by-transaction basis.  Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.  

Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognised in profit or loss.  Amounts previously recognised in other comprehensive income in relation to the acquiree are accounted for in the same manner as would be required if the interest were disposed of. 

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.  In such circumstances, the carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary.  Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Holding Company. 

Where the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests.  Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.  The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. 

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. 

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired.  If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.  Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income.  An impairment loss recognised for goodwill is not reversed in subsequent periods. 

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 

Investment in subsidiaries

A subsidiary is an entity that is controlled by the Holding Company.  The Holding Company controls an investee when the Holding Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 

Investments in subsidiaries, in the Holding Company’s financial statements are stated at cost less any accumulated impairment losses.  Dividends from the investments are recognised in profit or loss. 

At each reporting date, the Holding Company reviews the carrying amount of its investments in subsidiaries to determine whether there is any indication of impairment and, if any such indication exists, the recoverable amount of the investment is estimated.  An impairment loss is the amount by which the carrying amount of an investment exceeds its recoverable amount.  The recoverable amount is the higher of fair value less costs to sell and value in use.  An impairment loss that has been previously recognised is reversed if the carrying amount of the investment exceeds its recoverable amount.  An impairment loss is reversed only to the extent that the carrying amount of the investment does not exceed the carrying amount that would have been determined if no impairment loss had been previously recognised.  Impairment losses and reversals are recognised immediately in profit or loss.  

Property, plant and equipment

The Group’s property, plant and equipment are classified into the following classes – land and buildings, improvement to premises, motor vehicles, plant and equipment and other equipment.  The Holding Company’s property, plant and equipment are classified into furniture, fixtures and other equipment. 

Property, plant and equipment are initially measured at acquisition cost, including any costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by the Group’s management.  Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.  Expenditure on repairs and maintenance of property, plant and equipment is recognised as an expense when incurred. 

Land and buildings are held for use in the production or supply of goods or services or for administrative purposes.  Subsequent to initial recognition, land and buildings are stated at cost less any accumulated depreciation and any accumulated impairment losses.  Land and buildings are measured at fair value based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings.  A revaluation surplus is credited to other reserves in shareholders equity. 

Improvements to premises incorporate all costs incurred, including acquisition costs and other costs attributable to bring the leased premises to the design, specifications and conditions requested by McDonalds.  Subsequent to initial recognition, improvements to premises are stated at cost less any accumulated depreciation and any accumulated impairment losses.  

Other tangible assets are stated at cost less any accumulated depreciation and any accumulated impairment losses.  

Property, plant and equipment are derecognised when no future economic benefits are expected from their use or upon disposal.  Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are included in profit or loss within administrative expenses in the period of derecognition. 

Depreciation

Depreciation commences when the depreciable assets are available for use and is charged to profit or loss so as to write off the cost, less any estimated residual value, over their estimated useful lives, using the straight-line method, on the following bases:

Buildings                                                                               2.5% - 5% per annum

Improvements to premises                                                5% - 20% per annum

in line with lease expiry

Motor vehicles                                                                  12.5% - 33.3% per annum

Plant and equipment                                                           10% - 50% per annum

Furniture, fixtures and other equipment                         10% - 25% per annum

No depreciation is charged on land.  

The depreciation method applied, the residual value and the useful life are reviewed, and adjusted if appropriate, at the end of each reporting period. 

In the case of right-of-use assets, expected useful lives are determined by reference to comparable owned assets or the lease term, if shorter.  Material residual value estimates and estimates of useful life are updated as required, but at least annually. 

Intangible assets

An intangible asset is recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. 

Intangible assets are initially measured at cost, being the fair value at the acquisition date for intangible assets acquired in a business combination.  Expenditure on an intangible asset is recognised as an expense in the period when it is incurred unless it forms part of the cost of the asset that meets the recognition criteria or the item is acquired in a business combination and cannot be recognised as an intangible asset, in which case it forms part of goodwill at the acquisition date. 

The useful life of intangible assets is assessed to determine whether it is finite or indefinite.  Intangible assets with a finite useful life are amortised.  Amortisation is charged to profit or loss so as to write off the cost of intangible assets less any estimated residual value, over the estimated useful lives.  The amortisation method applied, the residual value and the useful life are reviewed, and adjusted if appropriate, at the end of each reporting period. 

Intangibles are derecognised when no future economic benefits are expected from their use or upon disposal.  Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are included in profit or loss within administrative expenses in the period of derecognition. 

(i)           Support services licence