4.3      Basis of consolidation

The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 31 December 2024. Subsidiaries are all entities over which the Group has power to control the financial and operating policies. MIH obtains and exercises control through voting rights. All subsidiaries have a reporting date of 31 December.

Intra-group balances, transactions and unrealised gains and losses on transactions between the group companies are eliminated. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from the Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

Non-controlling interests represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owner of the parent and the non-controlling interests based on their respective ownership interests.

The consolidated financial statements have been prepared from the financial statements of the following companies comprising the Group.

4.4    Revenue recognition and expenses

Revenue is mainly derived from leasing out the investment property owned by the subsidiary, and the sales generated from the food and beverage outlets within the Palm City residential complex.

To determine whether to recognise revenue, the Group follows a 5-step process:

The Group often enters into transactions involving a range of products and services.  In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.

The Group recognises deferred income for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statements of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statements of financial position, depending on whether something other than the passage of time is required before the consideration is due.

4.5     Investments in associate

Associates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor joint ventures. Investments in associate are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group’s share in the associate is not recognised separately and is included in the amount recognised as investment in associates.

The carrying amount of the investments in associate is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustment of assets and liabilities.

Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies of the Group.

4.6     Foreign currency translation

Functional and presentation currency

The separate and consolidated financial statements are presented in euro (€), which is also the functional currency of the parent company.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

4.7     Borrowing costs

Borrowing costs primarily comprise interest on the Group and Company’s borrowings. Borrowing costs incurred on specific fixed asset projects prior to their commissioning are capitalised as part of the cost of the asset. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is based on the average rate of interest on bank borrowings. All other borrowing costs are amortised on an effective interest basis over the life of the loan facility agreement.

4.8   Property, plant and equipment

All items of property, plant and equipment are initially recognised 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 management. They are subsequently measured at acquisition cost or manufacturing cost less subsequent depreciation and impairment losses. The cost of assets in the course of construction includes the cost of materials, direct labour and an appropriate proportion of overheads, and, where applicable, interest costs incurred in financing, together with any other costs, to the extent that they are incurred prior to the commencement of the use of these assets.

Depreciation is calculated, using the straight-line method, to write off the cost or valuation of assets over their estimated useful lives on the following bases:

No depreciation is provided on land and on assets in the course of construction and assets that are not yet brought into use.

4.9   Investment property

Investment property is property held to earn rentals and/or for capital appreciation and is accounted for using the fair value model.

Investment property is revalued annually and is included in the statement of financial position at its fair value. This is determined by the directors based either on management’s estimates of expected future cash flows or market values. When based on management’s estimates of future cash flows, the value of the property is determined by applying a suitable discount rate.

Any gain or loss resulting from either a change in the fair value or the sale of an investment property is immediately recognised in profit or loss within ‘fair value gain on investment property’.

Rental income and operating expenses from investment property are reported within ‘revenue’ and ‘operating expenses’.

4.10  Leased assets

The Group as a lessee

The Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition, the Group assesses whether the contract meets three key evaluations which are whether:

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the commencement date (net of any incentives received).

The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

At lease commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and finance costs.

The lease liability is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

On the statement of financial position, right-of-use asset has been included in property, plant and equipment and lease liabilities disclosed separately.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis.

The Group as a lessor

As a lessor, the Group classifies its leases as either operating or finance leases.

The Group assessed whether it transfers substantially all the risks and rewards of ownership. Those assets that do not transfer substantially all the risks and rewards are classified as operating leases.

Rental income is accounted for on a straight-line basis over the lease term and is included in revenue due to its operating nature.

4.12  Investment in subsidiaries

Investment in subsidiaries is included in the Company’s financial statements at fair value (refer to note 4.13).

4.13  Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Group and the Company become a party to the contractual provisions of the financial instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets are classified into the following categories:

The classification is determined by both:

All income and expenses relating to financial assets that are recognised in profit or loss are presented within ‘finance costs’ or ‘finance income’, except for impairment of trade receivables which is presented in ‘administrative expenses’.

Subsequent measurement of financial assets

Financial assets at amortised cost

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.  The Group’s and the Company’s cash and cash equivalents, and trade and most other receivables fall into this category of financial instruments.

Financial assets at FVOCI

The Group and the Company accounts for financial assets at FVOCI if the assets meet the following conditions:

The Company made the irrevocable election to account for the investment in subsidiaries and associate at FVOCI.

Any gains or losses recognised in other comprehensive income will be recycled upon derecognition of the asset.

Financial assets at FVTPL

Financial assets held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at FVTPL. Further, irrespective of the business model used, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL.

Impairment of financial assets

IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’.  Instruments within the scope of the new requirements included FVOCI, trade receivables and contract assets recognised and measured under IFRS 15.

Recognition of credit losses is no longer dependent on the Group and Company first identifying a credit loss event. Instead the Group and Company consider a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

In applying this forward-looking approach, a distinction is made between:

‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.

‘12-month ECL are recognised for the first category while ‘lifetime ECL’ are recognised for the second category.

Measurement of the ECL is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.

Trade and other receivables

The Group and Company make use of a simplified approach in accounting for trade and other receivables as well as contract assets and record the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group and Company use their historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Group and Company assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics.  Refer to note 27.1 for a detailed analysis of how the impairment requirements of IFRS 9 are applied.

Classification and measurement of financial liabilities

The Group’s and the Company’s financial liabilities include bonds and most trade and other payables.

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group and Company designates a financial liability at FVTPL.

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).

All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within ‘finance costs’ or ‘finance income’.

4.14  Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

The cost of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. 

4.16  Cash and cash equivalents

For the purposes of the statements of cash flows, cash and cash equivalents comprise cash in hand and demand deposits, net of bank balance overdrawn.

4.17  Equity

Share capital represents the nominal (par) value of shares that have been issued.

Other components of equity include the following:

Retained earnings includes all current and prior period retained profits.

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

All transactions with owners are recorded separately within equity.

4.19  Significant management judgement in applying accounting policies and estimation uncertainty

When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

The resulting accounting estimates will, by definition, seldom equal actual results.  The estimates, assumptions and management judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below.

The fair value of investment property is determined by using valuation techniques.  Further details of the judgements and assumptions made are disclosed in note 13.

This note highlights information about the fair value estimation of the investment property.

In the opinion of the directors, the accounting estimates and judgements made in the course of preparing these financial statements are, with the exception of those described hereunder, not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1.

(a)   Income taxes

In order to establish the taxation provisions, management exercises significant judgement in view of the fact that the Group and the Company operate in various jurisdictions and as a result there are diverse transactions for which the ultimate tax determination is somewhat uncertain.  In the event that the amount of actual tax due differs from the original amounts provided for, such variances will have an impact on the taxation charges for future periods.

(b)  Impairment of trade and other receivables

The Group applies the simplified model of recognising lifetime expected credit losses for all trade receivables.  In measuring the expected credit losses, the trade receivables are assessed on a collective basis as they possess shared credit characteristics.  They have been grouped according to the past due dates and geographical location.  The Group has concluded that the expected credit losses for trade receivables is not material (see note 18).

(c) Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the Group and Company.  The carrying amounts are analysed in note 12.  Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.

(d) Inventories

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by expiry, obsolescence, future technology or other market-driven changes that may reduce future selling prices.

(e) Recognition of contract revenue over time or at a point in time

For some of the Group’s contracts with customers significant judgement is required to assess whether control of the related performance obligation(s) transfers to the customer over time or at a point in time in accordance with IFRS 15. Specifically, for contracts that involve developing a customer-specific asset with no alternative use to the Group, judgement is needed to determine whether the Group is entitled to payment for its performance throughout the contract period if the customer sought to cancel the contract. This relates mainly to residential and commercial leases which represent €29,769,240 (2023: €26,514,400) of the Group’s revenue. The Group assesses it has a right to payment for its performance throughout the contract period and recognises revenue over time.

For other revenue sources, the Group assessed that the performance obligations are satisfied at a point in time.

(f) Fair value of investment property

At each reporting date the investment property is revalued by the directors based either on management’s estimates of expected future cash flows or market values.  The Group has not recognised a fair value uplift to the investment property during the year under review.  When based on management’s estimates of expected future cash flows the value of each property is determined by applying a suitable discount rate.

The Group’s investment property is situated in Libya which is still experiencing prolonged political uncertainty.

The estimated fair values were arrived at using projected cash flows from the operation of the investment property. On the basis of the valuation carried out by the directors, no uplift was recognised in these financial statements. The uncertainty which is still prevailing in Libya and the significant judgements surrounding the valuation of the investment property situated in that country render the valuation of any uplift of the property extremely difficult and judgemental (see note 13). 

4.20  Segment reporting

The standard requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes.  The chief operating maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group board of directors.

An operating segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different from that of other segments.  The operating segments can be classified as investment property rental, income from food and beverages and others.

The Group is engaged in the ownership and leasing of its investment property. The Group’s country of domicile is Malta and the operation is in Libya.

The board of directors assesses performance based on the measure of earnings before interest, tax, depreciation and amortisation (EBITDA).

The Group is not required to report a measure of total assets and liabilities for each reportable segment since such amounts are not regularly provided to the chief operating decision maker.  However, in accordance with IFRS 8, non-current assets (other than financial instruments and deferred tax assets) are divided into geographical areas in note 5.