Annual Report

and

Financial Statements

For the year ended 31 December 2025

General Information

Directors’ Report

Statement of Responsibilities pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority

Corporate Governance - Statement of Compliance with the Code of Principles of Good Corporate Governance

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Independent Auditors’ Report

General Information

Registration

Bonnici Bros. Properties p.l.c. is registered in Malta as a public limited liability company under the Companies Act, 1995 (Chapter 386, Laws of Malta) with registration number C 74286.

Directors

Gilbert Bonnici

David Bonnici

Alexis Bonnici (resigned on 23 April 2025)

Jozef Wallace Galea

Richard Abdilla Castillo

Alfred Attard

Joanne Azzopardi Bonnici (appointed on 23 April 2025)

Company secretary

Laragh Cassar LL.D

Registered office

Bonnici House

Sardine Street, Burmarrad

San Pawl il-Bahar SPB 6073

Malta

Auditors

Grant Thornton

Fort Business Centre, Level 2

Triq L-Intornjatur, Zone 1

Central Business District

Birkirkara CBD 1050

Malta

Directors’ Report

The directors present their report, together with the audited financial statements of Bonnici Bros. Properties p.l.c. (‘the Company’) for the year ended 31 December 2025 (‘the reporting period’).

Board of directors

The directors who held office during the reporting period up to the date of this report were:

Gilbert Bonnici

David Bonnici

Alexis Bonnici (resigned on 23 April 2025)

Jozef Wallace Galea

Richard Abdilla Castillo

Alfred Attard

Joanne Azzopardi Bonnici (appointed on 23 April 2025)

In accordance with the Company’s Articles of Association, the directors retire from office every year and become eligible for re-election at the Annual General Meeting. During the Annual General Meeting held on 23 April 2025, Alexis Bonnici did not confirm his availability to remain in office and Joanne Azzopardi Bonnici was appointed in his stead.

Principal activities

The Company principally invests in immovable property to earn rental and other income therefrom, in the short and long term.

Review of business development and financial position

During the second quarter of the financial year ended 31 December 2025, the Company placed its apartments in St Julian’s on the market and enriched its residential property supply in the market. During the last quarter of the year, the Company started accepting inert material from construction waste in its quarries.

During the year, the Company achieved a profit before taxation amounting to €699,819 (2024: €1,440,807). After deducting taxation thereon, the profit for the year amounted to €262,561 (2024: €885,700).

The Company’s profit before taxation for the year ended 31 December 2025 is lower than the results achieved in the comparative year mainly in view of the significant difference in the fair value movement of investment properties.

The profit after taxation was significantly impacted by a tax charge arising from the market value of investment properties, which increased in value in view of the developments carried out during the year.

The Company’s financial position as at the reporting date remains satisfactory and healthy with total equity position at €18,209,447 (2024: €17,946,886).

Principal risks and uncertainties

The successful management of risk is essential for the Company to achieve its objectives. The ultimate responsibility for risk management rests with the Company’s directors, who evaluate and formulate policies for identifying and managing such risks.

The Company principally faces the same risks and uncertainties that affect the local property market, given that the Company invests solely in this market. Over time, the Company recognised a cumulative gross fair value gain on investment properties of €8,513,294 (2024: €8,510,879).

The Board has considered current geopolitical developments, including the conflict in the Middle East. Based on the Company’s current operations, supply chain exposure, and market footprint, the directors do not consider these events to have a material impact on the Company’s financial position as at the reporting date. The Board will continue to monitor and review the situation.

Future developments and events subsequent to the reporting date

No changes are envisaged in the Company’s current business model.

On 5 December 2025, the Company was served with an action for damages in relation to an alleged right of way over land owned by the Company. In connection with these proceedings, a garnishee order was served against the Company. The claims are being contested in full by the Company. Meanwhile the Company has successfully requested the joinder into the lawsuit of the previous owners.

Subsequent to the reporting end, the garnishee order was revoked pursuant to the deposit in Court by the Company of a bank guarantee provided by a related party.

No other significant or non-adjusting events have occurred between the reporting date and the date of authorization of these financial statements.

Going concern

Based on the recent financial and non-financial information presented to the Board of Directors, and the long-term financial projections that support the bond issue, the directors are satisfied that, at the time of approval of these financial statements, it is appropriate to adopt the going concern as an underlying assumption in the preparation of these financial statements.

Reserves and dividends

No dividends are recommended. The directors propose that the balance of retained earnings amounting to €6,589,572 (2024: €6,327,011) to be carried forward to the next financial year.

Disclosure of information to auditor

At the date of making this report, the directors confirm the following:

Directors’ Responsibilities

The directors are required by the Companies Act, 1995 (Chapter 386, Laws of Malta) (‘the Act’) to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing these financial statements, the directors are required to:

The directors are also responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Act. 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 Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Auditor

The auditor Grant Thornton has intimated its willingness to continue in office and a resolution proposing its reappointment will be put to the Annual General Meeting.

Signed on behalf of the Board of Directors on 20 April 2026 by Gilbert Bonnici (Director) and Jozef Wallace Galea (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements 2025.

Statement of responsibilities pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority

Pursuant to the Capital Markets Rule 5.68, we confirm that to the best of our knowledge:

Signed on behalf of the Board of Directors on 20 April 2026 by Gilbert Bonnici (Director) and Jozef Wallace Galea (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements 2025.

Corporate Governance - Statement of Compliance with the Code of Principles of Good Corporate Governance

1.             Introduction

Companies listed on a regulated market in Malta are subject to The Code of Principles of Good Corporate Governance (‘the Code’ ). Whilst the adoption of the Code is not mandatory, the Capital Markets Rules issued by the Malta Financial Services Authority (MFSA) (‘the Rules’ or ‘the CMRs’ ) require listed companies to include a Statement of Compliance with the Code in their Annual Report, accompanied by a report of the independent auditor.

The Board of Directors (‘the Board’) of the Company are of the view that the adoption of the principles set out in the Code is in the Company’s best interests. The Board considers that during the reporting period, the Company has generally been in compliance with the Code to the extent that was considered adequate with the size and operations of the Company. Instances of divergence from the Code are disclosed and explained below.

2.             Compliance with the Code

Principle 1 and Principle 4: The Board of Directors

The Board of the Company sets the overall long-term strategy and direction of the Company and exercises the necessary oversight of the Company’s executive management, ensuring that internal control systems are adequate and that the integrity of financial reporting is maintained at all times. The Board is responsible for understanding and managing the business risks faced by the Company. The Board is also responsible for the Company’s communication with the market and its general body of shareholders. Delegation of powers by the Board to management is approved and set out in writing by the Board.

The Board is composed of individuals who are fit and proper to direct the Company’s business, each possessing the appropriate calibre, skills, and experience to contribute effectively to the Board’s decision making. All directors are fully aware of, and conversant with, the statutory and regulatory requirements relevant to the Company’s business. The Board is accountable for its own performance and that of its delates to shareholders and other stakeholders.

The directors are committed to:

The Board is composed of a mix of executive and independent non-executive directors, as further detailed below. This structure enables the Board, and particularly the non-executive directors, to have direct information about the Company’s performance and business activities, in line with the requirements of the Rules regarding the composition and operation of the Board and its committees.

The Board recognises its responsibility, in line with the Principle 4, to ensure effective systems of accountability, monitoring; strategy formulation, and policy development are in place.

In fulfilling its mandate, the Board:

The Company has also incorporated an Audit Committee tasked to monitor the Company’s present and future operations, threats and risks in the external environment and current and future strengths and weaknesses. The Audit Committee has a particular focus on the auditor selection and annual audit of the Company’s financial statements, with a view to inter alia, ensure that the Annual Financial Statements are published within the prescribed time period. The Chair of the Audit committee is present at Board Meetings and relays its workings to the Board.

Principle 2: The Company’s Chairman and Chief Executive Officer

Due to its lean operating structure and the nature of its current business, the Company does not employ a Chief Executive Officer (CEO). This function is undertaken by the three executive directors of the Company, who are responsible for the day-to-day administration of the business. The Chairman of the Company is presently Mr Jozef Wallace Galea, an independent non-executive director.

The Chairman is responsible for:

Principle 3: Composition of the Board

The Board’s structure and size are considered to be suitable for the business of the Company, ensuring that it is efficient and effective and compliant with regulatory requirements. The Board is composed of a mix of executive and non-executive directors, thus ensuring that the appropriate mix is maintained. There are three executive Directors (Mr David Bonnici, Mrs Joanne Azzopardi Bonnici and Mr Gilbert Bonnici) and three independent non-executive directors (Mr Richard Abdilla Castillo, Mr Jozef Wallace Galea and Mr Alfred Attard).

Each of the non-executive directors declares that:

Dr Laragh Cassar is the secretary to the Board.

The Board also considers its financial information in relation to the entities of which it acts as guarantor, as disclosed in the Company’s Base Prospectus dated 30 January 2023 and, on a continuous basis, assesses and ensures compliance with the financial and other covenants set out in the said Base Prospectus.

Principle 5: Board Meetings

During 2025, the Board met four (4) times, and passed another nine (9) written resolutions. With the exception of one meeting, all Board members were present. During the said Board Meetings, the Board discussed matters of ordinary business as well as matters of strategy affecting the business of the Company.

Principle 6: Information and professional development

On joining the Board, the non-executive directors were briefed by the executive directors on the activities of the Company. The directors are provided with professional training on their obligations emanating from the Market Abuse Regulation and the Capital Markets Rules as well as the internal policies of the Company relating to the treatment of inside information and dealing in the Company’s listed securities.

Directors may, where they judge it necessary, discharge their duties as directors and consult professional advisors at the expense of the Company.

Principle 7: Evaluation of the Board’s performance

The Board has carried out an internal Board performance evaluation in respect of the year ended 31 December 2025. The findings were tabled at the subsequent Board Meeting. The findings were not such that merited any material changes in the Company’s structures and organisation.

Principle 8: Committees

The only committee set up by the Board is the Audit Committee.

The Audit Committee’s primary objective is to assist the Board in fulfilling its oversight responsibilities over the financial reporting processes, financial policies and internal control structure.

The Audit Committee oversees the conduct of the internal and external audit and acts to facilitate communication between the Board, management and the internal and external auditors. The Audit Committee reports directly to the Board. The Audit Committee is composed of Richard Abdilla Castillo (independent non-executive director), Alfred Attard (independent non-executive director) and Jozef Wallace Galea (independent non-executive director).

The Chairman of the Audit Committee, appointed by the Board, is entrusted with reporting to the Board on the workings and findings of the Audit Committee. The appointed Chairman to the Audit Committee is Richard Abdilla Castillo who is considered by the Board to be competent in accounting and auditing in terms of the Capital Markets Rules.

During 2025, the Audit Committee met four (4) times and all members were present at the said meetings.

Remuneration Statement

The remuneration for directors has been consistent since inception; no director (including the Chairman) is entitled to profit sharing, share options or pension benefits. There is no linkage between the remuneration and the performance of directors. A fixed honorarium is payable at each financial year to the non-executive directors. For the financial year under review, the aggregate remuneration of the directors of the Company was a fixed remuneration amounting to €27,000. The executive directors do not presently receive any remuneration for their position as executive directors.

The shareholders of the Company in General Meeting determine the maximum annual aggregate remuneration of the directors. None of the directors are employed with the Company, but have a service contract with the Company.

Internal Control

While the Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness, the authority to determine day-to-day, non-material operational aspects that fall within the ordinary course of business are delegated to the executive directors. Controls are designed to manage risk to achieve business objectives and to provide reasonable assurance against normal business risks. Through the Audit Committee, the Board reviews the effectiveness of the Company’s system of internal controls.

The key features of the Company’s system of internal control are as follows:

Principle 9: Relations with shareholders and with the market

The Board considers the communication with the market to be an important feature of its listed status and accordingly, all required communication is made through the portal of the Malta Stock Exchange in a regular, timely, accurate, comprehensive manner ensuring that comparable information in sufficient detail is provided to enable investors to make informed investment decisions.

Principle 11: Conflicts of interest

The directors are aware of their responsibilities to act in the best interests of the Company and its shareholders generally. In terms of the Memorandum and Articles of Association of the Company, a director is required to disclose any conflict of interest in any contract or arrangement and is not permitted to vote on any such conflicted contract or arrangement.

Principle 12: Corporate social responsibility

The directors are committed to high standards of ethical conduct and to contribute to the development of the well-being of employees and their families as well as the local community and society at large.

3.             Non-compliance with the Code

Principle 4: Succession policy

Due to the very recent appointment of the directors on the Board and listing of the Company, the Board has not yet undergone any succession planning for its executive and non-executive directors.

Principle 8: Committees

Due to the size and type of operation of the Company, the Board does not believe that the Company requires a Remuneration Committee, and the Board itself carries out the functions of the Remuneration Committee specified in, and in accordance with, Principle 8A of the Code, given that the remuneration of the directors is not performance related.

Furthermore, in view of the private shareholding in the Company. the Board has not considered it necessary to set up a Nomination Committee for the appointment of directors to the Board. The directors are appointed by the shareholders in a general meeting in accordance with the Memorandum and Articles of Association of the Company.

Principle 10: Institutional shareholders

This principle does not apply to the Company due to its shareholding structure not comprising any institutional shareholders.

Signed on behalf of the Board of Directors on 20 April 2026 by Gilbert Bonnici (Director) and Jozef Wallace Galea (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements 2025.

Statement of Comprehensive Income

For the year ended 31 December 2025

Statement of Financial Position

As at 31 December 2025

The accompanying notes form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 20 April 2026. The financial statements were signed on its behalf by Gilbert Bonnici (Director) and Jozef Wallace Galea (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements 2025.

Statement of Changes in Equity

For the year ended 31 December 2025

Statement of Cash Flows

For the year ended 31 December 2025

Notes to the Financial Statements

For the year ended 31 December 2025

1            Reporting entity

Bonnici Bros. Properties p.l.c. (‘the Company‘) is a public limited liability company domiciled and incorporated in Malta under the Companies Act, 1995 (Chapter 386, Laws of Malta) (‘the Act’), whose registered address is situated at Bonnici House, Sardine Street, Burmarrad, San Pawl il-Bahar, SPB 6073, Malta. 

The Company principally invests in immovable property to earn rental and other income therefrom in the short and long term.

2            Basis of preparation

2.1          Basis of measurement and statement of compliance

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by International Accounting Standards Board (IASB) and as adopted by the European Union (EU) and the provisions of the Act. The Company’s financial statements have been prepared on an accruals basis and under the historical cost convention except for the revaluation of investment properties. Monetary amounts are expressed in euro (€).

2.2          Going concern

The financial statements have been prepared under the assumption that the Company operates on a going concern basis, which assumes that the Company will be able to discharge its liabilities, when and as these fall due.

As at the reporting date, the Company had a positive net equity position of €18,209,447 (2024: €17,946,886) and a net working capital liability position of €4,618,126 (2024: €2,852,975). In conforming the validity of the going concern basis of preparation, management considered the fact that the ultimate shareholders have the ability to assign and novate to themselves €5,182,604 (2024: €3,912,055), in part or in full, of the amounts owed to related parties as at the reporting date.

2.3          Functional and presentation currency

The financial statements are presented in euro (€), which is also the functional currency of the Company.

3              New or revised Standards or Interpretations

3.1          New Standards adopted as at 1 January 2025

Some accounting pronouncements which have become effective from 1 January 2025 and have therefore been adopted do not have a significant impact on the Company’s financial results or position.

Amendments that are effective for the first time in 2025 and could be applicable to the Company are:

These amendments do not have a significant impact on these financial statements and therefore the disclosures have not been made.

3.2         Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Company

At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB or International Financial Reporting Interpretations Committee (IFRIC). None of these Standards or amendments to existing Standards have been adopted early by the Company and no Interpretations have been issued that are applicable and need to be taken into consideration by the Company at either reporting date.

Standards and amendments that are not yet effective and have not been adopted early by the Company include:

These Standards and amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore no disclosures have been made.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. 

In April 2024, the IASB issued IFRS 18, which replaces IAS 1 ‘Presentation of Financial Statements’. The adoption of IFRS 18 ‘Presentation and Disclosures in financial statements’, effective for periods commencing on or after 1 January 2027, is expected to have a material impact on the presentation of the financial statements, and therefore relevant disclosures are included below.

Although IFRS 18 includes many of the requirements of IAS 1, it introduces new requirements to better structure financial statements and to provide more detailed and useful information to investors, including:

IFRS 18 will be applied retrospectively with specific transitional provisions.

The Company is currently working to identify all of the impacts that IFRS 18 will have on the primary financial statements and notes to the financial statements.

Other new Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Company’s financial statements.

4            Material accounting policies

An entity should disclose its material accounting policies. Accounting policies are material and must be disclosed if they can be reasonably expected to influence the decision of users of the financial statements.

Management has concluded that the disclosure of the entity’s material accounting policies below are appropriate.

4.1          Revenue

Revenue from contracts with customers is recognised at an amount that reflects the consideration at which the Company is expected to be entitled when performance obligation is satisfied in a manner that depicts the transfer of control over the goods or services promised to the customer. A performance obligation may be satisfied either at a point in time or over time.

The consideration relates to the transaction price allocated to each performance obligation as defined in the contract with the customer. The transaction price reflects discounts, rebates, refunds granted to customers and excludes sales taxes, if any.

The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position (note 18). Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset (note 13) or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

4.1.1       Rental income

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

The Company 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.

The Company has currently not entered into any lease that is classified as a finance lease.

Rental income is accounted for on a straight-line basis over the non-cancellable period of the lease term. Thereafter, rental income is based on contractual terms.

4.1.2       Security fee income

Revenue arises from the fee charged to related parties for the granting of the Company’s investment properties as security against facilities issued by bankers to the related parties. The fee is established for each calendar year based on contractual terms and charged over time.

4.1.3       Quarry excavation and dumping income

Revenue from excavation and dumping of inert waste material in the Company’s quarries is recognised at a point in time, reflecting the amount of consideration to which the Company is expected to be entitled, net of variable consideration.

4.2          Operating expenses and administrative expenses

Operating expenses and administrative expenses are recognised in profit or loss upon utilisation of the service or as incurred.

4.3          Borrowing costs

Borrowing costs are expensed in the period in which they are incurred and reported in ‘net finance costs’.

4.4          Income taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

The calculation of current and deferred tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method. The carrying amounts of deferred tax are reviewed at the end of each reporting period on the basis of their most likely amounts and adjusted if needed. 

Assessing the most likely amount of current and deferred tax in case of uncertainties (e.g. as a result of the need to interpret the requirements of the applicable tax law), requires the Company to apply judgements in considering whether it is probable that the taxation authority will accept the tax treatment retained.

Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Company’s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.

Deferred tax liabilities are generally recognised in full, although IAS 12 specifies limited exemptions. As a result of these exemptions, the Company does not recognise deferred tax on temporary differences relating to goodwill, or to its investments in subsidiary (only to the extent that the Company controls the timing of the reversal of the taxable temporary difference and that reversal is not likely to occur in the foreseeable future). The Company does not offset deferred tax assets and liabilities unless it has a legally enforceable right to do so and intends to settle on a net basis.

4.5          Property and equipment

Items of property 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 the Company’s management. 

After initial recognition, items of property and equipment are subsequently measured at cost less accumulated depreciation and impairment losses, if any. 

Depreciation is recognised on a straight-line basis for each class of assets to write down their cost less estimated residual values, over their estimated useful lives as follows:

The landfilling activity period is determined by the time-period necessary to fill in the total volume available after the completion of the quarries’ excavation period. Once the quarries are landfilled, they fetch a residual market value based on the overall land area.

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. The effects of any revisions are recognised in profit or loss when the change arise.

Gains or losses arising on the disposal of property and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss either within ‘other income’ or ‘other expenses’.

4.6          Impairment of property and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment, and some are tested at cash-generating unit level.

Property and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value in use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. If the recoverable amount of the asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. The difference between the carrying amount and the recoverable amount is recognised as an impairment loss in profit or loss.

Property and equipment are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset’s recoverable amount exceeds its carrying amount. 

Reversal of impairment loss for an asset is recognised in profit or loss to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, if no impairment loss had been recognised.

4.7          Investment properties

Investment properties are properties held to earn rentals or for capital appreciation, or both, and accounted for using the fair value model. Investment properties are revalued annually with resulting gains and losses recognised in profit or loss. These are included in the statement of financial position at their fair values. The revaluation exercise is carried out internally by the directors or by an accredited external independent architect.

4.8          Financial instruments

4.8.1       Recognition and derecognition

Financial assets and financial liabilities are recognised when the Company becomes 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 substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.

4.8.2      Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financial 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, other than those designated and effective as hedging instruments, are classified into one of the following categories:

In the periods presented, the Company does not have any financial assets categorised as FVOCI.

The classification is determined by both:

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

4.8.3      Subsequent measurement of 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.

4.8.4      Impairment of financial assets at amortised cost

IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses - the ‘expected credit loss (ECL) model’. Instruments within the scope of these requirements include loans and other debt-type financial assets measured at amortised cost, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at FVTPL.

The Company considers 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 expected credit losses’ are recognised for first category (i.e. Stage 1) while ‘lifetime expected credit losses’ are recognised for the second category (i.e. Stage 2).

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

Trade and other receivables and contract assets

The Company makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records 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 Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Company assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics and they have been grouped based on the days past due. Refer to Note 22.2 for a detailed analysis of how the impairment requirements of IFRS 9 are applied.

4.8.5      Classification and measurement of financial liabilities

The Company’s financial liabilities include borrowings, contract liabilities and trade and other payables.

Financial liabilities are initially measured at fair value, and where applicable, adjusted for transaction costs unless the Company designated 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 ‘net finance costs’.

4.9          Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits.

For the purpose of the Statement of Cash Flows, cash and cash equivalents comprise cash on hand, deposits held at call with banks less overdrawn bank balances.

4.10        Share capital, reserves and dividend payments

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

Other components of equity include capital contribution reserve, which represents the equity portion of long-dated contractually interest-free loans advanced by the corporate shareholders.

Retained earnings include all current and prior period retained profits. All transactions with owners are recorded separately within equity.

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.

4.11        Employee benefits

The Company contributes towards the State pension defined contribution plan in accordance with local legislation, and to which it has no commitment beyond the payment of fixed contributions. 

Obligations for contributions are recognised in profit or loss in the years during which the services are rendered by employees.

4.12        Provisions and contingent liabilities

Provisions for onerous contracts or other claims are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Company and amount can be estimated reliably. The timing of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted to their present values, when the time value of money is material.

No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.

4.13        Significant management judgement and estimation uncertainty

When preparing the Company’s financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, revenue and expenses.

The directors have considered the development, selection and disclosures of the Company’s critical accounting policies and estimates and the application of these policies and estimates. Estimates and judgements are continually evaluated and are based on historical and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In the opinion of the directors, except for the matter disclosed below, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult to reach, subjective or complex to a degree which would warrant their disclosure in terms of the requirements of IAS 1.

4.13.1     Fair value measurement

Management uses various valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the asset.

Management bases its assumptions on observable data as far as possible, but this is not always available. In that case, management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date (note 23).

5            Revenue

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

6            Net finance costs

7            Profit before taxation

The profit before taxation is stated after charging:

8            Staff costs

The average number of persons employed by the Company during the year was 4 (2024: 4).

9            Taxation

9.1          Tax expense

9.2          Tax reconciliation

The relationship between the expected tax expense based on the effective tax rate of the Company at 35% (2024: 35%) and the tax expense actually recognised in profit or loss can be reconciled as follows:

9.3          Deferred taxation

Deferred tax liability represents the tax effect of temporary differences relating to the fair value of the Company’s investment properties and property and equipment. The movement during the year is analysed as follows:

10          Property and equipment

One of the Company’s quarries at a carrying amount of €1,396,395 (2024: €1,405,721) is pledged as security in relation to bank facilities granted to related parties (note 19).

11          Investment properties

Investment properties consist of undeveloped land, property under construction, and other immovable properties in a finished state.

Properties in a finished state are leased to related and third parties on operating leases or are vacant. Rental income of €851,612 (2024: €818,741) is included within revenue. 

Direct operating and other expenses arising from investment properties that generated rental income during the year amounted to €20,654 (2024: €5,913). Other operating expenses arising from investment properties that did not generate rental income during the year amounted to €8,695 (2024: €4,517).

The lease contracts cover a non-cancellable contractual period up to 10 years from the date of commencement of the lease. Maturity analysis of future operating lease rentals as at the reporting date are as follows:

Investment properties valued at €1,960,000 (2024: €1,780,000) are pledged as security in relation to bank facilities (note 16). Investment properties valued at €19,960,000 (2024: €26,800,500) are pledged as security in relation to bank facilities granted to related parties (note 19).

12          Trade and other receivables

The balance of trade receivables from related parties is unsecured, interest-free and payable on demand. 

Other receivables include:

13          Contract assets

14          Cash and cash equivalents

Cash and cash equivalents consist of the following:

15          Equity

15.1        Share capital

As at the reporting date, the Company’s authorised and issued share capital consist of:

All shares in issue are fully paid up. The holders of the ordinary ‘B’, ‘C’ and ‘D’ shares each have the right to appoint two directors to the board. The holders of the ordinary ‘A’ shares do not have any right to appoint directors to the board. 

The ordinary ‘A’, ‘B’, ‘C’ and ‘D’ shares carry identical equal voting rights at general meetings of the Company, are entitled to any distribution of dividends, and rank pari passu for any residual assets of the Company after the settlement of all liabilities in the event of the Company’s winding up.

15.2        Capital contribution reserve

The capital contribution reserve comprises the equity portion of long-dated interest-free loans advanced by the Company’s corporate shareholders on 31 December 2020 and 29 November 2022 amounting to €5,836,735 (2024: €5,836,735) and €783,140 (2024: €783,140), respectively.

15.3        Retained earnings

The balance of retained earnings includes €4,897,295 (2024: €5,113,866) non-distributable earnings arising from the fair value measurements of investment properties.

16          Borrowings

16.1        Unsecured bond issue

On 30 January 2023, the Company published its Final Terms in relation to the issue of Tranche 1 €12,000,000 5.25% 2033 unsecured bonds issued pursuant to a Base Prospectus approved by the Malta Financial Services Authority. These unsecured bonds were listed on the Malta Stock Exchange on 3 April 2023.

The terms and conditions of the bond issue are summarised as follows:

Based on this section, the Company binds itself not to incur any financial indebtedness and/or provide any security interest (other than permitted security interest) unless the net asset value (as defined in the Base Prospectus) of the Issuer at that point in time is more than €1,000,000 or unless the said financial indebtedness and/or security interest is otherwise approved by the bondholders in a bondholders’ meeting.

The unsecured bonds are stated net of attributable issue costs. The bond attributable cost is amortised over the term of the bond issue through the effective interest rate. The effective interest rate of the bond is 5.6% per annum. Total interest expense on the bond issue for the year ended 31 December 2025 amounted to €656,993 (2024: €655,561) (note 6), as follows:

16.2        Loans due to corporate shareholders

The loans due to corporate shareholders are unsecured, interest-free and payable in full by 29 November 2082. The contractual amount of these loans as at the reporting date was €7,582,333 (2024: €7,582,333). Interest expense using the effective interest method recognised in profit or loss during the year amounted to €37,294 (2024: €37,066) (note 6). The loans are subordinated and junior to any, and all other unsubordinated debts and liabilities of the Company towards its creditors.

16.3        Bank loan

The bank loan is secured by special hypothecary guarantee over the Company’s investment properties up to an original limit of €1,071,000 (note 11), pledges on receivables on lease agreement, insurance policies and guarantees issued by related parties. The bank liability as at the reporting date stood at €894,546 (2024: €999,971) (note 11), gross of unamortised bank issuing expenses.

The bank loan bears an interest rate of 4% per annum and is repayable over a period of 15 years as follows:

16.4        Overdrawn bank balance

As at the reporting date, the bank balance was temporarily overdrawn, with negligible interest cost (note 14).

17          Trade and other payables

The amounts owed to related parties are unsecured, interest-free and payable on demand.

18          Contract liabilities

19          Related parties

The Company’s related parties include the corporate shareholders and entities owned by the common corporate shareholders.

Details on the terms and conditions of the outstanding balances with related parties are disclosed in notes 12, 15, 16 and 17 to these financial statements.

Transactions with related parties include the following:

The carrying amount of the Company’s properties amounting to €21,356,395 (2024: €28,206,221) (notes 10 and 11) are provided as security against bank facilities granted to related parties.

20          Contingent liabilities

As disclosed in notes 10 and 11, the Company’s properties are provided as security against bank borrowings granted to related parties. The maximum amount that can be settled by the Company if the special hypothecary guarantee is called upon by the bankers as at the reporting date amounted to €21,356,395 (2024: €23,596,001).

On 5 December 2025, the Company was served with an action for damages in relation to an alleged right of way over land owned by the Company. In connection with these proceedings, a garnishee order was served against the Company (note 12). The claims are being contested in full by the Company. Meanwhile the Company has successfully requested the joinder into the lawsuit of the previous owners.

Subsequent to the reporting end, the garnishee order was revoked pursuant to the deposit in Court by the Company of a bank guarantee provided by a related party (note 25).

21          Reconciliation of liabilities arising from financing activities

The table below details changes in the Company’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or further cash flows will be, classified in the statement of cash flows as cash from financing activities.

The ‘other non-cash changes’ included in the table above relate to the amortisation of bond issuing costs, the notional interest on the loans due to corporate shareholders, and the amortisation of bank borrowings issuing costs (note 16).

22          Financial instruments risk

The Company is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk.

The Company’s risk is managed by the board of directors and focuses on actively securing the Company’s short to medium-term cash flows by minimising the exposure to volatile financial markets. The Company does not engage in the trading of financial assets for speculative purposes, nor does it write options. The most significant financial risks to which the Company is exposed are described below.

22.1        Market risk analysis

The Company is exposed to market risk through its use of financial instruments and specifically to interest rate risk, which results from its financing. The Company is not exposed to currency risk since its financial instruments are denominated in the Company’s functional currency.

The interest rate profile of the Company’s interest-bearing financial instruments is as follows:

The Company does not account for any fixed-rate financial instruments at FVTPL. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

The following table illustrates the sensitivity of profit and equity to a reasonable possible change in interest rates of a parallel increase or decrease of 0.5% as at the reporting date. These changes are reasonably possible based on observation of current market conditions. The calculation is based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

22.2        Credit risk analysis

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. The Company is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables and contract assets.

Cash and cash equivalents

The credit risk associated with cash and cash equivalents is low in view of the existence of the depositors’ compensation scheme that covers bank deposits up to a limit of €100,000 and that placements are only made with major reputable financial institutions.

Trade receivables and contract assets

The carrying amount of trade receivables and contract assets is stated net of expected credit losses. In measuring the expected credit losses, the customers have been assessed on a collective basis as they possess common-shared risk characteristics, and the model is based on past due dates.

The contractual terms of the lease agreements entered with customers stipulate that receipts are received in advance of the period of use of the Company’s investment properties by the tenants. Any amounts due by related parties  can be offset against any amounts payable by the Company.

22.3        Liquidity risk analysis

Liquidity risk is the risk that the Company might be unable to meet its obligations, when these fall due. The Company raises funds mainly from its operations, unsecured bond issued, overdrawn bank balance, related party borrowings and bank borrowings. Net cash requirements are compared to available borrowing facilities to determine headroom or any shortfalls. 

As at 31 December 2025 and 2024, the Company’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

23          Fair value measurement

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.

Measurement of fair value is grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

23.1        Fair value measurement of financial instruments

The Company’s financial instruments are classified into the amortised cost category and measured at amortised cost, determined at the net present value using the effective interest rate method (where discounting is material) at the date of issuance. 

The fair value of these financial instruments is determined at the net present value using the effective interest rate method (where discounting is material) at the reporting date. The determination of this fair value falls under the ‘Level 2’ of the fair value hierarchy.

The fair value of the loans advanced to the Company by the corporate shareholders which as at the reporting date amounted to €1,133,405 (2024: €1,096,111) is determined at €512,375 (2024: €487,977) in view of the increase in market interest rates from the date of issuance of the loan. 

The fair value of the unsecured bond issue as at the reporting date is €11,970,000 (2024: €12,480,000) based on the market value of the bond quoted on the Malta Stock Exchange. In view that the Company’s other interest-bearing financial instruments are subject to a variable interest rate, the carrying amount of these instruments is a close approximation of their fair value. The carrying amount of other financial assets is also a close approximation of their fair value in view of their short-term nature.

23.2        Fair value measurement of non-financial assets

The fair value of the Company’s investment properties (note 11) has been determined by the directors based on a recent valuation performed by an accredited external independent architect and updated to reflect current market conditions. The valuation is based on ‘Level 3’ inputs. The valuation approaches adopted are based on the economic principles of price equilibrium and consisted of the market approach or the cost approach, whichever method was considered more appropriate.

In general, when adopting the market approach, fair value is determined by comparing the asset with identical or comparable assets for which price information was readily available. 

The cost approach is based on the economic principle that a buyer will pay no more for an asset than the amount to create an asset of equal utility. This requires consideration of the cost that a prospective buyer would incur in acquiring a similar asset with the potential to earn similar profit from its development.

24          Capital management policies and procedures

The Company’s capital management objectives are:

The Company monitors capital on the basis of the carrying amount of equity plus its subordinated loan (note 16), less cash and cash equivalents as presented in the financial statements.

No changes were made in the Company’s objectives, policies and processes for managing capital during the years ended 31 December 2025 and 2024.

25          Events after the reporting date

Subsequent to the reporting date, the garnishee order (note 20) has been revoked following the deposit of a bank guarantee in Court provided by a related party.

No other significant adjusting or non-adjusting events have occurred between the reporting date and the date of authorisation of these financial statements.