Simonds Farsons Cisk : Interim Report 2023

Simonds Farsons Cisk Plc
Annual Report	2022/23
	For the year ended
	31 January 2023

THE BREWHOUSE EXPERIENCE

After more than a decade of careful planning and preparation, Farsons is thrilled to finally fully open The Brewhouse doors to the public. Another major milestone to celebrate in our near century proud history.

ANNUAL REPORT

2022/23

SIMONDS FARSONS CISK PLC

CONTENTS

Annual Report for the year ended 31 January 2023

02. Chairman's Statement

06. Board of Directors

07. Board Committees

07. The Farsons Foundation

07. Senior Management

08. Group Chief Executive's Review

37. Financial Statements

38. Directors' Report

42. Statement by the Directors on Non-Financial Information

61. Corporate Governance Statement

68. Remuneration Report

72. Statements of Financial Position

74. Income Statements

75. Statements of Comprehensive Income

76. Statements of Changes in Equity

78. Statements of Cash Flows

79. Notes to the Consolidated Financial Statements

110. Shareholder Information

111. Five Year Summarised Group Financial Information

Independent Auditor's Report

Readers are reminded that the official statutory Annual Financial Report 2022/23, authorised for issue by the Board of Directors, is in European Single Electronic Format (ESEF) and is published on the Malta Stock Exchange portal https://www.borzamalta.com.mt/ and on the Company's website https://www.farsons.com/en/financial-statements.

A copy of the Independent auditor's report issued on the official statutory Annual Financial Report 2022/23, is included within this document and comprises the auditor's report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the ESEF RTS), by reference to Capital Markets Rule 5.55.6.

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SIMONDS FARSONS CISK PLC

CHAIRMAN'S STATEMENT

I am delighted that after three years of virtual meetings I will once again be able to address you in person at the 76th Annual General Meeting of the Company which will be held on 15 June at the Trident Park Conference Hall. For over two years from March 2020 all our lives were severely impacted by the spread of COVID-19 across the globe. No country or region was spared the consequences of the pandemic, and certainly Malta and the Farsons Group were no exception to this rule.

The tourism and the leisure sectors, both so important to the Farsons Group, were heavily impacted, with the local hospitality trade being shut down for extended periods of time through the various phases of the periodic COVID-19 related restrictions. As reported last year, the take home market segment held up well, and with the support of Government led wage supplement scheme we were able to navigate through the most difficult periods between March 2020 and the early part of 2022. In fact, as a result of the above and the rapid mitigating measures that had been implemented by management and the Board, your Group returned to reasonable levels of profitability during the financial year ended 31 January 2023, even though the on-premises market sector had still not fully recovered. And you will recollect that in 2022 we were once again able to pay dividends (albeit with some delay).

As the business came through the more severe consequences of the pandemic, the Russia-Ukraine war broke out in February 2022, adding a whole new dimension to the challenges being faced by the Group. The combination of the after-effects of COVID-19 and those of the Russia-Ukraine war were to result in a severe dislocation of international supply chains - and the emergence of rampant inflationary pressures. For the Farsons Group this meant both difficulties in sourcing key raw materials and other products as well as significantly higher prices. Inevitably, the higher cost of living pressures experienced globally were transmitted over time into increased costs in the labour market, where (in Malta) severe shortages of skills and supply were of themselves pushing up salary and wage demands.

The better news is that during much of the financial year to 31 January 2023 (FY 2023) the impact of COVID-19 was much diminished - and we saw a gradual but strong recovery across both the tourist and leisure sectors. From the early summer of 2022, it seemed that it was increasingly a case of efforts to return to "business as usual" insofar as the bar, restaurant and hotel sectors were concerned

• sectors that have long been a Farsons strength in the Malta market.

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ANNUAL REPORT

2022/23

As a result of this recovery, I am pleased to report that during FY 2023 Group Turnover reached a record €118.2 million, an increase of 28.8% from last year's figure of €91.8 million. Group Profit before Taxation also reached a record €15.3 million, up from €12.2 million in FY 2022. Group Turnover improved across all the business units. We can report strong performances from both the core beer and beverage production segment as well as that of the importation of foods and beverages. Our quick service restaurants increased in numbers and in turnover, however profitability decreased due to the number of startups coming on stream during the year and structural changes that are taking place in that sector. Food Chain now operates from 20 outlets under four different franchises, and I believe that there exists potential for further growth.

In (calendar) 2022 despite the turbulence caused by macroeconomic and the geo-political events described above, Malta's economy performed well, registering an increase in Gross Domestic Product of 6.9%, boosted by much improved tourist arrivals and strong local consump- tion. In response to the significant increase in the prices of energy products in global markets, Government has supported industry, business concerns as well as households through freezing the price of fuel, gas, and electricity rates for all customers at 2019 prices. This subsidisation has come at high cost to the Exchequer but has helped the economy stabilise and recover in the vulnerable post-pandemic period. This policy has also helped to contain the local rate of inflation below the EU average but does beg the question as to how long Government can maintain this level of subsidy. Some relief will be obtained from the moderating oil and gas prices seen recently in global markets.

During this period under review, we have faced double-digit cost increases in our raw materials, products and services. We have in turn had to respond through adjusting certain of our prices as have all international and local suppliers

Photo by Joe Smith

"I believe the conversion of the iconic old Brewery building into a living and reinvented space bearing fruit for all stakeholders, is a fine example of how we can sustain development

in an environmentally responsible manner."

of food and beverages. In part this explains the increase in our Group Turnover, but we have also been able to increase volumes and market share in certain beverage and food categories. Our price increases, reflecting increasing costs, were carefully studied to ensure we retain fair pricing to our customers whilst retaining our competitiveness. This I hasten to add is the result of high-quality products, sound market strategies and good teamwork.

Over the past 5 years management and the Board have been very engaged with The Brewhouse project. In my previous Chairman's statements, I highlighted the substantial investment that we have made in this project which comprises the redevelopment of a non-productive space into that of a revenue earning entertainment and hospitality facility. The various outlets include The Farsons Brewery Experience and Brandstore, The Cisk Tap, The Chapels Gastrobrewpub (serving a range of craft beers), and Kettles Cafe, as well as office spaces - all of which are now open for business.

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