Malta International Airport Plc

Annual Report • Feb 26, 2020

COMPANY ANNOUNCEMENT

Malta International Airport plc (the "Company")

Announces approval of Financial Statements and Dividend Proposal

Date of Announcement 26 February 2020

Reference 318/2020

In terms of Chapter 5 of the Listing Rules

QUOTE

Following a meeting of the Board of Directors held earlier today, Malta International Airport plc announced that the Company's profits for the year ended 31st December 2019 increased from €30.3 million to €33.9 million, representing an 11.9% growth when compared to 2018.

Both the Company's aviation and non-aviation activities registered an increase over 2018, driving Group revenues for the year under review up to €100.2 million from €92.2 million in 2018.

Aviation revenues grew by 9.2% to total €70.8 million. Malta International Airport closed off 2019 with a new record of 7,310,289 passenger movements.

In line with Malta International Airport's diversification strategy, the Company's non-aviation activities too delivered solid results, with revenues for the Company's Retail and Property segment registering an increase of 7.6% over 2018 to reach €29.1 million.

The Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) of the Group increased from €54.4 million in 2018 to €63.2 million for the year under review.

At the said meeting the Board of Directors approved the financial statements for the financial year ended 31st December 2019. These statements are attached to this Company Announcement and can also be viewed on the Company's web portal: www.maltairport.com/corporate/investors/financial-results.

Further to the net interim dividends paid of EUR 4,059,000 (Gross: EUR 6,244,615), the Board of Directors is recommending the payment of a final net dividend of EUR 0.10 per share (Gross: EUR 0.154) on all shares settled as at close of business on Monday 13th April 2020, which dividend shall be paid not later than Wednesday 27th May 2020.

Finally, the Directors also announced that the Annual General Meeting of the Company will be held on Wednesday 13th May 2020. Shareholders on the register of members at the Central Securities Depository as at close of business on Monday 13th April 2020 shall be eligible to receive notice, attend, and vote at the Annual General Meeting and to receive a copy of the Annual Report.

UNQUOTE

Signed: Louis de Gabriele

Company Secretary

About Malta International Airport

Malta International Airport connects the Maltese archipelago to over 100 destinations in more than 30 countries. Being Malta's only air terminal, the airport hosts more than six million passengers annually, of which the majority are inbound tourists. To be able to cater for an ever-increasing number of passengers, the company has consistently invested in the terminal since the airport's privatisation in 2002, with the Terminal Reconfiguration Project set to be completed in 2018 bringing about the most recent overhaul. The airport campus itself has grown to provide over 1,500 parking spaces, and 14,000m² of office and retail space housed within SkyParks Business Centre, with projects in the offing set to bring about further expansion. The airport team is guided by a vision of service excellence, which has landed MIA among the top five airports in ACI's prestigious Airport Service Quality Awards for the past nine years. To maximise its contribution to Malta's cultural heritage and environment, MIA set up the Malta Airport Foundation, an independently run non-profit organisation, which will be unveiling three projects in 2018.

Malta International Airport plc is a public company listed on the Malta Stock Exchange, with its shareholders being the Malta Mediterranean Link Consortium (40%), with Flughafen Wien AG owning a 96% share, the Government of Malta (20%), the general public (29.9%), and VIE Malta Limited (10.1%).

For more information, visit www.maltairport.com. Alternatively, follow us on Facebook (facebook.com/maltairport).

Malta International Airport p.l.c.

C 12663

Annual Report and Financial Statements

31 December 2019

Contents

General Information	1
Directors' Report	2-9
Statement of Directors' Responsibilities	10
Corporate Governance – Statement of Compliance	11-20
Statements of Comprehensive Income	21
Statements of Financial Position	22
Statements of Changes in Equity	23
Statements of Cash Flows	24
Notes to the Financial Statements	25-75
Independent Auditor's Report	76-80

General Information

Directors:	Mr Nikolaus Gretzmacher (Chairman) Mr Alan Borg (Chief Executive Officer) Mr Karl Dandler (Chief Financial Officer) Dr. Cory Greenland Ms Rita Heiss Dr. Wolfgang Koeberl Mr Florian Nowotny
Company secretary:	Dr. Louis de Gabriele LL.D.
Registered office:	Malta International Airport, Luqa, Malta. Tel. (+356) 2124 9600
Country of incorporation:	Malta
Company registration number:	C 12663
Auditor:	Deloitte Audit Limited, Deloitte Place, Mriehel Bypass, Mriehel, Malta.
Legal advisors:	Camilleri Preziosi Advocates, Level 2 - Valletta Buildings, South Street, Valletta, Malta.

Year Ended 31 December 2019

The directors present their report together with the audited financial statements for the year ended 31 December 2019.

Principal Activities

Malta International Airport p.l.c.'s ("The Company") principal activities are the development, operation and management of Malta International Airport, for which the Company has a 65-year concession, which came into effect in July 2002.

The Company has three 100% owned operating subsidiaries; Airport Parking Limited, Sky Parks Development Limited and Sky Parks Business Centre Limited. Airport Parking Limited operates all the car parks situated on the land leased to Malta International Airport p.l.c., whilst Sky Parks Development Limited and Sky Parks Business Centre Limited run the SkyParks Business Centre building. The Company and these subsidiaries are together referred to as 'the Group'.

Malta International Airport p.l.c. also has another 100% owned subsidiary; Kirkop PV Farm Limited, set up with the intention to explore opportunities in the generation of electricity using photovoltaic technologies. Kirkop PV Farm Limited, however, did not trade in 2019.

Review of the Business

Traffic Development

Passenger traffic for 2019 totalled 7,310,289 passenger movements at Malta International Airport, reaching a new milestone and marking a decade of growth.

Translating into a noteworthy increase of 7.4% over 2018, this annual all-time high was observed in parallel with a 6.5% increase in aircraft movements together with a growth of 7.3% in seat capacity. Seat load factor remained unchanged from the previous year and stood at a healthy 81.8%. Cargo and mail handled throughout the year reached 18,498 tonnes, an increase of 4.6% over the previous year.

A total of 20 new routes were introduced in 2019, whilst a number of carriers increased frequency on existing routes or extended their schedules into the shoulder period. Ryanair carried the largest number of passengers in 2019, registering a 15.7% increase in passenger movements over the previous year. This growth was due to the airline basing an additional aircraft, its 6th, at Malta International Airport as from summer 2019 and introducing 11 new routes for the season as well as another 4 new routes in the winter season.

Passengers travelling with Air Malta accounted for 28.7% of total passengers in 2019. The carrier operated with a fleet of 10 aircraft throughout the year and introduced a new route to Cairo in summer 2019, which was extended into the winter schedule, together with another 2 routes.

Traffic Highlights

	2019	2018	+/-	% Change
Passenger Movements	7,310,289	6,808,177	502,112	7.4%
Aircraft Movements	51,910	48,737	3,173	6.5%
Seat Capacity	8,938,602	8,329,997	608,605	7.3%
Seat Load Factor	81.8%	81.8%		0 pp
MTOW (in tonnes) *	1,976,569	1,864,610	111,959	6.0%
Cargo and Mail (in tonnes)	18,498	17,684	814	4.6%
Operational Performance Indicators
Since 2005, Malta International Airport (MLA) has been participating in a survey developed and run by Airports Council International (ACI), which measures the quality of the service that airports provide to passengers. This survey, known as the ASQ (Airport Service Quality) survey, is carried out in more than 300 airports worldwide, covering more than half the world's annual airline passengers. The objective of the survey is to measure passengers' satisfaction while they are at the airport and provide the participating airports with research tools and management
information to better understand the passenger experience with respect to the airport's products and services.

Operational Performance Indicators

Since 2005, Malta International Airport (MLA) has been participating in a survey developed and run by Airports Council International (ACI), which measures the quality of the service that airports provide to passengers. This survey, known as the ASQ (Airport Service Quality) survey, is carried out in more than 300 airports worldwide, covering more than half the world's annual airline passengers. The objective of the survey is to measure passengers' satisfaction while they are at the airport and provide the participating airports with research tools and management

Year Ended 31 December 2019

(continued)

Over the past 10 years, MLA has consistently ranked among the top 5 airports in Europe. In 2010 and 2011, MLA received the "Best Airport in Europe" award, whilst in 2018 the airport was awarded the "Best Airport in Europe" title in the 5-15 million passenger category.

The scores for the four quarters of 2019 are outlined below. The indicators are measured with a score from 1-5, with 5 being the highest mark. The overall average score for 2019 is identical to that of 2018, with a stronger performance being observed in the last three quarters following the completion of works in parts of the air terminal early in the year.

The Company's target is that the airport will continue to rank within the top ASQ positions in Europe in the foreseeable future in line with the Company's vision of offering the best airport experience in Europe, which delights airport guests.

1st Quarter	4.27	4.50	(0.23)
2nd Quarter	4.36	4.26	0.10
3rd Quarter	4.39	4.37	0.02
4th Quarter	4.43	4.37	0.06
Average for the year	4.36	4.36	-

Infrastructural Investments

The Group is committed to realising an ambitious programme of investments in its infrastructure to ensure that the airport can meet the current and future requirements of the business. Hence, the Group committed EUR 20 million to infrastructural development in 2019.

Works on the parking village project, which commenced in 2018, are well under way and scheduled for completion in 2020. This EUR 20 million project will introduce 1,300 covered car parking spaces on the airport campus, a centralised area of operation for car rental companies, and a tunnel linking to a walkway leading to the terminal building. During 2019, EUR 6.9 million were invested in this project.

Over EUR 5.5 million were invested in numerous projects in relation to new and upgraded equipment in the areas of operations, security and ICT in order to maintain the highest levels of safety, security and operational efficiency at all times. Another EUR 2.8 million went into terminal infrastructure improvements, ranging from an upgrade of the building management system to improvements in offices of tenants and switch rooms. On the airfield, the Company carried out investments that amounted to a total of EUR 2.5 million in 2019, with the most notable projects being the resurfacing of Taxiway Echo as well as the continuation of pavement surface rehabilitation works on Apron 8 and Apron 9. Another EUR 0.8 million were invested into the first phase of a sizeable extension of the Cargo Village, which is scheduled for completion in 2020. In addition to this, in summer 2019, the Company commissioned a new photovoltaic (PV) farm with a capacity of 1 megawatt peak (MWp) for a total investment of EUR 0.8 million. Whilst this PV investment has more than tripled the airport's capacity to generate renewable energy, the Company will continue exploring opportunities to expand further in this field. SkyParks 2 project, which will see the construction of a new business centre and a hotel within the airport campus. 2019 2018 +/-

In 2020, the Company will once again be committed to rolling out an ambitious programme of infrastructural investments, with capital expenditure expected to reach EUR 23 million. In addition to works leading to the completion of the parking village (EUR 10 million), the Company will be focusing its capital expenditure on other major projects such as the completion of the extended Cargo Village (EUR 2.8 million) and the relocation of the fuel station (EUR 1.7 million) to free up necessary space for the construction of SkyParks 2 in the coming years. Further investment will be dedicated to the ongoing improvements of airfield infrastructure and the terminal building as well as operations, security and ICT-related equipment.

In January 2020, the Company also unveiled its long-term vision for the airport, which entails an investment of approximately EUR 100 million in the years beyond 2020. This multi-year project will gradually expand the terminal building to eventually double its current footprint and will be focused on improving the passenger experience and airport processes at key points of the journey, most notably at the departure gates, check-in hall and the security screening area, but also in immigration areas and the food court. Eventually, this will enable the Company to handle further traffic growth and offer a 5-star airport experience to its customers. In addition to the terminal expansion project, the Company is also embarking on other long-term investments such as the construction of a new aircraft parking stand, Apron X, which will ensure sufficient aircraft parking capacity for the long-term, as well as the

Year Ended 31 December 2019

(continued)

Principal Risk and Uncertainties

The Board as a whole, including the Audit Committee members, consider the nature and the extent of the risk management framework and the risk profile that is acceptable to the Board. The Audit Committee periodically reviews the work carried out by the Company's Risk Management Committee and evaluates the impact these risks pose to the Company's strategic objectives.

The main strategic, corporate and operational risks and uncertainties identified during the year are listed below:

Challenging Aviation Environment: The market environment for airlines in 2020 and beyond is expected to remain difficult, particularly in view of an expected general economic slowdown across Europe, significant overcapacity in the European short-haul market as well as pressure on airline yields as a result of intense competition and oil price fluctuations. Additionally, the climate change movement gained strong momentum in 2019, leading to the aviation industry being under increased scrutiny, particularly in the European markets. Geopolitical tensions in the Middle East are causing additional uncertainty, especially with regards to the development of the oil price. The Company is mindful of such risks, both as a result of the possible downturns in passenger traffic, due to a potential economic slowdown, as well as scaled-down activities of airlines that operate to and from Malta. The Company will therefore continue to collaborate closely with all airlines and other key industry and local tourism stakeholders, always seeking to create a sustainable operating environment and to secure traffic from existing and new markets. Additionally, the Company will continue to closely monitor the situation in order to be better poised to react in an effective and timely manner and thereby minimize its economic and strategic risks.

Security Breaches and Threats: Civil aviation in general and airports in particular have always been susceptible to security threats due to them being considered as critical infrastructure and institutions of public interest. Malta International Airport is committed to continue to invest heavily in its security infrastructure and activities, to ensure that the airport environment remains safe and secure at all times. The airport works closely with the police and government security agencies to meet the high international standards required to respond to existing and potential security threats. The Company's security facilities and processes are subject to periodic extensive internal and external audits by regulators, aviation security specialists and internal security teams, which regularly test the effectiveness of the Company's surveillance, security screening, landside and airside security processes as well as staff training requirements.

Disruption to Critical Operational Systems: Potential disruptions as a result of a failure of critical ICT infrastructure, electricity supply for the terminal or the airfield as well as aviation accidents can lead to prolonged interruptions of operations. To address these issues, the Company has emergency response, crisis management and business continuity plans in place, which are regularly updated and tested to ensure a maintained ability to respond quickly and effectively to any disruptions to aerodrome or terminal operations. The Company is also adequately covered by an insurance programme which provides financial protection in case of major operational disruptions.

Employees

During the year under review, the Group employed an average of 379 employees; an increase of 11.5% over the previous year. In total, 386 persons were employed with the Group as at year-end, including 6 employees working with Airport Parking Limited and 3 with SkyParks Business Centre Limited. At 31 December 2019, the majority of the Group's employees were employed on indefinite full-time contracts, whereas one-third were on definite contracts and 39 employed on a part-time basis. Employee turnover rate for the Group during the year was 7.3%.

Each year, the Group invests in its training programme for staff and management with the purpose of supporting their professional development as well as ensuring they are skilled enough and confident in responding to the requirements of the dynamic environment in which the Company operates. During 2019 alone, EUR 359,000 were dedicated to formal employee training, resulting in a total of 11,900 hours of training, or an average of 31 hours per employee. This figure excludes on-the-job training that was provided to the 58 employees who joined the Group during the year. The majority of training hours was related to safety, with over 4,000 hours of training conducted in this area.

Employee wellbeing was once again a priority for the Group with emphasis being made on promoting an active and healthy lifestyle. Whilst 89% of the wellbeing allowance was availed of, the Company also continued to promote mental wellbeing by offering counselling sessions in collaboration with the Richmond Foundation.

Year Ended 31 December 2019

(continued)

	2019	2018	+/-	% Change
Headcount - 31 December	386	357	29	8.1%
Headcount - Average	379	340	39	11.5%
FTE - 31 December	360	332	28	8.3%
FTE - Average	355	322	33	10.2%
Average age (in years)	39.0	38.9	0.1	0.4%
Length of service (in years)	10.3	10.0	0.3	2.8%
Share of women in workforce	35.5%	35.6%		-0.1 pp
Employee turnover rate	7.3%	9.3%		-2.0 pp
Training expenses (in EUR)	359,000	243,500	115,500	47.4%
Reportable accidents	10	11	(1)	-9.1%
Corporate Responsibility The directors are committed to the highest standards of Corporate Responsibility (CR), particularly in respect of the Company's social, economic and environmental impact. The Company's internal and external CR initiatives underline the Company's pledge to be a responsible stakeholder, and benefit not just its customers, partners, employees and shareholders, but the wider community as well. In 2019, the Company undertook several such initiatives aimed at mitigating or eliminating any negative impacts, whilst building on and enhancing positive ones. These initiatives and their outcomes are all reported in more detail, and in a transparent manner, in the Company's sustainability report, which is compiled annually in accordance with the internationally recognised Global Reporting Initiative (GRI) standards and independently audited by PwC. During 2019, the Company signed the Airports Council International (ACI) Europe's resolution to become a net zero carbon emissions industry by not later than 2050. As part of its efforts to honour this commitment, in 2019, the Company commissioned a 1 MWp photovoltaic (PV) farm on the airfield, which has more than tripled the airport's capacity to generate clean energy. Additionally, the Company commenced the process of preparing for Level 2 accreditation through ACI's widely recognised Airport Carbon Accreditation Scheme in 2020 by setting out detailed environmental targets and action plans in order to continue reducing its carbon footprint. The CR Committee, furthermore, continued to support good causes through its philanthropy fund and channelled sizeable contributions to the wider community through the Malta Airport Foundation; an independent organisation set up to invest funds in Malta's touristic, cultural and environmental heritage. In July 2019, the foundation officially inaugurated the restored Torri Xutu tower in Wied Iż-Żurrieq. The Torri Xutu project entailed the complete restoration of the 17th century watchtower as well as the embellishment and landscaping of the surrounding area together with the local heritage NGO Din L-Art Ħelwa. Another project the Malta Airport Foundation is supporting, and which is nearing completion, is the restoration of Fondazzjoni Wirt Artna's Combined Operations Room in Valletta, which is set to re-open its doors to the public in early 2020. The Combined Operations Room was Malta's nerve centre during World War II and forms part of an underground military park. This project is another which highlights the Malta Airport Foundation's commitment to invest in Malta's history and heritage, thus making the island a more attractive destination for tourists and a richer place for locals.
Financial Performance
Financial Results
The financial results of the Group in 2019 were once again driven by another year of dynamic traffic development, in which a record 7.3 million passengers (+7.4%) travelled to and from Malta International Airport.
The Group therefore continued to deliver a solid financial performance throughout the year, which together with the continued investment in the infrastructure will enable future financial sustainability and growth. During the year, revenue of the Group increased by EUR 8.0 million - from EUR 92.2 million in 2018 to EUR 100.2 million in 2019, translating into an increase of 8.7%. Revenues from the Airport segment were up EUR 6.0 million, from EUR 64.8 million to EUR 70.8 million, whilst revenues from the Retail and Property segment rose by EUR 2.0 million; from EUR 27.1 million to EUR 29.1 million.

Corporate Responsibility

The directors are committed to the highest standards of Corporate Responsibility (CR), particularly in respect of the Company's social, economic and environmental impact.

The Company's internal and external CR initiatives underline the Company's pledge to be a responsible stakeholder, and benefit not just its customers, partners, employees and shareholders, but the wider community as well. In 2019, the Company undertook several such initiatives aimed at mitigating or eliminating any negative impacts, whilst building on and enhancing positive ones. These initiatives and their outcomes are all reported in more detail, and in a transparent manner, in the Company's sustainability report, which is compiled annually in accordance with the internationally recognised Global Reporting Initiative (GRI) standards and independently audited by PwC.

During 2019, the Company signed the Airports Council International (ACI) Europe's resolution to become a net zero carbon emissions industry by not later than 2050. As part of its efforts to honour this commitment, in 2019, the Company commissioned a 1 MWp photovoltaic (PV) farm on the airfield, which has more than tripled the airport's capacity to generate clean energy. Additionally, the Company commenced the process of preparing for Level 2 accreditation through ACI's widely recognised Airport Carbon Accreditation Scheme in 2020 by setting out detailed environmental targets and action plans in order to continue reducing its carbon footprint.

The CR Committee, furthermore, continued to support good causes through its philanthropy fund and channelled sizeable contributions to the wider community through the Malta Airport Foundation; an independent organisation set up to invest funds in Malta's touristic, cultural and environmental heritage. In July 2019, the foundation officially inaugurated the restored Torri Xutu tower in Wied Iż-Żurrieq. The Torri Xutu project entailed the complete restoration of the 17th century watchtower as well as the embellishment and landscaping of the surrounding area together with the local heritage NGO Din L-Art Ħelwa. Another project the Malta Airport Foundation is supporting, and which is nearing completion, is the restoration of Fondazzjoni Wirt Artna's Combined Operations Room in Valletta, which is set to re-open its doors to the public in early 2020. The Combined Operations Room was Malta's nerve centre during World War II and forms part of an underground military park. This project is another which highlights the Malta Airport Foundation's commitment to invest in Malta's history and heritage, thus making the island a more attractive destination for tourists and a richer place for locals.

Financial Performance

Financial Results

The financial results of the Group in 2019 were once again driven by another year of dynamic traffic development, in which a record 7.3 million passengers (+7.4%) travelled to and from Malta International Airport.

The Group therefore continued to deliver a solid financial performance throughout the year, which together with the continued investment in the infrastructure will enable future financial sustainability and growth. During the year, revenue of the Group increased by EUR 8.0 million - from EUR 92.2 million in 2018 to EUR 100.2 million in 2019, translating into an increase of 8.7%. Revenues from the Airport segment were up EUR 6.0 million, from EUR 64.8 million to EUR 70.8 million, whilst revenues from the Retail and Property segment rose by

Year Ended 31 December 2019

(continued)

Earnings before interest, taxation, depreciation and amortisation (EBITDA) of the Group increased by 16.0%; from EUR 54.4 million in 2018 to EUR 63.2 million in 2019, whilst the EBITDA margin was 4.0 percentage points higher, up from 59.0% to 63.0%. Profit after tax rose from EUR 30.3 million in 2018 to EUR 33.9 million in 2019, representing an increase of 11.9%, whereas total comprehensive income for the year attributable to shareholders of the Company (net of tax) reached EUR 33.8 million, up 11.3% when compared to EUR 30.4 million in the previous year.

Changes as a result of the adoption of IFRS 16

With effect from 1 January 2019, the Group has mandatorily adopted IFRS 16 Leases, which requires lessees to recognise most operating leases on-balance sheet. The initial application of IFRS 16 led to an increase of the balance sheet by EUR 45.7 million, due to the recognition of new right-of-use assets and lease liabilities. Within the income statement, there was a shift out of other operating expenses into depreciation and finance cost in the reporting period, with a total negative effect on net profit of EUR 0.6 million. A full explanation of the effects upon initial application of IFRS 16 Leases can be found in Note 4.

Revenues

Total revenue of the Group increased by 8.7% or EUR 8.0 million when compared to 2018, up from EUR 92.2 million to EUR 100.2 million. Representing EUR 70.8 million in income, aviation-related revenues remain the most important income stream of the Group, with the Airport segment constituting a share of 70.6% of total revenues (2018: 70.3%), showing an increase of 9.2% or EUR 6.0 million over the previous year. Revenues from the Retail and Property segment totalled EUR 29.1 million (2018: EUR 27.1 million) and were thus growing at a rate of 7.6%, thereby slightly lowering the segment's share of total revenues from 29.3% in 2018 to 29.0% in 2019. The remaining portion of EUR 0.4 million of revenues originated from the Other segment and remained unchanged from the previous year at a 0.4% share.

Staff Costs

Staff costs of the Group amounted to EUR 10.8 million in 2019, up EUR 1.1 million or 11.2% when compared to 2018. This increase was primarily a result of a higher headcount, which was necessary to maintain the high level of service to our customers as the number of passengers continued to increase.

Other Operating Expenses

Other operating expenses of the Group decreased by 7.3% on a year-by-year basis, from EUR 28.0 million to EUR 26.0 million. Marginal increases in operating costs, as a result of an increasing number of passengers passing through the airport, were offset by reductions due to effects from the initial application of IFRS 16 Leases in the current reporting period (see above and Note 4), which led to a change in the accounting treatment of operating lease expenditure and therefore shifts out from other operating expenses (EUR 2.2 million).

Comprehensive Income and Dividends

The financial results of the Group and the Company for the year ended 31 December 2019 are shown in the Statement of Comprehensive Income on page 21. Total comprehensive income of the Group for the year after taxation amounted to EUR 33.8 million (2018: EUR 30.4 million).

Further to the net interim dividends paid of EUR 4,059,000 (Gross: EUR 6,244,615), the Board of Directors is recommending the payment of a final net dividend of EUR 0.10 per share (Gross: EUR 0.154) on all shares settled as at close of business on 13 April 2020, which dividend shall be paid not later than the 27 May 2020.

Year Ended 31 December 2019

(continued)

Financial Position

The profit for the year, net of dividends paid together with shareholders' funds brought forward from the prior year, resulted in shareholders' funds as at 31 December 2019 of EUR 129.0 million and EUR 128.5 million for the Group and the Company, respectively. These totals were up from EUR 112.6 million and EUR 113.4 million, respectively, as at year end 2018.

Going Concern

After reviewing the Company's budget for the next financial year and its 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.

Financial Risk Management

Financial risks of the Group and the Company identified during the year and their financial risk management objectives are outlined in detail in Note 37 of the financial statements.

Financial Key Performance Indicators

(EUR mn)	2019	2018	+/-	% Change
Total Revenue	100.2	92.2	8.0	8.7%
thereof Aviation Revenue *	70.8	64.8	6.0	9.2%
thereof Non-Aviation Revenue *	29.5	27.4	2.1	7.6%
EBITDA	63.2	54.4	8.7	16.0%
EBITDA Margin (in %)	63.0%	59.0%		4.0 pp
EBIT	54.4	47.0	7.3	15.5%
EBIT Margin (in %)	54.2%	51.0%		3.2 pp
Net Profit	33.9	30.3	3.6	11.9%
ROCE (in %) *	27.1%	24.5%		2.6 pp
Cash (incl. term deposits)	33.2	20.3	12.9	63.8%
Equity	129.0	112.6	16.4	14.6%
Balance Sheet Total	238.0	169.8	68.2	40.2%
Capital Expenditure	19.9	8.4	11.4	135.2%
Taxes on Income	18.7	16.8	1.9	11.3%

* 2018 restated

Share Capital

The share capital of the Company is EUR 33,825,000 divided into three classes of shares as follows:

• 81,179,990 Ordinary 'A' Shares representing approximately 60% of the total issued share capital;
• 54,120,000 Ordinary 'B' Shares representing 40% of the total issued share capital; and
• 10 Ordinary 'C' Shares.

All shares issued have a nominal value of EUR 0.25 and are fully paid up and allotted.

The ordinary "A" Shares are admitted to the official list of the Malta Stock Exchange, whilst the ordinary "B" and ordinary "C" Shares are not admitted or traded on an exchange.

The Ordinary 'A' Shares and Ordinary 'B' Shares shall entitle their holders to the same rights, benefits and powers in the Company save for the transferability thereof. The Ordinary 'A' Shares shall be freely transferable whilst the Ordinary 'B' Shares were non-transferable for a period of fifteen (15) years from 26 July 2002, upon which date they automatically became fully and freely transferable without the need of any formality.

Year Ended 31 December 2019

(continued)

The Class 'C' Share is held by and, in terms of the Memorandum of Association, may only be held by the Government of Malta. It does not carry any right to receive dividends or assets on a winding up or other return of capital but entitles the Government of Malta to appoint members on the National Interest Matters Committee pursuant to article 58.10 of the Articles of Association of the Company.

Save for the above, there are no other restrictions attached to the shares of the Company.

No changes in the share capital of the Company were made nor did the Company acquire ownership of, or any rights over, any portion of its own share capital.

The following shareholders have an interest in more than 5% of the issued share capital of the Company:

• Malta Mediterranean Link Consortium Ltd
• Government of Malta
• VIE (Malta) Ltd

Directors

Appointment and replacement of directors

The Board of Directors of the Company is made up of a maximum of eight (8) directors. Five (5) directors are Non-Executive Directors and a maximum of three (3) directors, amongst whom is the CEO, are Executive Directors.

Any shareholder holding not less than 20% of the issued share capital of the Company having voting rights is entitled to appoint one director for each 20% shareholding by a letter addressed to the Company. In this respect, Malta Mediterranean Link Consortium Limited is entitled to appoint two (2) Non-Executive Directors and the Government of Malta is entitled to appoint one (1) Non-Executive Director. The remaining Non-Executive Directors are appointed by the shareholders in a general meeting pursuant to the Articles of Association.

Unless appointed for a longer term, a director holds office from one Annual General Meeting to the next and is eligible for re-appointment. The maximum period for which a director may be appointed is a term of three (3) years, following the lapse of which, such director shall be eligible for re-appointment.

In terms of the Articles of Association, the CEO of the Company shall occupy one of the Executive Director positions. The other Executive Directors to be co-opted to the Board are the Chief Finance Officer and the Chief Commercial Officer.

Powers of Directors

The directors of the Company have all the powers necessary to manage and direct the Company. The Company is empowered to buy back any of its shares, subject to the limitations and restrictions at law and the listing rules. Subject to the authority of shareholders, to be given at five (5) year intervals, the directors are also empowered to issue further shares in the Company.

Directors

The directors who served during the year were:

Director	Title	Director since
Mr Nikolaus Gretzmacher	Chairman & Non-Executive Director	2012
Ms Rita Heiss	Non-Executive Director	2015
Dr. Cory Greenland	Non-Executive Director	2015
Dr. Wolfgang Koeberl	Non-Executive Director	2016
Mr Florian Nowotny	Non-Executive Director	2017
Mr Alan Borg	CEO and Executive Director	2012
Mr Karl Dandler	CFO and Executive Director	2014

Year Ended 31 December 2019

(continued)

In accordance with paragraph 56.1 of the Company's Articles of Association, all the present directors are to retire at the forthcoming Annual General Meeting. The appointment of the new directors will take place in accordance with paragraphs 55 and 56 of the same Articles of Association at the Annual General Meeting.

Directors' Interests in Material Contracts

The following directors have declared their interests in the share capital of the Group:

• Mr Nikolaus Gretzmacher a non-beneficial interest¹
• Ms Rita Heiss a non-beneficial interest²
• Dr. Cory Greenland a beneficial interest

No other director has a beneficial or non-beneficial interest in the Company's share capital.

Auditor

A resolution to reappoint Deloitte Audit Limited as auditor of the Company will be proposed at the forthcoming Annual General Meeting.

Outlook

Traffic Development

Looking ahead to 2020, Ryanair will extend its four new winter routes into the summer season and introduce a further two routes from Trapani and Brindisi. The airline will also increase frequencies on 9 existing routes. Additionally, both Air Malta and Eurowings will be introducing a new Stuttgart route in April 2020. This year will also see the introduction of new low-cost airline Laudamotion, which forms part of the Ryanair group, operating from Vienna. In total, Malta International Airport is expected to be connected to over 125 destinations in 2020.

Further increases in seat capacity are also expected due to a number of carriers opting to operate with more environmentally friendly aircraft which offer additional seats when compared to the aircraft types that were previously operated. Growth in traffic will, however, be diluted by carriers which have withdrawn some routes from their schedule and a reduction in the cruise & fly operations.

The outlook for 2020 is positive, with the Company expecting an increase of 2-3% in passengers, translating into a total of approximately 7.5 million passenger movements.

Financial Performance

Based on the forecast traffic figures for 2020 above, total revenue of the Group for this year is expected to exceed EUR 102 million. EBITDA and Net Profit are projected to exceed EUR 64 million and EUR 35 million, respectively. Capital expenditure of the Group during the year is expected to reach EUR 23 million.

Approved by the Board of Directors on 26 February 2020 and signed on its behalf by:

Nikolaus Gretzmacher Alan Borg Karl Dandler

Chairman Chief Executive Officer Chief Financial Officer

¹ These shares are held by MMLC and VIE Malta Limited, companies of which Mr Gretzmacher is a director.

² These shares are held by MMLC and VIE Malta Limited, companies of which Ms Heiss is a director.

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 EU which give a true and fair view of the state of affairs of the Company and the Group at the end of each financial year, and of the profit or loss of the Company and the Group for the year then ended.

In preparing the financial statements, the directors should:

• select suitable accounting policies and apply them consistently;
• make judgments and estimates that are reasonable; and
• prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Company and the Group will continue in business as a going concern.

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 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 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 Listing Rules issued by the Listing Authority

We confirm that to the best of our knowledge:

• a) In accordance with the Listing Rules, the financial statements give a true and fair view of the financial position of the Company and the Group as at 31 December 2019 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 Listing Rules the Directors' Report includes a fair review of the performance of the business and the financial 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.

Karl Dandler Chief Financial Officer

obo/directors

Introduction

Pursuant to the Listing Rules issued by the Listing Authority, Malta International Airport p.l.c. (the "Company") should endeavor to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Listing Rules (the "Code"). In terms of Listing Rule 5.94, the Company hereby reports on the extent of its adoption of the principles of the Code for the financial year being reported upon.

The Company acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of good practice. However, the directors strongly believe that such practices are generally in the best interests of the Company and its shareholders and that compliance with the principles of good corporate governance is not only expected by investors but also evidences the directors' and the Company's commitment to a high standard of governance.

The Board of Directors (the "Board") has carried out a review of the Company's compliance with the Code for the financial year being reported upon, namely the year ended 31 December 2019.

General

The directors believe that good corporate governance is a function of a mix of checks and balances that best suit the Company and its business. Accordingly, whilst there are best practices that can be of general application, the structures that may be required within the context of larger companies are not necessarily and objectively the best structures for companies whose size and/or business dictate otherwise. It is in this context that the directors have adopted a corporate governance framework within the Company that is designed to better suit the Company, its business, scale and complexity whilst still ensuring proper checks and balances.

The Company has a corporate decision-making and supervisory structure that is tailored to suit the Company's requirements and designed to ensure the existence of adequate checks and balances within the Company, whilst retaining an element of flexibility. In general, the directors believe that the Company has adopted appropriate structures to achieve an adequate level of good corporate governance, together with an adequate system of checks and balances in line with the Company's requirements.

This corporate governance statement (the "Statement") will now set out the structures and processes in place within the Company and how these effectively achieve the goals set out in the Code. For this purpose, this Statement will make reference to the pertinent principles of the Code and then set out the manners in which the directors believe that these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement will give an explanation for non-compliance.

For the avoidance of doubt, reference in this Statement to compliance with the principles of the Code means compliance with the Code's main principles, and the Code Provisions.

Compliance with the Code

Principle One: The Board

The directors believe that for the period under review the Company has generally complied with the requirements of this principle and the relative code provisions.

The Board is composed of members who are fit and proper to direct the business of the Company with honesty, competence and integrity. All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board is accountable for its performance and that of its delegates too.

The Board is responsible for determining the Company's strategic direction and organisational requirements, whilst ensuring that the Company has the appropriate mix of financial and human resources to meet its objectives and improve its performance. Throughout the period under review, the Board provided the necessary leadership in the overall direction of the Company and has adopted prudent and effective systems whereby it obtains timely information from the Chief Executive Officer (the "CEO") as the head of the Executive Committee to ensure an open dialogue between the CEO and directors at regular intervals and not only at meetings of the Board. The Company has a structure that ensures a mix of Executive and Non-Executive Directors that enables the Board, and particularly the Non-Executive Directors to have direct information about the Company's performance and business activities from the head of executive management that is also a director on the Board.

(continued)

Principle Two: Chairman and Chief Executive Officer

In line with the requirements of Principle Two, the Company has segregated the functions of the CEO and the Chairman. Whilst the CEO heads the Executive Committee, the Chairman's main function is to lead the Board and set its agenda. The Chairman is also responsible to ensure that the Board receives correct, timely and objective information so that the directors can take sound decisions and effectively monitor the performance of the Company. The Chairman exercises independent judgement and ensures that, during Board meetings, there is effective communication with stakeholders as well as active engagement by all directors for the discussion of complex and/or contentious issues.

The CEO is accountable to the Board of the Company for all business operations. He has the power and authority to appoint the persons to fill in the post of each member of the Executive Committee. He also has the discretion to ask any one or more of such members, from time to time, to address the Board on matters relating to the operations of the Company and its Subsidiaries. The Board, of course, is entitled to call in, at its discretion, any one or more of the executives of the Company.

Principle Three: Composition of the Board

The full maximum complement of the Board, in line with Principle Three is of five (5) Non-Executive Directors and three (3) Executive Directors, a balance that is entrenched in the Company's Memorandum and Articles of Association, which requires that the CEO is an ex ufficio director together with a maximum of two (2) other senior executives of the Company. The presence of top executives on the Board is designed to ensure that all the members of the Board, including Non-Executive Directors, have direct access at meetings of directors to the individuals having the prime responsibility for day-to-day operations and executive management of the Company and to the implementation of policies that allow effective discussion and the availability of all the information necessary to carry out their functions in the best possible manner.

Director	Title	Director since
Mr Nikolaus Gretzmacher	Chairman & Non-Executive Director	2012
Ms Rita Heiss	Non-Executive Director	2015
Dr. Cory Greenland	Non-Executive Director	2015
Dr. Wolfgang Koeberl	Non-Executive Director	2016
Mr Florian Nowotny	Non-Executive Director	2017
Mr Alan Borg	CEO and Executive Director	2012
Mr Karl Dandler	CFO and Executive Director	2014

The members of the Board for the year under review were:

Pursuant to generally accepted practices, as well as the Company's Articles of Association, the appointment of directors to the Board is reserved exclusively to the Company's shareholders, except in so far as an appointment is made to fill a vacancy on the Board.

The Board normally meets every eight (8) weeks and as a matter of Board policy, a guideline was established whereby at its first meeting, meetings are scheduled for the full year. Board meetings concentrate mainly on strategy, operational performance and financial performance. The Board also delegates specific responsibilities to the CEO and the Committees, notably the Executive Committee and the Audit Committee which operate under their respective formal terms of reference. Directors may, in the furtherance of their duties, take independent professional advice on any matter at the Company's expense.

For the purposes of Code Provision 3.2, requiring the Board to report on whether it considers each Non-Executive Director as independent in line with the requirements of that Code Provision, the Board considers each of the Non-Executive Directors as independent within the meaning of the Code.

(continued)

Save for what is stated hereunder, none of the Non-Executive Directors:

• (a) are or have been employed in any capacity by the Company;
• (b) have or have had a significant direct or indirect relationship with the Company;
• (c) receive significant additional remuneration from the Company;
• (d) have close family ties with any of the executive members of the Board;
• (e) have served on the Board for more than twelve consecutive years;
• (f) have been within the last three years an engagement partner or a member of the audit team of the present or past external auditor of the Company or any Company forming part of the same group; and
• (g) have a significant business relationship with the Company.

Mr Nikolaus Gretzmacher, and Ms Rita Heiss (Non-Executive Directors) are currently members of the Board of Directors of Malta Mediterranean Link Consortium Limited, a Company holding 40 per cent of the issued and voting capital of the Company, and, together with Mr Wolfgang Koeberl are also employees of Flughafen Wien AG, the company's ultimate parent company. Notwithstanding the above relationship the Board still considers Mr Gretzmacher, Ms Heiss and Mr Koeberl as having the required skills, experience and integrity to retain their impartiality in acting as directors of the Company.

In terms of Principle 3.4, each Non-Executive Director has declared in writing to the Board that he/she undertakes:

• to maintain in all circumstances his/her independence of analysis, decision and action;
• not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
• to clearly express his/her opposition in the event that he/she finds that a decision of the Board may harm the Company.

Principle Four: The Responsibilities of the Board

In line with the requirements of Principle Four, it is the Board's responsibility to ensure a system of accountability, monitoring, strategy formulation and policy development.

The Board believes that this responsibility includes the appropriate delegation of powers to management and the organization of the executive team in a manner that is designed to provide high levels of comfort to the directors that there is proper monitoring and accountability apart from appropriate implementation of policies. The Board delegates specific responsibilities to committees, which operate under their respective formal Terms of Reference.

Executive Committee

The Board's link to the Executive Committee is principally the CEO, together with the other Executive Director on the Board, both of whom are members of the Executive Committee.

The Executive Committee comprises the Executive Directors and the heads of each business unit of the Group. The role of the Executive Committee is to implement the Company`s strategy and policies, through the various departments within the organisation. It also makes recommendations to the Board on matters which are beyond its remit. The Chief Executive Officer chairs the Executive Committee.

(continued)

The members of the Committee for the period under review were:

Name	Title
Mr Alan Borg	Chief Executive Officer
Mr Karl Dandler	Chief Financial Officer
Mr Martin Dalmas	Airport Operations and Business Continuity
Mr George Mallia	Retail and Property
Mr Ian Maggi	Innovation and Technology
Mr Patrick Murgo	Security Services
Ms Tina Lombardi	Human Resources and Strategy 1
Ms Kristina Borg Cardona	Marketing and Brand Development 2
Mr Alex Cardona	Traffic Development and Customer Services
Mr Robert Mizzi	Aerodrome Safety and Compliance 3
Mr Kevin Alamango	Technical Services

¹ Ms Lombardi took over Marketing & Brand Development effective 01 October 2019

² Ms Borg Cardona was appointed Manager Design & Commercial Development effective 01 October 2019, and no longer forms part of the Executive Committee

³ Mr Mizzi was appointed member of the Committee effective May 2019

The Executive Committee has met 38 times during the year under review.

The Company has also established three cross-functional Committees, the 'Corporate Responsibility (CR) Committee, the 'Customer Experience (CE) Committee and the Finance Committee, which meet on a regular basis. The CR Committee is responsible for the company's internal CR policy and strategy including the respective formulation and implementation thereof.

The CE Committee systematically deals with how to improve the airport's Customer Experience with a special focus on customer journeys, touch points, pain points and delighters (wow factors).

The Finance Committee analyses the financial information on a monthly and quarterly basis with a special focus on current and future income streams, cost drivers and margins to secure a sustainable growth of the Company.

The Chief Executive Officer chairs these cross-functional Committees and all meetings are minuted.

Audit Committee

As part of its corporate governance structures the Company has an Audit Committee in line with the requirements of the Listing Rules. The principal roles of the Audit Committee are in line with the requirements of Listing Rule 5.127 and include the following:

• monitoring the financial reporting process and submitting recommendations or proposals to ensure its integrity;
• monitoring of the effectiveness of the company's internal quality control and risk management system and, where applicable, its internal audit, regarding the financial reporting of the Issuer, without breaching its independence;
• monitoring of the audit of the annual and consolidated financial statements;
• reviewing additional reports prepared by the statutory auditor/s or audit firm/s;
• reviewing and monitoring the independence of the statutory auditors or the audit firms;
• taking responsibility for the procedure for the selection of statutory auditor/s or audit firm/s; and
• recommending the statutory auditor/s or the audit firm/s to be appointed.

During the year ended 31 December 2019 the Committee consisted of three (3) Non-Executive Directors, namely Mr Florian Nowotny, Ms Rita Heiss, and Dr Cory Greenland. The Committee has the power and authority under its Terms of Reference to summon any person to assist it in the performance of its duties. The directors believe that, during the year under review, Mr Nowotny was independent and competent in accounting and/or auditing in terms of Listing Rule 5.117. Mr Nowotny is considered as competent in accounting and/or auditing in view of his qualifications and experience.

(continued)

When the Audit Committee's monitoring and review activities reveal cause for concern or scope for improvement, it shall make recommendations to the Board on the action needed to address the issue or make improvements. In the period under review the Audit Committee has held 7 meetings.

Company Executives participate in periodic strategic reviews, which include consideration of long-term projections and the revaluation of the business objectives in the short term. Regular budgets and strategic plans are prepared, which are incorporated into a comprehensive strategic plan for the Company. Performance against these plans is actively monitored and reported to the Board using key risk and performance indicators so that corrective measures can be taken to address any deficiencies and to ensure the future sustainability of the Company. These key risk and performance indicators are benchmarked against industry norms so that the Company's performance can be effectively evaluated.

In view of the number of members of the Board, the directors believe that its size is manageable to be able to address most issues as a Board rather than create sub-committees of the Board that may be more suitable in the case of companies having larger Boards. Indeed, the Board feels that its size and membership allows directors the opportunity to discuss matters directly and that this is a more effective and efficient manner to conduct its business.

The directors, however, are aware that there may be situations that require the delegation to certain committees of certain tasks or assignments and the Board has on occasion composed ad hoc committees for this purpose.

Notwithstanding that the board has established no formal policy on the matter, as part of succession planning, the Board and CEO ensure that the Company implements appropriate schemes to recruit, retain and motivate employees and senior management.

In ensuring compliance with other statutory requirements and with continuing listing obligations, the Board is advised directly, as appropriate, by its appointed broker, legal advisor and external auditors. The Board also ensures that appropriate policies and procedures are in place to assure that the highest standards of corporate conduct are maintained.

Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities at the Company's expense.

Principle Five: Board Meetings

The Board believes that it complies fully with the requirements of this principle and the relative Code Provisions, in that it has systems in place to ensure the reasonable notice of meetings of the Board and the circulation of discussion papers in advance of meetings so as to provide adequate time for directors to prepare themselves for such meetings. Minutes are prepared during Board meetings recording faithfully attendance, discussions and resolutions. These minutes are subsequently circulated to all directors as soon as practicable after the meeting.

The Board meets as often and as frequently as required in line with the nature and demands of the business of the Company. During the financial year under review the Board held six meetings:

Director	Attendance Board Meetings
Mr Nikolaus Gretzmacher	5 / 6
Ms Rita Heiss	6 / 6
Dr. Cory Greenland	5 / 6
Dr. Wolfgang Koeberl	6 / 6
Mr Florian Nowotny	6 / 6
Mr Alan Borg	6 / 6
Mr Karl Dandler	6 / 6

The Chairman ensures that all relevant issues are on the agenda and supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all directors every opportunity to contribute to relevant issues on the agenda. The agenda on the Board strikes a balance between long-term strategic and short-term performance issues.

Directors attend meetings on frequent and regular basis and dedicate the necessary time and attention to their duties as directors of the Company.

(continued)

Principle Six: Information and Professional Development

The CEO is appointed by the directors and enjoys the full confidence of the Board. The CEO, although responsible for the selection of the Executive Committee and the recruitment of senior executives, regularly updates the directors on the appointment of senior executives. The Board is satisfied that the current schemes for executive compensation and professional development are designed to render the Company an attractive proposition for the retention of top executives within the Company and to motivate the Executive Committee.

During the year under review the directors attended a training session dealing with legal and practical issues on governance and the duties of directors in complying with the requisite standards of conduct and governance under the listing rules, including the continuing listing obligations of the Company.

The board intends to organise other professional development sessions for directors and executives designed specifically to enable them to discharge their functions more efficiently and in line with the high standards expected of them.

Directors have access to the advice and services of the Company Secretary who is also the legal counsel to the Board and the Company. As part of succession planning and employee retention, the Board and CEO ensure that the Company implements appropriate schemes to attract, retain and develop the best talent and keep employees engaged and motivated.

Principle Seven: Evaluation of the Board's Performance

The Board has not appointed a committee for the purpose of undertaking an evaluation of the Board's performance in accordance with the requirements of Code Provision 7.1 but has conducted an informal review of its own performance over the period under review. Refer to the note under the Section on 'Non-Compliance with the Code'.

Principle Eight: Committees

A. Remuneration Committee

The Company has no performance-related remuneration payable to its Non-Executive Directors and accordingly, as allowed by Code Provision 8A.2, it has not appointed a Remuneration Committee, but rather the functions of such a Remuneration Committee are vested in the Board, which itself establishes the remuneration policies of the Company. The Non-Executive members of the Board establish the policies and decide on the performance related remuneration of its Executive Directors.

The Board notes that the organizational set-up of the Company and the size of the Board itself, together with the fact that Non-Executive Directors are not entitled to performance related remuneration, does not, in the opinion of the directors, warrant the establishment of a Remuneration Committee. Remuneration policies have therefore been retained within the remit of the Board itself, and as already stated in the case of the Executive Directors, it is the Non-Executive members of the Board that decide on their performance related remuneration.

The directors believe that certain committees that are suggested in the Code are either not required by the Company, or the functions of a number of committees may efficiently be merged or undertaken by the Board itself. In addition, the Board believes that its size and composition is sufficient for the proper direction and management of the Company and its business and that there would be no value added to the Company and its shareholders to increase the number of Board members simply to be able to have separate committees of the Board – when the same functions can properly be undertaken by the Board itself. The directors will retain the need of such committees under review and as in the past, may appoint ad hoc committees of directors to deal with specific issues as and when these arise.

The aggregate amount of remuneration paid to all directors, including salaries paid to the CEO, and the CFO amount to EUR 657,633. For the purposes of the provisions of Article 63 of the Company's Articles of Association, the aggregate emoluments paid to the directors is EUR 361,561 which is within the amount approved by the shareholders of €465,875 for the purpose of that article. The aggregate emoluments paid to the senior management amount to EUR 637,502.

(continued)

B. Nomination Committee

The Board believes that the main principle has been duly complied with, in that it is the Articles of Association themselves that establish a formal and transparent procedure for the appointment of directors. The Company has, however, not established a Nomination Committee as suggested by the Code.

Principle Nine: Relations with Shareholders and with the Market

The Board serves the legitimate interests of the Company, accounts to shareholders fully and ensures that the Company communicates with the market effectively through a number of Company announcements, informing the market of significant events happening within the Company.

The Company also communicates with its shareholders through the Annual General Meeting (AGM), where the Board communicates directly with shareholders on the performance of the Company over the last financial year and informs shareholders of the challenges that lie ahead.

Business at the Company's AGM will cover the approval of the Annual Report and the audited financial statements, the declaration of a dividend, if any, the election of directors, the determination of the maximum aggregate emoluments that may be paid to directors, the appointment of auditors and the authorisation of the directors to set the auditors' remuneration. Any other matter that may be placed by the directors before the AGM will be dealt with as "Special Business".

Apart from the AGM, the Company has continued to communicate with its shareholders and the market by way of the annual report and financial statements, by publishing its results on a six-monthly basis during the year and through the directors' statements, which are also published on a six-monthly basis, and by Company announcements to the market in general. The Company recognises the importance of maintaining a dialogue with the market to ensure that its strategies and performance are well understood. The Company's website (www.maltairport.com) also contains information about the Company and its business and is a source of further information to the market.

The Company's Articles of Association allow minority shareholders to call special meetings on matters of importance to the Company, provided that the minimum threshold of ownership established in the Articles of Association is met.

Principle Ten: Institutional Shareholders

This Principle is specifically applicable to the institutional shareholders of the Company and their responsibilities, including their evaluation of governance disclosures.

Principle Eleven: Conflicts of Interest

The Board has established procedures on how conflicts are to be handled, if and when they arise. A director having a personal conflict on any matter is bound to inform the other members of the Board of such a conflict whether it is an actual, potential or a perceived conflict. It is then the other members of the Board that would decide on whether there exists such a conflict, actual or potential. By virtue of the Memorandum and Articles of Association, in the event that, in the opinion of the Board such a conflict exists, then the conflicted director is invited to leave the meeting when it proceeds to the vote, if any, on the matter concerned. As a matter of practice, discussions of such matters are normally conducted in the absence of the conflicted director. The Board feels that this is a procedure that achieves compliance with both the letter and the rationale of principle eleven.

Commercial relationships between the Company and other companies may be related by way of common directors and shareholders ("Related Party Transactions"). Contracts are entered into in the ordinary course of business with shareholders and other parties in which the directors have a beneficial interest. Terms and conditions of contracts negotiated with related parties are reviewed by the Company's Audit Committee. Full disclosure of Related Party Transactions entered into during the financial year under review is made in Note 32 to the financial statements.

(continued)

The following directors have declared their interests in the share capital of the Company:

• Mr Nikolaus Gretzmacher a non-beneficial interest³
• Ms Rita Heiss a non-beneficial interest⁴
• Dr. Cory Greenland a beneficial interest

No other director has a beneficial or non-beneficial interest in the Company's share capital.

Principle Twelve: Corporate Social Responsibility

The directors are committed to high standards of Corporate Responsibility namely in the social, economic and environmental fields both internally and externally. This is being done for the benefit of its key stakeholders which include its shareholders, employees, customers as well as the local community at large.

Non-Compliance with Code Provisions

The directors set out below the code provisions with which they do not comply and a careful explanation as to the reasons for such non-compliance:

Code Provision	Explanation
2.1	Whilst the Company has segregated the functions of the Chairman and the CEO, in that the two posts are occupied by different persons, the division of responsibilities between them has not been established in writing, although there is significant experience and practice that determines the two roles.
4.2	The Board has not formally developed a succession policy for the future composition of the Board of Directors as recommended by Code Provision 4.2.7. In practice, however, the Board and CEO are actively engaged in succession planning and in ensuring that appropriate schemes to recruit, retain and motivate employees and senior management are in place.
7.1	The Board believes that the size of the Company and the Board itself does not warrant the establishment of a committee specifically for the purpose of carrying out a performance evaluation of its role. Whilst the requirement under Code Provision 7.1 might be useful in the context of larger companies having a more complex set-up and a larger Board, the size of the Board is such that it should enable it to evaluate its own performance without the requirement of setting up an ad hoc committee for this purpose. The Board shall retain this matter under review over the coming year. Having conducted an informal review of its own performance over the period under review it is the Board's view that all members of the Board, individually and collectively, have contributed in line with the required levels of diligence and skill. In addition, the Board believes that its current composition endows the Board with a cross-section of skills and experience, not only with respect to the specific business of the Company, but also in a wider range of business areas and skills. This process was conducted by the Board itself rather than by a Committee chaired by a Non Executive Director as required by the Code.

³ These shares are held by MMLC and VIE Malta Limited, companies of which Mr Gretzmacher is a director.

⁴ These shares are held by MMLC and VIE Malta Limited, companies of which Ms Heiss is a director.

(continued)

Code Provision	Explanation
8B	The Board has not appointed a Nominations Committee in line with Code Provision 8B, particularly in the light of the specific manner in which the Articles of Association require that Non-Executive Directors be appointed by a shareholding qualification to the Board. The Executive Directors are, in accordance with the Articles, appointed by the Non-Executive Directors after their appointment, as aforesaid. The Board believes that the current Articles of Association do not allow the Board itself to make any recommendations to the shareholders for appointments of directors and that if this function were to be undertaken by the Board itself or a Nominations Committee, they would only be able to make a non-binding recommendation to the shareholders having the necessary qualification to appoint directors pursuant to the Articles of Association. The Board intends to keep under review the utility and possible advantages of having a Nominations Committee and following an evaluation may, if the need arises, make recommendations to the shareholders for a change to the Articles of Association.
9.3	The Memorandum and Articles of Association does not provide any mechanism for the resolution of conflicts between shareholders or any process that would trigger arbitration in these instances. This is mitigated by ongoing open dialogue between executive management and Non-Executive Directors of the Company, to ensure that such conflicts do not arise.
9.4	The Company does not have a policy in place to allow minority shareholders to present an issue to the Board.

Internal Control

The Board is ultimately responsible for the Company's system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk to achieve business objectives, and can provide only reasonable, and not absolute, assurance against normal business risks or loss.

Through the Audit Committee, the Board reviews the effectiveness of the Company's system of internal controls, which are monitored by the Internal Auditors on a regular basis.

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

Organisation

The Company operates through the CEO and Executive Committee with clear reporting lines and delegation of powers.

Control Environment

The Company is committed to standards of business ethics that emulate best practice and seeks to maintain these standards across all of its operations. Company policies and employee procedures are in place for the reporting and resolution of improper activities.

The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Company objectives.

Risk Identification

Company management is responsible for the identification and evaluation of key risks applicable to their respective areas of business. A Risk Management Committee serve as a primary champion of risk management at a strategic and operational level to ensure that a sound system is in place that identifies, assesses, manages and monitors risk. In addition, through regular checks the internal auditors test the Company's internal control systems and processes and make recommendations to management and the audit committee on any deficiency in such systems.

(continued)

General Meetings

The general meeting is the highest decision-making body of the Company and is regulated by the Company's Articles of Association. All shareholders registered on the register of members of the Company on a particular record date are entitled to attend and vote at general meetings. A general meeting is called by twenty-one (21) days' notice.

At an Annual General Meeting what is termed as "ordinary business" is transacted, namely, the declaration of a dividend, the consideration of the accounts, balance sheets and the reports of the directors and the auditors, the election of directors, the appointment of auditors and the fixing of remuneration of directors and auditors. Other business which may be transacted at a general meeting (including at the Annual General Meeting) will be dealt with as "Special Business".

Voting at any general meeting takes place by a show of hands or a poll where this is demanded. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands each shareholder is entitled to one vote and on a poll each shareholder is entitled to one vote for each share carrying voting rights of which he is a holder. Shareholders who cannot participate in the general meeting may appoint a proxy by written or electronic notification to the Company. Appointed proxy holders enjoy the same rights to participate in the general meeting as those to which the shareholder they represent is entitled. Every shareholder represented in person or by proxy is entitled to ask questions which are pertinent and related to the items on the agenda of the general meeting and to have such questions answered by the directors or such persons as the directors may delegate for such purpose.

The directors' statement of responsibilities for preparing the financial statements is set out on page 10.

The information required by Listing Rule 5.97.5 is found in the Directors' Report.

Approved by the Board of Directors on 26 February 2020 and signed on its behalf by:

Nikolaus Gretzmacher Alan Borg Karl Dandler Chairman Chief Executive Officer Chief Financial Officer

Statements of Comprehensive Income

Year Ended 31 December 2019

Income Statements

		The Group		The Company
(in EUR)	Notes	2019	2018	2019	2018
Revenue	6	100,232,676	92,191,719	96,168,303	88,056,061
Staff costs	11	(10,839,794)	(9,747,167)	(10,602,977)	(9,521,138)
Other operating expenses	9	(25,951,490)	(27,995,969)	(25,433,991)	(27,310,381)
Impairment losses on financial assets	21	(284,580)	(18,157)	(299,712)	(40,578)
Depreciation	14/15	(8,801,219)	(7,384,403)	(7,914,112)	(6,494,396)
Release of deferred income arising on the sale of terminal buildings and fixtures	23	283,603	208,765	283,603	208,765
Investment income	7	37,436	(7,021)	423,679	395,541
Finance cost	8	(2,079,535)	(148,915)	(2,079,535)	(139,212)
Profit before tax		52,597,097	47,098,852	50,545,258	45,154,662
Income tax expense	12	(18,663,780)	(16,763,212)	(17,933,191)	(16,069,342)
Profit for the year attributable to the ordinary equity holders of the Company, net of tax		33,933,317	30,335,640	32,612,067	29,085,320
Earnings per share attributable to the ordinary equity holders of the Company	29	0.251	0.224	0.241	0.215

Statements of Comprehensive Income

		The Group		The Company
(in EUR)	Notes	2019	2018	2019	2018
Profit for the year attributable to the ordinary equity holders of the Company,
net of tax		33,933,317	30,335,640	32,612,067	29,085,320
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pension plans	24/25	(207,233)	47,805	(207,233)	47,805
Deferred tax debit/(credit)	12	72,532	(16,732)	72,532	(16,732)
Other comprehensive income for the year attributable to the ordinary equity holders of the Company, net of tax		(134,701)	31,073	(134,701)	31,073
Total comprehensive income for the year attributable to the ordinary equity holders of the Company, net of tax		33,798,616	30,366,713	32,477,366	29,116,393

Statements of Financial Position

31 December 2019

		The Group		The Company
(in EUR)	Notes	2019	2018	2019	2018
Assets
Property, plant and equipment	14	164,430,886	107,711,630	155,923,740	106,143,034
Investment property	15	15,905,686	15,874,085	334,491	-
Investment in subsidiaries	16	-	-	2,004,800	2,004,800
Loans receivable	18	-	-	21,116,478	17,507,198
Deferred tax assets	19	5,904,374	5,085,726	4,939,237	3,995,802
Non-current assets		186,240,946	128,671,441	184,318,746	129,650,834
Inventories	20	872,242	884,352	872,242	884,352
Loans receivable	18	-	-	1,290,720	1,290,720
Trade and other receivables	21	17,752,544	20,002,906	17,988,729	19,794,115
Term deposits	27	5,000,000	-	5,000,000	-
Cash and cash equivalents	28	28,174,981	20,253,186	26,691,276	18,553,002
Current assets		51,799,767	41,140,444	51,842,967	40,522,189
Total Assets		238,040,713	169,811,885	236,161,713	170,173,023
Equity and Liabilities
Equity attributable to ordinary equity holders of the Company
Share capital	26	33,825,000	33,825,000	33,825,000	33,825,000
Retained earnings and reserves		95,218,056	78,786,257	94,713,271	79,602,723
Total Equity		129,043,056	112,611,257	128,538,271	113,427,723
Lease liability	4	52,755,835	-	52,755,835	-
Deferred income	23	6,454,885	5,127,504	6,344,530	5,013,539
Provision for retirement benefit plan	24	3,880,077	3,906,809	3,880,077	3,906,809
Provision for MIA benefit fund	25	293,797	250,638	293,797	250,638
Non-current liabilities		63,384,594	9,284,951	63,274,239	9,170,986
Trade and other payables	22	43,792,203	46,575,104	42,636,509	46,371,354
Current tax liabilities		1,820,860	1,340,573	1,712,694	1,202,960
Current liabilities		45,613,063	47,915,677	44,349,203	47,574,314
Total Liabilities		108,997,657	57,200,628	107,623,442	56,745,300
Total Equity and Liabilities		238,040,713	169,811,885	236,161,713	170,173,023

These financial statements were approved and authorised for issue by the Board of Directors on 26 February 2020 and signed on its behalf by:

Nikolaus Gretzmacher Alan Borg Karl Dandler

Chairman Chief Executive Officer Chief Financial Officer

Statements of Changes in Equity

Year Ended 31 December 2019

The Company

The Group	Equity attributable to ordinary equity holders of the Company
	Share	Other	Retained
(in EUR)	capital	reserve	earnings	Total
Balance at 1 January 2018	33,825,000	1,179,462	60,743,889	95,748,351
Profit for the year	-	-	30,335,640	30,335,640
Other comprehensive income	-	-	31,073	31,073
Total comprehensive income for the year	-	-	30,366,713	30,366,713
Difference for historical depreciation for the year calculated on the revalued amount	-	(74,838)	74,838	-
Deferred tax	-	26,193	-	26,193
Dividends (Note 13)	-	-	(13,530,000)	(13,530,000)
Balance at 31 December 2018	33,825,000	1,130,817	77,655,440	112,611,257
Balance at 1 January 2019	33,825,000	1,130,817	77,655,440	112,611,257

-	-	33,933,317	33,933,317
-	-	(134,701)	(134,701)
-	-	33,798,616	33,798,616
-	(1,130,817)	-	(1,130,817)
-	-	(16,236,000)	(16,236,000)
33,825,000	-	95,218,056	129,043,056

Equity attributable to ordinary equity holders of the Company

	Share	Other	Retained
(in EUR)	capital	reserve	earnings	Total
Balance at 1 January 2018	33,825,000	1,179,462	62,810,676	97,815,138
Profit for the year	-	-	29,085,319	29,085,319
Other comprehensive income	-	-	31,073	31,073
Total comprehensive income for the year	-	-	29,116,392	29,116,392
Difference for historical depreciation for the year
calculated on the revalued amount	-	(74,838)	74,838	-
Deferred tax	-	26,193	-	26,193
Dividends (Note 13)	-	-	(13,530,000)	(13,530,000)
Balance at 31 December 2018	33,825,000	1,130,817	78,471,906	113,427,723

Balance at 1 January 2019	33,825,000	1,130,817	78,471,906	113,427,723
Profit for the year	-	-	32,612,067	32,612,067
Other comprehensive income	-	-	(134,701)	(134,701)
Total comprehensive income for the year	-	-	32,477,365	32,477,365
Transfer of Other reserve	-	(1,130,817)	-	(1,130,817)
Dividends (Note 13)	-	-	(16,236,000)	(16,236,000)
Balance at 31 December 2019	33,825,000	-	94,713,271	128,538,271

Statements of Cash Flows

Year Ended 31 December 2019

	The Group		The Company
(in EUR)	Notes	2019	2018	2019	2018
Cash flows from operating activities
Profit before tax		52,597,097	47,098,852	50,545,258	45,154,661
Adjustments for:
Depreciation	14/15	8,801,217	7,384,403	7,914,112	6,494,396
Investment income/(loss)	7	(37,436)	7,021	(423,679)	(395,541)
Finance cost	8	2,079,535	148,915	2,079,535	139,212
Release of deferred income arising on the
sale of the terminal building and fixtures	23	(283,603)	(208,765)	(283,603)	(208,765)
Amortisation of grants	23	(50,244)	(102,008)	(50,244)	(102,008)
Provision for retirement benefit plan	24	67,084	45,020	67,084	45,020
Provision for MIA benefit plan	25	42,387	28,979	42,387	28,979
Provision for impairment of trade receivables	21	284,580	18,157	299,712	40,578
		63,500,617	54,420,574	60,190,562	51,196,532
Working capital movements:
Movement in inventories	20	12,110	7,159	12,110	7,159
Movement in trade and other receivables	21	1,965,782	(4,519,100)	1,505,674	(5,439,629)
Movement in trade and other payables	22	3,887,707	5,998,170	2,935,759	6,231,797
Cash flows from operations		69,366,216	55,906,803	64,644,105	51,995,859
Interest paid	8	-	(148,915)	-	(139,212)
Lease interest paid	33	(1,693,705)	-	(1,693,705)	-
Income taxes paid		(18,340,943)	(18,425,846)	(17,705,693)	(17,839,129)
Retirement benefit paid	24	(300,277)	(500,326)	(300,277)	(500,326)
Net cash flows from operating activities		49,031,291	36,831,716	44,944,430	33,517,192
Cash flows from investing activities
Receipts/(payments) of deposit from tenant	23	(3,610)	15,146	-	-
Payments for property, plant and equipment	14	(19,374,886)	(8,433,655)	(12,347,119)	(7,080,069)
Payments for investment property	15	(495,000)	(15,367)	-	-
Payments for term deposits	27	(5,000,000)	-	(5,000,000)	-
Payments for intracompany loans	18	-	-	(4,900,000)	(1,725,323)
Repayments of intracompany loans Interest received	18 7	- -	- -	1,290,720 386,243	1,290,720 402,562
Net cash flows used in investing activities		(24,873,496)	(8,433,876)	(20,570,156)	(7,112,110)
Cash flows from financing activities
Repayment of bank loans		-	(33,016,561)	-	(31,291,524)
Dividends paid	13	(16,236,000)	(13,530,000)	(16,236,000)	(13,530,000)
Net cash flows used in financing activities		(16,236,000)	(46,546,561)	(16,236,000)	(44,821,524)
Net movement in
cash and cash equivalents		7,921,795	(18,148,721)	8,138,274	(18,416,442)
Cash and cash equivalents
at the beginning of the year		20,253,186	38,401,907	18,553,002	36,969,444
Cash and cash equivalents at the end of the year
	28	28,174,981	20,253,186	26,691,276	18,553,002

Year Ended 31 December 2019

1. Reporting entity

The Company is a public company whose shares are publicly listed and traded on the Malta Stock Exchange. The Company's registration number is C12663, the country of incorporation is Malta and the Company's registered office is Malta International Airport, Luqa, Malta.

The principal activities of the Company are the development, operation and management of Malta's airport. On 11 February 2008, the Company set up a wholly-owned subsidiary, Sky Parks Limited, to take over the operations of the car park business. The name of this subsidiary was changed to Airport Parking Limited on 27 October 2009. Another subsidiary, Sky Parks Development Limited, was set up by the Company on 29 October 2009. The main activity of Sky Parks Development Limited is to manage real estate projects within the land which is currently under the management of the Group. Another subsidiary Sky Parks Business Centre Limited was set up by the Company on 26 April 2012. The principal activity of the subsidiary is to operate the Business Centre within the limits of the airport. On 20 June 2013, the Company set up another wholly-owned subsidiary, Kirkop PV Farm Limited. The main activity of this company is to explore opportunities in the generation of electricity using photovoltaic technologies.

The Company and the subsidiaries are together referred to as 'the Group'.

2. Basis of preparation

Under the Companies Act, Cap. 386 of the Laws of Malta, the Company is required to present individual and consolidated financial statements. The financial statements of the Group and the Company have been prepared on a historical cost basis, except for certain financial instruments that are measured at fair value and are in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and comply with the Companies Act, Cap. 386 of the Laws of Malta. The functional currency of the Company is the Euro which is also the presentation currency of the Group.

The consolidated financial statements comprise the financial statements of Malta International Airport p.l.c, and its subsidiaries, as mentioned in Note 1 above. For more details on the scope of consolidation see Note 39.

This is the first set of the Group's and the Company's annual financial statements in which IFRS 16 Leases has been applied. Changes to significant accounting policies from this new standard that is effective for the current year are described in Note 4.

3. Judgments in applying accounting policies and key sources of estimation uncertainty

Except as discussed below and in the remaining notes to the financial statements, the directors did not make any significant judgments in the process of applying the Company's and the Group's accounting policies which can significantly affect the amounts recognised in the consolidated and the individual financial statements and, at the end of the reporting period, there were no key assumptions concerning the future, or any other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

3.1. Service Concession Arrangements in terms of IFRIC 12

IFRIC 12 Service Concession Arrangements was endorsed by the EU for financial years beginning after 29 March 2009. The Interpretation, which is limited in scope, clarifies the accounting of service concession arrangements by private sector operators which provide public services on behalf of government or other public sector entities.

Year Ended 31 December 2019

3.1. Service Concession Arrangements in terms of IFRIC 12 (continued)

The Interpretation states that for arrangements falling within its scope, the infrastructure assets are not recognised as property, plant and equipment of the operator. Rather, depending on the terms of the arrangement, the operator will recognise:

• (i) a financial asset (where the operator has an unconditional right to receive a specified amount of cash or other financial asset over the life of the arrangement); or
• (ii) an intangible asset (where the operator's future cash flows are not specified, for example, where they will vary according to usage of the infrastructure asset); or
• (iii) both a financial asset and an intangible asset where the operator's return is provided partially by a financial asset and partially by an intangible asset.

The Company and the Group's business activities and operations are governed under a 65-year concession which was granted by the Government in July 2002. The directors have conducted a detailed analysis to determine the applicability of IFRIC 12. Based on the Company's and the Group's proportion of regulated and unregulated activities, the directors have determined that the extent of unregulated business activities cannot be deemed as insignificant. Accordingly, the directors have concluded that IFRIC 12 does not apply to the Company and the Group.

3.2. Lessee Accounting in terms of IAS 17

In the comparative year operating lease and related payments represent ground rents payable by the Company to Malita Investments plc (previously to the Government of Malta) on the temporary emphyteuses and the related aerodrome licence fee payable to the Government of Malta, with an original term of 58 to 65 years and periodic upward adjustments by a specified rate over the lease term for the amounts payable under the temporary emphyteusis. The lease expense on the temporary emphyteusis was allocated to commercial and non-commercial areas, being site areas with restricted access on the basis of the total surface area covered by the lease. The recognition of the lease expense in relation to the non-commercial areas was made on a systematic basis that was considered to be most representative of the time pattern of the expected benefit that the Group and the Company can reasonably be expected to reap from the use of that part of the leased asset over the lease term on the basis of passenger movements. This assessment was reviewed annually to determine whether the basis that was applied in allocating the lease expense over the lease term continues to be appropriate.

Judgments and estimates in relation to lessee accounting under IAS 17 became obsolete during the current year with the initial application of IFRS 16 Leases as of 1 January 2019. New judgments and estimates with regards to IFRS 16 Leases that warrant additional disclosures in terms of IAS 1 comprise (a) the judgment in connection with the inclusion of the aerodrome licence within the scope of IFRS 16 and (b) the estimate in connection with the determination of the incremental borrowing rate, as further outlined in Note 4.

4. Application of new and revised IFRS

4.1. New and revised IFRS effective for the current year

IFRS 16 Leases

In the current year, the Group and the Company applied IFRS 16 Leases, which supersedes IAS 17 Leases and related interpretations, including IFRIC 4 Determining whether an Arrangement contains a Lease. IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. The date of initial application for the Group and the Company is 1 January 2019.

The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model, eliminating the distinction between operating and finance leases. Leases in which the Group is a lessee are subject to significant adjustments.

Year Ended 31 December 2019

4.1. New and revised IFRS effective for the current year (continued)

IFRS 16 Leases (continued)

Lessor accounting under IFRS 16 remains substantially unchanged from IAS 17 except for a requirement to provide enhanced disclosures and for the reassessment of subleases by an intermediate lessor. Lessors continue to classify leases as either operating or finance leases using similar principles as in IAS 17, whereas intermediate lessors are required to reassess subleases that were classified as operating leases applying IAS 17 and are ongoing at the date of initial application on the basis of the remaining contractual terms and conditions of the head lease and sublease at that date in terms of the transitional provisions of IFRS 16. The Group has determined that such leases continue to be classified as operating leases. Hence, IFRS 16 did not have a material impact for leases where the Group is a lessor.

Therefore, the remaining part of this note is in relation to leases in which the Group acts as a lessee.

Transition approach in accordance with the transitional provisions of IFRS 16

The Group adopted IFRS 16 using the cumulative catch-up retrospective application with the cumulative effect of initially applying the standard recognised at the date of initial application. Consequently, the Group has not restated the comparative information, which continues to be presented under IAS 17 and IFRIC 4.

In line with the transitional provisions of IFRS 16, the Group has not reassessed sale and leaseback transactions entered into before the date of initial application to determine whether the transfer of the underlying asset satisfies the requirements in IFRS 15 to be accounted for as a sale. For the sale and leaseback transaction of the Group's land and buildings in 2002, the Group (being the seller-lessee) has accounted for the transactions in terms of IFRS 16 as follows:

• (i) For the building and fixtures and fittings element which resulted in a sale and a finance lease in terms of IAS 17, the Group has accounted for the leaseback in the same way as it accounted for any other finance lease that existed at the date of initial application and has continued to amortise the deferred income on sale over the remaining life of the underlying assets (Note 23). The carrying amount of the right-of-use asset at the date of initial application is the carrying amount of the asset immediately before that date measured applying IAS 17. There is no corresponding lease liability at that date.
• (ii) For the land element which resulted in a sale and an operating lease in terms of IAS 17, the Group has accounted for the leaseback in the same way as it accounted for any other operating lease that existed at the date of initial application in the absence of any deferred gains or losses that related to off-market terms recognised in the statement of financial position immediately before the date of initial application, as further disclosed below.

The Group has concluded that the licence over the aerodrome which includes the Airfield, falls within the scope of IFRS 16 and the contractual payments in this respect have therefore been included within right-ofuse assets and lease liabilities, amounting to EUR 10.7 million at 1 January 2019 (Notes 14 and 33). The Group has arrived at this conclusion by taking into consideration the following factors - (a) the management of the Airfield is considered to be integral to the use of the land and buildings held as temporary emphyteusis, with the Group having an obligation to manage the Airfield for the same duration of the emphyteusis, (b) the Group considers the licence as being inseparable from the right to use the Airfield (being the tangible component), (c) it is not possible to split the right to operate the Airfield from the right to use the Airfield and (d) the Group considers the use of the Airfield to be the most significant element of the transaction.

For leases previously classified as operating leases in terms of IAS 17, the Group has chosen to measure the right-of-use asset at the date of initial application at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised immediately before the date of initial application. The Group applied IAS 36 to the right-of-use asset at the date of initial application and determined that there is no objective evidence of impairment at that date.

The Group and the Company did not apply the practical expedient not to reassess whether a contract is, or contains, a lease at the date of initial application. The new definition of a lease in IFRS 16 has not changed the scope of contracts that meet the definition of a lease for the Group and the Company.

Year Ended 31 December 2019

4.1. New and revised IFRS effective for the current year (continued)

IFRS 16 Leases (continued)

Impact on Financial Statements

Where the Group acts as a lessee, the nature of the lease contracts identified under IFRS 16 are primarily in relation to (a) the temporary emphyteuses in relation to the leasehold land and buildings with annual ground rents payable to Malita Investments plc (previously to the Government of Malta) and the related aerodrome licence fee payable to the Government of Malta; and (b) motor vehicle leases.

The lease terms under IFRS 16 for the temporary emphyteuses and the related aerodrome licence remain unchanged from IAS 17 and do not involve significant judgment as there are no extension, termination or purchase options from the perspective of the Group beyond the non-cancellable and enforceable period, with clauses for remote contingencies that are customary for the type of lease in place. The lease terms range from 58 years to 65 years, which are governed under a concession which was granted by the Government and which commenced in 2002 and ends in 2067 with a smaller lease being granted for the period 2010 to 2067.

The lease term of the motor vehicle lease contract commenced in 2014 and ends in 2020. The motor vehicle lease contract includes termination and purchase options, both of which are not expected to be exercised by the Group with reasonable certainty.

The effect on the Group's financial statements as at the date of initial application of IFRS 16 is as follows:

The Group & The Company (in EUR million)	Impact as at 1 January 2019
Assets
Tangible assets	45.7
Total Assets	45.7
Liabilities
Lease liability	52.4
Trade and other payables	(6.7)
Total Liabilities	45.7

Statement of Financial Position

On initial application, the Group recognized lease liabilities of EUR 52.4 million as at 1 January 2019 with a corresponding right-of-use asset for the same amount, as further adjusted below.

Lease liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as of 1 January 2019. The incremental borrowing rate reflects the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. To determine this rate, the Group obtained information from its bank for the particular purpose and extrapolated it to reflect the specific characteristics of the lease, in particular the long remaining lease term of the temporary emphyteuses and the related aerodrome licence until 2067. The weighted average incremental borrowing rate that the Group applied to its lease liabilities as at 1 January 2019 was 4.07% per annum. The selection of the applicable incremental borrowing rate has a significant effect on these financial statements. An decrease/(increase) of 50 basis points would have resulted in a increase/(decrease) in lease liabilities and right-of-use assets of EUR 5.6 million/(EUR 4.8 million) as at 1 January 2019.

The following table shows the operating lease commitments disclosed applying IAS 17 at 31 December 2018, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of initial application.

Lease Liability recognised as at 1 January 2019	52.4
Discounted using the incremental borrowing rate upon initial application	(86.7)
Operating lease committments disclosed as at 31 December 2018	139.1
(in EUR million)

Year Ended 31 December 2019

4.1. New and revised IFRS effective for the current year (continued)

IFRS 16 Leases (continued)

Upon transition to IFRS 16, the Group has applied the practical expedient to use a single discount rate to a portfolio of leases with reasonably similar characteristics for its motor vehicle lease contracts.

Lease liabilities are classified as non-current in the Statement of Financial Position as over the next 12 months interest will exceed the contractual cash payments.

Right-of-use assets were adjusted by the amount of the existing lease liability as at 31 December 2018 of EUR 6.7 million, which consisted of accrued lease payments relating to the operating leases now recognised as right-of-use assets

The carrying amount of the upfront payments made in relation to the temporary emphyteuses of the leasehold land and buildings (also included within right-of-use assets) amounted to EUR 56.6 million at 1 January 2019, which amount was already included within property, plant and equipment at 31 December 2018. This amount excludes subsequent additions and improvements made to tangible assets with a carrying amount of EUR 67.0 million for the Group at 1 January 2019.

The recognised right-of-use assets at 1 January 2019 relate to the following types of assets:

(in EUR million)

Upfront payments in relation to the temporary emphyteuses of the leasehold building classified as property, plant and equipment (Note 14)	25.2
Upfront payments and annual ground rents in relation to the temporary emphyteuses of the lease hold land and the related aerodrome licence classified as property, plant and equipment (Note 14)	76.7
Upfront payments and annual ground rents in relation to the temporary emphyteusis of the
leasehold land classified as Investment Property (Note 15)	0.3
Rental payments in relation to motor vehicle leases	0.1
Right-of-use assets recognised as at 1 January 2019	102.3

As detailed above, right-of-use assets at 1 January 2019 are allocated in the Statement of Financial Position under property, plant and equipment (EUR 102.0 million) and investment property (EUR 0.3 million). See Notes 14 and 15 for more details.

For leases of low value assets, the Group has applied the optional recognition exemptions to not recognise right-of-use assets as at the date of initial application of the standard.

Statement of Comprehensive Income

The impact on the income statement in the reporting period is a reduction of other operating expenses by EUR 2.2 million and increases of depreciation and interest expense by EUR 1.0 million and EUR 2.1 million, respectively.

The Group & The Company (in EUR million)	Impact in 2019
Other operating expenses	2.2
Depreciation	(1.0)
Finance costs	(2.1)
Profit before tax	(0.9)
Income tax expense	0.3
Profit for the period	(0.6)

The lease expense included in the line item 'Other operating expenses' in the financial statements for the year ending 31 December 2018 amounted to EUR 2.2 million. There is no impact on other comprehensive income. The above change in the presentation of the respective lease expenses has resulted in an increase in EBIT of EUR 1.2 million and an even greater increase in EBITDA of EUR 2.2 million. Earnings per share decreased by EUR 0.4 cents.

Year Ended 31 December 2019

4.1. New and revised IFRS effective for the current year (continued)

IFRS 16 Leases (continued)

Statement of Cash Flows

In the statement of cash flows, a lessee is required to classify cash payments for the principal portion of the lease liability within cash flows used in financing activities and to classify cash payments for the interest portion of the lease liability in accordance with the lessee's accounting policy for interest paid. In the reporting period, interest exceeded the contractual cash payments. As a result, the Group classifies all interest payments in relation to the lease liability within its operating cash flows.

4.2. New and revised IFRS in issue but not yet effective

At the date of the approval of these financial statements, a number of International Financial Reporting Standards were either not yet endorsed by the EU or were not yet applicable to the Group and the Company.

In relation to other IFRS that are not included below and that are in issue at the date of authorisation of these financial statements but not yet effective, the Board of Directors anticipate that their adoption will have no material impact on the financial statements of the Group and the Company in the period of initial application.

IAS 1 and IAS 8 Amendment – Definition of Material

This amendment was issued in October 2018 and is applicable for annual periods beginning on or after 1 January 2020. The Amendment clarifies the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendment ensures that the definition of material is consistent across all IFRS Standards.

5. Operating Segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

For management purposes the Group is organised into operating segments based on the nature of its operations and has the reportable segments as shown below.

Management monitors the operating results of its segments separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on earnings before interest, tax and deferred income arising from the sale of terminal buildings and fixtures (EBIT). Revenues and certain costs are allocated in full to particular segments. The remaining costs are allocated across the different segments on the basis of square meters or revenues, as applicable. The Group and the Company financing (including finance income and finance costs), deferred income arising from the sale of terminal buildings and fixtures and income tax are managed on a Group and Company basis and are not allocated to operating segments.

Airport Segment

The Airport Segment comprises of the activities usually carried out by an airport. These services include revenue from airport regulated fees, aviation concessions and PRMs (persons with reduced mobility) and their associated costs. This segment also includes the operations and maintenance of the terminal, runways, taxiways and aircraft parks.

Retail and Property Segment

The Retail and Property Segment includes various services that support the airport operations. These include the operations of the various retail outlets within the airport perimeter, advertising sites and rental of offices, warehouses and income from the running of the VIP lounges. Income and costs from Airport Parking Limited, Sky Parks Business Centre Limited and Sky Parks Development Limited are also allocated within the Retail and Property Segment.

Year Ended 31 December 2019

5. Operating Segments (continued)

Other Segment

This comprises services that do not fall under the Airport and the Retail and Property Segments, which include miscellaneous income and disbursement fees from third parties as well as any costs associated with this income.

The results of the operating segments are reported below:

2019		Retail &
(in EUR)	Airport	Property	Other	The Group
Revenue (external)	70,760,630	29,104,929	367,117	100,232,676
Staff costs	(9,466,627)	(1,373,167)	-	(10,839,794)
Other operating costs	(21,008,067)	(4,943,423)	-	(25,951,490)
Impairment losses on financial assets	(218,790)	(65,790)	-	(284,580)
EBITDA	40,067,146	22,722,549	367,117	63,156,812
Depreciation	(5,722,814)	(3,078,405)	-	(8,801,219)
EBIT	34,344,332	19,644,144	367,117	54,355,593
Investment income				37,436
Finance cost				(2,079,535)
Release of deferred income arising on the
sale of terminal buildings and fixtures				283,603
Profit before tax				52,597,097
2018		Retail &
(in EUR)	Airport	Property	Other	The Group
Revenue (external) *	64,801,169	27,055,661	334,889	92,191,719
Staff costs	(8,447,667)	(1,299,500)	-	(9,747,167)
Other operating costs	(22,192,007)	(5,803,962)	-	(27,995,969)
Impairment losses on financial assets	(29,622)	11,465	-	(18,157)
EBITDA	34,131,873	19,963,664	334,889	54,430,426
Depreciation	(4,973,379)	(2,411,024)	-	(7,384,403)
EBIT	29,158,494	17,552,640	334,889	47,046,023
Investment loss				(7,021)
Finance cost				(148,915)
Release of deferred income arising on the
sale of terminal buildings and fixtures				208,765
Profit before tax				47,098,852

* 2018 restated

Airport segment revenues generated from two clients with each generating 10% or more of revenues amounted to EUR 24,445,011 and EUR 21,243,915 (2018: EUR 21,548,739 and EUR 20,701,872).

The Group has initially applied IFRS 16 as from 1 January 2019. The impact of adopting the standard on the Group's other operating costs, depreciation and finance costs (and thus the effect on EBITDA and EBIT) are outlined in detail in Note 4. Comparative information is not restated under the transition method chosen and continues to be presented under IAS 17 and IFRIC 4.

Year Ended 31 December 2019

6. Revenue

In the following table, revenue of the Group is disaggregated by revenue category. The table also includes a reconciliation of the disaggregated revenue with the Group's operating segments (see Note 5).

The Group
2019		Retail and
(in EUR)	Airport	Property	Other	Total
Revenue from Services provided Over Time
Regulated revenue	63,858,110	-	-	63,858,110
Unregulated revenue	6,902,520	7,993,833	367,117	15,263,470
Revenue from Contracts with Customers	70,760,630	7,993,833	367,117	79,121,580
Revenue from Leases	-	21,111,096	-	21,111,096
Total Revenue	70,760,630	29,104,929	367,117	100,232,676

The Group
2018		Retail and
(in EUR)	Airport	Property	Other	Total
Revenue from Services provided Over Time
Regulated revenue	59,484,658	-	-	59,484,658
Unregulated revenue	5,316,511	7,800,146	334,889	13,451,546
Revenue from Contracts with Customers	64,801,169	7,800,146	334,889	72,936,204
Revenue from Leases	-	19,255,515	-	19,255,515
Total Revenue	64,801,169	27,055,661	334,889	92,191,719

In the following table, revenue of the Company is disaggregated by revenue category:

The Company
(in EUR)	2019	2018
Revenue from Services provided Over Time
Regulated revenue	63,858,110	59,484,658
Unregulated revenue	14,613,723	12,720,463
Revenue from Contracts with Customers	78,471,833	72,205,121
Revenue from Leases	17,696,470	15,850,940
Total Revenue	96,168,303	88,056,061

All the Group's revenues and its non-current assets other than financial assets are attributable to the Company's country of domicile.

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period either relates to contracts that have an original expected duration of one year or less or is in relation to contracts for which the Company and the Group provide a daily service of access that is distinct, with the uncertainty related to the consideration receivable being also resolved on that basis.

Year Ended 31 December 2019

7. Investment Income

Investment Income	The Group		The Company
(in EUR)	2019	2018	2019	2018
Interest income on loans receivable	-	-	386,243	402,562
Interest income on term deposits	37,436	-	37,436	-
Fair value gain/(loss) on other investments	-	(7,021)	-	(7,021)
Investment income/(loss)	37,436	(7,021)	423,679	395,541

8. Finance Cost

Finance Costs	The Group		The Company
(in EUR)	2019	2018	2019	2018
Interest on bank loans	-	148,915	-	139,212
Lease interest	2,079,535	-	2,079,535	-
Finance cost	2,079,535	148,915	2,079,535	139,212

9. Other Operating Expenses

Other Operating Expenses		The Group		The Company
(in EUR)	Notes	2019	2018	2019	2018
Air traffic services	34	929,611	921,173	929,611	921,173
Cleaning		1,315,288	1,113,657	1,245,007	1,049,310
Ground handling services	34	1,946,478	1,734,321	1,946,478	1,734,321
Insurance		384,153	353,999	368,013	338,771
Legal and professional fees		1,652,187	1,692,592	1,629,017	1,641,592
Lease payments on low-value items	33	13,746	-	13,746	-
Marketing and communication costs		5,930,982	6,013,894	6,116,950	5,969,883
Miscellaneous operating expenses		4,226,809	3,455,787	4,044,464	3,289,706
Operating lease and related payments	33	-	2,150,591	-	2,150,591
Other security services		205,916	167,879	146,868	117,530
Passenger security service		2,253,743	2,043,020	2,253,743	2,043,020
Provision of technical services		-	164,651	-	164,651
Repairs and maintenance		2,611,103	3,220,609	2,274,468	2,942,510
Net exchange differences		20,262	16,043	20,814	16,598
Restricted areas security service	34	1,471,875	1,800,000	1,471,875	1,800,000
Telecommunications		111,232	107,131	109,027	104,653
Utilities		2,878,105	3,040,622	2,863,910	3,026,072
Other operating expenses		25,951,490	27,995,969	25,433,991	27,310,381

Included in the legal and professional fees are amounts that are payable to the parent Company's auditor:

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Audit of the financial statements	63,800	62,000	49,850	48,350
Other assurance	54,490	8,685	54,490	8,685
Tax services	47,540	68,760	37,035	31,810

Year Ended 31 December 2019

10. Key Management Personnel Compensation

Directors' compensation		The Group		The Company
(in EUR)	2019	2018	2019	2018
Short-term benefits:
Fees	67,552	67,552	67,552	67,552
Management remuneration	508,647	506,433	508,647	506,433
Social security costs	2,420	2,416	2,420	2,416
	578,619	576,401	578,619	576,401

In addition, during the year under review, the Company granted other benefits to its directors. The aggregate amount of benefits, which includes monetary and non-monetary benefits, amounted to EUR 81,434 (2018: EUR 92,989). These amounts are included with other operating expenses.

Also, during the year under review, the Company maintained professional indemnity insurance for its directors. The aggregate amount of premiums paid in respect thereof amounted to EUR 14,909 (2018: EUR 12,972). These amounts are included with other operating expenses.

11. Staff Costs and Employee Information

Staff Costs	The Group		The Company
(in EUR)	2019	2018	2019	2018
Wages and salaries	9,977,695	8,976,006	9,756,626	8,759,034
Social security costs	707,628	631,662	691,880	622,605
Retirement benefit costs	109,471	73,999	109,471	73,999
Other retirement benefit costs	45,000	65,500	45,000	65,500
	10,839,794	9,747,167	10,602,977	9,521,138

The above amounts include the directors' compensation disclosed in Note 10.

The average number of persons employed during the year, including Executive Directors, was made up as follows:

Average No. of Employees	The Group		The Company
(Number)	2019	2018	2019	2018
Business development, operations and
marketing	226	198	217	189
Finance, IT and IM	25	22	25	22
Firemen	47	42	47	42
Met office	14	14	14	14
Technical and engineering	67	64	67	64
	379	340	370	331

Year Ended 31 December 2019

12. Income Tax Expense

Income tax recognised in profit or loss is as follows:

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Current tax expense	18,817,740	16,260,972	18,211,937	15,703,225
Deferred tax	(153,960)	502,240	(278,746)	366,117
Income tax expense for the year	18,663,780	16,763,212	17,933,191	16,069,342

Tax applying the statutory domestic income tax rate and the income tax expense for the year is reconciled as follows:

		The Group		The Company
(in EUR)	2019	2018	2019	2018
Profit before Tax	52,597,097	47,098,852	50,545,258	45,154,661
Tax at applicable rate of 35 %	18,408,984	16,484,598	17,690,840	15,804,131
Tax effect of:
Depreciation charges not deductible by way of capital allowances in determining taxable
income	321,075	345,963	262,572	287,590
Other net difference between accounting and tax deductible items of expenditure	(4,467)	(4,254)	(4,467)	(4,254)
Other differences	(61,812)	(63,095)	(15,754)	(18,125)
Income tax expense for the year	18,663,780	16,763,212	17,933,191	16,069,342

Deferred tax recognised in other comprehensive income is as follows:

		The Group The Company
(in EUR)	2019	2018	2019	2018
Deferred tax debit/(credit) on defined
benefit pension plans	72,532	(16,732)	72,532	(16,732)

13. Dividends

The net final dividend for 2018 of EUR 12,177,000 (EUR 9.0 cents per ordinary share) proposed by the directors of the Company in the previous financial year was approved by the shareholders at the Annual General Meeting on 15 May 2019 and was paid during the reporting on 29 May 2019. The net final dividend for 2017 of EUR 9,471,000 (EUR 7.0 cents per ordinary share) proposed by the directors during 2018 was paid in the comparative period on 25 May 2018.

On 13 September 2019, a net interim dividend of EUR 4,059,000 (EUR 3.0 cents per share) (2018: EUR 4,059,000 (EUR 3.0 cents per share)) was paid to ordinary shareholders of the Company.

The directors propose that a net final dividend of EUR 10.0 cents per ordinary share will be paid to ordinary shareholders in respect of the year ended 31 December 2019. This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements. The total proposed dividend to be paid is EUR 13,530,000.

Year Ended 31 December 2019

14. Property, Plant and Equipment

Property, Plant and Equipment						Furniture,
The Group	Land held on		Related Aerodrome			plant and fixtures,	Motor
(in EUR)	temporary emphyteusis		Licence	Buildings		equipment	vehicles	Total
Cost	Subject to operating leases	leases Not subject to operating		Subject to operating leases	leases Not subject to operating
At 1 January 2018	8,717,742	33,315,731	-	15,000,908	53,810,597	72,953,011	1,654,835	185,452,824
Additions	-	-	-	485,917	1,743,061	5,958,767	245,910	8,433,655
Write-offs	-	-	-	-	-	(10,418,595)	(412,827)	(10,831,422)
At 1 January 2019	8,717,742	33,315,731	-	15,486,825	55,553,658	68,493,183	1,487,918	183,055,057
Recognition of right-of-use asset on initial application of IFRS 16	9,268,773	25,251,359	10,746,985	-	-	-	73,613	45,340,730
At 1 January 2019 (adjusted)	17,986,515	58,567,090	10,746,985	15,486,825	55,553,658	68,493,183	1,561,531	228,395,787
Additions	-	-	-	151,189	5,712,417	13,417,301	93,979	19,374,886
Write-offs	-	-	-	-	-	(3,846,611)	(55,517)	(3,902,128)
At 31 December 2019	17,986,515	58,567,090	10,746,985	15,638,014	61,266,075	78,063,873	1,599,993	243,868,545
Accumulated depreciation
At 1 January 2018	2,067,670	7,901,811	-	5,918,787	21,231,612	40,946,618	1,521,932	79,588,430
Provision for the year	134,119	512,550	-	304,174	1,091,120	4,466,423	78,033	6,586,419
Write-offs	-	-	-	-	-	(10,418,595)	(412,827)	(10,831,422)
At 1 January 2019	2,201,789	8,414,361	-	6,222,961	22,322,732	34,994,446	1,187,138	75,343,427
Provision for the year	281,752	1,076,744	221,587	306,896	1,100,883	4,867,211	141,287	7,996,360
Write-offs	-	-	-	-	-	(3,846,610)	(55,518)	(3,902,128)
At 31 December 2019	2,483,541	9,491,105	221,587	6,529,857	23,423,615	36,015,047	1,272,907	79,437,659
Carrying amount
At 31 December 2018	6,515,954	24,901,369	-	9,263,864	33,230,926	33,498,737	300,780	107,711,630
At 1 January 2019 (adjusted)	15,784,726	50,152,729	10,746,985	9,263,864	33,230,926	33,498,737	374,393	153,052,360
At 31 December 2019	15,502,974	49,075,985	10,525,398	9,108,157	37,842,460	42,048,826	327,086	164,430,886

No depreciation is being charged on assets not yet available for use amounting to EUR 16,913,608 (2018: EUR 3,803,163).

Year Ended 31 December 2019

14. Property, Plant and Equipment (continued)

		Total				184,524,847	7,080,069	(10,831,422)	180,773,494	45,340,730	226,114,224	12,347,119	(3,902,128)	234,559,215		78,967,486	6,494,396	(10,831,422)	74,630,460	7,907,143	(3,902,128)	78,635,475		106,143,034	151,483,764	155,923,740
	Motor	vehicles				1,632,480	245,910	(412,827)	1,465,563	73,613	1,539,176	93,979	(55,517)	1,577,638		1,500,066	78,033	(412,827)	1,165,272	140,799	(55,518)	1,250,553		300,291	373,904	327,085
Furniture, fixtures,	plant and	equipment				72,047,389	5,875,959	(10,418,595)	67,504,753	-	67,504,753	11,612,993	(3,846,611)	75,271,136		40,347,540	4,374,400	(10,418,595)	34,303,345	4,778,861	(3,846,610)	35,235,596		33,201,408	33,201,408	40,035,540
			Not subject	to operating	leases	53,810,597	749,312	-	54,559,909	-	54,559,909	500,594	-	55,060,503		21,231,612	1,091,120	-	22,322,732	1,100,586	-	23,423,318		32,237,177	32,237,177	31,637,185
		Buildings	Subject to	operating	leases	15,000,908	208,888	-	15,209,796	-	15,209,796	139,552	-	15,349,348		5,918,787	304,174	-	6,222,961	306,813	-	6,529,774		8,986,835	8,986,835	8,819,574
Related	Aerodrome	Licence				-	-	-	-	10,746,985	10,746,985	-	-	10,746,985		-	-	-	-	221,587	-	221,587		-	10,746,985	10,525,398
			Not subject	to operating	leases	28,578,558	-	-	28,578,558	21,660,862	50,239,420	-	-	50,239,420		6,778,250	439,670	-	7,217,920	923,642	-	8,141,562		21,360,638	43,021,500	42,097,858
	Land held on	temporary emphyteusis	Subject to	operating	leases	13,454,915	-	-	13,454,915	12,859,270	26,314,185	-	-	26,314,185		3,191,231	206,999	-	3,398,230	434,855	-	3,833,085		10,056,685	22,915,955	22,481,100
	The Company	(in EUR)			Cost	At 1 January 2018	Additions	Write-offs	At 1 January 2019	Recognition of right-of-use asset on initial application of IFRS 16	At 1 January 2019 (adjusted)	Additions	Write-offs	At 31 December 2019	Accumulated depreciation	At 1 January 2018	Provision for the year	Write-offs	At 1 January 2019	Provision for the year	Write-offs	At 31 December 2019	Carrying amount	At 31 December 2018	At 1 January 2019 (adjusted)	At 31 December 2019
(2018: EUR 3,796,439).										No depreciation is being charged on assets not yet available for use amounting to EUR 8,226,395
										In addition, the cost of fully depreciated plant and equipment amounts to (2018: EUR 16,976,843) for both the Group and the Company.																EUR 15,298,080

No depreciation is being charged on assets not yet available for use amounting to EUR 8,226,395 (2018: EUR 3,796,439).

In addition, the cost of fully depreciated plant and equipment amounts to EUR 15,298,080 (2018: EUR 16,976,843) for both the Group and the Company.

Year Ended 31 December 2019

15. Investment Property

The investment property relates to the business centre which is located on a portion of the land held on temporary emphyteusis. The carrying amount of the Group includes the cost of construction and the cost of items that are an integral part of the building. With effect from 1 January 2019, the carrying amount of the Group and the Company includes the portion of the right-of-use asset in relation to the temporary emphyteusis of the leasehold land classified as investment property.

(in EUR)	The Group
Cost
At 1 January 2018	20,849,763
Additions from subsequent expenditure	15,367
At 1 January 2019	20,865,130
Recognition of right-of-use asset on initial application of IFRS 16 (Note 4)	341,460
At 1 January 2019 (adjusted)	21,206,590
Additions from subsequent expenditure	495,000
At 31 December 2019	21,701,590
Accumulated depreciation
At 1 January 2018	4,193,061
Provision for the year	797,984
At 1 January 2019	4,991,045
Provision for the year	804,859
At 31 December 2019	5,795,904
Carrying amount
At 31 December 2018	15,874,085
At 1 January 2019 (adjusted)	16,215,545
At 31 December 2019	15,905,686

The Company's investment property comprises the portion of the right-of-use asset in relation to the temporary emphyteusis of the leasehold land classified as investment property with a carrying amount of EUR 341,460 at 1 January 2019 (see Note 4) less depreciation charge for the year of EUR 6,969 resulting in the carrying amount of EUR 334,491 at 31 December 2019.

During the year, direct operating expenses of EUR 964,472 (2018: EUR 949,583), which arose from the investment property, were incurred. Such expenses were incurred in generating rental income during the year.

Fair Value

Based on an internal valuation carried out by the directors of the Company, the fair value of the investment property was in the region of EUR 40 million at the balance sheet date (2018: EUR 30 million).

The fair value measurement is categorised within Level 3 of the fair value hierarchy. The model is based on the present value of the net cash flows expected to be generated by the property on the basis of market expectations and includes the rates stipulated in the existing contracts with tenants, expected increase in rents after the non-cancellable period, occupancy rates and all other costs attributable to these assets. The expected net cash flows are discounted using a discount factor representing a weighted average cost of capital that is considered appropriate in the circumstances. The net cash flows reflect the amounts in the 2020 budget and long-term corporate planning.

In estimating fair value, the highest and best use of the property is its current use.

Year Ended 31 December 2019

16. Investment in Subsidiaries

The Company's investment in subsidiaries is stated at cost and comprises:

Share Capital		The Company
(in EUR)	2019	2018
Airport Parking Limited	1,200	1,200
Sky Parks Development Limited	2,001,200	2,001,200
Sky Parks Business Centre Limited	1,200	1,200
Kirkop PV Farm Limited	1,200	1,200
Investment in subsidiaries	2,004,800	2,004,800

The Company holds a 100% (2018: 100%) ownership in the ordinary share capital of Airport Parking Limited, a limited liability company incorporated in Malta, whose principal activity is the operation of car parks within the limits of the airport.

The Company holds a 100% (2018: 100%) ownership in the ordinary share capital of Sky Parks Development Limited, a limited company incorporated in Malta, whose principal activity is to manage real estate projects within the land which is currently under the management of the Group.

The Company holds a 100% (2018: 100%) ownership in the ordinary share capital of Sky Parks Business Centre Limited, a limited liability company incorporated in Malta, whose principal activity is to operate the Business Centre within the limits of the airport.

The Company holds a 100% (2018: 100%) ownership in the ordinary share capital of Kirkop PV Farm Limited, a limited liability company incorporated in Malta. The principal activity of this company is to explore opportunities in the generation of electricity using photovoltaic technologies.

The principal place of business of the company's subsidiaries is Malta. The registered offices for these subsidiaries are as follows:

Airport Parking Ltd

Level 2 Malta International Airport Head Office Malta International Airport Luqa LQA 4000

Sky Parks Development Ltd

Malta International Airport Head Office Malta International Airport Luqa LQA 4000

Sky Parks Business Centre Ltd Malta International Airport Head Office Malta International Airport Luqa LQA 4000

Kirkop PV Farm Limited Malta International Airport Head Office Malta International Airport Luqa LQA 4000

Year Ended 31 December 2019

16. Investment in Subsidiaries (continued)

The following table shows financial information for the consolidated subsidiaries:

Airport Parking Ltd (in EUR) 2019 2018 Profit for the year 465,946 350,663 Share Capital 1,200 1,200 Retained earnings 1,758,810 1,292,863 Total Equity 1,760,010 1,294,063

Sky Parks Development Ltd

(in EUR)	2019	2018
Profit for the year	415,006	387,555
Share Capital	2,001,200	2,001,200
Accumulated Losses	(2,672,200)	(3,087,206)
Total Equity	(671,000)	(1,086,006)

Sky Parks Business Centre Ltd.

(in EUR)	2019	2018
Profit for the year	440,296	512,102
Share Capital	1,200	1,200
Retained earnings	1,412,152	971,856
Total Equity	1,413,352	973,056

17. Other Investments

Investment fund policy

The Group & The Company
(in EUR)	Fair Value
Fair value
At 1 January 2018	107,578
Disposals	(100,557)
Movement in fair value	(7,021)
At 1 January 2019	-
At 31 December 2019	-

As at 1 January 2018, the Company held a policy which was linked to a number of unit-linked investment funds. Its fair value was determined by the prices quoted on the Malta Stock Exchange for the underlying funds (Level 2).

Upon the adoption of IFRS 9 on 1 January 2018, the asset was reclassified from available-for-sale to financial assets measured at FVTPL. This reclassification did not result in a change to the asset's carrying amount.

During the period ended 31 December 2018 the investment fund policy was surrendered.

Year Ended 31 December 2019

18. Loans Receivable

The Company (in EUR)	Loans to subsidiary
Amortised cost
At 31 December 2019	22,407,198
Less: Amount expected to be settled within 12 months (shown under current assets)	1,290,720
Amount expected to be settled after 12 months	21,116,478
The Company (in EUR)	Loans to subsidiary
Amortised cost
At 31 December 2018	18,797,918
Less: Amount expected to be settled within 12 months (shown under current assets)	1,290,720

The Company has granted four unsecured loans to subsidiaries. One of these loans was granted in the reporting period and represents a loan commitment of EUR 20 million which was partly drawn down during 2019 (EUR 4.9 million). The interest rates of all loans are at arm's length and comprise a margin which is over and above the bank base rate.

Two loans with a total amount outstanding as at the end of the reporting period of EUR 12.9 million (2018: EUR 14.2 million) are being repaid on equal annual instalments until 2029, whilst the loan granted in the reporting period of EUR 4.9 million is repayable from 2021 and shall be repaid in full by the year 2040. Repayments of the fourth loan with an amount outstanding of EUR 4.6 million (2018: EUR 4.6 million) will commence in 2030.

The following table shows a reconciliation from the opening to the closing balances for the loans to the subsidiaries:

The Company	Loans to
(in EUR)	subsidiary
Carrying amount
At 31 December 2017	18,363,315
Additions	1,725,323
Repayments	(1,290,720)
At 31 December 2018	18,797,918
Additions	4,900,000
Repayments	(1,290,720)
At 31 December 2019	22,407,198

Year Ended 31 December 2019

19. Deferred Taxation

The Group (in EUR)	31.12.2017	Movement for the year	31.12.2018	Movement for the year	31.12.2019
Arising on:	Recognised in Total Comprehensive Income:
Accelerated tax depreciation	(1,499,063)		(406,861) (1,905,924)		(239,314) (2,145,238)
Provision for pension costs	1,341,485	(132,485)	1,209,000	(10,982)	1,198,018
Deferred income	1,784,655	(73,069)	1,711,586	(73,068)	1,638,518
Unabsorbed capital allowances	1,588,656	51,714	1,640,370	44,588	1,684,958
Leases	1,607,260	156,170	1,763,430	456,055	2,219,485
Future deductions of refinancing costs	968,309	(85,976)	882,333	(82,077)	800,256
Other temporary differences	182,621	4,997	187,618	114,555	302,173
Subtotal	5,973,923	(485,510)	5,488,413	209,757	5,698,170
Arising on:	Other movements:
Revaluation of properties on privatisation	(635,084)	26,193	(608,891)	608,891	-
Provision for pension costs	206,204	-	206,204	-	206,204
Subtotal	(428,880)	26,193	(402,687)	608,891	206,204
Total	5,545,043	(459,317)	5,085,726	818,648	5,904,374

The Company (in EUR)	31.12.2017	Movement for the year	31.12.2018	Movement for the year	31.12.2019
Arising on:		Recognised in Total Comprehensive Income:
Accelerated tax depreciation	(170,573)	(314,205)	(484,778)	(142,363)	(627,141)
Provision for pension costs	1,341,485	(132,485)	1,209,000	(10,982)	1,198,018
Deferred income	1,784,655	(73,069)	1,711,586	(73,067)	1,638,519
Leases	1,607,260	156,168	1,763,428	456,058	2,219,486
Other temporary differences	185,049	14,204	199,253	104,898	304,151
Subtotal	4,747,876	(349,387)	4,398,489	334,544	4,733,033
Arising on:	Other movements:
Revaluation of properties on privatisation	(635,084)	26,193	(608,891)	608,891	-
Provision for pension costs	206,204	-	206,204	-	206,204
Subtotal	(428,880)	26,193	(402,687)	608,891	206,204
Total	4,318,996	(323,194)	3,995,802	943,435	4,939,237

The movement recognised in total comprehensive income during the current year for both the Group and the Company includes deferred tax of EUR 72,532 (2018: EUR 16,732) in connection with defined benefit plans, which deferred tax was recognised in other comprehensive income.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The amount of deferred tax assets that can be recognised is based upon the likely timing and level of future taxable profits together with future tax-planning strategies.

Year Ended 31 December 2019

20. Inventories

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Consumables	872,242	884,352	872,242	884,352

21. Trade and Other Receivables

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Trade receivables	13,080,993	13,190,401	12,680,165	12,825,074
Receivables from other related parties	685,429	3,355,751	685,429	3,355,751
Receivables from subsidiaries	-	-	1,771,305	910,199
Other receivables	2,245,616	2,241,090	1,393,427	1,790,851
Prepayments and accrued income	1,740,506	1,215,664	1,458,403	912,240
	17,752,544	20,002,906	17,988,729	19,794,115

The terms and conditions of the receivables from subsidiaries and related parties are disclosed in Note 32. Trade receivables are non-interest bearing and are generally on 30-day terms.

Impairment of Trade Receivables

For details on the accounting policies with respect to trade receivables and impairment of trade receivables refer to Note 39.

	Loss Allowance
The Group (in EUR)	Individual Assessment	Collective Assessment	Total
At 1 January 2018	121,257	22,439	143,696
Impairment loss	-	40,578	40,578
Reversal of impairment loss	(22,421)	-	(22,421)
At 31 December 2018	98,836	63,017	161,853
Impairment loss	202,709	117,936	320,645
Reversal of impairment loss	(36,065)	-	(36,065)
At 31 December 2019	265,480	180,953	446,433

The Company (in EUR)	Individual Assessment	Collective Assessment	Total
At 1 January 2018	70,697	22,439	93,136
Impairment loss	-	40,578	40,578
At 31 December 2018	70,697	63,017	133,714
Impairment loss	202,709	117,936	320,645
Reversal of impairment loss	(20,933)	-	(20,933)
At 31 December 2019	252,473	180,953	433,426

Year Ended 31 December 2019

21. Trade and Other Receivables (continued)

The movement in the allowance for impairment in respect of trade receivables during the year for the Group and the Company was as follows:

The Group	Collective	Collective	Individual
LT-ECL (in EUR)	(not credit impaired)	(credit-impaired, but not POCI)	(credit-impaired, but not POCI)	Total
Balance as at 1 January 2018	-	22,439	121,257	143,696
Addition	34,224	6,354	-	40,578
Reversal	-	-	(22,421)	(22,421)
Balance as at 31 December 2018	34,224	28,793	98,836	161,853
Addition	78,548	39,388	202,709	320,645
Reversal	-	-	(36,065)	(36,065)
Balance as at 31 December 2019	112,772	68,181	265,480	446,433

The Company	Collective	Collective	Individual
LT-ECL (in EUR)	(not credit impaired)	(credit-impaired, but not POCI)	(credit-impaired, but not POCI)	Total
Balance as at 1 January 2018	-	22,439	70,697	93,136
Addition	34,224	6,354	-	40,578
Balance as at 31 December 2018	34,224	28,793	70,697	133,714
Addition	78,548	39,388	202,709	320,645
Reversal	-	-	(20,933)	(20,933)
Balance as at 31 December 2019	112,772	68,181	252,473	433,426

The Group and the Company do not hold any collateral over the past due but not impaired balances. These trade receivables are substantially companies with good track records with the Group.

22. Trade and Other Payables

Trade and Other Payables		The Group	The Company
(in EUR)	2019	2018	2019	2018
Trade payables	2,737,338	2,044,849	2,549,563	2,002,509
Other payables	1,046,151	8,352,995	1,299,879	8,116,828
Payables due to subsidiaries	-	-	605,705	546,410
Contract liabilities	383,158	409,174	383,159	409,174
Accruals and deferred income	39,625,556	35,768,086	37,798,203	35,296,433
	43,792,203	46,575,104	42,636,509	46,371,354

Contract liabilities represent prepayments from contracts with customers in relation to VIP services. The balance as at 31 December 2018 of EUR 409,174 was fully recognised as revenue during the reporting period and the balance as at 1 January 2018 of EUR 287,397 was fully recognised as revenue during the comparative period.

Terms and conditions of the above financial liabilities:

• Trade payables are non-interest bearing and are normally settled on 30-day terms.
• Other payables are non-interest bearing and have an average term of three months.
• The terms and conditions of the payables due to the related party and the subsidiaries are disclosed in Note 32.

All the above amounts are unsecured.

Year Ended 31 December 2019

23. Deferred Income

The Group	Movement for the year
(in EUR)	2018	Transfer	Amortisation	2019
Deferred income arising from the gain on the sale and leaseback of the buildings and fixtures upon
privatisation	4,890,253	1,739,678	(283,603)	6,346,328
European Commission grant	362,315	-	(40,255)	322,060
Government grant	19,980	-	(9,989)	9,991
Deposit received from tenant	113,965	(3,610)	-	110,355
Total deferred income as at 31 December	5,386,513	1,736,069	(333,847)	6,788,734
Less amounts included in trade and other payables	(259,009)			(333,849)
Amounts included in non-current liabilities	5,127,504			6,454,885

The Group	Movement for the year
(in EUR)	2017	Additions	Amortisation	2018
Deferred income arising from the gain on the sale and leaseback of the buildings and fixtures upon
privatisation	5,099,018	-	(208,765)	4,890,253
European Commission grant	402,570	-	(40,255)	362,315
Norwegian grant	51,762	-	(51,762)	-
Government grant	29,971	-	(9,991)	19,980
Deposit received from tenant	98,819	15,146	-	113,965
Total deferred income as at 31 December	5,682,140	15,146	(310,773)	5,386,513
Less amounts included in trade and other payables	(310,772)			(259,009)
Amounts included in non-current liabilities	5,371,368			5,127,504

The Company	Movement for the year
(in EUR)	2018	Transfer	Amortisation	2019
Deferred income arising from the gain on the sale and leaseback of the buildings and fixtures upon
privatisation	4,890,253	1,739,678	(283,603)	6,346,328
European Commission grant	362,315	-	(40,255)	322,060
Government grant	19,980	-	(9,989)	9,991
Total deferred income as at 31 December	5,272,548	1,739,678	(333,847)	6,678,379
Less amounts included in trade and other payables	(259,009)			(333,849)
Amounts included in non-current liabilities	5,013,539			6,344,530

The Company	Movement for the year
(in EUR)	2017	Additions	Amortisation	2018
Deferred income arising from the gain on the sale and leaseback of the buildings and fixtures upon
privatisation	5,099,018	-	(208,765)	4,890,253
European Commission grant	402,570	-	(40,255)	362,315
Norwegian grant	51,762	-	(51,762)	-
Government grant	29,971	-	(9,991)	19,980
Total deferred income as at 31 December	5,583,321	-	(310,773)	5,272,548
Less amounts included in trade and other payables	(310,772)			(259,009)
Amounts included in non-current liabilities	5,272,549			5,013,539

Year Ended 31 December 2019

23. Deferred Income (continued)

The deferred income arising from the gain on the sale and leaseback of the buildings and fixtures that took place on the date of the privatisation of the Company in 2002 is being taken to income in accordance with the accounting policy stated in Note 39.

The European Commission grant is composed of grants related to assets and which were received in 2006 and 2011 in respect of the upgrading of the taxiways project. The Government grant is related to the installation of the photovoltaic system and was received in 2011. The Norwegian grant was related to the implementation of the Schengen project and was received in 2009.

24. Provision for the Retirement Benefit Plan

Provision for Retirement Benefit Fund	The Group		The Company
(in EUR)	2019	2018	2019	2018
Non-current provision	3,880,077	3,906,809	3,880,077	3,906,809

The provision at year end represents the estimated amounts that are to be reimbursed by the Company to the Government of Malta. The provision for retirement benefits is unfunded and represents the Company's and the Group's share of the year end provision in accordance with the Pensions Ordinance (Cap 93) for obligations relating to pensions of employees who joined the public service before 15 January 1979 and were transferred to the Company.

The provision has been computed in accordance with the accounting policy stated in Note 40 and represents the Company's and the Group's obligation (i) discounted to the net present value at the rate which has been determined by reference to market yields at the end of the reporting period on high quality corporate bonds in Euros (ii) after considering the average life expectancy of such employees based on the latest publicly available mortality tables and (iii) where applicable, expected rates of salary increases based on the inflation and previous increases given to employees and (iv) the Company's expectations, based on historic data, of the payment options that will be selected by the plan members, being either an annual benefit per employee or a lump sum payment plus a reduced annual benefit per employee until death, capped in accordance with statutory requirements.

The movement in the provision for retirement benefit plan may be analysed as follows:

The Group & The Company (in EUR)	2019	2018
Present value of the provision for retirement benefits at 1 January	3,906,809	4,408,590
Payments effected	(289,877)	(500,326)
Recognised in Staff costs
Charge for the year	67,084	45,020
thereof Service costs	66,547	44,210
thereof Interest costs	537	810
Recognised in Other Comprehensive Income
Actuarial gains resulting from changes in financial assumptions, gross of deferred tax	196,061	(46,475)
Present value of the provision for
retirement benefits at 31 December	3,880,077	3,906,809

The year-end obligation includes EUR 3,676,334 (2018: EUR 3,661,664) in relation to retired employees.

Year Ended 31 December 2019

24. Provision for the Retirement Benefit Plan (continued)

The plan exposes the Group and the Company to such risks as (i) interest risk, since a decrease in market yields will increase the plan liability; (ii) longevity risk, since an increase in the life expectancy of the plan participants will increase the plan liability; and (iii) salary risk, since an increase in the salary of the plan participants will increase the plan liability.

The significant actuarial assumptions used to determine the present value of the retirement benefit plan were as follows:

	2019	2018
Discount rate(s)	0.8%	1.8%
Mortality rate(s) in years
- Males	79	79
- Females	83	83

The sensitivity analyses below are in connection with each significant actuarial assumption and are prepared as of the end of the reporting period, showing how the defined benefit obligation would have been affected by hypothetical changes in the relevant actuarial assumption that were reasonably possible at that date, while holding all other assumptions constant.

The sensitivity analyses presented below are for illustrative purposes only and may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. In presenting the sensitivity analyses, the present value of the obligation has been calculated using the projected unit credit method at the end of the reporting period. The amounts generated from the sensitivity analyses represent forwardlooking estimates and hence, actual results in the future may differ materially from those projected results.

• If the discount rate is 25 basis points higher (lower) with all other assumptions held constant, the defined benefit obligation decreases by EUR 55,469 (increases by EUR 57,150) (2018: decreases by EUR 56,531 (increases by EUR 58,272)).
• If the life expectancy increases (decreases) by one year for both men and women with all other assumptions held constant, the defined benefit obligation increases by EUR 229,505 (decreases by EUR 225,131) (2018: increases by EUR 195,623 (decreases by EUR 209,033)).

The weighted average duration of the defined benefit obligation at 31 December 2019 is 18 years (2018: 18 years) in relation to employees that are still employed by the Company and 12 years (2018: 12 years) in relation to retired employees.

25. Provision for the MIA Benefit Plan

Provision for Retirement Benefit Fund	The Group		The Company
(in EUR)	2019	2018	2019	2018
Non-current provision	293,797	250,638	293,797	250,638

The provision for the MIA benefit plan is unfunded and represents the year-end provision for obligations relating to payments to employees after their retirement as per the Company's Collective Agreement. The provision has been computed in accordance with the accounting policy stated in Note 40 and represents the Company's possible obligation discounted to the net present value at the rate which has been determined by reference to market yields at the end of the reporting period on high quality corporate bonds in Euros after considering the probability that employees reach the applicable retirement age when they are still in employment with the Company.

Year Ended 31 December 2019

25. Provision for the MIA Benefit Plan (continued)

The movement in the provision for retirement pension plan may be analysed as follows:

The Group & The Company
(in EUR)	2019	2018
Present value of the provision for MIA benefit
plan at 1 January	250,638	222,989
Payments effected	(10,400)	-
Recognised in Staff costs
Charge for the year	42,387	28,979
Recognised in Other Comprehensive
Income
Actuarial gains resulting from changes in
financial assumptions, gross of deferred tax	11,172	(1,330)
Present value of the provision for
MIA benefit plan at 31 December	293,797	250,638

26. Share Capital

The Company	As at 31.12.2019 and 31.12.2018
		Issued and
(in EUR)	Authorised	called up
111,809,746 "A" ordinary shares of EUR 0.25 each (81,179,990 of which have been issued, called up and fully paid)	27,952,436	20,294,997
74,539,840 "B" ordinary shares of EUR 0.25 each (54,120,000 of which have been issued, called up and fully paid)	18,634,960	13,530,000
14 "C" ordinary shares of EUR 0.25 each (10 of which have been issued, called up and fully paid)	4	3
	46,587,400	33,825,000

The Ordinary 'A' and 'B' shares have the same rights, benefits, powers in the Company and are freely transferable. Ordinary 'C' shares carry no voting rights and do not receive dividends.

Shareholders owning 5% or more of the Company's equity share capital at 31 December 2019 were:

Shareholder	Share	Type
Malta Mediterranean Link Consortium Ltd. *	40.0%	'B' shares
Government of Malta	20.0%	'A' and 'C' shares
VIE (Malta) Limited	10.1%	'A' shares

* of which VIE (Malta) Limited constitutes 95.85%

The number of shareholders developed as follows:

Number of Shareholders	31.12.2019	13.09.2019	Change
1-500 shares	384	431	-47
501-1,000 shares	740	765	-25
1,001-5,000 shares	3,692	3,604	88
5,001 and over	1,562	1,539	23
	6,378	6,339	39

Year Ended 31 December 2019

27. Term Deposits

In the reporting period, the Company deposited EUR 5.0 million into a fixed term deposit account with a maturity of one year carrying a fixed interest rate.

28. Cash and Cash Equivalents

Cash and cash equivalents shown in the statements of cash flow comprise the following amounts presented in the Statements of Financial Position:

Provision for Retirement Benefit Fund		The Group	The Company
(in EUR)	2019	2018	2019	2018
Cash and cash equivalents	28,174,981	20,253,186	26,691,276	18,553,002

29. Earnings per Share

Earnings per ordinary share for the Group and the Company have been calculated by dividing the net profit for the year after taxation attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Provision for Retirement Benefit Fund		The Group	The Company
	2019	2018	2019	2018
Profit for the year attributable to ordinary equity
holders of the company (in EUR)	33,965,588	30,335,640	32,612,066	29,085,319
Weighted average number of shares	135,299,990	135,299,990	135,299,990	135,299,990
Earnings per share attributable to ordinary
equity holders of the Company (in EUR)	0.251	0.224	0.241	0.215

There is no difference between the basic and diluted earnings per share as the Company has no potential dilutive ordinary shares.

The effect on earnings per share upon initial adoption of IFRS 16 on 1 January 2019 is disclosed in Note 4.

30. Capital Commitments

Provision for Retirement Benefit Fund		The Group	The Company
(in EUR)	2019	2018	2019	2018
Property, plant and equipment:
Contracted but not provided for	9,416,173	1,679,656	2,587,772	1,679,656
Authorised but not contracted for	27,985,100	24,293,177	18,232,659	13,503,150
Investment property:
Contracted but not provided for	-	-	-	-
Authorised but not contracted for	700,000	475,000	-	-

Year Ended 31 December 2019

31. Contingent Liabilities

At reporting date, there existed the following contingent liabilities:

• (i) claims filed by former employees of the Company for unfair dismissal and wrong application of disciplinary procedures, the amount of which has not been determined;
• (ii) a claim filed by former CEO for unfair dismissal, the amount of which has not been determined;
• (iii) A judicial protest first lodged by the Government of Malta in 2008 relating to reimbursement of specified expenses and which were last estimated by the Government to amount to approximately EUR 5.1 million as at 31 December 2019 (2018: EUR 5.1 million)

In the directors' opinion, all the above contingent liabilities are unfounded.

32. Related Party Disclosures

During the course of the year, the Group and the Company entered into transactions with related parties as set out below. Transactions between the Company and its subsidiaries have been eliminated on consolidation. The related party transactions in question were:

	2019			2018
	Related			Related
The Group	party	Total		party	Total
(in EUR)	activity	activity	%	activity	activity	%
Revenue
Related party transaction with:
Entities controlled by Government	22,218,790			21,604,978
Entities that control the Company's parent	85			3,227
	22,218,875	100,232,676	22	21,608,205	92,191,719	23
Other operating expenses
Related party transaction with:
Key management personnel of the Group	674,961			682,362
Related parties other than the parent and
key management personnel of the Group	3,108,956			3,039,195
	3,783,917	25,951,490	15	3,721,557	27,995,969	13
		2019		2018
	Related			Related
The Company	party	Total		party	Total
(in EUR)	activity	activity	%	activity	activity	%
Revenue
Related party transaction with:
Entities controlled by Government	21,874,408			21,232,502
Subsidiaries	1,749,640			2,055,760
Entities that control the Company's parent	85			3,227
	23,624,133	96,168,303	25	23,291,489	88,056,060	26
Other operating costs
Related party transactions with:
Key management personnel of the Company	674,961			682,362
Related parties other than parent and key
management personnel of the Company	3,108,956			3,039,195
	3,783,917	25,433,993	15	3,721,557	27,310,381	14

Year Ended 31 December 2019

32. Related Party Disclosures (continued)

The Company has earned interest income amounting to EUR 386,243 (2018: EUR 402,562) on the loans granted to subsidiaries (see Note 18).

The Company's and the Group's other operating costs for the current year in relation to related parties other than the parent and key management personnel comprise EUR 2,937,771 (2018: EUR 2,870,760) in connection with entities controlled by Government and EUR 171,185 (2018: EUR 168,435) which in connection with entities which have an equity interest in the Company's parent.

The amounts due to/from related parties are disclosed in Note 18, 21 and 22. The terms and conditions do not specify the nature of the consideration to be provided in settlement. No guarantees have been given or received. These amounts were unsecured and, except as specified in Note 18, are interest-free.

In addition to the above, the details of the material contracts entered into by the Company in the year ended 31 December 2019 with its substantial shareholders and their related parties are disclosed in Note 34.

Right-of-use assets presented in the Statement of Financial Position within Property, plant and equipment and Investment Property and recognised on 1 January 2019 in terms of IFRS 16 include the Group's right to use the land and the buildings held on temporary emphyteuses with annual ground rents payable to Malita Investments plc (previously to the Government of Malta) and the corresponding licence payable to the Government of Malta, as further disclosed in Notes 4 and 34. The annual depreciation is recognised as an expense over the earlier of the end of the useful life of the right-of-use assets or the end of the lease term. The interest expense on the lease liability is recognised using the effective interest method.

Prior to 1 January 2019, the upfront payments in relation to the temporary emphyteusis of the leasehold land and buildings were recognised within property, plant and equipment and amortised in accordance with the Group's accounting policies. The corresponding operating lease and related payments are disclosed in Note 33.

33. Lease Arrangements

The Group and the Company as lessee

Current year

The Company and the Group initially applied IFRS 16 Leases in the current reporting period. The impact upon transition to the new standard and the related disclosures are outlined in Note 4.

Upon the initial adoption of IFRS 16 with effect from 1 January 2019, the Group and the Company recognised right-of-use assets within Property, Plant and Equipment and Investment Property.

Right-of-use assets are primarily in relation to the temporary emphyteusis of the leasehold land and buildings with ground rents payable by the Company to Malita Investments plc (previously to the Government of Malta) and further payments for the related aerodrome licence fee payable to the Government of Malta, with no renewal option included in the contracts. The term of the leases ranges from 58 years to 65 years and the lease payments on the temporary emphyteusis are adjusted upwards periodically by a specified rate. The payments for the related aerodrome licence fee are subject to revisions in terms of the Airport Economic Regulations and are directly linked to revisions in airport charges. There are no residual value guarantees in this respect. The lessor has a special privilege in relation to the obligations emanating from the temporary emphyteuses and a general hypothec over all the property of the Company, present and future. The Group is entitled to enjoy and make full use of the emphyteutical site as provided in the contractual arrangement, with the terminal building to be used only as an airport passenger terminal, the terminal land to be used for the purposes necessary for, ancillary to and/or related with the operation of an international airport and the aerodrome sites to be used for such commercial, industrial or administrative purposes as the Company may consider appropriate, provided that such activities are related or ancillary to the aviation industry or are designed to provide facilities and services which are complimentary to the operation of the terminal site and all the activities therein carried out.

Year Ended 31 December 2019

33. Lease Arrangements (continued)

Right-of-use assets also comprise applicable amounts in relation to leases of motor vehicles with a lease contract commencing in 2014 and ending in 2020. The motor vehicle lease contract includes termination and purchase options, both of which are not expected to be exercised by the Company with reasonable certainty. There are no residual value guarantees in this respect.

For leases of low value assets, which relate to the multi-function printers situated in the administration offices, the Company has applied the optional recognition exemptions to not recognise right-of-use assets as at the date of initial application of the standard. This expense is presented in Note 9.

The adjustment at 1 January 2019 in relation to right-of-use assets classified as investment property is disclosed in Note 15.

The adjustment at 1 January 2019 and the movements during the year in relation to right-of-use assets classified as property, plant and equipment are disclosed below:

The Group & The Company (in EUR)	Additions as at 1 Jan 2019	Reclassi- fications as at 1 Jan 2019	amount 1 Jan 2019	Carrying Depreciation charge for the year	Carrying amount 31 Dec 2019
Land held on temporary emphyteusis	34,520,132	31,417,323	65,937,455	(1,358,496)	64,578,959
Related aerodrome licence	10,746,985	-	10,746,985	(221,587)	10,525,398
Buildings	-	25,174,531	25,174,531	(1,074,702)	24,099,829
Motor vehicles	73,613	-	73,613	(51,963)	21,650
Total right-of-use assets classified as property, plant and equipment	45,340,730	56,591,854	101,932,584	(2,706,748)	99,225,836

The interest expense for the year on lease liabilities amounts to EUR 2,079,535 and is included in Note 8. Expenses relating to low value assets for which the recognition exemption is applied are presented in Note 9. Total cash outflows during the year in relation to leases amounted to EUR 1,693,705.

Comparative year

The Group & The Company
(in EUR)	2018
Minimum lease payments under operating lease
and related payments recognised as an expense
for the year	2,150,591

In the comparative year, the Company and the Group had outstanding commitments under non-cancellable operating lease and related payments as follows:

The Group & The Company
(in EUR)	2018
Within one year	1,640,966
In the second to fifth years inclusive	6,846,049
After five years	130,578,350
	139,065,365

The lessor has a special privilege in relation to the obligations emanating from the temporary emphyteuses and a general hypothec over all the property of the Company, present and future.

Year Ended 31 December 2019

33. Lease Arrangements (continued)

The Group and the Company as lessor

Current year

			The Group	The Company
(in EUR)			2019	2019
Lease income under operating leases recognised as income for the year			5,175,870	3,134,423
Lease income under operating leases relating to variable
lease payments that do not depend on an index or a rate			14,713,235	14,829,565
Total lease income under operating leases recognised as income for the year		19,889,105	17,963,988
	The Group	The Company
(in EUR)	2019	2019
Year 1	3,735,923	1,440,204
Year 2	3,641,366	1,458,467
Year 3	3,528,861	1,476,898
Year 4	2,559,360	1,482,563
Year 5	2,332,365	1,505,298
Year 6 and onwards	23,329,522	25,059,555
	39,127,397	32,422,985
arrangements ranges between 1 month and 9 years. The leases include periodic adjustments by a specified rate and variable portions linked to the turnover of the lessees. Operating lease income also includes income from the lease to tenants of commercial property within the building held on temporary emphyteusis. The terms of these leases range from 2 months to 30 years. The
leases include periodic adjustments by a specified rate and variable portions linked to the turnover of lessees. Operating lease income receivable by the Company also includes income from the lease to a subsidiary of certain carparks situated on portions of land held on temporary emphyteusis and classified as property, plant and equipment and income from the lease of the land on which the investment property is built, which investment property is also situated on portions of land held on temporary emphyteusis. The leases terminate in 2048 and 2035 respectively. One of the leases includes periodic adjustments by a specified rate and the other comprises fixed annual amounts and variable portions linked to the turnover of the lessee. The lease in connection with the car parks was replaced with effect from 1 January 2019.
Where the lease income is adjusted periodically by a specified rate, the lease income is recognised on a straight-line basis over the lease term.
The income above includes an amount of EUR 3,184,316 generated by the Group in relation to the business centre classified as investment property as well as an amount of EUR 75,443 generated by the Company in relation to the corresponding right-of-use assets in relation to the land on which the business centre is located. The Group and the Company generate EUR 16,704,789 and EUR 17,888,545, respectively, from subleasing right-of-use assets that are classified as property, plant and equipment.
All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have an option to purchase the property at the expiry of the lease period. The Group manages credit risk from operating lease contracts by implementing contractual terms that ensure that rentals are payable quarterly in advance. All leases include clauses to enable upward revision of the rental charge according to prevailing market conditions or at pre-fixed rates. In addition, the Group obtains security deposits from tenants, in the form of bank guarantees for the term of the lease.

	The Group	The Company
(in EUR)	2019	2019
Year 1	3,735,923	1,440,204
Year 2	3,641,366	1,458,467
Year 3	3,528,861	1,476,898
Year 4	2,559,360	1,482,563
Year 5	2,332,365	1,505,298
Year 6 and onwards	23,329,522	25,059,555
	39,127,397	32,422,985

Operating lease income receivable by the Group includes income from leases of portions of land held on temporary emphyteuses and classified as property, plant and equipment. The term of the principal noncancellable lease arrangements ranges between 3 months and 21 years and the lease receivables are adjusted upwards periodically by a specified rate.

Operating lease income receivable by the Group also includes the lease of the investment property built on a portion of land held on temporary emphyteuses. The term of the principal non-cancellable lease arrangements ranges between 1 month and 9 years. The leases include periodic adjustments by a specified rate and variable portions linked to the turnover of the lessees.

Operating lease income also includes income from the lease to tenants of commercial property within the building held on temporary emphyteusis. The terms of these leases range from 2 months to 30 years. The leases include periodic adjustments by a specified rate and variable portions linked to the turnover of lessees.

Operating lease income receivable by the Company also includes income from the lease to a subsidiary of certain carparks situated on portions of land held on temporary emphyteusis and classified as property, plant and equipment and income from the lease of the land on which the investment property is built, which investment property is also situated on portions of land held on temporary emphyteusis. The leases terminate in 2048 and 2035 respectively. One of the leases includes periodic adjustments by a specified rate and the other comprises fixed annual amounts and variable portions linked to the turnover of the lessee. The lease in connection with the car parks was replaced with effect from 1 January 2019.

Where the lease income is adjusted periodically by a specified rate, the lease income is recognised on a straight-line basis over the lease term.

The income above includes an amount of EUR 3,184,316 generated by the Group in relation to the business centre classified as investment property as well as an amount of EUR 75,443 generated by the Company in relation to the corresponding right-of-use assets in relation to the land on which the business centre is located. The Group and the Company generate EUR 16,704,789 and EUR 17,888,545, respectively, from subleasing right-of-use assets that are classified as property, plant and equipment.

All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have an option to purchase the property at the expiry of the lease period. The Group manages credit risk from operating lease contracts by implementing contractual terms that ensure that rentals are payable quarterly in advance. All leases include clauses to enable upward revision of the rental charge according to prevailing market conditions or at pre-fixed rates. In addition, the Group obtains

Year Ended 31 December 2019

33. Lease Arrangements (continued)

Comparative year

(in EUR)	The Group 2018	The Company 2018
Minimum lease payments under operating lease recognised as income for the year	5,996,421	2,868,713

At the reporting date, the Company and the Group had non-cancellable operating lease receivables as follows:

(in EUR)	The Group 2018	The Company 2018
Within one year	4,148,394	1,363,988
In the second to fifth years inclusive	13,160,046	5,618,133
After five years	27,657,493	25,064,853
	44,965,933	32,046,974

Operating lease income receivable by the Group represents income from leases of land held on temporary emphyteuses. The term of the principal non-cancellable lease arrangements ranges between 21 and 25 years and the lease receivables are adjusted upwards periodically by a specified rate. It also includes income from the lease of commercial property to tenants. The term of these leases ranges from 1 year to 10 years and the lease receivables are adjusted upwards periodically by specified rates.

Operating lease income receivable by the Company also includes income from the lease of land to subsidiaries. The term of the lease is of 25 years and the lease receivables are adjusted upwards periodically by a specified rate.

Where the lease income is adjusted periodically by a specified rate, the lease income is recognised on a straight-line basis over the lease term.

The Group's income above includes an amount of EUR 3,127,708 generated in relation to the business centre.

The amounts recognised by the Group as income during the prior year that are based on the higher of a percentage of sales and a minimum annual guarantee are EUR 13,099,310.

The amounts recognised by the Company as income during the prior year that are based on the higher of a percentage of sales and a minimum annual guarantee are EUR 12,030,128.

34. Material Contracts

The material contracts entered into by the Company in the year ended 31 December 2019 with its current and former substantial shareholders and their related parties are the following:

Malta Mediterranean Link Consortium Limited

The provision for Technical Services by the Company's strategic partners VIE Operations Limited and SNC-Lavalin Inc., did not give rise to an expense (2018: EUR 164,651).

The Government of Malta

• (i) The terminal and other land lease agreements with Malita Investments plc for EUR 1,144,809 (2018: EUR 1,144,809);
• (ii) Licence Fee payable to the Government of Malta for the airport operation amounting EUR 496,157 (2018: EUR 496,157);

Year Ended 31 December 2019

34. Material Contracts (continued)

• (iii) The contract for contribution to the Malta Tourism Authority for EUR 232,937 (2018: EUR 232,937); the contracts for contributions payable towards the Route Development Fund that is administered by the Malta Tourism Authority for EUR 4,900,000 (2018: EUR 5,900,000); and a contract for the contribution for a calendar of events administered by the Malta Tourism Authority for EUR 1,380,000 (2018: EUR 1,100,000);
• (iv) The contract with the Armed Forces of Malta for the security of the restricted areas at the Airport for an expense of EUR 1,471,875 (2018: EUR 1,800,000);
• (v) The provision of Air Navigation Services and other services by Malta Air Traffic Services Limited for an expense of EUR 929,648 (2018: EUR 921,173);
• (vi) The provision of Meteorological Services and other services to Malta Air Traffic Services Limited for revenue of EUR 743,717 (2018: EUR 736,938);
• (vii) The contract with Enemalta Corporation for fuel throughput charges generated the amount of EUR 440,832 (2018: EUR 441,089) in revenue;
• (viii) The ground handling and concession agreements with Air Malta p.l.c. and its subsidiaries that generated income of EUR 1,984,254 (2018: EUR 1,693,791); and
• (ix) The contracts with Malta Industrial Parks Ltd. for the lease of land that generated income of EUR 1,021,415 (2018: EUR 990,391).

35. Parent Company

For the purposes of IFRS 10 Consolidated Financial Statements, it is considered that Articles 58.2 and 58.7 of the Company's Articles of Association combine so as to give Malta Mediterranean Link Consortium Limited ("MMLC"), which has its registered office at Palazzo Pietro Stiges, 60 St. Christopher Street, Valletta, Malta, control over the Company. MMLC has a 40% equity interest in Malta International Airport p.l.c. (the "Company").

Effective as at 26 November 2019, MMLC's majority shareholders VIE (Malta) Limited (which has an equity interest of 57.1% in MMLC) and MMLC Holdings Malta Limited (previously SNC-Lavalin (Malta) Limited) (which has an equity interest of 38.75% in MMLC) merged, leading to VIE (Malta) Limited being MMLC's majority shareholder with an equity interest of 95.85% in MMLC.

VIE (Malta) Limited also holds an additional 10.1% equity stake in the Company.

VIE (Malta) Limited is controlled by VIE International Beteiligungsmanagement GmbH ("VINT"), which also controlled MMLC Holdings Malta Limited until the merger in November 2019. VINT does not produce consolidated financial statements. The ultimate parent of the Company is Flughafen Wien AG, whose registered office is Postfach 1, A-1300 Wien-Flughafen. Flughafen Wien AG's consolidated share in the Company amounts to 48.44%.

The financial results and financial position of the Company are included in the consolidated financial statements of Flughafen Wien AG. Copies of these consolidated financial statements may be obtained from Investor Relations department of Flughafen Wien or online.

36. Fair Values of Financial Assets and Financial Liabilities

At 31 December 2019 and 2018, the carrying amounts of financial assets and financial liabilities classified with current assets and current liabilities respectively, comprising trade and other receivables, cash and cash equivalents, term deposits, current loans receivable and trade and other payables approximated their fair values due to the short-term maturities of these assets and liabilities.

The fair values (Level 2) of non-current financial assets that are not measured at fair value and that carry a floating rate of interest, comprising of loans receivable by the Company, are not materially different from their carrying amounts because they carry an arm's length interest rate that is repriced periodically and the margin continues to be reflective of the credit risk of the borrower at the year-end (see Note 18).

Year Ended 31 December 2019

37. Financial Risk Management

The Group's and the Company's principal financial liabilities comprise trade payables. The principal recognised financial assets of the Group and the Company (other than investments in subsidiaries) are trade receivables, loans receivable, term deposits and cash and cash equivalents.

The carrying amount of principal financial instruments (other than investments in subsidiaries) are as follows:

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Loans receivable	-	-	22,407,198	18,797,918
Trade and other receivables	16,012,038	18,787,242	16,530,326	18,881,875
Term deposit	5,000,000	-	5,000,000	-
Cash and cash equivalents	28,174,981	20,253,186	26,691,276	18,553,003
Financial liabilities at amortised cost	56,539,324	10,397,844	57,210,982	10,665,747

Net gains/(losses) arising from these financial instruments are classified as follows:

	The Group		The Company
(in EUR)	2019	2018	2019	2018
Recorded in profit or loss:
Other investments	-	(7,021)	-	(7,021)
Loans receivable	-	-	386,243	402,562
Trade and other receivables	(284,579)	(18,157)	(299,712)	(40,578)
Term deposit	37,436	-	37,436	-
Financial liabilities at amortised cost	(2,079,535)	(148,915)	(2,079,535)	(139,212)

The main risks arising from the Group's and the Company's financial instruments are changes in interest rate, liquidity risk and credit risk, which are summarised below.

Interest Rate Risk

The Group and the Company have term deposits as disclosed in Note 27 and cash at bank balances as disclosed in Note 28. The Company has also granted interest-bearing loans to its subsidiaries as disclosed in Note 18.

The Group and the Company are exposed to cash flow interest rate risk on financial instruments carrying a floating interest rate. Management monitors the movement in interest rates and, where possible, reacts to material movements in such rates by restructuring its investing and financing structure.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's and Company's profit before tax. The Group and Company consider the reasonably possible changes in interest rates to be a change in 25 basis points.

	Increase or	Effect on Profit before tax
	Decrease	The Group	The Company
	(basis points)	(in EUR)	(in EUR)
2019	+ 25	82,937	135,246
	- 25	(82,937)	(135,246)
2018	+ 25	50,633	93,377
	- 25	(50,633)	(93,377)

The effect on profit takes into consideration both interest payable and interest receivable based on the financial instruments as disclosed in Notes 18, 27 and 28.

Year Ended 31 December 2019

37. Financial Risk Management (continued)

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group or the Company. Financial assets which potentially subject the Group and the Company to concentrations of credit risk, consist principally of the following:

• Trade and other receivables
• Cash and cash equivalents
• Term deposits
• Loans receivable
• Loan commitments to subsidiary undertakings

Such financial assets are presented net of a loss allowance, where applicable. The maximum exposure to credit risk for recognised financial assets is the carrying amounts of each class of asset as disclosed in Notes 18, 21, 27and 28 respectively. The maximum exposure to credit risk for the loan commitment is disclosed in Note 18.

Management considers the quality of its financial assets as being acceptable, as further detailed below.

Allowances for provision for impairment on financial assets measured at amortised cost are made in line with the accounting policies outlined in Note 39.

Trade and other receivables

Credit risk with respect to trade and other receivables is managed and assessed through the adherence to credit control procedures, which include client acceptance procedures, and is also limited through the number of customers comprising the Group's and Company's debtor base. Outstanding trade receivables are regularly monitored by management.

For trade receivables the Group and the Company have applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL.

Where the Group has reasonable and supportable information that is available without undue cost or effort to measure LT-ECLs on an individual instrument basis, such an individual assessment is carried out. LT-ECLs on the remaining financial assets are measured on a collective basis, using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions.

Trade receivables – tested individually:

LT-ECL (credit-impaired but not POCI)	The Group		The Company
(in EUR)	2019	2018	2019	2018
Internal rating grades
Performing	-	-	-	-
In default	265,480	98,836	252,473	70,696
Gross carrying amount at 31 December 2019	265,480	98,836	252,473	70,696
Loss allowance at 31 December 2019	(265,480)	(98,836)	(252,473)	(70,696)
Net carrying amount at 31 December 2019	-	-	-	-

Year Ended 31 December 2019

37. Financial Risk Management (continued)

Trade receivables – tested collectively:

The table below details the risk profile of trade receivables for which a provision matrix is applied:

31 December 2019 (in EUR)	Expected Credit Loss Rate	Gross Carrying Amount	LT-ECL	Net Carrying Amount
Current (not past due)	0.2%	3,493,136	6,985	3,486,151
30 to 90 Days	0.2%	9,420,171	19,933	9,400,237
91 to 180 Days	4.0%	681,750	25,669	656,081
181 to 270 Days	13.8%	184,249	25,426	158,823
271 to 360 Days	35.0%	100,203	35,072	65,131
> 360 Days	100.0%	67,868	67,868	-
		13,947,377	180,953	13,766,422

The Group 31 December 2019 (in EUR)	Expected Credit Loss Rate	Carrying Amount	Gross	LT-ECL	Net Carrying	Amount
Current (not past due)	0.2%	3,493,136		6,985	3,486,151
30 to 90 Days	0.2%	9,420,171		19,933	9,400,237
91 to 180 Days	4.0%	681,750		25,669	656,081
181 to 270 Days	13.8%	184,249		25,426	158,823
271 to 360 Days	35.0%	100,203		35,072		65,131
> 360 Days	100.0%	67,868		67,868		-
		13,947,377		180,953	13,766,422
The Group 31 December 2018	Expected Credit Loss	Carrying	Gross		Net Carrying
(in EUR)	Rate	Amount		LT-ECL	Amount
Current (not past due)	0.1%	7,525,738		7,526	7,518,212
30 to 90 Days	0.1%	8,592,934		8,593	8,584,341
91 to 180 Days	2.7%	422,536		11,408	411,128
181 to 270 Days	10.4%	27,196		2,828		24,368
271 to 360 Days	32.3%	11,972		3,869		8,103
> 360 Days	100.0%	28,793		28,793		-
		16,609,169		63,017	16,546,152
(2018: EUR 30,833) is in relation to trade debtors that are more than 360 days past due. obligations. Cash and cash equivalents
Poor's and BBB by Fitch).
12m-ECL
External rating grades
to be material.

The same ECL Rates are applied to the Company's debtors with a gross carrying amount of EUR 15,317,850 (2018: EUR 17,154,041), resulting in a net carrying amount of EUR 15,136,899 (2018: EUR 17,091,024) and a collective LT-ECL of EUR 180,953 (2018: EUR 63,017) of which an amount of EUR 72,276 (2018: EUR 30,833) is in relation to trade debtors that are more than 360 days past due.

The second largest single customer of the Group, Air Malta p.l.c., which is currently going through a restructuring process, accounts for EUR 0.1 million (2018: EUR 3.4 million) of the Group's trade and other receivables at year end and 22% (2018: 23%) of the Group's revenue for the year (recorded in all segments). The Company's exposure to this customer is not materially different to that of the Group. The maximum exposure to this customer during a period of increased trading, in particular in the summer months at normal credit terms, is expected to be in the region of EUR 5.6 million (2018: EUR 5.4 million). The Board feels confident that the Group's and the Company's exposure to Air Malta p.l.c. will not jeopardize in any way the Group's ability to continue operations for the foreseeable future and that Air Malta p.l.c. will meet its obligations.

Cash and cash equivalents

The cash at bank balances held by the Group and the Company are disclosed in Note 28. Currently the Group holds its cash at bank balances with reputable and investment grade rated banking institutions (1 January 2019: BBB by Standard & Poor's and BBB by Fitch, 31 December 2019: BBB- by Standard & Poor's and BBB by Fitch).

12m-ECL	The Group		The Company
(in EUR)	2019	2018	2019	2018
External rating grades
BBB negative (Fitch), BBB- (S&P)	28,174,981	20,253,186	26,691,276	18,553,003
Gross/Net Carrying Amount at 31 December 2019	28,174,981	20,253,186	26,691,276	18,553,003

On the basis of the low credit risk exemption, the resulting 12m-ECL in terms of IFRS 9 are not considered

Year Ended 31 December 2019

37. Financial Risk Management (continued)

Term Deposits

The Group holds its term deposits with the same reputable and investment grade rated banking institutions as its cash and cash equivalents as outlined above.

12m-ECL		The Group	The Company
(in EUR)	2019	2018	2019	2018
External rating grades
BBB negative (Fitch), BBB- stable (S&P)	5,000,000	-	5,000,000	-
Gross/Net Carrying Amount at 31 December 2019	5,000,000	-	5,000,000	-

On the basis of the low credit risk exemption, the resulting 12m-ECL in terms of IFRS 9 are not considered to be material.

Loans receivable

Loans receivable and undrawn loan commitments of the Company are disclosed in Note 18. The credit risk is contained within the Group.

12m-ECL	The Company
(in EUR)	2019	2018
Internal rating grades
Performing	22,407,198	18,797,918
Gross/Net Carrying Amount at 31 December 2019	22,407,198	18,797,918

The Company determined that the loans and the undrawn loan commitments did not result in a significant increase in credit risk, as compared to the risk of default on initial recognition and accordingly a 12m-ECL applies. On the basis of the expected manner of recovery of the loans and the possible alternative strategies available to the borrower, the Company concluded that full recovery is expected, taking into consideration the financial position of the respective counterparty and, where applicable, forward-looking information that addresses the future prospects of the industries in which the borrower operates and information that relates to the borrower's core operations. Consequently, the resulting 12m-ECL in terms of IFRS 9 are not considered to be material.

Liquidity Risk

The tables below summarise the maturity profile of the Group's and Company's financial liabilities at 31 December 2018 and 2019 based on contractual undiscounted payments.

The Group
31 December 2019 (in EUR)	Carrying Amount	Gross Cash Flows	< 1 year	1-5 Years	> 5 years
Lease Liability	52,755,835	137,424,399	1,647,117	7,011,621	128,765,662
Other payables	1,046,151	1,046,151	1,046,151
Trade payables	2,737,338	2,737,338	2,737,338
	56,539,324	141,207,888	5,430,606	7,011,621	128,765,662
The Group	-
31 December 2018 (in EUR)	Carrying Amount	Gross Cash Flows	< 1 year	1-5 Years	> 5 years
Other payables	8,352,995	8,352,995	8,352,995
Trade payables	2,044,849	2,044,849	2,044,849
	10,397,844	10,397,844	10,397,844	-	-

Year Ended 31 December 2019

37. Financial Risk Management (continued)

The Company
31 December 2019 (in EUR)	Carrying Amount	Gross Cash Flows	< 1 year	1-5 Years	> 5 years
Lease liability	52,755,835	137,424,399	1,647,117	7,011,621	128,765,662
Other payables	1,905,584	1,905,584	1,905,584
Trade payables	2,549,563	2,549,563	2,549,563
	57,210,982	141,879,546	6,102,264	7,011,621	128,765,662
The Company	-
31 December 2018 (in EUR)	Carrying Amount	Gross Cash Flows	< 1 year	1-5 Years	> 5 years
Other payables	8,663,238	8,663,238	8,663,238
Trade payables	2,002,509	2,002,509	2,002,509
	10,665,747	10,665,747	10,665,747	-	-

The Group monitors and manages its risk to a shortage of funds by monitoring forecast and actual cash flows.

Capital Management

One of the objectives of the Group and the Company is to ensure that it maintains a strong credit rating and healthy capital ratios by means of proper management of its capital. The Group and the Company manage their capital structure and adjust it, in light of changes in economic conditions. No changes were made in the objectives and processes during the years ended 31 December 2019 and 31 December 2018.

The Company monitors its capital requirement on a periodic basis considering its current requirements. Capital primarily includes equity attributable to the equity holders. Based on recommendations of the directors, the Group and the Company balance their overall capital structure through the payments of dividends, new share issues as well as the issue of new debt or the redemption of existing debt. The Group's and Company's policy in managing capital has remained unchanged from the prior year.

38. Events after the Reporting Period

All events occurring after the balance sheet date until the date of authorisation for issue of these financial statements and that are relevant for valuation and measurement as of 31 December 2019 for the Group and the Company, such as outstanding legal proceedings or claims for damages and other obligations or impending losses that must be recognised or disclosed in accordance with IAS 10 – are included in these consolidated financial statements.

39. Significant Accounting Policies

Scope of Consolidation

The consolidated financial statements include all subsidiaries, with the exception of Kirkop PV Farm Limited, as its economic significance and influence on the financial position, financial performance and cash flows of the Group is immaterial. The net liability position of Kirkop PV Farm Limited is under EUR 3,000(2018: under EUR 3,000). Kirkop PV Farm Limited did not commence to trade by the balance sheet date.

The 2019 and 2018 consolidated financial statements include Malta International Airport p.l.c as well as three domestic subsidiaries that are controlled by Malta International Airport p.l.c.

Subsidiaries included in the consolidated financial statements 2019 and 2018 are Airport Parking Limited, Sky Parks Development Limited and Sky Parks Business Centre Limited. For financial information on these subsidiaries see Note 16.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control or from the date of set-up under the control of the Company and continue to be consolidated until the date such control ceases.

Fair Value

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 Company determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.

Property, Plant and Equipment

The Group's and the Company's property, plant and equipment are classified into the following classes – land held as temporary emphyteusis, related aerodrome licence, buildings, furniture, fixtures, plant and equipment and motor vehicles.

With effect from 1 January 2019, upfront payments in relation to the temporary emphyteusis of the leasehold land and buildings are reclassified to right-of-use assets. With effect from 1 January 2019, property, plant and equipment also include right-of-use assets in terms of IFRS 16. The accounting policy for right-of-use assets is included below in the Section entitled 'Leases'.

With effect from 1 January 2019, property, plant and equipment also include the right-of-use assets in relation to the related licence over the aerodrome, which includes the Airfield. The management of the Airfield is considered to be integral to the use of the land and buildings held as temporary emphyteusis, with the Group having an obligation to manage the Airfield for the same duration of the emphyteusis. The Group considers the licence as being inseparable from the right to use the Airfield (being the tangible component). It is also not possible to split the right to operate the Airfield from the right to use the Airfield and the Group considers the use of the Airfield to be the most significant element of the transaction.

Property, plant and equipment are initially measured at cost. Such cost includes borrowing costs for longterm construction projects, if the recognition criteria are met. 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 or the Company 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.

Subsequent to initial recognition, property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses.

Property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount. Any gains or losses arising on derecognition are included in profit or loss in the year the asset is derecognised.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Properties in the Course of Construction

Properties in the course of construction for production supply or administrative purposes are classified as property, plant and equipment and are carried at cost less any identified impairment loss. Cost includes professional fees, and for qualifying assets, borrowing costs capitalised in accordance with the Company's accounting policy on borrowing costs. Depreciation of these assets, on the same basis as other property assets, commences when the assets are available for use.

Properties in the course of construction for future use as investment property are classified as investment property. Existing investment property that is being redeveloped for continued future use as investment property continues to be classified as investment property.

Investment Property

With effect from 1 January 2019, investment property also includes right-of-use assets in terms of IFRS 16. The accounting policy for right-of-use assets is included below in the Section entitled 'Leases'.

Investment property is property held to earn rentals or for capital appreciation or both. Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property will flow to the entity and the cost can be measured reliably. Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at cost less any accumulated depreciation and any accumulated impairment losses.

Investment property is derecognised on disposal or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses on derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount, and are recognised in profit or loss 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 (unless this exceeds the end of any applicable leases or emphyteusis, in which case the accounting policy in the Section entitled 'Leases' applies), using the straight-line method, on the following bases:

Land held on temporary emphyteusis	by equal annual instalments over the remaining term of the emphyteusis
Buildings classified within Property, Plant and Equipment	2% to 5% per annum
Furniture, fixtures, plant and equipment classified within Property, Plant and Equipment	10% to 33 1/3% per annum
Motor vehicles classified within Property, Plant and Equipment	20% per annum
Investment property (other than the land component)	5% to 15% per annum

With effect from 1 January 2019, property, plant and equipment and investment property also include rightof-use assets in terms of IFRS 16. The accounting policy for right-of-use assets is included below in the Section entitled 'Leases'. Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset.

The depreciation method applied, the residual value and the useful life are reviewed at each financial year end and adjusted prospectively, as appropriate.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Borrowing Costs

Borrowing costs include the costs incurred in obtaining external financing and mainly consist of interest on bank loans. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset, which is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed as incurred.

Investments in Subsidiaries

A subsidiary is an entity that is controlled by the Company. The Company controls an investee when the 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. Investment in subsidiaries in the separate financial statements of the Company is accounted for on the basis of the direct equity interest and is stated at cost less any provisions for impairment, where in the opinion of the directors, any impairment in value has taken place. Dividends from the investment are recognised in profit or loss.

Impairment of Non-Financial Assets and Investments in Subsidiaries

At each reporting date, the carrying amount of assets other than financial assets measured at amortised cost, including property, plant and equipment, investment property and investments in subsidiaries is reviewed to determine whether there is any indication or objective evidence of impairment, as appropriate, and if any such indication or objective evidence exists, the recoverable amount of the asset is estimated.

In the case of such assets tested for impairment, the recoverable amount is the higher of fair value (which 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) less costs of disposal and value-in-use (which is the present value of the future cash flows expected to be derived, discounted using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset). Where the recoverable amount is less than the carrying amount, the carrying amount of the asset is reduced to its recoverable amount, as calculated.

Impairment losses are recognised immediately in profit or loss, unless the asset is carried at a revalued amount, in which case, the impairment loss is recognised in other comprehensive income against the asset's revaluation surplus to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that asset.

An impairment loss recognised in a prior year is reversed if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. Where an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

Impairment reversals are recognised immediately in profit or loss, unless the asset is carried at a revalued amount, in which case, the impairment reversal is recognised directly in other comprehensive income, unless an impairment loss on the same asset was previously recognised in profit or loss.

Other Financial Instruments

Financial assets and financial liabilities are recognised when the Group entities become a party to the contractual provisions of the instrument. Unless otherwise stated below, financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.

Financial assets and financial liabilities are offset, and the net amount presented in the Statement of Financial Position when the Group entities have a legally enforceable right to set off the recognised amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Other Financial Instruments (continued)

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition. Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Ordinary shares issued by the Company are classified as equity instruments.

Other Financial Assets

This accounting policy is in relation to the following other financial assets:

• Trade and other receivables
• Term deposits
• Cash and cash equivalents
• Loans receivable

The significant accounting policies for other financial assets are as follows:

On initial recognition, a financial asset is classified as measured at either amortised cost (AC), fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The classification is based on the business model in which a financial asset is managed and its contractual cash flow characteristics:

• A financial asset is measured at AC if it is held within a business model whose objective is to hold assets to collect contractual cash flows and its cash flows are solely payments of principal and interest on the principal amount outstanding, to the extent that the financial asset is not designated at FVTPL (fair value option).
• A financial asset is measured at FVOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and its cash flows are solely payments of principal and interest on the principal amount outstanding, to the extent that the financial asset is not designated at FVTPL (fair value option).
• An equity investment that is not held for trading may be irrevocably designated as at FVOCI with any subsequent changes in fair value being presented in OCI. This election is made on an investment-by-investment basis. Otherwise, the equity investment is measured at FVTPL.
• All financial assets not classified as measured at AC or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets.

The following accounting policies apply to the subsequent measurement of financial assets:

Classification	Subsequent Measurement
Financial Assets at FVTPL	The Group and the Company do not have any financial assets classified within this category.
	These assets are subsequently measured at FV and net gains and losses are recognised in profit or loss.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Other Financial Instruments (continued)

Classification	Subsequent Measurement
Financial Assets at AC	The following financial assets are classified within this category – trade and other receivables, term deposit, cash at bank and loans receivable.
	These assets are subsequently measured at AC using the effective interest method. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. Trade receivables which do not have a significant financing component are initially measured at their transaction price and are subsequently stated at their nominal value less any loss allowance for expected credit losses.
Debt Investments at FVOCI	The Group and the Company do not have any financial assets classified within this category.
	These assets are subsequently measured at FV. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity Investments at FVOCI	The Group and the Company do not have any financial assets classified within this category.
	These assets are subsequently measured at FV. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

Impairment of Other Financial Assets

Credit losses are determined based on the ECL model. The ECL model applies to financial assets measured at amortised cost, debt investments at FVOCI, lease receivables and contract assets, but not to investments in equity instruments. The amount of ECLs is updated at each reporting date to reflect changes in credit risk since the initial recognition.

ECLs are probability-weighted estimates of credit losses with the respective risks of a default occurring as the weights. Credit losses are measured at the present value of all expected cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset. The measurement of ECLs is a function of the probability of default, loss given default (that is, the magnitude of the loss if there is a default) and the exposure at default.

The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information, where applicable. Forward-looking information considered includes economic and industry indicators such as GDP, unemployment rates and/or industry projections as well as factors that are specific to the debtors, unless the effect is considered to be immaterial.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Impairment of Other Financial Assets (continued)

ECLs are determined by means of a three-stage model for impairment (the general approach) based on changes in credit risk since initial recognition.

• Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month ECLs (12-M-ECLs) are recognised. 12-M ECLs are the ECLs that result from default events that are possible within 12 months after the reporting date.
• Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition - unless they have low credit risk at the reporting date - but that do not have objective evidence of impairment. For these assets, lifetime ECLs (LT-ECLs) are recognised. LT-ECLs are the ECLs that result from all possible default events over the expected life of a financial asset.
• Stage 3 includes financial assets that have objective evidence of impairment at the reporting date. For these assets, LT-ECLs are recognised. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Impairment gains or losses are recognized in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVOCI, for which the loss allowance is recognised in other comprehensive income and accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset in the statement of financial position.

Loss allowances are measured according to the above outlined three-stage model (the general approach) except for trade receivables and contract assets that do not contain a significant financing component or for which the practical expedient for contracts that are one year or less is applied. For these financial assets the simplified approach is applied and LT-ECLs are recognized.

Simplified approach

The Group applies the simplified approach for trade receivables and contract assets that do not contain a significant financing component. The Group's trade receivables are of a short-term nature as they are based on credit terms of less than one year and, thus, do not include a significant financing component.

Where the Group does not have reasonable and supportable information that is available without undue cost or effort to measure LT-ECLs on an individual instrument basis and in order to ensure that LT-ECLs are recognised before an asset becomes credit-impaired or an actual default occurs, LT-ECLs on the remaining financial assets are measured on a collective basis.

In such instances and where appropriate, the financial instruments are grouped on the basis of shared credit risk characteristics and the LT-ECLs are estimated using a provision matrix based on actual credit loss experience over past years, which is adjusted to reflect current conditions and the Group's view of economic conditions over the expected lives of the receivables. Such adjustments are based on factors that are specific to the debtors and economic and industry indicators such as GDP, unemployment rates and/or industry projections, where applicable, unless the effect is considered to be immaterial. For the purpose of the provision matrix, loss rates are calculated using a 'roll rate' method based on the probability of a receivable progressing through successive stages of delinquency over a selected period, taking into consideration the applicable credit terms for such debtors and the past due status. Unless the effect is immaterial, for receivables after 360 days, the loss rate is adjusted to take into consideration the proportion of actual recoveries over the selected period.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Impairment of Other Financial Assets (continued)

Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition: an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating, significant deterioration in external market indicators of credit risk for a particular financial instrument, existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the borrower's ability to meet its debt obligations, an actual or expected significant deterioration in the operating results of the borrower, an actual or expected significant adverse change in the regulatory, economic, or technological environment of the borrower that results in a significant decrease in the borrower's ability to meet its debt obligations.

Forward-looking information considered includes economic and industry indicators such as GDP, unemployment rates and/or industry projections as well as factors that are specific to the debtors, unless the effect is considered to be immaterial.

Irrespective of the outcome of the above assessment, it is presumed that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless there is reasonable and supportable information, that is available without undue cost or effort, that demonstrates otherwise.

Despite the aforegoing, it is assumed that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if i) the financial instrument has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. A financial asset is considered to have low credit risk when it has an internal or external credit rating of 'investment grade' as per globally understood definitions. The Group and the Company have applied the low credit risk assumption for the following classes of financial assets – cash at bank with an external credit rating of Investment grade.

Definition of default

For internal credit risk management purposes, the Group considers it as constituting an event of default when historical experience or information indicates that a financial asset is generally not recoverable as the debtor is unlikely to pay its creditors in full, without taking into account any collateral held by the Group or the Company.

Irrespective of the above analysis, default is considered to have occurred when a financial asset is more than 90 days past due unless reasonable and supportable information is available to demonstrate that a more lagging default criterion is more appropriate. The Group and the Company rebut the 90 days past due presumption for trade receivables since they have reasonable and supportable information to demonstrate that a more lagging default criterion of 360 days past due is more appropriate.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Impairment of Other Financial Assets (continued)

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events: significant financial difficulty of the issuer or the borrower, a breach of contract, such as a default or delinquency in interest or principal payments, the probability to enter bankruptcy or other financial reorganisation, the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider, the disappearance of an active market for that financial asset because of financial difficulties.

Write-off policy

The Group and the Company write off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Group's recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Loan commitments

For loan commitments, the date that the Company becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of a loan commitment, the Company considers changes in the risk of a default occurring on the loan to which a loan commitment relates. For undrawn loan commitments, the ECL is the present value of the difference between the contractual cash flows that are due to the Company if the holder of the loan commitment draws down the loan, and the cash flows that the Company expects to receive if the loan is drawn down. For loan commitments, the loss allowance is recognised as a provision.

Financial Liabilities

The accounting policy on financial liabilities is in relation to Trade and other payables, which are classified with current liabilities and are stated at their nominal value unless the effect of discounting is material.

Cash and short-term deposits

Cash and short-term deposits comprise cash on hand, demand deposit and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and short-term deposits are stated at nominal amounts, being the amount recognised at inception.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method and comprises expenditure incurred in acquiring the inventories and other costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Revenue Recognition

The Group and the Company generate income from regulated revenue, unregulated revenue and leases.

• Regulated revenue comprises income from aviation services which arise from income from passenger services charges, security fees as well as aircraft landing and parking fees.
• Unregulated revenue consists of PRM charges, income from ground handling charges, certain car parking revenue, income from VIP services as well as meteorological services and other income.

Revenue from leases reflects all income from renting office, retail, food and beverage, and advertising space including commissions based on sales as well as income from renting certain car parks. The accounting policies for this revenue stream are addressed below.

The remainder of this note addresses regulated and unregulated revenue from contracts with customers.

Revenue from contracts with customers is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group and the Company recognise such revenue when (or as) they satisfy a performance obligation by transferring control of a promised good or service to the customer.

Regulated revenue

Regulated revenue constitutes income based on fees that are subject to the Airport Economic Regulations. These fees are charged to airlines and aircraft operators for the use of the airport infrastructure and include passenger service charges as well as landing, parking and security fees.

The performance obligation is to make the airport available as and when each airline makes use of it. The transaction price follows a set fee structure and is based on a variety of underlying metrics, such as the number of departing passengers, and the maximum take-off weight, which metrics become known by the time the services are provided and thus no significant estimates are required in this respect.

In determining the transaction price, consideration is taken of variable fee-reducing rebates based on incentive agreements. Incentives are deducted from revenue in full and are included within the line item 'Trade and other payables'. Any such incentives which are not taken up are recognised as revenue only when it is highly probable that a significant reversal will not occur, that is, when the uncertainty associated with the incentives is subsequently resolved.

The performance obligation in relation to regulated revenue is satisfied over time. A receivable is recognised as the services are provided and included in the line item 'Trade and other receivables' until the actual payment is made by the respective customers.

In determining the transaction price, consideration is also made of contributions payable to airlines through a government entity, in an effort to improve the number of passengers departing from the airport, thus resulting in additional revenues to the Company and the Group. Such contributions are payable to an Air Route Development Fund that is administered by the government entity, with a particular focus being made on the timing and destination of strategic routes which result in increased revenues. The allocations that are made by this Fund to the respective airlines are subject to the satisfaction by the airlines of the conditions attaching to eligibility for such contributions and accordingly any revenues disclosed in the respective notes are gross of any such contributions. The amounts payable by the Company and the Group to the Fund are non-refundable and vary with the number of passenger departures, subject to a fixed cap. These amounts are treated as a reduction of the transaction price (and therefore, of revenue) since such payments are not considered to be in exchange for a distinct good or service that the customers, or the government entity, transfer to the Company or the Group. These amounts are included within the line item 'Trade and other payables' until they are settled. No estimates are required in this regard since the extent of the consideration payable is dependent on the number of passenger departures and thus corresponds to the Company's and the Group's efforts to satisfy its performance obligation, with such allocation being consistent with the objective of allocating the transaction price in an amount that depicts the amount of consideration to which the Company and the Group expect to be entitled in exchange for transferring the promised services to the customers.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Revenue Recognition (continued)

Unregulated revenue

Unregulated revenue is income based on charges that are not regulated, but subject to fee structures that are negotiated with the Group's customers. Fees for each service are uniform among all customers.

• PRM fees are charged to airlines in order to recover costs emanating to the Group for the provision of assistance to persons with reduced mobility (PRM) in line with Regulation (EC) 1107/2006. The performance obligation is to arrange the required services for persons with reduced mobility on behalf of the airline or aircraft operator. The transaction price is represented by a set fee that is based on the number of departing passengers of an airline or aircraft operator. The performance obligation is satisfied over time.
• Ground handling concession income is revenue from ground handling and infrastructure providers for the right to provide their services (ground handling, fuelling) within the airport perimeter for the duration of the respective contracts. The performance obligation is to make the maintained airport infrastructure and equipment available so that the ground handling provider is able to provide its services to airlines and aircraft operators. The transaction price follows a fee structure that is based on a variety of underlying metrics, such as the number of departing passengers, aircraft movements, maximum take-off weight, kilograms of freight and mail and litres of fuel. The Group has determined that it provides a daily service of access that is distinct, with the uncertainty related to the consideration receivable being also resolved on that basis and accordingly no further estimates are required in this regard. The performance obligation is satisfied over time. A receivable is recognised as the services are provided and included in the line item "Trade and other receivables" until the actual payment is made by the respective ground handling provider.
• Car parking income primarily represents revenue generated through the provision of car parking spaces at the car parks within the airport perimeter, other than revenue from rental income resulting from the lease of car parks which is addressed by the accounting policy on leases. The performance obligation is to provide and maintain car parking space for the duration of the stay. The transaction price follows a pre-determined fee structure that is based on parking time and that is payable immediately upon use. The performance obligation is satisfied over time. Besides, income from the sale of car park access cards, which allow customers to make use of the car park over a fixed period of time, is recognised over time on straight-line basis for the duration of the contract.
• Income from VIP services primarily represents revenue generated through the provision of services, such as access to airport lounges and ancillary services (e.g. porterage, meet-and-greet). The Group's performance obligation is to provide the services if and when requested by customers in line with underlying terms and conditions. The transaction price follows a fixed price structure. The performance obligation is satisfied over time. In addition, the Group issues membership cards that enable members to make use of a variety of VIP services and facilities provided by the airport, such as lounges and access to car parks, over a fixed period. Such revenue is recognised over time on a straight-line basis for the duration of the contract with any deferred income being recognised as a contract liability within the line item 'Trade and other payables'.
• Revenue from meteorological services is generated from the provision of meteorological services to Malta Air Traffic Services (MATS). The Group's performance obligation is to provide meteorological services in respect of air navigation as well as for public, maritime and agricultural purposes and to maintain the equipment and facilities necessary to do so over the specified contractual period. The transaction price is a contractually agreed amount recognised over the term of the agreement. The performance obligation is satisfied over time.

In addition to the above-mentioned revenue streams, the Group and the Company generate other income that is classified within unregulated revenue, which arises from a variety of services, such as the issuance of security passes, the provision of luggage trolleys, lost and found services and left luggage.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Interest income

Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost or at FVTOCI. Interest income is recognised to the extent that it is probable that future economic benefits will flow to the Group entity and these can be measured reliably.

Grants

Grants are recognised when there is reasonable assurance that all the conditions attached to them are complied with and the grants will be received. Grants related to income are recognised in the profit or loss over the periods necessary to match them with the related costs which they are intended to compensate on a systematic basis. Such grants are presented as part of profit or loss. Grants related to assets are presented in the Statement of Financial Position as deferred income, which is recognised as income on a systematic basis over the useful life of the asset.

Deferred Income

Deferred income arising from the gain on disposal of the buildings and fixtures that took place on the date of the privatisation of the Company in 2002 is transferred separately to the income statement in equal annual instalments over the remaining life of the underlying assets.

Leases

Comparative year

The Group as a lessee

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. Lease classification is made at the inception of the lease, which is the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease.

Where the Company is a lessee, rentals payable under operating leases less the aggregate benefit of incentives received from the lessor, are recognised as an expense in profit or loss on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the users' benefit.

The Group as a lessor

As a lessor the Group classifies its leases as either operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset and classified as an operating lease if it does not.

Lease classification is made at inception of the lease, which was the earlier of the date of the lease agreement and the date of commitment by the parties to the principal terms and conditions of the lease.

Rentals receivable under operating leases are recognised as income in profit or loss on a straight-line basis over the lease term unless another systematic basis is more representative of the pattern in which use benefit derived from the leased asset is diminished.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Leases (continued)

Current year

The Group as a lessee

For any contract entered into by the Group, it considers whether the 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 (1) whether the contract contains an identified asset; (2) whether the Group has the right to obtain substantially all of the economic benefits from use throughout the period of use; and (3) whether the Group has the right to direct the use of the identified asset throughout the period of use.

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.

The Group measures the lease liability at the lease commencement date 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 determined) 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) less any incentives receivable, variable payments based on an index or rate (initially measured using the index or rate at the commencement date), amounts expected to be payable under a residual value guarantee and payments arising from purchase options or termination penalties reasonably certain to be exercised.

Variable lease payments not included in the measurement of the lease liability are recognised in profit or loss (unless the costs are included in the carrying amount of another asset) in the period in which the event or condition that triggers those payments occurs.

The right-of-use asset is initially 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 at or before the lease commencement date.

Right-of-use assets are subsequently measured using the cost model. The Group depreciates the right-ofuse assets 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. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The Group also assesses the right-of-use asset for impairment when such indicators exist using the accounting policy described in the Section entitled 'Impairment of Non-Financial Assets and Investments in Subsidiaries'.

Subsequent to initial measurement, the liability is reduced for payments made and increased for interest (using the effective interest method). It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, 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.

The Group accounts for short-term leases and leases of low-value assets using the recognition exemptions. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term or another systematic basis that is more representative of the pattern of the lessee's benefit.

As a practical expedient, a lessee is permitted not to separate non-lease components from lease components, and instead account for any lease and associated non-lease components as a single lease component. The Group has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Leases (continued)

A lessee accounts for a lease modification as a separate lease if both (a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract. For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification, the lessee allocates the consideration accordingly, determines the lease term of the modified lease and remeasures the lease liability by discounting the revised lease payments using a revised discount rate.

The Group does not present right-of-use assets separately from other assets in the statement of financial position. It includes such assets within the same line item as that within which the corresponding underlying assets would be presented if they were owned. Right-of-use assets are presented within Property, plant and Equipment and Investment Property. The Group presents lease liabilities separately from other liabilities in the Statement of Financial Position.

In the Statement of profit or loss and other comprehensive income, the Group presents interest expense on the lease liability separately from the depreciation charge for the right-of-use asset. The lease payments attributable to low value items and short-term leases for which the recognition exemption is applied, together with variable lease payments not included in the measurement of the lease liability, are presented within 'other operating expenses.'

In the Statement of Cash Flows, the Group classifies cash payments for the principal portion of the lease liability within financing activities and the cash payments for the interest portion of the lease liability within operating activities.

The Group as a lessor

When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

The Group's remaining accounting policy under IFRS 16 has not changed from the comparative period.

Furthermore, for a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying IFRS 15. With respect to modifications to an operating lease in which the Group is a lessor, such modifications are accounted for as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.

Taxation

Current and deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly in other comprehensive income or directly in equity, in which case the current and deferred tax is also dealt with in other comprehensive income or equity as appropriate.

The charge for current tax is based on the taxable result for the year. The taxable result for the year differs from the result as reported in profit or loss because it excludes items which are non-taxable or disallowed for tax purposes and it further excludes items that are taxable or deductible in other periods. The tax charge is calculated using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Taxation (continued)

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets (including deferred tax assets for the carry forward of unused tax losses and unused tax credits) are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences (or the unused tax losses and unused tax credits) can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to taxation authorities. Deferred tax assets and liabilities are offset when the Group and the Company have a legally enforceable right to set off current tax assets against current tax liabilities and the deferred taxes are levied by the same taxation authority on either (i) the same taxable entity; or (ii) different taxable entities which satisfy certain criteria.

Employee Benefits

Employee benefits include short-term benefits and post-employment benefits.

Short-term employee benefits

The Group and the Company contribute towards the state pension fund in accordance with local legislation. The only obligation of the Group and the Company is to make the required contribution. Costs are expensed in the year in which they are incurred.

Retirement plans

For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with estimations being carried out at each reporting date. Past service cost is recognised as an expense at the earlier of the following dates (a) when the plan amendment or curtailment occurs and (b) when the entity recognises related restructuring costs or termination benefits. The amount recognised in the Statement of Financial Position represents the present value of the expected future payments required to settle the obligation resulting from employee service in the current and prior periods. The service cost and the net interest on the net defined benefit liability are recognised in profit or loss.

Remeasurements of the net defined benefit liability, comprising actuarial gains and losses are recognised in other comprehensive income and are not reclassified to profit or loss in a subsequent period. Such remeasurements are reflected immediately in retained earnings.

Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from experience adjustments and the effects of changes in actuarial assumptions. Actuarial assumptions are an entity's best estimates of the variables that will determine the ultimate cost of providing post-employment benefits.

Provisions

Provisions 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 resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Provisions are not recognised for future operating losses.

Year Ended 31 December 2019

39. Significant Accounting Policies (continued)

Currency Translation

Transactions denominated in currencies other than the functional currency are translated at the exchange rates ruling on the date of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are retranslated to the functional currency at the spot rate of exchange ruling at the date of the Statement of Financial Position. All differences are taken to the income statement. Nonmonetary items that are measured in terms of historical cost in a currency other than the functional currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a currency other than the functional currency are translated using the exchange rates at the date when the fair value is determined.

Dividends

Dividends to holders of equity instruments are recognised as liabilities in the year in which they are declared.

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