This article is a continuation of my previous analysis of Vitals Global Healthcare which was registered on 13 May 2015, and which, on 30 November 2015 signed the services concession agreement with the Government for the redevelopment, maintenance, management and operation of the sites of St Luke’s Hospital, Karin Grech Rehabilitation Hospital and the Gozo General Hospital. The effective date of the agreement was 1 June 2016.

For a better understanding of the set-up of the Group and its audited financial statements since it was set up, I suggest reading my articles of March 2020, April 2020 and June 2020.

Going Concern

On 31 December 2019, the company still had a share capital of €1,200 and negative equity of €34.5 million. In 2018, this stood at €38.4 million, and therefore the situation improved by €3.9 million.

One must question how a company with an overall deficit of €34.5 million can operate with a share capital of €1,200. That is, the company is only liable to whomever it owes money up to €1,200. Still, the company has to date, that is December 2020, not bothered to increase its share capital to at least cover its negative equity.

In layman’s terms, if your overall net savings, that is all your assets (the value of what you own), less your liabilities (the value of what you owe), stand at €1,200, how can you pay your net debts (liabilities minus assets) which amount to €34.5 million? Such a situation would mean that you are in a state of bankruptcy, and this is exactly the current situation of Steward Healthcare, and it has been so since its first year of operation.

The term ‘going concern’ means that the company has no reserves to fall upon to continue operating, or if you are a self-employed person, you cannot continue to provide for your basic living, let alone that of your family. This is happening regularly at present, with persons owning shops and small businesses, with no reserves to fall upon, at a time when business is not doing well because of the economic repercussions of covid-19 and other underlying economic conditions.

In the case of Steward, the present director, Armin Ernst, who has been a director of the company since its inception, determined that the shareholders have given their undertaking (guarantee) to support the group financially to continue operating in the foreseeable future which, in accounting terms, is expressed as 18 months from the balance sheet date.

This guarantee is, in my opinion, highly questionable, in view of the fact that the shareholders have to date, done nothing to support the ongoing operational deterioration of the company’s financial situation, and we now know that they are expecting the government to finance them with tens of millions. We have seen Joseph Muscat recently visiting Prime Minister Robert Abela with the excuse of introducing the directors, while grabbing the opportunity to solicit additional government finance to bail out the company,  to support it in continuing to operate, and to fund its capital expenditure for the improvement of the hospitals and the purchase of new equipment, in accordance with the 30-year concession agreement.

In fact, the financial statements disclose that on 31 December 2019, the Company did not have any capital commitments. This in itself, raises concern on the intentions on the completion of the project itself.


One of the directors, Michael Callum, who has been a director since 18 May 2018, resigned on 1 June 2020, and to date, has not been replaced.

This raises questions on the intentions of the shareholders, as one cannot expect a company of this magnitude, and a provider of an essential national health service, to be taken seriously from a good governance aspect if it continues to operate with just one director, who also acts as the company secretary.


The Group’s non-current assets increased by €22.5 million, represented by an increase of €1.1 million in property, plant and equipment, €16.3 million in additional construction works financed by the group’s associated companies, and a financial asset of €5.04 million, which is disclosed as a loan receivable. It is questionable why no disclosure is made as to whether the loan was given to a third party, and whether it is unsecured, interest-free and with a fixed date for repayment. Hopefully, this payment does not represent a camouflaged bonus to the retiring director.

In fact, a public interest entity providing essential services as health is should be required to be more transparent in its reporting and should be subject to half-yearly public detailed reports of income and expenditure, as well as capital expenditure on each of the three hospitals.

Why should the company be allowed to give a loan to a third party, without disclosing the reason for the loan, when the company itself is short of share capital and out of liquid funds?

As regards construction costs, these are disclosed as a contract asset. The value on 31 December 2020 was €42.75 million. However, no details are given as to the nature of the underlying expense.

In this case, the company is responsible for operating three hospitals, and it is in the interest of accountability and transparency that the public is made aware of the expenses incurred on each hospital, as well as the underlying tender procedures in awarding equitably the related works on a value for money basis.

Inventory – the total amount held on 31 December 2020, was €2.3 million, an increase of €0.6 million over 2018. The main stocks carried relate to pharmaceuticals which total €1.4 million.

Trade and other receivables – the total amount at 31 December 2020, was €9.1 million, an increase of €6.2 million over 2019.

The main increase is an amount of €5.04 million which is shown as accrued income, that is, income due to the company which has not yet been received. There is no comparative figure for 2018. What I find questionable, suspicious even, about this amount for which no details are given, is that the amount is roughly equivalent to the loan made to the third party which is mentioned above.

Unless this is a one in a million coincidence, unfortunately, I have no interpretation to give, and I look forward to the financial statements for 2020, to hopefully understand the reasons behind these two transactions. Perhaps, the director or financial controller of Steward would wish to oblige by clarifying this themselves. Otherwise, my gut feeling is that they are adopting creative accounting to possibly hide suspicious transactions.

Another questionable figure is trade receivables of €453,226, which are stated after deducting a provision for bad debts of €4.4 million. This provision was already €4.3 million in 2018, and unless there is a valid reason, this could indicate bad management of the creditworthiness of debtors or lack of robust procedures for debt collection.

What is surely clear, is that the group complains that it is not making a profit while seemingly mismanaging funds paid out of our taxes.


Borrowings – The Company has borrowings of €24.3 million from the bank, and €32 million from a related company, whose name is not disclosed. The bank loan is secured by the assets of the company and the group, as well as guaranteed by the shareholders.

I assume that the borrowings from the related company, are in respect of the contract expenditure on the hospitals. If this is the case, I also wonder why the group has not converted the related company loan into share capital.

Trade and other payables – The company owes a total of €44 million of which €27 million are due to trade creditors in respect of trading activities, €13 million to the government in respect of indirect taxes and €4 million being accrued expenses, which are not detailed.

Employees – The number of full-time employees decreased from 1,696 in 2018 to 1,548 in 2019, and part-timers increased from 1 to 3. A decrease of 148 is quite significant, and it likely had a very negative impact on the quality of service to patients and added unnecessary pressure on the staff. In fact, this could be one of the reasons why elderly persons effected by covid-19, do not seem to be receiving the personal attention they deserve. From a health aspect, this is extremely serious and worrying, as one regularly hears of patients who are left in bed for whole days presumably because of this lack of human resources, and as a result, they are known to be losing their mobility and ending up bedridden, while losing their will to recover.

Availability of beds

The number of beds available and the percentage occupancy is not disclosed in the director’s report.

This should be a key statistic as the services concession agreement is based on a minimum availability of 712 hospital beds per day, for which they are paid a contracted rate, irrespective as to whether the bed is occupied or not.

The future

In a recent interview with the new Minister of Finance, it was reported that discussions with Steward Healthcare are at an advanced stage for a renewal of the agreement under new terms and conditions.

I hope that the revised agreement will be discussed with the stakeholders before it is renewed and that the full agreement is made available to the public.

I also hope that the disclosure of the ultimate beneficial owners together with professional due diligence on experience in the health sector, a validation of their financial standing and financial going concern potential, and most of all the deletion of the notorious clause providing for a unilateral breach of compensation of Euro 100 million, are considered as deal breakers for the signing of the agreement.

I also expect that no additional funding is granted, neither as compensation for the past, nor as a bonus for the future, and also that Steward is debarred from transferring their shares/interests in the company to third parties, without first reaching cross-party consensus on the future of our health services.