Al Qudra Holding PJSC - ADX

Al Qudra Holding PJSC Consolidated financial statements 31 December 2017

Principal business address: P.O. Box 48111 Abu Dhabi United Arab Emirate

Al Qudra Holding PJSC Consolidated financial statements Contents

Pages

Directors’ Report

1-3

Independent Auditors’ Report

4-7

Consolidated statement of profit or loss

8

Consolidated statement of other comprehensive income

9

Consolidated statement of financial position

10 - 11

Consolidated statement of changes in equity

12 - 13

Consolidated statement of cash flows

14 - 15

Notes to the consolidated financial statements

16 - 61

KPMG Lower Gulf Limited Level 19, Nation Tower 2 Abu Dhabi Corniche, UAE Tel. +971 (2) 401 4800, Fax +971 (2) 632 7612

Independent Auditors' Report To the Shareholders of Al Qudra Holding PJSC Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Al Qudra Holding PJSC (“the Company”) and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the United Arab Emirates, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter We draw attention to Note 6 to the consolidated financial statements relating to the Group’s plot of land in Syria. Our opinion is not qualified in this respect. Other matter The consolidated financial statements of Al Qudra Holding PJSC and its subsidiaries as at and for the year ended 31 December 2016 were audited by another auditor who expressed an unmodified opinion on those statements in their report dated 12 April 2017.

3

KPMG Lower Gulf Limited is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG Lower Gulf Limited is registered and licensed as a foreign branch under the laws of the United Arab Emirates.

Al Qudra Holding PJSC Independent Auditors’ Report 31 December 2017

Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and their preparation in compliance with the applicable provisions of the UAE Federal Law No. (2) of 2015, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with Governance are responsible for overseeing the Group’s financial reporting process. Auditors' Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

4



As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (continued) •

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•

Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

5



Report on Other Legal and Regulatory Requirements Further, as required by the UAE Federal Law No. (2) of 2015, we report that: i)

we have obtained all the information and explanations we considered necessary for the purposes of our audit;

ii)

the consolidated financial statements have been prepared and comply, in all material respects, with the applicable provisions of the UAE Federal Law No. (2) of 2015;

iii)

the Group has maintained proper books of account;

iv)

the financial information included in the Directors' report, in so far as it relates to these consolidated financial statements, is consistent with the books of account of the Group;

v)

as disclosed in note 18 to the consolidated financial statements, the Group has purchased / invested shares during the year ended 31 December 2017;

vi)

note 11 to the consolidated financial statements discloses material related party transactions and the terms under which they were conducted; and

vii)

based on the information that has been made available to us nothing has come to our attention which causes us to believe that the Group has contravened during the financial year ended 31 December 2017 any of the applicable provisions of the UAE Federal Law No. (2) of 2015 or in respect of the Company, its Articles of Association, which would materially affect its activities or its consolidated financial position as at 31 December 2017.

KPMG Lower Gulf Limited

Richard Ackland Registration No. 1015 Abu Dhabi, United Arab Emirates Date: 29 March 2018

6


Al Qudra Holding PJSC Consolidated statement of profit or loss for the year ended 31 December Notes Continuing operations Revenue Cost of sales

2017 AED’000

497,198 (193,056)

Gross profit General and administrative expenses Selling and marketing expenses Provisions and write offs, net Dividend income from financial assets held at fair value through other comprehensive income Gain / (loss) on changes in fair value of investment properties Other income

31

6 30

Operating profit Finance income Finance costs Net finance cost

2016 AED’000

979,970 (598,915)

-----------------------------------------------

-----------------------------------------------

304,142

381,055

(123,619) (25,104) (21,190)

(93,294) (20,426) (45,282)

45,643

43,443

898 48,892

(116,574) 136,004

-----------------------------------------------

-----------------------------------------------

229,662

284,926

-----------------------------------------------

-----------------------------------------------

1,801 (31,668)

2,617 (34,060)

-----------------------------------------------

-----------------------------------------------

(29,867)

(31,443)

Share of profit of investment in associates

7

5,124

11,425

Gain on acquisition of shares in associates

7

7,787

-

Share of losses of investment in joint ventures

7

Profit from continuing operations Discontinued operations Loss from discontinued operations

(269)

(997)

-----------------------------------------------

-----------------------------------------------

212,437

263,911

===============

===============

-----------------------------------------------

Profit for the year Profit attributable to: Owners of the company Non-controlling interests

Basic and diluted earnings per share

21

Basic and diluted earnings per share – continuing operations

8

21

(11) -----------------------------------------------

212,437

263,900

===============

===============

202,517 9,920

263,529 371

-----------------------------------------------

-----------------------------------------------

212,437

263,900

===============

===============

0.250

0.439

===============

===============

0.250

0.439

===============

===============

Al Qudra Holding PJSC Consolidated statement of other comprehensive income for the year ended 31 December Notes

Profit for the year

2017 AED’000

2016 AED’000

212,437

263,900

36,660 -------------------36,660

7,241 -------------------7,241

2,133 -------------------38,793 -------------------251,230 ==========

(159) -------------------7,082 -------------------270,982 ==========

241,310 9,920 -------------------251,230 ==========

270,611 371 -------------------270,982 ==========

Other comprehensive income: Items that will not be reclassified to statement of profit or loss Net changes in the fair value of financial assets held through other comprehensive income

8

Items that may be reclassified subsequently to statement of profit or loss Foreign operations – foreign currency translation differences Other comprehensive income for the year Total comprehensive income for the year

Total comprehensive income attributable to: Owners of the company Non-controlling interests

The notes set out on pages 16 to 61 are an integral part of these financial statements. The independent auditors’ report is set out on pages 4 to 7.

9

Al Qudra Holding PJSC Consolidated statement of financial position As at 31 December

Notes

2017 AED’000

2016 AED’000

5 6 7 7

314,639 2,484,437 67,354 9,157

300,304 426,237 56,510 10,020

8 16 11

605,740 125,156 5,999 -------------------3,612,482 --------------------

575,934 132,493 7,866 -------------------1,509,364 --------------------

Inventories Development work in progress Trade and other receivables Amounts due from related parties Advances and prepayments Cash and cash equivalents

9 29 17 11 14 10

Assets held for sale

22

3,636 398,567 335,951 28,374 115,208 109,494 -------------------991,230 -------------------991,230 -------------------4,603,712 ==========

71,604 414,813 249,103 27,321 107,669 134,154 -------------------1,004,664 14,057 -------------------1,018,721 -------------------2,528,085 ==========

808,984 266,609 336,465 245,885 (3,924) 207,413 452,043 -------------------2,313,475 147,137 -------------------2,460,612 --------------------

600,000 246,357 (6,057) 170,753 209,843 -------------------1,220,896 (44,309) -------------------1,176,587 --------------------

Assets Property, plant and equipment Investment properties Investment in associates Investment in joint ventures Financial assets held at fair value through other comprehensive income Long term receivables Amounts due from related parties Non-current assets

Current assets Total assets

Equity Share capital Legal reserve Merger reserve Other reserves Foreign currency translation reserve Cumulative changes in fair value Retained earnings

18 19 27 28 20

Equity attributable to owners of the Company Non-controlling interests Total equity

10

Al Qudra Holding PJSC Consolidated statement of changes in equity for the year ended 31 December 2017

Share Capital AED ’000

At 1 January 2016 Profit for the year Reclassification of loss on disposal of financial assets measured at fair value through other comprehensive income Other comprehensive income for the year

Merger reserve AED ’000

Legal reserve AED ’000

(note 18) (note 27)

(note 19)

600,000 -

Dividend Transfer to legal reserve At 31 December 2016

219,967 -

(note 28)

(note 20)

(note 8)

-

(5,898) -

164,687 -

Retained earnings AED ’000

Equity attributable Nonto owners of controlling the Company interest AED ’000 AED ’000

19,529 263,529

998,285 263,529

-

(44,680) 371

953,605 263,900

-

-

-

-

(1,175)

1,175

-

-

-

-

(159)

7,241

-

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

(159)

7,241

263,529

270,611

371

270,982

----------------------600,000 ==========

--------------------------------------------==========

----------------------26,390 ----------------------246,357 ==========

--------------------------------------------==========

12

----------------------- ----------------------(6,057) 170,753 ========== ==========

(48,000) (26,390) ----------------------209,843 ==========

7,082

(48,000) ----------------------1,220,896 ==========

-

Total equity AED ’000

-

----------------------Total comprehensive (loss) / income for the year

-

Foreign currency Cumulative Other translation fair value reserves reserve reserve AED ’000 AED ’000 AED ’000

-

7,082

(48,000) ----------------------- ----------------------(44,309) 1,176,587 ========== ==========

Al Qudra Holding PJSC Consolidated statement of changes in equity for the year ended 31 December 2017

At 1 January 2017 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners of the Company Issue of ordinary shares related to business combinations Acquisition of Al Rayan with NCI Acquisition of Al Rayan reserves Acquisition of Al Rayan Dividend Transfer to legal reserve At 31 December 2017

Share Merger Capital reserve AED ’000 AED ’000

Legal reserve AED ’000

(note 18) (note 27)

(note 19)

600,000 -----------------------

-----------------------

246,357 -----------------------

208,984 ----------------------208,984

336,465 ----------------------336,465

-----------------------

----------------------808,984 ==========

----------------------336,465 ==========

20,252 ----------------------266,609 ==========

Other Translation reserves reserve AED ’000 AED ’000

(note 28)

Fair value reserve AED ’000

(note 20)

(note 8)

-

(6,057)

170,753

-

-

-----------------------

202,517

202,517

9,920

212,437

(44,309)

1,176,587

-----------------------

38,793 -----------------------

-----------------------

38,793 -----------------------

2,133

36,660

202,517

241,310

9,920

251,230

-----------------------

-----------------------

113,935 ----------------------113,935

208,984 696,285 ----------------------905,269

181,526 ----------------------181,526

208,984 181,526 696,285 ----------------------1,086,795

(54,000) (20,252) ----------------------452,043 ==========

(54,000) ----------------------2,313,475 ==========

----------------------147,137 ==========

(54,000) ----------------------2,460,612 ==========

-

-

----------------------- ----------------------(3,924) 207,413 ========== ==========

The notes set out on pages 16 to 61 are an integral part of these financial statements.

13

1,220,896

Total equity AED ’000

36,660 -----------------------

----------------------245,885 ==========

209,843

Non controlling interest AED ’000

2,133 -----------------------

-

245,885 ----------------------245,885

-

Retained earnings AED ’000

Equity attributable to owners of the Company AED ’000

Al Qudra Holding PJSC Consolidated statement of cash flows for the year ended 31 December Notes

Cash flows from operating activities Profit for the year Adjustment for the acquired subsidiary profit

27

Adjustments for: Depreciation of property, plant and equipment Dividend income Finance cost Provision for employees’ end of service benefits Provisions and write offs Share of losses of investment in joint ventures Share of profits of investment in associate Changes in fair value of investment properties, net Interest income

5

15 31 7 7 6

Changes in: - inventories - development work in progress - advances and prepayments - trade and other receivables - accrued expenses - amounts due from related parties - amounts due to related parties - trade and other payables Cash generated from operating activities Employees’ end of service benefit paid, net Net cash from operating activities

2017 AED’000

2016 AED’000

212,437 (65,134)

263,900 -

-------------------------------

----------------------------

147,303

263,900

12,292 (45,643) 25,009 2,585 21,190 269 (12,911) 42,000 (1,801)

10,005 (43,443) 34,060 1,065 45,282 997 (11,425) 116,574 (2,617)

-------------------------------

----------------------------

190,293

414,398

(12) 16,246 (5,489) (15,469) (17,072) (7,634) (8,363) (58,152)

(930) (8,081) 37,638 48,192 (120,202) 7,167 (65,845) (150,949)

-------------------------------

--------------------------

94,348

161,388

(387)

-

-------------------------------

-------------------------------

93,961

161,388

-------------------------------

-------------------------------

(28,770)

(27,375)

1,224 42,585 1,801 -

2,773 45,998 2,617 4,677 (15,044)

Cash flows from investing activities Acquisition of property, plant and equipment 5 Proceeds from disposal of property, plant and equipment Dividends received Interest income received Decrease in time deposits under lien Investment in associate Purchase of investments carried at fair value through through other comprehensive income

14

-

(8,269)

Al Qudra Holding PJSC Consolidated statement of cash flows (continued) for the year ended 31 December Notes Cash flows from investing activities (continued) Addition to investment property Purchase of investment Proceeds from disposal of financial asset at fair value through other comprehensive income Proceeds from redemption of financial assets at fair value through other comprehensive income

6

2017 AED’000

2016 AED’000

(17,200) (922) 55

-

-------------------------------

----------------------------

Net cash generated from investing activities Cash flows from financing activities Proceeds from loans and borrowings Repayment of loans and borrowings Finance costs paid Dividend paid

12 12

Net cash used in financing activities Net decrease in cash and cash equivalents

(1,227)

105,106

-------------------------------

----------------------------

56,925 (142,692) (25,009) (54,000)

(176,121) (34,060) (48,000)

-------------------------------

----------------------------

(164,776)

(258,181)

-------------------------------

----------------------------

(72,042)

8,313

2,728

4,040

43,094

-

Net foreign exchange differences Cash acquired from Al Rayan Cash and cash equivalents at 1 January

10

Cash and cash equivalents at 31 December

10

99,729

135,120

122,767

-------------------------------

---------------------------------

108,900

135,120

==============

==============

Significant non-cash transaction during the year were as follows: i) ii)

Significant non-cash transaction related to Al Rayan acquisition, refer to note 27 to the consolidated financial statements. Significant non-cash transaction for assets and liabilities classified as held for sale: 2017 AED’000 Net movement in assets held for sale (note 22)

-

14,057 ==============

Net movement in liabilities associated with assets held for sale (note 22)

2016 AED’000

==============

-

(93,161) ==============

==============

The notes set out on pages 16 to 61 are an integral part of these financial statements. The independent auditors’ report is set out on pages 4 to 7.

15

Al Qudra Holding PJSC Notes to the consolidated financial statements 1

Legal status and principal activities (continued)

Name of subsidiaries

Place of incorporation Percentage and operation of ownership

Principal activities

Al Qudra New Line Oil & Gas L.L.C.*

UAE

Oil and gas equipment

100%

and maintenance services Buhyarat Ain Al Fayda Real Estate L.L.C Manarah Bay Real Estate L.L.C Q International Limited Al Qudra Services L.L.C (formerly “Al Qudra Suez”) Al Qudra and Ravago Investment LLC Q Scape L.L.C

UAE UAE UAE

100% 100% 100%

UAE

100%

UAE UAE

51% 51%

Q Energy L.L.C

UAE

60%

Al Qudra Education L.L.C Al Qudra Holding - Algeria Al Qudra Holding – International L.L.C

UAE UAE UAE

100% 100% 100%

Emirates Simulation Academy L.L.C

UAE

60%

Q For Commercial Markets Management

UAE

60%

Q Link Transport Q Car Park LLC.*

UAE UAE

85% 50%

Q Active for Technologies L.L.C

UAE

51%

ABNIA for Industrial Holding L.L.C.*

UAE

50%

Al Qudra Belarus Ltd. Al Qudra Holding - Yemen Al Qudra Holding Industrial L.L.C

Belarus Yemen UAE

100% 100% 100%

Q Parks Establishment

UAE

100%

Al Qudra Health Care L.L.C QP International LLC Al Rayan Investment PSC

UAE UAE UAE

100% 60% 99.65%

Construction workers residential City LLC Moon Flower Real Estate Development LLC Green Precast Systems Technology LLC

UAE

65%

General investment Building Maintenance & Landscaping Oil & Gas equipment installation and maintenance services Education Services General Investment Industrial Enterprise & Financial Management Construction, Operation Management and Development of Training Centre Setup, Ownership and development of commercial Market, Parks and entertainment facilities. Transportation Developing, operating, renting and equipping of car parking. Telecommunication system installation and maintenance. Activities of cement, glass, iron, wood and electro mechanical industries. General Investment General Investment Consultancy in alternative power and industrial projects Touristic resort management & entertainment investment Health care & hospitality Project Management Develop, manage and invest in real estate enterprises Real Estate Investment

UAE

100%

Real Estate Investment

UAE

60%

General Contracting

17

Real estate management Real estate management General Investment Environmental plants maintenance


Legal status and principal activities (continued)

Name of subsidiaries

Place of incorporation and operation

Percentage of ownership

Principal activities

Earth Care Agricultural Products LLC Apex Residential LLC Al Rayan Global Real Estate LLC

UAE UAE UAE

100% 100% 100%

Agribusiness Real Estate Investment Real Estate Investment

*Although the Group owns 50% of the outstanding shares of Al Qudra New Line Oil & Gas LLC, Q Car Park LLC and ABNIA for Industrial Holding LLC, the investment has been classified as a subsidiary by virtue of control over the investee.

2

Basis of preparation

(a)

Statement of compliance These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and comply, where appropriate, with the relevant Articles of Association of the Company and the requirements of the United Arab Emirates Federal Law No (2) of 2015.

(b)

Basis of measurement These financial statements have been prepared on a historical cost basis except for investment properties and financial assets held at fair value through other comprehensive income that have been measured at fair value.

(c)

Functional and presentation currency These financial statements are presented in United Arab Emirates Dirham (‘AED’), which is the functional currency of the Company. All amounts have been rounded to the nearest thousand (AED “000”), unless otherwise stated.

(d)

Use of estimates and judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as at and for the year ended 31 December 2017. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements in Note 4.

18


Basis of preparation (continued)

(e)

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in statement of consolidated profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Any contingent consideration payable is measured at fair value at the date of acquisition. If contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in consolidated statement of profit or loss.

(f)

(g)

Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Non-controlling interests Non-controlling interest (NCI) are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Financial information of subsidiaries that have material non-controlling interests are provided below:

19


Basis of preparation (continued)

(g)

Non-Controlling Interests (continued) Portion of equity interest held by non-controlling interests:

Q Energy LLC Q Link Transport LLC Emirates Simulation Academy LLC Q For Commercial Markets Management LLC Q Car Park LLC Q Active for Technologies LLC ABNIA for Industrial Holding LLC Q Scape LLC QP International LLC Construction Workers Residential City LLC Green Precast Systems Technology LLC (h)

2017 2016 % % 40 40 15 15 40 40 40 40 50 50 49 49 50 50 49 49 40 40 35 40 -

Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(i)

Foreign currency transaction Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in consolidated statement of profit or loss. However, foreign currency differences arising from the translation of the following items are recognised in OCI: ––

–– ––

through other comprehensive income equity investments (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to consolidated statement of profit or loss); a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective (see (iii)); and qualifying cash flow hedges to the extent that the hedges are effective.

20


Significant accounting policies The Group has consistently applied the following accounting policies to all the periods presented in these consolidated financial statements except for the adoption of new and amended standards and interpretations effective as at 1 January 2017. The adoption of the new and amended standards and interpretations did not have an impact on the consolidated financial position or performance of the Group during the year.

(a)

Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but has no control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The consolidated statement of profit or loss and other comprehensive income reflects the Group’s share of the results of operations of the associates and joint ventures. Any change in other comprehensive income of those investees is presented as part of the Group’s other comprehensive income. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The aggregate of the Group’s share of statement of profit or loss of an associate and a joint venture is shown on the face of the consolidated statement of income outside operating profit. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, then recognises the loss in the consolidated statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in consolidated statement of profit or loss. 21


Significant accounting policies (continued)

(b)

Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(c)

Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. When the consideration is deferred, the fair value is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and nominal amount of the consideration is accrued and recognised as interest revenue on a time basis.

(i)

Sale of properties Revenues from the sale of properties are recognised when equitable interest in a property vests in the buyer and all the following conditions are satisfied: • • • • •

the Group has transferred to the buyer the significant risks and rewards of ownership of the properties or goods; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the properties or goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

(ii)

Sale of goods Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.

(iii)

Rendering of services The Group recognises revenue from rendering of services in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed.

(iii)

Dividend and interest income Dividend income from investments is recognised when the Group’s right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. 22



(d)

Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. The Group as lessee Leases payable under operating leases are charged to consolidated statement of profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

(e)

Foreign currencies The consolidated financial statements are presented in UAE Dirhams (AED), which is the Al Qudra Holding PJSC functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are recorded at the respective functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the respective functional currency rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of profit or loss and other comprehensive income. On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange foreign currency rates for the year. Exchange differences arising, if any, are transferred to the Group’s foreign currency translation reserve in equity. Such translation differences are recognised as income or as expense in the period in which the operation is disposed of.

(f)

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in consolidated statement of profit or loss in the period which they are incurred.

(g)

Government grants Government grants are initially recognised as deferred income at fair value if there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant; they are then recognised in consolidated statement of profit or loss as other income on a systematic basis over the useful life of the asset. 23



(h)

Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. All of the Group’s non-derivative financial assets fall within the category of loans and receivables and available for sale financial assets. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Financial assets through other comprehensive income These assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt instruments, are recognised in Other Comprehensive Income and accumulated in fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified in equity. Cash and cash equivalents For the purpose of the statement of cash flows, cash and cash equivalents include cash in hand and at banks and bank deposits with original maturities of three months or less, net of margin deposits if any. Non-derivative financial liabilities The Group initially recognises financial liabilities on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when the contractual obligations are discharged, cancelled or expired. Financial assets and financial liabilities designated at fair value through profit or loss Financial assets and financial liabilities classified in this category are those that have been designated by management at initial recognition. Management may designate a financial asset at fair value through consolidated statement of profit or loss upon initial recognition only when the first of the following criteria are met. A financial liability may be so designated when any of the three criteria are met. Designation is determined on an instrument by instrument basis:

24

Al Qudra Holding PJSC Notes to the consolidated financial statements 3 (h)

Significant accounting policies (continued) Financial instruments (continued) Financial assets and financial liabilities designated at fair value through profit or loss (continued) • The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis. • The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. • The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwise would be required by the contract.

(i)

Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses (if any). Historical cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of property, plant and equipment is their purchase cost together with any incidental costs of acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenses are charged to consolidated statement of profit or loss during the financial period in which they are incurred. Depreciation is charged so as to write off the cost of property, plant and equipment on a straightline basis over the expected useful economic lives of the assets concerned as follows: Building Machineries and equipment Office and computer equipment Motor vehicles Furniture and fixtures Leasehold improvements Other assets

40 years 3 - 4 years 4 - 5 years 3 - 4 years 4 - 5 years lower of lease term or 4 years 5 years

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Freehold land is not depreciated. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the net disposal proceeds and the carrying amount of the asset and is included in the consolidated statement of profit or loss when the asset is derecognized.

25



(i)

Property, plant and equipment (continued) The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

(j)

Capital work in progress Capital work in progress is stated at cost. When commissioned, capital work in progress is transferred to the appropriate property, plant and equipment category and is depreciated in accordance with the Group’s policies.

(k)

Investment properties Investment properties, which are properties held to earn rentals and/or for capital appreciation, are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Gains or losses arising from changes in the fair value of investment properties are included in consolidated statement of profit or loss in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition.

(l)

Development work in progress Development work in progress consists of properties being developed principally for sale and is stated at the higher of cost or fair value. Cost comprises all direct costs attributable to the design and construction of the property including staff costs. Net realisable value is the estimated selling price in the ordinary course of the business less applicable variable selling expenses.

(m)

Inventories Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories by the method most appropriate to the particular class of inventory, valued on a first-in-first-out basis.

(n)

Impairment of non-financial assets At end of each reporting period, the Group reviews the carrying amounts of its assets whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

26



(n)

Impairment of non-financial assets (continued) Recoverable amount is the higher of fair value less costs to sell or value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in consolidated statement of profit or loss. Where an impairment loss subsequently reverses, 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. A reversal of an impairment loss is recognised immediately in consolidated statement of profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(o)

Employee benefits An accrual is made for the estimated liability for employees’ entitlement to annual leave and leave passage as a result of services rendered by eligible employees up to the end of the reporting period. The Group provides end of service benefits for its non-local employees. The entitlement to these benefits is based upon the employees’ length of service and completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment. The accrual relating to annual leave and leave passage is disclosed as a current liability, while the provision relating to employees’ end of service benefits is disclosed as a non-current liability. Pension contributions are made in respect of UAE national employees to the Abu Dhabi Retirement Pension and Benefits Fund in accordance with the UAE Federal Law No. (2), 2000 for Pension and Social Security. Such contributions are charged to consolidated statement of profit or loss during the employees' period of service.

(p)

Trade receivables Trade receivables are stated at original invoice amount net of provisions for amounts estimated to be impaired. A provision for doubtful debts is made when collection of the full amount is no longer possible. Bad debts are written off when there is no possibility of recovery.

(q)

Cash and cash equivalents Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and on hand and short-term-deposits with an original maturity of three month or less.

(r)

Accounts payable and accruals For the purpose of consolidated statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits as defined above, net of deposits under lien. Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

27

Al Qudra Holding PJSC Notes to the consolidated financial statements 3 (s)

Significant accounting policies (continued) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(t)

Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are integral part of the EIR. The EIR amortisation is included in finance cost in the consolidated statement of profit or loss.

(u)

Fair value measurement A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • •

•

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. 28



(v)

New standards and interpretations issued but not yet effective A number of new standards are effective for annual periods beginning after 1 January 2017 and earlier application is permitted. Management has assessed the following standards and concluded that none of these will have a significant material impact in its initial year of application.

(i)

Impairment – Financial assets and contract assets IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis. The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments, and to contract assets. Under IFRS 9, loss allowances will be measured on either of the following bases: •

12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

•

lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date. However, lifetime ECL measurement always applies for trade receivables and contract assets without a significant financing component. (ii)

Classification – Financial liabilities IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognised in consolidated statement of profit or loss, whereas under IFRS 9 these fair value changes are generally presented as follows:

(iii)

•

the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and

•

the remaining amount of change in the fair value is presented in consolidated statement of profit or loss.

Disclosures IFRS 9 will require extensive new disclosures, in particular about hedge accounting, credit risk and ECLs.

29



(v)

New standards and interpretations issued but not yet effective (continued)

(iv)

Transition Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as described below: •

• • • • •

The Group will take advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 will generally be recognised in retained earnings and reserves as at 1 January 2018. The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application. The determination of the business model within which a financial asset is held. The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL. The designation of certain investments in equity instruments not held for trading as at FVOCI.

IFRS 15 Revenue from Contracts with Customers

(effective 1 January 2018)

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The management has performed its assessment and concluded that the application of IFRS-15 in future period will not impact the current treatment of revenue recognition. IFRS 16 ‘Leases’

(effective 1 January 2018)

IFRS 16 introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases. The management has performed its assessment and concluded that the application of IFRS-16 in future period will not impact the current treatment of revenue recognition.

30

Al Qudra Holding PJSC Notes to the consolidated financial statements 3 (w)

Significant accounting policies (continued) New amended standards and interpretations effective after 1 January 2017 The following new accounting standards or amendments to and interpretations of standards relevant to the Company that have been implemented for the financial year beginning 1 January 2017, with no material impact on the Group’s financial position or performance. Amendments resulting from the IASB annual improvements project have no impact on the Company’s financials but may affect the accounting for future transactions or arrangement. • • •

Disclosure Initiative (Amendments to IAS 7) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) Annual Improvements to IFRSs 2014–2016 Cycle – various standards (Amendments to IFRS 12).

4

Significant accounting judgements, estimates and assumptions

(a)

Judgments The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosures of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods. In the process of applying the Group’s accounting policies, management has made the following judgments, which have the most significant effect in the amounts recognised in the consolidated statement of financial position: Classification of properties In the process of classifying properties, management has made various judgments. Judgment is needed to determine whether a property qualifies as an investment property, property plant and equipment, inventory and/or land held for resale. The Group develops criteria so that it can exercise that judgment consistently in accordance with the definitions of investment property, property plant and equipment and land held for resale. In making its judgment, management considered the detailed criteria and related guidance for the classification of properties as set out in IAS 2, IAS 16 and IAS 40, in particular, the intended usage of property as determined by management. Classification of investments in subsidiaries, joint ventures and associates Management made assessment on the extent of control or influence over the entities considered subsidiaries, joint ventures and associates. Management is satisfied that the investments are appropriately classified after consideration of the Group's control or influence over the operational and financial policies of these entities. Valuation of assets classified as held for sale Assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Management has reviewed the assets classified as held for sale and has determined the fair value less costs to sell based on market research and current economic environment. During the year, management has recognised an impairment loss amounting to AED nil (2016: AED nil) to write-down the carrying amounts of the assets held for sale to their fair values less costs to sell. 31


Significant accounting judgements, estimates and assumptions (continued)

(b)

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Useful lives of property, plant and equipment The Group determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on projected product lifecycles. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or nonstrategic assets that have been abandoned or sold. Impairment of investments in joint ventures and associates Management regularly reviews its investments in joint ventures and associates for indicators of impairment. This determination of whether investments in joint ventures and associates are impaired entails Management's evaluation of the specific investee’s profitability, liquidity, solvency and ability to generate operating cash flows from the date of acquisition and until the foreseeable future. The difference between the estimated recoverable amount and the carrying value of investment is recognised as an expense in the consolidated statement of profit or loss. Valuation of unquoted equity investments carried at fair value through other comprehensive income Valuation of unquoted equity investments carried at fair value through other comprehensive income is normally based on recent market transactions on an arms length basis, fair value of another instrument that is substantially the same, expected cash flows discounted at current rates for similar instruments or other valuation models. Impairment of development work in progress Properties classified under development work in progress are assessed for impairment based on cash flows when there is indication that those assets have suffered an impairment loss. Cash flows are determined based on contractual agreements or future expected selling prices and estimations of total costs until the properties are completed. Any impairment losses determined by the Group are recorded in consolidated statement of profit or loss. Fair value of investment properties In order to assess the fair value of investment properties, the Group engages the services of third party professional appraisers. Management believes that the appraised value reflects the true fair value of properties in light of current economic situations. The total fair value of investment properties at 31 December 2017 amounted to AED 2,484,437 thousand (2016: AED 426,237 thousand). If fair value increases/decreases by 10%, the change in fair value of investment properties recognised in consolidated statement of profit or loss for the year ended 31 December 2017 will increase/decrease by AED 248,444 thousand. Impairment of trade and other receivables and due from related parties An estimate of the collectible amount of trade and other receivables and due from related parties is made when collection of the full amount is no longer probable. This determination of whether these receivables are impaired entails management's evaluation of the specific credit and liquidity position of the customers and related parties and their historical recovery rates, including discussion with legal department and review of current economic environment. Management believes that the recorded provision is sufficient to cover anticipated losses and taking into consideration specific matters discussed below. 32


Significant accounting judgements, estimates and assumptions (continued) Estimates and assumptions (continued) Provisions for reduction in gross floor area of properties The Group had legal title to a plot of land located in Abu Dhabi, United Arab Emirates. The plot of land is kept as an investment property which is located in Manarah Bay, and is valued at AED 338 million as at 31 December 2017 (2016: AED 348 million). In 2009, the Group received recommendations and guidelines from the Abu Dhabi Urban Planning Council (UPC) that highlighted the need to significantly reduce the development density (up to 53% reduction in the proposed gross floor area (GFA)), due to traffic accessibility constraints. The Company has engaged an independent traffic consultant to undertake a transportation impact study in an attempt to identify traffic mitigation solutions in order to address UPC’s concerns and minimise the reduction in GFA for above said plot of land. Based on the communication with UPC and review of technical studies done by the traffic consultant, management believes that a 30% reduction (2016: 30% reduction) is the best reasonable estimate for the change in GFA of the subject properties. The discussions with UPC are currently ongoing. Based on the above, an estimated reduction in the fair value of the investment property amounting to AED 101.4 million was recognised which is equivalent to 30% of the fair value of the 338 million as at 31 December 2017. If the final GFA approved by UPC increase / decrease by 5%, the provision for change in fair value will increase / decrease by AED 16.9 million. Valuation of assets classified as held for sale Assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Management has reviewed the assets classified as held for sale and has determined the fair value less costs to sell based on market research and current economic environment. During the year, management has recognised an impairment loss amounting to AED nil (2016: AED nil) to write-down the carrying amounts of the assets held for sale to their fair values less costs to sell.

33


Property, plant and equipment Land and building AED ‘000 Cost: At 1 January 2016 Reclassified from discontinued operations Additions Disposals Transfers Reclassed to investment properties Net foreign currency exchange differences

211,957 9,601 60,652 (784)

Machineries and equipment AED ‘000

Motor vehicles AED ‘000

52,768 65 56 (5) 531 -

1,710 773 114 (2)

Office and computer equipment AED ‘000 12,077 749 152 (8) 392 (15)

Furniture and Leasehold Other fixtures improvements assets AED ‘000 AED ‘000 AED ‘000 7,285 411 179 9,723 (4)

5,469 70 -

23,364 21 446 (31) (4,288) (63)

Capital work in progress AED ‘000 206,044 133 16,827 (2,758) (67,010) (51,574) (36)

Total AED ‘000 520,674 2,222 27,375 (2,802) (51,574) (904)

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

281,426

53,415

2,595

13,347

17,594

5,539

19,449

101,626

494,991

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

At 1 January 2017 Additions Addition due to acquisition of new subsidiary Disposals Transfers Net foreign currency exchange differences

281,426 2,619 (21,944) 1,285

53,415 5 (2) 2 -

2,595 235 192 (118) (2) 8

13,347 80 72,036 (672) 1,101 78

17,594 2,354 2,765 (760) 4 7

5,539 (5) -

19,449 1,780 1,182 359

101,626 21,697 (7,315) 19,657 2,874

494,991 28,770 74,993 (8,872) 4,611

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

At 31 December 2017

263,386

53,420

2,910

85,970

21,964

5,534

22,770

138,539

594,493

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

At 31 December 2016

34


Property, plant and equipment (continued) Land and building AED ‘000 Accumulated depreciation and impairment: At 1 January 2016 Reclassified from discontinued operations Charge for the year Disposal Net foreign currency exchange differences Impairment loss At 31 December 2016

At 1 January 2017 Charge for the year Disposals Charge due to acquisition of New subsidiary Net foreign currency exchange differences Impairment loss At 31 December 2017

Carrying amount: At 31 December 2017 At 31 December 2016

41,242 7,273 (88) -

Machineries and equipment AED ‘000

Motor vehicles AED ‘000

52,086 62 143 (2) -

1,345 689 150 (1) -

Office and computer equipment AED ‘000

Furniture and Leasehold fixturesimprovements AED ‘000 AED ‘000

11,832 668 188 (6) (7) -

6,251 289 2,045 (2) -

5,469 70 -

Other assets AED ‘000

16,363 13 206 (21) (30) -

Capital work in progress AED ‘000

13,460 35,000

Total AED ‘000

148,048 1,791 10,005 (29) (128) 35,000

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

48,427

52,289

2,183

12,675

8,583

5,539

16,531

48,460

194,687

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

48,427 7,055 -

52,289 169 (2)

2,183 182 (62)

12,675 1,131 (504)

8,583 2,625 (465)

5,539 (5)

16,531 1,130 -

48,460 -

194,687 12,292 (1,038)

70,615 (51) -

2,749 (3) -

-

1,000

73,548 (635) 1,000

(394) -

-

184 (6) -

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

55,088

52,456

2,481

83,866

13,489

5,534

17,480

49,460

279,854

-----------

-----------

-----------

-----------

-----------

-----------

-----------

-----------

----------314,639

208,298

964

429

2,104

8,475

======

======

======

======

======

232,999

1,126

412

672

9,011

======

======

======

======

======

35

-

-

====== -

======

(181) -

5,290

89,079

======

======

======

2,918

53,166

300,304

======

======

======


Property, plant and equipment (continued) The depreciation charge for the year has been allocated as follows:

Cost of goods and services General and administrative expenses

6

2017 AED’000 5,082 7,210 --------------------12,292 ==========

2016 AED’000 4,854 5,151 --------------------10,005 ========

2017 AED’000

2016 AED’000

236,600 29,000 92,737 52,100 800,000 325,000 887,000 16,000 45,000 1,000 -----------------------2,484,437 ==========

243,600 35,000 92,737 54,900 -----------------------426,237 ==========

Investment properties Investment properties consist of the following properties:

Location: Manarah Bay Abu Dhabi, UAE Ain Al Faydah Resort, Abu Dhabi, UAE Damascus, Syria Al Qudra building, Abu Dhabi, UAE Al Rayan Residents Village –CWRC Khalifa city lands Moon flower residential city Hydra golf walk Reem Island plot RT6-C7 Residential unit in Al Ghadeer Project

The movements in the investment properties during the year were as follows:

As at 1 January Additions due to acquisition of Al Rayan Reclassified from CWIP / inventory Additions during the year Increase / (loss) on revaluation of investment properties As at 31 December

36

2017 AED’000

2016 AED’000

426,237 1,917,088 70,000 70,214 898 -----------------------2,484,437 ==========

491,237 51,574 (116,574) -----------------------426,237 ==========


Investment properties (continued) The following illustrates the analysis of investment properties recorded at fair value by level of hierarchy: Date of valuation

Total Level 1 Level 2 Level 3 AED’000 AED’000 AED’000 AED’000

31 December 2017 Investment Properties

31 December 2017 2,484,437

-

-

2,484,437

31 December 2016 Investment Properties

31 December 2016

-

-

426,237

426,237

During the year ended 31 December 2017 and 31 December 2016, there were no transfers between Level 1, Level 2 and Level 3 fair value measurements. The fair value of Manarah Bay at 31 December 2017 has been determined by management by reference to valuation carried out by British Arabian, independent valuers not related to the Group. The valuation, which conforms to the Royal institution of Chartered Surveyors Valuation Standards, was arrived at by considering both the Direct Comparison and Residual approaches. The fair value at 31 December 2017 was reduced by AED 101.4 million (2016: reduced by AED 104.4 million) being the estimated reduction in the GFA of this plot of 30% (2016: 30%) estimated by management. The final GFA of the plot is dependent on the outcome of discussions with UPC and the UPC's final resolution in respect of the reduction of the plot's GFA. The fair value at 31 December 2017 related to Group’s 70% share has decreased by AED 7 million (2016: increased by AED 5.6 million). The fair value of Al Ain Fayda Resort at 31 December 2017 has been determined by reference to valuation carried out by British Arabian, independent valuers not related to the Group. The valuation, which conforms to the Royal institution of Chartered Surveyors Valuation Standards, was arrived at by utilizing the investment method of valuation (income capitalization method). During the year, there is an addition in Al Ain Fayda Resort by AED 17.2 million. The fair value at 31 December 2017 has decreased by AED 23.2 million (2016: decreased by AED 0.5 million) Manarah Bay and Ain Al Fayda resort were initially recorded at a nominal value of AED 1 in accordance with the Group's accounting policy for government grants. The Group has a plot of land in Syria amounting to AED 92.7 million (2016: AED 92.7 million). There is uncertainty relating to the Group’s ability to derive the economic benefit or recover the value of this land due to the current political situation in Syria. The fair value of AED 92.7 million as at 31 December 2017 has been estimated by the management and approved by the Group’s Board of Directors. In 2016, the Group transferred capital work in progress relating to the Group's head office building's ground floor, mezzanine floor and floors 1-3 amounting to AED 51.6 million to investment properties as those areas of the property will be used for rental generation. The fair value of those areas of the building as at 31 December 2017 is AED 52.1 million (31 December 2016: AED 54.9 million) have been determined by reference to a valuation carried out by British Arabian, independent valuers not related to the Group. The valuation, which conforms to the Royal institution of Chartered Surveyors Valuation Standards, was arrived at by utilizing the investment method of valuation (income capitalization method). The fair value at 31 December 2017 has decreased by AED 2.8 million (2016: decreased by Nil)

37


Investment properties (continued) The fair value of Construction Workers Residential City project, amounted to AED 800 million (2016: AED 796 million), which has been determined based on a valuation performed on 31 December 2017 by Asteco property management an independent valuer. The valuation, which conforms to the Royal institution of Chartered Surveyors Valuation Standards, was arrived at by utilizing the investment method of valuation (Discounted Cash Flow method). The Group owns two plots of land in Khalifa city A and Khalifa city B for which the Group intends to construct investment properties. Accordingly these plots of lands have been classified as investment properties. During 2017, the Group requested an external independent valuation which was performed by Asteco Property Management and British Arabian an independent valuers, where fair value of these plots was determined using valuation models utilising market observable inputs. The fair value of these plots are AED 325 million as at 31 December 2017 (2016: AED 317 million) Moonflower Residential City the property under development (“the project”) was granted by Zones Corp in December 2012 to Moon Flower Real Estate Development LLC (“Moon Flower”), a subsidiary of the Group in December 2012 for a lease period of thirty years. The fair value of the property under development amounted to AED 887 million (2016: AED 536 million) based on a valuation performed by ValuStrat Management Consultancies an independent valuer. The valuation, which conforms to the Royal institution of Chartered Surveyors Valuation Standards, was arrived at by utilizing the investment method of valuation (Discounted Cash Flow method). During the year, the Group has changed their intention from sale to holding it for capital appreciation and accordingly these have been reclassified to investment properties. Furthermore, the Group requested an external independent valuation which was performed by British Arabian an independent valuer, where fair value of these plots are AED 16 million and 45 million respectively as at 31 December 2017 (2016: AED 19 million and 51 million). The residential unit in Al Ghadeer Project with a total value of AED 1 million are carried at fair value.

38


Investment in associates and joint ventures Investee

Principal activity

Ownership interest

Associate Q Construction L.L.C

General Contracting

100%

Abu Dhabi

Trading and operation of refrigeration and air conditioning equipment

50%

Abu Dhabi

Sawaeed Employment L.L.C.

Employment agency

10%

Abu Dhabi

Joint ventures Al Qudra Sports Management L.L.C

Sports management

50%

Abu Dhabi

Al Qudra Addoha pour L’investissement Immobilier

Real estate investment

50%

Morocco

SKM-Q L.L.C.

Place of registration

By virtue of an agreement, Group purchased from third party an additional 51% of the equity of Q Construction LLC. The legal right title of the 51% equity has not been transferred to the Group as at 31 December 2017. During 2017, the Company entered into an agreement with a third party to purchase an additional 24% of equity of Q Construction LLC for an amount of AED 1,000 thousand. The legal right title of this 24% equity has not been transferred to the Group as at 31 December 2017 and the Group as at the reporting date, does not exercise control over Q Construction LLC and accordingly the investment classified as an associate. Investment in SKM-Q is treated as an associate even though the Group holds 50% of the equity of the investee since the Group does not exercise control or joint control over the operations and decision making function of the investee. Sawaeed Employment L.L.C. is treated as an associate even though the Group holds 10% of equity of the investee since the Group exercises significant influence over the operations and decision making function of the investee due to member of the Board.

39


Investment in associates and joint ventures (continued)

Associates Q Construction L.L.C. SKM-Q L.L.C. Sawaeed Employment L.L.C.

Share in net assets at 1 January 2017 AED ‘000

Additions (disposals) AED ‘000

Share in profit (loss) AED ‘000

22,324 34,186 ----------56,510 ======

1,000 ----------1,000 ======

5,124 ----------5,124 ======

(3,067) ----------(3,067) ======

7,787 ----------7,787 ======

----------======

31,111 36,243 ----------67,354 ======

7,239 2,781 ----------10,020 ======

----------======

624 (893) ----------(269) ======

----------======

----------======

(594) ----------(594) ======

7,863 1,294 ----------9,157 ======

Dividends AED ‘000

Gain on additional purchased AED ‘000

Share in Share in net assets at translation 31 December reserves 2017 AED ‘000 AED ‘000

Joint Ventures Al Qudra Sports Management L.L.C Al Qudra Addoha pour L'Investisement Immobilier

40


Investment in associates and joint ventures (continued)

Associates Q Construction L.L.C. SKM-Q L.L.C. Sawaeed Employment L.L.C.

Share in net assets at 1 January 2016 AED ‘000

Additions (disposals) AED ‘000

Share in profit (loss) AED ‘000

7,280 25,316 ----------32,596 ======

15,044 ----------15,044 ======

11,425 ----------11,425 ======

(2,555) ----------(2,555) ======

----------======

----------======

22,324 34,186 ----------56,510 ======

8,236 6,202 ----------14,438 ======

----------======

(997) ----------(997) ======

----------======

----------======

(3,421) ----------(3,421) ======

7,239 2,781 ----------10,020 =====

Dividends AED ‘000

Gain on additional purchased AED ‘000

Share in Share in net assets at translation 31 December reserves 2016 AED ‘000 AED ‘000

Joint Ventures Al Qudra Sports Management L.L.C Al Qudra Addoha pour L'Investisement Immobilier

SKM-Q L.L.C. is a net deficit position as at 31 December 2017. The Group accounted for its share of losses of the investees up to the extent of its capital contribution and advance

41


Investments in associates and joint ventures (continued) Financial information in respect of the Group’s associates is summarised below:

Total assets Total liabilities Net assets Group’s share of net assets of associates Total revenue Total profit for the year

2017 AED’000

2016 AED’000

447,448 (53,907) -----------------393,541 ======== 67,354 ======== 229,971 ======== 50,754 ========

492,760 (119,313) -----------------373,447 ======== 56,510 ======== 222,011 ======== 54,945 ========

Financial information in respect of the Group’s joint ventures is summarised below:

Total assets Total liabilities Net assets Group’s share of net assets of joint ventures Total revenue Total profit for the year

8

2017 AED’000

2016 AED’000

47,768 (29,454) -----------------18,314 ======== 9,157 ======== 62,739 ======== 1,111 ========

134,582 (99,141) -----------------35,441 ======== 10,020 ======== 65,299 ======== 38 ========

Financial assets Financial assets held at fair value through other comprehensive income (FVTOCI):

Investment in quoted securities Investment in unquoted securities

42

2017 AED’000

2016 AED’000

8,098 597,642 -----------------------605,740 ==========

10,905 565,029 -----------------------575,934 ==========


Financial assets (continued) The movement in financial assets during the year was as follows:

At 1 January Acquisition through business combination Purchase during the year Disposal during the year Redemption of shares Increase in fair value

At 31 December

2017 AED’000

2016 AED’000

575,934 512 (7,366) 36,660 -----------------------605,740 ==========

660,153 8,269 (93,536) (6,193) 7,241 -----------------------575,934 ==========

Fair value of certain unquoted investments have been estimated on the basis of recently concluded sales of similar investments confirmed by market intermediaries.

9

Inventories

Complete properties held for resale (note 6) Land held for sale (note 6) Others

2017 AED’000

2016 AED’000

3,636 -----------------------3,636 ==========

19,000 51,000 1,604 -----------------------71,604 ==========

During the year, the Group has changed their intention from sale to holding it for capital appreciation and accordingly these have been reclassified to investment properties.

10

Cash and cash equivalents

Cash and bank balances Time deposits – short term

Less: deposits under lien

Classified as part of disposal group held for sale Cash and cash equivalents for cash flow statement

43

2017 AED’000

2016 AED’000

95,507 13,987 -----------------------109,494 (594) -----------------------108,900 -----------------------108,900 ==========

113,856 20,298 -----------------------134,154 (594) -----------------------133,560 1,560 -----------------------135,120 ==========


Transactions and balances with related parties In the ordinary course of business the Group enters into transactions which are carried out on commercially agreed terms, with other business enterprises or individuals that fall within the definition of a related party contained in International Accounting Standard 24. The Group has a related party relationship with its executive officers and business entities over which they can exercise significant influence or which can exercise significant influence over the Group. The related party outstanding balances, transactions and related income and expenses were as follows:

(a)

Amounts due from related parties:

Non-current Hydra Properties Connection Real Estate Others

Less: allowance for doubtful debts

Current Al Qudra Addoha pou L’investissement Immobilier (Joint Venture) Al Qudra Sports Management (Joint Venture) Hydra Properties SKM-Q L.L.C. (Associate) Projects International Dubai Viola Communication LLC Others


Reclassified as part of disposal group held for sale (note 22)

44

2017 AED’000

2016 AED’000

243 5,905 280 ------------------6,428 (429) ------------------5,999 ==========

2,551 5,905 ------------------8,456 (590) ------------------7,866 ==========

2017 AED’000

2016 AED’000

18,694 161 3,635 6,868 2,678 ------------------32,036 (3,662) ------------------28,374 ------------------28,374 ==========

46 21,423 161 3,635 6,868 3,630 3,668 ------------------39,431 (3,662) ------------------35,769 (8,448) ------------------27,321 ==========


Transactions and balances with related parties (continued)

(a)

Amounts due from related parties (continued): The movement in allowance for doubtful debts was as follows:

Non-current At 1 January Reversal during the year At 31 December Current At 1 January and 31 December

(b)

2017 AED’000

2016 AED’000

590 (161) ------------------429 ==========

1,168 (578) ------------------590 ==========

3,662 ==========

3,662 ==========

2017 AED’000

2016 AED’000

29,500 28,256 1,584 8,065 4,661 8,467 8,277 1,614 ------------------90,424 ------------------90,424 ==========

29,500 28,256 1,615 8,065 4,661 8,087 1,222 ------------------81,406 (41,715) ------------------39,691 ==========

Amounts due to related parties:

Current Q Construction L.L.C. (Associate) Center of Excellence for Applied Research & Training Viola Communications L.L.C. GSE Power Systems, Inc. Emirates Link Group Lootah BCGas Salvatore Saker Others


45


Transactions and balances with related parties (continued) Significant transactions with related parties during the year are as follows:

Finance income Purchases Sales

Compensation to key management personnel

12

2017 AED'000

2016 AED'000

1,316 ========== 2,866 ========== 409 ==========

1,883 ========== ========== ==========

42,558 ==========

26,263 ==========

2017 AED'000

2016 AED'000

Loans and borrowings

Bank overdrafts Interest bearing term loan

2,113 1,184,740 --------------------1,186,853 (828,596) --------------------358,257 ==========

Less: term loans (non-current portion)

59,962 368,264 --------------------428,226 (196,144) --------------------232,082 ==========

The bank overdrafts are repayable on demand and bear interest at prevailing inter-bank rates. (a)

During 2010, the Company's overdraft facility with a local bank was cancelled and a new loan agreement rescheduling the repayment of outstanding unpaid indebtedness amounting to AED 36.5 million was executed. Based on the loan agreement, the Group is to pay the outstanding loan on quarterly basis with AED 4 million each plus interest commencing September 2010. During 2013, the loan was restructured once again. Based on the new loan agreement, the outstanding loan is payable in four quarterly installments of AED 375 thousand each, and thereafter AED 1.4 million is payable in 13 quarterly installments with the last installment including the residual balance payable by January 2018.The loan carries interest at the rate of EIBOR (minimum of 3.5%) per annum. The amount outstanding as at 31 December 2017 is AED 9.2 million (31 December 2016: AED 14.3 million).

(b)

Bank loan and overdraft facility taken from a local bank to partly finance development of Danet Holiday Inn Hotel, Abu Dhabi. During 2013, the loan was restructured and a new facility was executed whereby the outstanding loan and overdraft facility balances were consolidated into a single loan. Based on the new loan agreement, the outstanding loan is payable in 58 quarterly installments ending March 2028. The loan carries interest rate of EIBOR (minimum of 6%) per annum. The amount outstanding as at 31 December 2017 is AED 160 million (31 December 2016: AED 166 million). 46


Loans and borrowings (continued)

(c)

During 2017, a local bank provided the Group a term loan facilities amounting to AED 200 million for business operation and projects. The loan is secured by a Mortgage on Manarah Bay Investment Property. The loan is to be repaid in 18 quarterly installments plus interest commencing three month from the end of Moratorium Period. Interest is charged at EIBOR plus 3.5% per annum (minimum 5.50%) per annum. The outstanding amount as at 31 December 2017 is AED 117 million.

(d)

During the year the Group has re-structured an overdraft facility with local bank into term loan. The loan will be repaid in 10 semi-annual instalments. Interest in charged at EIBOR plus 3.5% per annum (minimum 5%) per annum. The outstanding amount as at 31 December 2017 is AED 54 million (December 2016: AED 60 million)

(e)

During the year, the Group has entered into an Islamic financing facility in accordance with sharia compliant structure which amounted to AED 600 million. The purpose of this facility is to settle previous loan of the Group from another bank Finance the construction cost of the labour camp project in Musaffah. The term of the repayment is quarterly unequal instalments. The maturity of the loan is 31 January 2027. The term loan is secured against the mortgage over project assets, corporate guarantees and assignment of the rental proceeds. The outstanding amount of the loan as at 31 December 2017 is AED 259 million.

(f)

During the year, the Group renegotiated an existing term loan amounted to AED 259 million on the date of restructuring. The only change in the terms was a different repayment pattern while the remaining terms remained the same. The change in terms are not significant and accordingly the original loan liability not extinguished. The term of the repayment is Semi-annual unequal instalments. The Bank has extended the maturity of the loan is 30 December 2020 to 30 December 2021. The term loan is secured against the pledged over the assets and irrevocable corporate guarantees. The outstanding amount of the loan as at 31 December is AED 585 million.

13

Trade and other payables

Trade payable Advance from customers (i) Provision for infrastructure construction cost Retention payable Dividend payable Other payables


Less (non-current portion): Retention payable Advances from customer Provision for infrastructure construction cost Others

47

2017 AED’000

2016 AED’000

262,163 79,353 61,869 341,095 24,108 55,407 ------------------823,995 ------------------823,995 ------------------

153,941 155,850 66,967 326,451 19,136 64,256 -------------786,601 (46,384) --------------740,217 --------------

(166,183) (12,973) (61,869) (2,361) -----------------(243,386) ------------------580,609

(159,559) (66,967) ---------------(226,526) ----------------513,691

Al Qudra Holding PJSC Notes to the consolidated financial statements ==========

=========

13

Trade and other payables (continued)

(i)

In June 2010, Ain Al Fayda Real Estate L.L.C., a subsidiary, was awarded by the Abu Dhabi Urban Planning Council (UPC) the contract for the first phase of its Ain Al Fayda Development with a total contract amount of AED 4.2 billion. An advance payment amounting to AED 428.3 million equivalent to 10% of the total project cost was received in respect of the contract and had been recorded under advances from customers. Trade payables are non-interest bearing and are normally settled on 60-day terms. Other payables are non-interest bearing and vary in average terms.

14

Advances and prepayments

Advance payment to contractors Advance payment for the acquisition of equity investments Other advances and prepayments

Less: allowance for doubtful debt

Classified as part of disposal group held for sale

15

2017 AED’000

2016 AED’000

65,065 5,498 48,365 ------------------118,928 (3,720) ------------------115,208 ------------------115,208 ==========

84,642 5,725 23,149 ------------------113,516 (3,720) ------------------109,796 (2,127) ------------------107,669 ==========

2017 AED’000

2016 AED’000

8,865 2,315 2,585 (923) -----------------------12,842 -----------------------12,842 ==========

6,903 2,557 (595) -----------------------8,865 (536) -----------------------8,329 ==========

Provision for end of service benefits

At 1 January Addition due to acquisition of Al Rayan Charge for the year Payment during the year

Classified as part of disposal group held for sale At 31 December

48


Long term receivables

Retention receivable Less: allowance for doubtful debts

2017 AED’000

2016 AED’000

127,851 (2,695) -----------------------125,156 ==========

136,381 (3,888) -----------------------132,493 ==========

2017 AED’000

2016 AED’000

3,888 (1,193) -----------------------2,695 ==========

4,240 (352) -----------------------3,888 ==========

2017 AED’000

2016 AED’000

388,513 1,447 -----------------------389,960 (54,009) -----------------------335,951 -----------------------335,951 ==========

172,933 133,894 -----------------------306,827 (56,013) -----------------------250,814 (1,711) -----------------------249,103 ==========

2017 AED’000

2016 AED’000

56,013 (2,004) -----------------------54,009 ==========

65,352 2,745 (12,084) -----------------------56,013 ==========

The movement in allowance for doubtful debt is as follows:

At 1 January Reversal during the year At 31 December

17

Trade and other receivables

Trade receivables Other receivables


Classified as part of disposal group held for sale

The movement in allowance for doubtful debts was as follows:

At 1 January Charge for the year Written off during the year At 31 December

49


Share capital Authorized, issued and fully paid: 808,984,000 shares of AED 1 each

2017 AED’000

2016 AED’000

808,984 =======

600,000 =========

During the year, the Group has issued 208.9 million shares to share holders of Al Rayan Investment PSC for the purpose of acquisition of 99.35% holding in Al Rayan Investment PSC. Dividends amounting to AED 54 million (2016: 48 million) pertaining to 2016 profits were approved.

19

Legal reserve In accordance with the UAE Federal Law number (2) of 2015, concerning Commercial Companies and the Company's Articles of Association, 10% of the net profit of the Group is transferred to an undistributable statutory reserve until such reserve equals 50% of paid up capital of the Company. This reserve is not available for distribution.

20

Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements of foreign operations.

21

Earnings per share Basic profit per share is calculated by dividing the net profit for the year by the weighted average number of shares outstanding during the year. Diluted profit per share is calculated by dividing the net profit for the year by the weighted average number of shares outstanding during the year adjusted for the effects of dilutive instruments. The calculation of the basic and diluted profit per share is based on the following data:

Profit Profit attributable to equity holders of the parent company Income / Loss from discontinued operations used in the the basic and diluted loss per share from discontinued operations Profit used in the calculation of basic and diluted earnings per share from continuing operations Number of shares Weighted average number of shares in issue for the purpose of basic and diluted earnings per share Basic and diluted earnings per share From continuing and discontinued operations

50

2017 AED’000

2016 AED’000

202,517

263,529

-------------------

(11) -------------------

202,517 ==========

263,540 ==========

808,984 ==========

600,000 ==========

0.250 ==========

0.439 ==========


Assets held for sale Discontinued operations In 2016, the shareholders of the below mentioned subsidiaries unanimously decided to liquidate the operations in accordance with the shareholder’s resolution. In 2017, there were no operations or profits or losses to be disclosed. Name of subsidiary

Percentage ownership

Year

60% 60% 85% 50% 51% 50% 100% 100% 100% 100% 100% 100% 100% 100%

2011 2009 2010 2009 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011

Emirates Simulation Academy L.L.C Q For Commercial Markets Management Q Link Transport Q Car Park LLC Q Active for Technologies L.L.C ABNIA for Industrial Holding L.L.C Al Qudra Holding – Yemen Al Qudra Holding Industrial L.L.C Q Parks Establishment Al Qudra Education L.L.C Al Qudra Holding - Algeria Al Qudra Holding – International L.L.C Al Qudra Health Care L.L.C Al Qudra Belarus Ltd.

The results of the discontinued operations included in consolidated statement of profit or loss are set out below. Loss from discontinued operations:

Revenues Cost of sales Profit from operations General and administrative expenses Other expenses, net Finance costs Loss for the period from discontinued operations Attributable to: Equity holders of the parent company Non-controlling interests

51

2017 AED'000

2016 AED'000

---------------------

---------------------

--------------------==========

(11) --------------------(11) ==========

--------------------==========

(11) --------------------(11) ==========


Assets held for sale (continued) Discontinued operations (continued) Cash flow from discontinued operations

Net cash from / (used in) operating activities Net cash from / (used in) investing activities Net (decrease) / increase in cash

2017 AED'000

2016 AED'000

--------------------==========

--------------------==========

Assets held for sale During the year, Management has decided to change the plan of sale for the assets classified as held for sale. Accordingly, these assets have been reclassified back to the respective category of assets and liabilities and ceases to be classified as held for sale. The major classes of assets and liabilities comprising the operations classified as held for sale at 31 December 2017 and 31 December 2016 are as follows:

Statement of assets and liabilities Property, plant and equipment Trade and other receivables Due from related parties Advances and prepayments Bank balances and cash Assets classified as held for sale Provision for end of service benefit Trade and other payables Due to related parties Accrued expenses Total liabilities directly associated with assets classified as held for sale Net assets classified as held for sale

52

2017 AED'000

2016 AED'000

--------------------========== ---------------------

211 1,711 8,448 2,127 1,560 --------------------14,057 ========== 536 46,384 41,715 4,526 ---------------------

--------------------==========

93,161 --------------------(79,104) ==========


Commitments and contingent liabilities Capital expenditure contracted but not yet incurred is as follows:

Within one year Within two to five years Guarantees

2017 AED'000

2016 AED'000

808,731 ========== 333,453 ========== 150,340 ===========

228,229 ========== ========== 102,397 ============

Guarantees were issued in the normal course of business which includes bank and corporate guarantees

24

Financial instruments

(a)

Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 12 and equity attributable to equity holders of the parent company, comprising issued share capital, reserves and retained earnings (accumulated losses) as disclosed in the consolidated statement of changes in equity. During the year, the Group's strategy was to monitor capital on the basis of the gearing ratio. This ratio is calculated as debt divided by total equity, as shown in the consolidated statement of financial position. The Group's overall strategy remains unchanged from the prior year. The gearing ratio at the end of the reporting period was as follows:

Debt (i) Total equity (ii) Gearing ratio

(i) (ii)

2017 AED'000

2016 AED'000

1,186,853 ========== 2,313,475 ========== 51% ==========

428,226 ========== 1,220,896 ========== 35% ==========

Debt is defined as short term and long term bank borrowings. Equity includes all capital and reserves of the Group.

53


Financial instruments (continued)

(b)

Financial risk management objectives The Group's Corporate Finance and Treasury function provides services to the business and monitors and manages the financial risks relating to the operations of the Group by analysing exposures by degree and magnitude of risks. These risks include market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group does not use any derivative financial instruments to hedge these risk exposures. Management has not implemented formal risk management policies and procedures to manage these risks, however, management reviews the exposure limits on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

(c)

Market Risk During the year, there has been no change to the Group's manner in which it manages and measures the risk.

(d)

Foreign currency risk Management considers that the Group is not exposed to significant currency risk. The majority of its transactions and balances are in either UAE Dirhams or US Dollars. As the UAE Dirham is pegged to the US Dollar, balances in US Dollars are not considered to represent significant currency risk.

(e)

Interest Rate Risk The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for interest bearing financial instruments at the end of the reporting period. For variable rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2017 would decrease/increase by AED 5.93 million (2016: profit would decrease / increase by AED 2.14 million). This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings. The Group's sensitivity to interest rates has increased during the current year mainly due to the increase in variable rate borrowings.

(f)

Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Trade receivables consist of local customers 54


Financial instruments (continued)

(f)

Credit risk (continued) and related parties with good credit standing. Trade receivables are reviewed on an ongoing basis and provision is made for doubtful debts as and when required. The Group's credit risk exposure to single counterparties or group of counterparties having similar characteristics is detailed below. The Group defines counterparties as having similar characteristics if they are related entities. The credit risk on liquid funds is limited because the counterparties are reputable local banks closely monitored by the regulatory body. The carrying amount reflected in these consolidated financial statements represents the Group's maximum exposure to credit risk for such loans and receivables. Ageing of gross trade accounts receivable and due from related parties is as follows: 2017 AED'000 Not past due Due for 61 to 90 days Due for 91 to 180 days Due for more than 181 days Provision at 31 December

134,370 207,496 59,487 154,921 (60,794) --------------------495,840 ==========

2016 AED'000 297,839 9,846 17,720 165,690 (74,312) --------------------416,783 ==========

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. (g)

Liquidity risk The table below summarises the maturity profile of the Company’s financial instruments. The contractual maturities of the financial instruments have been determined on the basis of the remaining period at the end of the reporting period to the contractual/expected maturity date. The maturity profile is monitored by management to ensure adequate liquidity is maintained.

55


Financial instruments (continued) Liquidity risk (continued)

2017 Trade and other payables Bank loans

2016 Trade and other payables Bank loans

(h)

Less than 1 year AED’000

1- 5 years AED’000

More than 5 years AED’000

Total AED’000

580,609 358,257 ========== 938,866 ==========

243,386 426,088 ========== 669,474 ==========

402,508 ========= 402,508 =========

823,995 1,186,853 =========== 2,010,848 ===========

Less than 1 year AED’000

1- 5 years AED’000

More than 5 years AED’000

Total AED’000

513,691 232,082 ========== 745,773 ==========

226,526 104,473 ========== 330,999 ==========

91,671 ========= 91,671 =========

740,217 428,226 =========== 1,168,443 ===========

Fair value of financial assets and liabilities The carrying amount of financial assets and financial liabilities presented in the consolidated statement of financial position approximate their fair values. The fair value of the Group's financial assets and liabilities approximates their carrying amounts as stated in the consolidated financial statements. Fair value measurements are recognised in the consolidated statement of financial position. The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. •

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

•

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

•

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

56


Financial instruments (continued) Fair value of financial assets and liabilities (continued)

31 December 2017

Financial assets at FVTOCI Quoted shares Unquoted shares Total

Level 1 AED’000

Level 2 AED’000

Level 3 AED’000

Total AED’000

8,098 -----------------------8,098 ===========

492,654 --------------------492,654 =========

104,988 ----------------------104,988 ==========

8,098 597,642 ------------------------605,740 ===========

Level 1 AED’000

Level 2 AED’000

Level 3 AED’000

Total AED’000

10,905 -----------------------10,905 ===========

496,432 --------------------496,432 =========

68,597 ----------------------68,597 ==========

10,905 565,029 ------------------------575,934 ===========

31 December 2016

Financial assets at FVTOCI Quoted shares Unquoted shares Total

The following valuation techniques were used in measuring Level 3 fair values for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used. i)

Valuation techniques and significant unobservable inputs Financial assets measured at FVTOCI: Unquoted shares: Valuation technique: The investment’s fair value is estimated on the basis of an analysis of the investee’s financial position and results, risk profile, prospects and other factors. Significant unobservable input: The investee’s financial position and results, risk profile, prospects and other factors used for the valuation is unobservable. Interrelationship between significant unobservable inputs and fair value: The estimated fair value would increase / (decrease) if these significant unobservable inputs were better / (worse).

ii) Reclassification from Level 1, 2 and 3 During the year, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 fair value measurements.

57


Seasonality of results No income of a seasonal nature was recorded in the consolidated income statements for the year ended 31 December 2017 and 31 December 2016.

27

Business combinations On 12 June 2017, the Group acquired 99.35% of the shares and voting interests in Al Rayan Investment PSC through shares swap. Both parties agreed that the share swap conversion rate would be 2.61 shares of Al Rayan Investment for one share in Al Qudra Holding PJSC. Accordingly, Al Qudra Holding PJSC issued 208,984 thousand shares of 1 AED each, to the shareholders of Al Rayan Investment PSC as a consideration for their shares in Al Rayan Investment PSC which amounted to AED 545,449 thousand. Considering the fact that both Al Qudra Holding and Al Rayan investments are under common control as the shareholders of Al Qudra Holding own 56.99% of Al Rayan investments shares, the management has decided to account for this acquisition in accordance to book value (carryover basis) accounting on the basis that the investment has simply been moved from one part of the group to another as per IFRS 3. In applying book value accounting, an adjustment may be required in equity to reflect any difference between the consideration paid and the capital of the acquiree. The management has decided to reflect the adjustment in a capital account, called a 'merger' reserve. AED'000 Shares issued in Al Qudra Holding PJSC (208,984 thousand shares 1 AED each) Shares acquired in Al Rayan Investments PSC (5,454 thousand 100 AED each) Difference between the consideration paid and the capital of the acquire Recognised as merger reserve in statement of changes in equity

208,984 545,449 --------------------336,465 ==========

For the 203 days ended 31 December 2017, Al Rayan Investment PSC earned a revenue of AED 53,726 thousand and a net profit of AED 65,134 thousand to the Group’s results. If the acquisition had occurred on 1 January 2017 management estimates that consolidated revenue would have been AED 539,195 thousand, and consolidated profit for the year would have been AED 162,860 thousand. In determining these amounts, management has assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2017.

58


Business combinations (continued) Identifiable assets acquired and liabilities assumed The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition: AED'000 Property, plant and equipment Investment property Available for sales investments Trade receivable Cash and cash equivalent End of service benefits Long-term payables Long-term due to related parties Long-term bank borrowings Bank borrowings Trade and other payables

3,818 1,917,088 512 30,736 42,813 (2,315) (12,026) (8,277) (613,067) (115,150) (147,474) --------------------1,096,658 ==========

Total identifiable net assets acquired

28

Other reserves Other reserves balance acquired as part of Al Rayan reserves includes legal reserve of Al Rayan amounted to AED 242,728 and an amount of AED 3,157 as other reserves.

59


Development work in progress Development work in progress represents development and construction costs incurred on properties under construction and are related to the following projects:

Saadu projects - Abu Dhabi Ain Al Faydah Al Nasseem Emirates Investment Park Others

2017 AED’000

2016 AED’000

375,000 7,717 15,639 211 -----------------------398,567 ==========

391,626 7,890 14,140 946 211 -----------------------414,813 ========

The movements in the development work in progress during the year were as follows:

As at 1 January Developments during the year Cost charged to cost of sale during year Write-off and impairment during year As at 31 December

30

2017 AED’000

2016 AED’000

414,813 134,436 (149,736) (946) -----------------------398,567 ==========

407,495 561,922 (553,841) (763) -----------------------414,813 ==========

2017 AED’000

2016 AED’000

4,209

3,415

30,000 9,360 5,323 -----------------------48,892 ==========

120,859

Other income

Rental income from investment properties Income on settlement agreement entered into during the year Reversal of infrastructure provision Others

60

11,730 -----------------------136,004 ==========


Provisions and write offs, net 2017 AED'000 Provision for doubtful debts, net of reversal Impairment loss on development work in progress Write off of advances Provision against inventories Impairment loss on capital work in progress Others

61

19,222 1,000 968 --------------------21,190 ==========

2016 AED'000 1,815 763 6,304 1,400 35,000 --------------------45,282 ==========