MABANEE COMPANY S.A.K. (CLOSED) AND SUBSIDIARIES INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION AND INDEPENDENT

Transcription

1 MABANEE COMPANY S.A.K. (CLOSED) AND SUBSIDIARIES INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION AND INDEPENDENT AUDITORS REVIEW REPORT FOR THE PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2010

2 INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION AND INDEPENDENT AUDITORS REVIEW REPORT INDEX Page Independent auditors report on review of interim condensed consolidated financial information 1 Interim condensed consolidated statement of financial position at Interim condensed consolidated statement of income for the period from 1 January to Interim condensed consolidated statement of comprehensive income for the period from 1 January to Interim condensed consolidated statement of changes in equity for the period from 1 January to Interim condensed consolidated statement of cash flows for the period from 1 January to Notes to the interim condensed consolidated financial information 8-17

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5 INTERIM CONDENSED CONSOLIDATED STATEMENT OF INCOME Three month period ended 30 September Nine month period ended 30 September Notes KD KD KD KD Investment properties revenue 12a 8,888,699 8,233,566 26,592,071 26,005,210 Investment properties expenses 12b (1,972,451) ) 1,856,886( (5,407,796) (5,102,723) Depreciation (796,342) ) 721,451( (2,389,024) (2,237,361) Finance costs (387,682) ) 1,010,817( (1,279,259) (4,025,906) Profit from operations 5,732,224 4,644,412 17,515,992 14,639,220 Net gain / (loss) from financial investments 12c 3,522 1,002,753 (43,892) 1,418,916 General and administrative expenses (275,671) ) 478,716( (1,020,263) (1,307,432) Other income 11,272 ) 10,536( 29, ,126 Foreign currency gain / (loss) 8,807 5,386 (6,497) 856,202 Share of results from associates (54,410) (190,140) 83,982 Profit for the period before contributions to Kuwait Foundation for the Advancement of Sciences ( KFAS ), National Labour Support Tax ( NLST ) and Zakat 5,425,744 5,163,299 16,284,453 15,846,014 Contribution to KFAS (48,832) ) 46,470( (146,560) ) 142,614( Contribution to NLST (137,074) ) 129,806( (399,035) ) 381,015( Contribution to Zakat (54,830) ) 51,923( (159,614) ) 152,406( Profit for the period 5,185,008 4,935,100 15,579,244 15,169,979 Basic and diluted earnings per share fils 9.81fils 31.02fils 30.15fils The accompanying notes set out on pages 8 to 17 form an integral part of this interim condensed consolidated financial information. 3

6 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three month period ended 30 September Nine month period ended 30 September KD KD KD KD Profit for the period 5,185,008 4,935,100 15,579,244 15,169,979 Other comprehensive income Change in fair value of available for sale investments 594,724 (785,127) (63,112) (745,414) Transfer to consolidated statement of income on sale of available for sale investments 740, , ,972 23,369 Transfer to consolidated statement of income on impairment of available for sale investments - 721, ,490 Other comprehensive income /(loss) for the period 1,335,264 (318,857) 991,288 (31,555) Total comprehensive income for the period 6,520,272 4,616,243 16,570,532 15,138,424 The accompanying notes set out on pages 8 to 17 form an integral part of this interim condensed consolidated financial information. 4

7 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Statutory General Treasury Treasury Fair value Retained capital reserve reserve shares shares reserve reserve earnings Total KD KD KD KD KD KD KD KD At 1 January ,919,500 10,127,673 10,127,673 (2,644,679) 4,417,923 (1,082,001) 44,527, ,394,073 Total comprehensive income for the period ,288 15,579,244 16,570,532 Issue of bonus shares (See note 15) 4,591, ) 4,591,950( - Purchase of treasury shares ) 589,920( ) 589,920( Sale of treasury shares ,691 (146,434) ,257 Cash dividend (See note 15) ) 4,563,776( ) 4,563,776( At ,511,450 10,127,673 10,127,673 (2,448,908) 4,271,489 (90,713) 50,951, ,450,166 At 1 January 41,745,000 8,513,318 8,513,318 (2,300,079) 4,634,120 (118,980) 36,621,400 97,608,097 Total comprehensive income for the period (31,555) 15,169,979 15,138,424 Issue of bonus shares (Note 15) 4,174, (4,174,500) - At 45,919,500 8,513,318 8,513,318 (2,300,079) 4,634,120 (150,535) 47,616, ,746,521 The accompanying notes set out on pages 8 to 17 form an integral part of this interim condensed consolidated financial information. 5

8 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Nine month period ended 2010 OPERATING ACTIVITIES Profit before contribution to KFAS, NLST and Zakat 16,284,453 15,846,014 Adjustments for: Depreciation 2,496,934 2,275,514 Provision for staff indemnity 126, ,534 Net loss / (gain) from financial investments 43,892 (2,109,406) Share of results from associate 190,140 (83,982) Provision for doubtful debts 19,363 - Loss on sale of property, plant and equipment Impairment loss on available for sale investments - 690,490 Finance costs 1,279,259 4,025,906 20,441,153 20,770,070 Movements in working capital Accounts receivable and prepayments (4,597,818) 111,662 Trade and other payables (3,205,995) (5,829,179) Other non-current liabilities (299,942) 150,919 Cash generated from operations 12,337,398 15,203,472 Staff indemnity paid (216,783) (1,242) Finance costs paid (1,227,478) (3,675,299) KFAS, NLST and Zakat paid (821,967) (279,943) Net cash generated by operating activities 10,071,170 11,246,988 INVESTING ACTIVITIES Purchase of property, plant and equipment (457,192) (196,528) Proceeds from sale of property, plant and equipment Additions to investment properties (33,289,248) (9,491,498) Purchase of shares in an associate - (997,826) Purchase of available for sale investments (7,842,685) (21,305,797) Proceeds from sale of available for sale investments 11,744,671 27,426,241 Proceeds from sale of investments at fair value through statement of income - 762,916 Dividend received on available for sale investments 269, ,477 Dividend received on investments at fair value through statement of income - 38,275 Net cash used in investing activities (29,574,069) (3,138,740) KD KD (Continued) 6

9 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Nine month period ended 2010 Note KD KD FINANCING ACTIVITIES Purchase of treasury shares (589,920) - Proceeds from sale of treasury shares 639,257 - Term loans repaid (36,064,952) (36,199,321) Term loans obtained 53,432,858 11,000,000 Cash dividend (4,503,865) - Net cash generated by / (used in) financing activities 12,913,378 (25,199,321) Net decrease in cash and cash equivalents (6,589,521) (17,091,073) Cash and cash equivalents at beginning of the period 5,128,363 20,546,770 Cash and cash equivalents at end of the period 8 (1,461,158) 3,455,697 The accompanying notes set out on pages 8 to 17 form an integral part of this interim condensed consolidated financial information. 7

10 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 1. ESTABLISHMENT AND PRINCIPAL ACTIVITIES Mabanee Company S.A.K. (Closed) ( the Company ) is a Kuwaiti Shareholding Company established and registered in Kuwait in The Company and its subsidiaries (together referred to as the Group ) are engaged in the manufacture and erection of pre-cast buildings, other construction work and the installation of sanitary, mechanical, electrical and other equipment that relates to the construction industry. It is also engaged in real estate investment and surplus funds are invested in portfolios managed by specialised firms. The Company is listed on the Kuwait Stock Exchange. The Company is an associated company of Alshaya United Company W.L.L. The registered address of the Company is P.O. Box 5132, Safat 13052, Kuwait. This interim consolidated financial information were authorised for issue by the Board of Directors on 9 November BASIS OF PRESENTATION This interim condensed consolidated financial information of the Group is prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, ( IAS 34 ). This interim condensed consolidated financial information does not contain all information and disclosures required for full consolidated financial statements prepared in accordance with International Financial Reporting Standards ( IFRS ). In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included in this interim condensed consolidated financial information. Operating results for the period are not necessarily indicative of the results that may be expected for the financial year ending 31 December For more details, please refer to the annual audited consolidated financial statements of the Group for the year ended 31 December. The accounting policies used in the preparation of this interim condensed consolidated financial information are consistent with those used in the annual audited consolidated financial statements for the year ended 31 December except for the impact of the adoption of new and revised standards as mentioned below. 3. ADOPTION OF NEW AND REVISED STANDARDS During the period, the Group has adopted the following standards effective for the annual periods beginning on or after 1 January The main changes in the Group s accounting policies relate to IFRS 3 (Revised) Business Combinations and consequential amendments to IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates whereby acquisition related costs are expensed in the consolidated statement of income in the periods in which the costs are incurred. Also, changes in ownership interest in a subsidiary that do not result in a loss of control are treated as transaction between equity holders and are accounted for within equity. Equity interest held prior to control being obtained are remeasured to fair value at the date of obtaining control, and any gain or loss is recognized in the consolidated statement of income. 4. JUDGEMENTS AND ESTIMATES The preparation of interim condensed consolidated financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this interim condensed consolidated financial information, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual audited consolidated financial statements at and for the year ended 31 December. 8

11 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 5. INVESTMENT PROPERTIES Cost December (Audited) KD KD KD At beginning of the period 177,128, ,402, ,402,807 Additions 33,289,248 15,725,793 9,491,498 Accumulated depreciation 210,417, ,128, ,894,305 At beginning of the period 7,331,447 4,280,568 4,280,568 Charge for the period 2,389,024 3,050,879 2,187,045 9,720,471 7,331,447 6,467,613 Carrying amount 200,697, ,797, ,426,692 Annual depreciation rates 2%-3.33% 2%-3.33% 2% 3.33% The balance includes KD 47,186,834 (31 December : KD 13,897,586 and : KD 21,185,326) representing costs incurred in the construction of The Avenues commercial complex, which is being constructed in phases. During the period ended 2010, borrowing costs of KD 3,472,662 relating to phases under construction of The Avenues complex have been capitalised within the total costs (31 December : KD 617,103 and : KD 354,484). The average fair value of the investment properties at 2010 is not materially different from the fair value at 31 December, which was KD 323,232, AVAILABLE FOR SALE INVESTMENTS December (Audited) KD KD KD Quoted local equities 7,515,625 10,638,345 11,486,245 Unquoted local equities 2,818,410 2,657,352 3,027,352 Unquoted international equities 5,104,600 5,367,496 5,593,308 15,438,635 18,663,193 20,106,905 At 2010, certain investments amounting to KD 4,314,489 (31 December : KD 4,602,685; : KD 6,835,330) were carried at cost, due to the lack of an active market or other reliable measures of their fair value. Management is not aware of any indication of impairment of these investments. 9

12 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 7. ACCOUNTS RECEIVABLE AND PREPAYMENTS December (Audited) KD KD KD Trade receivables 1,577,445 2,289,780 3,579,710 Advance payments to contractors 3,445,941 42,052 - Other receivables 730, , ,758 Prepaid expenses 1,442, ,521 1,433,983 Current accounts with associates (See note 14) 1,640, , ,889 8,836,562 4,258,107 6,377, CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the interim condensed consolidated statement of cash flows include the following amounts in the interim condensed consolidated statement of financial position: December (Audited) KD KD KD Cash and bank current accounts 4,731,436 10,171,803 8,944,301 Bank overdrafts (6,192,594) (5,043,440) (5,488,604) (1,461,158) 5,128,363 3,455,697 The average interest rate charged on bank overdrafts on 2010 is 2% to 2.25% (31 December : 1.25% to 2.25%; : 1.25% to 3.5%) over CBK discount rate per annum. 10

13 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 9. LONG-TERM LOANS Long-term loans include the following loans payable to local banks: December (Audited) KD KD KD a) Unsecured KD loan to the Company. The balance is repayable in 8 equal quarterly instalments with last instalment due on 24 August 2012 with option to renew for additional periods. The total available facility is KD 10,000,000 (See Note 10-f). 5,000,000 8,750,000 10,000,000 b) Unsecured KD loan to the Company. The balance was paid on 27 January 2010 (See Note 10-g). - 11,428,571 12,857,143 c) Unsecured KD loan to the Company. The balance is repayable in 16 equal quarterly instalments with last instalment due on 31 December The total available facility is KD 17,750,000 (See Note 10-h). 14,375, d) Unsecured KD loan in the books of the subsidiaries. The balance is repayable in 16 equal quarterly instalments with last instalment due on The total available facility is KD 51,200,000 (See Note 10-i). 19,682, e) Unsecured KD loan to the Company. The balance is repayable in 11 equal quarterly instalments with last instalment due on 1 April The total available facility is KD 10,000,000. 3,200, ,257,858 20,178,571 22,857,143 11

14 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 10. SHORT-TERM LOANS Short-term loans include the following loans payable to local banks: December (Audited) KD KD KD a) Unsecured KD loan to the Company. The balance was paid on 27 January ,000,000 b) Unsecured KD loan to the Company. The balance is repayable on 30 April 2011 with option to renew for additional periods. 3,000,000 3,000,000 3,000,000 c) Unsecured KD loan to the Company. The balance was paid on 6 January ,922,095 3,922,094 d) Unsecured KD loan to the Company. The balance is repayable on 5 December The total available facility is KD 9,800,000. 8,000,000 8,000,000 8,000,000 e) Unsecured KD loan to the Company. The balance is repayable on 15 November 2010 with option to renew for additional periods. The total available facility is KD 20,000, ,800,000 19,800,000 19,800,000 f) Current portion of long-term loan (See Note 9-a) 5,000,000 1,250,000 - g) Current portion of long-term loan (See Note 9-b) - 5,714,286 5,714,286 h) Current portion of long-term loan (See Note 9-c) 3,375, i) Current portion of long-term loan (See Note 9-d) 12,800, ,975,000 56,686,381 55,436,380 12

15 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 11. TRADE AND OTHER PAYABLES December (Audited) KD KD KD Trade suppliers 1,004, , ,091 Retentions payable 4,348,774 3,412,186 3,581,107 Payable to contractors 5,185,322 7,448,259 2,724,085 Rent received in advance 1,952,027 2,821,558 3,006,909 KFAS, NLST and Zakat Payable 740, , ,813 Other payables 1,007,990 2,137,553 1,192,154 14,238,432 17,449,493 11,769,159 13

16 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 12. SEGMENT REPORTING The Group is organised into functional divisions in order to manage its various lines of business. For the purpose of segment reporting, the Group s management uses the following business segments: a) Construction and real estate investment: includes real estate development, Group s properties, projects leasing and the construction activity for self or others. b) Financial investments: includes investments in portfolios, shares and financial instruments in and outside Kuwait managed by self or by specialised firms. Segment reporting information for the nine month period ended is as follows: Construction and real estate investment Financial investments Unallocated Total KD KD KD KD KD KD KD KD Segment revenue 26,592,071 26,005,210 (43,892) 1,418,916 (167,384) 1,095,310 26,380,795 28,519,436 Segment results 17,515,992 14,639,220 (104,978) 1,339,427 (1,831,770) (808,668) 15,579,244 15,169,979 14

17 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 12. a INVESTMENT PROPERTIES REVENUE Details of revenue relating to construction and real estate investment are: Three month period ended 30 September Nine month period ended 30 September KD KD KD KD Rental income 8,202,834 7,672,000 24,373,745 22,847,659 Arrangement fees from investors ,463,700 Advertising services from investors 414, ,350 1,442,214 1,111,899 Others 271, , , , b INVESTMENT PROPERTIES EXPENSES 8,888,699 8,233,566 26,592,071 26,005,210 Details of expenses relating to construction and real estate investment are: Three month period ended Nine month period ended KD KD KD KD Land Rent 646, ,037 1,905,276 1,595,937 Repair and maintenance 1,012, ,331 2,607,293 2,622,318 General and administrative expenses 313, , , , c NET GAIN / (LOSS) FROM FINANCIAL INVESTMENTS Details of net gain / (loss) from financial investments are: 1,972,451 1,856,886 5,407,796 5,102,723 Three month period ended Nine month period ended KD KD KD KD Dividend income from investments at fair value through statement of income ,596 Dividend income from available for sale investments 3, , ,477 Gain on sale of investments at fair value through statement of income ,679 (Loss)/gain on sale of available for sale investments - 1,002, ,568 1,445,654 Impairment loss on available for sale investments - - (721,428) (690,490) 3,522 1,002,753 (43,892) 1,418,916 15

18 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 13. BASIC AND DILUTED EARNINGS PER SHARE Basic and diluted earnings per share are computed by dividing profit for the period by the weighted average number of shares outstanding during the period. There are no potential dilutive ordinary shares. The information necessary to calculate basic earning per share based on the weighted average number of share outstanding during the period is as follows: Three month period ended Nine month period ended KD KD KD KD Profit for the period 5,185,008 4,935,100 15,579,244 15,169,979 Shares Shares Shares Shares Number of authorised, issued and fully paid up shares outstanding during the period 505,114, ,114, ,114, ,114,500 Weighted average number of treasury shares outstanding during the period (3,173,931) (1,960,750) (2,962,025) (1,960,750) Weighted average number of outstanding shares during the period 501,940, ,153, ,152, ,153,750 Basic and diluted earnings per share 10.33fils 9.81fils 31.02fils 30.15fils The basic and diluted earnings per share for the three month and nine month period ended was fils and fils before retroactive adjustment to the number of shares for bonus shares issued in 2010 (See note 15). 14. RELATED PARTY TRANSACTIONS Related parties comprise of major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group s management. a) Balances with related parties included in the interim condensed consolidated statement of financial position are as follows: Accounts receivable and prepayments December (Audited) KD KD KD Current accounts with associates (See note 7) 1,640, , ,889 b) Transactions with related parties included in the interim condensed consolidated statement of income are as follows: Nine month period ended 2010 KD KD Rental income 4,326,666 3,703,040 16

19 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 14. RELATED PARTY TRANSACTIONS (CONTINUED) c) Compensation of key management personnel The remuneration of directors and other members of key management during the period were as follows: Nine month period ended 2010 Salaries and other short-term benefits 422, ,422 Termination benefits 74,439 95,596 KD KD 497, , ANNUAL GENERAL ASSEMBLY The Annual General Assembly held on 28 March 2010 approved the annual audited consolidated financial statements for the year ended 31 December and the proposed distribution of bonus shares of 10% (2008: bonus shares of 10%) and cash dividend of 10 fils per share (2008: Nil) of the paid-up share capital at 31 December to the shareholders of record as of the date of the Annual General Assembly. 16. COMMITMENTS AND CONTINGENT LIABILITIES a) At 2010 there were capital commitments amounting to KD 100,267 in respect of uncalled capital of investments (31 December : KD 101,116 and : KD 109,612). b) The Group s management has approved future capital expenditure amounting to KD 116,057,055 (31 December : KD 136,834,707 and : KD 15,308,927). c) At 2010, the Group has given letters of credit and bank guarantees amounting to KD 277,934 (31 December : KD 5,390,000 and : KD 279,064). 17