Depa Limited and its subsidiaries. Review report and condensed consolidated interim financial statements for the six month period ended 30 June 2017

Transcription

1 Review report and condensed consolidated interim financial statements for the six month period ended 2017

2 Review report and condensed consolidated interim financial statements for the six month period ended 2017 Pages Condensed consolidated interim statement of profit or loss 1 Condensed consolidated interim statement of other comprehensive income 2 Condensed consolidated interim statement of financial position 3 Condensed consolidated interim statement of changes in equity 4 Condensed consolidated interim statement of cash flows Report on review of condensed consolidated interim financial statements 19

3 Condensed consolidated interim statement of profit or loss For the six month period ended June Six month period ended (unaudited) (unaudited) Revenue Expenses (704.9) (741.7) Share of (loss)/profit from associates (0.9) 1.1 Profit before interest and tax Finance income Finance cost (5.6) (5.8) Net finance cost (5.0) (4.9) Profit before tax Income tax expense (10.5) (7.3) Profit for the period Attributable to: Equity holders of the Parent Non-controlling interests Earnings per share Basic earnings per share (AED) Diluted earnings per share (AED) The notes on pages 6-18 are an integral part of these condensed consolidated interim financial statements. 1

4 Condensed consolidated statement of other comprehensive income For the six month period ended June Six month period ended (unaudited) (unaudited) Profit for the period Other comprehensive income Items that may be reclassified to profit or loss in subsequent periods: Exchange gain on translation of foreign operations Total comprehensive income for the period Attributable to: Equity holders of the Parent Non-controlling interests The notes on pages 6-18 are an integral part of these condensed consolidated interim financial statements. 2

5 Condensed consolidated interim statement of financial position Note 31 December (unaudited) (audited) ASSETS Cash and bank balances Trade and other receivables Due from construction contract customers Inventories Total current assets 1, ,863.8 Contract retentions Available-for-sale investments Property, plant and equipment Intangible assets Investment properties Investment in associates Deferred tax assets Goodwill Total non-current assets Total assets 2, ,625.1 LIABILITIES Trade and other payables 7 1, ,099.2 Income tax payable Borrowings Total current liabilities 1, ,276.0 Employees end of service benefits Retentions Other non-current liabilities Borrowings Total non-current liabilities Total liabilities 1, ,404.0 Net assets 1, ,221.1 EQUITY Share capital Share premium Share issuance costs 10 - (64.8) Treasury shares (16.5) (16.5) Statutory reserve Other reserve (3.1) (5.3) Retained earnings/(accumulated losses) 79.7 (311.9) Translation reserve (19.1) (41.0) Equity attributable to equity holders of the parent 1, ,215.7 Non-controlling interests Total equity 1, ,221.1 The condensed consolidated interim financial statements were approved for issue by the Board of Directors on 3 August 2017 and signed on its behalf. Chairman Chief Executive Officer Chief Financial Officer The notes on pages 6-18 are an integral part of these condensed consolidated interim financial statements. 3

6 Condensed consolidated interim statement of changes in equity Attributable to equity holders of the Parent Share capital Share premium Share issuance costs Treasury shares Statutory reserve Other reserve Retained earnings/ losses Translation reserve Total Noncontrolling interests Total At 1 January (64.8) (16.5) 51.2 (8.1) (355.3) (42.5) 1, ,172.8 Profit for the period Other comprehensive income Total comprehensive income Dividends paid (6.1) (6.1) Acquisition of noncontrolling interest (1.9) - (1.9) 1.5 (0.4) At 2016 (unaudited) (64.8) (16.5) 51.2 (8.1) (340.9) (22.3) 1, ,206.9 At 1 January (64.8) (16.5) 51.4 (5.3) (311.9) (41.0) 1, ,221.1 Profit for the period Other comprehensive income Total comprehensive income Transfer to statutory reserve (2.4) Adjustment to share premium account (Note 10) - (346.3) Employee share scheme Dividends paid (6.3) (6.3) At 2017 (unaudited) (16.5) 53.8 (3.1) 79.7 (19.1) 1, ,353.1 The notes on pages 6-18 are an integral part of these condensed consolidated interim financial statements. 4

7 Condensed consolidated interim statement of cash flows For the six month period ended June Six month period ended (unaudited) (unaudited) Cash flows from operating activities Profit before tax Adjustment for: Depreciation of property, plant and equipment Amortisation of intangible assets Profit on disposal of property, plant and equipment (0.1) (0.2) Share of loss/(profit) from associates 0.9 (1.1) Net reversal of allowance for doubtful debts and unbilled revenue (32.5) (1.9) Other long term provision Finance costs Finance income (0.6) (0.9) Provision for employees end of service benefits Operating cash flows before payment of employees end of service benefits, taxes and changes in working capital Employees end of service benefits paid (3.7) (8.9) Income tax paid (5.9) (7.6) Changes in working capital: Due from construction contract customers (11.5) (53.0) Restricted cash (33.6) (24.7) Inventories (8.7) (6.5) Trade and other receivables 98.0 (3.6) Contract retentions (1.8) (14.2) Subcontractors retentions (3.3) (0.8) Trade and other payables (38.8) 30.3 Net cash generated from/(used in) operating activities (30.7) Investing activities Purchase of property, plant and equipment (5.9) (6.2) Disposal of property, plant and equipment Finance income received Paid for additional acquisition of non-controlling interests - (0.4) Dividends received from associates Movement in fixed deposits Net cash (used in)/generated from investing activities (0.1) 20.0 Financing activities Dividends paid to non-controlling interests (6.3) (6.1) Finance cost paid (5.6) (5.8) Net movement in bank borrowings (24.5) (46.1) Net cash used in financing activities (36.4) (58.0) Net increase/(decrease) in cash and cash equivalents 79.0 (68.7) Cash and cash equivalents at beginning of the period Exchange differences arising on translation of foreign operations Cash and cash equivalents at the end of the period The notes on pages 6-18 are an integral part of these condensed consolidated interim financial statements. 5

8 for the six month period ended Corporate information Depa Limited (the Company ) is a company limited by shares and registered in accordance with Companies Law DIFC Law No. 2 of 2009, as amended, and was incorporated on 25 February Depa Limited is the management company of Depa United Group P.J.S.C. The Company and its subsidiaries (together referred to as the Group ) specialises in the luxury fit-out sector, focusing primarily on hospitality, commercial and residential property developments, and also includes the airport, retail, yacht, theming and specialist fit-out sectors. Additionally, the Group is a provider of manufactured products and procurement services, with a primary focus on customised furniture, fixtures and equipment, much of which is produced in its in-house facilities. The Company's shares are listed on the Nasdaq Dubai. The address of the Company s registered office is P.O. Box 56338, Dubai, United Arab Emirates. 2 Basis of preparation The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Statement of compliance and accounting convention These condensed consolidated interim financial statements for the six month period ended 2017 have been prepared in accordance with International Accounting Standard 'IAS 34 Interim Financial Reporting. The condensed consolidated interim financial statements have been prepared under the historical cost basis, except for certain investment properties and available for sale investments, which have been measured at fair value. The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group s annual consolidated financial statements for the year ended 31 December 2016 and any public announcements made by the Group during the interim reporting period. In addition, results for the period from 1 January 2017 to 2017 are not necessarily indicative of the results that may be expected for the financial year ending 31 December

9 2 Basis of preparation (continued) Financial risk management The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual consolidated financial statements; therefore, it should be read in conjunction with the Group s annual consolidated financial statements as at 31 December The Group s financial risk management objectives and policies are consistent with those disclosed in the annual consolidated financial statements at and for the year ended 31 December There have been no changes in the risk management department or in any risk management policies since the year end. Liquidity risk factors Ultimate responsibility for liquidity risk management rests with the board of directors, which has an appropriate liquidity risk management framework for the management of the Group s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and financial liabilities. Fair values of financial instruments Financial instruments comprise financial assets and financial liabilities. Financial assets consist of cash and bank balances, accounts receivable and other assets (excluding prepayments and advances to subcontractors and suppliers), amount due from customers on construction contracts and due from related parties. Financial liabilities consist of bank borrowings, accounts payable and accruals, subcontractors retention and due to related parties. At the period ended, the fair values of financial instruments are not materially different from their carrying values. The fair value of the financial assets and liabilities are considered at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: Cash and bank balances, accounts receivable and other assets (excluding prepayments and advances to subcontractors and suppliers), amount due from customers on construction contracts, due from related parties, bank borrowings, accounts payable and accruals, subcontractors retention and due to related parties approximate their carrying amounts, largely due to the short-term maturities of these instruments. Long term receivables are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual credit worthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, provisions are taken to account for the expected losses of these receivables. As at 2017, the carrying amounts of such receivables, net of provisions, are not materially different from their fair values. 7

10 2 Basis of preparation (continued) Financial risk management (continued) Fair value estimation The table below analyses financial instruments carried at fair value and investment properties for which fair value is disclosed, by valuation method. The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following table presents the Group s assets that are measured at fair value and investment properties for which fair value is disclosed at Level 1 AED Level 2 AED Level 3 AED Total AED million million million million (unaudited) (unaudited) (unaudited) (unaudited) Assets Assets carried at fair value - Investment properties Total assets The following table presents the Group s assets that are measured at fair value and investment properties for which fair value is disclosed at 31 December Assets Level 1 Level 2 Level 3 Total AED AED AED AED million million million million (audited) (audited) (audited) (audited) Assets carried at fair value - Investment properties Total assets

11 3 Accounting policies Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards as set out below: (a) New and amended standards adopted by the Group There are no new standards, amendments or interpretations which are effective for the financial period commencing on 1 January 2017, which have a material impact on the Group s condensed consolidated interim financial statements. (b) New standards and amendments not early adopted by the Group Certain new standards and amendments to existing standards have been published and are mandatory for the Group s accounting periods beginning after 1 January 2018 or later periods, but have not been early adopted by the Group: IFRS 9, Financial instruments (effective from 1 January 2018); IFRS 15, Revenue from contracts with customers (effective from 1 January 2018); and IFRS 16, Leases (effective from 1 January 2019). Management anticipates that these new and revised standards, interpretations and amendments will be adopted in the Group s consolidated financial statements for the year beginning 1 January 2018 or as and when they are applicable. The adoption of these new standards, interpretations and amendments are expected to have a material impact on the consolidated financial statements of the Group in the period of initial application and are currently being assessed by management for the concerned impact on the Group s consolidated financial statements. 9

12 4 Cash and cash equivalents 2017 (unaudited) 31 December 2016 (audited) Cash on hand Current accounts Short term fixed deposits Term deposits Restricted cash Cash and bank balances Term deposits with maturity over three months (16.0) (16.7) Restricted cash (180.6) (147.0) Bank overdraft (46.9) (57.1) Cash and cash equivalents Trade and other receivables 2017 (unaudited) 31 December 2016 (audited) Trade receivables Contract retentions Less: Allowances for doubtful debts (112.4) (92.7) Net- trade receivable and retentions Guarantees encashed by customers Less: Allowances for doubtful debts (27.7) (74.6) Net- guarantee encashed - - Advances to subcontractors and suppliers Prepayments Other receivables and current assets Trade receivables represent amounts due from customers for contract work rendered by the Group and duly certified by the customers. Contract retentions represent the current portion of amounts withheld by the customers in accordance with contract terms and conditions. These amounts are to be repaid upon fulfilment of contractual obligations. During current period, the disputed amounts relating to a contract cancelled by a customer in 2012 were amicably settled through out of court settlement. 10

13 5 Trade and other receivables (continued) In relation to a select number of projects involving either arbitrations against its customers to recover payment for unpaid works and/or long overdue contract balances where the Group is currently in discussion with either the customer or in some cases directly with the main employer in respect of settlement, AED 118 million is included in gross trade and other receivables and due from construction contract customers. In relation to this balance, AED 19 million has been provided for, resulting in a net balance of AED 99 million. Management is confident that it will be able to recover the net balance in full and that no further provision is required in the condensed consolidated interim financial statements. 6 Goodwill Goodwill attributable to cash generating units is as follows: 2017 (unaudited) 31 December 2016 (audited) Design Studio Vedder Depa Interiors Group Deco Group The Parker Company Linder Middle East Goodwill is tested for impairment annually or when circumstances indicate the carrying value may be impaired. The Group s impairment test for goodwill and intangible assets with indefinite lives is based on value-in-use calculations that use a discounted cash flow model. The key assumptions used to determine the recoverable amount for the different cash generating units were disclosed in the consolidated financial statements for the year ended 31 December

14 7 Trade and other payables 2017 (unaudited) 31 December 2016 (audited) Trade payables Advances received Subcontractor/suppliers retentions Accrued expenses Amount due to construction contract customers Other payables , , Borrowings 2017 (unaudited) 31 December 2016 (audited) Bank overdrafts Trust receipts and acceptances Bank loans The borrowings are repayable as follows: Within 1 year Between 1-2 years After 2 years Presented in the condensed consolidated interim statement of financial position as: Current liabilities Non-current liabilities

15 8 Borrowings (continued) Bank overdrafts The interest rate on the overdrafts varies between EIBOR plus 3.0% to 4.0% per annum (2016: EIBOR plus 2.7% to 5.0%) and the bank base rate plus a margin per annum. Trust receipts and acceptances Trust receipts and acceptances are facilities used by the Group for imports. The payment terms vary between 30 and 180 days and are subject to interest rates ranging from 4.5% to 7.0% per annum (2016: 4.5% to 7.0% per annum). Bank loans No new facilities have been obtained since year ended 31 December The movement in the bank loan balance represents the repayments made during the current period. The terms of the bank loans are detailed in the consolidated financial statements for the year ended 31 December Related parties Transactions between the Company and its subsidiaries have been eliminated upon consolidation and are not disclosed in this note. Related parties include Directors, shareholders and key management personnel and entities in which they have the ability to control and exercise a significant influence in financial and operating decisions. The Group considers its joint operations as related parties on the basis of substance of the relationship. The Group maintains significant balances with related parties which arise from commercial transactions. The types of related party transactions are described below. Commercial transactions The Group receives and provides services to related parties in the normal course of business. These services consist of construction/fit-out work, leasing office space or land, use of specialised skills on certain projects, and use of employees from related party entities. In addition, the Group purchases supplies and inventory from certain related parties. Pricing policies and terms of related parties transactions are approved in accordance with the Group s Corporate Governance policies, addressing related party transactions and conflicts of interest. 13

16 9 Related parties (continued) The tables below summarise amounts included in expenses and management remuneration (unaudited) (unaudited) Related party transactions Entities with common ownership and/or management Revenue Expenses Finance cost Compensation of key management personnel The remuneration of Directors and other key members of management of the Group during the period were as follows: (unaudited) (unaudited) Short-term compensations End of service benefits Employee share scheme Director s fees Trade and other receivables (Note 5) and due from construction contract customers includes amount due from related parties amounting to AED 331 million as at 2017 (31 December 2016: AED million) Trade and other payables (Note 7) includes amounts due to related parties amounting to AED 78.5 million as at 2017 (31 December 2016: AED 56.6 million) 14

17 10 Share premium In line with the Board of Directors recommendation and following the provision of article of association of the Company, a special resolution was passed by the shareholders during the General Assembly convened on 14 May 2017 to reduce the accumulated losses and share issuance costs by using the share premium account. Accordingly, share premium amounting to AED million was offset against the accumulated losses of AED million and share issuance costs of AED 64.8 million as at the date of approval. 11 Commitments and contingencies 2017 (unaudited) 31 December 2016 (audited) Letters of credit Letters of guarantee Security cheques issued The above letters of credit and guarantee were issued in the normal course of business. The Group has no committed capital expenditures for the period (2016: nil). Legal cases The Group companies are defendants in a number of legal proceedings which arose in the normal course of business. The Group does not expect that the outcome of such proceedings either individually or in the aggregate will have a material effect on the Group s operations, cash flows or financial position. 15

18 12 Segment information The Group is operating into four key business units and Investments and others. Principal products and services of each of these businesses are as follows: Design Studio Interior fit-out solutions, including contracting, manufacturing and supply, specialising in the hospitality, commercial and residential sectors. Primarily operates in Asia. Vedder Interior fit-out solutions, including contracting, manufacturing and supply, specialising in luxury super yachts, private jets and residences. Primarily operates in Europe. Depa Interiors Group Interior fit-out solutions, including contracting, manufacturing and supply, specialising in luxury hotels, villas, residential, hospitality and public buildings. Primarily operates in the Middle East. Deco Group Interior fit-out solutions, including contracting, manufacturing and supply, specialising in the high-end luxury retail sector. Manufacture and supply of stone works to the interior fit-out sector, specialising in high quality marble. Manufacture and supply of joinery and carpentry work to the interior fit-out sector. Primarily operates in the Middle East. Investments and others Strategic management activities at a corporate level. Various activities, including procurement services, contracting, manufacturing and supply to the interior fit-out sector. Activities are geographically spread. 16

19 12 Segment information (continued) The following is the analysis of the Group s segments as at 2017 and 2016: Design Studio Vedder Depa Interiors Group Deco Group Investments and others Eliminations Total 2017 (unaudited) Reportable segment assets , ,446.2 (3,279.5) 2,687.9 Reportable segment liabilities , (839.6) 1, December 2016 (audited) Reportable segment assets , ,412.4 (3,300.7) 2,625.1 Reportable segment liabilities , (876.5) 1, (unaudited) Revenue (38.0) Expenses (172.5) (136.4) (250.8) (133.6) (43.5) 31.9 (704.9) Share of (loss)/profit from associates (0.9) - (0.9) Net finance income/(cost) 0.2 (0.5) (9.5) (0.4) (5.0) Income tax expense (1.8) (4.3) (4.4) (10.5) Profit/(loss) for the period (3.5) (6.1) Capital expenditure Depreciation Amortisation (unaudited) Revenue (15.9) Expenses (157.6) (136.5) (312.3) (99.1) (47.5) 11.9 (741.7) Share of profit from associates Net finance income/(cost) 0.2 (0.6) (7.9) (1.7) (4.9) Income tax (3.3) (3.4) (0.6) (7.3) Profit/(loss) for the period (1.8) 5.1 (6.0) (4.6) 19.4 Capital expenditure Depreciation Amortisation

20 13 Reclassification The following amounts have been re-classified; During the current period, the Group has changed the presentation of the condensed consolidated interim income Statement by adopting nature of expense method of presentation. As per new presentation, total expenses for the period include cost of sales amounting to AED million ( 2016: AED million). AED 26.5 million of cash in current accounts and AED 10.6 million of margin money in other receivables as at 31 December 2016 have been reclassified to restricted cash to conform to current period presentation. 14 Subsequent event The Board of Directors has declared an interim dividend of AED 15.2 million (2.5 fils per share) on 3 August The declared dividend has not been recognized as a liability in these condensed consolidated interim financial statements. 18

21 Report on review of condensed consolidated interim financial statements to the shareholders of Depa Limited Introduction We have reviewed the accompanying condensed consolidated interim statement of financial condensed consolidated interim statements of profit or loss, other comprehensive income, changes in equity and cash flows for the six month period then ended and notes, comprising a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with International Accounting Standard IAS 34 Interim n on these condensed consolidated interim financial statements based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity'. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with IAS 34. PricewaterhouseCoopers 3 August 2017 Murad Nsour Partner Dubai, United Arab Emirates PricewaterhouseCoopers Limited, License no. CL0215 Al Fattan Currency House, Tower 1, Level 8, Unit 801, DIFC, PO Box 11987, Dubai - United Arab Emirates T: +971 (0) , F: +971 (0) , PricewaterhouseCoopers Limited is registered with the Dubai Financial Services Authority. 19