Palestine Development and Investment Limited (PADICO) Unaudited Interim Condensed Consolidated Financial Statements

Transcription

1 Palestine Development and Investment Limited (PADICO) Unaudited Interim Condensed Consolidated Financial Statements 30, 2016

2 Ernst & Young Jordan P.O. Box 1140 Amman Jordan Tel: / Fax: Report on review of interim condensed consolidated financial statements to the shareholders of Palestine Development and Investment Limited (PADICO) Introduction We have reviewed the accompanying interim condensed consolidated statement of financial position of Palestine Development and Investment Limited (PADICO) and its subsidiaries as at 30, 2016 and the related interim condensed consolidated income statement, interim condensed consolidated statement of comprehensive income, interim condensed consolidated statement of changes in equity and interim condensed consolidated statement of cash flows for the six-month period then ended and other explanatory notes. The Board of Directors is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on these interim condensed consolidated 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, it 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 interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34. August 23, 2016 Amman-Jordan A member firm of Ernst & Young Global Limited

3 Palestine Development and Investment Limited (PADICO) INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30, 2016 (U.S $ 000 s) Assets 30, 2016 December 31, 2015 (Unaudited) (Audited) Notes U.S. $ U.S. $ Non-current assets Property, plant and equipment 127, ,110 Intangible assets 5 31,592 23,344 Investment properties 96,950 93,975 Projects in progress 6 14,787 20,793 Investment in associates 377, ,452 Financial assets at fair value through other comprehensive income 32,944 32,819 Biological assets 14,287 13,348 Long term accounts receivable 9,610 8, , ,038 Current assets Inventories and ready for sale properties 6 42,427 39,361 Accounts receivable and other current assets 50,625 40,709 Financial assets at fair value through profit or loss 11,214 11,378 Cash and short-term deposits 7 21,225 15, , ,028 Total assets 831, ,066 Equity and liabilities Equity Paid-in share capital 250, ,000 Share premium 16,932 16,932 Treasury shares (387) (387) Statutory reserve 8 28,741 28,741 Voluntarily reserve 1,594 1,594 Fair value reserve (25,704) (21,964) Foreign currency translation reserve Retained earnings 167, ,022 Equity attributable to equity holders of the parent 440, ,565 Non-controlling interests 100, ,799 Total equity 540, ,364 Non-current liabilities Long - term loans and borrowings 95,439 93,959 Provision for employees indemnity 8,097 7,815 Other non-current liabilities , ,043 Current liabilities Credit facilities and short term loans and borrowings 39,265 43,349 Debt bonds 10 85,000 85,000 Accounts payable and other liabilities 62,061 46, , ,659 Total liabilities 290, ,702 Total equity and liabilities 831, ,066 The attached notes 1 to 14 form part of these interim condensed consolidated financial statements 1

4 Palestine Development and Investment Limited (PADICO) INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT For the three month and six-month period ended 30, 2016 (U.S $ 000 s) For the three months ended 30 For the six months ended (Unaudited) (Unaudited) U.S. $ U.S. $ Revenues Operating income 24,105 26,565 48,091 46,280 Share of associates results of operations 8,898 9,880 19,164 19,882 Gain from financial assets portfolio ,060 33,562 36,944 67,964 67,222 Expenses Operating costs (17,582) (17,751) (34,712) (33,579) General and administrative expenses (4,360) (4,232) (9,286) (8,352) Finance costs (2,998) (2,824) (5,920) (5,551) Depreciation and amortization (2,603) (2,176) (4,704) (4,294) (27,543) (26,983) (54,622) (51,776) Other revenues Profit before income tax 6,611 10,191 14,061 16,110 Income tax expense (185) (653) (538) (920) Profit for the period 6,426 9,538 13,523 15,190 Attributable to: Equity holders of the parent 5,792 8,334 12,418 14,131 Non controlling interests 634 1,204 1,105 1,059 6,426 9,538 13,523 15,190 Basic and diluted earnings per share attributable to shareholders of the parent The attached notes 1 to 14 form part of these interim condensed consolidated financial statements 2

5 Palestine Development and Investment Limited (PADICO) INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the three month and six-month period ended 30, 2016 (U.S $ 000 s) For the three months ended 30 For the six months ended (Unaudited) (Unaudited) U.S. $ U.S. $ Profit for the period 6,426 9,538 13,523 15,190 Other comprehensive income items: Items not to be reclassified to profit or loss in subsequent periods: Change in fair value (247) (66) (3,753) (1,330) Items to be reclassified to profit or loss in subsequent periods: Foreign currency translation differences (850) 1, ,171 Total other comprehensive income items (1,097) 1,785 (3,189) (159) Net comprehensive income for the period 5,329 11,323 10,334 15,031 Attributable to: Equity holders of the parent 5,098 9,401 8,993 13,486 Non controlling interests 231 1,922 1,341 1,545 5,329 11,323 10,334 15,031 The attached notes 1 to 14 form part of these interim condensed consolidated financial statements 3

6 Palestine Development and Investment Limited (PADICO) INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six-month period ended 30, 2016 () Paid-in share capital Share premium Treasury shares Equity attributable to equity holders of the parent Statutory reserve Voluntarily reserve Fair value reserve Foreign currency translation reserve Retained earnings Total Noncontrolling interests 30, 2016 U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ U.S. $ Balance as at January 1, ,000 16,932 ) 387( 28,741 1,594 (21,964) , , , ,364 Profit for the period ,418 12,418 1,105 13,523 Other comprehensive income items (3,740) (3,425) 236 (3,189) Net comprehensive income for the period (3,740) ,418 8,993 1,341 10,334 Distributed cash dividends (note 9) (12,492) (12,492) (2,387) (14,879) Change in non-controlling interests Balance as at 30, 2016 (Unaudited) 250,000 16,932 ) 387( 28,741 1,594 (25,704) , , , ,985 30, 2015 Balance as at January 1, ,000 16,932 ( 426) 26,773 1,594 ( 15,495) , , , ,173 Profit for the period ,131 14,131 1,059 15,190 Other comprehensive income items ) 1,259( ) 645( 486 )159( Net comprehensive income for the period ) 1,259( ,131 13,486 1,545 15,031 Distributed cash dividends (note 9) ) 12,490( ) 12,490( ) 1,624( )14,114( Sale of financial assets transferred directly to retained earnings ) 2,643( - 2, Treasury shares ) 9( Change in non-controlling interests ) 53( )53( Balance as at 30, 2015 (Unaudited) 250,000 16,932 ) 387( 26,773 1,594 ) 19,397( 1, , , , ,067 Total equity The attached notes 1 to 14 form part of these interim condensed consolidated financial statements 4

7 Palestine Development and Investment Limited (PADICO) INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six-month period ended 30, 2016 () For the six months ended (Unaudited) (Unaudited) Notes U.S. $ U.S. $ Operating activities Profit before income tax 14,061 16,110 Adjustments for: Depreciation and amortization 4,704 4,294 Share of associates results of operations (19,164) (19,882) Gain from financial assets portfolio (709) (1,060) Finance costs 5,920 5,551 Provisions and other non-cash items (103) 453 4,709 5,466 Working capital adjustments: Accounts receivable and other current assets (8,858) (11,429) Inventories and ready for sale properties 4,570 12,311 Change in financial assets at fair value through profit or loss (16) 749 Accounts payable and other liabilities 2,182 (3,684) Payments of income tax (747) (803) Net cash from operating activities 1,840 2,610 Investing activities Financial assets at fair value through other comprehensive income (29) 15,390 Investments in associates 2,546 2,487 Dividends received 28,283 25,591 Property, plant and equipment (992) (2,548) Biological assets (939) (766) Projects in progress (6,877) (5,243) Investment properties (3,438) (3,833) Treasury shares - 30 Acquisition of a subsidiary (2,495) - Cash from acquisition of a subsidiary Net cash from investing activities 16,867 31,108 Financing activities Distributed cash dividends (4,857) (10,176) Long - term loans and credit facilities (3,290) (4,172) Finance costs paid (5,889) (4,589) Change in non-controlling interests 166 (53) Net cash used in financing activities (13,870) (18,990) Increase in cash and cash equivalents 4,837 14,728 Foreign currency translation differences Cash and cash equivalents, beginning of the period 15,180 7,776 Cash and cash equivalents, end of period 7 20,139 22,661 The attached notes 1 to 14 form part of these interim condensed consolidated financial statements. 5

8 Palestine Development and Investment Limited (PADICO) NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30, Corporate Information Palestine Development and Investment Limited (PADICO) was incorporated on October 14, 1993 under the Liberian Off Shore Business Corporation Act in Monrovia, Liberia. PADICO shares are publicly traded in Palestine Securities Exchange. On December 3, 2009, the Company was registered in Palestine as a foreign company under registration No. ( ). The main objectives of PADICO are to develop and encourage investment in various s including industrial, agriculture, real estate, tourism, housing and services, and to provide technical and consultancy services through the establishment of companies, joint ventures and associations with other companies. The interim condensed consolidated financial statements of PADICO for the period ended 30, 2016 were authorized for issuance by the Board of Directors on August 23, Consolidated Financial Statements The interim condensed consolidated financial statements comprise of Palestine Development and Investment Limited (PADICO) and its subsidiaries as at 30, PADICO's direct and indirect ownership in its subsidiaries' subscribed capital was as follows: Country of origin 30, 2016 Ownership % December 31, 2015 Activity type Palestine Real Estate Investment Company (PRICO) Real estate Palestine Jericho Gate for Real Estate Investment (JG) Real estate Palestine TAICO for trade and investment company Real estate Jordan Palestine Industrial Investment Company (PIIC) Industrial Palestine The Palestinian Waste Recycling Company (Tadweer) Industrial Palestine Palestine Securities Exchange Company (PSE) Financial market Palestine Jerusalem Development and Investment Company Ltd. (JEDICO) Tourism Britain Palestine Development and Investment Company Private Shareholding Investment Palestine Rawan International Investment Company Investment Jordan Palestine General Trading Company Ltd. Investment Palestine Palestine Company for the Transfer of Technology Ltd. Investment Palestine Palestine Company for Canning and Packaging Ltd. Investment Palestine Palestine Company for Basic Chemical Products Ltd. Investment Palestine PADICO Services Company Investment Palestine

9 3. Basis of preparation and significant accounting policies The interim condensed consolidated financial statements for the six months ended 30, 2016 have been prepared in accordance with International Accounting Standard IAS 34 (Interim financial reporting). The consolidated financial statements have been presented in U.S Dollars, and all values except when otherwise indicated, are rounded to the nearest thousand (). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with PADICO`s annual financial statements as at 31 December The results for the six-month period ended 30, 2016 are not necessarily indicative of the results that may be expected for the financial year ending December 31, Changes in significant accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of PADICO s annual consolidated financial statements for the year ended December 31, Acquisition of a subsidiary during 2016 During the year 2016, PIIC (a subsidiary), acquired 100% of Al Pinar General Trading Company (Al Pinar) 1,500,000 outstanding shares. As a result, PIIC gained control over Al Pinar through acquiring all the voting rights, and accordingly the financial statements of Al Pinar were consolidated with the consolidated financial statements of PIIC as of the date of acquisition. PIIC s share of net income from Al Pinar from the date of acquisition and until 30, 2016 amounted to U.S.$ 175,605. The fair values of the assets and liabilities of Al Pinar as at the date of acquisition were: Fair values at the date of the Assets acquisition Property, plant and equipment 1,745 Inventory 310 Accounts receivables 252 Other current assets 15 Cash and short-term deposits 808 3,130 Liabilities Accounts payables 1,196 Provision for income tax 39 Other current liabilities 32 Provision for employees indemnity 346 1,613 Fair value of net assets 1,517 Purchase price (4,992) Goodwill on acquisition (3,475) 7

10 5. Intangible Assets Leasing rights Bus stations Goodwill Total Cost Balance at January 1, ,516 18,402 8,180 30,098 Additions (Note 4) 3, ,475 Transferred from projects in progress (Note 6) - 5,533-5,533 Balance at 30, ,991 23,935 8,180 39,106 Accumulated amortization Balance at January 1, ,196 6,754 Amortization for the year Balance at 30, ,031 6,483 7,514 Net book value At 30, ,991 22,904 1,697 31,592 At December 31, ,516 17,844 1,984 23, Projects in Progress and Ready for Sale Properties 30, , 2015 Balance, beginning of year 20,793 69,640 Additions 6,853 8,667 Disposals - (110) Transferred to inventory and ready for sale properties * (7,326) (38,694) Transferred to intangible assets ** (5,533) (17,893) Transferred to property, plant and equipment - (817) Balance, end of year 14,787 20,793 * During the period, PRICO (a subsidiary) has completed the construction and preparation works related to PRICO house (2) project and transferred it to ready for sale properties. ** PRICO (a subsidiary) has also completed the first phase of Jericho Agro Industrial Park project that amounted U.S $ 5,533,000 and transferred it to intangible assets (Note 5). 8

11 7. Cash and Short Term Deposits For the purpose of the interim condensed consolidated financial statements of cash flows, cash and cash equivalents comprise the following: 30, , 2015 Cash on hand and current accounts at banks 18,493 16,176 Term deposits at banks 2,732 6,661 21,225 22,837 Restricted cash (1,086) (176) 20,139 22, Statutory Reserve As these financial statements represent interim financial information, PADICO did not appropriate any amounts to the statutory reserve. 9. Distributed cash Dividends PADICO s General Assembly decided in its meeting held on May 17, 2016 to distribute a cash dividend of U.S. $ 0.05 per share for the year 2015, which amounted to U.S. $ 12,500,000. For the purpose of preparing the interim condensed consolidated financial statements, an amount of U.S. $ 8,000 was deducted from cash dividends which belongs to PADICO s subsidiaries that own shares in PADICO s capital. PADICO s General Assembly decided in its meeting held on May 18, 2015 to distribute a cash dividend of U.S. $ 0.05 per share for the year 2014, which amounted to U.S. $ 12,500,000. For the purpose of preparing the interim condensed consolidated financial statements, an amount of U.S. $ 10,000 was deducted from cash dividends which belongs to PADICO s subsidiaries that own shares in PADICO s capital. Distributed cash dividends from subsidiaries PIIC s General Assembly decided in its meeting held on May 4, 2016, a cash dividend distribution of JD 0.06 per share for the result of operations of the year 2015, which amounted to U.S. $ 1,586,700. Non-controlling interest s share of the dividends was U.S. $ 687,000. Palestine Poultry Company (a subsidiary of PIIC) General Assembly decided in its meeting held on May 4, 2016, a cash dividend distribution of JD 0.15 per share for the result of operations of the year 2015, which amounted to U.S. $ 2,843,000. Non-controlling interest s share of the dividends was U.S. $ 325,000. National Carton Industry (a subsidiary of PIIC) General Assembly decided in its meeting held on April 27, 2016, a cash dividend distribution of U.S. $ 0.08 per share for the result of operations of the year 2015, which amounted to U.S. $ 400,000. Non-controlling interest s share of the dividends was U.S. $ 228,000 as at 30, Palestine Real Estate Investment Company (a subsidiary) General Assembly decided in its meeting held on May 8, 2016, a cash dividend distribution of JD 0.05 per share for the result of operations of the year 2015, which amounted to U.S. $ 4,496,531. Non-controlling interest s share of the dividends was U.S. $ 1,146,750. 9

12 10. Debt Bonds During September 2011, PADICO issued 8,500 debt bonds with a nominal amount of $ 10,000. The bonds were underwritten in full with a fixed annual interest rate of 5% for the first 30 months, and an annual interest rate of 2.5% plus six months LIBOR for the remaining thirty months with a minimum of 5%. The interest is to be paid at the end of each six months starting March 15, 2012 and the bonds principle is to be paid in one installment after five years from the issuing date. Subsequent to the interim condensed consolidated financial statements date, PADICO agreed to issue additional bonds with a value of U.S. $ 120 million to pay off current bonds and to finance its future projects and activities. 11. Related Party Transactions Related parties represent associated companies, major shareholders, directors and key management personnel of PADICO, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by PADICO s Board of Directors. Balances with related parties included in the interim condensed consolidated statement of financial position as at 30, 2016 and December 31, 2015 are as follows: Statement of financial position items: Nature of Relationship 30, 2016 December 31, 2015 Accounts receivable and other current assets Associate and sister companies 834 3,620 Accounts payable and other liabilities Associates and sister companies 520 1,627 Accounts payable and other liabilities Key management Loans and credit facilities Banks - Members of the Board of Directors 75,741 86,725 Debt bonds Banks - Members of the Board of Directors 30,000 30,000 Transactions with related parties included in the interim condensed consolidated income statement for the six-month period ended 30, 2016 and 2015 are as follows: Expenses Finance costs Nature of Relationship 30, , 2015 Banks - Members of the Board of Directors 2,367 1,783 Finance costs Associate Company Key management personnel compensations: Salaries and related benefits 1,728 1,666 10

13 12. Commitments and Contingent Liabilities The unpaid investments of PADICO and its subsidiaries in financial assets at fair value through profit or loss amounted to U.S. $ 147,000 and U.S. $ 183,000 as at 30, 2016 and December 31, 2015, respectively. On April 9, 2015, Palestine Real Estate Investment (a subsidiary) signed a partnership and investment agreement with Ramallah Municipality which comprise the establishment of a commercial project (AlSireyah Building Project) for a period of seven years beginning once the company obtained all the required licenses to start the building process. The company will commit to pay to the municipality a lump sum amount each year throughout the term of the agreement with a total amount of U.S. $ 544,000. Palestine Real Estate Investment (a subsidiary) is committed to pay U.S. $ 60,000 for the Chalets land annual rent in Gaza for a period of 49 years started January 1, 1998 and it s renewable for a similar period. The contingent liabilities resulted from contracts and agreements signed with suppliers in relation to PADICO s projects amounted to U.S. $ 1,660,272. This amount represents the difference between the total contract value and the completed amount as at the date of the consolidated financial statements. There has been several lawsuits against PADICO s subsidiaries within the normal course of business. PADICO s management and their legal advisors believe that provisions against these litigations are sufficient and no material liabilities will result from these lawsuits. PADICO and its subsidiaries have entered into commercial property leases on its investment property portfolio and part of its property, plant and equipment and intangible assets. These non-cancellable leases have remaining period between 6 and 11 years. 13. Fair Value of Financial Instruments Set out below is an overview of financial instruments held by PADICO as of 30, 2016 and December 31, 2015: U.S. $000 s Carrying amount December 31, , , 2016 Fair value December 31, 2015 Financial assets Accounts receivable and other current assets 56,519 46,655 56,519 46,655 Financial assets at fair value through profit or loss 11,214 11,378 11,214 11,378 Cash and short-term deposits 21,225 15,580 21,225 15,580 Financial assets at fair value through other comprehensive income Quoted 9,323 6,741 9,323 6,741 Unquoted 23,621 26,078 23,621 26, , , , ,432 Financial liabilities Debt Bonds 85,000 85,000 85,000 85,000 Loans and credit facilities 134, , , ,308 Accounts payable and other liabilities 61,627 35,851 61,627 35, , , , ,159

14 The fair value of the financial assets and liabilities are included 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 fair values of accounts receivable and other current assets, other current liabilities and credit facilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair values of financial assets at fair value through profit or loss and through other comprehensive income are based on price quotations at the reporting date. The fair values of unquoted financial assets at fair value through other comprehensive income were determined using appropriate valuation techniques. The fair value of interest-bearing loans and borrowings and debt bonds is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. Fair Value Measurement PADICO uses the following hierarchy for determining and disclosing the fair value of its financial instruments: Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. There have been no transfers between Level 1, Level 2 and level 3 during the year. 12

15 The following table provides the fair value measurement hierarchy of PADICO s assets and liabilities. Following are quantitative disclosures fair value measurement hierarchy for assets as at 30, 2016: Quoted Prices in active markets (Level 1) Fair value Measurement using Significant observabl e inputs (Level2) Significant unobservable inputs (Level3) Total U.S. $000 s Financial assets measured at fair value Financial assets at fair value through other comprehensive income Quoted 9,323 9, Unquoted 23, ,621 Financial assets at fair value through profit or loss 11,214 11, Following are quantitative disclosures fair value measurement hierarchy for assets as at December 31, 2015: Fair value Measurement using Quoted Prices in active markets (Level 1) Significant observabl e inputs (Level2) Significant unobservable inputs (Level3) Total U.S. $000 s Financial assets measured at fair value Financial assets at fair value through other comprehensive income Quoted 6,741 6, Unquoted 26, ,078 Financial assets at fair value through profit or loss 11,378 11, Biological assets 13, ,348 13

16 14. Segment Reporting PADICO s reporting segments as PADICO's risks and rates of return are affected predominantly by differences in the products and services provided. PADICO and its subsidiaries segments are real estate, industrial and agricultural, tourism, financial markets, in addition to the investment. The following table presents revenues and profit information regarding PADICO's business segments for the six-month period ended 30, 2016 and 2015, respectively as follows: Six months ended 30, 2016 (unaudited) Investment Sector Real estate Industrial and agricultural Financial market Tourism Eliminations Consolidated Revenues 18,467 9,115 35,357 1,606 3,688 (269) 67,964 Segment profit (loss) before tax 14,040 (964) 5, (4,557) (287) 14,061 Six months ended 30, 2015 (unaudited) Investment Sector Real estate Industrial and agricultural Financial market Tourism Eliminations Consolidated Revenues 19,549 15,711 26, ,435 (262) 67,222 Segment profit (loss) before tax 12,967 3,128 2, (2,103) (430) 16,110 The following table presents assets and liabilities of PADICO s operating segments as at 30, 2016 and December 31, 2015: Investment Real estate Industrial and agricultural Financial market Tourism Eliminations Consolidated Segment assets As at 30, , , ,911 12,791 85,726 (227,036) 831,116 As at December 31, , ,093 94,037 11,823 86,606 (228,109) 822,066 Segment liabilities As at 30, ,606 80,389 35,592 1,631 20,489 (28,576) 290,131 As at December 31, ,834 72,615 26,097 1,118 20,895 (21,857) 276,702 14