...371.6 352.8 TERM LOANS 965.1 916.2 0.065 (0.136) BASIC EARNINGS PER SHARE 0.168 (0.353) 0.010 -...
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Transcript of ...371.6 352.8 TERM LOANS 965.1 916.2 0.065 (0.136) BASIC EARNINGS PER SHARE 0.168 (0.353) 0.010 -...
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H I S M A J E S T Y S U LT A N Q A B O O S B I N S A I D
H I S M A J E S T Y S U LT A N Q A B O O S B I N S A I D
CONTENTS
OPERATING ETHOSSAFE – no harm to people
EFFICIENT – cost effective and quality services
GREEN – no harm to the environment
LOCAL – we are serious about in-country value
VALUESSAFETY – HSE, no harm to people,
no harm to the environment
SERVICE – customers really do come first, standards, performance, unique solutions
INTEGRITY – governance, honesty, ethics
EFFICIENCY – best in class competitiveness with world-class competition, performance
CARING – nurturing our people, family culture, helping communities
RENAISSANCEThe Renaissance Group is anOmani multinational listed on theMuscat Securities Market(MSM30) as “Renaissance Services SAOG”. The group contains twobusinesses, each with anindependent vision. Topaz operates a modern anddiverse fleet of 100 off-shoresupport vessels for the oil andgas sector, primarily located inthe Caspian and MENA markets. The Topaz vision is to be theglobal local quality champion andtop five OSV player, withprofitability in the top quartile. Renaissance is an Omani company offering strategic facilities management solutions for businesses in a wide range of sectors and geographies. We provide contract services, IFM and run the Renaissance Village brand, which is our uniquely designed workforce accommodation solution. Clients include government, universities and hospitals, ports, industry, onshore and offshore hydrocarbon development and the military.
The Renaissance vision is todeliver world-class services to aworldwide market.
CONTENTS
OPERATING ETHOSSAFE – no harm to people
EFFICIENT – cost effective and quality services
GREEN – no harm to the environment
LOCAL – we are serious about in-country value
VALUESSAFETY – HSE, no harm to people,
no harm to the environment
SERVICE – customers really do come first, standards, performance, unique solutions
INTEGRITY – governance, honesty, ethics
EFFICIENCY – best in class competitiveness with world-class competition, performance
CARING – nurturing our people, family culture, helping communities
Renaissance Services SAOGP.O. Box 1676, P.C. 114, Muttrah, Sultanate of OmanTel.: +968 2479 6636 Fax: +968 2479 6639www.renaissanceoman.com
RENAISSANCEThe Renaissance Group is anOmani multinational listed on theMuscat Securities Market(MSM30) as “Renaissance Services SAOG”. The group contains twobusinesses, each with anindependent vision. Topaz operates a modern anddiverse fleet of 100 off-shoresupport vessels for the oil andgas sector, primarily located inthe Caspian and MENA markets. The Topaz vision is to be theglobal local quality champion andtop five OSV player, withprofitability in the top quartile. Renaissance is an Omani company offering strategic facilities management solutions for businesses in a wide range of sectors and geographies. We provide contract services, IFM and run the Renaissance Village brand, which is our uniquely designed workforce accommodation solution. Clients include government, universities and hospitals, ports, industry, onshore and offshore hydrocarbon development and the military.
The Renaissance vision is todeliver world-class services to aworldwide market.
Board of Directors 6
Financial Highlights 8
Chairman’s Report 10
Chief Executive’s Report 18
Auditors’ Report on Corporate Governance 25
Report on Corporate Governance 26
Auditors’ Report on Financial Statements 34
Financial Statements 35
BOARD OF DIRECTORS
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Colin RutherfordDirector
Saleh bin Nasser Al HabsiDirector
Sunder GeorgeDirector
Samir J FancyChairman
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HH Sayyid Tarik bin Shabib bin TaimurDirector
Yeshwant C DesaiDirector
Ali bin Hassan SulaimanDeputy Chairman
USD Million
Summary Financial Information
2015
Revenue EBITDA
# Before one-offs
Profit fromOperations
ProfitBefore Tax
Profit After Tax(Before Minority)
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0
USD Million USD Million
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0
2014
Significant Ratios
2.00
1.60
1.20
0.80
0.40
0
Gearing Total Liabilities/Net Worth
Ratio
1.58
1.29
1.48
1.21
129.4
57.7
30.6
156.6
79.4
52.5
613.2
213.0
634.8
232.7
2014 2015
GEARING* 1.21 1.29
TOTAL LIABILITIES/NET WORTH* 1.48 1.58
RETURN ON CAPITAL EMPLOYED (%) 8.38 0.83
2014 2015 2014 2015
244.4 236.0 REVENUE # 634.8 613.2
89.6 82.0 EBITDA # 232.7 213.0
60.3 49.8 PROFIT FROM OPERATIONS # 156.6 129.4
30.6 22.2 PROFIT BEFORE TAX # 79.4 57.7
20.2 11.8 PROFIT AFTER TAX (BEFORE MINORITY) # 52.5 30.6
3.9 (35.7) ONE-OFF CHARGES 10.1 (92.7)
24.1 (23.9) PROFIT AFTER TAX (BEFORE MINORITY) 62.6 (62.1)
591.5 571.2 NET FIXED ASSETS 1,536.4 1,483.5
248.5 257.1 TOTAL EQUITY (INCLUDING PERPETUAL NOTES) 645.6 667.9
- 46.8 PERPETUAL NOTES - 121.6
63.1 21.6 EQUITY SETTLED MANDATORY CONVERTIBLE BONDS (MCBs) 163.8 56.1
371.6 352.8 TERM LOANS 965.1 916.2
0.065 (0.136) BASIC EARNINGS PER SHARE 0.168 (0.353)
0.010 - DIVIDEND PER SHARE 0.026 -
OMR Million
Note: * MCBs are considered as part of Equity
FINANCIAL HIGHLIGHTS
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USD Million
Summary Financial Information
2015
Revenue EBITDA
# Before one-offs
Profit fromOperations
ProfitBefore Tax
Profit After Tax(Before Minority)
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0
USD Million USD Million
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0
2014
Significant Ratios
2.00
1.60
1.20
0.80
0.40
0
Gearing Total Liabilities/Net Worth
Ratio
1.58
1.29
1.48
1.21
129.4
57.7
30.6
156.6
79.4
52.5
613.2
213.0
634.8
232.7
2014 2015
GEARING* 1.21 1.29
TOTAL LIABILITIES/NET WORTH* 1.48 1.58
RETURN ON CAPITAL EMPLOYED (%) 8.38 0.83
2014 2015 2014 2015
244.4 236.0 REVENUE # 634.8 613.2
89.6 82.0 EBITDA # 232.7 213.0
60.3 49.8 PROFIT FROM OPERATIONS # 156.6 129.4
30.6 22.2 PROFIT BEFORE TAX # 79.4 57.7
20.2 11.8 PROFIT AFTER TAX (BEFORE MINORITY) # 52.5 30.6
3.9 (35.7) ONE-OFF CHARGES 10.1 (92.7)
24.1 (23.9) PROFIT AFTER TAX (BEFORE MINORITY) 62.6 (62.1)
591.5 571.2 NET FIXED ASSETS 1,536.4 1,483.5
248.5 257.1 TOTAL EQUITY (INCLUDING PERPETUAL NOTES) 645.6 667.9
- 46.8 PERPETUAL NOTES - 121.6
63.1 21.6 EQUITY SETTLED MANDATORY CONVERTIBLE BONDS (MCBs) 163.8 56.1
371.6 352.8 TERM LOANS 965.1 916.2
0.065 (0.136) BASIC EARNINGS PER SHARE 0.168 (0.353)
0.010 - DIVIDEND PER SHARE 0.026 -
OMR Million
Note: * MCBs are considered as part of Equity
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CHAIRMAN’S REPORT
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OverviewOn behalf of the Board of Directors, I present the audited accounts for the Renaissance Group, Renaissance Services SAOG, for the financial period ending 31 December 2015
Financial performanceOur business is exposed to oil and gas and there has never been a time in our group’s history where the end of year numbers do so little justice to our stability and progress.
It is naturally disappointing to report a net loss. However, EBITDA and operational performance both remain robust; the net loss arises purely from a non-operational and exceptional write-down that has no effect on cash-flows.
Understanding the economic context really matters because we remain a secure business with operational performance that is well ahead of our industry peers in the global marketplace.
Our fortress position in the Caspian continues to develop and we are successful in securing new business in Oman. We have the liquidity to meet our obligations and across the group we are growing our secured revenue. Topaz has increased its contract backlog from 750 million USD to 1.4 billion USD, including significant
contract extensions with major oil clients. And the Renaissance services business is showing a 200 million USD backlog in cyclical contracts as well as 80 million USD annual turnover from long-term contracts in its Renaissance Villages. This is without Renaissance Village Duqm, which will open in H2 2016.
We have the fiscal strength to invest in growth even in this market. We are ideally – perhaps almost uniquely – placed to take advantage of the opportunities this crisis brings.
Million OMR Million USD2015 2014 2015 2014
Continuing Operations (before one-off charges)Revenue 236.1 244.4 613.2 634.8EBITDA 82.0 89.6 213.0 232.7Operating Profit 49.8 60.3 129.4 156.6Net Profit after tax from continuing operations (before one-off charges) 11.8 20.2 30.6 52.5One-Off Charges (35.7) 3.9 (92.7) 10.1Net Profit/(Loss) after tax from continuing operations (23.9) 24.1 (62.1) 62.6Discontinued operationsProfit / (Loss) from discontinued operations (6.1) 1.3 (15.8) 3.4Net Profit/(Loss) for the year (30.0) 25.4 (77.9) 66.0
Our cleaning operations at Salalah Port
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Profit/(Loss) from discontinued operations is as follows:
Million OMR Million USD
2015 2014 2015 2014
Media and Communications – Divested in Q1 2014 - 1.8 - 4.7
Marine Engineering Division (3.2) (0.6) (8.3) (1.6)
RS Angola (2.9) 0.1 (7.5) 0.3
Total (6.1) 1.3 (15.8) 3.4
The past two years have seen the oil and gas industry in turmoil, with asset distress and business foreclosures a real threat to other operators in our markets, particularly Offshore Support Vessels (OSV).
But, against this background, our group delivered an EBITDA of 89.6 million OMR in 2014 and this year we delivered 82 million OMR. Our OSV business is holding, our Integrated Facilities Management (IFM) business improved and our group remains stable overall.
Discontinued businessThere are two key factors behind the discontinued operations figure.
First, we have ceased our facilities management activities in Angola, as a direct result of the effect the oil price is having on the local market’s ability to meet our terms. This impact is fully accounted for.
Second, in line with our strategy to consolidate the group and focus on OSV, IFM and the Renaissance
Villages, we have divested our UAE Marine Engineering business. The ship repair operations of this business had returned to profitability, but the boat building business was still challenging. Last year, Renaissance entered into agreement to divest these businesses, which resulted in a loss of 5.5 million USD for the company. There will be no further impact.
TopazOur global Offshore Support Vessel (OSV) company
Million OMR Million USD
2015 2014 2015 2014
Revenue 138.5 149.4 359.7 388.1
Operating profit 40.4 51.7 104.9 134.3
The following one-off charges relate to Topaz for 2015
Million OMR Million USD
2015 2014 2015 2014
Provision for impairment of vessels
(27.3) (1.5) (70.9) (3.9)
Increase in derivative liability
(4.7) - (12.2) -
Unamortised arrangement fees write-off
(3.2) - (8.3) -
Net gain/(loss) on sale of vessels
(0.5) 2.9 (1.3) 7.5
Write back of tax provision - 2.5 - 6.5
Total (35.7) 3.9 (92.7) 10.1
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The Topaz Installer
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Notes on one-offs
Provision for impairment of vessels:The decrease in oil prices to the lowest in a decade and its impact on the valuation of assets and businesses in the oil & gas industry has been substantial. Topaz’s long-term contract visibility is able to support the value in use for the major portion of its fleet, however where the vessels are on short-term contracts and were underutilised, we have taken prudent decisions on impairment in line with IFRS requirements to recognise the fall in market value of those assets.Increase in derivative liability:In 2014, Topaz had offered 9.8% of its equity to Standard Chartered Private Equity (SCPE) at a price of 75 million USD (28.8 million OMR). SCPE has a put option if a Topaz IPO doesn’t take place after three years from the date of its investment. The current adverse sentiments in the oil & gas industry has also impacted the valuation of the businesses within the industry and that led to a further provisioning for the derivative liability for the SCPE put option as required under IFRS.Unamortised arrangement fees write-off:During the year 2015, Topaz has successfully refinanced bank debt of 313 million USD with lower interest rates and extended tenure. The unamortised costs relating to the loan that was refinanced has been written off.Net Gain/(Loss) on sale of vessels:One of the non-performing vessels was disposed of at a net loss of 1.2 million USD (0.45 million OMR).
2015 opened with the OSV market responding to an oil price in steep decline. Our fortress position in the Caspian has remained stable and the fleet there did not face the abject inactivity experienced by much of the OSV market.
The company has just signed a new long-term agreement with BP to extend current contracts for 14 vessels until 2023. This is a significant achievement for the business because it delivers long-term security and stability.
All OSV operators in spot markets in West Africa took tough hits to their business volumes and this has, of course, dampened our overall performance.
The Middle East has again delivered a satisfactory result, with high levels of utilisation. We have grown our backlog of contracts and deployed a new Anchor Handling Vessel in our key market of Saudi Arabia.
Rates and utilisationTopaz has developed strong relationships with our clients over our long contract tenures and the quality of these relationships have been important to our stability this past year. When our clients asked us to help them manage their costs, we responded with the rigorous emphasis on efficiency, safety and quality that the market knows to expect from Topaz. We have achieved considerable cost reductions to help our clients.
The Topaz Arrow working the deep water section of the Gunlashi oil field
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However, as we respond to this pressure on rates, our businesses must not compromise on safety. Our management team have briefed our Board comprehensively on the steps they are taking to get this balance right and we are confident that we are achieving the optimum operational equilibrium to take us – Topaz and our clients – through 2016 and beyond.
Core utilisation in our main markets has been high: the Caspian markets have been 96%, MENA 87% and sub-sea 83%. However, West Africa has seen utilisation fall to below 50% and we have moved assets out of this region and laid up two ships into cold store. We believe these are the right measures to take in reaction to the lack of demand, although we retain a small but relevant presence in that market to service high-end, international clients.
Investment in our fleetThe Topaz fleet leads the market in terms of its young age profile and efficiency and this must be the investment focus for growth. Across the world, the OSV market is seeing hundreds of vessels laid up and taken out of action, so we will not allow the right opportunities to pass us by.
This year, we invested 115 million USD in acquiring two sub-sea vessels from Vard Brattvaag in Norway, which are scheduled for delivery in 2017. These DP2 class vessels will have a 120-ton active heave compensated offshore crane with the capability to reach working depths of 3,000 meters. We also bolstered our Emergency Response fleet with a fourth vessel, the Topaz Responder.
In June, we began the deployment of the ABS Nautical Systems fleet management software on 58 of our OSVs. The system plans maintenance work more efficiently, so minimising downtime and reducing the costs associated with dry-docking. The system also offers extra health and safety features – the wellbeing of staff remains the number one priority across all our businesses.
RenaissanceOur Renaissance Villages (Accommodation Solutions) and Facilities Management Brand
Million OMR Million USD
2015 2014 2015 2014
Revenue 97.6 94.9 253.5 246.5
Operating profit 9.4 8.6 24.4 22.3
Our Oman business performance has improved on last year and continues to offer real growth: our expanding facilities management capability is winning contracts and our construction of the Renaissance Village Duqm will considerably expand the business volumes in our accommodation services.
As expected, we are seeing pressure on the business where we are most exposed to oil prices and this has been felt in the performance of the Renaissance Villages, where our occupancy last year was around 83% and this year this has reduced to 78%.
International performance has slowed this year. Norway performance has held up despite the reduction in the
Construction of the Mosque at our flagship Duqm project
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number of rigs operating in the North Sea, but our UAE operations made a loss. However, we remain optimistic that the UAE is the right market for expanding our IFM offer and we will continue with a presence there.
Duqm2015 began with the completion of our equity-raising for the Duqm project and over the course of this year, the Duqm project construction has progressed on time and to budget, with the facility itself moving from design into reality. In October, the first Shareholder meetings for the new Duqm companies were held and the Renaissance Board of Directors visited the Duqm site to see the accommodation being constructed first-hand.
The opportunities for Renaissance here are exciting and we have been in close discussion with potential clients to begin securing occupancy for the facility when it opens in July. We are already considering options for a second phase of construction, to provide for extra executive accommodation and to add to the facilities already planned. We have also recently signed an agreement to take on extra land, to expand the volume of the Renaissance Village accommodation and to provide for a leisure club which we will build and operate.
Facilities management
The Integrated Facilities Management market is huge – worth over 1 trillion USD worldwide and growing as businesses come to recognise IFM as the best way to get the most value out of outsourcing their services. Renaissance is leveraging its considerable experience
in building and operating fully serviced accommodation facilities (the Renaissance Villages) as well as its legacy of contract services, to provide a considered Integrated Facilities Management solution for any business here in Oman.
Beyond our existing cyclical contracts, which have been successful performers this year, our IFM business scored a major success in securing an important 48 million USD facilities management contract in the Oman oil and gas fields.
Joint ventureIn May, Renaissance announced a Memorandum of Understanding for the formation of a Joint Venture with an international technical partner, Ferrovial. The new JV will provide expert waste management services, including waste collection, operation of transfer
Stock movement at our central stores
Port of Salalah technical cleaning
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stations, engineered landfills and treatment plants. The aim of this JV is to participate in the current tendering rounds for the regional waste management contracts currently being issued by Oman’s waste management authority, be’ah.
Convertible Bond buyback schemeIn June, our Shareholders and our Board were asked to approve the issuance of Perpetual Notes by Renaissance to fund a scheme to buyback our Mandatory Convertible Bonds (MCB). This was beneficial for our Shareholders and MCB holders and the purpose of the scheme was to create an additional option for MCB holders to opt for cash in place of shares in the company when the Bonds themselves mature.
Renaissance went on to successfully complete the repurchase of two tranches of MCBs and we are considering repurchasing the remaining MCBs before they convert in 2017.
OutlookToday, we are a stable company in very turbulent markets and 2016 will continue to be challenging. We are meeting the challenges with balance sheet strength, a robust backlog of work, continuing investment in
relevant assets and stable, long-term contracts with
clients. We have taken the right steps this year to
manage our operational costs, we have the liquidity to
meet our obligations and we are preserving the health
and spending power of our finances.
Overall, we are pleased to have delivered an above-
market result in such trying times and I believe this is
proof of the resilience of our strategy.
TributeOn behalf of the Board of Directors, I would like to
express our sincere gratitude to His Majesty Sultan
Qaboos bin Said for his leadership and support to create
a business environment that enables our company to
thrive and prosper in our home market, and compete
with the very best in markets abroad.
Samir J FancyChairman
Renaissance Village Duqm is due to open in mid-2016 providing housing for workforces up to 16,000 people
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On 5th December 2015, during heavy weather and high seas, a gas riser ruptured on one of the manned platforms in the Azerbaijani Guneshli Field, resulting in a major fire and requiring complete abandonment. Topaz vessels raced to the scene.
Topaz Dignity was first to arrive at the scene, with Caspian Protector and Caspian Endeavour arriving shortly thereafter, together with state-owned AHTS M/V Lankaran. Protector immediately joined in firefighting with Dignity, whilst Endeavour and Lankaran provided assistance to survivors in the water and in survival craft. At this time, weather conditions were producing 10-11 meter waves.Soon after the fire broke out, the platform crew had attempted to launch one of their lifeboats but the high winds had blown it into the legs of the platform, crushing it and ejecting the survivors into the sea. The crew of Protector’s FRDC-7 demonstrated exemplary skill by launching in heavy seas, maneuvering close to the platform and safely recovering the survivors.
In recognition of the swift, effective and selfless actions shown, the officers and FRC crew of Caspian Protector were honoured at a ceremony held in Baku on 24th December, and were each presented with prizes and plaques recognising their outstanding efforts during the firefighting and rescue operations. Each of these colleagues has demonstrated their commitment to protecting the safety of our clients’ personnel, as well as their own, and have provided true examples of operating safely, The Topaz Way!
At the time of writing, the platform remains on fire, over one month after it initially broke out. Throughout these four weeks - over the holiday and New Year periods - our crews and vessels have rotated through support duties to ensure continuous, tireless support on-scene, demonstrating even more commitment and craftsmanship to be proud of!
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A W A R D S A N D P R I Z E S
P l e a s e s e n d a l l a r t i c l e s & f e e d b a c k t o ; q h s e . n e w s @ t o p a z - m a r i n e . c o m
FIRE-FIGHTING OPERATIONS IN AZERBAIJAN
Protector’s FRDC-7 in action on the morning after the fire broke out
The Topaz monthly newsletter highlights our part in a rescue operation in the Caspian
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CHIEF EXECUTIVE’S REPORT
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OverviewWe are in as strong a position as we could be to sustain and grow our businesses, as the markets we serve go through a crisis of supply and demand patterns created by unpredictable geo-political factors.
Context matters to all businesses and the oil price that affects so much of our work continues to defy expert attempts to understand what the future will hold. One expert might predict $20 per barrel by the end of this year, while another sees $75 per barrel as possible.
Today’s business response is therefore to realise that we service markets in a new normality of much lower oil prices than experienced in the recent past. We are finding innovative ways to reduce costs for our clients and ourselves, while maintaining the same high qualities of performance, safety, efficiency and sustainability that people expect from the Renaissance group.
Our bottom line has been under pressure in 2015 and we expect 2016 to be tough too, but our EBITDA has held up well, indicating strong operational performance and healthy cash-flows despite the market downturn. Our overall loss for the year is down to an unprecedented level of one-off, non-cash charges, although market comparisons for both our businesses show they are holding up extremely well. This is a source of encouragement for us and our investors.
TopazOur long-term contracts in stable OSV geographies give us confidence in the security of our business.
A lot of our competitors in the OSV space are finding the market pressures too tough to wait out, but we are in a position to do so: we can afford to take the strategic view. Our plan is therefore to continue consolidating Topaz’s key competitive edge of a youthful and efficient fleet, serving blue-chip clients, in long-term stable contracts, with an excellent reputation for safety, efficiency and performance.
60% of our fleet is seeing near 100% utilisation due to strong performance in the Caspian, MENA and sub-sea markets. Our West Africa performance has meant that we took the decision to relocate some assets and we will maintain a smaller fleet in this region until the market recovers.
Our refinancing last year yielded a significant reduction in finance costs and our debt covenants are comfortable with good headroom. For a healthy company like Topaz, the tough OSV market conditions may offer up some bargain opportunities and we have the capacity on our balance sheet to pursue the right kinds of further investment, if and when they arise.
The DMS Courageous: a 70 meter, 5,000 BHP DPI supply vessel
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Chief Executive’s Report
Topaz responds!
In May 2015, Topaz added a new newly-built Emergency Response and Recovery Vessel to the fleet, the Topaz Responder. This is a 300-berth capacity ship, with fully-equipped medical treatment and recovery facilities, firefighting capability and two 15-man fast rapid deployment craft that can be launched within 60 seconds.
The Responder, was primarily designed to provide safety support for offshore oil and gas producers, but in December it began operating as a search and rescue vessel in the Aegean Sea. Contracted by not-for-profit organisation Migrant Offshore Aid Station (MOAS), the Responder is playing a crucial role scouring the often treacherous waters of the relatively short (10 – 14 nautical miles) crossing, acting as MOAS’ ‘mothership’ in its Aegean Sea Mission.
As a search and rescue boat, the Responder patrols the sea ready to respond to urgent calls from the Greek Coast guard patrols. Once on the scene, the Responder can accommodate up to 300 passengers and address any urgent medical needs in the on-board hospital on the way to bringing its passengers back safely to shore.
As reported in recent years, Topaz continues to operate as an independent entity, with a distinct management and governance structure. Topaz produces its own Annual Report, which is available through their website: www.topazworld.com.
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RenaissanceThis year, we have developed the core business of Renaissance in three key ways: construction of a significant major asset at Duqm to expand our accommodation business volumes, developing new business capacities within Renaissance, and developing our Integrated Facilities Management position.
Despite reductions in occupancy in the Renaissance Villages and other oilfield contracts, our Oman business has grown because we won sizeable contracts with major oilfield clients and others.
Our international business has come under pressure. Our contract services in Norway have performed well under the circumstances: the total number of rigs operating in the North Sea has fallen from 50 to 34 and the number of rigs we service has gone from 16 to 12. Performance here was further tempered by foreign
exchange rate pressure but the business remains healthy and profitable. We have discontinued our operations in Angola. Our expansion programme into the UAE and other GCC markets has not yet secured its breakthrough and the losses here are effectively the costs of our continuing business development initiative.
Renaissance has a strong background in building, owning and operating permanently placed accommodation facilities, which provide exceptional standards of living for remote workforces at costs that compete with much lower standard temporary worker accommodation. One key to this success is our highly developed and best-quality suite of facilities services: from catering to laundry to maintenance to pest control and more. The point is, we have developed an excellent reputation for mobilising contracts that can serve any of the non-core activities of a business operating at scale.
The Topaz Responder ©2015 Robert Young Pelton/MOAS.eu - all rights reserved
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The advantage to our clients is that we can now create strategic outsourcing solutions that mean we can guarantee to improve the standards of service they are receiving and save them money. Unlike many IFM providers, who act as a focal point for subcontracting, we can deliver the services ourselves. This makes for better coordination and means we can avoid the ‘margins-on-margins’ you get with multiple sub-contracts.
Taking new service areas to scaleOur IFM capability is a key area to focus on for growth and our success in securing the BP Khazzan facilities service contract shows that we are highly competitive in this market.
We have also sought to expand our capability, looking at the opportunities presented to bid for waste management contracts in Oman’s regions. This is an excellent opportunity to leverage our existing experience of waste collection and achieve a new scale of operation in this business area. The key to success here was finding the right international partner to bring their expertise on board of delivering civic waste management services at scale. Following an extensive search, we have entered into an agreement with Ferrovial of Spain, a leading international Waste Management expert, and together we will be bidding for new contracts.
Discontinued businessThis year we divested our UAE Marine Engineering business, which was the final step in our strategic commitment to focus on our two core businesses. We have also stopped our contract services operations in Angola, where the oil price crisis has created difficulties in collection of receivables. The result of these two actions is a one-off loss.
OutlookThe immediate challenge for 2016 will be to secure sufficient occupancy when we open our Duqm facility in July. It is also imperative that we achieve an early breakthrough in our developing UAE business.
The key risk continues to be the low oil price, which could bring further reductions in occupancy at our Renaissance Villages in the oilfields. However, government commitment to the development of Duqm as a key diversification for Oman’s economy gives us confidence that we will secure the requisite occupancy in the medium to long term. At macro level, we operate in regions where government revenue and break-even points are exposed to those oil price fluctuations, so we must be prepared to respond to changes in economic policies. These situations present many opportunities to a company such as ours, as we offer a key component of the solution: improving or rationalising standards and saving costs.
For all the challenges we expect from 2016, our future is positive: the advent of our state-of-the-art facility in Renaissance Village Duqm and our continuing evolution in facilities management provides us with a platform to expand and diversify our services, sectors and geographies.
Integrated Facilities Management has become the global default solution for businesses who want to do more with less, saving companies and governments around the world over 1 trillion USD so far. Simplicity is key in facilities management: in Renaissance, our clients find a strategic partnership that creates a single outsourcing solution for all their facilities and services, giving them more time to focus on their core business.
Renaissance offers to improve the standards and reduce the costs of the facilities and services our clients use. Our operations are the best in class and our fully integrated solutions mean our clients can avoid the costs and complications of engaging multi-layered sub-contracts.
That is why our clients continue to trust the Renaissance guarantee: to do more with less.
Stephen R Thomas
We are expanding our capabilities in civic waste management
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SustainabilityIn May, we welcomed His Excellency Salim bin Nasser bin Said Al Aufi, Undersecretary, Ministry of Oil & Gas, to inaugurate our pilot Solar Project at our Fahud accommodation facility. This is a pioneering energy efficiency project, using a solar cell structure to provide shade to our parking area. The solar generation provides much of the power required by the facility and brings a considerable environmental benefit – the equivalent of not driving 4.5 million kilometres.
Renaissance has also been exploring the efficiencies of greener solutions to waste management, introducing a system for composting
food waste instead of sending it to landfill. Our company attended the Global Green Awards in Berlin, Germany to accept an award for this initiative, which will lower our overall carbon footprint by 45%.
This year, we have seen how the economic challenges have exacted a tension on sustainability commitments. We have sought to understand this from our stakeholders view by inviting them to give us feedback on their priorities and their views on the Renaissance priorities too.
Our Sustainability Report contains an account of this feedback exercise, as well as detailed information on our own sustainability activity this year.
Our catering operations at the Royal Hospital
The Fahud solar panel pilot project
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Dividend recordIn 2015 our Board is proposing no dividend, as it is important to maintain the cash position of the company through this period of uncertainty in oil markets.
The Renaissance Dividend Policy is based on the proposition that cash is returned to Shareholders in the form of higher dividend pay-outs when there are no credible value creating opportunities to invest in the business.
2011 2012 2013 2014 2015
% Rial’000 % Rial’000 % Rial’000 % Rial’000 % Rial’000
Cash dividend - - - - 10 2,821 10 2,821 - -
Stock dividend - - - - - - - - - -
Total dividend - - - - 10 2,821 10 2,821 - -
In December, fifteen aspiring Omani students and their families attended an international graduation ceremony in Muscat Hall at the Oman Chamber of Commerce.
Renaissance sponsored these students to study abroad, so they could bring their newly certified skills and training to the developing hospitality economy, here in Oman.
Each student completed a two-year Advanced Diploma in Hospitality with the Colombo Academy of Hospitality Management (CAHM) at the William Angliss Institute, Sri Lanka Institute of Information Technology.
The particular commitment and dedication of the Omani students shone through in their results, with two receiving special awards for their performance at CAHM:
Mohammed Salim Al Hajri was recognised as the Best Student in Hospitality Operations/Finance Management. And, Ahad Abdullah Al Jabri was recognised as Most Outstanding Graduate, due to her outstanding academic record (she scored a perfect ‘A’ in all 61 exams), as well as her leadership and management skills.
The Renaissance Class of 2015
Our graduation day
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Renaissance Customers include the following
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Corporate governance is an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is not only about structure and clarity in management and areas of responsibility, but it also encourages good transparency so that shareholders can understand and monitor the development of the company.
The Board and the Management of Renaissance Services SAOG (the “Company”) are committed to adopt the best practices of corporate governance that promote ethical standards and individual integrity. The Company will continue to focus on its resources, strengths and strategies for creating, safeguarding and enhancing shareholders’ value while at the same time protecting the interests of its stakeholders.
This report illustrates how the Principles of Corporate Governance and the provisions of the Code of Corporate Governance, set out in the Capital Market Authority’s (CMA) Code of Corporate Governance for companies listed on the Muscat Securities Market (MSM), and the Provisions for Disclosure stipulated in the Executive Regulations of the Capital Market Law, are adhered to by the Company.
In July 2015, the Capital Market Authority promulgated a new Code of Corporate Governance which will come into force and effect as of July 2016. The new Code features changes with regard to the independence of directors, related parties transactions, Board performance, development of policies and other corporate governance requirements.
In demonstrating our commitment to good practice in corporate governance, both in letter and spirit, Renaissance Services has started implementing the requirements of the new Code of Corporate Governance, and will be fully compliant with the Code within the prescribed timeframe.
The Company believes that the Code prescribes a minimum framework for governance of a business. The Company’s philosophy is to develop this minimum framework and institutionalise its principles as an ingredient of its corporate culture. This will lay the foundation for further development of a model of governance with superior governance practices, which are vital for growing a successful business. The Company recognises that transparency, disclosure, financial controls and accountability are the pillars of any good system of corporate governance.
REPORT ON CORPORATE GOVERNANCEIn accordance with the provision for disclosure stipulated in the Executive Regulation of the Capital Market Law, PricewaterhouseCoopers (PwC) has issued a separate Factual Findings Report on the Company’s Corporate Governance Report for the year ended 31 December 2015.
1. Company’s PhilosophyThe Company upholds a governance philosophy that aims at enhancing long term shareholder value while at the same time adheres to the law and observes the ethical standards of the business environment within which it operates.
According to the Company’s governance paradigm the management assumes accountability to the Board, and the Board assumes accountability to the Shareholders. The Board’s role is to be an active participant and a decision-maker in fostering the overall success of the Company by enhancing Shareholder value, selecting and evaluating the top management team, approving and overseeing the corporate strategy and management’s business plan, and acting as a resource for management in matters of planning and policy. The Board monitors corporate performance against the strategic and business plans, and evaluates on a regular basis whether those plans pay off in terms of operating results.
In order that it can effectively discharge its governance responsibilities, the Board ensures that the majority of Board members are non-executive.
Furthermore, the Board accesses independent legal and expert advice of professionals who also assist the management. The Board also encourages active participation and decision-making on the part of shareholders in General Meeting proceedings.
The Board maintains a positive and ethical work environment that is conducive to attracting, retaining and motivating a diverse group of top quality employees at all levels. The Board, through the Compensation Committee, reviews and decides the parameters for assessment and compensation of key personnel.
The Board ensures ethical behaviour and compliance with all laws and regulations and has developed a Code of Ethics that promotes values among its employees. The Company’s Manuals of Procedures (internal regulations) cover a wide range of functions including، but not limited to، Corporate Information & Disclosure Policy, Rules for Related Party Transactions, Procurement Manual and Financial Authority, IT Policies and HR Manuals.
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2. Board of Directors During 2015, the Board consisted of seven directors. Five directors on the Board are Shareholders / representatives of Shareholders and two Directors are non-shareholder Directors.
According to CMA’s Code of Corporate Governance, issued by Circular No. 11/2002, as amended by Circular No. 1/2003, all the Directors of the Company are independent and non-executive.
2.1 The Composition and Category of Directors, Attendance of Board Meetings
Sr. No. Name of Director Position Category
No. of Board meetings held
during the year
No. of Board meetings attended
Whether attended last AGM
1 Samir J Fancy ChairmanIndependent Non-ExecutiveShareholder
5 5 Yes
2 Ali bin Hassan Sulaiman
Deputy Chairman
Independent Non-ExecutiveShareholder
5 4 No
3 Sayyid Tarik bin Shabib bin Taimur Director
Independent Non-ExecutiveShareholder
5 5 No
4 Sunder George Director Independent Non-ExecutiveNon-Shareholder
5 3 Yes
5 Yeshwant C Desai Director Independent Non-ExecutiveNon-Shareholder
5 5 Yes
6 Colin Rutherford Director Independent Non-ExecutiveShareholder
5 5 No
7 Saleh bin Nasser Al Habsi Director Independent Non-Executive,
Representative of a shareholder 5 4 Yes
The above board members were elected on the 26th of March 2014 for a tenure of three years which will expire in 2017.
2.2 Statement of the Names & Profiles of Directors and Top Management
The Renaissance Board brings together core competencies of directors with vision, strategic insight, and industry knowledge, who provide direction to the executive management.
Samir J Fancy - ChairmanMr. Samir J Fancy is the Chairman of the Board of Directors since 1996. He has held senior positions and undertaken leading roles such as:
• Founder and Vice Chairman of Tawoos Group since 1983, and Chairman of Tawoos Group since 2005.
• Chairman of Topaz Energy & Marine SAOG since foundation and up to its acquisition by the Company in May 2005.
• Chairman of Amani Financial Services SAOC since 1997.
• Chairman of Topaz Energy & Marine Ltd.• Director of Renaissance Duqm Holding SAOC.• Director of Renaissance Duqm Accommodation
Company SAOC.• Director of Renaissance International Ltd.• Director of Samena Capital.
He has acted as a Director of National Bank of Oman, Muscat Finance Company and Vision Insurance in the past.
Mr. Samir Fancy is also recognized for his philanthropy and charitable works in Oman.
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Ali bin Hassan Sulaiman - Deputy Chairman Mr. Ali bin Hassan Sulaiman is a member of the Board of Directors of the Company since 1996 and is Deputy Chairman since March 2010. He is a founder of Ali and Abdul Karim Group and director in the following companies:
• Topaz Energy & Marine SAOG for several years up to its acquisition by the Company in May 2005.
• Majan Glass Co SAOG.• Topaz Energy & Marine Ltd. • Renaissance Duqm Holding SAOC.• Renaissance Duqm Accommodation Company SAOC.
HH Sayyid Tarik bin Shabib bin Taimur - DirectorHH Sayyid Tarik bin Shabib bin Taimur is a member of the Board of Directors of the Company since 1996. Other positions held by him include the following:
• Founder and Director of Tawoos Group.• Chairman of Marina Bander Al Rowdha SAOG for
six years until its takeover by the Government of the Sultanate of Oman in April 2003.
• Chairman of Renaissance Duqm Holding SAOC.• Chairman of Renaissance Duqm Accommodation
Company SAOC.• Chairman of National Hospitality Institute SAOG
since 1995.• Director in Amani Financial Services SAOC.
Sunder George – DirectorMr. Sunder George is a member of the Board of Directors of the Company since 2001. He has extensive experience in Banking & Finance and has held several senior executive positions in Oman & abroad until he retired from Bank Muscat on 31 December 2012 as its Deputy Chief Executive. He was Chief Adviser to the bank for a year until the end of 2013. Mr. Sunder George sits on the Board of Directors of the following companies:
• Topaz Energy & Marine Ltd.• Halcyon Capital SAOC.
Yeshwant C Desai - DirectorMr. Yeshwant C Desai is a member of the Board of Directors of the Company since 2001 and is the Chairman of the Audit Committee and also Chairman of the Compensation Committee. He has had a successful career and extensive experience in Banking & Finance and has held senior executive positions in Oman & abroad, which include:
• Ex-CEO of Bank Muscat SAOG.• Director of Topaz Energy & Marine SAOG for several
years up to its acquisition by the Company in May 2005.
• Ex-Director of Topaz Energy & Marine Ltd.
Colin Rutherford – Director
Mr. Colin Rutherford has been a member of the Board since 2005 and was formerly Chairman of BUE Marine Holdings Limited prior to its acquisition by Renaissance Group SAOG. He has diverse experience of public and private companies having served on many International Boards. He is a Chartered Accountant and former Corporate Financier, and currently enjoys the following positions within his portfolio:
• Executive Chairman and CEO of Teachers Media PLC.
• Non-Executive Director and Audit Committee Chairman of Mitchells & Butlers PLC.
• Non-Executive Chairman of Brookgate Limited.• Mr. Rutherford holds further positions in retail,
specialist building products and real estate, amongst others.
Saleh bin Nasser Al Habsi - Director
Mr. Saleh Al Habsi is the General Manager of Pension Fund of the Ministry of Defence. He holds an MBA and M.Sc in Finance from the University of Maryland (USA) and BSBA and BA from Boston University (USA). He also attended a senior executive programme at London Business School and High Performance Boards Program at IMD, Switzerland. Mr. Al Habsi is also member of the Board of GrowthGate Capital, a regional private equity company and also a former member of the Board of Al Suwadi Power Company SAOG.
Previously, he served as Chairman of Muscat Fund, Deputy Chairman of Gulf Custody Company Oman SAOC. He was a Board member of Bank Dhofar SAOG, Board member of National Bank of Oman and Al Omaniya Financial Services SAOG.
Stephen R Thomas OBE – Chief Executive Officer
Mr. Stephen R Thomas joined Tawoos Group as General Manager of Tawoos Industrial Services Co. LLC in 1988. He took over as Chief Executive Officer of Renaissance Services SAOG in 1998. In the 2010 United Kingdom New Year’s Honours List, Mr. Thomas was appointed an Officer of the Most Excellent Order of the British Empire (OBE) for services to business abroad and services to the community in Oman. He also held senior positions in the Group including the following positions:
• Director of Renaissance Hospitality Services SAOG since foundation and until its merger with Renaissance Services SAOG in April 2002.
• Founder and former Chairman of Oman Society for Petroleum Services (“OPAL”).
• Director of Topaz Energy & Marine Ltd.
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2.3 Membership of Other Boards/ Board Committees (SAOG Companies in Oman)
Sr. No.
Name of Director
Directorship in other
SAOG companies
Membership in Board
Committees of other
companies
1 Samir J Fancy - -
2 Ali bin Hassan Sulaiman 1 -
3HH Sayyid Tarik bin Shabib bin Taimur
1 -
4 Sunder George - -
5 Yeshwant C Desai - -
6 Colin Rutherford - -
7 Saleh bin Nasser Al Habsi - -
2.4 Number & Dates of Meetings of the Board of Directors
The Board held five meetings during 2015 on the following dates:-
15 January 2015, 25 February 2015, 19 May 2015, 10 August 2015 and 15 November 2015.
3. Audit Committee & Other Sub-committees
Audit CommitteeThe Audit Committee is a sub-committee of the Board comprising of three Directors, all of whom are independent non-executive Directors.
3.1 Brief Description & Terms of Reference The functions of the Audit Committee are as follows:• Recommends to the Board the appointment
of the Statutory Auditors and determine their independence, fee and terms of engagement for approval by the Shareholders.
• Review the audit plan and results of the audit and whether Statutory Auditors have full access to all relevant documents.
• Oversee the Internal Audit function in general and with particular reference to reviewing the scope of internal audit plan for the year, reports of internal auditors pertaining to critical areas, efficacy of internal auditing and whether the internal auditors have full access to relevant documents.
• Oversee the adequacy of internal control systems and Internal Audit Reports.
• Review any non-compliance with disclosure requirements prescribed by CMA.
• Oversee the Company’s financial reporting process and the disclosure of its financial information to ensure accuracy, sufficiency and credibility of the financial statements.
• Ensure that proper system is in place for adoption of appropriate accounting policies and principles leading to fairness in financial statements.
• Review annual and quarterly financial statements and recommend to the Board.
• Serve as a channel of communication between Statutory & Internal Auditors and the Board.
• Review risk management policies.• Review proposed specific related party transactions
for making appropriate recommendations to the Board.
• Make recommendations to the Board for entering into small value transactions with related parties without securing prior approval of Audit Committee & the Board.
• Accord prior approval to the Statutory Auditors to provide non-audit services, in accordance with CMA Circular E/12/2009.
3.2 Composition of Audit Committee and Attendance of Meetings
In 2015 the Audit Committee of the Company was comprised of three non-executive Directors. During 2015, the committee held four meetings on 24 February 2015, 11 May 2015, 10 August 2015 and 08 November 2015 respectively. The following table shows the composition of the Audit Committee and the attendance of its meetings:-
Sr. No. Name Position
Meetings held
during the year
Meetings attended
during the year
1 Yeshwant C Desai Chairman 4 4
2 Ali bin Hassan Sulaiman Member 4 4
3 Sunder George Member 4 3
During its meetings the Audit Committee discussed and approved the annual internal audit plan. The Committee reviewed and recommended to the Board the audited and quarterly accounts and the related party transactions. The Committee had recommended the appointment of the Statutory Auditors for the year 2016. The Committee
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also looked into certain specific areas of the Company’s operations and reported on these to the Board.
3.3 The Compensation Committee
The Compensation Committee was formed as a Board Committee to lay down and update the parameters for assessment and compensation of key personnel, undertake their performance assessment and report to the Board on the compensation and personnel policies. The Committee, which consists of the following Directors, held two meetings on 31 March 2015 and 11 May 2015:
Sr. No. Name Position
Meetings held
during the year
Meetings attended
during the year
1 Yeshwant C Desai Chairman 2 2
2 Ali bin Hassan Sulaiman Member 2 1
3 Colin Rutherford Member 2 2
4. Process of Nomination of the Directors
In nominating and screening candidates to fill a casual vacancy, the Board seeks candidates with the skills and capacity to provide strategic insight and direction, encourage innovation, conceptualise key trends and evaluate strategic decisions. The Board focuses on professionalism, integrity, accountability, performance standards, leadership skills, professional business judgment, financial literacy and industry knowledge as core competencies of the candidates. While nominating competent candidates, the Board ensures that the Shareholders retain the power of electing any candidate, irrespective of his candidature being recommended by the Board or otherwise and that any Shareholder has the full right of nominating himself.
5. Remuneration MattersAs per the approval accorded by the AGM held on 31 March 2015, the Chairman is paid OMR 1,000/- for attending Board meetings, and other Directors are paid OMR 500/- as sitting fees per meeting. Sitting fees of OMR 750/- are paid to Committee Chairmen and sitting fees of OMR 650/- are paid to Committee Members. The remuneration, sitting fees and travelling expenses relating to the attending of the meetings paid to the Chairman and Directors for 2015 are as follows:
Sr. No. Name of Director Position
Sitting Fees Paid for Board & Sub-committee Meetings for
2015 (OMR)
Travel Expenses (OMR)
1 Samir J Fancy Chairman 5,000 5,849
2 Ali bin Hassan Sulaiman Deputy Chairman 5,250 -
3 HH Sayyid Tarik bin Shabib bin Taimur Director 2,500 -
4 Sunder George Director 3,450 -
5 Yeshwant C Desai Director 7,000 5,188
6 Colin Rutherford Director 3,800 17,230
7 Saleh bin Nasser Al Habsi Director 2,000 -
Total 29,000 28,267
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For the financial year 2015, it is proposed to pay remuneration of OMR 21,000/- for the Directors.
Total remuneration paid to the five senior executives of the Company (including its subsidiaries) during the year was OMR 1,405,518/-. This includes salary and benefits paid in cash, monetary value of all benefits calculated as per Company rules and a variable amount based on performance as recommended by the Compensation Committee of the Board.
The majority of the top 5 officers of the Company have been with the Company for a lengthy period of time. The employment contracts are usually entered into for an initial period of 2 years which are automatically renewed unless terminated in accordance with the terms mentioned therein. The notice period for termination of employment contracts for all the key personnel is a minimum of 2 months and the gratuity is computed and paid in accordance with the applicable Labour Laws.
The Company has a Senior Management Incentive Plan (SMIP). Under the Plan, the Company has created an overseas based trust structure under the name of Renaissance Services SMIP Limited, and uses trustees from an independent professional firm to oversee and administer the employees’ long-term benefit scheme independently from the Company. The scheme is a rolling programme that allows a part of the Company’s senior management bonus payments every year to be paid into the independent trust and the underlying structure. The proceeds are invested by the trustees in the shares of the Company through the MSM. The shares are directly released to the employees by the trustees proportionately over a period of 3 years. The structure and the operation mechanism ensure independency and transparency so that the employees are fully aware of the management and liquidity of their long-term employment benefits.
6. Details of non-Compliance by the Company
There were no penalties or strictures imposed on the Company by the MSM/CMA or any statutory authority for the last three years. There are no areas in which the Company is not compliant with the Code of Corporate Governance.
7. Means of Communication 7.1 The Company has been sending financial results
and material information to MSM Website via the MSM Electronic Transmission System. The
Company has also been publishing annual audited & quarterly unaudited financial results and material information in English and Arabic newspapers. The annual audited accounts and Chairman’s Report are despatched to all shareholders by mail, as required by law.
7.2 The financial results and information on the Company are posted at www.renaissanceoman.com as well as on the Muscat Securities Market website, www.msm.gov.om.
7.3 Meetings are held with analysts and members of the financial press in line with internal guidelines of disclosure.
7.4 The CEO’s Report, provided in the Annual Report, includes the Management Discussion and Analysis of the year’s performance.
8. Stock Market Data8.1 High/ Low share prices during each
month of 2015:
MonthHigh/Low share price movement
High (OMR) Low (OMR)
January 2015 0.512 0.454
February 2015 0.500 0.450
March 2015 0.456 0.360
April 2015 0.394 0.356
May 2015 0.380 0.322
June 2015 0.334 0.280
July 2015 0.289 0.274
August 2015 0.278 0.165
September 2015 0.179 0.155
October 2015 0.185 0.158
November 2015 0.175 0.157
December 2015 0.168 0.161
(Source: Muscat Securities Market)
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8.2 Renaissance Share Price movement in comparison to the MSM Index and MSM Services Index
4800
5200
5600
6000
6400
6800
0.150
0.250
0.350
0.450
0.550
MSM
Inde
x
Shar
e P
rice
in
OM
R
RS Closing Price MSM Index
2650
2800
2950
3100
3250
3400
3550
3700
0.150
0.250
0.350
0.450
0.550
MSM
Ser
vice
s In
dex
Shar
e P
rice
in O
MR
RS Closing Price MSM Service Index
Jan 2015
Feb 2015
Mar 2015
Apr 2015
May 2015
June 2015
July 2015
Aug 2015
Sep 2015
Oct 2015
Nov 2015
Dec 2015
Jan 2015
Feb 2015
Mar 2015
Apr 2015
May 2015
June 2015
July 2015
Aug 2015
Sep 2015
Oct 2015
Nov 2015
Dec 2015
8.3 Distribution of Shareholding as on 31 December 2015Source of Statistics: Muscat Clearing & Depository Company (SAOC)
Sr. No. Category Number of Shareholders No. of shares % Shareholding
1 Less than 100,000 shares 4,034 14,846,763 5.1%
2 100,000 – 200,000 shares 35 4,724,352 1.62%
3 200,001 – 500,000 shares 44 13,339,829 4.58%
4 500,001 – 2,820,944 shares 41 54,314,234 18.69%
5 1% - 1.99% of share capital 9 35,184,734 12.1%
6 2% - 9.99% of share capital 12 125,703,084 43.24%
7 10% of share capital & above 1 42,538,025 14.65%
Total 4,176 290,651,021 100%
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8.4 The Company has issued 423,141,678 mandatory convertible bonds (MCBs) at OMR 0.102 each on 25 July 2012 and listed on Muscat Securities Market (MSM) on 6 August 2012. The MCBs carry a coupon rate of 3.75% per annum and shall be converted at face value (OMR 0.100) through conversion into shares of the Company at the conversion price. In accordance with the issue prospectus, the conversion would be carried out in three tranches, 33.33% at the end of third and fourth year each and 33.34% at the end of fifth year, commencing from the third anniversary and ending on the fifth anniversary from the issue date.
However in order to safeguard the interests of all stakeholders including MCB holders, the Company offered a repurchase option to MCB holders wishing to tender their MCBs to the Company prior to the first conversion date. To date, the Company has repurchased the first tranche of MCBs in July 2015, and the second tranche in September 2015 from MCB holders who offered to tender their MCBs.
Following the repurchase of the second tranche of MCBs, the remaining MCBs have been reclassified for trading on MSM under two categories as Renaissance Services Bonds (A) and (B). This reclassification is for identification purposes only.
Renaissance Services Bonds (A) are due for conversion in 2016 and 2017 and represents those MCB holders who did not opt to participate in the second repurchase. All MCBs under this category will be converted into shares in 2016 and 2017 as set out in Section VII of the Terms and Conditions of the MCB Prospectus issued in 2012.
Renaissance Services Bonds (B) are due for conversion into shares in 2017 only, and represents those MCB holders who participated in the second repurchase.
The Company also has the option, to repurchase the remaining MCB tranche upon notice to MCB holders, prior to the final conversion date in August 2017.
9. Professional Profile of the Statutory Auditors
PwC is a global network of firms operating in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. PwC also provides corporate training and professional financial qualifications through PwC’s Academy.
Established in the Middle East for 40 years, PwC employs over 2,780 people and has 21 offices across 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, the Palestinian Territories and the United Arab Emirates.
PwC has been established in Oman for 40 years and
the firm comprises 3 partners, including one Omani national, and over 135 professionals and support staff. Expert assurance, tax and advisory professionals are able to combine internationally acquired specialist consulting and technical skills with relevant local experience.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
As per article 9 (para b) of the Code of Corporate Governance pertaining to the rotation of external auditors, PwC have completed four years as statutory auditors of the Company by the end of 2015 and therefore, are not eligible for re-appointment as statutory auditor of the Company for the financial year 2016.
10. Audit Fees paid to the AuditorsDuring the year 2015, aggregate professional fees in the amount of OMR 503,942/- were paid by the Company to PwC Oman and other PwC offices in respect of the services provided. The amount paid includes OMR 366,498/- for audit (of which OMR 303,668 relates to 2015 and the balance of RO 62,830/- relates to 2014), OMR 16,961/- for tax and OMR 120,482/- for other services.
11. Confirmation by the Board of DirectorsRenaissance is committed to conducting business legally and professionally under the highest standards of business ethics and moral code. This same high standard is expected and required of all Renaissance subsidiary companies and people working at every level throughout the group.
The Board of Directors confirms its accountability for the preparation of the financial statements in accordance with the applicable standards and rules.
The Board of Directors confirms that it has reviewed the efficiency and adequacy of the internal control systems of the Company. The Board is pleased to inform Shareholders that adequate and efficient internal controls are in place, and that they are in full compliance with the internal rules and regulations.
The Board of Directors also confirms that there are no material matters that affect the continuation of the Company, and its ability to continue its operations during the next financial year.
_________________ ________________ Chairman Director
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014Note RO’000 RO’000
Continuing operationsRevenue 30 237,011 250,752Operating costs (164,032) (162,519)Gross profit 72,979 88,233Administrative expenses (23,611) (24,909)Impairment of vessels 7 (27,308) (1,538)Profit from operations 22,060 61,786Finance costs 5 (30,833) (29,781)Fair value change in derivative liability 29 (4,707) -(Loss)/profit before tax (13,480) 32,005Taxation 6 (10,439) (7,912)(Loss)/profit for the year from continuing operations (23,919) 24,093Discontinued operations(Loss)/profit for the year from discontinued operations 15 (6,108) 1,340(Loss)/profit for the year (30,027) 25,433(Loss)/profit attributable to: Owners of the parent (34,833) 17,341Non-controlling interests 4,806 8,092
(30,027) 25,433Other comprehensive income:Items that may be subsequently reclassified to profit or lossForeign currency translation differences (439) (717)Changes to cash flow hedges - (60)Items that may not be subsequently reclassified to profit or lossRe-measurement of post-employment benefit obligations (net of tax) 22 919
(417) 142Total comprehensive (loss)/income for the year (30,444) 25,575
Attributable to:Owners of the parent (35,250) 17,483 Non-controlling interests 4,806 8,092 Total comprehensive (loss)/income for the year (30,444) 25,575
Total comprehensive (loss)/income from:Continuing operations (24,336) 24,235Discontinued operations (6,108) 1,340
(30,444) 25,575Earnings per share from continuing and discontinued operations attributable to owners of the parent during the year (expressed in Rial Omani)
Basic (loss)/earnings per shareFrom continuing operations 25 (0.113) 0.060From discontinued operations (0.023) 0.005From (loss)/profit for the year (0.136) 0.065
Diluted (loss)/earnings per shareFrom continuing operations 25 (0.071) 0.043From discontinued operations (0.015) 0.003From (loss)/profit for the year (0.086) 0.046
The parent company statement of comprehensive income is presented as a separate schedule attached to the consolidated financial statements.The notes on pages 40 to 88 form an integral part of these consolidated financial statements.Independent auditor’s report on pages 34.
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2015
2015 2014Note RO’000 RO’000
ASSETSNon-current assetsProperty, plant and equipment 7 571,156 591,519 Intangible assets 8 32,828 31,758 Other long-term receivables 13 3,562 1,052 Investments 10 322 322 Deferred tax asset 6 563 1,142
608,431 625,793 Current assetsFinancial assets at fair value through profit or loss 14 14Inventories 11 4,103 4,306 Trade and other receivables 13 65,665 76,353 Cash and bank balances 14 41,576 46,146
111,358 126,819 Assets of disposal group classified as held-for-sale 15 421 19,154
111,779 145,973Total assets 720,210 771,766EQUITY AND LIABILITIESEQUITYEquity attributable to owners of the parentShare capital 16 29,065 28,209 Share premium 21,045 19,496 Treasury shares (3,445) (1,704)Perpetual notes 19 46,799 -Legal reserve 9,817 9,605 Subordinated loan reserve 20,000 21,429 Retained earnings 55,402 92,155Exchange reserve (1,084) (645)
177,599 168,545Non-controlling interests 79,546 79,996Net equity 257,145 248,541LIABILITIESNon-current liabilitiesBorrowings 17 325,978 331,997 Equity settled mandatory convertible bonds 18 21,016 41,514Non-current payables and advances 20 20,320 13,012 Staff terminal benefits 21 4,435 4,428
371,749 390,951Current liabilitiesTrade and other payables 22 56,049 54,883 Short term borrowings and bank overdrafts 14 & 23 7,717 6,850 Current portion of long term borrowings 17 26,775 39,578 Equity settled mandatory convertible bonds - current portion 18 575 21,540
91,116 122,851Liabilities of disposal group classified as held-for-sale 15 200 9,423
91,316 132,274Total liabilities 463,065 523,225Total equity and liabilities 720,210 771,766Net assets per share (RO) 24 0.485 0.630
The consolidated financial statements on pages 35 to 88 were approved and authorised for issue in accordance with a resolution of the Board of Directors on 24 February 2016.
_____________________________ _____________________________ Chairman DirectorThe parent company statement of financial position is presented as a separate schedule attached to the consolidated financial statements.Independent auditor’s report on pages 34.
36
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ISS
AN
CE
REN
AIS
SAN
CE
SER
VIC
ES S
AOG
AN
D IT
S SU
BSI
DIA
RY
CO
MPA
NIE
S
CON
SOLI
DAT
ED S
TATE
MEN
T O
F CH
AN
GES
IN E
QU
ITY
FOR
TH
E YE
AR
EN
DED
31
DEC
EMB
ER 2
015
Not
e
Att
ribu
tabl
e to
sha
reho
lder
s’ o
f the
par
ent c
ompa
nyN
on-
cont
roll
ing
inte
rest
sTo
tal
Shar
eca
pita
lSh
are
prem
ium
Trea
sury
shar
esP
erpe
tual
note
sLe
gal
rese
rve
Subo
rdin
ated
loan
res
erve
Ret
aine
dea
rnin
gsEx
chan
gere
serv
eTo
tal
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
At 1
Jan
uary
201
528
,209
19,4
96(1
,704
)-
9,60
521
,429
92,1
55(6
45)
168,
545
79,9
9624
8,54
1
Loss
for
the
year
--
--
--
(34,
833)
-(3
4,83
3)4,
806
(30,
027)
Oth
er c
ompr
ehen
sive
loss
for
the
year
--
--
--
22(4
39)
(417
)-
(417
)To
tal c
ompr
ehen
sive
loss
for
the
year
--
--
--
(34,
811)
(439
)(3
5,25
0)4,
806
(30,
444)
Tran
sfer
to le
gal r
eser
ve -
net
16-
--
-28
5-
(285
)-
--
-Tr
ansf
er fr
om le
gal r
eser
ve
rela
ting
to d
ives
tmen
t of a
su
bsid
iary
--
-(7
3)-
73-
--
-Tr
ansf
er fr
om s
ubor
dina
ted
loan
res
erve
16-
--
--
(1,4
29)
1,42
9-
--
-Tr
ansa
ctio
ns w
ith
non-
cont
rolli
ng in
tere
sts
29(4
82)
-(4
82)
482
-M
ovem
ent r
elat
ed to
no
n-co
ntro
lling
inte
rest
s 29
--
--
--
--
-(5
,738
)(5
,738
)In
com
e fr
om tr
easu
ry s
hare
s-
--
--
-14
4-
1
44-
144
Shar
es is
sued
on
conv
ersi
on
of m
anda
tory
con
vert
ible
bo
nds
1885
61,
549
(1,7
41)
--
--
-
66
4-
664
Issu
e of
per
petu
al n
otes
19
--
-46
,799
--
--
46,
799
-46
,799
Div
iden
d pa
id-
--
--
-(2
,821
)-
(2,8
21)
-(2
,821
)To
tal t
rans
acti
ons
wit
h ow
ners
856
1,54
9(1
,741
)46
,799
212
(1,4
29)
(1,9
42)
(439
) 4
4,30
4(5
,256
)39
,048
At 3
1 D
ecem
ber
2015
29,
065
21,0
45(3
,445
)46
,799
9,81
720
,000
55,4
02(1
,084
)17
7,59
979
,546
257,
145
The
pare
nt c
ompa
ny s
tate
men
t of c
hang
es in
equ
ity is
pre
sent
ed a
s a
sepa
rate
sch
edul
e at
tach
ed to
the
cons
olid
ated
fina
ncia
l sta
tem
ents
.Th
e no
tes
on p
ages
40
to 8
8 fo
rm a
n in
tegr
al p
art o
f the
se c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
Inde
pend
ent a
udito
r’s
repo
rt o
n pa
ges
34.
37
AN
NU
AL
RE
PO
RT
20
15
REN
AIS
SAN
CE
SER
VIC
ES S
AOG
AN
D IT
S SU
BSI
DIA
RY
CO
MPA
NIE
S
CON
SOLI
DAT
ED S
TATE
MEN
T O
F CH
AN
GES
IN E
QU
ITY
FOR
TH
E YE
AR
EN
DED
31
DEC
EMB
ER 2
015
(con
tinue
d)At
trib
utab
le to
sha
reho
lder
s’ o
f the
par
ent c
ompa
ny
Not
eSh
are
capi
tal
Shar
epr
emiu
mTr
easu
rysh
ares
Lega
lre
serv
eSu
bord
inat
edlo
an r
eser
veR
etai
ned
earn
ings
Hed
ging
rese
rve
Exch
ange
rese
rve
Tota
l
Non
- co
ntro
lling
inte
rest
sTo
tal
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
’000
RO
‘000
RO
’000
RO
’000
RO
’000
RO
’000
At 1
Jan
uary
201
4 28
,209
19,4
96(1
,704
)9,
718
17,1
4310
3,43
760
7217
6,43
136
,456
212,
887
Pro
fit fo
r th
e ye
ar-
--
--
17,3
41-
-17
,341
8,09
225
,433
Oth
er c
ompr
ehen
sive
inco
me
--
--
-91
9(6
0)(7
17)
142
-14
2To
tal c
ompr
ehen
sive
inco
me
for
the
year
--
--
-18
,260
(60)
(717
)17
,483
8,09
225
,575
Tran
sfer
rel
atin
g to
di
scon
tinue
d op
erat
ions
and
di
spos
al o
f sub
sidi
ary
--
-(1
13)
-11
3-
--
--
Tran
sfer
to s
ubor
dina
ted
loan
re
serv
e16
--
--
4,28
6(4
,286
)-
--
--
Mov
emen
t rel
ated
to
non-
cont
rolli
ng in
tere
sts
29
--
--
-1,
339
--
1,33
935
,448
36,7
87In
com
e fr
om tr
easu
ry s
hare
s-
--
--
144
--
144
-14
4R
e-m
easu
rem
ent o
f m
anda
tory
con
vert
ible
bon
ds
-
--
--
(24,
031)
--
(24,
031)
-(2
4,03
1)D
ivid
end
paid
--
--
-(2
,821
)-
-(2
,821
)-
(2,8
21)
Tota
l tra
nsac
tions
with
ow
ners
--
-(1
13)
4,28
6(2
9,54
2)-
-(2
5,36
9)35
,448
10,0
79
At 3
1 D
ecem
ber
2014
28,2
0919
,496
(1,7
04)
9,60
521
,429
92,1
55-
(645
)16
8,54
579
,996
248,
541
The
pare
nt c
ompa
ny s
tate
men
t of c
hang
es in
equ
ity is
pre
sent
ed a
s a
sepa
rate
sch
edul
e at
tach
ed to
the
cons
olid
ated
fina
ncia
l sta
tem
ents
.Th
e no
tes
on p
ages
40
to 8
8 fo
rm a
n in
tegr
al p
art o
f the
se c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
Inde
pend
ent a
udito
r’s
repo
rt o
n pa
ges
34.
38
RE
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ISS
AN
CE
RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014Note RO’000 RO’000
OPERATING ACTIVITIESCash receipts from customers 258,325 276,993 Cash paid to suppliers and employees (175,066) (180,385) Cash generated from operations 83,259 96,608
Net finance costs (25,726) (30,690) Income tax paid (8,928) (6,904) Net cash generated from operating activities 48,605 59,014
INVESTING ACTIVITIESAcquisition of property, plant and equipment (39,126) (133,599) Proceeds from divestment of subsidiaries 5,599 11,026 Purchase of intangibles (408) -Dividends received 146 159 Net cash used in investing activities (33,789) (122,414)
FINANCING ACTIVITIESProceeds from issue of Perpetual Notes 46,799 -Repurchase of MCBs (40,799) -Deposits under lien 5,412 8,116Proceeds from borrowings 142,422 40,993Borrowings repaid during the year (165,259) (54,727)Net movement in related party balances 3 (50)Dividends paid (2,821) (2,821)Funds paid to non-controlling interests (492) 39,435Net cash (used in)/generated from financing activities (14,735) 30,946
Change in cash and cash equivalents 81 (32,454)Cash and cash equivalents at the beginning of the year 41,201 73,655Cash and cash equivalents at the end of the year 41,282 41,201
Cash and cash equivalents comprise the following:Cash and bank balances 41,576 40,734Bank overdrafts (327) (1,075)Cash and cash equivalents 14 41,249 39,659Cash at bank classified as assets held-for-sale 15(c) 33 1,542
41,282 41,201
The parent company statement of cash flows is presented as a separate schedule attached to the consolidated financial statements.The notes on pages 40 to 88 form an integral part of these consolidated financial statements.Independent auditor’s report on pages 34.
39
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
1 Legal status and principal activitiesRenaissance Services SAOG (the parent company) is incorporated in the Sultanate of Oman as a public joint stock company. The business activities of Renaissance Services SAOG and its subsidiary companies (together referred to as the Group) include investing in companies and properties, providing offshore support vessel fleet, purchase and sale of vessels, providing turnkey contract services, providing accommodation solutions, providing facilities management, facilities establishment, contract catering, operations and maintenance services, providing training services, general trading and related activities.
2 Summary of significant accounting policies2.1 Basis of preparation
(a) The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirements of the Commercial Companies Law of 1974 and the disclosure requirements of the Capital Market Authority (CMA) of Sultanate of Oman. The standalone statement of financial position, statement of comprehensive income, changes in equity and cash flows of the parent company are given in the attached schedule to the consolidated financial statements, in order to comply with the disclosure requirements of CMA. For a further understanding of the standalone parent company’s financial position and the results of its operations and the auditor’s report on those financial statements, the schedule should be read in conjunction with the full set of separate financial statements of the parent company on which an unqualified opinion dated 29 February 2016 was rendered by the auditors.
(b) These financial statements have been prepared in Rial Omani (RO) rounded to the nearest thousand, unless otherwise stated.
(c) Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Rial Omani (RO), which is the Group’s presentation currency.
(d) The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair value of the following assets and liabilities:
- Financial assets at fair value through profit or loss;
- Available-for-sale investments; and
- Derivative financial instruments.
(e) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
(f) Standards and amendments effective in 2015 and relevant for the Group’s operations:
For the year ended 31 December 2015, the Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for periods beginning on 1 January 2015.
The adoption of these standards and interpretations has not resulted in changes to the Group’s accounting policies and has not affected the amounts reported for the current year.
40
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AN
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.1 Basis of preparation (continued)
(g) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:
A number of new standards, amendments and interpretations to existing standards have been published and are mandatory for the annual accounting periods beginning on or after 1 January 2016 or later periods, but the Group has not early adopted them. None of these standards are expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:
IAS 16 and IAS 38 (Amendments), ‘Property, plant and equipment’ and ‘Intangible assets’, on depreciation and amortisation, (effective on or after 1 January 2016);
IAS 27 (Amendments), ‘Separate financial statements’, on the equity method, (effective on or after 1 January 2016);
IAS 28 (Amendments), ‘Investment in associates and joint ventures’, (effective on or after 1 January 2016);
IAS 34 (Amendments), ‘Interim financial reporting’, regarding disclosure of information (effective on or after 1 January 2016);
IFRS 9 (Amendments), ‘Financial instruments’, (effective on or after 1 January 2018);
IFRS 10 and IAS 28 (Amendments), ‘Consolidated financial statements’ and ‘Investment in associates and joint ventures’ (effective on or after 1 January 2016);
IFRS 11 (Amendments), ‘Joint arrangements’, on acquisition of an interest in a joint operation, (effective on or after 1 January 2016);
IFRS 15, ‘Revenue from contracts with customers’ (effective on after 1 January 2018); and
IFRS 16, ‘Leases’ (effective on after 1 January 2019).
2.2 Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the group has control. The Group controls an entity when the Group 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are attributed to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Upon loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the statement of comprehensive income. If the Group retains any interest on entity that was a subsidiary in the past, then such interest is measured at fair value at the date that the control is lost. Subsequently, it is accounted for as equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.
The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.
(b) Associates
Associates are all entities over which, the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of profit or loss of the investee after the date of acquisition. Investment in associates includes goodwill identified on acquisition.
41
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.2 Basis of consolidation (continued)
(b) Associates (continued)
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the consolidated statement of comprehensive income, and its share of post-acquisition movements is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in an associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated statement of comprehensive income.
Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Dilution gains and losses arising in investments in associates are recognised in the consolidated statement of comprehensive income.
(c) Joint arrangements
The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
(d) Transactions eliminated on consolidation
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries are adjusted to conform to the group’s accounting policies.
42
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.2 Basis of consolidation (continued)
(e) Accounting for business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities, contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in statement of comprehensive income.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in statement of comprehensive income or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated statement of comprehensive income.
(f) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is ceased, with the change in carrying amount recognised in statement of comprehensive income. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or a financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for, as if the Group had directly disposed the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the consolidated statement of comprehensive income.
(g) Non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
2.3 Revenue recognition
(a) Marine charter
Revenue comprises operating lease rent from charter of marine vessels, mobilisation income, and revenue from provision of on-board accommodation, catering services and sale of fuel and other consumables.
Lease rent income is recognised on a straight line basis over the period of the lease. Revenue from provision of on-board accommodation and catering services is recognised over the period of hire of such accommodation while revenue from sale of fuel and other consumables is recognised when delivered. Income generated from the mobilisation or demobilisation of the vessel to or from the location of charter under the vessel charter agreement is recognised over the period of the related charter party contract.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.3 Revenue recognition (continued)
(b) Goods sold and services rendered
Revenue from the sale of goods is recognised in the statement of comprehensive income when the significant risks and rewards of ownership have been transferred to the buyer i.e. when goods are delivered, accepted by the customer and the amount of revenue can be measured reliably.
Revenue from services rendered is recognised in the statement of comprehensive income in proportion to the stage of completion of the transaction in the accounting period in which the services are rendered and the right to receive the consideration is established. No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due, associated costs or the possible return of goods.
(c) Maintenance contracts
Income from maintenance contracts is recognised in the statement of comprehensive income on a straight line basis evenly over the term of the contract.
(d) Dividend income
Dividend income is recognised in the statement of comprehensive income on the date that the right to receive dividend is established.
(e) Sale of vessels
Revenue from sale of vessels is recognised in the statement of comprehensive income when persuasive evidence exists, usually in the form of an executed sales agreement, that significant risks and rewards of ownership have been transferred to the buyer, 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 vessel and the amount of revenue can be measured reliably.
(f) Tuition fee
Tuition fee represents the fee value of courses conducted during the year, net of provisions for drop outs. Fees are billed at different stages of the course; however, income is accrued evenly over the duration of each course. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or associated losses.
(g) Others
Sale of operating assets are shown as part of revenue and are recognised when the right to receive is established.
2.4 Earnings per share
The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is calculated by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.5 Property, plant and equipment
(a) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Cost of marine vessels includes purchase price paid to third parties, including registration and legal documentation costs, all directly attributable costs incurred to bring the vessel into working condition at the area of planned use, mobilisation costs to the operating location, sea trial costs, significant rebuild expenditure incurred during the life of the asset and financing costs incurred during the construction period of vessels. In certain operating locations where the time taken for mobilisation is significant and the customer pays a mobilisation fee, certain mobilisation costs are charged to the statement of comprehensive income. Costs for other items of property, plant and equipment include expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
(b) Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in property, plant and equipment. All other expenditure is recognised in the statement of comprehensive income as an expense as incurred.
(c) DepreciationDepreciation is charged to the statement of comprehensive income on a straight line basis over the estimated useful lives of items of property, plant and equipment. The estimated useful lives are as follows: YearsBuildings and improvements 5 - 25Marine vessels and boats acquired 15 - 30Plant, machinery and office equipment 1 - 15Motor vehicles 3Furniture and fixtures 3 - 5
Freehold land is not depreciated. The cost of certain assets used on specific contracts is depreciated to estimated residual value over the period of the respective contract, including extensions if any. Depreciation method, useful lives and residual values are reviewed at each reporting date.
Vessels that are no longer being chartered and are held-for-sale are transferred to inventories at their carrying value.
(d) Capital work-in-progress
Capital work-in-progress is stated at cost and comprises all costs including borrowing costs directly attributable to bringing the assets under construction ready for their intended use. Capital work-in-progress is transferred to property, plant and equipment at cost on completion. No depreciation is charged on capital work-in-progress.
2.6 Dry docking costs
The expenditure incurred on vessel dry docking, a component of property, plant and equipment, is amortised over the period from the date of dry docking, to the date on which the management estimates that the next dry docking is due which is generally between two to three years.
2.7 Vessel refurbishment costs
Owned assetsCosts incurred to refurbish owned assets are capitalised within property, plant and equipment and then depreciated over the shorter of the estimated economic life of the related refurbishment or the remaining life of the vessel.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.8 Intangible assets
2.8.1 Goodwill
Goodwill that arises on the acquisition of subsidiaries is presented within intangible assets. Goodwill is initially measured at the fair value of consideration transferred plus the recognised amount of any non-controlling interest in the acquiree plus, if the business combination is achieved in stages, the fair value of pre-existing equity interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. Any negative goodwill is immediately recognised in statement of comprehensive income. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or Groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the Group are assigned to those units or Groups of units. Each unit or group of units to which the goodwill is so allocated:represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; andis not larger than a segment based on the Group’s operating segment format determined in accordance with IFRS 8 - Operating Segments.Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
2.8.2 Other intangible assets
Other intangible assets acquired by the Group are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. The useful lives of other intangible assets are assessed to be finite and generally amortised over 5 years. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible asset.
2.9 Financial assets
2.9.1 ClassificationThe Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets upon initial recognition.
(a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within twelve months, otherwise they are classified as non-current.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.9 Financial assets (continued)
2.9.1 Classification (continued)
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position (notes 2.13 and 2.14).
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose them within twelve months of the end of the reporting period.
2.9.2 Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the consolidated statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are recognised in the consolidated statement of comprehensive income in the period in which they arise.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are recognised in the statement of comprehensive income under ‘gains and losses from investment securities’.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive income as part of finance income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.
2.10 Impairment of financial assets(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period, whether there is objective evidence that a financial asset or group of financial assets are impaired. A financial asset or a group of financial assets are impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.10 Impairment of financial assets (continued)
(a) Assets carried at amortised cost (continued)
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.
(b) Assets classified as available-for-sale
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets are impaired. For debt securities, the Group uses the criteria referred to in (a) above. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in statement of comprehensive income is removed from equity and recognised in statement of comprehensive income. Impairment losses recognised in the consolidated statement of profit or loss on equity instruments are not reversed through the consolidated statement of other comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in statement of comprehensive income, the impairment loss is reversed through the consolidated statement of comprehensive income.
2.11 Impairment of non-financial assets
Non-financial assets (other than goodwill)
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses, are recognised in the statement of comprehensive income.
The recoverable amount of an asset or its cash generating unit is the greater of its value-in-use and its fair value less costs to sell. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit).
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.12 Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined applying the first-in, first-out and the weighted average methods depending on the category of inventory and includes all costs incurred in acquiring and bringing them to their present location and condition. Net realisable value signifies the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.13 Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
2.14 Cash and cash equivalents
Cash and cash equivalents comprise cash at hand, bank balances and short-term deposits with an original maturity of three months or less. Bank borrowings that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of statement of cash flows.
Deposits under lien
Cash, which is under lien and held by commercial banks, is classified as deposits under lien.
2.15 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any gain or loss or income related to these shares is directly transferred to retained earnings and shown in the statement of changes in equity.
Gains and losses on measurement of transactions with shareholders are recognised in equity.
2.16 Perpetual notes
The perpetual notes are instruments issued by the Group with no fixed redemption date. The notes currently carry affixed periodic rate of 7.9% per annum, payable semi-annually in arrears. Coupon liability is recognised on the perpetual notes and the related charge recognised in equity, only upon occurrence of certain trigger events specified in the terms of perpetual notes. Management has accounted for these instruments as equity in the consolidated financial statements as the notes do not carry an obligation to make payments. The transaction costs incurred on issuance of these notes are deducted from equity.
2.17 Trade and other payables
Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.
2.18 Non-current assets (or disposal groups) classified as held-for-sale
Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and their fair value less costs to sell.
2.19 Discontinued operations
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held-for- sale, and, represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. Results of discontinued operations are presented separately in the statement of comprehensive income.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.20 Interest bearing borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
2.21 Provisions
A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefit will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liabilities.
2.22 Onerous contracts
A provision for onerous contract is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
2.23 Leases
(a) Group as a lessee
Finance leases, which transfer to the Group, substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Subsequent to initial recognition, leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of comprehensive income.
Capitalised leased assets are depreciated over the estimated useful life of the asset or the lease term, whichever is less.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and are not recognised in the Group’s statement of financial position. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives are recognised as an integral part of the total lease expense, over the term of the lease.
Leases where the group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.23 Leases (continued)
(a) Group as a lessor
Finance leases, which transfer from the group substantially all of the risks and rewards incidental to ownership of the leased item, are recognised as a disposal of asset at the inception of the lease and are presented as receivables under a finance lease at an amount equal to the net investment in the finance lease. Lease receivables are apportioned between finance income and reductions of the receivables under a finance lease so as to achieve a constant periodic rate of return on the lessor’s net investment in the finance lease. Finance income earned is recognised in the consolidated statement of comprehensive income. Lease receivables due within one year are disclosed as current assets.
2.24 Employee benefits
Contributions to a defined contribution retirement plan for Omani employees, in accordance with the Oman social insurance scheme, are recognised as an expense in the statement of comprehensive income as incurred.
End of service benefits are accrued in accordance with the terms of employment of the Group’s employees at the reporting date, having regard to the requirements of the Oman Labour Law 2003, as amended (for employees working in Oman). Employee entitlements to annual leave and leave passage are recognised when they accrue to employees and an accrual is made for the estimated liability arising as a result of services rendered by employees up to the reporting date. These accruals are included in current liabilities, while that relating to end of service benefits is disclosed as a non-current liability. The entitlement to these benefits is based upon the employees’ salary and length of service, subject to completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.
For non-Omani companies the end of service benefits are provided as per the respective regulations in their country.
The Group also operates a defined benefit pension plan which defines the amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.
2.25 Dividend distribution
Dividends are recognised as a liability in the year in which they are approved by the company’s shareholders.
2.26 Interest expense and income
Interest expense on borrowings is calculated using the effective interest rate method. Financing costs are recognised as an expense in the statement of comprehensive income in the period in which they are incurred.
Borrowing costs comprise interest payable on borrowings. 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 cost of those assets. All other borrowing costs are recognised as an expense in the year in which they are incurred.
Interest income is recognised in the statement of comprehensive income as it accrues, taking into account the effective yield on the asset.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.27 Directors’ remuneration
The Board of Directors’ remuneration of the parent company is accrued within the limits specified by the Capital Market Authority and the requirements of the Commercial Companies Law of the Sultanate of Oman.
2.28 Segment reporting
An operating segment is the component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transaction with any of the Group’s other components, whose operating results are reviewed regularly by the Group CEO (being the chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Group CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and head office tax expenses.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.
2.29 Income tax
Income tax is provided for in accordance with the fiscal regulations of the country in which the Group operates.
Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in the equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax is calculated on the basis of the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantially enacted by the reporting date. The tax effects on the temporary differences are disclosed under non-current liabilities as deferred tax.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. The carrying amount of deferred tax assets is reviewed at reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.
In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The assessment regarding adequacy of tax liability for open tax year relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.30 Foreign currency
Transactions denominated in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate ruling at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in functional currency at the beginning of the year, adjusted for effective interest and payments during the year and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in statement of comprehensive income except for differences arising in retranslation of a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, to the extent these hedges are effective, which are recognised in other comprehensive income.
2.31 Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Rial Omani at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rial Omani at exchange rates at the date of the transaction. Foreign currency differences if any are recognised in other comprehensive income and are reflected in the exchange reserve in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the exchange reserve is transferred to statement of comprehensive income as part of the profit or loss on disposal. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of net investment in a foreign operation and are recognised in other comprehensive income, and are presented within the equity in the translation reserve.
2.32 Derivatives
Derivatives are stated at fair value.
For the purpose of hedge accounting, hedges are classified into two categories: (a) fair value hedges which hedge the exposure to changes in the fair value of a recognised asset or liability; and (b) cash flow hedges which hedge exposure to variability in cash flows of a recognised asset or liability or a highly probable transaction.
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be ‘highly effective’ in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.
Derivatives are recognised initially at fair value. Attributable transaction costs are recognised in statement of comprehensive income as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
2 Summary of significant accounting policies (continued)2.32 Derivatives (continued)
(a) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in statement of comprehensive income.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in statement of comprehensive income. In other cases, the amount recognised in other comprehensive income is transferred to statement of comprehensive income in the same period that the hedged item affects profit or loss.
(b) Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in statement of comprehensive income.
2.33 Determination of fair values
Certain of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to the asset or liability.
(a) Investments
For investments traded in organised financial markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the reporting date. (Level 1)
For unquoted investments, a reasonable estimate of the fair value is determined by reference to the market value of a similar investment or is based on the expected discounted cash flows (Level 2). Fair value cannot be reliably measured for certain unquoted investments. Such investments are measured at cost. (Level 3)
(b) Other interest bearing items
The fair value of interest-bearing items is estimated based on discounted cash flows using market interest rates for items with similar terms and risk characteristics. (Level 2)
3 Financial risk management3.1 Financial risks factors
Financial instruments carried on the statement of financial position comprise investments, other long-term receivables, trade receivables, amount due from related parties, cash in hand and at bank, term loans, bank borrowings, trade and other payables and amount due to related parties.
The Group has exposure to the following risks from its use of financial instruments: (a) Credit risk(b) Liquidity risk(c) Market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
3 Financial risk management (continued)3.1 Financial risks factors (continued)
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the receivables from customers and investments.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as below:
2015 2014RO’000 RO’000
Other long term receivables 3,562 1,052Investments (available-for-sale) 322 322Financial assets at fair value through profit or loss 14 14Trade receivables 55,665 59,332Amount due from related parties 181 184Deposits under lien - 5,412Cash and cash equivalents 41,576 40,734Financial assets of disposal group classified as held-for-sale 335 8,918
101,655 115,968
The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are generally performed on all customers requiring credit over specified amounts. The Group does not require collateral in respect of financial assets.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.
With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, and derivative instruments with positive values, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group limits its liquidity risk by ensuring that bank facilities are available. Short term loans and overdraft are, on average, utilised for a period of ninety days to bridge the gap between collections of receivables and settlement of payables during the month.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
3 Financial risk management (continued)3.1 Financial risks factors (continued)
(b) Liquidity risk (continued)
The contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements at reporting date is as below:
31 December 2015
Carrying amountRO’000
Contractual cash flows
RO’000
Upto1 year
RO’000
1 year to 5 years
RO’000
More than 5 yearsRO’000
Borrowings 352,753 448,850 56,092 270,583 122,175Equity settled mandatory convertible bonds 21,826 995 504 491 -Short-term borrowings and bank overdrafts 7,717 7,717 7,717 - -Trade and other payables (including derivatives) 66,539 66,539 43,831 22,708 -
448,835 524,101 108,144 293,782 122,175
31 December 2014
Carrying amountRO’000
Contractual cash flows
RO’000
Upto1 year
RO’000
1 year to 5 years
RO’000
More than 5 yearsRO’000
Borrowings 371,575 456,878 60,502 335,263 61,113 Equity settled mandatory convertible bonds 63,054 2,944 1,472 1,472 - Short-term borrowings and bank overdrafts 6,850 6,850 6,850 - - Trade and other payables (including derivatives) 54,841 54,841 44,504 10,337 -
496,320 521,513 113,328 347,072 61,113
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The Group also enters into derivative transactions, primarily interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.
(i) Foreign exchange risk
Trade accounts payable include amounts due in foreign currencies, mainly US Dollar, Euro, Pounds Sterling, UAE Dirham, Singapore Dollar, Norwegian Kroner, Kazakhstan Tenge, Nigerian Naira and Azerbaijan New Manat.
As Rial Omani (RO) is pegged with US Dollars, the risk of transactions made in US Dollar is considered minimal. With respect to other currencies mentioned above, had the Rial Omani (RO) weakened/strengthened by 5%, with all other variables held constant, the impact on the Group’s consolidated financial statements is considered to be insignificant.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
3 Financial risk management (continued)3.1 Financial risks factors (continued)
(c) Market risk (continued)
(ii) Interest rate risk
The Group’s borrowings are on fixed as well as floating interest rate basis. The Group is exposed to interest rate risk due to fluctuation in the market interest rate of floating interest rate borrowings.
As at 31 December 2015, the floating rate financial assets and liabilities held by the Group does not have material effect on the profit or loss, as a result of change in such interest rate.
(iii) Other market price risk
Equity price risk arises from available-for-sale equity securities. Management of the Group monitors the mix of debt and equity securities in its investment portfolio based on market indices. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors.
3.2 Capital management
The Group’s policy is to maintain an optimum capital base to maintain investor, creditor and market confidence to sustain future growth of business as well as achieve appropriate return on capital.
3.3 Fair value of financial instruments
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: 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: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1RO’000
Level 2RO’000
Level 3RO’000
TotalRO’000
31 December 2015Investments 14 - 322 336Derivative financial instruments - - 12,284 12,284
31 December 2014Investments 14 - 322 336Derivative financial instruments - 523 7,577 8,100
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
4 Critical accounting estimates and judgements4.1 Judgements
In the process of applying the Group’s accounting policies, management has made the following significant judgements, apart from those involving estimations, which have the most significant effect in the amounts recognised in the financial statements:LeasesWhere the group acts as a lessor, management exercises judgment in assessing whether a lease is a finance lease or an operating lease. The judgement as to which category applies to a specific lease depends on management’s assessment of whether in substance the risks and rewards of ownership of the assets have been transferred to the lessee. In the instances where management estimates that the risks and rewards have been transferred, the lease is considered as a finance lease, otherwise it is accounted for as an operating lease.The Group’s property, plant and equipment include marine crafts such as barges and other vessels of a specialist nature capable of operating in difficult climatic conditions. Although these vessels are currently leased to a customer under contracts which contain purchase options, the leases have been judged by management to be operating leases. Where the Group acts as a lessor, management have based this judgement on a number of factors that indicate that, in substance the risks and rewards of owning these vessels remain with the Group, which include:• the lease periods are generally for a short term (10 years) when compared with the overall estimated
economic life of the vessels (30 years or more);• the leases do not automatically transfer the ownership of the vessels at the end of the lease term;• the Group is responsible for regular dry-docking and insurance in addition to maintenance of the vessels;• the customer is unlikely to want to bear the cost and responsibility of owning and maintaining these
specialised vessels and is, therefore, unlikely to exercise options to purchase;• the recent renewal by the customer of one major leasing contract for a secondary period despite the
purchase option being available to the lessee; • the expectation that the customer would wish to renew its contracts for the leases of the vessels from the
Group due to the Group’s proven track record and established support and services infrastructure in the region of operation; and
• management has reached an in-principle agreement with the customer, for the removal of the option to purchase clauses in the contracts and are concluding formal variations to contracts, which is subject to fulfilment of certain conditions. In 2015, the Group received the five (5) vessels returned by the customer in this respect.
4.2 Estimates and assumptions
The preparation of financial statements requires management to make estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.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.
(a) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. These calculations use current year actual free cash flows determined from EBITDA, which is extrapolated using the estimated growth rate of 3%. The growth rate does not exceed the long-term average growth rate of the business in which the CGU operates. The net carrying amount of goodwill at 31 December 2015 was RO 31.431 million (2014 - RO 31.562 million).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
4 Critical accounting estimates and judgements (continued)4.2 Estimates and assumptions (continued)
(b) Impairment of vessels
The Group determines whether its vessels are impaired when there are indicators of impairment as defined in IAS 36. This requires an estimation of the value-in-use of the cash-generating unit, which is the vessel owning and chartering segment. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from this cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The Group used an estimated growth rate of 3% to extrapolate the cash flows used for value-in-use. The carrying value of the vessels as at 31 December 2015 was RO 453.705 million (2014 - RO 478.032 million).
The recoverable amount of all vessels has been determined based on value in use calculations where the fair value less cost to sell was lower than the carrying amount. These calculations use pre-tax cash flow projections based on the financial budgets approved by the management covering a period of 5 years based on the expected utilization rates of the individual vessels. Cash flows beyond five years are estimate using a nil growth rate. The growth rate does not exceed the long-term average growth rate for marine business in which the CGU operates.
If the estimated cost of capital used in determining the pre-tax discount rate for the marine vessel impairment assessments had been 1% higher than management’s estimates, the Group would have recognised a further impairment against marine vessels of RO 0.843 million (2014: RO 0.158 million).
If the estimated utilisation rates and charter rates used in determining the cash flows had been lower than the management’s estimates by 1%, each taken in isolation, the Group would have recognised a further impairment against marine vessels of RO 1.360 million (2014: RO 0.219 million) and RO 2.144 million (2014: RO 0.512 million), respectively.
(c) Impairment of accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.
At the reporting date, gross trade accounts receivable were RO 64.381 million (2014 – RO 67.120 million) and the provision for doubtful debts was RO 8.715 million (2014 - RO 7.788 million). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the statement of comprehensive income.
(d) Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis.
At the reporting date, gross inventories were RO 4.103 million (2014 - RO 4.307 million) and no provisions for old and obsolete inventories was recorded, based on management assessment (2014 - RO Nil). Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the statement of comprehensive income.
(e) Useful lives of property, plant and equipment
The useful lives, residual values and methods of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at each financial year end. In the review process, the Group takes guidance from recent acquisitions, as well as market and industry trends.
(f) Provision for tax
The Group reviews the provision for tax on a regular basis. In determining the provision for tax, laws of particular jurisdictions (where applicable entity is registered) are taken into account. The management considers the provision for tax to be a reasonable estimate of potential tax liability after considering the applicable laws and past experience.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
4 Critical accounting estimates and judgements (continued)4.2 Estimates and assumptions (continued)
(g) Accounting for investments The Group reviews its investment in entities to assess whether the Group has control, joint control or significant influence over the investee. This includes consideration of the level of shareholding held by the Group in the investee as well as other factors such as representation on the Board of Directors of the investee, terms of any agreement with the other shareholders etc. Based on the above assessment the Group decides whether the investee needs to be consolidated, proportionately consolidated or equity accounted in accordance with the accounting policy of the Group.
(h) Fair value of financial instruments For the purpose of determining the fair value of financial instruments on initial recognition, management estimates the applicable discount rates based on its evaluation of applicable market rates of instruments of similar nature and terms.
5 Expenses by natureProfit for the year from continuing operations is after charging: 2015 2014
RO’000 RO’000
Staff costs 83,330 85,602Operating lease rentals 2,970 5,323Provision for doubtful debts 226 1,868Depreciation 32,056 29,209Finance costs 30,833 29,781
Finance cost for the year 2015 includes a charge of RO 3.2 million on account of extinguishment of debt in Topaz [refer note 17(c)(iii)].
6 Income tax(a) The income expense relates to tax payable on the profits earned by the Group calculated in accordance with
the taxation laws and regulations of various countries in which the Group operates.
2015 2014RO’000 RO’000
Tax charge for the year comprises of:Current tax in respect of current year 9,860 10,280Reversal of tax in respect of prior year - (2,500)Deferred tax in respect of current year 579 132
10,439 7,912Deferred tax assetAt 1 January 1,142 1,274Charged to statement of comprehensive income (579) (132)At 31 December 563 1,142
(b) The deferred tax balance at 31 December 2015 comprises depreciation in excess of capital allowances of RO 0.237 million (2014 - RO 0.699 million), short term timing differences of RO 0.326 million (2014 – RO 0.288 million) and temporary differences relating to pension obligations of nil (2014 - RO 0.155 million).
(c) Deferred tax assets are recognised for temporary differences to the extent that the realisation of the related tax benefit through future taxable profits is probable.
(d) The parent company and its Oman incorporated subsidiaries are subject to income tax at the rate of 12% of taxable income in excess of RO 30,000 in accordance with the Income Tax Law of the Sultanate of Oman.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
6 Income tax (continued)(e) Reconciliation of tax charge is as follows:
2015 2014RO’000 RO’000
(Loss)/profit before income tax of Group entities operating in non-taxable jurisdictions (22,425) 6,932
Profit before income tax of Group entities operating in taxable jurisdictions 8,945 25,073Less: non-taxable profits earned by these entities (795) (9,977)Profit subject to tax included in the consolidated statement of comprehensive income for the year 8,150 15,096
Tax at domestic tax rate 978 1,812Tax effect of expenses that are not deductible in determining taxable profit 752 773Effect of different tax rates of subsidiaries operating in jurisdictions other than Sultanate of Oman 8,709 5,327Tax expense for the year 10,439 7,912
(f) In some jurisdictions, the tax returns for certain years have not been reviewed by the tax authorities. However, the Group’s management is satisfied that adequate provisions have been made for potential tax contingencies.
(g) The parent company’s assessments for the tax years 2012 to 2014 have not been finalised with the Secretariat General for Taxation at the Ministry of Finance of the Government of Sultanate of Oman (‘the Department’). The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax laws and prior experience.
(h) The parent company has filed appeals to the Tax Committee and the Court against certain adjustments made by the Department in the previous assessments. The main issues under the appeals are taxation of overseas income, taxation of overseas dividend, and disallowances relating to interest and some specific expenses. As required under the tax laws, the parent company has paid the tax dues relating to those issues and is continuing to appeal to the higher authorities.
(i) The parent company has established provisions at 31 December 2015 against the tax liabilities, which may arise, relating to disallowances of interest and some specific expenses.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
7 Property, plant and equipment Freeholdland and
buildingsMarinevessels
Machineryand
equipmentMotor
vehicles
Furnitureand
fixtures
CapitalWork-in
-progress TotalRO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Cost At 1 January 2015 87,840 612,476 15,137 1,379 1,368 40,864 759,064 Additions 188 13,884 1,235 223 533 26,114 42,177Transfers 166 18,835 859 - - (19,860) -Disposals - (2,441) (2) (6) (39) - (2,488)At 31 December 2015 88,194 642,754 17,229 1,596 1,862 47,118 798,753
Accumulated depreciationAt 1 January 2015 21,537 134,444 9,808 879 877 - 167,545 Charge for the year 3,395 26,612 1,643 146 304 - 32,100Amortisation of mobilisation costs - 1,112 - - - - 1,112Impairment - 27,308 - - - - 27,308Disposals - (428) - (6) (34) - (468)At 31 December 2015 24,932 189,048 11,451 1,019 1,147 - 227,597
Net book amount at31 December 2015 63,262 453,706 5,778 577 715 47,118 571,156
Freeholdland andbuildings
Marinevessels
Machineryand
equipmentMotor
vehicles
Furnitureand
fixtures
CapitalWork-in
-progress TotalRO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Cost At 1 January 2014 82,678 506,968 14,146 1,060 1,240 37,324 643,416Additions 1,453 53,788 1,843 357 180 64,966 122,587 Transfers 3,709 57,623 53 41 - (61,426) -Disposals - (5,903) (905) (79) (52) - (6,939)At 31 December 2014 87,840 612,476 15,137 1,379 1,368 40,864 759,064
Accumulated depreciationAt 1 January 2014 18,222 111,705 9,133 788 742 - 140,590Charge for the year 3,315 24,066 1,523 165 183 - 29,252Impairment - 1,538 - - - - 1,538Disposals - (2,865) (848) (74) (48) - (3,835)31 December 2014 21,537 134,444 9,808 879 877 - 167,545
Net book amount at31 December 2014 66,303 478,032 5,329 500 491 40,864 591,519
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
7 Property, plant and equipment (continued)(a) The Group’s property, plant and equipment excluding certain immaterial assets are pledged against bank
loans and bank borrowings. Marine vessels with a net book amount of RO 313.775 million (2014- RO 245.223 million) are pledged against bank loans obtained. Further details of property, plant and equipment secured against borrowings are disclosed in note 17.
(b) Capital work-in-progress includes costs incurred for construction of marine vessels and buildings.(c) Advances or deposits paid for construction or acquisition of assets are classified as advances to contractors,
and the amount is transferred to capital work-in-progress after the commencement of construction.(d) During the year, the Group capitalised borrowing costs amounting to RO 0.384 million (2014 - RO 1.758
million). Borrowing costs were capitalized for certain assets at interest rates of non-amortised Senior Notes which is 9.2% (2014 – 9.2%) and for certain other assets at the rate of 4.3% to 5.75% (2014 - 5.75%).
(e) During the year an impairment charge of RO 27.308 million (2014 - RO 1.538 million) was recognised for 19 marine vessels (2014: 2).
(e) The depreciation charge has been allocated in the statement of comprehensive income as follows:
2015 2014RO’000 RO’000
Operating expenses 31,284 28,624Administrative expenses 772 585
32,056 29,209Depreciation related to discontinued operations 44 44
32,100 29,253
8 Intangible assetsIntangible assets as at 31 December consisted of the following:
2015 2014 RO’000 RO’000
Goodwill 31,431 31,562Computer software 1,397 196At 31 December 32,828 31,758
Goodwill
2015 2014RO’000 RO’000
Initial goodwill 38,101 38,287Exchange differences (131) (186)At 31 December 37,970 38,101
Impairment At 1 January and 31 December 6,539 6,539
Net carrying amount 31 December 31,431 31,562
(a) Goodwill represents the excess of the cost of acquiring shares in certain subsidiary companies over the aggregate fair value of the net assets acquired.
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8 Intangible assets (continued)(b) The carrying amount of goodwill at 31 December allocated to each of the cash-generating units is as follows:
2015 2014RO’000 RO’000
Topaz Energy and Marine Limited 28,821 28,821Tawoos Industrial Services Company LLC 1,900 1,900Norsk Offshore Catering AS 710 841
31,431 31,562
(c) The recoverable amount of each cash-generating unit is determined based on a value-in-use calculation, using current year actual free cash flows determined from EBITDA. The key assumptions of the value-in-use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs incurred during the period. Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to each cash-generating unit. The growth rates are based on management estimates having regard to industry growth rates. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
(d) The key assumptions underlining the value in use are described below:
Discount rate
The discount rate used for value in use calculations in 2015 ranges from 7.8 % to 11.7 % (2014 - 9.2% to 11.56%) for various cash generating units.
Terminal value calculations
The discounted cash flow calculations for all the cash generating units are based on the current year actual free cash flows determined from EBITDA. These cash flows then form the basis of perpetuity cash flows used in calculating the terminal value.
Growth rate
Growth rate used for value in use calculation in 2015 is 3% (2014 - 3%).
Sensitivity to changes in assumptions
(e) With regard to the assessment of value-in-use of the cash generating units, management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of the goodwill to materially exceed its recoverable amount.
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9 Principal subsidiaries (a) The details of Group and parent company investments in principal subsidiary and associate companies are
as follows:
Company Country of incorporation
Percentage shareholding Principal activities 2015 2014
Subsidiary companiesTopaz Energy and Marine Limited (TEAM JAFZA)
United Arab Emirates
100% 100% Holding company
Tawoos Industrial Services Company LLC (TISCO) Sultanate of Oman 100% 100%
Contract catering, facilities management and establishment, operations and maintenance services
Renaissance International Limited (RIL)
Cayman Islands 100% - Holding company
Renaissance Energy Limited (REL)
United Arab Emirates 100% 100% Holding company
Renaissance Duqm Holding SAOC (RDH) Sultanate of Oman 51.9% 51.9% Holding companyRenaissance Integrated Facilities Management SAOC Sultanate of Oman 100% 100%
Contract catering, facilities management and establishment, operations and maintenance services
(b) Subsidiaries of TEAM JAFZA
Company Country of incorporation
Percentage shareholding Principal activities 2015 2014
Topaz Energy and Marine Limited (formerly Nico Middle East Limited) [Topaz]
Bermuda 90.2% 90.2% Charter of marine vessels
Topaz Holdings Limited [refer (ii) below]
United Arab Emirates
- 100% Holding company
Topaz Engineering Limited (TE) [refer (iii) below]
Bermuda - 100% Holding company
Topaz Energy and Marine Plc United Kingdom 100% 100% Dormant company
(i) Topaz Energy and Marine Limited (formerly Nico Middle East Limited) has a subsidiary BUE Marine Ltd, incorporated in UK, which operates through its subsidiaries and is engaged principally in charter of marine vessels and vessel management.
(ii) During the year, the Group has dissolved Topaz Holdings Limited.
(iii) During the year, the Group has disposed Topaz Engineering Limited as disclosed in note 15.
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9 Principal subsidiaries (continued)(c) Subsidiaries of TISCO
Company Country of incorporation
Percentage shareholding Principal activities 2015 2014
Rusail Catering and Cleaning Services LLC
Sultanate of Oman 100% 100% Catering and cleaning services
Supraco Limited (Supraco) Cyprus 100% 100% Catering services
Renaissance Contract Services International LLC (RCSI)
Sultanate of Oman 100% 100% Holding company
Al Wasita Catering Services LLC (Al Wasita)
Sultanate of Oman 100% 100% Dormant company
Renaissance Facilities Management Company SAOC
Sultanate of Oman 100% 100% Contract catering, facilities management and establishment, operations and maintenance services
(i) Supraco Limited through its subsidiaries in Norway provides contract catering services.
(ii) RCSI through its subsidiaries in Angola and UAE provides catering and allied services in the respective countries. One of its subsidiaries in UAE is dormant as at 31 December 2015 and the other subsidiary in Angola has been classified as discontinued operations during the year [refer note 15(b)].
(d) Subsidiary of Renaissance Duqm Holding SAOC
Company Country of incorporation
Percentage shareholding Principal activities 2015 2014
Renaissance Duqm Accommodation Company SAOC (RDAC)
Sultanate of Oman 100% 100% Build, own and operate permanent accommodation for contractors
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9 Principal subsidiaries (continued)(e) Summarised financial information of subsidiaries in TEAM JAFZA with material non-controlling interest.
Summarised statement of financial position Topaz Energy and Marine Limited
Caspian Region Subsidiaries
2015 2014 2015 2014 RO’000 RO’000 RO’000 RO’000CurrentAssets 67,354 75,971 40,998 22,625Liabilities 50,751 61,981 75,108 80,632Total current net assets/(liabilities) 16,603 13,990 (34,110) (58,007) Non-currentAssets 481,747 517,192 198,464 205,979Liabilities 277,598 273,741 55,913 54,492 Total non-current net assets 204,149 243,451 142,551 151,487 Net assets 220,752 257,441 108,441 93,480 Summarised statement of comprehensive income Revenue 139,412 155,624 38,044 37,407 (Loss)/profit before income tax (13,940) 28,641 15,865 15,602Income tax expense (8,557) (8,604) (267) (221) (Loss)/profit for the year from continuing operations (22,497) 20,037 15,598 15,381Other comprehensive income - - - - Total comprehensive (loss)/income for the year (22,497) 20,037 15,598 15,381 Total comprehensive income allocated to non-controlling interests 4,830 8,053 7,799 7,683
Dividends paid to non-controlling interests 1,675 - 846 -
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9 Principal subsidiaries (continued)(e) Summarised financial information of subsidiaries in TEAM JAFZA with material non-controlling interest.
(continued)
Summarised statement of cash flows
2015 2014 2015 2014RO’000 RO’000 RO’000 RO’000
Cash flows from operating activitiesCash generated from operations 69,542 87,102 11,598 39,624Income taxes paid (8,062) (6,619) (105) (221)Interest paid (21,224) (24,017) (10,170) (10,676)End of service benefits paid (257) (130) - - Net cash generated from operating activities 39,999 56,336 1,323 28,727 Net cash used in investing activities (18,108) (114,659) (558) (37,413) Net cash (used in)/generated from financing activities (20,160) 16,830 (5,092) 9,332 Net increase/(decrease) in cash and cash equivalents 1,731 (41,493) (4,327) 646Cash and cash equivalents at 1 January 19,390 60,883 5,364 4,718 Cash and cash equivalents at 31 December 21,121 19,390 1,037 5,364
The information above is the amount before inter-company eliminations.
(f) Summarised financial information of subsidiaries in Renaissance Duqm Holding Company SAOC with material non-controlling interest.
2015RO’000
Summarised statement of financial positionCurrentAssets 2,305Liabilities (9,572)Total current net liabilities (7,267)
Non-currentAssets 26,865Liabilities (3,607)Total non-current net assets 23,258Net assets 15,991
Summaries statement of cashflows
Net cash used in investing activities (20,453)Net cash generated from financing activities 21,785Increase in cash and cash equivalents 1,332Cash and cash equivalents at 1 January -Cash and cash equivalents at 31 December 1,332
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10 Investments2015 2014
RO’000 RO’000
Available-for-sale investments 322 322
Available-for-sale investments
(a) Available-for-sale investments represent the cost of investments in the following entities:
Ownership interest (%)2015 2014
Fund for Development of Youth Projects SAOC 2.33 2.33Industrial Management Technology & Contracting LLC 1.25 1.25
(b) There are no movements in the carrying value of the Group’s investments in available-for-sale.
(c) The available-for-sale investments are denominated in Rial Omani.
(d) None of these financial assets are impaired.
(e) Available-for-sale investments are carried at cost and the carrying value approximates its fair value.
11 Inventories 2015 2014
RO’000 RO’000
Stock and consumables 4,103 4,306
(a) During the year the Group did not require to make a provision for slow-moving and obsolete stock (2014: Nil).
12 Financial instruments (a) Financial instruments by category
2015Loans and
receivablesAvailable-
for- saleAssets at fair value
through profit or loss TotalRO’000 RO’000 RO’000 RO’000
AssetsInvestments - 322 - 322Other long-term receivables 3,562 - - 3,562Financial assets at fair value through profit or loss - - 14 14Trade and other receivables (excluding other receivables and prepayments and advances) 55,846 - - 55,846Cash and bank balances 41,576 - - 41,576
100,984 322 14 101,320
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12 Financial instruments (continued)(a) Financial instruments by category (continued)
2014Loans and
receivablesAvailable-
for- saleAssets at fair value
through profit or loss TotalRO’000 RO’000 RO’000 RO’000
AssetsInvestments - 322 - 322Other long-term receivables 1,052 - - 1,052Financial assets at fair value through profit or loss - - 14 14Trade and other receivables (excluding other receivables and prepayments and advances) 61,379 - - 61,379Deposits under lien 5,412 - - 5,412Cash and bank balances 40,734 - - 40,734
108,577 322 14 108,913
Other financial liabilities at amortised cost
2015 2014Liabilities RO’000 RO’000Borrowings 352,753 371,575Equity settled mandatory convertible bonds 21,591 63,064Non-current payables and advances 6,618 2,760Trade and other payables 43,765 36,927Derivative liability 12,284 7,577Short-term borrowings and bank overdrafts 7,717 6,850
444,728 488,753
(b) Credit quality of financial assets
As per the credit policy of the company, customers are generally extended a credit period of up to three months in the normal course of business. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external ratings (if available) or to historical information about counterparty default rates:
Trade debtors 2015 2014Counterparties without external credit rating RO’000 RO’000
Not past due 38,518 40,335Past due 0 to 3 months 13,411 12,610Past due over 3 months 3,736 6,387Total 55,665 59,332
Cash at bank
With respect to exposures with banks, management considers the credit risk exposure to be minimal as the company only deals with banks with a minimum rating of P-2 as per Moody’s investors service. Management does not expect any losses to arise from non-performance by these counterparties
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13 Trade and other receivables 2015 2014
RO’000 RO’000CurrentTrade receivables (net of provision for doubtful debts) 55,665 59,332Other receivables and prepayments 7,660 14,974Advances to suppliers and contractors 2,159 1,863 Amounts due from related parties 181 184
65,665 76,353Non-currentOther long-term receivables 3,562 1,052
(a) As at 31 December 2015, trade receivables of RO 8.715 million (2014 - RO 7.788 million) were impaired and provided for.
(b) The fair value of trade debtors and other receivables approximate their carrying amounts.
(c) The other classes within trade and other receivables do not contain impaired assets.
(d) Other receivables and prepayments include receivable from Caspian JV partners (MI) amounting to RO Nil (2014 – RO 4.885 million)
(e) Other long-term receivables include receivables relating to divestment of a subsidiary amounting to RO 2.45 million.
(f) The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above.
(g) Movement in the allowance for impairment of receivables is as follows:
2015 2014RO’000 RO’000
At 1 January 7,788 6,211Charge for the year (refer note below) 226 1,868Charge for the year (relating to discontinued operation) 2,315 -Amounts written-off (1,630) (576)Transfer 16 285At 31 December 8,715 7,788
(h) As at 31 December, the ageing of unimpaired trade receivables is as follows:
Past due but not impaired
TotalRO’000
Neither past due nor impaired
RO’000< 30 days
RO’000
30 – 60 days
RO’000
60 – 90 days
RO’000
90 – 120 days
RO’000>120 days
RO’000
2015 55,665 38,518 8,085 3,224 2,102 641 3,095
2014 59,332 40,334 7,679 3,086 1,845 1,358 5,030
(i) Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables and the vast majority are, therefore, unsecured.
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13 Trade and other receivables (continued)(j) The carrying amounts of the Group’s trade receivables are denominated in the following currencies
2015 2014RO’000 RO’000
Rial Omani 21,044 23,355US Dollar 32,556 32,686Others 2,065 3,291
55,665 59,332
14 Cash and cash equivalents2015 2014
RO’000 RO’000
Cash and bank balances 41,576 46,146Less: deposits under lien - (5,412)Cash and cash equivalents (excluding bank overdrafts) 41,576 40,734Less: bank overdrafts (note 23) (327) (1,075)Cash and cash equivalents 41,249 39,659
15 Non-current assets held-for-sale and discontinued operations(a) During the year, the Group disposed of one of its subsidiaries Topaz Engineering Limited (TE). The disposal
comprised of sale of shares of TE with effective disposal date of 31 August 2015, as per the Sale and Purchase Agreement (the Agreement) executed with a third party and recognised loss on disposal of RO 2.2 million. The Agreement excluded one of the businesses of TE (the Business) with net assets of RO 1.6 million as at the date of the Agreement. On 1 September 2015, management decided to close down the Business and consequently recognised a loss amounting to RO 1.4 million which was included in the loss on disposal of RO 2.2 million. No additional losses are expected to be recognised from the closure of the Business.
(b) During the year, Renaissance Contratos e Servicos Angola, Lda, one of the subsidiaries of the Group, was classified as discontinued operations following the approval of the Board of Directors on 15 November 2015.
(c) In 2013, the assets and liabilities related to NHI were classified as held-for-sale following the approval of the Group’s Board of Directors on 10 December 2013. The related disposal transactions are expected to be completed in 2016.
(d) Assets of disposal group classified as held-for-sale:
2015 2014RO’000 RO’000
Property, plant and equipment 86 5,669Inventories - 4,567Cash and bank balances 33 1,542Other current assets 302 7,376
421 19,154
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15 Non-current assets held-for-sale and discontinued operations (continued)(e) Liabilities of disposal group classified as held-for-sale:
2015 2014RO’000 RO’000
Trade payables and accrued expenses 75 7,334Other liabilities 125 2,089
200 9,423
(f) The operations of disposal group are presented as discontinued operations in these consolidated financial statements.
(g) Analysis of the results of discontinued operations is as follows:
2015 2014RO’000 RO’000
Revenue 20,652 31,869Expenses (24,556) (32,286)Loss before tax from discontinued operations (3,904) (417)Tax - (45)Loss after tax from discontinued operations (3,904) (462)
(Loss)/gain on disposal where completed (2,204) 1,802(Loss)/gain on disposal after tax (6,108) 1,340
(Loss)/profit for the year from discontinued operations (6,108) 1,340
(h) Analysis of the cash flows of discontinued operations is as follows:
2015 2014RO’000 RO’000
Operating cash flows 283 (3,115)Investing cash flows (30) (2,053)Financing cash flows (248) 5,999Total cash flows 5 831
The cash flows of discontinued operations for 2015 above do not include cash flows of TE, which was disposed during the year. The net sale proceeds from disposal of TE were received and classified as cash flows from investing activities.
(i) Following closure of operations of the parent company’s associate companies i.e. Dubai Wire and Global Fastener Limited in 2013, the carrying amount of investments in these associates RO 1.587 million was fully written-off in 2013. These associates were dormant in 2015 and their liquidation process commenced in 2015.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
16 Capital and reserves(a) Share capital
The authorised share capital of the parent company comprises 1,500,000,000 ordinary shares of RO 0.100 each (2014 : 1,500,000,000 of RO 0.100 each). At 31 December 2015, the issued and fully paid up share capital comprised 290,651,021 ordinary shares of RO 0.100 each (2014: 282,094,452 of RO 0.100 each). The increase in number of shares pertains to conversion of the MCBs to shares in 2015 (refer Note 18).
Details of shareholders, who own 10% or more of the parent company’s share capital, are as follows:
2015 2014Number of shares
000 %Number of shares
000 %
Tawoos LLC 42,538 14.64 42,538 15.08
(b) Legal reserve
The Omani Commercial Companies Law of 1974 requires that 10% of an entity’s net profit be transferred to a non-distributable legal reserve until the amount of the legal reserve becomes equal to one-third of the entity’s issued share capital. The legal reserve is not available for distribution. Legal reserve also includes a transfer relating to non-Oman registered subsidiary companies as per the respective regulations in their country of incorporation. During the year, the parent company transferred RO 0.285 million to legal reserve.
(c) Treasury shares
These are shares held by a subsidiary of the parent company at the cost of RO 3,444,927 (2014 - RO 1,703,826). Dividend received on these treasury shares has been directly transferred to retained earnings and shown as movement in the statement of changes in equity. At 31 December 2015, the subsidiary held 20,750,625 shares (2014 - 14,554,586 shares) in the parent company. The increase in number of treasury shares pertains to conversion of the MCBs held by one its subsidiaries to shares in 2015 (refer Note 18). The market value of these shares at 31 December 2015 was approximately RO 3.4 million (2014 – RO 6.9 million).
(d) Share premium
The Group utilises the share premium for issuing bonus shares and transfers to legal reserve. No such transfers took place during 2015. The increase in share premium pertains to conversion of the MCBs to shares in 2015 (refer Note 18).
(e) Subordinated loan reserve
As per the subordinated loan agreement, the parent company is required to create a subordinated reserve by transferring an amount equal to 1/7th of the outstanding aggregate amount of loan notes out of annual profits after tax of the parent company. As the balance of the subordinated reserve account was adequate to cover the outstanding balance of the loan notes, no transfer was required to be made in 2015 and excess amount of RO 1.429 million in the reserve account was transferred back to retained earnings. This reserve will be completely released at the time of full repayment of the subordinated loan. This reserve will be completely released at the time of full repayment of the subordinated loan [note 17 (b)].
(f) Exchange reserve
The exchange reserve comprises of foreign currency differences arising from translation of the financial statements of foreign operations.
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17 Borrowings 31 December 2015 Total 1 year or less 2 -5 Years More than 5 years
RO’000 RO’000 RO’000 RO’000
Parent company - term loans 72,554 5,236 23,960 43,358Parent company - subordinated loan 20,000 10,000 10,000 - Borrowings of subsidiary companies 260,199 11,539 181,353 67,307
352,753 26,775 215,313 110,665
31 December 2014 Total 1 year or less 2 -5 Years More than 5 yearsRO’000 RO’000 RO’000 RO’000
Parent company - term loans 78,163 7,767 22,026 48,370Parent company - subordinated loan 30,000 10,000 20,000 -Borrowings of subsidiary companies 263,412 21,811 234,193 7,408
371,575 39,578 276,219 55,778
(a) Term loans in parent company
2015 2014RO’000 RO’000
Parent company - term loans 74,504 80,297Less: Deferred finance costs (1,950) (2,134)
72,554 78,163
The parent company obtained a syndicated long-term loan (the facility) from commercial banks dated 4 July 2013. The total facility limit is RO 130 million. The facility carries interest of 5% p.a and is repayable in 52 quarterly installments as per the facility agreement. The facility is secured by commercial and legal mortgage over certain properties of the parent company, pledge of certain TEAM JAFZA shares, account pledge with lead bank, assignment of receivables from the parent company’s business, assignment of insurance and dividend income. The first drawdown from the facility of RO 90 million was made on 23 August 2013.
(b) Subordinated loan in parent company
In 2010, the parent company raised a subordinated loan of RO 40,000,000 through an issue of subordinated loan notes denominated in Rial Omani, which is secured by a second charge over the assets of the parent company and its subsidiaries. The loan has been raised by the parent company for funding its subsidiary company, TEAM JAFZA for meeting the financing requirements of the expansion plans in TEAM JAFZA’s marine (OSV) businesses.
The first drawdown of RO 20,000,000 of the loan was made on 6 December 2010 and the second drawdown of RO 20,000,000 was made on 28 February 2011. The tenure of the loan is 7 years with repayment of four annual installments of RO 10,000,000 with effect from November 2014. Pursuant to the subordinated loan agreement, the parent company is required to restrict dividends, raise additional capital and create a subordinated loan reserve by transferring an amount equal to 1/7th of the outstanding aggregate amount of loan notes out of annual profit after tax of the company from 31 December 2011. The subordinated loan carries a fixed interest rate of 8.5% per annum.
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17 Borrowings (continued)(c) Borrowings of subsidiary companies
(i) Loans relating to TEAM JAFZA On 4 November 2013 the Group issued RO 135 million aggregate principal amount of 8.625% senior notes (the Senior Notes) that matures on 1 November 2018. The Senior Notes are denominated in US Dollars and pay interest semi-annually in arrears on 1 May and 1 November of each year, which commenced from 1 May 2014. Interest has been accrued from the issue date. On and after 1 November 2016, the Group may redeem some or all of the Senior Notes at the redemption prices (expressed as percentages of principal amount) equal to 104.3125% for the twelve month period beginning 1 November 2016, 102.15625% for the twelve month period beginning 1 November 2017 and 100% beginning 1 October 2018, plus accrued and unpaid interest and additional amounts, if any, to the redemption date. The Senior Notes have been issued by Topaz Marine S.A., a wholly-owned subsidiary of Topaz Energy and Marine Limited (formerly Nico Middle East Ltd.), incorporated in Luxembourg. The Senior Notes are listed on the Global Exchange Market of the Irish Stock Exchange.In conjunction with the Senior Notes offering, RO 4.64 million in debt issuance costs were incurred. These costs are accounted as per IFRS and are amortised into finance costs over the life of the Senior Notes using the effective interest method. Out of the proceeds from the issuance of the Senior Notes RO 46 million equivalent were used to prepay amounts outstanding under some of the senior secured bank borrowings and the balance proceeds have been used for acquisition of vessels.
(ii) The term loans of TEAM JAFZA amounting to RO 258.199 million (2014 - RO 263.412 million) are denominated either in USD or UAE Dirham and are secured by a first preferred mortgage over certain assets of the subsidiaries, the assignment of marine vessel insurance policies, corporate guarantees, lien on fixed deposits and the assignment of the marine vessel charter lease income.
(iii) During the year, the Group successfully refinanced its existing bank debt amounting to RO 120.638 million under various facilities. As a result of this refinancing, on 30 April 2015, the Group entered into an agreement with a syndicate of banks for a financing facility of RO 212 million. The existing liabilities under the target restructure loans were prepaid and were replaced by a new term loan amounting to RO 126.482 million as at 31 December 2015. The Group recognised a charge on extinguishment of debt of RO 3.2 million in 2015 in relation to the prepayment of these term loans and included under net finance cost. The amount is included as part of finance costs in the consolidated statement of comprehensive income. The new term loan carries interest at the rate of three-month LIBOR plus 2.75% and is repayable in quarterly instalments till April 2022.
(iv) The borrowing arrangements include undertakings to comply with various covenants including net debt to EBITDA ratio and EBITDA to debt service ratio as well as an undertaking to maintain a minimum tangible net worth which shall not be less than RO 192 million and minimum total free liquidity which shall not be less than RO 11.5 million.
(v) Loans relating to Renaissance Duqm Accommodation Company SAOC (RDAC)
RDAC has signed a facility agreement dated 20 April 2015 with commercial banks and financial institutions in Oman amounting to RO 45,308,000 and out of total facility, the Group has availed RO 2 million in August 2015. The costs incurred to arrange this facility amounted to RO 844,810. These borrowings are denominated in Rial Omani. Under the terms of the facility agreement, the principal is repayable in 141 monthly instalments starting from 180 days after the commencement of operations. The interest rate of 4.5% p.a. is fixed up to 18 months from the commencement of operations, thereafter it shall be reviewed and can be revised annually by majority of the lenders. Interest is payable from the date of utilisation of the loan. The loan is secured by mortgage over assets of RDAC and assignment of insurance.
(d) Term loans are disclosed in the statement of financial position as:
2015 2014RO’000 RO’000
Non-current liabilities 325,978 331,997Current liabilities 26,775 39,578
352,753 371,575
(e) The carrying amounts of term loans approximate to their fair values.
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17 Borrowings (continued)(f) The carrying amounts of the Group’s borrowings are denominated in the following currencies:
2015 2014RO’000 RO’000
Rial Omani 94,554 108,163US Dollar 258,199 257,825AED - 5,587
352,753 371,575
18 Equity settled mandatory convertible bondsIn 2012 the parent company issued 423,141,678 Mandatory Convertible Bonds (MCB) to its shareholders at RO 0.102 each (including RO 2 baizas for expenses) on 25 July 2012. The Group companies subscribed 30,673,468 bonds out of the total issue. The bonds carry a coupon rate of 3.75% per annum. The MCB shall be converted at face value through conversion into equity shares of the parent company at the conversion price. The conversion will be carried out in three tranches of 33.33% in third and fourth year each and 33.34% in fifth year from the issue date. The number of outstanding MCBs shall convert upon each conversion into equity shares, so as to fully convert all the outstanding MCBs at the end of fifth anniversary from the issue date. The conversion price shall be equal to the average of the closing market price of the shares, as quoted on Muscat Securities Market (MSM), in the 30 days prior to the respective date of conversion, subject to adjustments including rights issue, stock dividend, split and reverse split of shares divided by the conversion factor (1.7). The bonds are listed on MSM and classified as liabilities in accordance with the guidance given in IAS-32 ‘Financial instrument: Presentation’.
In conjunction with MCB, RO 0.372 million in bond issuance costs were incurred and have been accounted as per IFRS and are amortised into finance costs over the life of the MCB using the effective interest method.
For all banking covenants calculations, MCBs are considered as part of equity.
The shareholders and the MCB holders of the company approved MCBs repurchase program in their respective General meetings held in June 2015. Accordingly, the company completed repurchase of first tranche of MCBs in July 2015. Out of 141,032,909 due for conversion in July 2015, 126,914,334 MCBs were repurchased at a price of RO 0.170 per MCB amounting to RO 21.6 million. The balance 14,118,575 MCBs were converted to 8,556,712 shares at a conversion price of RO 0.165 per MCB. The company has also repurchased 127,320,320 out of second tranche of MCBs in August 2015 at a repurchase price of RO 0.151 amounting to RO 19.2 million.
As at 31 December 2015, the quoted market value of the MCBs was RO 19.48 million (2014 – RO 45.13 million)
19 Perpetual notesThe Group issued step-up subordinated perpetual notes (perpetual notes) on 29 July 2015. Renaissance International Limited (the Issuer), a limited liability company registered in the Cayman Islands and a wholly-owned subsidiary of the parent company, has issued RO 48.3 million (USD 125.5 million) perpetual notes. Issuance costs amounting to RO 1.5 million (USD 3.9 million) were incurred. The perpetual notes are listed on the Irish Stock Exchange. These perpetual notes are a perpetual security in respect of which there is no fixed redemption date. The perpetual notes are callable by the issuer 5 years after the issue date, being 29 July 2020 (the First Call Date). The perpetual notes bear a coupon rate of 7.9% per annum, from the issue date to the first call date, payable semi-annually in arrears, however coupon is payable only upon occurrence of certain events, which are at the company’s discretion. The perpetual notes are classified as equity instruments. Post the first call date the coupon rate on perpetual notes shall increase to 12.9% per annum on the outstanding perpetual notes. The coupon liability under perpetual notes is recorded as a liability and the related charge recognised in equity in the period in which the trigger for such coupon liability occurs.
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20 Non-current payables and advances2015 2014
RO’000 RO’000
Derivative financial instrument (note 29) 12,284 7,577Income tax payable 1,197 2,104Other payables and advances 6,618 2,760Deferred income 221 571
20,320 13,012
21 Staff terminal benefits The table below outlines the Group’s post-employment liabilities:
2015 2014RO’000 RO’000
Defined benefit pension plan - Funded (a) - 571Unfunded benefits (b) 4,435 3,857
4,435 4,428
(a) The amount recognised in the statement of financial position is determined as follows:
2015 2014RO’000 RO’000
Present value of defined benefit obligation 4,464 5,745 Fair value of plan assets (4,692) (5,174)(Assets)/liability in the statement of financial position (228) 571
(i) The movement in defined benefit obligation over the year is as follows:
2015 2014 RO’000 RO’000
At 1 January 5,745 7,324Service cost during the year 698 962Interest costs on prior year’s benefit obligation 155 194Pension paid during the year (106) (141)Exchange differences (847) (954)Employer’s social security tax on contributions (180) (140)Re - measurement during the year arising from actuarial loss (1,001) (1,500)At 31 December 4,464 5,745
(ii) The movement in fair value of plan assets over the year is as follows:
2015 2014RO’000 RO’000
At 1 January 5,174 5,550Return on plan assets 146 147Company contributions 1,457 1,138Pension paid during the year (96) (124)Exchange differences (838) (1,039)Employer social security tax on contribution (180) (140)Re - measurement during the year arising from actuarial loss (971) (358)At 31 December 4,692 5,174
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
21 Staff terminal benefits (continued)(iii) The following table summarises the components of net benefit recognised in the income statement
2015 2014RO’000 RO’000
Net present value of the year’s pensions earnings 602 824Interest on net obligation 12 50Administration cost 15 15Employer’s social security tax 89 122At 31 December 718 1,011
The following actuarial assumptions were used:
2015 2014Discount rate 2.5% 3%Yield on pension assets 2.5% 3%Wage growth 2.5% 3.25%Expected regulation of G 2.25% 3%Expected growth rate – pensions under payment 0.00% 0.10%Applied mortality table (Norwegian Insurance Standard) K2013BE K2013BE
(iv) The pension scheme of one of Group’s overseas subsidiary covers a total of 278 employees (2014- 386 employees). The pension scheme gives the right to defined future benefits, which are mainly dependent on number of years the employee worked, salary level at time of retirement and the amount of payment from the national insurance fund. The obligations are partially covered through an insurance company. The calculated pension obligations are based on actuarial valuations. The actuarial valuations are based on assumptions of demographical factors normally used within the insurance industry.
(b) The amount of unfunded benefits recognised in the statement of financial position are determined as follows:
2015 2014 RO’000 RO’000At 1 January 3,857 3,267Accrued during the year 1,553 1,984Payments during the year (978) (1,394)Disposal 3 -At 31 December 4,435 3,857
The unfunded obligation represents end of service benefits for expatriate employees calculated in accordance with the local labour laws.
Significant amount of terminal benefits as at 31 December 2015 comprised of end of service obligations of TEAM JAFZA 2015 - RO 1,488,000 (2014 - RO 1,569,000). Principal actuarial assumptions for TEAM JAFZA at the reporting date are:
• Normal retirement age: 60-65 years (2014 - 60-65 years).
• Mortality, withdrawal and retirement: 5% (2014 - 5%) turnover rate. Due to the nature of the benefit, which is a lump sum payable on exit due to any cause, a combined single decrement rate has been used for maturity, withdrawal and retirement.
• Discount rate: 4.16% (2014 – 4.27 %) p.a.
• Salary increases: 3% to 5% (2014 - 3% to 5%) p.a.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
22 Trade and other payables
2015 2014
RO’000 RO’000
Trade payables 10,859 13,614
Accrued expenses and other payables 32,971 30,890
Income tax payable 12,218 10,379
Amounts due to related parties 1 -
56,049 54,883
23 Short-term borrowings and bank overdrafts Certain of the Group’s bank borrowings are secured by a registered first mortgage over certain assets of the Group, guarantees and assignment of receivables. Short-term bank borrowings and overdrafts carry interest rates ranging from 2.2% to 7.5% per annum (2014 - 3% to 8% per annum).
24 Net assets per shareNet assets per share is calculated by dividing the net assets at the year-end attributable to the shareholders of the parent company by the number of shares outstanding as follows:
2015 2014
RO’000 RO’000
Net assets
Net assets 257,145 248,541
Perpetual Notes (46,799) -
Non-controlling interest (79,546) (79,996)
Net assets attributable to the shareholders of the parent company 130,800 168,545
Number of shares
Number of shares at 1 January (‘000) 290,651 282,094
Treasury shares (refer note 16) (‘000) (20,751) (14,555)
Number of shares at 31 December (‘000) 269,900 267,539
Net assets per share (RO) 0.485 0.630
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25 Earnings per share(a) Basic
Basic earnings per share is calculated by dividing the net profits for the year attributable to the shareholders of the parent company by the weighted average number of shares in issue during the year excluding ordinary shares purchased by the Group and held as treasury shares as follows:
2015 2014
Net (loss)/profit for the year attributable to the shareholders of the parent company (RO 000) from continuing operations (28,725) 16,001
Net (loss)/profit for the year attributable to the shareholders of the parent company (RO 000) from discontinued operations (6,108) 1,340
Total (loss)/profit for the year attributable to the shareholders (34,833) 17,341
Weighted average number of shares
Number of shares at 1 January (000) 285,659 282,094
Less: weighted average number of treasury shares (000) (17,137) (14,555)
Weighted average number of shares (000) 268,522 267,539
(Loss)/earnings per share expressed in Rial OmaniBasic (loss)/earnings per share from continuing operations (0.113) 0.060
Basic (loss)/earnings per share from discontinued operations (0.023) 0.005
Basic (loss)/earnings per share for the year (0.136) 0.065
(b) Diluted
Diluted earnings per share is calculated by dividing the net profit attributable to the ordinary shareholders of the parent company for the period by the weighted average number of ordinary shares including dilutive potential ordinary shares issued on the conversion of convertible bonds.
2015 2014Net (loss)/profit for the year attributable to the shareholders of the parent company (RO 000) from continuing operations (28,725) 16,001(after adding back post tax interest on mandatory convertible bonds)
Net (loss)/profit for the year attributable to the shareholders of the parent company (RO 000) from discontinued operations (6,108) 1,340
(34,833) 17,341Weighted average number of shares
Number of ordinary shares at 1 January (000) 290,651 282,094Less: weighted average number of ordinary treasury shares (000) (20,751) (14,555)Add: weighted average number of potential ordinary shares (000) 161,436 151,760Less: weighted average number of potential ordinary treasury shares (000) (21,328) (11,001)Weighted average number of shares (000) 410,008 408,298
(Loss)/earnings per share expressed in Rial OmaniDilutive (loss)/earnings per share from continuing operations (0.071) 0.043Dilutive (loss)/earnings per share from discontinued operations (0.015) 0.003Dilutive (loss)/earning per share for the year (0.086) 0.046
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
25 Earnings per share (continued)Potential ordinary shares are the ordinary shares to be issued in future against Mandatory Convertible Bonds issued by the parent company. These potential ordinary shares are notional and are calculated based on the assumption that all the MCBs were converted to ordinary shares based on the market price of the parent company’s shares as at 31 December 2015, which is as per the requirement of IAS-33 ‘Earnings per share’. However, the actual shares to be issued against MCBs, would be determined at future market price of the parent company’s share as per terms of the bonds issue (refer note 18).
(i) Reconciliations of (loss)/profit used in calculating (loss)/earnings per share
2015 2014RO’000 RO’000
Basic earnings per share(Loss)/profit attributable to the ordinary shareholders of the Group used in calculating basic earnings per share:From continued operations (28,725) 16,001Less: return on perpetual notes (1,631) -(Loss)/profit from continued operations (30,356) 16,001(Loss)/profit from discontinued operations (6,108) 1,340
(36,464) 17,341Diluted earnings per share(Loss)/profit from continuing operations attributable to the ordinary shareholders of the Group: Used in calculating basic earnings per share: (28,725) 16,001Less: return on perpetual notes (1,631) -Add: Interest savings on MCBs 1,120 1,362(Loss)/profit from continued operations (29,236) 17,363(Loss)/profit from discontinued operation (6,108) 1,340
(35,344) 18,703
26 Related parties Related parties comprise the shareholders, directors, key management personnel and business entities in which the company or these related parties have the ability to control or exercise significant influence in financial and operating decisions.
The Group has balances with these related parties which arise in the normal course of business. Outstanding balances at year end are unsecured and settlement occurs in cash.
The Group entered into transactions in the ordinary course of business with related parties, other affiliates and parties in which certain members and senior management have a significant influence (other related parties).
(a) Significant related party transactions during the year are listed below:
2015 2014RO’000 RO’000
IncomeServices rendered and sales to other related parties 23 26
ExpensesServices received and purchases from other related parties 274 274
Directors’ remuneration and sitting feesSitting fees 50 200
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
26 Related parties (continued)Remuneration and sitting fees above relate only to the parent company.
Out of above related party transactions, following are the details of transactions entered into with the related parties holding 10% or more interest in the parent company:
2015 2014RO’000 RO’000
Service rendered and sales 20 20
(b) Compensation to key management personnel
The remuneration of key management personnel during the year are as follows:
2015 2014RO’000 RO’000
Short-term benefits 1,081 1,769Employees’ end of service benefits 325 119
1,406 1,888
TEAM JAFZA has paid RO 270,900 (2014 - RO 270,900) as remuneration to its Chairman, who is also the Chairman of the parent company.
(c) Amounts due from and due to related parties have been disclosed in notes 13 and 22 respectively. For the year ended 31 December 2015, the Group has not recorded any impairment of amounts due from related parties (2014 - Nil).
27 Commitments and contingent liabilities2015 2014
RO’000 RO’000CommitmentsCapital expenditure commitments 95,105 66,152Contingent liabilitiesCorporate guarantees - 1,268Letters of guarantee 19,249 20,761
19,249 22,029
Capital expenditure commitments to be paid as at 31 December 2015 are as follows:
2015 2014RO’000 RO’000
Within one year 49,990 25,393 After one year 45,115 40,759
95,105 66,152
Contingent liabilities represent guarantees like bid bonds, performance bonds, refund guarantee retention bonds etc., which are issued by banks on behalf of Group companies to customers and suppliers under the non-funded working capital lines with the banks. These lines are secured by the corporate guarantee of various Group entities. The amounts are payable only in the event when certain terms of contracts with customers or suppliers are not met.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
28 Leases(a) Operating lease receivables
The Group leases its marine vessels under operating leases. The leases typically run for a period between 3 months to 10 years and are renewable after the expiry date. The lease rental is usually renewed to reflect market rentals.
Future minimum lease rentals receivable under non-cancellable operating leases at 31 December are as follows:
2015 2014
RO’000 RO’000
Within one year 77,195 88,627
Between one and five years 99,157 84,295
More than five years - 5,677
176,352 178,599
(b) Operating lease payables
The Group has future minimum lease payments under operating leases with payments as follows:
2015 2014
RO’000 RO’000
Within one year 80 58
Between one and five years 354 140
More than five years 10,211 -
10,645 198
During the year, an amount of RO 2.970 million (2014 - RO 5.323 million) was recognised as an expense in the statement of comprehensive income in respect of bareboat charter of marine vessels obtained on operating lease.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
29 Movement in non-controlling interests (NCI)Movement in NCI
2015 2014
RO’000 RO’000
Equity contribution from minority investors in RDH 1,250 7,300
Equity contribution from TEAM JAFZA NCI - 8,300
Increase in NCI share in TEAM JAFZA (refer note below) - 19,848
Dividends paid to minority investors in the Group (6,626) -
Adjustments to retained earnings in TEAM JAFZA (refer note below) - 1,339
Transaction costs relating to equity contribution from minority investors in RDAC (362) -
(5,738) 36,787
In 2014, a subsidiary of TEAM JAFZA (subsidiary) entered into a Subscription Agreement, consisting the issue and sale of 27,902,522 common shares, from the authorised but unissued capital stock of the subsidiary (amounting to 9.8% of the subsidiary’s paid up share capital) at a price of USD 2.68 equivalent to RO 1.03 per share for total proceeds of RO 29 million in cash. As part of the issue and sale of the subsidiary’s shares, TEAM JAFZA entered into a Shareholders Agreement with the investor, whereby the company and the subsidiary indicated that it shall use all reasonable endeavours to provide the investor a Liquidity Event, as defined in the Shareholders Agreement, within three (3) years. If a Liquidity Event has not been achieved within three years, the investor shall have the right thereafter to request Renaissance Services SAOG (the parent company) to purchase the investor’s entire share, at a price that yields the investor, a return of 12% on the invested amount.
The parent company has the right to decide whether or not to exercise this right. If the parent company does not exercise this right, the investor has the right to sell the shares it owns to a third party on arm’s length terms. In the event, such a sale does not achieve the required return, TEAM JAFZA will provide the investor a right to drag that portion of TEAM JAFZA’s shares in the subsidiary which would enable the investor to achieve the target return. The aggregate impact of these terms has been accounted for as a derivative liability in accordance with IAS 39.
The proceeds of the private placement were used by the subsidiary to fund expansion plans, which included the acquisition of additional vessels, mergers and acquisitions and joint venture transactions, repayment of existing third party debt, repayment of shareholder loans and general corporate purposes at the subsidiary.
As a result of the above transaction, the company recognised a net adjustment to retained earnings of RO 1.3 million upon signing the subscription agreement. Non-controlling interests have increased by RO 19.8 million to reflect the reduction in the Group’s interest in the subsidiary. Furthermore, a derivative liability of RO 7.6 million was recognised in 2014. As at 31 December 2015 the fair value of the derivative liability of RO 12.3 million was estimated by applying stochastic equity value simulation using Geometric Brownian Motion to model the distribution of paths that the equity value of the subsidiary might take. The fair value estimates are based on a discount rate of 15.5%, estimated equity volatility based on an observed 5-year historical volatilities of the stock prices of a group of guideline public companies and expected dividend yield of the subsidiary. This is a level 3 fair value measurement. A charge on account of increase in the value of the derivative liability of RO 4.7 million has been recorded in the consolidated statement of comprehensive income.
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30 Segment reportingThe Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on a regular basis. The following summary describes the operations in each of the Group’s reportable segments:
Marine (Offshore Support Vessel) services: includes vessel chartering to oil and gas off shore companies.
Contract services: includes contract Services, accommodation solutions, and integrated facilities management (IFM) services.
Other operations include discontinuing operations such as the engineering services, media publishing, advertising and distribution. This also includes investments and related activities and unallocated corporate tax expenses.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after income tax, as included in the internal management reports that are reviewed by the Group’s CEO (chief operating decision-maker). Segment profit is used to measure performance as management believes that such information is most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Sales between segments are carried out at arm’s length. The revenue from external parties reported to the Group’s CEO is measured in a manner consistent with that in the consolidated statement of comprehensive income.
The amounts provided to the Group’s CEO with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment.
RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014
86
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30 Segment reporting (continued) Geographical segments:
Revenue based on the geographical location of the business activities is as follows:
2015 2014RO’000 RO’000
Oman 77,961 68,988Middle East and North Africa (excluding Oman) 35,915 38,824Caspian 87,694 86,037Norway 19,600 25,994Others 15,841 30,909
237,011 250,752
Breakdown of the revenue from all services is as follows:
2015 2014RO’000 RO’000
From services 236,049 244,406From sale of vessels 962 6,346
237,011 250,752
The total of non-current assets other than financial instruments and deferred tax assets is as follows:
2015 2014RO’000 RO’000
Oman 103,936 87,893Others 500,048 535,384
603,984 623,277
Others include mainly MENA and Caspian regions.
31 Comparative figuresCertain comparative figures for the previous year have been reclassified, where necessary, in order to conform to the current year’s presentation. Such reclassifications did not result in changes to previously reported total comprehensive income or equity.
Independent auditor’s report on pages 34.
RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014
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STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014RO’000 RO’000
Revenue 28,236 29,071Operating expenses (18,821) (19,358)Gross profit 9,415 9,713
Other income 5,685 6,883Administrative expenses (4,057) (4,284)Profit from operations 11,043 12,312
Finance costs - net (6,941) (6,670)Net investment gain - 697Profit before tax 4,102 6,339
Taxation (1,220) 1,248Profit and comprehensive income for the year 2,882 7,587
Basic and diluted earnings per share (RO) 0.010 0.027
Diluted earnings per share (RO) 0.009 0.021
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STATEMENT OF FINANCIAL POSITION (PARENT COMPANY)AS AT 31 DECEMBER 2015
2015 2014RO’000 RO’000
ASSETSNon-current assetsProperty, plant and equipment 71,832 71,937Investments 156,789 148,251Subordinated loan to a subsidiary 20,000 20,000
248,621 240,188Current assetsInventories 718 544Trade and other receivables 51,135 51,680Subordinated loan to a subsidiary 10,000 10,000Cash and bank balances 3,134 9,922
64,987 72,146Assets of disposal group classified as held-for-sale 316 316
65,303 72,462Total assets 313,924 312,650EQUITY AND LIABILITIESEQUITYShare capital and reservesShare capital 29,065 28,209Share premium 21,045 19,496Legal reserve 9,689 9,404Subordinated loan reserve 20,000 21,429Retained earnings 17,011 15,806Total equity 96,810 94,344LIABILITIESNon-current liabilitiesBorrowings 67,318 70,396Equity settled mandatory convertible bonds 22,370 44,834Subordinated loan 10,000 20,000Non-current payables and advances 1,197 2,104Subordinated loan from a subsidiary 48,318 -Amount due to subsidiaries 25,023 18,078Staff terminal benefits 992 867
175,218 156,279Current liabilitiesCurrent portion of long-term borrowings 5,236 7,767
Equity settled mandatory convertible bonds - Current portion 2,249 22,991Current portion of long-term subordinated loan 10,000 10,000Trade and other payables 16,750 15,415Short-term borrowings 7,390 5,775
41,625 61,948Liabilities of disposal group classified as held-for-sale 271 79
41,896 62,027Total liabilities 217,114 218,306Total equity and liabilities 313,924 312,650Net assets per share (RO) 0.333 0.334
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STATEMENT OF CHANGES IN EQUITY (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2015
Sharecapital
Sharepremium
Legalreserve
Subordinatedloan reserve
Retainedearnings Total
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
At 1 January 2014 28,209 19,496 9,404 17,143 40,999 115,251
Comprehensive income :Profit for the year - - - - 7,587 7,587
Transactions with owners:Transfer to subordinated loan reserve - - - 4,286 (4,286) -Re-measurement of equity settled mandatory convertible bonds (note 22) - - - - (25,673) (25,673)Dividend paid - - - - (2,821) (2,821)At 31 December 2014 28,209 19,496 9,404 21,429 15,806 94,344
At 1 January 2015 28,209 19,496 9,404 21,429 15,806 94,344
Comprehensive income :Profit for the year - - - - 2,882 2,882
Transactions with owners:Shares issued on conversion of MCBs 856 1,549 - - - 2,405Transfer from subordinated loan reserve - - - (1,429) 1,429 -Transfer to legal reserve - - 285 - (285) -Dividend paid - - - - (2,821) (2,821)At 31 December 2015 29,065 21,045 9,689 20,000 17,011 96,810
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RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES SCHEDULES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014RO’000 RO’000
Operating activitiesCash receipts from customers 28,177 32,626Cash paid to suppliers and employees (18,959) (14,821)Cash generated from operations 9,218 17,805Finance costs - net (6,941) (6,595)Income tax (paid)/refunded (207) 98Net cash generated from operating activities 2,070 11,308
Investing activitiesAcquisition of property, plant and equipment (4,038) (4,673)Proceeds from sale of property, plant and equipment 3 17Investment in subsidiary (8,538) (7,838)Proceeds from sale of subsidiaries - 10,108Dividend received 5,334 5,664Net cash used in investing activities (7,239) (3,278)
Financing activitiesRepurchase of MCBs (40,799) -Net payments of borrowings (13,994) (15,766)Deposits matured - 5,000Deposits under lien matured 412 3,885Net movement in related parties 55,995 (4,752)Dividend paid (2,821) (2,821)Net cash used in financing activities (1,207) (14,454)
Increase in cash and cash equivalents (6,376) 132Cash and cash equivalents at the beginning of the year 9,510 9,378Cash and cash equivalents at the end of the year 3,134 9,510
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