logistics financial report 2014... · the company offers warehousing services that ranges from...

Board of Directors’ Report 6

Board Members 7

KGL Logistics Overview 9

Consolidated Financial Statements 19 - 50

6

Board of Directors’ Report

Dear Valued Shareholders,

It is with great pleasure that we are gathered here today during the ordinary general assembly meeting of KGL Logistics Company (K.P.S.C.) to present to you the Board of Director’s annual report along with Company’s financial statements and its notes and also Auditor’s report for the financial year ended 31/12/2014.

Financial IndicatorsCompany’s revenues for the financial year 2014 have reached the amount of KD 25,673,368 comparing to the amount of KD 23,987,802 for the financial year 2013, reflecting the increase of K.D 1,685,566 with a percentage of 7%.

Also, Company’s total expenses for the financial year 2014 have reached the amount of KD 20,092,610 comparing to the amount of KD 14,328,024 for the financial year 2013, reflecting the increase of K.D 5,764,586 with a percentage of 40.2%.

However, the net profits for the financial year 2014 have reached the amount of KD 5,231,686 comparing to the amount of KD 9,006,375 for the financial year 2013, reflecting the decrease of K.D 3,774,689 with a percentage of 41.9%.

Distribution of Dividends and BOD Members RemunerationThe Board of Directors is pleased to submit the following recommendations to your respectful Assembly:

• Distribute cash dividends with the total amount of K.D 3,030,687 (Three Million thirty thousand six hundred and eighty seven Kuwaiti Dinars) with the percentage of 5% from Company’s issued and paid Capital which reflects the amount of 5 Fils per share, the distribution shall be to the shareholders registered in the Company’s Registry records on the date of convening the General Assembly for the financial year ended 31/12/2014.• Grant the members of the board remunerations with the amount of K.D 100,000/- (One Hundred Thousand Kuwaiti Dinars) for the financial year 2014.

Financial benefits granted to the Board MembersNo financial benefits were granted to the Board members during the financial year 2014.

Financial benefits granted to members of Executive ManagementSalaries, indemnities and other short-term benefits amounting to KD 127,142 were granted to the Executive Management members during the financial year 2014.

Future PlansDuring the financial year 2015, Company’s Management shall develop all the logistics services which the Company provides to its client locally and regionally (within GCC) by providing the newest technical and technology resolutions in the supply and transportation field as well as logistic support to upgrade the logistics service industry in the region which notice daily speed up changes day after day, in order to expand its clients base and pave the way for additional future expansion, to assure Company’s growth and increase Shareholders’ equities and also achieve the targeted incomes in order to reach Shareholders’ aspirations. In addition, the Company is seeking to strength its participation in the local and regional tenders in order to keep up its steadily development.

Finally, we extend our sincere thanks to all the employees in our company for their great efforts and dedication to work. We ask God to bless us with progress and prosperity under the distinguished leadership of his Highness the Amir of Kuwait, His Highness the Crown Prince, His Highness the Prime Minister and his distinguished government.

With our best Regards, Dr. Ali Ismael Dashti

Chairman

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Ali E. Dashti, Ph. D.Chairman

Jafar Mohamed Ali, Ph. D.Vice Chairman

Yaqoub Abdullah Al WazzanBoard Member

Maher A. MarafiBoard Member

Sam Matthew KhatibBoard Member

Board Members

9

KGL Logistics is a Kuwaiti company listed on the Kuwait Stock Exchange. The company is a key player in the Logistics market, offering warehousing, freight forwarding, transport and stevedoring services in the region, having its headquarter in Kuwait with operations in Qatar and the United Arab Emirates along with strategic partners and representation offices all over the world.

The company offers warehousing services that ranges from leasing of warehousing space managed by the client, to managing client’s inventory in our own warehousing facility (3PL), and in 2008, the company launched its fourth party logistics services (4PL), a service that enables KGL Logistics, through a highly experienced team and specialized technology, to manage clients’ warehouses and inventory at their storage facilities.

As to freight forwarding, our services cover air, sea, and land transport including customs clearance and cargo insurance. The key to the success of the freight forwarding practice is the international network of business partners KGL Logistics endures, enabling the company to efficiently move goods around the globe.

The Stevedoring function has established partnership with Port Authorities and shipping lines locally in Kuwait and regionally within the GCC.

Throughout all of its areas of business practices, KGL Logistics implements the highest standards of technology by applying the latest warehousing management systems which enables the company to provide quality and value added services to its clients. The company is an ISO 9001:2008 certified.

KGL Logistics has been recognized in 2010, 2012 and 2013 as “The Best Logistics Company” by ITP Publishing/ Arabian Business and the Arabia500 Winner by the AllWorld Network in 2012. KGL Logistics is a member of many International and National Trade Organizations such as: IATA (International Air Transport Association), FIATA (International Federation of Freight Forwarders Associations), WCA (World Cargo Alliance), Global Group (Quality Management System), and Kuwait Overland Transport, Freight & Storage Union.

10

CONSOLIDATED FINANCIAL STATEMENTSAND INDEPENDENT AUDITORS’ REPORT

FOR THE YEAR ENDED 31 DECEMBER 2014

11

Index

Independent Auditors’ Report 12-13

Consolidated Statement of Financial Position 14

Consolidated Statement of Income 15

Consolidated Statement of Comprehensive Income 16

Consolidated Statement of Changes in Equity 17

Consolidated Statement of Cash Flows 18

Notes to the Consolidated Financial Statements 19 to 50

12

Al Johara Tower, 6th FloorKhaled Ben Al Waleed Street, SharqP.O. Box 25578, Safat 13116KuwaitTelephone: +96522426999Fax: +96522401666www.bdo.com.kw

Al-Shatti & Co.Arraya Tower II, 23rd-24th floor,Sharq P.O. Box 1753Safat 13018 KuwaitTelephone: +96522275777Fax: +96522275888

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF KGL LOGISTICS K.P.S.C.

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of KGL Logistics K.P.S.C. (“the parent company”) and its subsidiaries (together referred to as “the group”), which comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements

The parent company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Khalid Ebrahim Al-ShattiLicense No. 175APricewaterhouseCoopers (Al-Shatti & Co.)

Qais M. Al-NisfLicense No. 38-ABDO Al Nisf & Partners

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF KGL LOGISTICS K.P.S.C. (CONTINUED)

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the group as at 31 December 2014, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory Requirements

Furthermore, in our opinion proper books of accounts have been kept by the parent company and the consolidated financial statements, together with the contents of the report of the parent company’s board of directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the consolidated financial statements incorporate all information that is required by Companies Law No. 25 of 2012, as amended, and it’s Executive Regulations, Law No.7 of 2010 in respect of the establishment of Capital Markets Authority and Organisation of the Security Activity and its Executive Regulations and by the parent company’s Memorandum and Articles of Association, as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Companies Law No. 25 of 2012, as amended and it’s Executive Regulations, law No.7 of 2010 in respect of the Establishment of Capital Markets Authority and the Organisation of the Security Activity and its Executive Regulations nor of the parent company’s Memorandum and Articles of Association, as amended have occurred during the year ended 31 December 2014 that might have had a material effect on the business of the group or its consolidated financial position.

31 March 2015Kuwait

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The accompanying notes on pages 19 to 50 form an integral part of these consolidated financial statements.

KGL Logistics K.P.S.C. and subsidiaries Consolidated statement of financial position (All amounts in Kuwaiti Dinars unless otherwise stated)

As at 31 December

Notes 2014 2013ASSETSCurrent AssetsCash and bank balances 6 4,181,425 2,398,611Fixed deposits 2,272,185 250,000Trade and other receivables 7 18,388,134 7,780,041Inventories 1,174,109 -Due from related parties 18 5,772,106 2,988,657

31,787,959 13,417,309Non-Current AssetsAvailable for sale financial assets 8 235,568 235,568Investment in associate 93,819 -Intangible assets 9 14,028,097 9,100,127Investment properties 10 40,350,000 40,750,000Property, plant and equipment 11 10,137,300 4,144,814

64,844,784 54,230,509Total Assets 96,632,743 67,647,818

LIABILITIES AND EQUITYLIABILITIES Current LiabilitiesBank overdrafts 6 999,835 293,471Trade and other payables 12 6,004,971 4,180,557Due to related parties 18 362,543 38,335Current portion of term loans 13 4,667,974 1,500,000

12,035,323 6,012,363Non-Current LiabilitiesTerm loans 13 1,719,158 375,000Provision for staff indemnity 805,430 523,205

2,524,588 898,205

Total Liabilities 14,559,911 6,910,568

EQUITYShare capital 14 60,613,740 33,396,000Statutory reserve 15 6,168,331 5,610,193Voluntary reserve 15 6,168,331 5,610,193Treasury shares 16 (630,633) (339,495)Foreign currency translation reserve 26,957 3,946

Treasury shares reserve 112,281 112,281Retained earnings 8,988,069 15,873,200Equity Attributable to Owners of the Parent Company 81,447,076 60,266,318Non-controlling interests 17 625,756 470,932Total Equity 82,072,832 60,737,250Total Liabilities and Equity 96,632,743 67,647,818

Ali E. Dashti Ph.D. Chairman

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KGL Logistics K.P.S.C and SubsidiariesConsolidated statement of income(All amounts in Kuwaiti Dinars unless otherwise stated)

Year ended 31 December

Notes 2014 2013

Income

Operating revenues 25,418,222 24,028,049

Change in fair value of investment properties 10 (354,520) (189,713)

Other income 343,156 149,466

Reversal of impairment of property, plant and equipment 11 255,191 -

Share of results of associate 11,319 -

25,673,368 23,987,802

Expenses

Freight, logistics and food supply services (10,460,775) (6,959,167)

Salaries and related costs (3,081,891) (2,560,580)

Rent and occupancy costs (1,553,465) (1,260,707)

Other operating expenses (3,848,432) (2,325,092)

Depreciation, amortization and impairment 9 & 11 (1,012,094) (1,065,630)

Finance costs (135,953) (156,848)

(20,092,610) (14,328,024)

Profit before contribution to Kuwait Foundation for the Advancement of Sciences (“KFAS”), National Labour Support Tax (“NLST”), Zakat and Board of Directors’ remuneration

5,580,758 9,659,778

KFAS (50,233) (86,984)

NLST (142,468) (244,231)

Zakat (56,987) (97,152)

Board of Directors’ remuneration 21 (100,000) (229,600)

Profit for the year 5,231,070 9,001,811

Attributable to:

Owners of the parent company 5,231,686 9,006,375

Non-controlling interests (616) (4,564)

5,231,070 9,001,811

Earnings per share attributable to Owners of the parent company 19 9.15 fils 24.67 fils

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KGL Logistics K.P.S.C and SubsidiariesConsolidated statement of comprehensive income(All amounts in Kuwaiti Dinars unless otherwise stated)

Year ended 31 December

2014 2013

Profit for the year 5,231,070 9,001,811

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss

Foreign exchange difference on translation of foreign operations 40,597 182

Other comprehensive income for the year 40,597 182

Total comprehensive income for the year 5,271,667 9,001,993

Total comprehensive income attributable to:

Owners of the parent company 5,254,697 9,006,538

Non-controlling interests 16,970 (4,545)

5,271,667 9,001,993


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KGL Logistics K.P.S.C and SubsidiariesConsolidated statement of changes in equity(All amounts in Kuwaiti Dinars unless otherwise stated)

Sharecapital

Statutoryreserve

Voluntaryreserve

Treasury shares

Foreign currency

translation reserve

Treasury sharesreserve

Retainedearnings

Equity attributable to ow

ners of the Parent C

ompany

Non-

controlling interests

Totalequity

KDKD

KDKD

KDKD

KDKD

KDKD

Balance at 1 January 201330,360,000

4,643,7594,643,759

(650,886)3,783

-17,869,818

56,870,233475,477

57,345,710

Profit for the year-

--

--

-9,006,375

9,006,375(4,564)

9,001,811

Other com

prehensive income for the year

--

--

163-

-163

19182

Total comprehensive incom

e for the year-

--

-163

-9,006,375

9,006,538(4,545)

9,001,993

Issue of bonus shares (note 15)3,036,000

--

--

-(3,036,000)

--

-

Dividends distributed (note 15)

--

--

--

(6,041,473)(6,041,473)

-(6,041,473)

Sale of treasury shares-

--

311,391-

112,2817,348

431,020-

431,020

Transfer to reserves-

966,434966,434

--

-(1,932,868)

--

-

Balance at 31 Decem

ber 201333,396,000

5,610,1935,610,193

(339,495)3,946

112,28115,873,200

60,266,318470,932

60,737,250

Profit for the year-

--

--

-5,231,686

5,231,686(616)

5,231,070

Other com

prehensive income for the year

--

--

23,011-

-23,011

17,58640,597

Total comprehensive incom

e for the year-

--

-23,011

-5,231,686

5,254,69716,970

5,271,667

Issue of share capital (note 14)21,707,400

--

--

--

21,707,400-

21,707,400

Issue of bonus shares (note 15)5,510,340

--

--

-(5,510,340)

--

-

Dividends distributed (note 15)

--

--

--

(5,490,201)(5,490,201)

-(5,490,201)

Purchase of treasury shares-

--

(291,138)-

--

(291,138)-

(291,138)

Change in non-controlling interests

--

--

--

--

137,854137,854

Transfer to reserves-

558,138558,138

--

-(1,116,276)

--

-

Balance at 31 Decem

ber 201460,613,740

6,168,3316,168,331

(630,633)26,957

112,2818,988,069

81,447,076625,756

82,072,832

The accompanying notes on pages 19 to 50 form

an integral part of these consolidated financial statements.

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KGL Logistics K.P.S.C and SubsidiariesConsolidated statement of cash flows (All amounts in Kuwaiti Dinars unless otherwise stated)

Year ended 31 DecemberNotes 2014 2013

OPERATING ACTIVITIESProfit before KFAS, NLST, Zakat and Board remuneration 5,580,758 9,659,778Adjustments for:Change in fair value of investment properties 10 354,520 189,713Provision for staff indemnity 130,101 110,576Depreciation, amortization and impairment 9 & 11 1,012,094 1,065,630Reversal of impairment of property, plant and equipment 11 (255,191) -Share of results of associate (11,319) -Write off of intangible assets 9 2,012 -Finance costs 135,953 156,848Provision for doubtful debts 2,430 85,000Gain on sale of property, plant and equipment - (40,477)

6,951,358 11,227,068Trade and other receivables (13,496,534) (3,056,079)Inventories (1,174,109) -Trade and other payables 1,492,580 (45,713)Due from/to related parties - net (2,454,938) (2,000,683)Cash (used in) / generated from operations (8,681,643) 6,124,593Payment of staff indemnity (15,173) (138,973)Payment of KFAS, NLST and Zakat (97,152) (476,143)Net cash (used in) / generated from operating activities (8,793,968) 5,509,477

INVESTING ACTIVITIESPurchase of property, plant and equipment 11 (3,430,221) (2,417,006)Proceeds from sale of property, plant and equipment 112,441 -Purchase of investment in associate (82,500) -Acquisition of subsidiary, net of cash acquired (8,750,631) -Fixed deposits 1,727,815 (250,000)Net cash used in investing activities (10,423,096) (2,667,006)

FINANCING ACTIVITIESFinance costs paid (135,953) (156,848)(Purchase) / sale of treasury shares (291,138) 431,020Issue of share capital 21,707,400 -Excess money received on issue of share capital 19,641 -Dividends paid (5,576,845) (5,886,730)Repayment of term loans (1,769,294) (2,412,014)Receipt of term loans 6,281,426 -Net cash generated from / (used in) financing activities 20,235,237 (8,024,572)Effect of foreign currency translation 58,277 149Net increase / decrease in cash and cash equivalents 1,076,450 (5,181,952)Cash and cash equivalents at beginning of the year 6 2,105,140 7,287,092Cash and cash equivalents at end of the year 6 3,181,590 2,105,140

Non cash transaction:During the period, the group capitalised property, plant and equipment amounting to KD 2,894,778 (31 December 2013: Nil) by transferring it from advance to suppliers under trade and other receivables. There were no other material non-cash transactions during the years 2014 and 2013.


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KGL Logistics K.P.S.C and SubsidiariesNotes to the consolidated financial statements for the year ended 31 December 2014(All amounts in Kuwaiti Dinar unless otherwise stated)

1. GENERAL INFORMATION

KGL Logistics K.P.S.C. (“the parent company”) was established on 3 May, 2000 as a limited liability company under the name of Gulf Doctor for Public Trading and Contracting W.L.L. (Jassim Matar Al Shemari and Partner). On 11 December 2005, the parent company’s legal status was changed to a Kuwaiti Shareholding Company under the name of KGL Logistics K.P.S.C. and is a public shareholding company listed on the Kuwait Stock Exchange on 8 December 2009.

The parent company’s objectives as per the Articles of Association are as follows: (i) Establishment of all types of warehouses (cooled - dried warehouses), creation of areas and spaces for storing merchandise, goods, primary and raw materials of all types including space for storing cars and other heavy equipment.(ii) Management and maintenance of warehouses, protection of the stored items therein, provision of loading, packing and collecting works for materials, goods and merchandises intended for marketing.(iii) Lease of warehouses and management of stock for others.(iv) Storing of all types of merchandise as per the deposit system under the customs supervision inside or outside customs zones and practice of customs handling activities.(v) Equipping warehouses with the necessary installations, means and cranes to arrange and move merchandise inside the warehouses area, construction and lease of buildings for the objects of the group.(vi) Management of the stagnant stock and sale for prescription of all types of merchandise stock inside and outside the State of Kuwait and arrangement of special auctions for the disposal of the same.(vii) Performance of customs clearance, land, sea and air shipment, handling, transportation, services and logistics management, distribution and packing of imported and exported merchandise of all types.(viii) Exercise of all electronic commerce activities and ancillary activities in accordance with the parent company’s activity.(ix) Establishment, equipping, management and operation of all types of storing and customs areas and warehouses in Kuwait or abroad along with all the facilities thereof in the building, operation and transfer system (BOT).(x) Possession of necessary movables and real estates to commence its activity within the limits permitted by law.(xi) Exploitation of the available financial surpluses of the parent’s company’s by investing the same in financial portfolios managed by competent companies and bodies.(xii) Performance of computer business such as the designing various software in accordance with the parent company’s activity.

The parent company’s may engage in the aforementioned businesses in the State of Kuwait or abroad, for its own benefit or by proxy.

The parent company’s may have an interest in or participate in any manner with entities that carry on business activities similar to its own or which may assist the parent company’s in realizing its objects in Kuwait or abroad, and it may establish, participate in, buy or otherwise acquire such companies. The registered office of the parent company is P.O. Box 4135, Safat 13042, Kuwait.

These consolidated financial statements of the group for the year ended 31 December 2014 were authorised for issue in accordance with a resolution of the board of directors of the parent company on 29 March 2015. The annual general assembly of the parent company’s shareholders has the power to amend these consolidated financial statements after issuance.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The comparative amounts in the consolidated financial statements are not comparable, due to the new acquisitions of subsidiaries during 2014 (note 17).

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, IFRIC interpretations and the Companies Law no. 25 of 2012, as amended. The consolidated financial statements have been prepared under the historical cost convention as amended for the valuation of available for sales financial assets and investment properties which have been measured at fair value.

The preparation of consolidated financial statements in conformity with International Financial Reporting Standards 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.

2.2 Changes in accounting policies and disclosures

(a) New and amended standards adopted by the group:

The following amendments have been adopted by the group for the first time for the financial period beginning on or after 1 January 2014:

Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsettingThese amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The adoption of this amendment has no significant impact on the consolidated financial statements.

Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosuresThis amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. This amendment did not have a material impact on the group’s consolidated financial statements.

IFRIC 21 – ‘Levies’This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation addresses what the obligating event is that gives rise to the payment of a levy and when a liability should be recognised. The group is not currently subjected to significant levies so the impact on the group is not material.

(b) New standard, amended and interpretation issued but not yet adopted by the group:

‘IFRS 9 – Financial instruments’IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Changes in accounting policies and disclosures (Continued)

(b) New standard, amended and interpretation issued but not yet adopted by the group: (Continued)

categories for financial assets: amortised cost, fair value through consolidated statement of comprehensive income and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in consolidated statement of comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The group is yet to assess IFRS 9’s full impact.

‘IFRS 15 – Revenue from contracts with customers’IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The group is assessing the impact of IFRS 15.

2.3 Consolidation

(a) Subsidiaries

Subsidiaries are all 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.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values 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 and 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 consolidated statement of income.


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2.3 Consolidation (Continued)

(a) Subsidiaries (Continued)

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 the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in consolidated statement of 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 for within consolidated statement of changes in 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 income (note 2.7).

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 have been adjusted to conform to the group’s accounting policies.

(b) Changes in ownership interests in subsidiaries without change of control

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 consolidated statement of changes in equity. Gains or losses on disposals to non-controlling interests are also recorded in consolidated statement of changes in equity.

(c) 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 lost, with the change in carrying amount recognised in consolidated statement of 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 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 of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to consolidated statement of income.

(d) 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 the profit or loss of the investee after the date of acquisition. The group’s investment in associates includes goodwill identified on acquisition.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 consolidated statement of income where appropriate.The group’s share of post-acquisition profit or loss is recognised in the consolidated statement of income, and its share of post-acquisition movements in other comprehensive income 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

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2.3 Consolidation (Continued)

(d) Associates (Continued)

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 the 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 adjustment to share of profit / (loss) of associates in the consolidated statement of income.Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the group’s 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. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognised in the consolidated statement of income.

2.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is the person responsible for allocating resources to and assessing the performance of the operating segments has been identified as the parent company’s board of directors.

2.5 Foreign currency translation

(a) Functional and presentation currency

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 Kuwaiti Dinars (KD), which is the group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of income.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in consolidated statement of income, and other changes in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets, such as equities classified as available for sale financial assets, are included in other comprehensive income.

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyper-

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2.5 Foreign currency translation (Continued)

(c) Group companies (Continued)

inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in consolidated statement of comprehensive income.

2.6 Property, plant and equipment

All property, plant and equipment (PPE) are stated at historical cost less depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Cost of an item of PPE includes its purchase price and any direct attributable costs. Cost includes the cost of replacing part of an existing PPE at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day to day servicing of an item of PPE.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.

Construction work in progress will be depreciated upon completion of the asset’s construction and being ready for its intended use. Depreciation is calculated using the straight-line method to allocate the cost over the assets’ estimated useful lives, as follows:

Vehicles 10%-20%Buildings 10%-25%Machinery & equipment 5% to 10%Furniture and fixtures 20%-25%Computer equipment 25%-33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.10).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the consolidated statement of income.

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2.7 Intangible assets

(a) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over parent company’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(b) Other intangible assets:

Other intangible assets represent the operating rights which entitle the group to perform stevedoring services at Shuwaikh and Shuaiba ports and cost of computer software.

Management believes that the operating rights have an indefinite useful life on the basis that these intangible assets represent legal rights that are renewable and that there is pervasive evidence that the renewal is virtually certain. Also, management expects that these assets will contribute cash flows on an ongoing basis. Intangible assets with an indefinite useful life are not amortised.

Computer software is stated in the consolidated statement of financial position at cost less accumulated amortisation and accumulated impairment losses, if any. Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognised as intangible assets when the following criteria are met:

• it is technically feasible to complete the software product so that it will be available for use;• management intends to complete the software product and use or sell it;• there is an ability to use or sell the software product;• it can be demonstrated how the software product will generate probable future economic benefits;• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and• the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development, employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed five years.

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2.8 Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property.

Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs.

After initial recognition, investment properties are re-measured at fair value.

The fair value of investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions.

Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

Changes in fair values are recognised in the consolidated statement of income. Investment properties are derecognised when they have been disposed.

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Gains or losses arising on the retirement or disposal of an investment property are recognized in the consolidated statement of income.

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using weighted average method. The cost includes purchase price, import duties, transportation, handling and other direct costs. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.10 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

2.11 Financial assets

2.11.1 Classification

The group classifies its financial assets in the following categories: 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 at initial recognition.

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2.11 Financial assets (Continued)

2.11.1 Classification (Continued)

(a) 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 12 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’ ‘due from related parties’ and ‘cash and bank balances’ in the consolidated statement of financial position.

(b) 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 of it within 12 months of the end of the reporting period.

2.11.2 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. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. 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 are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair value of monetary and non-monetary securities classified as available for sale financial assets are recognised in other comprehensive income.

When securities classified as available for sale financial assets are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the consolidated statement of income as ‘gains and losses from available for sale financial assets’.

Dividends on available for sale financial assets equity instruments are recognised in the consolidated statement of income as part of other income when the group’s right to receive payments is established.

2.12 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

2.13 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 is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a

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2.13 Impairment of financial assets (Continued)

(a) Assets carried at amortised cost (Continued)

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 is 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.

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 income. 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 trade receivable’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of 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 is impaired. For equity investments classified as available for sale financial assets, 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 profit or loss is removed from equity and recognised in the consolidated statement of income. Impairment losses recognised in the consolidated statement of income on equity instruments are not reversed through the consolidated statement of income.

2.14 Trade receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.

2.15 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less net of bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown in current liabilities.


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2.16 Share capital

Shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

2.17 Treasury shares

Treasury shares consist of the parent company’s own shares that have been issued, subsequently reacquired by the parent company and not yet reissued or cancelled. The treasury shares are accounted for using the cost method. Under the cost method, the weighted average cost of the shares reacquired is charged to a contra equity account.

When the treasury shares are reissued, gains are credited to a separate account in equity (treasury shares reserve) which is not distributable. Any realised losses are charged to the same account to the extent of the credit balance on that account. Any excess losses are charged to retained earnings then reserves. Gains realized subsequently on the sale of treasury shares are first used to offset any previously recorded losses in the order of reserves, retained earnings and the gain on sale of treasury shares account.

No cash dividends are paid on these shares. The issue of bonus shares increases the number of treasury shares proportionately and reduces the average cost per share without affecting the total cost of treasury shares.

2.18 Trade payables

Trade payables are obligations to pay for services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost.

2.19 Staff indemnity

The group provides for staff indemnity to its employees as per labour laws and contracts. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

With respect to its national employees, the group makes contributions to Public Authority for Social Security calculated as a percentage of the employees’ salaries.

The group’s obligations are limited to these contributions, which are expensed when due.

This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination at the end of the reporting period and approximates the present value of the final obligation.


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2.20 Provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.21 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 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.

2.22 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.23 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services supplied, stated net of discounts and returns. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group’s activities, as described below.

Sale of servicesFor sales of services, revenue is recognised in the accounting period in which the services are rendered, by reference to stage of completion of the specific transaction and assessed by reference to surveys of work performed.


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2.23 Revenue recognition (Continued)

Rental incomeRental income from investment property is recognised in the consolidated statement of income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.Dividend incomeDividend income is recognised when the right to receive payment is established.

Interest incomeInterest income is recognised using the effective interest method. When a loan and receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate.

Sale of goodsRevenues from sale of goods is recognised when the 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 goods and the amount of revenue can be measured reliably.

2.24 Leases

Where the group is the lesseeLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor 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 income on a straight-line basis over the period of the lease.

Where the group is the lessorWhen assets are leased out under an operating lease, the asset is included in the consolidated statement of financial position based on the nature of the asset.

Lease income on operating leases is recognized over the term of the lease on a straight-line basis.

2.25 KFAS, NLST and Zakat

Contributions to Kuwait Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST) and Zakat represent levies/taxes imposed on the parent company at the flat percentage of net profits less permitted deductions under the prevalent respective fiscal regulations of the State of Kuwait. Under prevalent taxation/levy regulations no carry forward of losses is permitted and there are no significant differences between the tax/levy bases of assets and liabilities and their carrying amount for financial reporting purposes.

Tax/statutory levy RateKFAS 1.0% of profit attributable to owners of the parent company, less permitted deductionsNLST 2.5% of profit attributable to owners of the parent company, less permitted deductionsZakat 1.0% of profit attributable to owners of the parent company, less permitted deductions


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2.26 Dividend distribution

Dividend distribution to the parent company’s shareholders is recognised as a liability in the group’s financial statements in the period in which the dividends are approved by the parent company’s shareholders.

3. FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance.

(a) Market risk

(i) Foreing Currency Risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Qatari Riyal, Egyptian Pound and UAE Dirhams. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.The group has certain investments in foreign operations (principally in the Middle East Region), whose net assets are exposed to foreign currency translation risk. Positions are monitored on a regular basis to ensure positions are maintained within established limits.

The group had the following net exposures:

As at 31 December

2014 2013

USD 86,949 6,336UAE Dirhams 931,254 844,325Qatari Riyal 956,926 926,589

1,975,129 1,777,250

The analysis below calculates the effect of a reasonably possible movement of the KD currency rate against the following currencies with all other variables held constant, on the profit (loss) for the year and equity. 31 December 2014 Change in rates Effect on profit for the year

and equity2014 2013

USD +5% (4,348) (317)UAE Dirhams +5% (46,563) (42,216)Qatari Riyal +5% (47,846) (46,329)

The decrease in foreign currency percentage movement will have the opposite effect on the profit for the year and equity.

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3. FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1 Financial risk factors (Continued)

(a) Market risk (Continued)

(ii) Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. The group is exposed to interest rate risk on all interest bearing financial instruments such as deposits, overdrafts and term loans. Positions are monitored on a regular basis to ensure positions are maintained within established limits. The risk is managed by maintaining an appropriate mix between interest bearing assets and liabilities and floating and flat interest rates.If interest rates had been 1% higher/lower with all other variables held constant, profit for the year and equity would not have been significantly changed.

(b) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation and arises principally from fixed deposits, trade and other receivables, amounts due from related parties and bank balances. The group seeks to limit its credit risk with respect to bank balances by dealing with reputable banks and with respect to customers by setting credit limits and terms for individual customers and monitoring outstanding receivables. Normal credit terms for customers range from 1 to 3 months. It is not the practice of the group to obtain collateral over receivables.

(i) Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum net exposure to credit risk by class of assets at the reporting date is as follows:

As at 31 December

2014 2013Due from related parties 5,772,106 2,988,657Trade and other receivables (net) 17,564,479 7,253,096Bank balances 4,145,155 2,393,640Fixed deposits 2,272,185 250,000

29,753,925 12,885,393

(ii) Concentration of credit risk Concentration arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentration indicates the relative sensitivity of the group’s performance to developments affecting in particular industry or geographical location. The group seeks to avoid undue concentration of risks with individuals or group of customers in specific location or business through diversifications of its activity.

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(b) Credit risk (Continued)

(ii) Concentration of credit risk (Continued)The group’s credit risk bearing assets can be analysed by the geographic region and the industry sector as follows:

As at 31 December2014 2013

Geographic region:Kuwait 24,504,401 10,747,801Qatar 996,360 960,365United Arab Emirates 1,407,093 1,177,227Lebanon 2,846,071 -Total 29,753,925 12,885,393

Industry sector:Trading and manufacturing 22,555,789 9,930,641Banks and other financial institutions 6,417,340 2,643,640Government and public sector 780,796 311,112Total 29,753,925 12,885,393

(iii) Credit quality of financial assetsIt is not the practice of the Company to obtain collateral over loans and receivables. Credit exposures classified as ‘rated’ quality are those where the ultimate risk of financial loss from the obligor’s failure to discharge its obligation is assessed to be low. These include facilities to corporate entities with financial condition, risk indicators and capacity to repay which are considered to be good. Credit exposures defined as “not rated” and classified under ‘standard’ quality comprise all other facilities whose payment performance is fully compliant with contractual conditions and which are not ‘impaired’. The ultimate risk of possible financial loss on “not rated” or ”standard’ quality is assessed to be higher than that for the exposures classified within the ‘rated’ quality range. Not rated assets are classified according to internal credit ratings of the counterparties since there is no independent rating for customers. Management of the group assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by management.

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(b) Credit risk (Continued)

(iii) Credit quality of financial assets (Continued)The table below provides information regarding the credit risk exposure by credit quality of financial assets by class, grade and status of financial assets as at 31 December.

Neither past due nor impaired

Rated Not rated Total31 December 2014Amounts due from related parties - 5,772,106 5,772,106Trade and other receivables (net) - 16,339,283 16,339,283Bank balances 4,145,155 - 4,145,155Fixed deposits 2,272,185 - 2,272,185Total 6,417,340 22,111,389 28,528,729

Neither past due nor impaired

Rated Not rated Total31 December 2013Amounts due from related parties - 2,988,657 2,988,657Trade and other receivables (net) - 6,276,074 6,276,074Bank balances 2,393,640 - 2,393,640Fixed deposits 250,000 - 250,000Total 2,643,640 9,264,731 11,908,371

Management believes that not rated financial assets are of a standard quality. All amounts due from related parties and bank balances are neither past due nor impaired. The analysis by credit quality of trade and other receivables is as follows:


Neither past due nor impaired 16,339,283 6,276,074

Past due but not impaired: 90 to 180 days overdue 624,850 739,917More than 180 days overdue 600,346 237,105Total past due but not impaired 1,225,196 977,022

Individually determined to be impaired (note 7):More than 365 days overdue 556,182 557,617Total individually determined to be impaired 556,182 557,617

Less: Impairment provision (note 7) (556,182) (557,617)Total trade and other receivables, net of impairment provision 17,564,479 7,253,096

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(c) Liquidity RiskLiquidity risk is the risk that the entity will encounter difficulty in meeting commitments associated with financial liabilities, arises because of the possibility (which may often be remote) that the entity could be required to pay its liabilities earlier than expected. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The group’s objective is to maintain a balance between continuity of funding and flexibility through the use of term loans.Except the non-current portion of the term loans, all the financial liabilities are due within 1 year.

3.2 Capital management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current term loans’ and ‘bank overdraft’ as shown in the consolidated statement of financial position) less cash and bank balances. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.The gearing ratios as at 31 December were as follows:


Term loans 6,387,132 1,875,000Bank overdrafts 999,835 293,471Less: cash and bank balances (4,181,425) (2,398,611)Net debt 3,205,542 (230,140)Total Equity 82,072,832 60,737,250Total Capital 85,278,374 60,507,110Gearing Ratio 3.76 % -

4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Estimated impairment of goodwillThe group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7. The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of estimates.


37


4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS (CONTINUED)

(a) Estimated impairment of goodwillThe group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7. The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of estimates.

(b) Estimated impairment of intangible assets with indefinite useful livesAt the reporting date, management assesses the intangible assets with indefinite useful lives for impairment. The assessment is based on the “value in use” method. This method uses estimated cash flow projections and requires estimates.

5. SEGMENT INFORMATION

The group identifies its operating segments based on internal management reporting information that is regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance and is reconciled to the group’s consolidated statement of income. The following is an analysis of the group’s revenue and results by operating segments for the year, these figures represent the consolidated statement of income before inter-group eliminations:

Year ended 31 December 2014Warehousing,

freight and logistics services

Equipment lease and food supply services

Stevedoring Total

Segment revenue 18,003,692 4,154,676 3,515,000 25,673,368Segment expenses (13,849,729) (3,895,248) (2,347,633) (20,092,610)Segment profit 4,153,963 259,428 1,167,367 5,580,758Unallocated expenses (349,688)Profit for the year 5,231,070Depreciation, amortisation and impairment (573,692) (323,558) (114,844) (1,012,094)

Purchase of property, plant and equipment 1,602,483 4,679,689 42,827 6,324,999




Stevedoring Total

Segment revenue 21,669,184 - 2,318,618 23,987,802Segment expenses (12,206,677) - (2,121,347) (14,328,024)Segment profit 9,462,507 - 197,271 9,659,778Unallocated expenses (657,967)Profit for the year 9,001,811Depreciation, amortisation and impairment (951,445) - (114,185) (1,065,630)

Purchase of property, plant and equipment 2,417,006 - - 2,417,006

38

5. SEGMENT INFORMATION (CONTINUED)

Segment assets and liabilities:Year ended 31 December 2014

Warehousing, freight and

logistics services


Stevedoring Total

Segment assets 75,648,455 10,499,685 10,484,603 96,632,743Segment liabilities (13,042,555) (652,774) (864,582) (14,559,911)Net assets employed 62,605,900 9,846,911 9,620,021 82,072,832




Stevedoring Total

Segment assets 58,155,159 - 9,492,659 67,647,818Segment liabilities (6,088,521) - (822,047) (6,910,568)Net assets employed 52,066,638 - 8,670,612 60,737,250

The following is an analysis of the group’s revenue by geographical area for the year:

Year ended 31 December2014 2013

Revenue:Kuwait and Lebanon 22,707,196 21,542,685Other countries in the GCC 2,710,981 2,445,117

25,418,177 23,987,802

6. CASH AND CASH EQUIVALENTSAs at 31 December

2014 2013

Cash on hand 36,270 4,971Cash at bank, current, call and short term deposit accounts 4,145,155 2,393,640Cash and bank balances 4,181,425 2,398,611Less: Bank overdrafts (999,835) (293,471)Cash and cash equivalents 3,181,590 2,105,140

Bank overdraft facilities are from a local bank and are denominated in KD. These facilities carry an effective interest rate of approximately 4.5% (31 December 2013: 5%) per annum. Effective interest on bank call accounts approximates nil (31 December 2013: nil) per annum and short term deposits from 1.25% to 1.875% (31 December 2013: 1% to 1.625%) per annum.


39

7. TRADE AND OTHER RECEIVABLESAs at 31 December

2014 2013

Trade receivables 4,570,722 3,551,130Less: provision for doubtful debts (556,182) (557,617)

4,014,540 2,993,513Prepaid expenses 823,655 526,945Due from staff 103,001 18,360Advances and other debit balances 8,807,813 2,949,489Other receivables 4,639,125 1,291,734

18,388,134 7,780,041 Advances and other debit balances include an amount of KD 6,750,000 (2013: nil) paid to one of the related parties.

The credit period on rendering of services is 30 to 90 days. No interest is charged on the overdue trade receivables. Trade receivables between 90 days and 360 days are provided for based on estimated irrecoverable amounts, determined by reference to past default experience. Other classes of receivables do not contain impaired assets.

The carrying amounts of the group’s trade and other receivables are denominated in the following currencies:

As at 31 December 2014 2013

Kuwait Dinars 16,416,017 6,422,611

UAE Dirhams 1,217,338 1,013,915US Dollars 754,434 343,184Qatari Riyals 345 331

18,388,134 7,780,041

Movement in the provision for doubtful debts


Balance at beginning of the year 557,617 480,383Written off during the year - (7,850)Charge for the year 2,430 85,000Net foreign currency exchange differences (3,865) 84Balance at end of the year 556,182 557,617

At the reporting date, the carrying amount of trade and other receivables approximated the fair value.


40


8. AVAILABLE FOR SALE FINANCIAL ASSETS

These investments are in unquoted local shares and are denominated in KD. They are carried at cost due to the lack of an active market or other reliable measure of their fair value. Management is not aware of any indication regarding impairment and believes that the carrying amount approximated the fair value.

9. INTANGIBLE ASSETS

Goodwill Operating rights

Computer software Total

At 1 January 2013Cost 1,099,361 7,975,550 491,830 9,566,741Accumulated amortisation - - (355,472) (355,472)Net book amount 1,099,361 7,975,550 136,358 9,211,269Year ended 31 December 2013Opening net book value 1,099,361 7,975,550 136,358 9,211,269Write off - - (77,498) (77,498)Amortisation - - (111,162) (111,162)Amortisation on write off - - 77,498 77,498Exchange differences - - 20 20Closing net book amount 1,099,361 7,975,550 25,216 9,100,127At 31 December 2013Cost 1,099,361 7,975,550 414,352 9,489,263Accumulated amortisation - - (389,136) (389,136)Net book amount 1,099,361 7,975,550 25,216 9,100,127Year ended 31 December 2014Opening net book value 1,099,361 7,975,550 25,216 9,100,127Arising on acquisition during the year (note 17) 4,944,150 - - 4,944,150

Write off - - (2,012) (2,012)Amortisation - - (14,186) (14,186)Exchange differences - - 18 18Closing net book amount 6,043,511 7,975,550 9,036 14,028,097At 31 December 2014Cost 6,043,511 7,975,550 412,898 14,431,959Accumulated amortisation - - (403,862) (403,862)Net book amount 6,043,511 7,975,550 9,036 14,028,097

During 2014, the group acquired new subsidiary “Kuwait Motoring Company K.S.C.C.” which resulted in a provisional goodwill amounted to KD 4,944,150 (note 17)In addition, at 31 December 2014, the group assessed the recoverable amount of goodwill amounting to KD 1,099,361 (2013: KD 1,099,361) and operating rights amounting to KD 7,975,550 (2013: KD 7,975,550) and determined that goodwill associated with the cash generating unit and operating rights were not impaired (31 December 2013: no impairment). The recoverable amount is determined using a value in use determined by using discounted cash

41

KGL Logistics K.P.S.C and SubsidiariesNotes to the consolidated financial statements(All amounts in Kuwaiti Dinar unless otherwise stated)

9. INTANGIBLE ASSETS (CONTINUED)

flow model, which uses inputs that consider features of the stevedoring business and its regulatory environment. The recoverable amount is calculated by estimating streams of free cash flows available to shareholders over the next ten years, discounted to their present values. The applicable cost of equity is 11.88% (2013: 10.5%). The model used to determine the recoverable amount is most sensitive to changes in the forecast free cash flows available to shareholders, the cost of equity and to changes in the long-term growth rate. The applied long-term growth rate is based on real growth rates and expected inflation.

Valuation parameters used within the group’s impairment test model are linked to external market information, where applicable. If the discount rate had been 1% higher than management’s estimates, the group would not have recognized any impairment against the carrying values.

10. INVESTMENT PROPERTIESAs at 31 December

2014 2013

Investment properties at beginning of the year 40,750,000 40,950,000Transfers (45,480) (10,287)Change in fair value (354,520) (189,713)

40,350,000 40,750,000 The fair value of investment properties as at 31 December has been arrived at on the basis of valuations carried out by independent valuers who have experience in the valuation of properties. Management has obtained two independent valuations and used the lowest valuation of them to record the fair value of such properties. The valuations were arrived at by reference to market evidence of transaction prices for similar assets. Such fair value is a level 2 fair value.Investment properties include an amount of KD 37,000,000 representing assets held in virtue of an appropriation right granted to the group through a subsidiary in its capacity as a stevedoring contractor for unspecified period. The group has classified these assets as investment properties in accordance with IAS 40.

42


Vehicles

BuildingsM

achinery &

equipment

Furnitureand fixtures

Com

puter equipm

entProjects in progress

Total

At 1 January 2013

Cost

815,8572,897,343

1,439,677308,957

974,988-

6,436,822A

ccumulated depreciation and im

pairment

(636,881)(1,164,428)

(977,038)(259,939)

(713,452)-

(3,751,738)N

et book amount

178,9761,732,915

462,63949,018

261,536-

2,685,084Year ended 31 D

ecember 2013

Opening net book am

ount178,976

1,732,915462,639

49,018261,536

-2,685,084

Additions

2,320,84611,624

19,3205,202

3,82756,187

2,417,006Transfer to related party

(135,000)-

(24,721)-

(2,027)-

(161,748)D

isposals(494)

--

(10,176)-

-(10,670)

Transfers-

-10,287

--

-10,287

Accumulated depreciation and im

pairment on disposals

494-

-10,176

--

10,670A

ccumulated depreciation and im

pairment on transfer

to related party135,000

-13,640

--

-148,640

Depreciation and im

pairment charges

(138,865)(518,279)

(138,579)(30,124)

(128,621)-

(954,468)Exchange differences

10-

3-

--

13C

losing net book amount

2,360,9671,226,260

342,58924,096

134,71556,187

4,144,814A

t 31 Decem

ber 2013C

ost3,001,219

2,908,9671,444,566

303,983976,788

56,1878,691,710

Accum

ulated depreciation and impairm

ent(640,252)

(1,682,707)(1,101,977)

(279,887)(842,073)

-(4,546,896)

Net book am

ount2,360,967

1,226,260342,589

24,096134,715

56,1874,144,814

Year ended 31 Decem

ber 2014O

pening net book amount

2,360,9671,226,260

342,58924,096

134,71556,187

4,144,814A

dditions1,485,870

1,416,8793,231,265

5384,774

185,6736,324,999

Transfer from / to related party

68,55219,126

38,976-

(1,359)-

125,295A

cquired on acquisition105,701

157,92887,861

--

-351,490

Disposals

(192,216)(172,818)

--

--

(365,034)Transfers from

investment properties

-45,480

--

--

45,480Accum


ent on disposals149,195

103,394-

--

-252,589

Depreciation and im

pairment charges

(314,529)(265,026)

(302,171)(15,598)

(100,584)-

(997,908)Reversal of im

pairment

-255,191

--

--

255,191Exchange differences

50-

25252

57-

384C

losing net book amount

3,663,5902,786,414

3,398,5459,288

37,603241,860

10,137,300A

t 31 Decem

ber 2014C

ost4,469,587

4,375,5624,802,953

305,381981,306

241,86015,176,649

Accum


ent(805,997)

(1,589,148)(1,404,408)

(296,093)(943,703)

-(5,039,349)

Net book am

ount3,663,590

2,786,4143,398,545

9,28837,603

241,86010,137,300

11. PROPERTY, PLA

NT A

ND

EQU

IPMEN

T

43


12. TRADE AND OTHER PAYABLESAs at 31 December

2014 2013

Trade payables 1,307,292 755,621

Payable to sub-contractor 86,263 165,449Accrued expenses 2,432,847 2,005,820Refundable deposits 456,110 408,277Unearned income 911,529 442,177Other payables 810,930 403,213

6,004,971 4,180,557

The carrying amounts of the group’s trade and other payables are denominated in the following currencies:


Kuwaiti Dinars 5,167,829 3,481,188

US dollars 317,252 336,849UAE Dirhams 480,351 328,643Qatar Riyals 39,539 33,877

6,004,971 4,180,557

At the reporting date, the carrying amount of trade and other payables approximated the fair value.

13. TERM LOANSAs at 31 December

2014 2013

Current 4,667,974 1,500,000Non-current 1,719,158 375,000

6,387,132 1,875,000 Term loans denominated in Kuwaiti Dinars (“KD”) obtained from local banks are unsecured floating interest rate loans granted against corporate guarantee issued by a related party and carry effective interest rate of 4.5% (31 December 2013: 4.5%) per annum. Monthly revenue from certain lease contracts are assigned against these term loans.

Term loans denominated in EURO and USD obtained from foreign banks are unsecured floating interest rate loans and carry effective interest rate of 1.8% and 2.07% respectively (31 December 2013: nil) per annum. These term loans mature in 2019 and 2015 respectively.

44


13. TERM LOANS (CONTINUED)

The carrying amounts of the group’s term loans are denominated in the following currencies:


KD 375,000 1,875,000

EURO 2,210,416 -USD 3,801,716 -

6,387,132 1,875,000 These term loans mature as follows:


6 months or less 4,422,345 750,0006 – 12 months 245,629 750,0001 – 5 years 1,719,158 375,000

6,387,132 1,875,000 At the reporting date, the carrying amount of term loans approximated the fair value.

14. SHARE CAPITAL

The authorised capital is 606,137,400 (31 December 2013: 551,034,000) shares of 100 fils each. The issued and fully paid up shares are 606,137,400 (31 December 2013: 333,960,000) shares of 100 fils each, paid in cash. During the year, the parent company increased its capital through issuing a prospectus for inviting public to subscribe to the equity shares of the parent company starting from 27 January 2014 to 24 February 2014 which was fully subscribed at an amount of KD 21,707,400 which was authenticated in the parent company’s commercial register on 12 June 2013 and through issue of bonus shares at an amount of KD 5,510,340 which was authenticated in commercial register on 9 July 2014.

15. RESERVES AND DIVIDENDS

Statutory reserveIn accordance with the Companies Law and the parent company’s Articles of Association, 10% of profit for the year before KFAS, NLST, Zakat and Board of Directors’ remuneration is to be transferred to statutory reserve until this reserve reaches a minimum of 50% of share capital. Distribution of this reserve is limited to the amount required to enable the payment of a dividend up to 5% of the share capital in years when retained earnings are not sufficient for payment of such dividend.

Voluntary reserveIn accordance with the parent company’s Articles of Association, 10% of the profit for the year before KFAS, NLST, Zakat and Board of Directors’ has been transferred to the voluntary reserve. This transfer may be discontinued by a resolution adopted by the ordinary assembly as recommended by the Board of Directors. There are no restrictions on distributions from the voluntary reserve.

45


15. RESERVES AND DIVIDENDS (CONTINUED)

DividendsThe Annual General Assembly Meeting of shareholders held on 26 June 2014, approved the annual audited consolidated financial statements of the group for the year ended 31 December 2013 and approved a cash dividend of 10% (2012: 20%) of the paid up capital for the year ended 31 December 2013 payable to shareholders as of the date of the Annual General Assembly Meeting, and also approved the distribution of the bonus shares for the year ended 31 December 2013 in the ratio of one share for every ten shares held (2012: one share for every ten shares held) by the registered shareholders the day preceding to the dilution of the share price.

The Board of Directors proposed a cash dividend of 5% (2013: 10%) and no issuance of bonus shares (2013: issue of bonus shares in the ratio of one share for every ten shares) to the registered shareholders as of the date of Annual General Assembly meeting. This proposal is subject to approval of shareholders at the annual General Assembly meeting.

16. TREASURY SHARES As at 31 December

2014 2013Number of shares 4,671,026 1,804,743Percentage of issued shares 0.77% 0.5%Cost – KD 630,633 339,495Market value – KD 485,787 478,257

17. SUBSIDIARIES AND NON CONTROLLING INTERESTS

The group had the following subsidiaries as at 31 December 2014.

Name Country of incorporation

Principal activity

Ownership percentage

2014

Ownership percentage

2013KGL Stevedoring W.L.L. Kuwait Stevedoring 99% 99%KGL Logistics Qatar W.L.L. Qatar Logistics 49% 49%KGL Logistics Emirates (Anchorage) W.L.L. Dubai Logistics 100% 100%Kuwait Motoring Company K.S.C.C. Kuwait Driver

training96.58% -

Kuwait and Gulf Link for General Trading and Contracting Company W.L.L. Kuwait General

trading 99.5% -

On 22 April 2014, the group acquired 96.58% of the voting equity instruments of Kuwait Motoring Company K.S.C.C., whose principal activity is teaching and training to get driver’s licence.

Details of the book value of net assets acquired, purchase consideration and goodwill are as follows:

46


17. SUBSIDIARIES AND NON CONTROLLING INTERESTS (CONTINUED)

Book value of net assets acquired as at the date of acquisition is: ValueAssets

Cash and bank balances 86,440

Fixed deposits 3,750,000Trade and other receivables 8,766Property, plant and equipment 351,490

Total assets 4,196,696LiabilitiesTrade and other payables 16,701Provision for staff indemnity 149,220Total liabilities 165,921

Book value of net assets 4,030,775Share attributable to non-controlling interest (137,854)Net assets acquired 3,892,921Provisional goodwill on acquisition 4,944,150Fair value of consideration paid – all cash 8,837,071Less: Cash and cash equivalents acquired (86,440)Net cash outflow on acquisition 8,750,631

At the date of these consolidated financial statements a detailed assessment of the fair value of the identifiable net assets of Kuwait Motoring Company K.S.C.C. has not been completed thus, the purchase was provisionally accounted for in accordance with IFRS 3 resulting in a provisional goodwill of KD 4,944,150. The purchase price allocation exercise will be completed within one year.

Since the acquisition date, Kuwait Motoring Company K.S.C.C. has contributed KD 433,515 to group revenues and KD 60,454 to group profit.

The non-controlling interest was recognised as a proportion of the net assets acquired.

In addition, on 30 April 2014 the group acquired 99.5% of the equity interest of Kuwait and Gulf Link General Trading and Contracting Company W.L.L. from a related party for a total consideration of KD 500,000 through participating in its capital increase. Management believes that the book value of net assets acquired amounting to KD 500,000 is equal to the fair value of identifiable net assets at the date of acquisition.

Summarised financial information of major operating subsidiaries

The total non-controlling interest as at 31 December 2014 is KD 625,756 (2013: KD 470,932) mainly related to KGL Logistics Qatar W.L.L amounting to KD 485,836 (2013: KD 470,932) and Kuwait Motoring Company K.S.C.C. amounting to KD 139,920 (2013: KD nil).

47


17. SUBSIDIARIES AND NON CONTROLLING INTERESTS (CONTINUED)

Set out below is the summarised financial information of major operating subsidiaries to the group. The information below is before inter-company eliminations.

Summarised statement of financial position

KGL Stevedoring W.L.L. KGL Logistics EmiratesKuwait Motoring

Company K.S.C.C.

Kuwait and Gulf Link for General Trading and Contracting Company

W.L.L.

As at 31 December As at 31 December As at 31 December As at 31 December

2014 2013 2014 2013 2014 2013 2014 2013

Current assets 4,962,542 3,687,842 1,432,443 1,202,333 3,992,286 - 4,115,272 -

Current liabilities 559,870 535,351 1,232,050 1,056,655 50,903 - 9,702,354 -

Non-current assets 8,234,666 8,299,464 9,839 14,443 373,308 - 6,384,414 -

Non-currentliabilities

304,711 286,696 32,838 29,366 223,465 - - -

Summarised statement of comprehensive income

KGL Stevedoring W.L.L. KGL Logistics EmiratesKuwait Motoring

Company K.S.C.C.

Kuwait and Gulf Link for General Trading and Contracting Company

W.L.L.

Year ended 31 December Year ended 31 December Year ended 31 December Year ended 31 December

2014 2013 2014 2013 2014 2013 2014 2013

Revenue 3,515,000 2,318,618 2,710,981 2,445,117 462,441 - 4,154,676 -

Expenses )2,347,633) (2,121,347) )2,670,459) (2,440,801) )401,987) - )3,895,248) -

Net profit 1,167,367 197,271 40,522 4,316 60,454 - 259,428 -

48


17. SUBSID

IARIES A

ND

NO

N C

ON

TROLLIN

G IN

TERESTS (CO

NTIN

UED

)

Summ

arised statement of cash flow

s

KGL Stevedoring W

.L.L.KG

L Logistics Emirates

Kuwait M

otoring Com

pany K.S.C

.C.

Kuwait and G

ulf Link for G

eneral Trading and C

ontracting Com

pany W

.L.L.

Year ended 31 Decem

berYear ended 31 D

ecember

Year ended 31 Decem

berYear ended 31 D

ecember

20142013

20142013

20142013

20142013

Net cash flow

s generated from / (used in) operating

activities116,824

(209,244))54,293)

(61,137))1,794,824)

-)129,586)

-

Net

cash (used

in) /

generated from

investing

activities)49,563)

1,405)3,752)

(11,103)1,880,182

-10,787

-

Net cash (used in ) / generated from

financing activities

--

)11,446)29,224

--

252,500-

Net increase / decrease in cash and cash equivalents

67,261(207,839)

)69,491)(43,016)

85,358-

133,701-

Cash, cash equivalents at beginning of year

11,723219,562

165,855208,871

86,440-

2,077-

Cash and cash equivalents at end of year

78,98411,723

96,364165,855

171,798-

135,778-

49


18. RELATED PARTY TRANSACTIONS

Related parties consist of shareholders, directors and executive officers of the group, their families and companies of which they are the principal owners. All related party transactions and are approved by the group’s management. The related party balances and transactions not disclosed elsewhere in the consolidated financial statements are as follows:


(a) TransactionsRendering of services 1,762,299 567,798Receiving of services (3,203,433 ) (2,002,116)Gain on transfer of property, plant and equipment to a related party - 40,477

(b) Key management compensationSalaries and other short-term benefits 122,700 214,123Directors’ remuneration 100,000 229,600Termination benefits 4,442 16,969

227,142 460,692(c) Balances included in the statement of financial position


Due from related parties 5,772,106 2,988,657Due to related parties 362,543 38,335

In addition, due from related parties included an amount of KD 745,539 (31 December 2013: KD 745,539) from an associate in Egypt (KGL Logistics (East Med) Egypt Company S.A.E.) and its related party (Waleed Bader) for an amount of KD 83,110 (31 December 2013: KD 83,110) which have been fully impaired and written off in prior years (31 December 2013: fully impaired and written off in prior years). The group has no other legal or constructive obligations towards the associate or its related parties.

19. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY

Earnings per share are calculated by dividing the profit for the year attributable to Owners of the parent company by the weighted average number of shares outstanding during the year.


Profit for the year attributable to Owners of the parent company 5,231,686 9,006,375Weighted average number of shares outstanding: Weighted average number of issued shares 574,022,342 367,356,000Less: Weighted average number of treasury shares (2,318,177) (2,342,039)Weighted average number of shares outstanding 571,704,165 365,013,961Earnings per share attributable to Owners of the parent company(Basic and diluted) 9.15 24.67

50


19. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY (CONTINUED)

Earnings per share were 27.1 fils for the year ended 31 December 2013 before retrospective adjustment to the number of shares following the bonus issue during 2014. There are no potential dilutive shares.

20. CONTINGENT LIABILITIESYear ended 31 December

2014 2013

Letters of guarantee 3,380,857 1,525,420

21. DIRECTORS’ REMUNERATION

The Directors’ remuneration amounting to KD 100,000 for the year ended 31 December 2014 is subject to the approval of shareholders at the forthcoming Annual General Assembly.

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