renaissance annual report 2014_english

A N N U A L R E P O R T 2 0 1 4

BusinessDesigned

His Majesty Sultan Qaboos bin Said

ContentsBoard of Directors 6

Financial Highlights 8

Chairman’s Report 10

Chief Executive’s Report 18

Auditors’ Report on Corporate Governance 26

Report on Corporate Governance 27

Auditors’ Report on Financial Statements 34

Financial Statements 35

The Renaissance Group is an Omani multinational listed on the Muscat Securities Market (MSM30) as ‘Renaissance Services SAOG’.

The group contains two businesses, each with an independent vision.

Topaz operates a modern and diverse fleet of 98 off-shore support vessels for the oil and gas sector, primarily located in the Caspian and MENA markets.

Operating ethos:Safe – no harm to people

Efficient – cost effective and quality services

Green – no harm to the environment

Local – we are serious about in-country value

Values

PEOPLE

HEALTH, SAFETY & ENVIRONMENT (HSE)

INTEGRITY

REWARD

EFFICIENCY & PRODUCTIVITY

CUSTOMERS

GROWTH

MERIT

SOCIAL RESPONSIBILITY

TRANSPARENCY

QUALITY

PROFIT

Renaissance Services SAOGP.O. Box 1676, P.C. 114, Muttrah, Sultanate of OmanTel.: +968 2479 6636 Fax: +968 2479 6639www.renaissance-oman.com

The Topaz vision is to be the global local quality champion and top five OSV player, with profitability in the top quartile.

Renaissance provides contract services, permanent accommodation, and integrated facilities management, primarily in the Middle East and with operations expanding globally, including West Africa and Norway. Clients include universities and hospitals, onshore and offshore hydrocarbon development and the military.

The Renaissance vision is to deliver world-class services to a worldwide market.

Renaissance Services SAOG

Board of Directors

6

Colin RutherfordDirector

Saleh bin Nasser Al HabsiDirector

Sunder GeorgeDirector

7ANNUAL REPORT 2014

Samir J. FancyChairman

HH Sayyid Tarik bin Shabib bin TaimurDirector

Yeshwant C. DesaiDirector

Ali bin Hassan SulaimanDeputy Chairman

Rial Million USD Million

Summary Financial Information

2013 2014 2013 2014

239.3 252.1 REVENUE 621.5 654.8

73.9 88.6 GROSS PROFIT 191.9 230.1

48.3 61.9 PROFIT FROM OPERATIONS 125.4 160.8

73.2 91.2 EBITDA 190.1 236.9

24.3 32.1 PROFIT BEFORE TAX 63.0 83.4

15.6 24.1 PROFIT AFTER TAX (BEFORE MINORITY) 40.5 62.6

502.8 591.5 NET FIXED ASSETS 1,306.0 1,536.4

212.9 248.5 TOTAL EQUITY 553.0 645.6

38.9 63.1 EQUITY SETTLED MANDATORY CONVERTIBLE BONDS (MCBs) 101.2 163.8

387.7 371.6 BORROWINGS 1,007.1 965.1

0.042 0.065 BASIC EARNINGS PER SHARE (Rial/USD) 0.110 0.168

0.010 0.010 DIVIDEND PER SHARE (Rial/USD) 0.026 0.026

2013 2014

Revenue Gross ProfitEarnings Before Tax InterestDepreciation & Amortisation

2014

Profit fromOperations

ProfitBefore Tax

Profit After Tax(Before Minority)

Financial Highlights

800.0

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0

USD Million

654.8

230.1 236.9

2013

USD Million

621.5

191.9 190.1

2.40

2.00

1.60

1.20

0.80

0.40

0

Significant Ratios

2013 2014

CURRENT RATIO 1.66 1.10

GEARING* 1.54 1.21

TOTAL LIABILITIES/NET WORTH* 1.88 1.48

INTEREST COVER 1.99 2.08

RETURN ON CAPITAL EMPLOYED (%) 6.42 8.38

RETURN ON AVERAGE EQUITY (%) 8.55 10.05

Note: * For all ratios MCBs are considered as part of Equity

Gearing Total Liabilities/Net WorthReturn on Capital Employed (%)

Return on AverageEquity (%)

2013 2014

Ratio

2013 2014

11.00

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0

Ratio

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0

160.8

83.4

62.6

2.40

2.00

1.60

1.20

0.80

0.40

0

125.4

63.0

40.5

1.48

1.21

1.88

1.54

10.05

8.388.55

6.42

8


Summary Financial Information

2013 2014 2013 2014

239.3 252.1 REVENUE 621.5 654.8

73.9 88.6 GROSS PROFIT 191.9 230.1

48.3 61.9 PROFIT FROM OPERATIONS 125.4 160.8

73.2 91.2 EBITDA 190.1 236.9

24.3 32.1 PROFIT BEFORE TAX 63.0 83.4

15.6 24.1 PROFIT AFTER TAX (BEFORE MINORITY) 40.5 62.6

502.8 591.5 NET FIXED ASSETS 1,306.0 1,536.4

212.9 248.5 TOTAL EQUITY 553.0 645.6

38.9 63.1 EQUITY SETTLED MANDATORY CONVERTIBLE BONDS (MCBs) 101.2 163.8

387.7 371.6 BORROWINGS 1,007.1 965.1

0.042 0.065 BASIC EARNINGS PER SHARE (Rial/USD) 0.110 0.168

0.010 0.010 DIVIDEND PER SHARE (Rial/USD) 0.026 0.026

2013 2014

Revenue Gross ProfitEarnings Before Tax InterestDepreciation & Amortisation

2014

Profit fromOperations

ProfitBefore Tax

Profit After Tax(Before Minority)

Financial Highlights

800.0

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0

USD Million

654.8

230.1 236.9

2013

USD Million

621.5

191.9 190.1

2.40

2.00

1.60

1.20

0.80

0.40

0

Significant Ratios

2013 2014

CURRENT RATIO 1.66 1.10

GEARING* 1.54 1.21

TOTAL LIABILITIES/NET WORTH* 1.88 1.48

INTEREST COVER 1.99 2.08

RETURN ON CAPITAL EMPLOYED (%) 6.42 8.38

RETURN ON AVERAGE EQUITY (%) 8.55 10.05

Note: * For all ratios MCBs are considered as part of Equity

Gearing Total Liabilities/Net WorthReturn on Capital Employed (%)

Return on AverageEquity (%)

2013 2014

Ratio

2013 2014

11.00

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0

Ratio

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0

160.8

83.4

62.6

2.40

2.00

1.60

1.20

0.80

0.40

0

125.4

63.0

40.5

1.48

1.21

1.88

1.54

10.05

8.388.55

6.42

ANNUAL REPORT 2014 9

Chairman’sReport

10

On behalf of the Board of Directors, I present the audited accounts for Renaissance Services SAOG for the financial year ended 31 December 2014.

Financial performanceThe 2014 financial performance reflects growth in the operating businesses; and positive reduction and containment of one-off impacts, which had tempered results in 2013.

Rial Million USD Million2014 2013 2014 2013

Continuing OperationsRevenue 252.1 239.3 654.8 621.6EBITDA 91.2 73.2 236.9 190.1Operating profit 61.9 48.3 160.8 125.5Net profit after tax from continuing operations 24.1 15.6 62.6 40.5Discontinued operationsProfit from discontinued operations 1.3 3.2 3.4 8.3Net profit for the year 25.4 18.8 66.0 48.8

Revenue has increased by 5.3% compared with last year. Net profit after tax from continuing operations is up by 54.4%. The EBITDA result highlights the strong cash flows in the business.

Net profit after tax from continuing operations is after the following:


2014 2013 2014 2013

One-off receivables provisions and write-off (1.9) (5.9) (4.9) (15.3)

Provision for impairment of vessels (1.5) - (3.9) -

Net loss on other investments - (0.9) - (2.3)

Net gain on sale of vessels 3.0 0.6 7.8 1.6

Write back of tax provision 2.5 - 6.5 -

Total 2.1 (6.2) 5.5 (16.1)

Balance sheetIn the current year the Company’s auditors PwC have suggested changes to the accounting of the Mandatory Convertible Bonds (MCB). The Company has adopted these changes in accounting that require us to accrue the cumulative benefits due to the MCB holders against the retained earnings of the Company. The one-third of MCBs due for conversion in the next 12 months are shown under current liabilities. There is no cash flow impact to the Company. Upon conversion the entire amount

Chairman’s Report

11ANNUAL REPORT 2014

of MCBs shown under the liability will move to the Shareholder’s funds. The Company may choose to buy back MCBs subject to necessary approvals and arrangement of an appropriate alternative financial instrument.

The Company has also accounted a derivative liability of Rial 7.6 million relating to the new shares issued in Topaz to Standard Chartered Private Equity (SCPE). The derivate liability shall increase or decrease based on the movement in the valuation of Topaz, and over a longer period this derivative liability is expected to reduce to nil.

The MCBs or its successor instrument, the SCPE equity infusion, the Topaz US$ 350 million Bond, and ongoing refinancing have strengthened the Group’s balance sheet materially to give it the ability to weather a turbulent environment, or to seize opportunities as they occur – the intent being to never waste a good crisis, but always after considering safety first.

Dividend

The Board is recommending a dividend of 10% for shareholder approval at the Annual General Meeting (AGM).

Investment for growth

In 2014 the Company made capital investments of Rial 122.6 million (US$ 318.4 million) in new assets for future growth. Rial 103.4 million (US$ 268.6 million) of this is in Topaz for further modernization and expansion of the Company’s Offshore Support Vessel (OSV) fleet. The balance Rial 19.2 million (US$ 49.9 million) is in the Renaissance contract services business, expanding the Company’s capacity of Permanent Accommodation for Contractors (PAC) facilities in Oman.

Topaz

The global Offshore Support Vessel (OSV) company


2014 2013 2014 2013

Revenue 155.8 145.5 404.7 377.9

Operating profit 53.2 41.4 138.2 107.5

Notes:

1. 2014 Operating profit is after one-off receivables provisions and write-off of Rial 1.9 million, provision for impairment of a vessel Rial 1.5 million and gain on sale of vessels Rial 3.0 million.

2. 2013 Operating profit includes net gain on sale of vessels Rial 0.6 million and one-off receivables provisions and write-off of Rial 2.4 million.

In 2014, Topaz crossed the important milestone of achieving EBITDA > US$ 200 million.

Chairman’s Report

12

In Q3 we took an important step in our capital market plan towards a potential intention to list Topaz independently at the appropriate time, and on the appropriate market. SCPE acquired a 9.8% stake in Topaz for an investment of US$ 75 million. Renaissance Services SAOG retains ownership of the balance shares. Topaz has gained further world-class experience and expertise into its ownership and onto its Board. The balance sheet is strengthened and financial capability to grow is enhanced.

The Topaz strategy received further endorsement after the Company assigned Boston Consulting Group (BCG) the task to independently test and validate the Topaz 2020 Vision. We believe the BCG review was comprehensive and incisive, and both the Topaz Board and Renaissance Board feel confident and assured that the Topaz management team is steering the company on a path of growth and success.

This year we divested three aging vessels from our fleet. Six vessels, previously in the operating fleet on bareboat charter have joined the permanent fleet following acquisition. Five new vessels have also been acquired, these are: Topaz Seema, Topaz Xara, Topaz Isra, Topaz Megan and Topaz Faye. All valuable additions to our fleet and our service offering to our clients. We plan further strategic investment in the

fleet in 2015, including expanding our subsea service capability.

We continue to nurture and grow our presence in our key core markets within the Caspian and the Arabian Gulf. These core markets are defined as countries where we have a critical mass of vessels, supported by in-country people, assets and infrastructure. Today these markets include Azerbaijan, Kazakhstan, Qatar, Saudi Arabia and UAE.

In the coming year, our target markets for building new core positions are the vibrant and promising markets of Angola, Nigeria and Turkmenistan. During 2014 we developed important partnerships in Angola and Nigeria and this cements our local credentials to move from reliance on short-term spot contracts into being eligible to compete for longer-term sustainable contract opportunities. In the Caspian, we were pleased to re-enter the Turkmenistan market with an important new contract and hope to build on this with further awards during the year.

That said, our strategic commitment to long-term presence and growth in West Africa, will give us some serious challenges in the first half of 2015 in the wake of the oil price crisis. We shall feel pressure on rates in the Caspian and MENA, but this is mitigated by the stability of our business model of established medium


to long-term contracts and secured income streams. In West Africa, the short-term position is different. There is a squeeze on spot rates and some cancellations and temporary suspensions of tenders. The immediate consequence is the sudden loss of revenue, which flows directly to the bottom line. Instant effort to manage these consequences takes a little longer to take effect. We however remain resolute in our long-term strategies, particularly in West Africa.

Temporary setbacks in our short-term contracts are counter-balanced by stability in our long-term contracts; a secured contract backlog > US$ 1 billion; our predominant presence in the sustainable development and production cycle of the oilfields, as distinct from the more vulnerable exploration cycle; and the safety, relevance and efficiency of our modern fleet.

Renaissance

The international Contract Services, Accommodation Solutions, and Integrated Facilities Management (IFM) business


2014 2013 2014 2013

Revenue 96.2 94.5 249.9 245.5

Operating profit 11.9 9.7 30.9 25.2Notes:

1. 2013 Operating profit is after one-off receivables provision of Rial 3.5 million.

Renaissance is growing its business successfully on three complementary fronts, whilst absorbing high local employment cost impacts over recent years in its major home market of Oman.

In Contract Services, the Company won 85% of the Oman Ministry of Health Patient Catering, Cleaning and Laundry Services contracts in 34 hospitals located the length and breadth of the country. The contract value is Rial 37 million (US$ 96.2 million) over three years. This success was the largest of several contracts gained or retained this year, worth an annualized revenue of Rial 17.09 million (US$ 44.4 million). The net new contract gains, over and above retained contracts, are worth net additional annual revenue of Rial 8.21 million (US$ 21.3 million).

The Company’s Accommodation Solutions footprint in Oman is also expanding through investment in two major Permanent Accommodation for Contractors (PAC) projects: The expansion of the Company’s existing PAC facility at Qarn Alam, one of five PAC facilities under

contract for Petroleum Development Oman (PDO) in Oman’s oilfields; and in the ongoing construction of the new flagship 16,000-bed Duqm PAC under contract for the Duqm Special Economic Zone Authority (SEZAD). This project continues, on-time and in-cost, with target completion mid-2016.

In Q4 of 2014 we were delighted to secure the full equity raise required for the Rial 75 million (US$ 195 million) Duqm PAC project. The total equity of Rial 30.2 million (US$ 78.5 million) is subscribed 51.9% by Renaissance Services SAOG, as founder and developer, and 48.1% by our co-shareholders: Royal Court Affairs, Ministry of Defence Pension Fund, Al Khonji Development Group and Bank Muscat. We had targeted the equity raise thoughtfully with the aim of having Renaissance, as an Omani public company, in joint venture with a sovereign wealth fund, a major pension fund, a renowned local community investor and a formidable financial institution. We are delighted to welcome these prestigious new partners in Renaissance Duqm Holding SAOC.

Chairman’s Report

14

We continue to grow and develop our capability as a turnkey provider of Integrated Facilities Management (IFM). The Wave, Muscat has become a flagship IFM project here in Muscat. Although our own PAC projects qualify as mini-townships in their own right The Wave is a real town and a fully integrated tourism project and residential complex. It showcases our capability and provides a platform for our related 24/7 home maintenance call-out services.

While continuing to grow in Oman we seek to spread market concentration risk by expanding our international presence. We have deployed new senior professional resources to grow our IFM and Contract Services businesses in UAE, the broader GCC and selected markets in Africa. Renaissance’s Norwegian subsidiary, Norske Offshore Catering (NOC), is the market leader offshore catering services provider in the Norwegian Sector of the North Sea. We seek to replicate similar success in new markets.

Like Topaz, Renaissance is feeling pressure in its small but important market presence in West Africa, which is adversely affected by the oil price crisis. We are

watching that situation closely. However, outside Africa, we are seeing stability and growth tempered by some margin and volume pressure.

The PACs are long-term stable contracts, although they may experience some occupancy decline. PAC


occupancy in 2014 was 83%, but should have been higher but for a low 41% occupancy at Marmul PAC that also dented profitability and ROE in an otherwise successful PAC business.

The Renaissance businesses won’t be completely immune from current market conditions, but they

have a proven record of resilience at such times,

so we anticipate continued progress and growth in

2015. Renaissance solutions drive down unit cost of

production for oil & gas sector clients. That is a great

service offering in any business cycle.

Discontinuing businesses


2014 2013 2014 2013

National Hospitality Institute SAOG 0.06 0.03 0.16 0.08

Marine Engineering Business (0.6) (6.5) (1.5) (16.9)

Total (0.5) (6.5) (1.3) (16.9)

The turnaround of the NHI business and the Ship Repair

business means that we can now press ahead with finding

good new owners for these fine enterprises. The Ship

Building business has not turned to profit yet, but progress

is visible. In all cases, our people are doing a fine job and

we shall not let them down in securing their future.

In Q1 we completed the divestment of the Media and

Communications businesses. We thank our people on

the UMS team for their contribution to the Renaissance

journey. We are delighted to see their continuing

success under excellent new ownership with the Muscat

Overseas Group.

Chairman’s Report

16

OutlookLet’s be clear, our flagship Topaz business shall have a torrid time amidst difficult trading conditions, particularly during the first half of the year, and particularly in the West Africa arena. Pressure shall abate as the year progresses, and overall performance shall depend on the scale of new opportunities that arise alongside our strong order backlog. The Renaissance businesses shall not be immune, but we believe they are well-placed to grow in spite of the current oil price scenario.

Let’s also be clear on the long-term prospects for this Company – the clarity and consistency of the path we have chosen for our businesses, lead us to adapt a corporate posture that is humble to, and wary of, current market forces; but resolute about, and confident in, the prospect of realizing our high ambitions for all our stakeholders.

TributeAs an Omani public company we are proud to pay tribute and thanks to His Majesty Sultan Qaboos bin Said. 2015 shall mark the celebration of the milestone 45th year of His Majesty’s remarkable reign. Each and every one of us in the Renaissance family wish His Majesty well for his return to good health and look forward to welcoming him home.

Samir J. FancyChairman


Chief Executive’sReport

18

As we review 2014 performance and look ahead to 2015 and the long-term future we should be clear on three important points:

• 2014 has been a good year.

• The first half of 2015 will be very tough as the oil price crisis brings temporary pressure on our margins.

• Our long-term strategies are right and the businesses are on a very sound footing to grow and prosper.

The Renaissance Group operations always try to follow excellent performance by improving efficiency. That is why our clients rely on us to help them do more for less. Our core expertise is in offering greater efficiency than our competitors, so we are always innovating to see what more we can do for our clients inside and outside the hydrocarbons industry.

We are confident that we have a strategy for growth and that we can make the most of any fresh opportunities that arise.

Renaissance unplugged: The Chief Financial Officer on our fiscal discipline

“From my perspective, once you look beyond the operational efficiencies of our group, real and exponential growth then comes from continuous investment in expansions to the business. Many of our operations are capital intensive, so as each asset matures fresh cash is needed to meet the relatively high up-front costs of taking revenue growth to the next level.

Regularly refinancing bonds and conventional debt is the wisest way to release equity and make sure that our cash is being used as efficiently as possible. Put simply, each year we look at what we’ve borrowed and see if we can make those loans cheaper, so that our money works harder for us. But each decision has to be considered over its full term: the borrowing cycle and the time it takes for individual assets to mature both mean we are often considering how a particular debt or equity instrument affects our balance sheet for the next 5-8 years.

Right now, the most important corporate factor for growth across all the excellent services our group offers, is a strong capital and debt structure that means our cost of borrowing is managed for the long term, and that cash is available to fund our asset plan and take advantage if the right acquisition opportunity presents itself.

This is exactly what our financial strategy puts in place.”

Vishal Goenka, CFO

Chief Executive’s Report

Chief Executive’sReport


One Group: Two Companies: a strategy that works.Renaissance Services is two independent, internationally competitive businesses, each offering a specialist and world-class level of service.

While nurturing and growing existing key markets in the Caspian and the Arabian Gulf, Topaz’s strategy is focused on maximising the company’s position in West Africa; globalising through M&A when the right opportunities arise; adding select offshore services to further improve our service offering to customers; and improving execution – never satisfied, always innovative in finding better ways to serve our clients safely and efficiently.

This approach is mirrored in the Renaissance strategy to broaden its service offering in pure contract services, world-class accommodation solutions and integrated facilities management (IFM). The company is increasing resources deployed on diversifying its geographical footprint. Oman remains a superb and growing market opportunity for the business to flourish and build on its market leadership position. But we need to duplicate the Oman success story and export it abroad. This shall reduce concentration risk and expand the scale of opportunity.

Our dividend recordRenaissance Dividend Policy is based on the proposition that cash is returned to shareholders in the form of higher dividend payouts when there are no credible value-creating opportunities to invest in the business.

In 2014 our Board has recommended a cash dividend of 10%, while endorsing a substantial programme of investment growth for Topaz and Renaissance Contract Services. This is a strong sign of the financial health of the Company and our desire is that shareholders should be rewarded every year with a reasonable dividend, while retaining the bulk of surplus cash for identified investment in the business.

Exceptional dividends may arise from time to time after any major liquidity event, when surplus cash exceeds visibility of immediate investment potential; but our general target is for regular and consistent, reasonable dividends, in line with what we have achieved in 2014.

2010 2011 2012 2013 2014

% Rial ‘000 % Rial ‘000 % Rial ‘000 % Rial ‘000 % Rial ‘000

Cash dividend 12 3,385 - - - - 10 2,821 10 2,821

Stock dividend - - - - - - - - - -

Total dividend 12 3,385 - - - - 10 2,821 10 2,821


20

TopazTopaz is a leading offshore support vessel (OSV) company with a diversified and versatile fleet of 98 vessels, offering a wide range of services required by the Oil and Gas sector across the world, and mostly (>90%) focusing on the development and production segments of that market.

Topaz is a global operator, with the market leadership position in the Caspian Sea, a strong and growing leadership presence in our chosen MENA markets, and a developing market position as we become better established in West Africa.

The 2014 oil price decline means the OSV market is facing pressure on utilization levels and day rates, so we do expect pressure in 2015, particularly in our spot markets in West Africa, where our contracts are short-term. But in the MENA and Caspian regions, our contract positions are more stable and we have a significant amount of business already secured (our existing contract pipeline is c. USD 1 billion).

In terms of growth, a key priority for Topaz is maintaining the market advantage offered by our comparatively young fleet, whose vessels have an average age of c. 6.7 years – well below the market average of 15 years. In 2014 we divested three older vessels and acquired five more. This means our fleet continues to offer clients more efficiency than the rest of the market: reduced fuel consumption, better safety and less downtime are good news for clients who are looking hard at their costs.

The Topaz fleet: staying ahead of the market.The Topaz fleet leads the market in terms of youth and efficiency. Maintaining this advantage means continuous investment in new vessels. Recent acquisitions include:

Topaz Megan – USD 20m, PSVTopaz Isra - USD 20m, PSVTopaz Seema - USD 20m, PSVTopaz Faye - USD 20m, PSVTopaz Xara – USD 20m, PSVCaspian Voyager – USD 36m, PSV

These are all new vessels, so offer strong operational uptime for clients.

The daughter class vessels are DP2 medium size PSV. We now have 7 of these units in the West Africa Fleet, providing our clients fit for purpose vessels and increasing our business operational efficiency by operating 7 sister vessels in the same market.

The Caspian Voyager is the largest PSV in the Caspian region working for BP and her size gives the client operational efficiency and flexibility. She is DP2 and is about the largest PSV that can fit through the canal system. In fact, owing to the limitations offered by the canal, moving a vessel the size of the Caspian Voyager into this region was a technical challenge that very few OSV support companies could manage.

21ANNUAL REPORT 2014ANNUAL REPORT 2014

As it continues its journey towards a potential independent listing, Topaz will spend between USD 100-200 million per year on new vessels and other capital investments. Our acquisition strategy will keep our fleet modern, so that we always offer the safest, greenest, best value for money, and make sure we can respond quickly when fresh opportunity presents itself.

RenaissanceRenaissance offers a range of tailored facilities and service solutions for large projects and operations around the world.

2014 has seen our facilities and services capabilities mature as we have demonstrated the success of our experience and expertise in three design models:

• Contract services: where the client owns an existing facility, we provide a range of services through branded retail solutions, for example providing catering services to a hospital or university.

• Accommodation solutions: we design, build, own and operate cost-effective permanent accommodation solutions, for example for a workforce, students or military sites.

• Integrated facilities management (IFM): we provide a complete range of solutions to operate and service major infrastructure, for example prisons or industrial complexes.

Today, Renaissance is unique because we can offer the advantages of integrating all three models; no-

one else has the capability or experience to do this

well. And delivering turnkey IFM and accommodation

solutions with the in-house provision of services

involves fewer companies and offers much better

value: it reduces management overheads by not

charging ‘margins-on-margins’, improves service

coordination and promises to deliver even more

efficiency, through the obvious economies of scale.

We had expected 2014 to be a muted year for our

facilities and services as we absorb higher costs of

operations in our home market of Oman. But the

strength of our business means that our revenue

has improved. The off-setting gains elsewhere

reflect our ambition to grow beyond our Oil and Gas

sector roots, with significant increases in business

volumes made in healthcare and other sectors,

most notably the June re-award of the Ministry of

Health contract, which gained double the previous

volume of business.

Our flagship project is creating a modern, fully

serviced accommodation facility for over 16,000

people living and working in Duqm. Our design

teams have shown they can turn the challenge of

scale and permanency into design economies for the

project, showing how Omani enterprise is combining

efficiency and integrity to offer today’s workers high

standards of comfort, safety and service but at a

rate that is better value – in fact, equal or lower in

cost – than what can be offered by temporary, lower

standard, portacabin camps.


22

Duqm in numbersDuqm will be the largest permanent accommodation for contractors in Oman.

The project offers a comprehensive accommodation solution, including food, cleaning and recreational services.

16,000 beds, up to 17,580 depending upon room configuration

3,710 rooms

192,480 square meters site

26 March 14: construction started

Mid-2016: accommodation facility will open

Tariff rates from just USD 12 per day per resident for a comprehensive, fully catered service that complies with SEZAD and international regulations.

In 2014, we finalised the Duqm Equity Partnership that brings together investors from the local community with Omani Pension and Sovereign Wealth funds. The investment is funded through this equity partnership, with Renaissance Services holding 51.9% of the shares and the remainder held by Royal Court Affairs, the Ministry of Defence Pension Fund, Al Khonji Development and Bank Muscat.


Our sustainability approach

As a growing global presence, Renaissance Services is strongly interested in the sustainability of our growth and throughout our history, our operating ethos has been one of commitment to safety, to the environment and to growing the communities in which we operate. This is the fourth year of our sustainability reporting, and the second time we have asked Ernst & Young to support us in preparing a standalone report in line with the Global Reporting Initiative G4 framework.

We will publish this report as part of our suite of end year publications and we remain committed to our operating mantra of Safe, Efficient, Green and Local.

The safety of everyone affected by our work continues to be a top priority for the Renaissance Group. Each year, we publish a safety track-record and commentary of safety lessons we have learned and milestones for the year. We shall never be satisfied until we reach Goal Zero: no harm to people, no harm to the environment. We remain thoroughly committed to achieving this goal.

I am proud of what our hard working people have achieved in 2014, and I remain confident that our best strategy for growth is financial discipline for the balance sheet, investment to grow our operations and delivering safe and efficient services to our customers. On this sound footing, we can be patient in delivering our business and alert for the new opportunities that 2015 – and the future – will bring.

Stephen R. Thomas


24

Renaissance Customers include the following


Corporate governance is an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is not only about structure and clarity in management and areas of responsibility, but it also encourages good transparency so that shareholders can understand and monitor the development of the company.

The Board and the Management of Renaissance Services SAOG (the “Company”) are committed to adopt the best practices of corporate governance that promote ethical standards and individual integrity. The Company will continue to focus on its resources, strengths and strategies for creating, safeguarding and enhancing shareholders’ value while at the same time protecting the interests of its stakeholders.

This Report illustrates how the Principles of Corporate Governance and the provisions of the Code of Corporate Governance, set out in the Capital Market Authority’s (CMA) Code of Corporate Governance for companies listed on the Muscat Securities Market (MSM), and the Provisions for Disclosure stipulated in the Executive Regulations of the Capital Market Law, are adhered to by the Company.

The Company believes that the Code prescribes a minimum framework for governance of a business. The Company’s philosophy is to develop this minimum framework and institutionalise its principles as an ingredient of its corporate culture. This will lay the foundation for further development of a model of governance with superior governance practices, which are vital for growing a successful business. The Company recognises that transparency, disclosure, financial controls and accountability are the pillars of any good system of corporate governance.

In accordance with the provision for disclosure stipulated in the Executive Regulation of the Capital Market Law, PricewaterhouseCoopers (PwC) has issued a separate Factual Findings Report on the Company’s Corporate Governance Report for the year ended 31 December 2014.

1. Company’s Philosophy

The Company upholds a governance philosophy that aims at enhancing long-term shareholder value while at the same time adheres to the law and observes the ethical standards of the business environment within which it operates.

Report on Corporate GovernanceAccording to the Company’s governance paradigm the Management assumes accountability to the Board, and the Board assumes accountability to the Shareholders. The Board’s role is to be an active participant and a decision-maker in fostering the overall success of the Company by enhancing Shareholder value, selecting and evaluating the top management team, approving and overseeing the corporate strategy and Management’s business plan, and acting as a resource for Management in matters of planning and policy. The Board monitors corporate performance against the strategic and business plans, and evaluates on a regular basis whether those plans pay off in terms of operating result.

In order that it can effectively discharge its governance responsibilities, the Board ensures that the majority of Board members are non-executive.

Furthermore, the Board accesses independent legal and expert advice of professionals who also assist the Management. The Board also encourages active participation and decision making on the part of Shareholders in General Meeting proceedings.

The Board maintains a positive and ethical work environment that is conducive to attracting, retaining and motivating a diverse group of top quality employees at all levels. The Board through the Compensation Committee reviews and decides the parameters for assessment and compensation of key personnel.

The Board ensures ethical behaviour and compliance with all laws and regulations and has developed a Code of Ethics that promotes values among its employees. The Company’s Manuals of Procedures (internal regulations) cover a wide range of functions including but not limited to Corporate Information & Disclosure Policy, Rules for Related Party Transactions, Procurement Manual and Financial Authority Manual, IT Policies Manual and HR Manual.

2. Board of Directors

During 2014, the Board consisted of seven Directors. Five Directors on the Board are Shareholders / representatives of Shareholders and two Directors are non-shareholder Directors.

According to CMA’s Code of Corporate Governance, issued by Circular No. 11/2002, as amended by Circular No. 1/2003, all the Directors of the Company are independent and non-executive.


2.1 The Composition and Category of Directors, Attendance of Board Meetings

Sr. No Name of Director Position Category

No. of Board meetings held

during the year

No. of Board meetings attended

Whether attended last AGM

1 Samir J. Fancy Chairman Independent, Non-Executive Shareholder 6 6 Yes

2 Ali bin Hassan Sulaiman

Deputy Chairman

Independent, Non-Executive Shareholder 6 5 Yes

3 HH Sayyid Tarik bin Shabib bin Taimur Director Independent, Non-Executive

Shareholder 6 4 Yes

4 Sunder George Director Independent, Non-Executive Non-Shareholder 6 5 Yes

5 Yeshwant C. Desai Director Independent, Non-Executive Non-Shareholder 6 6 Yes

6 Colin Rutherford Director Independent, Non-Executive Shareholder 6 6 No

7 Saleh bin Nasser Al Habsi Director Independent, Non-Executive,

Representative of a Shareholder 6 5 Yes

The above Board members were elected on the 26th of March 2014 for a tenure of three years which will expire in 2017.

2.2 Statement of the Names & Profiles of Directors and Top Management

The Renaissance Board brings together core competencies of Directors with vision, strategic insight, and industry knowledge, who provide direction to the executive management.

Samir J. Fancy - ChairmanMr. Samir J. Fancy is the Chairman of the Board of Directors since 1996. He has held senior positions and undertaken leading roles such as:

• Founder and Vice Chairman of Tawoos Group since 1983, and Chairman of Tawoos Group since 2005.

• Chairman of Topaz Energy & Marine SAOG since foundation and up to its acquisition by the Company in May 2005.

• Chairman of Amani Financial Services SAOC since 1997.

• Chairman of Topaz Energy & Marine Ltd.• Director of Samena Capital.• He has acted as a Director of National Bank of Oman,

Muscat Finance Company and Vision Insurance in the past.

• Mr. Samir Fancy is also recognised for his philanthropy and charitable works in Oman.

Ali bin Hassan Sulaiman - Deputy Chairman Mr. Ali bin Hassan Sulaiman is a member of the Board of Directors of the Company since 1996 and is Deputy Chairman since March 2010. He is a founder of Ali and Abdul Karim Group and Director in the following companies:

• Topaz Energy & Marine SAOG for several years up to its acquisition by the Company in May 2005.

• Majan Glass Co SAOG.• Topaz Energy & Marine Ltd.

HH Sayyid Tarik bin Shabib bin Taimur - DirectorHH Sayyid Tarik bin Shabib bin Taimur is a member of the Board of Directors of the Company since 1996. Other positions held by him include the following:

• Founder and Director of Tawoos Group.• Chairman of Marina Bander Al Rowdha SAOG for

six years until its takeover by the Government of the Sultanate of Oman in April 2003.

• Chairman of National Hospitality Institute SAOG since 1995.

Sunder George - DirectorMr. Sunder George is a member of the Board of Directors of the Company since 2001. He has extensive experience in Banking & Finance and has held several senior executive positions in Oman & abroad until he

Report on Corporate Governance

28

retired from Bank Muscat on 31 December 2012 as its Deputy Chief Executive. He was Chief Advisor to the Bank for a year until the end of 2013. Sunder George sits on the Board of Directors of the following Companies:

• Topaz Energy & Marine Ltd.• Halcyon Capital SAOC.• Oman Fixed Income Fund.

Yeshwant C. Desai - DirectorMr. Yeshwant C. Desai is a member of the Board of Directors of the Company since 2001 and is the Chairman of the Audit Committee and also Chairman of the Compensation Committee. He has had a successful career and extensive experience in Banking & Finance and has held senior executive positions in Oman & abroad, which include:

• Ex-CEO of Bank Muscat SAOG.• Director of Topaz Energy & Marine SAOG for several

years up to its acquisition by the Company in May 2005.

• Ex-Director of Topaz Energy & Marine Ltd.

Colin Rutherford - DirectorMr. Colin Rutherford has been a member of the Board since 2005 and was formerly Chairman of BUE Marine Holdings Limited prior to its acquisition by Renaissance Group SAOG. He has diverse experience of public and private companies having served on many international Boards. He is a Chartered Accountant and former Corporate Financier, and currently enjoys the following positions within his portfolio:

• Executive Chairman and CEO of Teachers Media PLC.

• Non-Executive Director and Audit Committee Chairman of Mitchells & Butlers PLC.

• Non-Executive Chairman of Brookgate Limited.• Colin holds further positions in Retail, Specialist

building products and Real estate, amongst others.

Saleh bin Nasser Al Habsi - DirectorMr. Saleh Al Habsi is the General Manager of Pension Fund of the Ministry of Defence. He holds an MBA and M.Sc in Finance from the University of Maryland (USA) and BSBA and BA from Boston University (USA). He also attended a senior executive programme at London Business School and High Performance Boards Programme at IMD, Switzerland. Mr. Al Habsi is also member of the Board of GrowthGate Capital, a regional private equity company and also a member of the Board of Al Suwadi Power Company SAOG.

Previously, he served as Chairman of Muscat Fund, Deputy Chairman of Gulf Custody Company Oman, SAOC. He was a Board member of Bank Dhofar SAOG, Board member of National Bank of Oman and Al Omaniya Financial Services SAOG.

Stephen R. Thomas OBE – Chief Executive OfficerMr. Stephen R. Thomas joined Tawoos Group as General Manager of Tawoos Industrial Services Co LLC in 1988. He took over as Chief Executive Officer of Renaissance Services SAOG in 1998. In the 2010 United Kingdom New Year’s Honours List, Mr. Thomas was appointed an Officer of the Most Excellent Order of the British Empire (OBE) for services to business abroad and services to the community in Oman. He also held senior positions in the Group including the following positions:

• Director of Renaissance Hospitality Services SAOG since foundation and until its merger with Renaissance Services SAOG in April 2002.

• Founder and former Chairman of Oman Society for Petroleum Services (“OPAL”).

• Director of Topaz Energy & Marine Ltd.

2.3 Membership of Other Boards / Board Committees (SAOG Companies in Oman)

Sr. No Name of Director

Directorship in other

SAOG companies

Membership in Board

Committees of other

companies

1 Samir J. Fancy - -

2 Ali bin Hassan Sulaiman 1 -

3 HH Sayyid Tarik bin Shabib bin Taimur 1 -

4 Sunder George - -

5 Yeshwant C. Desai - -

6 Colin Rutherford - -

7 Saleh bin Nasser Al Habsi 1 -

2.4 Number & Dates of Meetings of the Board of Directors

The Board held six meetings during 2014 on the following dates:

14-15 January 2014, 26 February 2014, 17 March 2014, 19 May 2014, 10 August 2014, and 22 October 2014.

3. Audit Committee & Other Sub-committees

Audit CommitteeThe Audit Committee is a sub-committee of the Board comprising of three Directors, all of whom are independent, non-executive Directors.

29


3.1 Brief Description & Terms of Reference The functions of the Audit Committee are as follows:

• Recommend to the Board the Statutory Auditors in the context of their independence, fee and terms of engagement for approval by the Shareholders.

• Review the audit plan and results of the audit and whether Statutory Auditors have full access to all relevant documents.

• Oversee the Internal Audit function in general and with particular reference to reviewing the scope of internal audit plan for the year, reports of internal auditors pertaining to critical areas, efficacy of internal auditing and whether the internal auditors have full access to relevant documents.

• Oversee the adequacy of internal control systems and Internal Audit Reports.

• Review any non-compliance with disclosure requirements prescribed by CMA.

• Oversee the Company’s financial reporting process and the disclosure of its financial information to ensure accuracy, sufficiency and credibility of the financial statements.

• Ensure that proper system is in place for adoption of appropriate accounting policies and principles leading to fairness in financial statements.

• Review annual and quarterly financial statements and recommend to the Board.

• Serve as a channel of communication between Statutory & Internal Auditors and the Board.

• Review risk management policies.

• Review proposed specific related party transactions for making appropriate recommendations to the Board.

• Make recommendations to the Board for entering into small value transactions with related party without securing prior approval of Audit Committee & the Board.

• Accord prior approval to the Statutory Auditors to provide non-audit services, in accordance with CMA Circular E/12/2009.

3.2 Composition of Audit Committee and Attendance of Meetings

In 2014 the Audit Committee of the Company was comprised of three non-executive Directors as members. During 2014, the Committee held four meetings on 25 February, 12 May, 10 August and 11 November respectively. The following table shows the composition of the Audit Committee and the attendance of its meetings:

Sr. No Name Position

Meetings held

during the year

Meetings attended

during the year

1 Yeshwant C. Desai Chairman 4 4

2 Ali bin Hassan Sulaiman Member 4 2

3 Sunder George Member 4 4

During its meetings the Audit Committee discussed and approved the annual internal audit plan. The Committee reviewed and recommended to the Board the audited and quarterly accounts and the related party transactions. The Committee had recommended the appointment of the Statutory Auditors for the year 2014. The Committee also looked into certain specific areas of the Company’s operations and reported on these to the Board.

3.3 The Compensation CommitteeThe Compensation Committee was formed as a Board Committee to lay down and update the parameters for assessment and compensation of key personnel, undertake their performance assessment and report to the Board on the compensation & personnel policies. The Committee, which consists of the following Directors, held one meeting on 26 March 2014:

Sr. No Name Position

Meetings held

during the year

Meetings attended

during the year

1 Yeshwant C. Desai

Chairman 1 1

2 Ali bin Hassan Sulaiman Member 1 1

3 Colin Rutherford Member 1 1

4. Process of Nomination of the Directors

In nominating and screening candidates to fill a casual vacancy, the Board seeks candidates with the skills and capacity to provide strategic insight and direction, encourage innovation, conceptualize key trends and evaluate strategic decisions. The Board focuses on professionalism, integrity, accountability, performance standards, leadership skills, professional business judgment, financial literacy and industry knowledge as core competencies of the candidates. While nominating competent candidates, the Board ensures that the Shareholders retain the power of electing any candidate, irrespective of his candidature being recommended by the Board or otherwise and that any Shareholder has the full right of nominating himself.

5. Remuneration MattersAs per the approval accorded by the AGM held on 26 March 2014, the Chairman is paid Rial 1,000/- for

30

attending Board meetings and other Directors are paid Rial 500/- as sitting fees per meeting. Sitting fees of Rial 750/- are paid to Committees’ Chairman and sitting fees of Rial 650/- are paid to Committees’ members. The remuneration, sitting fees and travelling expenses relating to the attending of the meetings paid to the Chairman and Directors for 2014 are as follows:

Sr. No.

Name of Director Position

Sitting Fees Paid for

Board & Sub-committees’ Meetings for 2014 (Rial)

Travelling Expenses

(Rial)

1 Samir J. Fancy Chairman 6,000/- 2,846/-

2 Ali bin Hassan Sulaiman

Deputy Chairman 4,450/- 390/-

3HH Sayyid Tarik bin Shabib bin Taimur

Director 2,000/- 320/-

4 Sunder George Director 5,100/- 699/-

5 Yeshwant C. Desai

Director 6,750/- 3,806/-

6 Colin Rutherford Director 3,650/- 14,361/-

7 Saleh bin Nasser Al Habsi Director 2,500/- 320/-

Total 30,450/- 22,742/-

For the financial year 2014, it is proposed to pay remuneration of Rial 169,550/- for the Directors.

Total remuneration paid to the five senior executives of the Company (including its subsidiaries) during the year was Rial 1,888,223/-. This includes salary and benefits paid in cash, monetary value of all benefits calculated as per Company rules and a variable amount based on performance as recommended by the Compensation Committee of the Board.

The majority of the top 5 officers of the Company have been with the Company for a long time. The employment contracts are usually entered into for an initial period of 2 years which are automatically renewed unless terminated in accordance with the terms mentioned therein. The notice period for termination of employment contracts for all the key personnel is a minimum of 2 months and the gratuity is computed and paid in accordance with the applicable Labour Laws.

The Company has a Senior Management Incentive Plan (SMIP). Under the plan the Company has created an overseas based trust structure under the name of Renaissance Services SMIP Limited, and uses trustees from an independent professional firm to oversee and administer the employees’ long-term benefit scheme independently from the Company. The scheme is a rolling programme that allows a part of the Company’s

senior management bonus payments every year to be paid into the independent trust and the underlying structure. The proceeds are invested by the trustees in the shares of the Company through the MSM. The shares are directly released to the employees by the trustees proportionately over a period of 3 years. The structure and the operation mechanism ensure independency and transparency so that the employees are fully aware of the management and liquidity of their long-term employment benefits.

6. Details of Non-compliance by the Company There were no penalties or strictures imposed on the Company by the MSM/CMA or any statutory authority for the last three years. There are no areas in which the Company is still not compliant with the Code of Corporate Governance.

7. Means of Communication 7.1 The Company has been sending financial results

and material information to MSM Website via the MSM Electronic Transmission System. The Company has also been publishing annual audited & quarterly un-audited financial results and material information in the English and Arabic newspapers. The annual audited accounts & Chairman’s Report are despatched to all Shareholders by mail, as required by law.

7.2 The financial results and information on the Company are posted at www.renaissance-oman.com as well as on Muscat Securities Market website: www.msm.gov.om

7.3 Meetings are held with analysts and members of the financial press in line with internal guidelines of disclosure.

7.4 The CEO’s Report, provided in the Annual Report, includes the Management Discussion & Analysis of the year’s performance.

8. Stock Market Data

8.1 High/ Low share prices during each month of 2014

(Source of statistics: MSM)

MonthHigh/Low share price movement

High (Rial) Low (Rial)January 2014 0.820 0.732February 2014 0.816 0.764March 2014 0.764 0.672April 2014 0.696 0.664May 2014 0.680 0.624June 2014 0.660 0.600July 2014 0.628 0.580August 2014 0.752 0.600September 2014 0.720 0.664October 2014 0.688 0.584November 2014 0.612 0.554December 2014 0.560 0.350

31


8.2 Renaissance Share Price movement in comparison to the MSM Index and MSM Services Index

8.3 Distribution of Shareholding as on 31 December 2014Source of Statistics: Muscat Clearing & Depository Company (SAOC)

Sr. No. Category Number of

Shareholders No of shares % Shareholding

1 Less than 100,000 shares 3,999 14,034,648 4.98%

2 100,000 – 200,000 shares 37 5,160,046 1.83%

3 200,001 – 500,000 shares 44 14,736,223 5.22%

4 500,001 – 2,820,944 shares 43 50,731,539 17.98%

5 1% - 1.99% of share capital 10 40,487,026 14.35%

6 2% - 9.99% of share capital 10 114,406,945 40.56%

7 10% of share capital & above 1 42,538,025 15.08%

Total 4,144 282,094,452 100%

5000.00

5400.00

5800.00

6200.00

6600.00

7000.00

7400.00

0.350

0.450

0.550

0.650

0.750

0.850

MSM

Inde

x

Shar

e P

rice

in R

ial

RS Closing price MSM Index

Jan 2014

Feb 2014

Mar 2014

Apr 2014

May 2014

June 2014

July 2014

Aug 2014

Sep 2014

Oct 2014

Nov 2014

Dec 2014

3000

3100

3200

3300

3400

3500

3600

3700

3800

3900

0.350

0.450

0.550

0.650

0.750

0.850

MSM

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Shar

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in R

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RS Closing Price MSM Service Index

Jan 2014

Feb 2014

Mar 2014

Apr 2014

May 2014

June 2014

July 2014

Aug 2014

Sep 2014

Oct 2014

Nov 2014

Dec 2014

32

8.4 The Company has issued 423,141,678 mandatory convertible bonds (MCBs) at Rial 0.102 each on 25 July 2012 and listed on Muscat Security Market (MSM) on 6 August 2012. The MCBs carry a coupon rate at 3.75% per annum and shall be converted at face value (Rial 0.100) through conversion into shares of the Company at the conversion price. The conversion will be carried out in three tranches, 33.33% at the end of third and fourth year each and 33.34% at the end of fifth year, commencing from the third anniversary and ending on the fifth anniversary from the issue date. The number of outstanding MCBs shall decline upon each conversion into shares, so as to fully convert all the outstanding MCBs at the end of fifth anniversary from the issue date. The conversion price shall be equal to the average of the closing market price of the shares, as quoted on MSM, in the 30 days prior to the respective date of conversion, subject to adjustments including rights issue, stock dividend, split and reverse split of shares divided by the conversion factor (1.7). The impact of conversion of MCBs on the Company’s equity shall depend on the market price of shares of the Company at the time of conversion.

9. Professional Profile of the Statutory Auditors

PwC is a global network of firms operating in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. PwC also provides corporate training and professional financial qualifications through PwC’s Academy.

Established in the Middle East for 40 years, PwC employs over 2,780 people and has 21 offices across 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, the Palestinian Territories and the United Arab Emirates.

PwC has been established in Oman for over 40 years and the Firm comprises 3 partners, including one Omani national, and over 135 professionals and support staff. Expert assurance, tax and advisory professionals are able to combine internationally acquired specialist consulting and technical skills with relevant local experience.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

As per Article 9 (para b) of the Code of Corporate Governance pertaining to the rotation of external auditors, PwC have completed three years as statutory auditors of the Company by the end of 2014 and therefore, are eligible for re-appointment as a statutory

auditor of the Company for the financial year 2015.

10. Audit Fees paid to the Auditors

During the year 2014, aggregate professional fees in the amount of Rial 303,741/- were paid by the Company to PwC Oman and other PwC offices in respect of the services provided (Rial 207,331/- for audit, Rial 18,691/- for tax and Rial 77,720/- for other services).

11. Confirmation by the Board of Directors

Renaissance is committed to conducting business legally and professionally under the highest standards of business ethics and moral code. This same high standard is expected and required of all Renaissance subsidiary companies and people working at every level throughout the group.

The Board of Directors confirms its accountability for the preparation of the financial statements in accordance with the applicable standards and rules.

The Board of Directors confirms that it has reviewed the efficiency and adequacy of the Internal Control Systems of the Company. The Board is pleased to inform the Shareholders that adequate and efficient internal controls are in place and that they are in full compliance with the Internal Rules & Regulations.

The Board of Directors also confirms that there are no material things that affect the continuation of the Company and its ability to continue its operations during the next financial year.

Chairman Director

33


RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013Note RO’000 RO’000

Continuing operationsRevenue 32 252,058 239,263Operating costs (163,481) (165,395)Gross profit 88,577 73,868Administrative expenses (26,655) (25,606)Profit from operations 61,922 48,262Finance costs 5 (29,783) (23,115)Amortisation of intangible assets (31) (31)Loss on investments 6 (2) (857)Profit before tax 32,106 24,259Taxation 7 (7,947) (8,684)Profit for the year from continuing operations 24,159 15,575Discontinued operationsProfit for the year from discontinued operations 17 1,274 3,205Profit for the year 25,433 18,780Profit attributable to: Owners of the parent 17,341 11,298Non-controlling interests 8,092 7,482

25,433 18,780Other comprehensive income:Items that may be subsequently reclassified to profit or lossForeign currency translation differences (717) (150)Changes to cash flow hedges (60) 875Items that may not be subsequently reclassified to profit or lossRe-measurement of post-employment benefit obligations 919 (243)

142 482Total comprehensive income for the year 25,575 19,262Attributable to:Owners of the parent 17,483 11,780Non-controlling interests 8,092 7,482Total comprehensive income for the year 25,575 19,262Total comprehensive income from:Continuing operations 24,301 16,057Discontinued operations 1,274 3,205

25,575 19,262Earnings per share from continuing and discontinued operations attributable to owners of the parent during the year (expressed in Rial Omani)

Basic earnings per shareFrom continuing operations 26 0.060 0.030From discontinued operations 0.005 0.012From profit for the year 0.065 0.042Diluted earnings per shareFrom continuing operations 26 0.043 0.027From discontinued operations 0.003 0.009From profit for the year 0.046 0.036

The parent company statement of comprehensive income is presented as a separate schedule attached to the consolidated financial statements.

The notes on pages 40 to 90 form an integral part of these consolidated financial statements. Independent auditor’s report on pages 34

36


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2014

2014 2013Note RO’000 RO’000

ASSETSNon-current assetsProperty, plant and equipment 8 591,519 502,826Intangible assets 9 31,758 31,975Other long-term receivables 14 1,052 3,872Investments 11 322 322Deferred tax asset 7 1,142 1,274

625,793 540,269Current assetsFinancial assets at fair value through profit or loss 14 16Inventories 12 4,306 4,044Trade and other receivables 14 76,353 78,779Cash and bank balances 15 & 16 46,146 86,092

126,819 168,931Assets of disposal group classified as held-for-sale 17 19,154 16,651

145,973 185,582Total assets 771,766 725,851EQUITY AND LIABILITIESEquity attributable to owners of the parentShare capital 18 28,209 28,209Share premium 19,496 19,496Treasury shares (1,704) (1,704)Legal reserve 9,605 9,718Subordinated loan reserve 21,429 17,143Retained earnings 92,155 103,437Hedging reserve - 60Exchange reserve (645) 72

168,545 176,431Non-controlling interests 79,996 36,456Total equity 248,541 212,887LIABILITIESNon-current liabilitiesBorrowings 19 331,997 351,580Equity settled mandatory convertible bonds 20 41,514 38,948Non-current payables and advances 21 13,012 5,724Staff terminal benefits 22 4,428 5,041

390,951 401,293Current liabilitiesTrade and other payables 23 54,883 59,699Short term borrowings and bank overdrafts 16 & 24 6,850 139Current portion of long term borrowings 19 39,578 36,158Equity settled mandatory convertible bonds - current portion 20 21,540 -

122,851 95,996Liabilities of disposal group classified as held-for-sale 17 9,423 15,675

132,274 111,671Total liabilities 523,225 512,964Total equity and liabilities 771,766 725,851Net assets per share (RO) 25 0.630 0.659

The consolidated financial statements on pages 35 to 90 were authorised for issue in accordance with a resolution of the Board of Directors on 25 February 2015.

_____________________________ _____________________________ Chairman DirectorThe parent company statement of financial position is presented as a separate schedule attached to the consolidated financial statements.Independent auditor’s report on pages 34.


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34.



CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013Note RO’000 RO’000

OPERATING ACTIVITIESCash receipts from customers 276,993 294,320Cash paid to suppliers and employees (180,385) (211,316)

Cash generated from operations 96,608 83,004Net finance costs (30,690) (24,364)Income tax paid (6,904) (9,506)Net cash generated from operating activities 59,014 49,134

INVESTING ACTIVITIESAcquisition of property, plant and equipment (133,599) (77,477)Proceeds from divestment of subsidiaries 11,026 14,373Deposits placed (769) (5,000)Deposits under lien 8,885 (8,528)Dividends received 159 26Net cash used in investing activities (114,298) (76,606)

FINANCING ACTIVITIESNet (payment)/receipt of borrowings (13,734) 76,014Net movement in related party balances (50) (147)Dividend paid (2,821) -Funds received from /(paid to) non-controlling interests 39,435 (66)Net cash generated from financing activities 22,830 75,801

(Decrease)/increase in cash and cash equivalents (32,454) 48,329Cash and cash equivalents at the beginning of the year 73,655 25,326Cash and cash equivalents at the end of the year 41,201 73,655

Cash and cash equivalents comprise the following:Cash and bank balances 40,734 72,564Bank overdrafts (1,075) (139)

16 39,659 72,425Cash at bank classified as assets held-for-sale 17 (c) 1,542 1,230

41,201 73,655

The parent company statement of cash flows is presented as a separate schedule attached to the consolidated financial statements.The notes on pages 40 to 90 form an integral part of these consolidated financial statements. Independent auditor’s report on pages 34.

40


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014

1 Legal status and principal activities

Renaissance Services SAOG (the parent company) is incorporated in the Sultanate of Oman as a public joint stock company. The business activities of Renaissance Services SAOG and its subsidiary companies (together referred to as the Group) include investing in companies and properties, providing offshore support vessel fleet, ship building, purchase and sales of vessels, afloat ship repair, providing turnkey contract services, providing facilities management, facilities establishment, contract catering, operations and maintenance services, providing training services, general trading and related activities.

2 Summary of significant accounting policies

2.1 Basis of preparation

(a) The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirements of the Commercial Companies Law of 1974 and the disclosure requirements of the Capital Market Authority (CMA) of Sultanate of Oman. The standalone statement of financial position, statement of comprehensive income, changes in equity and cash flows of the parent company are given in the attached schedule to the consolidated financial statements, in order to comply with the disclosure requirements of CMA. For a further understanding of the standalone parent company’s financial position and the results of its operations, the schedule should be read in conjunction with the full set of separate financial statements of the parent company on which an unqualified opinion dated 2 March 2015 was rendered by the auditors.

(b) These financial statements have been prepared in Rial Omani (RO) rounded to the nearest thousand, unless otherwise stated.

(c) Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Rial Omani (RO), which is the Group’s presentation currency.

(d) The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair value of the following assets and liabilities:- Financial assets at fair value through profit or loss; - Available-for-sale investments; and- Derivative financial instruments.

(e) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

(f) Standards and amendments effective in 2014 and relevant for the Group’s operations:

For the year ended 31 December 2014, the Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for periods beginning on 1 January 2014.

The adoption of these standards and interpretations has not resulted in changes to the Group’s accounting policies and has not affected the amounts reported for the current year.




2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

(g) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:

A number of new standards, amendments and interpretations to existing standards have been published and are mandatory for the annual accounting periods beginning on or after 1 January 2015 or later periods, but the Group has not early adopted them. None of these standards are expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:IAS 16 and IAS 38 (Amendments), ‘Property, plant and equipment’ and ‘Intangible assets’, on depreciation and amortisation, (effective on or after 1 January 2016);IAS 16 and IAS 41 (Amendments), ‘Property, plant and equipment’ and ‘Agriculture’, on bearer plants (effective on or after 1 January 2016);IAS 27 (Amendments), ‘Separate financial statements’, on the equity method, (effective on or after 1 January 2016);IAS 28 (Amendments), ‘Investment in associates and joint ventures’, (effective on or after 1 January 2016);IAS 34 (Amendments), ‘Interim financial reporting’, regarding disclosure of information (effective on or after 1 January 2016);IFRS 9 (Amendments), ‘Financial instruments’, (effective on or after 1 January 2018);IFRS 10 and IAS 28 (Amendments), ‘Consolidated financial statements’ and ‘Investment in associates and joint ventures’ (effective on or after 1 January 2016);IFRS 11 (Amendments), ‘Joint arrangements’, on acquisition of an interest in a joint operation, (effective on or after 1 January 2016); and IFRS 15, ‘Revenue from contracts with customer’ (effective on after 1 January 2017).

2.2 Basis of consolidation

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are attributed to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Upon loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the statement of comprehensive income. If the Group retains any interest on entity that was a subsidiary in the past, then such interest is measured at fair value at the date that the control is lost. Subsequently, it is accounted for as equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

Associates

Associates are all entities over which, the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of profit or loss of the investee after the date of acquisition. Investment in associates includes goodwill identified on acquisition.

42




2.2 Basis of consolidation (continued)

Associates (continued)

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in the consolidated statement of comprehensive income, and its share of post-acquisition movements is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in an associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated statement of comprehensive income.

Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Dilution gains and losses arising in investments in associates are recognised in the consolidated statement of comprehensive income.

Joint arrangements

The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

Transactions eliminated on consolidation

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries are adjusted to conform to the group’s accounting policies.





2.2 Basis of consolidation (continued)

Accounting for business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities, contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in statement of comprehensive income.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in statement of comprehensive income or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated statement of comprehensive income.

Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is ceased, with the change in carrying amount recognised in statement of comprehensive income. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or a financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for, as if the Group had directly disposed the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the consolidated statement of comprehensive income.

Non-controlling interests

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

44




2.3 Revenue recognition

(a) Marine charter

Revenue comprises operating lease rent from charter of marine vessels, mobilisation income, and revenue from provision of on-board accommodation, catering services and sale of fuel and other consumables.

Lease rent income is recognised on a straight line basis over the period of the lease. Revenue from provision of on-board accommodation and catering services is recognised over the period of hire of such accommodation while revenue from sale of fuel and other consumables is recognised when delivered. Income generated from the mobilisation or demobilisation of the vessel to or from the location of charter under the vessel charter agreement is recognised over the period of the related charter party contract.

(b) Ship building and ship repair services

Revenue is recognised under the percentage of completion method and is stated net of discounts and allowances. Percentage of completion is determined by reference to the proportion that accumulated costs up to the period end bear to the estimated total costs of the contract. Cost includes all expenditure directly related to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contractual activities. Where the outcome of a contract can be assessed with reasonable certainty, a prudent estimate of attributable profit is recognised in the statement of comprehensive income. Full provision is immediately made for all known or expected losses on individual contracts, when such losses are foreseen. Revenue arising from contract variations and claims is not accounted for unless it is probable that the customer will approve the variations/claims and the amount of revenue arising from the variations/claims can be measured reliably.

(c) Goods sold and services rendered

Revenue from the sale of goods is recognised in the statement of comprehensive income when the significant risks and rewards of ownership have been transferred to the buyer i.e. when goods are delivered, accepted by the customer and the amount of revenue can be measured reliably.

Revenue from services rendered is recognised in the statement of comprehensive income in proportion to the stage of completion of the transaction in the accounting period in which the services are rendered and the right to receive the consideration is established. No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due, associated costs or the possible return of goods.

(d) Maintenance contracts

Income from maintenance contracts is recognised in the statement of comprehensive income on a straight line basis evenly over the term of the contract.

(e) Dividend income

Dividend income is recognised in the statement of comprehensive income on the date that the right to receive dividend is established.

(f) Sale of vessels

Revenue from sale of vessels is recognised in the statement of comprehensive income when persuasive evidence exists, usually in the form of an executed sales agreement, that significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the vessel and the amount of revenue can be measured reliably.





2.3 Revenue recognition (continued)

(g) Tuition fee

Tuition fee represents the fee value of courses conducted during the year, net of provisions for drop outs. Fees are billed at different stages of the course; however, income is accrued evenly over the duration of each course. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or associated losses.

(h) Others

Sale of operating assets and other miscellaneous income like insurance claims and other income are shown as part of revenue and are recognised when the right to receive is established.

2.4 Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is calculated by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

2.5 Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Cost of marine vessels includes purchase price paid to third parties, including registration and legal documentation costs, all directly attributable costs incurred to bring the vessel into working condition at the area of planned use, mobilisation costs to the operating location, sea trial costs, significant rebuild expenditure incurred during the life of the asset and financing costs incurred during the construction period of vessels. In certain operating locations where the time taken for mobilisation is significant and the customer pays a mobilisation fee, certain mobilisation costs are charged to the statement of comprehensive income. Costs for other items of property, plant and equipment include expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in property, plant and equipment. All other expenditure is recognised in the statement of comprehensive income as an expense as incurred.

Depreciation

Depreciation is charged to the statement of comprehensive income on a straight line basis over the estimated useful lives of items of property, plant and equipment. The estimated useful lives are as follows: YearsBuildings and improvements 5 - 25Marine vessels and boats acquired 15 - 30Plant, machinery and office equipment 1 - 15Motor vehicles 3Furniture and fixtures 3 - 5

46




2.5 Property, plant and equipment (continued)

Depreciation (continued)

Freehold land is not depreciated. The cost of certain assets used on specific contracts is depreciated to estimated residual value over the period of the respective contract, including extensions if any. Depreciation method, useful lives and residual values are reviewed at each reporting date.

Vessels that are no longer being chartered and are held-for-sale are transferred to inventories at their carrying value.

Capital work-in-progress

Capital work-in-progress is stated at cost and comprises all costs including borrowing costs directly attributable to bringing the assets under construction ready for their intended use. Capital work-in-progress is transferred to property, plant and equipment at cost on completion. No depreciation is charged on capital work-in-progress.

2.6 Dry docking costs

The expenditure incurred on vessel dry docking, a component of property, plant and equipment, is amortised over the period from the date of dry docking, to the date on which the management estimates that the next dry docking is due which is generally between two to three years.

2.7 Vessel refurbishment costs

Owned assets

Costs incurred to refurbish owned assets are capitalised within property, plant and equipment and then depreciated over the shorter of the estimated economic life of the related refurbishment or the remaining life of the vessel.

2.8 Intangible assets

Goodwill

Goodwill that arises on the acquisition of subsidiaries is presented within intangible assets. Goodwill is initially measured at the fair value of consideration transferred plus the recognised amount of any non-controlling interest in the acquiree plus, if the business combination is achieved in stages, the fair value of pre-existing equity interest in the acquire, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. Any negative goodwill is immediately recognised in statement of comprehensive income. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or Groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the Group are assigned to those units or Groups of units. Each unit or group of units to which the goodwill is so allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• is not larger than a segment based on the Group’s operating segment format determined in accordance with IFRS 8 - Operating Segments.





2.8 Intangible assets (continued)

Goodwill (continued)

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Other intangible assets

Other intangible assets acquired by the Group are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be finite and generally amortised over 5 years.

Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible asset.

2.9 Financial assets

2.9.1 Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within twelve months, otherwise they are classified as non-current.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position (notes 2.14 and 2.15).

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose them within twelve months of the end of the reporting period.

48




2.9 Financial assets (continued)

2.9.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the consolidated statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are recognised in the consolidated statement of comprehensive income in the period in which they arise.

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

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are recognised in the statement of comprehensive income under ‘gains and losses from investment securities’.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive income as part of finance income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.

2.10 Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period, whether there is objective evidence that a financial asset or group of financial assets are impaired. A financial asset or a group of financial assets are impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.





2.10 Impairment of financial assets (continued)

(a) Assets carried at amortised cost (continued)

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.

(b) Assets classified as available-for-sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets are impaired. For debt securities, the Group uses the criteria referred to in (a) above. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in statement of comprehensive income – is removed from equity and recognised in statement of comprehensive income. Impairment losses recognised in the consolidated statement of comprehensive income on equity instruments are not reversed through the consolidated statement of comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in statement of comprehensive income, the impairment loss is reversed through the consolidated statement of comprehensive income.

2.11 Impairment of non-financial assets

(a) Non-financial assets (other than goodwill)

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses, are recognised in the statement of comprehensive income.

The recoverable amount of an asset or its cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

2.12 Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined applying the first-in, first-out and the weighted average methods and includes all costs incurred in acquiring and bringing them to their present location and condition. Net realisable value signifies the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses.

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2.13 Construction work-in-progress

Construction contracts in progress represent the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Construction contracts in progress are presented as part of current assets for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as billings in excess of valuation in the current liabilities.

2.14 Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

2.15 Cash and cash equivalents

Cash and cash equivalents comprise cash at hand, bank balances and short-term deposits with an original maturity of three months or less. Bank borrowings that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of statement of cash flows.

Deposits under lien

Cash, which is under lien and held by commercial banks, is classified as deposits under lien.

2.16 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any gain or loss or income related to these shares is directly transferred to retained earnings and shown in the statement of changes in equity.

Gains and losses on measurement of transactions with shareholders are recognised in equity.

2.17 Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

2.18 Non-current assets (or disposal groups) classified as held-for-sale

Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and their fair value less costs to sell.





2.19 Discontinued operations

A discontinued operation is a component of an entity that either has been disposed of, or is classified as held-for- sale, and, represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. Results of discontinued operations are presented separately in the statement of comprehensive income.

2.20 Interest bearing borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

2.21 Provisions

A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefit will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liabilities.

2.22 Onerous contracts

A provision for onerous contract is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

2.23 Leases

Group as a lessee

Finance leases, which transfer to the Group, substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Subsequent to initial recognition, leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of comprehensive income.

Capitalised leased assets are depreciated over the estimated useful life of the asset or the lease term, whichever is less.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and are not recognised in the Group’s statement of financial position. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives are recognised as an integral part of the total lease expense, over the term of the lease.

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2.23 Leases (continued)

Group as a lessor

Leases where the group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.

Finance leases, which transfer from the group substantially all of the risks and rewards incidental to ownership of the leased item, are recognised as a disposal of asset at the inception of the lease and are presented as receivables under a finance lease at an amount equal to the net investment in the finance lease. Lease receivables are apportioned between the finance income and reductions of the receivables under a finance lease so as to achieve a constant periodic rate of return on the lessor’s net investment in the finance lease. Finance income earned is recognised in the consolidated statement of comprehensive income. Lease receivables due within one year are disclosed as current assets.

2.24 Employee benefits

Contributions to a defined contribution retirement plan for Omani employees, in accordance with the Oman social insurance scheme, are recognised as an expense in the statement of comprehensive income as incurred.

End of service benefits are accrued in accordance with the terms of employment of the Group’s employees at the reporting date, having regard to the requirements of the Oman Labour Law 2003, as amended (for employees working in Oman). Employee entitlements to annual leave and leave passage are recognised when they accrue to employees and an accrual is made for the estimated liability arising as a result of services rendered by employees up to the reporting date. These accruals are included in current liabilities, while that relating to end of service benefits is disclosed as a non-current liability. The entitlement to these benefits is based upon the employees’ salary and length of service, subject to completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

For non-Omani companies the end of service benefits are provided as per the respective regulations in their country.

Regardless of the compliance of local laws in respective jurisdiction of subsidiaries, the Group operates defined benefit pension plan which define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.

2.25 Dividend distribution

Dividends are recognised as a liability in the year in which they are approved by the company’s shareholders.





2.26 Directors’ remuneration

The Board of Directors’ remuneration of the parent company is accrued within the limits specified by the Capital Market Authority and the requirements of the Commercial Companies Law of the Sultanate of Oman.

2.27 Interest expense and income

Interest expense on borrowings is calculated using the effective interest rate method. Financing costs are recognised as an expense in the statement of comprehensive income in the period in which they are incurred.

Borrowing costs comprise interest payable on borrowings. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets. All other borrowing costs are recognised as an expense in the year in which they are incurred.

Interest income is recognised in the statement of comprehensive income as it accrues, taking into account the effective yield on the asset.

2.28 Segment reporting

An operating segment is the component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transaction with any of the Group’s other components, whose operating results are reviewed regularly by the Group CEO (being the chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and head office expenses.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

2.29 Income tax

Income tax is provided for in accordance with the fiscal regulations of the country in which the Group operates.

Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in the equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax is calculated on the basis of the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantially enacted by the reporting date. The tax effects on the temporary differences are disclosed under non-current liabilities as deferred tax.

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2.29 Income tax (continued)

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. The carrying amount of deferred tax assets is reviewed at reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The assessment regarding adequacy of tax liability for open tax year relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

2.30 Foreign currency

Transactions denominated in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate ruling at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in functional currency at the beginning of the year, adjusted for effective interest and payments during the year and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognised in statement of comprehensive income except for differences arising in retranslation of a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, to the extent these hedges are effective, which are recognised in other comprehensive income.

2.31 Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Rial Omani at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rial Omani at exchange rates at the date of the transaction. Foreign currency differences if any are recognised in other comprehensive income and are reflected in the exchange reserve in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the exchange reserve is transferred to statement of comprehensive income as part of the profit or loss on disposal. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of net investment in a foreign operation and are recognised in other comprehensive income, and are presented within the equity in the translation reserve.





2.32 Derivatives

Derivatives are stated at fair value.

For the purpose of hedge accounting, hedges are classified into two categories: (a) fair value hedges which hedge the exposure to changes in the fair value of a recognised asset or liability; and (b) cash flow hedges which hedge exposure to variability in cash flows of a recognised asset or liability or a highly probable transaction.

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be ‘highly effective’ in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

Derivatives are recognised initially at fair value. Attributable transaction costs are recognised in statement of comprehensive income as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in statement of comprehensive income.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in statement of comprehensive income. In other cases, the amount recognised in other comprehensive income is transferred to statement of comprehensive income in the same period that the hedged item affects profit or loss.

Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in statement of comprehensive income.

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2.33 Determination of fair values

Certain of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to the asset or liability.

Forward exchange contracts and interest rate swaps

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a credit adjusted risk free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.

Investments

For investments traded in organised financial markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the reporting date. (Level 1)

For unquoted investments, a reasonable estimate of the fair value is determined by reference to the market value of a similar investment or is based on the expected discounted cash flows (Level 2). Fair value cannot be reliably measured for certain unquoted investments. Such investments are measured at cost. (Level 3)

Other interest bearing items

The fair value of interest-bearing items is estimated based on discounted cash flows using market interest rates for items with similar terms and risk characteristics. (Level 2)

3 Financial risk management

3.1 Financial risks factors

Financial instruments carried on the statement of financial position comprise investments, other long-term receivables, trade receivables, amount due from related parties, cash in hand and at bank, term loans, bank borrowings, trade and other payables and amount due to related parties.

The Group has exposure to the following risks from its use of financial instruments: (i) Credit risk(ii) Liquidity risk(iii) Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these financial statements.




3 Financial risk management (continued)

3.1 Financial risks factors (continued)

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the receivables from customers and investments.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as below:

2014 2013RO’000 RO’000

Other long term receivables 1,052 3,872Investments (available-for-sale) 322 322Financial assets at fair value through profit or loss 14 16Trade receivables 59,332 54,613Amount due from related parties 184 354Deposits - 5,000Deposits under lien 5,412 8,528Cash and cash equivalents 40,734 72,564Financial assets of disposal group classified as held-for-sale 8,918 10,193

115,968 155,462

The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are generally performed on all customers requiring credit over specified amounts. The Group does not require collateral in respect of financial assets.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, and derivative instruments with positive values, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

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(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group limits its liquidity risk by ensuring that bank facilities are available. Short term loans and overdraft are, on average, utilised for period of ninety days to bridge the gap between collections of receivables and settlement of payables during the month.

The contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements at reporting date is as below:

31 December 2014

Carrying amountRO’000

Contractual cash flows

RO’000

Upto1 year

RO’000

1 year to 5 years

RO’000

More than 5 years

RO’000

Borrowings 371,575 456,878 60,502 335,263 61,113 Equity settled mandatory convertible bonds 63,054 2,944 1,472 1,472 - Bank overdrafts 6,850 6,850 6,850 - - Trade and other payables 54,841 54,841 44,504 10,337 -

496,320 521,513 113,328 347,072 61,113

31 December 2013

Carrying amountRO’000

Contractual cash flows

RO’000

Upto1 year

RO’000

1 year to 5 years

RO’000

More than 5 years

RO’000

Borrowings 387,738 514,882 60,847 370,656 83,379Equity settled mandatory convertible bonds 38,948 4,416 1,472 2,944 -

Bank overdrafts 139 139 139 - -Trade and other payables 52,243 52,243 51,964 279 -

479,068 571,680 114,422 373,879 83,379

(c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group also enters into derivative transactions, primarily interest rate swap and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.






(c) Market risk (continued)

(i) Foreign exchange risk

Trade accounts payable include amounts due in foreign currencies, mainly US Dollar, Euro, Pounds Sterling, UAE Dirham, Singapore Dollar, Norwegian Kroner, Kazakhstan Tenge, Nigerian Naira and Azerbaijan New Manat.

As Rial Omani (RO) is pegged with US Dollars, the risk of transactions made in US Dollar is considered minimal. With respect to other currencies mentioned above, had the Rial Omani (RO) weakened/strengthened by 5%, with all other variables held constant, the impact on the Group’s consolidated financial statements is considered to be insignificant.

(ii) Interest rate risk

The Group’s borrowings are on fixed as well as floating interest rate basis. The Group is exposed to interest rate risk due to fluctuation in the market interest rate of floating interest rate borrowings.

The following table demonstrates the sensitivity of the statement of comprehensive income to reasonably possible changes in interest rates, with all other variables held constant.

The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on the Group’s profit for the year, based on the floating rate financial assets and financial liabilities held at 31 December 2014.

Increase/decrease

in basis points

Effect on profitfor the year

RO’0002014Borrowings converted to Rial Omani +15 191Borrowings converted to Rial Omani -10 (127)2013Borrowings converted to Rial Omani +15 187Borrowings converted to Rial Omani -10 (125)

(iii) Other market price risk

Equity price risk arises from available-for-sale equity securities. Management of the Group monitors the mix of debt and equity securities in its investment portfolio based on market indices. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors.

3.2 Capital risk management

The Group’s policy is to maintain an optimum capital base to maintain investor, creditor and market confidence to sustain future growth of business as well as achieve appropriate return on capital.

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3.3 Fair value of financial instruments

Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1RO’000

Level 2RO’000

Level 3RO’000

TotalRO’000

31 December 2014Investments 14 - 322 336Derivative financial instruments - 523 7,577 8,100

31 December 2013Investments 16 - 322 338Derivative financial instruments - 1,005 - 1,005

4 Critical accounting estimates and judgements

4.1 Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect in the amounts recognised in the financial statements:

(a) Leases

Where the group acts as a lessor, management exercises judgment in assessing whether a lease is a finance lease or an operating lease. The judgement as to which category applies to a specific lease depends on management’s assessment of whether in substance the risks and rewards of ownership of the assets have been transferred to the lessee. In the instances where management estimates that the risks and rewards have been transferred, the lease is considered as a finance lease, otherwise it is accounted for as an operating lease.

The Group’s property, plant and equipment include marine crafts such as barges and other vessels of a specialist nature capable of operating in difficult climatic conditions. Although these vessels are currently leased to a customer under contracts which contain purchase options, the leases have been judged by management to be operating leases.




4 Critical accounting estimates and judgements (continued)

4.1 Judgements (continued)

(a) Leases (continued)

Where the Group acts as a lessor, management has based this judgement on a number of factors that indicate that, in substance the risks and rewards of owning these vessels remain with the group, including:

• the lease periods are generally for a short term (10 years) when compared with the overall estimated economic life (30 years or more) of the vessels;

• the leases do not automatically transfer the ownership of the vessels at the end of the lease term;• the Group is responsible for regular dry-docking and insurance in addition to maintenance of the vessels;• the customer is unlikely to want to bear the cost and responsibility of owning and maintaining these specialised

vessels and is, therefore, unlikely to exercise options to purchase;• the recent renewal by the customer of one major leasing contract for a secondary period despite the purchase

option being available to the lessee; and• the expectation that the customer would wish to renew its contracts for the leases of the vessels from the

Group due to the Group’s proven track record and established support and services infrastructure in the region of operation.

• Management has reached an in-principle agreement with the customer, for the removal of the option to purchase clauses in the contracts and are concluding formal variations to contracts, which is subject to fulfillment of certain conditions.

(b) Guarantees

During 2013, the Group had provided certain performance bank guarantees to a customer. Subsequently the customer terminated the contract and the Group is in negotiations to receive back the performance guarantee given to the customer. Based on on-going negotiations, the management is confident that the guarantees provided would not result in significant liability to the Group.

4.2 Estimates and assumptions

The preparation of financial statements requires management to make estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. These calculations use current year actual free cash flows determined from EBITDA, which is extrapolated using the estimated growth rate of 3%. The growth rate does not exceed the long-term average growth rate of the business in which the CGU operates. The net carrying amount of goodwill at 31 December 2014 was RO 31.562 million (2013 - RO 31.748 million).

62




4.2 Estimates and assumptions (continued)

(b) Impairment of vessels

The Group determines whether its vessels are impaired when there are indicators of impairment as defined in IAS 36. This requires an estimation of the value in use of the cash-generating unit, which is the vessel owning and chartering segment. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from this cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying value of the vessels as at 31 December 2014 was RO 478.032 million (2013 - RO 395.263 million).

(c) Impairment of accounts receivable

An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.

At the reporting date, gross trade accounts receivable were RO 67.120 million (2013 - RO 60.824 million) and the provision for doubtful debts was RO 7.788 million (2013 - RO 6.211 million). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the statement of comprehensive income.

(d) Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis.

At the reporting date, gross inventories were RO 4.307 million (2013 - RO 4.084 million) with provisions for old and obsolete inventories of RO Nil (2013 - RO 0.04 million). Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the statement of comprehensive income.

(e) Useful lives of property, plant and equipment

The useful lives, residual values and methods of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at each financial year end. In the review process, the Group takes guidance from recent acquisitions, as well as market and industry trends.

(f) Provision for tax

The Group reviews the provision for tax on a regular basis. In determining the provision for tax, laws of particular jurisdictions (where applicable entity is registered) are taken into account. The management considers the provision for tax to be a reasonable estimate of potential tax liability after considering the applicable laws and past experience.

(g) Effectiveness of hedge relationship

At the inception of the hedge, the management documents the hedging strategy and performs hedge effectiveness testing to assess whether the hedge is effective. This exercise is performed at each reporting date to assess whether the hedge will remain effective throughout the term of the hedging instrument. As at the reporting date, the cumulative fair value of the interest rate swap was RO 0.523 million (2013 - RO 1.005 million).





4.2 Estimates and assumptions (continued)

(h) Accounting for investments

The Group reviews its investment in entities to assess whether the Group has control, joint control or significant influence over the investee. This includes consideration of the level of shareholding held by the Group in the investee as well as other factors such as representation on the Board of Directors of the investee, terms of any agreement with the other shareholders etc. Based on the above assessment the Group decides whether the investee needs to be consolidated, proportionately consolidated or equity accounted in accordance with the accounting policy of the Group.

(i) Determining percentage completion of contracts in progress and estimating foreseeable losses

Contract work-in-progress is stated at cost plus estimated attributable profits less foreseeable losses and progress billings. In determining estimated attributable profits or foreseeable losses, if any, to be recognised, the Group needs to estimate the outcome of each contract and also the percentage of completion of the contract which is determined by the actual cost incurred to date in relation to the total estimated costs. The final results of the contract may differ from the estimates made at the time of preparation of these consolidated financial statements.

(j) Recoverable values of disposal group classified as held-for-sale

The assets of disposal groups classified as held-for-sale are carried at lower of carrying amount and realisable values. The Group estimates the recoverable value of these assets, based on a number of factors including market value of the assets, values offered by potential acquirers of the disposal groups.

(k) Fair value of financial instruments

For the purpose of determining the fair value of financial instruments on initial recognition, management estimates the applicable discount rates based on its evaluation of applicable market rates of instruments of similar nature and terms.

5 Expenses by nature

Profit for the year from continuing operations is after charging: 2014 2013RO’000 RO’000

Staff costs 86,099 81,846Operating lease rentals 5,323 13,430Provision for doubtful debts 1,868 5,460Depreciation 29,252 27,086Finance costs 29,783 23,115

6 Loss on investments - net2014 2013

RO’000 RO’000

Write-off of investment in associates (note 17 (h)) - (1,587)Gain on sale of investments - 730Unrealised loss on investments (2) -

(2) (857)

64



7 Income tax

(a) The expense relates to tax payable on the profits earned by the Group calculated in accordance with the taxation laws and regulations of various countries in which the Group operates.

2014 2013RO’000 RO’000

Tax charge for the year comprises of: Current tax in respect of current year 10,315 7,676Reversal of tax in respect of prior year (2,500) -Deferred tax in respect of current year 132 1,008

7,947 8,684Deferred tax asset

At 1 January 1,274 2,282Charged to statement of comprehensive income (132) (1,008)At 31 December 1,142 1,274

(b) The deferred tax balance at 31 December 2014 comprises depreciation in excess of capital allowances of RO 0.779 million (2013 - RO 0.556 million), short term timing differences of RO 0.208 million (2013 - RO 0.147 million) and temporary differences relating to pension obligations of RO 0.155 million (2013 - RO 0.571 million).

(c) Deferred tax assets are recognised for temporary differences to the extent that the realisation of the related tax benefit through future taxable profits is probable.

(d) The parent company and its Oman incorporated subsidiaries are subject to income tax at the rate of 12% of taxable income in excess of RO 30,000 in accordance with the Income Tax Law of the Sultanate of Oman.

(e) Reconciliation of tax charge is as follows:

2014 2013RO’000 RO’000

Profit before income tax of Group entities operating in taxable jurisdictions

32,106 24,259

Less: non-taxable profits earned by these entities (9,977) (1,318)Profit subject to tax included in the consolidated statement of comprehensive income for the year 22,129 22,941

Tax at domestic tax rate 2,655 2,753Tax effect of expenses that are not deductible in determining taxable profit 773 653Effect of different tax rates of subsidiaries operating in jurisdictions other than Sultanate of Oman 4,519 5,278Tax expense for the year 7,947 8,684

(f) In some jurisdictions, the tax returns for certain years have not been reviewed by the tax authorities. However, the Group’s management is satisfied that adequate provisions have been made for potential tax contingencies.




7 Income tax (continued)

(g) The parent company’s assessments for the tax years 2012 to 2014 have not been finalised with the Secretariat General for Taxation at the Ministry of Finance of the Government of Sultanate of Oman (‘the Department’). The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax laws and prior experience.

(h) The parent company has filed appeals to the Tax Committee and the Court against certain decisions of the Department on disallowances made by the Department in the previous assessments. The main issues under the appeals are taxation of overseas income, taxation of overseas dividend, and disallowances relating to interest and some specific expenses. As required under the tax laws, the parent company has paid the tax dues relating to those issues and is continuing to appeal to the higher authorities.

(i) The parent company has established provisions at 31 December 2014 against the tax liabilities, which may arise, relating to disallowances of interest and some specific expenses.

8 Property, plant and equipment

Freeholdland and

buildingsMarine

Vessels

Machineryand

equipmentMotor

vehicles

Furnitureand

fixtures

CapitalWork-in

-progress TotalRO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Cost At 1 January 2014 82,678 506,968 14,146 1,060 1,240 37,324 643,416Additions 1,453 53,788 1,843 357 180 64,966 122,587 Transfers 3,709 57,623 53 41 - (61,426) -Disposals - (5,903) (905) (79) (52) - (6,939)At 31 December 2014 87,840 612,476 15,137 1,379 1,368 40,864 759,064

Accumulated depreciationAt 1 January 2014 18,222 111,705 9,133 788 742 - 140,590Charge for the year 3,315 24,066 1,523 165 183 - 29,252 Impairment - 1,538 - - - - 1,538Disposals - (2,865) (848) (74) (48) - (3,835)31 December 2014 21,537 134,444 9,808 879 877 - 167,545

Net book amount at31 December 2014 66,303 478,032 5,329 500 491 40,864 591,519

66



8 Property, plant and equipment (continued)

Freeholdland andbuildings

Marinevessels

Machineryand

equipmentMotor

vehicles

Furnitureand

fixtures

CapitalWork-in

-progress TotalRO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Cost At 1 January 2013 87,019 455,928 20,908 2,298 2,487 13,989 582,629Transfer from current assets - 1,452 - - - - 1,452Additions 730 53,130 1,169 212 357 23,632 79,230Transfers - 290 - - - (290) -Assets of disposal group classified as held-for-sale (4,070) (1,272) (6,390) (802) (772) (7) (13,313)Disposals (1,001) (2,560) (1,541) (648) (832) - (6,582)At 31 December 2013 82,678 506,968 14,146 1,060 1,240 37,324 643,416

Accumulated depreciationAt 1 January 2013 17,431 92,138 13,084 1,754 1,836 - 126,243Charge for the year 3,582 22,088 2,068 276 275 - 28,289Assets of disposal group classified as held-for-sale (2,169) (1,036) (4,920) (752) (705) (9,582)Disposals (622) (1,485) (1,099) (490) (664) - (4,360)31 December 2013 18,222 111,705 9,133 788 742 - 140,590

Net book amount at 31 December 2013 64,456 395,263 5,013 272 498 37,324 502,826

(a) The Group’s property, plant and equipment excluding certain immaterial assets are pledged against bank loans and bank borrowings. Marine vessels with a net book amount of RO 245.223 million (2013- RO 227.621 million) are pledged against bank loans obtained. Further details of property, plant and equipment secured against borrowings are disclosed in note 19.

(b) Capital work-in-progress includes costs incurred for construction of marine vessels and buildings.

(c) Advances or deposits paid for construction or acquisition of assets are classified as advances to suppliers and contractors, and the amount is transferred to capital work-in-progress after the commencement of construction.

(d) During the year, the Group capitalised borrowing costs amounting to RO 1.758 million (2013 - RO 0.904 million). Borrowing costs were capitalised at the interest rate of non-amortised Senior Notes issued in 2013 which is 9.2% (2013 – 9.2%) and other interest rates at 5.75% (2013 - 5.75%)

(e) The depreciation charge has been allocated in the statement of comprehensive income as follows:

2014 2013RO’000 RO’000

Operating expenses 28,636 26,450Administrative expenses 616 636

29,252 27,086Depreciation related to discontinued operations - 1,203

29,252 28,289




9 Intangible assets

Intangible assets as at 31 December consisted of the following:

2014 2013 RO’000 RO’000

Goodwill 31,562 31,748Computer software 196 227At 31 December 31,758 31,975

Goodwill2014 2013

RO’000 RO’000

Initial goodwill 38,287 39,817Exchange differences (186) (94)Disposal - (828)Transfer to assets classified as held-for-sale (note 17) - (608)At 31 December 38,101 38,287Impairment At 1 January and 31 December 6,539 6,539

Net carrying amount 31 December 31,562 31,748

(a) Goodwill represents the excess of the cost of acquiring shares in certain subsidiary companies over the aggregate fair value of the net assets acquired.

(b) The carrying amount of goodwill at 31 December allocated to each of the cash-generating units is as follows:

2014 2013RO’000 RO’000

Topaz Energy and Marine Limited 28,821 28,821Tawoos Industrial Services Company LLC 1,900 1,900Norsk Offshore Catering AS 841 1,027

31,562 31,748

(c) The recoverable amount of each cash-generating unit is determined based on a value-in-use calculation, using current year actual free cash flows determined from EBITDA. The key assumptions of the value-in-use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs incurred during the period. Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to each cash-generating unit. The growth rates are based on management estimates having regard to industry growth rates. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

(d) Key assumptions used in the calculation of recoverable amounts are discount rates, growth rate, and terminal value calculations. These assumptions are as follows

68



9 Intangible assets (continued)

Goodwill (continued)

Discount rate

The discount rate used for value in use calculation in 2014 ranges from 9.2% to 11.56% (2013 - 9.1% to 11.32%) for various cash generating units.

Terminal value calculations

The discounted cash flow calculations for all the cash generating units are based on the current year actual free cash flows determined from EBITDA. These cash flows then form the basis of perpetuity cash flows used in calculating the terminal value.

Growth rate

Growth rate used for value in use calculation in 2014 is 3% (2013 - 3%).

(e) Sensitivity to changes in assumptions

With regard to the assessment of value-in-use of the cash generating units, management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of the goodwill to materially exceed its recoverable amount.

10 Principal subsidiaries

(a) The Group and parent company investments in principal subsidiary and associate companies are as follows:

Percentage shareholding

Company Country of incorporation 2014 2013 Principal activities

Subsidiary companiesTopaz Energy and Marine Limited (TEAM JAFZA)

United Arab Emirates

100% 100% Holding company

Tawoos Industrial Services Company LLC (TISCO)

Sultanate of Oman 100% 100% Contract catering, facilities management and establishment, operations and maintenance services

United Media Services LLC (UMS) (refer note 17(a))

Sultanate of Oman - 100% Media advertising, distribution and publishing activities

National Hospitality Institute SAOG (NHI) (refer note 17(b))

Sultanate of Oman 46% 46% Hospitality and tourism training services

Renaissance Energy Limited (REL) United Arab Emirates


Renaissance Duqm Holding SAOC (under formation)

Sultanate of Oman 51.9% - Holding company




10 Principal subsidiaries (continued)

(b) Subsidiaries of TEAM JAFZA



Topaz Energy and Marine Limited (formerly Nico Middle East Limited) (Topaz)

Bermuda 100% 100% Charter of marine vessels

Topaz Holdings Limited United Arab Emirates


Topaz Engineering Limited Bermuda 100% 100% Holding company

Topaz Energy and Marine Plc United Kingdom 100% 100% Dormant company

(i) Topaz Energy and Marine Limited (formerly Nico Middle East Limited) has a subsidiary BUE Marine Ltd, incorporated in UK, which operates through its subsidiaries and is engaged principally in charter of marine vessels and vessel management.

(ii) Topaz Engineering Limited through its subsidiaries and divisions (collectively called Marine Engineering Division) engaged in ship building and ship repair services.

(c) Subsidiaries of TISCO



Rusail Catering and Cleaning Services LLC Sultanate of Oman

100% 100% Catering and cleaning services

Supraco Limited (Supraco) Cyprus 100% 100% Catering services

Renaissance Contract Services International LLC (RCSI)

Sultanate of Oman


Al Wasita Catering Services LLC (Al Wasita) Sultanate of Oman

100% 100% Dormant company

Renaissance Facilities Management Company SAOC (under formation)

Sultanate of Oman

100% - Contract catering, facilities management and establishment, operations and maintenance services

(i) Supraco Limited through its subsidiaries in Norway provides contract catering services.

(ii) RCSI through its subsidiaries in Angola and UAE provides catering and allied services in the respective countries. One of its subsidiaries in UAE is dormant as at 31 December 2014.

70



10 Principal subsidiaries (continued)

(d) Subsidiary of Renaissance Duqm Holding SAOC (under formation)



Renaissance Duqm Accommodation company SAOC (under formation)

Sultanate of Oman

100% - Build, own and operate permanent

accommodation for contractors (e) Summarised financial information of subsidiaries in Topaz with material non-controlling interest.

(i) Summarised statement of financial position

2014 2013RO’000 RO’000

Non-current assets 206,185 176,386Current assets 22,648 4,834Non-current liabilities (54,546) (50,820)Current liabilities (80,713) (59,080)Net assets 93,574 71,320

(ii) Summarised statement of comprehensive income

2014 2013RO’000 RO’000

Revenue 37,444 28,048

Profit before income tax 15,618 14,932Income tax (221) (112)Profit for the year 15,397 14,820Other comprehensive income - -Total comprehensive income for the year 15,397 14,820

(iii) Summarised statement of cash flows

2014 2013RO’000 RO’000

Net cash generated from operating activities 28,760 66,256Net cash used in investing activities (37,450) (71,960)Net cash generated from financing activities 9,341 6,455Net increase in cash and cash equivalents 651 751Cash and cash at beginning of the year 4,718 3,967Cash and cash equivalent at the end of the year 5,369 4,718

The information above is the amount before inter-company eliminations.




11 Investments

2014 2013RO’000 RO’000

Available-for-sale investments 322 322

Available-for-sale investments

(a) Available-for-sale investments represent the cost of investments in the following entities:

Ownership interest (%)2014 2013

Fund for Development of Youth Projects SAOC 2.33 2.33Industrial Management Technology & Contracting LLC 1.25 1.25

(b) There are no movements in the carrying value of the Group’s investments in available-for-sale.

(c) The available-for-sale investments are denominated in Rial Omani.

(d) None of these financial assets are impaired.

(e) Available-for-sale investments are carried at cost and the carrying value approximates its fair value.

12 Inventories

2014 2013RO’000 RO’000

Stock and consumables - net of provision 4,306 4,044

(a) During the year Group did not require to make a provision for slow-moving and obsolete stock (2013 - RO 40,000).

13 Financial instruments

13 (a) Financial instruments by category

2014Loans and

receivablesAvailable-

for- saleAssets at fair value

through profit or lossTotal

RO’000 RO’000 RO’000 RO’000AssetsInvestments - 322 - 322Other long term receivables 1,052 - - 1,052Financial assets at fair value through profit or loss - - 14 14Trade and other receivables excluding other receivables and prepayments 61,379 - - 61,379Deposits under lien 5,412 - - 5,412Cash and bank balances 40,734 - - 40,734

108,577 322 14 108,913

72



13 Financial instruments (continued)

13 (a) Financial instruments by category (continued)

2013

Loans and receivables

Available-for-sale

Assets at fair value through profit or loss

Total

RO’000 RO’000 RO’000 RO’000AssetsInvestments - 322 - 322Other long term receivables 3,872 - - 3,872Financial assets at fair value through profit or loss - - 16 16Trade and other receivables excluding other receivables and prepayments 58,453 - - 58,453Deposits 5,000 - - 5,000 Deposits under lien 8,528 - - 8,528Cash and bank balances 72,564 - - 72,564

148,417 322 16 148,755

Other financial liabilities at amortised cost

2014 2013Liabilities RO’000 RO’000Borrowings (including equity settled mandatory convertible bonds) 434,629 426,686Non-current payables and advances 2,760 279Trade and other payables 44,504 51,964Short-term borrowings and bank overdrafts 6,850 139

488,743 479,068

13 (b) Credit quality of financial assets

As per the credit policy of the company, customers are generally extended a credit period of up to three months in the normal course of business. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external ratings (if available) or to historical information about counterparty default rates:

Trade debtors 2014 2013Counterparties without external credit rating RO’000 RO’000Not past due 40,335 39,201Past due 0 to 3 months 12,610 8,177Past due over 3 months 6,387 7,235Total 59,332 54,613

Cash at bank

With respect to exposures with banks, management considers the credit risk exposure to be minimal as the company only deals with banks with a minimum rating of P-2 as per Moody’s investors service. Management does not expect any losses to arise from non-performance by these counterparties




14 Trade and other receivables

2014 2013 RO’000 RO’000

CurrentTrade receivables (net of provision for doubtful debts) 59,332 54,613Other receivables and prepayments 14,974 20,326Advances to suppliers and contractors 1,863 3,486Amounts due from related parties 184 354

76,353 78,779Non-currentOther long-term receivables 1,052 3,872

(a) As at 31 December 2014, trade receivables of RO 7.788 million (2013 - RO 6.211 million) were impaired and provided for.

(b) The fair value of trade debtors and other receivables approximate their carrying amounts.(c) The other classes within trade and other receivables do not contain impaired assets.(d) Other long-term receivables represent costs to mobilise certain vessels and will be amortised over the

contract period. It also includes the balance amount of sale proceeds from disposal of Al Wasita Emirates which is receivable over a period of five years from the date of sale (31 March 2012). This receivable was recognised at fair value and carried at amortised cost.

(e) The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above.

(f) Movement in the allowance for impairment of receivables is as follows:

2014 2013 RO’000 RO’000

At 1 January 6,211 3,949Charge for the year (refer note below) 1,868 5,518Amounts written-off (576) (1,795)Transfer 285 -Disposal - (39)Transfer of assets to disposal group held-for-sale - (1,422)At 31 December 7,788 6,211

(g) As at 31 December, the ageing of unimpaired trade receivables is as follows:

Past due but not impaired

TotalRO’000

Neither past due nor impaired

RO’000< 30 days

RO’000

30 – 60 days

RO’000

60 – 90 days

RO’000

90 – 120 days

RO’000

>120 days

RO’000

2014 59,332 40,334 7,679 3,086 1,845 1,358 5,030

2013 54,613 39,201 4,482 2,230 1,465 779 6,456

(h) Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables and the vast majority are, therefore, unsecured.

74



14 Trade and other receivables (continued)

(i) The carrying amounts of the Group’s trade receivables are denominated in the following currencies

2014 2013RO’000 RO’000

Rial Omani 23,355 15,961US Dollar 32,686 34,591Others 3,291 4,061

59,332 54,613

15 Deposits

Deposits under lien include cash margin and other deposits which are kept in a commercial bank as security against guarantee given to a third party and against term loans obtained by the Group. These deposits are denominated in Rial Omani and US Dollar.

16 Cash and cash equivalents

2014 2013RO’000 RO’000

Cash and bank balances 46,146 86,092Less: deposits more than three months - (5,000)Less: deposits under lien (note 15) (5,412) (8,528)Cash and cash equivalents (excluding bank overdrafts) 40,734 72,564Less: bank overdrafts (note 24) (1,075) (139)Cash and cash equivalents 39,659 72,425

Included in cash and bank balances are short-term deposit of RO 5.775 million (deposits in 2013 - RO 5.009 million) maintained with commercial banks. This deposit carry interest rate of 3.5% p.a. (2013: 0.2% to 3.5%) and is denominated mainly in Rial Omani.

17 Non-current assets held-for-sale and discontinued operations

(a) During the year 2014, the company disposed of one of its subsidiary United Media Services LLC (UMS). The disposal comprised of sale of shares of UMS with effective disposal date of 31 March 2014 as per share purchase agreement (SPA) between the company (the seller) and Muscat Overseas Group (the buyer). Total consideration of RO 2.340 million was agreed as the purchase price and the gain arising was RO 1.802 million.

(b) In 2013, the assets and liabilities related to NHI and Topaz Marine and Engineering Division (together referred to as the disposal group) were classified as held-for-sale following the approval of the Group’s Board of Directors on 10 December 2013. The related disposal transactions are expected to be completed in 2015.




17 Non-current assets held-for-sale and discontinued operation (continued)

(c) Assets of disposal group classified as held-for-sale:

2014 2013RO’000 RO’000

Property, plant and equipment 5,669 3,731Goodwill - 608Inventories 4,567 2,119Cash and bank balances 1,542 1,230Other current assets 7,376 8,963

19,154 16,651Property, plant and equipment include buildings with net book value amounting to RO 1.797 million (2013 - RO 1.892 million) situated on leasehold land which is renewable every year.

(d) Liabilities of disposal group classified as held-for-sale:

2014 2013RO’000 RO’000

Trade payables and accrued expenses 7,334 9,948Bank overdraft and short-term loans - 3,346Other liabilities 2,089 2,381

9,423 15,675

(e) The operations of UMS and disposal group are presented as discontinued operations in these consolidated financial statements.

(f) Analysis of the result of discontinued operations is as follows:

2014 2013RO’000 RO’000

Revenue 30,563 56,676Expenses (31,081) (60,788)Loss before tax from discontinued operations (518) (4,112)Tax (10) (96)Loss after tax from discontinued operations (528) (4,208)

Gain on disposal where completed 1,802 7,780Tax - (367)Gain on disposal after tax 1,802 7,413

Profit for the year from discontinued operations 1,274 3,205

76



17 Non-current assets held-for-sale and discontinued operation (continued)

(g) Analysis of the cash flows of discontinued operations is as follows:

2014 2013RO’000 RO’000

Operating cash flows (3,115) (4,457)Investing cash flows (2,053) (208)Financing cash flows 5,999 5,087Total cash flows 831 422

The cash flows of discontinued operations for 2014 above do not include cash flows of UMS, which was disposed during the year. The net sale proceeds from disposal of UMS were received and classified as cash flows from investing activities.

(h) Following closure of operations of the parent company’s associate companies i.e. Dubai Wire and Global Fastener Limited in 2013, the carrying amount of investments in these associates RO 1.587 million was fully written-off in 2013. These associates were dormant in 2014 and their liquidation process will commence in 2015.

18 Capital and reserves

(a) Share capital

The authorised share capital of the parent company comprises 400,000,000 ordinary shares of RO 0.100 each (2013 - 400,000,000 of RO 0.100 each). At 31 December 2014, the issued and fully paid up share capital comprised 282,094,452 ordinary shares of RO 0.100 each (2013 - 282,094,452 of RO 0.100 each).

Details of shareholders, who own 10% or more of the parent company’s share capital, are as follows:

2014 2013Number of

shares‘000 %

Number ofshares

‘000 %

Tawoos LLC 42,538 15.08 42,538 15.08

(b) Legal reserve

The Omani Commercial Companies Law of 1974 requires that 10% of an entity’s net profit be transferred to a non-distributable legal reserve until the amount of the legal reserve becomes equal to one-third of the entity’s issued share capital. The legal reserve is not available for distribution. Legal reserve also includes a transfer relating to non-Oman registered subsidiary companies as per the respective regulations in their country of incorporation. The parent company utilises the share premium for transfers to legal reserve. Transfers to legal reserves made during the year relates to the legal reserves of certain subsidiaries.

(c) Treasury shares

These are shares held by a subsidiary in the parent company at the cost of RO 1,703,826 (2013 - RO 1,703,826). Dividend received on these treasury shares has been directly transferred to retained earnings and shown as movement in the statement of changes in equity. At 31 December 2014, the subsidiary held 14,554,586 shares (2013 - 14,554,586 shares) in the parent company. The market value of these shares at 31 December 2014 was approximately RO 6.9 million (2013 - RO 10.7 million).




18 Capital and reserves (continued)

(d) Share premium

The Group utilises the share premium for issuing bonus shares and transfers to legal reserve. No such transfers took place during 2014.

(e) Subordinated loan reserve

As per the subordinated loan agreement, the parent company is required to create a subordinated reserve by transferring an amount equal to 1/7th of the outstanding aggregate amount of loan notes out of annual profit after tax of the parent company. In order to meet the objectives of the loan agreement, the parent company has made a transfer of RO 4.286 million (2013 - RO 5.714 million) from retained earnings to subordinated loan reserve during the year.

(f) Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

(g) Exchange reserve

The exchange reserve comprises of foreign currency differences arising from translation of the financial statements of foreign operations.

19 Borrowings

Total1 year

or less2 -5

YearsMore than

5 years31 December 2014 RO’000 RO’000 RO’000 RO’000

Parent company - term loans 78,163 7,767 22,026 48,370 Parent company - subordinated loan 30,000 10,000 20,000 - Borrowings of subsidiary companies 263,412 21,811 234,193 7,408

371,575 39,578 276,219 55,778

Total 1 yearor less

2 -5Years

More than5 years

31 December 2013 RO’000 RO’000 RO’000 RO’000

Parent company - term loans 89,704 6,490 26,114 57,100Parent company - subordinated loan 40,000 10,000 30,000 -Loans of subsidiary companies 258,034 19,668 228,723 9,643

387,738 36,158 284,837 66,743

(a) Term loans in parent company

2014 2013 RO’000 RO’000

Parent company - term loans 80,297 92,022Less: Deferred finance costs (2,134) (2,318)

78,163 89,704

78



19 Borrowings (continued)

(a) Term loans in parent company (continued)

The parent company obtained a syndicated long-term loan (the facility) from commercial banks dated 4 July 2013. The total facility limit is RO 130 million. The facility carries interest of 5% p.a and is repayable in 52 quarterly installments as per the facility agreement. The facility is secured by commercial and legal mortgage over certain properties of the parent company, pledge of certain Topaz shares, account pledge with lead bank, assignment of receivables from the parent company’s business, assignment of insurance and dividend income. The first drawdown of RO 90 million was made on 23 August 2013 from the facility.

(b) Subordinated loan in parent company

In 2010, the parent company raised a subordinated loan of RO 40,000,000 through an issue of subordinated loan notes denominated in Rial Omani, which is secured by a second charge over the assets of the parent company and its subsidiaries. The loan has been raised by the parent company for funding its subsidiary company, Topaz for meeting the financing requirements of the expansion plans in Topaz’s marine and engineering businesses.

The first drawdown of RO 20,000,000 of the loan was made on 6 December 2010 and the second drawdown of RO 20,000,000 was made on 28 February 2011. The tenure of the loan is 7 years with repayment of four annual installments of RO 10,000,000 with effect from November 2014. Pursuant to the subordinated loan agreement, the parent company is required to restrict dividends, raise additional capital and create a subordinated loan reserve by transferring an amount equal to 1/7th of the outstanding aggregate amount of loan notes out of annual profit after tax of the company from 31 December 2011. The subordinated loan carries a fixed interest rate of 8.5% per annum. During the year, the parent company has made a transfer of RO 4.286 million (2013 - RO 5.714 million) from retained earnings to a subordinated loan reserve.

(c) Borrowings of subsidiary companies

Loans relating to Topaz

(i) On 4 November 2013 the Group issued RO 135 million aggregate principal amount of 8.625% senior notes (the Senior Notes) that matures on 1 November 2018. The Senior Notes are denominated in US Dollars and pay interest semi-annually in arrears on 1 May and 1 November of each year, which commence from 1 May 2014. Interest has been accrued from the issue date. On and after 1 November 2016, the Group may redeem some or all of the Senior Notes at the redemption prices (expressed as percentages of principal amount) equal to 104.3125% for the twelve month period beginning 1 November 2016, 102.15625% for the twelve month period beginning 1 November 2017 and 100% beginning 1 October 2018, plus accrued and unpaid interest and additional amounts, if any, to the redemption date. The Senior Notes have been issued by Topaz Marine S.A., a wholly-owned subsidiary of Topaz Energy and Marine Limited (formerly Nico Middle East Ltd.), incorporated in Luxembourg. The Senior Notes are listed on the Global Exchange Market of the Irish Stock Exchange.

(ii) In conjunction with the Senior Notes offering, RO 4.64 million in debt issuance costs were incurred. These costs are accounted as per IFRS and are amortised into finance costs over the life of the Senior Notes using the effective interest method. RO 46 million equivalent, out of the proceeds from the issuance of the Senior Notes, were used to prepay amounts outstanding under some of the senior secured bank borrowings and the balance proceeds have been used for acquisition of vessels. The Group recognised a loss on extinguishment of debt of RO 0.92 million in relation to the prepayment of these bank borrowings. The amount is included as part of finance costs in the consolidated statement of comprehensive income for the year 2013.

(iii) The term loans of Topaz amounting to RO 263.412 million (2013 - RO 258.034 million) are denominated either in USD or UAE Dirham and are secured by a first preferred mortgage over certain assets of the subsidiaries, the assignment of marine vessel insurance policies, corporate guarantees, lien on fixed deposits and the assignment of the marine vessel charter lease income.

(iv) The borrowing arrangements include undertakings to comply with various covenants like senior interest cover, current ratio, debt to EBITDA ratio, tangible debt to net worth ratio and equity ratio including an undertaking to maintain a minimum net worth of Topaz which, at no time, shall be less than RO 135 million until 31 December 2013 and thereafter it shall be the greater of RO 173 million or 35% of total assets. Term loans carry interest rates ranging from 3% to 8.625% per annum (2013- 3% to 8.625% per annum).




19 Borrowings (continued)

(d) Term loans are disclosed in the statement of financial position as:

2014 2013RO’000 RO’000

Non-current liabilities 331,997 351,580Current liabilities 39,578 36,158

371,575 387,738

(e) The carrying amounts of terms loans is approximate to their fair values.

(f) The carrying amounts of the Group’s borrowings are denominated in the following currencies:

2014 2013RO’000 RO’000

Rial Omani 108,163 129,704US Dollar 257,825 251,389AED 5,587 6,645

371,575 387,738

20 Equity settled mandatory convertible bonds

In 2012 the parent company issued 423,141,678 Mandatory Convertible Bonds (MCB) to its shareholders at RO 0.102 each (including RO 2 baizas for expenses) on 26 July 2012. The Group companies subscribed 30,673,468 bonds out of the total issue. The bonds carry a coupon rate of 3.75% per annum. The MCB shall be converted at face value through conversion into equity shares of the parent company at the conversion price. The conversion will be carried out in three tranches of 33.33% in third and fourth year each and 33.34% in fifth year from the issue date. The number of outstanding MCBs shall convert upon each conversion into equity shares, so as to fully convert all the outstanding MCBs at the end of fifth anniversary from the issue date. The conversion price shall be equal to the average of the closing market price of the shares, as quoted on Muscat Securities Market (MSM), in the 30 days prior to the respective date of conversion, subject to adjustments including rights issue, stock dividend, split and reverse split of shares divided by the conversion factor (1.7). The bonds are listed on MSM and classified as liabilities in accordance with the guidance given in IAS-32 ‘Financial instrument: Presentation’.

In conjunction with MCB, RO 0.372 million in bonds issuance costs were incurred and have been accounted as per IFRS and will be amortised into finance costs over the life of the MCB using the effective interest method.

During the year, the company re-evaluated the accounting for its mandatorily convertible bonds. The terms of the bonds entitled the shareholders to receive bonds as rights and provided the benefits that are generally associated with a rights issue, being an entitlement to receive shares at the defined ratio. It was noted that such benefit entitlement given to shareholders is regarded as a transfer of benefits. Accordingly, the company revised its accounting of the bonds by recognising the value of benefits transferred under the bond issue as an equity movement in its statement of changes in equity. These financial statements accordingly present the application of this revised accounting for the bonds.

For all banking covenants calculations, MCBs are considered as part of equity.

80



21 Non-current payables and advances

2014 2013RO’000 RO’000

Derivative financial instrument (note 31) 7,577 -Income tax payable 2,104 3,833Other payables and advances 2,760 279Deferred income 571 1,612

13,012 5,724

22 Staff terminal benefits

The table below outlines the Group’s post-employment liabilities:

2014 2013 RO’000 RO’000

Defined benefit pension plan - Funded (a) 571 1,774Unfunded benefits (b) 3,857 3,267

4,428 5,041

(a) The amount recognised in the statement of financial position is determined as follows:

2014 2013 RO’000 RO’000

Present value of defined benefit obligation 5,745 7,324Fair value of plan assets (5,174) (5,550)Liability in the statement of financial position 571 1,774

(i) The movement in defined benefit obligation over the year is as follows:

2014 2013 RO’000 RO’000

At 1 January 7,324 6,730Benefits earned during the year 962 853Interest costs on prior year’s benefit obligation 194 137Pension paid during the year (141) (89)Exchange differences (954) (258)Employer’s social security tax on contributions (140) (100)Curtailment - (185)Re - measurement during the year arising from actuarial (gain)/ loss (1,500) 236At 31 December 5,745 7,324




22 Staff terminal benefits (continued)

(ii) The movement in fair value of plan assets over the year is as follows:

2014 2013 RO’000 RO’000

At 1 January 5,550 5,134Return on plan assets 147 96Company contributions 1,138 806Pension paid during the year (124) (74)Exchange differences (1,039) (195)Employer social security tax on contribution (140) (100)Curtailment - (130)Re - measurement during the year arising from actuarial (loss)/gain (358) 13At 31 December 5,174 5,550

(iii) The pension scheme of one of Group’s overseas subsidiary covers a total of 386 employees (2013- 365 employees). The pension scheme gives the right to defined future benefits, which are mainly dependent on number of years the employee worked, salary level at time of retirement and the amount of payment from the national insurance fund. The obligations are partially covered through an insurance company. The calculated pension obligations are based on actuarial valuations. The actuarial valuations are based on assumptions of demographical factors normally used within the insurance industry.

(b) The amount of unfunded benefits recognised in the statement of financial position are determined as follows:

2014 2013 RO’000 RO’000

At 1 January 3,267 5,538Accrued during the year 1,984 2,185Payments during the year (1,394) (1,729)Disposal - (348)Transfer to liabilities of disposal group held-for-sale - (2,379)At 31 December 3,857 3,267

Significant amount of terminal benefits as at 31 December 2014 comprised of end of service obligations of Topaz (2014 - RO 1,569,000; 2013 - RO 1,181,000). Principal actuarial assumptions for Topaz at the reporting date are:

• Normal retirement age: 60-65 years (2013 - 60-65 years).• Mortality, withdrawal and retirement: 5% (2013 - 5%) turnover rate. Due to the nature of the benefit, which is

a lump sum payable on exit due to any cause, a combined single decrement rate has been used for maturity, withdrawal and retirement.

• Discount rate: 4.27% (2013 – 4.5% ) p.a.• Salary increases: 3% to 5% (2013 - 3% to 5%) p.a.

82



23 Trade and other payables

2014 2013RO’000 RO’000

Trade payables 13,614 22,476Accrued expenses and other payables 30,890 29,268Income tax payable 10,379 7,735Amounts due to related parties - 220

54,883 59,699

24 Short term borrowings and bank overdrafts Certain of the Group’s bank borrowings are secured by a registered first mortgage over Group’s certain assets, guarantees and assignment of receivables. Bank borrowings carry interest rates ranging from 3% to 8% per annum (2013 - 3% to 8% per annum).

25 Net assets per share

Net assets per share is calculated by dividing the net assets at the year-end attributable to the shareholders of the parent company by the number of shares outstanding as follows:

2014 2013Net assets RO’000 RO’000

Net assets 248,541 212,887Non-controlling interest (79,996) (36,456)Net assets attributable to the shareholders of the parent company 168,545 176,431

Number of sharesNumber of shares at 1 January (‘000) 282,094 282,094Treasury shares (refer note 18) (‘000) (14,555) (14,555)Number of shares at 31 December (‘000) 267,539 267,539Net assets per share (RO) 0.630 0.659

As explained in note 20, the company remeasured its equity settled mandatory convertible bonds during the year, recognising the related movement in statement of changes in equity. Accordingly, the net assets per share reduced during the year. Had this remeasurement not been applied, the net assets per share would have been RO 0.720 per share as at 31 December 2014.




26 Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the net profits for the year attributable to the shareholders of the parent company by the weighted average number of shares in issue during the year excluding ordinary shares purchased by the Group and held as treasury shares as follows:

2014 2013

Net profit for the year attributable to the shareholders of the parent company (RO‘000) from continuing operations 16,067 8,093

Net profit for the year attributable to the shareholders of the parent company (RO‘000) from discontinued operations 1,274 3,205

Total profit for the year attributable to the shareholders 17,341 11,298

Weighted average number of shares

Number of shares at 1 January (‘000) 282,094 282,094

Less: weighted average number of treasury shares (‘000) (14,555) (14,555)

Weighted average number of shares (‘000) 267,539 267,539

Earnings per share expressed in Rial Omani

Basic earnings per share from continuing operations 0.060 0.030

Basic earnings per share from discontinued operations 0.005 0.012

Basic earnings per share for the year 0.065 0.042

84



26 Earnings per share (continued)

(b) Diluted

Diluted earnings per share is calculated by dividing the net profit attributable to the ordinary shareholders of the parent company for the period by the weighted average number of ordinary shares including dilutive potential ordinary shares issued on the conversion of convertible bonds.

2014 2013Net profit for the year attributable to the shareholders of the parent company (RO‘000) from continuing operations 17,429 9,404

(after adding back post tax interest on mandatory convertible bonds)

Net profit for the year attributable to the shareholders of the parent company (RO‘000) from discontinued operations 1,274 3,205

18,703 12,609

Weighted average number of shares

Number of ordinary shares at 1 January (‘000) 282,094 282,094

Less: weighted average number of ordinary treasury shares (‘000) (14,555) (14,555)

Add: weighted average number of potential ordinary shares (‘000) 151,760 99,356

Less: weighted average number of potential ordinary treasury shares (‘000) (11,001) (13,183)

Weighted average number of shares (‘000) 408,298 353,712

Earnings per share expressed in Rial OmaniDilutive earnings per share from continuing operations 0.043 0.027

Dilutive earnings per share from discontinued operations 0.003 0.009

Dilutive earning per share for the year 0.046 0.036

Potential ordinary shares are the ordinary shares to be issued in future against Mandatory Convertible Bonds issued by the parent company. These potential ordinary shares are notional and are calculated based on the assumption that all the MCBs were converted to ordinary shares based on the market price of the parent company’s shares as at 31 December 2014, which is as per the requirement of IAS-33 ‘Earnings per share’. However, the actual shares to be issued against MCBs, would be determined at future market price of the parent company’s share as per terms of the bonds issue (refer note 20).




27 Related parties

Related parties comprise the shareholders, directors, key management personnel and business entities in which the company or these related parties have the ability to control or exercise significant influence in financial and operating decisions.

The Group has balances with these related parties which arise in the normal course of business. Outstanding balances at year end are unsecured and settlement occurs in cash.

The Group entered into transactions in the ordinary course of business with related parties, other affiliates and parties in which certain members and senior management have a significant influence (other related parties).

(a) Significant related party transactions during the year are listed below:

2014 2013RO’000 RO’000

IncomeService rendered and sales to other related parties 26 39ExpensesServices received and purchases from other related parties 274 274Directors’ remuneration and sitting feesSitting fees 200 200

Remuneration and sitting fees above relate only to the parent company.Out of above related party transactions, following are the details of transactions entered into with the related parties holding 10% or more interest in the parent company:

2014 2013RO’000 RO’000

Service rendered and sales 20 21

(b) Compensation to key management personnelThe remuneration of key management personnel during the year are as follows:

2014 2013RO’000 RO’000

Short-term benefits 1,769 1,753Employees’ end of service benefits 119 81

1,888 1,834

TEAM JAFZA has paid RO 270,900 (2013 - RO 270,900) as remuneration to its Chairman, who is also the Chairman of the parent company.

(c) Amounts due from and due to related parties have been disclosed in notes 14 and 23 respectively. For the year ended 31 December 2014, the Group has not recorded any impairment of amounts due from related parties (2013 - Nil).

86



28 Commitments and contingent liabilities

2014 2013RO’000 RO’000

CommitmentsLetters of credit - 3,957Capital expenditure commitments 66,152 51,792

66,152 55,749Contingent liabilitiesCorporate guarantees 1,268 6,940Letters of guarantee 20,761 24,890

22,029 31,830 Contingent liabilities represent guarantees like bid bonds, performance bonds, refund guarantee retention bonds etc, which are issued by banks on behalf of Group companies to customers and suppliers under the non-funded working capital lines with the banks. These lines are secured by the corporate guarantee of various Group entities. The amounts are payable only in the event when certain terms of contracts with customers or suppliers are not met.

The above letters of guarantee and credit as at 31 December 2014 include RO 4.458 million (2013 – RO 10.972 million) and nil (2013 – RO 3.957) respectively related to discontinued operations.

29 Leases

(a) Operating lease receivables

The Group leases its marine vessels under operating leases. The leases typically run for a period between 3 months to 10 years and are renewable after the expiry date. The lease rental is usually renewed to reflect market rentals.

Future minimum lease rentals receivable under non-cancellable operating leases at 31 December are as follows:2014 2013

RO’000 RO’000Within one year 88,627 102,182Between one and five years 84,295 112,681More than five years 5,677 24,433

178,599 239,296

(b) Operating lease payables

The Group has future minimum lease payments under operating leases for marine vessels with payments as follows:

2014 2013RO’000 RO’000

Within one year 58 18,492Between one and five years 140 29,440More than five years - 4,155

198 52,087

During the year, an amount of RO 5.323 million (2013 - RO 13.430 million) was recognised as an expense in the statement of comprehensive income in respect of bareboat charter of marine vessels obtained on operating lease.




30 Derivative financial instruments

The table below shows the fair values of derivative financial instruments, which are equivalent to the market values, together with the notional amounts analysed by the term to maturity. The notional amount is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year end and are neither indicative of the market risk nor credit risk.

Notional amounts by term to maturityPositive Negative Notional Over 1

fair fair amount Within 1 year to Overvalue value Total year 5 years 5 years

RO’000 RO’000 RO’000 RO’000 RO’000 RO’00031 December 2014Interest rate swaps - 523 45,485 11,425 34,060 -

31 December 2013Interest rate swaps - 1,005 56,854 11,414 45,440 -

Certain term loan facilities of the Group bear interest at US LIBOR plus applicable margins. In accordance with the financing arrangements, the Group has fixed the rate of interest through Interest Rate Swap Agreements (“IRS”) as follows:

- RO 11,738,000 (2013 - 14,754,000) at a fixed rate of 2.5% (2013 - 2.5%) per annum excluding margin;- RO 22,008,000 (2013 - RO 26,154,000) at the rate of 0.83% (2013 - 0.83%) per annum excluding margin ; - RO 1,340,000 (2013 - RO 1,803,000) at the rate of 3.25% (2013 – 3.25%) per annum excluding margin; and - RO 10,372,000 (2013 - RO 14,143,000) at the rate of 1.97% (2013 - 1.97%) per annum excluding margin.

At 31 December 2014 the six months US LIBOR was approximately 0.34% (2013: 0.35%) per annum. Accordingly, the gap between US LIBOR and the fixed rates under IRS was approximately 2.16%, 2.91%, 1.63%, and 0.49% (2013: approximately 2.15%, 2.9%, 2.74%, 1.62% and 0.48%) per annum.

Based on the interest rate gap over the life of the IRS, the indicative losses were assessed at approximately RO 523,000 (2013: RO 1,005,000) by the counter parties to IRS. Consequently, in order to comply with IAS 39 Financial Instruments: Recognition and Measurement the fair value of the derivative instruments’ indicative losses in the amount of approximately RO 523,000 (2013: RO 1,005,000) have been recorded under current and non-current liabilities and the impact for the year amounting to RO 543,000 (2013: RO 419,000) has been recorded under finance (expense)/income and RO (60,000) (2013: RO 875,000) has been recognised in the hedging reserve.

31 Transactions with non-controlling interests

In 2014, a subsidiary of TEAM JAFZA (subsidiary) entered into a Subscription Agreement, consisting the issue and sale of 27,902,522 common shares, from the authorised but unissued capital stock of the subsidiary (amounting to 9.8% of the subsidiary’s paid up share capital) at a price of USD 2.68 equivalent to RO 1.03 per share for total proceeds of RO 29 million in cash. As part of the issue and sale of the subsidiary’s shares, TEAM JAFZA entered into a Shareholders Agreement with the investor, whereby the company and the subsidiary indicated that it shall use all reasonable endeavors to provide the investor a Liquidity Event, as defined in the Shareholders Agreement, within three (3) years. If a Liquidity Event has not been achieved within three years, the investor shall have the right thereafter to request Renaissance Services SAOG (the parent company) to purchase the investor’s entire share, at a price that yields the investor a return of 12% on the invested amount.

88



31 Transactions with non-controlling interests (continued)

The parent company has the right to decide whether or not to exercise this right. If the parent company does not exercise this right, the investor has the right to sell the shares it owns to a third party on arm’s length terms. In the event, such a sale does not achieve the required return, TEAM JAFZA will provide the investor a right to drag that portion of TEAM JAFZA’s shares in the subsidiary which would enable the investor to achieve the target return. The aggregate impact of these terms has been accounted for as a derivative liability in accordance with IAS 39.

The proceeds of the private placement will be used by the subsidiary to fund expansion plans, which includes the acquisition of additional vessels, mergers and acquisitions and joint venture transactions, repayment of existing third party debt, repayment of shareholder loans and general corporate purposes at the subsidiary.

As a result of the above transaction, the company recognised a net adjustment to retained earnings of RO 1.3 million. Non-controlling interests have been increased by RO 19.8 million to reflect the reduction in the Group’s interest in the subsidiary. Furthermore, a derivative liability of RO 7.6 million has been recognised. The fair value of the derivative liability of RO 7.6 million was estimated by applying stochastic equity value simulation using Geometric Brownian Motion to model the distribution of paths that the equity value of the subsidiary might take. The fair value estimates are based on a discount rate of 15.5%, estimated equity volatility based on an observed 5-year historical volatilities of the stock prices of a group of guideline public companies and expected dividend yield of the subsidiary. This is a level 3 fair value measurement. Future changes in the value of the derivative liability will be recorded in the consolidated statement of comprehensive income.

32 Segment reporting

The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on a regular basis. The following summary describes the operations in each of the Group’s reportable segments:

Marine (Offshore Support Vessel) services: includes vessel chartering to oil and gas off shore companies.

Contract services: includes contract Services, accommodation solutions, and integrated facilities management (IFM) services.

Other operations include discontinuing operations such as the engineering services, provision of training services, media publishing, advertising and distribution. This also includes investments and related activities and unallocated corporate expenses.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after income tax, as included in the internal management reports that are reviewed by the Group’s CEO (chief operating decision-maker). Segment profit is used to measure performance as management believes that such information is most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Sales between segments are carried out at arm’s length. The revenue from external parties reported to the Group’s CEO is measured in a manner consistent with that in the consolidated statement of comprehensive income.

The amounts provided to Group’s CEO with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the assets.


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32 Segment reporting (continued)

Geographical segments:

Revenue based on the geographical location of the business activities is as follows:

2014 2013RO’000 RO’000

Oman 68,988 65,978Middle East and North Africa (excluding Oman) 38,824 37,306Caspian 86,037 86,085Others 58,209 49,894

252,058 239,263

Breakdown of the revenue from all services is as follows:2014 2013

RO’000 RO’000

From services 245,712 236,303From sale of vessels 6,346 2,960

252,058 239,263

The total of non-current assets other than financial instruments and deferred tax assets is as follows:

2014 2013RO’000 RO’000

Oman 87,893 74,366Others 535,384 460,435

623,277 534,801

Others include mainly from MENA and Caspian region.

33 Proposed dividend

The Board of Directors at their meeting dated 25 February 2015 has proposed a dividend of RO 2,820,945 for the year ended 31 December 2014 (2013 – 2,820,945).

34 Comparative figures

Certain comparative figures for the previous year have been reclassified, where necessary, in order to conform to the current year’s presentation. Such reclassifications did not result in changes to previously reported total comprehensive income or equity.

Independent auditor’s report on pages 34.



91

RENAISSANCE SERVICES SAOG AND ITS SUBSIDIARY COMPANIESSCHEDULE TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013RO’000 RO’000

Revenue 29,071 29,937Operating expenses (19,358) (19,609)Gross profit 9,713 10,328

Other income 6,883 3,256Administrative expenses (4,284) (6,852)Profit from operations 12,312 6,732

Finance costs - net (6,670) (7,428)Net investment gain 697 3,694Profit before tax 6,339 2,998

Taxation 1,248 (1,130)Profit and comprehensive income for the year 7,587 1,868

Basic earnings per share (RO) 0.027 0.007

Diluted earnings per share (RO) 0.021 0.007

ANNUAL REPORT 2014

92


STATEMENT OF FINANCIAL POSITION (PARENT COMPANY)AS AT 31 DECEMBER 2014

2014 2013RO’000 RO’000

ASSETSNon-current assetsProperty, plant and equipment 71,937 70,032Investments 148,251 140,413Subordinated loan to a subsidiary 20,000 30,000

240,188 240,445Current assetsInventories 544 582Trade and other receivables 51,680 55,194Subordinated loan to a subsidiary 10,000 10,000Cash and bank balances 9,922 18,675

72,146 84,451Assets of disposal group classified as held-for-sale 316 1,687

72,462 86,138Total assets 312,650 326,583EQUITY AND LIABILITIESShare capital and reservesShare capital 28,209 28,209Share premium 19,496 19,496Legal reserve 9,404 9,404Subordinated loan reserve 21,429 17,143Retained earnings 15,806 40,999Total equity 94,344 115,251LIABILITIESNon-current liabilitiesBorrowings 70,396 83,214Equity settled mandatory convertible bonds 44,834 42,077Subordinated loan 20,000 30,000Non-current payables and advances 2,104 3,833Amount due to subsidiaries 18,078 22,607Staff terminal benefits 867 800

156,279 182,531Current liabilitiesCurrent portion of long-term borrowings 7,767 6,490Equity settled mandatory convertible bonds - Current portion 22,991 -Current portion of long-term subordinated loan 10,000 10,000Trade and other payables 15,415 11,556Short-term borrowings 5,775 -

61,948 28,046Liabilities of disposal group classified as held-for-sale 79 755

62,027 28,801Total liabilities 218,306 211,332Total equity and liabilities 312,650 326,583Net assets per share (RO) 0.334 0.409

93


STATEMENT OF CHANGES IN EQUITY (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2014

Sharecapital

Sharepremium

Legalreserve

Subordinatedloan reserve

Retainedearnings Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

At 1 January 2013 28,209 19,496 9,404 11,429 44,845 113,383

Comprehensive income:Profit for the year - - - - 1,868 1,868

Transactions with owners:Transfer to subordinated loan reserve - - - 5,714 (5,714) -At 31 December 2013 28,209 19,496 9,404 17,143 40,999 115,251

At 1 January 2014 28,209 19,496 9,404 17,143 40,999 115,251

Comprehensive income:Profit for the year - - - - 7,587 7,587

Transactions with owners:Transfer to subordinated loan reserve - - - 4,286 (4,286) -Re-measurement of equity settled mandatory convertible bonds - - - - (25,673) (25,673)Dividend paid - - - - (2,821) (2,821)At 31 December 2014 28,209 19,496 9,404 21,429 15,806 94,344

ANNUAL REPORT 2014

94


STATEMENT OF CASH FLOWS (PARENT COMPANY)FOR THE YEAR ENDED 31 DECEMBER 2014

2014 2013RO’000 RO’000

Operating activitiesCash receipts from customers 32,626 33,105Cash paid to suppliers and employees (14,821) (21,879)Cash generated from operations 17,805 11,226Finance costs - net (6,595) (7,355)Income tax refunded/(paid) 98 (2,631)Net cash generated from operating activities 11,308 1,240

Investing activitiesAcquisition of property, plant and equipment (4,673) (2,749)Proceeds from sale of property, plant and equipment 17 10Investment in subsidiary (7,838) -Deposits matured/(placed) 5,000 (5,000)Deposits under lien matured/(placed) 3,885 (4,297)Proceeds from sale of subsidiaries 10,108 -Dividend received 5,664 2,922Net cash generated from/(used in) investing activities 12,163 (9,114)

Financing activitiesNet payment of borrowings (15,766) (27,514)Net movement in related parties (4,752) 34,287Dividend paid (2,821) -Net cash (used in)/generated from financing activities (23,339) 6,773

Increase/(decrease) in cash and cash equivalents 132 (1,101)Cash and cash equivalents at the beginning of the year 9,378 10,479Cash and cash equivalents at the end of the year 9,510 9,378

renaissance annual report 2014_english

Documents

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renaissance vision

auditors report

renaissance group

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